<PAGE>
As filed with the Securities and Exchange Commission on February 8, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
GEMSTAR INTERNATIONAL GROUP LIMITED
(Exact name of registrant as specified in its charter)
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British Virgin Islands 3651 N/A
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
(626) 792-5700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
Stephen A. Weiswasser, Esq.
Executive Vice President and General Counsel
Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
(626) 792-5700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies to:
David A. Krinsky, Esq. Elizabeth Markowski, Esq. Francis R. Wheeler, Esq.
J. Jay Herron, Esq. Baker & Botts, L.L.P. Holme Roberts & Owen LLP
Karen K. Dreyfus, Esq. 599 Lexington Avenue, 1700 Lincoln, Suite 4100
O'Melveny & Myers LLP Suite 2900 Denver, Colorado 80203
610 Newport Center New York, New York (303) 861-7000
Drive, 17th Floor 10022-6030
Newport Beach, (212) 705-5000
California 92660
(949) 760-9600
--------------
Approximate date of commencement of proposed sale to the public. With
respect to the shares relating to the domestication of Gemstar International
Group Limited, a British Virgin Islands corporation, as a domestic corporation
under the laws of the State of Delaware, upon the effective date of the
domestication. With respect to the shares to be issued in connection with the
merger of a subsidiary of the Registrant with and into TV Guide, Inc. ("TV
Guide"), as soon as practicable after the completion of the merger.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount Maximum Maximum Amount of
Title of each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered(1) Per Share(2) Offering Price Fee(2)(3)
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Common Stock, par value $.01 per
share............................... 414,245,832 shares Not Applicable $20,063,412,141(2) $4,140,234
- --------------------------------------------------------------------------------------------------------
Preferred Stock Purchase Rights...... 414,245,832 rights (4) (4) (4)
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(1) The number of shares of common stock, par value $.01 per share ("Gemstar
common stock"), with Preferred Stock Purchase Rights, issuable by the
Registrant (a) upon conversion of the currently outstanding ordinary shares
of Gemstar International Group Limited, a British Virgin Islands
corporation upon its domestication as a corporation under the laws of the
State of Delaware, (b) upon completion of the merger of a subsidiary of the
Registrant with and into TV Guide, Inc. ("TV Guide"), and (c) upon exercise
of TV Guide options which will be converted into options to purchase
Gemstar common stock in connection with the merger.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) based on the sum of (1)
$13,261,702,215, which represents the product of (A) $64.125, the average
of the reported high and low sales prices of a share of Gemstar common
stock on the Nasdaq National Market on February 7, 2000 and (B)
206,810,171, the maximum number of shares of Gemstar common stock that may
be converted in the domestication, (2) $6,075,491,971, which represents the
product of (A) $36.6875, the average of the reported high and low sales
prices of a share of TV Guide Class A common stock on the Nasdaq National
Market on February 7, 2000 and (B) 165,601,144, the maximum number of
shares of TV Guide Class A common stock, including shares issuable upon
exercise of outstanding options to purchase TV Guide Class A common stock,
that may be received in the merger and (3) $726,217,955, which represents
the book value of the 149,986,352 outstanding shares of TV Guide Class B
common stock at December 31, 1999.
(3) In accordance with Rule 457(b), the total registration fee of $5,296,741
has been reduced by $1,156,507 which was previously paid pursuant to
Section 14(g) of the Securities Exchange Act of 1934, in connection with
filings by Gemstar and TV Guide on December 2, 1999 of preliminary proxy
materials in connection with the merger.
(4) The Preferred Stock Purchase Rights of Gemstar initially are carried and
traded with the shares of the Gemstar common stock being registered hereby.
Value attributable to such Preferred Stock Purchase Rights, if any, is
reflected in the market price of the Gemstar common stock.
--------------
The Registrant hereby amends this Registration Statement of such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Dear Gemstar Stockholder:
As you may already know, Gemstar International Group Limited and TV Guide,
Inc. have agreed to merge. The boards of directors of each of Gemstar and TV
Guide believe that the merger advances the vision we share of creating a
preeminent advertising and transaction business based on our interactive
program guide platforms.
In the merger, TV Guide will become a wholly owned subsidiary of Gemstar,
and TV Guide stockholders will receive 0.6573 of a share of Gemstar common
stock for each share of TV Guide common stock outstanding at the time of the
merger. The merger will not change the aggregate number of shares of Gemstar
common stock held by Gemstar stockholders before the merger, but Gemstar
stockholders' ownership percentage of the total shares outstanding will
decrease as a result of the merger. Gemstar stockholders will own approximately
50.8% and TV Guide stockholders will own approximately 49.2% of the outstanding
Gemstar common stock after the merger, based on the number of shares of Gemstar
common stock and TV Guide common stock outstanding on January 25, 2000. On a
fully diluted basis (assuming the exercise of all vested and unvested options),
Gemstar stockholders will own approximately 55.4% and TV Guide stockholders
will own approximately 44.6% of the combined company's common stock after the
merger, based on the number of shares of Gemstar common stock and TV Guide
common stock and options to purchase such shares (both vested and unvested)
outstanding on January 25, 2000. Gemstar common stock is listed on the Nasdaq
National Market under the symbol "GMST."
We are very enthusiastic about the merger, about the combined company's
prospects and about the benefits it will bring to Gemstar's stockholders. The
merger cannot be completed, however, unless Gemstar stockholders approve the
issuance of Gemstar common stock to TV Guide stockholders in the merger.
Similarly, the merger cannot be completed unless TV Guide stockholders approve
and adopt the merger agreement.
We have scheduled a special meeting of Gemstar stockholders to vote on the
issuance of Gemstar common stock to TV Guide stockholders in the merger. The
special meeting will be held on March 17, 2000, at 10 a.m., local time, at 2-
29-18 Nishi-Ikebukuro, Toshima-ku, Tokyo 171, Japan.
The board of directors of Gemstar has unanimously approved the merger and
the transactions necessary to effect the merger and is seeking your approval of
the specific proposal that will allow the merger to take place.
Please see pages 17 through 33 for a description of risk factors pertaining
to the merger and the combined company that you should consider.
Gemstar's board of directors also has unanimously approved an amendment to
the Gemstar International Group Limited 1994 Stock Incentive Plan and is
seeking your approval of the amendment.
The affirmative vote of a majority of the shares voted at the special
meeting, in person or by proxy, is required to approve the issuance of Gemstar
common stock to TV Guide stockholders in the merger. The affirmative vote of a
majority of the shares voted at the special meeting, in person or by proxy, is
required to approve the plan amendment.
Four stockholders of Gemstar who in the aggregate own approximately 31.6% of
Gemstar's outstanding common stock as of January 25, 2000, have agreed to vote
for the issuance of Gemstar common stock to TV Guide stockholders in the
merger.
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Before February 23, 2000, Gemstar will adopt a new certificate of
incorporation in the form attached as Annex B to this joint proxy
statement/prospectus and bylaws and change its place of incorporation from the
British Virgin Islands to the State of Delaware. Upon completion of the merger,
Gemstar's bylaws will be automatically amended and replaced with new bylaws in
the form attached as Annex C to this joint proxy statement/prospectus. The
change in Gemstar's place of incorporation is a condition to the obligation of
TV Guide to close the merger but the change in place of incorporation does not
require the approval of Gemstar stockholders.
This document provides you with detailed information about the merger and
the plan amendment. We encourage you to read this document carefully in its
entirety.
We believe the merger offers Gemstar significant opportunities to expand its
business in exciting new ways. We urge you to vote FOR the proposals described
above.
Sincerely yours,
Henry C. Yuen
Chairman of the Board, Chief Executive
Officer and President
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the shares of Gemstar common stock to
be issued in the merger or determined if this document is truthful or
complete. Any representation to the contrary is a criminal offense. This
joint proxy statement/prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction where
such offer or solicitation would be illegal.
- --------------------------------------------------------------------------------
This joint proxy statement/prospectus is dated February 7, 2000, and will be
first mailed to stockholders on February 11, 2000.
2
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GEMSTAR INTERNATIONAL GROUP LIMITED
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 17, 2000
----------------
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Gemstar
International Group Limited will be held on March 17, 2000, at 10 a.m., local
time, at 2-29-18 Nishi-Ikebukuro, Toshima-ku,Tokyo 171, Japan, for the
following purposes:
1. To consider and vote upon a proposal to approve the issuance of Gemstar
common stock to TV Guide stockholders in the merger contemplated by the
Agreement and Plan of Merger, dated as of October 4, 1999, as amended,
among Gemstar International Group Limited, G Acquisition Subsidiary
Corp., a wholly owned subsidiary of Gemstar, and TV Guide, Inc. A copy
of the merger agreement, as amended, is attached to the accompanying
joint proxy statement/prospectus as Annex A.
2. To consider and vote upon a proposal to amend the Gemstar International
Group Limited 1994 Stock Incentive Plan to increase the number of shares
of Gemstar common stock available for issuance from 80,000,000 shares to
110,000,000 shares.
3. To transact such other business as may properly come before the special
meeting of stockholders or any adjournment or postponement thereof.
The close of business on February 10, 2000 has been fixed as the record date
for determining stockholders entitled to notice of, and to vote at, the special
meeting of stockholders and at any and all adjournments or postponements
thereof.
The board of directors of Gemstar unanimously recommends that stockholders
vote FOR the proposals listed above. The affirmative vote of a majority of the
shares voted at the special meeting, in person or by proxy, is required to
approve the issuance of Gemstar common stock to TV Guide stockholders in the
merger. The affirmative vote of a majority of the shares voted at the special
meeting, in person or by proxy, is required to approve the plan amendment.
The accompanying joint proxy statement/prospectus gives you more information
about the proposals listed above. We have enclosed a proxy card for you to cast
your vote.
Whether or not you plan to attend the special meeting of stockholders,
please complete, date, sign and return the enclosed proxy card in the enclosed
envelope. You may revoke your proxy in writing or in person at any time before
the special meeting of stockholders in accordance with the instructions in the
accompanying joint proxy statement/prospectus. If your proxy card is signed,
dated and returned without specifying your choice, your shares will be voted as
recommended by the directors.
By order of the board of directors
Stephen A. Weiswasser
Secretary
Pasadena, California
February 7, 2000
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[LOGO OF TV GUIDE APPEARS HERE]
Dear TV Guide Stockholder:
As you may already know, TV Guide, Inc. and Gemstar International Group
Limited have agreed to merge. The boards of directors of each of TV Guide and
Gemstar believe that the merger advances the vision we share of creating a
preeminent advertising and transaction business based on our interactive
program guide platforms.
In the merger, TV Guide will become a wholly owned subsidiary of Gemstar,
and TV Guide stockholders will receive 0.6573 of a share of Gemstar common
stock for each share of TV Guide common stock outstanding at the time of the
merger. TV Guide stockholders will own approximately 49.2% and Gemstar
stockholders will own approximately 50.8% of the outstanding Gemstar common
stock after the merger, based on the number of shares of TV Guide common stock
and Gemstar common stock outstanding on January 25, 2000. On a fully diluted
basis (assuming the exercise of all vested and unvested options), TV Guide
stockholders will own approximately 44.6% and Gemstar stockholders will own
approximately 55.4% of the combined company's common stock after the merger,
based on the number of shares of TV Guide common stock and Gemstar common stock
and options to purchase such shares (both vested and unvested) outstanding on
January 25, 2000. Gemstar common stock is listed on the Nasdaq National Market
under the symbol "GMST."
We are very enthusiastic about the merger. The merger cannot be completed,
however, unless TV Guide stockholders approve and adopt the Agreement and Plan
of Merger, dated as of October 4, 1999, as amended, among Gemstar, G
Acquisition Subsidiary Corp., a wholly owned subsidiary of Gemstar, and TV
Guide. Adoption of the merger agreement will constitute approval of the merger
and the other transactions contemplated by the merger agreement. Similarly, the
merger cannot be completed unless Gemstar stockholders approve the issuance of
Gemstar common stock to TV Guide stockholders in the merger.
We have scheduled a special meeting of TV Guide stockholders to vote on the
approval and adoption of the merger agreement. The special meeting will be held
on March 17, 2000, at
10 a.m., local time, at the Southern Hills Marriott Hotel, 1902 East 71st
Street South, Tulsa, Oklahoma.
The board of directors of TV Guide has unanimously approved the merger and
the transactions necessary to effect the merger and is seeking your approval of
the specific proposal that will allow the merger to take place.
Please see pages 17 through 33 for a description of risk factors pertaining
to the merger and the combined company that you should consider.
TV Guide's board of directors also has unanimously approved amendments to
the TV Guide, Inc. Equity Incentive Plan and is seeking your approval of these
amendments.
The affirmative vote of a majority of the combined voting power of the
outstanding shares of TV Guide Class A and Class B common stock, voting
together as a single class, is required to approve and adopt the merger
agreement. The affirmative vote of a majority of the combined voting power of
the shares of TV Guide Class A and Class B common stock present in person or
represented by proxy at the special meeting and entitled to vote, voting
together as a single class, is required to approve the plan amendments.
1
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The two largest stockholders of TV Guide, Liberty Media Corporation and The
News Corporation Limited, who together beneficially own TV Guide shares
representing approximately 97.7% of the total voting power of the TV Guide
common stock have agreed to vote for the merger and have stated they intend to
vote for the plan amendments.
This document provides you with detailed information about the merger and
the plan amendments. We encourage you to read this document carefully in its
entirety.
We believe the merger offers TV Guide significant opportunities to expand
its business in exciting new ways. We urge you to vote FOR the proposals
described above.
Sincerely yours,
Joachim Kiener
Chairman and Chief Executive Officer
Peter C. Boylan III
President and Chief Operating Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the shares of Gemstar common stock to
be issued in the merger or determined if this document is truthful or
complete. Any representation to the contrary is a criminal offense. This
joint proxy statement/prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction where
such offer or solicitation would be illegal.
This joint proxy statement/prospectus is dated February 7, 2000, and will be
first mailed to stockholders on February 11, 2000.
2
<PAGE>
TV GUIDE, INC.
7140 South Lewis Avenue
Tulsa, Oklahoma 74136-5422
---------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 17, 2000
---------------
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of TV Guide,
Inc. will be held on March 17, 2000, at 10 a.m., local time, at the Southern
Hills Marriott Hotel, 1902 East 71st Street South, Tulsa, Oklahoma, for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of October 4, 1999, as amended, among
Gemstar International Group Limited, G Acquisition Subsidiary Corp., a
wholly owned subsidiary of Gemstar, and TV Guide, Inc. Adoption of the
merger agreement will constitute approval of the merger and the other
transactions contemplated by the merger agreement. A copy of the merger
agreement, as amended, is attached to the accompanying joint proxy
statement/prospectus as Annex A.
2. To consider and vote upon a proposal to amend the TV Guide, Inc. Equity
Incentive Plan to increase the number of shares of Class A common stock
available for issuance from 16,000,000 to 24,000,000 and to increase the
maximum aggregate number of shares of Class A common stock that may be
granted under the plan to any one employee from 3,200,000 shares to
6,000,000 shares.
3. To transact such other business as may properly come before the special
meeting of stockholders or any adjournment or postponement thereof.
The close of business on January 25, 2000 has been fixed as the record date
for determining stockholders entitled to notice of, and to vote at, the special
meeting of stockholders and at any and all adjournments or postponements
thereof.
The board of directors of TV Guide unanimously recommends that stockholders
vote FOR the proposals listed above. The affirmative vote of a majority of the
combined voting power of the outstanding shares of TV Guide Class A and Class B
common stock, voting together as a single class, is required to approve and
adopt the merger agreement. The affirmative vote of a majority of the combined
voting power of the shares of TV Guide Class A and Class B common stock present
in person or represented by proxy at the special meeting and entitled to vote,
voting together as a single class, is required to approve the plan amendments.
The accompanying joint proxy statement/prospectus gives you more information
about the proposals listed above. We have enclosed a proxy card for you to cast
your vote.
Whether or not you plan to attend the special meeting of stockholders,
please complete, date, sign and return the enclosed proxy card in the enclosed
envelope. You may revoke your proxy in writing or in person at any time before
the special meeting of stockholders in accordance with the instructions in the
accompanying joint proxy statement/prospectus. If your proxy card is signed,
dated and returned without specifying your choice, your shares will be voted as
recommended by the directors.
By order of the board of directors
Joachim Kiener
Chairman and Chief Executive Officer
Peter C. Boylan III
President and Chief Operating Officer
Tulsa, Oklahoma
February 7, 2000
<PAGE>
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... i
WHO CAN HELP ANSWER YOUR QUESTIONS........................................ vi
SUMMARY................................................................... 1
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA........................... 10
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA...................... 12
HISTORICAL AND PRO FORMA PER SHARE DATA................................... 13
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION............... 14
RISK FACTORS.............................................................. 15
RISKS RELATING TO THE MERGER.............................................. 15
The exchange ratio is determined in advance, and fluctuations in the
market price of Gemstar common stock will affect the value of the
merger consideration to be received by TV Guide stockholders........... 15
The holdings of Gemstar stockholders will be diluted by the merger...... 15
Substantial stockholders of Gemstar and TV Guide have entered into a
stockholders agreement that will significantly affect control of the
combined company following the completion of the merger................ 15
Our corporate governance structure following the merger will be unusual,
will continue Gemstar's and TV Guide's current management and will
require stockholders and directors of the combined company to meet
specified voting requirements before taking certain actions............ 16
Anti-takeover defense provisions may make it more difficult for a third
party to acquire control of the combined company....................... 17
Regulatory agencies may impose conditions on the merger................. 18
We may have difficulties in combining the operations of Gemstar and TV
Guide and may not achieve strategic and other benefits................. 19
Gemstar's and TV Guide's directors and executive officers may have
interests different from or in addition to those of stockholders
generally.............................................................. 19
If we fail to complete the merger, the stock price and future business
and operations of Gemstar and/or TV Guide could be negatively
impacted............................................................... 22
RISKS RELATING TO THE COMBINED COMPANY.................................... 23
After the merger, the combined business may experience slower growth and
decreased profit margins and require greater capital expenditures than
the present business of Gemstar........................................ 23
TV Guide Magazine, which is a significant business, has experienced
significant declines in circulation and EBITDA......................... 23
TV Guide's C-band business, which is a significant business, is rapidly
declining.............................................................. 24
Growth of VCR Plus+ revenues may be limited............................. 24
Leverage may impair our financial condition............................. 24
Paper and postal price increases can materially raise TV Guide's costs.. 25
The interests of the combined company may diverge from those of
substantial stockholders............................................... 25
New products and rapid technological change may affect our operations... 26
Our interactive program guides may not be accepted by the market........ 26
Our business may be affected by changes in the consumer electronics
market................................................................. 26
After the merger, we will face competition in many areas................ 27
The stock prices of Gemstar and TV Guide have each been volatile; such
volatility may continue after the merger............................... 27
Any infringement by us on patent rights of others could result in
litigation............................................................. 27
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TOC-1
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RISKS RELATING TO THE CHANGE IN GEMSTAR'S PLACE OF INCORPORATION.......... 28
The rights of Gemstar stockholders under the new certificate of
incorporation and bylaws and under Delaware law will be different than
under Gemstar's current governing documents and under British Virgin
Islands law............................................................ 28
FORWARD-LOOKING STATEMENTS................................................ 29
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS............... 30
THE SPECIAL MEETINGS...................................................... 38
Times and Places; Purposes.............................................. 38
Record Dates; Voting Rights............................................. 38
Votes Required.......................................................... 39
Quorum.................................................................. 39
Proxies; Revocation of Proxies.......................................... 39
Solicitation of Proxies................................................. 41
Security Ownership of Certain Beneficial Owners and Management.......... 42
INFORMATION ABOUT GEMSTAR................................................. 45
INFORMATION ABOUT TV GUIDE................................................ 46
THE MERGER................................................................ 48
Background of the Merger................................................ 48
Gemstar Board of Directors' Reasons for the Merger...................... 54
Recommendation of Gemstar's Board of Directors.......................... 56
TV Guide Board of Directors' Reasons for the Merger..................... 57
Recommendation of TV Guide's Board of Directors......................... 59
Opinion of Financial Advisor to Gemstar's Board of Directors............ 59
Opinion of Financial Advisor to TV Guide's Board of Directors........... 68
Interests of Certain Persons in the Merger.............................. 73
Anticipated Accounting Treatment........................................ 76
Regulatory Approvals.................................................... 77
Percentage Ownership Interest of TV Guide Stockholders After the
Merger................................................................. 78
Nasdaq National Market Listing.......................................... 78
Consequences of the Merger on TV Guide Common Stock..................... 78
No Appraisal or Dissenters' Rights...................................... 78
Federal Securities Laws Consequences; Stock Transfer Restriction
Agreements............................................................. 78
Cross License Agreement................................................. 79
Cross Option Agreements................................................. 79
TERMS OF THE MERGER AGREEMENT............................................. 82
Structure of the Merger................................................. 82
Merger Consideration.................................................... 82
No Fractional Shares.................................................... 82
Completion of the Merger................................................ 82
Conversion of Shares in the Merger...................................... 82
Exchange Agent; Procedures for Exchange of Certificates................. 83
Representations and Warranties.......................................... 83
Conduct of Business Pending the Merger.................................. 84
Other Covenants......................................................... 86
Conditions to the Merger................................................ 89
Indemnification of Directors and Officers............................... 90
Termination............................................................. 90
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TOC-2
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Fees and Expenses....................................................... 91
Termination Fee......................................................... 91
Amendment............................................................... 92
Extension and Waiver.................................................... 93
TERMS OF THE VOTING AGREEMENTS............................................ 94
TERMS OF THE STOCKHOLDERS AGREEMENT....................................... 95
Directors............................................................... 95
Officers................................................................ 95
Standstill.............................................................. 96
Non-competition......................................................... 96
Registration Rights..................................................... 96
Rights of First Refusal................................................. 97
SUMMARY OF THE COMBINED COMPANY'S CERTIFICATE OF INCORPORATION AND
BYLAWS................................................................... 98
Board of Directors...................................................... 98
Board Meetings.......................................................... 102
Fundamental Decisions................................................... 103
Executive Officers...................................................... 104
Stockholder Meetings.................................................... 105
Stockholder Proposals................................................... 105
Supermajority Vote...................................................... 105
Amendment............................................................... 106
Fiscal Year............................................................. 106
SUMMARY OF AMENDMENTS TO RIGHTS AGREEMENT................................. 107
COMPARISON OF THE RIGHTS OF GEMSTAR AND TV GUIDE STOCKHOLDERS............. 108
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER...... 109
Tax Consequences of the Merger.......................................... 109
Tax Treatment to Non-United States Persons Holding Gemstar Common Stock
After the Change in Gemstar's Place of Incorporation and the Merger.... 110
Backup Withholding and Information Reporting on Dividends and
Dispositions of Gemstar Common Stock................................... 111
1994 STOCK INCENTIVE PLAN PROPOSAL........................................ 112
Summary Description of the 1994 Stock Incentive Plan.................... 112
Federal Income Tax Consequences......................................... 115
Specific Benefits....................................................... 116
Certain Executive Compensation Information.............................. 116
Required Vote........................................................... 121
Recommendation of Gemstar's Board of Directors.......................... 121
SUMMARY OF AMENDMENTS TO TV GUIDE EQUITY INCENTIVE PLAN................... 122
Reasons for the Proposed Amendment...................................... 122
New Plan Benefits....................................................... 122
Description of the Equity Incentive Plan................................ 122
Federal Income Tax Consequences of Issuance and Exercise of Options..... 125
Certain Compensation Information........................................ 127
Recommendation of TV Guide's Board of Directors......................... 129
CHANGE IN GEMSTAR'S PLACE OF INCORPORATION FROM THE BRITISH VIRGIN ISLANDS
TO THE STATE OF DELAWARE................................................. 130
Reasons for Changing Gemstar's Place of Incorporation................... 130
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TOC-3
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Effect of Changing Gemstar's Place of Incorporation....................... 130
Change in Governing Corporate Law......................................... 130
Change in Governing Documents............................................. 135
Tax Consequences.......................................................... 138
EXPERTS..................................................................... 141
LEGAL OPINIONS.............................................................. 141
STOCKHOLDER PROPOSALS....................................................... 141
OTHER MATTERS............................................................... 142
WHERE YOU CAN FIND MORE INFORMATION......................................... 142
</TABLE>
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ANNEX A Agreement and Plan of Merger, as amended
ANNEX B Certificate of Incorporation
ANNEX C Bylaws
ANNEX D Opinion of Lazard Freres & Co. LLC
ANNEX E Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
ANNEX F Comparison of the Rights of Gemstar and TV Guide Stockholders
Comparison of the Rights of Gemstar (BVI) and Gemstar (Delaware)
ANNEX G Stockholders
</TABLE>
TOC-4
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What will happen to Gemstar and TV Guide if the merger is approved?
A: TV Guide will become a wholly owned subsidiary of Gemstar.
Q: What happens to my shares?
A: Gemstar stockholders: If the merger is completed, you will retain the same
number of Gemstar shares you currently own. Before February 23, 2000,
Gemstar will change its place of incorporation from the British Virgin
Islands to the State of Delaware. For simplicity, your ordinary shares of
Gemstar are referred to in this joint proxy statement/prospectus as "common
stock."
TV Guide stockholders: If the merger is completed, you will be entitled to
receive 0.6573 of a share of Gemstar common stock in exchange for each share
of TV Guide common stock you own. You will not receive any fractional shares
of Gemstar common stock. Instead, you will receive a cash payment equal to
the market value of the fractional share (determined by multiplying the
fractional share interest to which such TV Guide stockholder would otherwise
be entitled by the average closing price for a share of Gemstar common stock
on the Nasdaq National Market, as reported in The Wall Street Journal,
during the 20 consecutive trading days ending on the third trading day
before the completion of the merger). For example, assume the average
closing price of Gemstar's common stock is $70.00. If a TV Guide stockholder
owns 10 shares of TV Guide common stock, he or she will receive six shares
of Gemstar common stock (10 shares multiplied by the exchange ratio of
0.6573) and a check for the value of 0.573 fractional share, which will be
$40.11 (0.573 fractional share multiplied by $70.00).
Q: Will holders of TV Guide Class A common stock be treated differently from
holders of TV Guide Class B common stock?
A: No. Each will be entitled to receive 0.6573 of a share of Gemstar common
stock in exchange for each share of TV Guide Class A common stock or TV
Guide Class B common stock.
Q: Will TV Guide stockholders receive shares of common stock in a British
Virgin Islands corporation?
A: No. Gemstar will change its place of incorporation from the British Virgin
Islands to the State of Delaware before February 23, 2000, and after
completion of the merger TV Guide stockholders will be entitled to receive
shares of common stock in Gemstar, which at that time will be a Delaware
corporation.
Q: As a stockholder, how will the merger affect me?
A: Gemstar stockholders: After the merger, each share of Gemstar common stock
that you own will represent a smaller ownership percentage of a larger
company that will own the assets of both Gemstar and TV Guide.
TV Guide stockholders: After the merger, you will own shares of a company
that will own the assets of both Gemstar and TV Guide.
Q: What percentage of Gemstar common stock will be received by TV Guide
stockholders?
A: Based on the number of outstanding shares of TV Guide common stock and
Gemstar common stock outstanding on January 25, 2000, we anticipate that TV
Guide stockholders will receive approximately 200.1 million shares (207.4
million shares assuming the exercise of all vested and unvested options) of
Gemstar common stock in the merger. Based on that number, the former TV
Guide stockholders will hold immediately after the merger an aggregate
equity interest in the combined company of approximately 49.2% (44.6%
assuming the exercise of all vested and unvested options).
Q: Why must Gemstar change its place of incorporation?
A: Gemstar must change its place of incorporation for two reasons. First, on
January 24, 2000, final Treasury regulations affecting the tax consequences
of the change in place of incorporation were published in the Federal
Register. These regulations become effective on
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February 23, 2000. If Gemstar changes its place of incorporation on or after
February 23, 2000, the change in place of incorporation will be a taxable
event for certain United States persons that are stockholders of Gemstar on
the date of the change in place of incorporation. Second, if Gemstar does
not change its place of incorporation before the completion of the merger,
Gemstar might be a "controlled foreign corporation," as that term is defined
in the U.S. Internal Revenue Code of 1986, as amended. If Gemstar were a
controlled foreign corporation, the holders of 10% or more of its
outstanding stock following the completion of the merger who are also United
States persons would suffer adverse tax consequences. The stockholders
potentially facing adverse tax consequences are Henry C. Yuen, Liberty Media
Corporation and the U.S. subsidiary of The News Corporation Limited that
holds the TV Guide common stock beneficially owned by News Corp.
Q: What effect does the change in place of incorporation have on Gemstar?
A: Gemstar will be subject to the laws of the State of Delaware instead of the
laws of the British Virgin Islands. This process is called domestication.
Gemstar will not, however, be relieved of any obligations or liabilities it
incurred before changing its place of incorporation.
After the change in place of incorporation, Gemstar's effective corporate
tax rate may increase. See the summary of tax consequences of the change in
place of incorporation beginning on page 149.
Q: What effect does Gemstar's change in place of incorporation have on me as a
stockholder?
A: Gemstar stockholders: Your rights as a Gemstar stockholder will be governed
by the laws of the State of Delaware and Gemstar's new certificate of
incorporation and bylaws (which bylaws will be automatically amended and
replaced upon the completion of the merger with new bylaws in the form
attached as Annex C to this joint proxy statement/prospectus), as opposed to
the laws of the British Virgin Islands and Gemstar's existing governing
documents. We have prepared and included summaries of Gemstar's new
certificate of incorporation and bylaws (which will be in effect following
Gemstar's change in place of incorporation) on pages 128 through 140 and a
comparison of the corporate laws of the British Virgin Islands and Delaware
on pages 143 through 148 for your review. We have also prepared and included
a summary of Gemstar's new certificate of incorporation and bylaws which
will be in effect following the completion of the merger on pages
through for your review.
TV Guide stockholders: Your rights as a TV Guide stockholder are not
affected by Gemstar's change in place of incorporation.
Q: Who will manage Gemstar after the merger?
A: Before completing the merger, Gemstar will amend and restate its bylaws,
and upon completion of the merger, certain provisions in Gemstar's new
certificate of incorporation will become effective. As a result of these
changes in Gemstar's governing documents, Gemstar's board of directors will
be expanded from 9 to 12 directors after the merger. Six of the directors
will be designated by Gemstar, and six of the directors will be designated
by TV Guide.
Henry C. Yuen will continue to serve as Chairman of the Board and Chief
Executive Officer of Gemstar. Elsie Ma Leung will continue to serve as the
Chief Financial Officer of Gemstar and will serve as co-President and co-
Chief Operating Officer in charge of existing operations of Gemstar. Joachim
Kiener, TV Guide's Chairman and Chief Executive Officer, and Peter C. Boylan
III, TV Guide's President and Chief Operating Officer, will each serve as
co-President and co-Chief Operating Officer in charge of existing operations
of TV Guide. Ms. Leung and Messrs. Kiener and Boylan will join the newly
formed Office of the Chief Executive with Mr. Yuen. Stephen A. Weiswasser
will continue to serve as the Executive Vice President and General Counsel
of Gemstar.
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The governing structure of the combined company after the merger is an
important part of the merger. We recommend that you read carefully the
complete explanation of this structure on pages through , as well as
the complete text of the combined company's certificate of incorporation and
bylaws attached as Annexes B and C, respectively, to this joint proxy
statement/prospectus.
Q: Will there be a controlling stockholder following the merger?
A: No. However, Henry C. Yuen, Liberty Media Corporation, The News Corporation
Limited and Gemstar have entered into a stockholders agreement, which will
be effective upon the completion of the merger. Immediately following the
merger, Mr. Yuen will own approximately 3.0%, Liberty will beneficially own
approximately 21.5% and News Corp. will beneficially own approximately
21.5% of Gemstar's outstanding common stock based on the number of shares
of Gemstar common stock and TV Guide common stock outstanding on January
25, 2000. On a fully diluted basis (assuming the exercise of all vested and
unvested options), Mr. Yuen will own approximately 10.0%, Liberty will
beneficially own approximately 18.8% and News Corp. will beneficially own
approximately 18.8% of Gemstar's common stock based on the number of shares
of Gemstar common stock and TV Guide common stock and options to purchase
such shares outstanding on January 25, 2000.
The terms of the stockholders agreement are an important part of the merger.
We recommend that you read carefully the explanation of the stockholders
agreement on pages 121 through 124.
Q: What will Gemstar's name be after the merger?
A: TV Guide International, Inc.
Q: What effect do the merger agreement and the merger have on the pending
litigation between Gemstar and TV Guide?
A: The parties will seek to have the litigation placed in abeyance until
either the merger is completed or the merger agreement is terminated. If
the merger is completed, the litigation will cease permanently. If the
merger agreement is terminated, the litigation may be re-activated, unless
the cross license agreement between Gemstar and TV Guide becomes effective.
The cross license agreement is described below on page 99.
Q: What are the tax consequences of the merger to Gemstar and TV Guide
stockholders?
A: Gemstar stockholders will not be taxed as a result of the merger. TV Guide
stockholders will be taxed as a result of the exchange of TV Guide common
stock for Gemstar common stock in the merger only to the extent they
receive a cash payment for fractional shares.
A summary of the material U.S. federal income tax consequences of the merger
is included in the section "Material United States Federal Income Tax
Consequences of the Merger" beginning on page 149.
Q: What are the tax consequences of changing Gemstar's place of incorporation?
A: Gemstar believes that, under current regulations, neither Gemstar
stockholders nor TV Guide stockholders will be taxed as a result of
changing Gemstar's place of incorporation from the British Virgin Islands
to the State of Delaware if the change occurs before February 23, 2000.
After the change in place of incorporation, Gemstar's effective corporate
tax rate may increase. See the summary of tax consequences of the change in
Gemstar's place of incorporation beginning on page 149.
Q: What am I being asked to vote on?
A: Gemstar stockholders: You are being asked to vote on the following two
proposals:
. to approve the issuance of Gemstar common stock to TV Guide stockholders
in the merger; and
. to approve an amendment to the Gemstar International Group Limited 1994
Stock Incentive Plan.
Gemstar's board of directors has determined that the merger and the plan
amendment are in
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the best interests of Gemstar, has unanimously approved the proposals
listed above and unanimously recommends that you vote in favor of the
proposals. Four stockholders of Gemstar have agreed to vote in favor of the
first proposal listed above. See "Terms of the Voting Agreements" on page
120. These stockholders own an aggregate of approximately 31.6% of
Gemstar's outstanding common stock as of January 25, 2000.
TV Guide stockholders: You are being asked to vote on the following two
proposals:
. to approve and adopt the merger agreement; and
. to approve amendments to the TV Guide, Inc. Equity Incentive Plan.
TV Guide's board of directors has determined that the merger and the plan
amendments are in the best interests of TV Guide, has unanimously approved
the merger agreement, the merger and the plan amendments and unanimously
recommends that you vote in favor of the proposals.
Liberty Media Corporation and The News Corporation Limited together have
approximately 97.7% of the voting power of the outstanding TV Guide common
stock as of January 25, 2000. Each of Liberty and News Corp. has agreed to
vote for the approval and adoption of the merger agreement. See "Terms of
the Voting Agreements" on page 120. Accordingly, the required TV Guide
stockholder approval on this matter will be obtained.
Liberty and News Corp. have each indicated their intention to vote to
approve the plan amendments, thereby assuring their approval.
Q: When do you expect to complete the merger?
A: We expect to complete the merger as soon as possible after the
stockholders' meetings, if we obtain the required stockholder approvals at
these meetings. Because the merger is subject to governmental approvals,
we cannot predict when we will complete the merger. Either company can
terminate the merger agreement if we do not complete the merger by March
31, 2000 (except that this date will be extended to September 30, 2000 if
regulatory waiting periods have not expired or if the Department of
Justice has instituted an action seeking to challenge or enjoin the
merger).
Q: What do I need to do now?
A: Gemstar stockholders: After carefully reading and considering the
information contained in this joint proxy statement/prospectus, indicate on
the enclosed proxy card how you want to vote, and sign and submit it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the Gemstar special stockholders' meeting.
TV Guide stockholders: After carefully reading and considering the
information contained in this joint proxy statement/prospectus, indicate on
the enclosed proxy card how you want to vote, and sign and submit it in the
enclosed return envelope as soon as possible so that your shares may be
represented at the TV Guide special stockholders' meeting.
Q: How will my shares be voted if I return a blank proxy card?
A: If you sign and send in your proxy card and do not indicate how you want
to vote, we will count your proxy as a vote in favor of the proposals
submitted at your stockholders' meeting.
Q: When are the special stockholders' meetings?
A: The Gemstar special stockholders' meeting will take place on March 17,
2000. The TV Guide special stockholders' meeting will take place on March
17, 2000.
Q: Can I vote my shares in person?
A: Yes. You may attend your stockholders' meeting and vote your shares in
person rather than signing and mailing your proxy card.
Q: Can I revoke my proxy and change my vote?
A: Yes. You may revoke your proxy on or before the day of your stockholders'
meeting by
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following the directions on pages 50 through 52. Then you can either change
your vote or attend your stockholders' meeting and vote in person.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Brokers who hold shares of Gemstar common stock as nominees will not have
discretionary authority to vote the shares on the proposals to approve the
issuance of Gemstar common stock to TV Guide stockholders in the merger or
the plan amendment in the absence of instructions from the beneficial
owners. Brokers who hold shares of TV Guide common stock as nominees will
not have discretionary authority to vote the shares on the merger proposal
in the absence of instructions from the beneficial owners, but generally
will have discretionary authority to vote the shares on the plan amendment
proposal.
Q: Should I send in my share or stock certificates now?
A: Gemstar stockholders: No. Your stock certificates will continue to
represent your shares of Gemstar common stock after the change in Gemstar's
place of incorporation and your shares of the combined company's common
stock after the merger.
TV Guide stockholders: No. Gemstar will appoint an exchange agent to
coordinate the exchange of your shares of TV Guide common stock for shares
of Gemstar common stock after the merger is completed. The exchange agent
will send you written instructions on how to exchange your stock
certificates.
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WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions you should contact:
Gemstar International Group Limited TV Guide, Inc.
Investor Relations Investor Relations
135 North Los Robles Avenue, Suite 7140 South Lewis Avenue
800 Tulsa, Oklahoma 74136-5422
Pasadena, California 91101 (918) 488-4000
(626) 792-5700
If you would like additional copies of this document or if you have other
questions about the merger, you may contact Gemstar's proxy solicitor:
[LOGO OF GEORGESON SHAREHOLDER COMMUNICATIONS INC. APPEARS HERE]
17 State Street
10th Floor
New York, New York 10004
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800) 223-2064
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SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the terms of the merger fully and for a more
complete description of these terms, you should read carefully this joint proxy
statement/prospectus, including the annexes and the documents we have referred
you to. See "Where You Can Find More Information" on page 130.
Except as otherwise indicated, all share and per share numbers in the
following summary have been adjusted to reflect the two-for-one stock splits
effected in the form of stock dividends by Gemstar and TV Guide in December
1999.
The Companies
(see page 44)
Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
Gemstar develops, markets and licenses proprietary technologies and systems
that simplify and enhance the viewing and recording of video and television
programming. Gemstar licenses its technology and intellectual property to major
companies in the consumer-electronics and service provider industries.
TV Guide, Inc.
7140 South Lewis Avenue
Tulsa, Oklahoma 74136-5422
TV Guide is a media and communications company that provides print, passive
and interactive program listings guides to households, distributes programming
to cable television systems and direct-to-home satellite providers and markets
satellite-delivered programming to C-band satellite dish owners.
The Gemstar Special Meeting
(see page 37)
The special meeting of Gemstar stockholders will be held at 2-29-18 Nishi-
Ikebukuro, Toshima-ku, Tokyo 171, Japan on March 17, 2000, at 10 a.m. local
time.
At the Gemstar special meeting, holders of Gemstar common stock will
consider and vote upon proposals to:
. approve the issuance of Gemstar common stock to TV Guide stockholders in
the merger; and
. approve an amendment to the Gemstar International Group Limited 1994
Stock Incentive Plan.
The affirmative vote of a majority of the shares voted at the special
meeting, in person or by proxy, is required to approve the issuance of Gemstar
common stock in the merger. The affirmative vote of a majority of the shares
voted at the special meeting, in person or by proxy, is required to approve the
plan amendment.
Only Gemstar stockholders who hold Gemstar common stock at the close of
business on the Gemstar record date, February 10, 2000, will be entitled to
notice of and to vote at the Gemstar special meeting. As of January 25, 2000,
directors and executive officers of Gemstar and their affiliates beneficially
owned approximately 25.4% of the outstanding shares of Gemstar common stock.
In conjunction with the execution of the merger agreement, Henry C. Yuen,
Chairman of the Board, Chief Executive Officer, President and a director of
Gemstar, Elsie Ma Leung, Chief Financial Officer and a director of Gemstar,
Dynamic Core Holdings Limited, of which Thomas Lau (a director of Gemstar) is
the sole stockholder, and THOMSON multimedia S.A. each entered into agreements
with TV Guide to vote all Gemstar common stock that they are entitled to vote
in favor of the merger. These stockholders collectively have voting control, or
the ability to influence the vote, with respect to over 65,287,420 shares of
Gemstar common stock, which represented approximately 31.6% of the outstanding
shares of Gemstar common stock as of January 25, 2000.
As of January 25, 2000, Gemstar had a total of 206,788,370 shares of common
stock outstanding.
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The TV Guide Special Meeting
(see page 37)
The special meeting of TV Guide stockholders will be held at the Southern
Hills Marriott Hotel, 1902 East 71st Street South, Tulsa, Oklahoma on March 17,
2000, at 10 a.m. local time.
At the TV Guide special meeting, holders of TV Guide common stock will
consider and vote upon the proposals to:
. approve and adopt the merger agreement; and
. approve amendments to the TV Guide, Inc. Equity Incentive Plan.
The proposal to approve the merger agreement requires the affirmative vote
of a majority of the combined voting power of the outstanding shares of TV
Guide Class A and Class B common stock voting together as a single class.
Holders of shares of TV Guide Class A common stock are entitled to one vote for
each share of Class A common stock held and holders of shares of TV Guide Class
B common stock are entitled to ten votes for each share of Class B common stock
held on all matters submitted to a vote of TV Guide stockholders. The proposal
to approve the plan amendments requires the affirmative vote of a majority of
the combined voting power of the shares of TV Guide Class A and Class B common
stock present in person or represented by proxy at the special meeting and
entitled to vote, voting together as a single class.
Only TV Guide stockholders who hold TV Guide common stock at the close of
business on the TV Guide record date, January 25, 2000, will be entitled to
notice of and to vote at the TV Guide special meeting. As of January 25, 2000,
directors and executive officers of TV Guide and their affiliates (other than
Liberty Media Corporation and The News Corporation Limited) beneficially owned
less than 1% of the outstanding shares of TV Guide common stock, representing
less than 1% of the total voting power of the TV Guide common stock.
In conjunction with the execution of the merger agreement, Liberty Media
Corporation and The News Corporation Limited each entered into agreements with
Gemstar to vote all TV Guide common stock that they are entitled to vote in
favor of the merger. Each of Liberty and News Corp. has voting control over
58,075,040 shares of TV Guide's Class A common stock and 74,993,176 shares of
TV Guide's Class B common stock, which collectively represented approximately
87.4% of the outstanding shares and 97.7% of the total voting power of TV Guide
common stock as of January 25, 2000.
As of January 25, 2000, TV Guide had a total of 154,512,896 shares of Class
A common stock and 149,986,352 shares of Class B common stock outstanding.
Interests of Certain Gemstar
Directors and Executive Officers
in the Merger
(see page 72)
When considering the recommendation of Gemstar's board of directors
regarding the merger,
you should be aware of the interests that Henry C. Yuen, Chairman of the Board,
Chief Executive Officer, President and a director of Gemstar, and Elsie Ma
Leung, Chief Financial Officer and a director of Gemstar, have in the merger
that may be different from your and their interests as stockholders:
. Mr. Yuen will, pursuant to the combined company's bylaws, continue to be
Chairman of the Board and Chief Executive Officer of Gemstar for five
years after the completion of the merger unless he earlier dies or
resigns or his employment is earlier terminated for disability or for
cause in accordance with his employment agreement.
. Mr. Yuen has entered into a stockholders agreement with Liberty Media
Corporation, The News Corporation Limited and Gemstar under which
Liberty and News Corp. have agreed (1) to vote for, or to use their best
efforts to cause their respective designees on the board of directors to
vote for, Mr. Yuen's election as a director and appointment as Chairman
of the Board and Chief Executive Officer
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<PAGE>
until the earlier of the fifth anniversary of the completion of the
merger and the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar other than as a result of his termination without cause and (2)
to vote for the election to the board of five other persons (including
two independent directors) designated by Mr. Yuen until the earlier of
the fifth anniversary of the completion of the merger and the date
Mr. Yuen ceases to be Chief Executive Officer of Gemstar other than as a
result of his termination without cause, provided that if Mr. Yuen
should die or become disabled during such five-year period Liberty and
News Corp. have each agreed, for the remainder of the five-year period,
to continue to vote for the election to the board of the directors
formerly designated by Mr. Yuen or their successors (including Mr.
Yuen's successor) and to vote against their removal except for cause.
. Mr. Yuen has entered into an amendment to his existing employment
agreement, which, subject to the completion of the merger, extends the
overall term of his employment.
. Liberty and News Corp. have agreed to use their respective best efforts
to cause their designees to the Gemstar board of directors to vote for
the election of Ms. Leung (and any successor to her chosen by Mr. Yuen)
as co-President, co-Chief Operating Officer, a member of the Office of
the Chief Executive and Chief Financial Officer, for five years after
the completion of the merger unless her employment is earlier terminated
for cause.
Interests of Certain TV Guide
Directors and Executive Officers
in the Merger
(see page 73)
When considering the recommendation of TV Guide's board of directors
regarding the merger, you should be aware of the interests that the following
TV Guide directors and executive officers have in the merger that may be
different from your and their interests as stockholders:
. Joachim Kiener, TV Guide's Chairman and Chief Executive Officer, and
Peter C. Boylan III, TV Guide's President and Chief Operating Officer,
are entering into new employment agreements with TV Guide. Gemstar will
assume these new agreements in the merger. These agreements will
generally provide for increased benefits and a longer term of employment
after the completion of the merger. See pages 24, 25 and 94 for more
detail.
. Under the terms of existing stock option agreements, if the merger is
completed, stock options outstanding as of January 25, 2000 to purchase
an aggregate of 2,943,552 shares of TV Guide common stock will become
exercisable immediately, including stock options to purchase 2,164,400
shares of TV Guide common stock held by directors and executive officers
of TV Guide. Each stock option will become an option to purchase Gemstar
common stock (as adjusted in accordance with the merger agreement).
. Options granted to each of Messrs. Kiener and Boylan to purchase
1,521,376 shares of TV Guide common stock (which options will each
represent the right to purchase 1,000,000 shares of Gemstar common stock
following the completion of the merger), subject to TV Guide stockholder
approval of the plan amendments, will vest and become exercisable
ratably on each of the first through the sixth anniversaries of the
completion of the merger, rather than vesting at one time on September
30, 2009.
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<PAGE>
. The parties have agreed to continue the indemnification currently in
effect for TV Guide's directors, officers, employees and agents for a
period of six years after the completion of the merger. See page 114 for
more details.
. Messrs. Kiener and Boylan will join Gemstar after the completion of the
merger in the positions of co-Presidents and co-Chief Operating Officers
in charge of the businesses of TV Guide.
. Up to seven executive officers of TV Guide, including Messrs. Kiener and
Boylan, will enter into tax protection agreements with TV Guide before
the completion of the merger. These agreements will obligate TV Guide to
compensate them for the effects of United States federal excise taxes
that may become payable because of the acceleration of the vesting of
their stock options in connection with the completion of the merger.
Opinion of Financial Advisor to Gemstar's Board of Directors
(see page 58)
In deciding to approve the merger, Gemstar's board of directors considered
the opinion of Lazard Freres & Co. LLC, financial advisor to Gemstar's board of
directors, as to the fairness of the exchange ratio from a financial point of
view to Gemstar's stockholders. This opinion is attached as Annex D to this
document. We encourage you to read it in its entirety and consider it. See
pages 75 through 84 for a summary of the opinion.
Opinion of Financial Advisor to TV Guide's Board of Directors
(see page 67)
In deciding to approve the merger, TV Guide's board of directors considered
the opinion of TV Guide's financial advisor, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, that, as of October 3, 1999 and based upon and subject to
the factors and assumptions set forth in the opinion, the exchange ratio was
fair from a financial point of view to TV Guide's stockholders, other than
Liberty Media Corporation, The News Corporation Limited, Gemstar and their
respective affiliates. This opinion is attached as Annex E to this document. We
encourage you to read it in its entirety and consider it. See pages 85 through
92 for a summary of the opinion.
The Merger
The merger agreement, as amended, is attached as Annex A to this document.
We encourage you to read the merger agreement because it is the legal document
that governs the merger.
Conditions to the Merger
(see page 87)
We will not complete the merger until we have satisfied numerous conditions.
Some of the conditions are listed below:
. Gemstar stockholders must approve the issuance of Gemstar common stock
to TV Guide stockholders in the merger;
. Gemstar must adopt a new certificate of incorporation and bylaws in the
forms attached as Annexes B and C, respectively, to this joint proxy
statement/prospectus and change its place of incorporation from the
British Virgin Islands to the State of Delaware;
. TV Guide stockholders must approve and adopt the merger agreement;
. there must be no law or court order prohibiting the merger;
. the federal antitrust authorities must complete their review of the
merger and not seek to prohibit the merger;
. the shares of Gemstar common stock issuable to TV Guide stockholders
must be listed on the Nasdaq National Market; and
. the stockholders of Gemstar immediately before the completion of the
merger must own more than 50% of the combined company's outstanding
common stock immediately after the merger is completed.
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Regulatory Approvals
(see page 75)
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Gemstar and
TV Guide must furnish information and materials to the Department of Justice
(known as the DOJ) and the Federal Trade Commission (known as the FTC) and wait
a specified period of time before they can complete the merger. The DOJ or the
FTC has the authority to challenge the merger on antitrust grounds before or
after Gemstar and TV Guide complete the merger. Gemstar and TV Guide filed pre-
merger notification forms with the DOJ and the FTC on November 12, 1999. In
addition, Liberty Media Corporation and The News Corporation Limited, the two
largest beneficial owners of TV Guide common stock, filed or, in the case of
Liberty, caused its ultimate parent entity to file, on November 23, 1999 pre-
merger notification forms with the DOJ and the FTC.
The DOJ, which has been assigned as the reviewing agency, issued requests to
Gemstar and TV Guide on December 10, 1999 and to Liberty's ultimate parent
entity and News Corp. on December 23, 1999 for additional information and
documentary material (each known as a second request). As soon as there is
substantial compliance with each second request, a 20-day waiting period begins
during which the DOJ has an opportunity to review the merger. Such waiting
periods must expire or terminate before the merger may be completed. Gemstar,
TV Guide, Liberty (and its ultimate parent entity) and News Corp. are currently
preparing responses to the second requests.
Under U.S. federal communications laws, the merger will result in a transfer
of control to Gemstar of licenses held by TV Guide. The transfer of these
licenses will require the prior approval of the Federal Communications
Commission (known as the FCC). Both Gemstar and TV Guide have requested the
required approval in applications to the FCC.
Both companies also may be required to file a notice with the Committee on
Foreign Investment in the United States seeking approval of the United States
Government for the merger. See "The Merger--Regulatory Approvals."
Both companies may be required to make filings with or obtain approvals from
other domestic or international regulatory authorities in connection with the
merger. Some governmental authorities may impose conditions on the merger
before granting approval. We cannot predict whether we will obtain the required
regulatory approvals within the time frame specified in the merger agreement or
on conditions that would not be detrimental to either of us or the combined
company.
Non-Solicitation Agreements
(see page 85)
Neither Gemstar nor TV Guide may solicit or initiate or encourage or
participate in discussions or negotiations with or provide any information to
any third party concerning any merger, consolidation, purchase of assets,
tender offer, share exchange or other business combination or similar
transaction or an acquisition of 10% or more of its equity or a substantial
portion of its assets.
The restriction above will not prevent Gemstar's board of directors, in the
exercise of its fiduciary duties (after consultation with and not inconsistent
with advice of its legal counsel), from engaging in negotiations with a third
party who makes an unsolicited, written, bona fide acquisition proposal for 50%
or more of Gemstar's equity that is financially superior to the merger and for
which financing is capable of being obtained; provided, however:
. Gemstar's board of directors consults with its financial advisors, and
receives an opinion from them that the unsolicited offer is financially
superior to the merger;
. in considering any such unsolicited offer, Gemstar's board of directors
takes into consideration the strategic benefits of the merger and the
resolution of the litigation between Gemstar and TV Guide; and
. TV Guide is given at least five business days to amend the merger
agreement to offer terms no less favorable than the unsolicited superior
offer.
After complying with these conditions, Gemstar's board of directors may
withdraw its recommendation to Gemstar's stockholders that they
5
<PAGE>
approve the issuance of Gemstar common stock to TV Guide stockholders in the
merger. Even if Gemstar's board of directors withdraws its recommendation,
Gemstar must submit the foregoing proposal to a vote of its stockholders unless
the merger agreement is earlier terminated. For more a more detailed
description of these non-solicitation provisions, see pages 110 through 112.
Termination of the Merger Agreement
(see pages 88 and 89)
The boards of directors of both companies can jointly agree to terminate the
merger agreement at any time without completing the merger. In addition, either
company can terminate the merger agreement if we do not complete the merger by
March 31, 2000 (except that this date will be extended to September 30, 2000 if
regulatory waiting periods have not expired or the Department of Justice or
Federal Trade Commission has instituted an action seeking to challenge or
enjoin the merger) or the stockholders of either company fail to approve their
respective proposals related to the merger. Both companies have additional
termination rights more specifically described in the section "Terms of the
Merger Agreement--Termination" beginning on page 114.
Gemstar must pay TV Guide a termination fee of $205 million if Gemstar's
stockholders do not approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger.
If the Gemstar stockholders fail to approve the issuance of Gemstar common
stock to TV Guide stockholders in the merger and
. before the Gemstar stockholders' meeting there is an unsolicited
proposal by a third party for a merger, consolidation, purchase of
assets, tender offer, share exchange or other business combination or
similar transaction involving Gemstar or any of its subsidiaries or an
acquisition of 35% or more of the total equity interests in or voting
securities of Gemstar or any of its subsidiaries or a substantial
portion of the assets of Gemstar or any of its subsidiaries or any
public announcement of or agreement to engage in the foregoing, or
. Gemstar's board of directors withdraws or modifies its recommendation of
the proposal to approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger,
then Gemstar must pay TV Guide an additional amount of $204 million as
liquidated damages.
If the Gemstar stockholders fail to approve the issuance of Gemstar common
stock to TV Guide stockholders in the merger and at any time within 12 months
following termination of the merger agreement Gemstar enters into a definitive
agreement for, or consummates a transaction that if proposed before termination
of the merger agreement would have constituted an unsolicited proposal by a
third party for
. a merger, consolidation, purchase of assets, tender offer, share
exchange or other business combination or similar transaction involving
Gemstar or any of its subsidiaries,
. an acquisition of 10% or more of the total equity interests in or voting
securities of Gemstar or any of its subsidiaries,
. a substantial portion of the assets of Gemstar or any of its
subsidiaries, or
. any public announcement of or agreement to engage in the foregoing,
then Gemstar must pay TV Guide an additional amount of $204 million as
liquidated damages unless it already paid that amount in accordance with the
preceding paragraph.
Alternatively, Gemstar must pay TV Guide $409 million if TV Guide terminates
the merger agreement for any of the following reasons and is not then in
material breach of its representations, warranties or covenants:
. an inaccuracy at the time of signing the merger agreement of any
representation or warranty of Gemstar that would have a material adverse
effect on Gemstar;
. the unenforceability of certain ancillary agreements to the merger
agreement, including the stockholders agreement, against Gemstar, its
subsidiaries and Henry C. Yuen; or
6
<PAGE>
. a breach of the covenants made by Gemstar in the merger agreement,
unless in the case of certain of the covenants the breach would not have
a material adverse effect on Gemstar.
TV Guide must pay Gemstar $409 million if Gemstar terminates the merger
agreement for any of the following reasons and is not then in material breach
of its representations, warranties or covenants:
. an inaccuracy at the time of signing the merger agreement of any
representation or warranty of TV Guide that would have a material
adverse effect on TV Guide;
. the unenforceability of certain ancillary agreements to the merger
agreement, including the stockholders agreement, against TV Guide, its
subsidiaries, Liberty Media Corporation and The News Corporation
Limited;
. a breach of the covenants made by TV Guide in the merger agreement,
unless in the case of certain of the covenants the breach would not have
a material adverse effect on TV Guide,
. the stockholders of Gemstar immediately before the completion of the
merger would not in the aggregate own more than 50% of the combined
company's outstanding common stock immediately after the merger is
completed, using Gemstar's representations as to its capital stock and
assuming in general that shares repurchased remained outstanding, or
. the TV Guide stockholders do not approve the merger.
Cross License Agreement
(see page 77)
If the merger agreement is terminated for any of the following reasons,
Gemstar and TV Guide will, at the election of TV Guide, each grant a non-
exclusive license to the other of its patent rights with respect to interactive
program guides:
. the merger is not completed by March 31, 2000 (except that this date
will be extended to September 30, 2000 if regulatory waiting periods
have not expired or the Department of Justice or Federal Trade
Commission has instituted an action seeking to challenge or enjoin the
merger);
. TV Guide terminates the merger agreement because Gemstar's
representations and warranties were inaccurate at the time of signing
the merger agreement, except where the inaccuracy would not have a
material adverse effect on Gemstar;
. TV Guide terminates the merger agreement because of a breach of
covenants in the merger agreement by Gemstar, unless in the case of
certain of the covenants the breach would not have a material adverse
effect on Gemstar;
. either Gemstar or TV Guide terminates the merger agreement because a
governmental entity issues an order prohibiting the merger, and such
order is final and non-appealable; and
. either Gemstar or TV Guide terminates the merger agreement because the
Gemstar stockholders fail to approve the issuance of Gemstar common
stock to TV Guide stockholders in the merger.
7
<PAGE>
Cross Option Agreements
(see page 78)
Gemstar and TV Guide each granted the other an option to purchase 14.9% of
its common stock at the market price before the announcement of the merger
agreement. The options granted become exercisable in full upon either of the
following triggering events:
. if at any time before termination of the merger agreement (1) a third
party makes with respect to the company granting the option a proposal
regarding a merger, consolidation, purchase of assets, tender offer,
share exchange or other business combination or similar transaction or
the acquisition of 35% or more of the total equity interests in or
voting securities of the company granting the option, or publicly
announces an intention to make such a proposal, and (2) stockholders of
the company granting the option subsequently fail to approve the
issuance of Gemstar common stock to TV Guide stockholders in the merger,
in the case of Gemstar, or the merger agreement, in the case of TV
Guide; or
. the grantee of the option learns of a breach by the grantor of any of
the following covenants in the merger agreement: (1) the covenant
relating to non-solicitation; (2) the covenant relating to preparation
of the proxy statement, the holding of stockholders' meetings and the
recommendation of the board of directors to stockholders; (3) the
covenant to make filings with appropriate governmental entities; or (4)
with respect to TV Guide, Gemstar's covenant to list the shares of
Gemstar common stock to be issued in the merger for trading on the
Nasdaq National Market.
Each grantee of an option has registration rights with respect to the shares
issued pursuant to the option.
Accounting Treatment
(see page 74)
The merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles. Accordingly,
Gemstar's cost to acquire TV Guide will be allocated to the assets acquired and
liabilities assumed based on their fair values, with any excess being treated
as goodwill and amortized over its estimated useful life.
Treatment of TV Guide Stock Options
(see page )
When the merger is completed, all outstanding TV Guide stock options granted
before January 1, 1999, and 400,000 TV Guide stock options granted to each of
Joachim Kiener and Peter C. Boylan III on or after January 1, 1999 and 50,000
TV Guide stock options granted to others on or after January 1, 1999 will
accelerate and remain exercisable for the balance of their term. Gemstar will
assume all TV Guide stock options on substantially the same terms and
conditions as they were granted under the TV Guide stock option plans, except
that the number of shares subject to such options and the exercise price will
be adjusted as described on page and the vesting schedule for options to
purchase 1,521,376 shares of TV Guide common stock granted to each of Messrs.
Kiener and Boylan will change as described on page .
No Appraisal Rights
(see page 76)
Neither Gemstar stockholders nor TV Guide stockholders have a right to an
appraisal of the value of their shares in connection with the merger.
Change in Gemstar's Place of Incorporation (see page )
Gemstar is currently a British Virgin Islands corporation. Before February
23, 2000, Gemstar will change its place of incorporation from the British
Virgin Islands to the State of Delaware. For a comparison of the rights of
stockholders of Gemstar as a British Virgin Islands corporation and of
stockholders of Gemstar as a Delaware corporation see "Change in Gemstar's
Place of Incorporation From the British Virgin Islands to the State of
Delaware" beginning on page and Annex G.
8
<PAGE>
Comparison of the Rights of Gemstar and TV Guide Stockholders
(see page )
When the merger is completed, TV Guide stockholders will become Gemstar
stockholders. For a comparison of the rights of Gemstar stockholders and of TV
Guide stockholders see "Comparison of the Rights of Gemstar and TV Guide
Stockholders" beginning on page 142 and Annex F.
Risk Factors
(see page 15)
There are risks relating to the merger and the combined company that both
Gemstar and TV Guide stockholders should consider in evaluating how to vote.
These risks include the following, as well as others, which are more fully
discussed in the section "Risk Factors" on pages 17 through 33:
. the exchange ratio is determined in advance, and fluctuations in the
market price of Gemstar common stock will affect the value of the merger
consideration to be received by TV Guide stockholders;
. the holdings of Gemstar stockholders will be diluted by the merger;
. substantial stockholders of Gemstar and TV Guide have entered into a
stockholders agreement that will significantly affect control of the
combined company following the completion of the merger;
. the combined company's corporate governance structure following the
merger will be unusual, will continue Gemstar's and TV Guide's current
management and will require stockholders and directors of the combined
company to meet specified voting requirements before taking certain
actions;
. regulatory agencies may impose conditions on the merger;
. Gemstar and TV Guide may encounter difficulties in combining their
operations; and
. after the merger, the combined business may experience slower growth and
decreased profit margins and require greater capital expenditures than
the present business of Gemstar.
Recommendation of Gemstar's Board of Directors
(see page 55)
After careful consideration, Gemstar's board of directors believes that
approving the issuance of Gemstar common stock to TV Guide stockholders in the
merger and the plan amendment are advisable and are in your best interest and
unanimously recommends that you vote FOR these proposals.
Recommendation of TV Guide's Board of Directors
(see page 58)
TV Guide's board of directors believes that approving and adopting the
merger agreement and the plan amendments are advisable and are in your best
interest and unanimously recommends that you vote FOR these proposals.
9
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
Gemstar and TV Guide stockholders should read the selected consolidated
historical financial data presented below in conjunction with the consolidated
financial statements and related notes thereto of Gemstar and TV Guide
incorporated by reference into this joint proxy statement/prospectus.
Gemstar
The following selected consolidated historical financial data for Gemstar as
of September 30, 1999 and for the six months ended September 30, 1999 and 1998
are derived from the unaudited condensed consolidated financial statements of
Gemstar included in Gemstar's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, incorporated by reference into this joint proxy
statement/prospectus, and include all adjustments (consisting only of normal,
recurring adjustments) which management considers necessary for a fair
presentation of the results of such periods. The following selected
consolidated historical financial data for Gemstar as of March 31, 1999 and
1998 and for each of the years in the three-year period ended March 31, 1999
are derived from the audited consolidated financial statements of Gemstar
included in Gemstar's Annual Report on Form 10-K for the year ended March 31,
1999, incorporated by reference into this joint proxy statement/prospectus. The
following selected consolidated historical financial data for Gemstar as of
March 31, 1997, 1996 and 1995 and for each of the years in the two-year period
ended March 31, 1996 are derived from the consolidated financial statements of
Gemstar not included or incorporated by reference into this joint proxy
statement/prospectus. The selected consolidated historical financial data
presented below (in thousands, except per share data) should be read in
conjunction with the consolidated financial statements and related notes
thereto of Gemstar incorporated by reference into this joint proxy
statement/prospectus.
<TABLE>
<CAPTION>
Six Months
Ended
September 30, Year Ended March 31,
---------------- --------------------------------------------
1999 1998 (1) 1999 (1) 1998 (2) 1997 1996 1995 (3)
------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $90,303 $70,931 $166,456 $126,552 $82,997 $55,365 $41,814
Operating income
(loss)................. 51,224 35,785 95,364 51,781 (4,771) (56,182) (27,152)
Net income (loss)....... 41,865 28,445 73,915 38,707 (7,984) (59,029) (23,245)
Earnings (loss) per
share (4):
Basic................. 0.21 0.15 0.38 0.20 (0.04) (0.35) (0.15)
Diluted............... 0.18 0.13 0.33 0.19 (0.04) (0.35) (0.15)
</TABLE>
<TABLE>
<CAPTION>
March 31,
Sept. 30, ------------------------------------------
1999 1999 1998 1997 1996 1995
--------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............. $331,365 $253,164 $186,078 $131,276 $96,513 $64,457
Long-term debt........... -- -- -- -- -- --
Net shareholders' equity
(5)..................... 255,834 183,971 103,482 53,717 34,246 39,916
</TABLE>
- --------
(1) The consolidated operating results for the year ended March 31, 1999 and
for the six months ended September 30, 1998 include nonrecurring expenses
of $1.9 million incurred in defending Gemstar against a hostile takeover.
(2) The consolidated operating results for the year ended March 31, 1998
include nonrecurring expenses of $11.7 million incurred as a result of the
acquisition of StarSight Telecast, Inc.
(3) The consolidated operating results for the year ended March 31, 1995
include income from discontinued operations of $5.2 million.
(4) Earnings (loss) per share have been adjusted for the two-for-one stock
split effected in the form of a stock dividend in December 1999.
(5) A cash dividend of $0.03 per share, as adjusted for the stock split, was
declared in the year ended March 31, 1995.
10
<PAGE>
TV Guide
The following selected consolidated historical financial data for TV Guide
as of September 30, 1999 and for the nine months ended September 30, 1999 and
1998 are derived from the unaudited condensed consolidated financial statements
of TV Guide included in TV Guide's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, incorporated by reference into this joint
proxy statement/prospectus, and includes all adjustments (consisting only of
normal, recurring adjustments) which management considers necessary for a fair
presentation of the results of such periods. The following selected
consolidated historical financial data for TV Guide as of December 31, 1998 and
1997 and for each of the years in the three-year period ended December 31, 1998
are derived from the audited consolidated financial statements of TV Guide
included in TV Guide's Current Report on Form 8-K filed December 30, 1999,
incorporated by reference into this joint proxy statement/prospectus. These
consolidated financial statements became the historical consolidated financial
statements of TV Guide on March 1, 1999, the date TV Guide acquired certain
businesses from Liberty Media Corporation in a transaction that was accounted
for as a combination of entities under common control, similar to a pooling of
interests. The following selected consolidated historical financial data for TV
Guide as of December 31, 1996, 1995 and 1994 and for each of the years in the
two-year period ended December 31, 1995 are derived from the consolidated
financial statements of TV Guide not included or incorporated by reference into
this joint proxy statement/prospectus. The selected consolidated historical
financial data presented below (in thousands, except per share data) should be
read in conjunction with the consolidated financial statements and related
notes thereto of TV Guide incorporated by reference into this joint proxy
statement/prospectus.
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
----------------- --------------------------------------------
1999 (1) 1998 (2) 1998 (2) 1997 1996 (3) 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $817,439 $460,639 $621,940 $530,420 $484,713 $262,919 $196,679
Operating income........ 80,570 81,579 108,619 101,126 69,364 38,416 26,364
Net income.............. 23,916 77,937 102,059 67,435 46,302 23,172 16,307
Earnings per share (4):
Basic................. 0.09 0.45 0.59 0.39 0.28 0.16 0.12
Diluted............... 0.09 0.45 0.59 0.39 0.27 0.16 0.11
</TABLE>
<TABLE>
<CAPTION>
December 31,
Sept. 30, --------------------------------------------
1999 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............ $3,331,476 $412,506 $303,142 $259,004 $185,880 $147,048
Long-term debt.......... 625,321 13,007 17,207 20,718 23,992 26,542
Net stockholders'
equity................. 1,490,880 199,844 120,781 70,859 69,093 43,128
</TABLE>
- --------
(1) Effective March 1, 1999, TV Guide's consolidated operating results include
the operating results of certain corporations which own and publish TV
Guide Magazine, publish cable-based television listing guides, operate the
web site now known as TV Guide Online and hold certain other assets. These
corporations were acquired from an indirect subsidiary of The News
Corporation Limited in a transaction accounted for as a purchase.
(2) Effective February 1, 1998, TV Guide's consolidated operating results
include the operating results of Turner Vision Inc.'s retail C-band
business. Turner Vision contributed its retail C-band business to
Superstar/Netlink Group LLC, a joint venture formed to combine the retail
C-band business of TV Guide's Superstar division and Liberty's Netlink USA
division, in return for an approximate 20% interest in Superstar/Netlink
Group LLC.
(3) Effective April 1, 1996, TV Guide's consolidated operating results include
the operating results of Superstar/Netlink Group LLC. Before the formation
of Superstar/Netlink Group LLC, Superstar's retail C-band business operated
as a division of TV Guide.
(4) Earnings per share have been adjusted for the two-for-one stock split
effected in the form of a stock dividend in December 1999.
11
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial data gives
effect to the merger. The operating data assumes that the merger was completed
on April 1, 1998 and the balance sheet data assumes that the merger was
completed on September 30, 1999. The selected unaudited pro forma combined
financial data do not reflect any cost savings and other synergies which may
result from the merger and are not necessarily indicative of the results of
operations or the financial position which would have occurred had the merger
been completed on the dates indicated, nor is it necessarily indicative of
future results or financial position. The selected unaudited pro forma combined
financial data presented below (in thousands, except per share data) should be
read in conjunction with the historical consolidated financial statements and
related notes thereto of Gemstar and TV Guide incorporated by reference into
this joint proxy statement/prospectus and the Unaudited Pro Forma Condensed
Combined Financial Statements and related notes thereto included in this joint
proxy statement/prospectus.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
Sept. 30, 1999 March 31, 1999 (2)
---------------- ------------------
<S> <C> <C>
Statement of Operations Data:
Revenues.................................... $ 705,900 $1,466,991
Operating loss.............................. (147,030) (245,328)
Net loss.................................... (170,063) (278,211)
Loss per share (1):
Basic..................................... (0.43) (0.70)
Diluted................................... (0.43) (0.70)
Other Data:
EBITDA (3).................................. 173,145 386,887
</TABLE>
<TABLE>
<CAPTION>
Sept. 30, 1999
--------------
<S> <C>
Balance Sheet Data:
Total assets..................................................... $10,920,125
Long-term debt................................................... 605,321
Net shareholders' equity......................................... 8,117,646
</TABLE>
- --------
(1) Loss per share has been adjusted for the two-for-one stock split effected
in the form of a stock dividend in December 1999.
(2) The pro forma combined financial data for the year ended March 31, 1999 is
based on Gemstar's operating results for that period and those of TV Guide
for the year ended December 31, 1998.
(3) EBITDA means operating loss before depreciation and amortization. EBITDA is
presented supplementally as management believes it is an appropriate
measure for evaluating operating performance and is a standard measure
commonly reported and widely used by analysts, investors and others
associated with the media and entertainment industry. However, EBITDA does
not take into account substantial costs of doing business, such as income
taxes and interest expense. Accordingly, it should be considered in
addition to, but not as a substitute for, operating income, net income,
cash flow from operations and other measures of financial performance
prepared in accordance with generally accepted accounting principles which
are presented in the consolidated financial statements incorporated by
reference into this joint proxy statement/prospectus. Additionally,
Gemstar's calculation of EBITDA may be different than the calculation used
by other companies and therefore, comparability may be affected.
12
<PAGE>
HISTORICAL AND PRO FORMA PER SHARE DATA
We have summarized below the per share information of Gemstar and TV Guide
on a historical, pro forma combined and pro forma equivalent basis. The
information should be read in conjunction with the historical consolidated
financial statements and related notes thereto of Gemstar and TV Guide that are
incorporated by reference into this joint proxy statement/prospectus and the
Unaudited Pro Forma Condensed Combined Financial Statements and related notes
thereto included in this joint proxy statement/prospectus. For information on
where you can find more information about Gemstar and TV Guide, see pages 170
through 172.
You should be aware that the pro forma information may not be indicative of
what actual results will be in the future or what results would have been had
Gemstar and TV Guide been merged for the periods presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
Sept. 30, 1999 March 31, 1999 (1)
---------------- ------------------
<S> <C> <C>
Basic earnings (loss) per share (2):
Gemstar historical......................... $0.21 $0.38
TV Guide historical........................ 0.04 0.30
Gemstar pro forma combined................. (0.43) (0.70)
TV Guide pro forma equivalent (3).......... (0.28) (0.46)
Diluted earnings (loss) per share (2):
Gemstar historical......................... 0.18 0.33
TV Guide historical........................ 0.04 0.30
Gemstar pro forma combined................. (0.43) (0.70)
TV Guide pro forma equivalent (3).......... (0.28) (0.46)
<CAPTION>
Sept. 30, 1999
--------------
<S> <C> <C>
Book value per share (2):
Gemstar historical......................... $1.27
TV Guide historical........................ 4.90
Gemstar pro forma combined................. 20.26
TV Guide pro forma equivalent (3).......... 13.32
</TABLE>
- --------
(1) Earnings per share for TV Guide are for the year ended December 31, 1998 on
a pro forma basis for TV Guide's acquisitions of News America Publications
Inc. and TVSM, Inc.
(2) Per share amounts have been adjusted for the Gemstar and TV Guide two-for-
one stock splits effected in the form of stock dividends in December 1999.
(3) Amount is calculated by multiplying the Gemstar pro forma combined amount
by the exchange ratio of 0.6573.
(4) No cash dividends were paid by Gemstar or TV Guide during the periods
presented.
13
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Gemstar common stock is traded on the Nasdaq National Market under the
symbol "GMST." TV Guide Class A common stock is traded on the Nasdaq National
Market under the symbol "TVGIA."
The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of Gemstar common stock and TV Guide Class A
common stock each as reported on the Nasdaq National Market and, in the case of
Gemstar common stock, as adjusted for the two-for-one stock splits, effected in
the form of stock dividends, on May 14, 1999 and December 13, 1999 and, in the
case of the TV Guide Class A common stock, as adjusted for the two-for-one
stock splits, effected in the form of stock dividends, on August 21, 1998 and
December 17, 1999. The TV Guide Class B common stock is not publicly traded and
is beneficially owned by Liberty Media Corporation and The News Corporation
Limited. All share numbers and share prices in this joint proxy
statement/prospectus (other than share numbers and share prices in "The
Merger--Background of the Merger," "The Merger--Opinion of Financial Advisor to
Gemstar's Board of Directors," "The Merger--Opinion of Financial Advisor to TV
Guide's Board of Directors," Annex E and Annex F) have been appropriately
adjusted to reflect the foregoing stock splits as applicable.
<TABLE>
<CAPTION>
TV Guide
Gemstar Class A
Common Stock Common Stock
------------- -------------
Market Price Market Price
------------- -------------
High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
Year Ended December 31, 1998
First Quarter..................................... $ 9.34 $ 5.19 $10.82 $ 6.69
Second Quarter.................................... 11.44 7.19 11.07 9.00
Third Quarter..................................... 12.06 7.75 10.28 6.88
Fourth Quarter.................................... 17.30 9.63 13.38 5.13
Year Ended December 31, 1999
First Quarter..................................... $18.97 $13.88 $20.75 $10.94
Second Quarter.................................... 33.81 18.00 25.13 17.39
Third Quarter..................................... 40.56 24.63 20.82 12.82
Fourth Quarter ................................... 79.50 33.31 48.50 19.31
Year Ended December 31, 2000
First Quarter (through February 7, 2000).......... $88.50 $60.94 $50.00 $34.44
</TABLE>
On October 1, 1999, the last full trading day before the public announcement
of the execution and delivery of the merger agreement, the closing price per
share of: (1) Gemstar common stock was $41.81 and (2) TV Guide Class A common
stock was $20.77. On February 7, 2000, the most recent practicable date before
the date of this document, the closing price per share of: (1) Gemstar common
stock was $63.38 and (2) TV Guide Class A common stock was $36.75. We urge
stockholders to obtain current market quotations before making any decision
with respect to the merger.
Neither Gemstar nor TV Guide has declared a cash dividend on its securities
since it became a public company. Gemstar intends to retain future earnings for
use in its business and does not anticipate paying any dividends on Gemstar
common stock in the foreseeable future. Under TV Guide's existing credit
facilities, TV Guide is limited in the amount of cash dividends it can pay on
TV Guide common stock.
On February 7, 2000, there were approximately 266 holders of record of
Gemstar common stock. There were approximately 111 holders of record of TV
Guide common stock on the record date for the special meeting of TV Guide
stockholders.
After the change in Gemstar's place of incorporation from the British Virgin
Islands to the State of Delaware and after the completion of the merger, shares
of Gemstar common stock will continue to be traded on the Nasdaq National
Market. After the completion of the merger, shares of TV Guide Class A common
stock will cease to be traded on the Nasdaq National Market.
14
<PAGE>
RISK FACTORS
You should consider the following risks in making your determination as to
how to vote on the proposals relating to the merger and the transactions
contemplated by the merger agreement. These matters should be considered along
with the other information included or incorporated by reference in this joint
proxy statement/prospectus. We have separated the risks into three groups:
. risks relating to the merger;
. risks relating to the combined company; and
. risks relating to the change in Gemstar's place of incorporation.
RISKS RELATING TO THE MERGER
The exchange ratio is determined in advance, and fluctuations in the market
price of Gemstar common stock will affect the value of the merger consideration
to be received by TV Guide stockholders
As a result of the merger, each outstanding share of TV Guide common stock
will be converted into the right to receive 0.6573 of a share of Gemstar common
stock. The merger agreement does not provide for adjustment of this exchange
ratio if the market price of Gemstar common stock fluctuates. As a result, TV
Guide stockholders will not be compensated for decreases in the market price of
Gemstar common stock which could occur before the completion of the merger. If
the market price of Gemstar common stock decreases before the completion of the
merger, the value at the completion of the merger of the Gemstar common stock
to be received by TV Guide stockholders in the merger would correspondingly
decrease. In addition, because the merger will be completed only after all the
conditions to the merger are satisfied or waived, including the receipt of
regulatory approvals, there is no way to be sure that the price of Gemstar
common stock at the time the merger is completed will be the same as its price
on the date of the special meetings. Changes in the business, operations or
prospects of Gemstar, regulatory considerations, general market and economic
conditions and other factors may affect the price of Gemstar common stock. Many
of those factors are beyond our control. You are encouraged to obtain current
market quotations for Gemstar common stock. No assurance can be given as to the
market price of Gemstar common stock at any time before the completion of the
merger or as to the market price of Gemstar common stock at any time
thereafter.
The holdings of Gemstar stockholders will be diluted by the merger
The merger will dilute the ownership position of the present stockholders of
Gemstar. Based on the number of shares of TV Guide common stock outstanding at
January 25, 2000 and an exchange ratio of 0.6573, Gemstar would issue to TV
Guide stockholders approximately 200.1 million shares (207.4 million shares
assuming the exercise of all vested and unvested options) of Gemstar common
stock in the merger. As a result, based on the number of shares of Gemstar
common stock outstanding at January 25, 2000, TV Guide stockholders would hold
approximately 49.2% (44.6% on a fully diluted basis assuming the exercise of
all vested and unvested options) of the outstanding shares of Gemstar common
stock immediately after the completion of the merger.
Substantial stockholders of Gemstar and TV Guide have entered into a
stockholders agreement that will significantly affect control of the combined
company following the completion of the merger
Immediately following the completion of the merger, Henry C. Yuen will own
approximately 3.0%, Liberty Media Corporation will beneficially own
approximately 21.5% and The News Corporation Limited will beneficially own
approximately 21.5% of the outstanding shares of Gemstar common stock based on
the number of shares of Gemstar common stock and TV Guide common stock
outstanding on January 25, 2000. On a fully diluted basis (assuming the
exercise of all vested and unvested options), Mr. Yuen will own approximately
10.0%, Liberty will beneficially own approximately 18.8% and News Corp. will
beneficially own approximately 18.8% of Gemstar's common stock based on the
number of shares of Gemstar common
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stock and TV Guide common stock and options to purchase such shares outstanding
on January 25, 2000. These stockholders and Gemstar have entered into a
stockholders agreement, which will be effective upon the completion of the
merger. The stockholders agreement provides, among other things, for the
following:
. Each of Liberty and News Corp. will vote their shares of Gemstar common
stock for the election to the combined company's board of directors of
Mr. Yuen and five persons (including two independent directors)
designated by Mr. Yuen. For purposes of the stockholders agreement, six
of the combined company's initial directors selected by Gemstar are
deemed selected by Mr. Yuen.
. Mr. Yuen will vote his shares of Gemstar common stock for the election
to the combined company's board of directors of three persons (including
one independent director) designated by Liberty and three persons
(including one independent director) designated by News Corp. For
purposes of the stockholders agreement, three of the combined company's
initial directors selected by TV Guide are deemed selected by Liberty
and three of the combined company's initial directors selected by TV
Guide are deemed selected by News Corp.
. Liberty and News Corp. have agreed to use their respective best efforts
to cause their designees to the combined company's board of directors to
vote for the election of Mr. Yuen as Chairman of the Board and Chief
Executive Officer and Elsie Ma Leung (and any successor to her chosen by
Mr. Yuen) as co-President, co-Chief Operating Officer, a member of the
Office of the Chief Executive and Chief Financial Officer for five years
after the completion of the merger unless her employment is earlier
terminated for cause.
. Mr. Yuen has agreed to use his best efforts to cause his designees to
the combined company's board of directors to vote for (1) the election
of Joachim Kiener (and any successor to him chosen by News Corp.) as co-
President, co-Chief Operating Officer and a member of the Office of the
Chief Executive, and (2) the election of Peter C. Boylan III (and any
successor to him chosen by Liberty) as co-President, co-Chief Operating
Officer and a member of the Office of the Chief Executive.
Except as stated above, the arrangements described above will be in effect
until the earlier of the fifth anniversary of the completion of the merger and
the date Mr. Yuen ceases to be Chief Executive Officer of Gemstar other than as
a result of his termination without cause. Additionally, if Mr. Yuen should die
or become disabled during such five-year period, Liberty and News Corp. have
each agreed, for the remainder of the five-year period, to continue to vote for
the election to the combined company's board the directors formerly designated
by Mr. Yuen or their successors (including Mr. Yuen's successor) and to vote
against their removal except for cause.
The arrangements created by the stockholders agreement, together with the
provisions of the combined company's bylaws discussed below, will have the
effect of continuing the present management of Gemstar and TV Guide in office
for five years. Such documents will also ensure that six directors selected by
Mr. Yuen (two of whom will be independent directors), three directors selected
by Liberty (one of whom will be an independent director) and three directors
selected by News Corp. (one of whom will be an independent director) will
comprise the combined company's board of directors for five years after the
completion of the merger.
The terms of the stockholders agreement are an important part of the merger.
We recommend that you read carefully the explanation of the stockholders
agreement on pages 121 through 124.
Our corporate governance structure following the merger will be unusual,
will continue Gemstar's and TV Guide's current management and will require
stockholders and directors of the combined company to meet specified voting
requirements before taking certain actions
Gemstar and TV Guide have agreed to a variety of corporate governance
arrangements that will differ significantly from the manner in which the two
companies are currently managed.
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First, the combined company's bylaws will provide that Henry C. Yuen will be
Chairman of the Board (so long as he is a director) and Chief Executive Officer
for five years after the completion of the merger unless he earlier dies or
resigns or his employment is earlier terminated for disability or for cause in
accordance with his employment agreement. This bylaw requirement can only be
changed with the approval of nine of the twelve members of the board of
directors or by the affirmative vote of 66 2/3% or more of the voting power of
Gemstar's stock. It is unlikely that any such amendment to the bylaws will be
made, however, because:
. Mr. Yuen is entitled to select six members of the board of directors;
and
. Liberty Media Corporation and The News Corporation Limited (who will
collectively beneficially own approximately 43.0% of Gemstar's
outstanding common stock immediately after the completion of the merger
based on the number of shares of Gemstar common stock and TV Guide
common stock outstanding on January 25, 2000) have each agreed to vote
their shares of Gemstar common stock for, or to use their best efforts
to cause their respective designees on the board of directors to vote
for, the election of Mr. Yuen as a director, the appointment of Mr. Yuen
as Chairman of the Board and Chief Executive Officer and the election of
five other designees of Mr. Yuen as directors.
Second, the combined company's certificate of incorporation will require the
affirmative vote of at least 66 2/3% of the voting power of Gemstar's stock to
approve certain actions. See "Summary of the Combined Company's Certificate of
Incorporation and Bylaws--Supermajority Vote." As a result, Liberty and News
Corp., if they voted together, would be able to prevent the combined company
from taking such actions.
Third, the combined company's bylaws will require approval of seven of the
twelve members of the board of directors for certain itemized fundamental
decisions. As a result, if all six directors designated by Mr. Yuen or all six
directors designated by Liberty and News Corp. vote to oppose any fundamental
decision identified in the bylaws, then the combined company will not be able
to take such action.
Fourth, the combined company's bylaws provide that, except for matters
delegated to the Compensation Committee, the Audit Committee or the Special
Committee, matters identified in the bylaws as "fundamental decisions" and
matters that require approval by supermajority vote of stockholders, if a
matter is brought before the board of directors and if there is a tie vote with
respect to such matter, then the exclusive power to approve or disapprove that
matter will generally be exercised by the Tie-breaking Committee (of which Mr.
Yuen will be the sole member) until the earlier of the fifth anniversary of the
completion of the merger and the date Mr. Yuen ceases to be Chief Executive
Officer of Gemstar. Thereafter, until the third annual board of directors'
meeting following (1) the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar or, if later, (2) the fifth anniversary of the completion of the
merger, the TVG Director Committee, the members of which will be directors
designated by TV Guide immediately before the merger or their successors, will
generally have the ability to resolve tie votes. See "Summary of Certificate of
Incorporation and Bylaws--Board of Directors."
There is no assurance that the arrangements contained in the combined
company's certificate of incorporation or bylaws will prove to be a successful
model for managing the combined company.
The combined company's governance structure following the completion of the
merger is an important part of the merger. We recommend that you read carefully
the complete explanation of this structure in the "Summary of the Combined
Company's Certificate of Incorporation and Bylaws," as well as the complete
text of the proposed form of certificate of incorporation and bylaws attached
as Annexes B and C, respectively, to this joint proxy statement/prospectus.
Anti-takeover defense provisions may make it more difficult for a third party
to acquire control of the combined company
After the change in Gemstar's place of incorporation from the British Virgin
Islands to the State of Delaware and the completion of the merger, the combined
company's new certificate of incorporation and bylaws will contain certain
provisions substantially similar to those provisions in Gemstar's current
governing
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documents that could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the combined company. These provisions impose various procedural and
other requirements which could make it more difficult for stockholders to
effect certain corporate actions. For example, the combined company's
certificate of incorporation will provide that directors will be elected and
retired in rotation. Directors will be elected to three-year terms, and only
one-third of the directors will stand for election in a given year.
Additionally, after the completion of the merger, the combined company will
continue the effectiveness of Gemstar's rights agreement commonly known as a
"poison pill," with certain amendments. Under the rights agreement, holders of
Gemstar's common stock are entitled to one preferred share purchase right for
each share of common stock they hold. The rights are triggered if a third party
acquires beneficial ownership of 15% or more of Gemstar's common stock. Once
triggered, the rights entitle stockholders (other than the third party causing
such rights to be triggered) to purchase Gemstar common stock at a discount. As
a result, the rights have the anti-takeover effect of causing substantial
dilution to a person or group that attempts to acquire a significant amount of
Gemstar common stock on terms not approved by Gemstar's board of directors. The
purpose of the rights agreement is to ensure that any potential acquiror of
Gemstar must negotiate with the board of directors before an acquisition. The
rights agreement, as amended, will also discourage each of Liberty Media
Corporation and The News Corporation Limited from increasing their respective
ownership positions in the combined company after the completion of the merger,
except for certain permitted purchases of Gemstar common stock. See "Summary of
Amendments to Rights Agreement."
The foregoing provisions may now and could in the future limit the price
that certain investors might be willing to pay for shares of Gemstar common
stock or may discourage offers for Gemstar, even those in the best interests of
Gemstar's stockholders.
Regulatory agencies may impose conditions on the merger
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Gemstar and
TV Guide were required to file pre-merger notification and report forms with
the Antitrust Division of the Department of Justice (known as the DOJ) and the
Federal Trade Commission (known as the FTC), and a waiting period must expire
or terminate before the merger may be completed. The DOJ or the FTC could take
action under the antitrust laws to enjoin the merger or require divestiture of
assets or businesses of Gemstar or TV Guide. We also do not know whether a
third party will challenge the merger on antitrust grounds or what the result
of a third party challenge might be.
Gemstar and TV Guide filed pre-merger notification forms with the DOJ and
the FTC on November 12, 1999. In addition, Liberty Media Corporation and The
News Corporation Limited, the two largest beneficial owners of TV Guide common
stock, filed or, in the case of Liberty, caused its ultimate parent entity to
file, on November 23, 1999 pre-merger notification forms with the DOJ and the
FTC. The DOJ, which has been assigned as the reviewing agency, issued requests
to Gemstar and TV Guide on December 10, 1999 and to Liberty's ultimate parent
entity and News Corp. on December 23, 1999 for additional information and
documentary material (each known as a second request). As soon as there is
substantial compliance with each second request, a 20-day waiting period begins
during which the DOJ has an opportunity to review the merger. Such waiting
periods must expire or terminate before the merger may be completed. Gemstar,
TV Guide, Liberty (and its ultimate parent entity) and News Corp. are currently
preparing responses to the second requests.
It is possible that one or more individual states could investigate and
challenge the merger under either federal law or their own state law, although
states have no notification and waiting period requirements. Depending on the
nature of any of these challenges, and any conditions imposed as a result,
these challenges and conditions could delay the completion of the merger or
lessen the anticipated benefits of the merger.
In addition, approval by the Federal Communications Commission (known as the
FCC) is required for the transfer of control to Gemstar of a small number of
licenses which authorize TV Guide to use facilities to
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transmit programming to satellites. Applications have been filed requesting
such approval, which are subject to public comment.
The merger agreement requires us to take all steps necessary to avoid or
eliminate each and every impediment to the merger and to obtain all consents or
waivers under any antitrust, competition, communications or broadcast law that
may be asserted by any governmental authority so as to enable us to complete
the merger as expeditiously as possible (including, among other things, the
sale or disposition of assets or businesses as may be required). The merger
agreement does not, however, obligate either of us to divest assets on which
our respective electronic program guide businesses are dependent if such
divestiture would have a material adverse effect on such business or take any
other action that materially and adversely impacts our respective abilities to
participate in the electronic program guide business.
We may have difficulties in combining the operations of Gemstar and TV Guide
and may not achieve strategic and other benefits
We may not be able to combine successfully the operations of Gemstar and TV
Guide. Among the factors considered by Gemstar's board of directors and TV
Guide's board of directors in connection with their respective approvals of the
merger agreement and the merger were the opportunities for efficiencies that
could result from the merger. Difficulties may be encountered in integrating
the operations of Gemstar and TV Guide, and the benefits expected from such
integration may not be realized. We cannot assure you that we will retain our
key personnel or that we will realize any of the other anticipated benefits of
the merger.
The merger will permit integrating Gemstar's and TV Guide's product
offerings and coordinating our research and development and sales and marketing
efforts. The difficulties of such integration and coordination may be increased
by the fact that:
. our executive officers are not anticipated to be located in one place,
and
. our personnel do not have the same business backgrounds.
In addition, the process of integrating Gemstar and TV Guide will require
substantial attention from management and could cause the interruption of, or a
loss of momentum in, our business activities, which could have an adverse
effect on our combined operations. See "Unaudited Pro Forma Combined Financial
Statements." Also, any delays or increased costs of combining the two companies
could adversely affect us and disrupt our operations.
Gemstar's and TV Guide's directors and executive officers may have interests
different from or in addition to those of stockholders generally
When considering the recommendation of Gemstar's board of directors to
approve the issuance of Gemstar common stock to TV Guide stockholders in the
merger, you should be aware that the directors and executive officers of
Gemstar identified below may have interests in the merger that are different
from or in addition to your and their interests as stockholders:
. Henry C. Yuen, Chairman of the Board, Chief Executive Officer, President
and a director of Gemstar:
. will, pursuant to the combined company's bylaws, continue to be
Chairman of the Board (so long as he is a director) and Chief
Executive Officer of Gemstar for five years after the completion of
the merger unless he earlier dies or resigns or his employment is
earlier terminated for disability or for cause in accordance with
his employment agreement;
. will, pursuant to the combined company's bylaws, be the sole member
of the Tie-breaking Committee of the Gemstar board with the power to
resolve tie votes of the Gemstar board and the Executive Committee
(except for matters delegated to the Compensation Committee, the
Audit Committee or the Special Committee, matters identified in the
bylaws as "fundamental
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decisions" and matters that require approval by supermajority vote
of stockholders) until the earlier of the fifth anniversary of the
completion of the merger and the date Mr. Yuen ceases to be Chief
Executive Officer of Gemstar;
. has entered into a stockholders agreement with Liberty Media
Corporation, The News Corporation Limited and Gemstar under which
Liberty and News Corp. have agreed (1) to vote for, or to use their
best efforts to cause their respective designees on the board of
directors to vote for, Mr. Yuen's election as a director and
appointment as Chairman of the Board and Chief Executive Officer
until the earlier of the fifth anniversary of the completion of the
merger and the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar other than as a result of his termination without cause and
(2) to vote for the election to the board of five other persons
(including two independent directors) designated by Mr. Yuen until
the earlier of the fifth anniversary of the completion of the merger
and the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar other than as a result of his termination without cause,
provided that if Mr. Yuen should die or become disabled during such
five-year period Liberty and News Corp. have each agreed, for the
remainder of the five-year period, to continue to vote for the
election to the board of the directors formerly designated by Mr.
Yuen or their successors (including Mr. Yuen's successor) and to
vote against their removal except for cause; and
. has entered into an amendment to his existing employment agreement,
which, subject to the completion of the merger, extends the overall
term of his employment.
. Liberty and News Corp. have agreed to use their respective best efforts
to cause their designees to the Gemstar board of directors to vote for
the election of Elsie Ma Leung (and any successor to her chosen by Mr.
Yuen), as co-President, co-Chief Operating Officer, a member of the
Office of the Chief Executive and Chief Financial Officer, for five
years after the completion of the merger unless her employment is
earlier terminated for cause.
Gemstar stockholders should consider whether these interests may have
influenced Gemstar's directors and executive officers to support or recommend
the proposal to approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger.
When considering the recommendation of TV Guide's board of directors to
approve and adopt the merger agreement, you should be aware that the directors
and executive officers of TV Guide identified below may have interests in the
merger that are different from or in addition to your and their interests as
stockholders:
. Joachim Kiener, TV Guide's Chairman and Chief Executive Officer, and
Peter C. Boylan III, TV Guide's President and Chief Operating Officer,
are entering into new employment agreements with TV Guide, effective as
of March 1, 1999, for a term of four years expiring on March 1, 2003.
Gemstar will assume these agreements in the merger. The employment
agreements will provide for Messrs. Kiener and Boylan to receive the
following increased benefits subject to completion of the merger:
. The term of employment for each of Messrs. Kiener and Boylan will be
extended to the sixth anniversary of the completion of the merger.
. After the sixth anniversary of the completion of the merger, the
employment agreements for each of Messrs. Kiener and Boylan will be
automatically renewed for a term of three additional years unless
either party elects not to renew. If such agreements are not renewed
or if the terms of such renewal are not agreed upon, such failure to
renew or agree will be treated as a termination without cause under
the employment agreements, in which case Mr. Kiener or Mr. Boylan,
as the case may be, will be entitled to three times his annual base
salary.
. Mr. Kiener's base compensation will increase, but the guaranteed
portion of his bonus will be eliminated, resulting in a net decrease
of Mr. Kiener's guaranteed annual cash compensation.
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. Provisions in the employment agreements relating to the procedure
for and effect of terminating the employment of Messrs. Kiener and
Boylan for cause will become more favorable to the employee and will
require that Mr. Kiener or Mr. Boylan, as the case may be, receives
notice of any proposed termination and an opportunity to be heard by
a majority of the board of directors before any such termination.
. If either Mr. Kiener or Mr. Boylan is terminated without cause or
has been constructively terminated, Mr. Kiener or Mr. Boylan, as the
case may be, will be entitled to a lump sum payment equal to the
greater of three times his annual base salary or the amount equal to
the product of his annual base salary multiplied by the number of
years remaining (rounded up) in the term of employment under his
employment agreement and will be entitled to the continuation of the
additional benefits provided for in his employment agreement (such
as participation in medical, disability and life insurance plans)
for 60 months from the last date of employment. If either Mr. Kiener
or Mr. Boylan is terminated without cause or is constructively
terminated, all stock options and other stock incentive awards
previously granted to him will immediately vest in full and become
fully exercisable for their full term and all previously vested
stock options and other stock incentive awards will remain fully
exercisable for their full term.
. At any time after the eighteenth month following the completion of
the merger, each of Messrs. Kiener and Boylan will be entitled to
terminate his employment with Gemstar without reason and receive a
lump sum payment equal to his current annual base salary. All
previously vested stock options and other stock incentive awards
shall remain fully exercisable for their full term rather than a
maximum period of three months in the event of such termination.
. The definition of "change of control" in the employment agreements
will be broader following the completion of the merger, and in the
event of a change of control, each of Mr. Kiener or Mr. Boylan will
have the right to terminate his employment within 90 days of notice
of a change of control and receive a lump sum payment of five times
his current base salary and the continuation of all other elements
of his compensation for 60 months from the last date of employment.
In such event, all unvested stock options and other stock incentive
awards previously granted to each of Mr. Kiener or Mr. Boylan, as
the case may be, will immediately vest in full and such options and
awards and all previously vested stock options and other stock
incentive awards shall remain fully exercisable for their full term.
. Each of Messrs. Kiener and Boylan will be released from certain
post-employment covenants relating to competing with, soliciting
employees of and cooperating with Gemstar.
. Gemstar may not terminate (1) Mr. Kiener's employment without the
consent of the Gemstar board members designated by The News
Corporation Limited (other than Mr. Kiener and any independent
director) or (2) Mr. Boylan's employment without the consent of the
Gemstar board members designated by Liberty Media Corporation (other
than Mr. Boylan and any independent director).
. The amount that Messrs. Kiener and Boylan will be entitled to be
reimbursed for certain benefits will be increased to offset the tax
effect of receiving such benefits.
. Pursuant to the merger agreement, all outstanding TV Guide stock options
granted before January 1, 1999, and 400,000 TV Guide stock options
granted to each of Messrs. Kiener and Boylan on or after January 1, 1999
and 50,000 TV Guide stock options granted to others on or after January
1, 1999 will accelerate and remain exercisable for the balance of their
term. Also, options granted to each of Messrs. Kiener and Boylan to
purchase 1,521,376 shares of TV Guide common stock (which options will
each represent the right to purchase 1,000,000 shares of Gemstar common
stock following the completion of the merger), subject to TV Guide
stockholder approval of the plan amendments, will vest and become
exercisable ratably on each of the first through the sixth anniversaries
of the merger,
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rather than vesting at one time on September 30, 2009. Each of the
foregoing stock options will become an option to purchase Gemstar common
stock (as adjusted in accordance with the merger agreement). As of
January 25, 2000, the number of shares of TV Guide common stock subject
to options held by
. Mr. Kiener was 2,121,376, and
. Mr. Boylan was 4,134,584.
Additionally, other directors or executive officers of TV Guide have
TV Guide stock options. As of January 25, 2000, the number of shares of
TV Guide common stock subject to options held by directors and
executive officers other than Messrs. Kiener and Boylan was 1,128,000.
. The parties have agreed to continue the indemnification currently in
effect for TV Guide's directors, officers, employees and agents for a
period of six years after the completion of the merger.
. Mr. Kiener will join Gemstar after the completion of the merger in the
position of co-President and co-Chief Operating Officer in charge of
certain businesses of TV Guide, and Mr. Boylan will join Gemstar after
the completion of the merger in the position of co-President and co-
Chief Operating Officer in charge of certain businesses of TV Guide.
. Up to seven executive officers of TV Guide, including Messrs. Kiener and
Boylan, will enter into tax protection agreements with TV Guide before
the completion of the merger. These agreements will obligate TV Guide to
compensate them for the effects of United States federal excise taxes
that may become payable because of the acceleration of the vesting of
their stock options in connection with the completion of the merger.
. TV Guide may enter into severance arrangements with certain of its
executive officers which would entitle such executive officers to a lump
sum payment equivalent to 24 months of salary if such officers are
terminated without cause within 24 months after the completion of the
merger.
TV Guide stockholders should consider whether these interests may have
influenced TV Guide's directors and executive officers to support or recommend
the merger.
If we fail to complete the merger, the stock price and future business and
operations of Gemstar and/or TV Guide could be negatively impacted
If we do not complete the merger for any reason, each company may be subject
to a number of material risks, including the following:
. either Gemstar or TV Guide may be required to pay the other a
termination fee of up to $409 million. See "Terms of the Merger
Agreement--Termination Fee."
. TV Guide may elect to effectuate the non-exclusive cross license between
Gemstar and TV Guide of patent rights with respect to interactive
program guides. See "The Merger--Cross License."
. The option to purchase 14.9% of Gemstar common stock granted to TV Guide
by Gemstar may become exercisable. See "The Merger--Cross Options."
. The option to purchase 14.9% of TV Guide common stock granted to Gemstar
by TV Guide may become exercisable. See "The Merger--Cross Options."
. The price of Gemstar common stock and/or TV Guide common stock may
decline to the extent that the current market price of each stock is
greater than it would have been in the absence of the merger.
. The pending litigation between Gemstar and TV Guide may not be resolved
unless the cross license agreement between Gemstar and TV Guide
described below on page 99 becomes effective.
. Certain costs related to the merger, such as financial advisor, attorney
and accountant fees, must be paid even if the merger is not completed.
