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EXHIBIT 10-38
GEMSTAR INTERNATIONAL GROUP LIMITED
Deferred Compensation Plan
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Article I - Purpose
1.01 Purpose and Effective Date. Effective as of January 30, 2000, Gemstar
International Group Limited and subsidiaries ("Subsidiaries"), together the
Company ("Company"), by action of its compensation committee, hereby
establishes the Gemstar International Group Limited Voluntary Executive
Deferred Compensation Plan ("Plan"). The Plan is intended to help the
Company and any participating subsidiary attract and retain key employees
by allowing them to defer a portion of their compensation.
The Plan is to be construed as a plan maintained to provide deferred
compensation to a "select group of management or highly compensated
employees" within the meaning of Section 201(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as amended from time to time. The
Plan is intended to be exempt from the participation, vesting, funding and
fiduciary requirements of Title I of ERISA, to the fullest extent permitted
under the law. The Plan shall at all times be "unfunded" within the
meaning of ERISA and the Internal Revenue Code of 1986, as amended from
time to time.
1.02 Gender and Number. Where the context permits, words in any gender shall
include any other gender, words in the singular shall include the plural,
and the plural shall include the singular.
Article II - Definitions and Certain Provisions
2.01 Account means the account maintained to record the interest of a
Participant under the Plan. A Participant's Account shall consist of the
value of any Bonus and/or Base Salary amounts the Participant elects to
defer hereunder, and any income credited or debited thereto.
2.02 Base Salary means the base salary before giving effect to any 401(k)
elective deferrals excluding any Bonus, of the Participant for services to
an Employer before or on the date of termination of his employment.
2.03 Beneficiary means the person or persons entitled to receive a distribution
under the Plan in the event of a Participant's death.
2.04 Bonus means any cash bonus before giving effect to any 401(k) elective
deferrals to a Participant for services to an Employer that, absent a
Deferral Election under this Plan, would be paid to a Participant before or
on the date of termination of his employment and that otherwise would be
includable in the Participant's gross income for federal income tax
purposes, received in or after a Plan Year. Bonus programs, as set forth
in individual employment contracts, consist of both discretionary and
formula based programs. Bonus shall not include any amounts paid in the
form of stock options.
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2.05 Board means the Board of Directors of the Company.
2.06 Change of Control event shall mean any of the following (other than as a
result of a public offering of shares of the Company):
(a) Approval by the shareholders of the Company of the dissolution or
liquidation of the Company;
(b) Approval by the shareholders of the Company of an agreement to merge
or consolidate, or otherwise recapitalize or reorganize, with or into
one or more entities that are not Subsidiaries, as a result of which
less than 50% of the outstanding voting securities of the surviving or
resulting entity immediately after the event are, or will be, owned by
the shareholders of the Company and/or Related Parties immediately
before such event (assuming for purposes of such determination that
there is no change in the record ownership of the Company's securities
from the record date for such approval until such event but taking
into consideration securities of the other parties to such transaction
held by record holders);
(c) Approval by the shareholders of the Company of the sale of
substantially all of the Company's business and/or assets to a person
or entity which is not a Subsidiary or other Related Party;
(d) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act)(other than a Related Party or other person having
beneficial ownership of more than 50% of the outstanding voting
securities at the time of adoption of this Plan, or any successor,
subsidiary or associate of such owner) becomes the "beneficial owner"
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(as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly, of securities of the Company representing more than 50% of
the combined voting power of the Company's then outstanding securities
entitled to then vote generally in the election of directors of the
Company; or
(e) During any period not longer than two consecutive years, individuals
who at the beginning of such period constituted the Board cease to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's shareholders, of each new
Board member was approved by a vote of at least three-fourths of the
Board members then still in office who were Board members at the
beginning of such period, including for these purposes (but without
duplication of predecessors and successors), new members whose
election or nomination was so approved.
2.07 Code means the Internal Revenue Code of 1986, as amended from time to
time, all successor laws thereto, and any regulations or guidance
promulgated thereunder. Where the Plan refers to a particular section of
the Code, the reference shall also apply to any successor to that section.
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2.08 Company means Gemstar International Group Limited and any Subsidiary
identified by Gemstar International Group Limited (see Section 2.19 for
definition of Subsidiary).
