EXHIBIT 10.23
AMENDMENT NO. 2 TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDMENT NO. 2 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Second Amendment") is entered into as of May 4, 2001 by and among Gemstar-TV
Guide International, Inc., a Delaware corporation formerly known as Gemstar
International Group Limited ("GMST"), Gemstar Development Corporation, a
California corporation ("Company"), and Henry C. Yuen ("Employee"):
WITNESSETH:
WHEREAS, Employee is a party to that certain Amended and Restated
Employment Agreement, entered into as of January 7, 1998, by and among Gemstar
International Group Limited, a British Virgin Islands corporation ("GIGL-BVI"),
Company and Employee (the "Employment Agreement");
WHEREAS, GIGL-BVI was domesticated in Delaware under the name "Gemstar
International Group Limited" on February 9, 2000 pursuant to Section 388 of the
General Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, the Delaware corporation resulting from the domestication of
GIGL-BVI changed its name effective as of July 12, 2000 to "Gemstar-TV Guide
International, Inc." in connection with the acquisition of TV Guide, Inc.
("TVGI"), which acquisition was effected as of such date by the merger (the
"Merger") of G Acquisition Subsidiary Corp., a wholly owned subsidiary of GMST
("Acquisition Sub"), with and into TVGI pursuant to the terms of an Agreement
and Plan of Merger by and among GMST, TVGI and Acquisition Sub dated as of
October 4, 1999, as amended;
WHEREAS, in recognition of the increased duties and responsibilities which
Employee would bear following the Merger, GIGL-BVI, Company and Employee entered
into that certain Amendment No. 1 to Amended and Restated Employment Agreement
dated as of October 4, 1999 (the "First Amendment") pursuant to which certain
provisions of the Employment Agreement were amended in anticipation of the
domestication of GIGL-BVI and the Merger;
WHEREAS, subsequent to the Merger and prior to December 31, 2000, GMST and
Company each changed their fiscal year from a fiscal year ending on March 31 to
a fiscal year ending on December 31 (the "Fiscal Year Change"), with the
nine-month period from April 1, 2000 through December 31, 2000 constituting a
short fiscal year for GMST and Company and the calendar year ending December 31,
2001 constituting the first full fiscal year ending December 31; and
WHEREAS, Employee, GMST and Company have agreed, with the approval of the
Compensation Committees of the Boards of Directors of GMST and Company, to make
certain further modifications to the Employment Agreement as provided herein to
correct certain inadvertent omissions in the First Amendment, to clarify certain
procedures and terms for carrying out certain obligations under the Employment
Agreement, as amended, and to amend
the Employment Agreement to make certain changes required as a result of
the Fiscal Year Change.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree to amend the Employment Agreement as
follows:
1. Domestication of GIGL. The Employment Agreement, as amended by the
First Amendment and by this Second Amendment, shall continue to bind GMST
following the domestication of GIGL pursuant to Section 388 of the DGCL to
the same extent as if GMST were the original signatory thereto and,
effective from and after February 9, 2000, all references in the Employment
Agreement and in the First Amendment to GIGL shall be deemed to refer to
GMST (which was known as "Gemstar International Group Limited" from
February 9, 2000 through July 12, 2000 at which time it changed its name to
"Gemstar-TV Guide International, Inc."). In addition, due to the
reclassification of GMST's capital stock in connection with the
domestication, all references in the Employment Agreement to the Company's
"Ordinary Shares" shall be deemed references to the Company's "Common
Stock".
2. Consummation of the Merger. All provisions of the First Amendment
that were made "subject to the consummation of the Merger" or were
similarly qualified shall be deemed effective as of July 12, 2000 as a
result of the consummation of the Merger as of such date and shall no
longer be subject to any condition or qualification relating to the
consummation of the Merger.
3. Amendments Related to the Fiscal Year Change. GMST, Company and
Employee acknowledge and agree that, as a result of the Fiscal Year Change,
the following provisions of the Employment Agreement shall be interpreted
and amended as follows:
(i) Section l(c). The term "Compensation Period" as defined in
Section l(c) of the Employment Agreement, as amended, shall mean,
as the context may require, (i) the twelve-month period from June
1 through May 31, for each such period prior to and including the
annual period ended May 31, 2000, (ii) the nine-month period from
June 1, 2000 through February 28, 2001 (the "Transition
Compensation Period") or (iii) the twelve-month period from March
1 through February 28 (February 29 in leap years), for each such
period beginning on or after March 1, 2001.
(ii) Section 3(b).