In addition, customers of Gemstar and TV Guide may, in response to the
announcement of the merger, delay or defer purchasing products or services
offered by the companies. Any delay or deferral in such
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purchases could have a material adverse effect on the respective businesses of
Gemstar or TV Guide, regardless of whether the merger is ultimately completed.
Similarly, current and prospective TV Guide employees may experience
uncertainty about their future role with Gemstar until Gemstar's strategies
with regard to TV Guide are announced or executed. This may adversely affect TV
Guide's ability to attract and retain key management, marketing and technical
personnel.
If the merger agreement is terminated and the board of directors of either
Gemstar or TV Guide seeks another merger or business combination, there can be
no assurance that Gemstar will be able to find as attractive a merger candidate
or that TV Guide will be able to find a partner willing to pay an equivalent or
more attractive price than that which would be paid in the merger. In addition,
while the merger agreement is in effect and subject to limited exceptions
described on page of this joint proxy statement/prospectus, Gemstar and TV
Guide are prohibited from soliciting, initiating, encouraging or participating
in negotiations regarding transactions, such as a merger, consolidation or
other business combination, with any party other than each other.
RISKS RELATING TO THE COMBINED COMPANY
After the merger, the combined business may experience slower growth and
decreased profit margins and require greater capital expenditures than the
present business of Gemstar
In recent fiscal years, Gemstar has experienced significant increases in its
revenues and has earned substantial profit margins. For example, Gemstar's
revenues were $83.0 million for fiscal 1997, $126.6 million for fiscal 1998 and
$166.5 million for fiscal 1999, representing an increase in revenues of 52% in
fiscal 1998 and 32% in fiscal 1999. Gemstar's net income of $38.7 million in
fiscal 1998 and $73.9 million in fiscal 1999 represented 30.6% and 44.4% of
Gemstar's total revenues for such fiscal years. While TV Guide's total revenues
are significantly greater than Gemstar's, its profit margins are substantially
lower. Thus, while we expect the combined company's revenues to be greater, its
profit margins will probably be lower than those earned by Gemstar before the
completion of the merger. Further, we do not expect the combined company to
experience, in percentage terms, the rapid revenue growth that Gemstar
experienced before the completion of the merger.
In addition, the merger will be accounted for under the purchase method of
accounting in accordance with generally accepted accounting principles. The
cost to acquire TV Guide will be allocated by Gemstar to the assets acquired
and liabilities assumed based on their fair values, with any excess being
treated as goodwill and amortized over the useful life of such assets and
liabilities. The combined company's net income will be adversely affected by
the amortization of goodwill and other intangible assets following the
completion of the merger.
TV Guide Magazine, which is a significant business, has experienced significant
declines in circulation and EBITDA
TV Guide provides TV Guide Magazine to households and newsstands and
customized monthly program guides for cable and satellite operators. These
businesses constitute a significant portion of TV Guide's operations. If TV
Guide had acquired TV Guide Magazine on January 1, 1999, TV Guide Magazine
would have represented approximately 52% of TV Guide's revenues and
approximately 60% of its operating income before depreciation and amortization
(known as EBITDA) for the nine months ended September 30, 1999. TV Guide
Magazine has seen circulation decline significantly. These declines have been
steady since the late 1980s and continued through the most recent period. The
primary causes of these declines have been the continued effects of increased
competition from television listings included in local newspapers, free
television listings supplements in Sunday newspapers, electronic program guides
and other sources. EBITDA for TV Guide Magazine has also declined
significantly, from $203 million in fiscal 1994 to $151 million in fiscal 1998.
These declines are largely due to the effects of lower circulation for TV Guide
Magazine on the financial
23
<PAGE>
performance of the related business. Declines in TV Guide Magazine's
circulation and EBITDA may continue, and the declines could be significant.
TV Guide's C-band business, which is a significant business, is rapidly
declining
TV Guide markets entertainment services to C-band satellite dish owners in
the United States through its approximately 80% owned subsidiary,
Superstar/Netlink Group. It faces significant competition in this business and
has experienced a significant decline in subscribers in recent years. Although
the C-band satellite industry experienced rapid growth during the early 1990s,
the C-band satellite industry is shrinking with the continued expansion of
cable systems and the introduction of direct broadcast satellite services. C-
band satellite dishes are substantially larger and less attractive than direct
broadcast satellite dishes, which are small and less obtrusive. Recently
enacted legislation may permit direct broadcast satellite programmers to offer
more attractive programming than Superstar/Netlink Group.
At December 31, 1999, TV Guide had approximately 1.0 million C-band
subscribers as compared to 1.2 million subscribers at December 31, 1998.
Superstar/Netlink Group represented 31% of TV Guide's consolidated revenues and
29% of EBITDA for the nine months ended September 30, 1999 on a pro forma basis
assuming the acquisition of TV Guide Magazine had occurred on January 1, 1999.
TV Guide expects the decline in the C-band industry to continue.
In November 1999, TV Guide announced an exclusive direct broadcast satellite
marketing alliance agreement with EchoStar, Inc. to convert the existing and
inactive C-band customers of Superstar/Netlink Group to the high power (small
satellite dish) DISH Network service. Under the conversion process, EchoStar
will compensate Superstar/Netlink Group on a per subscriber basis, both upon
successful conversion and with residual payments over time. It is anticipated
that implementation of this agreement will accelerate the subscriber decline in
its C-band business.
Growth of VCR Plus+ revenues may be limited
While VCR Plus+ license fees have increased in each year since Gemstar's
inception, future growth of revenues derived from VCR Plus+ may be limited by
the fact that virtually all major VCR and television manufacturers have
licensed the VCR Plus+ technology and the fact that Gemstar has already
expanded into most major markets worldwide. Any further growth in VCR Plus+
license revenues will come only from further penetration of increasingly
saturated markets. Accordingly, the combined company's future success depends
to a significant extent upon its ability to develop, market and license
emerging and new products and services, including Gemstar's interactive program
guide technologies.
Leverage may impair our financial condition
As of September 30, 1999, TV Guide had approximately $625.3 million of long-
term debt. TV Guide's debt is significant and could have important consequences
to the combined company's stockholders. Potential consequences to the combined
company include the following:
. the ability to obtain any necessary financing in the future for working
capital, capital expenditures, acquisitions, debt service requirements
and other purposes may be limited;
. a significant amount of the combined company's earnings may be dedicated
to the payment of interest on debt and therefore would be unavailable
for financing operations and other business activities;
. the debt level and the covenants contained in the debt instruments could
limit flexibility in planning for, or reacting to, changes in business
because certain financing options may be limited or prohibited;
. the degree of leverage may be more than that of competitors, placing the
combined company at a competitive disadvantage; and
24
<PAGE>
. the debt level may make the combined company more vulnerable in the
event of a downturn in its business or the economy in general.
Most of TV Guide's long-term debt consists of its $400 million of principal
amount of senior subordinated notes due 2009. Those notes provide that upon the
occurrence of a change of control of TV Guide the noteholders have the right to
require TV Guide to repurchase all or any part of their notes at a purchase
price equal to 101% of the principal amount of the notes plus accrued and
unpaid interest through the repurchase date. Completion of the merger will
constitute such a change of control. TV Guide anticipates that substantially
all noteholders will require TV Guide to repurchase their notes if market
interest rates do not decrease materially. The combined company may fund TV
Guide's repurchase obligation with borrowings under TV Guide's existing bank
credit facilities and with cash, although there can be no assurance that it
will be able to negotiate such funding arrangements.
TV Guide's bank credit facilities require it to maintain specified financial
ratios and satisfy certain financial tests. After the completion of the merger,
the combined company may be required to be subject to such financial ratios and
tests. The combined company's ability to meet these financial ratios and tests
may be affected by events beyond its control, and there is no assurance that it
will be able to do so. In the event of a default under the bank credit
facilities, the lenders could terminate their commitments and declare all
amounts borrowed, together with accrued interest and other fees, to be due and
payable. Borrowings under other debt instruments that contain cross-
acceleration or cross-default provisions may also be accelerated and become due
and payable.
Gemstar or the combined company may elect to refinance all or a portion of
the outstanding debt of TV Guide. If Gemstar or the combined company elects to
raise additional funds to repay the TV Guide debt through the issuance of
equity or convertible debt securities, the percentage ownership of the existing
stockholders will be reduced, and these securities may have rights, preferences
or privileges senior to those of the existing stockholders.
Paper and postal price increases can materially raise TV Guide's costs
The price of paper can be a significant factor affecting TV Guide Magazine's
operating performance. TV Guide does not hedge against increases in paper
costs. The price of paper began to rise around mid-year 1994 and continued to
rise more dramatically in 1995 and early 1996. In mid-1996, paper prices began
to fall, then increased moderately in 1997 and 1998. Although the combined
company intends to continue TV Guide's use of The News Corporation Limited's
bulk paper procurement services, paper prices may increase.
If paper prices do increase and the combined company cannot pass these costs
on to its customers, the increases may have a material adverse effect on the
combined company. Postage for product distribution and direct mail
solicitations will also be a significant expense to the combined company.
Postal rates increased in January 1999 and may increase in the future.
The interests of the combined company may diverge from those of substantial
stockholders
Liberty Media Corporation, The News Corporation Limited and Henry C. Yuen
will have significant influence over the combined company's business and
affairs as a result of the stockholders agreement and their respective
beneficial ownership of Gemstar common stock. Based on the market price of
Gemstar's common stock on January 25, 2000, each of Liberty and News Corp.'s
holdings of Gemstar common stock after the completion of the merger would have
an approximate value of $6.6 billion. Due to the significant value of their
respective investments in the combined company, it is unlikely that the
interests of Liberty and News Corp. would diverge significantly from those of
the combined company. Nevertheless, Liberty and News Corp. may have interests
that differ from those of the combined company.
25
<PAGE>
New products and rapid technological change may affect our operations
The emergence of new entertainment products and technologies, changes in
consumer preferences and other factors may limit the life cycle of our
technologies and any future products and services we develop. Accordingly, our
future performance depends on our ability to:
. identify emerging technological trends in our market;
. identify changing consumer needs, desires and tastes;
. develop and maintain competitive technology, including new product and
service offerings;
. improve the performance, features and reliability of our products and
services, particularly in response to technological changes and
competitive offerings; and
. bring technology to the market quickly at cost-effective prices.
We cannot assure you that we will be successful in developing and marketing
new products and services that respond to technological and competitive
developments and changing customer needs, or that such products and services
will gain market acceptance and be incorporated into the technology or products
of third parties. However, it is our view that the merger will enhance our
ability to do so. Any significant delay or failure in developing new or
enhanced technology, including new product and service offerings, would have a
material adverse effect on our business, financial condition and operating
results.
Our interactive program guides may not be accepted by the market
The market for our interactive program guides has only recently begun to
develop, is rapidly evolving and is increasingly competitive. Demand and market
acceptance for our interactive program guides are subject to a high level of
uncertainty and risk. We cannot predict whether, or how fast, this market will
grow. We cannot guarantee either that the market for our interactive program
guides will continue to develop or that demand for such guides can be
sustained. If the market for our interactive program guides develops more
slowly than expected or becomes saturated with competitors, our business,
financial condition and operating results will be materially and adversely
affected.
Our business may be affected by changes in the consumer electronics market
Gemstar derives a substantial majority of its revenues from manufacturer
license fees for its VCR Plus+ and interactive program guide technologies. Such
fees are largely assessed based on unit shipment volumes of VCRs, televisions
and other devices incorporating Gemstar's technologies. Accordingly, our future
operating results are substantially dependent on continued growth in the video
entertainment products category, and any decline in sales of consumer
electronics products employing our technologies would have an adverse impact on
our operating results. Demand for new VCRs and televisions may be adversely
affected by increasing market saturation, a decline in consumer interest due to
a lack of desirable new product features, and a decreased need for unit
replacement as the durability of consumer electronics products improves. Demand
may also be adversely affected by consumer confusion because of the status of
the broadcast industry's conversion to digital broadcast standards. Moreover,
sales of consumer electronics devices incorporating Gemstar's technologies may
be adversely impacted by the emergence of new product categories and consumer
entertainment options. For example, even though Gemstar's VCR Plus+ technology
has been licensed to be incorporated into DVD recorders, increased sales of
non-recording DVD recorders or other non-recording video entertainment devices
and widespread availability of video on demand or near-video on demand services
from cable service providers may reduce demand for Gemstar's VCR Plus+
technology. The availability of alternative home entertainment options such as
the Internet may also reduce consumer spending on VCRs and televisions.
26
<PAGE>
After the merger, we will face competition in many areas
After the completion of the merger, we will face competition from a wide
range of other companies in the communications, advertising, entertainment,
information, media, Internet services, software and technology fields. Some
competitors may have greater financial, technical, sales and marketing
resources than the combined company. The competitive environment could have a
variety of adverse effects on the combined company. For example, it could:
. require price reductions and increased spending on marketing and product
development;
. limit our ability to develop new products and services;
. limit our ability to expand our customer base; and
. result in attrition in our customer base.
Any of the foregoing events could have an adverse impact on revenues or
result in an increase in costs as a percentage of revenues, either of which
could have a material adverse effect on our business, financial condition and
operating results.
The stock prices of Gemstar and TV Guide have each been volatile; such
volatility may continue after the merger
The market price of Gemstar common stock and TV Guide common stock, each of
which is traded on the Nasdaq National Market, have historically been volatile,
and it is likely that the market price of the combined company's common stock
following the completion of the merger will be subject to significant
fluctuations. We believe that future announcements concerning us, our
competitors or our principal customers, including technological innovations,
new product introductions, governmental regulations, litigation or changes in
earnings estimated by analysts, may cause the market price of the combined
company's common stock following the completion of the merger to fluctuate
substantially in the future. Sales of substantial amounts of outstanding common
stock in the public market could materially adversely affect the market price
of our common stock. Further, in recent years the stock market has experienced
extreme price and volume fluctuations that have particularly affected the
market prices of equity securities of high technology companies. Such price and
volume fluctuations often have been unrelated to the operating performance of
those companies. These fluctuations as well as general economic, political and
market conditions, such as recessions, international currency fluctuations, or
tariffs and other trade barriers, may materially and adversely affect the
market price of the combined company's common stock following the completion of
the merger.
Any infringement by us on patent rights of others could result in litigation
Patents of third parties may have an important bearing on our ability to
offer certain of our products and services. Many of our competitors as well as
other companies and individuals have obtained, and may be expected to obtain in
the future, patents that concern products or services related to the types of
products and services we plan to offer. We cannot assure you that we will be
aware of all patents containing claims that may pose a risk of infringement by
our products and services. In addition, patent applications in the United
States are generally confidential until a patent is issued and so we cannot
evaluate the extent to which our products and services may be covered or
asserted to be covered by claims contained in pending patent applications. In
general, if one or more of our products or services were to infringe patents
held by others, we may be required to stop developing or marketing the products
or services, to obtain licenses to develop and market the services from the
holders of the patents or to redesign the products or services in such a way as
to avoid infringing the patent claims. We cannot assess the extent to which we
may be required in the future to obtain licenses with respect to patents held
by others, whether the licenses would be available or, if available, whether we
would be able to obtain the licenses on commercially reasonable terms. If we
were unable to obtain the licenses, we may not be able to redesign our products
or services to avoid infringement.
27
<PAGE>
RISKS RELATING TO THE CHANGE IN GEMSTAR'S PLACE OF INCORPORATION
The rights of Gemstar stockholders under the new certificate of incorporation
and bylaws (which bylaws will be automatically amended and replaced upon the
completion of the merger with new bylaws in the form attached as Annex C to
this joint proxy statement/prospectus) and under Delaware law will be different
than under Gemstar's current governing documents and under British Virgin
Islands law
Before February 23, 2000, Gemstar will change its place of incorporation
from the British Virgin Islands to the State of Delaware. For a comparison of
the provisions of Gemstar's current amended and restated memorandum of
association and amended and restated articles of association to the provisions
of Gemstar's new certificate of incorporation and bylaws, see Annex G to this
joint proxy statement/prospectus. The rights of stockholders under British
Virgins Islands law are different than under Delaware law. For a comparison of
British Virgin Islands and Delaware corporate laws, see "Change of Gemstar's
Place of Incorporation From the British Virgin Islands to the State of
Delaware--Change in Governing Corporate Law" beginning on page 143.
In addition, after the change in place of incorporation, Gemstar's effective
corporate tax rate may increase. See "Change in Gemstar's Place of
Incorporation From the British Virgin Islands to the State of Delaware--Tax
Consequences" beginning on page 113.
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<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements about Gemstar, TV Guide and the combined company
contained in this joint proxy statement/prospectus, including statements
containing the words "believes," "anticipates," "intends," "expects," and words
of similar import, constitute "forward-looking statements" within the meaning
of the federal securities laws. These forward-looking statements involve
numerous known or unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Important factors that could cause actual results
to differ materially from those in forward-looking statements, some of which
are beyond the control of Gemstar, TV Guide or the combined company, include:
. continued declines in circulation and operating profits for TV Guide
Magazine;
. increases in paper costs and postal rates;
. changes in the regulation of cable television and/or satellite
industries;
. loss of the cable and/or satellite compulsory licenses provided by
federal law;
. the willingness of cable and satellite television systems to acquire and
install new equipment that will allow us effectively to market our
interactive technology;
. our ability to keep pace with technological developments to protect our
intellectual property rights and defend against claims by others
asserting infringement of their intellectual property rights;
. a reduction in demand for advertising;
. operating and financial risks related to integrating the Gemstar
businesses and the TV Guide businesses;
. general economic and business conditions, both nationally and
internationally;
. uncertain demand for our products;
. rapid technological changes;
. competition;
. the ability to manage expanding operations;
. dependence on customers and suppliers; and
. other factors referenced in this joint proxy statement/prospectus or in
our reports incorporated by reference.
Given these uncertainties, you are cautioned not to place undue reliance on
such forward-looking statements. We disclaim any obligation to update any such
factor or to publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
for Gemstar (the "Gemstar Pro Forma Statements") give effect to the merger
using the purchase method of accounting as if the merger had been completed on
September 30, 1999 for balance sheet purposes and on April 1, 1998 for
statement of operations purposes, subject to the assumptions and adjustments
described in the accompanying Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.
The pro forma adjustments contained in the Gemstar Pro Forma Statements,
including the amounts used in the preliminary purchase price allocation, are
based upon the best information available to management as of the date of this
joint proxy statement/prospectus, in part utilizing preliminary assessments by
independent valuation consultants. The pro forma adjustments are preliminary
and have been made solely for purposes of developing such Gemstar Pro Forma
Statements. In most cases, these estimates have relied heavily on assessments
by TV Guide's current management in light of TV Guide's current business model.
Following consummation of the merger, the business activities of the combined
company will be evaluated by management of the combined company in light of
facts and circumstances existing at that time. As a result of that assessment,
there is a possibility that certain of the businesses of TV Guide could be
substantially changed. As a result, the final allocation of the purchase price
and the amounts and lives of the intangible assets, including goodwill, could
be different from the amounts and lives used in the Gemstar Pro Forma
Statements and such differences could be material to the results of operations
of the combined company following the merger.
The fiscal year ends for Gemstar and TV Guide are different. For purposes of
preparing the Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended March 31, 1999, Gemstar's operating results for that period
have been combined with the operating results of TV Guide for the year ended
December 31, 1998, as further adjusted for TV Guide's acquisition of News
America Publications Inc. and TVSM, Inc. on a pro forma basis. See Note 2. For
purposes of preparing the Unaudited Pro Forma Condensed Combined Statement of
Operations for the six months ended September 30, 1999, Gemstar's operating
results for that period have been combined with the operating results of TV
Guide for the same period. Accordingly, TV Guide's results of operations for
the three months ended March 31, 1999 have been excluded from the pro forma
presentation.
The Gemstar Pro Forma Statements have been derived from the historical
consolidated financial statements of Gemstar and TV Guide, which are
incorporated by reference into this joint proxy statement/prospectus, and are
qualified in their entirety by reference to, and should be read in conjunction
with, such historical consolidated financial statements and related notes
thereto.
The Gemstar Pro Forma Statements are presented for illustrative purposes
only and do not purport to be indicative of the operating results or financial
position that would have actually occurred if the merger had occurred on the
dates indicated, nor are they necessarily indicative of the future operating
results or financial position of the combined company. The Gemstar Pro Forma
Statements do not give effect to any cost savings or synergies which may result
from the integration of the Gemstar and TV Guide operations.
30
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Gemstar TV Guide Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash, cash equivalents and $258,585 $ 102,894 $ (27,500)(1) $ 312,379
marketable securities..... (20,000)(2)
(1,600)(3)
Accounts receivable,
prepaid expenses and other
current assets............ 14,412 340,262 -- 354,674
-------- ---------- ---------- -----------
Total current assets..... 272,997 443,156 (49,100) 667,053
Property, plant and
equipment, net............ 3,236 58,771 -- 62,007
Intangible assets, net..... 17,780 2,801,539 7,306,384 (1) 10,125,703
Other assets, net.......... 37,352 28,010 -- 65,362
-------- ---------- ---------- -----------
$331,365 $3,331,476 $7,257,284 $10,920,125
======== ========== ========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable, accrued
expenses and current
debt...................... $ 21,816 $ 207,198 $ -- $ 229,014
Deferred revenue........... 25,561 287,501 -- 313,062
-------- ---------- ---------- -----------
Total current
liabilities............. 47,377 494,699 -- 542,076
Deferred income taxes...... 26,271 650,314 906,352 (1) 1,582,937
Long-term debt............. -- 625,321 (20,000)(2) 605,321
Other liabilities.......... 1,883 70,262 -- 72,145
Shareholders' equity:
Capital stock............ 2,035 3,042 (1,042)(1) 4,035
Additional paid-in 260,455 1,283,490 6,577,922 (1) 8,120,267
capital................. (1,600)(3)
Accumulated other
comprehensive income,
net of tax.............. 84 3,577 (3,577)(1) 84
Retained earnings........ 21,699 200,771 (200,771)(1) 21,699
Treasury stock, at cost.. (28,439) -- -- (28,439)
-------- ---------- ---------- -----------
Net shareholders'
equity................ 255,834 1,490,880 6,370,932 8,117,646
-------- ---------- ---------- -----------
$331,365 $3,331,476 $7,257,284 $10,920,125
======== ========== ========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
31
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Six Months Ended September 30, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Gemstar TV Guide Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues...................... $90,303 $615,597 $ -- $ 705,900
Operating expenses, excluding
depreciation and
amortization................. 36,618 496,137 -- 532,755
Depreciation and
amortization................. 2,461 70,893 246,821 (4) 320,175
------- -------- --------- ---------
Operating income (loss)....... 51,224 48,567 (246,821) (147,030)
Interest expense.............. -- (24,652) -- (24,652)
Other income (expense), net... 6,122 (3,419) -- 2,703
------- -------- --------- ---------
Income (loss) before income
taxes........................ 57,346 20,496 (246,821) (168,979)
Provision (benefit) for income 15,481 9,341 (31,422)(5) 1,084
taxes........................ 7,684 (6)
------- -------- --------- ---------
Net income (loss)............. $41,865 $ 11,155 $(223,083) $(170,063)
======= ======== ========= =========
Earnings (loss) per share (a):
Basic....................... $ 0.21 $ (0.43)
Diluted..................... $ 0.18 $ (0.43)
Number of shares (a):
Basic....................... 199,830 399,807
Diluted..................... 238,850 399,807
</TABLE>
- --------
(a) Share and per share amounts have been adjusted for the two-for-one stock
split effected in the form of a stock dividend in December 1999.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
32
<PAGE>
GEMSTAR INTERNATIONAL GROUP LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended March 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Gemstar TV Guide Pro Forma
Historical Pro Forma (a) Adjustments Pro Forma
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues.................. $166,456 $1,300,535 $ -- $1,466,991
Operating expenses,
excluding depreciation
and amortization......... 66,558 1,013,546 -- 1,080,104
Depreciation and
amortization............. 4,534 134,039 493,642 (4) 632,215
-------- ---------- --------- ----------
Operating income (loss)... 95,364 152,950 (493,642) (245,328)
Gain on issuance of equity
by subsidiary............ -- 37,898 -- 37,898
Interest expense.......... -- (49,791) -- (49,791)
Other income, net......... 8,740 16,148 -- 24,888
-------- ---------- --------- ----------
Income (loss) before
income taxes............. 104,104 157,205 (493,642) (232,333)
Provision (benefit) for
income taxes............. 30,189 66,492 (62,844)(5) 45,878
12,041 (6)
-------- ---------- --------- ----------
Net income (loss)......... $ 73,915 $ 90,713 $(442,839) $ (278,211)
======== ========== ========= ==========
Earnings (loss) per share
(b):
Basic................... $ 0.38 $ (0.70)
Diluted................. $ 0.33 $ (0.70)
Number of shares (b):
Basic................... 195,097 395,074
Diluted................. 224,973 395,074
</TABLE>
- --------
(a) Amounts presented for TV Guide Pro Forma are for the year ended December
31, 1998 on a pro forma basis for TV Guide's acquisitions of News America
Publications Inc. and TVSM, Inc. See Note 2.
(b) Share and per share amounts have been adjusted for the two-for-one stock
split effected in the form of a stock dividend in December 1999.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
All share and per share numbers in the Unaudited Pro Forma Condensed
Combined Financial Statements and related notes thereto have been adjusted to
reflect the two-for-one stock splits effected in the form of stock dividends by
Gemstar and TV Guide in December 1999.
Note 1--Pro Forma Adjustments
The Gemstar Pro Forma Statements give effect to the following pro forma
adjustments:
(1) To record the merger using the purchase method of accounting,
reflecting the estimated purchase price and purchase price allocation
noted below (in thousands, except share and per share amounts which
have been adjusted for the two-for-one stock splits effected in the
form of stock dividends by Gemstar and TV Guide in December 1999).
<TABLE>
<S> <C>
Estimated Purchase Price:
Shares of TV Guide common stock outstanding at September
30, 1999.................................................. 304,239,576
Exchange ratio per share................................... .6573
-----------
Equivalent Gemstar shares.................................. 199,976,673
Gemstar share price based on the average closing price for
two days before and after the merger was agreed to and
announced................................................. $ 38.21
-----------
Consideration for TV Guide outstanding common stock........ $ 7,641,109
Fair value of TV Guide stock options assumed by Gemstar.... 222,303
Estimated transaction costs................................ 27,500
-----------
Total estimated purchase price........................... $ 7,890,912
===========
Purchase Price Allocation:
Historical net book value of TV Guide...................... $ 1,490,880
Estimated fair value adjustments relating to:
Contracts.................................................. 838,938
Patents and trademarks..................................... 633,301
Customer subscriber lists.................................. 980,675
Deferred income taxes...................................... (906,352)
Preliminary goodwill....................................... 4,853,470
-----------
Total.................................................... $ 7,890,912
===========
</TABLE>
On a pro forma basis as of September 30, 1999, intangible assets are
comprised of the following amounts (in thousands) and estimated useful
lives:
<TABLE>
<S> <C> <C>
Publishing rights................................ 1,281,398 40 years
Contracts........................................ 838,938 10 years
Patents and trademarks........................... 1,072,679 7 to 40 years
Customer subscriber lists........................ 1,089,475 3 to 15 years
Goodwill......................................... 5,843,213 5 to 40 years
-----------
$10,125,703
===========
</TABLE>
The above purchase price allocation and the lives assigned to the
assets are preliminary and have been made solely for the purpose of
developing the Gemstar Pro Forma Statements. After the closing of the
merger, Gemstar, with the assistance of valuation consultants, will
complete its evaluation of the fair value and the lives of the assets
acquired. Accordingly, the allocation of the purchase price and the
lives of the assets acquired, which are based on preliminary estimates,
may differ from the final purchase price allocation and the final lives
assigned to the assets.
34
<PAGE>
TV Guide has a secured bank credit facility comprised of a $300 million
six-year revolving credit facility and a $300 million 364-day revolving
credit facility that converts into a five-year term loan under which
$215.3 million of borrowings are outstanding as of September 30, 1999.
The credit facility bears interest, at the option of TV Guide, at a
rate per annum equal to either (a) LIBOR for interest periods of 1, 2,
3 or 6 months plus an applicable margin based on TV Guide's then-
existing leverage ratio or (b) the prime rate (or federal funds
effective rate plus 0.5%, if greater) plus the applicable margin based
on TV Guide's then existing leverage ratio. At September 30, 1999, the
weighted average interest rate on the $215.3 million of borrowings
outstanding under the credit facility was 6.3%. The credit facility
contains provisions whereby borrowings under the facility are deemed to
be in default upon the occurrence of a change in control, such as will
result in the merger. The Gemstar Pro Forma Statements assume that TV
Guide will be able to obtain a modification of the terms of the credit
facility to allow the merger to occur and not result in a default under
the credit facility. In the event that a modification to allow the
merger to occur does not result, TV Guide will either repay the
outstanding borrowings and cancel the facility or replace the facility.
Additionally, the Gemstar Pro Forma Statements assume the interest rate
provisions of this facility or a replacement facility remain unchanged
from the historical provisions.
(2) As of September 30, 1999, TV Guide has outstanding $400 million of
8.125% senior subordinated notes due 2009 that contain provisions
whereby upon the occurrence of a change in control, such as will result
in the merger, the noteholders will have the right to require TV Guide
to repurchase all or any part of such noteholders' securities at a
purchase price equal to 101% of the principal amount of the notes plus
accrued and unpaid interest through the repurchase date. The Gemstar
Pro Forma Statements assume that the noteholders will require TV Guide
to repurchase the notes and the cost of the repurchase in excess of the
principal amount of the notes plus accrued interest, $4 million, has
been included in the estimated transaction costs above. Additionally,
the Gemstar Pro Forma Statements assume that TV Guide will finance the
repurchase of the notes using the existing secured bank credit facility
and $20 million in cash. However, TV Guide may elect to obtain
financing to fund the repurchase from an alternate source or to fund
all or additional amounts of the repurchase out of then available cash.
An increase of 25 basis points in the historical interest rates,
assuming $600 million of borrowings under the secured bank credit
facility remain outstanding, would result in an additional interest
expense of $1.5 million annually.
(3) To reflect the costs of registering the Gemstar common stock to be
issued in the merger.
(4) To reflect the amortization of the identified intangible assets and
preliminary goodwill resulting from the merger. The intangible assets
and goodwill will be amortized on a straight-line basis over their
estimated useful lives as described above. After the closing of the
merger, Gemstar, with the assistance of valuation consultants, will
complete its evaluation of the fair value and the lives of the assets
acquired. Accordingly, the allocation of the purchase price and the
lives of the assets acquired, which are based on preliminary estimates,
may differ from the final purchase price allocation and the final lives
assigned to the assets. Gemstar will continually evaluate the periods
of amortization to determine whether later events and circumstances
warrant revised estimates of useful lives.
(5) To reflect the statutory tax effects of the pro forma adjustments.
(6) To reflect the statutory tax effects of the domestication of Gemstar.
35
<PAGE>
The following information reconciles the number of shares used to compute
Gemstar's historical basic and diluted earnings per share to pro forma basic
and diluted earnings per share (in thousands):
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1999 March 31, 1999
-------------------- ---------------
Basic Diluted Basic Diluted
--------- ---------- ------- -------
<S> <C> <C> <C> <C>
Weighted average number of shares--
historical........................... 199,830 238,850 195,097 224,973
Exclude historical dilutive potential
shares of common stock as shares
would be antidilutive................ -- (39,020) -- (29,876)
Common shares to be issued in
connection with the merger........... 199,977 199,977 199,977 199,977
--------- --------- ------- -------
Weighted average number of shares--pro
forma................................ 399,807 399,807 395,074 395,074
========= ========= ======= =======
</TABLE>
Note 2--TV Guide Pro Forma Information for the Year Ended December 31, 1998
On March 1, 1999, TV Guide (formerly United Video Satellite Group, Inc.)
acquired all of the outstanding stock of News America Publications and TVSM
which own and publish TV Guide Magazine, publish cable-based television listing
guides, operate the web site now known as TV Guide Online and hold certain
other assets, in exchange for 45,006,824 shares of TV Guide's Class A common
stock, 74,993,176 shares of TV Guide's Class B common stock and $800 million in
cash. The cash portion of the acquisition and related costs were funded with
gross proceeds of $400 million from an offering of 8.125% senior subordinated
notes due 2009, $185.3 million from initial borrowings under the bank credit
facility, $130.7 million from the issuance of common stock to an indirect
subsidiary of The News Corporation Limited and $100 million from existing cash
balances. The acquisition was accounted for as a purchase.
In June 1998, an indirect subsidiary of News Corp. acquired all of the
outstanding capital stock of TVSM which owns and publishes monthly proprietary
program listings for certain cable television systems and satellite programming
distributors. The operating results of TVSM subsequent to June 26, 1998, the
acquisition date, are included with those of News America Publications and not
with the "TVSM Historical" financial information presented below.
The Unaudited Pro Forma Condensed Combined Statement of Operations for TV
Guide for the year ended December 31, 1998 (the "TV Guide Pro Forma Statement")
has been derived from the historical consolidated financial statements of TV
Guide, incorporated by reference into this joint proxy statement/prospectus,
the historical combined financial statements of News America Publications,
incorporated by reference into this joint proxy statement/prospectus, as
adjusted to be presented on a calendar year basis, and the historical financial
statements of TVSM, not included in this joint proxy statement/prospectus, and
are qualified in their entirety by reference to, and should be read in
conjunction with, such historical financial statements and related notes
thereto.
The TV Guide Pro Forma Statement was prepared as if the acquisitions of News
America Publications and TVSM had occurred on January 1, 1998. The TV Guide Pro
Forma Statement may not be indicative of the results that actually would have
occurred if the acquisitions had occurred on the date indicated or which may be
obtained in the future.
The following presents the statement of operations for TV Guide for the year
ended December 31, 1998 on a pro forma basis for TV Guide's acquisitions of
News America Publications and TVSM.
36
<PAGE>
TV GUIDE, INC.
(FORMERLY UNITED VIDEO SATELLITE GROUP, INC.)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
News
America
UVSG Publications TVSM Pro Forma TV Guide
Historical Historical Historical Adjustments Pro Forma
---------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues................ $621,940 $ 642,406 $36,189 $ -- $1,300,535
Operating expenses,
excluding depreciation
and amortization....... 485,094 492,049 36,403 -- 1,013,546
Depreciation and
amortization........... 28,227 102,277 432 3,103 (a) 134,039
-------- --------- ------- -------- ----------
Operating income
(loss)................. 108,619 48,080 (646) (3,103) 152,950
Gain on issuance of
equity by subsidiary... 37,898 -- -- -- 37,898
Interest expense........ (1,629) (259,065) (358) (47,804)(b) (49,791)
259,065 (c)
Other income, net....... 16,148 -- -- -- 16,148
-------- --------- ------- -------- ----------
Income (loss) before
income taxes........... 161,036 (210,985) (1,004) 208,158 157,205
Provision (benefit) for
income taxes........... 58,977 (27,368) -- 34,883 (d) 66,492
-------- --------- ------- -------- ----------
Net income (loss)....... $102,059 $(183,617) $(1,004) $173,275 $ 90,713
======== ========= ======= ======== ==========
Earnings per share (e):
Basic................. $ 0.59 $ 0.30
Diluted............... $ 0.59 $ 0.30
Number of shares (e):
Basic................. 171,916 304,984
Diluted............... 173,771 306,839
</TABLE>
- --------
(a) To adjust amortization of the intangible assets associated with the
acquisitions. These assets are being amortized on a straight-line basis
over their estimated useful lives ranging from three to forty years.
(b) To reflect interest, at the rate of 8.125% and 6.54% per annum on the
senior subordinated notes due 2009 and borrowings under the bank credit
facility, respectively, which funded the acquisitions, commitment fees on
the unused portion of the bank credit facility and amortization of related
costs. The interest rate on the senior subordinated notes are fixed,
however a change in the interest rate of 1/8 of a percent on borrowings
under the bank credit facility would result in a change in interest expense
of approximately $232,000 annually.
(c) To eliminate intercompany interest expense of News America Publications.
(d) To reflect income taxes resulting from the above pro forma adjustments.
(e) The following information reconciles the number of shares used to compute
UVSG's historical basic and diluted earnings per share to pro forma basic
and diluted earnings per share (in thousands) (Share and per share amounts
have been adjusted for the two-for-one stock split effected in the form of
a stock dividend by TV Guide in December 1999):
<TABLE>
<CAPTION>
Basic Diluted
------- -------
<S> <C> <C>
Weighted average number of shares--historical............... 171,916 173,771
Common shares issued in connection with the acquisitions.... 133,068 133,068
------- -------
Weighted average number of shares--pro forma................ 304,984 306,839
======= =======
</TABLE>
37
<PAGE>
THE SPECIAL MEETINGS
This joint proxy statement/prospectus is furnished in connection with the
solicitation of proxies from Gemstar stockholders by the Gemstar board for use
at the Gemstar special stockholders' meeting and TV Guide common stockholders
by the TV Guide board for use at the TV Guide special stockholders' meeting.
Times and Places; Purposes
Gemstar. The Gemstar special stockholders' meeting will be held on March 17,
2000, at 10 a.m., local time, at 2-29-18 Nishi-Ikebukuro, Toshima-ku, Tokyo
171, Japan. The purpose of the Gemstar special stockholders' meeting is to
consider and vote upon the following matters:
. A proposal to approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger.
. A proposal to amend the Gemstar International Group Limited 1994 Stock
Incentive Plan to increase the number of shares of Gemstar common stock
available for issuance from 80,000,000 shares to 110,000,000 shares.
. The transaction of any other business which properly comes before the
meeting or any adjournment or postponement.
If the issuance of Gemstar common stock to TV Guide stockholders in the
merger is approved, Gemstar will adopt amended and restated bylaws, in the form
attached as Annex C to this joint proxy statement/prospectus, before completing
the merger.
TV Guide. The TV Guide special stockholders' meeting will be held on March
17, 2000, at 10 a.m., local time, at the Southern Hills Marriott Hotel, 1902
East 71st Street South, Tulsa, Oklahoma. The purpose of the TV Guide special
stockholders' meeting is to consider and vote upon the following matters:
. A proposal to approve and adopt the merger agreement, as amended.
Adoption of the merger agreement will constitute approval of the merger
and the other transactions contemplated by the merger agreement.
. A proposal to amend the TV Guide, Inc. Equity Incentive Plan to increase
the number of shares of Class A common stock available for issuance from
16,000,000 to 24,000,000 and to increase the maximum aggregate number of
shares of Class A common stock that may be granted under the plan to any
one employee from 3,200,000 shares to 6,000,000 shares.
. The transaction of any other business which properly comes before the
meeting or any adjournment or postponement.
Record Dates; Voting Rights
Gemstar. Only holders of record of Gemstar common stock at the close of
business on February 10, 2000 are entitled to receive notice of and to vote at
the Gemstar special stockholders' meeting. At the close of business on January
25, 2000, there were 206,788,370 shares of Gemstar common stock outstanding.
Each share of Gemstar common stock is entitled to one vote at the Gemstar
special stockholders' meeting.
TV Guide. Only holders of record of TV Guide common stock at the close of
business on January 25, 2000 are entitled to receive notice of and to vote at
the TV Guide special stockholders' meeting. At the close of business on January
25, 2000, there were 154,512,896 shares of TV Guide Class A common stock and
149,986,352 shares of TV Guide Class B common stock outstanding. Holders of
shares of TV Guide Class A common stock are entitled to one vote for each share
of Class A common stock held and holders of shares of TV Guide Class B common
stock are entitled to ten votes for each share of Class B common stock held on
all matters submitted to a vote of TV Guide stockholders.
38
<PAGE>
Votes Required
Gemstar. The rules governing companies listed on the Nasdaq National Market
require companies to obtain stockholder approval before issuing additional
shares of common stock in connection with an acquisition if the number of
additional shares proposed to be issued exceeds 20% of the shares outstanding
before the issuance. Gemstar will issue more than 20% of its outstanding common
stock to TV Guide stockholders. Accordingly, Gemstar is seeking stockholder
approval of the issuance of Gemstar common stock in the merger. The rules of
the Nasdaq National Market require that such a stock issuance be approved by
the affirmative vote of a majority of the shares voted at the special meeting,
in person or by proxy.
The affirmative vote of a majority of the shares voted at the special
meeting, in person or by proxy, is required to approve the plan amendment.
TV Guide. The affirmative vote of a majority of the combined voting power of
the outstanding shares of TV Guide Class A and Class B common stock, voting
together as a single class, is required to approve and adopt the merger
agreement. The affirmative vote of a majority of the combined voting power of
the shares of TV Guide Class A and Class B common stock present in person or
represented by proxy at the special meeting and entitled to vote, voting
together as a single class, is required to approve the plan amendments.
Quorum
Gemstar. The presence in person or by proxy of the holders of at least 50%
of Gemstar common stock issued, outstanding and entitled to vote at the Gemstar
special stockholders' meeting will constitute a quorum for the transaction of
business. The shares of Gemstar common stock present at the Gemstar special
stockholders' meeting that abstain from voting or that are the subject of
broker non-votes will be included for the purpose of determining a quorum. A
broker non-vote occurs when a nominee holding stock for a beneficial owner does
not vote on a particular matter because the nominee does not have discretionary
voting power with respect to the matter and has not received voting
instructions from the beneficial owner. If a quorum is not present at the
Gemstar special stockholders' meeting, the Gemstar board will likely adjourn or
postpone the meeting to solicit additional proxies.
TV Guide. The presence in person or by proxy of the holders of a majority of
the voting power of TV Guide Class A and Class B common stock issued,
outstanding and entitled to vote at the TV Guide special stockholders' meeting
will constitute a quorum for the transaction of business. The shares of TV
Guide common stock present at the TV Guide special stockholders' meeting that
abstain from voting or that are the subject of broker non-votes will be
included for the purpose of determining a quorum. A broker non-vote occurs when
a nominee holding stock for a beneficial owner does not vote on a particular
matter because the nominee does not have discretionary voting power with
respect to the matter and has not received voting instructions from the
beneficial owner. Because each of Liberty Media Corporation and The News
Corporation Limited has entered into the voting agreements described on page
120, a quorum will be present at the special meeting. See "Terms of the Voting
Agreements."
Proxies; Revocation of Proxies
Gemstar. The Gemstar board is soliciting proxies for the Gemstar special
stockholders' meeting to enable its stockholders to vote upon the Gemstar
proposals to approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger and the plan amendment, whether or not they attend
the Gemstar special stockholders' meeting. For all shares of common stock
Gemstar represented by a properly executed proxy received before the Gemstar
special stockholders' meeting, the proxy holders will vote in accordance with
the instructions on the proxies. If no voting instructions are indicated on a
proxy, then the proxy holders will vote the shares represented by the proxy in
favor of the Gemstar proposals.
In addition, the proxy holders will have discretion to vote on any other
matters properly presented at the Gemstar special stockholders' meeting. If
Gemstar proposes to adjourn the Gemstar stockholders' meeting, the
39
<PAGE>
proxy holders will vote all shares for which they have voting authority in
favor of adjournment, except for those shares that were voted against the
Gemstar proposal to approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger. The Gemstar board requests Gemstar stockholders to
complete, sign, date and promptly return the enclosed proxy card in the
enclosed postage-prepaid envelope. Brokers who hold shares of Gemstar common
stock as nominees will not have discretionary authority to vote the shares on
the proposals to approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger or the plan amendment in the absence of instructions
from the beneficial owners. If your shares are present at the special meeting
and you abstain from voting on the proposals to approve the issuance of Gemstar
common stock to TV Guide stockholders in the merger or the plan amendment, it
will have the same effect as voting against such proposals. Shares not present
at the special meeting will have no effect on the vote on the proposals to
approve the issuance of Gemstar common stock to TV Guide stockholders in the
merger and the plan amendment.
A Gemstar stockholder may revoke his or her proxy at any time before the
proxy is exercised by filing a revoking instrument with the Secretary of
Gemstar or by executing another proxy bearing a later date. A Gemstar
stockholder who executed a proxy may suspend the powers of the proxy holders
with respect to his or her shares by attending the Gemstar special
stockholders' meeting in person and voting or requesting the suspension. If a
Gemstar stockholder executes two or more proxies with respect to the same
shares, the proxy bearing the most recent date will be honored if otherwise
valid. Attendance at the Gemstar special stockholders' meeting will not, in
itself, revoke a proxy.
If the Gemstar special stockholders' meeting is postponed or adjourned for
any reason, at any subsequent reconvening of the Gemstar special stockholders'
meeting, the proxy holders will vote all shares represented by a proxy in the
same manner as they would have been voted at the initial convening of the
Gemstar special stockholders' meeting, even if they were voted on the same or
any other matter at a previous meeting. However, the proxy holders will not
vote those shares represented by a proxy which was revoked or withdrawn before
the reconvened meeting.
In connection with the Gemstar special stockholders' meeting, holders of
Gemstar common stock should not return to Gemstar any stock certificates with
their proxy cards. Your stock certificates will continue to represent your
shares of Gemstar common stock after the change in Gemstar's place of
incorporation and your shares of the combined company's common stock after the
merger.
TV Guide. The TV Guide board is soliciting proxies for the TV Guide special
stockholders' meeting to enable its stockholders to vote upon the TV Guide
merger and plan amendment proposals, whether or not they attend the TV Guide
special stockholders' meeting. For all shares of TV Guide common stock
represented by a properly executed proxy received before or at the TV Guide
special stockholders' meeting, the proxy holders will vote in accordance with
the instructions on the proxies. If no voting instructions are indicated on a
proxy, then the proxy holders will vote the shares represented by the proxy in
favor of the proposals to approve and adopt the merger agreement and to approve
the plan amendments.
In addition, the proxy holders will have discretion to vote on any other
matters properly presented at the TV Guide special stockholders' meeting. If TV
Guide proposes to adjourn the TV Guide stockholders' meeting, the proxy holders
will vote all shares for which they have voting authority in favor of
adjournment, except for those shares that were voted against the TV Guide
merger or plan amendment proposal. The TV Guide board requests TV Guide
stockholders to complete, sign, date and promptly return the enclosed proxy
card in the enclosed postage-prepaid envelope. Brokers who hold shares of TV
Guide common stock as nominees will not have discretionary authority to vote
the shares on the merger proposal in the absence of instructions from the
beneficial owners, but generally will have discretionary authority to vote the
shares on the plan amendment proposal. Broker non-votes will have the same
effect as votes against the TV Guide merger proposal and the plan amendments.
If your shares are present at the special meeting and you abstain from voting
on the merger proposal or the plan amendments, it will have the same effect as
voting against the merger proposal or the plan amendments. Shares not present
at the special meeting will have no effect on the vote on the plan amendments,
but will have the effect of voting against the merger proposal.
40
<PAGE>
A TV Guide stockholder may revoke his or her proxy at any time before the
proxy is exercised by filing a revoking instrument with the Secretary of TV
Guide or by executing another proxy bearing a later date. A TV Guide
stockholder who executed a proxy may suspend the powers of the proxy holders
with respect to his or her shares by attending the TV Guide special
stockholders' meeting in person and voting or requesting the suspension. If a
TV Guide stockholder executes two or more proxies with respect to the same
shares, the proxy bearing the most recent date will be honored if otherwise
valid. Attendance at the TV Guide special stockholders' meeting will not, in
itself, revoke a proxy.
If the TV Guide special stockholders' meeting is postponed or adjourned for
any reason, at any subsequent reconvening of the TV Guide special stockholders'
meeting, the proxy holders will vote all shares represented by a proxy in the
same manner as they would have been voted at the initial convening of the TV
Guide special stockholders' meeting, even if they were voted on the same or any
other matter at a previous meeting. However, the proxy holders will not vote
those shares represented by a proxy which was revoked or withdrawn before the
reconvened meeting.
In connection with the TV Guide special stockholders' meeting, holders of TV
Guide common stock should not return to TV Guide any stock certificates with
their proxy cards. We will inform you when and how to return your stock
certificates after the completion of the merger.
Solicitation of Proxies
Gemstar and TV Guide will each bear the cost of proxy solicitation for their
respective special stockholders' meetings, including the reasonable expenses of
brokers, fiduciaries and other nominees in forwarding solicitation material to
beneficial owners. In addition to solicitation by mail, directors, officers and
employees of Gemstar and TV Guide may solicit proxies personally or by
telephone, facsimile transmission or otherwise. Gemstar and TV Guide will not
pay additional compensation to these directors, officers and employees for
their solicitation but may reimburse them for out-of-pocket expenses. We expect
to incur nominal expenses, if any, to engage in such solicitation. Gemstar has
retained Georgeson Shareholder Communications, Inc. to assist in solicitation
of proxies for a fee not to exceed $7,500, plus reimbursement of out-of-pocket
expenses. We will make arrangements with brokerage houses and other custodians,
nominees, fiduciaries and stockholders of record to forward proxy solicitation
materials to the beneficial owners of the stock held of record by such persons.
We may reimburse these solicitors for reasonable out-of-pocket expenses.
41
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
Gemstar. The following table sets forth certain information, as of January
25, 2000, regarding ownership of Gemstar common stock by (1) each person
believed by Gemstar to be the beneficial owner of more than five percent of its
outstanding common stock, (2) each director, the Chief Executive Officer and
the four other most highly compensated executive officers of Gemstar for the
fiscal year ended March 31, 1999, and (3) all current directors and executive
officers of Gemstar as a group. Except as otherwise indicated, beneficial
ownership includes voting and investment power with respect to the shares
shown.
All share numbers and percentages have been adjusted to reflect the two-for-
one stock split effected in the form of a stock dividend by Gemstar in December
1999.
<TABLE>
<CAPTION>
Number of Shares Percentage of Shares
Name Beneficially Owned (1) Outstanding (1)
---- ---------------------- --------------------
<S> <C> <C>
Thomas L. H. Lau (2).............. 40,000,000 19.3%
Henry C. Yuen (3)................. 29,698,456 13.2
THOMSON multimedia S.A. (4)....... 12,307,464 6.0
Elsie Ma Leung (5)................ 4,639,996 2.2
Douglas B. Macrae (6)............. 198,000 *
George F. Carrier (7)............. 88,000 *
Teruyuki Toyama (7)............... 88,000 *
Perry A. Lerner (8)............... 40,000 *
Stephen A. Weiswasser............. 0 --
James E. Meyer.................... 0 --
All current directors and
executive officers as a group
(9 persons) (9).................. 74,752,452 32.6
</TABLE>
- --------
NOTES:
* Less than 1%
(1) Applicable percentage of ownership is based on 206,788,370 shares of common
stock outstanding as of January 25, 2000 together with applicable options
for such stockholder. 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 January 18, 2000 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 shares of common stock shown as beneficially owned by such stockholder.
The address for all directors and officers of Gemstar 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 17,518,496 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
January 25, 2000.
(4) The address for THOMSON multimedia S.A. is 46 Quai A. LeGallo, 92100
Boulogne, Republic of France. Reflects ownership as provided to Gemstar by
a representative of THOMSON multimedia S.A.
(5) Includes 4,440,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
January 25, 2000.
(6) Includes 152,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
January 25, 2000.
(7) Includes 88,000 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days following January 25,
2000.
(8) Includes 40,000 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days following January 25,
2000.
(9) Includes 22,326,496 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days following
January 25, 2000.
42
<PAGE>
TV Guide. The following table sets forth certain information, as of January
25, 2000, regarding ownership of TV Guide common stock by (1) each person
believed by TV Guide to be the beneficial owner of more than five percent of
its outstanding common stock; (2) each director, the Chief Executive Officer
and the four other most highly compensated executive officers of TV Guide for
the fiscal year ended December 31, 1999; and (3) all current directors and
executive officers of TV Guide as a group. Shares of Class B common stock are
convertible at the option of the holder immediately into shares of Class A
common stock on a one-for-one basis and, accordingly, holders of Class B common
stock are deemed to own beneficially the same number of shares of Class A
common stock. The table below does not reflect such beneficial ownership of
Class A common stock or beneficial ownership of shares of Class A common stock
that may be acquired upon the exercise of unvested stock options that will
become exercisable upon the completion of the merger.
All share numbers and percentages have been adjusted to reflect the two-for-
one stock split effected in the form of a stock dividend by TV Guide in
December 1999.
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock Percent of
------------------- ------------------- Vote of All
Number Percent Number Percent Outstanding
Beneficial Owner of Shares of Class of Shares of Class Common Stock
---------------- ---------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Liberty Media Corporation
(1)..................... 58,075,040 37.6% 74,993,176 50.0% 48.8%
The News Corporation
Limited (2)............. 58,075,040 37.6% 74,993,176 50.0% 48.8%
Joachim Kiener (3)....... 120,000 * -- -- *
Peter C. Boylan III (4).. 1,482,072 * -- -- *
Charles Butler Ammann
(5)..................... 90,800 * -- -- *
Craig M. Waggy (6)....... 133,600 * -- -- *
Robert R. Bennett (7).... 24,000 * -- -- *
Chase Carey.............. -- -- -- -- --
Peter Chernin............ -- -- -- -- --
Nicholas Donatiello,
Jr...................... -- -- -- -- --
Gary S. Howard (8)....... 160,000 * -- -- *
Larry E. Romrell (9)..... 36,000 * -- -- *
J. David Wargo (9)....... 36,000 * -- -- *
All Directors and
Executive Officers as a
Group (11 persons)
(10).................... 2,082,472 1.3% -- -- *
</TABLE>
- --------
NOTES:
*Less than 1%
(1) The address for Liberty Media Corporation is 9197 South Peoria Street,
Englewood, Colorado 80112. Liberty holds shares of common stock indirectly
through its subsidiaries Liberty UVSG, Inc. and Liberty TVGIA, Inc.
Liberty is a subsidiary of Tele-Communications, Inc., which in turn is a
subsidiary of AT&T Corp.
(2) The Class A common stock and Class B common stock reported as beneficially
owned by The News Corporation Limited are directly owned by TVG Holdings,
Inc., an indirect subsidiary of News Corp. and a direct subsidiary of News
Publishing Australia Limited. Each of News Corp. and News Publishing
Australia Limited, as persons who may be deemed to control TVG Holdings,
Inc., may also be deemed to indirectly beneficially own such shares. By
virtue of ordinary shares of News Corp. owned by (i) Mr. K. Rupert Murdoch
and members of his family, (ii) Cruden Investments Pty. Limited, a private
Australian investment company owned by Mr. Murdoch, members of his family
and certain charities, and (iii) corporations which are controlled by
trustees of settlements and trusts set up for the benefit of the Murdoch
family, certain charities and other persons, and Mr. Murdoch's positions
as Chairman and Chief Executive Officer of News Corp., Mr. Murdoch may be
deemed to control the operations of News Corp., and may therefore be
deemed to indirectly beneficially own such shares of TVG Holdings, Inc.
The address of TVG Holdings, Inc. is 1300 North Market Street, Suite 404,
Wilmington, Delaware 19801; the
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address of News Corp. is 2 Holt Street, Sydney, New South Wales 2010,
Australia; the address of News Publishing Australia Limited is 1300 North
Market Street, Suite 404, Wilmington, Delaware 19801; and the address of
Mr. Murdoch is 10201 West Pico Boulevard, Los Angeles, California 90035.
(3) Includes 120,000 shares of Class A common stock subject to options that
will become exercisable within 60 days.
(4) Includes 1,246,808 shares of Class A common stock subject to presently
exercisable options and 200,000 shares of Class A common stock subject to
options that will become exercisable within 60 days.
(5) Includes 49,600 shares of Class A common stock subject to presently
exercisable options and 41,200 shares of Class A common stock subject to
options that will become exercisable within 60 days.
(6) Includes 66,400 shares of Class A common stock subject to presently
exercisable options and 51,200 shares of Class A common stock subject to
options that will become exercisable within 60 days.
(7) Includes 12,000 shares of Class A common stock subject to presently
exercisable options and 12,000 shares of Class A common stock subject to
options that will become exercisable within 60 days.
(8) Includes 160,000 shares of Class A common stock subject to presently
exercisable options.
(9) Includes 36,000 shares of Class A common stock subject to presently
exercisable options.
(10) Includes 1,606,808 shares of Class A common stock subject to presently
exercisable options and 424,400 shares of Class A common stock subject to
options that will become exercisable within 60 days.
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INFORMATION ABOUT GEMSTAR
Gemstar develops, markets and licenses proprietary technologies and systems
that simplify and enhance consumers' interaction with electronics products and
other platforms that deliver video, programming information and other data.
Gemstar seeks to have its technologies widely licensed, incorporated and
accepted as the technologies and systems of choice by consumer electronics
manufacturers, service providers (such as owners or operators of cable systems,
telephone networks, Internet service providers, direct broadcast satellite
providers, wireless systems and other multi-channel video programming
distributors), software developers and consumers.
Gemstar's first proprietary system, VCR Plus+, was introduced in 1990. This
system is widely accepted as a de facto industry standard for programming VCRs
and is currently incorporated into virtually every major brand of VCR sold
worldwide. VCR Plus+ enables consumers to record a television program by simply
entering a proprietary code into a VCR or television equipped with the VCR
Plus+ technology. These proprietary codes are printed next to television
program listings in over 1,800 publications worldwide, with a combined
circulation of over 330 million.
During Gemstar's fiscal year 1999, Gemstar executed long-term renewals of
license agreements with key licensees of the VCR Plus+ technology, including
Sony Corporation and Thomson Consumer Electronics, Inc. Gemstar also continued
its international expansion by launching VCR Plus+ in Mexico, the 40th country
in which VCR Plus+ is offered.
Gemstar has also developed and acquired a large portfolio of technologies
and intellectual property for implementing its interactive program guides which
enable consumers to navigate through, sort, select and record television
programming. These technologies have been licensed for, or incorporated into,
televisions, VCRs, TV-VCR combination units, cable set-top boxes, integrated
satellite receiver decoders, personal computers, PCTVs and Internet appliances
and interactive services provided thereon. Gemstar believes that with the
increase in programming content and number of accessible channels, its
technologies will become an increasingly important tool for assisting consumers
in sorting, selecting and recording television programming.
Gemstar also believes that its interactive program guides are an attractive
vehicle for the delivery of advertising and other content to consumers.
Gemstar's principal executive offices are located at 135 North Los Robles
Avenue, Suite 800, Pasadena, California 91101 (telephone (626) 792-5700).
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INFORMATION ABOUT TV GUIDE
TV Guide is a media and communications company that provides print, passive
and interactive program listings guides to households, distributes programming
to cable television systems and direct-to-home satellite providers, and markets
satellite-delivered programming to C-band satellite dish owners.
On March 1, 1999, TV Guide acquired from Liberty Media Corporation 40% of
Superstar/Netlink Group, thereby increasing TV Guide's interest in that company
to 80%, and Liberty's Netlink Wholesale Division, which includes a business
that provides six Denver-based television channels to cable systems and home
satellite programming packagers and a separate business that sells programming
packages to satellite master antenna television systems serving hotels and
multi-unit dwellings. On that date, TV Guide also acquired from The News
Corporation Limited the stock of certain corporations which publish TV Guide
Magazine and other printed television program listings guides and distribute,
through the Internet, an entertainment service now known as TV Guide Online.
Liberty and News Corp. each beneficially own approximately 43.7% of TV
Guide's common stock each representing approximately 48.8% of the total voting
power of TV Guide's common stock.
TV Guide is organized into three operating groups: TV Guide Magazine Group;
TV Guide Entertainment Group; and United Video Group.
The TV Guide Magazine Group provides TV Guide Magazine to households and
newsstands. TV Guide Magazine is the most widely circulated paid weekly
magazine in the United States. It is printed in over 200 separate editions and
had circulation of approximately 11 million as of December 31, 1999. In
addition, the TV Guide Magazine Group provides customized monthly program
guides for cable and satellite operators.
The TV Guide Entertainment Group supplies satellite-delivered on-screen
program promotion and guide services, both nationally and internationally. Its
customers are cable television systems and other multi-channel video
programming distributors. Its services include:
. TV Guide Channel;
. Sneak Prevue;
. TV Guide Interactive; and
. TV Guide Online.
TV Guide Channel is a passive program listing guide that reaches
approximately 50 million households in more than 2,400 cable systems. Sneak
Prevue promotes pay-per-view movies to over 34 million households in more than
850 cable systems. Currently reaching more than 2.7 million households, TV
Guide Interactive provides a service that allows television viewers to retrieve
on demand continuously updated program guide information through their cable
television system. TV Guide Online is an Internet-based program listings guide.
The United Video Group provides:
. direct-to-home satellite services;
. satellite distribution of video entertainment services;
. software development and systems integration services; and
. satellite transmission services for private networks.
Through Superstar/Netlink Group, TV Guide markets satellite entertainment
programming to approximately 1.0 million C-band direct-to-home satellite dish
owners in North America. In November 1999, TV Guide announced an exclusive
direct broadcast satellite marketing alliance agreement with EchoStar to
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convert the existing and inactive C-band customers of Superstar/Netlink Group
to the high power (small satellite dish) DISH Network service. Under the
conversion process, EchoStar will compensate Superstar/Netlink Group on a per
subscriber basis, both upon successful conversion and with residual payments
over time. TV Guide owns 80% of Superstar/Netlink Group. Through UVTV, TV Guide
markets and distributes WGN (Chicago), KTLA (Los Angeles) and WPIX (New York),
three independent satellite-delivered television "superstations" to cable
television systems and other multi-channel video programming distributors. WGN
reaches in excess of 46 million households. In addition, TV Guide offers six
Denver-based television channels to cable television systems and home satellite
programming packagers and provides programming packages to satellite master
antenna television systems. Through ODS Technologies, TV Guide markets and
distributes Television Games Network, a channel launched in August 1999 that is
devoted to horse racing. Through SSDS, Inc., TV Guide provides software
development and systems integration services to large organizations with
complex computer needs. TV Guide owns 70% of SSDS, Inc. TV Guide's SpaceCom
subsidiary provides satellite-delivered point-to-multipoint audio and data
transmission services for various customers, including radio programmers,
paging network operators, financial information providers, news services and
other private business networks.
TV Guide's principal executive offices are located at 7140 South Lewis
Avenue, Tulsa, Oklahoma 74136-5422 (telephone (918) 488-4000).
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THE MERGER
Background of the Merger
On October 19, 1993, TV Guide (which before March 1, 1999 was known as
United Video Satellite Group, Inc.) brought suit in federal district court in
Tulsa, Oklahoma against StarSight Telecast, Inc., a California corporation,
which subsequently became a wholly owned subsidiary of Gemstar. The suit sought
a declaratory judgment that TV Guide's interactive program guide products do
not infringe certain patents issued to StarSight. StarSight counterclaimed
charging patent infringement. Through subsequent motions, the litigation
expanded to include additional patents to which StarSight claims rights and
federal antitrust claims. A bench trial began in May 1996 with respect to
whether one of TV Guide's interactive program guides for advanced analog set
top devices infringed a StarSight patent, and the validity and enforceability
of that patent. Proceedings on all other issues other than liability with
respect to the patent had been previously stayed by the court.
In August 1997, shortly after Gemstar acquired StarSight, Gemstar and TV
Guide engaged in settlement negotiations with respect to the StarSight
litigation. These negotiations led to the parties' announcement in January 1998
of an agreement to form a joint venture to provide interactive programming
guides to cable television system operators and other multichannel video
programming distributors (collectively referred to as Service Providers).
In connection with the January 1998 agreement, Gemstar received warrants to
purchase shares of TV Guide's Class A common stock and each of TV Guide and a
subsidiary of Tele-Communications, Inc. received warrants to purchase shares of
Gemstar common stock. At the time, TCI owned a majority of the voting and
equity interests in TV Guide and certain intellectual property rights with
respect to technology that would be incorporated in the joint venture's
interactive program guides. These rights were subsequently transferred to TV
Guide. Upon the closing of the formation of the joint venture, the StarSight
litigation was to be dismissed and each of Gemstar and TV Guide was to cause
one nominee of the other to be elected to its board of directors. The closing
was subject to certain conditions, including the satisfactory completion of
negotiations for a 10-year affiliation agreement between the joint venture and
TCI for the deployment of the interactive program guide to digital cable
customers of the cable systems of TCI's subsidiaries and agreement upon the
initial specifications for the interactive program guide.
Following the January 1998 announcement, the parties and their respective
counsel continued to negotiate the terms of the agreements that were necessary
to conclude the transaction. Because of the limited progress in this regard, in
early March 1998, Gary S. Howard, then Chairman of the Board and Chief
Executive Officer of TV Guide, and Peter C. Boylan III, President and Chief
Operating Officer of TV Guide, first broached with Henry C. Yuen, President and
Chief Executive Officer of Gemstar, the possibility of TV Guide's acquiring
Gemstar.
At a meeting at Gemstar's offices in Pasadena, California on March 13, 1998,
Messrs. Howard and Boylan outlined the terms for a possible business
combination of the companies. Under the proposal, TV Guide would acquire
Gemstar by merger, and the stockholders of Gemstar would receive $40 for each
share of Gemstar common stock.
On March 20, 1998, TV Guide delivered a letter to Mr. Yuen and Thomas Lau,
then Chairman of the Board of Gemstar, which proposed terms similar to those
outlined at the March 13, 1998 meeting. On March 26, 1998, Gemstar publicly
announced that the deadline for the satisfaction of the closing conditions for
the formation of the joint venture with TV Guide had passed. Accordingly, the
joint venture formation agreement lapsed and the previously granted warrants
expired without vesting. Although the parties continued discussions following
the announcement, they were unsuccessful in concluding the necessary agreements
for the joint venture to proceed.
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During April and May 1998, Messrs. Howard and Boylan continued to explore a
possible business combination with Gemstar, holding separate meetings with
Messrs. Yuen and Lau. Respective counsel for the companies conferred by
telephone regarding the tax consequences of various possible structures for a
combination. Merrill Lynch, Pierce, Fenner & Smith Incorporated, financial
advisor to TV Guide, met with Gemstar's then financial advisors, Goldman Sachs
& Co., Morgan Stanley & Co. and Lazard Freres & Co. LLC, and outlined revised
terms for a proposed business combination at $45 per share of Gemstar common
stock. Beginning in late May 1998, TV Guide also began discussions with Mr. Lau
and with Gemstar stockholders, Viacom, Inc. and THOMSON multimedia S.A.
concerning their willingness to enter into an agreement to vote in favor of the
proposed merger and to grant TV Guide an option to purchase their Gemstar
shares at $45 per share.
By letter dated June 10, 1998, Mr. Howard transmitted to Gemstar's board of
directors TV Guide's offer to acquire Gemstar in an all cash merger of $45 per
share of Gemstar common stock. During June 1998, TV Guide also began to explore
with its counsel and financial advisors the possibility of a tender offer for
Gemstar's common stock and soliciting consents for amendments to Gemstar's
governing instruments and for the election of TV Guide's nominees as directors.
At the end of June, Messrs. Howard and Boylan also proposed to Mr. Lau, Viacom
and THOMSON that they agree to tender their shares and submit their consents if
a tender offer and consent solicitation were commenced. These discussions
continued into early July but no agreements were entered into.
TV Guide reiterated its June 10, 1998 offer in a letter dated July 2, 1998
to Mr. Yuen, in which TV Guide stated that if it did not receive a favorable
response it was prepared to make the offer public. On July 6, 1998, TV Guide
publicly announced the terms of its July 2, 1998 offer.
On July 7, 1998, Gemstar announced that it was evaluating the July 2
proposal and that it had previously engaged Lazard Freres to act as its
financial advisor. On July 12, 1998, Gemstar announced that its board of
directors had adopted a rights agreement and a series of amendments to
Gemstar's memorandum of association and articles of association. In connection
with the adoption of the rights agreement, Gemstar's board of directors
declared a dividend of one preferred share purchase right for each outstanding
share of Gemstar common stock. On July 16, 1998, Gemstar announced that its
board of directors had voted to reject TV Guide's unsolicited proposal. The
announcement stated that in reaching its decision, the Gemstar board
considered, among other things, the opinion of Lazard Freres that TV Guide's
proposal was financially inadequate. On July 22, 1998, TV Guide announced that
it would not increase its offer for Gemstar and, accordingly, withdrew its
outstanding proposal.
On July 24, 1998, Gemstar and StarSight filed an action in federal court in
the Northern District of California against Prevue Networks, Inc., a subsidiary
of TV Guide, claiming infringement of two patents by TV Guide's interactive
program guide. The action was later amended to add TCI Communications, Inc.
Subsequently the action was transferred to the court in Tulsa, Oklahoma hearing
the StarSight litigation.
On February 19, 1999, the Tulsa court ruled against TV Guide's defense that
the StarSight patent then being considered by the court was unenforceable (on
inequitable conduct grounds). The court did not then rule on the validity and
infringement issues regarding that patent, but it referred the case to a
magistrate judge to schedule settlement conferences.
On March 4, 1999, TV Guide entered into a 10-year affiliation agreement with
a subsidiary of TCI for the deployment of the TV Guide Interactive electronic
program guide service to TCI's cable customers. On March 9, 1999, TCI, which is
now known as AT&T Broadband and Internet Services, was acquired by AT&T Corp.
The affiliation agreement remains in effect.
On March 31, 1999, certain officers of TV Guide, including Mr. Boylan,
certain officers of Gemstar, including its then general counsel, and the
respective trial counsel for each party met in Tulsa, Oklahoma for a settlement
conference with respect to the patent litigations. Another settlement
conference was held on May 20, 1999 in Tulsa in which Mr. Yuen, Mr. Boylan, a
representative of AT&T Broadband and their respective trial
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counsel participated. The participants discussed various alternatives to settle
the litigations. Mr. Boylan proposed that TV Guide and Gemstar enter into
cross-licensing arrangements with respect to their respective worldwide patents
in the field of on-screen and on-line interactive program guides. Mr. Yuen
indicated that Gemstar would consider only granting a license confined to the
Service Provider sector and he discussed certain agreements Gemstar would
require of any Service Provider, including AT&T Broadband, sublicensed to use
an interactive program guide that included any of Gemstar's technology.
Following the conference, Mr. Boylan sent Mr. Yuen an outline of the terms he
was proposing for the patent cross license.
Messrs. Yuen and Boylan met again at Gemstar's offices on June 10, 1999. Mr.
Yuen rejected the proposed cross licenses and suggested instead that the
parties reconsider forming a joint venture. Following that meeting, Mr. Yuen
sent Mr. Boylan on June 13 an outline of a settlement proposal. This proposal
contemplated that Gemstar and TV Guide would form a joint venture that would
license each company's relevant intellectual property to Service Providers for
interactive guides and related services. During June, Gemstar and TV Guide
continued to discuss the terms of the proposed joint venture, including the
terms on which each company would license its intellectual property to the
joint venture and the terms on which the joint venture would provide its
interactive program guide to Service Providers. Mr. Yuen, Mr. Boylan and
Joachim Kiener, Chairman and Chief Executive Officer of TV Guide, participated
in these discussions.
The negotiations continued through July 1999. During this period, Messrs.
Kiener and Boylan also discussed with AT&T Broadband the terms of a new
affiliation agreement between the proposed joint venture and AT&T Broadband,
which would replace the existing agreement between TV Guide and AT&T Broadband
and, in particular, certain covenants that Gemstar would require from Service
Providers as a condition of its license to the joint venture. Limited progress
was made in negotiating these covenants with AT&T Broadband, and on July 30,
1999, Mr. Yuen wrote to the magistrate presiding over the settlement
negotiations indicating that the apparent lack of TV Guide's progress on these
issues had brought the joint venture negotiations to a standstill.
At a meeting of the TV Guide board on August 6, 1999, the board discussed
the proposed joint venture, and requested management to explore the possibility
of broadening the scope of the proposed relationship with Gemstar. On August
12, 1999, Messrs. Kiener and Boylan met with Mr. Yuen at Gemstar's offices.
They discussed numerous alternative transactions, including the acquisition of
Gemstar by TV Guide, the acquisition of TV Guide by Gemstar, the purchase and
sale of assets, and a significant TV Guide equity investment. Two of the
alternatives discussed were of mutual interest. One alternative was to couple
the completion of the joint venture with a substantial equity investment by TV
Guide in Gemstar, in consideration for TV Guide common stock. The other
alternative was the acquisition of TV Guide by Gemstar in a stock for stock
merger. Messrs. Kiener and Boylan subsequently apprised the executive committee
of the TV Guide board of the status of the discussions. Through the end of
August and into September, Messrs. Kiener and Boylan also continued to seek to
resolve the remaining issues relating to an affiliation agreement between the
proposed joint venture and AT&T Broadband.
Messrs. Kiener and Boylan met again with Mr. Yuen at Gemstar's offices on
September 1 and September 2 to continue to explore a potential expanded
relationship. At the end of the meeting, the parties agreed to focus their
efforts on the merger option. On September 8, 1999, Mr. Boylan sent Mr. Yuen a
term sheet outlining the structure for the acquisition of TV Guide by Gemstar
in a tax-free stock for stock exchange, after giving effect to which former TV
Guide stockholders would own 47-49%, and former Gemstar stockholders would own
51-53%, of the equity interests of the combined company on a fully diluted
basis (assuming the exercise of all vested and unvested options). Gemstar would
continue to have only one class of common stock, but certain governance
procedures would be established to ensure meaningful representation of the
interests of the former TV Guide stockholders. These procedures would include
the TV Guide board's having the right to designate before the closing of the
merger 50% of the members of the board of directors of the resulting combined
company, certain rights to representation on committees of the board of
directors, supermajority voting requirements applicable to specified
fundamental decisions by the board of directors and by the stockholders, and
the appointment of Messrs. Kiener and Boylan as co-Presidents and co-Chief
Operating
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Officers with Elsie Ma Leung. TV Guide also proposed that Gemstar change its
place of incorporation from the British Virgin Islands to the State of Delaware
to avoid potentially negative tax consequences to significant U.S.
stockholders, including Mr. Yuen, Liberty Media Corporation, and a subsidiary
of The News Corporation Limited. Mr. Yuen responded preliminarily to the term
sheet on September 12 and suggested the principals meet again on September 20.
Messrs. Yuen, Kiener and Boylan met at Gemstar's offices on September 20, 21
and 22 to negotiate the terms of the proposed merger. Respective outside
counsel for TV Guide and Gemstar were briefed on the terms of the transaction
on September 21 and instructed to prepare the necessary documentation. In a
conference call on September 23, 1999, Messrs. Kiener and Boylan advised the
executive committee of the TV Guide board of the outcome of the meetings. The
executive committee authorized Messrs. Kiener and Boylan to continue the
negotiations with Gemstar.
From September 27 through October 3, 1999, the parties, assisted by their
respective legal counsel and financial advisors, negotiated the definitive
merger agreement and related transaction agreements. Mr. Yuen was represented
by his own counsel, separate from the firm representing Gemstar, in the
negotiation of the stockholders agreement among Mr. Yuen, Liberty, News Corp.
and Gemstar and in the negotiation of certain amendments to Mr. Yuen's
employment agreement. On September 30, Robert R. Bennett, President and Chief
Executive Officer of Liberty, and Mr. Howard, Executive Vice President and
Chief Operating Officer of Liberty, met with Mr. Yuen in Pasadena to discuss
various potential issues involving the combined company.
At a telephonic meeting of Gemstar's board of directors on September 30,
1999, Gemstar's senior management introduced and outlined the terms and
structure of the proposed merger, including the change in Gemstar's place of
incorporation, the accounting treatment of the proposed transaction, the
proposed stockholders agreement and the amendments to Gemstar's governing
documents. Gemstar's senior management discussed with Gemstar's board of
directors the history of events leading to the proposed merger with TV Guide,
the various business reasons for the contemplated merger and the potential
risks of such a transaction. Representatives of Lazard Freres, financial
advisor to Gemstar's board of directors, presented to Gemstar's board of
directors the results of its due diligence regarding TV Guide, reviewed
detailed financial analysis and pro forma and other information with respect to
TV Guide, and advised Gemstar's board of directors regarding various financial
aspects of the merger, including whether Lazard Freres was prepared to render a
fairness opinion regarding the proposed financial terms of the merger.
Gemstar's legal counsel, O'Melveny & Myers LLP, summarized for Gemstar's board
of directors its fiduciary duties in connection with considering the proposed
merger and presented an overview of the proposed transaction and the material
terms of the proposed merger. Gemstar's senior management, financial advisors
and legal counsel responded to questions regarding various aspects of the
proposed merger. At the conclusion of the meeting, Gemstar's board of directors
agreed that management should continue with the negotiations of the terms of
the definitive merger agreement and related agreements. Immediately after the
meeting, each member of Gemstar's board of directors was provided with written
materials regarding TV Guide prepared by Gemstar's financial advisor and a
written summary of the proposed transaction prepared by Gemstar's legal
advisors.
At a telephonic meeting of Gemstar's board of directors on October 1, 1999,
Gemstar's senior management outlined in detail the terms and structure of the
proposed merger and advised the members of Gemstar's board of directors of the
status of the negotiations with TV Guide. Lazard Freres, O'Melveny & Myers LLP,
Sullivan & Cromwell, Gemstar's legal co-counsel, Harney Westwood & Riegels,
Gemstar's British Virgin Islands legal counsel, and Potter Anderson & Corroon,
Gemstar's Delaware legal counsel, participated in the call. Gemstar's legal
counsel again advised Gemstar's board of directors of its fiduciary duties in
connection with considering the proposed merger. Gemstar's legal counsel also
advised Gemstar's board of directors of the parties' positions on the principal
open issues, including TV Guide's desire that Gemstar be restricted in its
ability to consider alternative transactions, the circumstances under which
Gemstar would be obligated to pay TV Guide a termination fee if the merger
agreement were terminated and the size of the fee, and the terms of the stock
options each company would grant to the other and the events that would trigger
the right to exercise the options. Gemstar's financial advisor presented
written materials to Gemstar's board of
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directors regarding the transaction, including an overview of the merger, an
overview of TV Guide, a valuation analysis of Gemstar and TV Guide, an analysis
of the pro forma impact of the merger, an analysis of the potential market
reaction and a comparison of precedent transactions. Gemstar's senior
management, legal counsel and financial advisors responded to questions
regarding various aspects of the proposed merger. At the conclusion of the
meeting, Gemstar's board of directors agreed again that management should
continue with the negotiations of the terms of the definitive merger agreement
and related agreements.
At a telephonic meeting of the TV Guide board of directors on October 1,
1999, Messrs. Kiener and Boylan outlined the terms and structure of the
proposed merger, including corporate governance and stockholder arrangements,
and described the status of negotiations with respect to open issues. Baker
Botts L.L.P., TV Guide's legal counsel on the transaction, and Merrill Lynch
participated in the call. The principal open issues concerned TV Guide's
insistence that Gemstar, like TV Guide, be restricted in its ability to
consider alternative transactions, the circumstances under which Gemstar would
be obligated to pay TV Guide a termination fee if the merger agreement were
terminated and the size of the fee, and the terms of the stock options each
company would grant to the other and the events that would trigger the right to
exercise the options. Counsel reviewed with the TV Guide board each party's
position on these issues, the legal bases for these positions and alternatives
to be considered. Merrill Lynch discussed its preliminary financial analysis
and the expected range for the exchange ratio, having been instructed by
management to assume that former TV Guide stockholders would own 47-49% of the
combined company on a fully diluted basis (assuming the exercise of all vested
and unvested options).
The negotiations continued through the weekend, focusing particularly on the
calculation of the exchange ratio, which Gemstar and its financial advisors
insisted be based on outstanding shares rather than fully diluted shares. The
negotiations also focused on the issues surrounding the termination fee and the
stock options, the agreements to vote for the transaction that TV Guide
insisted be entered into by certain significant stockholders of Gemstar, the
terms of the patent cross licenses and certain provisions of the stockholders
agreement.
On October 3, 1999, Gemstar's board of directors met at Gemstar's corporate
offices in Pasadena, California, with two attendees participating by telephone
conference call. At the meeting, Gemstar's senior management and legal and
financial advisors discussed the following, among other matters:
. the procedural and substantive requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, the obligations imposed on Gemstar
and TV Guide by applicable antitrust laws, the possibility that the
Department of Justice or the Federal Trade Commission could take action
under the antitrust laws to enjoin the merger or require divestiture of
assets or businesses of Gemstar or TV Guide;
. the status of the negotiations with TV Guide and the benefits and
potential risks of the proposed transactions;
. the nature of the cable and consumer electronics industries;
. the exchange ratio and the basis on which it was determined;
. TV Guide's insistence on a termination fee and an option on Gemstar's
stock in the event the merger were not completed because of an adverse
stockholder vote, together with the other circumstances in which a
termination fee would be payable by Gemstar to TV Guide or by TV Guide
to Gemstar upon termination of the merger agreement and the amount of
such a fee;
. the covenant made by each company not to solicit other offers;
. the limitations on TV Guide to consider alternative transactions and the
ability of Gemstar's board of directors to withdraw its recommendation
of the merger in the event Gemstar receives a superior proposal;
. the terms of the stock options granted by Gemstar to TV Guide and TV
Guide to Gemstar and the circumstances in which they would become
exercisable;
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. the governance arrangements for the combined company provided for in the
proposed amendments to Gemstar's governing documents;
. the terms and conditions of the merger agreement, including the
inability of the parties to avoid closing the merger because of a
material adverse change in the other party;
. the terms of the stockholders agreement among Mr. Yuen, Liberty, News
Corp. and Gemstar;
. the terms of the patent cross license agreement to be entered into by
Gemstar and TV Guide the circumstances in which it would become
effective;
. the stockholder vote required to approve proposed transactions;
. the voting agreements that Liberty and News Corp. would enter into if TV
Guide's board of directors approved the merger;
. the voting agreements of Messrs. Yuen and Lau, Ms. Leung and THOMSON to
vote their respective shares in favor of the merger;
. the amendments that would be made to Gemstar's rights agreement in
connection with the merger; and
. the terms of the amendment to Mr. Yuen's employment agreement that would
become effective upon the merger.
Lazard Freres described the financial analyses performed in connection with
its opinion, and rendered an oral opinion (which was subsequently confirmed in
writing) that, as of that date and based upon and subject to the matters stated
in its opinion, the exchange ratio was fair to Gemstar from a financial point
of view. See "--Opinion of Financial Advisor to Gemstar's Board of Directors."
After discussion and after concluding that the proposed merger and related
transactions, including the change in Gemstar's place of incorporation and the
adoption of a new certificate of incorporation and bylaws, were fair to and in
the best interests of Gemstar and its stockholders, Gemstar's board of
directors voted unanimously to approve, among other things, (1) the proposed
merger and to authorize the execution of the merger agreement and the other
transaction documents, (2) the change in Gemstar's place of incorporation from
the British Virgin Islands to the State of Delaware and the adoption of a new
certificate of incorporation and bylaws, and (3) the amendment to Gemstar's
rights agreement, and to recommend that Gemstar's stockholders approve the
issuance of Gemstar common stock to TV Guide stockholders in the merger.
At a telephonic meeting of the TV Guide board on October 3, 1999, Mr.
Kiener, Mr. Boylan and Baker Botts reviewed with the TV Guide board the terms
of the merger agreement and other transaction documents, including:
. the fixed exchange ratio and the basis on which it had been determined;
. the covenant made by each company not to solicit other offers;
. the inability of TV Guide and the limited ability of Gemstar to consider
alternative transactions;
. the circumstances under which a termination fee would be payable by TV
Guide to Gemstar or by Gemstar to TV Guide upon termination of the
merger agreement and the amount of such a fee;
. the terms and conditions of the merger agreement, including the
inability of the parties to avoid closing the merger because of a
material adverse change in the other party;
. the terms of the stock options granted by TV Guide to Gemstar and
Gemstar to TV Guide and the circumstances under which they would become
exercisable;
. the terms of the patent cross license agreement to be entered into by TV
Guide and Gemstar and the circumstances under which it would become
effective;
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. the voting agreements that would be entered into by Liberty and News
Corp. if the TV Guide board approved the merger, which would ensure
approval of the transaction by TV Guide's stockholders;
. the voting agreements that certain significant stockholders of Gemstar
would enter into if the Gemstar board approved the merger;
. the governance structure of the combined company;
. the terms of the stockholders agreement among Mr. Yuen, Liberty, News
Corp. and Gemstar;
. the amendments that would be made to Gemstar's rights agreement in
connection with the merger; and
. the terms of the amendment to Mr. Yuen's employment agreement that would
become effective upon the merger.
Merrill Lynch made a presentation as to the financial analyses performed in
connection with its opinion, and rendered to the TV Guide board an oral opinion
(which was subsequently confirmed in writing) to the effect that, as of that
date and based upon and subject to the matters stated in its opinion, the
exchange ratio was fair from a financial point of view to the holders of TV
Guide's stock, other than Liberty, News Corp., Gemstar and their respective
affiliates. See "--Opinion of Financial Advisor to TV Guide's Board of
Directors." After discussion and after concluding that the proposed merger and
related transactions were fair to and in the best interests of TV Guide and its
stockholders, the TV Guide board of directors voted unanimously to approve the
proposed merger, to authorize the execution of the merger agreement and the
other transaction documents, and to recommend that TV Guide's stockholders
approve the proposal.
On October 4, 1999, Gemstar and TV Guide issued a joint press release
announcing the execution of the merger agreement. For a discussion of the terms
of the merger agreement and the other transaction documents see "Terms of the
Merger Agreement," "Terms of the Voting Agreements" and "Terms of the
Stockholders Agreement."
On January 31 and February 7, 2000, the TV Guide board re-approved the terms
of the merger agreement and certain amendments thereto in connection with their
approval of the definitive proxy materials that are being sent to TV Guide
stockholders.
On February 7, 2000, the Gemstar board re-approved the terms of the merger
agreement and certain amendments thereto in connection with their approval of
the definitive proxy materials which are being sent to Gemstar stockholders.
The Gemstar board also approved changing Gemstar's place of incorporation from
the British Virgin Islands to the State of Delaware before February 23, 2000
rather than at the time of the merger.
Gemstar Board of Directors' Reasons for the Merger
In reaching its decision to approve the merger and the adoption of a new
certificate of incorporation and bylaws and recommend that the Gemstar
stockholders approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger, Gemstar's board of directors consulted with:
. Gemstar's management regarding the business and financial condition of
TV Guide, trends and competitors in the industry, management's
investigation of TV Guide and the terms and other considerations of the
proposed merger;
. Gemstar's legal counsel regarding the proposed terms of the merger
agreement, the stockholders agreement, the certificate of incorporation,
the bylaws, the governance provisions of the combined company generally,
the obligations of the board of directors in its consideration of the
proposed transaction and the review of certain legal matters with
respect to TV Guide; and
. Lazard Freres & Co. LLC, financial advisor to Gemstar's board of
directors, regarding the financial aspects of the proposed transactions
(including the assumptions and methodology underlying the financial
information presented), trends and competitors in the industry and the
written opinion of Lazard Freres regarding the fairness to Gemstar, from
a financial point of view, of the consideration to be paid by Gemstar in
the merger.
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In reaching its conclusion that the merger and the adoption of a new
certificate of incorporation and bylaws are in the best interests of Gemstar
and its stockholders, and in deciding to recommend that its stockholders
approve the proposal to issue Gemstar common stock to TV Guide stockholders in
the merger, Gemstar's board of directors considered the following information
and factors:
. the complementary relationship between Gemstar's global presence in the
highly competitive consumer electronics industry and TV Guide's
franchise and brand name;
. the complementary relationship between Gemstar's association with
broadcasters and consumer electronics manufacturers and TV Guide's
relationship with publications, cable companies, programmers and content
providers;
. the effect that the merger will have on the resolution of litigation
between Gemstar and TV Guide, permitting the combined company to focus
on developing products that will better serve the two companies'
partners, customers and end-users;
. the technology, sales force and advertiser customer base of the combined
company, which will be well positioned to compete in the highly
competitive areas of advertising and e-commerce on a global basis;
. the creation of a larger business with the high profile and branding
strength to enable the combined company to attract more advertisers and
strategic partners;
. the rapid development and deployment of guide products throughout
multiple business sectors and the enhanced speed at which the combined
company can compete for consumer attention and against other entities
for advertising revenues;
. benefits from the potential financial and operating synergies that will
result from integrating the systems and operations of their existing
businesses;
. the possibility of accelerating the adoption of advertising on Gemstar's
and TV Guide's interactive program guides;
. TV Guide's recognized brand name, with its strong connection to
television content;
. the historical market prices of Gemstar common stock and TV Guide common
stock as compared with the proposed exchange ratio;
. TV Guide's financial condition, competitive position and prospects for
growth;
. the representations, warranties, covenants and conditions in the merger
agreement;
. the circumstances under which Gemstar or TV Guide would have the right
to terminate the merger agreement and the circumstances in which a
termination fee would be payable in the event of a termination of the
merger agreement;
. the fact that the vote of certain Gemstar stockholders would be assured
by reason of the voting agreements to be entered into by Henry C. Yuen,
Elsie Ma Leung, Dynamic Core Holdings Limited and THOMSON multimedia
S.A.;
. the consequences of changing Gemstar's place of incorporation to the
State of Delaware, including the material differences between British
Virgin Islands corporate law and Delaware corporate law;
. the terms of the stockholders agreement, the certificate of
incorporation and the bylaws of the combined company after the merger;
. the financial condition, cash flows and results of operations of Gemstar
and TV Guide, on both a historical and prospective basis;
. the impact of the merger on Gemstar's customers, suppliers and
employees;
. current industry, economic and market conditions;
. the prospects of Gemstar as an independent company; and
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<PAGE>
. the regulatory approvals required to complete the merger and the
prospects for receiving those approvals.
Gemstar's board of directors also considered the following potentially
adverse consequences of the merger:
. the limitations of the corporate governance arrangements provided for by
the new certificate of incorporation and bylaws and the terms of the
stockholders agreement;
. the risk that the combined company will experience slower growth and
decreased profit margins and require greater capital expenditures than
Gemstar has in the past;
. the impact of a change of control of TV Guide on certain material
contracts, including the right of TV Guide public debt holders to put
their bonds to TV Guide at a price of $101;
. the assumption of TV Guide's debt;
. the possibility that regulatory agencies may oppose or impose conditions
on the merger;
. the possibility that substantial stockholders of TV Guide may have
interests that are different from or in addition to those of other
Gemstar stockholders following the completion of the merger;
. the risk that the operations of Gemstar and TV Guide might not be
successfully integrated;
. the risk that potential benefits of the merger might not be fully
realized; and
. the risk that Gemstar's effective corporate tax rate may increase.
Gemstar's board of directors determined, however, that on balance, the
positive aspects of the merger significantly outweigh any potentially adverse
consequences. Gemstar's board of directors ultimately concluded that the
merger, the adoption of a new certificate of incorporation and bylaws and the
proposal to approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger are advisable and in the best interests of Gemstar
and its stockholders.
The foregoing discussion of the information and factors considered by
Gemstar's board of directors is not intended to be exhaustive. In view of the
wide variety of factors considered in connection with its evaluation of the
merger agreement and the merger, Gemstar's board of directors did not find it
practical to, nor did it attempt to, quantify, rank or otherwise attempt to
assign relative weights to the specific factors considered in reaching its
determination. In addition, Gemstar's board of directors did not undertake to
make a specific determination as to whether any particular factor was favorable
or unfavorable to the Gemstar board's ultimate determination or assign any
particular weight to any factor, but rather conducted an overall analysis of
the factors described above, including thorough discussion with and questioning
of Gemstar's management and management's analysis of the merger based on
information received from Gemstar's legal, financial and accounting advisors.
In considering the factors described above, individual members of Gemstar's
board of directors may have given different weights to different factors.
Gemstar's board of directors considered all these factors as a whole, and
considered the factors overall to be favorable to and to support its
determination.
Recommendation of Gemstar's Board of Directors
Gemstar's board of directors believes that the terms of the merger are fair
to and in the best interests of Gemstar and its stockholders. Accordingly,
Gemstar's board of directors unanimously recommends that Gemstar stockholders
vote "FOR" the proposal to approve the issuance of Gemstar common stock to TV
Guide stockholders in the merger.
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TV Guide Board of Directors' Reasons for the Merger
In reaching its decision to approve the terms of the merger and recommend
that the TV Guide stockholders approve and adopt the merger agreement, TV
Guide's board of directors consulted with:
. TV Guide's management regarding the business and financial condition of
Gemstar, trends and competitors in the industry, management's
investigation of Gemstar and the terms of the proposed merger;
. TV Guide's legal counsel regarding the proposed terms of the merger
agreement, the stockholders agreement and Gemstar's new certificate of
incorporation and bylaws, the proposed governance of Gemstar after the
merger, and the obligations of TV Guide's board of directors in
considering the proposed merger transaction; and
. Merrill Lynch, Pierce, Fenner & Smith Incorporated, TV Guide's financial
advisor, regarding the financial aspects of the proposed merger
transaction.
In reaching its conclusion that the proposed merger is in the best interests
of TV Guide and its stockholders, and in deciding to recommend that TV Guide's
stockholders approve and adopt the merger agreement, TV Guide's board of
directors considered the following information and factors:
. the historical market prices, volatility, liquidity and trading
information with respect to Gemstar's common stock and TV Guide's common
stock and the premium to be received by TV Guide stockholders in the
merger by virtue of the exchange ratio. In this regard, the TV Guide
board noted that the exchange ratio represented, as of October 3, 1999,
the date on which the TV Guide board approved the merger, approximately
a 9.6% premium over the closing price per share of TV Guide Class A
common stock on October 1, 1999;
. the fact that the merger would resolve the litigation between Gemstar
and TV Guide, permitting the entity resulting from the merger to focus
on developing and licensing new products and services and improving
existing products and services;
. the fact that the merger should allow TV Guide's stockholders to
exchange their shares of TV Guide common stock for shares of Gemstar
common stock without recognition of taxable income by TV Guide's
stockholders;
. detailed financial analyses and other information with respect to TV
Guide and Gemstar presented by Merrill Lynch in a presentation to the TV
Guide board, including Merrill Lynch's oral opinion, which was
subsequently confirmed in writing (and which opinion is attached to this
joint proxy statement/prospectus as Annex E), that, based upon and
subject to the factors and assumptions set forth in the opinion, as of
the date of the opinion, the exchange ratio was fair, from a financial
point of view, to TV Guide's stockholders, other than Liberty Media
Corporation, The News Corporation Limited, Gemstar and their respective
affiliates;
. the usefulness of Gemstar's significant portfolio of patents;
. the revenue that Gemstar derives from licensing its intellectual
property;
. the strategic benefits to be derived from combining the businesses and
assets of TV Guide and Gemstar, including the generation of potential
economies of scale, diversification of revenues and efficiencies in
marketing products and services;
. the experience and accomplishments of Henry C. Yuen and other members of
Gemstar's management;
. the familiarity of the TV Guide board with Gemstar's financial
condition, competitive position and prospects for growth;
. the representations, warranties, covenants and conditions contained in
the merger agreement;
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<PAGE>
. the limited circumstances under which Gemstar would have the right to
terminate the merger agreement, the circumstances in which a termination
fee would be payable to TV Guide in the event the merger agreement is
terminated in certain cases, and the protections afforded TV Guide by
the cross license with Gemstar and the option for 14.9% of Gemstar's
common stock in the event of a termination of the merger agreement;
. the fact that Liberty and News Corp., the two largest stockholders of TV
Guide (who in the aggregate have approximately 97.7% of the voting power
of TV Guide), would enter into voting agreements to vote their shares of
TV Guide common stock for the approval of the merger agreement;
. the fact that each of Mr. Yuen, Elsie Ma Leung, Dynamic Core Holdings
Limited, of which Thomas Lau (a director of Gemstar) is the sole
stockholder, and THOMSON multimedia S.A. (who in the aggregate hold
approximately 31.6% of Gemstar's outstanding common stock as of January
25, 2000) would enter into voting agreements to vote their shares of
Gemstar common stock for the issuance of Gemstar common stock in
connection with the merger;
. the terms of the merger agreement, the stockholders agreement and
Gemstar's new certificate of incorporation and bylaws;
. the financial condition, cash flows and results of operations of TV
Guide and Gemstar, on both a historical and prospective basis;
. current industry, economic and market conditions;
. TV Guide's prospects as an independent company;
. the interests of certain directors and officers of TV Guide and Gemstar
in the outcome of the merger; and
. the regulatory approvals required to complete the merger and the
prospects and timing for receiving those approvals.
TV Guide's board of directors also considered the following potentially
adverse consequences of the merger:
. the fact that the exchange ratio is fixed, and the risk of a decline in
the market value of Gemstar common stock during the period between
signing the merger agreement and the completion of the merger;
. the restrictions on TV Guide imposed by the merger agreement and the
potential business opportunities that might be foregone due to those
restrictions or the pendency of the merger generally;
. the possibility that the merger might not be completed, the impact that
the failure to complete the merger might have on TV Guide's businesses
and assets, and TV Guide's ability to complete an alternative
transaction to the merger on similar or equally advantageous terms;
. the corporate governance arrangements provided for by Gemstar's new
certificate of incorporation and bylaws and by the terms of the
stockholders agreement, particularly the fact that the vote of seven of
twelve directors after the completion of the merger will be required to
decide matters that are classified as fundamental decisions in the
proposed form of bylaws as described under "Summary of the Combined
Company's Certificate of Incorporation and Bylaws--Fundamental
Decisions";
. the possibility that regulatory agencies may oppose or impose conditions
on the merger;
. the potentially lengthy period of time that may be required to complete
the merger;
. the risk that the operations of TV Guide and Gemstar might not be
successfully integrated, and that, in attempting to complete the merger,
management of both TV Guide and Gemstar might be diverted from other
strategic opportunities and from operational matters for an extended
period of time; and
. the risk that potential benefits of the merger might not be fully
realized.
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TV Guide's board of directors determined, however, that the positive aspects
of the merger are significantly greater than the potentially adverse
consequences, and ultimately concluded that the merger is advisable and in the
best interests of TV Guide and its stockholders.
The foregoing discussion of the information and factors considered by TV
Guide's board of directors is not intended to be exhaustive, but includes the
material factors considered by TV Guide's board of directors. In view of the
wide variety of factors considered in connection with the TV Guide board's
evaluation of the terms of the merger agreement and the proposed merger
transaction, and the complexity of these matters, the TV Guide board evaluated
these factors as a whole and did not find it practical to, nor did it attempt
to, quantify, rank or otherwise attempt to assign relative weights to the
specific factors considered in reaching its determination. The TV Guide board
also relied on the experience and expertise of Merrill Lynch for an analysis of
the financial terms of the merger. In considering the factors described above,
individual members of the TV Guide board may have given different weights to
different factors.
Recommendation of TV Guide's Board of Directors
TV Guide's board of directors believes that the terms of the merger
agreement are fair to and in the best interests of TV Guide and its
stockholders. Accordingly, TV Guide's board of directors unanimously recommends
that TV Guide stockholders vote "FOR" the approval and adoption of the merger
agreement.
Opinion of Financial Advisor to Gemstar's Board of Directors
The following summary does not reflect the two-for-one stock split effected
in the form of a stock dividend on December 13, 1999 to record holders of
Gemstar common stock as of November 29, 1999.
Gemstar's board of directors has retained Lazard Freres & Co. LLC to act as
its financial advisor in connection with the merger. Lazard Freres was selected
by the Gemstar board based on Lazard Freres' qualifications, expertise and
reputation in transactions similar to the merger and its knowledge of the
national and worldwide technology industry and the business and affairs of
Gemstar. At the meeting of the Gemstar board on October 3, 1999, Lazard Freres
rendered its oral opinion that as of such date, based upon and subject to the
various considerations set forth therein, the exchange ratio was fair to
Gemstar and its stockholders from a financial point of view. Lazard Freres
subsequently confirmed its oral opinion by delivery of its written opinion
dated October 3, 1999.
The full text of the Lazard Freres opinion, which sets forth, among other
things, assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by Lazard Freres in rendering
such opinion, is attached as Annex D to this joint proxy statement/prospectus
and is incorporated herein by reference. The Lazard Freres opinion addresses
only the fairness of the exchange ratio pursuant to the merger agreement from a
financial point of view as of the date of the Lazard Freres opinion, and does
not address any other aspect of the merger or constitute a recommendation to
any holder of Gemstar common stock as to how to vote with respect to the
merger. The summary of the Lazard Freres opinion set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the Lazard Freres opinion. Gemstar stockholders are urged to, and should,
read the Lazard Freres opinion carefully and in its entirety in conjunction
with this joint proxy statement/prospectus.
In connection with rendering its opinion, Lazard Freres:
. reviewed the financial terms and conditions of the merger agreement;
. analyzed certain publicly available historical business and financial
information relating to Gemstar and TV Guide;
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. reviewed various data provided to Lazard Freres by Gemstar and TV Guide
relating to their respective businesses and the benefits projected by
Gemstar to be realized in connection with the merger;
. held discussions with certain members of the senior management of each
of Gemstar and TV Guide with respect to the businesses and prospects of
Gemstar and TV Guide, respectively, the strategic objectives of each,
the litigation that is pending between Gemstar and TV Guide and other
litigation to which they are parties, possible benefits which might be
realized following the completion of the merger and the consistency of
publicly available research prepared by financial analysts with their
own views;
. reviewed the public information with respect to certain other companies
in lines of businesses Lazard Freres believed to be generally comparable
to the businesses of Gemstar and TV Guide;
. reviewed the financial terms of certain business combinations involving
companies in lines of businesses Lazard Freres believed to be generally
comparable to those of Gemstar and TV Guide;
. reviewed the historical stock prices and trading volumes of Gemstar
common stock and TV Guide Class A common stock; and
. conducted such other financial studies, analyses and investigations as
Lazard Freres deemed appropriate.
Lazard Freres relied, with Gemstar's consent, upon the accuracy and
completeness of the foregoing information, and did not assume any
responsibility for any independent verification of such information, nor did
Lazard Freres make any independent valuation or appraisal of any of the assets
or liabilities of Gemstar or TV Guide, or concerning the solvency or fair value
of either Gemstar or TV Guide. With respect to the information received by
Lazard Freres concerning the prospects of Gemstar and TV Guide, the benefits
projected to be realized following the completion of the merger and the
litigation referred to above, Lazard Freres assumed that this information
reflected the best currently available estimates and judgments of the
managements of Gemstar and TV Guide. Lazard Freres assumed no responsibility
for and expressed no view as to such information or the assumptions on which
they were based. Further, the Lazard Freres opinion was necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to Lazard Freres as of, the date of the Lazard
Freres opinion.
In rendering its opinion, Lazard Freres assumed that the merger would be
completed on the terms described in the merger agreement, without any waiver of
any material terms or conditions by Gemstar and that obtaining the necessary
regulatory approvals for the merger would not materially affect Gemstar or TV
Guide and that the projected benefits of the merger would be realized
substantially in accordance with such projections.
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The following is a brief summary of the analysis performed by Lazard Freres
in connection with its opinion.