2.09 Compensation means earnings as defined in the Gemstar Employees 401(k) &
Profit Sharing Plan for Salaried Employees of the Company, excluding
severance pay and ignoring any IRS limitations, less deferrals under the
Plan.
2.10 Deferral Account means the amount as defined in Section 6.01.
2.11 Deferral Election means an election made under Article 5.01.
2.12 Eligible Participant means an employee of the Employer selected by the
Board, in its sole and absolute discretion, to make Base Salary and Bonus
deferral elections under the Plan pursuant to Section 5.01 (a) and (b),
provided, however that Participant shall not be eligible to make such
deferral elections and any prior deferral elections shall become invalid
upon any distribution of benefits under the Plan pursuant to Article VI.
2.13 Employer means Gemstar International Group Limited or any Subsidiary to
which the employee provides services in exchange for compensation,
including but not limited to Base Salary and Bonus.
2.14 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, all successor laws thereto, and any regulations
or guidance promulgated thereunder. Where the Plan refers to a particular
section of ERISA, the reference shall also apply to any successor to the
section.
2.15 Participant means an executive eligible to participate under Article IV
who has filed a completed and executed Deferral Election Agreement and
Deferral Enrollment Agreement with the Committee and is participating in
the Plan in accordance with the provisions of Article V and VI.
2.16 Payout Date means the date on which the Participant elected pursuant to
his completed and executed Enrollment Election Agreement, to commence
receiving deferred monies but in no event later than Termination, except
that termination for cause shall create a lump sum distribution
notwithstanding the Participant's Deferral Enrollment Agreement.
2.17 Penalty means ten percent (10%) of the Participant's credited balance and
two years suspension from the Plan.
2.18 Plan Year means the year beginning April 1 and ending March 31 of the
immediate following year.
2.19 Subsidiary shall mean any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned directly or
indirectly by Gemstar International Group Limited.
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2.20 Termination means termination of employment or retirement other than by
reason of death.
Article III - Administration of the Plan
3.01 Administration. This Plan shall be administered by the Board who may
appoint a Plan Administrator.
The Plan Administrator shall have all powers necessary or appropriate to
carry out the provisions of the Plan. The Plan Administrator may, from
time to time, establish rules for the administration of the Plan and the
transaction of the Plan's business.
The Plan Administrator shall have the exclusive right to make any finding
of fact necessary or appropriate for any purpose under the Plan, including,
but not limited to, the determination of eligibility for and amount of any
benefit.
The Plan Administrator shall have the exclusive right to interpret the
terms and provisions of the Plan and to determine any and all questions
arising under the Plan or in connection with its administration, including,
without limitation, the right to remedy or resolve possible ambiguities,
inconsistencies, or omissions by general rule or particular decision, all
in its sole and absolute discretion.
All findings of fact, determinations, interpretations and decisions of the
Plan Administrator shall be conclusive and binding upon all person(s)
having or claiming to have any interest or right under the Plan and shall
be given the maximum deference allowed by law.
3.02 Tax Withholding. The Company or the appropriate Employer may withhold from
any payment under this Plan any and all withholdings under all
jurisdictions including federal, state, local or foreign taxes required by
law to be withheld with respect to the payment and any sum the Company or
the appropriate Employer may reasonably estimate as necessary to cover any
taxes for which they may be liable and that may be assessed with regard to
the payment.
Article IV - Eligibility
4.01 Participation shall be limited to a "select group of management of highly
compensated employees" within the meaning of ERISA Section 201(2).
4.02 The Plan Administrator may permit any person who first becomes an Eligible
Participant on or after the first day of a Plan Year to enroll in the Plan
within 30 days following his eligibility. The deferral election shall be
effective only for compensation earned after the 30-day period.
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4.03 The Plan Administrator also may permit any person, who through job
transfer or demotion no longer meets the "Eligible Participant" definition
of Article II, to cease his deferral election immediately, but no later
than March 31 of the Plan Year in which deferrals have been made. If a
participant no longer satisfies the definition of "Eligible Participant"
or, in the plan administrator's discretion, no longer satisfies the
requirements of Section 4.01, the participant's deferral election
automatically and immediately terminates.
4.04 Participation in or eligibility for the Plan shall not constitute a
guarantee or contract of employment and shall not give any employee the
right to be retained in the employment of the Company. Nor shall
participation in or eligibility for constitute any right to claim any
benefit under the terms of the Plan, unless this right or claim has
specifically accrued under the terms of the Plan.
Article V - Deferral Elections and Rules Regarding Delay of Payments
5.01 Deferral Elections.
(a) Base Salary An Eligible Participant may elect to defer a specified
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percentage of his Base Salary. A minimum deferral of ten percent
(10%) of the Participant's Base Salary is required, and the maximum
deferral allowed is one hundred percent (100%), less required any
withholding under section 5.04, of the Participant's Base Salary.
Deferral elections between 10% and 100% may be made in whole
increments of 10%.
A Participant who wishes to defer receipt of all or a portion of any
Base Salary to be earned during the Plan Year shall provide the Plan
Administrator with a completed and executed Deferral Election
Agreement and Deferral Enrollment Agreement according to the rules
established by the Board in its sole and absolute discretion. A
Participant's election to defer any Base Salary shall be received by
the Plan Administrator no later than the January 31st preceding the
Plan Year, provided, however that for the Plan Year ending March 31,
2001, such election shall be received no later than March 31, 2000.
(b) Bonus. An Eligible Participant may elect to defer a specified
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percentage of his Bonus to be earned the following year. A minimum
deferral of ten percent (10%) of the Participant's Bonus is required,
and the maximum deferral allowed is one hundred percent (100%), less
any required withholding under section 5.04, of the Participant's
Bonus. Deferral elections between 10% and 100% may be made in whole
increments of 10%.
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A Participant who wishes to defer receipt of all or a portion of any
Bonus to be earned during the Plan Year shall provide the Plan
Administrator with a completed and executed Deferral Election
Agreement and Deferral Enrollment Agreement according to the rules
established by the Board in its sole and absolute discretion.
Discretionary bonus program elections and formula based elections
shall be received by the Plan Administrator no less than 90 days
prior to the declaration day (the day the Board approves the Bonus).
5.02 Rules Regarding Deferral Elections. A Participant's Deferral Election
shall state any whole percent, in 10% increments of their Base Salary
and/or Bonus to be deferred.
5.03 Investment Equivalents. Except to the extent other arrangements are
established by the Plan Administrator, amounts in the Participant's Account
under the Plan shall be credited (or debited) with investment gains (or
losses) corresponding to investment equivalents established by the Plan
Administrator and selected by the Participant. The Participant's election
of the investment equivalent or equivalents upon which such crediting and
debiting will be based, including the right to change such election with
respect to his future contributions and his existing account balance, shall
be handled in the manner prescribed by the Plan Administrator. Neither the
Company, nor any Subsidiary, nor the Trustee of the Rabbi Trust, shall be
required to invest amounts corresponding to the investment equivalents.
The Participant may choose from the following investment choices as
described in the Gemstar Employees 401(k) & Profit Sharing Plan. The
Compensation Committee of the Board shall have the right to change the
investment choices as long as a diversified selection is maintained:
(i) Merrill Lynch Retirement Preservation Trust
(ii) Merrill Lynch Federal Securities Trust (C1 B)
(iii) MFS Bond Fund
(iv) Merrill Lynch Capital Fund, Inc. (C1 B)
(v) Merrill Lynch Global Allocation Fund (C1 B)
(vi) Merrill Lynch Fundamental Growth C1 (C1 B)
(vii) Merrill Lynch Growth Fund (C1 B)
(viii) Merrill S&P 500 Index Fund (C1 D)
(ix) Merrill Lynch Special Value Fund (C1 B)
(x) MFS Emerging Growth Fund (C1 B)
5.04 Rules Regarding Withholdings. No Participant shall be allowed to defer
Base Salary or Bonus to the extent the Company determines that such
compensation should be withheld to pay the Participant's portion of taxes
under the Federal Insurance Contributions Act ("FICA"), and federal, state
or local income taxes, payments required to maintain coverage for the
Participant or the Participant's dependents under any welfare plan or
program of the Company, or any similar payment.
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Article VI - Benefits Distribution
6.01 Benefit. A Participant is eligible for a benefit under the Plan when he
has reached a Payout Date (as defined in Article II). The benefit will be
based on the total value of the entire amount standing to the credit of the
account of the Participant ("Deferral Account".)
6.02 Benefit Amount. Any amount to be distributed shall be determined as of the
date coincident with or immediately preceding the Payout Date.
6.03 Time and Form. Distributions shall be made in the form, and as soon as
practicable, after the dates specified in the Participant's Deferral
Enrollment Agreement.