Historical Trading Analysis
Lazard Freres' examination included the historical trading prices for
Gemstar common stock and TV Guide Class A common stock in comparison to each
other over various periods of time ended on October 1, 1999. Lazard Freres
compared the price performance of Gemstar and TV Guide since 1997 and also
computed exchange ratios of the trading prices of Gemstar common stock as
compared to the trading prices of TV Guide Class A common stock for the same
period, the results of which are summarized below.
<TABLE>
<CAPTION>
2-Year Exchange Ratio
---------------------
<S> <C>
2-Year High (4/2/98)............................... 1.43
2-Year Low (8/31/99)............................... 0.40
30-Day Average..................................... 0.48
90-Day Average..................................... 0.53
180-Day Average.................................... 0.71
12-Month Average................................... 0.70
</TABLE>
Pre-Tax Sum-of-the-Parts Analysis of TV Guide
Lazard Freres prepared a pre-tax "sum-of-the-parts" analysis for TV Guide.
Lazard Freres noted that TV Guide had several business segments with different
operating and other financial characteristics. Accordingly, in preparing this
analysis, Lazard Freres employed one or more of three analyses for each of the
various segments and reviewed selected analyst commentary and studied other
companies and industries and independent sources. The three analyses were a
comparable publicly traded companies analysis, a selected precedent transaction
analysis and a discounted cash flow analysis, each of which is described below.
Lazard Freres used the comparable publicly traded companies analysis as the
primary methodology for valuing TV Guide's Online segment and as an additional
methodology for valuing TV Guide's Magazine, TV Games Network and Satellite
segments. Lazard Freres used the selected precedent transaction analysis as the
primary methodology for valuing TV Guide's Magazine, Preview Channels and
Satellite segments. Lazard Freres used the discounted cash flow analysis as the
primary methodology for valuing TV Guide's Interactive Programming Guide and TV
Games Network segments and as an additional methodology for valuing TV Guide's
Magazine segment.
The pre-tax "sum-of-the-parts" analysis for TV Guide based on the
projections provided by TV Guide's management indicated a range of $37.63 to
$48.83 per share without giving effect to financial synergies and $39.65 to
$58.87 per share including financial synergies. Lazard Freres noted that, in
preparing this analysis, it had assumed that no explicit royalty would be
payable by TV Guide to Gemstar for any future potential patent settlement and
that, based on a per-subscriber fee plus 40% of advertising revenues, the
present value of any such royalty could be between $1.2-1.5 billion.
Lazard Freres noted that the assumed financial synergies were calculated on
a discounted cash flow basis and included litigation savings, advertising
agency/commission savings, general and administrative savings and revenue
enhancements through the acceleration of the advertising plan. The assumed
synergies did not include the potential impact of the merger on the discount
rate and that a 250 basis point reduction in the discount rate for the
Interactive Programming Guide segment from 17.5% to 15% would increase the
value by approximately $600 million. Lazard Freres also noted that the assumed
synergies did not include the potential negative tax effect of changing
Gemstar's place of incorporation from the British Virgin Islands to the State
of Delaware, which could reduce the discounted cash flow value of the synergies
in the aggregate by $76 million to $434 million.
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Lazard Freres observed that analyses prepared by three buy side analysts in
June and July 1999 had estimated a value of TV Guide of $47 to $53 per share in
one case, $50 per share in another case and $46 to $56 per share in a third
case.
Comparable Publicly Traded Companies Analysis of TV Guide. Lazard Freres
reviewed and compared certain actual and projected financial, operating and
stock market information of companies in lines of business believed to be
comparable to those of individual business segments of TV Guide for which
Lazard Freres deemed this analysis to be relevant. Lazard Freres noted that,
although there were no public companies with precisely the same mix of
businesses and financial conditions as TV Guide, Lazard Freres believed the
most relevant comparable company universes to TV Guide's individual segments to
include:
The Magazine and Newspaper Publishing Universe
. Meredith Corporation
. Penton Media, Inc.
. PRIMEDIA Inc.
. Readers Digest
. Scholastic Corporation
. Central Newspapers
. Dow Jones
. Gannett Co.
. Journal Register Co.
. Knight-Ridder
. McClatchy Newspapers
. New York Times Co.
. Pulitzer Publishing
. E.W. Scripps
. The Times Mirror Co.
. Tribune Co.
. Washington Post Co.
The Internet "Thin Portal"/1/ Universe
. Looksmart Ltd.
. Xoom.com
. About.com
. Goto.com
. ZDNet Group
. iVillage
--------
/1/A "Thin Portal" is a World Wide Web site that is accessed for a specific
topic area, but not for all topic areas. By contrast, an "Internet
Portal" attempts to be the starting point for all topic areas on the
World Wide Web.
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. SportsLine
. Ask Jeeves
. TicketMaster City Search
. Go2Net
. C|Net
. TheGlobe.com
. Earthweb.com
. Salon.com
. Internet.com
. AlloyOnline
The Electronic Gaming Universe
. Youbet.com
. Starnet Communications
. GalaxiWorld
. Online Gaming Systems
. Trackpower
. Multimedia Games
. Inland Entertainment
. PlayStar Wyoming
Selected Precedent Transactions Analysis of TV Guide. Lazard Freres reviewed
and analyzed selected financial, operating and stock market information
relating to 21 selected acquisition transactions in the magazine publishing
industry during the period 1994 through 1999 and noted the following:
. the median and mean revenue multiples for these transactions were 1.9x
and 2.1x; and
. the median and mean EBITDA multiples for these transactions were 12.6x
and 13.5x.
Lazard Freres also reviewed and analyzed selected financial, operating and
stock market information relating to 23 selected acquisition transactions in
the cable network industry during the period 1991 through 1999 and noted the
following:
. the mean and median revenue multiples for these transactions were 4.31x
and 4.25x;
. the mean and median cash flow multiples for these transactions were
17.3x and 14.2x;
. the mean and median revenue per subscriber were $2.97 and $2.35; and
. the mean and median transaction value per subscriber were $15.50 and
$8.56.
Lazard Freres noted that the reasons for, and circumstances surrounding,
each of the transactions analyzed were diverse and the characteristics of such
transactions and the companies involved were not directly comparable to the
merger or to TV Guide.
Discounted Cash Flow Analysis of TV Guide. Based upon forecasts provided by
TV Guide's management, Lazard Freres estimated the net present value of the
future cash flows of TV Guide for those of
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TV Guide's business segments for which Lazard Freres viewed this analysis to be
relevant. In the TV Guide Magazine segment, Lazard Freres utilized discount
rates ranging from 9.0% to 11.0% and a terminal multiple of 2003 EBITDA at
9.0x, which resulted in an implied asset value range of $1,425-$1,526. In the
TV Guide Interactive Programming Guide segment, Lazard Freres utilized discount
rates ranging from 15.0% to 20.0% and a terminal multiple of 2005 EBITDA at
17.5x, which resulted in an implied asset value range of $2,181-$2,836. In the
TV Games Network segment, Lazard Freres utilized discount rates ranging from
15.0% to 19.0% and a terminal multiple of 2005 EBITDA at 12.5x, which resulted
in an implied asset value range of $1,003-$1,246. This analysis indicated an
aggregate implied asset value for these segments ranging from $4.6 billion to
$5.6 billion.
Lazard Freres noted that the management projections used for this analysis
were subject to various uncertainties and assumed that:
. revenues and EBITDA for the TV Guide Magazine segment would grow from
$620.6 million and $143.5 million in 1999 to $679.0 million and $183.7
million in 2003;
. revenues and EBITDA for the TV Guide Interactive Programming Guide
segment would grow from $9.7 million and $2.8 million in 1999 to $366.1
million and $123.2 million in 2003; and
. revenues and EBITDA for the TV Guide Games Network segment would grow
from $6.7 million and $34.5 million in 1999 to $240.0 million and $104.0
million in 2003.
Discounted Cash Flow Analysis of Gemstar
Based upon forecasts provided by Gemstar's management, Lazard Freres
estimated the net present value of the future cash flows of Gemstar. Lazard
Freres examined each of the various business segments of Gemstar utilizing
discount rates ranging from 9.0% to 20.0% and terminal multiples of estimated
EBITDA in the year 2005 ranging from 8.0x to 17.5x for Gemstar's business
segments. This analysis indicated a total net present equity value reference
range of $61.95 to $73.44 per share of Gemstar common stock. Lazard Freres
noted that, in preparing this analysis, it had assumed that no explicit royalty
would be payable by TV Guide to Gemstar for any future potential patent
settlement and that, based on a per-subscriber fee plus 40% of advertising
revenues, the present value of any such royalty could be between $1.2-1.5
billion, or $10.01 to $12.57 per share. This analysis is summarized below.
Lazard Freres noted that the revenue and earning before interest and taxes
("EBIT") assumptions used for this analysis were that revenues and EBIT for the
Gemstar business segments would grow from $270 million and $197 million for the
fiscal year ending March 31, 2001 to $1,240 million and $963 million for the
fiscal year ending March 31, 2005.
Comparable Publicly Traded Companies Analysis of Gemstar
Lazard Freres reviewed and compared certain actual and projected financial,
operating and stock market information of companies in lines of business
believed to be comparable to those of individual business segments of Gemstar
for which Lazard Freres viewed this analysis to be relevant. Lazard Freres
noted that, although there were no public companies with precisely the same mix
of businesses and financial conditions as Gemstar, Lazard Freres believed the
most relevant comparable companies to Gemstar's individual segments to include:
The Public Licensing Segment
. ARM Holdings
. Avant Corp.
. Hi-Fn
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. Macrovision Corporation
. Rambus
The Internet Platform Business Segment
. Yahoo!
. America Online
. Lycos
. Inktomi Corporation
Contribution Analysis
Lazard Freres also considered the potential contribution of each of Gemstar
and TV Guide to estimated sales, EBITDA and net income of the combined company
following the completion of the merger, without taking into account any
operating, financial or accounting impacts resulting from the merger, any cost
savings or other benefits projected by Gemstar and TV Guide to be realized from
the merger. This analysis used financial analyst research for Gemstar and TV
Guide, as well as public information with respect to Gemstar and TV Guide, for
projected fiscal years 1999 through 2001.
Contribution Analysis Summary
<TABLE>
<CAPTION>
% Contribution
----------------
Gemstar TV Guide
------- --------
<S> <C> <C>
Estimated Sales
1999...................................................... 12% 88%
2000...................................................... 14% 86%
2001...................................................... 16% 84%
Estimated EBITDA
1999...................................................... 28% 72%
2000...................................................... 35% 65%
2001...................................................... 38% 62%
Net Income Before Amortization
1999...................................................... 40% 60%
2000...................................................... 52% 48%
2001...................................................... 53% 47%
</TABLE>
Lazard Freres discussed with the Gemstar board, based on the closing price
of TV Guide Class A common stock on October 1, 1999, that upon the completion
of the merger current holders of Gemstar common stock would own approximately
55% of the combined company on a fully diluted basis, based upon an estimated
exchange ratio of 0.6573.
Pro Forma Merger Analysis
Lazard Freres considered the effect that the merger could have on the sales,
EBITDA, net income before amortization and net income on both an aggregate and
a per share basis of the combined company following the completion of the
merger as compared with Gemstar and TV Guide on a stand-alone basis. Using
forecasts for Gemstar and TV Guide provided by research analyst reports, as
well as public information, and assuming an exchange ratio in the merger of
0.650 but assuming the realization of none of the potential synergies projected
by the managements of Gemstar and TV Guide to be realized for the merger, this
analysis indicated that the merger would be accretive to the stand-alone sales,
EBITDA and net income before amortization of
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Gemstar and be dilutive to the projected stand-alone net income per share of
Gemstar in each of the years 1999, 2000 and 2001.
Merger Of Equals Analysis
Lazard Freres reviewed and analyzed selected financial, operating and stock
market information relating to 30 selected "merger of equals" transactions.
Lazard Freres noted the implied premium as compared to various dates before the
completion of each such transaction and the subsequent stock market reaction to
the announcement of each of the parties to the transaction. Lazard Freres'
analysis showed that the implied premium paid versus the target's stock price
one day prior ranged from a low of 16.1% to a high of 46.0%
Lazard Freres also performed an analysis based on the average of all
transactions as well as for transactions valued over $5 billion. Lazard Freres
noted that the reasons for, and circumstances surrounding, each of the
transactions analyzed were diverse and the characteristics of such transactions
and the companies involved were not directly comparable to the merger or to
Gemstar. A summary of the findings is set forth below.
Summary of Analysis of Selected Precedent
Merger of Equals Transactions Premiums
<TABLE>
<CAPTION>
Premium(a)
-------------------------
One One Three Six Price Change
Day Month Months Months One Week After vs.
Prior Prior Prior Prior One Day Prior
----- ----- ------ ------ ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Transactions Median 5.0% 5.2% 8.2% 11.3% Acquiror 2.2%
Target 0.8%
Mean 5.4% 9.2% 12.0% 14.8% Acquiror 3.3%
Target 2.8%
Transactions over $5
billion Median 9.0% 16.3% 15.6% 14.4% Acquiror 6.6%
Target 4.0%
Mean 9.4% 14.9% 19.3% 19.3% Acquiror 3.4%
Target 3.7%
</TABLE>
- --------
(a) Based on target's average closing price over period.
Among other factors, Lazard Freres indicated that the merger and acquisition
transaction environment varies over time because of macroeconomic factors, such
as interest rate and equity market fluctuations, and microeconomic factors,
such as industry results and growth expectations. As noted above, no
transaction reviewed was identical to the merger and, accordingly, an
assessment of the results of this analysis necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of Gemstar and TV Guide and other factors that would affect the
acquisition value of the companies to which Gemstar was compared.
Special Considerations
In connection with the review of the merger by the Gemstar board, Lazard
Freres performed a variety of financial and comparative analyses for purposes
of its opinion given in connection therewith. While the foregoing summary
describes the analyses and factors reviewed by Lazard Freres in connection with
its opinion, it does not purport to be a complete description of all the
analyses performed by Lazard Freres in arriving at its opinion. The preparation
of a fairness opinion is a complex process and not necessarily susceptible to
partial analysis or summary description. Selecting portions of the analyses or
the summary set forth in this joint proxy statement/prospectus, without
considering the analyses as a whole, could create an incomplete or a misleading
view of the process underlying the Lazard Freres opinion. Lazard Freres did not
attribute any particular weight to any analysis or factor considered by it. No
company or transaction used in the
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analyses as a comparison is identical to Gemstar or TV Guide or the transaction
contemplated by the merger agreement. The analyses were prepared solely for the
purpose of Lazard Freres providing its opinion to the Gemstar board in
connection with its consideration of the merger and do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold, which may be significantly more or less favorable than as set
forth in the analyses. Similarly, any estimate of values or forecast of future
results contained in the analyses is not necessarily indicative of actual
values or actual results, which may be significantly more or less favorable
than suggested by such analyses. In performing its analyses, Lazard Freres
assumed that both Gemstar and TV Guide would perform substantially in
accordance with earnings forecasts provided to Lazard Freres by the managements
of Gemstar and TV Guide or their representatives and that the potential cost
savings to be realized in connection with the merger would be realized
substantially in accordance with the projections provided to Lazard Freres by
Gemstar's management. The actual results achieved by the combined company
following the completion of the merger could vary from any projected results
and the variations may be material. See "Risk Factors" and "Forward-Looking
Statements."
The forecasts and other projections furnished to Lazard Freres and estimates
of potential cost savings resulting from the merger were prepared by the
management of Gemstar and constitute forward-looking statements within the
meaning of the federal securities laws. As a matter of policy, Gemstar does not
publicly disclose internal management forecasts, projections or estimates of
the type furnished to Lazard Freres in connection with its analysis of the
merger terms, and such forecasts, projections and estimates were not prepared
with a view towards public disclosure. These forecasts, projections and
estimates were based on numerous variables and assumptions which are inherently
uncertain and which may not be in the control of the management of Gemstar,
including, without limitation, factors related to the integration of Gemstar
and TV Guide and general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates. See "Risk Factors" and "Forward-Looking
Statements."
In performing these analyses, Lazard Freres made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters. Because such analyses are inherently subject to uncertainty,
being based on numerous factors or events beyond the control of Gemstar or its
advisors, neither Gemstar nor Lazard Freres or any other person assumes
responsibility if future results or actual values are materially different from
those forecasts or estimates contained in the analyses. Although, in connection
with the delivery of its opinion, Lazard Freres also analyzed TV Guide, the
opinion is not a valuation of TV Guide and does not represent Lazard Freres'
view as to what the value of the TV Guide Class A common stock would be before
or after the completion of the merger. In addition, Lazard Freres noted that,
notwithstanding the fact that holders of TV Guide common stock will receive
Gemstar common stock in the merger, the trading prices for TV Guide Class A
common stock will be significantly affected by the results of operations and
other factors, such as the realization of potential cost savings resulting from
the merger, relating to both Gemstar and TV Guide. The opinion of Lazard Freres
was one of many factors taken into consideration by the Gemstar board 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 Lazard
Freres.
Lazard Freres is an internationally recognized investment banking and
advisory firm. Lazard Freres, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements, leveraged buyouts and valuations for estate, corporate and other
purposes. In the ordinary course of its business, Lazard Freres and its
affiliates may actively trade in the securities of Gemstar for their own
accounts and for the accounts of their customers and, accordingly, may at any
time hold a long or short position in such securities.
Under a letter agreement dated July 3, 1998, as amended, Gemstar engaged
Lazard Freres to act as its financial advisor in connection with the possible
merger. According to the terms of this letter agreement, Gemstar has agreed to
pay Lazard Freres for its financial advisory services in connection with the
merger,
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including among other things, rendering the opinion of Lazard Freres discussed
above, a transaction fee based on the outcome of the merger. Gemstar also has
agreed to pay Lazard Freres periodic retainer fees for work performed before
the completion of the merger. Gemstar also has agreed to reimburse Lazard
Freres for its reasonable out-of-pocket expenses, including attorneys' fees,
and to indemnify Lazard Freres and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Lazard
Freres or any of its affiliates against certain liabilities and expenses,
including certain liabilities under the federal securities laws, related to
Lazard Freres' engagement.
Opinion of Financial Advisor to TV Guide's Board of Directors
The following summary does not reflect the two-for-one stock split effected
in the form of a stock dividend on December 17, 1999 to record holders of TV
Guide common stock as of December 3, 1999.
TV Guide retained Merrill Lynch, Pierce, Fenner & Smith Incorporated to act
as its exclusive financial advisor in connection with a possible business
combination. On October 3, 1999, Merrill Lynch rendered to TV Guide's board of
directors its oral opinion that, as of such date and based upon and subject to
the factors and assumptions set forth in the opinion, the exchange ratio was
fair from a financial point of view to the holders, other than Liberty Media
Corporation, The News Corporation Limited, Gemstar and their respective
affiliates, of shares of TV Guide Class A common stock. Such opinion was
confirmed in writing as of October 3, 1999, and again as of the date of this
joint proxy statement/prospectus.
The full text of Merrill Lynch's opinion, which sets forth the assumptions
made, matters considered, and qualifications and limitations on the review
undertaken by Merrill Lynch, is attached as Annex E to this joint proxy
statement/prospectus and is incorporated herein by reference. The summary of
Merrill Lynch's opinion set forth in this joint proxy statement/prospectus is
qualified in its entirety by reference to the full text of such opinion.
Holders of TV Guide Class A common stock (other than Liberty, News Corp.,
Gemstar and their respective affiliates) are urged to read such opinion in its
entirety. Merrill Lynch's opinion was provided to TV Guide's board of directors
for its information and is directed only to the fairness from a financial point
of view of the exchange ratio to the holders of TV Guide Class A common stock
(other than Liberty, News Corp., Gemstar and their respective affiliates), does
not address the merits of the underlying decision by TV Guide to engage in the
merger and does not constitute a recommendation to any TV Guide stockholder as
to how such stockholder should vote on the proposed merger or any matter
related thereto.
The exchange ratio was determined through negotiations between TV Guide and
Gemstar and was approved by TV Guide's board of directors. Merrill Lynch
provided advice to TV Guide during the course of such negotiations.
The summary set forth below does not purport to be a complete description of
the analyses underlying Merrill Lynch's opinion or the presentation made by
Merrill Lynch to TV Guide's board of directors. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. In arriving at its opinion, Merrill Lynch did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Merrill Lynch believes that its analyses must be
considered as a whole and that selecting portions of its analyses, without
considering all analyses, would create an incomplete view of the process
underlying its opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, TV Guide or Gemstar. Any estimates contained in the analyses performed
by Merrill Lynch are not necessarily indicative of actual values or future
results, which may be significantly more or less
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favorable than suggested by such analyses. Additionally, estimates of the value
of businesses or securities do not purport to be appraisals or to reflect the
prices at which such businesses or securities might actually be sold.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. In addition, as described above, Merrill Lynch's opinion and
Merrill Lynch's presentation to TV Guide's board of directors were among
several factors taken into consideration by TV Guide's board of directors in
making its determination to approve the merger agreement and the merger.
Consequently, the Merrill Lynch analyses described below should not be viewed
as determinative of the decision of TV Guide's board of directors or TV Guide's
management with respect to the fairness of the exchange ratio.
In arriving at its opinion, Merrill Lynch, among other things,
. reviewed certain publicly available business and financial information
relating to TV Guide and Gemstar that Merrill Lynch deemed to be
relevant,
. reviewed certain information, including financial forecast information
relating to the business, earnings, cash flow, assets, liabilities and
prospects of TV Guide and Gemstar furnished to Merrill Lynch by TV Guide
(after having been reviewed by Gemstar, in the case of information
relating to Gemstar),
. conducted discussions with members of senior management of TV Guide and
Gemstar concerning the matters described in the clauses above, as well
as their respective businesses and prospects before and after giving
effect to the merger,
. reviewed the market prices and valuation multiples for TV Guide Class A
common stock and Gemstar common stock and compared them with those of
certain publicly traded companies that Merrill Lynch deemed to be
relevant,
. reviewed the results of operations of TV Guide and Gemstar and compared
them with those of certain publicly traded companies that Merrill Lynch
deemed to be relevant,
. compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed to be
relevant,
. participated in certain discussions and negotiations among
representatives of TV Guide and Gemstar and their financial and legal
advisors,
. reviewed the potential pro forma impact of the merger,
. reviewed a draft of the merger agreement dated October 3, 1999, and
. reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch has not assumed any responsibility for
independently verifying such information or undertaken an independent
evaluation or appraisal of any of the assets or liabilities of TV Guide or
Gemstar or been furnished with any such evaluation or appraisal. In addition,
Merrill Lynch did not assume any obligation to conduct any physical inspection
of the properties or facilities of TV Guide or Gemstar. With respect to the
financial forecast information furnished to, discussed with or reviewed for
Merrill Lynch by TV Guide or Gemstar, Merrill Lynch assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of TV Guide's or Gemstar's management as to the expected future
financial performance of TV Guide or Gemstar, as the case may be. Merrill Lynch
expressed no opinion as to such financial forecast information or the
assumptions on which it was based. Merrill Lynch also assumed that the merger
will qualify as a tax-free reorganization for U.S. federal income tax purposes.
Merrill Lynch also has not taken into account in arriving at its opinion any
potential adverse effects
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of changing Gemstar's place of incorporation from the British Virgin Islands to
the State of Delaware on the business, earnings, cash flow, assets, liabilities
or prospects of Gemstar, including, without limitation, any potential adverse
tax effects.
Merrill Lynch's opinion is necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Merrill Lynch as of, the date of such opinion. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the merger. For purposes of rendering its opinion,
Merrill Lynch assumed, in all respects material to its analysis, that the
representations and warranties of each party in the merger agreement and all
related documents and instruments contained in the merger agreement were true
and correct, that each party to such documents will perform all of the
covenants and agreements required to be performed by such party under such
documents and that all conditions to the completion of the merger will be
satisfied without waiver of such conditions.
In connection with the preparation of its opinion, Merrill Lynch was not
authorized by TV Guide or TV Guide's board of directors to solicit, nor did
Merrill Lynch solicit, third-party indications of interest for the acquisition
of all or any part of TV Guide. In addition, Merrill Lynch did not express any
opinion as to the prices at which shares of TV Guide or Gemstar would trade
following the announcement or the completion of the merger. Merrill Lynch also
did not express any opinion with respect to the transactions contemplated by
the stockholders agreement entered into among Henry C. Yuen, Liberty, News
Corp. and Gemstar as of October 4, 1999, to be effective upon the completion of
the merger, or with respect to any other agreement among Liberty, News Corp.
and/or their respective affiliates not expressly referenced in Merrill Lynch's
opinion. See "Terms of the Stockholders Agreement" for a description of the
stockholders agreement.
The following is a brief summary of the material analyses presented by
Merrill Lynch to TV Guide's board of directors in connection with the rendering
of Merrill Lynch's opinion:
TV Guide Valuation
Merrill Lynch calculated estimated per share equity valuation ranges for TV
Guide by utilizing a historical stock price analysis, a research analyst price
target comparison, a public market "sum-of-the-parts" valuation analysis and a
discounted cash flow analysis.
Historical Stock Price Analysis. Merrill Lynch reviewed publicly available
information and found that the maximum, mean and minimum closing prices for TV
Guide Class A common stock for the:
. 3 years ending October 1, 1999 were $49.25, $18.89 and $6.75,
respectively;
. 12 months ending October 1, 1999 were $49.25, $30.27 and $11.50,
respectively;
. 3 months ending October 1, 1999 were $41.53, $32.59 and $26.38,
respectively; and
. 1 month ending October 1, 1999 were $41.53, $34.72 and $27.06,
respectively.
Research Analyst Price Target Comparison. Merrill Lynch compared the 12-
month price targets of four research analysts covering the public market
trading of TV Guide Class A common stock and found that such price targets
ranged from a high of $57.00 to a low of $50.00, with a mean of $52.50.
Public Market "Sum-of-the-Parts" Valuation Analysis. Merrill Lynch performed
a "sum-of-the-parts" valuation analysis by:
. using management's projections of estimated 2000 earnings before
interest, taxes, depreciation and amortization for certain individual TV
Guide business segments, management's projections of total subscribers
in 2000 for certain other individual TV Guide business segments and
management's
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projections of estimated 2000 revenues for another individual TV Guide
business segment, and applying relevant market multiples of public
companies with businesses comparable to such TV Guide business segments;
and
. using management's projections of estimated future cash flows for
certain other individual TV Guide business segments, valuing such
business segments based upon a discounted cash flow methodology and
applying a public market discount to such intrinsic valuations, to
arrive at a range of valuations for each such TV Guide business segment.
Based upon the value of such TV Guide business segments in the aggregate,
Merrill Lynch calculated a range of per share equity values for TV Guide of
$35.01 to $47.94.
No company utilized in the sum-of-the-parts analysis was identical to TV
Guide. Accordingly, an analysis of the results of this comparison is not purely
mathematical; rather, it involves complex considerations and judgments
concerning differences in historical and projected financial and operating
characteristics of the comparable companies and other factors that could affect
the value of such companies and TV Guide.
Discounted Cash Flow Analysis. Using management's projections and a
discounted cash flow methodology, Merrill Lynch calculated a range of per share
value for TV Guide Class A common stock. Such discounted cash flow methodology
calculations were based on terminal earnings before interest, taxes,
depreciation and amortization multiples ranging from 15.0x to 17.0x and
discount rates ranging from 14.0% to 18.0%. Using this analysis, Merrill Lynch
calculated a range of per share equity values for TV Guide of $42.55 to $57.01.
Gemstar Valuation
Merrill Lynch calculated estimated per share equity valuation ranges for
Gemstar by utilizing a historical stock price analysis, a research analyst
price target comparison, a public market "sum-of-the-parts" valuation analysis
and a discounted cash flow analysis.
Historical Stock Price Analysis. Merrill Lynch reviewed publicly available
information and found that the maximum, mean and minimum closing prices for
Gemstar common stock for the:
. 3 years ending October 1, 1999 were $83.63, $23.67 and $5.00,
respectively;
. 12 months ending October 1, 1999 were $83.63, $45.67 and $20.38,
respectively;
. 3 months ending October 1, 1999 were $83.63, $66.88 and $51.06,
respectively; and
. 1 month ending October 1, 1999 were $83.63, $69.59 and $61.25,
respectively.
Research Analyst Price Target Comparison. Merrill Lynch compared the 12-
month price targets of five research analysts covering the public market
trading of Gemstar common stock and found that such price targets ranged from a
high of $100.00 to a low of $75.00, with a mean of $90.60.
Public Market "Sum-of-the-Parts" Valuation Analysis. Merrill Lynch performed
a "sum-of-the-parts" valuation analysis by:
. using management's projections of estimated 2000 earnings before
interest, taxes, depreciation and amortization for Gemstar's licensing
business segment and applying relevant market multiples of public
companies with businesses comparable to such Gemstar business segment;
and
. using management's projections of estimated future cash flows for
Gemstar's advertising business segment, valuing such business segment
based upon a discounted cash flow methodology and applying a public
market discount to such intrinsic valuation, to arrive at a range of
valuations for such Gemstar business segment.
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Based upon the value of such Gemstar business segments in the aggregate,
Merrill Lynch calculated a range of per share equity values for Gemstar of
$61.10 to $82.65.
No company utilized in the sum-of-the-parts analysis was identical to
Gemstar. Accordingly, an analysis of the results of this comparison is not
purely mathematical; rather, it involves complex considerations and judgments
concerning differences in historical and projected financial and operating
characteristics of the comparable companies and other factors that could affect
the value of such companies and Gemstar.
Discounted Cash Flow Analysis. Using management's projections and a
discounted cash flow methodology, Merrill Lynch calculated a range of per share
value for Gemstar common stock. Such discounted cash flow methodology
calculations were based on terminal earnings before interest, taxes,
depreciation and amortization multiples ranging from 18.0x to 20.0x and
discount rates ranging from 15.0% to 19.0%. Using this analysis, Merrill Lynch
calculated a range of per share equity values for Gemstar of $75.86 to $96.84.
Exchange Ratio Analysis
Historical Stock Price Analysis. Based upon the historical stock price
analyses described above, Merrill Lynch calculated the historical ratios of the
closing prices of TV Guide Class A common stock to the closing prices of
Gemstar common stock and found that the maximum, mean and minimum implied
exchange ratios resulting from such calculation for the:
. 3 years ending October 1, 1999 were 1.738x, 0.954x and 0.402x,
respectively;
. 12 months ending October 1, 1999 were 1.120x, 0.701x and 0.402x,
respectively;
. 3 months ending October 1, 1999 were 0.545x, 0.488x and 0.402x,
respectively; and
. 1 month ending October 1, 1999 were 0.545x, 0.499x and 0.408x,
respectively.
Research Analyst Price Target Comparison. Based upon the research analyst
price target comparisons described above, Merrill Lynch calculated the ratios
of the 12-month price targets for TV Guide Class A common stock to the 12-month
price targets for Gemstar common stock and found that the maximum, mean and
minimum implied exchange ratios resulting from such calculation were 0.760x
(based upon the highest price target for TV Guide Class A common stock and the
lowest price target for Gemstar common stock), 0.579x (based upon the mean
price target for TV Guide Class A common stock and the mean price target for
Gemstar common stock) and 0.500x (based upon the lowest price target for TV
Guide Class A common stock and the highest price target for Gemstar common
stock), respectively.
Public Market Sum-of-the-Parts Valuation Analysis. Based upon the public
market "sum-of-the-parts" valuation analyses described above, Merrill Lynch
calculated a range of implied exchange ratios by comparing the highest
estimated valuation of TV Guide Class A common stock under such analyses to the
lowest estimated valuation of Gemstar common stock under such analyses, and the
lowest estimated valuation of TV Guide Class A common stock under such analyses
to the highest estimated valuation of Gemstar common stock under such analyses,
and found that the implied exchange ratio range was 0.785x to 0.424x.
Discounted Cash Flow Analysis. Based upon the discounted cash flow valuation
analyses described above, Merrill Lynch calculated a range of implied exchange
ratios by comparing the highest estimated valuation of TV Guide Class A common
stock under such analyses to the lowest estimated valuation of Gemstar common
stock under such analyses, and the lowest estimated valuation of TV Guide Class
A common stock under such analyses to the highest estimated valuation of
Gemstar common stock under such analyses, and found that the implied exchange
ratio range was 0.752x to 0.439x.
Relative Contribution Analysis. Based upon management's projections, Merrill
Lynch compared the relative contribution of TV Guide and Gemstar to the
combined company's
. earnings before interest, taxes, depreciation and amortization (adjusted
for respective debt levels),
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. after-tax cash flow, and
. net income for the years 1999 to 2004
and found that the implied exchange ratio ranges resulting from such
comparisons were 2.008x to 0.650x, 1.991x to 0.656x and 0.530x to 0.418x,
respectively.
Under a letter agreement between Merrill Lynch and TV Guide, dated as of
March 15, 1998 and amended as of May 29, 1998, Merrill Lynch has provided
advisory services and a fairness opinion in connection with the merger, and TV
Guide has paid to Merrill Lynch a customary fee upon the execution of the
merger agreement and has agreed to pay a customary fee to Merrill Lynch based
on the aggregate value of the transaction if the merger is completed.
Additionally, TV Guide agreed to reimburse Merrill Lynch for certain reasonable
out-of-pocket expenses and to indemnify Merrill Lynch and certain related
persons for certain liabilities related to or arising out of its engagement,
including liabilities under the federal securities laws.
TV Guide retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking
and advisory firm. Merrill Lynch, as part of its investment banking business,
is continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
Merrill Lynch has, in the past, provided financial advisory and financing
services to TV Guide and/or its affiliates and may continue to do so and has
received, and may receive, fees for the rendering of such services. In the
ordinary course of its business, Merrill Lynch and its affiliates may actively
trade the debt and equity securities of TV Guide and Gemstar for their own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
Interests of Certain Persons in the Merger
Gemstar. In considering the recommendations of Gemstar's board of directors
regarding the merger, you should be aware of the interests that certain
directors and executive officers have in the merger that are different from or
in addition to the interests of Gemstar stockholders. In this regard, you
should consider, among other things, the following information.
. Henry C. Yuen, Chairman of the Board, Chief Executive Officer, President
and a director of Gemstar:
. will, pursuant to the combined company's bylaws, continue to be
Chairman of the Board (so long as he is a director) and Chief
Executive Officer of Gemstar for five years after the completion of
the merger unless he earlier dies or resigns or his employment is
earlier terminated for disability or for cause in accordance with
his employment agreement;
. will, pursuant to the combined company's bylaws, be the sole member
of the Tie-breaking Committee of the Gemstar board with the power to
resolve tie votes of the Gemstar board and the Executive Committee
(except for matters delegated to the Compensation Committee, the
Audit Committee or the Special Committee, matters identified in the
bylaws as "fundamental decisions" and matters that require approval
by supermajority vote of stockholders) until the earlier of the
fifth anniversary of the completion of the merger and the date Mr.
Yuen ceases to be Chief Executive Officer of Gemstar;
. has entered into a stockholders agreement with Liberty Media
Corporation, The News Corporation Limited and Gemstar under which
Liberty and News Corp. have agreed (1) to vote for, or to use their
best efforts to cause their respective designees on the board of
directors to vote for, Mr. Yuen's election as a director and
appointment as Chairman of the Board and Chief Executive Officer
until the earlier of the fifth anniversary of the completion of the
merger and the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar other than as a result of his
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termination without cause and (2) to vote for the election to the
board of five other persons (including two independent directors)
designated by Mr. Yuen until the earlier of the fifth anniversary of
the completion of the merger and the date Mr. Yuen ceases to be
Chief Executive Officer of Gemstar other than as a result of his
termination without cause, provided that if Mr. Yuen should die or
become disabled during such five-year period Liberty and News Corp.
have each agreed, for the remainder of the five-year period, to
continue to vote for the election to the board of the directors
formerly designated by Mr. Yuen or their successors (including Mr.
Yuen's successor) and to vote against their removal except for
cause; and
. has entered into an amendment to his existing employment agreement,
which, subject to the completion of the merger, extends the overall
term of his employment.
. Liberty and News Corp. have agreed to use their respective best efforts
to cause their designees to the Gemstar board of directors to vote for
the election of Elsie Ma Leung (and any successor to her chosen by Mr.
Yuen), as co-President, co-Chief Operating Officer, a member of the
Office of the Chief Executive and Chief Financial Officer, for five
years after the completion of the merger unless her employment is
earlier terminated for cause.
See "Terms of the Stockholders Agreement" and "Summary of the Combined
Company's Certificate of Incorporation and Bylaws."
TV Guide. In considering the recommendations of TV Guide's board of
directors regarding the merger, you should be aware of the interests that
certain directors and executive officers have in the merger that are different
from or in addition to the interests of TV Guide stockholders. In this regard,
you should consider, among other things, the following information.
. Joachim Kiener, TV Guide's Chairman and Chief Executive Officer, and
Peter C. Boylan III, TV Guide's President and Chief Operating Officer,
are entering into new employment agreements with TV Guide effective as
of March 1, 1999, for a term of four years expiring on March 1, 2003.
Gemstar will assume these agreements in the merger. The employment
agreements will provide for Messrs. Kiener and Boylan to receive the
following increased benefits subject to the completion of the merger:
. The term of employment for each of Messrs. Kiener and Boylan will be
extended to the sixth anniversary of the completion of the merger.
. After the sixth anniversary of the completion of the merger, the
employment agreements for each of Messrs. Kiener and Boylan will be
automatically renewed for a term of three additional years unless
either party elects not to renew. If such agreements are not renewed
or if the terms of such renewal are not agreed upon, such failure to
renew or agree will be treated as a termination without cause under
the employment agreements, in which case Mr. Kiener or Mr. Boylan,
as the case may be, will be entitled to three times his annual base
salary.
. Mr. Kiener's base compensation will increase, but the guaranteed
portion of his bonus will be eliminated, resulting in a net decrease
of Mr. Kiener's guaranteed annual cash compensation.
. Provisions in the employment agreements relating to the procedure
for and effect of terminating the employment of Messrs. Kiener and
Boylan for cause will become more favorable to the employee and will
require that Mr. Kiener or Mr. Boylan, as the case may be, receives
notice of any proposed termination and an opportunity to be heard by
a majority of the board of directors before any such termination;
. If either Mr. Kiener or Mr. Boylan is terminated without cause or
has been constructively terminated, Mr. Kiener or Mr. Boylan, as the
case may be, will be entitled to a lump sum payment equal to the
greater of three times his annual base salary or the amount equal to
the product of his annual base salary multiplied by the number of
years remaining (rounded up) in
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the term of employment under his employment agreement and will be
entitled to the continuation of the additional benefits provided for
in his employment agreement (such as participation in medical,
disability and life insurance plans) for 60 months from the last
date of employment. If either Mr. Kiener or Mr. Boylan is terminated
without cause or is constructively terminated, all stock options and
other stock incentive awards previously granted to him will
immediately vest in full and become fully exercisable for their full
term and all previously vested stock options and other stock
incentive awards will remain fully exercisable for their full term.
. At any time after the eighteenth month following the completion of
the merger, each of Messrs. Kiener and Boylan will be entitled to
terminate his employment with Gemstar without reason and receive a
lump sum payment equal to his current annual base salary. All
previously vested stock options and other stock incentive awards
shall remain fully exercisable for their full term rather than a
maximum period of three months in the event of such termination.
. The definition of "change of control" in the employment agreements
will be broader following the completion of the merger, and in the
event of a change of control, each of Mr. Kiener or Mr. Boylan will
have the right to terminate his employment within 90 days of notice
of a change of control and receive a lump sum payment of five times
his current base salary and the continuation of all other elements
of his compensation for 60 months from the last date of employment.
In such event, all unvested stock options and other stock incentive
awards previously granted to each of Mr. Kiener or Mr. Boylan, as
the case may be, will immediately vest in full and such options and
awards and all previously vested stock options and other stock
incentive awards shall remain fully exercisable for their full term.
. Each of Messrs. Kiener and Boylan will be released from certain
post-employment covenants relating to competing with, soliciting
employees of and cooperating with Gemstar.
. Gemstar may not terminate (1) Mr. Kiener's employment without the
consent of the Gemstar board members designated by The News
Corporation Limited (other than Mr. Kiener and any independent
director) or (2) Mr. Boylan's employment without the consent of the
Gemstar board members designated by Liberty Media Corporation (other
than Mr. Boylan and any independent director).
. The amount that Messrs. Kiener and Boylan will be entitled to be
reimbursed for certain benefits will be increased to offset the tax
effect of receiving such benefits.
. Under the terms of existing stock option agreements, if the merger is
completed, stock options outstanding as of January 25, 2000 to purchase
an aggregate of 2,943,552 shares of TV Guide common stock will become
exercisable immediately, including stock options held by the following
directors and executive officers to purchase the following number of
shares of TV Guide common stock:
<TABLE>
<S> <C>
Joachim Kiener........................ 400,000 shares
Peter C. Boylan III................... 1,166,400 shares
Charles Butler Ammann................. 86,400 shares
Craig M. Waggy........................ 145,600 shares
Robert R. Bennett..................... 48,000 shares
Nicholas Donatiello, Jr............... 30,000 shares
Gary S. Howard........................ 240,000 shares
Larry E. Romrell...................... 24,000 shares
J. David Wargo........................ 24,000 shares
</TABLE>
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Each stock option will become an option to purchase Gemstar common
stock (as adjusted in accordance with the merger agreement).
. Options granted to each of Messrs. Kiener and Boylan to purchase
1,521,376 shares of TV Guide common stock (which options will each
represent the right to purchase 1,000,000 shares of Gemstar common stock
following the completion of the merger), subject to TV Guide stockholder
approval of the plan amendments, will vest and become exercisable
ratably on each of the first through the sixth anniversaries of the
completion of the merger, rather than vesting at one time on September
30, 2009.
. As of January 25, 2000, the number of shares of TV Guide common stock
subject to options held by
. Mr. Kiener was 2,121,376, and
. Mr. Boylan was 4,134,584.
Additionally, other directors or executive officers of TV Guide have TV
Guide stock options. As of January 25, 2000, the number of shares of TV
Guide common stock subject to options held by directors and executive
officers other than Messrs. Kiener and Boylan was 1,128,000.
. The parties have agreed to continue the indemnification currently in
effect for TV Guide's directors, officers, employees and agents for a
period of six years after the completion of the merger. For more
information, see "Terms of the Merger Agreement--Indemnification of
Directors and Officers."
. Mr. Kiener will join Gemstar after the completion of the merger in the
position of co-President and co-Chief Operating Officer in charge of
certain business of TV Guide, and Mr. Boylan will join Gemstar after the
completion of the merger in the position of co-President and co-Chief
Operating Officer in charge of certain businesses of TV Guide.
. Under the stockholders agreement among Mr. Yuen, Liberty, News Corp. and
Gemstar:
. Mr. Kiener initially will be one of News Corp.'s designees to
Gemstar's board of directors; and
. Mr. Boylan initially will be one of Liberty's designees to Gemstar's
board of directors.
. Up to seven of the executive officers of TV Guide, including Messrs.
Kiener and Boylan, will enter into tax protection agreements with TV
Guide before the completion of the merger. These agreements will
obligate TV Guide to compensate them for the effects of United States
federal excise taxes that may become payable because of the acceleration
of the vesting of their stock options in connection with the completion
of the merger.
. TV Guide may enter into severance arrangements with certain of its
executive officers which would entitle such executive officers to a lump
sum payment equivalent to 24 months of salary if such officers are
terminated without cause within 24 months after the completion of the
merger.
Anticipated Accounting Treatment
The merger will be accounted for as a purchase for financial accounting
purposes in accordance with generally accepted accounting principles. For
purposes of preparing Gemstar's consolidated financial statements, Gemstar will
establish a new accounting basis for the TV Guide assets and liabilities based
upon their fair values, the merger consideration and the costs of the merger.
Gemstar believes that any excess of cost over the fair value of the net
tangible assets of TV Guide will be recorded as goodwill and other intangible
assets. A final determination of the intangible asset lives and required
purchase accounting adjustments, including the allocation of the purchase price
to the assets acquired and liabilities assumed based on their respective fair
values, has not yet been made. Accordingly, the purchase accounting adjustments
made in connection with the development of the unaudited pro forma condensed
combined financial statements appearing elsewhere in this joint proxy
statement/prospectus are preliminary and have been made solely for purposes of
developing that pro forma information. Gemstar will determine the fair value of
certain TV Guide assets and liabilities and will make appropriate purchase
accounting adjustments, including adjustments to the amortization period of the
intangible assets.
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Regulatory Approvals
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Gemstar and
TV Guide have filed pre-merger notification and report forms with the Antitrust
Division of the Department of Justice (known as the DOJ) and the Federal Trade
Commission (known as the FTC), and a waiting period must expire or terminate
before the merger may be completed. The DOJ or the FTC could take action under
the antitrust laws to enjoin the merger or require divestiture of assets or
businesses of Gemstar or TV Guide. We also do not know whether a third party
will challenge the merger on antitrust grounds or what the result of a third
party challenge might be.
The initial filings under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 were made by Gemstar and TV Guide on November 12, 1999. In addition,
Liberty Media Corporation and The News Corporation Limited, the two largest
beneficial owners of TV Guide common stock, filed or, in the case of Liberty,
caused its ultimate parent entity to file, on November 23, 1999 pre-merger
notification forms with the DOJ and the FTC. The DOJ, which has been assigned
as the reviewing agency, issued requests to Gemstar and TV Guide on December
10, 1999 and to Liberty's ultimate parent entity and News Corp. on December 23,
1999 for additional information and documentary material (each known as a
second request). As soon as there is substantial compliance with each second
request, a 20-day waiting period begins during which the DOJ has an opportunity
to review the merger. Such waiting periods must expire or terminate before the
merger may be completed. Gemstar, TV Guide, Liberty (and its ultimate parent
entity) and News Corp. are currently preparing responses to the second
requests.
It is possible that one or more individual states could investigate and
challenge the merger under either federal law or their own state law, although
states have no notification and waiting period requirements. Depending on the
nature of any of these challenges, and any conditions imposed as a result,
these challenges and conditions could delay the completion of the merger or
lessen the anticipated benefits of the merger.
In addition, approval by the Federal Communications Commission (known as the
FCC) is required for the transfer of control to Gemstar of a small number of
licenses which authorize TV Guide to use facilities to transmit programming to
satellites. Applications have been filed requesting such approval, which are
subject to public comment.
We will also make any other filings or submissions and seek the approval of
all other applicable regulatory agencies for the transfer of any licenses or
other regulatory approvals required in relation to the consummation of the
transactions contemplated in the merger agreement.
As a result of the proposed merger, a significant percentage of TV Guide's
stock will be owned by foreign entities. TV Guide currently owns approximately
70% of SSDS, Inc., which contracts with the Defense Department and other
agencies. Pursuant to 50 U.S.C.A. (S) 2170, the President of the United States
has the power to halt any transaction by foreign entities which threatens to
impair the national security. We may be required to file a notice with the
Committee on Foreign Investment in the United States seeking approval of the
United States Government for the merger, with appropriate security safeguards
with respect to the management of SSDS, Inc.
The merger agreement requires us to take all steps necessary to avoid or
eliminate each and every impediment to the merger and to obtain all consents or
waivers under any antitrust, competition, communications or broadcast law that
may be asserted by any governmental authority so as to enable us to complete
the merger as expeditiously as possible (including, among other things, the
sale or disposition of assets or businesses as may be required). The merger
agreement does not, however, obligate either of us to divest assets on which
our respective electronic program guide businesses are dependent if such
divestiture would have a material adverse effect on such business or take any
other action that materially and adversely impacts our respective abilities to
participate in the electronic program guide business.
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Percentage Ownership Interest of TV Guide Stockholders After the Merger
In the merger, TV Guide stockholders will become stockholders of Gemstar.
Based on the number of shares of Gemstar common stock, shares of TV Guide
common stock and options to purchase shares of Gemstar common stock and shares
of TV Guide common stock outstanding as of January 25, 2000 and an exchange
ratio of 0.6573, we estimate that the Gemstar common stock to be issued to TV
Guide stockholders will represent approximately 49.2% (44.6% on a fully diluted
basis assuming the exercise of all vested and unvested options) of the
outstanding Gemstar common stock after the merger.
Nasdaq National Market Listing
As a condition to the merger, the shares of Gemstar common stock to be
issued to the TV Guide stockholders in the merger must be listed on the Nasdaq
National Market.
Consequences of the Merger on TV Guide Common Stock
After the merger, TV Guide Class A common stock will no longer be traded on
the Nasdaq National Market, will be deregistered under the Securities Exchange
Act of 1934, as amended, and will not be publicly traded.
No Appraisal or Dissenters' Rights
TV Guide is a Delaware corporation. Following the change in Gemstar's place
of incorporation from the British Virgin Islands to the State of Delaware,
Gemstar will be a Delaware corporation. Section 262 of the Delaware General
Corporation Law provides appraisal or dissenters' rights under particular
circumstances to stockholders of a Delaware corporation that is involved in a
merger. In general, these rights confer on stockholders who oppose the merger
or consolidation the right to receive the fair value for their shares as
determined in a judicial appraisal proceeding, in lieu of the consideration
being offered in the merger. TV Guide stockholders are not entitled to
appraisal or dissenters' rights under Delaware law in connection with the
merger because the shares of TV Guide common stock were listed on the Nasdaq
National Market on the record date for the TV Guide stockholders' meeting and
the Gemstar common stock to be issued in the merger will be listed on the
Nasdaq National Market at the completion of the merger.
The Gemstar stockholders are not entitled to appraisal or dissenters' rights
under the laws of the State of Delaware because a wholly owned subsidiary of
Gemstar, not Gemstar itself, will be merged with TV Guide.
Federal Securities Laws Consequences; Stock Transfer Restriction Agreements
This document does not cover any resales of the shares of Gemstar common
stock to be received by TV Guide stockholders in the merger, and no person is
authorized to make any use of this document in connection with any such resale.
All shares of Gemstar common stock to be issued in the merger will be freely
transferable, except for shares received by any person who may be deemed to be
an affiliate of TV Guide under Rule 145 under the Securities Act of 1933, as
amended, such as Liberty Media Corporation and The News Corporation Limited and
directors and executive officers of TV Guide. Under Rule 145, an affiliate of
TV Guide may not resell his or her shares of Gemstar common stock received in
the merger except in transactions permitted by Rule 145 or as otherwise
permitted under the Securities Act of 1933, as amended, including selling such
shares pursuant to an effective registration statement. TV Guide will deliver
to Gemstar a list setting forth the names of all persons who are, in TV Guide's
reasonable judgment, affiliates of TV Guide.
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Cross License Agreement
Gemstar and TV Guide (and various controlled affiliates of Gemstar and TV
Guide) have entered into a non-exclusive patent cross license agreement
relating to interactive program guide patents that will become effective, at
the election of TV Guide, if the merger agreement is terminated for any of the
following reasons:
. the merger is not completed by March 31, 2000 (except that this date
will be extended to September 30, 2000 if regulatory waiting periods
have not expired or if the Department of Justice or Federal Trade
Commission has instituted an action seeking to challenge or enjoin
the merger);
. TV Guide terminates the merger agreement because Gemstar's
representations and warranties were inaccurate at the time of
signing the merger agreement, except where the inaccuracy would not
have a material adverse effect on Gemstar;
. TV Guide terminates the merger agreement because of a breach of
covenants in the merger agreement by Gemstar, unless in the case of
certain of the covenants the breach would not have a material
adverse effect on Gemstar;
. either Gemstar or TV Guide terminates the merger agreement because a
governmental entity issues an order prohibiting the merger and such
order is final and non-appealable; and
. either Gemstar or TV Guide terminates the merger agreement because
the Gemstar stockholders fail to approve the issuance of Gemstar
common stock to TV Guide stockholders in the merger.
If the cross license agreement becomes effective, interactive program guides
provided by Gemstar would be licensed under TV Guide's patents. Gemstar also
would be licensed to include features covered by TV Guide's patents in
specifications for interactive program guides that Gemstar licenses to third
parties, such as consumer electronics manufacturers. Gemstar's license to
include such features in its specifications would include the right for Gemstar
to sublicense the third parties as part of its specification licenses so long
as Gemstar complies with the conditions of the cross license agreement.
If the cross license agreement becomes effective, TV Guide would be licensed
under Gemstar's patents to provide interactive program guides to service
providers, so long as the conditions of the cross license agreement are met.
The term "service providers" is defined in the cross license agreement and, in
general, refers to the owners of distribution systems or networks that provide
video programming services as the primary service over such systems or
networks. Service providers would include, for example, cable systems and
direct broadcast satellite systems.
The cross license agreement would provide for the payment of royalties if it
becomes effective. For example, for interactive program guides provided to
service providers, the royalties would be based on a per subscriber fee and a
percentage of net advertising revenues. The per subscriber fee payable by TV
Guide would be greater than the per subscriber fee payable by Gemstar. For
other interactive program guides provided by Gemstar, or licensed under a
Gemstar specification after the date the merger agreement was signed, that
include features covered by TV Guide's patents, a reasonable royalty will be
payable by Gemstar to TV Guide.
The licenses granted pursuant to the cross license agreement would be
limited to the United States and its territories and commonwealths, Canada and
Mexico, and would include Gemstar and TV Guide patents that have a first
effective filing date on or before the fifth anniversary of the effective date
of the cross license agreement. The licenses would remain in force until the
last of the licensed Gemstar and TV Guide patents expires, or is adjudged
invalid or unenforceable.
Cross Option Agreements
As a condition and inducement to Gemstar's and TV Guide's willingness to
enter into the merger agreement, Gemstar and TV Guide each granted the other an
option to purchase 14.9% of its common stock at
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the market price before the announcement of the merger agreement. Thus, Gemstar
has an option to purchase up to a maximum of 53,268,738 shares of TV Guide
Class A common stock at $20.765625 per share, and TV Guide has an option to
purchase up to a maximum of 35,141,588 shares of Gemstar common stock at
$41.8125 per share. The options granted become exercisable in full upon either
of the following triggering events:
. if at any time before the termination of the merger agreement (1) a
third party makes with respect to the company granting the option a
proposal regarding a merger, consolidation, purchase of assets,
tender offer, share exchange or other business combination or
similar transaction or the acquisition of 35% or more of the total
equity interests or voting securities of the company granting the
option, or publicly announces an intention to make such a proposal,
and (2) stockholders of the company granting the option subsequently
fail to approve the issuance of Gemstar common stock to TV Guide
stockholders in the merger, in the case of Gemstar, or the merger
agreement, in the case of TV Guide; or
. the grantee of the option learns of a breach by the grantor of any
of the following covenants in the merger agreement: (1) the covenant
relating to non-solicitation; (2) the covenant relating to
preparation of the proxy statement, the holding of stockholders'
meetings and the recommendation of the board of directors to
stockholders; (3) the covenant to make filings with appropriate
governmental entities; or (4) with respect to TV Guide, Gemstar's
covenant to list the shares of Gemstar common stock to be issued in
the merger for trading on the Nasdaq National Market.
The obligation of the grantor of the option to deliver the shares upon
exercise of the applicable option is subject only to the following conditions:
. no preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United
States prohibiting the delivery of the shares shall be in effect;
. any applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have expired or been terminated; and
. any other consent, approval, order, notification or authorization,
the failure of which to obtain or make would make the issuance of
the shares illegal, shall have been obtained or made and be in full
force and effect.
Each option terminates upon the earlier of:
. the completion of the merger; and
. 120 days after a triggering event as described above (which 120-day
period will be extended to the extent necessary to obtain all
regulatory approvals for the exercise of the option and for the
expiration of all statutory waiting periods, to the extent necessary
to avoid liability under Section 16(b) of the Securities Exchange
Act of 1934, as amended, from exercising the option and during any
period in which the grantee is enjoined or legally restricted from
exercising the option, plus, in each case, an additional period of
ten business days).
If before the termination of the options as described above, the grantor
enters into an agreement
. to consolidate with or merge into any person, other than the grantee
or one of its subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger,
. to permit any person, other than the grantee or one of its
subsidiaries, to merge into the grantor and the grantor shall be the
continuing or surviving corporation, but, in connection with such
merger, the then outstanding shares (including Class B common stock,
in the case of TV Guide) shall be changed into or exchanged for
stock or other securities of any other person or cash or any other
property or the then outstanding shares shall after such merger
represent less than 50% of the outstanding voting shares and voting
share equivalents of the merged company, or
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. to sell or otherwise transfer all or substantially all of its assets
to any person, other than the grantee or one of its subsidiaries,
then, and in each such case, the agreement governing such transaction must make
provision so that the option granted by the grantor shall, upon the
consummation of any such transaction and upon specified terms and conditions,
be converted into, or exchanged for, an option which the grantee reasonably
believes to have equivalent value and equivalent terms, at the grantee's
election, to acquire shares of either (1) the acquiring corporation or (2) any
person that controls the acquiring corporation. For purposes of the cross
options, the acquiring corporation is:
. the continuing or surviving corporation of a consolidation or merger
with the grantor (if other than the grantor);
. the grantor in a merger in which the grantor is the continuing or
surviving person; and
. the transferee of all or substantially all of the grantor's assets.
In no event shall the substitute option described above be exercisable for
more than 14.9% of the shares of the issuer of such substitute option. Further,
the grantor entering into any agreement of the type described above shall not
enter into any such agreement unless the acquiring corporation and any person
that controls the acquiring corporation assume in writing all the obligations
of the grantor under the applicable cross option.
Each grantee of an option has registration rights with respect to the shares
issued pursuant to the option.
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TERMS OF THE MERGER AGREEMENT
The description of the merger agreement, as amended, set forth below
describes the material terms, but does not purport to describe all of the
terms, of the merger agreement. The full text of the merger agreement, as
amended, is attached as Annex A to this document and is incorporated by
reference herein. All stockholders are urged to read the merger agreement in
its entirety. All references in this document to the merger agreement are to
the merger agreement, as amended, unless indicated otherwise.
Structure of the Merger
Before February 23, 2000, Gemstar will change its place of incorporation
from the British Virgin Islands to the State of Delaware. At the time the
merger becomes effective, G Acquisition Subsidiary Corp., a wholly owned
subsidiary of Gemstar, will merge with and into TV Guide, with TV Guide as the
surviving corporation. TV Guide will then be a wholly owned subsidiary of
Gemstar, and Gemstar. Promptly after the completion of the merger, Gemstar will
change its name to "TV Guide International, Inc."
Merger Consideration
Gemstar will convert each share of TV Guide common stock outstanding
immediately before the completion of the merger into 0.6573 of a share of
Gemstar common stock (including all rights attached to such shares).
No Fractional Shares
Gemstar will not issue fractional shares of Gemstar common stock to TV Guide
stockholders. Instead, for each fractional share, Gemstar will pay an amount of
cash determined by multiplying the fractional share interest to which such TV
Guide stockholder would otherwise be entitled by the average closing price for
a share of Gemstar common stock on the Nasdaq National Market (as reported in
The Wall Street Journal) during the 20 consecutive trading days ending on the
third trading day before the completion of the merger. For more information
regarding the conversion of TV Guide common stock, see "--Conversion of Shares
in the Merger."
Example: Assume the average closing price of Gemstar's common stock is
$70.00. If a TV Guide stockholder owns 10 shares of TV Guide common stock,
he or she will receive six shares of Gemstar common stock (10 shares
multiplied by the exchange ratio of 0.6573) and a check for the value of
0.573 fractional share, which will be $40.11 (0.573 fractional share
multiplied by $70.00).
Completion of the Merger
The merger will become effective when we file a certificate of merger with
the Delaware Secretary of State. We will file the certificate of merger as soon
as practicable after all conditions in the merger agreement are waived or
satisfied. For more information regarding these conditions, see "--Conditions
to the Merger."
Conversion of Shares in the Merger
As of the completion of the merger, by virtue of the merger and without any
additional action on the part of TV Guide stockholders or Gemstar:
. Each share of TV Guide common stock issued and outstanding as of the
completion of the merger (other than shares to be cancelled as provided
below) will be converted into 0.6573 of a share of Gemstar common stock.
Gemstar will not issue any fractional shares of its common stock to
TV Guide stockholders. Rather, Gemstar will pay TV Guide stockholders
cash for these fractional shares. For more information regarding
fractional shares, see "--No Fractional Shares."
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. Each share of the capital stock of G Acquisition Subsidiary Corp. issued
and outstanding immediately before the completion of the merger will be
converted into and exchanged for one share of common stock of the
surviving corporation.
. Each share of TV Guide common stock owned immediately before the
completion of the merger by TV Guide, Gemstar or G Acquisition
Subsidiary Corp. will be cancelled automatically and retired without any
conversion of such share, and no consideration will be paid for these
shares.
As of the completion of the merger, all TV Guide common stock will no longer
be outstanding, will be cancelled automatically and retired, and will cease to
exist. Each holder of TV Guide common stock will cease to have any rights in
such common stock, except the right to receive the appropriate number of shares
of Gemstar common stock, cash in lieu of fractional shares of Gemstar and
dividends, if any, declared on Gemstar common stock with a record date after
the completion of the merger. For information regarding how to exchange TV
Guide common stock, see "--Exchange Agent; Procedures for Exchange of
Certificates."
Exchange Agent; Procedures for Exchange of Certificates
After the completion of the merger, Gemstar will appoint American Stock
Transfer & Trust Company to serve as exchange agent and will deliver to the
exchange agent certificates representing the number of shares of Gemstar common
stock to be issued in the merger and cash in an amount sufficient for payment
in lieu of fractional shares. The exchange agent will, according to irrevocable
instructions, deliver to TV Guide stockholders shares of Gemstar common stock
(including all rights attached to such shares) and any cash in lieu of
fractional shares.
The exchange agent will mail to each TV Guide stockholder a letter of
transmittal and instructions to surrender his or her certificates representing
TV Guide common stock in exchange for certificates representing shares of
Gemstar common stock and cash in lieu of fractional shares. After a TV Guide
stockholder surrenders his or her TV Guide common stock certificate along with
a duly executed and properly completed letter of transmittal and other required
documents, the exchange agent will deliver to such stockholder the following:
. a certificate representing the number of whole shares of Gemstar common
stock to which such stockholder is entitled;
. cash in lieu of any fractional shares of Gemstar common stock to which
such stockholder would otherwise be entitled; and
. the amount of any dividends or other distributions declared on Gemstar
common stock with a record date on or after the completion of the merger
and a payment date before surrender of such certificates representing
shares of TV Guide common stock.
TV Guide stockholders should not forward their TV Guide common stock
certificates with the enclosed proxy card nor should they forward their TV
Guide common stock certificates to the exchange agent until they have received
the packet of information, including a letter of transmittal, described above.
Representations and Warranties
The merger agreement contains various representations and warranties of
Gemstar, TV Guide and G Acquisition Subsidiary Corp., relating to, among other
things, the following:
. incorporation, existence, good standing, corporate power and similar
corporate matters;
. capital structure;
. authorization to execute, deliver and perform obligations under the
merger agreement, the enforceability of the merger agreement, and the
absence of violations of law, its governing instruments and material
contracts as a result of such execution, delivery and performance;
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. documents, reports and financial statements filed with the Securities
and Exchange Commission and the accuracy and completeness of the
information contained in such documents;
. the absence of undisclosed liabilities;
. material contracts;
. the absence of material changes or events since June 30, 1998;
. pending or threatened investigations or litigation;
. employee benefit matters;
. accounting and tax matters;
. compliance with laws, ordinances and regulations;
. environmental matters;
. the receipt of fairness opinions from financial advisors;
. the required vote of stockholders;
. intellectual property; and
. year 2000 compliance matters.
Gemstar, TV Guide and G Acquisition Subsidiary Corp. made the
representations and warranties listed above as of the date of the merger
agreement, which was October 4, 1999. Such representations and warranties will
not be updated to the completion of the merger.
Conduct of Business Pending the Merger
The merger agreement requires that until the completion of the merger or
termination of the merger agreement, both Gemstar and TV Guide are to use all
reasonable efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees and
preserve their relationships with customers, suppliers and others having
business dealings with them.
Further, the merger agreement specifies that, except as specified on
disclosure schedules delivered by the parties with the merger agreement,
without the prior written consent of the other party, each of Gemstar and TV
Guide will not, and will not permit their respective subsidiaries to:
. declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned
subsidiary of Gemstar or TV Guide, as the case may be, to its parent;
. split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock;
. purchase, redeem or otherwise acquire:
. in the case of Gemstar and its subsidiaries, any shares of capital
stock of Gemstar or any of its subsidiaries or any other securities
of Gemstar or its subsidiaries or any rights, warrants or options to
acquire any such shares or other securities in an aggregate amount
exceeding $50 million, which aggregate amount does not include any
repurchases made to offset issuances of Gemstar common stock made in
connection with acquisitions permitted by the merger agreement
before the closing of the merger; and
. in the case of TV Guide and its subsidiaries, any shares of capital
stock of TV Guide or any of its subsidiaries or any other securities
of TV Guide or its subsidiaries or any rights, warrants or options
to acquire any such shares or other securities in an aggregate
amount exceeding $50
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million, which aggregate amount does not include any repurchases made
to offset issuances of TV Guide common stock made in connection with
acquisitions permitted by the merger agreement before the closing of
the merger or made to permit TV Guide to satisfy the closing
condition to the merger that the stockholders of Gemstar immediately
before the merger own, in the aggregate, more than 50% of the
outstanding common stock of Gemstar immediately after the merger;
. (1) issue, deliver, sell, award, pledge, dispose of or otherwise
encumber or authorize or propose any such actions with respect to any
shares of its capital stock, any voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities, (2) amend or
otherwise modify the terms of any such rights (except as permitted by
the merger agreement), warrants or options, or (3) accelerate the
vesting of any stock options (except, in the case of TV Guide, for such
options granted on or before January 1, 1999), in each case other than:
. the issuance of capital stock upon the exercise of outstanding
options on the date of the merger agreement;
. the issuance by Gemstar of options to purchase an additional
2,000,000 shares of Gemstar common stock;
. the issuance by TV Guide of options to purchase an additional
3,542,752 shares of TV Guide common stock and certain other options;
and
. issuances of Gemstar common stock or TV Guide common stock made in
connection with acquisitions permitted by the merger agreement before
the completion of the merger, subject to the requirement to effect
offsetting repurchases of such capital stock;
. amend its organizational documents (except, in the case of Gemstar, as
contemplated by Gemstar's adoption of a new certificate of incorporation
and bylaws in connection with changing its place of incorporation from
the British Virgin Islands to the State of Delaware and amended and
restated bylaws in connection with the merger);
. acquire or agree to acquire any business organization or division
thereof, unless the purchase price and required capital contributions
with respect to such acquisition or acquisitions do not exceed $200
million in the aggregate and such transactions would not be reasonably
likely to prevent or materially delay the completion of the merger;
. mortgage or otherwise encumber or subject to any lien, or sell, lease,
exchange or otherwise dispose of, any of its properties or assets,
except for sales in the ordinary course of business consistent with past
practice or other sales that do not exceed $50 million in the aggregate;
. dispose of, pledge or encumber any of its or its subsidiaries'
intellectual property, except through non-exclusive license agreements;
. with regard to TV Guide only, except in the ordinary course of business
and subject to specified exceptions:
. increase the rate or terms of compensation payable or to become
payable generally to any of its or its subsidiaries' directors,
executive officers or employees, other than usual and customary
salary increases to non-management employees, or increase the rate of
compensation under or otherwise change the terms or renew any
existing employment agreement, except that this covenant will not
preclude payments under the terms of existing incentive compensation
plans in accordance with past practice, preclude extending the term
of any employment agreement of any senior officer (other than Joachim
Kiener and Peter C. Boylan III) for up to two years or preclude
adjustments to the base compensation of any senior officer (other
than Messrs. Kiener and Boylan) by not more than 15%;
. pay or agree to pay any pension, retirement allowance or other
employee benefit not provided for by any existing plan, arrangement
or understanding or employment agreement described in its public
filings with the Securities and Exchange Commission;
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. commit itself to any additional pension, profit sharing, bonus,
incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay,
continuation pay, termination pay, retirement or other employee
benefit plan, agreement or arrangement, or increase the rate or
terms of any employee plan or benefit arrangement; or
. enter into any employment agreement with or for the benefit of any
person (except that TV Guide is permitted to enter into employment
agreements with each of Messrs. Kiener and Boylan);
. change its fiscal year;
. incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any of its or its subsidiaries' debt
securities, guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the above, except for the incurrence of
indebtedness which when added to its and its subsidiaries' existing
indebtedness does not in the aggregate exceed $50 million, in the case
of Gemstar and its subsidiaries, and $650 million, in the case of TV
Guide and its subsidiaries, plus, in each case and as calculated under
the merger agreement, indebtedness incurred or assumed in connection
with acquisitions permitted to be made by the merger agreement;
. make any loans, advances or capital contributions to, or investments in,
any other person, other than in the ordinary course of business
consistent with past practice and within the $200 million limit imposed
by the merger agreement on acquisitions and except to:
. any direct or indirect wholly owned subsidiary of Gemstar (in the
case of Gemstar and its subsidiaries); and
. any direct or indirect wholly owned subsidiary of TV Guide (in the
case of TV Guide and its subsidiaries);
. make or agree to make any new capital expenditures for tangible physical
assets which in the aggregate exceed $50 million (which amount for TV
Guide does not include certain itemized capital expenditures);
. purchase or acquire, or permit or cause any of its subsidiaries to
purchase or acquire, beneficial or record ownership of:
. any shares of Gemstar common stock (in the case of TV Guide and its
subsidiaries); and
. any shares of TV Guide common stock (in the case of Gemstar and its
subsidiaries);
. modify, amend, renew, fail to renew or terminate any material contract
or agreement to which it or any of its subsidiaries is a party or waive,
release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice; or
. authorize any of, or commit or agree to take any of, the foregoing
actions.
Other Covenants
Under the merger agreement, Gemstar and TV Guide agreed to the following
additional covenants:
Stockholders' Meetings
Gemstar and TV Guide will each call and hold a meeting of its respective
stockholders to approve the necessary proposals to effect the merger and the
transactions contemplated by the merger agreement. Gemstar and TV Guide will
use their reasonable efforts to hold their respective stockholders' meetings on
the same day.
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Access to Information; Confidentiality
TV Guide will, and will cause its subsidiaries to, afford Gemstar and its
officers, employees, accountants, counsel, financial advisors and other
representatives, reasonable access during normal business hours during the
period before the completion of the merger to all of their respective
properties, books, contracts, commitments, personnel and records. In addition,
during such period, TV Guide will, and will cause its subsidiaries to, furnish
to Gemstar:
. a copy of each document filed by it during such period pursuant to the
requirements of federal or state securities laws; and
. all other information concerning its business, properties and personnel
as Gemstar may reasonably request.
Gemstar will keep, and will cause its officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates to keep,
any confidential information confidential in accordance with confidentiality
agreements in effect between Gemstar and TV Guide.
Filings; Other Actions
Before we can complete the merger, we must satisfy all regulatory
requirements and obtain the approval of all regulatory agencies having
jurisdiction over the merger. To facilitate the regulatory review and approval
process, we have each agreed to make all necessary filings promptly and use our
best efforts to take all actions necessary to complete the merger. Accordingly,
we must make filings and other required submissions under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. We will also make any other filings or
submissions and seek the approval of all other applicable regulatory agencies,
including the Federal Communications Commission, for the transactions
contemplated by the merger agreement.
We have each agreed to take all actions to resolve any objections to the
merger which may be raised by regulatory agencies. This agreement, however,
does not obligate either of us to divest assets on which our respective
electronic program guide businesses are dependent if such divestiture would
have a material adverse effect on such business or take any other action that
materially and adversely impacts our respective abilities to participate in the
electronic program guide business.
During the regulatory review process, each party will use reasonable best
efforts to obtain third party consents necessary to complete the merger,
furnish the other with information and assistance in preparing any required
governmental filings or submissions, and cooperate with the other in responding
to any inquiry from any governmental entity.
No Solicitation
Gemstar. Gemstar, its subsidiaries and its directors, officers, employees,
advisors and agents will not solicit, initiate, encourage or participate in any
negotiations regarding, or furnish to any person any information with respect
to, any of the following proposals:
(1) a merger, consolidation, purchase of assets (other than purchases of
assets or inventory in the ordinary course of business), tender offer,
share exchange or other business combination or similar transaction
involving Gemstar or any of its subsidiaries;
(2) the acquisition of 10% or more of the total equity interests in or
voting securities of Gemstar or any of its subsidiaries or a substantial
portion of the assets of Gemstar or any of its subsidiaries;
(3) the acquisition by any person or group of beneficial ownership or a
right to acquire beneficial ownership of 10% or more of the then
outstanding shares of capital stock of Gemstar; or
(4) any public announcement of or agreement to engage in the foregoing.
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Gemstar will promptly advise TV Guide of any of the foregoing proposals or
of any request for information.
The merger agreement does not prohibit Gemstar from disclosing or filing the
statements required by applicable rules of the Securities and Exchange
Commission with respect to any tender offer proposal. The merger agreement also
does not prohibit Gemstar's board of directors from providing information to,
or discussing or negotiating with, any third party who makes an unsolicited,
written, bona fide proposal of the type described above (except that for this
purpose the percentages used in clauses 2 and 3 will be 50%, rather than 10%)
if, in addition to first notifying TV Guide in writing of any such proposal,
the following conditions are satisfied:
. the Gemstar board determines in good faith, after consultation with and
not inconsistent with the advice of Gemstar's outside legal counsel,
that failure to provide information to, or engage in discussions or
negotiations with, such third party would be a breach of the board's
fiduciary duties;
. after consultation with, and the receipt of an opinion from, Gemstar's
financial advisor, the Gemstar board determines, after taking into
consideration the strategic benefits to Gemstar of the merger, including
the termination of litigation between Gemstar and TV Guide, that such
proposal is financially superior to the merger, and financing for such
proposal, to the extent required, is reasonably capable of being
obtained; and
. Gemstar gives TV Guide, for at least five business days, an opportunity
to amend the merger agreement to provide for terms and conditions no
less favorable than such proposal so as to enable Gemstar to proceed
with the merger.
If Gemstar's board of directors makes the foregoing determinations and
Gemstar is in compliance with the related applicable undertakings in the merger
agreement, Gemstar's board of directors is permitted to not include or to
withdraw or modify its recommendation to its stockholders to approve the
issuance of Gemstar common stock to TV Guide stockholders in the merger.
Nevertheless, unless the merger agreement has been terminated in accordance
with its terms, Gemstar must submit the proposal to approve the issuance of
Gemstar common stock to TV Guide stockholders in the merger to a vote of its
stockholders even if Gemstar's board of directors determines that the merger is
no longer advisable and withdraws its recommendation that its stockholders
approve such proposal.
TV Guide. TV Guide, its subsidiaries and its directors, officers, employees,
advisors and agents will not solicit, initiate, encourage or participate in any
negotiations regarding, or furnish to any person any information with respect
to, any of the following proposals:
(1) a merger, consolidation, purchase of assets (other than purchases of
assets or inventory in the ordinary course of business), tender offer,
share exchange or other business combination or similar transaction
involving TV Guide or any of its subsidiaries;
(2) the acquisition of 10% or more of the total equity interests in or
voting securities of TV Guide or any of its subsidiaries or a substantial
portion of the assets of TV Guide or any of its subsidiaries;
(3) the acquisition by any person or group of beneficial ownership or a
right to acquire beneficial ownership of 10% or more of the then
outstanding shares of capital stock of TV Guide; or
(4) any public announcement of or agreement to engage in the foregoing.
TV Guide will promptly advise Gemstar of any of the foregoing proposals or of
any request for information.
The merger agreement does not prohibit TV Guide from disclosing or filing
the statements required by the applicable rules of the Securities and Exchange
Commission with respect to any tender offer proposal.
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Conditions to the Merger
We are not obligated to complete the merger unless the following conditions
are satisfied or waived:
. the requisite number of Gemstar stockholders approve the issuance of
Gemstar common stock to TV Guide stockholders in the merger;
. Gemstar must have adopted a new certificate of incorporation and bylaws
in the forms attached as Annexes B and C, respectively, to this joint
proxy statement/prospectus and have changed its place of incorporation
from the British Virgin Islands to the State of Delaware;
. the requisite number of TV Guide stockholders approve and adopt the
merger agreement;
. the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 expires or is terminated;
. no order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the merger is in effect;
. the Securities and Exchange Commission does not issue a stop order
suspending the effectiveness of the registration statement of which this
document is a part or initiate any proceedings for that purpose; and
. the shares of Gemstar common stock to be issued to TV Guide stockholders
in the merger have been listed on the Nasdaq National Market.
In addition, Gemstar is not required to complete the merger if the holders
of its outstanding common stock immediately before the completion of the merger
would not own in the aggregate more than 50% of the combined company's
outstanding common stock immediately after the completion of the merger. The
merger agreement provides that for purposes of calculating such share
ownership:
. Gemstar must use the number of issued and outstanding shares of Gemstar
common stock on September 30, 1999 as specified in the merger agreement
plus any shares of Gemstar common stock issued after September 30, 1999
and before the completion of the merger;
. any shares of Gemstar common stock purchased by Gemstar or any person it
controls after September 30, 1999 (other than shares repurchased to
offset shares issued in an acquisition permitted by the merger
agreement) must be counted as outstanding immediately following the
completion of the merger; and
. any shares of Gemstar common stock repurchased after September 30, 1999
to offset shares issued in an acquisition permitted by the merger
agreement must be counted as outstanding until the tenth business day
following the receipt by TV Guide of written notice from Gemstar
containing the date of any such repurchase and the number of shares of
Gemstar common stock so repurchased.
Further, neither Gemstar and G Acquisition Subsidiary Corp., on the one
hand, nor TV Guide, on the other, is obligated to complete the merger unless:
. the other party's representations and warranties in the merger agreement
were true and correct as of the date of the merger agreement (which is
October 4, 1999), except where the failure to be so true and correct
would not have a material adverse effect on such other party;
. certain specified agreements are valid, binding and enforceable against
the other party, such other party's subsidiaries and certain
stockholders of such other party, as applicable; and
. the other party has not willfully and materially breached any of its
covenants regarding the conduct of its business except in certain
circumstances where the breach would not have a material adverse effect
on such other party.
A party may waive certain unsatisfied conditions if such party is entitled
to require the satisfaction of such condition before the completion of the
merger.
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Indemnification of Directors and Officers
The merger agreement provides that the rights to indemnification and
exculpation from liability that exist for any director, officer, employee or
agent of TV Guide and that are provided in TV Guide's existing certificate of
incorporation and bylaws will survive the completion of the merger and continue
in full force and effect for a period of six years. The obligations of Gemstar
and TV Guide, as the surviving corporation in the merger agreement with G
Acquisition Subsidiary Corp., are binding on their successors and assigns and
survive the completion of the merger.
Termination
The merger agreement may be terminated at any time before the completion of
the merger as follows:
(1) by mutual written consent of Gemstar and TV Guide if the board of
directors of each company so determines by a majority vote of the entire
board;
(2) by either Gemstar or TV Guide if the merger does not occur by March
31, 2000 (except that this date will be extended to September 30, 2000 if
regulatory waiting periods have not expired or if the Department of Justice
or Federal Trade Commission has instituted an action seeking to challenge
or enjoin the merger), unless such party's action or failure to act caused
or resulted in the failure of the merger to occur by such date and such act
or failure to act is a breach of the merger agreement;
(3) by Gemstar, provided Gemstar is not then in material breach of any
representation, warranty, covenant or agreement in the merger agreement
such that such breach would have a material adverse effect on Gemstar or TV
Guide, but only if any of the following conditions would be incapable of
being satisfied by March 31, 2000 (or September 30, 2000, if applicable):
. TV Guide's representations and warranties in the merger agreement
being true and correct as of the date of the merger agreement (which
is October 4, 1999), except where the failure to be so true and
correct would not have a material adverse effect on TV Guide;
. ancillary agreements, including the stockholders agreement, being
valid, binding and enforceable against TV Guide, TV Guide's
subsidiaries, Liberty Media Corporation and The News Corporation
Limited, as applicable;
. TV Guide not willfully and materially breaching any of its covenants
except with respect to certain covenants where the breach would not
have a material adverse effect on TV Guide; and
. the holders of Gemstar's outstanding common stock immediately before
the completion of the merger owning in the aggregate more than 50%
of the combined company's outstanding common stock immediately after
the completion of the merger;
(4) by TV Guide, provided TV Guide is not then in material breach of any
representation, warranty, covenant or agreement in the merger agreement
such that such breach would have a material adverse effect on Gemstar or TV
Guide, but only if any of the following conditions would be incapable of
being satisfied by March 31, 2000 (or September 30, 2000, if applicable):
. Gemstar's representations and warranties in the merger agreement
being true and correct as of the date of the merger agreement (which
is October 4, 1999), except where the failure to be so true and
correct would not have a material adverse effect on Gemstar;
. ancillary agreements, including the stockholders agreement, being
valid, binding and enforceable against Gemstar, Gemstar's
subsidiaries and Henry C. Yuen, as applicable; and
. Gemstar not willfully and materially breaching any of its covenants
except with respect to certain covenants where the breach would not
have a material adverse effect on Gemstar;
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(5) by either Gemstar or TV Guide if any governmental entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the completion of the
merger and such order, decree, ruling or other action shall have become
final and non-appealable;
(6) by either Gemstar or TV Guide if Gemstar stockholders fail to
approve the issuance of Gemstar common stock to TV Guide stockholders in
the merger, provided that Gemstar shall not have this right to terminate
the merger agreement if Gemstar's action or failure to act, in breach of
the merger agreement, caused the failure to obtain such approval; or
(7) by either Gemstar or TV Guide if TV Guide stockholders fail to
approve the merger agreement, provided that TV Guide shall not have this
right to terminate the merger agreement if TV Guide's action or failure to
act, in breach of the merger agreement, caused the failure to obtain such
approval.
Fees and Expenses
Except as described in "--Termination Fee" below, the party incurring costs
and expenses will pay all such costs and expenses incurred in connection with
the merger agreement and the transactions contemplated by the merger agreement,
provided that Gemstar and TV Guide will share equally the following expenses
(other than attorneys' and accountants' fees and expenses):
. expenses incurred in connection with printing and filing this joint
proxy statement/prospectus and the registration statement of which this
document is a part; and
. fees incurred in connection with the filing of the pre-merger
notification and report form pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
Termination Fee
Gemstar. Gemstar must pay TV Guide a termination fee if the merger agreement
is terminated in the circumstances described below:
(1) Gemstar must pay $205 million if either Gemstar or TV Guide
terminates the merger agreement because Gemstar stockholders failed to
approve the issuance of Gemstar common stock to TV Guide stockholders in
the merger, plus an additional $204 million if either of the following
circumstances should occur:
. before the Gemstar special stockholders' meeting there is an
unsolicited proposal by a third party for a merger, consolidation,
purchase of assets, tender offer, share exchange or other business
combination or similar transaction involving Gemstar or any of its
subsidiaries or an acquisition of 35% or more of the total equity
interests in or voting securities of Gemstar or any of its
subsidiaries or a substantial portion of the assets of Gemstar or
any of its subsidiaries or any public announcement of or agreement
to engage in the foregoing, or Gemstar's board of directors
withdraws or modifies its recommendation of the proposal to approve
the issuance of Gemstar common stock to TV Guide stockholders in the
merger; or
. at any time within 12 months following termination of the merger
agreement, Gemstar enters into a definitive agreement for, or
consummates a transaction that if proposed before termination of the
merger agreement would have constituted an unsolicited proposal by a
third party for, a merger, consolidation, purchase of assets, tender
offer, share exchange or other business combination or similar
transaction involving Gemstar or any of its subsidiaries or an
acquisition of 10% or more of the total equity interests in or
voting securities of Gemstar or any of its subsidiaries or a
substantial portion of the assets of Gemstar or any of its
subsidiaries or any public announcement of or agreement to engage in
the foregoing; or
(2) Gemstar must pay $409 million if TV Guide terminates the merger
agreement because at least one of the following conditions would be
incapable of being satisfied by March 31, 2000 (or September 30, 2000, if
applicable), and provided that TV Guide is not then in material breach of
any
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representation, warranty, covenant or agreement in the merger agreement
such that such breach would have a material adverse effect on Gemstar or TV
Guide:
. Gemstar's representations and warranties in the merger agreement
being true and correct as of the date of the merger agreement except
where the failure to be so true and correct would not have a
material adverse effect on Gemstar;
. ancillary agreements, including the stockholders agreement, being
valid, binding and enforceable against Gemstar, Gemstar's
subsidiaries and Henry C. Yuen, as applicable; and
. Gemstar not willfully and materially breaching any of its covenants
except with respect to certain covenants where the breach would not
have a material adverse effect on Gemstar.
TV Guide. TV Guide must pay Gemstar a termination fee of $409 million if the
merger agreement is terminated under any of the following circumstances:
(1) Gemstar terminates the merger agreement because at least one of the
following conditions would be incapable of being satisfied by March 31,
2000 (or September 30, 2000, if applicable), and provided that Gemstar is
not then in material breach of any representation, warranty, covenant or
agreement in the merger agreement such that such breach would have a
material adverse effect on Gemstar or TV Guide:
. TV Guide's representations and warranties in the merger agreement
being true and correct as of the date of the merger agreement except
where the failure to be so true and correct would not have a
material adverse effect on TV Guide;
. ancillary agreements, including the stockholders agreement, being
valid, binding and enforceable against TV Guide, TV Guide's
subsidiaries, Liberty Media Corporation and The News Corporation
Limited, as applicable;
. TV Guide not willfully and materially breaching any of its covenants
except with respect to certain covenants where the breach would not
have a material adverse effect on TV Guide; and
. the holders of Gemstar's outstanding common stock immediately before
the completion of the merger owning in the aggregate more than 50%
of the combined company's outstanding common stock immediately after
the completion of the merger; or
(2) either Gemstar or TV Guide terminates the merger agreement because
TV Guide stockholders failed to approve the merger agreement.
For purposes of the condition described in the fourth bullet point of clause
(1) of the preceding sentence, however:
. TV Guide is permitted under the merger agreement to repurchase shares of
TV Guide common stock to the extent necessary to prevent such condition
from arising;
. any shares of Gemstar common stock purchased by Gemstar or any person it
controls after September 30, 1999 (except as described in the following
bullet point) must be counted as outstanding immediately following the
completion of the merger; and
. any shares of Gemstar common stock repurchased after September 30, 1999
to offset shares issued in an acquisition permitted by the merger
agreement must be counted as outstanding until the tenth business day
following the receipt by TV Guide of written notice from Gemstar
containing the date of any such repurchase and the number of shares of
Gemstar common stock so repurchased.
Amendment
Gemstar and TV Guide may amend the merger agreement in writing at any time
before the completion of the merger, except that following approval by Gemstar
stockholders and TV Guide stockholders, the parties
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may not amend the merger agreement if such amendment by law requires further
approval by Gemstar stockholders or TV Guide stockholders unless Gemstar or TV
Guide, as applicable, first obtains such approval.
To be effective, any amendment of the merger agreement requires the
affirmative vote of a majority of the members of the entire board of directors
of Gemstar or TV Guide, as the case may be.
Extension and Waiver
The merger agreement permits Gemstar, G Acquisition Subsidiary Corp. and TV
Guide, at any time before the completion of the merger, to:
. extend the time to perform any of the obligations or other acts of the
other parties;
. waive any inaccuracies in the representations and warranties contained
in the merger agreement or in any document delivered pursuant to the
merger agreement; or
. waive the other party's compliance with any of the agreements or
conditions contained in the merger agreement, but if such waiver occurs
after Gemstar stockholders or TV Guide stockholders, as applicable,
approve the merger and related transactions and if such waiver by law
requires approval by the applicable stockholders such stockholder
approval must first be obtained before such waiver is given.
The failure of any party to the merger agreement to assert any of its rights
under the merger agreement or otherwise will not constitute a waiver of those
rights.
To be effective, any extension or waiver of the merger agreement requires
the affirmative vote of a majority of the members of the entire board of
directors of Gemstar or TV Guide, as the case may be.
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TERMS OF THE VOTING AGREEMENTS
Simultaneously with the execution of the merger agreement, each of Henry C.
Yuen, Elsie Ma Leung, Dynamic Core Holdings Limited, of which Thomas Lau (a
director of Gemstar) is the sole stockholder, and THOMSON multimedia S.A.
entered into a voting agreement with TV Guide in which they agreed to vote or
cause to be voted all of their respective shares of Gemstar common stock in
favor of the issuance of Gemstar common stock in connection with the merger,
the merger, and the transactions contemplated by the merger agreement, and
against any inconsistent proposals or transactions. Mr. Yuen, Ms. Leung,
Dynamic Core Holdings and THOMSON have also agreed in the voting agreements,
with certain specified exceptions, not to dispose of any of their respective
shares of Gemstar common stock unless, in the case of Dynamic Core Holdings,
THOMSON and Ms. Leung, the transferee agrees in writing to be bound by the
terms of the applicable voting agreement. Each of these voting agreements
grants to and appoints (to the extent possible) Joachim Kiener and Peter C.
Boylan III as proxy and attorney-in-fact for the respective party to vote the
shares of Gemstar common stock in accordance with the respective voting
agreement. The voting agreements terminate, in the case of Mr. Yuen and Ms.
Leung, upon any termination of the merger agreement, except that the
restrictions on transfer of shares of Gemstar common stock by Ms. Leung will
terminate on September 30, 2000 if the merger has not occurred by that date,
and in the case of Dynamic Core Holdings and THOMSON, upon the earliest of the
termination of the merger agreement, the completion of the merger or September
30, 2000.
Simultaneously with the execution of the merger agreement, each of Liberty
Media Corporation and The News Corporation Limited and certain of their
respective affiliates entered into a voting agreement with Gemstar in which
they agreed to vote or cause to be voted all of their respective shares of TV
Guide common stock in favor of the merger, the merger agreement and the
transactions contemplated by the merger agreement, and against any inconsistent
proposals or transactions. Liberty and News Corp. and certain of their
respective affiliates have also agreed in the voting agreements, with certain
specified exceptions, not to dispose of any of their respective shares of TV
Guide common stock. Each of these voting agreements grants to and appoints Mr.
Yuen and Ms. Leung as proxy and attorney-in-fact for the relevant affiliate of
Liberty and News Corp., as the case may be, to vote the shares of TV Guide
common stock in accordance with the respective voting agreement. The voting
agreements terminate upon any termination of the merger agreement.
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TERMS OF THE STOCKHOLDERS AGREEMENT
The description of the stockholders agreement set forth below describes the
material terms, but does not purport to describe all of the terms, of the
stockholders agreement. The description of the stockholders agreement is
subject to and qualified in its entirety by reference to the full text of the
stockholders agreement which is an exhibit to the registration statement of
which this document forms a part and is incorporated by reference herein. All
stockholders are urged to read the stockholders agreement in its entirety.
Simultaneously with the execution of the merger agreement, Henry C. Yuen,
Liberty Media Corporation, The News Corporation Limited and Gemstar entered
into a stockholders agreement, the terms of which are described below. The
stockholders agreement does not become effective until the completion of the
merger.
Directors
Henry C. Yuen and Designees of Mr. Yuen. Liberty and News Corp. have agreed
(1) to vote for, or to use their best efforts to cause their respective
designees on the board of directors to vote for, Mr. Yuen's election as a
director and appointment as Chairman of the Board and Chief Executive Officer
until the earlier of the fifth anniversary of the completion of the merger and
the date Mr. Yuen ceases to be Chief Executive Officer of Gemstar other than as
a result of his termination without cause and (2) to vote for the election to
the board of five other persons (including two independent directors)
designated by Mr. Yuen until the earlier of the fifth anniversary of the
completion of the merger and the date Mr. Yuen ceases to be Chief Executive
Officer of Gemstar other than as a result of his termination without cause,
provided that if Mr. Yuen should die or become disabled during such five-year
period Liberty and News Corp. have each agreed, for the remainder of the five-
year period, to continue to vote for the election to the board of the directors
formerly designated by Mr. Yuen or their successors (including Mr. Yuen's
successor) and to vote against their removal except for cause.
Designees of Liberty and News Corp. For so long as Liberty and News Corp.
are committed to vote for Mr. Yuen and his designees, Mr. Yuen has agreed to
vote his shares of Gemstar common stock for the election to the Gemstar board
of three designees of Liberty (including one independent director) and three
designees of News Corp. (including one independent director).
Each of Liberty's and News Corp.'s right to designate directors generally
shall be reduced by one director upon the transfer of 90% or more of its
respective shares of Gemstar common stock, but if the transfer of any of the
shares was from one to the other then the total number of directors Liberty and
News Corp. have the right to designate will not be reduced. Liberty and News
Corp. have the right to allocate designees to the Gemstar board between one
another as they may agree in connection with any transfer of shares among
Liberty, News Corp. and their respective controlled related parties.
Officers
Henry C. Yuen. Liberty and News Corp. will use their respective best efforts
to cause their designees to the Gemstar board to vote for Mr. Yuen's election
as Chairman of the Board and Chief Executive Officer of Gemstar during the
five-year period following the completion of the merger and against any removal
or diminution of Mr. Yuen's responsibilities during such period (provided that
Gemstar does not have the right to terminate Mr. Yuen's employment for
disability pursuant to his employment agreement or that "cause," within the
meaning of his employment agreement, does not exist for termination of such
employment).
Elsie Ma Leung. Liberty and News Corp. will use their respective best
efforts to cause their designees to the Gemstar board to vote for the election
of Ms. Leung (and any successors to her offices) as co-President, co-Chief
Operating Officer, a member of the Office of the Chief Executive and Chief
Financial Officer of Gemstar during the five-year period following the
completion of the merger and against any removal or diminution of Ms. Leung's
responsibilities during such period (provided that "cause," within the meaning
of Mr. Yuen's employment agreement, does not exist for termination of such
employment).
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Joachim Kiener and Peter C. Boylan III. Mr. Yuen will vote, and will use his
best efforts to cause his designees to the Gemstar board to vote, for the
election of Messrs. Kiener and Boylan (and the successors to their respective
offices) as co-Presidents and co-Chief Operating Officers of Gemstar and as
members of the Office of the Chief Executive during the five-year period
following the completion of the merger and against any removal or diminution of
their responsibilities during such period (provided that "cause," within the
meaning of Mr. Yuen's employment agreement, does not exist for termination of
such employment).
Standstill
Each of Mr. Yuen, Liberty and News Corp. agree, provided that their
respective designees to the Gemstar board continue to be elected and appointed
directors, that until the earlier of the fifth anniversary of the completion of
the merger and the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar other than as a result of his termination without cause, they will not:
. make a public offer to acquire all or part of Gemstar, except in certain
cases where another unaffiliated person has made an offer for a
comparable percentage of Gemstar (for purposes of this provision, AT&T
Corp. and its affiliates generally are not deemed to be affiliates of
Liberty);
. solicit proxies for the election of directors or make any stockholder
proposal, except in certain cases;
. act in concert with other stockholders or become a group within the
meaning of applicable rules of the Securities and Exchange Commission,
other than with each other and parties controlled by each other and
except in connection with making a permitted competing offer for
Gemstar;
. transfer shares of Gemstar common stock to any person who would, to the
knowledge of such party, be an "Acquiring Person" within the meaning of
Gemstar's rights agreement (i.e., a person whose ownership of Gemstar
common stock is such as to cause the share purchase rights issued under
the rights agreement to become exercisable); or
. seek to challenge the legality of the foregoing provisions of the
stockholders agreement.
Non-competition
Until the earlier of the fifth anniversary of the completion of the merger
and the date Liberty or News Corp., as the case may be, no longer has a
designee serving on Gemstar's board of directors, Liberty and News Corp. have
each agreed that Gemstar will be the exclusive vehicle through which Liberty
and News Corp. and their controlled affiliates engage in the program guide
business (print, electronic or otherwise) within or outside the United States.
The foregoing non-competition restriction, however, does not prohibit the
provision by NDS Group plc as successor to News Digital Systems plc and its
subsidiaries of technology relating to electronic program guides solely in
conjunction with the development and sale of encryption and conditional access
services for television and data broadcasting. For purposes of the foregoing
restriction, the provision of program guides to customers of the multi-channel
video programming delivery systems of Liberty and News Corp. or a subsidiary or
controlled affiliate of such company shall not be deemed to be the conduct of a
program guide business.
Registration Rights
At any time after the date which is six months after the completion of the
merger and before the tenth anniversary of the completion of the merger, either
Liberty or News Corp. (or transferees of their Gemstar common stock) may
request that Gemstar effect a registration of all or part of their shares of
Gemstar common stock. Gemstar will not be required to effect a demand
registration unless the aggregate number of shares of Gemstar common stock
demanded to be registered is at least 1% of the number of shares of Gemstar
common stock then outstanding, in which case Gemstar must use all commercially
reasonable efforts to cause a registration statement to become effective for
the sale of such shares.
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Notwithstanding the foregoing, Gemstar will not be required to effect any
demand registration after such time as Liberty or News Corp. (or transferees of
their Gemstar common stock), as the case may be, is able to sell all of its
respective Gemstar common stock without restriction. In addition, once a demand
registration has been effected, Gemstar is not obligated to register shares
pursuant to a demand registration before the expiration of twelve months from
the date on which the previous demand registration statement was declared
effective. Gemstar may postpone for up to 90 days the filing of a registration
statement if it reasonably believes that such a registration statement would
have a material adverse effect on its ability to engage in any financing,
acquisition of assets or any merger, consolidation, tender offer or other
significant transaction. However, Gemstar is not permitted to so postpone a
demand registration more than once in any period of twelve consecutive months.
Under the stockholders agreement, Gemstar has agreed to pay all expenses,
other than underwriting discounts and commissions and any transfer taxes,
connected with the registration or qualification of the shares subject to the
first two demand registrations and Gemstar's legal and accounting expenses for
subsequent registrations.
Under the stockholders agreement, demand registrations may be effected by
means of an underwritten offering or, in certain cases, pursuant to a delayed
or continuous offering under applicable rules of the Securities and Exchange
Commission.
Under the stockholders agreement, Gemstar has agreed to indemnify the
parties requesting a demand registration against certain liabilities that may
arise in connection with any offer and sale of Gemstar common stock, including
liabilities under the Securities Act of 1933, as amended, and to contribute to
payments that such parties may be required to make in respect of any such offer
and sale. The stockholders agreement also provides that parties requesting a
demand registration will indemnify Gemstar, its directors and officers and each
person which controls Gemstar against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, for certain actions
arising from the offer and sale of shares of Gemstar common stock under the
demand registration.
Rights of First Refusal
Under the stockholders agreement, Mr. Yuen may not transfer shares of
Gemstar common stock which he owns, except for limited transfers as specified
in the stockholders agreement, unless he first offers such shares to each of
Liberty and News Corp. Any purchases of Gemstar common stock from Mr. Yuen by
Liberty or News Corp. will not cause a triggering event under Gemstar's rights
agreement. See "Summary of Amendments to Rights Agreement."
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SUMMARY OF THE COMBINED COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
The description of the certificate of incorporation and bylaws for the
combined company after the merger set forth below describes the material terms,
but does not purport to describe all of the terms, of such certificate of
incorporation and bylaws. The full text of such certificate of incorporation
and bylaws are attached as Annexes B and C, respectively, to this document and
are incorporated by reference herein. All stockholders are urged to read such
certificate of incorporation and bylaws in their entirety.
The bylaws, and certain provisions of the certificate of incorporation, will
not be effective until the completion of the merger.
Board of Directors
Number. The combined company's board will be set at twelve directors, four
of whom will be independent directors. However, this number may be changed by:
. a resolution adopted by at least nine of the twelve board members; or
. a duly adopted amendment to the certificate of incorporation. See "--
Amendment--Certificate of Incorporation" below.
TV Guide will designate six of the twelve directors of the combined company
(two of whom will be independent directors), and the other six directors of the
combined company (two of whom will be independent directors) will be initially
designated by Gemstar's current board of directors and thereafter by Henry C.
Yuen. An independent director cannot be an officer or employee of Gemstar or
its subsidiaries and cannot have a relationship that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. The determination of "independence" will be made, with respect to the
TV Guide-designated directors and their successors, by the TVG Director
Committee, and with respect to the Gemstar-designated directors and their
successors, by the GS Director Committee. See "Board of Directors--Committees"
below.
Term. There will be three classes of directors: Class I, Class II and Class
III. Each class will have four members consisting of two members designated by
Gemstar and two members designated by TV Guide. The initial term of office for
the Class I, Class II and Class III directors will expire at the annual meeting
of stockholders in 2003, 2002 and 2001, respectively. At each annual meeting of
stockholders, the successors of that class of directors whose term expires at
that meeting will be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of such
election.
Nomination and Election by Stockholders. Any stockholder may nominate
persons for election to the Gemstar board by giving timely notice in writing to
Gemstar's Secretary. To be timely:
. in the case of an annual meeting or special meeting, a stockholder's
notice must be delivered to or mailed and received at Gemstar's
principal executive offices not less than 60 days nor more than 90 days
before the meeting; provided, however, that if less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder must be received not later
than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public
disclosure was made; and
. in the case of a special meeting called at the request of a stockholder
or stockholders nominating persons for election to the Gemstar board,
the notice of nomination by the stockholder or stockholders requesting
such meeting must be received by Gemstar with the request for such
meeting, which request must be made by holders of at least a majority of
the total voting power of Gemstar's outstanding voting securities.
Directors will be elected, at any stockholder meeting duly called and held for
such purpose at which a quorum is present, by a plurality of the voting power
of the shares present in person or represented by proxy at the meeting and
entitled to vote.
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Removal. Directors may be removed with or without cause by the affirmative
vote of at least 66 2/3% of the total voting power of Gemstar's outstanding
voting securities, voting together as a single class at a meeting specifically
called for such purpose.
Vacancies. Vacancies on the Gemstar board will be filled by the majority
vote of the directors present and voting at a meeting of the board duly called
and held at which a quorum is present or by unanimous written consent of the
directors. However, expiring directorships or vacancies on the Gemstar board
will be filled by the GS Director Committee, in the case of the Gemstar-
designated directors and their successors, and by the TVG Director Committee,
in the case of the TV Guide-designated directors and their successors, until
the fifth anniversary of the completion of the merger. See "Board of
Directors--Committees" below.
Newly created directorships resulting from an increase in the size of the
Gemstar board will be filled solely by the affirmative vote of at least nine of
the twelve board members then authorized.
Chairman. The Chairman of the board of directors will be elected from among
the board members. However, until the earlier of the fifth anniversary of the
completion of the merger and the date Mr. Yuen ceases to be Chief Executive
Officer of Gemstar, Mr. Yuen will be Chairman of the Board so long as he is a
director. Thereafter, until the third annual board of directors' meeting
following (1) the date Mr. Yuen ceases to be Chief Executive Officer of Gemstar
or, if later, (2) the fifth anniversary of the completion of the merger, the
Chairman of the Board will be elected by a majority vote or unanimous written
consent of TV Guide-designated directors or their successors.