The Deferral Enrollment Agreement shall state:
(a) the Payout Date with respect to the Participant's Deferral Account
either:
i. Commencing January 1 in any year of the Participant's choosing
other than the year for which the deferrals are made and in no
event less than 3 years from the date of the last deferral; or
ii. Commencing the January 1 following his Retirement or Termination,
if later.
(b) the form of payment, whether in one lump sum or annual installments
over 5, 10 or 15 years.
6.04 Rules Regarding Modification of Deferral Enrollment Agreement ("Modified
Enrollment Agreement".)
(a) The form and timing of payment may be modified if communicated to the
Plan Administrator prior to the end of the Plan Year preceding: i) the
scheduled lump sum payment or installment payment, or ii) Termination,
provided however that such modifications must be made at least one
year prior to the scheduled payment date.
(b) Notwithstanding the Participant's Enrollment Election under Article
6.03, a Participant, upon occurrence of a Change of Control, may elect
to change said Payout Date to one year from the Change of Control. A
Participant may make such modification only one time with respect to
Participant's Deferral Account and only to receive a lump sum payment.
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6.05 Participant's Death
(a) If a Participant dies after payments of benefits under the Plan have
commenced, payments shall continue to be made in the same form and for
the same duration as elected by the Participant. However, such
payments of benefits shall be made to his Beneficiary. The Beneficiary
may elect to receive a lump sum payment of the benefit with the
approval of the Plan Administrator or the Board of Directors, and by a
Modified Enrollment Agreement pursuant to Section 6.04.
(b) If a Participant dies prior to the commencement of a payment of his
benefits under the Plan, distributions of his Deferral Account shall
be made to his Beneficiary. Payments shall commence as soon as
practicable, in the same form and for the same duration as elected by
the Participant. The Beneficiary may elect to receive a lump sum
payment of the benefit with the approval of the Plan Administrator or
the Board of Directors, and by a Modified Enrollment Agreement
pursuant to Section 6.04.
(c) Each Participant shall submit a written, signed, and dated list of his
designated Beneficiary to the Plan Administrator on a form approved by
the Plan Administrator ("Gemstar Beneficiary Designation Form").
Beneficiary may be changed at any time without the consent of any
prior Beneficiary. If no Beneficiary survives the Participant or if no
valid beneficiary designation is in effect, the Participant's
Beneficiary shall be his estate. A married participant's designation
of beneficiary other than his or her spouse as primary beneficiary
must be consented to by the spouse.
6.06 Emergency Benefit. In the event that the Committee, on written petition of
the Participant, determines, in its sole discretion, that the Participant
has suffered an unforeseeable financial emergency, the Company shall pay to
the Participant, as soon as practicable following such determination, an
amount up to the balance of his Deferral Account as necessary to meet the
emergency (the "Emergency Benefit"). For purposes of the Plan, an
unforeseeable financial emergency is an unexpected need for cash arising
from an illness, casualty loss, or other comparable unforeseeable
occurrence. The amount of the benefits otherwise payable under the Plan
shall thereafter be adjusted to reflect the payment of the Emergency
Benefit. Applications for Emergency Benefits and the determinations
thereon by the Committee shall be in writing, and a Participant may be
required to furnish written proof of the financial emergency. Any
Participant who receives an Emergency Benefit will be precluded from
electing to make new deferrals under the Plan until the next enrollment
period that occurs at least twelve (12) months following payment of the
Emergency Benefit.
No payment shall be made under this Section if the Plan Administrator
determines that such payment would leave any other amounts deferred
hereunder to be deemed constructively received under the Code.
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6.07 Early Distribution. Notwithstanding a Participant's election under Article
V, a Participant may elect to receive his entire Deferral Account in a
single lump sum payment less ten percent (10%) immediately. Such
Participant will cease to become an Eligible Participant for the 24-month
period commencing on the Early Distribution.
6.08 Small Benefit. In the event the Committee determines that the balance of a
Participant's Deferral Account is less than $25,000 at the time of
commencement of payment of his benefit, or that the portion of the balance
of the Participant's Deferral Account payable to any Beneficiary is less
than $25,000 at the time of commencement of payment of a survivor benefit
to such Beneficiary, the Committee may pay the benefit in the form of a
lump sum payment, notwithstanding any provision of this Article V to the
contrary. Such lump sum payment shall be equal to the balance of the
Participant's Deferral Account or the portion thereof payable to a
Beneficiary.