Tie Votes. Except for the matters delegated to the Compensation Committee,
the Audit Committee or the Special Committee, matters identified in the bylaws
as "fundamental decisions" and matters that require approval by supermajority
vote of stockholders, if a matter is brought before the board of directors and
if there is a tie vote with respect to such matter, then the exclusive power to
approve or disapprove that matter will generally be exercised by the Tie-
breaking Committee (of which Mr. Yuen will be the sole member) until the
earlier of the fifth anniversary of the completion of the merger and the date
Mr. Yuen ceases to be Chief Executive Officer of Gemstar. Thereafter, until the
third annual board of directors' meeting following (1) the date Mr. Yuen ceases
to be Chief Executive Officer of Gemstar or, if later, (2) the fifth
anniversary of the completion of the merger, the TVG Director Committee, the
members of which will be directors designated by TV Guide immediately before
the merger or their successors, will generally have the ability to resolve tie
votes.
Notwithstanding the foregoing, no committee of directors will have the power
to resolve a tie vote of the board of directors until the fifth anniversary of
the completion of the merger if Mr. Yuen ceases to be Chief Executive Officer
of Gemstar because of his death or disability. See "Board of Directors--
Committees," "--Fundamental Decisions" and "--Supermajority Vote" below.
Committees. The Gemstar board will have the following committees:
. The Executive Committee
. The Executive Committee will consist of four directors and will act
by majority vote of the quorum which is present or by unanimous
written consent.
. The members of the Executive Committee will include each of the
following who are directors: the Chief Executive Officer; the Chief
Financial Officer (but if the Chief Financial Officer is not a
director selected by Gemstar or a successor to such director, then,
until the earlier of the fifth anniversary of the completion of the
merger and the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar, a director designated by the GS Director Committee or a
successor to such director will be a member of the Executive
Committee instead of the Chief Financial Officer); and two TV Guide-
designated directors or their successors.
. The Executive Committee will have, to the extent permitted by law,
and until the third annual board of directors' meeting following (1)
the date Mr. Yuen ceases to be Chief Executive Officer
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of Gemstar or, if later, (2) the fifth anniversary of the completion
of the merger, all powers of the Gemstar board with respect to
matters related to the operations of Gemstar and its subsidiaries
between board meetings, except:
. as otherwise determined by the Gemstar board;
. with respect to any matter that is delegated to a different
committee of directors;
. with respect to matters itemized in the bylaws as "fundamental
decisions" or that require approval by supermajority vote of
stockholders; or
. with respect to (1) any acquisition by Gemstar or any person
controlled by Gemstar of any business or assets if the amount
involved exceeds $25 million, (2) any sale, lease, exchange or
other disposition, pledge or encumbrance of assets or of all or a
part of any business of Gemstar or any person controlled by
Gemstar if the amount involved exceeds $25 million, and (3) the
incurrence by Gemstar or any person controlled by Gemstar of
indebtedness in excess of $50 million in any fiscal year.
. If a matter is brought before the Executive Committee and if there is
a tie vote with respect to such matter, then the exclusive power to
approve or disapprove that matter will generally be exercised by the
Tie-breaking Committee (of which Mr. Yuen will be the sole member)
until the earlier of the fifth anniversary of the completion of the
merger and the date Mr. Yuen ceases to be Chief Executive Officer of
Gemstar. Thereafter, until the third annual board of directors'
meeting following (1) the date Mr. Yuen ceases to be Chief Executive
Officer of Gemstar or, if later, (2) the fifth anniversary of the
completion of the merger, the TVG Director Committee, the members of
which will be directors designated by TV Guide immediately before the
merger or their successors, will generally have the ability to
resolve tie votes. Notwithstanding the foregoing, no committee of
directors will have the power to resolve a tie vote of the Executive
Committee until the fifth anniversary of the completion of the merger
if Mr. Yuen ceases to be Chief Executive Officer of Gemstar because
of his death or disability. See "Board of Directors--Committees--Tie-
breaking Committee" below.
. Only the Chief Executive Officer of Gemstar may call a meeting of the
Executive Committee until the earlier of the fifth anniversary of the
completion of the merger and the date Mr. Yuen ceases to be Chief
Executive Officer of Gemstar. Thereafter, the Chief Executive Officer
or any two members of the Executive Committee may call a meeting.
. The Compensation Committee
. The Compensation Committee will consist of five directors and will
act by majority vote of all its members or by unanimous written
consent.
. The members of the Compensation Committee will include the two
Gemstar-designated independent directors and their successors, the
two TV Guide-designated independent directors and their successors,
and the Chief Executive Officer of Gemstar (provided he or she is a
director). The Chief Executive Officer of Gemstar will be the
chairman of the Compensation Committee.
. Except with respect to matters itemized in the bylaws as "fundamental
decisions" or that require approval by supermajority vote of
stockholders, the Compensation Committee will be empowered to make
all decisions with respect to the compensation and other terms of
employment of any executive officer of Gemstar or any of its
subsidiaries, or any other officer or employee of Gemstar or any of
its subsidiaries. See "--Fundamental Decisions" below.
Notwithstanding the foregoing, unless otherwise determined by at
least seven of the twelve directors, the Compensation Committee's
authority to grant stock options or other stock based compensation is
limited, on a cumulative basis from the completion of the merger, to
2% of the outstanding shares of Gemstar common stock on a fully
diluted basis immediately after the
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completion of the merger. Further, not more than 1% of the
outstanding shares of Gemstar common stock on a fully diluted basis
immediately after the completion of the merger may be granted,
awarded or issued in the aggregate to officers of Gemstar or any
person controlled by Gemstar who directly report to the Chief
Executive Officer.
. Any member of the Compensation Committee who is an employee of
Gemstar or its subsidiaries will excuse himself or herself from the
deliberations, and abstain from voting, on matters related to such
employee's own compensation.
. The Special Committee
. The Special Committee will consist of three members and will act by
majority vote of all its members or by unanimous written consent
other than with respect to matters itemized in the bylaws as
"fundamental decisions" or that require approval by supermajority
vote of stockholders.
. The members of the Special Committee will include the Chief
Executive Officer (provided he or she is a director) and two TV
Guide-designated directors or their successors.
. The Special Committee will have authority to determine matters
related to the relationship between Gemstar and "service providers"
as contemplated by the bylaws.
. The Audit Committee
. The Audit Committee will consist of four members and will act by
majority vote of all its members or by unanimous written consent and
will have all powers normally accorded to an audit committee other
than with respect to matters itemized in the bylaws as "fundamental
decisions" or that require approval by supermajority vote of
stockholders.
. The members of the Audit Committee will include the Chief Financial
Officer, one Gemstar-designated independent director or his or her
successor and two TV Guide-designated independent directors or their
successors.
. The GS Director Committee
. The GS Director Committee will consist of all Gemstar-designated
directors or their successors other than the independent directors
designated by Gemstar and will act by majority vote of all its
members or by unanimous written consent.
. The GS Director Committee will have the right to:
. appoint the Chairman of the Board (which will be Mr. Yuen so long
as he is a director) until the earlier of the fifth anniversary
of the completion of the merger and the date Mr. Yuen ceases to
be Chief Executive Officer of Gemstar;
. nominate directors to fill expiring directorships held by Gemstar
designees or their successors until the fifth anniversary of the
completion of the merger; and
. fill vacancies with respect to the directorships held by Gemstar
designees or their successors until the fifth anniversary of the
completion of the merger.
. The Gemstar board may not dissolve the GS Director Committee or
modify its duties or composition without the approval of at least
ten of the twelve members of the Gemstar board until the earlier of
the fifth anniversary of the completion of the merger and the date
Mr. Yuen ceases to be Chief Executive Officer of Gemstar. If Mr.
Yuen should cease being the Chief Executive Officer before the fifth
anniversary of the completion of the merger as a result of his death
or disability, then until the fifth anniversary of the completion of
the merger the Gemstar board may dissolve the GS Director Committee
or modify its duties or composition with the approval of nine of the
twelve members of the Gemstar board.
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. The TVG Director Committee
. The TVG Director Committee will consist of all TV Guide-designated
directors or their successors other than the independent directors
designated by TV Guide and will act by majority vote of all its
members or by unanimous written consent.
. The TVG Director Committee will have the right to:
. nominate directors to fill expiring directorships held by TV
Guide designees or their successors until the fifth anniversary
of the completion of the merger;
. fill vacancies with respect to the directorships held by TV Guide
designees or their successors until the fifth anniversary of the
completion of the merger; and
. resolve tie votes of the Gemstar board and Executive Committee as
described above under "Board of Directors--Tie Votes" and "Board
of Directors--Committees--The Executive Committee."
. The Gemstar board may not dissolve the TVG Director Committee or
modify its duties or composition without the approval of at least
ten of the twelve members of the Gemstar board until the third
annual board of directors' meeting following (1) the date Mr. Yuen
ceases to be Chief Executive Officer of Gemstar or, if later, (2)
the fifth anniversary of the completion of the merger.
. The Tie-breaking Committee
. The Tie-breaking Committee will consist of Mr. Yuen as Chairman of
the Board and will exist until the earlier of the fifth anniversary
of the completion of the merger and the date Mr. Yuen ceases to be
Chief Executive Officer of Gemstar.
. During such time, the Tie-breaking Committee will have the power to
resolve tie votes of the Gemstar board and the Executive Committee
as described above under "Board of Directors--Tie Votes" and "Board
of Directors--Committees--The Executive Committee."
. During such time, the Gemstar board may not dissolve the Tie-
breaking Committee or modify its duties or composition.
. Other committees
. The Gemstar board may establish other board committees which will
exercise the powers specifically granted to such committees by the
unanimous vote of the Gemstar board.
Board Meetings
Calling of Meeting. The Gemstar board will have an annual meeting and will
hold regular meetings at least quarterly. Special meetings of the Gemstar board
may be called by the Chairman of the Board or by at least six of the twelve
board members.
Quorum. A majority of the total number of Gemstar board members will
constitute a quorum, except that six of the twelve board members will
constitute a quorum at a duly called board meeting where either all Gemstar-
designated directors or their successors or all TV Guide-designated directors
or their successors fail to attend such meeting.
Voting. Generally, directors present at any meeting at which a quorum is
present may act by majority vote. However, matters itemized in the bylaws as
"fundamental decisions" will require the approval of at least seven of the
twelve Gemstar board members and other matters require the approval of at least
nine of the twelve Gemstar board members. See "--Board of Directors," "--
Fundamental Decisions" and "--Amendment--Bylaws".
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Fundamental Decisions
The following is a summary of those matters itemized in the bylaws as
"fundamental decisions" which require the approval of at least seven of the
twelve Gemstar board members:
. conducting any business other than those businesses identified in the
bylaws which include the current businesses engaged in by Gemstar and TV
Guide;
. creating, selling or issuing any additional class of capital stock of
Gemstar or any person controlled by Gemstar (other than in connection
with permitted grants of options to employees, officers and directors of
Gemstar, pursuant to any permitted acquisition and pursuant to Gemstar's
rights agreement) or repurchasing stock in excess of $50 million in any
fiscal year by Gemstar or any person controlled by Gemstar;
. acquiring any business or assets not within the scope of the businesses
identified in the bylaws;
. acquiring any business or assets within the scope of the businesses
identified in the bylaws, if the amount involved in such acquisition
plus the amount of all other acquisitions authorized in the same fiscal
year which were not fundamental decisions equals or exceeds 2% of the
average market capitalization of Gemstar for the immediately preceding
fiscal year;
. disposing (including by exclusive license), pledging or encumbering any
material intellectual property rights (with all patent rights being
deemed material);
. entering into exclusive contracts (as against Gemstar or any person
controlled by Gemstar), other than those pertaining to intellectual
property rights, except for contracts in the ordinary course of business
which do not involve an amount in excess of $50 million in any year;
. selling, leasing, exchanging or otherwise disposing of, pledging or
encumbering any assets of Gemstar or a person controlled by Gemstar if
the amount involved in such transaction plus the amount involved in all
other such transactions which were not fundamental decisions authorized
in the same fiscal year equals or exceeds 1% of the average market
capitalization of Gemstar for the immediately preceding fiscal year;
. entering into a contract if the aggregate amount of annual expenses to
be incurred by Gemstar and persons controlled by Gemstar pursuant to
such contracts entered into in any fiscal year would exceed in any year
of such contract the lower of 1% of the average market capitalization of
Gemstar for the fiscal year immediately preceding the year in which such
contract is entered into or $100 million;
. amending Gemstar's certificate of incorporation or bylaws;
. any merger, consolidation or binding share exchange involving Gemstar;
. any merger, consolidation or binding share exchange to which any person
controlled by Gemstar is a party which involves any other action which
constitutes a "fundamental decision";
. declaring or paying a dividend or distribution other than under
Gemstar's rights agreement;
. dissolving, liquidating or winding up Gemstar or, if such act would
otherwise constitute a "fundamental decision," any person controlled by
Gemstar;
. entering into any agreement or obtaining any license or franchise that
restricts the persons to whom Gemstar common stock may be transferred or
otherwise binds or encumbers any stockholder's shares or other assets
other than Gemstar's rights agreement;
. amending or waiving any provision of Gemstar's rights agreement to
extend the expiration date of the rights agreement, exempt a new person
from any of its provisions or change the definition of "Acquiring
Person" in a manner adverse to any person exempted from any of its
provisions, or adopting any new plan or agreement which would have
effects equivalent to Gemstar's rights agreement;
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. incurring, replacing or refinancing indebtedness unless after giving
effect to the incurrence of such indebtedness the aggregate outstanding
principal amount of indebtedness of Gemstar and all persons controlled
by Gemstar does not exceed the sum of $550 million and 1% of the average
market capitalization of Gemstar for the immediately preceding fiscal
year;
. changing Gemstar's accountants;
. instituting, settling or abandoning any legal action or arbitration
involving claims in excess of $25 million if Gemstar is a defendant or
1% of the average market capitalization of Gemstar for the immediately
preceding fiscal year if Gemstar is a plaintiff or involving any claim
by a governmental authority;
. incurring capital expenditures for tangible assets in excess of $50
million in any fiscal year;
. making any loan or advancing money to another person or guaranteeing
obligations of another person, unless the amounts involved are less than
$5 million in the aggregate outstanding at any time and such loan,
advance or guarantee is not made with respect to a director or officer
of Gemstar or any person controlled by Gemstar or a holder of 5% or more
of Gemstar's common stock and the respective affiliates and associates
of the foregoing;
. adopting or changing a significant tax or accounting practice of
Gemstar, making any significant tax or accounting election, or adopting
any position for purposes of any tax return that would have a material
adverse effect on any United States Shareholder (defined as a United
States person who owns or is deemed to own 10% or more of the voting
power of a foreign corporation) or its affiliates;
. approving any transaction with a director or officer of Gemstar or any
person controlled by Gemstar or a holder of 5% or more of Gemstar's
common stock and the respective affiliates and associates of the
foregoing;
. changing the number and type of officers included in the Office of the
Chief Executive or assigning to any officer that is not a member of such
office the powers or duties of a member of such office;
. any matter that by the terms of Gemstar's certificate of incorporation
or bylaws requires approval of a specified number of board members;
. changing the composition of or delegation of powers or duties to the
Executive, Compensation, Special, Audit, GS Director, TVG Director or
Tie-breaking committees of the Gemstar board or establishing any new
committees of the Gemstar board; and
. determining to compensate directors (other than independent directors)
in their capacity as directors.
Executive Officers
The bylaws provide that the officers of Gemstar will be a Chairman of the
Board, a Chief Executive Officer, two or more Presidents and Chief Operating
Officers, a Chief Financial Officer, a General Counsel (who may be an Executive
Vice President), one or more Vice Presidents, a Secretary and such other
officers as may be determined by the board.
Henry C. Yuen will be Chief Executive Officer of Gemstar for five years
after the completion of the merger unless he earlier dies or resigns or his
employment is terminated for disability as permitted by, or for "cause" within
the meaning of, his existing employment agreement. Until the earlier of the
fifth anniversary of the completion of the merger and the date Mr. Yuen ceases
to be Chief Executive Officer of Gemstar, Mr. Yuen will be Chairman of the
Board so long as he is a director of Gemstar. After the completion of the
merger, there will be three co-Presidents and co-Chief Operating Officers of
Gemstar: Elsie Ma Leung, Joachim Kiener and Peter C. Boylan III.
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Stockholder Meetings
Calling of Meeting. An annual meeting of stockholders for the purpose of
electing those directors whose term of office expires at such meeting and of
transacting such other business as may properly come before it will be held
each year. A special meeting of Gemstar stockholders will be called upon:
. the written request of holders of not less than a majority of the total
voting power of Gemstar's outstanding voting securities; or
. the request of six of the twelve members of the Gemstar board.
No stockholder action may be taken without a meeting, and the certificate of
incorporation expressly denies the power of stockholders to consent in writing
without a meeting.
Quorum. Except as otherwise provided in the certificate of incorporation,
the bylaws or by law, and subject to the rights of holders of any preferred
stock, the holders of a majority in total voting power of Gemstar's outstanding
shares of stock entitled to vote constitutes a quorum for the transaction of
business.
Voting. Holders of common stock will be entitled to one vote for each share
of such stock held on all matters presented to such stockholders. Except for
the election of directors and except as otherwise provided by the certificate
of incorporation, the bylaws or by law, and subject to the rights of holders of
any preferred stock, at any meeting duly called and held at which a quorum is
present, the affirmative vote of a majority of the total voting power of shares
present in person or represented by proxy and entitled to vote on the subject
matter is required for stockholders to act. See "--Supermajority Vote" below.
Stockholder Proposals
A stockholder may bring business before an annual meeting of stockholders by
giving timely notice in writing to Gemstar's Secretary in accordance with the
provisions of the bylaws. Stockholders with sufficient voting power to request
a special meeting may bring business before such meeting by specifying it in
such request.
Supermajority Vote
Subject to the rights of holders of any preferred stock, the affirmative
vote of at least 66 2/3% of the total voting power of Gemstar's outstanding
voting securities, voting together as a single class at a meeting specifically
called for such purpose, is required to authorize any of the following actions:
. amendment, alteration or repeal of any provision of Gemstar's
certificate of incorporation or the addition of other provisions other
than an amendment solely for the purpose of changing Gemstar's name;
. adoption, amendment or repeal of any provision of Gemstar's bylaws
(except that the Gemstar board has also retained the power to adopt,
amend or repeal any provision of the bylaws with the approval of at
least nine of the twelve members of the Gemstar board);
. a merger or consolidation of Gemstar with any other person or any
binding share exchange to which Gemstar is a party other than a merger
of a subsidiary of Gemstar with and into Gemstar effected in accordance
with Section 253 of the Delaware General Corporation Law solely for the
purpose of changing Gemstar's name (it being understood that this clause
will not apply to any transactions contemplated by the merger agreement,
as such agreement may be amended from time to time, including the
issuance of Gemstar common stock to TV Guide stockholders as
contemplated by such agreement);
. the sale, lease, exchange or other disposition of all or a substantial
part of the assets of Gemstar or its subsidiaries;
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. the dissolution, liquidation or winding up of Gemstar; or
. any other matter (other than the election of directors and the adoption
or amendment of any stock option, stock appreciation rights or other
stock incentive plan for Gemstar or its subsidiaries and any
transactions contemplated by the merger agreement, as such agreement may
be amended from time to time, including the issuance of Gemstar common
stock to TV Guide stockholders in connection with the merger) requiring
stockholder approval under the laws of the State of Delaware or the
rules of any national securities exchange or national securities
association on which Gemstar's common stock is listed or quoted.
Amendment
Certificate of Incorporation. The amendment of the certificate of
incorporation requires the affirmative vote of at least 66 2/3% of the total
voting power of Gemstar's outstanding voting securities. Also, at least seven
of the twelve members of the Gemstar board must approve an amendment to the
certificate of incorporation before the Gemstar board can submit such a
proposal to Gemstar's stockholders.
Bylaws. The amendment of the bylaws requires the affirmative vote of at
least 66 2/3% of the total voting power of Gemstar's outstanding voting
securities or the approval of at least nine of the twelve members of the
Gemstar board.
Fiscal Year
Gemstar's fiscal year will end on March 31 of each calendar year.
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SUMMARY OF AMENDMENTS TO RIGHTS AGREEMENT
Pursuant to the merger agreement, as amended, Gemstar is permitted to amend
and restate its existing rights agreement, dated July 10, 1998, with American
Stock Transfer & Trust Company, in connection with changing its place of
incorporation. Pursuant to the merger agreement, as amended, Gemstar has agreed
to make certain specified amendments to such amended and restated agreement in
order to render such amended and restated rights agreement inapplicable to the
merger and certain other transactions. As a result of the merger, Liberty Media
Corporation and The News Corporation Limited will each beneficially own more
than 15% of Gemstar's common stock. Under the existing rights agreement (as the
same is proposed to be amended and restated), that percentage ownership would
make them "Acquiring Persons" and cause the share purchase rights to become
exercisable. Accordingly, the rights agreement (as the same is proposed to be
amended and restated) will be further amended to exempt each of Liberty and its
controlled related parties and News Corp. and its controlled related parties
from the definition of Acquiring Person. If, however, Liberty or News Corp. or
their respective controlled related parties acquires beneficial ownership of
any additional shares of Gemstar common stock following the completion of the
merger, then such person would be an Acquiring Person unless the beneficial
ownership resulted from any of the following:
. the right to acquire or acquisition of additional shares by Liberty,
News Corp. or any of their respective controlled related parties from
each other or from Henry C. Yuen;
. the acquisition by Liberty, News Corp. or any of their respective
controlled related parties of additional shares which do not exceed, in
the aggregate, the number of shares of Gemstar common stock transferred
by Mr. Yuen before or after the completion of the merger to persons
other than Liberty, News Corp. or any of their respective controlled
related parties in certain transactions permitted by the stockholders
agreement (see "Terms of the Stockholders Agreement");
. the grant or exercise of employee or director options; and
. any agreement, arrangement or understanding among Liberty, News Corp. or
any of their respective controlled related parties with respect to
voting, holding, acquiring or disposing of beneficial ownership of
Gemstar common stock.
The definition of Acquiring Person will also be modified in certain respects
to make it less likely that someone would inadvertently become an Acquiring
Person.
The amendments to the rights agreement (as the same is proposed to be
amended and restated) also modify the definition of beneficial ownership so
that Mr. Yuen, Liberty and its controlled related parties, and News Corp. and
its controlled related parties will not be deemed to beneficially own any of
the shares of Gemstar common stock owned by each other as a result of any of
the transactions expressly contemplated by the merger agreement, including the
stockholders agreement and the voting agreements.
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COMPARISON OF THE RIGHTS OF GEMSTAR
AND TV GUIDE STOCKHOLDERS
After Gemstar's change in place of incorporation and before the completion
of the merger, the rights of Gemstar stockholders will be governed by Delaware
law, including the Delaware General Corporation Law, and Gemstar's new
certificate of incorporation and bylaws (which bylaws will be automatically
amended and replaced upon the completion of the merger with new bylaws in the
form attached as Annex C to this joint proxy statement/prospectus). Gemstar's
new certificate of incorporation is attached as Annex B to this joint proxy
statement/prospectus. The rights of TV Guide stockholders are governed by
Delaware law, including the Delaware General Corporation Law, and TV Guide's
certificate of incorporation and bylaws.
Upon the completion of the merger, holders of shares of TV Guide common
stock will become holders of shares of Gemstar common stock. At such time,
Gemstar's bylaws will be automatically amended and replaced with the bylaws
attached as Annex C to this joint proxy statement/prospectus. Consequently,
after the merger, Delaware law and Gemstar's new certificate of incorporation
and amended and restated bylaws will govern the rights of former TV Guide
stockholders. Copies of Gemstar's current amended and restated memorandum of
association, amended and restated articles of association and bylaws which will
be adopted upon Gemstar's change in place of incorporation from the British
Virgin Islands to Delaware, and TV Guide's current certificate of incorporation
and bylaws have been filed with the Securities and Exchange Commission and will
be sent to any stockholder of Gemstar or TV Guide upon request. Copies of
Gemstar's new certificate of incorporation and amended and restated bylaws are
attached as Annexes B and C to this joint proxy statement/prospectus.
A tabular comparison of the rights of Gemstar and TV Guide stockholders both
before and after the completion of the merger, as set forth in the
organizational documents, is attached to this joint proxy statement/prospectus
as Annex F. Annex F is not intended to be a complete statement of all
differences or a complete description of the specific provisions referred to in
this summary, and the identification of specific differences is not intended to
indicate that other significant differences do not exist.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material United States federal
income tax consequences of the merger. This discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
regulations promulgated thereunder and administrative rulings and court
decisions in effect as of the date hereof, all of which are subject to change,
possibly with retroactive effect. This discussion does not address all aspects
of United States federal income taxation that may be relevant to a stockholder
in light of the stockholder's particular circumstances or to those stockholders
subject to special rules, such as stockholders who are financial institutions,
tax-exempt organizations, insurance companies or dealers in securities,
stockholders who acquired their stock pursuant to the exercise of options or
similar derivative securities or otherwise as compensation or stockholders who
hold their stock as part of a straddle or conversion transaction, nor does it
address any consequences arising under the laws of any local, state or foreign
jurisdiction. This discussion assumes that stockholders hold their respective
shares of stock as capital assets within the meaning of Section 1221 of the
Code. All stockholders are urged to consult their own tax advisors as to the
particular tax consequences to them of the merger.
For purposes of this discussion, "United States person" means (1) any
citizen or resident of the United States, (2) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, (3) an estate, the income of which is
subject to United States federal income taxation regardless of its source, and
(4) a trust, if a United States court is able to exercise primary supervision
over the administration of the trust and one or more United States persons has
the authority to control all substantial decisions of the trust. "Non-United
States person" means any person other than a United States person.
TV Guide has received the opinion of Baker Botts L.L.P. to the effect that
the discussion under this section, "Material United States Federal Income Tax
Consequences of the Merger," insofar as it relates to the United States federal
income tax consequences to TV Guide and its stockholders of the merger, is
accurate in all material respects. Similarly, Gemstar has received the opinion
of O'Melveny & Myers LLP to the effect that the discussion under this section,
"Material United States Federal Income Tax Consequences of the Merger," insofar
as it relates to the United States federal income tax consequences to Gemstar
and its stockholders of the merger, is accurate in all material respects.
Tax Consequences of the Merger
Gemstar and TV Guide believe that the merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code. If the merger
were not a tax-free reorganization, the tax consequences of the merger could
differ from those described below. Neither TV Guide nor Gemstar will seek any
rulings from the Internal Revenue Service ("IRS") with respect to the merger.
Federal Income Tax Consequences to Gemstar Stockholders. Holders of Gemstar
common stock will not recognize any gain or loss for federal income tax
purposes solely as a result of the merger.
Federal Income Tax Consequences to TV Guide Stockholders. Except as provided
below, holders of shares of TV Guide common stock will not recognize any gain
or loss for federal income tax purposes solely as a result of the exchange of
their shares of TV Guide common stock for Gemstar common stock in the merger
except with respect to cash received in lieu of a fractional share of Gemstar
common stock. Following the completion of the merger, holders of TV Guide
common stock will have a tax basis in the Gemstar common stock received in the
merger equal to the tax basis of the TV Guide common stock surrendered in the
merger less any tax basis of the TV Guide common stock surrendered that is
allocable to a fractional share of Gemstar common stock for which cash is
received. A TV Guide common stockholder's holding period with respect to the
Gemstar common stock received in the merger will include the stockholder's
holding period of the TV Guide common stock surrendered in the merger.
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To the extent that a holder of shares of TV Guide common stock receives cash
in lieu of a fractional share of Gemstar common stock, the stockholder will be
required to recognize gain or loss for federal income tax purposes, measured by
the difference between the amount of cash received and the portion of the tax
basis of the stockholder's shares of TV Guide common stock allocable to such
fractional share of Gemstar common stock. This gain or loss will be a capital
gain or loss and will be a long-term capital gain or loss if the share of TV
Guide common stock exchanged for the fractional share of Gemstar common stock
was held for more than one year at the completion of the merger.
Federal Income Tax Consequences to TV Guide. TV Guide will not recognize
gain or loss for federal income tax purposes solely as a result of the merger.
Federal Income Tax Consequences to Gemstar and G Acquisition Subsidiary
Corp. Neither Gemstar nor G Acquisition Subsidiary Corp., a wholly owned
subsidiary of Gemstar, will recognize gain or loss for federal income tax
purposes solely as a result of the merger.
Tax Treatment to Non-United States Persons Holding Gemstar Common Stock After
the Change in Gemstar's Place of Incorporation and the Merger
The following discussion summarizes certain United States federal income tax
consequences to non-United States persons that hold Gemstar common stock
following the change in Gemstar's place of incorporation and the merger.
Dividends. Subject to the discussion below, dividends paid to a non-United
States person that holds Gemstar common stock generally will be subject to
withholding tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. No such withholding tax would have applied to
dividends paid by Gemstar before the change in Gemstar's place of
incorporation. For purposes of determining whether tax is to be withheld at a
30% rate or at a reduced rate as specified by an income tax treaty, Gemstar
ordinarily will presume that dividends paid on or before December 31, 2000, to
an address in a foreign country are paid to a resident of such country absent
knowledge that such presumption is not correct.
Under Treasury regulations issued on October 6, 1997, which are applicable
to dividends paid after December 31, 2000, to obtain a reduced rate of
withholding under a treaty, a non-United States person will generally be
required to provide an IRS Form W-8 certifying such non-United States person's
entitlement to benefits under a treaty. The new regulations also provide
special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a non-United States person
that is an entity should be treated as paid to the entity or those holding an
interest in that entity.
Generally, Gemstar must report to the IRS the amount of dividends paid, the
name and address of the recipient, and the amount, if any, of tax withheld.
Similar information is reported to the stockholder. Pursuant to tax treaties or
other agreements, the IRS may make such reports available to tax authorities in
the recipient's country of residence.
There will be no withholding tax on dividends paid to a non-United States
person that are effectively connected with that non-United States person's
conduct of a trade or business within the United States if a Form 4224 or a
Form W-8ECI stating that the dividends are so connected is provided to the
appropriate withholding agent. Instead, the effectively connected dividends
will be subject to regular United States income tax on a net basis in the same
manner as if the non-United States person were a United States resident. A non-
United States person that is a corporation and that is receiving effectively
connected dividends may also be subject to an additional branch profits tax
that is imposed, under certain circumstances, at a rate of 30%, or such lower
rate as may be specified in an applicable treaty, of the non-United States
corporation's effectively connected earnings and profits, subject to certain
adjustments. Under the new regulations, only Form W-8ECI may be used after
December 31, 2000.
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Gain on Disposition of Gemstar Common Stock. A non-United States person will
not be subject to United States federal income tax with respect to gain on a
sale or other disposition of Gemstar common stock unless (1) the gain is
effectively connected with a trade or business of such stockholder in the
United States, (2) in the case of certain non-United States persons who are
non-resident alien individuals and who hold the Gemstar common stock as a
capital asset, such individuals are present in the United States for 183 or
more days in the taxable year of the disposition, (3) the non-United States
person is subject to a tax pursuant to the provisions of the Code regarding the
taxation of United States expatriates, or (4) Gemstar is or has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code at any time within the shorter of the five-year period
preceding such disposition or such stockholder's holding period. At the times
of the change in Gemstar's place of incorporation and the merger, Gemstar will
not have been at any time, and does not anticipate becoming, a United States
real property holding corporation.
Backup Withholding and Information Reporting on Dividends and Dispositions of
Gemstar Common Stock
United States Persons. After the change in Gemstar's place of incorporation
and the merger, dividend payments made to, and proceeds of sales received by,
non-corporate stockholders of Gemstar who are United States persons will
generally be subject to information reporting requirements. In addition, such
payments or receipts will be subject to a 31% backup withholding tax if (1)
such stockholders fail to provide their taxpayer identification numbers
("TINs"), (2) the IRS or a broker notifies the payor that such stockholders
furnished an incorrect TIN, (3) in the case of dividend payments, Gemstar is
notified by the IRS that such stockholders have failed to properly report
payments of dividends, or (4) such stockholders failed to certify, under
penalty of perjury, that they have furnished a correct TIN and have not been
notified by the IRS that they are subject to backup withholding for failure to
report dividend payments.
Non-United States Persons. Dividends paid to a non-United States person at
an address within the United States may be subject to backup withholding
imposed at a rate of 31% if the non-United States person fails to establish
that it is entitled to an exemption or to provide a correct TIN and certain
other information. Under current United States federal income tax law, backup
withholding imposed at a rate of 31% generally will not apply to dividends paid
on or before December 31, 2000, to a person at an address outside the United
States unless the payor has knowledge that the payee is a United States person.
Under the new regulations, however, a non-United States person will be subject
to backup withholding unless applicable certification requirements are met.
Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to proceeds of a
disposition of stock by a non-corporate holder through a United States office
of a broker unless the disposing holder certifies as to its non-United States
status or otherwise establishes an exemption. Generally, United States
information reporting and backup withholding will not apply to a payment of
disposition proceeds where the transaction is effected outside the United
States through a non-United States office of a non-United States broker.
However, unless the broker has documentary evidence that the holder is a non-
United States person, information reporting requirements, but not backup
withholding, will apply to a payment of disposition proceeds where the
transaction is effected outside the United States by or through an office
outside the United States of a broker that is either (1) a United States
person, (2) a foreign person which derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States,
(3) a controlled foreign corporation, or (4) in the case of payments made after
December 31, 2000, a foreign partnership, if at any time during its tax year,
(a) one or more of its partners are United States persons who, in the aggregate
hold more than 50% of the income or capital interest in the partnership or (b)
it is engaged in the conduct of trade or business within the United States,
unless such broker has documentary evidence in its files of the holder's non-
United States status and has no actual knowledge to the contrary or unless the
broker establishes an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the IRS.
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1994 STOCK INCENTIVE PLAN PROPOSAL
On November 23, 1999, Gemstar's board of directors approved an amendment to
the Gemstar International Group Limited 1994 Stock Incentive Plan to increase
the number of shares of Gemstar common stock available for issuance under the
plan from 80,000,000 shares to 110,000,000 shares as adjusted to reflect the
two-for-one stock split effected in the form of a stock dividend by Gemstar in
December 1999. Effectiveness of the amendment requires the affirmative vote of
a majority of the shares voted at the special meeting, in person or by proxy.
As of January 25, 2000, a total of 14,729,790 shares were available for
future grants, or approximately 7.1% of the shares of common stock which were
issued and outstanding on that date. Gemstar's board of directors believes that
the remaining share authority is insufficient to allow the company to continue
to accomplish the plan's objectives.
The additional 30,000,000 shares which will, if stockholders approve this
proposal, be available under the 1994 Stock Incentive Plan (representing the
difference between the 110,000,000 proposed maximum number of shares authorized
for issuance under the plan and the 80,000,000 previously reserved for issuance
under the plan) represent approximately 14.5% of the shares of common stock
which were issued and outstanding as of January 25, 2000.
If the merger is completed, Gemstar will be the surviving parent
corporation. All employees of TV Guide, which will become a subsidiary of
Gemstar, will therefore also be eligible to be granted awards under the 1994
Stock Incentive Plan. The Gemstar board recommends the amendment, in part, so
that Gemstar has sufficient flexibility to grant and structure future
incentives after Gemstar merges with TV Guide. After giving effect to the
contemplated merger, the additional 30,000,000 shares will constitute
approximately 7.4% of the Gemstar shares expected to then be issued and
outstanding. However, the effectiveness of the amendment is not conditioned on
stockholder approval, or the consummation, of the merger. The approval (or lack
of approval) of this proposal will not have any effect on the merger. Likewise,
the approval (or lack of approval) of the issuance of Gemstar common stock to
TV Guide stockholders in the merger will not have any effect on this proposal.
The principal terms of the 1994 Stock Incentive Plan are summarized below.
The following summary is qualified in its entirety by reference to the full
text of the 1994 Stock Incentive Plan, which is an exhibit to the registration
statement of which this joint proxy statement/prospectus is a part.
Summary Description of the 1994 Stock Incentive Plan
The 1994 Stock Incentive Plan was first adopted by Gemstar's board of
directors in 1994, revised in 1995 in connection with Gemstar's initial public
offering and further revised in 1997 and again in 1998 principally to increase
the number of shares available for issuance thereunder. Stockholders previously
approved the adoption of the 1994 Stock Incentive Plan and the 1995, 1997 and
1998 amendments.
Purpose. The purpose of the 1994 Stock Incentive Plan is to promote the
success of Gemstar and its subsidiaries by providing a means of attracting,
rewarding and retaining individuals who provide services to Gemstar in various
capacities through awards of long-term incentives for high levels of
performance and efforts designed to improve the financial performance of
Gemstar and its subsidiaries.
Administration. Gemstar's board of directors administers the 1994 Stock
Incentive Plan. The board of directors has delegated general administrative
authority over the plan to the Compensation Committee of the board of
directors. The administrator (either the board or its delegate) has broad
discretion under the plan to grant awards and to structure their terms. The
forms of awards that may be granted include options to purchase
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shares of common stock, stock units and/or dividend equivalent rights. The
members of the Compensation Committee of the Gemstar board are currently
directors George F. Carrier and Teruyuki Toyama. As of January 31, 2000, Dr.
Carrier and Mr. Toyama were each disinterested within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, and Section
162(m) of the Code. The board and the Compensation Committee of the board also
generally have the power to amend the 1994 Stock Incentive Plan, as well as the
power to construe and interpret the plan.
Eligibility. The following persons are eligible for awards under the 1994
Stock Incentive Plan:
. any director, officer or key employee of Gemstar or any subsidiary;
. any consultant or advisor who (directly or through an entity with which
he or she is associated) renders or has rendered bona fide services to
Gemstar or any subsidiary (other than in connection with a capital-
raising transaction for Gemstar or any subsidiary); and
. certain non-employee agents of Gemstar providing bona fide services to
Gemstar.
Approximately 400 employees are currently considered eligible for awards
under the 1994 Stock Incentive Plan (including the Chief Executive Officer and
the four other most highly compensated executive officers), subject to the
administrator's power to determine eligible persons to whom awards will be
granted. In addition, there are currently four (4) Gemstar non-employee
directors. If the merger is completed, all TV Guide employees (currently,
approximately 3,000 persons) will be considered eligible for awards.
Shares Available for Awards. The maximum aggregate number of shares of
Gemstar common stock that may be issued upon the exercise or in payment of
awards granted under the 1994 Stock Incentive Plan is currently 80,000,000. If
Gemstar stockholders approve the 1994 Stock Incentive Plan amendment, this
aggregate share limit will increase by 30,000,000 shares to 110,000,000 shares.
Shares relating to plan awards which are not exercised or which expire or
are cancelled will again become available for grant purposes under the plan,
subject only to any applicable limitations under Section 162(m) of the Code to
preserve the intended tax deductibility of compensation paid under the plan.
The maximum number of shares subject to awards which may be granted to any
individual during any calendar year is 40,000,000.
Adjustments; Change in Control. As is customary in incentive plans of this
nature, the number and kind of securities available under the 1994 Stock
Incentive Plan and the then outstanding awards, as well as exercise prices, are
subject to adjustment, in the plan administrator's discretion, in the event of
recapitalizations, stock splits (including a stock split in the form of a stock
dividend), reverse stock splits, reorganizations, mergers, consolidations,
spin-offs, or similar extraordinary transactions or events in respect of
Gemstar or the common stock. Adjustments may include, in the case of
reorganizations, cash settlement, conversion or exchange of outstanding awards.
In addition, in the event of or in anticipation of a "Change in Control Event"
(as defined in the 1994 Stock Incentive Plan), the administrator may, in its
discretion, but subject to any applicable regulatory requirements, provide
acceleration of exercisability, vesting, payment or other benefits under some
or all awards or for certain other limited benefits under some or all awards.
A Change in Control Event generally will be deemed to occur under the 1994
Stock Incentive Plan if, among other things:
. the stockholders approve a dissolution or liquidation of Gemstar,
certain agreements of merger or consolidation resulting in Gemstar's
stockholders (or entities associated or affiliated with them) holding
less than 50% of the surviving entity's voting stock, or the sale of
substantially all of the business and/or assets of Gemstar to a person
or entity who or which is not an affiliate or subsidiary of Gemstar;
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. during any period not longer than two consecutive years, the individuals
who at the beginning of the period constituted Gemstar's board of
directors cease to constitute at least a majority of the board, unless
the election, or the nomination for election, by Gemstar's stockholders,
of each new board member was approved by a three-fourths vote of board
members then still in office who were board members at the beginning of
such period; or
. any person (other than any person who beneficially owned more than 50%
of Gemstar's outstanding voting securities at the time the 1994 Stock
Incentive Plan was adopted, or any successor, affiliate, associate or
relative of such beneficial owner) becomes the beneficial owner of
Gemstar securities representing more than 50% of the combined voting
power of Gemstar's outstanding securities then entitled to vote
generally in the election of Gemstar directors.
Currently, the merger is not expected to constitute a Change in Control
Event under the 1994 Stock Incentive Plan.
The 1994 Stock Incentive Plan also provides that if any award is fully
exercisable or has been fully accelerated as permitted under the plan but is
not exercised before a dissolution of Gemstar, a reorganization event that
Gemstar does not survive, or the consummation of a reorganization event that
results in a Change in Control Event which has been approved by the board of
directors, and no provision has been made for the survival, substitution,
exchange or settlement of such award, then the award will terminate upon the
occurrence of such dissolution or reorganization.
Stock Options. Under the 1994 Stock Incentive Plan, an option represents the
right to purchase shares of Gemstar common stock at a future date at a
specified price. The specified price is generally the closing price for one
share of Gemstar common stock reported on The Nasdaq National Market ("fair
market value") on the date of grant, but may be a greater or lesser amount as
determined by the plan administrator. Typically, the only consideration
received by Gemstar for the grant of an option under the plan will be the
optionee's services to or for Gemstar's benefit, as reflected in the vesting
schedule for the option.
An option may either be an incentive stock option ("ISO"), as defined in the
Code, or a non-qualified stock option. ISO benefits are taxed differently from
non-qualified stock options, as described under "--Federal Income Tax
Consequences" below. ISOs are also subject to more restrictive terms and are
limited in amount by the Code and the 1994 Stock Incentive Plan.
Full payment for shares purchased on the exercise of any option must be made
at the time of such exercise:
. in cash;
. by check payable to Gemstar;
. in exchange for a promissory note by the option holder in favor of
Gemstar;
. by notice and third-party payment;
. if expressly authorized by the plan administrator, in shares of common
stock that have been held by the optionee for at least six months and
that have a fair market value as of the time of exercise equal to the
option price; or
. any combination of the foregoing.
In addition, option holders may be permitted to reduce the number of shares to
be delivered or to obtain loans from Gemstar in order to satisfy applicable tax
withholding requirements.
Stock Units and Dividend Equivalent Rights; Deferrals. The plan
administrator may grant stock units to any eligible person under the 1994 Stock
Incentive Plan. A stock unit is a non-voting unit of measurement which is
deemed for bookkeeping purposes to be equivalent to one outstanding share of
common stock (subject
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to adjustment) solely for purposes of the plan. The plan administrator will
determine the specific terms, conditions and provisions of each award of stock
units (including vesting and payout provisions).
Vested stock units may be paid in the form of shares of common stock,
another award or a combination thereof. The plan administrator may permit the
deferral, in the form of stock units, of all or a portion of the compensation
that an eligible person could otherwise elect to defer under any Gemstar plan
or in respect of any award.
Dividend equivalent rights may also be granted to any eligible person
concurrently with the grant of any option or stock unit. A dividend equivalent
right is the right to receive payment (at the time specified in the award)
based on all or part of the dividends declared on the shares of common stock
underlying the rights between the grant date and the date the rights are
exercised or paid.
Transferability. Generally, awards under the 1994 Stock Incentive Plan
cannot be sold or otherwise transferred unless the administrator provides
otherwise.
Termination of Employment. The administrator retains the right to establish
the effect of a termination of employment on the rights and benefits under each
award granted to an eligible person, and the administrator may make
distinctions among such treatments based upon the cause of termination.
Modification of Awards. The administrator may from time to time authorize
any adjustment in the exercise or purchase price, the number of shares subject
to, the restrictions upon or the term of, an option granted under the 1994
Stock Incentive Plan. Such amendment or other action may result in, among other
things, an exercise price which is higher or lower than the exercise or
purchase price of the original or prior option, provide for a greater or lesser
number of shares subject to the option, or provide for a longer or shorter
vesting or exercise period. However, no amendment may be made to any
outstanding option without the optionee's written consent if the amendment
would change the terms of the option in a manner materially adverse to the
optionee.
Termination of or Changes to the Restated Plan. Gemstar's board of directors
may terminate, amend or suspend the 1994 Stock Incentive Plan at any time.
Gemstar stockholders must approve the amendment only if and to the extent
required by applicable law, or if deemed necessary or advisable by the board of
directors. Unless sooner terminated by the board, the 1994 Stock Incentive Plan
will terminate on January 6, 2008.
Non-Exclusivity. The 1994 Stock Incentive Plan does not limit the authority
of the Gemstar board or the Compensation Committee of the board to authorize
other compensation under any other plan or authority. Stockholder approval of
the amendment to the plan will not, however, constitute advance approval of any
such other compensation.
Federal Income Tax Consequences
The federal income tax consequences of awards granted under the 1994 Stock
Incentive Plan under current federal law, which is subject to change, are
summarized in the following discussion, which deals with the general tax
principles applicable to the plan. Local, state and/or international tax
consequences of the plan are beyond the scope of this summary.
With respect to non-qualified stock options, Gemstar is generally entitled
to deduct, and the optionee recognizes as taxable income, an amount equal to
the difference between the option exercise price and the fair market value of
the shares at the time of exercise. With respect to ISOs, Gemstar is generally
not entitled to a deduction, nor does the participant generally recognize
income, at the time of exercise. Stock units and dividend equivalent rights are
generally subject to tax at the time of payment, and Gemstar will generally
have a corresponding deduction at the time the participant recognizes income.
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If an award is accelerated under the 1994 Stock Incentive Plan in connection
with a change in control (as this term is used under the Code), Gemstar may not
be permitted to deduct the portion of the compensation attributable to the
acceleration ("parachute payments") if it exceeds certain threshold limits
under the Code (and certain related excise taxes may be triggered).
Furthermore, if the compensation attributable to awards is not "performance-
based" within the meaning of Section 162(m) of the Code, Gemstar may not be
permitted to deduct the aggregate non-performance-based compensation in excess
of $1 million in certain circumstances.
Specific Benefits
The future number, amount and type of awards to be received by or allocated
to eligible persons under the 1994 Stock Incentive Plan, as amended by this
proposal, cannot be determined at this time. Gemstar is not considering any
additional awards under the plan at this time. If the additional 30,000,000
shares of common stock had been available under the plan in 1998, Gemstar
expects that awards would not have been substantially different from those
actually granted.
Certain Executive Compensation Information
Compensation of Directors. Gemstar pays each director who is not an employee
of Gemstar $25,000 per year for services as a director of Gemstar and $1,000
per board or committee meeting attended. All directors are reimbursed for their
out-of-pocket expenses incurred in connection with attendance at meetings of,
and other activities relating to service on, the board or any committee of the
board. In addition, directors who are not full-time employees of Gemstar are
eligible to participate in, and each such director has received awards pursuant
to, the 1994 Stock Incentive Plan.
Summary of Executive Compensation. The following table sets forth certain
summary information concerning the compensation paid by Gemstar for fiscal
years 1999, 1998 and 1997 to Gemstar's principal executive officer and the two
other most highly compensated executive officers during the 1999 fiscal year
(collectively, the "Named Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual Compensation (2) (3) ---------------
------------------------------- Securities All Other
Salary Underlying Compensation
Name and Principal Positions(1) Fiscal Year ($) Bonus ($) Options (#) (4) ($) (5)
------------------------------- ----------- --------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Henry C. Yuen........................ 1999 1,534,833 2,215,167 4,220,980 492,144
Chief Executive Officer and President 1998 888,800 1,611,200 16,650,900 493,912
1997 648,000 518,400 -- 495,681
Elise Ma Leung....................... 1999 700,000 280,000 -- 1,333
Chief Operating Officer and Chief 1998 570,000 228,000 6,000,000 2,427
Financial Officer 1997 475,000 190,000 -- 4,076
Larry Goldberg....................... 1999 466,560 186,624 -- 1,333
Secretary and Corporate Counsel 1998 388,800 155,520 1,200,000 2,248
1997 324,000 129,600 -- 4,427
</TABLE>
- --------
(1) All of the Named Executive Officers are or were employed in the indicated
positions with Gemstar Development Corporation, a wholly owned subsidiary
of Gemstar. Mr. Yuen also serves as Chief Executive Officer and President
of Gemstar. Ms. Leung also serves as Chief Financial Officer of Gemstar.
(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.
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(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 Gemstar or Gemstar Development Corporation, as
the case may be. The bonuses paid to Mr. Yuen represent the aggregate
amounts of Mr. Yuen's merit bonus and annual incentive bonus, calculated
pursuant to the applicable formulae set forth in the Employment Agreement
between Gemstar Development Corporation and Mr. Yuen, dated April 1, 1994,
as amended, and the Amended and Restated Employment Agreement, effective as
of January 7, 1998, among Gemstar, Gemstar Development Corporation and
Henry C. Yuen (the "New Yuen Agreement"). The bonuses paid to each of Ms.
Leung and Mr. Goldberg 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 Gemstar Development Corporation or Gemstar, as the case may
be.
(4) Number of securities has been adjusted to reflect the two-for-one stock
split effected in the form of a stock dividend in December 1999.
(5) Gemstar or Gemstar Development Corporation, 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 Gemstar or Gemstar Development Corporation,
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, before January 1, 1998,
Gemstar Development Corporation or Gemstar 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, Gemstar Development Corporation'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.
Summary of Option Grants. The following table provides certain summary
information concerning grants of options to the Named Executive Officers of
Gemstar during the 1999 fiscal year.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Exercise Option Term
Options Employees in Price Expiration ----------------------
Name Granted(1) Fiscal Year Per Share Date 5% 10%
---- ---------- ------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Henry C. Yuen........... 890,800 17.1% 10.88 05/31/08 $6,092,385 $15,439,300
3,330,180 63.9 10.35 06/01/08 21,665,868 54,905,563
Elsie Ma Leung.......... -- -- -- -- -- --
Larry Goldberg.......... -- -- -- -- -- --
</TABLE>
- --------
(1) Number of securities and exercise price has been adjusted to reflect the
two-for-one stock split effected in the form of a stock dividend in
December 1999.
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Summary of Options Exercised. The following table sets forth certain summary
information concerning the exercise of stock options by the Named Executive
Officers during the 1999 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 in-the-Money Options at
Shares Fiscal Year-End(1) Fiscal Year-End(2)
Acquired Value ------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Henry C. Yuen........... -- -- 13,855,116 17,244,764 $208,675,900 $210,244,179
Elsie Ma Leung.......... -- -- 4,061,400 3,578,600 56,367,804 41,866,695
Larry Goldberg.......... -- -- 1,112,700 589,300 16,360,077 7,358,348
</TABLE>
- --------
(1) Number of securities has been adjusted to reflect the two-for-one stock
split effected in the form of a stock dividend in December 1999.
(2) 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.
Compensation Committee Interlocks and Insider Participation. Gemstar's
Compensation Committee consists of George F. Carrier and Teruyuki Toyama,
neither of whom is an officer or employee of Gemstar or was previously an
officer or employee of Gemstar.
Employment Agreements
Amended and Restated Employment Agreement with Mr. Yuen. In January 1998,
Gemstar's Compensation Committee and board of directors approved the New Yuen
Agreement. The New Yuen Agreement supersedes and replaces Mr. Yuen's former
employment agreement with Gemstar Development Corporation, and provides for Mr.
Yuen's service to each of Gemstar and Gemstar Development Corporation 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 Mr. Yuen will serve as a director of each
of Gemstar, Gemstar Development Corporation and StarSight Telecast, Inc. In
connection with the merger, Mr. Yuen entered into an amendment to the New Yuen
Agreement, which, subject to the completion of the merger, extends the overall
term of his employment.
The New Yuen Agreement includes provisions (collectively, the "Performance-
Based Provisions") pursuant to which Mr. 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 stockholder approval to satisfy one of the
requirements of Section 162(m) of the Code in order to permit Gemstar 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 stockholders at a
Special Meeting of Stockholders of Gemstar held on March 12, 1998 (the "1998
Special Meeting").
Under the New Yuen Agreement, Mr. Yuen's Base Salary initially is set at $1
million. The New Yuen Agreement provides for annual adjustments to Mr. Yuen's
Base Salary based on the growth of Gemstar's consolidated revenues and
consolidated net earnings, as similar to his former employment agreement. The
New Yuen Agreement also provides for the payment to Mr. Yuen of a merit bonus
(the "Merit Bonus") which is equal to a percentage of Mr. Yuen's then-current
Base Salary (reflecting any prior adjustments), equal to the percentage
increase, if any, in Gemstar's consolidated earnings before interest, taxes,
depreciation and amortization ("EBITDA") for its most recently completed fiscal
year from Gemstar'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 Mr. Yuen of an additional bonus
(the "Annual
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Incentive Bonus"), the amount of which, if any, is tied to the annual rate of
growth of Gemstar's consolidated earnings per share, as similar to his former
employment agreement. The New Yuen Agreement allows Mr. Yuen to elect to
receive the Merit Bonus and the Annual Incentive Bonus in the form of options
to acquire shares of Gemstar common stock, in lieu of receiving the Merit Bonus
and the Annual Incentive Bonus in cash. Gemstar granted Mr. Yuen options to
purchase 890,800 shares of Gemstar common stock (as adjusted to reflect the
two-for-one stock split effected in the form of a stock dividend in December
1999) in lieu of paying Mr. Yuen's Merit Bonus and Annual Incentive Bonus in
cash. Under the New Yuen Agreement, the aggregate dollar amount of Mr. 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 Mr. Yuen's Base Salary, and the amount of the Merit Bonus and the
Annual Incentive Bonus payable to Mr. Yuen under the New Yuen Agreement for the
fiscal year ended on March 31, 1999, were dependent upon Gemstar's financial
performance for such year and on whether Gemstar's consolidated revenues and
consolidated earnings from operations for the fiscal quarter ended March 31,
1999 exceeded Gemstar's consolidated revenues and consolidated earnings from
operations, respectively, for the fiscal quarter ended March 31, 1998, as
similar to his former employment agreement. The New Yuen Agreement provided for
the immediate grant to Mr. Yuen of options to purchase 8,325,450 shares of
Gemstar common stock and annual grants of options to purchase 832,545 shares of
Gemstar common stock (not adjusted to reflect the two-for-one stock splits
effected in the form of stock dividends in May 1999 and December 1999).
Gemstar's stockholders approved these stock option grants to Mr. Yuen at the
1998 Special Meeting. Mr. Yuen is also entitled to $1,000 a month automobile
allowance and other benefits, including health insurance and participation in
bonus, incentive and stock option compensation plans.
The New Yuen Agreement entitles Mr. 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 shares of
Gemstar common stock will remain fully exercisable for their full term. A
"change of control" is defined as the occurrence of any of the following: (1)
the acquisition (other than from Gemstar directly or from any Gemstar
stockholder who was, as of the effective date of the New Yuen Agreement, a 25%
stockholder of Gemstar) by any person or entity of beneficial ownership of 25%
or more of Gemstar's outstanding shares; (2) the acquisition (other than from
Gemstar Development Corporation directly or from any Gemstar Development
Corporation stockholder who was, as of the effective date of the New Yuen
Agreement, a 25% stockholder of Gemstar Development Corporation) by any person
or entity of beneficial ownership of 25% or more of Gemstar Development
Corporation's outstanding shares; (3) during any period of two consecutive
years, individuals who, at the beginning of such period, constituted the board
of directors of Gemstar or Gemstar Development Corporation (together with any
new directors whose election or appointment to such board of directors or whose
nomination for election by the stockholders of Gemstar or Gemstar Development
Corporation was approved by Mr. 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 Gemstar or Gemstar Development Corporation then in
office; (4) approval by the board of directors or a majority of the
stockholders of either Gemstar or Gemstar Development Corporation of a merger,
reorganization, combination or consolidation whereby the stockholders of either
Gemstar or Gemstar Development Corporation immediately before 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 (5) a liquidation or dissolution of either Gemstar or
Gemstar Development Corporation or the sale of all or substantially all of the
assets of either Gemstar or Gemstar Development Corporation, unless the
successor to the assets in any such liquidation, dissolution or sale is Gemstar
or any of its subsidiaries. The merger will not constitute a change of control
with respect to the New Yuen Agreement.
Under the New Yuen Agreement, as similar to Mr. Yuen's former employment
agreement, all inventions, designs, improvements, patents, copyrights,
discoveries and other intellectual property which (1) are developed
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by Mr. Yuen while performing his duties for Gemstar Development Corporation or
using Gemstar Development Corporation's equipment or trade secret information,
(2) are related at the time of conception to Gemstar Development Corporation's
business or actual or demonstrably anticipated research, or (3) result from any
work performed by Mr. Yuen for Gemstar Development Corporation, are the
property of Gemstar Development Corporation, if and only to the extent Gemstar
Development Corporation can show by clear and convincing evidence that such
property is Gemstar Development Corporation's property.
Amended and Restated Employment Agreement with Ms. Leung. Gemstar and
Gemstar Development Corporation 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 Gemstar and Chief Operating Officer and Chief Financial Officer of
Gemstar Development Corporation. Ms. Leung will also serve as a director of
Gemstar, Gemstar Development Corporation and StarSight Telecast, Inc. Ms. Leung
receives a base salary of $700,000 per year, with annual adjustments based upon
Gemstar'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 Gemstar'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 shares of Gemstar common stock
(not adjusted to reflect the two-for-one stock splits effected in the form of
stock dividends in May 1999 and December 1999), scheduled to vest ratably over
the six-year term of the New Leung Agreement. Ms. Leung is also entitled to a
$750 per month automobile allowance and other benefits, including health
insurance and participation in bonus, 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 pursuant
to 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 shares of Gemstar common stock 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 Gemstar
Development Corporation shall be assigned to Gemstar Development Corporation.
Employment Agreement with Mr. Goldberg. Gemstar Development Corporation
entered into an employment agreement with Mr. Goldberg (the "Goldberg
Agreement"). The term of the employment agreement 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. Mr. Goldberg resigned as
Secretary of Gemstar in May 1999 and resigned as Corporate Counsel of Gemstar
in August 1999. Mr. Goldberg will continue to be an employee of Gemstar
pursuant to the terms of his employment agreement.
The Goldberg Agreement provides for a base salary subject to an annual
adjustment based upon the Consumer Price Index and Gemstar's revenues and net
earnings, and an annual incentive bonus based upon the growth of Gemstar.
In the event that Gemstar Development Corporation is involved in a merger or
a sale of all or substantially all of its assets to another entity, Gemstar
Development Corporation will (or will cause a successor to) provide for such
adjustment to Mr. Goldberg's compensation as may be necessary to preserve, as
nearly as practicable, the payment of his base salary and certain other
benefits under such agreements, including, without limitation, health
insurance.
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The Goldberg Agreement provides that termination of Mr. Goldberg (or
termination of any compensation or benefits payable to Mr. Goldberg under the
Goldberg Agreement) may be effected upon the occurrence of certain specified
events. In addition, the Goldberg Agreement provides that all inventions,
patents, copyrights and other intellectual property developed or conceived by
Mr. Goldberg during the term of the Goldberg Agreement which are competitive
with any existing products or services of Gemstar or its affiliates, are the
property of Gemstar Development Corporation. All other intellectual property
belongs to Mr. Goldberg.
Certain Relationships and Related Transactions. Gemstar continues to
maintain a license agreement with a subsidiary of 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, the Holdings subsidiary pays
Gemstar a per unit royalty fee based on unit shipments. Royalty fees totaled
$1,446,000 for the year ended March 31, 1997. There were no royalty fees for
the years ended March 31, 1998 and 1999.
Gemstar continues to maintain service relationships with certain Holdings
subsidiaries. Pursuant to the services agreements, the Holdings subsidiaries
provide marketing and promotion services for Gemstar in their respective
territories in connection with Gemstar's systems, maintain relationships with
licensees and promote and monitor the publication of Gemstar's PlusCode Numbers
(a proprietary one to eight digit number that is entered into a VCR or
television equipped with Gemstar's VCR Plus+ system, enabling consumers to
record a television program). Service fees paid to these companies totaled
$8,300,000, $8,178,000 and $6,527,000 for each of the years in the three-year
period ended March 31, 1999.
Required Vote
The affirmative vote of a majority of the shares voted at the special
meeting, in person or by proxy, is required to approve the 1994 Stock Incentive
Plan proposal.
Recommendation of Gemstar's Board of Directors
Gemstar's board of directors believes that it is in the best interests of
Gemstar and its stockholders to approve the amendment to the 1994 Stock
Incentive Plan. The board believes that the additional share authority under
the plan will help to continue to promote Gemstar's success by providing an
additional means to attract, retain, motivate and reward key employees of
Gemstar and its subsidiaries by providing incentives related to equity
interests in Gemstar. For this reason, the board recommends that stockholders
approve the 1994 Stock Incentive Plan proposal.
Stockholders should note that all directors are eligible to be granted
awards under the 1994 Stock Incentive Plan, and thus have an interest in the
1994 Stock Incentive Plan proposal.
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SUMMARY OF AMENDMENTS TO TV GUIDE EQUITY INCENTIVE PLAN
TV Guide's board of directors has approved an amendment to the TV Guide,
Inc. Equity Incentive Plan to increase the number of shares of TV Guide Class A
common stock available for issuance from 16,000,000 to 24,000,000 and to
increase the maximum aggregate number of shares of Class A common stock that
may be granted under the plan to any one employee from 3,200,000 shares to
6,000,000 shares. Effectiveness of the amendment requires approval of the TV
Guide stockholders. Liberty Media Corporation and The News Corporation Limited,
which together beneficially own TV Guide common stock representing
approximately 97.7% of the outstanding voting power of all TV Guide common
stock, have each indicated their intention to vote to approve the proposed
amendment, thereby assuring its approval.
Reasons for the Proposed Amendment
As of January 25, 2000, after giving effect to the option grants to Joachim
Kiener and Peter C. Boylan III described below, a total of 453,036 shares of
Class A common stock remained available for future grants under the Equity
Incentive Plan. TV Guide's board of directors desires to authorize additional
shares of Class A common stock for grant or award under the Equity Incentive
Plan to provide sufficient shares for future grants to induce new key employees
to join TV Guide and for grants to existing key employees to provide
appropriate incentives to such employees. The merger agreement with Gemstar
limits awards that may be made under the Equity Incentive Plan to employees
before the completion of the merger, and TV Guide will be subject to those
limitations so long as the merger agreement with Gemstar is effective. If the
merger agreement with Gemstar were to be terminated, grants and awards under
the Equity Incentive Plan would be able to be made by TV Guide without regard
to the limitations imposed by the merger agreement.
The stock options granted to Messrs. Kiener and Boylan that are described
below are contingent upon and subject to stockholder approval of the proposed
amendments to the Equity Incentive Plan. The stock options granted to Mr.
Boylan exceed the maximum aggregate number of shares of Class A common stock
that may be granted under the Equity Incentive Plan to any one employee. TV
Guide's board of directors is seeking stockholder approval of the amendments so
that such grants will be effective.
New Plan Benefits
On October 3, 1999, the Special Compensation Committee of TV Guide's board
of directors granted to each of Messrs. Kiener and Boylan options under the
Equity Incentive Plan to acquire 1,521,376 shares of Class A common stock
contingent upon and subject to stockholder approval of the proposed amendments
to the Equity Incentive Plan. The exercise price of the options granted on
October 3, 1999 is $21.93 per share of Class A common stock, the average of the
closing prices of the Class A common stock on October 1 and October 8, 1999.
The options have a ten-year term and are exercisable commencing on the first to
occur of (1) the completion of the merger (in which event such options will be
exercisable over six years from such completion) or (2) September 30, 2009
(provided that such individual is then employed by TV Guide). If the TV Guide
stockholders do not approve the proposed amendments to the Equity Incentive
Plan, the 1,521,376 share option grants to each of Messrs. Kiener and Boylan
will be null and void.
The amounts and benefits of future grants under the Equity Incentive Plan as
a result of the increase in the number of shares authorized are not
determinable because the Special Compensation Committee of TV Guide's board of
directors has complete discretion over awards under the Equity Incentive Plan.
The Special Compensation Committee may make awards or decline to make awards in
accordance with its then existing policies and the terms of the Equity
Incentive Plan.
Description of the Equity Incentive Plan
The Equity Incentive Plan provides for the grant of non-qualified stock
options, incentive stock options, stock appreciation rights, restricted stock
and other stock based incentive compensation. Pursuant to
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amendments adopted by TV Guide's board of directors, under the Equity Incentive
Plan, the maximum number and kind of shares as to which options, stock
appreciation rights, restricted stock or stock units may be granted (subject to
adjustment in certain events as described below) will be 24,000,000 shares of
Class A common stock. Upon the expiration, termination or cancellation (in
whole or in part) of unexercised non-qualified or incentive stock options, the
shares of Class A common stock subject thereto will again be available for
option, grant or award under the Equity Incentive Plan. Shares of Class A
common stock covered by an option, or portion thereof, which are surrendered
upon exercise of a stock appreciation right, shares of restricted stock which
are subsequently forfeited, shares of stock that are used as payment of the
exercise price of an option and shares of stock that are withheld for the
payment of taxes will also be available for option or grant under the Equity
Incentive Plan. No more than 24,000,000 shares of Class A common stock may be
issued under the Equity Incentive Plan pursuant to incentive stock options. All
employees of TV Guide and its subsidiaries may be considered eligible for the
grant of awards under the Equity Incentive Plan.
TV Guide's board of directors has appointed a Special Compensation Committee
consisting of Robert R. Bennett, Chase Carey, Peter Chernin and J. David Wargo
to make grants of awards under, and to administer, the Equity Incentive Plan.
Options, stock appreciation rights, restricted stock and other stock based
incentive compensation may be granted by the Special Compensation Committee to
eligible employees in such numbers and at such times during the term of the
Equity Incentive Plan as the Special Compensation Committee shall determine,
except that, pursuant to the amendment adopted by TV Guide's board of
directors, the maximum number of shares subject to one or more options or stock
appreciation rights that can be granted to any one employee, in the aggregate,
will be 6,000,000 shares of the Class A common stock. In granting options,
stock appreciation rights, restricted stock and other stock based incentive
compensation, the Special Compensation Committee will take into account such
factors as it may deem relevant to accomplish the Equity Incentive Plan's
purposes, including one or more of the following: the extent to which
performance goals have been met, the duties of the respective employees and
their present and potential contributions to TV Guide's success.
All non-qualified options granted under the Equity Incentive Plan will be
options which do not meet the requirements of Section 422 of the Code and will
be subject to the following terms and conditions: (1) the option price per
share will be determined by the Special Compensation Committee but will not in
any event be less than 100% of the fair market value of the Class A common
stock on the date the option is granted; (2) in no event will any option be
exercisable more than ten years after the date the option is granted; and (3)
an option generally may not be transferred, except that it may be exercised by
an optionee's legal representative or heirs, and the Special Compensation
Committee may permit the transfer of options to family members and estate
planning vehicles for the benefit of family members. If the optionee's
employment is terminated due to disability or death, the option may be
exercised to the extent shares were then purchasable (except that the Special
Compensation Committee may determine in a specific case that particular
limitations shall not apply), but only if exercised by the optionee within one
year of the date of such termination (unless the Special Compensation Committee
shall provide for a different period at the time the option is granted). If the
optionee's employment is terminated by voluntary resignation with the consent
of the Special Compensation Committee, the option may be exercised to the
extent shares were then purchasable (except that the Special Compensation
Committee may determine in a specific case that particular limitations shall
not apply), but only if exercised by the optionee within three months of the
date of such termination (unless the Special Compensation Committee shall
provide for a different period at the time the option is granted). If the
optionee's employment is terminated for any other reason, the option will
expire immediately unless otherwise specified by the Special Compensation
Committee. The Special Compensation Committee, at the time it grants an option,
may specify other or additional consequences that would result upon the
termination of an optionee's employment with TV Guide. The Special Compensation
Committee will determine, with respect to each option grant, the nature and
extent of the restrictions, if any, to be imposed on the shares which may be
purchased thereunder.
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At the optionee's election, all or a portion of the exercise price of the
option may be paid by the surrender of previously acquired Class A common stock
owned by the optionee, subject to certain restrictions. In addition, the
Special Compensation Committee may permit the optionee to pay amounts due under
applicable withholding tax laws upon exercise of options by authorizing TV
Guide to accept shares of Class A common stock.
The Special Compensation Committee may also grant incentive stock options as
defined under Section 422 of the Code. All incentive stock options issued under
the Equity Incentive Plan shall be subject to the same terms and conditions as
the non-qualified options granted under the Equity Incentive Plan. The
aggregate fair market value (determined as of the date the incentive stock
option is granted) of the shares of Class A common stock, with respect to which
incentive stock options are exercisable for the first time by an optionee
during any calendar year, under the Equity Incentive Plan or any other stock
option plan adopted by TV Guide or any subsidiary or parent, shall not exceed
$100,000. In addition, if an incentive option is granted to an employee who
owns 10% or more of the total combined voting power of all classes of TV
Guide's common stock, the option price for the option must be at least equal to
110% of the fair market value of the Class A common stock on the date of grant
of the option and the option must terminate no more than five years from the
date of grant.
The Special Compensation Committee may grant a stock appreciation right
either in connection with an option, at the time of grant or by amendment, or
separate from an option. Each stock appreciation right shall entitle the holder
to receive from TV Guide, upon exercise, either (1) an amount equal to the
excess of the fair market value of Class A common stock over the fair market
value per share on the date of grant times the number of shares as to which the
stock appreciation right is exercised, or (2) an amount determined on the basis
of such other factors as may be specified by the Special Compensation Committee
at the time of the grant of the stock appreciation right. If the stock
appreciation right was issued in connection with the grant of an option, the
number of shares as to which the stock appreciation right is exercised shall
reduce, on a share-per-share basis, the number of shares thereafter subject to
the option. Payment may be made in shares of Class A common stock valued at
fair market value, or in cash, or partly in shares and partly in cash, as
determined by the Special Compensation Committee in its discretion. The Special
Compensation Committee may permit the holder to pay amounts due under
applicable withholding tax laws upon receipt of shares of Class A common stock
by authorizing TV Guide to withhold or accept shares of Class A common stock.
The Special Compensation Committee may also grant shares of restricted stock
to any eligible employee. Shares of restricted stock are subject to
restrictions in the hands of the employee for a restricted period determined by
the Special Compensation Committee in its discretion. The Special Compensation
Committee may also specify vesting conditions that must be satisfied before an
employee receives the shares without restriction. During a restricted period
and before the satisfaction of any vesting conditions, an employee will have
the entire beneficial interest in, and all rights and privileges of a
stockholder as to, such shares, including the right to vote such shares and,
unless the Special Compensation Committee determines otherwise, the right to
receive dividends, subject to the following restrictions: (1) the employee
shall not be entitled to delivery of the stock certificate until expiration of
the restricted period and the satisfaction of any vesting conditions; (2) none
of the shares may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the restricted period or before the
satisfaction of any vesting conditions; and (3) all of the shares shall be
forfeited and all rights of the participant to such shares shall terminate
unless the participant remains in continuous employment of TV Guide or a
subsidiary during the restricted period and until any applicable vesting
conditions have been satisfied, except as provided below. On any termination of
employment, the Special Compensation Committee may, in its discretion, permit
the participant to retain restricted stock which would otherwise be forfeited.
The Special Compensation Committee may permit a participant to pay amounts due
under applicable withholding tax laws on lapse of restrictions on restricted
stock by authorizing TV Guide to withhold shares of Class A common stock.
The Special Compensation Committee may also grant other types of stock based
incentive compensation to an eligible employee. Such stock based incentive
compensation arrangements shall contain such provisions
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as may be established from time to time by the Special Compensation Committee
in its discretion, including vesting requirements, performance requirements,
required payments by the employees or otherwise. The Special Compensation
Committee may also grant shares of Class A common stock in satisfaction of
other incentive compensation arrangements. Upon the satisfaction of the
conditions established by the Special Compensation Committee, an employee will
be eligible to receive shares of Class A common stock.
In the event of recapitalizations, stock splits, stock dividends,
combinations or exchanges of shares, or other changes in the corporate
structure or shares of TV Guide, the Equity Incentive Plan provides that the
Special Compensation Committee may make such equitable adjustments as it deems
appropriate in the number and kind of shares authorized by the Equity Incentive
Plan, in the number of shares that may be issued to individual participants
pursuant to options and stock appreciation rights, in the option price and in
the number and kind of shares or other securities or property subject to
options, stock appreciation rights, awards of restricted stock or other stock
based incentive compensation arrangements.
In the event of certain mergers, consolidations, sales or liquidations
involving TV Guide, the Equity Incentive Plan provides that TV Guide may make
provision for the assumption of outstanding options and other awards under the
Equity Incentive Plan by any acquiring company or may provide for the
acceleration of exercisability of options and stock appreciation rights and the
full vesting of restricted stock and other awards.
No option, stock appreciation right, restricted stock or other stock based
incentive compensation arrangement may be granted pursuant to the Equity
Incentive Plan after the tenth anniversary of the date of the Equity Incentive
Plan's adoption. TV Guide's board of directors may at any time terminate the
Equity Incentive Plan with respect to any shares of Class A common stock not at
the time subject to an option, stock appreciation right, restricted stock award
or other stock based incentive compensation arrangement and may alter or amend
the Equity Incentive Plan (including any amendment deemed necessary to ensure
that TV Guide may obtain any required regulatory approval or to ensure that the
grant or exercise of options or stock appreciation rights, or the grant or
payment of restricted stock or the grant of other stock based compensation
arrangements or any other provision of the Equity Incentive Plan complies with
Section 16(b) of the Securities Exchange Act of 1934, as amended); provided,
however, that the approval of the TV Guide stockholders is required for any
amendment if necessary to satisfy any applicable statutory or regulatory
requirement. No change may be made in any award previously granted that would
impair the rights of an employee with respect thereto without his or her
consent.
Federal Income Tax Consequences of Issuance and Exercise of Options
Under present federal income tax laws and regulations, the federal income
tax consequences to employees and TV Guide as a result of the grant and
exercise of non-qualified stock options and incentive stock options should be
as described below.
Non-Qualified Stock Options. Employees will not have taxable income upon the
grant of a non-qualified stock option. Upon the exercise of a non-qualified
stock option, the federal income tax consequences to the employee depend upon
whether or not the stock issued upon exercise is both non-transferable and
subject to a substantial risk of forfeiture. If one or both of the foregoing
conditions are not present, the employee will recognize ordinary income
(subject to withholding by TV Guide) at the time of such exercise equal to the
excess of the fair market value of the Class A common stock on the date of
exercise over the option price. If both conditions are present, recognition of
income and withholding upon the exercise of a non-qualified stock option will
be postponed until the stock becomes transferable or is no longer subject to a
substantial risk of forfeiture unless the employee elects to be taxed upon
exercise. At that time, the employee will recognize ordinary income from
exercising the option equal to the excess of the then fair market value of the
Class A common stock over the option price. The employee generally will have a
tax basis in the shares of Class A common stock received pursuant to the
exercise of a non-qualified stock option equal to the fair market value of such
shares on the date on which the employee recognizes income.
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Under current rulings, if the employee uses previously held shares of Class
A common stock in satisfaction of part or all of the exercise price of a non-
qualified stock option, no gain will be recognized on the disposition of such
previously held shares or on receipt of the equivalent number of shares
acquired on exercise. The tax basis (and holding period) of such previously
held shares will be allocated to the same number of shares acquired on exercise
as the number of previously held shares used to pay the exercise price. The
fair market value of any shares of Class A common stock received by the
employee in excess of the number of shares used to pay the exercise price (less
the amount of cash, if any, paid by the employee) will be taxed in accordance
with the rules described in the immediately preceding paragraph. The tax basis
of such shares will be equal to the fair market value of such shares on the
date on which the employee recognizes income, and the holding period for such
additional shares will commence on the date of exercise of the option.
TV Guide or a subsidiary will be entitled to a deduction, for federal income
tax purposes, in the same amount as the income that the employee recognizes and
in the taxable year in which the employee recognizes the income, assuming that
the compensation amounts satisfy the ordinary and necessary and reasonable
compensation requirements for deductibility and that the deduction is not
limited by Section 162(m) of the Code. See "--Federal Income Tax Consequences
of Issuance and Exercise of Options--Tax Code Limitations on Deductibility."
Incentive Stock Options. Employees will not have taxable income upon the
grant of an incentive stock option. Upon the exercise of an incentive stock
option, the employee will not have taxable income, provided the employee at all
times from the date of the granting of the incentive stock option to a date
three months before the date of exercise has been an employee of TV Guide or a
parent or subsidiary. In the case of an employee who is disabled within the
meaning of Section 22(e)(3) of the Code, the three-month period is extended to
one year, and in the case of an employee's death, there is no time limit for
such tax treatment. However, the excess of the fair market value of the shares
of Class A common stock purchased over the exercise price (the "spread") will
increase the alternative minimum taxable income of the employee, which may
cause such employee to incur "alternative minimum tax." The date on which the
spread will be determined is the date on which income would be recognized if
the option were a non-qualified option (as discussed above).
If the employee makes a "disqualifying disposition" of Class A common stock
acquired pursuant to the exercise of an incentive stock option, the employee
will recognize ordinary income in the year of the disqualifying distribution
equal to the amount by which the fair market value of the option stock at the
time of exercise (or, if less, the amount realized on such disposition) exceeds
the exercise price. To the extent the amount realized in the disqualifying
disposition less the exercise price of the incentive stock option exceeds the
amount recognized as ordinary income under the rules in the preceding sentence,
such excess would ordinarily constitute a capital gain. If the exercise price
exceeds the amount realized in the disqualifying disposition, such excess would
ordinarily constitute a capital loss. A disqualifying disposition generally
includes a sale, exchange, gift or transfer of legal title within one year of
exercise of the incentive stock option or within two years of grant, whichever
is later.
TV Guide and its subsidiaries will not be entitled to any federal income tax
deductions upon the grant or exercise of an incentive stock option unless the
employee makes a disqualifying disposition of the option stock. If an employee
makes such a disposition, TV Guide or a subsidiary will then be entitled to a
tax deduction equal to the amount by which the fair market value of the option
stock at the time of exercise (or, if less, the amount realized on such
disposition) exceeds the option price, assuming that the compensation amounts
satisfy the ordinary and necessary and reasonable compensation requirements for
deductibility and that the deduction is not limited by Section 162(m) of the
Code. See "--Federal Income Tax Consequences of Issuance and Exercise of
Options--Tax Code Limitations on Deductibility."
Tax Code Limitations on Deductibility. Section 162(m) of the Code limits the
deductibility, for federal income tax purposes, of compensation paid to certain
employees of TV Guide to $1,000,000 with respect to any such employee during
any taxable year of TV Guide. However, certain exceptions apply to this
limitation,
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including exceptions for compensation paid because of the attainment of certain
performance goals. TV Guide intends that the approval of the Equity Incentive
Plan by its stockholders and the description of the Equity Incentive Plan
contained herein will satisfy certain of the requirements of the Code and the
regulations for the performance based exception with respect to certain awards
under the Equity Incentive Plan. TV Guide generally intends to comply with the
requirements of the Code with respect to the grant and payment of performance
based awards under the Equity Incentive Plan so as to be eligible for the
performance based exception, but it may not be practicable to do so in all
cases. Additionally, TV Guide may, in its sole discretion, determine in one or
more cases that it is in TV Guide's best interests not to satisfy the
requirements of the Code for the exemption.
Certain Compensation Information
Executive Compensation. The following Summary Compensation Table sets forth
a summary of the compensation paid by TV Guide during each of the fiscal years
ended December 31, 1999, 1998 and 1997, to its Chief Executive Officer and four
other most highly compensated executive officers ("the TV Guide Named Executive
Officers"). During the last three fiscal years, none of the TV Guide Named
Executive Officers received any restricted stock awards or long-term incentive
payouts.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Name and Principal -------------------------- ------------- All Other
Position (1) Year Salary($) Bonus($) Options(#)(2) Compensation($)(3)
------------------ ---- --------- -------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Joachim Kiener (4) ..... 1999 $634,231 $515,000 2,121,376 $21,024
Chairman of the Board
and 1998 -- -- -- --
Chief Executive Officer 1997 -- -- -- --
Peter C. Boylan III..... 1999 $727,936(5) $475,000 2,121,376 $42,863
President and Chief
Operating Officer 1998 $406,637 $325,000 400,000 $40,560
1997 $323,091 $256,300 344,000 $16,025
Charles Butler Ammann... 1999 $195,833 $120,000 70,000 $14,188
Senior Vice President,
Secretary and 1998 $204,000 $115,000 80,000 $16,523
General Counsel 1997 $180,000 $ 78,000 -- $ 7,843
Craig M. Waggy.......... 1999 $195,833 $120,000 100,000 $13,095
Senior Vice President,
Chief Financial
Officer 1998 $150,000 $115,000 100,000 $14,017
and Treasurer 1997 $115,667 $ 77,000 72,000 $ 5,371
Anthea Disney (6)....... 1999 $230,769 $ 82,176 -- 20,950
Former Chairman of the
Board and 1998 -- -- -- --
Chief Executive Officer 1997 -- -- -- --
Gary S. Howard (7)...... 1999 -- -- -- --
Former Chairman of the
Board and 1998 $275,000 -- -- --
Chief Executive Officer 1997 $215,480 $174,300 400,000 --
</TABLE>
- -------
(1) The positions shown represent the positions held by such persons at the end
of 1999.
(2) All grants for 1999, 1998 and 1997 represent stock options to acquire Class
A common stock under TV Guide's Equity Incentive Plan. All amounts have
been adjusted for stock splits.
(3) 1999 includes (i) contributions under SERP and 401(k) Plans, and (ii) the
compensation component of term life insurance premiums, respectively, as
follows: Mr. Kiener, $18,747 and $2,277; Mr. Boylan, $41,547 and $807;
Mr. Ammann, $13,680 and $402; and Mr. Waggy, $12,651 and $354; Ms. Disney,
$18,450 and $2,500.
(4) Mr. Kiener joined TV Guide on March 1, 1999 as President and was appointed
Chairman of the Board and Chief Executive Officer on July 1, 1999. The
amounts presented for annual compensation and bonus represent the amounts
TV Guide reimbursed The News Corporation Limited for amounts paid to Mr.
Kiener for services provided to TV Guide, except for $475,000 of the bonus,
which was paid directly by TV Guide.
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(5) Includes additional amounts payable for 1999 under the employment agreement
Mr. Boylan is entering into effective as of March 1, 1999. See "--
Employment Agreements."
(6) Ms. Disney joined TV Guide on March 1, 1999 and served as Chairman of the
Board and Chief Executive Officer until July 1, 1999. The amounts presented
represent the amounts TV Guide reimbursed News Corp. for payments by News
Corp. to Ms. Disney for services provided to TV Guide.
(7) Mr. Howard joined TV Guide on June 1, 1997 and served as Chairman of the
Board and Chief Executive Officer until March 1, 1999. The amounts
presented represent the amounts TV Guide reimbursed Tele-Communications,
Inc. for payments to Mr. Howard for services provided to TV Guide.
The following table sets forth information concerning options granted in
1999 to the TV Guide Named Executive Officers.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Potential Realizable
Percent of Value at Assumed Value at Assumed
Total Annual Rates of Annual Rates of
Options/SARs Exercise Stock Price Stock Price
Granted to or Base Appreciation for Appreciation for
Employees in Price Option Term - Option Term -
Options Fiscal Per Expiration -------------------- --------------------
Name Granted(#) Year(1) Share Date 5% 10%
---- ---------- ------------ -------- ---------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Joachim Kiener (2)...... 600,000 8.8% $12.50 02-28-09 $ 4,716,709 $11,953,068
1,521,376 22.4% $21.93 09-30-09 $20,982,299 $53,173,266
Peter C. Boylan III
(2).................... 600,000 8.8% $12.50 02-28-09 $ 4,716,709 $11,953,068
1,521,376 22.4% $21.93 09-30-09 $20,982,299 $53,173,266
Charles Butler Ammann
(2).................... 70,000 1.0% $14.28 02-28-09 $ 628,698 $ 1,593,244
Craig M. Waggy (2)...... 100,000 1.5% $14.28 02-28-09 $ 898,140 $ 2,276,063
Anthea Disney........... -- -- -- -- -- --
Gary S. Howard.......... -- -- -- -- -- --
</TABLE>
- -------
(1) Computation includes 30,000 options granted under the TV Guide, Inc. Stock
Plan for Non-Employee Directors.
(2) Incentive and non-qualified stock options to acquire shares of TV Guide's
Class A common stock.
The following table sets forth information concerning options exercised in
1999 and outstanding options held by the TV Guide Named Executive Officers as
of December 31, 1999:
Aggregated Option/SAR Exercises in Last Fiscal Year
and Year-End Option/SAR Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at at December 31,
December 31, 1999(#) 1999($)(1)
------------------------- -------------------------
Shares
Acquired on Value
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Joachim Kiener.......... -- -- -- /2,121,376 $ -- /$50,355,392
Peter C. Boylan III..... 35,170 $518,325 1,246,808 /2,887,776 $48,808,424 /$78,473,190
Charles Butler Ammann... -- -- 49,600 / 156,400 $ 1,894,800 /$ 5,123,513
Craig M. Waggy.......... 16,000 $295,504 66,400 / 245,600 $ 2,520,550 /$ 8,227,575
Anthea Disney........... -- -- -- / -- -- / --
Gary S. Howard.......... -- -- 160,000 / 240,000 $ 6,215,000 /$ 9,322,500
</TABLE>
- -------
(1) The value of unexercised in-the-money options is calculated based upon the
last reported sales price per share of TV Guide's Class A common stock on
the Nasdaq National Market on December 31, 1999 ($43.00), less the exercise
price.
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Director Compensation. Directors who are not also employees of TV Guide or
its subsidiaries or affiliates receive a fee of $4,000 per meeting attended in
person and a fee of $2,000 per committee meeting attended in person, unless
such committee meeting is held on the same day as a meeting of the full board.
Telephonic meetings of the board and committees are compensable at the rate of
$400. Directors who are also employees of TV Guide or its subsidiaries or
affiliates receive no additional compensation for serving as directors. TV
Guide reimburses all of its directors for reasonable travel and out-of-pocket
expenses in connection with their attendance at meetings of the board. The
directors are eligible to participate in the TV Guide Stock Option Plan for
Non-Employee Directors (the "TV Guide Directors Plan"). TV Guide has reserved
820,000 shares of Class A common stock to be issued pursuant to the exercise of
options granted under TV Guide Directors Plan.
Compensation Committee Interlocks And Insider Participation. Lawrence Flinn,
Jr., J. David Wargo, Leo J. Hendrey, Jr., Robert R. Bennett, Chase Carey, Peter
Chernin and Gary S. Howard served as members of the Compensation Committee of
the board during all or part of 1999. Mr. Howard was Chairman of the Board and
Chief Executive Officer of TV Guide before he served as a member of the
Compensation Committee.
Employment Agreements. Messrs. Kiener and Boylan are entering into
employment agreements with TV Guide effective as of March 1, 1999, for a term
of four years expiring on March 1, 2003. See "The Merger--Interests of Certain
Persons in the Merger" beginning on page .
Recommendation of TV Guide's Board of Directors
TV Guide's board of directors believes that the amendments to the TV Guide,
Inc. Equity Incentive Plan are in the best interests of TV Guide and its
stockholders. Accordingly, TV Guide's board of directors unanimously recommends
that TV Guide stockholders vote "FOR" approval of the plan amendments.
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CHANGE IN GEMSTAR'S PLACE OF INCORPORATION FROM THE BRITISH VIRGIN ISLANDS TO
THE STATE OF DELAWARE
Before February 23, 2000, Gemstar will change its place of incorporation
from the British Virgin Islands to the State of Delaware. This process is
called "domestication." In the following summary, Gemstar (BVI) refers to the
pre-domestication British Virgin Islands corporation and Gemstar (Delaware)
refers to the post-domestication Delaware corporation.
Reasons for Changing Gemstar's Place of Incorporation
Tax Regulations. On January 24, 2000, final Treasury regulations affecting
the tax consequences of the change in place of incorporation (the
"Regulations") were published in the Federal Register. The Regulations become
effective on February 23, 2000 (the "Effective Date"). If the change in place
of incorporation occurs on or after the Effective Date, the change in place of
incorporation will be a taxable event for certain United States persons
(defined as (1) any citizen or resident of the United States, (2) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (3) an estate,
the income of which is subject to United States federal income taxation
regardless of its source, and (4) a trust, if a United States court is able to
exercise primary supervision over the administration of the trust and one or
more United States persons has the authority to control all substantial
decisions of the trust) that are stockholders of Gemstar on the date of the
change in place of incorporation.
If Gemstar does not change its place of incorporation before February 23,
2000, United States persons (1) who own or who are deemed to own less than 10%
of the Gemstar stock and (2) whose Gemstar stock is worth at least $50,000 on
the date of the change in place of incorporation, will recognize gain measured
by the difference between the fair market value of their shares and their
adjusted tax basis in those shares, unless such stockholders elect to be taxed
in the same manner as the stockholders who own 10% or more of Gemstar (as
described below under "--Tax Consequences--General Tax Consequences of the
Change in Place of Incorporation"). United States persons who own or are deemed
to own 10% or more of the Gemstar stock will have to include a "deemed
dividend" in their taxable income in the year of the change in place of
incorporation. The "deemed dividend" will be an amount equal to the
stockholder's portion of all of the current and accumulated earnings and
profits of Gemstar.
Merger Agreement. In addition, pursuant to the merger agreement, Gemstar
must change its place of incorporation from the British Virgin Islands to the
State of Delaware before the completion of the merger. If Gemstar does not
change its place of incorporation from the British Virgin Islands to the State
of Delaware before the completion of the merger, Gemstar might be a "controlled
foreign corporation," as that term is defined in the U.S. Internal Revenue Code
of 1986, as amended (the "Code"). If Gemstar were a controlled foreign
corporation, the holders of 10% or more of its outstanding stock following the
completion of the merger who are also United States persons would suffer
adverse tax consequences. The stockholders potentially facing adverse tax
consequences are Henry C. Yuen, Liberty Media Corporation and the U.S.
subsidiary of The News Corporation Limited that holds the TV Guide common stock
beneficially owned by News Corp.
Effect of Changing Gemstar's Place of Incorporation
By changing its place of incorporation, Gemstar will experience changes in
governing corporate law and its governing documents. Gemstar will also
experience certain tax consequences. These effects of changing Gemstar's place
of incorporation are further discussed under "--Change in Governing Corporate
Law,"""--Change in Governing Documents," and "--Tax Consequences" below.
Change in Governing Corporate Law
As a result of changing its place of incorporation, Gemstar will be
incorporated in the State of Delaware and will no longer be incorporated in the
British Virgin Islands. Thus, on the date Gemstar changes its place of
incorporation, Gemstar will be subject to the laws of the State of Delaware.
Gemstar will not, however, be
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relieved of any obligations or liabilities it incurred before changing its
place of incorporation because Gemstar's existence as a corporation will be
deemed to have commenced on the date it was incorporated in the British Virgin
Islands.
The following description of certain differences between British Virgin
Islands corporate law and Delaware corporate law is only a summary and does not
purport to be complete or to address every applicable aspect of such laws. The
following description is qualified in its entirety by references to British
Virgin Islands law and Delaware law.
Dissolution
Under British Virgin Islands law and subject to the organizational documents
of Gemstar (BVI), the corporation may dissolve voluntarily by a resolution of
directors or by a resolution of stockholders. The organizational documents of
Gemstar (BVI) permit the corporation to dissolve voluntarily by a resolution of
stockholders (approved by a simple majority of the votes of the shares present
at a duly convened and constituted meeting and entitled to vote and that voted
and did not abstain).
Under Delaware law, a corporation may voluntarily dissolve if (1) a majority
of the board adopts a resolution to that effect and the holders of a majority
of outstanding stock entitled to vote thereon vote for such dissolution or (2)
all stockholders entitled to vote thereon consent in writing to such
dissolution.
Removal of Directors
Under British Virgin Islands law and subject to the organizational documents
of Gemstar (BVI), directors may be removed by a resolution of directors or by a
resolution of stockholders. The organizational documents of Gemstar (BVI)
permit the removal of directors only with cause. Such removal requires a
resolution of directors (approved by a simple majority of directors present at
a duly convened and constituted meeting who voted and did not abstain or by all
directors in writing) or a resolution of stockholders (approved by a simple
majority of the votes of the shares present at a duly convened and constituted
meeting and entitled to vote and that voted and did not abstain).
Under Delaware law, directors may be removed, with or without cause, by the
holders of a majority of the shares entitled to vote. However, unless the
corporation's certificate of incorporation otherwise provides, if the board is
classified then stockholders may effect removal only for cause. The certificate
of incorporation of Gemstar (Delaware) permits the removal of directors, with
or without cause, by the affirmative vote of the holders of at least 66 2/3% of
the corporation's outstanding voting securities, voting together as a single
class at a meeting specifically called for such purpose.
Actions by Written Consent of Stockholders
Under British Virgin Islands law and subject to the organizational documents
of Gemstar (BVI), stockholders may act by written consent without a meeting.
The organizational documents of Gemstar (BVI), however, prohibit such
stockholder action.
Under Delaware law, stockholders may act by written consent without a
meeting. However, Delaware law permits a corporation to eliminate such actions
by written consent in its certificate of incorporation. The certificate of
incorporation of Gemstar (Delaware), like the organizational documents of
Gemstar (BVI), prohibits such stockholder action.
Mergers, Consolidations and Sales of Assets
Under British Virgin Islands law and subject to the organizational documents
of Gemstar (BVI), a merger, consolidation or substantial sale of assets must be
approved by the board and the stockholders. The organizational documents of
Gemstar (BVI) require the affirmative vote of at least 66 2/3% of the
outstanding shares entitled to vote for any merger, consolidation or sale of
substantially all of the assets.
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Under Delaware law, with certain exceptions, any merger, consolidation or
sale of all or substantially all of the corporation's assets must be approved
by the board and a majority of the outstanding shares entitled to vote. After
the completion of the merger, the organizational documents of Gemstar
(Delaware) will require a special board of directors vote of at least seven of
the twelve board members then authorized and stockholder supermajority vote for
certain mergers, consolidations and sales of all or substantially all of the
combined company's assets.
Rights of Dissenting Stockholders
British Virgin Islands law provides for compulsory appraisal of the
interests of a stockholder (and payment of the fair market value of his or her
shares) who dissents from a merger of a corporation (except where such
corporation is the surviving corporation and the stockholder continues to hold
the same or similar shares), a consolidation, sale or other disposition of more
than 50% of the corporation's assets not made in the usual or regular course of
the corporation's business, and a redemption.
Generally, stockholders of a Delaware corporation who dissent from a merger
or consolidation for which a stockholders' vote is required are entitled to
appraisal rights that require the surviving corporation to purchase the
dissenting shares at fair value, as determined in a judicial proceeding. There
are, however, generally no statutory rights of appraisal with respect to
stockholders of a Delaware corporation whose shares of stock are (1) listed on
a national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or (2) held of record by more than 2,000 stockholders,
where such stockholders receive only shares of stock of the corporation
surviving or resulting from the merger or consolidation (or cash in lieu of
fractional interests therein).
Inspection of Stockholder List and Books and Records
British Virgin Islands law provides that a stockholder may, for a proper
purpose, request to inspect the share register books, records, minutes and
consents kept by a corporation and make extracts or copies thereof. However,
British Virgin Islands law also provides that a corporation such as Gemstar
(BVI) may refuse such a request if determined by a resolution of directors that
it is not in the best interests of the corporation or its stockholders to
comply with such request. Upon the corporation's refusal of a request, the
stockholder may, before the expiration of a 90-day period after receiving
notice of the refusal, apply to a court for an order to allow inspection.
Delaware law allows any stockholder to inspect the stockholder list and the
corporation's books and records for a purpose reasonably related to such
person's interests as a stockholder.
Amendment of Memorandum of Association/Certificate of Incorporation
Under British Virgin Islands law, a corporation may amend its memorandum of
association by a resolution of stockholders or, if permitted by its
organizational documents, by a resolution of directors. The organizational
documents of Gemstar (BVI) generally permit the corporation to amend its
memorandum of association by a resolution of stockholders (approved by a simple
majority of the votes of the shares present at a duly convened and constituted
meeting and entitled to vote and that voted and did not abstain) or by a
resolution of directors (approved by a simple majority of directors present at
a duly convened and constituted meeting who voted and did not abstain or by all
directors in writing). Certain provisions of the memorandum of association of
Gemstar (BVI) may be amended only upon the affirmative vote of at least 66 2/3%
of the outstanding shares entitled to vote.
Under Delaware law, an amendment to a corporation's certificate of
incorporation requires (1) adoption of a resolution by the board and (2) the
affirmative vote of a majority of the outstanding stock entitled to vote
thereon. The certificate of incorporation of Gemstar (Delaware), however,
requires for the amendment, alteration or repeal of any provision of the
certificate of incorporation or the addition or insertion of other
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provisions in the certificate of incorporation, the affirmative vote of the
holders of at least 66 2/3% of the total voting power of the corporation's
outstanding voting securities, voting together as a single class at a meeting
specifically called for such purpose. Following the completion of the merger,
the approval of at least seven of the twelve members of the board then
authorized at a meeting duly called and held, or the unanimous written consent
of the board, is required to adopt a resolution for the purpose of amending or
modifying any provision of the certificate of incorporation of Gemstar
(Delaware) before the Gemstar board can submit such a proposal to Gemstar's
stockholders.
Amendment of Articles of Association/Bylaws
Under British Virgin Islands law, a corporation may amend its articles of
association by a resolution of stockholders or, if permitted by its
organizational documents, by a resolution of directors. The organizational
documents of Gemstar (BVI) permit the corporation to amend its articles of
association by a resolution of stockholders (approved by a simple majority of
the votes of the shares present at a duly convened and constituted meeting and
entitled to vote and that voted and did not abstain) or by a resolution of
directors (approved by a simple majority of directors present at a duly
convened and constituted meeting who voted and did not abstain or by all
directors in writing). However, certain provisions of its articles of
association may be amended only upon the affirmative vote of at least 66 2/3%
of the outstanding shares entitled to vote.
Under Delaware law, the authority to adopt, amend or repeal a corporation's
bylaws is held exclusively by such corporation's stockholders unless such
authority is conferred upon the board in the certificate of incorporation. The
certificate of incorporation of Gemstar (Delaware) permits stockholders to
adopt, amend or repeal any provision of the bylaws by the affirmative vote of
at least 66 2/3% of the corporation's outstanding voting securities. The
certificate of incorporation of Gemstar (Delaware) also permits the board, by
action taken by the affirmative vote of a majority of the board then authorized
(or, after the completion of the merger, by the affirmative vote of at least
nine of the twelve members of the board then authorized), to adopt, amend or
repeal any provision of the bylaws.
Transactions Involving Directors or Officers
British Virgin Islands law and the organizational documents of Gemstar (BVI)
provide that no agreement or transaction between the corporation and one or
more of its directors or any entity in which any director has a financial
interest or to whom any director is related including as a director of that
other entity is void or voidable for this reason only or by reason only that
the director is present at the meeting of directors, or at the meeting of the
committee of directors, that approves the agreement or transaction or that the
vote or consent of the director is counted for that purpose if the material
facts of the interest of each director in the agreement or transaction and his
or her interest in or relationship to any other party to the agreement or
transaction are disclosed in good faith or are known by the other directors and
all disinterested directors, who are not of a number sufficient to approve a
resolution, approve such transaction. Alternatively, the interest in the
transaction may be disclosed or known to or ratified by the stockholders. In
addition, a director who has an interest in any particular business to be
considered at a meeting of directors or stockholders may be counted for
purposes of determining whether the meeting is duly constituted.
A Delaware corporation may lend money to, or guarantee any obligation
incurred by, its directors or officers if in the judgment of the board such
loan or guarantee may reasonably be expected to benefit the corporation. With
respect to any other contract or transaction between the corporation and one or
more of its directors or officers, such transactions are neither void nor
voidable solely for this reason if either (1) the director's or officer's
interest is made known to the disinterested directors or the stockholders of
the corporation, who thereafter approve the transaction in good faith, or (2)
the contract or transaction is fair to the corporation as of the time it is
approved or ratified by either the board, a committee thereof or the
stockholders.
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Limitation of Liability of Directors
Under British Virgin Islands law, liability of a corporate director to the
corporation is limited to cases where the director has not acted honestly and
in good faith and with a view to the best interests of the corporation or to
cases where the director has not exercised the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances. Under the
organizational documents of Gemstar (BVI), the corporation is authorized to
indemnify any person who is made or threatened to be made a party to a legal or
administrative proceeding by virtue of being a director, officer or liquidator
of the corporation, provided such person acted honestly and in good faith and
with a view to the best interests of the corporation and, in the case of a
criminal proceeding, such person had no reasonable cause to believe that his or
her conduct was unlawful. The organizational documents of Gemstar (BVI) also
obligate the corporation to indemnify any director, officer or liquidator of
the corporation who was successful in any of the aforementioned proceedings
against expenses and judgments, fines and amounts paid in settlement and
reasonably incurred in connection with the proceedings, regardless of whether
such person met the standard of conduct described in the preceding sentence.
While British Virgin Islands law does permit a stockholder of a British
Virgin Islands corporation to sue its directors derivatively (i.e., in the name
of and for the benefit of the corporation) and to sue the corporation and its
directors for the stockholder's benefit and for the benefit of others similarly
situated, the circumstances in which any such action may be brought, and the
procedures and defenses that may be available in respect of any such action,
may result in the rights of stockholders of a British Virgin Islands
corporation being more limited than those of stockholders of a corporation
organized in Delaware.
Under Delaware law, a corporation may include in its certificate of
incorporation a provision which would, subject to the limitations described
below, eliminate or limit director liability for monetary damages for breaches
of their fiduciary duty of care. Under Delaware law, a director's liability
cannot be eliminated or limited for (1) breaches of the duty of loyalty, (2)
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (3) the payment of unlawful dividends or expenditure
of funds for unlawful stock purchases or redemptions, or (4) transactions from
which such director derived an improper personal benefit. The organizational
documents of Gemstar (Delaware) limit a director's liability to the fullest
extent permitted by Delaware law.
Business Combinations/Reorganizations
Under British Virgin Islands law, directors have the power to take certain
actions without stockholder approval, subject to the approval of a court,
including to implement a reorganization, certain mergers or consolidations,
certain sales, transfers, exchanges or dispositions of assets, property, parts
of the business or securities of the corporation, the winding up or dissolution
of the corporation, or any combination thereof, if they determine any such
action is in the best interests of the corporation, its creditors or its
stockholders.