6.09 Tax Withholdings. To the extent required by law in effect at the time
payments of deferred amounts are made, the Company shall withhold from
payments made hereunder the taxes required to be withheld by the federal or
any state or local governments.
Article VII - Rabbi Trust
7.01 Rabbi Trust. The Company shall maintain a single Rabbi Trust as part of
the Plan to implement the provisions of the Plan.
7.02 Contributions. The Employer shall make contributions to the Rabbi Trust
from time to time. Contributions shall be made equal to the amounts
deferred pursuant to each respective Participant's Deferral Election
Agreement.
7.03 Investments of the Rabbi Trust. The Company shall vest in itself or the
Trustee, responsibility for the management and control of the assets of the
Rabbi Trust.
No Participant or Beneficiary shall have any interest whatsoever in any
specific asset of the Company, Subsidiaries or Rabbi Trust. To the extent
that any person acquires a right to receive payments under the Plan, such
right shall be no greater than the rights of any unsecured general creditor
of the appropriate Employer.
7.04 No Reversion. Except as specified below and in the Rabbi Trust agreement,
the Company and the Subsidiaries shall not have any right, title, or
interest in the contributions made to (or earnings under) the Rabbi Trust.
No part of the Rabbi Trust shall revert to any Employer except upon
complete termination of the Plan after the satisfaction of all fixed and
contingent liabilities of the Plan.
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Article VIII - Amendment and Termination of the Plan
8.01 Amendment and Termination. While the Company expects and intends to
continue the Plan, the Company must reserve and hereby reserves the right
to amend or to terminate the Plan in any way, at any time, for any reason;
except that no amendment shall reduce a Participant's benefits to less than
the amount the Participant would have been entitled to receive if the
Participant had resigned from the employment of the Company or its
Subsidiaries on the effective date of amendment or termination.
In the event of a change of control solely with respect to one or more
Subsidiaries, such Subsidiaries may elect to stop participating in the Plan
by giving reasonable notice to the Board. The Board shall coordinate in
good faith with the Subsidiaries to effectively cause the Plan to terminate
solely with respect to the employee's of that former Subsidiary.
8.02 Distribution Upon Termination of the Plan. If the Plan is terminated after
the payments of benefits under the Plan have commenced, distributions shall
be made pursuant to the elections made on the participant election form.
However, the Board may, in its sole and absolute discretion, direct that
distribution be made in any form at any time selected by the Board,
regardless of whether payments of benefits under the Plan have commenced.
Article IX - General Provisions
9.01 Applicable Laws. The Plan shall be construed and administered under the
laws of the State of California, without regard to conflict of laws
provisions, to the extent that such laws are not pre-empted by the laws of
the United States of America
9.02 Benefits Payable from General Assets. Amounts payable hereunder shall be
paid exclusively from the general assets of the appropriate Employer, and
no person entitled to payment hereunder shall have any claim, right,
security interest, or other interest in any fund, trust, account, insurance
contract, or asset of the Employer which may be looked to for such payment,
other than the right of an unsecured general creditor against the Employer,
in respect of the Account of such Participant established hereunder. There
shall be no ability to obtain the general assets of the Employer except in
the case of bankruptcy or insolvency.
9.03 Cost of the Plan All costs of the Plan, including the administration
thereof, shall be borne by the Company and no contributions from
Participants shall be required or permitted. Costs shall be borne by the
Participant's accounts once the Trust is irrevocable.
9.04 Severability. If any provision of the Plan is held illegal or invalid, the
illegality or invalidity shall not affect its remaining parts. The Plan
shall be construed and enforced as if it did not contain the illegal or
invalid provision.
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9.05 No Assignment of Rights. No interest, right, or claim in or to any payment
hereunder shall be assignable, transferable, or subject to sale, mortgage,
pledge, hypothecation, commutation, anticipation, garnishment, attachment,
execution, or levy of any kind. The Company and Subsidiaries shall not
recognize any attempt to assign, transfer, sell, mortgage, pledge,
hypothecate, commute or anticipate the same, except to the extent required
by law.
9.06 Successors to Company. The Plan shall inure to the benefit of, and shall
be binding upon, the Company and the Participants and their successors or
assigns.
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