Delaware law prohibits certain transactions between a Delaware corporation
and an "interested stockholder." An "interested stockholder" for this purpose
is a stockholder who is directly or indirectly a beneficial owner of 15% or
more of the outstanding voting stock of a Delaware corporation (or such
stockholder's affiliate or associate). This provision prohibits certain
business combinations between an interested stockholder and a corporation for a
period of three years after the date such stockholder became an interested
stockholder unless (1) the business combination or transaction which resulted
in the stockholder becoming an interested stockholder is approved by the
corporation's board before such stockholder became an interested stockholder,
(2) the interested stockholder acquired at least 85% of the voting stock of the
corporation in the transaction in which such stockholder became an interested
stockholder, or (3) the business combination is approved by a majority of the
board and the affirmative vote of the holders of two-thirds of the outstanding
voting stock not owned by the interested stockholder at or subsequent to the
time that such stockholder became an interested stockholder. The foregoing
restrictions do not apply if, among other things, the corporation's original
certificate of incorporation contains a provision expressly electing not to be
governed by such law.
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Stockholder Derivative Suits
While British Virgin Islands law does permit a stockholder of a British
Virgin Islands corporation to sue its directors derivatively (i.e., in the name
of and for the benefit of the corporation) and to sue the corporation and its
directors for the stockholder's benefit and for the benefit of others similarly
situated, the circumstances in which any such action may be brought, and the
procedures and defenses that may be available in respect of any such action,
may result in the rights of stockholders of a British Virgin Islands
corporation being more limited than those of stockholders of a corporation
organized in Delaware.
Under Delaware law a stockholder may only bring a derivative action on
behalf of the corporation if the stockholder was a stockholder of the
corporation at the time of the transaction in question or his or her stock
thereafter devolved upon him or her by operation of law.
Change in Governing Documents
To change its place of incorporation, Gemstar must file a certificate of
domestication and a certificate of incorporation with the Delaware Secretary of
State. Following the change in Gemstar's place of incorporation, the rights of
Gemstar stockholders will be governed by the terms of such certificate of
incorporation and new bylaws (which bylaws will be automatically amended and
replaced upon the completion of the merger with new bylaws in the form attached
as Annex C to this joint proxy statement/prospectus). For a comparison of the
provisions of the amended and restated memorandum of association and amended
and restated articles of association of Gemstar (BVI) and the new certificate
of incorporation and bylaws of Gemstar (Delaware), see Annex G attached to this
joint proxy statement/prospectus, which is incorporated herein by reference.
The description set forth below of the new certificate of incorporation and
bylaws for Gemstar (Delaware) after the change in place of incorporation
describes the material terms, but does not purport to describe all of the terms
of such documents. The full text of the new certificate of incorporation is
attached as Annex B to this joint proxy statement/prospectus and is
incorporated by reference herein. The bylaws have been incorporated by
reference as an exhibit to the registration statement of which this joint proxy
statement/prospectus is a part and are incorporated by reference herein. All
stockholders are urged to read such documents in their entirety.
Board of Directors
Number. The board of Gemstar (Delaware) will intially consist of 9 directors
and will consist of not less than 3 nor more than 12 directors.
Term. There will be three classes of directors: Class I, Class II and Class
III. Each class will consist of a number of directors equal as nearly as
practicable to one-third of the then authorized number of members of the board.
The initial term of office for the Class I, Class II and Class III directors
will expire at the annual meeting of stockholders in 2003, 2002 and 2001,
respectively. At each annual meeting of stockholders, the successors of that
class of directors whose term expires at that meeting will be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of such election.
Nomination and Election by Stockholders. Any stockholder may nominate
persons for election to the Gemstar board by giving timely notice in writing to
Gemstar's Secretary. To be timely:
. in the case of an annual meeting or special meeting, a stockholder's
notice must be delivered to or mailed and received at Gemstar's
principal executive offices not less than 60 days nor more than 90 days
before the meeting; provided, however, that if less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder must be received not later
than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public
disclosure was made; and
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. in the case of a special meeting called at the request of a stockholder
or stockholders nominating persons for election to the Gemstar board,
the notice of nomination by the stockholder or stockholders requesting
such meeting must be received by Gemstar with the request for such
meeting, which request must be made by holders of at least a majority of
the total voting power of Gemstar's outstanding voting securities.
Directors will be elected, at any stockholder meeting duly called and held for
such purpose at which a quorum is present, by a plurality of the voting power
of the shares present in person or represented by proxy at the meeting and
entitled to vote.
Removal. Directors may be removed with or without cause by the affirmative
vote of at least 66 2/3% of the total voting power of Gemstar's outstanding
voting securities, voting together as a single class at a meeting specifically
called for such purpose.
Vacancies. Vacancies on the Gemstar board will be filled by the majority
vote of the remaining directors, although less than a quorum, or by a sole
remaining director or by unanimous written consent of the directors.
Chairman. The Chairman of the board of directors will be elected from among
the board members.
Committees. The board may designate one or more committees, each consisting
of one or more directors. Each committee has, to the extent permitted by
Delaware law, the powers of the board as are set forth in the board resolution
establishing the committee, except that no committee has any power or authority
either to approve or adopt, or recommend to the stockholders, any action or
matter required to be submitted to the stockholders for approval, to adopt,
amend or repeal any bylaw, or to take any action that it is not permitted to
take pursuant to Delaware law.
Board Meetings
Calling of Meeting. Regular meetings of the board will be held at such
times, if any, as the board from time to time by resolution determines. Special
meetings of the board will be held at such time and place within the United
States as designated in the notice of the meeting. Special meetings of the
board may be called by the Chairman of the Board or the Chief Executive Officer
(provided that the Chief Executive Officer is a member of the board) and will
be called by the Secretary upon the written request of not less than one half
of the entire board.
Quorum. A majority of the total number of Gemstar board members will
constitute a quorum.
Voting. Except as otherwise provided by law, the certificate of
incorporation or the bylaws, directors present at any meeting at which a quorum
is present for the transaction of business may by majority vote decide any
question brought before such meeting.
Executive Officers
The bylaws provide that the officers of Gemstar will be a Chairman of the
Board, a Chief Executive Officer, a President, a Chief Financial Officer, a
General Counsel (who may be an Executive Vice President), one or more Vice
Presidents, a Secretary and such other officers as may be determined by the
board.
Stockholder Meetings
Calling of Meeting. An annual meeting of stockholders for the purpose of
electing those directors whose term of office expires at such meeting and of
transacting such other business as may properly come before it will be held
each year. A special meeting of Gemstar stockholders will be called upon:
. the written request of holders of not less than a majority of the total
voting power of Gemstar's outstanding voting securities; or
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. the request of a majority of the members of the entire Gemstar board
which Gemstar would have if there were no vacancies on the board.
No stockholder action may be taken without a meeting, and the certificate of
incorporation expressly denies the power of stockholders to consent in writing
without a meeting.
Quorum. Except as otherwise provided in the certificate of incorporation,
the bylaws or by law, and subject to the rights of holders of any preferred
stock, the holders of a majority in total voting power of Gemstar's outstanding
shares of stock entitled to vote constitutes a quorum for the transaction of
business.
Voting. Holders of common stock will be entitled to one vote for each share
of such stock held on all matters presented to such stockholders. Except for
the election of directors and except as otherwise provided by the certificate
of incorporation, the bylaws or by law, and subject to the rights of holders of
any preferred stock, at any meeting duly called and held at which a quorum is
present, the affirmative vote of a majority of the total voting power of shares
present in person or represented by proxy and entitled to vote on the subject
matter is required for stockholders to act. See "--Supermajority Vote" below.
Stockholder Proposals
A stockholder may bring business before an annual meeting of stockholders by
giving timely notice in writing to Gemstar's Secretary in accordance with the
provisions of the bylaws. Stockholders with sufficient voting power to request
a special meeting may bring business before such meeting by specifying it in
such request.
Supermajority Vote
Subject to the rights of holders of any preferred stock, the affirmative
vote of at least 66 2/3% of the total voting power of Gemstar's outstanding
voting securities, voting together as a single class at a meeting specifically
called for such purpose, is required to authorize any of the following actions:
. amendment, alteration or repeal of any provision of Gemstar's
certificate of incorporation or the addition of other provisions other
than an amendment solely for the purpose of changing Gemstar's name;
. adoption, amendment or repeal of any provision of Gemstar's bylaws
(except that the Gemstar board has also retained the power to adopt,
amend or repeal any provision of the bylaws with the approval of a
majority of the board then authorized);
. a merger or consolidation of Gemstar with any other person or any
binding share exchange to which Gemstar is a party other than a merger
of a subsidiary of Gemstar with and into Gemstar effected in accordance
with Section 253 of the Delaware General Corporation Law solely for the
purpose of changing Gemstar's name (it being understood that this clause
will not apply to any transactions contemplated by the merger agreement,
as such agreement may be amended from time to time, including the
issuance of Gemstar common stock to TV Guide stockholders as
contemplated by such agreement);
. the sale, lease, exchange or other disposition of all or a substantial
part of the assets of Gemstar or its subsidiaries;
. the dissolution, liquidation or winding up of Gemstar; or
. any other matter (other than the election of directors and the adoption
or amendment of any stock option, stock appreciation rights or other
stock incentive plan for Gemstar or its subsidiaries and any
transactions contemplated by the merger agreement, as such agreement may
be amended from time to time, including the issuance of Gemstar common
stock to TV Guide stockholders in connection with the merger) requiring
stockholder approval under the laws of the State of Delaware or the
rules of any national securities exchange or national securities
association on which Gemstar's common stock is listed or quoted.
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Amendment
Certificate of Incorporation. The amendment of the certificate of
incorporation requires the affirmative vote of at least 66 2/3% of the total
voting power of Gemstar's outstanding voting securities.
Bylaws. The amendment of the bylaws requires the affirmative vote of at
least 66 2/3% of the total voting power of Gemstar's outstanding voting
securities or the approval of a majority of the members of the Gemstar board.
The bylaws will be automatically amended and replaced upon the completion of
the merger with new bylaws in the form attached as Annex C to this joint proxy
statement/prospectus.
Fiscal Year
Gemstar's fiscal year will end on March 31 of each calendar year.
Tax Consequences
The following discussion summarizes the material United States federal
income tax consequences of the change in Gemstar's place of incorporation. This
discussion is based upon the Code, the Treasury regulations promulgated
thereunder and administrative rulings and court decisions in effect as of the
date hereof, all of which are subject to change, possibly with retroactive
effect. This discussion does not address all aspects of United States federal
income taxation that may be relevant to a stockholder in light of the
stockholder's particular circumstances or to those stockholders subject to
special rules, such as stockholders who are financial institutions, tax-exempt
organizations, insurance companies or dealers in securities, stockholders who
acquired their stock pursuant to the exercise of options or similar derivative
securities or otherwise as compensation or stockholders who hold their stock as
part of a straddle or conversion transaction, nor does it address any
consequences arising under the laws of any local, state or foreign
jurisdiction. This discussion assumes that stockholders hold their respective
shares of stock as capital assets within the meaning of Section 1221 of the
Code. All stockholders are urged to consult their own tax advisors as to the
particular tax consequences to them of the change in Gemstar's place of
incorporation.
Gemstar has received the opinion of O'Melveny & Myers LLP to the effect that
the discussion under the heading "Tax Consequences," insofar as it relates to
the United States federal income tax consequences to Gemstar and its
stockholders of the change in Gemstar's place of incorporation, is accurate in
all material respects.
General Tax Consequences of the Change in Gemstar's Place of
Incorporation. Gemstar believes that the change in Gemstar's place of
incorporation will constitute a reorganization within the meaning of
Section 368(a)(1)(F) of the Code. If the change in Gemstar's place of
incorporation were not a tax-free reorganization, the tax consequences of the
change in Gemstar's place of incorporation could differ from those described
below. Gemstar will not seek any rulings from the Internal Revenue Service
("IRS") with respect to the change in Gemstar's place of incorporation.
If the change in Gemstar's place of incorporation constitutes a tax-free
reorganization, subject to the discussions under the headings "--Tax
Consequences to United States Persons" and "--Tax Consequences to United States
Persons if Gemstar Is or Was a PFIC" below, holders of Gemstar shares will not
recognize any income, gain or loss for federal income tax purposes solely as a
result of the change in Gemstar's place of incorporation. Following the change
in Gemstar's place of incorporation, a holder of Gemstar common stock will have
a tax basis in the Gemstar common stock equal to the tax basis such holder had
in the Gemstar shares before the change in Gemstar's place of incorporation. A
Gemstar stockholder's holding period with respect to the Gemstar common stock
will include the holding period that such holder had in the Gemstar shares
before the change in Gemstar's place of incorporation.
Gemstar will not recognize gain or loss as a result of the change in
Gemstar's place of incorporation.
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Tax Consequences to United States Persons. Subject to the discussion under
the heading "--Tax Consequences to United States Persons if Gemstar Is or Was a
PFIC" below, under current law, the change in Gemstar's place of incorporation
will not be a taxable event for any stockholder of Gemstar unless Gemstar was a
controlled foreign corporation ("CFC") at any time during the five-year period
ending on the date of the change in Gemstar's place of incorporation (the
"Five-Year Period"). A CFC is any foreign corporation if more than 50% of (1)
the total combined voting power of all classes of stock of such corporation
entitled to vote, or (2) the total value of the stock of such corporation, is
owned, or is considered as owned, by United States persons that own, or are
considered as owning, 10% or more of such foreign corporation's voting stock on
any day during the taxable year of such foreign corporation. Gemstar does not
believe that it is currently a CFC or that it will have been a CFC at any time
during the Five-Year Period. Therefore, under current law, the change in
Gemstar's place of incorporation should not be a taxable event for any Gemstar
stockholder based on an application of the CFC rules. Nonetheless, if Gemstar
had been a CFC at any time during the Five-Year Period, the change in Gemstar's
place of incorporation would be a taxable event for any of its stockholders
that are United States persons and that own or are considered as having owned
10% or more of the voting stock of Gemstar at any time during the Five-Year
Period when Gemstar was a CFC. Any such stockholder would have to include in
its gross income its pro rata share of a portion of the earnings and profits of
Gemstar (a "Deemed Dividend") to the extent that the fair market value of such
stockholder's Gemstar common stock exceeds its adjusted basis.
The tax consequences of the change in Gemstar's place of incorporation under
current law to United States persons that are corporate stockholders of Gemstar
may differ from the rules set forth above, both with respect to their
application to such stockholders and with respect to the amount of the Deemed
Dividend to be included in gross income. In light of this uncertainty, domestic
corporate stockholders of Gemstar should consult their own tax advisers as to
the particular tax consequences to them of the change in Gemstar's place of
incorporation.
Tax Consequences to United States Persons if Gemstar Is or Was a PFIC. In
addition to the discussion under the heading "--Tax Consequences to United
States Persons" above, the change in Gemstar's place of incorporation may be a
taxable event to certain Gemstar stockholders that are United States persons if
Gemstar is or ever was a passive foreign investment company under Section 1297
of the Code (a "PFIC"). Generally, a foreign corporation is a PFIC if 75% or
more of its gross income is passive income or 50% or more of its assets by
value produce or are held to produce passive income. Passive income includes
dividends, interest and royalties but excludes royalties that are derived in
the active conduct of a trade or business (as defined for United States federal
income tax purposes) and that are received from an unrelated person. Gemstar's
principal business is and has been to develop and license proprietary
technologies to unrelated customers. In carrying out that business, Gemstar and
its subsidiaries engage in substantial management and operation functions. On
that basis, consistent with previous representations in filings with the
Securities and Exchange Commission, Gemstar continues to believe that it is not
and has never been a PFIC. Accordingly, the change in Gemstar's place of
incorporation should not be a taxable event for any Gemstar stockholder based
on an application of the PFIC rules. However, the determination of whether a
foreign corporation is a PFIC is primarily factual. Moreover, there is little
administrative or judicial authority on which to rely to make such
determination. Therefore, there can be no assurance that the IRS would agree
with Gemstar's position that it is not and has never been a PFIC or that, if
the IRS took a contrary position, Gemstar would be able to prevail on this
issue.
Section 1291(f) of the Code provides that Treasury regulations may treat the
change in Gemstar's place of incorporation as a taxable event for certain
Gemstar stockholders that are United States persons if the domesticating
corporation is or was at any time a PFIC. The IRS has taken the position in
private letter rulings that transactions that would otherwise be tax-free, such
as a change in Gemstar's place of incorporation, are taxable events under
Section 1291(f) of the Code, unless an exception is set forth in the Treasury
regulations. In 1992, the IRS issued proposed regulations under Section 1291(f)
of the Code which, if Gemstar is or ever was a PFIC, would treat the change in
Gemstar's place of incorporation as a taxable event for Gemstar stockholders
that are United States persons that have not made a timely election to treat
Gemstar as a
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"qualified electing fund" and have thus agreed to be taxed currently on their
share of Gemstar's earnings and profits. The proposed regulations have a
retroactive effective date of April 1, 1992, and therefore if Gemstar is or
ever was a PFIC, and if the regulations are adopted in their current form,
Gemstar stockholders who are United States persons and who have not made a
timely "qualified electing fund" election would be subject to United States
federal income tax on the excess of the fair market value of their Gemstar
common stock over their tax basis in such stock as a result of the change in
Gemstar's place of incorporation. The tax on such "excess" would be imposed at
the rate applicable to ordinary income and an interest charge would apply based
on a complex set of computational rules designed to offset the tax deferral to
such stockholders on Gemstar's undistributed earnings.
Future Gemstar Income Subject to United States Federal Income Tax. The
change in Gemstar's place of incorporation will likely result in a greater
portion of Gemstar's earnings being subject to United States federal income tax
than is currently the case and may therefore subject Gemstar to a higher
effective income tax rate. As non-United States persons, Gemstar and its
foreign subsidiaries are generally not subject to tax in the United States on
their income derived from sources outside the United States. Following the
change in Gemstar's place of incorporation, however, Gemstar will be subject to
United States federal income tax on its worldwide income. In addition, all of
Gemstar's foreign subsidiaries meeting the definition of a CFC will be subject
to subpart F provisions under the Code. As a consequence, Gemstar may be
required to include in its United States taxable income certain items of income
earned by such foreign subsidiaries when that income is earned, even if Gemstar
does not receive dividends from those foreign subsidiaries. The change in
Gemstar's place of incorporation could thus result in a significant increase in
the amount of Gemstar income subject to United States federal income tax.
Gemstar stockholders should not forward their stock certificates in the
British Virgin Islands corporation with the enclosed proxy card. The stock
certificates of the British Virgin Islands corporation will continue to
represent shares of common stock in the Delaware corporation after the change
in Gemstar's place of incorporation.
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EXPERTS
The consolidated financial statements of Gemstar International Group Limited
as of March 31, 1999 and 1998, and for each of the years in the three-year
period ended March 31, 1999, have been incorporated by reference in this joint
proxy statement/prospectus in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The statement of operations of StarSight Telecast, Inc. and the related
statements of shareholders' equity and cash flows for the year ended December
31, 1996, not presented separately herein, before restatement to conform
StarSight's accounting policies and fiscal year to those of Gemstar, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference.
The consolidated financial statements and schedule of TV Guide, Inc. as of
December 31, 1998 and 1997, and for the years then ended, have been
incorporated by reference in this joint proxy statement/prospectus and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements and schedule of TV Guide, Inc.
(formerly United Video Satellite Group, Inc.) for the period ended December 31,
1996, incorporated by reference in this joint proxy statement/prospectus have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference elsewhere herein, which are based in
part on the reports of KPMG LLP, independent auditors. The financial statements
referred to above are included in reliance upon such reports given on the
authority of such firms as experts in accounting and auditing.
The combined financial statements and schedule of News America Publications
Inc. and subsidiaries incorporated by reference in this joint proxy
statement/prospectus and elsewhere in the registration statement report have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
LEGAL OPINIONS
The legality of the shares of Gemstar common stock to be issued in
connection with the merger will be passed upon by O'Melveny & Myers LLP.
Certain federal income tax consequences of the merger will be passed upon for
Gemstar by O'Melveny & Myers LLP and for TV Guide by Baker Botts L.L.P. The
legality of the shares of Gemstar common stock to be outstanding upon the
change in Gemstar's place of incorporation will be passed upon by Potter
Anderson & Corroon LLP.
STOCKHOLDER PROPOSALS
TV Guide will hold a 2000 annual meeting of stockholders only if the merger
is not completed before the time of such meeting. If such a meeting is held,
any proposals of stockholders intended to be presented at the 2000 annual
meeting of TV Guide stockholders must have been received by the Secretary of TV
Guide no later than March 15, 2000 to be considered for inclusion in its 2000
proxy materials.
For stockholder proposals to be presented at the 2000 annual meeting of
Gemstar stockholders and to be considered for inclusion in Gemstar's 2000 proxy
materials, notice of any such proposal must be received by Gemstar no later
than May 4, 2000.
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OTHER MATTERS
As of the date of this joint proxy statement/prospectus, Gemstar's board of
directors knows of no matters that will be presented for consideration at the
Gemstar stockholders' meeting other than as described in this joint proxy
statement/prospectus. If any other matters shall properly come before the
Gemstar stockholders' meeting or any adjournments or postponements thereof and
be voted upon, the enclosed proxies will be deemed to confer discretionary
authority on the individuals named as proxies therein to vote the shares
represented by such proxies as to any such matters. The persons named as
proxies intend to vote or not to vote in accordance with the recommendation of
the management of Gemstar.
As of the date of this joint proxy statement/prospectus, TV Guide's board of
directors knows of no matters that will be presented for consideration at the
TV Guide stockholders' meeting other than as described in this joint proxy
statement/prospectus. If any other matters shall properly come before the TV
Guide stockholders' meeting or any adjournments or postponements thereof and be
voted upon, the enclosed proxies will be deemed to confer discretionary
authority on the individuals named as proxies therein to vote the shares
represented by such proxies as to any such matters. The persons named as
proxies intend to vote or not to vote in accordance with the recommendation of
the management of TV Guide.
WHERE YOU CAN FIND MORE INFORMATION
TV Guide and Gemstar file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information we file at
the Securities and Exchange Commission's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-8330 for further information on the public reference rooms. Our SEC filings
are also available to the public from commercial document retrieval services
and at the web site maintained by the SEC at http://www.sec.gov.
Gemstar filed a registration statement on Form S-4 to register with the SEC
the Gemstar common stock which Gemstar will issue to TV Guide stockholders in
the merger. This document is part of that registration statement and
constitutes a prospectus of Gemstar in addition to being a proxy statement for
Gemstar and TV Guide for their stockholders' meetings. As allowed by the SEC
rules, this document does not contain all of the information you can find in
the registration statement or the exhibits to the registration statement.
The SEC allows Gemstar and TV Guide to incorporate by reference information
into this document, which means that Gemstar and TV Guide can disclose
important information to you by referring to another document filed separately
with the SEC. The information incorporated by reference is deemed to be part of
this document, except for any information superseded by information in this
document.
This document incorporates by reference the documents set forth below:
Gemstar SEC Filings (Commission File No. 0-26878):
. Annual Report on Form 10-K for the fiscal year ended March 31, 1999.
. Quarterly Reports on Form 10-Q for the quarters ended June 30 and
September 30, 1999.
. Current Reports on Form 8-K for January 25, 2000 and February 8,
2000.
. Revised Definitive Proxy Statement filed on August 30, 1999.
TV Guide SEC Filings (Commission File No. 0-22662):
. Annual Report on Form 10-K for the fiscal year ended December 31,
1998 (excluding information that has been superseded by the
information included in the Current Report on Form 8-K filed
December 30, 1999).
. Quarterly Reports on Form 10-Q for the quarters ended March 31, June
30 and September 30, 1999.
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. Current Reports on Form 8-K filed February 24, March 16, June 11,
1999, December 30, 1999 (which December 30, 1999 Form 8-K contains
information which supersedes information included in the 1998 Annual
Report on Form 10-K) and February 8, 2000.
Any additional documents that Gemstar or TV Guide may file with the
Securities and Exchange Commission under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended, between the date of this
document and the date of the stockholders' meetings are also incorporated by
reference.
The documents incorporated by reference and listed above are available
without charge, excluding all exhibits unless the exhibits have specifically
been incorporated by reference in this document. Stockholders may obtain
documents listed above by requesting them in writing from the appropriate
company at the following address:
Gemstar International Group Limited TV Guide, Inc.
Investor Relations Investor Relations
135 North Los Robles Avenue, Suite 800 7140 South Lewis Avenue
Pasadena, California 91101 Tulsa, Oklahoma 74136-5422
(626) 792-5700 (918) 488-4000
If you would like to request documents from us, please do so by March 7,
2000, so that you may receive them before the stockholders' meetings. You
should rely on the information contained in this document to vote on the
proposals submitted by the Gemstar and TV Guide boards. We have not authorized
anyone to provide you with information that is different from what is contained
in this document. This document is dated February 7, 2000. You should not
assume that the information contained in this document is accurate as of any
date other than such date, and neither the mailing of this document to
stockholders of Gemstar and TV Guide nor the issuance of Gemstar common stock
in the merger shall create any implication to the contrary.
You are urged to sign, date and promptly mail the enclosed proxy in the
enclosed prepaid envelope. Prompt return of your proxy may save Gemstar and TV
Guide additional solicitation expense.
We encourage all stockholders of Gemstar and TV Guide to attend the special
stockholders' meetings on March 17, 2000.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of October
4, 1999 by and among Gemstar International Group Limited, a British Virgin
Islands corporation ("Parent"), G Acquisition Subsidiary Corp., a Delaware
corporation and a direct wholly owned subsidiary of Parent ("Sub"), and TV
Guide, Inc., a Delaware corporation (the "Company").
BACKGROUND
A. The respective Boards of Directors of Parent, Sub and the Company have
approved the merger of Sub with and into the Company (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), whereby each issued and outstanding share of the Company's Class A
common stock, $0.01 par value per share (the "Company Class A Common Stock")
and each issued and outstanding share of the Company's Class B common stock,
$0.01 par value (the "Company Class B Common Stock", and together with the
Company Class A Common Stock, the "Company Common Stock"), other than shares to
be cancelled in accordance with Section 2.1(b), will be converted into the
right to receive a certain number of ordinary shares, $0.01 par value per
share, of Parent ("Parent Common Stock", which term shall also include any
rights attached to such Parent Common Stock to purchase Parent's Series A
Junior Participating Preferred Shares), such number to be determined as
provided herein.
B. Pursuant to, and in accordance with, Regulation 127 of Parent's Amended
and Restated Articles of Association, as amended ("Parent's Articles"), Section
88 of the International Business Companies Act, 1984 (Cap. 291) of the British
Virgin Islands (the "IBCA"), and Section 388 of the DGCL, the Board of
Directors of Parent has approved the continuation and domestication of Parent
as a corporation organized and incorporated pursuant to the laws of the State
of Delaware, such domestication to be effective prior to the Effective Time (as
defined below) of the Merger, at which time Parent shall cease to be a
corporation organized and incorporated under the laws of the British Virgin
Islands, shall continue as a corporation organized and incorporated under the
laws of the State of Delaware with the Certificate of Incorporation in the form
attached hereto as Exhibit 1.7(a) and the Bylaws in the form attached hereto as
Exhibit 1.7(b) serving as the certificate of incorporation and bylaws of Parent
until amended in accordance with the terms thereof and the laws of the State of
Delaware (the "Domestication").
C. The Merger requires the approval of the holders of a majority of the
combined voting power of the outstanding shares of the Company Common Stock
voting together as a single class (the "Company Stockholder Approval").
D. The rules of the Nasdaq National Market require that the stockholders of
Parent ("Parent Stockholders") approve the issuance of the Parent Common Stock
pursuant to this Agreement by the affirmative vote of the holders of a majority
of the shares of Parent Common Stock voted at a meeting of Parent Stockholders
in person or by proxy and Parent will seek to obtain such approval of the
Parent Stockholders of the Domestication as is required by applicable law
(collectively, the "Parent Stockholder Approvals" and together with the Company
Stockholder Approval, the "Stockholder Approvals").
E. Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
F. For federal income tax purposes, it is intended that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
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G. Concurrently with the execution of this Agreement and as an inducement to
Parent to enter into this Agreement, each of Liberty Media Corporation
("Liberty") and The News Corporation Limited ("News Corp."), each an indirect
stockholder of the Company (the "Company Significant Stockholders"), has
entered into an agreement with Parent (the "Company Voting Agreements"), in the
applicable form attached hereto as Exhibits A-1 through A-2, pursuant to which
the Company Significant Stockholders have, among other things, agreed (i) to
vote their shares of the Company Common Stock in favor of the Merger, and (ii)
to take certain other actions as provided therein.
H. Concurrently with the execution of this Agreement and as an inducement to
the Company to enter into this Agreement, each of Henry C. Yuen, Elsie Ma
Leung, Dynamic Core Holdings Limited and THOMSON multimedia, S.A., each a
stockholder of Parent (the "Parent Significant Stockholders"), has entered into
an agreement with the Company (the "Parent Voting Agreements"), in the
applicable form attached hereto as Exhibits B-1 through B-4, pursuant to which
each Parent Significant Stockholder has, among other things, agreed (i) to vote
their respective shares of Parent Common Stock in favor of the issuance of the
Parent Common Stock and the Domestication pursuant to this Agreement, and (ii)
to take certain other actions as provided therein.
I. Concurrently with the execution of this Agreement and as an inducement to
Parent to enter into this Agreement, the Company and Parent have entered into a
Company Option Agreement (the "Company Option Agreement") pursuant to which the
Company shall grant to Parent an option to purchase shares of Company Common
Stock as set forth in the Company Option Agreement.
J. Concurrently with the execution of this Agreement and as an inducement to
the Company to enter into this Agreement, the Company and Parent have entered
into a Parent Option Agreement (the "Parent Option Agreement") pursuant to
which Parent shall grant to the Company an option to purchase shares of Parent
Common Stock as set forth in the Parent Option Agreement.
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AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
The Merger
Section 1.1 The Domestication of Parent. Upon the terms and subject to the
conditions set forth in this Agreement and in accordance with Regulation 127 of
Parent's Articles, Section 88 of the IBCA and Section 388 of the DGCL, prior to
the Effective Time of the Merger, Parent shall effect the Domestication.
Following the Domestication, Parent shall cease to be a corporation organized
pursuant to the laws of the British Virgin Islands.
Section 1.2 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement and in accordance with the DGCL, Sub shall be merged
with and into the Company at the Effective Time (as defined in Section 1.4).
Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
the Company and of Sub in accordance with the DGCL.
Section 1.3 Closing. Unless this Agreement shall have been terminated
pursuant to Section 7.1, the closing of the Merger will take place at 10:00
a.m. on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article VI (the "Closing Date"), at the offices of O'Melveny & Myers LLP, 610
Newport Center Drive, 17th Floor, Newport Beach, California, unless another
time, date or place is agreed to in writing by the parties hereto.
Section 1.4 Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing a Certificate of Merger substantially in the
form of Exhibit 1.4 (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, executed in accordance with the relevant provisions
of the DGCL (the date and time of such filing, or such later date and time as
may be specified in the Certificate of Merger by mutual agreement of Parent,
Sub and the Company, being the "Effective Time").
Section 1.5 Effects of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Company
and Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
Section 1.6 Certificate of Incorporation and Bylaws of Surviving
Corporation. The Certificate of Incorporation of the Sub in effect at the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until duly amended in accordance with the terms thereof and the
DGCL; provided, however, that at the Effective Time the Certificate of
Incorporation of the Surviving Corporation shall be amended so that the name of
the Surviving Corporation shall be "TVG, Inc." or such other name as the
parties hereto may agree. The Bylaws of Sub in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation until duly amended in
accordance with the terms thereof and the DGCL.
Section 1.7 Certificate of Incorporation and Bylaws of Parent. Following the
Domestication and at the Effective Time, the Certificate of Incorporation in
the form attached hereto as Exhibit 1.7(a) shall be the Certificate of
Incorporation of Parent and shall remain in effect until duly amended in
accordance with the terms thereof and the laws of the State of Delaware.
Following the Domestication and at the Effective Time, the Bylaws in the form
attached hereto as Exhibit 1.7(b) shall be the Bylaws of Parent (the "Bylaws of
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Parent") and shall remain in effect until duly amended in accordance with the
terms thereof and the laws of the State of Delaware.
Section 1.8 Directors. At the Effective Time, the directors of the Company
immediately prior to the Effective Time shall be deemed to have resigned at
such time and the persons whose names are set forth on Exhibit 1.8 shall be the
directors of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified.
Section 1.9 Officers. At the Effective Time, the officers of the Company
immediately prior to the Effective Time shall continue to serve as the officers
of the Surviving Corporation until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified.
Section 1.10 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Sub or the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized, so long as such action is not in conflict with this Agreement, to
execute and deliver, in the name and on behalf of Sub or the Company, all such
deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf Sub or the Company, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
Effect of the Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates
Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Sub, the Company, or the
holders of any shares of the Company Common Stock or any shares of capital
stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub issued
and outstanding immediately prior to the Effective Time shall be converted
into and exchanged for one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each share of
the Company Common Stock that is owned by the Company and each share of the
Company Common Stock that is owned by Parent or Sub immediately prior to
the Effective Time shall automatically be cancelled and retired without any
conversion thereof and no consideration shall be delivered with respect
thereto.
(c) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding as of the Effective Time, other than shares to
be cancelled in accordance with Section 2.1(b), shall be converted, subject
to Section 2.1(e) and 2.2(e), into .6573 shares (the "Exchange Ratio") of
Parent Common Stock (including all rights attached thereto). As of the
Effective Time, all such shares of the Company Common Stock shall no longer
be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and the holders of certificates or instruments previously
evidencing such shares of the Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect
thereto except as otherwise provided herein or by law. Each certificate
previously representing the Company Common Stock shall thereafter represent
the right to receive a certificate representing the shares of Parent Common
Stock into which the Company Common Stock was converted in the Merger. Such
certificates previously representing shares of the Company Common Stock
shall be exchanged for certificates representing whole shares of Parent
Common Stock issued in
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consideration therefor upon the surrender of such certificates in
accordance with the provisions of Section 2.2, without interest. No
fractional shares of Parent Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.2(e).
(d) Stock Options. At the Effective Time, all options to purchase the
Company Common Stock (each, a "Company Stock Option") then outstanding
under the TV Guide, Inc. Stock Option Plan for Non-Employee Directors and
the TV Guide, Inc. Equity Incentive Plan (collectively, the "Company Stock
Option Plans") shall be assumed by Parent in accordance with Section 5.4
hereof.
(e) Adjustment to Exchange Ratio. If between the date of this Agreement
and the Effective Time, the outstanding shares of Parent Common Stock or
the Company Common Stock shall have been changed into a different number of
shares or a different class by reason of any reclassification,
recapitalization, split-up, stock dividend, stock combination, exchange of
shares, readjustment or otherwise, then the Exchange Ratio shall be
correspondingly adjusted. Nothing in this Section 2.1(e) shall be construed
to relieve the parties from their respective obligations under Section 4.1
below.
Section 2.2 Exchange of Certificates.
(a) Exchange Agent. Parent shall deposit, or shall cause to be deposited,
with American Stock Transfer and Trust Company, as exchange agent for Parent
Common Stock (the "Exchange Agent") as of the Effective Time (or otherwise when
requested by the Exchange Agent from time to time in order to effect any
exchange pursuant to this Section 2.2), for the benefit of the holders of
shares of the Company Common Stock for exchange in accordance with this Article
II through the Exchange Agent, certificates representing the shares of Parent
Common Stock issuable pursuant to Section 2.1 in exchange for outstanding
shares of the Company Common Stock (such certificates representing shares of
Parent Common Stock together with any dividends or distributions with respect
thereto, being collectively referred to as the "Exchange Fund"), and cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
2.2 (e). The Exchange Agent shall, pursuant to irrevocable instructions,
deliver the Parent Common Stock contemplated to be issued pursuant to Section
2.1 out of the Exchange Fund. Except as contemplated by Section 2.2(e), the
Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, Parent shall instruct the Exchange Agent to mail to each holder
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of the Company Common Stock (for convenience of
reference, the certificates of the Company Common Stock are referred to as the
"Certificates"), (i) a letter of transmittal (which shall be in customary form
and shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates
to the Exchange Agent) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of Parent
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, and the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate evidencing that number of whole shares of Parent Common Stock which
such holder has the right to receive in respect of the shares of the Company
Common Stock formerly evidenced by such Certificate (after taking into account
the provisions of this Agreement and all shares of the Company Common Stock
then held of record by such holder), cash in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e)
and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c), and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of the Company Common
Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock may
be issued to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate, accompanied by all documents
required to evidence and effect such transfer, shall be properly endorsed with
signature guarantee or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by
reason of the issuance of shares of Parent Common Stock to a person other than
the registered holder of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is
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not applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the certificate evidencing whole
shares of Parent Common Stock, cash in lieu of any fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(e) and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.2(c). No interest will be paid or will accrue on any cash payable
pursuant to Section 2.2(c) or 2.2(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made on or after the Effective Time with respect to
Parent Common Stock with a record date on or after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of Parent Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.2(e),
in each case until the surrender of such Certificate in accordance with this
Article II. Subject to the effect of applicable escheat laws, following
surrender of such Certificate, there shall be paid to the holder of the
certificate representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
any such cash payable in lieu of a fractional share of Parent Common Stock to
which such holder is entitled pursuant to Section 2.2(e) and the amount of
dividends or other distributions with a record date on or after the Effective
Time theretofore paid with respect to such whole shares of Parent Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date on or after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable
with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in the Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid pursuant
to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the shares of the Company Common
Stock theretofore represented by such Certificates, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by the Company on such shares of the Company Common Stock
in accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time and have not been paid
prior to surrender. At the Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further registrations of
transfers of shares of the Company Common Stock, or transfer or exercise of the
Company Stock Options thereafter on the records of the Company. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, Parent
or the Exchange Agent for any reason, they shall be cancelled and exchanged as
provided in this Article II.
(e) No Fractional Shares.
(i) No Certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate issued and outstanding at the
Effective Time who would otherwise be entitled to receive a fractional
share of Parent Common Stock upon surrender of such Certificate for
exchange pursuant to this Article II (after taking into account all shares
of Company Common Stock then held by such holder) shall receive, in lieu
thereof, cash in an amount equal to the value of such fractional share,
which shall be equal to the fraction of a share of Parent Common Stock that
would otherwise be issued multiplied by the average closing price for a
share of Parent Common Stock on the Nasdaq National Market (as reported in
The Wall Street Journal) during the 20 consecutive trading days ending on
the third trading day prior to the Effective Time.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Certificates with respect to any
fractional share interests, the Exchange Agent shall promptly pay such
amounts to such holders of Certificates subject to and in accordance with
the terms of Section 2.2(c).
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(f) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of Certificates for twelve months after
the Effective Time shall be delivered to Parent, upon demand, and any holders
of Certificates who have not theretofore complied with this Article II shall
thereafter look as a general creditor only to Parent for payment of the shares
of Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock to
which they are entitled.
(g) No Liability. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any holder of shares of the Company Common Stock, or Stock
Options for any shares of Parent Common Stock (or dividends or distributions
with respect thereto) or cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(i) Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common
Stock, cash in lieu of fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(c).
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. Notwithstanding
anything herein to the contrary, no representation is or shall be considered to
have been made with respect to any litigation, claims or disputes between the
Company and Parent or their respective subsidiaries, the merits of any such
claim or merits of defenses related thereto, based on the intellectual property
of the Company or Parent or their respective subsidiaries. Except as included
in, or filed in connection with, the Company SEC Documents (as defined in
Section 3.1(e)) which are Publicly Available ("Publicly Available" means
documents filed with the SEC that are publicly available on or before August
31, 1999, which shall be deemed to include exhibits to documents filed with the
SEC for which confidential treatment has been sought) or on the disclosure
schedule delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company and each of
its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate power and authority to carry on its
business as now being conducted. The Company and each of its subsidiaries
is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a "material
adverse effect" (as defined in Section 8.3(d)) on the Company.
(b) Subsidiaries. The Company Disclosure Schedule lists each subsidiary
of the Company and its jurisdiction of incorporation or organization. All
the outstanding shares of capital stock of each such subsidiary that is a
corporation have been validly issued and are fully paid and nonassessable.
The shares of capital stock, membership interests and partnership
interests, as applicable, of each such subsidiary that is owned by the
Company, by another subsidiary of the Company or by the Company and another
such subsidiary, are owned free and clear of all liens. Except for (i) the
capital stock of its subsidiaries that are corporations, and (ii) except
for the membership interests or partnership interests of its subsidiaries
that are
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limited liability companies or partnerships, and (iii) except for
investments in marketable securities, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of 650,000,000 shares of the Company Class A Common Stock,
300,000,000 shares of the Company Class B Common Stock, and 2,000,000
shares of the Company's Preferred Stock, $0.01 par value. At the close of
business on September 30, 1999, (i) 77,126,612 shares of the Company Class
A Common Stock were issued and outstanding and 74,993,176 shares of the
Company Class B Common Stock were issued and outstanding, (ii) no shares of
the Company Common Stock were held by the Company in its treasury, (iii)
4,253,584 shares of the Company Common Stock were reserved for issuance
upon exercise of the outstanding Company Stock Options, and (iv) 1,861,894
shares of the Company Common Stock were reserved for issuance upon exercise
of Company Stock Options available for grant under the Company Stock Option
Plans. As of September 30, 1999, there are no shares of the Company's
Preferred Stock issued or outstanding. Except as set forth above, at the
close of business on September 30, 1999, no shares of capital stock or
other voting securities of the Company were issued, reserved for issuance
or outstanding. All options to purchase shares of Company Common Stock were
granted under the Company Stock Option Plans. There are no outstanding
stock appreciation rights of the Company and no outstanding limited stock
appreciation rights or other rights to redeem for cash options or warrants
of the Company. All outstanding shares of capital stock of the Company are,
and all shares which may be issued upon the exercise of Company Stock
Options will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above and except for the Company Option Agreement, as
of the date of this Agreement, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its subsidiaries is
a party or by which any of them is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of the Company or of any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock (or options to acquire any
such shares) of the Company or any of its subsidiaries. Except for revenue
sharing arrangements in license agreements entered into in the ordinary
course of business, there are no agreements, arrangements or commitments of
any character (contingent or otherwise) pursuant to which any person is or
may be entitled to receive any payment based on the revenues, earnings or
financial performance of the Company or any of its subsidiaries or assets
or calculated in accordance therewith (other than ordinary course payments
or commissions to sales representatives of the Company based upon revenues
generated by them without augmentation as a result of the transactions
contemplated hereby) or to cause the Company or any of its subsidiaries to
file a registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), or which otherwise relate to the registration of
any securities of the Company. Neither the Company nor any of its
subsidiaries owns of record or beneficially any shares of Parent Common
Stock.
(d) Authority; Noncontravention. The Company has the requisite corporate
power and authority to enter into this Agreement and the Company Ancillary
Agreements (as defined in Section 8.3(c) hereof) and, subject to the
Company Stockholder Approval, to consummate the transactions contemplated
by this Agreement and the Company Ancillary Agreements. The execution and
delivery of this Agreement and the Company Ancillary Agreements by the
Company and the consummation by the Company of the transactions
contemplated by this Agreement and the Company Ancillary Agreements have
been duly authorized by all necessary corporate action on the part of the
Company, subject to the Company Stockholder Approval of this Agreement.
This Agreement and the Company Ancillary Agreements have been duly executed
and delivered by the Company and constitute a valid and binding obligation
of the
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Company, enforceable against the Company in accordance with its terms,
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors rights generally and (ii)
the availability of injunctive relief and other equitable remedies. The
execution and delivery of this Agreement and the Company Ancillary
Agreements do not, and the consummation of the transactions contemplated by
this Agreement and the Company Ancillary Agreements and compliance with the
provisions of this Agreement and the Company Ancillary Agreements will not,
conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any lien upon any of
the properties or assets of the Company or any of its subsidiaries under,
(i) the certificate of incorporation or bylaws of the Company or the
comparable charter or organizational documents of any of its subsidiaries,
(ii) the Exclusive Affiliation Agreement between TV Guide Interactive, Inc.
and Satellite Services, Inc., dated March 4, 1999, (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or
license applicable to the Company or any of its subsidiaries or their
respective properties or assets or (iv) subject to the governmental filings
and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
the Company or any of its subsidiaries or their respective properties or
assets, other than, in the case of clauses (iii) or (iv), any such
conflicts, violations, defaults, rights or liens that individually or in
the aggregate would not (x) have a material adverse effect on the Company,
(y) impair in any material respect the ability of the Company to perform
its obligations under this Agreement and the Company Ancillary Agreements
or (z) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement and the Company Ancillary
Agreements. No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by the Company or any of its
subsidiaries in connection with the execution and delivery of this
Agreement and the Company Ancillary Agreements by the Company or the
consummation by the Company of the transactions contemplated by this
Agreement and the Company Ancillary Agreements, except for (i) the filing
with the Federal Trade Commission and the Antitrust Division of the
Department of Justice (the "Specified Agencies") of a premerger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), (ii) the filing with
the Securities and Exchange Commission (the "SEC") of (x) the Proxy
Statement (as defined in Section 5.1) and (y) such reports under Sections
13(a), 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as may be required in connection with this Agreement
and the Company Ancillary Agreements and the transactions contemplated by
this Agreement and the Company Ancillary Agreements, (iii) the filing of
the Certificate of Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (iv) any filings with the
Federal Communications Commission (the "FCC") or any filings with the
United States Committee of Foreign Investments pursuant to the Exxon-Florio
Amendment to the Defense Protection Act of 1988 ("Exxon-Florio"), and (v)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings, including under (x) the laws of any foreign
country in which the Company or any of its subsidiaries conducts any
business or owns any property or assets or (y) the "takeover" or "blue sky"
laws of various states, the failure of which to be obtained or made would
not, individually or in the aggregate, have a material adverse effect on
the Company or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement and the Company Ancillary
Agreements.
(e) SEC Documents; Financial Statements. The Company has filed with the
SEC all required reports and forms and other documents (the "Company SEC
Documents"). As of their respective dates, except as subsequently amended
in a Publicly Available Company SEC Document, the Company SEC Documents
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to
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such Company SEC Documents and, to Company's knowledge, none of the Company
SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the
Company included in the Company SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent
consolidated balance sheet included in the Publicly Available Company SEC
Documents, neither the Company nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be recognized or disclosed on
a consolidated balance sheet of the Company and its consolidated
subsidiaries or in the notes thereto which are, individually or in the
aggregate, material to the business, results of operations or financial
condition of the Company and its consolidated subsidiaries taken as a
whole.
(f) Contracts. The Company has no executory agreement, contract,
arrangement or other obligation (i) with an affiliate (including with any
officer or director) of the Company (whether such executory agreement,
contract, arrangement or other obligation is oral or written) which would
be required by Rule 601 of SEC Regulation S-K to be filed as an exhibit to
an Annual Report on Form 10-K, or (ii) to sell, dispose or acquire a
"Significant Subsidiary," as such term is defined in Rule 1-02 of SEC
Regulation S-X.
(g) Absence of Certain Changes or Events. (a) Since June 30, 1998, there
has not been any change, event or circumstance which, when taken
individually or together with all other changes, events or circumstances,
has had or would have a material adverse effect on the Company, and (b)
from December 31, 1998 to the date of this Agreement, (i) each of the
Company and its subsidiaries has conducted its businesses in the ordinary
course and in a manner consistent with past practice and (ii) there has not
been (A) any change by the Company or any of its subsidiaries in its
accounting policies, practices and procedures having an overall material
adverse effect on its assets, liabilities or earnings, except as required
by GAAP, (B) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any of its
subsidiaries (other than cash dividends payable by any wholly owned
subsidiary to another subsidiary or the Company), or (C) any increase in
the compensation payable or to become payable to any corporate officer or
heads of divisions of the Company or any of its subsidiaries whose annual
base compensation exceeds $500,000, except in the ordinary course of
business consistent with past practice or as required by employment
agreements in effect as of the date hereof.
(h) Litigation. There is no suit, action, investigation, audit or
proceeding pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries that, individually or in the
aggregate, could reasonably be expected to (i) have a material adverse
effect on the Company, (ii) impair in any material respect the ability of
the Company to perform its obligations under this Agreement or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or
any of its subsidiaries having, or which is reasonably likely to have, any
effect referred to in the foregoing clauses (i), (ii) or (iii).
(i) Absence of Changes in Benefit Plans. Except (i) as would not have,
in the aggregate, a material adverse effect on the Company, or (ii) as
required by applicable law, since March 1, 1999, no collective bargaining
agreement or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation,
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severance, disability, death benefit, hospitalization, medical or other
plan, arrangement or understanding (collectively, "Benefit Plans") has been
adopted or amended by the Company or its subsidiaries which provides
benefits to any current or former employee, officer or director of the
Company or any of its subsidiaries. There exist no employment, consulting,
severance, termination or indemnification agreements, arrangements or
understandings between the Company or any of its subsidiaries and any
current or former officer or director of the Company or any of its
subsidiaries as to which unsatisfied or potential obligations of the
Company exist which individually are greater than $500,000 per year. Except
as would not have, in the aggregate, a material adverse effect on the
Company and except as contemplated by this Agreement, since March 1, 1999,
neither the Company nor any of its subsidiaries has taken any action to
accelerate any rights or benefits under any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director or officer or for the benefit of employees
generally.
(j) ERISA Compliance.
(i) The Company has made, or shall if requested make, available to
Parent true, complete and correct copies of all "employee pension
benefit plans" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (sometimes referred
to herein as "Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA) and all other Benefit Plans currently
maintained, or contributed to, or required to be maintained or
contributed to, by the Company or any other person or entity that,
together with the Company, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each a "Company Commonly
Controlled Entity"), including all employment, termination, severance
or other contracts for the benefit of any current or former employees,
officers or directors of the Company or any of its subsidiaries as to
which unsatisfied or potential obligations of the Company which
individually are greater than $500,000 per year exist. The Company has
made, or shall if requested make, available to Parent true, complete
and correct copies of (v) the most recent annual report on Form 5500
filed with the Internal Revenue Service with respect to each of its
Benefit Plans (if any such report was required), (w) the most recently
prepared actuarial report for each such Benefit Plan (if any such
report was required), (x) the most recent summary plan description for
each such Benefit Plan for which such summary plan description is
required under ERISA, (y) the most recently received Internal Revenue
Service determination letter for each such Benefit Plan that is
intended to be qualified under Section 401(a) of the Code and (z) each
trust agreement and group annuity contract relating to any such Benefit
Plan.
(ii) Except as would not have, in the aggregate, a material adverse
effect on the Company, each of the Company's and its subsidiaries'
Benefit Plans has been administered in accordance with its terms.
Except as would not have, in the aggregate, a material adverse effect
on the Company, the Company, each of its subsidiaries and all such
Benefit Plans are in compliance with applicable provisions of ERISA and
the Code.
(iii) All of the Company's and its subsidiaries' Pension Plans
intended to be qualified under Section 401(a) of the Code have been the
subject of determination letters from the Internal Revenue Service to
the effect that such Pension Plans are qualified and exempt from
federal income taxes under Section 401(a) and 501(a), respectively, of
the Code and, to the knowledge of the Company, no such determination
letter has been revoked nor has revocation of such determination letter
been threatened, nor has any such Pension Plan been amended since the
date of its most recent determination letter or application therefor in
any respect that could reasonably be expected to adversely affect its
qualification or materially increase its costs.
(iv) No Pension Plan that the Company or any of its subsidiaries
maintains is subject to Title IV of ERISA.
(v) To the knowledge of the Company, none of the Company, any of its
subsidiaries, any officer of the Company or any of its subsidiaries or
any of the Company's or its subsidiaries' Benefit Plans
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which are subject to ERISA, including, without limitation, its Pension
Plans, any trusts created thereunder or any trustee or administrator
thereof, has engaged in a non-exempt "prohibited transaction" (as such
term is defined in Section 406 of ERISA or Section 4975 of the Code) or
any other breach of fiduciary responsibility that could reasonably be
expected to subject the Company, or any of its subsidiaries or any
officer of the Company or any of its subsidiaries, to tax or penalty
under ERISA, the Code or other applicable law that, except as would not
have, in the aggregate, a material adverse effect on the Company, has
not been corrected. Neither any of such Benefit Plans nor any of such
trusts has been terminated, nor has there been any "reportable event"
(as that term is defined in Section 4043 of ERISA) with respect
thereto, during the last five years.
(vi) Without regard to Company Stock Options, the consummation of
the transactions contemplated by this Agreement will not result in an
increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any benefits payable to or in respect
of any employee or former employee of the Company or any subsidiary of
the Company or the beneficiary or dependent of any such employee or
former employee.
(vii) With respect to any of the Company's or any of its
subsidiaries' Benefit Plans that is an employee welfare benefit plan,
(x) no such Benefit Plan is funded through a "welfare benefit fund," as
such term is defined in Section 419(e) of the Code, (y) each such
Benefit Plan that is a "group health plan," as such term is defined in
Section 5000(b)(1) of the Code, complies in all material respects with
the applicable requirements of Section 4980B(f) of the Code and (z)
each such Benefit Plan (including any such Benefit Plan covering
retirees or other former employees) may be amended or terminated
without a material adverse effect on the Company.
(viii) Except as would not have, in the aggregate, a material
adverse effect on the Company, no Company Commonly Controlled Entity
has incurred any material liability to a Pension Plan of the Company or
any of its subsidiaries (other than for contributions not yet due).
(k) Taxes.
(i) To the Company's knowledge and except as would not have, in the
aggregate, a material adverse effect on the Company, (A) each of the
Company and its subsidiaries has timely filed all federal, state, local
and foreign tax returns and reports required to be filed by it through
the date hereof and shall timely file all such returns and reports
required to be filed on or before the Effective Time; (B) all such
returns and reports are and will be true, complete and correct in all
material respects; (C) the Company and each of its subsidiaries has
paid and discharged (or the Company has paid and discharged on such
subsidiary's behalf) all taxes due from them, other than such taxes as
are being or will be contested in good faith by appropriate proceedings
and are, in the judgment of the management of the Company, adequately
reserved for on the most recent financial statements contained in the
Publicly Available Company SEC Documents filed prior to the date of
this Agreement; (D) the most recent financial statements contained in
the Company SEC Documents filed prior to the date of this Agreement
properly reflect in accordance with GAAP all taxes payable by the
Company and its subsidiaries for all taxable periods and portions
thereof through the date of such financial statements.
(ii) No claim or deficiency for any taxes has been proposed,
threatened, asserted or assessed by the Internal Revenue Service (the
"IRS") or any other taxing authority or agency against the Company, or
any of its subsidiaries which, if resolved against the Company or any
of its subsidiaries, would, individually or in the aggregate, have a
material adverse effect upon the Company. Neither the Company nor any
of its subsidiaries has waived any statute of limitations in respect of
any taxes or agreed to any extension of time with respect to a tax
assessment or deficiency.
(iii) Neither the Company nor any of its subsidiaries has taken or
agreed to take any action or has any knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
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(iv) Neither the Company nor any of its subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations.
Neither the Company nor any of its subsidiaries has been a United
States real property holding corporation within the meaning of Code
Section 897(c)(2). Each of the Company and its subsidiaries has
disclosed on its federal income tax returns all positions taken therein
that could give rise to a substantial understatement of federal income
tax within the meaning of Code Section 6662. Neither the Company nor
any of its subsidiaries is a party to any tax allocation or tax sharing
agreement. Neither the Company nor any of its subsidiaries has any
liability for the taxes of any person (other than any of the Company
and its subsidiaries) under Treasury Regulation Section 1.1502 -6 (or
any similar provision of state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
(v) As used in this Agreement, "taxes" shall include all federal,
state, local and foreign income, property, sales, excise and other
taxes, of any nature whatsoever (whether payable directly or by
withholding), together with any interest and penalties, additions to
tax or additional amounts imposed with respect thereto. Notwithstanding
the definition of "subsidiary" set forth in Section 8.3(g) of this
Agreement, for the purposes of this Section 3.1(k), references to the
Company and each of its subsidiaries shall include former subsidiaries
of the Company for the periods during which any such corporations were
included in the consolidated federal income tax return of the Company.
(l) Compliance with Applicable Laws.
(i) Each of the Company and its subsidiaries has in effect all
federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or
operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under any such Permit,
except for the lack of Permits and for defaults under Permits which
lack or default individually or in the aggregate would not have a
material adverse effect on the Company. To the knowledge of the
Company, no Governmental Entity is considering limiting, suspending or
revoking any of the Company's or its subsidiaries' Permits. The Company
and its subsidiaries are in compliance with (and have not violated) all
applicable statutes, laws, ordinances, rules, orders and regulations
(including, without limitation, those relating to safety, hiring,
promotion or pay of employees) of any Governmental Entity, except for
noncompliance which individually or in the aggregate would not have a
material adverse effect on the Company.
(ii) To the knowledge of the Company, the Company and each of its
subsidiaries is, and has been, and each of the Company's former
subsidiaries, while subsidiaries of the Company, was, in compliance in
all material respects with all applicable Environmental Laws, except
for noncompliance which individually or in the aggregate would not have
a material adverse effect on the Company. The term "Environmental Laws"
means any federal, state, local or foreign statute, code, ordinance,
rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, injunction or other
authorization, including the requirement to register underground
storage tanks, relating to: (A) emissions, discharges, releases or
threatened releases of Hazardous Material (as defined below) into the
environment, including, without limitation, into ambient air, soil,
sediments, land surface or subsurface, buildings or facilities, surface
water, groundwater, publicly owned treatment works, septic systems or
land; or (B) the generation, treatment, storage, disposal, use,
handling, manufacturing, transportation or shipment of Hazardous
Material.
(iii) During the period of ownership or operation by the Company and
its subsidiaries of any of their respective current or previously owned
or leased properties, there have been no releases of Hazardous Material
in, on, under or affecting such properties or, to the knowledge of the
Company, any surrounding site, except in each case for those which
individually or in the aggregate are not reasonably likely to have a
material adverse effect on the Company. Prior to the period of
ownership or operation by the Company and its subsidiaries of any of
their respective current or previously owned or leased properties, to
the knowledge of the Company, no Hazardous Material was generated,
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<PAGE>
treated, stored, disposed of, used, handled or manufactured at, or
transported, shipped or disposed of from, such current or previously
owned or leased properties, and there were no releases of Hazardous
Material in, on, under or affecting any such property or any
surrounding site, except in each case for those which individually or
in the aggregate are not reasonably likely to have a material adverse
effect on the Company. The term "Hazardous Material" means (A)
hazardous materials, contaminants, constituents, medical wastes,
hazardous or infectious wastes and hazardous substances as those terms
are defined in the following statutes and their implementing
regulations: the Hazardous Materials Transportation Act, 49 U.S.C. (S)
1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6901 et seq., the Comprehensive Environmental Response, Compensation
and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. (S) 9601 et seq., the Clean Water Act,
33 U.S.C. (S) 1251 et seq. and the Clean Air Act, 42 U.S.C. (S) 7401 et
seq., (B) petroleum, including crude oil and any fractions thereof, (C)
natural gas, synthetic gas and any mixtures thereof, (D) asbestos
and/or asbestos-containing material and (E) polychlorinated biphenyls
("PCBs") or materials or fluids containing PCBs in excess of 50 ppm.
(m) Brokers. Except for Merrill Lynch & Co., Inc., the fees and expenses
of which will be paid by the Company, no broker, investment banker,
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
(n) Opinion of Financial Advisor. The Company has received the opinion
of Merrill Lynch & Co., Inc., dated the date of this Agreement, to the
effect that, as of such date, the Exchange Ratio is fair to the Company's
stockholders, other than Liberty, News Corp., Parent and their respective
affiliates, from a financial point of view, and a signed copy of such
opinion has been delivered to Parent.
(o) Voting Requirements. The Company Stockholder Approval is the only
vote of the holders of any class or series of the Company's securities
necessary to approve this Agreement and the transactions contemplated by
this Agreement.
(p) Noncompetition. The Company and its subsidiaries are not subject to
any restriction of competition with respect to their respective businesses.
(q) Intellectual Property. Except as would not have, in the aggregate, a
material adverse effect on the Company, the Company and each of its
subsidiaries owns or possesses adequate and enforceable licenses or other
rights to use all patents, trade secrets, trade names, trademarks,
inventions and processes used in and material to the business of the
Company or such subsidiary as currently conducted, and such licenses and
rights will not be affected by the consummation of the Merger. Neither the
Company nor any of its subsidiaries has received any written notice or
charge of patent, trademark or copyright infringement which asserts the
rights of others with respect to such licenses and rights which is
reasonably likely to have a material adverse effect on the Company. Except
as would not have, in the aggregate, a material adverse effect on the
Company, the Company owns or rightfully possesses (i) the source code,
recorded on computer magnetic media and in written form, for its
information systems programs, including both the information systems
programs themselves and the product related infrastructure (the "Company
Software"), and (ii) all commentary, explanations, specifications,
documentation, proprietary information, test programs and program
specifications, compiler and assembler descriptions of proprietary or third
party system utilities, and descriptions of system/program generation and
programs not owned by the Company but required for use or support, relating
to the Company Software that are reasonably necessary for the Surviving
Corporation to maintain and enhance the Company Software, and to provide a
commercially standard level of service and support to users of the Company
Software without the aid of any other party and without use of any other
material.
(r) Year 2000 Compliance.
(i) The Company does not believe that the cost of required
modifications to its Company Systems to make the Company Year 2000
Compliant will have a material adverse effect on the Company.
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<PAGE>
(ii) For purposes of this Section 3.1(r), (i) "Company Systems"
shall mean all computer, hardware, software, systems, and equipment
(including embedded microcontrollers in non-computer equipment)
embedded within the current products of the Company and its
subsidiaries, and/or material to or necessary for the Company and its
subsidiaries to carry on their respective businesses as currently
conducted; and (ii) "Company Year 2000 Compliant" means that Company
Systems will (A) manage, accept, process, store and output data
involving dates reasonably expected to be encountered in the
foreseeable future and (B) accurately process date data from, into and
between the 20th and 21st centuries and each date during the years 1999
and 2000.
(s) Stockholders' Agreement. News Corp. and Liberty have entered into
the Stockholders' Agreement (the "Stockholders' Agreement") with Parent and
Henry C. Yuen attached hereto as Exhibit 3.1(s), which agreement shall
become binding and enforceable effective only upon the Effective Time.
section 3.2 Representations and Warranties of Parent and
Sub. Notwithstanding anything herein to the contrary, no representation is or
shall be considered to have been made with respect to any litigation claims or
disputes between the Company and Parent or their respective subsidiaries, the
merits of any such claim or merits of defenses related thereto, based on the
intellectual property of the Company or Parent or their respective
subsidiaries. Except as included in, or filed in connection with, the Parent
SEC Documents (as defined in Section 3.2(e)) or reports, forms and other
documents filed with the SEC by StarSight Telecast, Inc., in each case, which
are Publicly Available or on the disclosure schedule delivered by Parent to the
Company prior to the execution of this Agreement (the "Parent Disclosure
Schedule"), Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Parent and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and
has the requisite corporate power and authority to carry on its business as
now being conducted. Parent and each of its subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect
on Parent.
(b) Subsidiaries. The Parent Disclosure Schedule lists each subsidiary
of the Parent and its jurisdiction of incorporation or organization. All
the outstanding shares of capital stock, membership interests and
partnership interests, as applicable, of each such subsidiary that is a
corporation have been validly issued and are fully paid and nonassessable.
The shares of capital stock of each such subsidiary that is owned by the
Parent, by another subsidiary of the Parent or by the Parent and another
such subsidiary, are owned free and clear of all liens. Except for (i) the
capital stock of its subsidiaries that are corporations, and (ii) except
for the membership interests or partnership interests of its subsidiaries
that are limited liability companies or partnerships, and (iii) except for
investments in marketable securities, Parent does not own, directly or
indirectly, any capital stock or other ownership interest in any
corporation, partnership, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of Parent consists
of 500,000,000 shares of Parent Common Stock, par value $.01 per share, and
50,000,000 preference shares, par value $.01 per share ("Parent Preference
Shares") of which 10,000,000 shares have been designated Series A Junior
Participating Preference Shares. At the close of business on September 30,
1999, (i) 100,354,000 shares of Parent Common Stock and no shares of Parent
Preference Shares were issued and outstanding, (ii) 1,395,000 shares of
Parent Common Stock were held by Parent in its treasury, (iii) 25,372,000
shares of Parent Common Stock were reserved for issuance upon exercise of
outstanding employee stock options ("Parent Stock Options") to purchase
shares of Parent Common Stock under the Parent Stock Incentive Plan (as
defined below), and (iv) 7,695,000 shares of the Parent Common Stock were
reserved for issuance upon exercise of Parent Stock Options available for
grant under the Parent Stock Incentive Plan. Except as set forth above, at
the close of business on September 30, 1999, no shares of capital stock or
other voting
A-15
<PAGE>
securities of the Parent were issued, reserved for issuance or outstanding.
All options to purchase shares of Parent Common Stock were granted under
the Gemstar International Group Limited 1994 Stock Incentive Plan (the
"Parent Stock Incentive Plan"). There are no outstanding stock appreciation
rights of Parent and no outstanding limited stock appreciation rights or
other rights to redeem for cash options or warrants of Parent. All
outstanding shares of capital stock of Parent are, and all shares which may
be issued upon the exercise of stock options will be, and all shares which
may be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which stockholders of Parent may vote. Except as set forth above and except
for the Parent Option Agreement, as of the date of this Agreement, there
are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Parent or any of its subsidiaries is a party or by which any of them is
bound obligating Parent or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of Parent or of any of its
subsidiaries or obligating Parent or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations of Parent or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock (or
options to acquire any such shares) of Parent or any of its subsidiaries.
Except for revenue arrangements in license agreements entered into in the
ordinary course of business, there are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which
any person is or may be entitled to receive any payment based on the
revenues, earnings or financial performance of Parent or any of its
subsidiaries or assets or calculated in accordance therewith (other than
ordinary course payments or commissions to sales representatives of Parent
based upon revenues generated by them without augmentation as a result of
the transactions contemplated hereby) or to cause Parent or any of its
subsidiaries to file a registration statement under the Securities Act, or
which otherwise relate to the registration of any securities of Parent. As
of the date of this Agreement, the authorized capital stock of Sub consists
of 1,000 shares of common stock, par value $.01 per share, of which 100
shares have been validly issued, are fully paid and nonassessable and are
owned by Parent free and clear of any liens. Neither Parent nor any of its
subsidiaries owns of record or beneficially any shares of Company Common
Stock.
(d) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement and the Parent
Ancillary Agreements (as defined in Section 8.3(e)) and, subject to the
Parent Stockholder Approvals, to consummate the transactions contemplated
by this Agreement and the Parent Ancillary Agreements, including to effect
the Domestication. The execution and delivery of this Agreement and the
Parent Ancillary Agreements and the consummation of the transactions
contemplated by this Agreement and the Parent Ancillary Agreements,
including effecting the Domestication, have been duly authorized by all
necessary corporate action on the part of Parent and Sub, subject to the
Parent Stockholder Approvals. This Agreement and the Parent Ancillary
Agreements have been duly executed and delivered by Parent and Sub and
constitute a valid and binding obligation of each such party, enforceable
against each such party in accordance with its terms, subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors rights generally and (ii) the
availability of injunctive relief and other equitable remedies. The
execution and delivery of this Agreement and the Parent Ancillary
Agreements does not, and the consummation of the transactions contemplated
by this Agreement and the Parent Ancillary Agreements and compliance with
the provisions of this Agreement and the Parent Ancillary Agreements will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any lien upon any of
the properties or assets of Parent or any of its subsidiaries under, (i)
Parent's amended and restated memorandum of association or articles of
association or Sub's articles of incorporation or by-laws or the comparable
charter or organizational documents of any other subsidiary of
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<PAGE>
Parent, (ii) the grant of rights to Parent or its applicable subsidiary of
the Levine "713 and Reiter "578 Patents, (iii) subject to the governmental
filings and other matters referred to in the following sentence, any loan
or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable
to Parent or any of its subsidiaries or their respective properties or
assets or (iv) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of
its subsidiaries or their respective properties or assets, other than, in
the case of clauses (iii) or (iv), any such conflicts violations, defaults,
rights or liens that individually or in the aggregate would not (x) have a
material adverse effect on Parent, (y) impair in any material respect the
ability of Parent and Sub to perform their respective obligations under
this Agreement and the Parent Ancillary Agreements or (z) prevent or
materially delay the consummation of any of the transactions contemplated
by this Agreement and the Parent Ancillary Agreements. No consent,
approval, order or authorization of, or registration, declaration or filing
with any Governmental Entity is required by Parent or any of its
subsidiaries in connection with the execution and delivery of this
Agreement and the Parent Ancillary Agreements or the consummation by Parent
or Sub, as the case may be, of any of the transactions contemplated by this
Agreement and the Parent Ancillary Agreements, except for (i) the filing
with the Specified Agencies of a premerger notification and report form
under the HSR Act, (ii) the filing with the SEC of (x) the Form S-4 (as
defined in Section 5.1 hereof) and (y) such reports under Sections 13(a),
13(d) and 16(a) of the Exchange Act as may be required in connection with
this Agreement and the Parent Ancillary Agreements and the transactions
contemplated by this Agreement and the Parent Ancillary Agreements, (iii)
the filing of the Certificate of Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business, (iv) the filing of
the Certificate of Domestication and Certificate of Incorporation of Parent
with the Delaware Secretary of State, (v) filings required under the laws
of the British Virgin Islands in connection with the Domestication, (vi)
any required filings with the FCC or the United States Committee of Foreign
Investments pursuant to Exxon-Florio, and (vii) such other consents,
approvals, orders, authorizations, registrations, declarations and filings,
including under (x) the laws of any foreign country in which the Company or
any of its subsidiaries conducts any business or owns any property or
assets or (y) the "takeover" or "blue sky" laws of various states, the
failure of which to be obtained or made would not, individually or in the
aggregate, have a material adverse effect on Parent or prevent or
materially delay the consummation of any of the transactions contemplated
by this Agreement and the Parent Ancillary Agreements.
(e) SEC Documents; Financial Statements. Parent has filed with the SEC
all required reports and forms and other documents (the "Parent SEC
Documents"). As of their respective dates, except as subsequently amended
in a Publicly Available Parent SEC Document, the Parent SEC Documents
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Parent SEC Documents,
and, to Parent's knowledge, none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP (except,
in the case of unaudited statements, as permitted by Form 6-K and Form 10-Q
of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of Parent and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations
and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end adjustments). Except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent
consolidated balance sheet included in the Publicly Available Parent SEC
Documents, neither Parent nor any of its subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute,
contingent
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or otherwise) required by GAAP to be recognized or disclosed on a
consolidated balance sheet of Parent and its consolidated subsidiaries or
in the notes thereto which are, individually or in the aggregate, material
to the business, results of operations or financial condition of the Parent
and its consolidated subsidiaries taken as a whole.
(f) Contracts. Parent has no executory agreement, contract, arrangement
or other obligation (i) with an affiliate (including with any officer or
director) of Parent (whether such executory agreement, contract,
arrangement or other obligation is oral or written) which would be required
by Rule 601 of SEC Regulation S-K to be filed as an exhibit to an Annual
Report on Form 10-K, or (ii) to sell, dispose or acquire a "Significant
Subsidiary," as such term is defined in Rule 1-02 of SEC Regulation S-X.
(g) Absence of Certain Changes or Events. (a) Since June 30, 1998, there
has not been any change, event or circumstance which, when taken
individually or together with all other changes, events or circumstances,
has had or would have a material adverse effect on Parent or Sub, and (b)
from June 30, 1998 to the date of this Agreement, (i) each of the Parent
and its subsidiaries has conducted its businesses in the ordinary course
and in a manner consistent with past practice and (ii) there has not been
(A) any change by Parent or any of its subsidiaries in its accounting
policies, practices and procedures having an overall material adverse
effect on its assets, liabilities or earnings, except as required by GAAP,
(B) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Parent or any of its
subsidiaries (other than cash dividends payable by any wholly owned
subsidiary to another subsidiary or Parent), or (C) any increase in the
compensation payable or to become payable to any corporate officer or heads
of divisions of Parent or any of its subsidiaries whose annual base
compensation exceeds $500,000, except in the ordinary course of business
consistent with past practice or as required by employment agreements in
effect as of the date hereof.
(h) Litigation. There is no suit, action, investigation, audit or
proceeding pending, or to the knowledge of Parent, threatened against
Parent or any of its subsidiaries that, individually or in the aggregate,
could reasonably be expected to (i) have a material adverse effect on
Parent, (ii) impair in any material respect the ability of Parent to
perform its obligations under this Agreement or (iii) prevent the
consummation of any of the transactions contemplated by this Agreement, nor
is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Parent or any of its
subsidiaries having, or which is reasonably likely to have any effect
referred to in the foregoing clauses (i), (ii) or (iii).
(i) Absence of Changes in Benefit Plans. Except (i) as would not have,
in the aggregate, a material adverse effect on Parent or any of its
subsidiaries, or (ii) as required by applicable law, since March 1, 1999,
no collective bargaining agreement or any Benefit Plans has been adopted or
amended by the Parent or its subsidiaries which provides benefits to any
current or former employee, officer or director of Parent or any of its
subsidiaries. There exist no employment, consulting, severance, termination
or indemnification agreements, arrangements or understandings between
Parent or any of its subsidiaries and any current or former officer or
director of Parent or any of its subsidiaries as to which unsatisfied or
potential obligations of Parent exist which individually are greater than
$500,000 per year. Except as would not have, in the aggregate, a material
adverse effect on Parent or any of its subsidiaries and except as
contemplated by this Agreement, since March 1, 1999, neither Parent nor any
of its subsidiaries has taken any action to accelerate any rights or
benefits under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director or
officer or for the benefit of employees generally.
(j) ERISA Compliance.
(i) Parent has made, or shall if requested make, available to the
Company true, complete and correct copies of all "employment pension
benefit plans" (as defined in Section 3(2) of ERISA, "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA) and all other
Benefit Plans currently maintained, or contributed to, or required to
be maintained or contributed to, by Parent or
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any other person or entity that, together with Parent, is treated as a
single employer under Section 414(b), (c), (m), or (o) of the Code
(each a "Parent Commonly Controlled Entity"), including all employment,
termination, severance or other contracts for the benefit of any
current or former employees, officers or directors of Parent or any of
its subsidiaries as to which unsatisfied or potential obligations of
Parent which individually are greater than $500,000 per year exist.
Parent has made, or shall if requested make, available to the Company
true, complete and correct copies of (v) the most recent annual report
on Form 5500 filed with the Internal Revenue Service with respect to
each of its Benefit Plans (if any such report was required), (w) the
most recently prepared actuarial report for each such Benefit Plan (if
any such report was required), (x) the most recent summary plan
description for each such Benefit Plan for which such summary plan
description is required under ERISA, (y) the most recently received
Internal Revenue Service determination letter for each such Benefit
Plan that is intended to be qualified under Section 401(a) of the Code
and (z) each trust agreement and group annuity contract relating to any
such Benefit Plan.
(ii) Except as would not have, in the aggregate, a material adverse
effect on Parent, each of Parent's and its subsidiaries' Benefit Plans
has been administered in accordance with its terms. Except as would not
have, in the aggregate, a material adverse effect on Parent or any of
its subsidiaries, Parent, each of its subsidiaries and all such Benefit
Plans are in compliance with applicable provisions of ERISA and the
Code.
(iii) All of Parent's and its subsidiaries' Pension Plans intended
to be qualified under Section 401(a) of the Code have been the subject
of determination letters from the Internal Revenue Service to the
effect that such Pension Plans are qualified and exempt from federal
income taxes under Section 401(a) and 501(a), respectively, of the Code
and, to the knowledge of Parent and Sub, no such determination letter
has been revoked nor has revocation of such determination letter been
threatened, nor has any such Pension Plan been amended since the date
of its most recent determination letter or application therefor in any
respect that could reasonably be expected to adversely affect its
qualification or materially increase its costs.
(iv) No Pension Plan that Parent or any of its subsidiaries
maintains is subject to Title IV of ERISA.
(v) To the knowledge of Parent, none of Parent, any of its
subsidiaries, any officer of Parent or any of its subsidiaries or any
of Parent's or its subsidiaries' Benefit Plans which are subject to
ERISA, including, without limitation, its Pension Plans, any trusts
created thereunder or any trustee or administrator thereof, has engaged
in a non-exempt "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) or any other breach
of fiduciary responsibility that could reasonably be expected to
subject Parent, or any of its subsidiaries or any officer of Parent or
any of its subsidiaries, to tax or penalty under ERISA, the Code or
other applicable law that, except as would not have, in the aggregate,
a material adverse effect on Parent or any of its subsidiaries, has not
been corrected. Neither any of such Benefit Plans nor any of such
trusts has been terminated, nor has there been any "reportable event"
(as that term is defined in Section 4043 of ERISA) with respect
thereto, during the last five years.
(vi) The consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation
or benefits or accelerate the vesting or timing of payment of any
benefits payable to or in respect of any employee or former employee of
Parent or any subsidiary of Parent or the beneficiary or dependent of
any such employee or former employee.
(vii) With respect to any of Parent's or any of its subsidiaries'
Benefit Plans that is an employee welfare benefit plan, (x) no such
Benefit Plan is funded through a "welfare benefit fund," as such term
is defined in Section 419(e) of the Code, (y) each such Benefit Plan
that is a "group health plan," as such term is defined in Section
5000(b)(1) of the Code, complies in all material respects with the
applicable requirements of Section 4980B(f) of the Code and (z) each
such Benefit Plan (including any such Benefit Plan covering retirees or
other former employees) may be amended or terminated without a material
adverse effect on Parent.
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(viii) Except as would not have, in the aggregate, a material
adverse effect on Parent or any of its subsidiaries, no Parent Commonly
Controlled Entity has incurred any material liability to a Pension Plan
of Parent or any of its subsidiaries (other than for contributions not
yet due).
(k) Taxes.
(i) To Parent's knowledge and except as would not have, in the
aggregate, a material adverse effect on Parent or any of its
subsidiaries, (A) each of Parent and its subsidiaries has timely filed
all federal, state, local and foreign tax returns and reports required
to be filed by it through the date hereof and shall timely file all
such returns and reports required to be filed on or before the
Effective Time; (B) all such returns and reports are and will be true,
complete and correct in all material respects; (C) Parent and each of
its subsidiaries has paid and discharged (or Parent has paid and
discharged on such subsidiary's behalf) all taxes due from them, other
than such taxes as are being or will be contested in good faith by
appropriate proceedings and are, in the judgment of the management of
Parent, adequately reserved for on the most recent financial statements
contained in the Publicly Available Parent SEC Documents filed prior to
the date of this Agreement; (D) the most recent financial statements
contained in the Parent SEC Documents filed prior to the date of this
Agreement reflect an adequate reserve in accordance with GAAP for all
taxes payable by Parent and its subsidiaries for all taxable periods
and portions thereof through the date of such financial statements.
(ii) No claim or deficiency for any taxes has been proposed,
threatened, asserted or assessed by the IRS or any other taxing
authority or agency against Parent or any of its subsidiaries which, if
resolved against Parent or any of its subsidiaries, would, individually
or in the aggregate, have a material adverse effect on Parent. Except
in connection with the tax audit disclosed in Publicly Available Parent
SEC Documents filed prior to the date of this Agreement, neither the
Parent nor any of its subsidiaries has waived any statute of
limitations in respect of any taxes or agreed to any extension of time
with respect to a tax assessment or deficiency.
(iii) Neither Parent nor any of its subsidiaries has taken or agreed
to take any action or has any knowledge of any fact or circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(iv) Neither Parent nor any of its subsidiaries has filed a consent
under Code Section 341(f) concerning collapsible corporations. Neither
Parent nor any of its subsidiaries has been a United States real
property holding corporation within the meaning of Code Section
897(c)(2). Each of Parent and its subsidiaries has disclosed on its
federal income tax returns all positions taken therein that could give
rise to a substantial understatement of federal income tax within the
meaning of Code Section 6662. Neither Parent nor any of its
subsidiaries is a party to any tax allocation or tax sharing agreement.
Neither Parent nor any of its subsidiaries has any liability for the
taxes of any person (other than any of Parent and its subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(l) Compliance with Applicable Laws.
(i) Each of Parent and its subsidiaries has in effect all Permits
necessary for it to own, lease or operate its properties and assets and
to carry on its business as now conducted, and there has occurred no
default under any such Permit, except for the lack of Permits and for
defaults under Permits which lack or default individually or in the
aggregate would not have a material adverse effect on Parent. To the
knowledge of Parent, no Governmental Entity is considering limiting,
suspending or revoking any of the Parent's or its subsidiaries'
Permits. Parent and its subsidiaries are in compliance with (and have
not violated) all applicable statutes, laws, ordinances, rules, orders
and regulations (including, without limitation, those relating to
safety, hiring, promotion or pay of employees) of any Governmental
Entity, except for noncompliance which individually or in the aggregate
would not have a material adverse effect on Parent.
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(ii) To the knowledge of Parent, Parent and each of its subsidiaries
is, and has been, and each of Parent's former subsidiaries, while
subsidiaries of Parent, was, in compliance in all material respects
with all applicable Environmental Laws, except for noncompliance which
individually or in the aggregate would not have a material adverse
effect on Parent.
(iii) During the period of ownership or operation by Parent and its
subsidiaries of any of their respective current or previously owned or
leased properties, there have been no releases of Hazardous Material
in, on, under or affecting such properties or, to the knowledge of
Parent, any surrounding site, except in each case for those which
individually or in the aggregate are not reasonably likely to have a
material adverse effect on Parent. Prior to the period of ownership or
operation by Parent and its subsidiaries of any of their respective
current or previously owned or leased properties, to the knowledge of
Parent, no Hazardous Material was generated, treated, stored, disposed
of, used, handled or manufactured at, or transported, shipped or
disposed of from, such current or previously owned or leased
properties, and there were no releases of Hazardous Material in, on,
under or affecting any such property or any surrounding site, except in
each case for those which individually or in the aggregate are not
reasonably likely to have a material adverse effect on Parent.
(m) Brokers. Except for Lazard Freres & Co. LLC, the fees and expenses
of which will be paid by Parent, no broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Sub.
(n) Opinion of Financial Advisor. Parent has received the opinion of
Lazard Freres & Co. LLC, dated the date of this Agreement, to the effect
that, as of such date, the Exchange Ratio is fair to Parent from a
financial point of view, and a signed copy of such opinion has been
delivered to the Company.
(o) Voting Requirements. The Parent Stockholder Approvals are the only
votes of the holders of any class or series of Parent's securities
necessary to approve this Agreement and the transactions contemplated by
this Agreement.
(p) Noncompetition. Parent and its subsidiaries are not subject to any
restriction of competition with respect to their respective businesses.
(q) Intellectual Property. Except as would not have, in the aggregate, a
material adverse effect on Parent, Parent and each of its subsidiaries owns
or possesses adequate and enforceable licenses or other rights to use all
patents, trade secrets, trade names, trademarks, inventions and processes
used in and material to the business of Parent or such subsidiary as
currently conducted, and such licenses and rights will not be affected by
the consummation of the Merger. Neither Parent nor any of its subsidiaries
has received any written notice or charge of patent, trademark or copyright
infringement which asserts the rights of others with respect to such
licenses and rights which is reasonably likely to have a material adverse
effect on the Parent. Except as would not have, in the aggregate, a
material adverse effect on Parent, Parent owns or rightfully possesses (i)
the source code, recorded on computer magnetic media and in written form,
for its information systems programs, including both the information
systems programs themselves and the product related infrastructure (the
"Parent Software") and (ii) all commentary, explanations, specifications,
documentation, proprietary information, test programs and program
specifications, compiler and assembler descriptions of proprietary or third
party system utilities, and descriptions of system/program generation and
programs not owned by Parent but required for use or support, relating to
the Parent Software that are reasonably necessary for the Parent to
maintain and enhance the Parent Software, and to provide a commercially
standard level of service and support to users of the Parent Software
without the aid of any other party and without use of any other material.
(r) Year 2000 Compliance.
(i) Parent does not believe that the cost of required modifications
to its Parent Systems to make the Parent Year 2000 Compliant will have
a material adverse effect on the Parent.
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(ii) For purposes of this Section 3.2(r), (i) "Parent Systems" shall
mean all computer, hardware, software, systems, and equipment
(including embedded microcontrollers in non-computer equipment)
embedded within the current products of Parent and its subsidiaries,
and/or material to or necessary for Parent and its subsidiaries to
carry on their respective businesses as currently conducted; and (ii)
"Parent Year 2000 Compliant" means that Parent Systems will (A) manage,
accept, process, store and output data involving dates reasonably
expected to be encountered in the foreseeable future and (B) accurately
process date data from, into and between the 20th and 21st centuries
and each date during the years 1999 and 2000.
(s) Interim Operations of Sub.
(i) Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated
hereby.
(ii) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement, Sub has not and will not have incurred, directly or
indirectly, through any subsidiary, any obligations or liabilities or
engaged in any business activities of any type or kind whatsoever or
entered into any agreements or arrangements with any person.
(t) Stockholders' Agreement. Parent and Henry C. Yuen have entered into
the Stockholders' Agreement attached hereto as Exhibit 3.1(s), which
agreement shall become binding and effective only upon the Effective Time.
(u) Yuen Amendment. Henry C. Yuen, Parent and Gemstar Development
Corporation ("GDC") have entered into the amendment (the "Yuen Amendment")
attached hereto as Exhibit 3.2(u) to the Employment Agreement, dated
January 7, 1998, by and among Henry C. Yuen, Parent and GDC (the "Yuen
Employment Agreement"), which amendment shall become effective only upon
the Effective Time.
ARTICLE IV
Covenants Relating to Conduct of Business
Section 4.1 Conduct of Business.
(a) Conduct of Business by the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company shall, and
shall cause its subsidiaries to, use all reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them. Between the date of
this Agreement and the Effective Time or until the earlier termination of this
Agreement pursuant to its terms, except (1) as contemplated by this Agreement,
(2) as set forth in Section 4.1(a) of the Company Disclosure Schedule, or (3)
with the prior written consent of Parent (which consent shall not be
unreasonably withheld or delayed), the Company shall not, and shall not permit
any of its subsidiaries to:
(i) (A) declare, set aside or pay (whether in cash, stock, property or
otherwise) any dividends on, or make any other distributions in respect of,
any of its capital stock, other than dividends and distributions by any
direct or indirect wholly owned subsidiary of the Company to its parent,
(B) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities, provided, however,
that with respect to clause (C) only, the Company may take such actions in
an aggregate amount not to exceed $50
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million in addition to any such actions taken as required by the proviso in
Section 4.1(a)(ii)(E) to offset issuances of capital stock in an
acquisition permitted under Section 4.1(a)(iv) or as may be necessary to
satisfy the condition set forth in Section 6.2(d);
(ii) (x) issue, deliver, sell, award, pledge, dispose of or otherwise
encumber or authorize or propose the issuance, delivery, grant, sale,
award, pledge or other encumbrance (including limitations in voting rights)
or authorization of, any shares of its capital stock, any voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities, (y)
amend or otherwise modify the terms of any such rights, warrants or options
(except as expressly contemplated by this Agreement) or (z) accelerate the
vesting of any of the Company Stock Options except for Company Stock
Options granted on or before January 1, 1999 in each case other than (A)
the issuance of the Company Common Stock upon the exercise of Company Stock
Options outstanding under the Company Stock Option Plans on the date of
this Agreement in accordance with their present terms or in accordance with
the present terms of any employment agreements existing on the date of this
Agreement, (B) the grant of stock options to employees and directors to
purchase up to 1,771,376 shares of Company Common Stock pursuant to the
Company Stock Option Plans as in effect on the date of this Agreement (as
the same may be amended to increase the number of shares of Company Common
Stock which may be the subject of awards thereunder), and the issuance of
Company Common Stock upon the exercise thereof, (C) the grant of stock
options to employees to purchase up to 50,000 shares of Company Common
Stock pursuant to the TV Guide, Inc. Equity Incentive Plan as in effect on
the date of this Agreement (as the same may be amended to increase the
number of shares of Company Common Stock which may be the subject of awards
thereunder); provided, however, that no single employee may be granted
options to purchase more than 10,000 shares of Company Common Stock
pursuant to this clause (C), (D) the grant of stock options (with the prior
consent of Parent, which consent shall not be unreasonably withheld) to new
employees of the Company hired after the date hereof to purchase up to
200,000 shares of Company Common Stock pursuant to the TV Guide, Inc.
Equity Incentive Plan as in effect on the date of this Agreement (as the
same may be amended to increase the number of shares of Company Common
Stock which may be the subject of awards thereunder), and (E) the issuance
of Company Common Stock in connection with a transaction not prohibited by
Section 4.1(a)(iv); provided, however, that stock issuances in connection
with a transaction permitted under Section 4.1(a)(iv) hereof may not exceed
the number of shares of Company Common Stock purchased by the Company after
the date hereof;
(iii) amend its certificate of incorporation, bylaws or other comparable
charter or organizational documents;
(iv) acquire or agree to acquire (for cash or shares of stock or
otherwise) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof; provided, however, that the Company and
its subsidiaries may enter into such transactions (in addition to those
listed on Schedule 4.1(a)), other than with an affiliate, if the purchase
price and required capital contributions therefor (whether consisting of
cash or Company Common Stock or a combination of both) do not exceed, in
the aggregate, $200 million (the "Company Acquisition Basket"), and if such
transactions would not be reasonably likely to prevent or materially delay
the consummation of the Merger;
(v) mortgage or otherwise encumber or subject to any lien (a non-
exclusive license shall not be considered a mortgage, encumbrance or lien),
or sell, lease, exchange or otherwise dispose of any of, its properties or
assets, except for sales of its properties or assets in the ordinary course
of business consistent with past practice or other sales that, exclusive of
the transactions listed on Schedule 4.1(a) of the Company Disclosure
Schedule, do not exceed in the aggregate, $50 million;
(vi) dispose of, pledge or encumber any of the Company's or its
subsidiaries' intellectual property, except through non-exclusive license
agreements;
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(vii) except in the ordinary course of business, (A) increase the rate
or terms of compensation payable or to become payable generally to any of
the Company's or any of its subsidiaries' directors, executive officers, or
employees other than usual and customary salary increases to non-management
employees, (B) pay or agree to pay any pension, retirement allowance or
other employee benefit not provided for by any existing Pension Plan,
Benefit Plan or employment agreement described in the Publicly Available
Company SEC Documents, (C) commit itself to any additional pension, profit
sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay,
continuation pay, termination pay, retirement or other employee benefit
plan, agreement or arrangement, or increase the rate or terms of any
employee plan or benefit arrangement, (D) enter into any employment
agreement with or for the benefit of any person or (E) increase the rate of
compensation under or otherwise change the terms of or renew any existing
employment agreement; provided, however, that nothing in this clause (vii)
shall (x) preclude payments under the terms of the existing incentive
compensation plans of the Company in accordance with past practice or (y)
preclude the Company from extending the term of any employment agreement of
any senior officer (other than Peter Boylan and Joe Kiener) for up to two
years or (z) preclude the Company from adjusting the base compensation with
respect to any senior officer (other than Peter Boylan and Joe Kiener) by
not more than 15%;
(viii) change its fiscal year;
(ix) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for (x) indebtedness
incurred to effect a transaction disclosed on Schedule 4.1(a) of the
Company Disclosure Schedule, (y) indebtedness incurred or assumed in
connection with one or more acquisition transactions permitted under
Section 4.1(a)(iv), provided that indebtedness assumed in connection with
any such transaction (as opposed to indebtedness incurred to effect any
such transaction which will be counted solely against the limitations of
Section 4.1(a)(iv)) shall not exceed the amount that would otherwise be
permitted to be incurred pursuant to clause (z) below plus any remaining
balance in the Company Acquisition Basket, and (z) indebtedness which when
added to existing indebtedness of the Company and its subsidiaries (other
than indebtedness incurred pursuant to clause (x) and indebtedness incurred
or assumed pursuant to clause (y) to the extent that such indebtedness
reduces the available amount in the Company Acquisition Basket) does not
exceed in the aggregate $650 million, or (B) other than in the ordinary
course of business consistent with past practice and within the limits
specified in Section 4.1(a)(iv) or as set forth on Schedule 4.1(a), make
any loans, advances or capital contributions to, or investments in, any
other person, other than to the Company or any direct or indirect wholly
owned subsidiary of the Company;
(x) make or agree to make any new capital expenditures (exclusive of
expenditures set forth on Schedule 4.1(a)) for tangible physical assets
which in the aggregate exceed $50 million;
(xi) purchase or acquire, or permit or cause any of its subsidiaries to
purchase or acquire, beneficial or record ownership of any shares of Parent
Common Stock;
(xii) except in the ordinary course of business consistent with past
practice, modify, amend, renew, fail to renew or terminate any material
contract or agreement to which the Company or any subsidiary is a party or
waive, release or assign any material rights or claims; or
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Conduct of Business by Parent. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Parent shall, and shall cause its
subsidiaries to, use all reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers and
others having business dealings with them. Between the date of this
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Agreement and the Effective Time or until the earlier termination of this
Agreement pursuant to its terms, except (1) as contemplated by this Agreement,
(2) as set forth in Section 4.1(b) of the Parent Disclosure Schedule, or (3)
with the prior written consent of the Company, Parent shall not, and shall not
permit any of its subsidiaries to:
(i) (A) declare, set aside or pay (whether in cash, stock, property or
otherwise) any dividends on, or make any other distributions in respect of,
any of its capital stock, other than dividends and distributions by any
direct or indirect wholly owned subsidiary of Parent to its parent, (B)
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of capital stock of Parent or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities; provided, however,
that with respect to clause (C) only, Parent may take such actions in an
aggregate amount not to exceed $50 million in addition to any such actions
taken as required by the proviso in Section 4.1(b)(ii)(C) to offset
issuances of capital stock in an acquisition permitted under Section
4.1(b)(iv);
(ii) (x) issue, deliver, sell, award, pledge, dispose of or otherwise
encumber or authorize or propose the issuance, delivery, grant, sale,
award, pledge or other encumbrance (including limitations in voting rights)
or authorization of, any shares of its capital stock, any voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities, (y)
amend or otherwise modify the terms of any such rights, warrants or options
(except as expressly contemplated by this Agreement) or (z) accelerate the
vesting of any of the stock options in each case other than (A) the
issuance of Parent Common Stock upon the exercise of stock options
outstanding under the Parent Stock Incentive Plan on the date of this
Agreement in accordance with their present terms or in accordance with the
present terms of any employment agreements existing on the date of this
Agreement, (B) the grant of stock options to employees and directors to
purchase up to 1,000,000 shares of Parent Common Stock (at an exercise
price equal to the fair market value of the Parent Common Stock on the date
of grant) pursuant to the Parent Stock Incentive Plan as in effect on the
date of this Agreement (as the same may be amended to increase the number
of shares of Parent Common Stock which may be the subject of awards
thereunder), and the issuance of Parent Common Stock upon the exercise
thereof, and (C) the issuance of Parent Common Stock in connection with a
transaction not prohibited by Section 4.1(b)(iv); provided, however, that
stock issuances in connection with a transaction permitted under Section
4.1(b)(iv) hereof may not exceed the number of shares of Parent Common
Stock purchased by the Parent after the date hereof;
(iii) amend its Amended and Restated Articles of Association or Amended
and Restated Memorandum of Association, other than as contemplated by the
Domestication;
(iv) acquire or agree to acquire (for cash or shares of stock or
otherwise) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof; provided, however, that the Parent and
its subsidiaries may enter into such transactions (in addition to those
listed on Schedule 4.1(b)), other than with an affiliate, if the purchase
price and required capital contributions therefore (whether consisting of
cash or Parent Common Stock or a combination of both) do not exceed, in the
aggregate, $200 million (the "Parent Acquisition Basket"), and if such
transactions would not be reasonably likely to prevent or materially delay
the consummation of the Merger;
(v) mortgage or otherwise encumber or subject to any lien (a non-
exclusive license shall not be considered a mortgage, encumbrance or lien),
or sell, lease, exchange or otherwise dispose of any of, its properties or
assets, except for sales of its properties or assets in the ordinary course
of business consistent with past practice or other sales that, exclusive of
the transactions listed on Schedule 4.1(b) of the Parent Disclosure
Schedule, do not exceed, in the aggregate $50 million;
(vi) dispose of, pledge or encumber any of Parent's or its subsidiaries'
intellectual property, except through non-exclusive license agreements;
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(vii) change its fiscal year;
(viii) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Parent or any of
its subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for (x) indebtedness
incurred to effect a transaction disclosed on Schedule 4.1(b) of the Parent
Disclosure Schedule, (y) indebtedness incurred or assumed in connection
with one or more acquisition transactions permitted under Section
4.1(b)(iv), provided that indebtedness assumed in connection with any such
transaction (as opposed to indebtedness incurred to effect any such
transaction which will be counted solely against the limitations of Section
4.1(b)(iv)) shall not exceed the amount that would otherwise be permitted
to be incurred pursuant to clause (z) below plus any remaining balance in
the Parent Acquisition Basket, and (z) indebtedness which when added to
existing indebtedness of Parent and its subsidiaries (other than
indebtedness incurred pursuant to clause (x) and indebtedness incurred or
assumed pursuant to clause (y) to the extent that such indebtedness reduces
the available amount in the Parent Acquisition Basket) does not exceed in
the aggregate $50 million, or (B) other than in the ordinary course of
business consistent with past practice and within the limits specified in
Section 4.1(b)(iv), make any loans, advances or capital contributions to,
or investments in, any other person, other than to Parent or any direct or
indirect wholly owned subsidiary of Parent;
(ix) purchase or acquire, or permit or cause any of its subsidiaries to
purchase or acquire, beneficial or record ownership of any shares of
Company Common Stock;
(x) make or agree to make any new capital expenditures (exclusive of
expenditures set forth on Schedule 4.1(b)) for tangible physical assets
which in the aggregate exceed $50 million;
(xi) except in the ordinary course of business consistent with past
practice, modify, amend, renew, fail to renew or terminate any material
contract or agreement to which the Parent or any subsidiary is a party or
waive, release or assign any material rights or claims; or
(xii) authorize any of, or commit or agree to take any of, the foregoing
actions.
Section 4.2 No Inconsistent Company Activities.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, the Company agrees that it shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor,
representative or agent of, the Company or any of its subsidiaries to, directly
or indirectly, solicit or initiate, or knowingly encourage the submission of,
any Company Takeover Proposal (as defined below), or participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Company Takeover Proposal or amend or grant any waiver or release of
any standstill agreement. For purposes of this Agreement, "Company Takeover
Proposal" means any proposal (whether or not in writing and whether or not
delivered to the Company's stockholders generally) regarding (i) a merger,
consolidation, purchase of assets (other than purchases of assets or inventory
in the ordinary course of business), tender offer, share exchange or other
business combination or similar transaction involving the Company or any of its
subsidiaries, (ii) any proposal or offer to acquire in any manner, directly or
indirectly, any equity interest in or any voting securities of the Company or
any of its subsidiaries which constitutes 10% or more of the total of such
equity interests or voting securities, or a substantial portion of the assets
of the Company or any of its subsidiaries, (iii) the acquisition by any person
of beneficial ownership or a right to acquire beneficial ownership of, or the
formation of any "group" (as defined under Section 13(d) of the Exchange Act
and the rules and regulations thereunder) which beneficially owns, or has the
right to acquire beneficial ownership of 10% or more of the then outstanding
shares of capital stock of the Company or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or
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any agreement to engage in any of the foregoing. Neither the Company nor any of
its subsidiaries shall, directly or indirectly, release any third party from
any confidentiality agreement relating to any transaction of the nature
referred to in the definition of Company Takeover Proposal, as if the
references to 10% therein referred to 1%. Nothing contained herein shall
prohibit the Board of Directors of the Company from complying with Rule 14e-2
and Rule 14d-9 under the Exchange Act with respect to a Company Takeover
Proposal by means of a tender offer.
(b) The Company shall promptly advise Parent orally and in writing of any
request for information or of any Company Takeover Proposal, or any inquiry
with respect to or which could lead to any Company Takeover Proposal, the
material terms and conditions of such request, Company Takeover Proposal or
inquiry, and the identity of the person making any such Company Takeover
Proposal or inquiry. The Company shall keep Parent informed of the status and
details of any such request, Company Takeover Proposal or inquiry.
(c) The Company shall not provide any non-public information to a third
party unless the Company provides such non-public information pursuant to a
non-disclosure agreement with terms regarding the protection of confidential
information at least as restrictive as such terms in the Confidentiality
Agreements (as defined in Section 5.2 hereof) previously entered into between
Parent and the Company. The Company shall be entitled to provide copies of this
Section 4.2 to third parties who, on an unsolicited basis after the date of
this Agreement, contact the Company regarding a Company Takeover Proposal,
provided that Parent shall concurrently be notified of such contact and
delivery of such copy.
(d) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than Parent and
Sub) conducted prior to the date of this Agreement with respect to any of the
foregoing.
Section 4.3 No Inconsistent Parent Activities.
(a) In light of the consideration given by the Board of Directors of Parent
prior to the execution of this Agreement to, among other things, the
transactions contemplated hereby, the strategic benefits associated with the
Merger and the settlement of pending litigation between the parties hereto that
will result from the Merger, and in light of Parent's representations contained
in Section 3.2(n), from and after the date of this Agreement until the earlier
of the Effective Time or the termination of this Agreement in accordance with
its terms, Parent agrees that it shall not, nor shall it permit any of its
subsidiaries to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor,
representative or agent of, Parent or any of its subsidiaries to, directly or
indirectly, solicit or initiate, or knowingly encourage the submission of, any
Parent Takeover Proposal (as defined below), or participate in any discussions
or negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the making
of, any proposal that constitutes, or may reasonably be expected to lead to,
any Parent Takeover Proposal, or amend or grant any waiver or release of any
standstill agreement or approve any termination or amendment of the Parent
Rights Agreement (as defined below) or redemption of rights thereunder (other
than as contemplated by Section 5.10 hereof). For purposes of this Agreement,
"Parent Takeover Proposal" means any proposal (whether or not in writing and
whether or not delivered to Parent's stockholders generally) regarding (i) a
merger, consolidation, purchase of assets (other than purchases of assets or
inventory in the ordinary course of business), tender offer, share exchange or
other business combination or similar transaction involving Parent or any of
its subsidiaries, (ii) the acquisition in any manner, directly or indirectly,
of any equity interest in or any voting securities of Parent or any of its
subsidiaries which constitutes 10% or more of the total of such equity
interests or voting securities, or a substantial portion of the assets of
Parent or any of its subsidiaries, (iii) the acquisition by any person of
beneficial ownership or a right to acquire beneficial ownership of, or the
formation of any "group" (as defined under Section 13(d) of the Exchange Act
and the rules and regulations thereunder) which beneficially owns, or has the
right to acquire beneficial ownership of, 10% or more of the then outstanding
shares of capital stock of Parent, or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. Neither Parent nor any of its subsidiaries
shall, directly or indirectly, release any third party from any
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confidentiality agreement relating to any transactions of the nature referred
to in the definition of Parent Takeover Proposal, as if the reference to 10%
therein referred to 1%. Nothing contained in this Agreement shall prevent the
Board of Directors of Parent from complying with Rule 14e-2 and Rule 14d-9
under the Exchange Act with respect to a Parent Takeover Proposal; provided,
however, that the Board of Directors of Parent will not recommend a Parent
Takeover Proposal unless it determines by a majority vote in its good faith
judgment (on the basis of the written advice of Parent's outside legal counsel)
that it must recommend a Parent Superior Proposal (as defined below) to comply
with its fiduciary duties under applicable law.
(b) The restrictions set forth in Section 4.3(a) shall not prevent the Board
of Directors of Parent (or any officer, director or employee of, or any
investment banker, attorney or other advisor, representative or agent, of
Parent) in the exercise of and as required by its fiduciary duties as
determined by the Board of Directors of Parent in good faith (after
consultation with and not inconsistent with the advice of Parent's outside
legal counsel) from engaging in discussions or negotiations with (but not
directly or indirectly soliciting or initiating such discussions or
negotiations or directly or indirectly encouraging inquiries or the making of
any Parent Takeover Proposal), and furnishing information concerning Parent and
its business, properties and assets to, a third party who makes a written,
unsolicited, bona fide Parent Takeover Proposal (except that for purposes of
this Section 4.3(b), to constitute a Parent Takeover Proposal such proposal,
(x) if relating to the acquisition in any manner of any equity interest in or
any voting securities of Parent or any of its subsidiaries, must contemplate
the acquisition of 50% or more, rather than 10% or more, of the total of such
equity interests or voting securities and (y) if relating to the acquisition by
any person in any manner of beneficial ownership or a right to acquire
beneficial ownership of, or the formation of any "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
which beneficially owns, or has the right to acquire beneficial ownership of,
outstanding shares of capital stock of Parent, must contemplate the acquisition
of 50% or more, rather than 10% or more, of the then outstanding shares of
capital stock of Parent) that, after taking into consideration the strategic
benefits to Parent of the Merger and the termination of the Subject Litigation
(as defined below) that will result from the Merger, (A) is financially
superior to the Merger, as determined in good faith by Parent's Board of
Directors after consultation with, and the receipt of an opinion from, Parent's
financial advisors, which shall be of national reputation and (B) will
constitute a transaction for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of
Parent, is reasonably capable of being obtained (any such Parent Takeover
Proposal satisfying both clauses (A) and (B) above is herein referred to as a
"Parent Superior Proposal"); provided that in advance of the taking of any such
actions by Parent the Company shall have been notified in writing of such
Parent Superior Proposal and given a copy of such Parent Superior Proposal.
(c) Parent shall provide the Company (for at least five business days
following the receipt of such notice) an opportunity to amend this Agreement to
provide for terms and conditions no less favorable than the Parent Superior
Proposal in which event Parent shall cause its respective financial and legal
advisors to negotiate in good faith with the Company to make such adjustments
to the terms and conditions of this Agreement as would enable Parent to proceed
with the transactions contemplated hereby. The provisions of this paragraph
shall apply to successive Parent Superior Proposals (provided that each such
Parent Superior Proposal shall meet the then applicable requirements thereof,
based upon the terms of this Agreement in effect on the date hereof or as such
terms shall be modified, amended or superseded).
(d) Parent shall promptly advise the Company orally and in writing of any
request for information or of any Parent Takeover Proposal, or any inquiry with
respect to or which could lead to any Parent Takeover Proposal, the material
terms and conditions of such request, Parent Takeover Proposal or inquiry, and
the identity of the person making any such Parent Takeover Proposal or inquiry.
Parent shall keep the Company informed of the status and details of any such
request, Parent Takeover Proposal or inquiry.
(e) Notwithstanding Section 4.3(b), Parent shall not provide any non-public
information to a third party unless Parent provides such non-public information
pursuant to a non-disclosure agreement with terms regarding the protection of
confidential information at least as restrictive as such terms in the
Confidentiality
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Agreements (as defined in Section 5.2 hereof) previously entered into between
Parent and the Company. Parent shall be entitled to provide copies of this
Section 4.3 to third parties who, on an unsolicited basis after the date of
this Agreement, contact Parent regarding a Parent Takeover Proposal, provided
that the Company shall concurrently be notified of such contact and delivery
of such copy.
(f) Parent shall immediately cease and cause to be terminated any existing
discussion or negotiations with any parties (other than the Company) conducted
prior to the date of this Agreement with respect to any of the foregoing and
will exercise its rights under any confidentiality agreements with any such
parties to require the return of confidential information provided by Parent
or its representatives to any such parties.
ARTICLE V
Additional Agreements
Section 5.1 Preparation of Form S-4 and the Proxy Statement; Other Filings;
Stockholders' Meetings.
(a) As promptly as reasonably practicable after the execution of this
Agreement, (i) the Company and Parent shall prepare and file with the SEC a
preliminary joint proxy statement in form and substance satisfactory to each
of the Company and Parent, relating to the meeting of the Company's
stockholders to be held to obtain the Company Stockholder Approval and the
meeting of the Parent's Stockholders to obtain the Parent Stockholder
Approvals (together with any amendments thereof or supplements thereto, the
"Proxy Statement") and (ii) Parent shall prepare and file with the SEC a
registration statement on Form S-4 (together with all amendments thereto, the
"Form S-4") in which the Proxy Statement shall be included as a prospectus, in
connection with the registration under the Securities Act of shares of Parent
Common Stock in connection with the transactions and matters contemplated
hereby. As promptly as reasonably practicable after the date of this
Agreement, Parent and the Company shall prepare and file any other filings
required under the Exchange Act, the Securities Act or any other Federal or
Blue Sky Laws relating to the Merger and the transactions contemplated by this
Agreement (the "Other Filings"). Each of Parent and the Company will notify
the other promptly of the receipt of any comments from the SEC or its staff
and of any request by the SEC or its staff or any other government officials
for amendments or supplements to the Form S-4, the Proxy Statement or any
Other Filing or for additional information and will supply the other with
copies of all correspondence between such company or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Form S-4, the
Proxy Statement, the Merger or any Other Filing. The Proxy Statement, the Form
S-4 and the Other Filings shall comply in all material respects with all
applicable requirements of law. Each of Parent and the Company shall use all
reasonable efforts to cause the Form S-4 to become effective as promptly as
reasonably practicable, and shall take all or any action required under any
applicable federal or state securities laws in connection with the issuance of
shares of Parent Common Stock pursuant to the Merger. The Company authorizes
Parent to utilize in the Form S-4 and in all such state filed materials, the
information concerning the Company and its subsidiaries provided to Parent in
connection with, or contained in, the Proxy Statement. Parent promptly will
advise the Company when the Form S-4 has become effective and of any
supplements or amendments thereto, and the Company shall not distribute any
written material that would constitute, as advised by counsel to the Company,
a "prospectus" relating to the Merger or the Parent Common Stock within the
meaning of the Securities Act or any applicable state securities law without
the prior written consent of Parent. As promptly as reasonably practicable
after the Form S-4 shall have become effective, each of the Company and Parent
shall mail the Proxy Statement to its respective stockholders.
(b) Parent agrees promptly to advise the Company if at any time prior to
the meeting of the Parent's Stockholders or the meeting of the Company's
stockholders any information provided by it in the Proxy Statement is or
becomes incorrect or incomplete in any material respect and to provide the
Company with the information needed to correct such inaccuracy or omission.
Parent will furnish the Company with such supplemental information as may be
necessary in order to cause the Proxy Statement, insofar as it relates to
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Parent and its subsidiaries, to comply with applicable law after the mailing
thereof to the Parent's Stockholders or the Company's stockholders.
(c) Each of Parent and the Company agrees that none of the information
supplied or to be supplied by it specifically for inclusion or incorporation by
reference in (i) the Form S-4 shall, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading or (ii) the Proxy Statement shall, at the
date it is first mailed to the Company's stockholders or the Parent's
stockholders or at the time of the Company Stockholders' Meeting (as defined
below) or the Parent Stockholders' Meeting (as defined below), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(d) The Company agrees promptly to advise Parent if at any time prior to the
meeting of the Parent's Stockholders or the meeting of the Company's
stockholders any information provided by it in the Proxy Statement is or
becomes incorrect or incomplete in any material respect and to provide Parent
with the information needed to correct such inaccuracy or omission. The Company
will furnish Parent with such supplemental information as may be necessary in
order to cause the Proxy Statement, insofar as it relates to the Company and
its subsidiaries, to comply with applicable law after the mailing thereof to
the Parent's Stockholders or the Company's stockholders.
(e) As soon as reasonably practicable following the date of this Agreement,
the Company shall call and hold a meeting of its stockholders (the "Company
Stockholders' Meeting") and the Parent shall call and hold a meeting of
Parent's Stockholders (the "Parent Stockholders' Meeting"). The purpose of such
meetings shall be to obtain the Company Stockholder Approval and the Parent
Stockholder Approvals, respectively. Each of the Company and Parent shall
coordinate and cooperate with respect to the timing of the Company
Stockholders' Meeting and Parent Stockholders' Meeting and shall use reasonable
efforts to hold such meetings on the same day. Each of the Company and Parent
shall use its best efforts to solicit from its stockholders proxies, and shall
take all other action necessary or advisable to secure the vote or consent of
stockholders required by applicable law or otherwise to obtain the Company
Stockholder Approval and the Parent Stockholder Approvals, respectively, and
through its respective Board of Directors, shall recommend to its respective
stockholders the obtaining of the Company Stockholder Approval and the Parent
Stockholder Approvals, respectively; provided, however, that the recommendation
of the Board of Directors of Parent may not be included or may be withdrawn or
modified if previously included if but only if a Parent Superior Proposal has
been made and Parent is in compliance with the provisions of Section 4.3(b) and
Section 4.3(c). Unless this Agreement is previously terminated in accordance
with Article 7, Parent shall submit the issuance of Parent Common Stock
pursuant to the terms of this Agreement and the Domestication to a vote of its
stockholders at the Parent Stockholders' Meeting even if the Board of Directors
of Parent determines at any time after the date hereof that the Merger is no
longer advisable and withdraws its recommendation that Parent Stockholders
approve such transaction.
Section 5.2 Access to Information; Confidentiality. The Company shall, and
shall cause each of its respective subsidiaries to, afford to Parent, and to
the officers, employees, accountants, counsel, financial advisors and other
representatives of Parent, reasonable access during normal business hours
during the period prior to the Effective Time to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall, and shall cause each of its respective
subsidiaries to, furnish promptly to Parent, (a) a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of federal or state securities laws and (b)
all other information concerning its business, properties and personnel as
Parent may reasonably request. Parent will hold, and will cause its respective
officers, employees, accountants, counsel, financial advisers and other
representatives and affiliates to hold, any confidential information
confidential in accordance with the Confidentiality Agreements between Parent
and the Company (the "Confidentiality Agreements").
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Section 5.3 Appropriate Action; Consents; Filings.
(a) Without limiting the obligations of the parties in Section 5.3(b), each
of the parties hereto shall (i) make promptly its respective filings, and
thereafter make any other required submissions under the HSR Act with respect
to the transactions contemplated herein and (ii) make promptly all filings with
or applications to the FCC with respect to the transactions contemplated
herein. The parties hereto will use their respective best efforts, and will
take all actions necessary, to consummate and make effective the transactions
contemplated herein and to cause the conditions to the Merger set forth in
Article VI to be satisfied, (including using best efforts, and taking all
actions necessary, to obtain all licenses, permits, consents, approvals,
authorizations, waivers, qualifications and orders of Governmental Entities as
are necessary for the consummation of the transactions contemplated herein),
and will do so in a manner designed to obtain such regulatory clearances and
the satisfaction of such conditions as expeditiously as possible.
(b) The Company and Parent each agree to take promptly any and all steps
necessary to avoid or eliminate each and every impediment and obtain all
consents or waivers under any antitrust, competition, communications or
broadcast law that may be asserted by any U.S. federal, state and local and
non-United States antitrust or competition authority, or by the FCC or similar
authority, so as to enable the parties to close the transactions contemplated
by this Agreement as expeditiously as possible, including committing to or
effecting, by consent decree, hold separate orders, trust, or otherwise, the
sale or disposition of such of its assets or businesses as are required to be
divested in order to obtain the consent of the FCC to or avoid the entry of, or
to effect the dissolution of, any decree, order, judgment, injunction,
temporary restraining order or other order in any suit or proceeding, that
would otherwise have the effect of preventing or materially delaying the
consummation of the Merger and the other transactions contemplated by this
Agreement; provided, however, that neither the Company, Parent nor any of their
respective subsidiaries shall be required to divest assets on which their
respective electronic program guide businesses are dependent if such
divestiture would have a material adverse effect on their electronic program
guide business or take any other action that materially and adversely impacts
their respective abilities to participate in the electronic program guide
business. In addition, each of the Company and Parent agree to take promptly
any and all steps necessary to obtain any consent or to vacate or lift any
order, writ, judgment, injunction, decree, stipulation, determination or award
entered by or with any Governmental Entity (each, an "Order") relating to
antitrust or communications matters that would have the effect of making any of
the transactions contemplated by this Agreement illegal or otherwise
prohibiting or materially delaying their consummation. Notwithstanding the
above, Parent and the Company shall not be obligated to take any action
pursuant to the foregoing if the board of directors of each of Parent and the
Company determine that the taking of such action is reasonably likely to have a
material adverse effect on the economic or business benefits of the
transactions contemplated by this Agreement.
(c) Each of the Company and Parent shall give (or shall cause its respective
subsidiaries to give) any notices to third parties, and the Company and Parent
shall use, and cause each of its subsidiaries to use, its reasonable best
efforts to obtain any third party consents, necessary, proper or advisable to
consummate the Merger. Each of the parties hereto will furnish to the other
such necessary information and reasonable assistance as the other may request
in connection with the preparation of any required governmental filings or
submissions and will cooperate in responding to any inquiry from a Governmental
Entity, including immediately informing the other party of such inquiry,
consulting in advance before making any presentations or submissions to a
Governmental Entity, and supplying each other with copies of all material
correspondence, filings or communications between either party and any
Governmental Entity with respect to this Agreement.
Section 5.4 Stock Options.
(a) At the Effective Time, each outstanding Company Stock Option, whether
vested or unvested, shall be assumed by Parent. Accordingly, each Company Stock
Option shall be deemed to constitute an option to acquire, on substantially the
same terms and conditions as were applicable under such Company Stock Option,
the number, rounded down to the nearest whole integer, of full shares of Parent
Common Stock the holder of
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such Company Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such Company Stock Option in full, including
as to unvested shares, immediately prior to the Effective Time, at a price per
share equal to (y) the exercise price per share for the shares of Company
Common Stock otherwise purchasable pursuant to such Company Stock Option
divided by (z) the Exchange Ratio, with such exercise price per share rounded
up to the nearest whole cent (except that all vesting periods with respect to
Company Stock Options granted prior to January 1, 1999 and 200,000 Company
Stock Options granted to each of Peter Boylan and Joe Kiener on or after
January 1, 1999 shall accelerate and such Company Stock Options will remain
exercisable for the balance of their term).
(b) As soon as practicable after the Effective Time, Parent shall deliver to
each holder of a Company Stock Option a document evidencing the foregoing
assumption of such Company Stock Option by Parent.
(c) As soon as practicable after the Effective Time, Parent shall file a
registration statement on Form S-8 (or any successor form), or another
appropriate form with respect to the shares of Parent Common Stock subject to
such Company Stock Options. With respect to those individuals who subsequent to
the Merger will be subject to the reporting requirements under Section 16(a) of
the Exchange Act, where applicable, Parent shall administer the Company Stock
Option Plans assumed pursuant to this Section 5.4 in a manner that complies
with Rule 16b-3 promulgated by the SEC under the Exchange Act.
(d) Parent will grant options for up to 300,000 shares of Parent Common
Stock following the Effective Time to certain senior officers (other than Peter
Boylan and Joe Kiener) who were senior officers of the Company with an exercise
price equal to the then current market price of shares of Parent Common Stock
in accordance with the recommendations of the Company's current directors
provided to the Parent Compensation Committee; provided, however, that without
the approval of the Parent Compensation Committee, (i) no single officer may be
granted options to purchase more than 30,000 shares of Parent Common Stock, and
(ii) officers employed by the following divisions of the Company may not be
granted options for more than 75,000 shares of Parent Common Stock in the
aggregate for each such division: TV Guide Magazine, Super Star and UVTV.
(e) Parent and the Company hereby agree to provide the other with the
following promptly upon the written request of such other party, but in no
event more frequently than once a month: (i) the number of shares of Parent
Common Stock or Company Common Stock, as the case may be, repurchased after
September 30, 1999 and prior to the Closing in accordance with the proviso in
Section 4.1(a)(ii)(E) or the proviso in Section 4.1(b)(ii)(C), as the case may
be, and (ii) the number of shares of Parent Common Stock or Company Common
Stock, as the case may be, issued after September 30, 1999 and prior to the
Closing.
Section 5.5 Conveyance Taxes. Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time. All of such taxes and
expenses shall be borne equally by Parent and the Company.
Section 5.6 Indemnification and Insurance.
(a) The certificate of incorporation and the bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability substantially identical to those set forth in the
Company's certificate of incorporation and bylaws on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who on or prior to
the Effective Time were directors, officers, employees or agents of the Company
unless such modification is required by law.
(b) If Parent, the Surviving Corporation or any of their successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such
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consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.6.
Section 5.7 Fees and Expenses. Except as provided in Section 7.5, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses, except that those expenses, other than
attorneys' and accountants' fees and expenses, incurred in connection with
printing the Proxy Statement and Form S-4, as well as the filing fee relating
to the Proxy Statement and Form S-4 paid to the SEC, will be shared equally by
Parent and the Company. Parent and the Company shall share equally the fees
incurred in connection with the filing of the premerger notification and report
form pursuant to the HSR Act.
Section 5.8 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or association.
Section 5.9 Takeover Statutes. If any "takeover" statute shall become
applicable to the transactions contemplated hereby, each of the Company, the
members of the Board of Directors of the Company, Parent and the Board of
Directors of Parent, subject to fiduciary duties, shall grant such approvals
and take such actions as are necessary such that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such takeover
statute on the transactions contemplated hereby.
Section 5.10 Rights Agreement. The Board of Directors of Parent has taken
all action necessary to render the Rights Agreement, dated July 10, 1998, by
and between Parent and American Stock Transfer & Trust Company (the "Parent
Rights Agreement") inapplicable to the Merger and the other transactions
contemplated by this Agreement. Prior to the Effective Time, Parent shall
either (i) amend the Parent Rights Agreement in the form attached hereto as
Exhibit 5.10, or (ii) adopt a new shareholders' rights agreement identical to
the Parent Rights Agreement, except as amended to reflect the fact that Parent
is then a Delaware corporation and to reflect the amendments reflected in the
form attached hereto as Exhibit 5.10, in each case immediately prior to the
Effective Time. Such amendment or new shareholders' rights agreement is
referred to herein as the "Parent Rights Agreement Amendment."
Section 5.11 Nasdaq National Marketing Listing. Parent shall use its best
efforts to cause the shares of Parent Common Stock issuable to the stockholders
of the Company in the Merger, and those required to be reserved for issuance in
connection with the Merger, to be listed for trading on the Nasdaq National
Market.
Section 5.12 Board of Directors of Parent. The Board of Directors of Parent
will take all actions necessary to cause the Board of Directors of Parent,
immediately after the Effective Time, to consist of twelve persons, six of whom
shall be designated by Parent (one of whom shall be Henry C. Yuen and two of
whom shall be Independent Directors (as that term is defined in the Bylaws of
Parent)), and six of whom shall be designated by the Board of Directors of the
Company prior to the Effective Time (one of whom shall be Peter Boylan, one of
whom shall be Joe Kiener, and two of whom shall be Independent Directors (as
that term is defined in the Bylaws of Parent)). If, prior to the Effective
Time, any of Parent or the Company designees shall decline or be unable to
serve as a director, Parent (if such person was designated by Parent) or the
Company (if such person was designated by the Company) shall designate another
person to serve in such person's stead.
Section 5.13 Committees of the Board of Directors of Parent. The Board of
Directors of Parent will take all actions necessary to cause the following
committees of the Board of Directors of Parent to be formed, immediately after
the Effective Time:
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(a) An executive committee comprised of four directors consisting of the
Chairman and Chief Executive Officer of Parent, the Chief Financial Officer
of Parent, one director designated by Liberty, and one director designated
by News Corp.
(b) A compensation committee comprised of five members of the Board of
Directors of Parent which will consist of two Independent Directors (as
that term is defined in the Bylaws of Parent) designated by Parent, one
Independent Director (as that term is defined in the Bylaws of Parent)
designated by Liberty, one Independent Director (as that term is defined in
the Bylaws of Parent) designated by News Corp. and the Chairman and Chief
Executive Officer of Parent.
(c) A special committee consisting of three members of the Board of
Directors of Parent which will be established and will be empowered to
determine issues related to Parent's relationship with and among service
providers. The members of the special committee will consist of the
Chairman and Chief Executive Officer of Parent, a director designated by
Liberty and a director designated by News Corp.
(d) An audit committee comprised of the Chief Financial Officer of
Parent, one Independent Director (as that term is defined in the Bylaws of
Parent) designated by Parent and two Independent Directors (as that term is
defined in the Bylaws of Parent) one of whom shall be designated by Liberty
and one of whom shall be designated by News Corp.
Section 5.14 Tax Matters.
(a) This Agreement is intended to constitute a "reorganization" within
the meaning of Section 368(a) of the Code.
(b) If required by the SEC, the Company shall cause its counsel, Baker &
Botts, L.L.P., to deliver an opinion to the Company, dated the date of the
Proxy Statement, to the effect that the Merger will qualify for federal
income tax purposes as a "reorganization" within the meaning of Section
368(a) of the Code. In connection with obtaining such opinions, the Company
and Parent shall provide to such counsel customary representation letters
upon which counsel may rely in rendering such opinion. The opinion shall,
if requested, be filed with the SEC as part of the Proxy Statement.
(c) If required by the SEC, Parent shall cause its counsel, O'Melveny &
Myers, LLP, to deliver an opinion to Parent, dated the date of the Proxy
Statement, to the effect that the Merger will qualify for federal income
tax purposes as a "reorganization" within the meaning of Section 368(a) of
the Code. In connection with obtaining such opinions, Parent and the
Company shall provide to such counsel customary representation letters upon
which counsel may rely in rendering such opinion. The opinion shall, if
requested, be filed with the SEC as part of the Proxy Statement.
(d) Between the date of this Agreement and the Effective Time, neither
Parent nor Company nor their affiliates shall directly or indirectly take
any action that could prevent the Merger from qualifying as a
reorganization under Section 368(a) of the Code or that could prevent each
of them from providing representations required from them in connection
with obtaining the opinions specified in Sections 5.14(b) and (c) hereof.
(e) Neither Parent nor Company shall (without the consent of the other)
take any action, except as specifically contemplated by this Agreement,
that could adversely affect the intended tax treatment of the transactions
contemplated hereby.
Section 5.15 Domestication; Certificates and Other Deliveries.
(a) On or prior to the Closing Date, the Company shall have delivered, or
caused to be delivered, to Parent (i) a certificate of good standing from the
Secretary of State of Delaware and of comparable authority in other
jurisdictions in which the Company and its subsidiaries are incorporated or
qualified to do business stating that each is a validly existing corporation in
good standing; (ii) duly adopted resolutions of the Board of Directors and
stockholders of the Company approving the execution, delivery and performance
of this
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Agreement and the Company Ancillary Agreements and the instruments contemplated
hereby, certified by the Secretary of the Company, and (iii) a true and
complete copy of the certificate of incorporation or comparable governing
instruments, as amended, of the Company and its subsidiaries certified by the
Secretary of State of the state of incorporation or comparable authority in
other jurisdictions, and a true and complete copy of the bylaws or comparable
governing instruments, as amended, of the Company and its subsidiaries
certified by the Secretary of the Company and its subsidiaries, as applicable.
(b) On or prior to the Closing Date, Parent shall have effected the
Domestication and delivered to the Company (i) a good standing certificate from
the Secretary of State of Delaware stating that Parent is a validly existing
corporation together with a certificate of good standing from the Secretary of
State of Delaware stating that Sub is a validly existing corporation in good
standing; (ii) duly adopted resolutions of the Board of Directors of each of
Parent and Sub approving the execution, delivery and performance of this
Agreement and the Parent Ancillary Agreements and the instruments contemplated
hereby, and of the stockholders of Parent approving the issuance of the Parent
Common Stock pursuant to the Merger, each certified by the Secretary or the
Assistant Secretary of the Company; (iii) a true, complete and certified copy
of the Certificate of Incorporation of Parent, which shall be in the form
attached to this Agreement and a true, complete and certified copy of the
Certificate of Incorporation of Sub; and (iv) a true and complete copy of
Parent's Bylaws which shall be in the form attached to this Agreement and a
true and complete copy of the Bylaws, as amended, of Sub, each certified by the
Secretary or Assistant Secretary of Parent and Sub, as applicable.
Section 5.16 Pending Litigation. Each of the parties covenants and agrees
that all activity (except as contemplated by this Section 5.16) with respect to
the pending litigation between and among the parties and their respective
affiliates (the "Subject Litigation") shall cease until the earlier of (i) the
termination of this Agreement pursuant to Section 7.1 hereof, and (ii) the
Effective Time. Each of the parties hereto agrees to take promptly any and all
action required and to file appropriate documents with each court (the
"Relevant Courts") in which the Subject Litigation is pending to inform the
court of this Section 5.16 and to request the stay of the Subject Litigation.
Upon any termination of this Agreement pursuant to Section 7.1, unless the IPG
License Agreement is effective, the stay implemented in connection with the
Subject Litigation pursuant to this Section 5.16 shall be deemed automatically
lifted and each of the parties hereto agrees to take promptly any and all
actions required and to file appropriate documents with the Relevant Courts to
lift the stay. The parties shall immediately and expeditiously as possible,
following the execution of this Agreement, take all necessary steps to execute
and file with the Relevant Courts the documents contemplated by this Section
5.16.
Section 5.17 IPG License Agreement. In the event this Agreement is
terminated pursuant to Section 7.1(b), (d), (e) or (g), the IPG License
Agreement (the "IPG License Agreement") entered into on the date hereof by
Parent and the Company in the form attached hereto as Exhibit 5.17, shall
become effective as of the date on which this Agreement is so terminated if the
Company so elects by giving notice to Parent within 30 days thereafter.
Section 5.18 Rule 16b-3. Prior to the Effective Time, Parent and the Company
shall take all steps reasonably necessary to cause the transactions
contemplated hereby and any other dispositions of equity securities of the
Company (including derivative securities) or acquisition of Parent and the
Company equity securities (including derivative securities) in connection with
this Agreement and the Option Agreement by each person who (a) is a director or
officer of Parent or the Company or (b) at the Effective Time, will become a
director or officer of Parent, to be exempted under Rule 16b-3 promulgated
under the Exchange Act.
Section 5.19 Multichannel Video Programming. Following the date hereof, the
Company shall enter into good faith negotiations with each multichannel video
programming delivery ("MVPD") system in which News Corp. or its affiliates has
an interest (each a "News MVPD") for the purpose of licensing the Company's IPG
technology on commercial terms and conditions and News Corp. shall cause each
such News MVPD to enter into good faith negotiations with the Company for the
purpose of licensing the Company's IPG technology on commercial terms and
conditions.
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ARTICLE VI
Conditions Precedent
Section 6.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. The Stockholder Approvals shall have been
obtained;
(b) Nasdaq National Market Listing. The shares of Parent Common Stock
issuable to the Company's stockholders pursuant to this Agreement shall
have been approved for inclusion on the Nasdaq National Market, subject to
official notice of issuance;
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger substantially on the terms contemplated
hereby shall be in effect;
(d) Form S-4. The Form S-4 shall have been declared effective by the SEC
under the Securities Act. No stop order suspending the effectiveness of the
Form S-4 shall have been issued by the SEC, and no proceedings for that
purpose shall have been initiated or, to the knowledge of Parent or the
Company, threatened by the SEC; and
(e) HSR Act. The applicable waiting period (and any extension thereof)
under the HSR Act shall have expired or been terminated.
Section 6.2 Additional Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are also subject to the
following conditions, unless waived in writing by Parent:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and
correct as of the date hereof, except, in all such cases, where the failure
to be so true and correct would not have a material adverse effect on the
Company;
(b) Agreements and Covenants. The Company shall not have willfully and
materially breached (i) any of the covenants specified in Section 4.1(a)(i)
through (xiii), inclusive, or Sections 5.5 or 5.8, except, in all such
cases, where the failure to have so performed or complied would not have a
material adverse effect on the Company or (ii) any covenant in Section 4.2
or Article V (other than Sections 5.5 and 5.8) required by this Agreement
to be performed or complied with by it on or prior to the Closing Date.
(c) Company Ancillary Documents. The Company Ancillary Agreements shall
be valid, binding and enforceable pursuant to the terms thereof and hereof
against the Company and its applicable subsidiaries, Liberty and News
Corp., as the case may be; and
(d) Share Ownership. The holders of Parent's outstanding Parent Common
Stock immediately prior to the Closing shall own in the aggregate more than
50% of Parent's outstanding Parent Common Stock immediately following the
Closing, provided that for purposes of such calculation, (i) Parent must
use the number of issued and outstanding shares of Parent Common Stock on
September 30, 1999 specified in Section 3.2(c) of this Agreement plus any
shares of Parent Common Stock issued after September 30, 1999 and prior to
the Closing, (ii) any shares of Parent Common Stock purchased by Parent or
any person controlled by Parent after September 30, 1999 (other than shares
of Parent Common Stock repurchased in accordance with the proviso in
Section 4.1(b)(ii)(C)) shall be deemed to be outstanding immediately
following the Closing, and (iii) any shares of Parent Common Stock
repurchased after September 30, 1999 in accordance with the proviso in
Section 4.1(b)(ii)(C) shall be deemed to be outstanding until the tenth
business day following the receipt by the Company of written notice from
Parent containing the date of any such repurchase and the number of shares
of Parent Common Stock so repurchased.
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Section 6.3 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger are also subject to the
following conditions, unless waived in writing by the Company:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Sub contained in this Agreement shall be true and
correct as of the date hereof, except, in all such cases, where the failure
to be so true and correct would not have a material adverse effect on
Parent and its subsidiaries taken as a whole;
(b) Agreements and Covenants. Each of Sub and Parent shall not have
willfully and materially breached (i) any of the covenants specified in
Section 4.1(b)(i) through (xii), inclusive, or Sections 5.5 and 5.8,
except, in all such cases, where the failure to have so performed or
complied would not have a material adverse effect on Parent and its
subsidiaries taken as a whole or (ii) any covenant in Section 4.3 or
Article V (other than Sections 5.5 and 5.8) required by this Agreement to
be performed or complied with by it on or prior to the Closing Date; and
(c) Parent Ancillary Agreements. The Parent Ancillary Agreements shall
be valid, binding and enforceable pursuant to the terms thereof and hereof
against Parent, its applicable subsidiaries and Henry C. Yuen, as the case
may be; provided, however, that if Henry C. Yuen dies prior to the
Effective Time, it shall not be a condition to the Company's obligations to
effect the Merger that the Yuen Amendment and the Stockholders' Agreement
be binding and enforceable upon Henry C. Yuen, as long as the Stockholders'
Agreement continues to be binding and enforceable upon Parent and its
applicable subsidiaries. The Yuen Employment Agreement as amended by the
Yuen Amendment shall not have been amended, modified or supplemented in any
manner.
ARTICLE VII
Termination, Amendment and Waiver
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
the Company or of Parent:
(a) by mutual written consent of Parent and the Company, if the Board of
Directors of each so determines by the affirmative vote of a majority of
the members of its entire Board of Directors; or
(b) by either Parent or the Company, if the Merger shall not have
occurred by March 31, 2000, provided that if as of such date the waiting
period (or any extension thereof) under the HSR Act has not expired or been
terminated, or an action has been instituted by the Department of Justice
or Federal Trade Commission challenging or seeking to enjoin the
consummation of the Merger and remains unresolved, then such date shall be
extended to September 30, 2000 (whichever date is operative being the
"Reference Date"), and provided further that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been the cause of or resulted in the
failure of the Merger to occur on or before the Reference Date and such
action or failure to act constitutes a breach of this Agreement; or
(c) by Parent (provided that Parent is not then in material breach of
any representation, warranty, covenant or other agreement contained herein
such that such breach would have a material adverse effect on Parent or the
Company), but only if the conditions set forth in Section 6.2(a), Section
6.2(b), Section 6.2(c) or Section 6.2(d), as the case may be, would be
incapable of being satisfied by the Reference Date; or
(d) by the Company (provided that the Company is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein such that such breach would have a material adverse effect
on the Company or Parent), but only if the conditions set forth in Section
6.3(a) or Section 6.3(b) or Section 6.3(c), as the case may be, would be
incapable of being satisfied by the Reference Date, including, without
limitation, as a result of the recommendation of the Merger of the Board of
Directors of
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Parent having been withdrawn or modified prior to the termination of this
Agreement other than as permitted by Section 5.1(a); or
(e) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any
case having the effect of permanently enjoining, restraining or otherwise
prohibiting the consummation of the Merger and such order, decree or ruling
or other action shall have become final and nonappealable; or
(f) by either Parent or the Company if any approval of the stockholders
of the Company required for the consummation of the Merger shall not have
been obtained by reason of the failure to obtain the required vote at a
duly held meeting of the Company's stockholders or at any adjournment or
postponement thereof, provided that the right to terminate this Agreement
under this Section 7.1(f) shall not be available to the Company where the
failure to obtain stockholder approval of the Company's stockholders shall
have been caused by the action or failure to act of the Company in breach
of this Agreement; or
(g) by either Parent or the Company if any approval of the Parent's
Stockholders required for the consummation of the Merger and the
Domestication shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of Parent's Stockholders or
at any adjournment or postponement thereof, provided that the right to
terminate this Agreement under this Section 7.1(g) shall not be available
to Parent where the failure to obtain the approval of the Parent's
Stockholders shall have been caused by the action or failure to act of
Parent in breach of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except (i) as set forth in Section 5.7, Section 5.17,
this Section 7.2, Section 7.5 and Article VIII (General Provisions), each of
which shall survive the termination of this Agreement, and (ii) nothing herein
shall relieve any party from liability for any willful and material breach of
this Agreement. No termination of this Agreement shall affect the obligations
of the parties contained in the Confidentiality Agreements, all of which
obligations shall survive termination of this Agreement in accordance with
their terms.
Section 7.3 Amendment. This Agreement may be amended prior to the Effective
Time by the parties at any time before or after approval hereof by the
stockholders of the Company and Parent; provided, however, that after such
stockholder approval there shall not be made any amendment that by law requires
further approval by the stockholders of the Company or Parent without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.3, waive compliance with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing, signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver
of those rights.
Section 7.5 Termination Fee; Liquidated Damages.
(a) Upon any termination of this Agreement by Parent pursuant to Section
7.1(c) or by Parent or the Company pursuant to Section 7.1(f) hereof, the
Company shall immediately pay to Parent $409 million (the "Company Termination
Fee") by wire transfer of immediately available funds to an account designated
by Parent.
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(b) Upon any termination of this Agreement by the Company or Parent pursuant
to Section 7.1(g) hereof, Parent shall pay to the Company $205 million (the
"Parent Termination Fee") by wire transfer of immediately available funds to an
account designated by the Company; provided, however, that an additional amount
shall be paid as liquidated damages, under the following circumstances: (i) if
prior to the meeting of Parent's Stockholders there shall have been a Parent
Takeover Proposal (except that for purposes of this Section 7.5(b)(i), to
constitute a Parent Takeover Proposal such proposal, (x) if relating to the
acquisition in any manner of any equity interest in or any voting securities of
Parent or any of its subsidiaries, must contemplate the acquisition of 35% or
more, rather than 10% or more, of the total of such equity interests or voting
securities and (y) if relating to the acquisition by any person in any manner
of beneficial ownership or a right to acquire beneficial ownership of, or the
formation of any "group" (as defined under Section 13(d) of the Exchange Act
and the rules and regulations thereunder) which beneficially owns, or has the
right to acquire beneficial ownership of, outstanding shares of capital stock
of Parent, must contemplate the acquisition of 35% or more, rather than 10% or
more, of the then outstanding shares of capital stock of Parent) or the
recommendation of the Merger of the Board of Directors of Parent shall have
been withdrawn or modified prior to the time of such termination or the meeting
of Parent's Stockholders, Parent shall pay to the Company upon such termination
by wire transfer of immediately available funds an additional fee of $204
million; and (ii) if at any time within 12 months following such termination of
this Agreement (whether or not a Parent Takeover Proposal (as defined in
Section 4.3(a)) was made prior to such termination), Parent enters into a
definitive agreement for or consummates a transaction that if proposed prior to
termination would have constituted a Parent Takeover Proposal (as defined in
Section 4.3(a)) then Parent shall concurrently with such signing or closing pay
the Company by wire transfer of immediately available funds, an additional $204
million but without in any case duplication of any payment made under clause
(i). Upon any termination of this Agreement by the Company pursuant to Section
7.1(d) hereof, Parent shall immediately pay to the Company $409 million (the
"Alternative Parent Termination Fee") by wire transfer of immediately available
funds to an account designated by the Company.
(c) Payment of the fees described in Sections 7.5(a) and (b) above
constitute liquidated damages and shall be in lieu of all other damages
incurred in the event of breach of this Agreement.
Section 7.6 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by its Board of Directors, acting by the affirmative vote of a
majority of the members of the entire Board of Directors.
ARTICLE VIII
General Provisions
Section 8.1 Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except that any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time of the Merger shall survive
the Merger.
Section 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied, or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
Facsimile: (626) 792-0257
Attention: Chief Executive Officer
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with a copy to:
O'Melveny & Myers LLP
Suite 1700
610 Newport Center Drive
Newport Beach, California 92660
Facsimile: (714) 669-6994
Attention: David A. Krinsky, Esq.
J. Jay Herron, Esq.
(b) if to the Company, to
TV Guide, Inc.
7140 S. Lewis Avenue
Tulsa, Oklahoma 74136-5422
Facsimile: (918) 488-4951
Attention: General Counsel
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue, Suite 2900
New York, New York 10022-6030
Facsimile: (212) 705-5125
Attention: Elizabeth Markowski, Esq.
Section 8.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Average Market Capitalization" means one-half of the sum of the Market
Capitalization of the applicable corporation on the first day of the relevant
period and on the last day of the relevant period. "Market Capitalization"
means the product of the number of shares of the applicable corporation's
common stock outstanding on the relevant date multiplied by the average closing
market price of the Corporation's common stock for the 20 consecutive trading
days immediately preceding such date.
(c) "Company Ancillary Agreements" means the Stockholders' Agreement, the
Company Option Agreement and the IPG License Agreement;
(d) "material adverse change" or "material adverse effect" means, when used
in connection with the Company, the Surviving Corporation or Parent, any
change, event or effect that is materially adverse to the business, assets,
financial condition or results of operations of such party and its subsidiaries
taken as a whole, except to the extent that such change, event, or effect is
attributable to or results from (i) general change in the industries in which
the Company, the Surviving Corporation or Parent operate, (ii) changes in
general economic conditions or securities markets in general, or (iii) the
effect of the public announcement or pendency of the transactions contemplated
hereby;
(e) "Parent Ancillary Agreements" means the Parent Option Agreement, the IPG
License Agreement, the Stockholders' Agreement, the Yuen Amendment and the
Parent Rights Agreement Amendment;
(f) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity; and
(g) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its directors or other
governing body (or, if there are no such voting interests, more than 50% of the
equity interest of which) is owned directly or indirectly by such first person.
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Section 8.4 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" and "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties whether by mail, overnight
courier, personal delivery or facsimile, it being understood that all parties
need not sign the same counterpart.
Section 8.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
(and the other exhibits hereto), the Confidentiality Agreement and the other
documents referenced herein constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and except for the
provisions of Article II and Sections 5.4 and 5.6, are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
Section 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with the internal laws of the State of Delaware without
regard to conflicts of laws, except for such provisions where the laws of the
British Virgin Islands is mandatorily applicable, which provisions shall be
governed by and construed in accordance with the laws of the British Virgin
Islands.
Section 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 8.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware State court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Delaware or
any Delaware State court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that
process may be served upon it in any manner authorized by the laws of the State
of Delaware, (c) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (d) agrees that it will not bring any action relating to this Agreement in
any court other than a federal or State court sitting in the State of Delaware.
Section 8.10 Severability. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any such jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provisions, as to such jurisdictions, shall
be ineffective, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction. Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
Attest: "Parent"
Gemstar International Group Limited,
a British Virgin Islands
corporation
/s/ Stephen A. Weiswasser
By: _________________________________
Name: Stephen A. Weiswasser
Title: Secretary /s/ Henry Yuen
By: _________________________________
Name: Henry Yuen
Title: Chief Executive Officer
Attest: "SUB"
G Acquisition Subsidiary Corp., a
Delaware corporation
/s/ Stephen A. Weiswasser
By: _________________________________ /s/ Henry Yuen
Name: Stephen A. Weiswasser By: _________________________________
Title: Assistant Secretary Name: Henry Yuen
Title: Chief Executive Officer
Attest: "Company"
tv guide, inc., a Delaware
corporation
/s/ Craig M. Waggy
By: _________________________________
Name: Craig M. Waggy /s/ Peter C. Boylan III
Title: Senior Vice President By: _________________________________
and Chief Financial Officer Name: Peter C. Boylan III
Title: President
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AMENDMENT
AMENDMENT (this "Amendment"), made effective as of February 7, 2000, by and
among Gemstar International Group Limited, a British Virgin Islands corporation
("Gemstar"), G Acquisition Subsidiary Corp., a Delaware corporation and a
wholly-owned subsidiary of Gemstar ("Sub"), and TV Guide, Inc., a Delaware
corporation ("TV Guide"), to the Agreement and Plan of Merger, dated as of
October 4, 1999 (the "Merger Agreement"), by and among Gemstar, Sub and TV
Guide. All capitalized terms used herein which are not otherwise defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
WHEREAS, pursuant to the Merger Agreement, Gemstar has agreed to effect the
Domestication on or prior to the Closing Date; and
WHEREAS, the Merger Agreement provides that Gemstar's Certificate of
Incorporation and Bylaws following the Domestication and at the Effective Time
will be in the respective forms annexed to the Merger Agreement as Exhibit
1.7(a) and Exhibit 1.7(b); and
WHEREAS, Gemstar and TV Guide have determined that it is advisable for
Gemstar to effect the Domestication prior to the Parent Stockholders' Meeting;
and
WHEREAS, the parties are entering into this Amendment in order to set forth
their agreement with respect to the forms of Gemstar's Certificate of
Incorporation and Bylaws following the Domestication and the Effective Time and
certain other matters.
NOW THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties hereto agree as follows:
Section 1. Governing Instruments.
(a) Immediately following the Domestication and the Effective Time,
Gemstar's Certificate of Incorporation will be in the form set forth as
Exhibit A hereto, which shall replace in its entirety Exhibit 1.7(a) to
the Merger Agreement.
(b) Immediately following the Domestication, Gemstar's Bylaws will be in
the form set forth as Exhibit B hereto.
(c) Immediately following the Effective Time, Gemstar's Bylaws will be in
the form set forth as Exhibit C hereto, which shall replace in its
entirety Exhibit 1.7(b) to the Merger Agreement.
(d) Immediately following the Domestication, the Parent Rights Agreement
will be amended and restated so as to be in the form set forth as
Exhibit D hereto (the "Amended Rights Agreement").
(e) Immediately prior to the Effective Time, the Amended Rights Agreement
will be amended as provided on Exhibit E hereto, which shall replace in
its entirety Exhibit 5.10 to the Merger Agreement.
(f) Promptly following the Effective Time, Gemstar will effect a merger of
a subsidiary of Gemstar with and into Gemstar in accordance with
Section 253 of the Delaware General Corporation Law solely for the
purpose of changing the name of Gemstar to "TV Guide International,
Inc."
Section 2. Waiver.
To the extent any provisions of the Merger Agreement would prohibit or
conflict with actions required to be taken in accordance with Section 1 hereof,
such provisions are hereby amended or waived to the extent necessary to permit
the taking of such actions.
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Section 3. Ratification.
Except as specifically set forth herein, the terms and provisions of the
Merger Agreement shall remain in full force and effect and are hereby in all
respects ratified and confirmed.
Section 4. Representations.
Each party represents and warrants to each other party that this Amendment
(1) has been duly executed by its authorized officer, and (2) in accordance
with Section 7.6 of the Merger Agreement has been approved by the affirmative
vote of a majority of the members of its entire board of directors.
Section 5. Miscellaneous.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE. This Amendment may be executed in any number of
counterparts, all of which shall be considered one and the same instrument.
This Amendment shall become effective as of the date first written above when
signed by each party and delivered to the other party. Delivery of an executed
signature page by facsimile shall be effective execution and delivery.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their respective authorized officers as of the date first written
above.
GEMSTAR INTERNATIONAL GROUP LIMITED
/s/ Stephen A. Weiswasser
By __________________________________
Name: Stephen A. Weiswasser
Title: Executive Vice President and
General Counsel
G ACQUISITION SUBSIDIARY CORP.
/s/ Stephen A. Weiswasser
By __________________________________
Name: Stephen A. Weiswasser
Title: Assistant Secretary
TV GUIDE, INC.
/s/ Charles B. Ammann
By __________________________________
Name: Charles B. Ammann
Title: Senior Vice President
A-44
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ANNEX B
CERTIFICATE OF INCORPORATION
OF
GEMSTAR INTERNATIONAL GROUP LIMITED
ARTICLE I
Name
The name of the Corporation is Gemstar International Group Limited (the
"Corporation").
ARTICLE II
Registered Office
The location of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware. The name of the registered agent at such address is
The Corporation Trust Company.
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
ARTICLE IV
Authorized Stock
The total number of shares of capital stock that the Corporation shall have
authority to issue is two billion five hundred million (2,500,000,000) shares,
divided into the following classes: two billion three hundred fifty million
(2,350,000,000) shares of Common Stock, par value $.01 per share ("Common
Stock") and one hundred fifty million (150,000,000) shares of preferred stock,
par value $.01 per share ("Preferred Stock"), of which (i) 25,000,000 shares
have been designated Series A Junior Participating Preferred Stock (the "Series
A Preferred Stock"), having the rights, preferences, privileges and
restrictions set forth in Article XI of this Certificate, and (ii) the balance
will be issuable in series as provided in Section B of this Article IV.
SECTION A
Common Stock
Each share of the Common Stock shall have the same relative rights and shall
be identical in all respects to all other shares of Common Stock.
1. Voting Rights.
Holders of Common Stock shall be entitled to one vote for each share of such
stock held on all matters presented to such stockholders. Except as may
otherwise be required by the laws of the State of Delaware and,
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with respect to any series of Preferred Stock, except as may be provided in
Article XI or in any resolution or resolutions providing for the establishment
of such series pursuant to authority vested in the Board of Directors by this
Certificate, the holders of outstanding shares of Common Stock and the holders
of outstanding shares of each series of Preferred Stock, if any, entitled to
vote thereon shall vote as one class with respect to the general election of
directors and with respect to all other matters to be voted on by stockholders
of the Corporation (including, without limitation, any proposed amendment to
this Certificate that would increase the number of authorized shares of Common
Stock or of any other class or series of stock or decrease the number of
authorized shares of any such class or series of stock (but not below the
number of shares thereof then outstanding)), and no separate vote or consent of
the holders of shares of Common Stock or any such series of Preferred Stock
shall be required for the approval of any such matter.
2. Dividends.
Dividends shall be payable only as and when declared by the Board of
Directors out of any assets legally available for the payment of dividends.
3. Liquidation and Dissolution.
In the event of a liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, after payment or provision for payment of the
debts and liabilities of the Corporation and subject to the prior payment in
full of the preferential amounts to which any series of Preferred Stock is
entitled, the holders of Common Stock shall share equally, on a share for share
basis, in the assets of the Corporation remaining for distribution to its
common stockholders. Neither the consolidation or merger of the Corporation
with or into any other person or persons nor the sale, transfer or lease of all
or substantially all of the assets of the Corporation shall itself be deemed to
be a liquidation, dissolution or winding up of the Corporation within the
meaning of this paragraph 3.
SECTION B
Preferred Stock
The Preferred Stock may be issued, from time to time, in one or more series,
with such powers, designations, preferences and relative, participating,
optional or other rights, and qualifications, limitations or restrictions
thereof, as shall be stated and expressed in a resolution or resolutions
providing for the issue of such series adopted by the Board of Directors (a
"Preferred Stock Designation"). Without limiting the foregoing, the Board of
Directors, in such Preferred Stock Designation (a copy of which shall be filed
as required by law), is also expressly authorized to fix with respect to each
series:
(i) the distinctive serial designations and the division of such shares
into series and the number of shares of a particular series, which may be
increased or decreased, but not below the number of shares thereof then
outstanding, by a certificate made, signed, filed and recorded as required
by law;
(ii) the dividend rate or amounts, if any, for the particular series,
the date or dates from which dividends on all shares of such series shall
be cumulative, if dividends on stock of the particular series shall be
cumulative, and the relative rights of priority, if any, or participation,
if any, with respect to payment of dividends on shares of that series;
(iii) the rights of the shares of each series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of each
series;
(iv) the right, if any, of the holders of a particular series to convert
or exchange such stock into or for other classes or series of a class of
stock or indebtedness of the Corporation or another entity, and the terms
and conditions of such conversion or exchange, including provisions for the
adjustment of the conversion or exchange rate in such events as the Board
of Directors shall determine;
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(v) the voting rights, if any, full or limited of the holders of a
particular series; and
(vi) the terms and conditions, if any, for the Corporation to purchase
or redeem shares of a particular series.
All shares of any one series of the Preferred Stock shall be alike in every
particular. Except to the extent otherwise provided in the resolution or
resolutions providing for the issue of any series of Preferred Stock, the
holders of shares of such series shall have no voting rights except as may be
required by the laws of the State of Delaware.
Except as may be provided by the Board of Directors in a Preferred Stock
Designation or by law, shares of any series of Preferred Stock that have been
redeemed (whether through the operation of a sinking fund or otherwise) or
purchased by the Corporation, or which, if convertible or exchangeable, have
been converted into or exchanged for shares of stock of any other class or
classes shall resume the status of authorized and unissued shares of Preferred
Stock without designation as to series and may be reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors or as part of any other series of Preferred Stock.
ARTICLE V
Directors
SECTION A
Number of Directors
The governing body of the Corporation shall be a Board of Directors.
Effective upon the filing of the Certificate of Merger of TV Guide, Inc., a
Delaware corporation ("TVG"), and G Acquisition Subsidiary Corp., a Delaware
corporation and subsidiary of the Corporation (the "Effective Time"), the Board
of Directors shall consist of twelve (12) directors. After the Effective Time,
the number of directors may be changed by the Board of Directors from time to
time by resolution adopted by at least nine of the twelve members of the Board
of Directors then authorized. At the Effective Time, six (6) directors shall be
persons who are designated by the Board of Directors of TVG prior to the
Effective Time to serve on the Board of Directors of the Corporation (the "TVG
Directors"), two of whom shall be Independent Directors (as defined in the
Corporation's By-laws as amended from time to time), and six (6) directors
shall be persons who are designated by the Board of Directors of the
Corporation prior to the Effective Time to serve on the Board of Directors of
the Corporation (the "GS Directors"), two of whom shall be Independent
Directors. No series of Preferred Stock shall be entitled to elect any
additional directors, although the terms of any series of Preferred Stock may
provide that the shares of such series are entitled to vote in elections of
directors.
SECTION B
Term of Office
The Corporation shall have three classes of directors: Class I, Class II and
Class III. Each class of directors shall consist of a number of directors equal
as nearly as practicable to one-third of the then authorized number of members
of the Board of Directors. The initial term of office of the Class I Directors
shall expire at the annual meeting of stockholders in 2003; the initial term of
office of the Class II Directors shall expire at the annual meeting of
stockholders in 2002; and the initial term of office of the Class III Directors
shall expire at the annual meeting of stockholders in 2001. At each annual
meeting of stockholders of the Corporation, the successors of that class of
directors whose term expires at that meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held in the third
year following the year of such election. The directors of each class will hold
office until their respective death, resignation or removal and until their
respective successors are elected and qualified. At the Effective Time, two of
the six TVG Directors will be Class I Directors, two will be Class II Directors
and two will be Class III Directors. At the Effective Time, the remaining two
Class I Directors, two Class II Directors and two Class III Directors will be
GS Directors.
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SECTION C
Election and Removal of Directors
Election of directors need not be by written ballot. Advance notice of
nominations for the election of directors, other than nominations by the Board
of Directors in accordance with the By-laws of the Corporation, shall be given
to the Corporation in the manner provided in the By-laws of the Corporation.
Directors may be removed from office with or without cause upon the affirmative
vote of the holders of at least 66 2/3% of the total voting power of the then
outstanding Voting Securities (defined below), voting together as a single
class at a meeting specifically called for such purpose. The term "Voting
Securities" shall mean the Common Stock and any series of Preferred Stock
entitled to vote with the holders of Common Stock generally upon all matters
which may be submitted to a vote of stockholders at any annual meeting or
special meeting thereof.
SECTION D
Newly Created Directorships and Vacancies
Vacancies on the Board of Directors resulting from death, resignation,
removal, disqualification or other cause, and newly created directorships
resulting from any increase in the number of directors on the Board of
Directors, shall be filled as shall be specified in the By-laws. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the vacancy
occurred or to which the new directorship is apportioned, and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
SECTION E
Limitation on Liability and Indemnification
1. Limitation On Liability.
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or may hereafter be amended, a director of the Corporation
shall not be liable to the Corporation or any of its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or modification
of this paragraph 1 shall be prospective only and shall not adversely affect
any limitation, right or protection of a director of the Corporation existing
at the time of such repeal or modification.
2. Indemnification.
(a) Right to Indemnification. The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, limited liability
company, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by such
person. Such right of indemnification shall inure whether or not the claim
asserted is based on matters which antedate the adoption of this Section E. The
Corporation shall be required to indemnify or make advances to a person in
connection with a proceeding (or part thereof) initiated by such person (other
than compulsory counterclaims) only if the proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
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(b) Prepayment of Expenses. The Corporation shall pay the expenses
(including attorneys' fees) incurred in defending any proceeding in advance of
its final disposition, provided however, that the payment of expenses incurred
by a director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the director or officer to
repay all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this paragraph or
otherwise.
(c) Claims. If a claim for indemnification or prepayment of expenses under
this paragraph 2 is not paid in full within 30 days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or prepayment of expenses under
applicable law.
(d) Non-Exclusivity of Rights. The rights conferred on any person by this
paragraph shall not be exclusive of any other rights which such person may have
or hereafter acquire under any statute, provision of this Certificate, the By-
laws, agreement, vote of stockholders or disinterested directors or otherwise.
(e) Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, limited
liability company, joint venture, trust, enterprise or nonprofit entity shall
be reduced by any amount such person may collect as indemnification from such
other corporation, partnership, limited liability company, joint venture,
trust, enterprise or nonprofit entity.
3. Amendment or Repeal.
Any repeal or modification of the foregoing provisions of this Section E
shall not adversely affect any right or protection hereunder of any person in
respect of any act of omission occurring prior to the time of such repeal or
modification.
SECTION F
Amendment of By-Laws
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors, by action taken by the
affirmative vote of not less than (x) prior to the Effective Time, a majority
of the Board of Directors then authorized and (y) after the Effective Time,
nine of the twelve members of the Board of Directors then authorized, is hereby
expressly authorized and empowered to adopt, amend or repeal any provision of
the By-laws of this Corporation, including any provision of the By-laws adopted
by the affirmative vote of the Corporation's stockholders.
ARTICLE VI
Meetings of Stockholders
Except as otherwise provided in the terms of any series of Preferred Stock,
no action required to be taken or which may be taken at any annual meeting or
special meeting of stockholders may be taken without a meeting, and the power
of stockholders to consent in writing, without a meeting, is specifically
denied.
ARTICLE VII
Actions Requiring Supermajority Stockholder Vote
Subject to the rights of the holders of any class or series of Preferred
Stock, the affirmative vote of the holders of at least 66 2/3% of the total
voting power of the then outstanding Voting Securities (as defined in
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Section C of Article V of this Certificate), voting together as a single class
at a meeting specifically called for such purpose, shall be required in order
for the Corporation to take any action to authorize:
(a) the amendment, alteration or repeal of any provision of this
Certificate or the addition or insertion of other provisions herein other
than an amendment solely for the purpose of changing the name of the
Corporation;
(b) the adoption, amendment or repeal of any provision of the By-laws of
the Corporation; provided, however, that this clause (b) shall not apply
to, and no vote of the stockholders of the Corporation shall be required to
authorize, the adoption, amendment or repeal of any provision of the By-
laws of the Corporation by the Board of Directors in accordance with the
power conferred upon it pursuant to Section F of Article V of this
Certificate;
(c) the merger or consolidation of this Corporation with or into any
other person or any binding share exchange to which this Corporation is a
party, other than a merger of a subsidiary of this Corporation with and
into this Corporation effected in accordance with Section 253 of the
Delaware General Corporation Law solely for the purpose of changing the
name of this Corporation (it being understood that this clause (c) shall
not apply to any transactions specified in that certain Agreement and Plan
of Merger dated as of October 4, 1999 by and among this Corporation, G
Acquisition Subsidiary Corp. and TVG, as such agreement may be amended from
time to time (the "Merger Agreement"), including, as contemplated thereby,
the issuance of shares of the Corporation's Common Stock in connection with
the merger of G Acquisition Subsidiary Corp. with and into TVG (the
"Merger"));
(d) the sale, lease, exchange or other disposition in one transaction or
a series of related transactions of all or a substantial part of the assets
of the Corporation and its subsidiaries;
(e) the dissolution, liquidation or winding up of the Corporation; or
(f) any other matter (other than the election of directors and the
adoption or amendment of any stock option, stock appreciation rights or
other stock incentive plan for the Corporation or its subsidiaries and any
transactions contemplated by the Merger Agreement including, as
contemplated thereby, the issuance of shares of the Corporation's Common
Stock in connection with the Merger) required to be submitted to
stockholders for approval by the laws of the State of Delaware or by the
rules of the national securities exchange or national securities
association on which the Common Stock is listed or quoted.
All rights at any time conferred upon the stockholders of the Corporation
pursuant to this Certificate are granted subject to the provisions of this
Article VII.
ARTICLE VIII
Term
The term of existence of this Corporation shall be perpetual.
ARTICLE IX
Stock Not Assessable
The capital stock of this Corporation shall not be assessable if fully paid.
It shall be issued as fully paid, and the private property of the stockholders
shall not be liable for the debts, obligations or liabilities of this
Corporation.
ARTICLE X
Section 203
The Corporation elects not be governed by Section 203 of the General
Corporation Law of the State of Delaware.
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ARTICLE XI
Rights and Preferences of
Series A Junior Preferred Stock
SECTION A
Dividends and Distributions
(1) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of the Corporation's Common
Stock, and of any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Preferred Stock. In the event
the Corporation shall at any time declare or pay any dividend on the Common
Stock payable in Common Stock, or effect a subdivision or combination or
consolidation of the outstanding Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(2) The Company shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (1) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(3) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
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SECTION B
Voting Rights
The holders of shares of Series A Preferred Stock shall have the following
voting rights:
(1) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(2) Except as otherwise provided herein, in any other amendment to this
Certificate creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of the Corporation's stockholders.
(3) Except as set forth herein, or as otherwise provided by law, holders of
Series A Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate action.
SECTION C
Certain Restrictions
(1) Whenever quarterly dividends or other dividends or distributions payable
on the Series A Preferred Stock as provided in Section A are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective
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annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(2) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (1) of this Section
C, purchase or otherwise acquire such shares at such time and in such manner.
SECTION D
Reacquired Shares
Any shares of Series A Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock and may
be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein or as otherwise
required by law.
SECTION E
Liquidation, Dissolution or Winding Up
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of Common
Stock, or (2) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event under
the proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION F
Consolidation, Merger, Etc.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which shares of Common Stock are exchanged
for or changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series A Preferred Stock shall at the same
time be similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of
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Common Stock, or effect a subdivision or combination or consolidation of the
outstanding Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
SECTION G
No Redemption
The shares of Series A Preferred Stock shall not be redeemable.
SECTION H
Rank
The Series A Preferred Stock shall rank, with respect to the payment of
dividends and the distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
SECTION I
Amendment of Article
This Article shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series A Preferred
Stock, voting together as a single class.
Article XII
Incorporator
The name and mailing address of the Incorporator is Stephen A. Weiswasser,
135 North Los Robles Avenue, Suite 800, Pasadena, California 91101.
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a corporation in pursuance of the General Corporation Law of
the State of Delaware and the acts amendatory thereof and supplemental thereto,
make and file this Certificate of Incorporation hereby declaring and certifying
that the facts herein stated are true as of February 9, 2000.
/s/ Stephen A. Weiswasser
_____________________________________
Stephen A. Weiswasser
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ANNEX C
BYLAWS
TV GUIDE INTERNATIONAL, INC.
(formerly known as Gemstar International Group Limited)
A Delaware Corporation
By-laws
----------------
ARTICLE I
Stockholders
Section 1.1 Annual Meeting.
An annual meeting of stockholders for the purpose of electing those
directors whose term of office expires at such meeting and of transacting such
other business as may properly come before it shall be held each year at such
date, time, and place in the United States, either within or without the State
of Delaware, as may be specified by the Board of Directors in the notice of
meeting.
Section 1.2 Special Meetings.
Except as otherwise provided in the terms of any class or series of
preferred stock or unless otherwise provided by law, special meetings of
stockholders of the Corporation, for any purpose or purposes, shall be called
by the Secretary of the Corporation promptly (i) upon the written request of
the holders of not less than a majority of the total voting power of the
outstanding Voting Securities (as hereinafter defined) of the Corporation (such
written request shall set forth the purpose or purposes for which the meeting
is called, and in case of a special meeting called for the purpose of
nominating directors of the Corporation, the information required by Section
1.9 hereof), or (ii) at the request of six of the twelve members of the Board
of Directors then authorized. The Secretary of the Corporation shall
immediately notify each member of the Board of Directors of the receipt of any
such request. The term "Voting Securities" shall mean the Corporation's Common
Stock, par value $.01 per share ("Common Stock"), and any class or series of
preferred stock entitled to vote with the holders of Common Stock generally
upon all matters which may be submitted to a vote of stockholders at any annual
meeting or special meeting thereof. Special meetings of stockholders for any
purpose or purposes may be held at such time and place in the United States
either within or without the State of Delaware as may be stated in the notice
of meeting.
Section 1.3 Notice of Meetings.
Written notice of stockholders meetings, stating the place, date, and hour
thereof, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given by the Chairman of the Board, the
Chief Executive Officer (if different from the Chairman), any President and
COO, any Vice President, the Secretary, or an Assistant Secretary, to each
stockholder entitled to vote there at least ten days but not more than sixty
days before the date of the meeting, unless a different period is prescribed by
law or the Certificate of Incorporation of the Corporation, as amended from
time to time (the "Certificate").
Section 1.4 Notice of Nominations for the Election of Directors and the
Proposal of Business.
1.4.1 Annual Meetings of Stockholders.
Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (i) pursuant to
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the Corporation's notice of meeting delivered pursuant to Section 1.3 of these
By-laws, (ii) by or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation that has complied with all applicable
requirements of Section 1.9 hereof.
1.4.2 Special Meetings of Stockholders.
Only such business shall be conducted at a special meeting of stockholders
as shall have been brought before the meeting pursuant to the Corporation's
notice of meeting pursuant to Section 1.3 of these By-laws. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors as provided in Section 2.4 hereof or (b) by any stockholder of the
Corporation that has complied with all applicable requirements of Section 1.9
hereof.
1.4.3 General.
(a) Only persons who are nominated in accordance with the procedures set
forth in these By-laws shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in these
By-laws. Except as otherwise provided by law, the Certificate or these By-laws,
the chairman of the meeting shall have the power and duty to determine whether
a nomination or any business proposed to be brought before the meeting was made
in accordance with the procedures set forth in these By-laws and, if any
proposed nomination or business is not in compliance with these By-laws, to
declare that such defective proposal or nomination shall be disregarded.
(b) Notwithstanding the foregoing or the provisions of Section 1.9 of these
By-laws, a stockholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder with respect to the matters set forth in this
Section 1.4 or Section 1.9 of these By-laws. Nothing in these By-laws shall be
deemed to affect any rights of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
Section 1.5 Quorum.
Subject to the rights of the holders of any class or series of preferred
stock and except as otherwise provided by law or in the Certificate or
elsewhere in these By-laws, at any meeting of stockholders, the holders of a
majority in total voting power of the outstanding shares of stock entitled to
vote at the meeting shall be present or represented by proxy in order to
constitute a quorum for the transaction of any business. In the absence of a
quorum, the holders of a majority in total voting power of the shares that are
present in person or by proxy or the chairman of the meeting may adjourn the
meeting from time to time in the manner provided in Section 1.6 of these By-
laws until a quorum shall attend.
Section 1.6 Adjournment.
Any meeting of stockholders, annual or special, may adjourn from time to
time to reconvene at the same or some other place, and notice need not be given
of any such adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the meeting is adjourned in a single adjournment for more
than thirty days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.7 Calling of Meeting.
The Chairman of the Board or, in the absence of the Chairman, the Chief
Executive Officer (if different from the Chairman) or, in the absence of the
Chief Executive Officer, the designee of the Chairman (provided
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such designee is a member of the Office of the Chief Executive or in their
absence, a Vice President), shall call to order meetings of stockholders and
shall act as chairman of such meetings. The Board of Directors or, if the Board
of Directors fails to act, the stockholders, may appoint any stockholder,
director, or officer of the Corporation to act as chairman of any meeting in
the absence of all of the foregoing officers.
The Secretary shall act as secretary of all meetings of stockholders, but,
in the absence of the Secretary, the chairman of the meeting may appoint any
other person to act as secretary of the meeting.
Section 1.8 Voting.
Subject to the rights of the holders of any class or series of preferred
stock and except as otherwise provided by law, the Certificate or elsewhere in
these By-laws and except for the election of directors, at any meeting duly
called and held at which a quorum is present, the affirmative vote of a
majority of the combined voting power of the shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. At any meeting duly called and held for
the election of directors at which a quorum is present, directors shall be
elected by a plurality of the voting power of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors.
Section 1.9 Advance Notice; Nominations.
At an annual or special meeting of stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before a meeting, business must be: (a) specified in the
notice of meeting (or any supplement thereto) given pursuant to Section 1.3
hereof or (b) in the case of an annual meeting, (i) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (ii)
otherwise properly brought before the meeting by a stockholder of the
Corporation. For business (other than the nomination of directors) to be
properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. The Secretary shall immediately notify each member of the Board of
Directors of the receipt of any such notice and the contents thereof. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. A stockholder's notice to the Secretary shall
set forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of
shares of the Corporation which are beneficially owned by the stockholder, and
(iv) any material interest of the stockholder in such business. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at
any meeting except in accordance with the procedures set forth in these By-
laws. The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this By-law, and if he should
so determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted, and if purported
to be transacted shall be void.
At each annual meeting of stockholders, the stockholders shall elect
directors in accordance with the Certificate. Only persons who are nominated in
accordance with the procedures set forth in this By-law shall be eligible for
election as directors at an annual meeting or at a special meeting called for
such purpose pursuant to Section 1.3 of these By-laws. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of stockholders by or at the direction of the Board of Directors
pursuant to Section 2.4 hereof or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this By-law. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing
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to the Secretary of the Corporation. The Secretary of the Corporation shall
immediately notify each member of the Board of Directors of the receipt of any
such notice and the contents thereof. To be timely, a stockholder's notice of
nomination in the case of an annual meeting or a special meeting called for the
election of directors shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must
be so received not later than the close of business on the 10th day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made, and, provided, further, that in the case of a
special meeting called at the request of a stockholder or stockholders
nominating persons for election to the Board of Directors, the notice of
nomination by the stockholder(s) requesting such meeting will be timely if
received by the Corporation pursuant to Section 1.2 hereof. Such stockholder's
notice shall set forth: (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (i) the name, age, business
address and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person, and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Exchange Act (including
without limitation such persons' written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in this By-law. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by these By-laws, and if
he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. For purposes of this By-law, "public
disclosure" shall mean disclosure in a press release reported by Dow Jones News
Service, Associated Press or a comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act.
ARTICLE II
Board of Directors
Section 2.1 Number and Term of Office.
(a) The governing body of this Corporation shall be a Board of Directors.
The Board of Directors shall be comprised of twelve (12) members, at least four
of whom shall be "Independent Directors". For purposes of these By-laws, the
term "Independent Director" means a person other than an officer or employee of
the Corporation or its subsidiaries or any other individual having a
relationship which, in the opinion of the GS Director Committee (as defined in
Section 2.11(e)) in the case of a GS Independent Director, and in the opinion
of the TVG Director Committee (as defined in Section 2.11(d)) in the case of a
TVG Independent Director, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director (provided that in
the event a designated Independent Director does not qualify under applicable
securities exchange or securities association listing standards as an
"independent director," then a new Independent Director shall be designated
pursuant to the terms hereof to replace such director). The Board of Directors,
by resolution adopted by the affirmative vote of at least nine of the twelve
members of the Board of Directors then authorized, may increase or decrease the
number of directors. Directors need not be stockholders of the Corporation.
Effective with the filing of the Certificate of Merger of TV Guide, Inc.
("TVG") and G Acquisition Subsidiary Corp., a subsidiary of the Corporation
(the "Effective Time"), the Board of Directors
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shall consist of six (6) directors who shall be persons designated by the Board
of Directors of TVG prior to the Effective Time to serve on the Board of
Directors of the Corporation (such directors, together with any person
subsequently elected or appointed to the directorship previously held by any
such director and any successor thereto in accordance with these By-laws, being
herein referred to as the "TVG Directors"), two of whom shall be Independent
Directors, and six (6) directors designated by the Board of Directors of the
Corporation prior to the Effective Time (such directors, together with any
person subsequently elected or appointed to the directorship previously held by
any such director and any successor thereto in accordance with these By-laws,
being herein referred to as the "GS Directors"), two of whom shall be
Independent Directors. Two of the TVG Directors who qualify as Independent
Directors shall be designated the TVG Independent Directors (which term shall
include any person subsequently elected or appointed to the directorship
previously held by any such TVG Independent Director and any successor thereto
who qualifies as an Independent Director). Two of the GS Directors who qualify
as Independent Directors shall be designated the GS Independent Directors
(which term shall include any person subsequently elected or appointed to the
directorship previously held by any such GS Independent Director and any
successor thereto who qualifies as an Independent Director). No class or series
of preferred stock shall be entitled to elect any additional directors,
although the terms of any class or series of preferred stock may provide that
the shares of such class or series are entitled to vote in elections of
directors.
(b) The Board of Directors shall be divided into three classes: Class I,
Class II and Class III. Each class of directors shall consist of a number of
directors equal as nearly as practicable to one-third of the then authorized
number of members of the Board of Directors. The initial term of office of the
Class I Directors shall expire at the annual meeting of stockholders in 2003;
the initial term of office of the Class II Directors shall expire at the annual
meeting of stockholders in 2002; and the initial term of office of the Class
III Directors shall expire at the annual meeting of stockholders in 2001. At
each annual meeting of stockholders of the Corporation, the successors of that
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of such election. The directors of each class
will hold office until their respective death, resignation or removal and until
their respective successors are elected and qualified. At the Effective Time,
two of the six TVG Directors will be Class I Directors, two will be Class II
Directors and two will be Class III Directors. At the Effective Time, the
remaining two Class I Directors, two Class II Directors and two Class III
Directors will be GS Directors. The class into which each director shall
initially be placed shall, in the case of the TVG Directors, be determined by
the Board of Directors of TVG prior to the Effective Time and shall, in the
case of the GS Directors, be determined by the Board of Directors of the
Corporation prior to the Effective Time.
Section 2.2 Resignations.
Any director of the Corporation, or any member of any committee, may resign
at any time by giving written notice to the Board of Directors and the Chairman
of the Board. Any such resignation shall take effect at the time specified
therein or, if the time be not specified therein, then upon receipt thereof.
The acceptance of such resignation shall not be necessary to make it effective
unless otherwise stated therein.
Section 2.3 Removal of Directors.
Directors may be removed from office with or without cause upon the
affirmative vote of holders of not less than 66 2/3% of the total voting power
of the then outstanding Voting Securities (as defined in Section 1.2), voting
together as a single class at a meeting specifically called for such purpose.
Section 2.4 Newly Created Directorships, Vacancies and Nominees.
Vacancies on the Board of Directors resulting from death, resignation,
removal, disqualification or other cause shall be filled, and nominees for
directors in the case of expiration of a director's term shall be made, by the
majority vote of the directors present and voting at a meeting of the Board of
Directors duly called and held at which a quorum is present, or by unanimous
written consent of the directors; provided, however, that until the later of
the expiration of the Specified Period (as defined in Section 2.5 of these By-
laws) and the fifth anniversary of the Effective Time, if such vacancy resulted
from the death, resignation, removal,
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disqualification or other cause, or if the directorship expiring is that, of
(i) a TVG Director, then the power to fill such vacancy or make such nomination
shall be vested in the TVG Director Committee, or (ii) a GS Director, then the
power to fill such vacancy or make such nomination shall be vested in the GS
Director Committee. Newly created directorships resulting from any increase in
the number of directors on the Board of Directors, shall be filled solely by
the affirmative vote of not less than nine of the twelve members of the Board
of Directors then authorized. Any director appointed in accordance with either
of the two preceding sentences shall hold office for the remainder of the full
term of the class of directors in which the vacancy occurred or to which the
new directorship is apportioned, and until such director's successor shall have
been elected and qualified. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
Section 2.5 Chairman of the Board.
The Chairman of the Board of Directors shall be elected from among the
members of the Board of Directors and shall perform the duties provided in
these By-laws and such other duties as may from time to time be assigned to the
Chairman by the Board of Directors. As of the Effective Time and during the
Specified Period (as defined below) the Chairman of the Board shall be
appointed by the GS Director Committee, but shall be Henry Yuen so long as he
is a GS Director. Upon the expiration of the Specified Period, the person who
immediately prior thereto was Chairman of the Board shall thereupon cease to be
Chairman of the Board, and from and after such time until (but not including)
the third annual Board of Directors' meeting following (i) the expiration of
the Specified Period or, if later, (ii) the fifth anniversary of the Effective
Time, the Chairman of the Board shall be elected by majority vote or unanimous
written consent of the TVG Directors. Following the expiration of the last of
the Specified Period and the period referred to in the immediately preceding
sentence (such periods, collectively, the "Specified Chairman Selection
Periods"), the directors shall select one of their members to be Chairman of
the Board of Directors. The term "Specified Period" as used in these By-laws
means the period beginning on the Effective Date and ending on the first to
occur of (i) the fifth anniversary of the Effective Time and (ii) such date as
Henry Yuen ceases to be Chief Executive Officer of the Corporation.
Section 2.6 Meetings.
The annual meeting of the Board of Directors, for the election of officers
and the transaction of such other business as may come before the meeting,
shall be held without notice at the same place as, and immediately following,
the annual meeting of the stockholders. Regular meetings of the Board of
Directors (including such annual meeting) shall be held not less frequently
than quarterly, at 10:00 a.m. local time on the last business day of each
calendar quarter, at the executive offices of the Corporation or at such other
time and place as shall be determined from time to time by the Board of
Directors. Notice of each regular meeting shall be furnished in writing to each
member of the Board of Directors not less than five business days in advance of
said meeting, unless such notice requirement is waived in writing by each
member.
Special meetings of the Board of Directors shall be held at such time and
place within the United States as shall be designated in the notice of the
meeting. Special meetings of the Board of Directors may be called by the
Chairman of the Board and shall be called by the Secretary of the Corporation
upon the written request of not less than six of the twelve members of the
Board of Directors then authorized.
Section 2.7 Notice of Special Meetings.
The Secretary, or in his or her absence or failure to give such notice any
other officer of the Corporation, shall give each director notice of the time
and place of holding of special meetings of the Board of Directors by overnight
courier, or by telegram, cable, facsimile transmission, or personal service at
least three business days before the meeting unless such notice requirement is
waived in writing by each member. Unless otherwise stated in the notice
thereof, any and all business may be transacted at any meeting without
specification of such business in the notice.
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Section 2.8 Quorum and Organization of Meetings.
Except as provided in the immediately following sentence, a majority of the
total number of members of the Board of Directors as constituted from time to
time shall constitute a quorum for the transaction of business, but, if at any
meeting of the Board of Directors (whether or not adjourned from a previous
meeting) there shall be less than a quorum present, a majority of those present
may adjourn the meeting to another time and place, and the meeting may be held
as adjourned without further notice or waiver. Notwithstanding the foregoing,
the presence of six of the twelve members of the Board of Directors then
authorized will constitute a quorum for the transaction of business at a
meeting of the Board if (i) such meeting was duly called pursuant to these By-
laws and (ii) either all of the TVG Directors or all of the GS Directors fail
to attend such meeting. Except as otherwise required by law or provided by the
Certificate or these By-laws, directors present at any meeting at which a
quorum is present for the transaction of business may by majority vote decide
any question brought before such meeting (other than any Fundamental Decision
(as defined below)). Except as otherwise required by law or provided by the
Certificate or these By-laws, in the event of a tie vote of the Board of
Directors on any matter that is presented to the Board of Directors for its
approval (but excluding any matter delegated by these By-laws or the Board of
Directors to the Compensation Committee, the Audit Committee or the Special
Committee (as defined below) for determination), the Tie-breaking Committee
during the Specified Period only, and thereafter the TVG Director Committee
during the remainder of the Specified Chairman Selection Periods (as defined in
Section 2.5 of these By-laws) only, shall have the exclusive power to approve
or disapprove the specific proposal with respect to which the vote was tied.
Notwithstanding anything to the contrary contained in this Section 2.8, if the
Specified Period expires prior to the fifth anniversary of the Effective Time
solely as the result of the termination of Henry Yuen's employment as Chief
Executive Officer of the Corporation pursuant to the terms of his employment
agreement with the Corporation because of his death or disability, then during
the period from such expiration of the Specified Period to the fifth
anniversary of the Effective Time (the "Suspension Period"), no committee of
directors will have the power to approve or disapprove any proposal with
respect to which the directors' votes are tied. The power of the Tie-breaking
Committee or the TVG Director Committee, as applicable, to resolve a tie vote
as described in this By-law shall not in any event apply to any matter listed
on Schedule I to these By-laws (each, a "Fundamental Board Decision") or to any
matter requiring the approval of stockholders by a supermajority vote as
provided in the Certificate (each, a "Fundamental Stockholder Decision" and,
together with the Fundamental Board Decisions, the "Fundamental Decisions"). No
action may be taken by the Corporation or any of its subsidiaries with respect
to any matter that constitutes a Fundamental Decision without the prior
approval of not less than seven of the twelve members of the Board of Directors
then authorized (or such greater number of directors or percentage of the
entire Board as may be specified elsewhere in these By-laws or the Certificate)
at a meeting of the Board duly called and held or the unanimous written consent
of the Board. Meetings shall be presided over by the Chairman of the Board or
in his or her absence, the Chief Executive Officer (if different from the
Chairman), or in his or her absence, by his or her designee (provided such
designee is a member of the Office of the Chief Executive). The Board of
Directors shall keep written minutes of its meetings. The Secretary of the
Corporation shall act as secretary of the meeting, but in his or her absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.9 Indemnification.
The Corporation shall indemnify members of the Board of Directors and
officers of the Corporation and their respective heirs, personal
representatives and successors in interest for or on account of any action
performed on behalf of the Corporation, to the fullest extent provided by the
laws of the State of Delaware and the Certificate, as now or hereafter in
effect.
Section 2.10 Executive Committee of the Board of Directors.
There shall be an executive committee of the Board of Directors, to be
comprised of four directors, except as otherwise provided below. As of the
Effective Time, the Executive Committee shall consist of each of the following
who are directors: the Chief Executive Officer (or, except during the
Suspension Period, if any, if the Chief Executive Officer is not a director,
the Chairman of the Board), the Chief Financial Officer and two of
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the TVG Directors designated by TVG prior to the Effective Time; provided,
however, that during the Specified Period (as defined in Section 2.5 of these
By-laws), if the Chief Financial Officer is not a GS Director, then the Chief
Financial Officer shall not be a member of the Executive Committee and a GS
Director designated by the GS Director Committee shall be a member of the
Executive Committee. During the Specified Period, the Tie-breaking Committee
will have the power to resolve any tie vote in the event of a tie vote by the
members of the Executive Committee on any matter properly presented to the
Executive Committee for determination. Thereafter during the remainder of the
Specified Chairman Selection Periods (as defined in Section 2.5 of these By-
laws), the TVG Director Committee will have the right to resolve such tie vote.
Notwithstanding anything to the contrary contained in this Section 2.10, during
the Suspension Period (as defined in Section 2.8 of these By-laws), if any, no
committee shall have the power to resolve a tie vote of the Executive
Committee. The TVG Director Committee shall have the exclusive power to replace
the TVG Directors on the Executive Committee and the two TVG Directors on the
Executive Committee shall abstain from any vote thereon. Subject to the
limitations of the laws of the State of Delaware and except as otherwise
provided in the Certificate or these By-laws, the Executive Committee shall
have such duties and powers relating to the management of the business and
affairs of the Corporation as may be delegated to it from time to time by the
affirmative vote of seven of the twelve members of the Board of Directors then
authorized; provided, however, that (i) during the Specified Chairman Selection
Periods the Executive Committee shall have all powers of the Board of Directors
with respect to matters related to the operations of the Corporation and its
subsidiaries between Board meetings, except as otherwise determined by the
Board of Directors or delegated to the Compensation Committee, the Special
Committee or the Audit Committee pursuant to these By-laws or otherwise, or
delegated by the Board to a different committee, and (ii) in the absence of a
Chief Executive Officer during the Suspension Period, if any, the Executive
Committee as then constituted shall have and perform the powers of the Chief
Executive Officer. No matter that constitutes a Fundamental Decision shall be,
in any event, within the power of the Executive Committee to determine.
Notwithstanding the foregoing, the Executive Committee will not have decision-
making authority with respect to any of the following matters and only the
Board of Directors shall have authority to decide such matters: (1) any
acquisition by the Corporation or any person controlled by the Corporation of
any business or assets if the amount involved exceeds $25 million, (2) any
sale, lease, exchange or other disposition, pledge or encumbrance of any assets
(including any interest or participation in any person) or of all or a part of
any business of the Corporation or any person controlled by the Corporation if
the amount involved exceeds $25 million, and (3) the incurrence by the
Corporation or any person controlled by the Corporation of indebtedness in
excess of $50 million in any fiscal year. The Executive Committee shall act by
the affirmative vote of a majority of the members of such committee that are
present at any duly called meeting of the Executive Committee at which a quorum
for the transaction of business is present (except as provided above with
respect to tie votes) or by unanimous written consent. The presence of at least
fifty percent of the members of the Executive Committee at any duly called
meeting held in the United States will constitute a quorum for the transaction
of business at such meeting. From the Effective Time and until the expiration
of the Specified Period, only the Chief Executive Officer may call a meeting of
the Executive Committee; thereafter, unless a majority of the members of the
Executive Committee otherwise determine, either the Chief Executive Officer
(or, if applicable, the Chairman of the Board) or any two members of the
Executive Committee may call a meeting of the Executive Committee. The Chief
Executive Officer (or, if applicable, the Chairman of the Board) will be the
chairman of the Executive Committee; provided, however, that in the absence of
a Chief Executive Officer during the Suspension Period, if any, the chairman of
the Executive Committee shall be selected by majority vote of the remaining
members of the Executive Committee. The Executive Committee shall keep minutes
of its meetings and shall report promptly after each of its meetings to the
Board of Directors so as to keep the Board of Directors sufficiently apprised
of the Executive Committee's meetings, actions and activities, and shall be
responsible to the Board of Directors for the conduct of the enterprises and
affairs entrusted to it.
Section 2.11 Other Committees of the Board of Directors.
(a) Compensation Committee. There shall be a compensation committee of the
Board of Directors. Subject to the limitations of the laws of the State of
Delaware and except as otherwise provided in the
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Certificate or these By-laws, the Compensation Committee will have the power to
make all decisions (other than any Fundamental Decision) with respect to the
compensation and the terms of employment of any executive officer of the
Corporation or any of its subsidiaries, or any other officer or employee of the
Corporation or any of its subsidiaries, and will have such other powers as may
be delegated by the Board to the Compensation Committee thereafter.
Notwithstanding the foregoing, unless and until otherwise determined by the
affirmative vote of not less than seven of the twelve members of the Board of
Directors then authorized, the Compensation Committee's authority to grant
stock options, stock appreciation rights, restricted stock awards or other
stock based compensation or otherwise to obligate the Corporation to issue any
equity security pursuant to a compensation plan or otherwise (collectively,
"Compensatory Awards"), shall be limited, on a cumulative basis from the
Effective Time, to an aggregate number of shares of Common Stock equal to the
product of the total number of shares of Common Stock outstanding on a fully
diluted basis immediately following the Effective Time (the "Fully Diluted
Share Number") times two percent (2%) (the "Available Stock Number"). Further,
not more than 1% of the Fully Diluted Share Number may be granted, awarded or
issued in the aggregate to officers of the Corporation or any person controlled
by the Corporation who directly report to the Chief Executive Officer, and any
such grant, award or issuance shall reduce the Available Stock Number. If a
Compensatory Award that reduced the Available Stock Number thereafter expires
unexercised or otherwise terminates without a payment in cash, stock, property
or otherwise, the shares of Common Stock subject to the unexercised or
terminated portion of such Compensatory Award shall be added back to the
Available Stock Number. All numbers of shares calculated in accordance with
this paragraph shall be appropriately adjusted on a consistent basis for stock-
splits, stock dividends, stock combinations and similar events following the
Effective Time. The adoption or amendment of any stock option, stock
appreciation rights or other stock incentive plan for the Corporation or any
person controlled by the Corporation shall be subject to the approval of the
Board of Directors.
The members of the Compensation Committee will be the two GS Independent
Directors; the two TVG Independent Directors and the Chief Executive Officer
(or, except during the Suspension Period, if any, if the Chief Executive
Officer is not a director, the Chairman of the Board). The Compensation
Committee shall act by the affirmative vote of a majority of all of the members
of the Compensation Committee or by unanimous written consent. The Chief
Executive Officer (or, if applicable, the Chairman of the Board) will be the
chairman of the Compensation Committee; provided, however, that in the absence
of a Chief Executive Officer during the Suspension Period, if any, the chairman
of the Compensation Committee shall be selected by majority vote of the
remaining members of the Compensation Committee. Any member of the Compensation
Committee who is an employee of the Corporation or its subsidiaries will not be
present during the deliberations with respect to, and shall abstain from and
not be present during any vote on, matters related to such employee's own
compensation or Compensatory Awards. The Compensation Committee shall keep
minutes of its meetings and shall report to the Board of Directors promptly
after each of its meetings so as to keep the Board of Directors sufficiently
apprised of the Compensation Committee's meetings, actions and activities.
(b) Special Committee. There shall be a separate committee of the Board of
Directors, which, subject to the limitations of the laws of the State of
Delaware and except as otherwise provided in the Certificate or these By-laws,
will have the exclusive power to determine matters (other than any Fundamental
Decision) related to the relationship with and among Service Providers (as
defined in the letter agreement, dated October 4, 1999, between Gemstar
International Group Limited and TV Guide, Inc. (the "Letter Agreement")) (the
"Special Committee"). The approval of the Special Committee shall be required
for the adoption of a Standard Form of Service Provider Agreement (other than
one that contains only terms consistent with or more favorable to Service
Providers than the terms set forth on a schedule to the Letter Agreement (the
"Standard Terms")), for any proposed offer to or agreement with a Service
Provider that is less favorable to such Service Provider than such Standard
Form or the Standard Terms and for any proposed change in or adoption of a new
Standard Form of Service Provider Agreement or set of "Standard Terms" unless
the same is more favorable to Service Providers. The Special Committee will
include the Chief Executive Officer (or, except during the Suspension Period,
if any, if the Chief Executive Officer is not a director, the Chairman of the
Board), and, as of the Effective Time, two of the TVG Directors designated by
TVG prior to the Effective Time. The TVG Director
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Committee shall have the exclusive power to replace the TVG Directors on the
Special Committee and the two TVG Directors on the Special Committee shall
abstain from any vote thereon. The Special Committee shall act by the
affirmative vote of a majority of all of the members of the Special Committee
or by unanimous written consent. The Special Committee shall keep minutes of
its meetings and shall report promptly to the Board of Directors after its
meetings so as to keep the Board of Directors sufficiently apprised of the
Special Committee's meetings, actions and activities.
(c) Audit Committee. There shall be an audit committee of the Board of
Directors. The members of the Audit Committee will be the Chief Financial
Officer, one GS Independent Director and the two TVG Independent Directors.
Subject to the limitations of the laws of the State of Delaware and except as
otherwise provided in the Certificate or these By-laws, the Audit Committee
will have all powers normally accorded to the audit committee of a U.S. public
company, other than with respect to any Fundamental Decision. The Audit
Committee shall act by the affirmative vote of a majority of all members of the
Audit Committee or by unanimous written consent. The Audit Committee shall keep
minutes of its meetings, shall report to the Board of Directors promptly after
each of its meetings so as to keep the Board of Directors sufficiently apprised
of the Audit Committee's meetings, actions, and activities, and shall be
responsible to the Board of Directors for the conduct of the matters entrusted
to it.
(d) TVG Director Committee. There shall be a committee of the Board to be
comprised of all of the TVG Directors other than any TVG Independent Director
(the "TVG Director Committee"). The TVG Director Committee shall have the
powers and duties conferred upon it by these By-laws. The TVG Director
Committee shall act by the affirmative vote of a majority of all members of
such committee or by unanimous written consent. The TVG Director Committee
shall report promptly to the Board of Directors after each meeting so as to
keep the Board of Directors sufficiently apprised of such committee's meetings,
actions and activities. During the Specified Chairman Selection Periods, the
Board of Directors may dissolve the TVG Director Committee or alter or modify,
in any manner, its duties or composition (i.e., type of director) only with the
affirmative vote of not less than 10 of the 12 members of the Board of
Directors then authorized.
(e) GS Director Committee. There shall be a committee of the Board to be
comprised of all of the GS Directors other than any GS Independent Director
(the "GS Director Committee"). The GS Director Committee shall have the powers
and duties conferred upon it by these By-laws. The GS Director Committee shall
act by the affirmative vote of a majority of all of its members or by unanimous
written consent. The GS Director Committee shall report promptly to the Board
of Directors after each meeting so as to keep the Board of Directors
sufficiently apprised of such committee's meetings, actions, and activities.
During the Specified Period, the Board of Directors may dissolve the GS
Director Committee or alter or modify, in any manner, its duties or composition
(i.e., type of director) only with the affirmative vote of not less than 10 of
the 12 members of the Board of Directors then authorized; provided that if the
Specified Period should terminate as a result of the death or disability of
Henry Yuen, then, until the fifth anniversary of the Effective Time, the Board
of Directors may dissolve the GS Director Committee or alter or modify, in any
manner, its duties or composition (i.e., type of director) only with the
affirmative vote of not less than 9 of the 12 members of the Board of Directors
then authorized.
(f) Tie-breaking Committee. During the Specified Period, there shall be a
Tie-breaking Committee to be comprised of the Chairman of the Board. The Tie-
breaking Committee shall have the powers and duties conferred upon it by these
By-laws. The Tie-breaking Committee shall act by the affirmative vote of its
sole member or the written consent thereof. The Tie-breaking Committee shall
report promptly to the Board of Directors after each meeting so as to keep the
Board of Directors sufficiently apprised of such committee's meetings, actions
and activities. During the Specified Period, the Board of Directors shall not
dissolve the Tie-breaking Committee or alter or modify, in any manner, its
duties or composition.
(g) Other Committees. The Board of Directors may by resolution establish
other committees in addition to the Executive Committee, Compensation
Committee, Special Committee, Audit Committee, TVG Director Committee, GS
Director Committee and Tie-breaking Committee and shall specify with
particularity the
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powers and duties of any such committee. Subject to the limitations of the laws
of the State of Delaware and, except as provided in the Certificate or these
By-laws, any such committee shall exercise all powers and authority
specifically granted to it by unanimous vote of the entire Board of Directors.
Such committees shall serve at the pleasure of the Board of Directors; keep
minutes of their meetings; and have such names as the Board of Directors by
resolution may determine and shall be responsible to the Board of Directors for
the conduct of the enterprises and affairs entrusted to them. The Board of
Directors at any time may remove, with or without cause, any members of any
such other committee and may, with or without cause, disband any such other
committee.
Section 2.12 Committees Generally.
Subject to any requirements of these By-laws, each committee that may be
established by the Board of Directors pursuant to these By-laws may fix its own
rules and procedures. Notice of meetings of committees, other than of regular
meetings provided for by such rules, shall be given to committee members at
least one business day (and not less than 24 hours in advance of the scheduled
time of the meeting) prior to any such meeting to be held at any office of the
Corporation located in the continental United States. Longer notice periods
shall be provided for meetings at other locations.
Section 2.13 Directors' Compensation.
Directors shall receive such compensation for attendance at any meetings of
the Board and any expenses incidental to the performance of their duties, as
the Board of Directors shall determine by resolution. Such compensation may be
in addition to any compensation received by the members of the Board of
Directors in any other capacity.
Section 2.14 Action Without Meeting.
Nothing contained in these By-laws shall be deemed to restrict the power of
members of the Board of Directors or any committee designated by the Board to
take any action required or permitted to be taken by them without a meeting.
Section 2.15 Telephone Meetings.
Nothing contained in these By-laws shall be deemed to restrict the power of
members of the Board of Directors, or any committee designated by the Board of
Directors, to participate in a meeting of the Board of Directors, or committee,
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other.
ARTICLE III
Officers
Section 3.1 Executive Officers.
The officers of the Corporation shall be a Chairman of the Board, a Chief
Executive Officer, two or more Presidents and Chief Operating Officers, a Chief
Financial Officer, a General Counsel, who may be an Executive Vice President,
one or more Vice Presidents, and a Secretary, each of whom shall be elected by
the Board of Directors, and such other officers, including a Treasurer and a
Controller, as may from time to time be determined by the Board of Directors
and elected or appointed by the Board of Directors. A person may hold more than
one of the foregoing offices and during the Specified Period, the Chairman of
the Board and the Chief Executive Officer will be the same person. Subject to
Section 3.3, other than the Chief Executive Officer whose term is specified in
Section 3.2(b) hereof, each officer shall hold office until the first meeting
of the Board of Directors following the next annual meeting of stockholders
following their respective election.
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Section 3.2 Powers and Duties of Officers.
The officers of the Corporation shall have the authority and shall exercise
the powers and perform the duties specified below, and as may be additionally
specified by the Board of Directors or these By-laws (and in all cases where
the duties of any officer are not prescribed by the By-laws or the Board of
Directors, such officer shall follow the orders and instructions of the Chief
Executive Officer), except that in any event each officer shall exercise such
powers and perform such duties as may be required by law:
(a) Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the stockholders and the Board of Directors of the
Corporation and shall have and may exercise all such powers and perform
such other duties as are provided in these By-laws to be exercised or
performed by the Chairman and as may be assigned to the Chairman from time
to time by the Board of Directors. The Chairman of the Board shall be
designated as set forth in Section 2.5 hereof.
(b) Chief Executive Officer. The Chief Executive Officer shall, subject
to the direction and supervision of the Board of Directors, (i) have
general and active control of the Corporation's affairs and business and
general supervision of its officers, agents and employees; (ii) in the
absence of the Chairman of the Board (provided that the Chief Executive
Officer does not hold such position), preside at all meetings of the
stockholders and the Board of Directors; (iii) see that all orders and
resolutions of the Board of Directors are carried into effect; and (iv)
perform all other duties incident to the office of Chief Executive Officer
and as from time to time may be assigned to the Chief Executive Officer by
the Board of Directors. Unless otherwise authorized and directed by the
Board of Directors or provided in these By-laws, only the Chief Executive
Officer or his or her designee (provided such designee is a member of the
Office of the Chief Executive) shall execute on behalf of the Corporation
all material contracts which implement policies established by the Board of
Directors. Henry C. Yuen shall be the Chief Executive Officer of the
Corporation until the fifth anniversary of the Effective Time, unless he
earlier dies or resigns or his employment is terminated for disability as
permitted by, or for "cause" within the meaning of, his employment
agreement as in effect immediately following the Effective Time. If so
determined by the affirmative vote of seven of the twelve members of the
Board of Directors then authorized (with Mr. Yuen abstaining from the
vote), Mr. Yuen's tenure as Chief Executive Officer may be extended from
time to time thereafter.
(c) President and Chief Operating Officer. Each President and Chief
Operating Officer shall, subject to the direction and supervision of the
Board of Directors and the Chief Executive Officer, perform all duties
incident to the office of President and Chief Operating Officer as from
time to time may be assigned to him or her by the Board of Directors or the
Chief Executive Officer. At the request of the Chief Executive Officer or,
except as otherwise provided in Section 2.10, in the event of his
disability, legal incapacity or refusal to act, at the request of the Board
of Directors, a President and Chief Operating Officer shall perform the
duties of the Chief Executive Officer in his capacity as an officer of the
Corporation, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer in his
capacity as an officer of the Corporation. Each President and Chief
Operating Officer shall report to the Chief Executive Officer of the
Corporation.
(d) Office of the Chief Executive. There shall be an Office of the Chief
Executive, comprised of the Chief Executive Officer of the Corporation and
the Presidents and Chief Operating Officers of the Corporation, each of
whom shall also be chairman and chief executive officer of certain of the
Corporation's business units.
(e) Executive Vice President; General Counsel. The Executive Vice
President and General Counsel shall be responsible for the legal affairs of
the Corporation and shall have such additional powers and perform such
additional duties as may be assigned to him or her by the Chief Executive
Officer or by the Board of Directors.
(f) Vice President. The Vice President, if any (or if there is more than
one, then each Vice President), shall assist the Chief Executive Officer
and the Presidents and Chief Operating Officers and
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shall perform such duties as may be assigned to the Vice President by the
Chief Executive Officer or by the Board of Directors. Assistant vice
presidents, if any, shall have the powers and perform the duties as may be
assigned to them by the Chief Executive Officer or by the Board of
Directors.
(g) Chief Financial Officer; Treasurer. The Chief Financial Officer or,
in the absence of a Chief Financial Officer, the Treasurer shall: (i) be
the principal financial officer of the Corporation and have the care and
custody of all funds, securities, evidences of indebtedness and other
personal property of the Corporation and deposit the same in accordance
with the instructions of the Board of Directors; (ii) unless assigned to
the Controller, receive and give receipts and acquittance for moneys paid
in on account of the Corporation, and pay out of the funds on hand all
bills, payrolls and other debts of the Corporation of whatever nature upon
maturity; (iii) unless there is a Controller, be the principal accounting
officer of the Corporation and as such prescribe and maintain the methods
and systems of accounting to be followed, keep complete books and records
of account, prepare and file all local, state and federal tax returns,
prescribe and maintain an adequate system of internal audit and prepare and
furnish to the Chief Executive Officer, the Audit Committee and the Board
of Directors statements of account showing the financial position of the
Corporation and the results of its operations; (iv) upon request of the
Board of Directors or the Audit Committee, make such reports to it as may
be required at any time; and (v) perform all other duties incident to such
office and such other duties as from time to time may be assigned to the
Chief Financial Officer by the Board of Directors or the Chief Executive
Officer. The Chief Financial Officer and the Treasurer shall report to the
Chief Executive Officer. Assistant treasurers, if any, shall have the same
powers and duties, subject to the supervision of the Chief Financial
Officer or Treasurer. If there is no Chief Financial Officer or Treasurer,
these duties shall be performed by the Secretary or the Chief Executive
Officer or other person appointed by the Board of Directors.
(h) Secretary. The Secretary shall: (i) keep the minutes of the
proceedings of the stockholders, the Board of Directors and any committees
of the Board of Directors, which shall at all reasonable times be open to
the examination of any director; (ii) see that all notices are duly given
in accordance with the provisions of these By-laws or as required by law;
(iii) be custodian of the corporate records, which shall at all reasonable
times be open to the examination of any director, and of the seal of the
Corporation; (iv) keep at the Corporation's registered office or principal
place of business a record containing the names and addresses of all
stockholders and the number and class of shares held by each, unless such a
record shall be kept at the office of the Corporation's transfer agent or
registrar; (v) have general charge of the stock books of the Corporation,
unless the Corporation has a transfer agent; and (vi) in general, perform
all other duties incident to the office of Secretary, including certifying
the record of proceedings of the meetings of the stockholders or of the
Board of Directors or resolutions adopted at such meetings, signing or
attesting certificates, statements or reports required to be filed with
governmental bodies or officials, signing acknowledgments of instruments,
and performing such other duties as from time to time may be assigned to
the Secretary by the Board of Directors, the Chief Executive Officer or any
President and Chief Operating Officer. The Secretary shall report to the
Chief Executive Officer. Assistant secretaries, if any, shall have the same
duties and powers, subject to supervision by the Secretary.
(i) Surety Bonds. The Board of Directors may require any officer or
agent of the Corporation to execute to the Corporation a bond in such sums
and with such sureties as shall be satisfactory to the Board of Directors,
conditioned upon the faithful performance of his duties and for the
restoration to the Corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the Corporation.
(j) Budget. At the regular meeting of the Board of Directors, occurring
during the third calendar quarter in any calendar year, the Chief Executive
Officer shall present to the Board of Directors for its approval a draft
budget for the Corporation's ensuing fiscal year. The budget shall contain
information customarily included for corporations having a size and type of
business similar to that of the Corporation (the "Draft Budget"). If the
Draft Budget is approved by the Board of Directors, then the Draft Budget
shall be the budget for the Corporations' next succeeding fiscal year (the
"Budget"). If the Draft Budget is
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not so approved by the Board of Directors, then the Draft Budget shall be
amended by the Chief Executive Officer to reflect any changes requested by
the Board of Directors and shall be presented, together with all such
amendments, to the Board of Directors for its approval at the last regular
meeting of the Board of Directors in such calendar year. Upon the approval
by the Board of Directors of such amended Draft Budget, such budget shall
be the Budget.
Section 3.3 Resignations; Removals.
(a) Any officer of the Corporation may resign at any time, subject to any
rights or obligations under any then existing contracts between such officer
and the Corporation, by giving written notice to the Board of Directors, the
Chairman of the Board, the Chief Executive Officer, any member of the Office of
the Chief Executive or the Secretary of the Corporation. Any such resignation
shall take effect at the time specified therein or, if the time be not
specified therein, then upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective unless otherwise stated
therein.
(b) Except as otherwise set forth herein, the Board of Directors, by a vote
of not less than seven of the twelve members of the Board of Directors then
authorized at any meeting thereof, or by unanimous written consent, at any
time, may, to the extent permitted by law, remove with or without cause from
office or terminate the employment of any officer, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
(c) Any vacancy in the office of any officer through death, resignation,
removal, disqualification, or other cause may be filled at any time by the
Board of Directors or, if such officer was appointed by the Chief Executive
Officer and is not a President and Chief Operating Officer, the Chief Financial
Officer or the Secretary, then by the Chief Executive Officer.
Section 3.4 Proxies.
Unless otherwise provided in the Certificate or directed by the Board of
Directors, the Chairman of the Board, the Chief Executive Officer (if different
from the Chairman) and, with respect to the subsidiaries of the division or
corporation for which they are responsible, any other member of the Office of
the Chief Executive, or their respective designees, shall have full power and
authority on behalf of the Corporation to attend and to vote upon all matters
and resolutions at any meeting of stockholders of any corporation in which this
Corporation may hold stock, and may exercise on behalf of this Corporation any
and all of the rights and powers incident to the ownership of such stock at any
such meeting, whether regular or special, and at all adjournments thereof, and
shall have power and authority to execute and deliver proxies and consents on
behalf of this Corporation in connection with the exercise by this Corporation
of the rights and powers incident to the ownership of such stock, with full
power of substitution or revocation.
ARTICLE IV
Capital Stock
Section 4.1 Stock Certificates.
Each stockholder of the Corporation shall be entitled to a certificate
certifying the class and number of shares represented thereby and in such form,
not inconsistent with the law of the State of Delaware or the Certificate, as
the Board of Directors may from time to time prescribe.
The certificates of stock shall be signed by the Chairman of the Board, the
Chief Executive Officer (if different from the Chairman) or any other member of
the Office of the Chief Executive and by the Secretary or the Chief Financial
Officer, and sealed with the seal of the Corporation. Such seal may be a
facsimile, engraved or printed. Where any certificate is manually signed by a
transfer agent or by a registrar, the signatures of any officers upon such
certificate may be facsimiles, engraved or printed. In case any officer,
transfer agent or
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registrar who has signed or whose facsimile signature has been placed upon any
certificate shall have ceased to be such before the certificate is issued, it
may be issued by the Corporation with the same effect as if such officer,
transfer agent or registrar had not ceased to be such at the time of its issue.
Section 4.2 Transfer of Shares.
(a) Shares of the capital stock of the Corporation may be transferred on the
books of the Corporation only by the holder of such shares or by his duly
authorized attorney, upon the surrender to the Corporation or its transfer
agent of the certificate representing such stock properly endorsed.
(b) The person in whose name shares of stock stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for all
purposes, and the Corporation shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Delaware.
Section 4.3 Lost Certificates.
The Board of Directors or any transfer agent of the Corporation may direct a
new certificate or certificates representing stock of the Corporation to be
issued in place of any certificate or certificates theretofore issued by the
Corporation, alleged to have been lost, stolen, or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate to be lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors (or any transfer agent of the Corporation
authorized to do so by a resolution of the Board of Directors) may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to give the Corporation a bond in such sum as the Board
of Directors (or any transfer agent so authorized) shall direct to indemnify
the Corporation against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed or
the issuance of such new certificates, and such requirement may be general or
confined to specific instances.
Section 4.4 Transfer Agent and Registrar.
The Board of Directors may appoint one or more transfer agents and one or
more registrars and may require all certificates for shares to bear the manual
or facsimile signature or signatures of any of them.
Section 4.5 Regulations.
The Board of Directors shall have power and authority to make all such rules
and regulations as it may deem expedient concerning the issue, transfer,
registration, cancellation, and replacement of certificates representing stock
of the Corporation.
ARTICLE V
General Provisions
Section 5.1 Offices.
The Corporation shall maintain a registered office in the State of Delaware
as required by law. The Corporation may also have offices in such other places,
either within or without the State of Delaware, as the Board of Directors may
from time to time designate or as the business of the Corporation may require.
Section 5.2 Corporate Seal.
The corporate seal shall have inscribed thereon the name of the Corporation,
the year of its organization, and the words "Corporate Seal" and "Delaware".
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Section 5.3 Fiscal Year.
The fiscal year of the Corporation shall end on March 31 of each calendar
year.
Section 5.4 Notices and Waivers Thereof.
Whenever any notice whatever is required by law, the Certificate or these
By-laws to be given to any stockholder, director or officer, such notice,
except as otherwise provided by law, may be given personally, or, in the case
of stockholders, by mail, or, in the case of directors or officers, by
telegram, cable or facsimile transmission, addressed to such address as appears
on the books of the Corporation. Any notice given by telegram, cable or
facsimile transmission shall be deemed to have been given when it shall have
been transmitted and any notice given by mail shall be deemed to have been
given three business days after it shall have been deposited in the United
States mail with postage thereon prepaid.
Whenever any notice is required to be given by law, the Certificate, or
these By-laws, a written waiver thereof, signed by the person entitled to such
notice, whether before or after the meeting or the time stated therein, shall
be deemed equivalent in all respects to such notice to the full extent
permitted by law.
Section 5.5 Amendments.
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors, by action taken by the
affirmative vote of not less than nine of the twelve members of the Board of
Directors then authorized, is hereby expressly authorized and empowered to
adopt, amend or repeal any provision of the By-laws of this Corporation.
Subject to the rights of the holders of any class or series of preferred
stock, these By-laws may be adopted, amended or repealed by the affirmative
vote of the holders of not less than 66 2/3% of the total voting power of the
Voting Securities of the Corporation entitled to vote thereon; provided,
however, that this paragraph shall not apply to, and no vote of the
stockholders of the Corporation shall be required to authorize, the adoption,
amendment or repeal of any provision of the By-laws by the Board of Directors
in accordance with the preceding paragraph.
For purposes of these Bylaws, the Letter Agreement and any portion thereof
or schedule thereto may be amended, altered, modified or deleted only with the
affirmative vote of not less than nine of the twelve members of the Board of
Directors then authorized or by the affirmative vote of the holders of not less
than 66 2/3% of the total voting power of the Voting Securities of the
Corporation entitled to vote thereon.
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SCHEDULE I
FUNDAMENTAL BOARD DECISIONS
Fundamental Board Decisions means any of the following actions:
(a) the conduct by the Corporation or any person controlled by the
Corporation of any business other than the Business (as defined below);
(b) (i) any creation of (x) any additional class of capital stock of the
Corporation or any person controlled by the Corporation or (y) any security
having a direct or indirect equity participation in the Corporation or any
person controlled by the Corporation, or (ii) the sale or issuance (whether by
stock dividend, stock split, reclassification, in a public offering or
otherwise) by the Corporation or any person controlled by the Corporation of
shares of capital stock or warrants, options or rights to acquire shares of
capital stock or securities convertible into or exchangeable for capital stock
or any security having a direct or indirect equity participation in the
Corporation or any person controlled by the Corporation (other than (1) shares
of Common Stock or options to acquire shares of Common Stock issued to
employees, officers, directors and consultants of the Corporation pursuant to
commitments of the Corporation's predecessors in effect at the Effective Time,
or with the approval of the Compensation Committee but only with respect to the
Corporation's Common Stock and only within the limits set forth in Section
2.11(a) of the By-laws, (2) pursuant to the Rights Plan and (3) shares of
Common Stock issued in any acquisition permitted by and subject to the
limitations of paragraph (d) below), or (iii) any repurchases of stock in
excess of $50 million in any fiscal year by the Corporation or any person
controlled by the Corporation;
(c) any acquisition by the Corporation or any person controlled by the
Corporation of a business or assets (including, without limitation, an interest
or participation in any person) that is not within the scope of the Business;
(d) any acquisition by the Corporation or any person controlled by the
Corporation of any business or assets (including, without limitation, an
interest or participation in any person) that is within the scope of the
Business if the amount involved in such acquisition (and any related
transactions) plus the amount involved in all other acquisitions authorized in
the same fiscal year (whether by the Board or a duly authorized officer) which
were not Fundamental Board Decisions within the meaning of this subparagraph
(d) equals or exceeds 2% of the Average Market Capitalization (as defined
below) of the Corporation for the immediately preceding fiscal year;
(e) any disposition of all or any part of any material intellectual property
rights (all patent rights being deemed material) of the Corporation (except
through non-exclusive licenses) or any person controlled by the Corporation
(whether by sale or exchange, by exclusive license in any field of use,
contribution to joint venture or any other arrangement that is the practical
equivalent of a disposition of either any of the economic benefits of or the
right to control the exploitation of any such intellectual property rights) and
any pledge or encumbrance of any such intellectual property rights;
(f) the entering into by the Corporation or any person controlled by the
Corporation of any contracts (other than those pertaining or relating to
intellectual property rights) that are exclusive as against the Corporation or
any person controlled by the Corporation, except for such contracts entered
into in the ordinary course of the Corporation's business and which do not
involve an amount in excess of $50 million in any year;
(g) any sale, lease, exchange or other disposition, pledge or encumbrance of
any assets (including any interest or participation in any person) or of all or
a part of any business of the Corporation or any person controlled by the
Corporation if the amount involved in such transaction (and any related
transactions) or the fair market value of the assets so disposed of, pledged or
encumbered in such transaction (and any related transactions) plus the amount
involved in all other such dispositions, pledges or encumbrances which were not
Fundamental Board Decisions within the meaning of this subparagraph (g) and
were authorized in the same
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fiscal year equals or exceeds 1% of the Average Market Capitalization of the
Corporation for the immediately preceding fiscal year;
(h) the entering into by the Corporation or any person controlled by the
Corporation of any contract or commitments (other than for a transaction
described in another clause of this Schedule) if the aggregate amount of
annual expenses to be incurred by the Corporation and persons controlled by
the Corporation pursuant to such contracts or commitments entered into in any
fiscal year would exceed in any year of such contract or commitment the lower
of (x) 1% of the Average Market Capitalization of the Corporation for the
fiscal year immediately preceding the year in which such Contract or
Commitment is entered into or (y) $100 million;
(i) any amendment to or modification of any provision of the Restated
Certificate of Incorporation or By-laws of the Corporation as in effect from
time to time;
(j) any merger or consolidation of the Corporation with or into any other
person and any binding share exchange to which the Corporation is a party;
(k) any merger, consolidation or binding share exchange to which any person
controlled by the Corporation is a party which involves any action that
constitutes a Fundamental Board Decision under any other clause of this
Schedule (e.g. if it involves the acquisition of assets and the amount exceeds
the applicable amount determined in accordance with clause (d) above);
(l) the declaration or payment of any dividend or distribution by the
Corporation or any person controlled by the Corporation (other than the
payment of a dividend or making of a distribution to the Corporation by a
wholly owned subsidiary of the Corporation), other than under the Rights Plan;
(m) the dissolution, liquidation or winding up of (x) the Corporation or
(y) any person controlled by the Corporation if, in the case of this clause
(y), any action that constitutes a Fundamental Board Decision under any other
clause of this Schedule is involved;
(n) the entering into by the Corporation or any person controlled by the
Corporation of any agreement or the obtaining by the Corporation or any person
controlled by the Corporation of any license or franchise which purports to
restrict the persons or categories of persons to whom shares of the
Corporation's common stock may be transferred, or imposes or purports to
impose obligations on a stockholder as such or to bind or otherwise encumber
such shareholder's shares of Common Stock or any of its other assets other
than the Rights Plan;
(o) any amendment of or waiver under the Rights Plan that would extend the
term or the expiration date of the Rights Plan, add any new Exempt Person (as
defined in the Rights Plan) (or have the equivalent effect), or change the
definition of Acquiring Person (or any defined term used in such definition)
in a manner that would be adverse to any Exempt Person, or the adoption or
implementation of any new plan with an intended effect equivalent to those of
the Rights Plan;
(p) the incurrence by the Corporation or any person controlled by the
Corporation of indebtedness or the replacement or refinancing thereof unless
after giving effect to the incurrence such indebtedness the aggregate
outstanding principal amount of the indebtedness of the Corporation and all
persons controlled by the Corporation would not exceed the sum of (i) $550
million and (ii) 1% of the Average Market Capitalization of the Corporation
for the immediately preceding fiscal year;
(q) any change in the accountants for the Corporation (which accountants
shall initially be KPMG LLP);
(r) the institution, settlement or abandonment of any legal action or
arbitration in the name of the Corporation or any person controlled by the
Corporation involving a claim or claims for equitable relief or monetary
damages aggregating in excess of (i) $25 million if the Corporation is the
defendant in such action or
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(ii) 1% of the Average Market Capitalization of the Corporation for the
immediately preceding fiscal year if the Corporation is the plaintiff in such
action, or involving a claim or claims by any governmental authority;
(s) the incurrence of any capital expenditures for tangible assets in excess
of $50 million in any fiscal year;
(t) the making by the Corporation or any person controlled by the
Corporation of any loan or other advance of money to any person (excluding for
this purpose financing provisions contained in purchase agreements entered into
in the ordinary course of business) or the guaranteeing of the obligations of
any person, unless the amounts involved are less than $5 million in the
aggregate outstanding at any time and such person is not an Affiliated Party
(as defined below);
(u) the adoption or change of a significant tax or accounting practice or
principle of the Corporation or the making of any significant tax or accounting
election by the Corporation or the adoption of any position for purposes of any
tax return that will have a material adverse effect on any "United States
Shareholder" (defined as a United States person who owns or is deemed to own
10% or more of the voting power of a foreign corporation) or any affiliates
(within the meaning of Rule 12b-2 under the Exchange Act) of a United States
Shareholder;
(v) any transaction with an Affiliated Party (provided that the entering
into of an employment agreement with or the payment of compensation to an
employee of the Corporation or any person controlled by the Corporation, in his
or her capacity as such, which has been duly approved by the Compensation
Committee, shall not be deemed a transaction with an Affiliated Party);
(w) any changes in the composition of the Office of the Chief Executive
(i.e., the number and type of executive officers included), except as otherwise
contemplated by these By-laws, or the assignment to any officer that is not a
member of the Office of the Chief Executive of the powers, duties or
responsibilities of a member of the Office of the Chief Executive; provided
that this item shall not be deemed to prevent the delegation by an officer of
the Corporation of his or her duties to a subordinate officer or employee;
(x) any matter that by the express terms of the By-laws or the Certificate
require the approval of a specified percentage of the entire Board or number of
the members then authorized;
(y) any change in the composition of or the delegation of additional powers
or duties to any of the Executive Committee, Compensation Committee, Special
Committee, Audit Committee, TVG Director Committee, GS Director Committee or
Tie-breaking Committee or the establishment of any new committees of the Board;
and
(z) any determination pursuant to Section 2.13 of the By-laws to pay
compensation to directors, other than the Independent Directors, in their
capacity as such.
For purposes hereof, the term "Affiliated Party" means any director or
officer of the Corporation or any director or officer of any person controlled
by the Corporation, any holder of 5% or more of the Corporation's common stock
and the respective affiliates and associates (within the meaning of Rule 12b-2
under the Exchange Act) of the foregoing.
For purposes hereof, the term "Business" shall include (subject to the
following sentence) each of the following regardless of the method by which the
Corporation conducts the same, and notwithstanding the fact that neither TVG
nor the Corporation may or may not have been conducting the following
activities:
(a) designing, specifying, developing, publishing, distributing,
operating, marketing, licensing and/or selling (and preparing and offering
to do any of the foregoing) (i) program listing guides and program
promotion services, whether in print or electronic form and whether passive
or interactive, in any and all markets, (ii) interactive advertising,
information and data services and other products and services (including
news, weather, and sports information and e-commerce, but excluding full
motion video programming services) ancillary to, incorporated in, accessed
from within or provided, marketed or sold, in connection with any such
guide, and (iii) related data broadcasting services;
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(b) designing, specifying, developing, publishing, distributing,
operating, marketing, licensing and/or selling (and preparing and offering
to do any of the foregoing) (i) products and services enabling sorting,
selecting, recording, time shifting and/or personal storage of data,
including television programming and other video and multimedia data and
any other such services that will enhance the businesses described in
subparagraph (a) and (ii) interactive gaming services, including horse
racing, betting and lotteries;
(c) developing, investing in, licensing and otherwise exploiting
technologies and intellectual property rights related to or useful in the
businesses described in clauses (a) and (b);
(d) the marketing and sale of program listings data to third parties to
the extent not otherwise encompassed in clauses (a) or (b);
(e) the marketing and sale of available advertising inventory on all
platforms referred to in clauses (a) and (b) above;
(f) the marketing and distribution of superstation programming;
(g) the marketing and distribution of direct-to-home satellite-delivered
entertainment services to C-band satellite dish owners;
(h) the provision of information technology consulting services;
(i) the provision of point-to-multi-point audio and data satellite
transmission services;
(j) the provision of call center based subscriber management services to
multi-channel video programming providers; and
(k) any business other than businesses described in subparagraphs (a)
through (j) above that has been authorized by the Board of Directors.
Notwithstanding the foregoing, if at any time following the Effective Time
the Corporation ceases to conduct directly and indirectly any such business
referenced in clauses (f) through (j) above (whether as a result of the
disposition of all of the assets comprising any such business or of the
Corporation's interest in the subsidiary conducting the same or otherwise) then
such business shall thereupon cease to be included within the scope of the
Business.
For purposes hereof, the term "Average Market Capitalization" means one-half
of the sum of the Market Capitalization of the Corporation on the first day of
the relevant period and on the last day of the relevant period; provided, that
with respect to the Corporation's fiscal year in which the Effective Time
occurs, such term shall mean one-half of the sum of the Market Capitalization
of the Corporation on the business day immediately following the Effective Time
and on the last day of the Corporation's fiscal year. "Market Capitalization"
means the product of the number of shares of the Corporation's common stock
outstanding on the relevant date times the average of the market prices of the
Corporation's common stock for the 20 consecutive trading days immediately
preceding such date; provided that with respect to the relevant date which is
the business day immediately following the Effective Time, the term shall mean
the product of the number of shares of the Corporation's Common Stock
outstanding on such date times the market price of the Corporation's common
stock on such date.
For purposes hereof, the term "Rights Plan" means the Rights Agreement,
dated as of July 10, 1998, between Gemstar International Group Limited and
American Stock Transfer and Trust, as rights agent, as in effect immediately
following the Effective Time.
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* If the Corporation replaces the Rights Plan with a new rights plan as
contemplated by the Merger Agreement, this definition will be amended
appropriately.
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ANNEX D
OPINION OF LAZARD FRERES & CO. LLC
October 3, 1999
The Board of Directors
Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
Dear Members of the Board:
We understand that Gemstar International Group Limited, a company organized
under the laws of the British Virgin Islands (the "Company"), and TV Guide,
Inc., a Delaware corporation (the "Subject Company"), have entered into an
Agreement and Plan of Merger dated as of October 4, 1999 (the "Merger
Agreement") pursuant to which a wholly-owned subsidiary of the Company will be
merged with and into the Subject Company (the "Merger") as a result of which
the Subject Company will become a wholly-owned subsidiary of the Company.
Pursuant to the Merger Agreement, each share of Class A common stock of the
Subject Company and each share of Class B common stock of the Subject Company,
in each case outstanding immediately prior to the effective time of the
Merger, will be converted into 0.6573 shares of common stock (the "Common
Stock") of the Company (the "Exchange Ratio"). The Exchange Ratio is not
subject to a collar. Immediately prior to consummation of the Merger, the
Company will be redomesticated as a Delaware corporation.
You have requested our opinion as to the fairness, from a financial point
of view, to the Company of the Exchange Ratio. In connection with this
opinion, we have:
(i) Reviewed the Merger Agreement;
(ii) Analyzed certain historical business and financial information
relating to the Company and the Subject Company;
(iii) Reviewed various data provided to us by the Company and the
Subject Company relating to their respective businesses and the benefits
projected by the Company to be realized in connection with the Merger;
(iv) Held discussions with members of the senior management of each of
the Company and the Subject Company with respect to the businesses and
prospects of the Company and the Subject Company, respectively, the
strategic objectives of each, the litigation that is pending between the
Company and the Subject Company and other litigation to which they are
parties (together, the "Litigation"), possible benefits which might be
realized following the Merger and the consistency of publicly available
research prepared by financial analysts with their own views;
(v) Reviewed the public information with respect to certain other
companies in lines of business we believe to be generally comparable to the
businesses of the Company and the Subject Company;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be generally
comparable to those of the Company and the Subject Company, and in other
industries generally;
(vii) Reviewed the historical stock prices and trading volumes of the
common stock of the Company and the Subject Company; and
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
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<PAGE>
We were advised by management of both the Company and the Subject Company
that they did not have internally prepared forecasts of their respective
company's future financial performance.
We have relied upon the accuracy and completeness of the foregoing
information and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company or the Subject Company, or
concerning the solvency or fair value of either the Company or the Subject
Company. With respect to the information received by us concerning the
prospects of the Company and the Subject Company, the benefits projected to be
realized following the Merger and the Litigation, we have assumed that this
information reflects the best currently available estimates and judgments of
management of the Company and the Subject Company. We assume no responsibility
for and express no view as to such information or the assumptions on which they
are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Merger Agreement without any waiver
of any material term or condition by the Company and that obtaining the
necessary regulatory approvals for the Merger will not have a material adverse
effect on the Company or the Subject Company and that the projected benefits of
the Merger are realized substantially in accordance with such projections
Lazard Freres & Co. LLC is acting as financial advisor to the Company in
connection with the Merger and will receive a fee for our services, a
substantial portion of which is contingent upon the closing of the Merger. We
have in the past provided and are currently providing financial advisory
services to the Company. In addition, the Company has agreed to indemnify us
for certain liabilities that may arise out of the rendering of this opinion.
Our opinion is limited to the fairness of the Exchange Ratio to the Company
from a financial point of view and does not address the Company's underlying
business decision to undertake the Merger or the relative merits of the
Litigation. In addition, our opinion does not address the future trading value
of the Common Stock.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors and our opinion is rendered to the Company's Board
in connection with its consideration of the Merger. This opinion is not
intended to and does not constitute a recommendation to any holder of common
stock of the Company as to whether such stockholder should vote for the Merger.
It is understood that, except for its inclusion in the proxy
statement/prospectus relating to the Merger, this letter may not be disclosed
or otherwise referred to without our prior consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing, we are of the opinion that, as of the
date hereof, the Exchange Ratio is fair to the Company from a financial point
of view.
Very truly yours,
Lazard Freres & Co. LLC
/s/ Richard P. Emerson
By __________________________________
Richard P. Emerson
Managing Director
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<PAGE>
ANNEX E
OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
October 3, 1999
Board of Directors
TV Guide, Inc.
7140 South Lewis Avenue
Tulsa, Oklahoma 74136-5422
Members of the Board of Directors:
TV Guide, Inc. (the "Company"), Gemstar International Group Limited (the
"Acquiror") and G Acquisition Subsidiary Corp., a newly formed, wholly owned
subsidiary of the Acquiror (the "Acquisition Sub"), propose to enter into the
Agreement and Plan of Merger, dated as of October 4, 1999 (the "Agreement")
pursuant to which (i) the Acquiror will be continued and domesticated as a
corporation organized and incorporated pursuant to the laws of the State of
Delaware, at which time the Acquiror will cease to be a corporation organized
and incorporated under the laws of the British Virgin Islands (the
"Domestication"), and (ii) following consummation of the Domestication, the
Acquisition Sub will be merged with and into the Company in a transaction (the
"Merger") in which each outstanding share of the Company's Class A common
stock, par value $.01 per share, and Class B common stock, par value $.01 per
share (collectively, the "Company Shares"), will be converted into the right to
receive .6573 (the "Exchange Ratio") shares of common stock, par value $.01 per
share, of the Acquiror (the "Acquiror Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the holders, other than Liberty ("Liberty"), News
Corp. ("News Corp."), the Acquiror and their respective affiliates, of the
Company Shares (the "Public Shares"). It is expressly understood that you have
not requested, and we are not rendering, any opinion with respect to the
transactions contemplated by the Stockholders' Agreement proposed to be entered
into as of October 4, 1999 among the Acquiror, Liberty, News Corp. and certain
other holders of Acquiror Shares, to be effective upon consummation of the
Merger (the "Stockholders' Agreement"), or with respect to any other agreement
among Liberty, News Corp. and/or their respective affiliates not expressly
referenced herein.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and the Acquiror that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecast
information, relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company and the Acquiror furnished to us
by the Company (after having been reviewed by the Acquiror, in the case of
information relating to the Acquiror);
(3) Conducted discussions with members of senior management of the
Company and the Acquiror concerning the matters described in clauses 1 and
2 above, as well as their respective businesses and prospects before and
after giving effect to the Merger;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and the Acquiror
and compared them with those of certain publicly traded companies that we
deemed to be relevant;
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<PAGE>
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions that we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed a draft dated October 3, 1999 of the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Acquiror or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Acquiror. With respect to the financial forecast information furnished
to, discussed with or reviewed for us by the Company or the Acquiror, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's or the Acquiror's management
as to the expected future financial performance of the Company or the Acquiror,
as the case may be. We have further assumed that the Merger will qualify as a
tax-free reorganization for U.S. federal income tax purposes. We have also not
taken into account in arriving at our opinion expressed herein any potential
adverse effects of the Domestication on the business, earnings, cash flow,
assets, liabilities or prospects of the Acquiror, including without limitation
any potential adverse tax effects. We have also assumed that the final form of
the Agreement will be substantially similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger. For purposes of rendering
this opinion we have assumed, in all respects material to our analysis, that
the representations and warranties of each party to the Agreement and all
related documents and instruments contained therein are true and correct, that
each party to such documents will perform all of the covenants and agreements
required to be performed by such party thereunder and that all conditions to
the consummation of the Merger will be satisfied without waiver thereof.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of the Company.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, significant
portions of which are contingent upon the execution of the Agreement and the
consummation of the Merger. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of our engagement. We have, in the past,
provided financial advisory and financing services to the Company and/or its
affiliates and may continue to do so and have received, and may receive, fees
for the rendering of such services.
In addition, in the ordinary course of our business, we may actively trade
the Company Shares and other securities of the Company, as well as the Acquiror
Shares and other securities of the Acquiror, for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
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<PAGE>
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any stockholder as to how such stockholder should vote on the proposed Merger
or any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Company Shares or the Acquiror Shares will trade following the announcement or
consummation of the Merger.
As indicated above, we are not expressing any opinion herein with respect to
the Stockholders' Agreement or any other agreement among Liberty, News Corp.
and/or their respective affiliates not expressly referenced herein, and we are
not expressing any opinion herein with respect to any Company Shares owned,
directly or indirectly, by Liberty, News Corp., Acquiror or their respective
affiliates.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view
to the holders of the Public Shares.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
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<PAGE>
ANNEX F
COMPARISON OF THE RIGHTS OF
GEMSTAR AND TV GUIDE STOCKHOLDERS
After Gemstar's change in place of incorporation and before the completion
of the merger, the rights of Gemstar stockholders will be governed by Delaware
law, including the Delaware General Corporation Law, and Gemstar's new
certificate of incorporation and bylaws (which bylaws will be automatically
amended and replaced upon the completion of the merger with new bylaws in the
form attached as Annex C to this joint proxy statement/prospectus). Gemstar's
new certificate of incorporation is attached as Annex B to this joint proxy
statement/prospectus. The rights of TV Guide stockholders are governed by
Delaware law, including the Delaware General Corporation Law, and TV Guide's
certificate of incorporation and bylaws.
Upon the completion of the merger, holders of shares of TV Guide common
stock will become holders of shares of Gemstar common stock. At such time,
Gemstar's bylaws will be automatically amended and replaced with the bylaws
attached as Annex C to this joint proxy statement/prospectus. Consequently,
after the merger Delaware law and Gemstar's new certificate of incorporation
and amended and restated bylaws will govern the rights of former TV Guide
stockholders. Copies of Gemstar's current amended and restated memorandum of
association and amended and restated articles of association and TV Guide's
current certificate of incorporation and bylaws have been filed with the
Securities and Exchange Commission and will be sent to any stockholder of
Gemstar or TV Guide upon request. Copies of Gemstar's new certificate of
incorporation and amended and restated bylaws are attached as Annexes B and C,
respectively, to this joint proxy statement/prospectus.
A tabular comparison of the rights of Gemstar and TV Guide stockholders both
before and after the completion of the merger, as set forth in the
organizational documents, follows as Annex F. Annex F is not intended to be a
complete statement of all differences or a complete description of the specific
provisions referred to in this summary, and the identification of specific
differences is not intended to indicate that other significant differences do
not exist.
F-1
<PAGE>
All share numbers in the following chart have been adjusted to reflect the two-
for-one stock splits effected in the form of stock dividends by Gemstar and TV
Guide in December 1999.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Authorized . 2.55 . 952 million . 2.55
capital billion shares, billion
shares, divided shares,
divided into the divided
into the following into the
following classes: following
classes: classes:
. 2.4 . 650 million . 2.4
billion shares of billion
shares of Class A shares of
common Common common
stock, par Stock, par stock, par
value $.01 value $.01 value $.01
per share, per share, per share,
of which of which of which
206,788,370 154,512,896 406,935,725
shares shares were shares
were issued and will be
issued and outstanding issued and
outstanding as of outstanding
as of January 25, upon
January 2000 completion
25, 2000 of the
. 300 million merger
. 150 shares of (assuming
million Class B conversion
shares of Common of all
preferred Stock, par shares of
stock, par value $.01 TV Guide
value $.01 per share, common
per share, of which stock into
of which 149,986,352 shares of
25 million shares were Gemstar
shares issued and common
have been outstanding stock
designated as of pursuant
Series A January 25, to the
Junior 2000 merger
Participating agreement)
Preferred . 2 million
Stock and shares of . 150
the preferred million
balance stock, par shares of
will be value $.01 preferred
issuable per share, stock, par
in series of which no value $.01
shares were per share,
issued and of which
outstanding 25 million
as of shares
January 25, have been
2000 designated
Series A
Junior
Participating
Preferred
Stock and
the
balance
will be
issuable
in series
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Preferred . The . The . The
stock directors directors directors
may fix may fix the may fix
the powers, the
powers, designations, powers,
designations, preferences designations,
preferences and preferences
and relative, and
relative, participating, relative,
participating, optional or participating,
optional other optional
or other rights, and or other
rights, qualifications, rights,
and limitations and
qualifications, and qualifications,
limitations restrictions limitations
and of each and
restrictions series of restrictions
of each shares that of each
class and TV Guide is class and
series of authorized series of
shares to issue. shares
that the that the
combined combined
company is company is
authorized authorized
to issue. to issue.
One series One series
of of
Preferred Preferred
Stock has Stock has
been been
designated designated
the Series the Series
A Junior A Junior
Participating Participating
Preferred Preferred
Stock. Stock.
Shares of Shares of
Series A Series A
Junior Junior
Participating Participating
Preferred Preferred
Stock have Stock have
the the
following following
rights and rights and
preferences: preferences:
. quarterly . quarterly
dividends dividends
payable in payable in
cash on cash on
the first the first
day of day of
March, March,
June, June,
September September
and and
December December
of each of each
year year
(each, a (each, a
"Quarterly "Quarterly
Dividend Dividend
Payment Payment
Date"), Date"),
when, as when, as
and if and if
declared declared
by the by the
board out board out
of funds of funds
legally legally
available available
for such for such
purpose, purpose,
subject to subject to
the rights the rights
of holders of holders
of any of any
senior senior
stock and stock and
in in
preference preference
to holders to holders
of common of common
stock and stock and
any other any other
junior junior
stocks, in stocks, in
an amount an amount
per share per share
(rounded (rounded
to the to the
nearest nearest
cent) cent)
equal to equal to
the the
greater of greater of
(1) $1 or (1) $1 or
(2) (2)
subject to subject to
adjustment adjustment
if Gemstar if Gemstar
shall at shall at
any time any time
declare or
pay any
dividend
on Gemstar
common
stock
payable in
Gemstar
common
stock or
effect a
subdivision
or
combination
or
consolidation
of the
outstanding
Gemstar
common
stock, 100
times the
aggregate
per share
amount of
all cash
dividends,
and
100 times
the
aggregate
per share
amount
(payable
in kind)
of all
non-cash
dividends
or other
distributions,
other than
a dividend
payable in
shares of
Gemstar
common stock
- --------------------------------------------------------------------
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ------------------------------------------------------------------------
<S> <C> <C> <C>
or a declare or
subdivision pay any
of the dividend on
outstanding Gemstar
shares of common stock
Gemstar payable in
common stock Gemstar
(by common stock
reclassification or effect a
or subdivision
otherwise), or
declared on combination
the Gemstar or
common stock consolidation
since the of the
immediately outstanding
preceding Gemstar
Quarterly common stock,
Dividend 100 times the
Payment Date aggregate per
or, with share amount
respect to of all cash
the first dividends,
Quarterly and 100 times
Dividend the aggregate
Payment Date, per share
since the amount
first (payable in
issuance of kind) of all
any share or non-cash
fraction of a dividends or
share of other
Series A distributions,
Junior other than a
Participating dividend
Preferred payable in
Stock; shares of
Gemstar
. a minimum common stock
dividend on or a
each subdivision
Quarterly of the
Dividend outstanding
Payment shares of
Date of $1 Gemstar
per share common stock
on the (by
Series A reclassification
Junior or
Participating otherwise),
Preferred declared on
Stock; the Gemstar
common stock
. 100 votes since the
on all immediately
matters preceding
submitted Quarterly
to a vote Dividend
of Payment Date
stockholders or, with
(subject to respect to
adjustment); the first
Quarterly
. upon any Dividend
liquidation, Payment Date,
dissolution since the
or winding first
up of issuance of
Gemstar, no any share or
distribution fraction of a
will be share of
made (1) to Series A
holders of Junior
shares of Participating
stock Preferred
ranking Stock;
junior to
the Series . a minimum
A Junior dividend on
Participating each
Preferred Quarterly
Stock Dividend
unless Payment
holders of Date of $1
Series A per share
Junior on the
Participating Series A
Preferred Junior
Stock have Participating
first Preferred
received Stock;
$100 per
share . 100 votes
(subject to on all
adjustment), matters
plus an submitted
amount to a vote
equal to of
accrued and stockholders
unpaid (subject to
dividends adjustment);
and
distributions . upon any
on such liquidation,
stock, dissolution
whether or or winding
not up of
declared, Gemstar, no
to the date distribution
of such will be
payment, or made (1) to
(2) to the holders of
holders of shares of
shares of stock
stock ranking
ranking on junior to
parity with the Series
the Series A Junior
A Junior Participating
Participating Preferred
Preferred Stock
Stock, unless
except holders of
distributions Series A
made Junior
ratably on Participating
the Series Preferred
A Junior Stock have
Participating first
Preferred received
Stock and $100 per
all such share
parity (subject to
stock in adjustment),
proportion plus an
to the amount
total equal to
amounts to accrued and
which the unpaid
holders of dividends
all such and
shares are distributions
entitled; on such
and stock,
whether or
. if the not
company declared,
enters into to the date
any of such
consolidation, payment, or
merger, (2) to the
combination holders of
or other shares of
transaction stock
in which ranking on
shares of parity with
common the Series
stock are A Junior
exchanged Participating
for or Preferred
changed Stock,
into other except
stock or distributions
securities, made
cash and/or ratably on
any other the Series
property, A Junior
then each Participating
share of Preferred
Series A Stock
Junior
Participating
Preferred
Stock shall
be
similarly
exchanged
or changed
into an
amount per
share equal
to 100
times the
- ------------------------------------------------------------------------
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Gemstar After
this
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
aggregate and all such
amount of parity stock
stock, in
securities, proportion
cash and/or to the
any other total amounts
property, as to which the
the case may holders of
be, into all such
which or for shares are
which each entitled; and
share of
common stock . if the company
is changed or enters into
exchanged any
(subject to consolidation,
adjustment). merger,
combination
. Whenever or other
quarterly transaction
dividends in which
or other shares of
dividends common
or stock are
distributions exchanged
payable on for or
the changed
Series A into other
Junior stock or
Participating securities,
Preferred cash and/or
Stock are any other
in arrears, property,
thereafter then each
and until share of
all accrued Series A
and unpaid Junior
dividends Participating
and Preferred
distributions, Stock shall
whether or be
not similarly
declared, exchanged
on shares or changed
of Series A into an
Junior amount per
Participating share equal
Preferred to 100
Stock times the
outstanding aggregate
shall have amount of
been paid stock,
in full, securities,
Gemstar cash and/or
shall not: any other
property,
. declare or as the case
pay may be,
dividends, into which
or make any or for
other which each
distributions, share of
on any common
shares of stock is
stock changed or
ranking exchanged
junior to (subject to
the Series adjustment).
A Junior
Participating . Whenever
Preferred quarterly
Stock; dividends
or other
. declare or dividends
pay or
dividends, distributions
or make any payable on
other the Series
distributions, A Junior
on any Participating
shares of Preferred
stock Stock are
ranking on in arrears,
a parity thereafter
with the and until
Series A all accrued
Junior and unpaid
Participating dividends
Preferred and
Stock, distributions,
except whether or
dividends not
paid declared,
ratably on on shares
the Series of Series A
A Junior Junior
Participating Participating
Preferred Preferred
Stock and Stock
all such outstanding
parity shall have
stock on been paid
which in full,
dividends Gemstar
are payable shall not:
or in
arrears in . declare or
proportion pay
to the dividends,
total or make any
amounts to other
which the distributions,
holders of on any
all such shares of
shares are stock
then ranking
entitled; junior to
the Series
. redeem or A Junior
purchase or Participating
otherwise Preferred
acquire for Stock;
consideration
shares of . declare or
any stock pay
ranking dividends,
junior to the or make any
Series A other
Junior distributions,
Participating on any
Preferred shares of
Stock, stock
provided that ranking on
Gemstar may a parity
at any time with the
redeem, Series A
purchase or Junior
otherwise Participating
acquire Preferred
shares of any Stock,
such junior except
stock in dividends
exchange for paid
shares of any ratably on
stock of the Series
Gemstar A Junior
ranking Participating
junior to the Preferred
Series A Stock and
Junior all such
Participating parity
Preferred stock on
Stock; or which
dividends
. redeem or are payable
purchase or or in
otherwise arrears in
acquire for proportion
consideration to the
shares of total
Series A amounts to
Junior which the
Participating holders of
Preferred all such
Stock, shares are
except in then
accordance entitled;
with a
purchase
offer made
in
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
writing or by . redeem or
publication purchase or
to all otherwise
holders of acquire for
such shares consideration
upon such shares of
terms as the any stock
Gemstar board ranking
shall junior to
determine in the Series
good faith A Junior
will result Participating
in fair and Preferred
equitable Stock,
treatment provided
among the that
respective Gemstar may
series or at any time
classes. redeem,
purchase or
otherwise
acquire
shares of
any such
junior
stock in
exchange
for shares
of any
stock of
Gemstar
ranking
junior to
the Series
A Junior
Participating
Preferred
Stock; or
. redeem or
purchase or
otherwise
acquire for
consideration
shares of
Series A
Junior
Participating
Preferred
Stock,
except in
accordance
with a
purchase
offer made
in writing
or by
publication
to all
holders of
such shares
upon such
terms as
the Gemstar
board shall
determine
in good
faith will
result in
fair and
equitable
treatment
among the
respective
series or
classes.
- -------------------------------------------------------------------------------
Board-- . The minimum . TV Guide's . Twelve
number of number of certificate members. At
directors directors of the
is three incorporation completion
and the provides of the
maximum is for a board merger, six
twelve, and of at least of the
the board three directors
will members. TV will be
initially Guide's persons
consist of bylaws designated
nine provide for by
directors. a board Gemstar's
with ten board
. The board members, at before the
has three least two completion
classes of of whom are of the
directors independent merger (two
(Class I, directors. of whom
II and III) will be
with . The board independent
staggered may change directors)
terms of the number and six of
office. of the
directors directors
by will be
resolution persons
adopted by designated
the by TV
unanimous Guide's
vote of board
members of before the
the board completion
then in of the
office. merger (two
of whom
will be
independent
directors).
. The board
may change
the number
of
directors
by a
resolution
adopted by
at least
nine of the
twelve
board
members or
by a duly
adopted
amendment
to the
certificate
of
incorporation.
. The board
will have
three
classes of
directors
(Class I,
II and III)
with
staggered
terms of
office.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Board-- . The initial . At each . The initial
term of term of annual term of
office office of meeting of office of
the Class stockholders, the Class
I, Class II the I, Class II
and Class directors and Class
III are elected III
directors to hold directors
will expire office for will expire
at the a one-year at the
annual term annual
meeting of expiring at meeting of
stockholders the next stockholders
in 2003, annual in 2003,
2002 and meeting of 2002 and
2001, stockholders. 2001,
respectively. The respectively.
directors
. At each serve until . At each
annual their annual
meeting of respective meeting of
stockholders, successors stockholders,
the are elected the
successors and successors
of that qualified. of that
class of class of
directors directors
whose term whose term
expires at expires at
that that
meeting are meeting
elected to will be
hold office elected to
for a term hold office
expiring at for a term
the annual expiring at
meeting of the annual
stockholders meeting of
held in the stockholders
third year held in the
following third year
the year of following
such the year of
election. such
election.
- --------------------------------------------------------------------------------
Board-- . Any . Notice of . Any
nomina- stockholder intent to stockholder
tions may nominate a may
by nominate director at nominate
stock- persons for stockholder persons for
holders election to meetings election to
the Gemstar must be the Gemstar
board by received by board by
giving TV Guide giving
timely not less timely
notice in than 70 nor notice in
writing to more than writing to
Gemstar's 90 days Gemstar's
Secretary. before the Secretary.
To be meeting, To be
timely: and must timely:
contain
. in the certain . in the
case of an information case of an
annual concerning annual
meeting or the person meeting or
special to be special
meeting, a nominated meeting, a
stockholder's and stockholder's
notice concerning notice
must be the must be
delivered stockholder delivered
to or submitting to or
mailed and the mailed and
received proposal. received
at If the date at
Gemstar's of the Gemstar's
principal annual principal
executive meeting is executive
offices advanced by offices
not less more than not less
than 60 20 days, or than 60
days nor delayed by days nor
more than more than more than
90 days 70 days, 90 days
before the from the before the
meeting; first meeting;
provided, anniversary provided,
however, of the however,
that if preceding that if
less than year's less than
70 days' annual 70 days'
notice or meeting, notice or
prior notice by prior
public the public
disclosure stockholder disclosure
of the must be of the
date of delivered date of
the not earlier the
meeting is than the meeting is
given or 90th day given or
made to before the made to
stockholders, annual stockholders,
notice by meeting and notice by
the not later the
stockholder than the stockholder
must be close of must be
received business on received
not later the later not later
than the of the 70th than the
close of day before close of
business the annual business
on the meeting or on the
10th day the 10th 10th day
following day following
the day on following the day on
which such the day on which such
notice of which notice of
the date public the date
of the announcement of the
meeting of the date meeting
was mailed of the was mailed
or such meeting is or such
public first made. public
disclosure If the disclosure
was made; number of was made;
and directors and
to be
. in the elected is . in the
case of a increased case of a
special and TV special
meeting Guide does meeting
called at not make a called at
the public the
request of announcement request of
a naming all a
stockholder of the stockholder
or nominees or
stockholders for stockholders
nominating director or nominating
persons specifying persons
for the size of for
election the election
to the increased to the
Gemstar board of at Gemstar
board, the least 80 days board, the
notice of before the notice of
nomination first nomination
by the anniversary by the
stockholder of the stockholder
or preceding or
stockholders year's annual stockholders
requesting meeting, a requesting
such stockholder's such
meeting notice shall meeting
must be also be must be
received considered received
by Gemstar timely, but by Gemstar
with the only with with the
request respect to request
for such nominees for for such
meeting, any new meeting,
which positions which
request created by request
must be the increase, must be
made by if it is made by
holders of delivered not holders of
at least a later than at least a
majority the close of majority
of the business on of the
total the 10th day total
voting voting
power of power of
Gemstar's Gemstar's
outstanding outstanding
voting voting
securities. securities.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Board-- . Directors . Stockholders . Directors
elections are elected, elect are elected,
at any directors at at any
stockholder the annual stockholder
meeting duly meeting of meeting duly
called and stockholders. called and
held for held for
such purpose such purpose
at which a at which a
quorum is quorum is
present, by present, by
a plurality a plurality
of the of the
voting power voting power
of the of the
shares shares
present in present in
person or person or
represented represented
by proxy at by proxy at
the meeting the meeting
and entitled and entitled
to vote. to vote.
- -------------------------------------------------------------------------------
Board-- . Directors . Directors . Directors
removal of may be may be may be
directors removed with removed from removed with
or without office with or without
cause by the or without cause by the
affirmative cause upon affirmative
vote of at the vote of at
least 66 affirmative least 66
2/3% of the vote of the 2/3% of the
total voting holders of total voting
power of at least 66 power of
Gemstar's 2/3% of TV Gemstar's
outstanding Guide's outstanding
voting outstanding voting
securities, voting securities,
voting securities, voting
together as voting together as
a single together as a single
class at a a single class at a
meeting class. meeting
specifically specifically
called for called for
such such
purpose. purpose.
- -------------------------------------------------------------------------------
Board-- . Vacancies on . Vacancies on . Vacancies on
vacancies the Gemstar the board the Gemstar
board are are filled board will
filled by by the be filled by
the majority affirmative the majority
vote of the vote of a vote of
remaining majority of directors
directors, the present and
although remaining voting at a
less than a directors meeting of
quorum, or then in the board
by a sole office or by duly called
remaining the sole and held at
director or remaining which a
by unanimous director. quorum is
written present, or
consent of by unanimous
the written
directors. consent of
the
directors.
However,
expiring
directorships
or vacancies
on the
Gemstar
board will
be filled by
the GS
Director
Committee,
in the case
of the
Gemstar-
designated
directors
and their
successors,
and by the
TVG Director
Committee,
in the case
of the TV
Guide-
designated
directors
and their
successors,
until the
fifth
anniversary
of the
completion
of the
merger.
. Newly
created
directorships
resulting
from an
increase in
the size of
the Gemstar
board will
be filled
solely by
the
affirmative
vote of at
least nine
of the
twelve board
members then
authorized.
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Board-- . The board . TV Guide . Executive
committees may has an Committee:
designate executive
one or more committee . This
committees, of its committee
each board, will
consisting comprised consist of
of one or of four four
more directors, directors
directors. all of whom and will
are act by
. Each designated majority
committee by holders vote of the
has, to the of the quorum
extent Class B which is
permitted Common present or
by Delaware Stock. by
law, the Subject to unanimous
powers of the written
the board limitations consent.
as are set of Delaware
forth in law, the . The members
the board executive of the
resolution committee Executive
establishing has such Committee
the duties and will
committee, powers include
except that relating to each of the
no the following
committee management who are
has any of the directors:
power or business the Chief
authority and affairs Executive
either to of TV Guide Officer;
approve or as are the Chief
adopt, or delegated Financial
recommend to it from Officer
to the time to (but if the
stockholders, time by the Chief
any action unanimous Financial
or matter vote of the Officer is
required to entire not a
be board. The director
submitted board may selected by
to the establish Gemstar or
stockholders committees a successor
for in addition to such
approval, to the director,
to adopt, executive then, until
amend or committee the earlier
repeal any and shall of the
bylaw, or specify fifth
to take any with anniversary
action that particularity of the
it is not the powers completion
permitted and duties of the
to take of any merger and
pursuant to committee. the date
Delaware Mr. Yuen
law. ceases to
be Chief
Executive
Officer of
Gemstar, a
director
designated
by the GS
Director
Committee
or a
successor
to such
director
will be a
member of the
Executive
Committee
instead of
the Chief
Financial
Officer); and
two TV Guide-
designated
directors or
their
successors.
. This
committee
will have,
to the
extent
permitted
by law, and
until the
third
annual
board of
directors'
meeting
following
(1) the
date Mr.
Yuen ceases
to be Chief
Executive
Officer of
Gemstar or,
if later,
(2) the
fifth
anniversary
of the
completion
of the
merger, all
powers of
the Gemstar
board with
respect to
matters
related to
the
operations
of Gemstar
and its
subsidiaries
between
board
meetings,
except:
. as
otherwise
determined
by the
Gemstar
board;
. with
respect to
any matter
that is
delegated
to a
different
committee
of
directors;
</TABLE>
F-8
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
. with
respect to
matters
itemized
in the
bylaws as
"fundamental
decisions"
or that
require
approval
by
supermajority
vote of
stockholders;
or
. with
respect to
(1) any
acquisition
by Gemstar
or any
person
controlled
by Gemstar
of any
business
or assets
if the
amount
involved
exceeds
$25
million,
(2) any
sale,
lease,
exchange
or other
disposition,
pledge or
encumbrance
of assets
or of all
or a part
of any
business
of Gemstar
or any
person
controlled
by Gemstar
if the
amount
involved
exceeds
$25
million,
and (3)
the
incurrence
by Gemstar
or any
person
controlled
by Gemstar
of
indebtedness
in excess
of $50
million in
any fiscal
year.
. If a matter
is brought
before the
Executive
Committee
and if
there is a
tie vote
with
respect to
such
matter,
then the
exclusive
power to
approve or
disapprove
that matter
will
generally
be
exercised
by the Tie-
breaking
Committee
(of which
Mr. Yuen
will be the
sole
member)
until the
earlier of
the fifth
anniversary
of the
completion
of the
merger and
the date
Mr. Yuen
ceases to
be Chief
Executive
Officer of
Gemstar.
Thereafter,
until the
third
annual
board of
directors'
meeting
following
(1) the
date Mr.
Yuen ceases
to be Chief
Executive
Officer of
Gemstar or,
if later,
(2) the
fifth
anniversary
of the
completion
of the
merger, the
TVG
Director
Committee,
the members
of which
will be
directors
designated
by TV Guide
immediately
before the
merger or
their
successors,
will
generally
have the
ability to
resolve tie
votes.
Notwithstanding
the
foregoing,
no
committee
of
directors
will have
the power
to resolve
a tie vote
of the
Executive
- ----------------------------------------------------------------------
</TABLE>
F-9
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Committee
until the
fifth
anniversary
of the
completion
of the
merger if
Mr. Yuen
ceases to be
Chief
Executive
Officer of
Gemstar
because of
his death or
disability.
. Only the
Chief
Executive
Officer of
Gemstar may
call a
meeting of
the
Executive
Committee
until the
earlier of
the fifth
anniversary
of the
completion
of the
merger and
the date
Mr. Yuen
ceases to
be Chief
Executive
Officer of
Gemstar.
Thereafter,
the Chief
Executive
Officer or
any two
members of
the
Executive
Committee
may call a
meeting.
. Compensation
Committee:
. This
committee
will
consist of
five
directors
and will
act by
majority
vote of all
its members
or by
unanimous
written
consent.
. The members
of the
Compensation
Committee
will
include the
two
Gemstar-
designated
independent
directors
and their
successors,
the two TV
Guide-
designated
independent
directors
and their
successors,
and the
Chief
Executive
Officer of
Gemstar
(provided
he or she
is a
director).
The Chief
Executive
Officer of
Gemstar
will be the
chairman of
the
Compensation
Committee.
. Except with
respect to
matters
itemized in
the bylaws
as
"fundamental
decisions"
or that
require
approval by
supermajority
vote of
stockholders,
the
Compensation
Committee
will be
empowered
to make all
decisions
with
respect to
the
compensation
and other
terms of
employment
of any
executive
officer of
Gemstar or
any of its
subsidiaries,
or any
other
officer or
employee of
Gemstar or
any of its
subsidiaries.
Notwithstanding
the
foregoing,
unless
otherwise
determined
by at least
seven of
the
- --------------------------------------------------------------------------------
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
twelve
directors,
the
Compensation
Committee's
authority to
grant stock
options or
other stock
based
compensation
is limited,
on a
cumulative
basis from
the
completion
of the
merger, to
2% of the
outstanding
shares of
Gemstar
common stock
on a fully
diluted
basis
immediately
after the
completion
of the
merger.
Further, not
more than 1%
of the
outstanding
shares of
Gemstar
common stock
on a fully
diluted
basis
immediately
after the
completion
of the
merger may
be granted,
awarded or
issued in
the
aggregate to
officers of
Gemstar or
any person
controlled
by Gemstar
who directly
report to
the Chief
Executive
Officer.
. Any member
of the
Compensation
Committee
who is an
employee of
Gemstar or
its
subsidiaries
will excuse
himself or
herself
from the
deliberations,
and abstain
from
voting, on
matters
related to
such
employee's
own
compensation.
. Special
Committee:
. This
committee
will
consist of
three
members and
will act by
majority
vote of all
its members
or by
unanimous
written
consent
other than
with
respect to
matters
itemized in
the bylaws
as
"fundamental
decisions"
or that
require
approval by
supermajority
vote of
stockholders.
. The members
of the
Special
Committee
will
include the
Chief
Executive
Officer
(provided
he or she
is a
director)
and two TV
Guide-
designated
directors
or their
successors.
. This
Committee
will have
authority
to
determine
matters
related to
the
relationship
between
Gemstar and
"service
providers,"
as
contemplated
by the
bylaws.
- --------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
. Audit
Committee:
. This
committee
will
consist of
four
members and
will act by
majority
vote of all
its members
or by
unanimous
written
consent and
will have
all powers
normally
accorded to
an audit
committee
other than
with
respect to
matters
itemized in
the bylaws
as
"fundamental
decisions"
or that
require
approval by
supermajority
vote of
stockholders.
. The members
of the
Audit
Committee
will
include the
Chief
Financial
Officer,
one
Gemstar-
designated
independent
director or
his or her
successor
and two TV
Guide-
designated
independent
directors
or their
successors.
. GS Director
Committee:
. This
committee
will
consist of
all
Gemstar-
designated
directors
or their
successors
other than
the
independent
directors
designated
by Gemstar
and will
act by
majority
vote of all
its members
or by
unanimous
written
consent.
. The GS
Director
Committee
will have
the right
to:
. appoint
the
Chairman
of the
Board
(which
will be
Mr. Yuen
so long as
he is a
director)
until the
earlier of
the fifth
anniversary
of the
completion
of the
merger and
the date
Mr. Yuen
ceases to
be Chief
Executive
Officer of
Gemstar;
. nominate
directors
to fill
expiring
directorships
held by
Gemstar
designees
or their
successors
until the
fifth
anniversary
of the
completion
of the
merger;
and
. fill
vacancies
with
respect to
directorships
held by
Gemstar
designees
- -----------------------------------------------------------------------
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
or their
successors
until the
fifth
anniversary
of the
completion
of the
merger.
. The
Gemstar
board may
not
dissolve
the GS
Director
Committee
or modify
its duties
or
composition
without
the
approval
of at
least ten
of the
twelve
members of
the
Gemstar
board
until the
earlier of
the fifth
anniversary
of the
completion
of the
merger and
the date
Mr. Yuen
ceases to
be Chief
Executive
Officer of
Gemstar.
If Mr.
Yuen
should
cease
being the
Chief
Executive
Officer
before the
fifth
anniversary
of the
completion
of the
merger as
a result
of his
death or
disability,
then until
the fifth
anniversary
of the
completion
of the
merger the
Gemstar
board may
dissolve
the GS
Director
Committee
or modify
its duties
or
composition
with the
approval
of nine of
the twelve
members of
the
Gemstar
board.
. TVG
Director
Committee:
. This
committee
will
consist of
all TV
Guide-
designated
directors
or their
successors
other than
the
independent
directors
designated by
TV Guide and
will act by
majority vote
of all its
members or by
unanimous
written
consent.
. The TVG
Director
Committee
will have
the right
to:
. nominate
directors
to fill
expiring
directorships
held by TV
Guide
designees
or their
successors
until the
fifth
anniversary
of the
completion
of the
merger;
. fill
vacancies
with
respect to
directorships
held by TV
Guide
designees
or their
successors
until the
- ----------------------------------------------------------------------
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
fifth
anniversary
of the
completion
of the
merger; and
. resolve
tie votes
of the
Gemstar
board and
the
Executive
Committee
as
described
under
"Summary
of
Certificate
of
Incorporation
and
Bylaws--
Board of
Directors--
Tie Votes"
and
"Summary
of
Certificate
of
Incorporation
and
Bylaws--
Board of
Directors--
Committees--
The
Executive
Committee."
. The Gemstar
board may
not
dissolve
the TVG
Director
Committee
or modify
its duties
or
composition
without the
approval of
at least
ten of the
twelve
members of
the Gemstar
board until
the third
annual
board of
directors"
meeting
following
(1) the
date Mr.
Yuen ceases
to be Chief
Executive
Officer of
Gemstar or,
if later,
(2) the
fifth
anniversary
of the
completion
of the
merger.
. Tie-
breaking
Committee:
. This
committee
will
consist of
Mr. Yuen as
Chairman of
the Board
(so long as
he is a
director)
and will
exist until
the earlier
of the
fifth
anniversary
of the
completion
of the
merger and
the date
Mr. Yuen
ceases to
be Chief
Executive
Officer of
Gemstar.
. During such
time the
Tie-
breaking
Committee
will have
the power
to resolve
tie votes
of the
Gemstar
board and
the
Executive
Committee
as
described
under
"Summary of
Certificate
of
Incorporation
and
Bylaws--
Board of
Directors--
Tie Votes"
and
"Summary of
Certificate
of
Incorporation
and
Bylaws--
Board of
Directors--
Committees--
The
Executive
Committee."
- ----------------------------------------------------------------------
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
. During such
time the
Gemstar
board may
not
dissolve
the Tie-
breaking
Committee
or modify
its duties
or
composition.
. Other
committees: The
Gemstar
board may
establish
other
committees
which will
exercise
the powers
specifically
granted to
such
committees
by the
unanimous
vote of the
Gemstar
board.
- ----------------------------------------------------------------------
Board-- . A majority . A majority . A majority
quorum for of the of the of the
meetings total total total
number of number of number of
board board Gemstar
members members board
constitutes constitutes members
a quorum. a quorum. will
constitute
a quorum,
except that
six of the
twelve
board
members
will
constitute
a quorum at
a duly
called
board
meeting
where
either all
Gemstar-
designated
directors
or their
successors
or all TV
Guide-
designated
directors
or their
successors
fail to
attend such
meeting.
- --------------------------------------------------------------------------
Board-- . Except as . Except as . Generally,
voting otherwise otherwise directors
provided by required by present at
law, the law or any meeting
certificate provided by at which a
of the quorum is
incorporation certificate present may
or the of act by
bylaws, incorporation majority
directors or the vote.
present at bylaws, However,
any meeting directors matters
at which a present at itemized in
quorum is any meeting the bylaws
present for and as
the representing "fundamental
transaction seven of decisions"
of business the ten will
may by members of require the
majority the board approval of
vote decide of at least
any directors seven of
question may decide the twelve
brought any Gemstar
before such question board
meeting. brought members and
before a other
meeting. matters
require the
approval of
at least
nine of the
twelve
Gemstar
board
members.
- --------------------------------------------------------------------------
Board-- . Not . Not . The
special required. required. approval of
vote at least
seven of
the twelve
members of
the board
then
authorized
(or such
greater
numbers of
directors
or
percentage
of the
entire
board as
may be
specified
in the
certificate
of
incorporation
or the
bylaws) at
a meeting
of the
board duly
called and
held, or
the
unanimous
written
consent of
the board,
is required
for certain
fundamental
decisions,
including,
without
limitation,
the following
actions:
. conducting
any
business
other than
those
businesses
identified
in the
bylaws
which
include the
current
businesses
engaged in by
Gemstar and
TV Guide;
- --------------------------------------------------------------------------
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
. creating,
selling or
issuing any
additional
capital
stock of
Gemstar or
any person
controlled
by Gemstar
(other than
in
connection
with
permitted
grants of
options to
employees,
officers
and
directors
of Gemstar,
pursuant to
any
permitted
acquisition
and
pursuant to
Gemstar's
rights
agreement)
or
repurchasing
stock in
excess of
$50 million
in any
fiscal
year;
. acquiring
any
business or
assets not
within the
scope of
the
businesses
identified
in the
bylaws;
. acquiring
any
business or
assets
within the
scope of
the
businesses
identified
in the
bylaws, if
the amount
involved in
such
acquisition
plus the
amount of
all other
acquisitions
authorized
in the same
fiscal year
which were
not
fundamental
decisions
equals or
exceeds 2%
of the
average
market
capitalization
of Gemstar
for the
immediately
preceding
fiscal
year;
. disposing
(including
by
exclusive
license),
pledging or
encumbering
any
material
intellectual
property
rights
(with all
patent
rights
being
deemed
material);
. entering
into
exclusive
contracts
(as against
Gemstar or
any person
controlled
by
Gemstar),
other than
those
pertaining
to
intellectual
property
rights,
except for
contracts
in the
ordinary
course of
business
which do
not involve
an amount
in excess
of $50
million in
any year;
. selling,
leasing,
exchanging
or
otherwise
disposing
of,
pledging or
encumbering
any assets
of Gemstar
or a person
controlled
by Gemstar
if the
amount
involved in
such
transaction
plus the
amount of
all other
such
transactions
which were
not
fundamental
decisions
authorized
in the
- ----------------------------------------------------------------------
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
same fiscal
year equals
or exceeds 1%
of the
average
market
capitalization
of Gemstar
for the
immediately
preceding
fiscal year;
. entering
into a
contract if
the
aggregate
amount of
annual
expenses to
be incurred
by Gemstar
and persons
controlled
by Gemstar
pursuant to
such
contracts
entered
into in any
fiscal year
would
exceed in
any year of
such
contract
the lower
of 1% of
the average
market
capitalization
of Gemstar
for the
fiscal year
immediately
preceding
the year in
which such
contract is
entered
into or
$100
million;
. amending
Gemstar's
certificate
of
incorporation
or bylaws;
. any merger,
consolidation
or binding
share
exchange
involving
Gemstar;
. any merger,
consolidation
or binding
share
exchange to
which any
person
controlled
by Gemstar
is a party
which
involves
any other
action
which
constitutes
a
"fundamental
decision";
. declaring
or paying a
dividend or
distribution
other than
under
Gemstar's
rights
agreement;
. dissolving,
liquidating
or winding
up Gemstar
or, if such
act would
otherwise
constitute
a
"fundamental
decision,"
any person
controlled
by Gemstar;
. entering
into any
agreement
or
obtaining
any license
or
franchise
that
restricts
the persons
to whom
Gemstar
common
stock may
be
transferred
or
otherwise
binds or
encumbers
any
stockholder's
shares or
other
assets
other than
Gemstar's
rights
agreement;
. amending or
waiving any
provision
of
Gemstar's
rights
agreement
to extend
the
- -------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
expiration
date of the
rights
agreement,
exempt a new
person from
any of its
provisions
or change
the
definition
of
"Acquiring
Person" in a
manner
adverse to
any person
exempted
from any of
its
provisions,
or adopting
any new plan
or agreement
which would
have effects
equivalent
to Gemstar's
rights
agreement;
. incurring,
replacing
or
refinancing
indebtedness
unless
after
giving
effect to
the
incurrence
of such
indebtedness
the
aggregate
outstanding
principal
amount of
indebtedness
of Gemstar
and all
persons
controlled
by Gemstar
does not
exceed the
sum of $550
million and
1% of the
average
market
capitalization
of Gemstar
for the
immediately
preceding
fiscal
year;
. changing
Gemstar's
accountants;
. instituting,
settling or
abandoning
any legal
action or
arbitration
involving
claims in
excess of
$25 million
if Gemstar
is a
defendant
or 1% of
the average
market
capitalization
of Gemstar
for the
immediately
preceding
fiscal year
if Gemstar
is a
plaintiff
or
involving
any claim
by a
governmental
authority;
. incurring
capital
expenditures
for
tangible
assets in
excess of
$50 million
in any
fiscal
year;
. making any
loan or
advancing
money to
another
person or
guaranteeing
obligations
of another
person,
unless the
amounts
involved
are less
than $5
million in
the
aggregate
outstanding
at any time
and such
loan,
advance or
guarantee
is not made
with
respect to
a director
or officer
of Gemstar
or any
person
controlled
by Gemstar
or a holder
of 5% or
more of
Gemstar's
- -------------------------------------------------------------------------------
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
common stock
and the
respective
affiliates
and
associates
of the
foregoing;
. adopting or
changing a
significant
tax or
accounting
practice of
Gemstar,
making any
significant
tax or
accounting
election,
or adopting
any
position
for
purposes of
any tax
return that
would have
a material
adverse
effect on
any United
States
Shareholder
(defined as
a United
States
person who
owns or is
deemed to
own 10% or
more of the
voting
power of a
foreign
corporation)
or its
affiliates;
. approving
any
transaction
with a
director or
officer of
Gemstar or
any person
controlled
by Gemstar
or a holder
of 5% or
more of
Gemstar's
common
stock and
the
respective
affiliates
and
associates
of the
foregoing;
. changing
the number
and type of
officers
included in
the Office
of the
Chief
Executive
or
assigning
to any
officer
that is not
a member of
such office
the powers
or duties
of a member
of such
office;
. any matter
that by the
terms of
Gemstar's
certificate
of
incorporation
or bylaws
requires
approval of
a specified
number of
board
members;
. changing
the
composition
of or
delegation
of powers
or duties
to the
Executive,
Compensation,
Special,
Audit, GS
Director,
TVG
Director or
Tie-
breaking
committees
of the
Gemstar
board or
establishing
any new
committees
of the
Gemstar
board; and
. determining
to
compensate
directors
(other than
independent
directors)
in their
capacity as
directors.
- ------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Board-- . The board . Directors . The board
compensation determines receive will
the such determine
compensation compensation the
to be paid for compensation
directors attendance to be paid
for at any directors
attendance meetings of for
at any the board attendance
board and any at any
meetings expenses board
and incidental meetings
expenses to the and
incidental performance expenses
to the of their incidental
performance duties, as to the
of their the board performance
duties. of of their
directors duties.
shall
determine
by
resolution.
- ----------------------------------------------------------------------
Board-- . Directors . To the . Directors
limitation will not be fullest will not be
of liable to extent liable to
personal Gemstar or permitted Gemstar or
liability any of its by the any of its
stockholders Delaware stockholders
for General for
monetary Corporation monetary
damages for Law, a damages for
breach of director breach of
fiduciary shall not fiduciary
duty as a be liable duty as a
director, to TV Guide director,
to the or any of to the
fullest its fullest
extent stockholders extent
permitted for permitted
by the monetary by the
Delaware damages for Delaware
General breach of General
Corporation fiduciary Corporation
Law. duty as a Law.
director.
- ----------------------------------------------------------------------
Indemnifi- . Gemstar . TV Guide . Gemstar
cation will will will
of indemnify indemnify indemnify
directors directors directors directors
and officers and and and
officers officers, officers
and their for or on and their
respective account of respective
heirs, any action heirs,
personal performed personal
representatives on behalf representatives
and of the and
successors company, to successors
in the fullest in
interest, extent interest,
for or on permitted for or on
account of by account of
any action applicable any action
performed law. performed
on behalf on behalf
of Gemstar, of Gemstar,
to the to the
fullest fullest
extent extent
permitted permitted
by by
applicable applicable
law. law.
- ----------------------------------------------------------------------
Officers . The . The . The
officers of officers of officers of
Gemstar TV Guide Gemstar
will be a shall be a will be a
Chairman of Chairman of Chairman of
the Board, the Board, the Board,
a Chief a Chief a Chief
Executive Executive Executive
Officer, a Officer, a Officer,
President, President, two or more
a Chief an Presidents
Financial Executive and Chief
Officer, a Vice Operating
General President, Officers, a
Counsel a Chief Chief
(who may be Financial Financial
an Officer, Officer, a
Executive one or more General
Vice Vice Counsel
President), Presidents, (who may be
one or more and a an
Vice Secretary, Executive
Presidents, each of Vice
a Secretary whom shall President),
and such be elected one or more
other by the Vice
officers as board of Presidents,
may be directors, a Secretary
determined and other and such
by the officers other
board. appointed officers as
by the may be
. A person board of determined
may hold directors. by the
more than There shall board.
one office. be an
Office of . Mr. Yuen
. To the the will be
extent Chairman, Chief
permitted comprised Executive
by law, the of three Officer of
board may members-- Gemstar for
remove with the five years
or without Chairman of after the
cause from the Board completion
office or and Chief of the
terminate Executive merger
the Officer and unless he
employment the earlier
of any respective dies or
officer by chairman resigns or
a vote of and chief his
not less executive employment
than a officers of is
majority of each of the terminated
directors principal for
at a divisions disability
meeting of of TV as
directors Guide. permitted
where a by, or for
quorum of . A person "cause"
the entire may hold within the
board is more than meaning of,
present or one office. his
by existing
unanimous . The board employment
written may remove agreement.
consent. with or Until the
without earlier of
cause from the fifth
office or anniversary
terminate of the
the completion
employment of
of any the merger or
officer by the date Mr.
a vote of Yuen ceases
not less to be Chief
than six of Executive
the ten Officer of
members of Gemstar,
the board Mr. Yuen will
or by be Chairman
written of the Board
consent. so long as he
is a director
of Gemstar.
. A person
may hold
more than
one office.
- ----------------------------------------------------------------------
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
. The board
may remove
with or
without
cause from
office or
terminate
the
employment
of any
officer by a
vote of at
least seven
of the
twelve
members of
the board
then
authorized
at any
meeting
thereof, or
by unanimous
written
consent, to
the extent
permitted by
law.
- -------------------------------------------------------------------------------
Stock- . Any . Notice of . Any
holders-- stockholder intent to stockholder
action may nominate raise may nominate
persons for business at persons for
election to stockholder election to
the Gemstar meetings the Gemstar
board by must be board by
giving received by giving
timely TV Guide not timely
notice as less than 70 notice as
described nor more described
under than 90 days under
"Board- before the "Board-
nominations meeting, and nominations
by must contain by
stockholders" certain stockholders"
above. information above.
concerning
. Any the matters . Any
stockholder to be stockholder
may bring brought may bring
business before the business
(other than meeting and (other than
nominating concerning nominating
persons for the persons for
election to stockholder election to
the Gemstar submitting the Gemstar
board) the board)
before an proposal. If before an
annual the date of annual
meeting of the annual meeting of
stockholders meeting is stockholders
by giving advanced by by giving
timely more than 20 timely
notice in days, or notice in
writing to delayed by writing to
Gemstar's more than 70 Gemstar's
Secretary in days, from Secretary in
accordance the first accordance
with the anniversary with the
bylaws. In of the bylaws. In
the case of preceding the case of
an annual year's an annual
meeting, a annual meeting, a
stockholder meeting, stockholder
notice to be notice by notice to be
timely must the timely must
be delivered stockholder be delivered
to or mailed must be to or mailed
and received delivered and received
at Gemstar's not earlier at Gemstar's
principal than the principal
executive 90th day executive
offices not before the offices not
less than 60 annual less than 60
days nor meeting and days nor
more than 90 not later more than 90
days before than the days before
the meeting; close of the meeting;
provided, business on provided,
however, the later of however,
that if less the 70th day that if less
than 70 before the than 70
days' notice annual days' notice
or prior meeting or or prior
public the 10th day public
disclosure following disclosure
of the date the day on of the date
of the which public of the
meeting is announcement meeting is
given or of the date given or
made to of the made to
stockholders, meeting is stockholders,
notice by first made. notice by
the If the the
stockholder number of stockholder
must be directors to must be
received not be elected received not
later than is increased later than
the close of and TV Guide the close of
business on does not business on
the 10th day make a the 10th day
following public following
the day on announcement the day on
which such naming all which such
notice of of the notice of
the date of nominees for the date of
the meeting director or the meeting
was mailed specifying was mailed
or such the size of or such
public the public
disclosure increased disclosure
was made. board of at was made.
least 80
. In the case days before . In the case
of a special the first of a special
meeting, anniversary meeting,
stockholders of the stockholders
may only preceding may only
conduct year's conduct
business annual business
(other than meeting, a (other than
nominating stockholder's nominating
persons for notice shall persons for
election to also be election to
the Gemstar considered the Gemstar
board) if timely, but board) if
such only with such
business is respect to business is
specified in nominees for specified in
the notice any new the notice
of such positions of such
special created by the special
meeting. increase, if meeting.
Stockholders it is Stockholders
with delivered not with
sufficient later than the sufficient
voting power close of voting power
to request a business on to request a
special the 10th day. special
meeting may meeting may
bring bring
business business
before such before such
meeting by meeting by
specifying specifying
it in such it in such
request. request.
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Stock- . An officer . Stockholders . An officer
holders-- of Gemstar will of Gemstar
notice of must give receive must give
meetings written written written
notice of notice of notice of
stockholder meetings at stockholder
meetings to least ten meetings to
stockholders days but stockholders
at least not more at least
ten days than 60 ten days
but not days before but not
more than the date of more than
60 days the 60 days
before the meeting. before the
date of the date of the
meeting, meeting,
unless a unless a
different different
period is period is
prescribed prescribed
by law or by law or
the the
certificate certificate
of of
incorporation. incorporation.
- -------------------------------------------------------------------------------
Stock- . Except as . The holders . Except as
holders-- otherwise of a otherwise
quorum for provided in majority in provided in
meetings the total the
certificate voting certificate
of power of of
incorporation, the incorporation,
the bylaws outstanding the bylaws
or by law, shares of or by law,
and subject stock and subject
to the entitled to to the
rights of vote rights of
holders of constitutes holders of
preferred a quorum preferred
stock, the for the stock, the
holders of transaction holders of
a majority of a majority
in total business. in total
voting voting
power of power of
Gemstar's Gemstar's
outstanding outstanding
shares of shares of
stock stock
entitled to entitled to
vote vote
constitutes constitutes
a quorum a quorum
for the for the
transaction transaction
of of
business. business.
- -------------------------------------------------------------------------------
Stock- . An annual . Special . An annual
holders-- meeting of meetings meeting of
meetings stockholders are called stockholders
for the by the for the
purpose of Secretary: purpose of
electing electing
those . upon the those
directors written directors
whose term request of whose term
of office the holders of office
expires at of at least expires at
such 66 2/3% of such
meeting and TV Guide's meeting and
of outstanding of
transacting voting transacting
such other securities; such other
business as or business as
may may
properly . at the properly
come before request of come before
it is held at least it will be
each year. 66% of the held each
members of year.
. Special the board
meetings then in . Special
are called office. meetings
upon: will be
called
. the written upon:
request of
the holders . the written
of a request of
majority of the holders
the total of a
voting majority of
power of the total
Gemstar's voting
outstanding power of
voting Gemstar's
securities; outstanding
or voting
securities;
. the request or
of a
majority of . the request
the members of six of
of the the twelve
entire members of
board which the Gemstar
Gemstar board.
would have
if there
were no
vacancies
on the
board.
- -------------------------------------------------------------------------------
Stock- . No . Such power . No
holders-- stockholder is stockholder
action action may specifically action may
without be taken denied. be taken
a meeting without a without a
meeting, meeting,
and the and the
certificate certificate
of of
incorporation incorporation
expressly expressly
denies the denies the
power of power of
stockholders stockholders
to consent to consent
in writing in writing
without a without a
meeting. meeting.
- -------------------------------------------------------------------------------
Stock- . Holders of . Class A . Holders of
holders-- common Common common
voting stock are Stock has stock will
generally entitled to one vote be entitled
one vote and Class B to one vote
for each Common for each
share of Stock has share of
such stock 10 votes such stock
held on all per share. held on all
matters The two matters
presented classes presented
to such vote to such
stockholders. together. stockholders.
. Except for . The . Except for
the affirmative the
election of vote of a election of
directors majority of directors
and except the and except
as combined as
otherwise voting otherwise
provided by power of provided by
the the shares the
present
</TABLE>
F-22
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
certificate in person or certificate
of represented of
incorporation, by proxy at incorporation,
the bylaws or the meeting the bylaws or
by law and and entitled by law and
subject to to vote on subject to
the rights of the subject the rights of
holders of matter shall holders of
any preferred be the act of any preferred
stock, at any the stock, at any
meeting duly stockholders. meeting duly
called and At any called and
held at which meeting duly held at which
a quorum is called and a quorum is
present, the held for the present, the
affirmative election of affirmative
vote of a directors at vote of a
majority of which a majority of
the total quorum is the total
voting power present, voting power
of shares directors of shares
present in shall be present in
person or elected by a person or
represented plurality of represented
by proxy and the combined by proxy and
entitled to voting power entitled to
vote on the of the shares vote on the
subject present in subject
matter is person or matter is
required for represented required for
stockholders by proxy at stockholders
to act. the meeting to act.
and entitled
to vote on
the election
of directors.
- --------------------------------------------------------------------------------
Stock- . Subject to . Not . Subject to
holders-- the rights required. the rights
super- of holders of holders
majority of any of any
vote preferred preferred
stock, the stock, the
affirmative affirmative
vote of at vote of at
least 66 least 66
2/3% of the 2/3% of the
total total
voting voting
power of power of
Gemstar's Gemstar's
outstanding outstanding
voting voting
securities, securities,
voting voting
together as together as
a single a single
class at a class at a
meeting meeting
specifically specifically
called for called for
such such
purpose, is purpose, is
required to required to
authorize authorize
any of the any of the
following following
actions: actions:
. amendment, . amendment,
alteration alteration
or repeal or repeal
of any of any
provision provision
of of
Gemstar's Gemstar's
certificate certificate
of of
incorporation incorporation
or the or the
addition of addition of
other other
provisions provisions
other than other than
an an
amendment amendment
solely for solely for
the purpose the purpose
of changing of changing
Gemstar's Gemstar's
name; name;
. adoption, . adoption,
amendment amendment
or repeal or repeal
of any of any
provision provision
of of
Gemstar's Gemstar's
bylaws bylaws
(except (except
that the that the
Gemstar Gemstar
board has board has
also also
retained retained
the power the power
to adopt, to adopt,
amend or amend or
repeal any repeal any
provision provision
of the of the
bylaws with bylaws with
the the
approval of approval of
a majority at least
of the nine of the
board then twelve
authorized); members of
the Gemstar
. a merger or board);
consolidation
of Gemstar . a merger or
with any consolidation
other of Gemstar
person or with any
any binding other
share person or
exchange to any binding
which share
Gemstar is exchange to
a party which
other than Gemstar is
a merger of a party
a other than
subsidiary a merger of
of Gemstar a
with and subsidiary
into of Gemstar
Gemstar with and
effected in into
accordance Gemstar
with effected in
Section 253 accordance
of the with
Delaware Section 253
General of the
Corporation Delaware
Law solely General
for the Corporation
purpose of Law solely
changing for the
Gemstar's purpose of
name (it changing
being Gemstar's
understood name (it
that this being
clause will understood
not apply that this
to any clause
transactions
contemplated
by the
merger
agreement,
as
</TABLE>
F-23
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
such will not
agreement may apply to any
be amended transactions
from time to contemplated
time, by the merger
including the agreement, as
issuance of such
Gemstar agreement may
common stock be amended
to TV Guide from time to
stockholders time,
as including the
contemplated issuance of
by such Gemstar
agreement); common stock
to TV Guide
. the sale, stockholders
lease, as
exchange or contemplated
other by such
disposition agreement);
of all or a
substantial . the sale,
part of the lease,
assets of exchange or
Gemstar or other
its disposition
subsidiaries; of all or a
substantial
. the part of the
dissolution, assets of
liquidation Gemstar or
or winding its
up of subsidiaries;
Gemstar; or
. the
. any other dissolution,
matter liquidation
(other than or winding
the up of
election of Gemstar; or
directors
and the . any other
adoption or matter
amendment (other than
of any the
stock election of
option, directors
stock and the
appreciation adoption or
rights or amendment
other stock of any
incentive stock
plan for option,
Gemstar or stock
its appreciation
subsidiaries rights or
and any other stock
transactions incentive
contemplated plan for
by the Gemstar or
merger its
agreement, subsidiaries
as such and any
agreement transactions
may be contemplated
amended by the
from time merger
to time, agreement,
including as such
the agreement
issuance of may be
Gemstar amended
common from time
stock to to time,
TV Guide including
stockholders the
in issuance of
connection Gemstar
with the common
merger stock to TV
requiring Guide
stockholder stockholders
approval in
under the connection
laws of the with the
State of merger)
Delaware or requiring
the rules stockholder
of any approval
national under the
securities laws of the
exchange or State of
national Delaware or
securities the rules
association of any
on which national
Gemstar's securities
common exchange or
stock is national
listed or securities
quoted. association
on which
Gemstar's
common
stock is
listed or
quoted.
- -------------------------------------------------------------------------------
Stock- . In the . In the . In the
holders-- event of a event of a event of a
liquida- liquidation, liquidation, liquidation,
tion dissolution dissolution dissolution
and or winding or winding or winding
dissolu- up of up of TV up of
tion Gemstar and Guide, Gemstar and
rights after after after
payment or payment or payment or
provision provision provision
for payment for payment for payment
of of all of
Gemstar's debts and Gemstar's
debts and liabilities debts and
liabilities and subject liabilities
and subject to the and subject
to prior prior to prior
payment in payment in payment in
full of the full of the full of the
preferential preferential preferential
amounts to amounts to amounts to
which any which any which any
series of series of series of
preferred preferred preferred
stock is stock is stock is
entitled, entitled, entitled,
the holders the holders the holders
of common of Class A of common
stock will Common stock will
share Stock and share
equally, on Class B equally, on
a share for Common a share for
share Stock shall share
basis, in share basis, in
Gemstar's equally, on Gemstar's
assets a share for assets
remaining share remaining
for basis, in for
distribution. the assets distribution.
remaining
for
distribution.
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Gemstar After
the
Domestication
and TV Guide
Stockholder Before the Before the Combined
Rights Merger Merger Company
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Dividends . Payable . Whenever a . Payable
only as and dividend is only as and
when paid to the when
declared by holders of declared by
the board one class the board
out of any of common out of any
assets stock, the assets
legally holders of legally
available the other available
for the class shall for the
payment of receive an payment of
dividends. equal dividends.
dividend.
Dividends
shall be
payable
only as and
when
declared by
the board
of
directors.
- ----------------------------------------------------------------------
Amendment . Certificate . Certificate . Certificate
of of of of
organizational Incorporation: Incorporation: Incorporation:
documents The Amendments The
amendment to the amendment
of the certificate of the
certificate of certificate
of incorporation of
incorporation must be incorporation
requires adopted by requires
the the board the
affirmative of affirmative
vote of at directors vote of at
least 66 and least 66
2/3% of the approved by 2/3% of the
total the holders total
voting of TV voting
power of Guide's power of
Gemstar's voting Gemstar's
outstanding securities outstanding
voting having a voting
securities. majority of securities.
the Also, at
. Bylaws: The outstanding least seven
amendment voting of the
of the power, twelve
bylaws except members of
requires where the the Gemstar
the certificate board must
affirmative of approve an
vote of at incorporation amendment
least 66 or Delaware to the
2/3% of the law certificate
total requires a of
voting separate incorporation
power of class vote. before the
Gemstar's Gemstar
outstanding . Bylaws: The board can
voting board, by submit such
securities the a proposal
or the affirmative to
approval of vote of at Gemstar's
a majority least 66 stockholders.
of the 2/3% of the
members of members of . Bylaws: The
the Gemstar the board amendment
board. The then in of the
bylaws will office, may bylaws
be adopt, requires
automatically amend or the
amended and repeal any affirmative
replaced provision vote of at
upon the of the least 66
completion bylaws. 2/3% of the
of the Alternatively, total
merger with the holders voting
new bylaws of TV power of
in the form Guide's Gemstar's
attached as voting outstanding
Annex C to securities voting
this joint having at securities
proxy least 66% or the
statement/ of the approval of
prospectus. outstanding at least
voting nine of the
power may twelve
adopt, members of
amend or the Gemstar
repeal the board.
bylaws.
- ----------------------------------------------------------------------
Fiscal . Ends on . Determined . Will end on
year March 31 of by March 31 of
each resolution each
calendar of the calendar
year. board of year.
directors.
- ----------------------------------------------------------------------
Section . Does not . Applies. . Will not
203 of apply. apply.
the
Delaware
General
Corporation
Law (an
anti-
takeover
statute)
- ----------------------------------------------------------------------
</TABLE>
F-25
<PAGE>
ANNEX G
COMPARISON OF THE RIGHTS OF GEMSTAR STOCKHOLDERS
BEFORE AND AFTER GEMSTAR CHANGES ITS PLACE OF INCORPORATION
FROM THE BRITISH VIRGIN ISLANDS TO THE STATE OF DELAWARE
The rights of Gemstar stockholders are governed by British Virgin Islands
law, including the British Virgin Islands International Business Companies Act,
and Gemstar's current amended and restated memorandum of association and
amended and restated articles of association. Before February 23, 2000, Gemstar
will change its place of incorporation to the State of Delaware. As part of
this process, Gemstar will file a certificate of domestication and a
certificate of incorporation in the State of Delaware making changes in the
organizational documents of Gemstar to, among other things, conform to Delaware
law.
A tabular comparison of the rights of Gemstar stockholders both before and
after Gemstar changes its place of incorporation from the British Virgin
Islands to the State of Delaware follows as Annex G. Annex G is not intended to
be a complete statement of all differences or a complete description of the
specific provisions referred to in this summary, and the identification of
specific differences is not intended to indicate that other significant
differences do not exist.
See "Change in Gemstar's Place of Incorporation From the British Virgin
Islands to the State of Delaware" for a comparison of British Virgin Islands
and Delaware corporate laws.
G-1
<PAGE>
All share numbers in the following chart have been adjusted to reflect the two-
for-one stock split effected in the form of a stock dividend by Gemstar in
December 1999.
<TABLE>
<CAPTION>
Stockholder Gemstar Before the Gemstar After the
Rights Domestication Domestication
- --------------------------------------------------------------------------------
<S> <C> <C>
Authorized . 550 million shares, . 2.55 billion
capital divided into the shares, divided
following classes: into the following
classes:
. 500 million shares
of Ordinary . 2.4 billion shares
Shares, par value of common stock,
$.01 per share, of par value $.01 per
which 206,788,370 share, of which
shares were issued 206,788,370 shares
and outstanding as were issued and
of January 25, outstanding as of
2000 January 25, 2000
. 50 million shares . 150 million shares
of Preference of preferred stock,
Shares, par value par value $.01 per
$.01 per share, of share, of which 25
which no shares million shares have
were issued and been designated
outstanding as of Series A Junior
January 25, 2000 Participating
Preferred Stock and
the balance will be
issuable in series
- --------------------------------------------------------------------------------
Preferred . The directors may . The directors may
stock fix the fix the powers,
designations, designations,
powers, preferences and
preferences, relative,
rights, participating,
qualifications, optional or other
limitations and rights, and
restrictions of qualifications,
each class and limitations and
series of shares restrictions of
that Gemstar is each class and
authorized to series of shares
issue, but the that the combined
directors may not company is
allocate different authorized to
rights as to issue. One series
voting, dividends, of Preferred Stock
redemption or has been designated
distributions on the Series A Junior
liquidation unless Participating
the Memorandum of Preferred Stock.
Association creates Shares of Series A
or is amended to Junior
create separate Participating
classes of shares. Preferred Stock
have the following
. If at any time the rights and
board provides for preferences:
the issuance of
preference shares, . quarterly
the rights attached dividends payable
to any class or in cash on the
series of ordinary first day of
shares or March, June,
preference shares September and
(unless otherwise December of each
provided by the year (each, a
terms of issue of "Quarterly
the shares of any Dividend Payment
such class or Date"), when, as
series) may be and if declared by
varied with the the board out of
consent in writing funds legally
of the holders of a available for such
majority of the purpose, subject
issued shares of to the rights of
any such class or holders of any
series and of the senior stock and
holders of a in preference to
majority of the holders of common
issued shares of stock and any
any other class or other junior
series of ordinary stocks, in an
shares or amount per share
preference shares (rounded to the
which may be nearest cent)
adversely affected equal to the
by such variation. greater of (1) $1
or (2) subject to
adjustment if
Gemstar shall at
any time declare
or pay any
dividend on
Gemstar common
stock payable in
Gemstar common
stock or effect a
subdivision or
combination or
consolidation of
the outstanding
Gemstar common
stock, 100 times
the aggregate per
share amount of
all cash
dividends, and
100 times the
aggregate per
share amount
(payable in kind)
of all non-cash
dividends or other
distributions,
other than a
dividend payable
in shares of
Gemstar common
stock or a
subdivision of the
outstanding shares
of Gemstar common
stock (by
reclassification
or otherwise),
declared on the
Gemstar common
stock since the
immediately
preceding
Quarterly Dividend
Payment Date or,
with respect to
the first
Quarterly Dividend
Payment Date,
since the first
issuance of any
share or fraction
of a share of
Series A Junior
Participating
Preferred Stock;
. a minimum dividend
on each Quarterly
Dividend Payment
Date of $1 per
share on the
Series A Junior
Participating
Preferred Stock;
- --------------------------------------------------------------------------------
</TABLE>
G-2
<PAGE>
<TABLE>
<CAPTION>
Stockholder Gemstar Before the Gemstar After the
Rights Domestication Domestication
- --------------------------------------------------------------------------------
<S> <C> <C>
. 100 votes on all
matters submitted
to a vote of
stockholders
(subject to
adjustment);
. upon any
liquidation,
dissolution or
winding up of
Gemstar, no
distribution will
be made (1) to
holders of shares
of stock ranking
junior to the
Series A Junior
Participating
Preferred Stock
unless holders of
Series A Junior
Participating
Preferred Stock
have first received
$100 per share
(subject to
adjustment), plus
an amount equal to
accrued and unpaid
dividends and
distributions on
such stock, whether
or not declared, to
the date of such
payment, or (2) to
the holders of
shares of stock
ranking on parity
with the Series A
Junior
Participating
Preferred Stock,
except
distributions made
ratably on the
Series A Junior
Participating
Preferred Stock and
all such parity
stock in proportion
to the total
amounts to which
the holders of all
such shares are
entitled; and
. if the company
enters into any
consolidation,
merger, combination
or other
transaction in
which shares of
common stock are
exchanged for or
changed into other
stock or
securities, cash
and/or any other
property, then each
share of Series A
Junior
Participating
Preferred Stock
shall be similarly
exchanged or
changed into an
amount per share
equal to 100 times
the aggregate
amount of stock,
securities, cash
and/or any other
property, as the
case may be, into
which or for which
each share of
common stock is
changed or
exchanged (subject
to adjustment).
. Whenever quarterly
dividends or other
dividends or
distributions
payable on the
Series A Junior
Participating
Preferred Stock are
in arrears,
thereafter and
until all accrued
and unpaid
dividends and
distributions,
whether or not
declared, on shares
of Series A Junior
Participating
Preferred Stock
outstanding shall
have been paid in
full, Gemstar shall
not:
. declare or pay
dividends, or make
any other
distributions, on
any shares of stock
ranking junior to
the Series A Junior
Participating
Preferred Stock;
. declare or pay
dividends, or make
any other
distributions, on
any shares of stock
ranking on a parity
with the Series A
Junior
Participating
Preferred Stock,
except dividends
paid ratably on the
Series A Junior
Participating
Preferred Stock and
all such parity
stock on which
dividends are
payable or in
arrears in
proportion to the
total amounts to
which the holders
of all such shares
are then entitled;
- --------------------------------------------------------------------------------
</TABLE>
G-3
<PAGE>
<TABLE>
<CAPTION>
Stockholder Gemstar Before the Gemstar After the
Rights Domestication Domestication
- --------------------------------------------------------------------------------
<S> <C> <C>
. redeem or purchase
or otherwise
acquire for
consideration
shares of any
stock ranking
junior to the
Series A Junior
Participating
Preferred Stock,
provided that
Gemstar may at any
time redeem,
purchase or
otherwise acquire
shares of any such
junior stock in
exchange for
shares of any
stock of Gemstar
ranking junior to
the Series A
Junior
Participating
Preferred Stock;
or
. redeem or purchase
or otherwise
acquire for
consideration
shares of Series A
Junior
Participating
Preferred Stock,
except in
accordance with a
purchase offer
made in writing or
by publication to
all holders of
such shares upon
such terms as the
Gemstar board
shall determine in
good faith will
result in fair and
equitable
treatment among
the respective
series or classes.
- --------------------------------------------------------------------------------
Board-- . The minimum number . The minimum number
number of of directors is of directors is
directors three and the three and the
maximum is ten. maximum is twelve,
and the board will
. Three classes of initially consist
directors with of nine directors.
staggered terms of
office. . The board has three
classes of
directors (Class I,
II and III) with
staggered terms of
office.
- --------------------------------------------------------------------------------
Board-- . At each annual . The initial term of
term of meeting of office of the Class
office stockholders, the I, Class II and
successors of that Class III directors
class of directors will expire at the
whose term expires annual meeting of
at that meeting are stockholders in
elected to hold 2003, 2002 and
office for a term 2001, respectively.
expiring at the
annual meeting of . At each annual
stockholders held meeting of
in the third year stockholders, the
following the year successors of that
of such election. class of directors
whose term expires
at that meeting are
elected to hold
office for a term
expiring at the
annual meeting of
stockholders held
in the third year
following the year
of such election.
- --------------------------------------------------------------------------------
Board-- . Any stockholder . Any stockholder may
nominations entitled to vote nominate persons
by for the election of for election to the
stockholders directors may Gemstar board by
nominate persons giving timely
for election to the notice in writing
board by giving to Gemstar's
notice in writing Secretary. To be
to Gemstar's timely:
Secretary. To be
timely, a . in the case of an
stockholder's annual meeting or
notice must be special meeting, a
delivered to or stockholder's
mailed and received notice must be
at Gemstar's delivered to or
principal executive mailed and
offices not less received at
than 60 days nor Gemstar's
more than 90 days principal
before the meeting; executive offices
provided, however, not less than 60
that if less than days nor more than
70 days' notice or 90 days before the
prior public meeting; provided,
disclosure of the however, that if
date of the meeting less than 70 days'
is given or made to notice or prior
stockholders, public disclosure
notice by the of the date of the
stockholder must be meeting is given
received not later or made to
than the close of stockholders,
business on the notice by the
10th day following stockholder must
the day on which be received not
such notice of the later than the
date of the meeting close of business
was mailed or such on the 10th day
public disclosure following the day
was made. on which such
notice of the date
of the meeting was
mailed or such
public disclosure
was made; and
. in the case of a
special meeting
called at the
request of a
stockholder or
stockholders
nominating persons
for election to
the Gemstar board,
the notice of
nomination by the
stockholder or
stockholders
requesting
</TABLE>
G-4
<PAGE>
<TABLE>
<CAPTION>
Stockholder Gemstar Before the Gemstar After the
Rights Domestication Domestication
- -------------------------------------------------------------------------------
<S> <C> <C>
such meeting must be
received by Gemstar
with the request for
such meeting, which
request must be made
by holders of at
least a majority of
the total voting
power of Gemstar's
outstanding voting
securities.
- -------------------------------------------------------------------------------
Board-- . Stockholders elect . Directors are
elections directors at the elected, at any
annual meeting of stockholder meeting
stockholders. duly called and
held for such
purpose at which a
quorum is present,
by a plurality of
the voting power of
the shares present
in person or
represented by
proxy at the
meeting and
entitled to vote.
- -------------------------------------------------------------------------------
Board-- . Directors may be . Directors may be
removal of removed from office removed with or
directors with cause by a without cause by
resolution of the affirmative
directors (approved vote of at least 66
by a simple 2/3% of the total
majority of voting power of
directors present Gemstar's
at a duly convened outstanding voting
and constituted securities, voting
meeting who voted together as a
and did not abstain single class at a
or by all directors meeting
in writing) or by a specifically called
resolution of for such purpose.
stockholders
(approved by a
simple majority of
the votes of the
shares present at a
duly convened and
constituted meeting
and entitled to
vote and that voted
and did not
abstain).
- -------------------------------------------------------------------------------
Board-- . Vacancies on the . Vacancies on the
vacancies board are filled by Gemstar board are
a simple majority filled by the
of directors majority vote of
present at a duly the remaining
convened and directors, although
constituted meeting less than a quorum,
who voted and did or by a sole
not abstain or by remaining director
all directors in or by unanimous
writing. written consent of
the directors.
- -------------------------------------------------------------------------------
Board-- . The board may, by a . The board may
committees simple majority of designate one or
directors present more committees,
at a duly convened each consisting of
and constituted one or more
meeting who voted directors.
and did not abstain
or by all directors . Each committee has,
in writing, to the extent
designate one or permitted by
more committees, Delaware law, the
each consisting of powers of the board
one or more as are set forth in
directors. the board
resolution
. Each committee has establishing the
such powers and committee, except
authorities of the that no committee
board as are set has any power or
forth in the board authority either to
resolution approve or adopt,
establishing the or recommend to the
committee, except stockholders, any
that no committee action or matter
has any power or required to be
authority either to submitted to the
amend the stockholders for
Memorandum of approval, to adopt,
Association or the amend or repeal any
Articles of bylaw, or to take
Association, to any action that it
appoint directors is not permitted to
or fix their take pursuant to
compensation, or to Delaware law.
appoint officers.
- -------------------------------------------------------------------------------
Board-- . At least . A majority of the
quorum for half of the total number of
meetings total board members
number of constitutes a
board quorum.
members
constitutes
a quorum.
- -------------------------------------------------------------------------------
Board-- . The . Except as otherwise
voting directors provided by law,
may act by the certificate of
a incorporation or
resolution the bylaws,
of directors present
directors at any meeting at
(approved which a quorum is
by a simple present for the
majority of transaction of
directors business may by
present at majority vote
a duly decide any question
convened brought before such
and meeting.
constituted
meeting who
voted and
did not
abstain or
by all
directors
in
writing).
- -------------------------------------------------------------------------------
Board-- . Not . Not required.
special required.
vote
</TABLE>
G-5
<PAGE>
<TABLE>
<CAPTION>
Stockholder Gemstar Before the Gemstar After the
Rights Domestication Domestication
- -------------------------------------------------------------------------------
<S> <C> <C>
Board-- . The board may fix . The board determines
compensation the compensation of the compensation to
directors by a be paid directors
resolution of for attendance at
directors (approved any board meetings
by a simple majority and expenses
of directors present incidental to the
at a duly convened performance of their
and constituted duties.
meeting who voted
and did not abstain
or by all directors
in writing) and by a
resolution of
stockholders
(approved by a
simple majority of
the votes of the
shares present at a
duly convened and
constituted meeting
and entitled to vote
and that voted and
did not abstain).
- -------------------------------------------------------------------------------
Board-- . None provided. . Directors will not
limitation be liable to Gemstar
of or any of its
personal stockholders for
liability monetary damages for
breach of fiduciary
duty as a director,
to the fullest
extent permitted by
the Delaware General
Corporation Law.
- -------------------------------------------------------------------------------
Indemnifi- . Gemstar may . Gemstar will
cation indemnify directors indemnify directors
of and officers who and officers and
directors acted honestly and their respective
and officers in good faiith a heirs, personal
views to Gemstar's representatives and
best interests. successors in
interest, for or on
account of any
action performed on
behalf of Gemstar,
to the fullest
extent permitted by
applicable law.
- -------------------------------------------------------------------------------
Officers . The directors may . The officers of
appoint officers by Gemstar will be a
a resolution of Chairman of the
directors (approved Board, a Chief
by a simple majority Executive Officer, a
of directors present President, a Chief
at a duly convened Financial Officer, a
and constituted General Counsel (who
meeting who voted may be an Executive
and did not abstain Vice President), one
or by all directors or more Vice
in writing). Presidents, a
Officers may consist Secretary and such
of a Chairman of the other officers as
Board, a Vice may be determined by
Chairman of the the board.
Board, a President
and one or more Vice . A person may hold
Presidents, more than one
Secretaries and office.
Treasurers and such
other officers as . To the extent
Gemstar may from permitted by law,
time to time deem the board may remove
desirable. with or without
cause from office or
. A person may hold terminate the
more than one employment of any
office. officer by a vote of
not less than a
. The board may remove majority of
with or without directors at a
cause from office or meeting of directors
terminate the where a quorum of
employment of any the entire board is
officer by the present or by
approval of a simple unanimous written
majority of consent.
directors present at
a duly convened and
constituted meeting
who voted and did
not abstain or by
all directors in
writing.
- -------------------------------------------------------------------------------
Stock- . A stockholder may . Any stockholder may
holders-- bring business nominate persons for
action before an annual election to the
meeting of Gemstar board by
stockholders by giving timely notice
giving timely notice as described under
in writing to "Board-nominations
Gemstar's Secretary. by stockholders"
To be timely, such above.
notice must be
delivered to or . Any stockholder may
mailed and received bring business
at Gemstar's (other than
principal executive nominating persons
offices not less for election to the
than 60 days nor Gemstar board)
more than 90 days before an annual
before the meeting; meeting of
provided, however, stockholders by
that if less than 70 giving timely notice
days' notice or in writing to
prior public Gemstar's Secretary
disclosure of the in accordance with
date of the meeting the bylaws. In the
is given or made to case of an annual
stockholders, notice meeting, a
by the stockholder stockholder notice
must be received not to be timely must be
later than the close delivered to or
of business on the mailed and received
10th day following at Gemstar's
the day on which principal executive
such notice of the offices not less
date of the annual than 60 days nor
meeting was mailed more than 90 days
or such public before the meeting;
disclosure was made. provided, however,
that if less than 70
days' notice or
prior public
disclosure of the
date of the
</TABLE>
G-6
<PAGE>
<TABLE>
<CAPTION>
Stockholder Gemstar Before the Gemstar After the
Rights Domestication Domestication
- -------------------------------------------------------------------------------
<S> <C> <C>
meeting is given or
made to stockholders,
notice by the
stockholder must be
received not later
than the close of
business on the 10th
day following the day
on which such notice
of the date of the
meeting was mailed or
such public disclosure
was made.
. In the case of a
special meeting,
stockholders may
only conduct
business (other than
nominating persons
for election to the
Gemstar board) if
such business is
specified in the
notice of such
special meeting.
Stockholders with
sufficient voting
power to request a
special meeting may
bring business
before such meeting
by specifying it in
such request.
- -------------------------------------------------------------------------------
Stock- . Stockholders will . An officer of
holders-- receive written Gemstar must give
notice of notice of meetings written notice of
meetings at least 30 days stockholder meetings
before the date of to stockholders at
the meeting. least ten days but
not more than 60
days before the date
of the meeting,
unless a different
period is prescribed
by law or the
certificate of
incorporation.
- -------------------------------------------------------------------------------
Stock- . The holders of at . Except as otherwise
holders-- least 50% of provided in the
quorum for Gemstar's certificate of
meetings outstanding voting incorporation, the
securities entitled bylaws or by law,
to vote constitutes and subject to the
a quorum for the rights of holders of
transaction of preferred stock, the
business. holders of a
majority in total
voting power of
Gemstar's
outstanding shares
of stock entitled to
vote constitutes a
quorum for the
transaction of
business.
- -------------------------------------------------------------------------------
Stock- . The board convenes . An annual meeting of
holders-- an annual meeting of stockholders for the
meetings stockholders for the purpose of electing
election of those directors
directors and such whose term of office
other matters as the expires at such
board proposes. meeting and of
transacting such
. Special meetings are other business as
convened upon: may properly come
before it is held
. the adoption of a each year.
resolution of
directors (approved . Special meetings
by a simple are called upon:
majority of
directors present . the written request
at a duly convened of the holders of a
and constituted majority of the
meeting who voted total voting power
and did not abstain of Gemstar's
or by all directors outstanding voting
in writing) to securities; or
convene a special
meeting; or . the request of a
majority of the
. the written request members of the
of stockholders entire board which
holding 50% or more Gemstar would have
of Gemstar's if there were no
outstanding voting vacancies on the
securities. board.
- -------------------------------------------------------------------------------
Stock- . Such power is . No stockholder
holders-- specifically denied. action may be taken
action without a meeting,
without and the certificate
a meeting of incorporation
expressly denies the
power of
stockholders to
consent in writing
without a meeting.
</TABLE>
G-7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Stockholder Gemstar Before the Gemstar After the
Rights Domestication Domestication
- --------------------------------------------------------------------------------
<S> <C> <C>
Stockholders--. Holders of ordinary . Holders of common
voting shares are entitled stock are entitled
generally to one vote for to one vote for
each share of such each share of such
stock held on all stock held on all
matters presented matters presented
to such to such
stockholders. stockholders.
. Except for actions . Except for the
requiring a election of
stockholder directors and
supermajority vote, except as otherwise
at any duly provided by the
convened and certificate of
constituted incorporation, the
meeting, a simple bylaws or by law
majority of the and subject to the
votes of the shares rights of holders
present and of any preferred
entitled to vote stock, at any
and that voted and meeting duly called
did not abstain is and held at which a
required for quorum is present,
stockholders to the affirmative
act. See vote of a majority
"Stockholders-- of the total voting
supermajority power of shares
vote." present in person
or represented by
proxy and entitled
to vote on the
subject matter is
required for
stockholders to
act.
- --------------------------------------------------------------------------------
Stockholders--. The affirmative . Subject to the
supermajority vote of the holders rights of holders
vote of at least 66 2/3% of any preferred
of Gemstar's stock, the
outstanding voting affirmative vote of
securities is at least 66 2/3% of
required to the total voting
authorize any of power of Gemstar's
the following outstanding voting
actions: securities, voting
together as a
. any merger or single class at a
consolidation of meeting
Gemstar with or specifically called
into any other for such purpose,
corporation or is required to
other entity; and authorize any of
the following
. any sale, lease, actions:
exchange or other
disposition of all . amendment,
or any substantial alteration or
part of Gemstar's repeal of any
assets to or with provision of
any other person or Gemstar's
entity. certificate of
incorporation or
. Certain provisions the addition of
of the Memorandum other provisions
of Association and other than an
the Articles of amendment solely
Association may be for the purpose of
amended only upon changing Gemstar's
the affirmative name;
vote of at least 66
2/3% of the . adoption, amendment
outstanding shares or repeal of any
entitled to vote. provision of
Gemstar's bylaws
(except that the
Gemstar board has
also retained the
power to adopt,
amend or repeal any
provision of the
bylaws with the
approval of a
majority of the
board then
authorized);
. a merger or
consolidation of
Gemstar with any
other person or any
binding share
exchange to which
Gemstar is a party
other than a merger
of a subsidiary of
Gemstar with and
into Gemstar
effected in
accordance with
Section 253 of the
Delaware General
Corporation Law
solely for the
purpose of changing
Gemstar's name (it
being understood
that this clause
will not apply to
any transactions
contemplated by the
merger agreement,
as such agreement
may be amended from
time to time,
including the
issuance of Gemstar
common stock to TV
Guide stockholders
as contemplated by
such agreement)
. the sale, lease,
exchange or other
disposition of all
or a substantial
part of the assets
of Gemstar or its
subsidiaries;
. the dissolution,
liquidation or
winding up of
Gemstar; or
. any other matter
(other than the
election of
directors and the
adoption or
amendment of any
stock option, stock
appreciation rights
or other stock
incentive plan and
any transactions
contemplated by the
merger agreement,
as such agreement
may be amended from
time to time,
including the
issuance of Gemstar
common stock to TV
Guide stockholders
as contemplated by
such agreement)
requiring
stockholder
approval under the
laws of the State
of Delaware or the
rules of any
national securities
exchange or
national securities
association on
which Gemstar's
common stock is
listed or quoted.
- --------------------------------------------------------------------------------
</TABLE>
G-8
<PAGE>
<TABLE>
<CAPTION>
Stockholder Gemstar Before the Gemstar After the
Rights Domestication Domestication
- -------------------------------------------------------------------------------
<S> <C> <C>
Stock- . All ordinary shares . In the event of a
holders-- have the same rights liquidation,
liquidation with regard to dissolution or
and distributions upon winding up of
dissolution liquidation. Such Gemstar and after
rights rights are not payment or provision
specified in for payment of
Gemstar's Gemstar's debts and
organizational liabilities and
documents. subject to prior
payment in full of
the preferential
amounts to which any
series of preferred
stock is entitled,
the holders of
common stock will
share equally, on a
share for share
basis, in Gemstar's
assets remaining for
distribution.
- --------------------------------------------------------------------------------
Dividends . Payable only out of . Payable only as and
surplus (excess of when declared by the
Gemstar's total board out of any
assets over its assets legally
aggregate total available for the
liabilities, plus payment of
capital) and if dividends.
approved by a simple
majority of
directors present at
a duly convened and
constituted meeting
who voted and did
not abstain or by
all directors in
writing.
- --------------------------------------------------------------------------------
Amendment . Memorandum of . Certificate of
of Association: Gemstar Incorporation: The
organiza- may amend its amendment of the
tional Memorandum of certificate of
documents Association by a incorporation
resolution of requires the
directors (approved affirmative vote of
by a simple majority at least 66 2/3% of
of directors present the total voting
at a duly convened power of Gemstar's
and constituted outstanding voting
meeting who voted securities.
and did not abstain
or by all directors . Bylaws: The
in writing) or by a amendment of the
resolution of bylaws requires the
stockholders affirmative vote of
(approved by a at least 66 2/3% of
simple majority of the total voting
the votes of the power of Gemstar's
shares present at a outstanding voting
duly convened and securities or the
constituted meeting approval of a
and entitled to vote majority of the
and that voted and members of the
did not abstain). Gemstar board. The
However, certain bylaws will be
provisions of the automatically
Memorandum of amended and replaced
Association may be upon the completion
amended only upon of the merger with
the affirmative vote new bylaws in the
of at least 66 2/3% form attached as
the outstanding Annex C to this
shares entitled to joint proxy
vote. statement/prospectus.
. Articles of
Association: Gemstar
may amend its
Articles of
Association by a
resolution of
directors (approved
by a simple majority
of directors present
at a duly convened
and constituted
meeting who voted
and did not abstain
or by all directors
in writing) or by a
resolution of
stockholders
(approved by a
simple majority of
the votes of the
shares present at a
duly convened and
constituted meeting
and entitled to vote
and that voted and
did not abstain).
However, certain
provisions of the
Articles of
Association may be
amended only upon
the affirmative vote
of at least 66 2/3%
of the outstanding
shares entitled to
vote.
- --------------------------------------------------------------------------------
Fiscal . Not specified in . Ends on March 31 of
year organizational each calendar year.
documents, but it is
March 31 of each
calendar year.
- --------------------------------------------------------------------------------
Anti- . Does not apply. . Does not apply.
takeover
statute
</TABLE>
G-9
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Subject to any limitations in a corporation's Memorandum of Association or
Articles of Association, British Virgin Islands law allows a corporation to
indemnify, against all expenses, judgments, fines and amounts paid in
settlement and reasonably incurred, any person who (1) is or was a party or is
threatened to be made a party to any threatened, pending or completed
proceedings by reason of the fact that the person is or was a director, officer
or liquidator of the company or (2) is or was, at the company's request,
serving as a director, officer or liquidator of, or in any other capacity is or
was acting for, another entity; provided, however, that such person acted
honestly and in good faith with a view to the best interests of the company
and, in the case of criminal proceedings, had no reasonable cause to believe
that his or her conduct was unlawful. Gemstar's Articles of Association require
the company to indemnify any person referred to in the preceding sentence if
such person has been successful in defending any proceeding of the type
described in the preceding sentence, regardless of whether such person acted
honestly and in good faith with a view to the best interests of the company
and, in the case of criminal proceedings, had reasonable cause to believe that
his or her conduct was unlawful.
Section 102(b)(7) of the Delaware General Corporation Law permits a Delaware
corporation to limit the personal liability of its directors in accordance with
the provisions set forth therein. Gemstar's Certificate of Incorporation
provides that the personal liability of its directors shall be limited to the
fullest extent permitted by applicable law. Section 145 of the Delaware General
Corporation Law contains provisions permitting corporations organized
thereunder to indemnify directors, officers, employees or agents against
expenses, judgments and fines and amounts paid in settlement actually and
reasonably incurred and against certain other liabilities in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person was or is a director, officer, employee or agent of the corporation.
Gemstar's Certificate of Incorporation provides for indemnification of
directors and officers to the fullest extent permitted by applicable law.
Gemstar's new Bylaws provide that Gemstar shall indemnify to the fullest extent
permitted by law members of the board of directors and officers of Gemstar and
their respective heirs, personal representatives and successors in interest for
or on account of any action performed on behalf of Gemstar.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<C> <S>
2.1 --Agreement and Plan of Merger dated as of October 4, 1999 among Gemstar
International Group Limited, G Acquisition Subsidiary Corp. and TV
Guide, Inc., as amended on February 7, 2000 (Included as Annex A to the
Joint Proxy Statement/Prospectus filed as part of this Registration
Statement)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
3.1 --Amended and Restated Memorandum of Association of Gemstar International
Group Limited (Incorporated by reference to Form F-1 Registration
Statement of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995) (Further amendments were filed
in connection with Gemstar's report on Form 8-K on July 13, 1998)
3.2 --Amended and Restated Articles of Association of Gemstar International
Group Limited (Incorporated by reference to Form F-1 Registration
Statement of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995) (Further amendments were filed
in connection with Gemstar's report on Form 8-K on July 13, 1998)
3.3 --Form of Certificate of Incorporation of Gemstar International Group
Limited (Included as Annex B to the Joint Proxy Statement/Prospectus
filed as part of this Registration Statement)
3.4 --Form of Bylaws of Gemstar International Group Limited
3.5 --Form of Bylaws of TV Guide International, Inc. (formerly Gemstar
International Group Limited) (Included as Annex C to the Joint Proxy
Statement/Prospectus filed as part of this Registration Statement)
4.1 --Rights Agreement, dated as of July 10, 1998, between Gemstar
International Group Limited and American Stock Transfer & Trust Company,
as Rights Agent (including as an exhibit thereto the terms of the
designated Junior Participating Preference Shares) (Incorporated by
reference to Exhibit 2 to the Registration Statement on Form 8-A dated
July 13, 1998 and filed with the Securities and Exchange Commission)
4.2 --Amended and Restated Rights Agreement, by and between Gemstar
International Group Limited, a Delaware corporation which is the
continuation of Gemstar International Group Limited, a British Virgin
Islands corporation, and American Stock Transfer & Trust Company, a New
York company
4.3 --Rights Amendments (Incorporated by reference to Exhibit 99.15 to
Gemstar's Form 8-K, filed February 8, 2000)
5.1 --Opinion of O'Melveny & Myers LLP
5.2 --Opinion of Potter Anderson & Corroon LLP
8.1 --Opinion of O'Melveny & Myers LLP
8.2 --Opinion of Baker Botts L.L.P.
10.1 --Patent Assignment Agreement, dated as of March 15, 1994, between
Gemstar Development Corporation and Roy J. Mankovitz (Confidential
treatment requested) (Incorporated by reference to Form F-1 Registration
Statement of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995)
10.2 --Contract Engineering Agreement (undated) between Hilite, Inc. and
Gemstar Development Corporation (Confidential treatment requested)
(Incorporated by reference to Form F-1 Registration Statement of Gemstar
International Group Limited (33-79016), which was declared effective on
October 10, 1995)
10.3 --Contract Engineering Agreement (undated) between Hilite, Inc. and
Gemstar Holdings Limited (Confidential treatment requested)
(Incorporated by reference to Form F-1 Registration Statement of Gemstar
International Group Limited (33-79016), which was declared effective on
October 10, 1995)
10.4 --Contract Engineering Agreement (undated) between Hilite, Inc. and Index
Systems, Inc. (Confidential treatment requested) (Incorporated by
reference to Form F-1 Registration Statement of Gemstar International
Group Limited (33-79016), which was declared effective on October 10,
1995)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.5 --Form of Option Exercise and Assignment Agreement, dated March 16,
1994, between Gemstar Development Corporation and each of Henry C.
Yuen, Wilson K.C. Cho and Daniel S.W. Kwoh (Incorporated by reference
to Form F-1 Registration Statement of Gemstar International Group
Limited (33-79016), which was declared effective on October 10, 1995)
10.6(a) --Exclusive Representation Agreement, dated July 30, 1990, between
Gemstar Development Corporation and United Feature Syndicate, Inc.
(Confidential treatment requested) (Incorporated by reference to Form
F-1 Registration Statement of Gemstar International Group Limited
(33-79016), which was declared effective on October 10, 1995)
10.6(b) --Exclusive Representation Agreement, dated May 20, 1991, between
Gemstar Development Corporation and United Feature Syndicate, Inc.,
together with First Amendment to Exclusive Representation Agreement,
dated March 4, 1994 (Confidential treatment requested) (Incorporated
by reference to Form F-1 Registration Statement of Gemstar
International Group Limited (33-79016), which was declared effective
on October 10, 1995)
10.6(c) --Exclusive Representation Agreement, dated March 21, 1994, between
Gemstar Development Corporation and United Feature Syndicate, Inc.
(Confidential treatment requested) (Incorporated by reference to Form
F-1 Registration Statement of Gemstar International Group Limited
(33-79016), which was declared effective on October 10, 1995)
10.7 --Registration Rights Agreement, dated August 16, 1995, between
Gemstar International Group Limited and the Shareholders of E Guide,
Inc. (Incorporated by reference to Form F-1 Registration Statement of
Gemstar International Group Limited (33-79016), which was declared
effective on October 10, 1995)
10.8 --Company Significant Shareholder Agreement, dated as of December 23,
1996, by and among Gemstar International Group Limited, a British
Virgin Islands corporation, and certain significant shareholders of
StarSight Telecast, Inc. (Incorporated by reference to Form F-4
Registration Statement of Gemstar International Group Limited (333-
6790), which was declared effective on April 15, 1997)
10.9 --Company Option Agreement, dated as of December 23, 1996, by and
between StarSight Telecast, Inc., a California corporation, and
Gemstar International Group Limited, a British Virgin Islands
corporation (Incorporated by reference to Form F-4 Registration
Statement of Gemstar International Group Limited (333-6790), which
was declared effective on April 15, 1997)
10.10 --Parent Option Agreement, dated as of December 23, 1996, by and
between StarSight Telecast, Inc., a California corporation, and
Gemstar International Group Limited, a British Virgin Islands
corporation (Incorporated by reference to Form F-4 Registration
Statement of Gemstar International Group Limited (333-6790), which
was declared effective on April 15, 1997)
10.11 --TDN, Inc., Stockholders Agreement, dated as of October 31, 1997, by
and among TDN, Inc., a Delaware corporation, Gemstar Marketing, Inc.,
a California corporation, and Thomson Consumer Electronics, Inc., a
Delaware corporation (Incorporated by reference to Form 8-K dated
January 12, 1998, as amended on June 11, 1998) (Certain information
in this exhibit has been omitted pursuant to a request for
Confidential Treatment granted by the Securities and Exchange
Commission)
10.12 --Cost and Reimbursement Support Agreement, dated as of October 31,
1997, by and among TDN, Inc., a Delaware corporation, and Gemstar
International Group Limited (Incorporated by reference to Form 8-K
dated January 12, 1998, as amended on June 11, 1998) (Certain
information in this exhibit has been omitted pursuant to a request
for Confidential Treatment granted by the Securities and Exchange
Commission)
10.13 --Definitive Agreement, dated as of January 9, 1998, by and among
Gemstar International Group Limited, StarSight Telecast, Inc., a
California corporation, and Microsoft Corporation, a Washington
corporation (Incorporated by reference to Form 8-K dated January 12,
1998, as amended on June 11, 1998) (Certain information in this
exhibit has been omitted pursuant to a request for Confidential
Treatment granted by the Securities and Exchange Commission)
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.14 --Rescission Agreement, dated as of January 9, 1998, by and between
StarSight Telecast, Inc., a California corporation, and Microsoft
Corporation, a Washington corporation (Incorporated by reference to
Form 8-K dated January 12, 1998, as amended on June 11, 1998) (Certain
information in this exhibit has been omitted pursuant to a request for
Confidential Treatment granted by the Securities and Exchange
Commission)
10.15 --Voting Agreement dated as of October 4, 1999 among Liberty Media
Corporation, certain of its controlled affiliates and Gemstar
International Group Limited (Incorporated by reference to Exhibit 7(i)
to Schedule 13D/A, filed November 4, 1999, with respect to ownership
of securities of TV Guide, Inc.)
10.16 --Voting Agreement dated as of October 4, 1999 among The News
Corporation Limited, certain of its controlled affiliates and Gemstar
International Group Limited (Incorporated by reference to Exhibit 10.8
to Schedule 13D/A, filed November 4, 1999, with respect to ownership
of securities of TV Guide, Inc.)
10.17 --Voting Agreement dated as of October 4, 1999 between TV Guide, Inc.
and Henry C. Yuen (a stockholder of Gemstar International Group
Limited) (Incorporated by reference to Exhibit 1 to Schedule 13D/A,
filed January 5, 2000, with respect to ownership of securities of
Gemstar International Group Limited)
10.18 --Voting Agreement dated as of October 4, 1999 between TV Guide, Inc.
and Elsie Ma Leung (a stockholder of Gemstar International Group
Limited) (Incorporated by reference to Exhibit 99.4 to Gemstar's Form
8-K, filed February 8, 2000)
10.19 --Voting Agreement dated as of October 4, 1999 between TV Guide, Inc.
and Dynamic Core Holdings Limited (a stockholder of Gemstar
International Group Limited) (Incorporated by reference to Exhibit 1
to Schedule 13D/A, filed January 5, 2000, with respect to ownership of
securities of Gemstar International Group Limited)
10.20 --Voting Agreement dated as of October 4, 1999 between TV Guide, Inc.
and THOMSON multimedia S.A. (a stockholder of Gemstar International
Group Limited) (Incorporated by reference to Exhibit 99.6 to Gemstar's
Form 8-K, filed February 8, 2000)
10.21 --Stockholders Agreement, dated as of October 4, 1999, by and among The
News Corporation Limited, a South Australia, Australia corporation,
Liberty Media Corporation, a Delaware corporation, Henry C. Yuen and
Gemstar International Group Limited, a British Virgin Islands
corporation (Incorporated by reference to Exhibit 99.9 to Gemstar's
Form 8-K, filed February 8, 2000)
10.22 --Stock Option Agreement, dated as of October 4, 1999, between Gemstar
International Group Limited, a British Virgin Islands corporation and
TV Guide, Inc., a Delaware corporation (Option on Gemstar Stock)
(Incorporated by reference to Exhibit 99.13 to Gemstar's Form 8-K,
filed February 8, 2000)
10.23 --Stock Option Agreement, dated as of October 4, 1999, between Gemstar
International Group Limited, a British Virgin Islands corporation and
TV Guide, Inc., a Delaware corporation (Option on TV Guide Stock)
(Incorporated by reference to Exhibit 99.14 to Gemstar's Form 8-K,
filed February 8, 2000)
10.24 --1994 Stock Incentive Plan, as amended (Incorporated by reference to
Form F-1 Registration Statement of Gemstar International Group Limited
(33-79016), which was declared effective on October 10, 1995)
10.25 --Amendment to Subsection 1.4(a) of 1994 Stock Incentive Plan, as
amended (Incorporated by reference to Form F-1 Registration Statement
of Gemstar International Group Limited (33-79016), which was declared
effective on October 10, 1995)
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.26 --Amendment to 1994 Stock Incentive Plan, as amended, adopted on March
12, 1998 (Incorporated by reference to Annual Report on Form 10-K of
Gemstar International Group Limited for the fiscal year ended March 31,
1998 Commission File No. 0-26878)
10.27 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Henry C. Yuen, as amended (Confidential treatment
requested) (Incorporated by reference to Form F-1 Registration
Statement of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995)
10.28 --Employment Agreement, dated August 1995, between Gemstar International
Group Limited and Thomas L.H. Lau (Incorporated by reference to Form F-
1 Registration Statement of Gemstar International Group Limited (33-
79016), which was declared effective on October 10, 1995)
10.29 --Employment Agreement, dated April 1, 1994, between Gemstar
Development Corporation and Daniel S.W. Kwoh, as amended (Confidential
treatment requested) (Incorporated by reference to Form F-1
Registration Statement of Gemstar International Group Limited (33-
79016), which was declared effective on October 10, 1995)
10.30 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Roy J. Mankovitz, as amended (Confidential treatment
requested) (Incorporated by reference to Form F-1 Registration
Statement of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995)
10.31 --Employment Agreement, dated August 16, 1995, between Pros Technology
Limited and Wilson K.C. Cho (Confidential treatment requested)
(Incorporated by reference to Form F-1 Registration Statement of
Gemstar International Group Limited (33-79016), which was declared
effective on October 10, 1995)
10.32 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Elsie Ma Leung, as amended (Incorporated by reference
to Form F-1 Registration Statement of Gemstar International Group
Limited (33-79016), which was declared effective on October 10, 1995)
10.33 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Larry Goldberg, as amended (Incorporated by reference
to Form F-1 Registration Statement of Gemstar International Group
Limited (33-79016), which was declared effective on October 10, 1995)
10.34 --Employment Agreement, dated July 22, 1999, among Gemstar International
Group Limited, Gemstar Development Corporation and Stephen A.
Weiswasser (Incorporated by reference to Form 10-Q of Gemstar
International Group Limited for the fiscal quarter ended June 30, 1999,
filed on August 16, 1999)
10.35 --Amended and Restated Employment Agreement, effective as of January 7,
1998, among Gemstar International Group Limited, Gemstar Development
Corporation and Henry C. Yuen (Incorporated by reference to Annual
Report on Form 10-K/A for the fiscal year ended March 31, 1998, filed
on November 17, 1998) (Certain information in this exhibit has been
omitted pursuant to a request for Confidential Treatment which was
filed with the Securities and Exchange Commission)
10.36 --Amendment No. 1 to Amended and Restated Employment Agreement, dated as
of October 4, 1999, by and among Gemstar International Group Limited,
Gemstar Development Corporation and Henry C. Yuen (Incorporated by
reference to Exhibit 99.10 to Gemstar's Form 8-K, filed February 8,
2000)
10.37 --Amended and Restated Employment Agreement, dated as of March 31, 1998,
among Gemstar International Group Limited, Gemstar Development
Corporation and Elsie Leung (Incorporated by reference to Annual Report
on Form 10-K/A for the fiscal year ended March 31, 1998, filed on
November 17, 1998) (Certain information in this exhibit has been
omitted pursuant to a request for Confidential Treatment which was
filed with the Securities and Exchange Commission)
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
10.38 --Employment Agreement between TV Guide, Inc. and Joachim Kiener
(Incorporated by reference to Exhibit 99.11 to Gemstar's Form 8-K,
filed February 8, 2000)
10.39 --Employment Agreement between TV Guide, Inc. and Peter C. Boylan III
(Incorporated by reference to Exhibit 99.12 to Gemstar's Form 8-K,
filed February 8, 2000)
21.1 --Material Subsidiaries of Gemstar International Group Limited
(Incorporated by reference to Exhibit 21 to Gemstar International Group
Limited's Annual Report on Form 10-K for the fiscal year ended
March 31, 1999 Commission File No. 0-26878)
23.1 --Consent of KPMG LLP
23.2 --Consent of Deloitte & Touche LLP
23.3 --Consent of KPMG LLP
23.4 --Consent of KPMG LLP
23.5 --Consent of Ernst & Young
23.6 --Consent of Arthur Andersen LLP
23.7 --Consent of O'Melveny & Myers LLP (Included in Exhibit 5.1)
23.8 --Consent of Potter Anderson & Corroon LLP (Included in Exhibit 5.2)
23.9 --Consent of O'Melveny & Myers LLP (Included in Exhibit 8.1)
23.10 --Consent of Baker Botts L.L.P. (Included in Exhibit 8.2)
23.11 --Consent of Lazard Freres & Co. LLC
23.12 --Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
24.1 --Power of Attorney (See Part II, page II-8)
99.1 --Form of Gemstar Proxy Card
99.2 --Form of TV Guide Proxy Card
</TABLE>
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration
II-6
<PAGE>
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed after the effective date of the registration statement through the date
of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pasadena, State of
California, on the 7th day of February, 2000.
GEMSTAR INTERNATIONAL GROUP LIMITED
/s/ Henry C. Yuen
By __________________________________
Henry C. Yuen,
Chairman of the Board, Chief
Executive Officer, President and
Director
/s/ Elsie Ma Leung
By __________________________________
Elsie Ma Leung,
Chief Financial Officer and
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Henry C. Yuen, Elsie Ma Leung and Stephen A.
Weiswasser, and each of them, his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to act, without the
other, for him or her and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, including any subsequent registration statement
for the same offering that may be filed under Rule 462(b), and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, their substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Henry C. Yuen Chairman of the Board, February 7, 2000
______________________________________ Chief Executive Officer,
Henry C. Yuen President and Director
(Principal Executive
Officer)
/s/ Elsie Ma Leung Chief Financial Officer February 7, 2000
______________________________________ and Director
Elsie Ma Leung (Principal Financial and
Accounting Officer)
/s/ Thomas L.H. Lau Director February 7, 2000
______________________________________
Thomas L.H. Lau
/s/ George F. Carrier Director February 7, 2000
______________________________________
George F. Carrier
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Teruyuki Toyama Director February 7, 2000
______________________________________
Teruyuki Toyama
/s/ James E. Meyer Director February 7, 2000
______________________________________
James E. Meyer
/s/ Douglas B. Macrae Director February 7, 2000
______________________________________
Douglas B. Macrae
/s/ Perry A. Lerner Director February 7, 2000
______________________________________
Perry A. Lerner
/s/ Stephen A. Weiswasser Director February 7, 2000
______________________________________
Stephen A. Weiswasser
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pasadena, State of California, on the 7th day
of February, 2000.
GEMSTAR INTERNATIONAL GROUP LIMITED
/s/ Henry C. Yuen
By __________________________________
Henry C. Yuen,
Chairman of the Board, Chief
Executive Officer, President and
Director
/s/ Elsie Ma Leung
By __________________________________
Elsie Ma Leung,
Chief Financial Officer and
Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
The undersigned individuals, who will be the directors and certain of the
executive officers of Gemstar International Group Limited, a Delaware
corporation ("Gemstar Delaware"), upon the domestication of the registrant from
the British Virgin Islands to the State of Delaware, hereby undertake to cause
Gemstar Delaware to file a post-effective amendment to this Registration
Statement upon the domestication for the purpose of filing an executed copy of
this signature page.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Henry C. Yuen Chairman of the Board, February 7, 2000
______________________________________ Chief Executive Officer,
Henry C. Yuen President and Director
(Principal Executive
Officer)
/s/ Elsie Ma Leung Chief Financial Officer February 7, 2000
______________________________________ and Director
Elsie Ma Leung (Principal Financial and
Accounting Officer)
/s/ Thomas L.H. Lau Director February 7, 2000
______________________________________
Thomas L.H. Lau
/s/ George F. Carrier Director February 7, 2000
______________________________________
George F. Carrier
/s/ Teruyuki Toyama Director February 7, 2000
______________________________________
Teruyuki Toyama
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James E. Meyer Director February 7, 2000
______________________________________
James E. Meyer
/s/ Douglas B. Macrae Director February 7, 2000
______________________________________
Douglas B. Macrae
/s/ Perry A. Lerner Director February 7, 2000
______________________________________
Perry A. Lerner
/s/ Stephen A. Weiswasser Director February 7, 2000
______________________________________
Stephen A. Weiswasser
</TABLE>
II-11
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
2.1 --Agreement and Plan of Merger dated as of October 4, 1999 among
Gemstar International Group Limited, G Acquisition Subsidiary Corp.
and TV Guide, Inc., as amended on February 7, 2000 (Included as
Annex A to the Joint Proxy Statement/Prospectus filed as part of
this Registration Statement)
3.1 --Amended and Restated Memorandum of Association of Gemstar
International Group Limited (Incorporated by reference to Form F-1
Registration Statement of Gemstar International Group Limited (33-
79016), which was declared effective on October 10, 1995) (Further
amendments were filed in connection with Gemstar's report on Form 8-
K on July 13, 1998)
3.2 --Amended and Restated Articles of Association of Gemstar
International Group Limited (Incorporated by reference to Form F-1
Registration Statement of Gemstar International Group Limited (33-
79016), which was declared effective on October 10, 1995) (Further
amendments were filed in connection with Gemstar's report on Form 8-
K on July 13, 1998)
3.3 --Form of Certificate of Incorporation of Gemstar International Group
Limited (Included as Annex B to the Joint Proxy Statement/Prospectus
filed as part of this Registration Statement)
3.4 --Form of Bylaws of Gemstar International Group Limited
3.5 --Form of Bylaws of TV Guide International, Inc. (formerly Gemstar
International Group Limited) (Included as Annex C to the Joint Proxy
Statement/Prospectus filed as part of this Registration Statement)
4.1 --Rights Agreement, dated as of July 10, 1998, between Gemstar
International Group Limited and American Stock Transfer & Trust
Company, as Rights Agent (including as an exhibit thereto the terms
of the designated Junior Participating Preference Shares)
(Incorporated by reference to Exhibit 2 to the Registration
Statement on Form 8-A dated July 13, 1998 and filed with the
Securities and Exchange Commission)
4.2 --Amended and Restated Rights Agreement, by and between Gemstar
International Group Limited, a Delaware corporation which is the
continuation of Gemstar International Group Limited, a British
Virgin Islands corporation, and American Stock Transfer & Trust
Company, a New York company
4.3 --Rights Amendments (Incorporated by reference to Exhibit 99.15 to
Gemstar's Form 8-K, filed February 8, 2000)
5.1 --Opinion of O'Melveny & Myers LLP
5.2 --Opinion of Potter Anderson & Corroon LLP
8.1 --Opinion of O'Melveny & Myers LLP
8.2 --Opinion of Baker Botts L.L.P.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.1 --Patent Assignment Agreement, dated as of March 15, 1994, between
Gemstar Development Corporation and Roy J. Mankovitz (Confidential
treatment requested) (Incorporated by reference to Form F-1
Registration Statement of Gemstar International Group Limited (33-
79016), which was declared effective on October 10, 1995)
10.2 --Contract Engineering Agreement (undated) between Hilite, Inc. and
Gemstar Development Corporation (Confidential treatment requested)
(Incorporated by reference to Form F-1 Registration Statement of
Gemstar International Group Limited (33-79016), which was declared
effective on October 10, 1995)
10.3 --Contract Engineering Agreement (undated) between Hilite, Inc. and
Gemstar Holdings Limited (Confidential treatment requested)
(Incorporated by reference to Form F-1 Registration Statement of
Gemstar International Group Limited (33-79016), which was declared
effective on October 10, 1995)
10.4 --Contract Engineering Agreement (undated) between Hilite, Inc. and
Index Systems, Inc. (Confidential treatment requested) (Incorporated
by reference to Form F-1 Registration Statement of Gemstar
International Group Limited (33-79016), which was declared effective
on October 10, 1995)
10.5 --Form of Option Exercise and Assignment Agreement, dated March 16,
1994, between Gemstar Development Corporation and each of Henry C.
Yuen, Wilson K.C. Cho and Daniel S.W. Kwoh (Incorporated by
reference to Form F-1 Registration Statement of Gemstar
International Group Limited (33-79016), which was declared effective
on October 10, 1995)
10.6(a) --Exclusive Representation Agreement, dated July 30, 1990, between
Gemstar Development Corporation and United Feature Syndicate, Inc.
(Confidential treatment requested) (Incorporated by reference to
Form F-1 Registration Statement of Gemstar International Group
Limited (33-79016), which was declared effective on October 10,
1995)
10.6(b) --Exclusive Representation Agreement, dated May 20, 1991, between
Gemstar Development Corporation and United Feature Syndicate, Inc.,
together with First Amendment to Exclusive Representation Agreement,
dated March 4, 1994 (Confidential treatment requested) (Incorporated
by reference to Form F-1 Registration Statement of Gemstar
International Group Limited (33-79016), which was declared effective
on October 10, 1995)
10.6(c) --Exclusive Representation Agreement, dated March 21, 1994, between
Gemstar Development Corporation and United Feature Syndicate, Inc.
(Confidential treatment requested) (Incorporated by reference to
Form F-1 Registration Statement of Gemstar International Group
Limited (33-79016), which was declared effective on October 10,
1995)
10.7 --Registration Rights Agreement, dated August 16, 1995, between
Gemstar International Group Limited and the Shareholders of E Guide,
Inc. (Incorporated by reference to Form F-1 Registration Statement
of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995)
10.8 --Company Significant Shareholder Agreement, dated as of December 23,
1996, by and among Gemstar International Group Limited, a British
Virgin Islands corporation, and certain significant shareholders of
StarSight Telecast, Inc. (Incorporated by reference to Form F-4
Registration Statement of Gemstar International Group Limited (333-
6790), which was declared effective on April 15, 1997)
10.9 --Company Option Agreement, dated as of December 23, 1996, by and
between StarSight Telecast, Inc., a California corporation, and
Gemstar International Group Limited, a British Virgin Islands
corporation (Incorporated by reference to Form F-4 Registration
Statement of Gemstar International Group Limited (333-6790), which
was declared effective on April 15, 1997)
</TABLE>
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<TABLE>
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10.10 --Parent Option Agreement, dated as of December 23, 1996, by and between
StarSight Telecast, Inc., a California corporation, and Gemstar
International Group Limited, a British Virgin Islands corporation
(Incorporated by reference to Form F-4 Registration Statement of
Gemstar International Group Limited (333-6790), which was declared
effective on April 15, 1997)
10.11 --TDN, Inc., Stockholders Agreement, dated as of October 31, 1997, by
and among TDN, Inc., a Delaware corporation, Gemstar Marketing, Inc., a
California corporation, and Thomson Consumer Electronics, Inc., a
Delaware corporation (Incorporated by reference to Form 8-K dated
January 12, 1998, as amended on June 11, 1998) (Certain information in
this exhibit has been omitted pursuant to a request for Confidential
Treatment granted by the Securities and Exchange Commission)
10.12 --Cost and Reimbursement Support Agreement, dated as of October 31,
1997, by and among TDN, Inc., a Delaware corporation, and Gemstar
International Group Limited (Incorporated by reference to Form 8-K
dated January 12, 1998, as amended on June 11, 1998) (Certain
information in this exhibit has been omitted pursuant to a request for
Confidential Treatment granted by the Securities and Exchange
Commission)
10.13 --Definitive Agreement, dated as of January 9, 1998, by and among
Gemstar International Group Limited, StarSight Telecast, Inc., a
California corporation, and Microsoft Corporation, a Washington
corporation (Incorporated by reference to Form 8-K dated January 12,
1998, as amended on June 11, 1998) (Certain information in this exhibit
has been omitted pursuant to a request for Confidential Treatment
granted by the Securities and Exchange Commission)
10.14 --Rescission Agreement, dated as of January 9, 1998, by and between
StarSight Telecast, Inc., a California corporation, and Microsoft
Corporation, a Washington corporation (Incorporated by reference to
Form 8-K dated January 12, 1998, as amended on June 11, 1998) (Certain
information in this exhibit has been omitted pursuant to a request for
Confidential Treatment granted by the Securities and Exchange
Commission)
10.15 --Voting Agreement dated as of October 4, 1999 among Liberty Media
Corporation, certain of its controlled affiliates and Gemstar
International Group Limited (Incorporated by reference to Exhibit 7(i)
to Schedule 13D/A, filed November 4, 1999, with respect to ownership of
securities of TV Guide, Inc.)
10.16 --Voting Agreement dated as of October 4, 1999 among The News
Corporation Limited, certain of its controlled affiliates and Gemstar
International Group Limited (Incorporated by reference to Exhibit 10.8
to Schedule 13D/A, filed November 4, 1999, with respect to ownership of
securities of TV Guide, Inc.)
10.17 --Voting Agreement dated as of October 4, 1999 between TV Guide, Inc.
and Henry C. Yuen (a stockholder of Gemstar International Group
Limited) (Incorporated by reference to Exhibit 1 to Schedule 13D/A,
filed January 5, 2000, with respect to ownership of securities of
Gemstar International Group Limited)
10.18 --Voting Agreement dated as of October 4, 1999 between TV Guide, Inc.
and Elsie Ma Leung (a stockholder of Gemstar International Group
Limited) (Incorporated by reference to Exhibit 99.4 to Gemstar's Form
8-K, filed February 8, 2000)
10.19 --Voting Agreement dated as of October 4, 1999 between TV Guide, Inc.
and Dynamic Core Holdings Limited (a stockholder of Gemstar
International Group Limited) (Incorporated by reference to Exhibit 1 to
Schedule 13D/A, filed January 5, 2000, with respect to ownership of
securities of Gemstar International Group Limited)
10.20 --Voting Agreement dated as of October 4, 1999 between TV Guide, Inc.
and THOMSON multimedia S.A. (a stockholder of Gemstar International
Group Limited) (Incorporated by reference to Exhibit 99.6 to Gemstar's
Form 8-K, filed February 8, 2000)
</TABLE>
<PAGE>
<TABLE>
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10.21 --Stockholders Agreement, dated as of October 4, 1999, by and among The
News Corporation Limited, a South Australia, Australia corporation,
Liberty Media Corporation, a Delaware corporation, Henry C. Yuen and
Gemstar International Group Limited, a British Virgin Islands
corporation (Incorporated by reference to Exhibit 99.9 to Gemstar's
Form 8-K, filed February 8, 2000)
10.22 --Stock Option Agreement, dated as of October 4, 1999, between Gemstar
International Group Limited, a British Virgin Islands corporation and
TV Guide, Inc., a Delaware corporation (Option on Gemstar Stock)
(Incorporated by reference to Exhibit 99.13 to Gemstar's Form 8-K,
filed February 8, 2000)
10.23 --Stock Option Agreement, dated as of October 4, 1999, between Gemstar
International Group Limited, a British Virgin Islands corporation and
TV Guide, Inc., a Delaware corporation (Option on TV Guide Stock)
(Incorporated by reference to Exhibit 99.14 to Gemstar's Form 8-K,
filed February 8, 2000)
10.24 --1994 Stock Incentive Plan, as amended (Incorporated by reference to
Form F-1 Registration Statement of Gemstar International Group Limited
(33-79016), which was declared effective on October 10, 1995)
10.25 --Amendment to Subsection 1.4(a) of 1994 Stock Incentive Plan, as
amended (Incorporated by reference to Form F-1 Registration Statement
of Gemstar International Group Limited (33-79016), which was declared
effective on October 10, 1995)
10.26 --Amendment to 1994 Stock Incentive Plan, as amended, adopted on March
12, 1998 (Incorporated by reference to Annual Report on Form 10-K of
Gemstar International Group Limited for the fiscal year ended March 31,
1998 Commission File No. 0-26878)
10.27 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Henry C. Yuen, as amended (Confidential treatment
requested) (Incorporated by reference to Form F-1 Registration
Statement of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995)
10.28 --Employment Agreement, dated August 1995, between Gemstar International
Group Limited and Thomas L.H. Lau (Incorporated by reference to Form F-
1 Registration Statement of Gemstar International Group Limited (33-
79016), which was declared effective on October 10, 1995)
10.29 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Daniel S.W. Kwoh, as amended (Confidential treatment
requested) (Incorporated by reference to Form F-1 Registration
Statement of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995)
10.30 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Roy J. Mankovitz, as amended (Confidential treatment
requested) (Incorporated by reference to Form F-1 Registration
Statement of Gemstar International Group Limited (33-79016), which was
declared effective on October 10, 1995)
10.31 --Employment Agreement, dated August 16, 1995, between Pros Technology
Limited and Wilson K.C. Cho (Confidential treatment requested)
(Incorporated by reference to Form F-1 Registration Statement of
Gemstar International Group Limited (33-79016), which was declared
effective on October 10, 1995)
10.32 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Elsie Ma Leung, as amended (Incorporated by reference
to Form F-1 Registration Statement of Gemstar International Group
Limited (33-79016), which was declared effective on October 10, 1995)
10.33 --Employment Agreement, dated April 1, 1994, between Gemstar Development
Corporation and Larry Goldberg, as amended (Incorporated by reference
to Form F-1 Registration Statement of Gemstar International Group
Limited (33-79016), which was declared effective on October 10, 1995)
</TABLE>
<PAGE>
<TABLE>
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10.34 --Employment Agreement, dated July 22, 1999, among Gemstar International
Group Limited, Gemstar Development Corporation and Stephen A.
Weiswasser (Incorporated by reference to Form 10-Q of Gemstar
International Group Limited for the fiscal quarter ended June 30, 1999,
filed on August 16, 1999)
10.35 --Amended and Restated Employment Agreement, effective as of January 7,
1998, among Gemstar International Group Limited, Gemstar Development
Corporation and Henry C. Yuen (Incorporated by reference to Annual
Report on Form 10-K/A for the fiscal year ended March 31, 1998, filed
on November 17, 1998) (Certain information in this exhibit has been
omitted pursuant to a request for Confidential Treatment which was
filed with the Securities and Exchange Commission)
10.36 --Amendment No. 1 to Amended and Restated Employment Agreement, dated as
of October 4, 1999, by and among Gemstar International Group Limited,
Gemstar Development Corporation and Henry C. Yuen (Incorporated by
reference to Exhibit 99.10 to Gemstar's Form 8-K, filed February 8,
2000)
10.37 --Amended and Restated Employment Agreement, dated as of March 31, 1998,
among Gemstar International Group Limited, Gemstar Development
Corporation and Elsie Leung (Incorporated by reference to Annual Report
on Form 10-K/A for the fiscal year ended March 31, 1998, filed on
November 17, 1998) (Certain information in this exhibit has been
omitted pursuant to a request for Confidential Treatment which was
filed with the Securities and Exchange Commission)
10.38 --Employment Agreement between TV Guide, Inc. and Joachim Kiener
(Incorporated by reference to Exhibit 99.11 to Gemstar's Form 8-K,
filed February 8, 2000)
10.39 --Employment Agreement between TV Guide, Inc. and Peter C. Boylan III
(Incorporated by reference to Exhibit 99.12 to Gemstar's Form 8-K,
filed February 8, 2000)
21.1 --Material Subsidiaries of Gemstar International Group Limited
(Incorporated by reference to Exhibit 21 to Gemstar International Group
Limited's Annual Report on Form 10-K for the fiscal year ended
March 31, 1999 Commission File No. 0-26878)
23.1 --Consent of KPMG LLP
23.2 --Consent of Deloitte & Touche LLP
23.3 --Consent of KPMG LLP
23.4 --Consent of KPMG LLP
23.5 --Consent of Ernst & Young
23.6 --Consent of Arthur Andersen LLP
23.7 --Consent of O'Melveny & Myers LLP (Included in Exhibit 5.1)
23.8 --Consent of O'Melveny & Myers LLP (Included in Exhibit 8.1)
23.9 --Consent of Baker Botts L.L.P. (Included in Exhibit 8.2)
23.10 --Consent of Lazard Freres & Co. LLC
23.11 --Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
24.1 --Power of Attorney (See Part II, page II-8)
99.1 --Form of Gemstar Proxy Card
99.2 --Form of TV Guide Proxy Card
</TABLE>
<PAGE>
Exhibit 3.4
GEMSTAR INTERNATIONAL GROUP LIMITED
A Delaware Corporation
By-laws
---------------------------
ARTICLE I
STOCKHOLDERS
Section 1.1 Annual Meeting.
---------------
An annual meeting of stockholders for the purpose of electing those
directors whose term of office expires at such meeting and of transacting such
other business as may properly come before it shall be held each year at such
date, time, and place either within or outside the State of Delaware, as may be
specified by the Board of Directors in the notice of meeting.
Section 1.2 Special Meetings.
-----------------
Except as otherwise provided in the terms of any class or series of
preferred stock or unless otherwise provided by law, special meetings of
stockholders of the Corporation, for any purpose or purposes, shall be called by
the Secretary of the Corporation promptly (i) upon the written request of the
holders of not less than a majority of the total voting power of the outstanding
Voting Securities (as hereinafter defined) of the Corporation (such written
request shall set forth the purpose or purposes for which the meeting is called,
and in case of a special meeting called for the purpose of nominating directors
of the Corporation, the information required by Section 1.9 hereof), or (ii) at
the request of a majority of the members of the entire Board. The use of the
phrase "entire Board" here refers to the total number of directors which the
Corporation would have if there were no vacancies. The Secretary of the
Corporation shall immediately notify each member of the Board of Directors of
the receipt of any such request.
<PAGE>
The term "Voting Securities" shall mean the Corporation's Common Stock, par
value $.01 per share ("Common Stock"), and any class or series of preferred
stock entitled to vote with the holders of Common Stock generally upon all
matters which may be submitted to a vote of stockholders at any annual meeting
or special meeting thereof. Special meetings of stockholders for any purpose or
purposes may be held at such time and place either within or outside the State
of Delaware as may be stated in the notice of meeting.
Section 1.3 Notice of Meetings.
-------------------
Written notice of stockholders meetings, stating the place, date, and
hour thereof, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given by the Chairman of the Board or the
Chief Executive Officer (if different from the Chairman), the Secretary or an
Assistant Secretary, to each stockholder entitled to vote thereat at least ten
days but not more than sixty days before the date of the meeting, unless a
different period is prescribed by law or the Certificate of Incorporation of the
Corporation, as amended from time to time (the "Certificate").
Section 1.4 Notice of Nominations for the Election of Directors and
-------------------------------------------------------
the Proposal of Business.
- -------------------------
1.4.1 Annual Meetings of Stockholders.
Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (i) pursuant to the
Corporation's notice of meeting delivered pursuant to Section 1.3 of these By-
laws, (ii) by or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation that has complied with all applicable
requirements of Section 1.9 hereof.
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<PAGE>
1.4.2 Special Meetings of Stockholders.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting pursuant to Section 1.3 of these By-laws.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant to
the Corporation's notice of meeting (i) by or at the direction of the Board of
Directors as provided in Section 2.4 hereof or (ii) by any stockholder of the
Corporation that has complied with all applicable requirements of Section 1.9
hereof.
1.4.3 General.
(a) Only persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in these By-laws. Except as otherwise provided by law, the Certificate or these
By-laws, the chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made in accordance with the procedures set forth in these By-laws and, if
any proposed nomination or business is not in compliance with these By-laws, to
declare that such defective proposal or nomination shall be disregarded.
(b) Notwithstanding the foregoing or the provisions of Section
1.9 of these By-laws, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder with respect to the matters set
forth in this Section 1.4 or Section 1.9 of these By-laws. Nothing in these By-
laws shall be deemed to affect any rights of stockholders to request
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<PAGE>
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
Section 1.5 Quorum.
-------
Subject to the rights of the holders of any class or series of
preferred stock and except as otherwise provided by law or in the Certificate or
elsewhere in these By-laws, at any meeting of stockholders, the holders of a
majority in total voting power of the outstanding shares of stock entitled to
vote at the meeting shall be present or represented by proxy in order to
constitute a quorum for the transaction of any business. In the absence of a
quorum, the holders of a majority in total voting power of the shares that are
present in person or by proxy or the chairman of the meeting may adjourn the
meeting from time to time in the manner provided in Section 1.6 of these By-laws
until a quorum shall attend.
Section 1.6 Adjournment.
------------
Any meeting of stockholders, annual or special, may adjourn from time
to time to reconvene at the same or some other place, and notice need not be
given of any such adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the meeting is adjourned in a single adjournment for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. When a quorum is once
present it is not broken by the subsequent withdrawal of any stockholder.
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<PAGE>
Section 1.7 Calling of Meeting.
-------------------
The Chairman of the Board or, in the absence of the Chairman, the
Chief Executive Officer (if different from the Chairman) or, in the absence of
the Chief Executive Officer, the designee of the Chairman, shall call to order
meetings of stockholders and shall act as chairman of such meetings. The
Secretary shall act as secretary of all meetings of stockholders, but, in the
absence of the Secretary, the chairman of the meeting may appoint any other
person to act as secretary of the meeting.
Section 1.8 Voting.
-------
Subject to the rights of the holders of any class or series of
preferred stock and except as otherwise provided by law, the Certificate or
elsewhere in these By-laws and except for the election of directors, at any
meeting duly called and held at which a quorum is present, the affirmative vote
of a majority of the combined voting power of the shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders. At any meeting duly called and held for
the election of directors at which a quorum is present, directors shall be
elected by a plurality of the voting power of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors.
Section 1.9 Advance Notice; Nominations.
----------------------------
At an annual or special meeting of stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To
be properly brought before a meeting, business must be: (a) specified in the
notice of meeting (or any supplement thereto) given pursuant to Section 1.3
hereof or (b) in the case of an annual meeting, (i) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or
-5-
<PAGE>
(ii) otherwise properly brought before the meeting by a stockholder of the
Corporation. For business (other than the nomination of directors) to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the Corporation.
The Secretary shall immediately notify each member of the Board of Directors of
the receipt of any such notice and the contents thereof. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the 10th day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting: (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in these By-laws to the contrary, no business shall be conducted at any meeting
except in accordance with the procedures set forth in these By-laws. The
chairman of the meeting shall, if the facts warrant, determine and declare to
the meeting that business was not properly brought before the meeting and in
accordance with the provisions of this By-law, and if he should so determine, he
shall so declare to the meeting and any such
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<PAGE>
business not properly brought before the meeting shall not be transacted, and if
purported to be transacted shall be void.
At each annual meeting of stockholders, the stockholders shall elect
directors in accordance with the Certificate. Only persons who are nominated in
accordance with the procedures set forth in this By-law shall be eligible for
election as directors at an annual meeting or at a special meeting called for
such purpose pursuant to Section 1.3 of these By-laws. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of stockholders by or at the direction of the Board of Directors
pursuant to Section 2.4 hereof or by any stockholder of the Corporation entitled
to vote for the election of directors at the meeting who complies with the
notice procedures set forth in this By-law. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. The Secretary of
the Corporation shall immediately notify each member of the Board of Directors
of the receipt of any such notice and the contents thereof. To be timely, a
stockholder's notice of nomination in the case of an annual meeting or a special
meeting called for the election of directors shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, and, provided, further, that in the case of a
special meeting called at the request of a stockholder or stockholders
nominating persons for election to the Board of Directors, the notice of
nomination by the stockholder(s) requesting such
-7-
<PAGE>
meeting will be timely if received by the Corporation pursuant to Section 1.2
hereof. Such stockholder's notice shall set forth: (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) the class and
number of shares of the Corporation which are beneficially owned by such person,
and (iv) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Exchange Act
(including without limitation such persons' written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); and
(b) as to the stockholder giving the notice (i) the name and address, as they
appear on the Corporation's books, of such stockholder and (ii) the class and
number of shares of the Corporation which are beneficially owned by such
stockholder. At the request of the Board of Directors any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the procedures set forth in this By-law. The chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by these By-laws, and if
he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. For purposes of this By-law, "public
disclosure" shall mean disclosure in a press release reported by Dow Jones News
Service, Associated Press or a comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14, or 15(d) of the Exchange Act.
-8-
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number and Term of Office.
--------------------------
(a) The governing body of this Corporation shall be a Board of
Directors. The number of directors constituting the entire Board shall be such
number as may be fixed by the Board of Directors from time to time but shall be
not less than three (3) nor more than twelve (12). The initial number of
directors shall be nine. A director need not be a stockholder, a citizen of the
United States or a resident of the State of Delaware.
(b) The Board of Directors shall be divided into three classes:
Class I, Class II and Class III. Each class of directors shall consist of a
number of directors equal as nearly as practicable to one-third of the then
authorized number of members of the Board of Directors. The initial term of
office of the Class I Directors shall expire at the annual meeting of
stockholders in 2003; the initial term of office of the Class II Directors shall
expire at the annual meeting of stockholders in 2002; and the initial term of
office of the Class III Directors shall expire at the annual meeting of
stockholders in 2001. At each annual meeting of stockholders of the Corporation,
the successors of that class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of such election. The
directors of each class will hold office until their respective death,
resignation or removal and until their respective successors are elected and
qualified.
Section 2.2 Resignations.
-------------
Any director of the Corporation, or any member of any committee, may
resign at any time by giving written notice to the Board of Directors and the
Chairman of the Board. Any such resignation shall take effect at the time
specified therein or, if the time be not specified
-9-
<PAGE>
therein, then upon receipt thereof. The acceptance of such resignation shall not
be necessary to make it effective unless otherwise stated therein.
Section 2.3 Removal of Directors.
---------------------
Directors may be removed from office with or without cause upon the
affirmative vote of holders of not less than 66-2/3% of the total voting power
of the then outstanding Voting Securities (as defined in Section 1.2), voting
together as a single class at a meeting specifically called for such purpose.
Section 2.4 Newly Created Directorships, Vacancies and Nominees.
----------------------------------------------------
Vacancies on the Board of Directors resulting from death, resignation,
removal, disqualification or other cause shall be filled by the majority vote of
the remaining directors, although less than a quorum, or by a sole remaining
director or by unanimous written consent of directors. Nominees for directors
in the case of expiration of a director's term shall be made, by the majority
vote of the directors present and voting at a meeting of the Board of Directors
duly called and held at which a quorum is present, or by unanimous written
consent of the directors.
Section 2.5 Chairman of the Board.
----------------------
The Chairman of the Board of Directors shall be elected from among the
members of the Board of Directors and shall perform the duties provided in these
By-laws and such other duties as may from time to time be assigned to the
Chairman by the Board of Directors.
Section 2.6 Meetings.
---------
At the next meeting following the annual meeting of stockholders, the
Board of Directors shall meet for the purpose of the election of officers and
the transaction of such other business as may properly come before the meeting.
Regular meetings of the Board of Directors
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shall be held at such times, if any, as the Board of Directors shall from time
to time by resolution determine. After the place and time of regular meetings of
the Board of Directors shall have been determined and notice thereof shall have
been once given to each member of the Board of Directors, regular meetings may
be held without further notice being given.
Special meetings of the Board of Directors shall be held at such time
and place within the United States as shall be designated in the notice of the
meeting. Special meetings of the Board of Directors may be called by the
Chairman of the Board or the Chief Executive Officer (provided that the Chief
Executive Officer is a member of the Board) and shall be called by the Secretary
of the Corporation upon the written request of not less than one half of the
entire Board.
Section 2.7 Notice of Special Meetings.
---------------------------
The Secretary, or in his or her absence or failure to give such notice
any other officer of the Corporation, shall give each director notice of the
time and place of holding of special meetings of the Board of Directors. Notice
of the date, time and place of each special meeting shall be mailed by regular
mail to each director at his designated address at least six days before the
meeting; or sent by overnight courier to each director at his designated address
at least two days before the meeting (with delivery scheduled to occur no later
than the day before the meeting); or given orally by telephone or other means,
or by telegraph or telecopy, or by any other means comparable to any of the
foregoing, to each director at his designated address at least 24 hours before
the meeting. Unless otherwise stated in the notice thereof, any and all
business may be transacted at any meeting without specification of such business
in the notice.
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Section 2.8 Quorum and Organization of Meetings.
------------------------------------
A majority of the total number of members of the Board of Directors as
constituted from time to time shall constitute a quorum for the transaction of
business, but, if at any meeting of the Board of Directors (whether or not
adjourned from a previous meeting) there shall be less than a quorum present, a
majority of those present may adjourn the meeting to another time and place, and
the meeting may be held as adjourned without further notice or waiver. Except
as otherwise required by law or provided by the Certificate or these By-laws,
directors present at any meeting at which a quorum is present for the
transaction of business may by majority vote decide any question brought before
such meeting. Meetings shall be presided over by the Chairman of the Board or
in his or her absence, a chairman chosen by the directors attending the meeting.
The Board of Directors shall keep written minutes of its meetings. The
Secretary of the Corporation shall act as secretary of the meeting, but in his
or her absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.9 Indemnification.
----------------
The Corporation shall indemnify members of the Board of Directors and
officers of the Corporation and their respective heirs, personal representatives
and successors in interest for or on account of any action performed on behalf
of the Corporation, to the fullest extent provided by the Delaware General
Corporation Law ("Delaware Law") and the Certificate, as now or hereafter in
effect.
Section 2.10 Insurance.
----------
The Corporation may, but shall not be required to, purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, member,
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employee, fiduciary or agent of another enterprise against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power or the obligation to indemnify such person against such
liability under the provisions of the Certificate.
Section 2.11 Establishing Committees.
------------------------
The Board of Directors may designate one or more Committees, each
Committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any Committee, who may replace any absent or disqualified member at any meeting
of the Committee. Any such Committee, to the extent provided in the resolution,
shall, have and may exercise, to the extent permitted by Delaware Law, the
powers of the Board of Directors in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it; but no such Committee shall have the power
or authority to: (i) approve or adopt, or recommend to the stockholders, any
action or matter required to be submitted to the Stockholders for approval,
(ii) adopt, amend or repeal any By-Law or (iii) take any action that it is not
permitted to take pursuant to Delaware Law. Such Committee or Committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors.
Such committees shall serve at the pleasure of the Board of Directors;
keep minutes of their meetings. The Board of Directors at any time may remove,
with or without cause, any members of any such other committee and may, with or
without cause, disband any such other committee.
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Section 2.12 Committees Generally.
---------------------
Each Committee shall fix its own rules of procedure, and shall meet
where and as provided by such rules or by resolution of the Board of Directors.
Except as otherwise provided by law, the presence of a majority of the then
appointed members of a Committee shall constitute a quorum for the transaction
of business by that Committee, and in every case where a quorum is present the
affirmative vote of a majority of the members of the Committee present shall be
the act of the Committee. Each Committee shall keep minutes of its proceedings,
and actions taken by a Committee shall be reported to the Board of Directors.
In the event any person shall cease to be a director of the Corporation, such
person shall simultaneously therewith cease to be a member of any Committee
appointed by the Board of Directors.
Section 2.13 Directors' Compensation.
------------------------
Directors shall receive such compensation for attendance at any
meetings of the Board and any expenses incidental to the performance of their
duties, as the Board of Directors shall determine by resolution. Such
compensation may be in addition to any compensation received by the members of
the Board of Directors in any other capacity.
Section 2.14 Action Without Meeting.
-----------------------
Nothing contained in these By-laws shall be deemed to restrict the
power of members of the Board of Directors or any committee designated by the
Board to take any action required or permitted to be taken by them without a
meeting.
Section 2.15 Telephone Meetings.
-------------------
Nothing contained in these By-laws shall be deemed to restrict the
power of members of the Board of Directors, or any committee designated by the
Board of Directors, to participate in a meeting of the Board of Directors, or
committee, by means of conference
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telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
ARTICLE III
OFFICERS
Section 3.1 Executive Officers.
-------------------
The officers of the Corporation shall be a Chairman of the Board, a
Chief Executive Officer, a President, a Chief Financial Officer, a General
Counsel, who may be an Executive Vice President, one or more Vice Presidents,
and a Secretary, each of whom shall be elected by the Board of Directors, and
such other officers, including a Treasurer and a Controller, as may from time to
time be determined by the Board of Directors and elected or appointed by the
Board of Directors. A person may hold more than one of the foregoing offices.
The term of office of all officers shall be until their respective successors
have been elected and qualified or their earlier death, resignation or removal.
Section 3.2 Powers and Duties of Officers.
------------------------------
The officers of the Corporation shall have the authority and shall
exercise the powers and perform the duties specified below, and as may be
additionally specified by the Board of Directors or these By-laws (and in all
cases where the duties of any officer are not prescribed by the By-laws or the
Board of Directors, such officer shall follow the orders and instructions of the
Chief Executive Officer), except that in any event each officer shall exercise
such powers and perform such duties as may be required by law. The Board of
Directors may authorize any person or persons, in the name and on behalf of the
Corporation, to enter into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and such authority
may be general or confined to specific instances. In addition, the officers may
enter into, execute and deliver such undertakings and authorize other persons to
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enter into, execute and deliver such undertakings in connection with the
officers' exercise of their powers enumerated in these By-Laws.
(a) Chairman of the Board. The Chairman of the Board shall preside
---------------------
at all meetings of the stockholders and the Board of Directors of the
Corporation and shall have and may exercise all such powers and perform such
other duties as are provided in these By-laws to be exercised or performed by
the Chairman and as may be assigned to the Chairman from time to time by the
Board of Directors.
(b) Chief Executive Officer. The Chief Executive Officer shall,
-----------------------
subject to the direction and supervision of the Board of Directors, (i) have
general and active control of the Corporation's affairs and business and general
supervision of its officers, agents and employees; (ii) in the absence of the
Chairman of the Board (provided that the Chief Executive Officer does not hold
such position and is a director), preside at all meetings of the stockholders
and the Board of Directors; and (iii) perform all other duties incident to the
office of Chief Executive Officer and as from time to time may be assigned to
the Chief Executive Officer by the Board of Directors.
(c) President. The President (provided that the Chief Executive
---------
Officer does not hold such position) shall, subject to the direction and
supervision of the Board of Directors and the Chief Executive Officer, perform
all duties incident to the office of President as from time to time may be
assigned to him or her by the Board of Directors or the Chief Executive Officer.
At the request of the Chief Executive Officer or, in the event of his
disability, legal incapacity or refusal to act, at the request of the Board of
Directors, a President shall perform the duties of the Chief Executive Officer
in his capacity as an officer of the Corporation, and when so acting shall have
all the powers of, and be subject to all the restrictions upon, the
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Chief Executive Officer in his capacity as an officer of the Corporation. The
President (if other than the Chief Executive Officer) shall report to the Chief
Executive Officer of the Corporation.
(d) Executive Vice President; General Counsel. The Executive Vice
-----------------------------------------
President and General Counsel shall be responsible for the legal affairs of the
Corporation and shall have such additional powers and perform such additional
duties as may be assigned to him or her by the Chief Executive Officer or by the
Board of Directors.
(e) Vice President. The Vice President, if any (or if there is more
--------------
than one, then each Vice President), shall assist the Chief Executive Officer
and the President (if other than the Chief Executive Officer) and shall perform
such duties as may be assigned to the Vice President by the Chief Executive
Officer or by the Board of Directors. Assistant vice presidents, if any, shall
have the powers and perform the duties as may be assigned to them by the Chief
Executive Officer or by the Board of Directors.
(f) Chief Financial Officer; Treasurer. The Chief Financial Officer
----------------------------------
or, in the absence of a Chief Financial Officer, the Treasurer shall: (i) be the
principal financial officer of the Corporation and have the care and custody of
all funds, securities, evidences of indebtedness and other personal property of
the Corporation and deposit the same in accordance with the instructions of the
Board of Directors; (ii) unless assigned to the Controller, receive and give
receipts and acquittance for moneys paid in on account of the Corporation, and
pay out of the funds on hand all bills, payrolls and other debts of the
Corporation of whatever nature upon maturity; (iii) unless there is a
Controller, be the principal accounting officer of the Corporation and as such
prescribe and maintain the methods and systems of accounting to be followed,
keep complete books and records of account, prepare and file all local, state
and federal tax returns, prescribe and maintain an adequate system of internal
audit and prepare and furnish to the Chief
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Executive Officer, and the Board of Directors statements of account showing the
financial position of the Corporation and the results of its operations; (iv)
upon request of the Board of Directors or the Audit Committee, make such reports
to it as may be required at any time; and (v) perform all other duties incident
to such office and such other duties as from time to time may be assigned to the
Chief Financial Officer by the Board of Directors or the Chief Executive
Officer. The Chief Financial Officer and the Treasurer shall report to the Chief
Executive Officer. Assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the Chief Financial Officer or Treasurer.
If there is no Chief Financial Officer or Treasurer, these duties shall be
performed by the Secretary or the Chief Executive Officer or other person
appointed by the Board of Directors.
(g) Secretary. The Secretary shall: (i) keep the minutes of the
---------
proceedings of the stockholders, the Board of Directors and any committees of
the Board of Directors, which shall at all reasonable times be open to the
examination of any director; (ii) see that all notices are duly given in
accordance with the provisions of these By-laws or as required by law; (iii) be
custodian of the corporate records, which shall at all reasonable times be open
to the examination of any director, and of the seal of the Corporation; (iv)
keep at the Corporation's registered office or principal place of business a
record containing the names and addresses of all stockholders and the number and
class of shares held by each, unless such a record shall be kept at the office
of the Corporation's transfer agent or registrar; (v) have general charge of the
stock books of the Corporation, unless the Corporation has a transfer agent; and
(vi) in general, perform all other duties incident to the office of Secretary,
including certifying the record of proceedings of the meetings of the
stockholders or of the Board of Directors or resolutions adopted at such
meetings, signing or attesting certificates, statements or reports required to
be
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filed with governmental bodies or officials, signing acknowledgments of
instruments, and performing such other duties as from time to time may be
assigned to the Secretary by the Board of Directors, the Chief Executive Officer
or any President and Chief Operating Officer. The Secretary shall report to the
Chief Executive Officer. Assistant secretaries, if any, shall have the same
duties and powers, subject to supervision by the Secretary.
Section 3.3 Resignations; Removals.
-----------------------
(a) Any officer of the Corporation may resign at any time,
subject to any rights or obligations under any then existing contracts between
such officer and the Corporation, by giving written notice to the Board of
Directors, the Chairman of the Board, the Chief Executive Officer or the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein or, if the time be not specified therein, then upon receipt
thereof. The acceptance of such resignation shall not be necessary to make it
effective unless otherwise stated therein.
(b) The Board of Directors, by a vote of not less than a majority
of the Directors at a meeting of Directors where a quorum of the entire Board is
present or by unanimous written consent, at any time, may, to the extent
permitted by law, remove with or without cause from office or terminate the
employment of any officer, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
(c) Any vacancy in the office of any officer through death,
resignation, removal, disqualification, or other cause may be filled at any time
by the Board of Directors or, if such officer was appointed by the Chief
Executive Officer and is not a President, the Chief Financial Officer or the
Secretary, then by the Chief Executive Officer.
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Section 3.4 Proxies.
--------
Unless otherwise provided in the Certificate or directed by the Board
of Directors, the Chairman of the Board, the Chief Executive Officer (if
different from the Chairman) or their respective designees, shall have full
power and authority on behalf of the Corporation to attend and to vote upon all
matters and resolutions at any meeting of stockholders of any corporation in
which this Corporation may hold stock, and may exercise on behalf of this
Corporation any and all of the rights and powers incident to the ownership of
such stock at any such meeting, whether regular or special, and at all
adjournments thereof, and shall have power and authority to execute and deliver
proxies and consents on behalf of this Corporation in connection with the
exercise by this Corporation of the rights and powers incident to the ownership
of such stock, with full power of substitution or revocation.
ARTICLE IV
CAPITAL STOCK
Section 4.1 Stock Certificates.
-------------------
Each stockholder of the Corporation shall be entitled to a certificate
certifying the class and number of shares represented thereby and in such form,
not inconsistent with Delaware Law or the Certificate, as the Board of Directors
may from time to time prescribe.
The certificates of stock shall be signed by the Chairman of the
Board, the Chief Executive Officer (if different from the Chairman), any Vice
President (including an Executive Vice President) or and by the Secretary or the
Chief Financial Officer, and sealed with the seal of the Corporation. Such seal
may be a facsimile, engraved or printed. Where any certificate is manually
signed by a transfer agent or by a registrar, the signatures of any officers
upon such certificate may be facsimiles, engraved or printed. In case any
officer, transfer agent or registrar
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who has signed or whose facsimile signature has been placed upon any certificate
shall have ceased to be such before the certificate is issued, it may be issued
by the Corporation with the same effect as if such officer, transfer agent or
registrar had not ceased to be such at the time of its issue.
Section 4.2 Fractional Shares.
------------------
The Corporation may, but shall not be required to, issue certificates
for fractions of a share where necessary to effect authorized transactions, or
the Corporation may pay in cash the fair value of fractions of a share as of the
time when those entitled to receive such fractions are determined, or it may
issue scrip in registered or bearer form over the manual or facsimile signature
of an officer of the Corporation or of its agent, exchangeable as therein
provided for full shares, but such scrip shall not entitle the holder to any
rights of a Stockholder except as therein provided.
Section 4.3 Transfer of Shares.
-------------------
(a) Shares of the capital stock of the Corporation may be
transferred on the books of the Corporation only by the holder of such shares or
by his duly authorized attorney, upon the surrender to the Corporation or its
transfer agent of the certificate representing such stock properly endorsed.
(b) The person in whose name shares of stock stand on the
books of the Corporation shall be deemed by the Corporation to be the owner
thereof for all purposes, and the Corporation shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by Delaware Law.
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(c) Subject to any limitations contained in the Certificate or under
applicable law, registered shares in the Corporation may be transferred by a
written instrument of transfer signed by the transferor and containing the name
and address of the transferee, but in the absence of such written instrument of
transfer, the directors may accept such evidence of a transfer of shares as they
consider appropriate.
Section 4.4 Lost Certificates.
------------------
The Board of Directors or any transfer agent of the Corporation may
direct a new certificate or certificates representing stock of the Corporation
to be issued in place of any certificate or certificates theretofore issued by
the Corporation, alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors (or any transfer agent of the Corporation
authorized to do so by a resolution of the Board of Directors) may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to give the Corporation a bond in such sum as the Board of
Directors (or any transfer agent so authorized) shall direct to indemnify the
Corporation against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed or
the issuance of such new certificates, and such requirement may be general or
confined to specific instances.
Section 4.5 Transfer Agent and Registrar.
-----------------------------
The Board of Directors may appoint one or more transfer agents and one
or more registrars and may require all certificates for shares to bear the
manual or facsimile signature or signatures of any of them.
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Section 4.6 Regulations.
------------
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer,
registration, cancellation and replacement of certificates representing stock of
the Corporation.
ARTICLE V
BOOKS AND RECORDS
Section 5.1 Location.
---------
The books and records of the Corporation may be kept at such place or
places as the Board of Directors or the respective officers in charge thereof
may from time to time determine. The record books containing the names and
addresses of all Stockholders, the number and class of shares of stock held by
each and the dates when they respectively became the owners of record thereof
shall be kept by the Secretary as prescribed in the By-Laws or by such officer
or agent as shall be designated by the Board of Directors.
Section 5.2 Addresses of Stockholders.
--------------------------
Notices of meetings and all other corporate notices may be delivered
personally or by mail, telegram, facsimile transmission or other electronic
means, to the extent permitted by Delaware Law, addressed to each Stockholder at
the Stockholder's address as it appears on the records of the Corporation. Any
notice given by telegram, cable, facsimile transmission or other electronic
means shall be deemed to have been given when it shall have been transmitted and
any notice given by mail shall be deemed to have been given when it shall have
been deposited in the United States mail with postage thereon prepaid
Section 5.3 Fixing Date for Determination of Stockholders of
------------------------------------------------
Record.
- -------
(a) In order that the Corporation may determine the
Stockholders entitled to notice of or to vote at any meeting of Stockholders or
any adjournment thereof, the
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Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors and which record date shall not be more than 60 days nor less
than 10 days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining Stockholders entitled to
notice of or to vote at a meeting of Stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of Stockholders of record entitled to
notice of or to vote at a meeting of Stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the
Stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the Stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action not contemplated by paragraph (a) of this Section 3, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted and which
record date shall be not more than 60 days prior to such action. If no record
date is fixed, the record date for determining Stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 Offices.
--------
The Corporation shall maintain a registered office in the State of
Delaware as required by law. The Corporation may also have offices in such other
places, either within or
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outside the State of Delaware, as the Board of Directors may from time to time
designate or as the business of the Corporation may require.
Section 6.2 Corporate Seal.
---------------
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal" and
"Delaware".
Section 6.3 Fiscal Year.
------------
The fiscal year of the Corporation shall end on March 31 of each
calendar year.
Section 6.4 Notices and Waivers Thereof.
----------------------------
Whenever any notice whatever is required by law, the Certificate or
these By-laws to be given to any stockholder, director or officer, such notice,
except as otherwise provided by law, may be given personally or by mail,
telegram, cable or facsimile transmission, addressed to such address as appears
on the books of the Corporation. Any notice given by telegram, cable or
facsimile transmission shall be deemed to have been given when it shall have
been transmitted and any notice given by mail shall be deemed to have been given
when it shall have been deposited in the United States mail with postage thereon
prepaid.
Whenever any notice is required to be given by law, the Certificate,
or these By-laws, a written waiver thereof, signed by the person entitled to
such notice, whether before or after the meeting or the time stated therein,
shall be deemed equivalent in all respects to such notice to the full extent
permitted by law.
Section 6.5 Amendments.
-----------
In furtherance and not in limitation of the powers conferred by
Delaware Law, the Board of Directors, by action taken by the affirmative vote of
not less than a majority of the Board of Directors then authorized is hereby
expressly authorized and empowered to adopt,
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amend or repeal any provision of the By-laws of this Corporation, including any
provision of the By-laws adopted by the affirmative vote of the Corporation's
stockholders.
Subject to the rights of the holders of any class or series of
preferred stock, these By-laws may be adopted, amended or repealed by the
affirmative vote of the holders of not less than 66-2/3% of the total voting
power of the Voting Securities of the Corporation entitled to vote thereon;
provided, however, that this paragraph shall not apply to, and no vote of the
- -------- -------
stockholders of the Corporation shall be required to authorize, the adoption,
amendment or repeal of any provision of the By-laws by the Board of Directors in
accordance with the preceding paragraph.
Notwithstanding any other provision of these By-laws, upon the filing
of the Certificate of Merger of TV Guide, Inc., a Delaware corporation ("TVG"),
and G Acquisition Subsidiary Corp., a Delaware corporation and a subsidiary of
this Corporation ("Sub"), these By-laws shall automatically (without any action
by the Board of Directors or the holders of any class or series of the
Corporation's capital stock) be amended and replaced in their entirety with the
By-laws set forth as Exhibit 1.7(b) to that certain Agreement and Plan of
Merger, dated as of October 4, 1999, among the Corporation, Sub and TVG, as the
same may be amended from time to time (as amended, the "Merger Agreement").
This paragraph of Section 6.5 may not, prior to termination of the Merger
Agreement, be amended, altered, modified or replaced without the written consent
of TVG, which consent may be given or withheld in TVG's absolute discretion.
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THIS AMENDED AND RESTATED RIGHTS AGREEMENT (this "Agreement"), is made
effective as of February ___, 2000, by and between Gemstar International Group
Limited, a Delaware corporation which is the continuation of Gemstar
International Group Limited, a British Virgin Islands corporation (the Delaware
entity as the continuation of the British Virgin Island corporation is referred
to herein as the "Company"), and American Stock Transfer & Trust Company, a New
York company (the "Rights Agent").
WHEREAS, the Board of Directors of the Company previously authorized
and declared a dividend of one preferred share purchase right (a "Right") for
each Common Share (as such term is hereinafter defined) of the Company
outstanding on the later of (i) July 10, 1998, and (ii) such date as permitted
by the Nasdaq Stock Market (the "Record Date"), each Right representing on the
Record Date the right to purchase one one-hundredth of a Preferred Share (as
such term is hereinafter defined), upon the terms and subject to the conditions
set forth in the Rights Agreement (the "Original Agreement"), dated as of July
10, 1998 (the "Original Agreement Date"), and further authorized and directed
the issuance of one Right with respect to each Common Share that becomes
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined).
WHEREAS, pursuant to Section 388 of the Delaware General Corporation
Law, the Company has, as of the date hereof, changed its place of incorporation
from the British Virgin Islands to the State of Delaware (the "Domestication")
by filing with the Delaware Secretary of State (i) a certificate of
domestication and (ii) a certificate of incorporation.
WHEREAS, in connection with the Domestication, the Company is amending
and restating the Original Agreement as herein set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the Original Agreement is hereby amended and
restated in its entirety as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
of the Company then outstanding, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, any entity holding
Common Shares for or pursuant to the terms of any such plan or any Exempt Person
(as such term is hereinafter defined); provided, however, that in the event that
-------- -------
any Exempt Person shall after July 10, 1998 become the Beneficial Owner of any
additional Common Shares of the Company (other than by exercise of employee or
director options granted prior to or after the Original Agreement Date by the
Company), then such Exempt Person shall be deemed to be an "Acquiring Person".
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of (i) an acquisition of Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to
<PAGE>
15% or more of the Common Shares of the Company then outstanding, or (ii) a
grant or exercise of employee or director options granted prior to or after the
Original Agreement Date by the Company; provided, however, that if a Person
-------- -------
shall become the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company, then such Person shall be deemed to be
an "Acquiring Person". Notwithstanding the foregoing, if the Board of Directors
of the Company determines in good faith that a Person who would otherwise be an
"Acquiring Person", as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of Common Shares so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the Original Agreement Date.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, rights (other than
these Rights), warrants or options, or otherwise; provided, however,
-------- -------
that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a
-------- -------
Person shall not be deemed the Beneficial Owner of, or to beneficially
own, any security if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent
2
<PAGE>
contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of
any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday,
or a day on which banking institutions in New York are authorized or obligated
by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., New
York time, on such date; provided, however, that if such date is not a Business
-------- -------
Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company shall mean
the shares of common stock (formerly ordinary shares), par value $0.01 per
share, of the Company. "Common Shares" when used with reference to any Person
other than the Company shall mean the capital stock (or equity interest) with
the greatest voting power of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(h) "Exempt Person" means Thomas Lau, or such Person or Persons who
succeed to ownership of his Common Shares either by will or pursuant to
applicable statutes of descent and distribution.
(i) "Final Expiration Date" shall have the meaning set forth in
Section 7.
(j) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(k) "Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock (formerly Series A Junior Participating Preference
Shares), par value $0.01 per share, of the Company having the rights and
preferences set forth in Exhibit A.
(l) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(m) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(n) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
3
<PAGE>
Section 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
---------------------------
the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day
(or such later date as may be determined by action of the Board of Directors
prior to or after such time as any Person becomes an Acquiring Person) after the
date of the commencement by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company or any entity holding Common Shares for or pursuant to the terms of
any such plan) of, or of the first public announcement of the intention of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer the consummation of which would result in
any Person becoming the Beneficial Owner of Common Shares aggregating 15% or
more of the then outstanding Common Shares (including any such date which is
after the Original Agreement Date and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of Common
Shares. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right for each Common Share so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) With respect to certificates for Common Shares outstanding as of
the Record Date, until the Distribution Date, the Rights will be evidenced by
such certificates registered in the names of the holders thereof. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for Common Shares
outstanding on the Record Date shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the date hereof but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in an Amended and Restated Rights Agreement between
Gemstar International Group Limited and American Stock Transfer & Trust
Company, effective as of February ___,
4
<PAGE>
2000 (the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
executive offices of Gemstar International Group Limited. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. Gemstar International Group Limited will mail to the holder of
this certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Under certain circumstances, as set
forth in the Rights Agreement, Rights issued to any Person (as defined in
the Rights Agreement) who becomes an Acquiring Person (as defined in the
Rights Agreement) may become null and void.
With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common Shares which
are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
--------------------------
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 22 hereof, each of the Right Certificates shall (as of the
Original Agreement Date) entitle the holders thereof to purchase such number of
one one-hundredths of a Preferred Share as shall be set forth therein at the
price per one one-hundredth of a Preferred Share set forth therein (the
"Purchase Price"), but the number of such one one-hundredths of a Preferred
Share and the Purchase Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right Certificates
---------------------------------
shall be executed on behalf of the Company by its Chairman of the Board, its
Chief Executive Officer, its Chief Financial Officer or its Secretary, either
manually or by facsimile signature, shall have affixed thereto the Company's
seal or a facsimile thereof, and shall be attested by the Secretary of the
Company, either manually or by facsimile signature. The Right Certificates shall
be manually countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Right Certificate, shall be a proper
5
<PAGE>
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the date of
each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
- ---------------------------------------------------------------------
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights. (a) The registered holder of any Right Certificate may exercise the
- ------
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
Preferred Share as to which the Rights are exercised, at or prior to the
earliest of (i) the close of business on July 10, 2008 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date"), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
6
<PAGE>
(b) The Purchase Price for each one one-hundredth of a Preferred Share
purchasable pursuant to the exercise of a Right shall (as of the Original
Agreement Date) initially be $225.00, and shall be subject to adjustment from
time to time as provided in Section 11 or 13 hereof and shall be payable in
lawful money of the United States of America in accordance with paragraph (c)
below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to be
purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 hereof, (iii) after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, deliver such cash to or
upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates. All
--------------------------------------------------
Right Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. The Company covenants and
--------------------------------
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury, the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with
7
<PAGE>
Section 7. The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
Section 10. Preferred Shares Record Date. Each person in whose name
----------------------------
any certificate for Preferred Shares is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
- -------- -------
which the Preferred Shares transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number
--------------------------------------------------------
of Rights. The Purchase Price, the number of Preferred Shares covered by each
- ---------
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the Original
Agreement Date (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification
of the Preferred Shares (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so
8
<PAGE>
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if
such Right had been exercised immediately prior to such date and at a time
when the Preferred Shares transfer books of the Company were open, he would
have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification; provided,
--------
however, that in no event shall the consideration to be paid upon the
-------
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any Person
becomes an Acquiring Person, each holder of a Right shall thereafter have a
right to receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-hundredths of a
Preferred Share for which a Right is then exercisable, in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
Common Shares of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-
hundredths of a Preferred Share for which a Right is then exercisable and
dividing that product by (y) 50% of the then current per share market price
of the Company's Common Shares (determined pursuant to Section 11(d)
hereof) on the date of the occurrence of such event. In the event that any
Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) shall be void and any
holder of such Rights shall thereafter have no right to exercise such
Rights under any provision of this Agreement. No Right Certificate shall be
issued pursuant to Section 3 that represents Rights beneficially owned by
an Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof; no Right Certificate shall
be issued at any time upon the transfer of any Rights to an Acquiring
Person whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate; and any Right Certificate delivered to the Rights
Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Company shall take all such action as may be
necessary to authorize additional Common Shares for issuance upon exercise
of the Rights. In the event the Company shall, after good faith effort, be
unable to take all such action as may be necessary to authorize such
additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exercise of a Right, a number
of Preferred Shares or fraction thereof such that the current per share
market price of one Preferred Share multiplied by such number or fraction
is equal to the current per share market price of one Common Share as of
the date of issuance of such Preferred Shares or fraction thereof.
9
<PAGE>
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("equivalent preferred
shares")) or securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of Preferred
Shares which the aggregate offering price of the total number of Preferred
Shares and/or equivalent preferred shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price and the denominator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
-------- -------
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Preferred Shares owned by or held for the account
of the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares; provided, however, that
-------- -------
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price
10
<PAGE>
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current
per share market price" of any security (a "Security" for the purpose of
this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to
such date; provided, however, that in the event that the current per share
-------- -------
market price of the Security is determined during a period following the
announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or
securities convertible into such shares, or (B) any subdivision,
combination or reclassification of such Security and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price
per share equivalent of such Security. The closing price for each day shall
be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Security is listed or admitted to
trading or, if the Security is not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or such other system then in use or,
if on any such date the Security is not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by the
Board of Directors of the Company. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the Security
is listed or admitted to trading is open for the transaction of business
or, if the Security is not listed or admitted to trading on any national
securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current
per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares as determined pursuant to Section
11(d)(i) (appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the Original Agreement Date),
multiplied by one hundred. If neither the Common Shares nor the Preferred
Shares are publicly held or so listed or traded, "current per share market
price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
-------- -------
11(e) are not required to be made
11
<PAGE>
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to
the nearest one one-millionth of a Preferred Share or one ten-thousandth of any
other share or security as the case may be. Notwithstanding the first sentence
of this Section 11(e), any adjustment required by this Section 11 shall be made
no later than the earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the date of the expiration of the right
to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Preferred Share (calculated to the nearest one one-millionth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right
12
<PAGE>
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.
(n) In the event that at any time after the Original Agreement Date
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
13
<PAGE>
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (B) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof,
- ------
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power. In the event, directly or indirectly, at any time after a Person
- -------------
has become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at a price equal
to the then current Purchase Price multiplied by the number of one one-
hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) as shall equal the result
obtained by (A) multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares of such other Person (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; (ii) the issuer of such Common Shares shall thereafter be liable for,
and shall assume, by virtue of such consolidation, merger, sale or transfer, all
the obligations and duties of the Company pursuant to this Agreement; (iii) the
term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such
issuer shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights. The
14
<PAGE>
Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent a supplemental agreement so providing. The Company
shall not enter into any transaction of the kind referred to in this Section 13
if at the time of such transaction there are any rights, warrants, instruments
or securities outstanding or any agreements or arrangements which, as a result
of the consummation of such transaction, would eliminate or substantially
diminish the benefits intended to be afforded by the Rights. The provisions of
this Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
---------------------------------------
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Rights are
listed or admitted to trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights, the fair
value of the Rights on such date as determined in good faith by the Board of
Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided, that such agreement shall provide that the holders of
--------
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-hundredth of a Preferred Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes of
this Section 14(b), the current market value of a Preferred Share shall be the
closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
15
<PAGE>
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or
16
<PAGE>
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
---------------------------
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided, that such corporation would be eligible for appointment as a
--------
successor Rights Agent under the provisions of Section 21 hereof. In case at
the time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name
17
<PAGE>
or in its changed name; and in all such cases such Right Certificates shall have
the full force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chief Executive Officer,
the Chief Financial Officer, or the Secretary of the Company and delivered to
the Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
Anything to the contrary notwithstanding, in no event shall the Rights Agent be
liable for special, indirect, consequential or incidental loss or damage of any
kind whatsoever (including, but not limited to, lost profits), even if the
Rights Agent has been advised of the likelihood of such loss or damage.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be
18
<PAGE>
issued pursuant to this Agreement or any Right Certificate or as to whether any
Preferred Shares will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the Chief
Financial Officer, or the Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered by it in good faith in accordance
with instructions of any such officer or for any delay in acting while waiting
for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing, mailed to the Company and to each transfer
agent of the Common Shares or Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. The Company
may remove the Rights Agent or any successor Rights Agent upon 30 days' notice
in writing, mailed to the Rights Agent or successor Rights Agent, as the case
may be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by the Company),
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be
either (A) a corporation organized and doing business under the laws of the
United States or of the State of New York (or of any other state of the United
States so long as such corporation is
19
<PAGE>
authorized to do business as a banking institution in the State of New York), in
good standing, having an office in the State of New York, which is authorized
under such laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million, or (B) an affiliate of such a corporation.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
or Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any
----------------------------------
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company
----------
may, at its option, at any time prior to such time as any Person becomes an
Acquiring Person, redeem all but not less than all the then outstanding Rights
at a redemption price of $.01 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the Original
Agreement Date (such redemption price being hereinafter referred to as the
"Redemption Price"). The redemption of the Rights by the Board of Directors may
be made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
-------- -------
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights, the Company shall mail a notice of redemption to
all the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or
20
<PAGE>
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange. (a) The Board of Directors of the Company may,
--------
at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the Original Agreement Date (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24, and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
--------
however, that the failure to give, or any defect in, such notice shall not
- -------
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all the holders of such Rights at their last addresses
as they appear upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the Common Shares for Rights will be effected and, in
the event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional Common Shares, the Company shall substitute, for each
Common Share that would otherwise be issuable upon exchange of a Right, a number
of Preferred Shares or fraction thereof such that the current per share market
price of one Preferred Share multiplied by such number or fraction is equal to
the current per share market price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with
21
<PAGE>
regard to which such fractional Common Shares would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a whole
Common Share. For the purposes of this paragraph (d), the current market value
of a whole Common Share shall be the closing price of a Common Share (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
Section 25. Notice of Certain Events. (a) In case the Company shall
------------------------
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the Common Shares and/or Preferred Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) above at least 10 days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least 10 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier. The Domestication is not subject to this Section 25.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
22
<PAGE>
Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Board of Directors may
--------------------------
from time to time supplement or amend this Agreement without the approval of any
holders of Right Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or to make any other provisions with respect
to the Rights which the Company may deem necessary or desirable, any such
supplement or amendment to be evidenced by a writing signed by the Company and
the Rights Agent; provided, however, that from and after such time as any Person
-------- -------
becomes an Acquiring Person, this Agreement shall not be amended in any manner
which would adversely affect the interests of the holders of Rights.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
23
<PAGE>
Section 31. Governing Law. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the day and year first above written.
GEMSTAR INTERNATIONAL GROUP
ATTEST: LIMITED
By: By:
-------------------------------- ------------------------------
Name: Name:
Title: Title:
AMERICAN STOCK TRANSFER AND TRUST
ATTEST: COMPANY
By: By:
-------------------------------- ------------------------------
Name: Name:
Title: Title:
S-1
<PAGE>
Exhibit A
Rights and Preferences of Series A Junior Preferred Stock
Article XI of the Certificate of Incorporation of Gemstar International
Group Limited sets forth the rights and preferences of the Series A Junior
Preferred Stock as follows:
SECTION A
DIVIDENDS AND DISTRIBUTIONS
(1) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of the Corporation's
Common Stock, and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in Common Stock, or effect a subdivision or combination or consolidation
of the outstanding Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(2) The Company shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (1) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A
Exhibit A-1
<PAGE>
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(3) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
SECTION B
VOTING RIGHTS
The holders of shares of Series A Preferred Stock shall have the
following voting rights:
(1) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(2) Except as otherwise provided herein, in any other amendment to
this Certificate creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of the Corporation's stockholders.
Exhibit A-2
<PAGE>
(3) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
SECTION C
CERTAIN RESTRICTIONS
(1) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section A are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series
A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking
on a parity with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(2) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (1) of this Section C,
purchase or otherwise acquire such shares at such time and in such manner.
Exhibit A-3
<PAGE>
SECTION D
REACQUIRED SHARES
Any shares of Series A Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein or as otherwise required by law.
SECTION E
LIQUIDATION, DISSOLUTION OR WINDING UP
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock, or (2) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
SECTION F
CONSOLIDATION, MERGER, ETC.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which shares of Common Stock are exchanged
for or changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series A Preferred Stock shall at the same
time be similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
Exhibit A-4
<PAGE>
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is changed or exchanged. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION G
NO REDEMPTION
The shares of Series A Preferred Stock shall not be redeemable.
SECTION H
RANK
The Series A Preferred Stock shall rank, with respect to the payment
of dividends and the distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
SECTION I
AMENDMENT OF ARTICLE
This Article shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
Exhibit A-5
<PAGE>
Exhibit B
Form of Right Certificate
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER JULY 10, 2008 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
GEMSTAR INTERNATIONAL GROUP LIMITED
This certifies that _________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Amended and Restated Rights Agreement, effective as of February ___, 2000
(the "Rights Agreement"), between Gemstar International Group Limited, a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M., New York time, on July 10, 2008 at the principal office of the Rights
Agent, or at the office of its successor as Rights Agent, one one-hundredth of a
fully paid non-assessable share of Series A Junior Participating Preference
Shares, par value $1.00 per share (the "Preferred Shares"), of the Company, at a
purchase price of $225.00 per one one-hundredth of a Preferred Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-hundredths of a
Preferred Share which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
July 10, 1998, based on the Preferred Shares as constituted at such date. As
provided in the Rights Agreement, the Purchase Price and the number of one one-
hundredths of a Preferred Share which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right
Exhibit B-1
<PAGE>
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Preferred Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for
Preferred Shares or shares of the Company's Common Shares (as such term is
defined in the Rights Agreement).
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
Exhibit B-2
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ___________________.
GEMSTAR INTERNATIONAL GROUP
ATTEST: LIMITED
By: ______________________________ By: ___________________________
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: _____________________________
Authorized Signature
Exhibit B-3
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ______________________________________ hereby
sells, assigns and transfers unto ____________________________________________
______________________________________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ________________
____________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- ----------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
___________________________
Signature
- ----------------------------------------------------------
Exhibit B-4
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: GEMSTAR INTERNATIONAL GROUP LIMITED
The undersigned hereby irrevocably elects to exercise ___________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
Dated: _____________________
_________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
Exhibit B-5
<PAGE>
Form of Reverse Side of Right Certificate -- continued
- -------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
__________________________
Signature
- -----------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
Exhibit B-6
<PAGE>
Exhibit 5.1
February 8, 2000
Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-4 to
be filed by you with the Securities and Exchange Commission in connection with
the registration under the Securities Act of 1933, as amended, of shares of
Common Stock, $.01 par value (the "Common Stock"). We are familiar with the
proceedings taken and proposed to be taken by you in connection with the
authorization and proposed issuance and sale of the Common Stock pursuant to
the Agreement and Plan of Merger, dated as of October 4, 1999, as amended (the
"Gemstar Shares"), which is included in Annex A to the Joint Proxy
Statement/Prospectus contained in the Registration Statement.
It is our opinion that, subject to said proceedings being duly taken and
completed by you as now contemplated prior to the issuance of the Gemstar
Shares (such proceedings include the change in the place of incorporation of
Gemstar International Group Limited from the British Virgin Islands to the
State of Delaware), the Gemstar Shares will, upon issuance and sale thereof in
the manner referred to in the Registration Statement, be legally and validly
issued, fully paid and nonassessable stock.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to us under the heading "Legal Opinions" in the
Registration statement.
Respectfully submitted,
O'Melveny & Myers LLP
<PAGE>
Exhibit 8.1
February 8, 2000
Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
Re: Registration Statement on Form S-4 of Gemstar
---------------------------------------------
Ladies and Gentlemen:
This opinion is delivered to you in connection with the Registration
Statement on Form S-4 (No. 333-______), (the "Registration Statement") filed
with the Securities and Exchange Commission by Gemstar International Group
Limited, a British Virgin Islands corporation ("Gemstar"), in connection with
the proposed merger (the "Merger") of G Acquisition Subsidiary Corp., a Delaware
corporation and wholly-owned subsidiary of Gemstar, with and into TV Guide,
Inc., a Delaware corporation ("TV Guide"), with TV Guide being the surviving
corporation and causing TV Guide to become a wholly-owned subsidiary of Gemstar.
We have reviewed the tax disclosure set forth in the Proxy Statement/Prospectus
which is included in the Registration Statement (the "Proxy
Statement/Prospectus"). In our opinion, the statements contained in the Proxy
Statement/Prospectus under the headings "Material United States Federal Income
Tax Consequences of the Merger" and "Change in Gemstar's Place of Incorporation
From the British Virgin Islands to the State of Delaware - Tax Consequences"
fairly and accurately present the information required to be presented.
This opinion is based on current authorities and upon facts and assumptions
as of this date, and is issued in reliance upon the completeness and accuracy of
those facts and assumptions. This opinion is subject to change in the event of a
change in the applicable law or a change in the interpretation of such law by
the courts or by the Internal Revenue Service. There can be no assurance that
legislative or administrative changes or court decisions will not be forthcoming
that would
<PAGE>
Gemstar International Group Limited, February 8, 2000 - Page 2
significantly modify this opinion. Any such changes may or may not be
retroactive with respect to transactions prior to the date of such changes. This
opinion has no binding effect or official status, and accordingly, no assurance
can be given that the position set forth herein will be sustained by a court, if
contested. No ruling will be obtained from the Internal Revenue Service with
respect to the Merger.
We consent to the filing of this opinion as an exhibit to the Registration
Statement. This letter is furnished by us as counsel for Gemstar and is solely
for the benefit of Gemstar.
Respectfully submitted,
O'MELVENY & MYERS LLP
<PAGE>
Exhibit 8.2
BAKER BOTTS L.L.P.
2001 Ross Avenue
Dallas, Texas 75201-2980
February 8, 2000
TV Guide, Inc.
7140 S. Lewis Avenue
Tulsa, Oklahoma 74136-5422
Ladies and Gentlemen:
Reference is made to the Registration Statement of Gemstar International
Group Limited, a British Virgin Islands corporation ("Gemstar"), on Form S-4
(the "Registration Statement"), which includes the Joint Proxy
Statement/Prospectus of TV Guide, Inc., a Delaware corporation ("TV Guide"), and
Gemstar (the "Proxy Statement/Prospectus"), relating to the merger of a wholly
owned subsidiary of Gemstar with and into TV Guide (the "Merger"). Any
capitalized term used and not defined herein has the meaning given to it in the
Proxy Statement/Prospectus.
We have participated in the preparation of the discussion set forth in the
section entitled "Material United States Federal Income Tax Consequences of the
Merger." We are of the opinion that such discussion insofar as it relates to
the U.S. federal income tax consequences of the Merger to TV Guide and its
stockholders is accurate in all material respects and addresses all material
U.S. federal income tax aspects of the Merger which are relevant to TV Guide and
its stockholders.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
references therein to our firm name. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
BAKER BOTTS L.L.P.
<PAGE>
Exhibit 23.1
Independent Accountants' Consent
The Board of Directors
Gemstar International Group Limited:
We consent to the use of our report dated May 9, 1999 incorporated by
reference in this Registration Statement of Gemstar International Group Limited
on Form S-4 and to the reference to our firm under the heading "Experts" in the
Proxy Statement/Prospectus, which is a part of this Registration Statement.
KPMG LLP
Los Angeles, California
February 8, 2000
<PAGE>
Exhibit 23.2
Independent Auditor's Consent
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Gemstar International Group Limited ("Gemstar") of our report
dated March 7, 1997, relating to the statement of operations of StarSight
Telecast, Inc. ("StarSight") and the related statements of shareholders' equity
and cash flows for the year ended December 31, 1996, not presented separately
therein, prior to restatement to conform StarSight's accounting policies and
fiscal year to those of Gemstar, which report is included in Gemstar's Annual
Report on Form 10-K for the year ended March 31, 1999. We also consent to the
reference to us under the heading "Experts" in the joint proxy
statement/prospectus.
Deloitte & Touche LLP
San Francisco, California
February 8, 2000
<PAGE>
Exhibit 23.3
Consent of Independent Auditors
The Board of Directors
TV Guide, Inc.:
We consent to the use of our report incorporated herein by reference and to
the reference to our Firm under the heading "Experts" in this joint proxy
statement/prospectus.
KPMG LLP
Tulsa, Oklahoma
February 8, 2000
<PAGE>
Exhibit 23.4
Consent of Independent Auditors
The Board of Directors
TV Guide, Inc.:
We consent to the use of our reports incorporated herein by reference and to
the reference to our Firm under the heading "Experts" in this joint proxy
statement/prospectus.
KPMG LLP
Denver, Colorado
February 8, 2000
<PAGE>
EXHIBIT 23.5
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 10, 1997 (except for the Liberty
Transaction described in Note 2, as to which the date is March 29, 1999), with
respect to the consolidated financial statements and schedule of TV Guide, Inc.
(formerly United Video Satellite Group, Inc.) incorporated by reference in the
Registration Statement on Form S-4 and related joint proxy/prospectus of
Gemstar International Group Limited.
Ernst & Young LLP
Tulsa, Oklahoma
February 8, 2000
<PAGE>
Exhibit 23.6
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) including in or made a part of this
registration statement.
Arthur Andersen LLP
New York, New York
February 8, 2000
<PAGE>
EXHIBIT 23.11
[Letterhead of Lazard Freres & Co. LLC]
February 7, 2000
The Board of Directors
Gemstar International Group Limited
135 North Los Robles Avenue, Suite 800
Pasadena, California 91101
Re: Joint Proxy Statement/Prospectus of Gemstar International Group
---------------------------------------------------------------
Limited and TV Guide, Inc. and Related Registration Statement on Form
---------------------------------------------------------------------
S-4 of Gemstar International Group Limited
------------------------------------------
Dear Members of the Board:
Reference is made to our opinion letter dated October 3, 1999 with respect
to the fairness, from a financial point of view, to Gemstar International Group
Limited ("Gemstar") of the Exchange Ratio as defined in the first paragraph of
such opinion letter pursuant to the Merger Agreement referred to therein.
The foregoing opinion letter is for the information and assistance of the
Board of Directors of Gemstar in connection with its consideration of the
transactions contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purposes, nor is it to be filed with or
referred to in whole or in part in any registration statement, proxy statement
or any other document, except in accordance with our prior written consent.
In that regard, we hereby consent to the reference to the opinion of our
firm under the captions "Summary-Opinion of Financial Advisor to Gemstar's Board
of Directors" and "Opinion of Financial Advisor to Gemstar's Board of Directors"
and to the inclusion of the foregoing opinion in the above-referenced Joint
Proxy Statement/Prospectus included in the above-referenced Registration
Statement. In giving such consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1993 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
Lazard Freres & Co. LLC
By: /s/ RICHARD P. EMERSON
---------------------------
Richard P. Emerson
Managing Director
<PAGE>
Exhibit 23.12
Investment Banking
Corporate and Institutional
Client Group
World Financial Center
North Tower
New York, New York 10281-1330
[LOGO OF MERRILL LYNCH] 212 449-1600
We hereby consent to the use of our opinion letter dated October 3, 1999
to the Board of Directors of TV Guide, Inc. included as Annex E to the Joint
Proxy Statement/Prospectus which forms a part of the Registration Statement
on Form S-4 relating to the proposed merger between Gemstar International
Group Limited and TV Guide, Inc. and to the references to such opinion in
such Joint Proxy Statement/Prospectus. In giving such consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder,
nor do we thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act, as amended, or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ JIM RATIGAN
---------------------------------
Name: Jim Ratigan
Title: Vice President
New York, New York
February 7, 2000