(A) The term "Fiscal Year" as defined in Section 3(b)(i) of the
Employment Agreement, as amended, shall mean, as the context
may require, (i) the twelve-month period from April 1
through March 31, for each such period prior to and
including the twelve-month period ended March 31, 2000, (ii)
the nine-month period from April 1, 2000 through December
31, 2000 (the "Transition Fiscal Year") or (iii) the
twelve-month period from January 1 through December 31, for
each such period beginning on or after January 1, 2001.
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(B) Employee acknowledges that he has received the Merit Bonus, if
any, required to be paid under the Employment Agreement for the
Fiscal Year ended March 31, 2000. GMST and Company agree that, in
recognition of the Fiscal Year Change, Employee shall be deemed
to have earned a Merit Bonus for the Transition Fiscal Year
payable by the Company to Employee by no later than June 22, 200l
equal to the amount by which the Base Salary will be increased as
of March 1, 2001 pursuant to Section 3(a)(ii) of the Employment
Agreement as amended by this Amendment.
(C) As provided in Section 3(b)(ii) of the Employee Agreement,
Employee shall have the right to elect to receive the Merit Bonus
for the Transition Fiscal Year in the form of Merit Options by
giving written notice of such election within ten (10) days
following notice to Employee of the amount of such Merit Bonus.
If Employee elects to receive Merit Options with respect to such
Merit Bonus, (i) such Merit Options shall be issued as of the
close of business on the tenth calendar day following the date on
which notice is given to Employee of the amount of such Merit
Bonus or, if such day is not a business day, on the next
following business day (the "Merit Options Grant Date"), (ii) the
Market Price to be used in computing the number of Merit Options
and the exercise price per share of Common Stock under the Merit
Options as provided in such Section 3(b) shall be the Market
Price per share of Common Stock as of the Merit Options Grant
Date, (iii) the vesting dates for the two-thirds of the Merit
Options that are not fully vested as of the date of grant shall
be March 1, 2002 (one-third to vest) and March 1, 2003 (the
remaining third to vest), and (iv) such Merit Options shall be
exercisable through March 1, 201l.
(iii) Section 3(c)
(A) Employee acknowledges that he has received the Annual Incentive
Bonus, if any, required to be paid under the Employment Agreement
for the fiscal year ended March 31, 2000. GMST and Company agree
that, in recognition of the Fiscal Year Change, Company shall pay
to Employee in respect of the Transition Fiscal Year an Annual
Incentive Bonus equal to the amount by which the Base Salary will
be increased as of March 1, 2001 pursuant to Section 3(a)(ii) of
the Employment Agreement as amended by this Amendment, by no
later than June 22, 2001. Accordingly, the "Due Date" for such
Annual Incentive Bonus, as such term is defined in paragraph (c)
of Schedule I to the Employment Agreement shall be June 22, 2001.
(B) As provided in paragraph (d) of Schedule I to the Employment
Agreement, Employee shall have the right to elect to receive the
Annual Incentive Bonus for the Transition Fiscal Year in the form
of Annual Incentive Options. If Employee elects to receive Annual
Incentive Options with respect to such Annual Incentive Bonus as
permitted by paragraph (d) of Schedule I to the Employment
Agreement, (i) such
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Annual Incentive Options shall be issued on the tenth calendar
day following the date on which notice is given to Employee of
the amount of such Annual Incentive Bonus or, if such day is not
a business day, on the next following business day (the
"Incentive Options Grant Date"), (ii) the Market Price to be used
in computing the number of Annual Incentive Options and the
exercise price per share of Common Stock under the Annual
Incentive Options as provided in such paragraph (d) of such
Schedule I shall be the Market Price per share of Common Stock as
of the Incentive Options Grant Date, (iii) the vesting dates for
the two-thirds of the Annual Incentive Options that are not fully
vested as of the date of grant shall be March 1, 2002 (one-third
to vest) and March 1, 2003 (the remaining third to vest), and
(iv) such Annual Incentive Options shall be exercisable through
March 1, 2011.
(iv) Section 3(d). No later than June 22, 2001, GMST shall grant to
Employee, subject to the vesting provisions described below, options
to acquire two million four hundred and ninety-seven thousand six
hundred and thirty-five (2,497,635) shares of Common Stock (the
"Transition Options") (such number to be adjusted appropriately to
reflect any future stock split or stock dividend with respect to the
Company's Common Stock). The Transition Options shall constitute the
Annual Options required to be granted pursuant to Section 3(d) of the
Employment Agreement, as amended, for the Transition Compensation
Period ended February 28, 2001. All future Periodic Grants of Annual
Options shall be made on the first day of each subsequent Compensation
Period, commencing on March 1, 2002, and shall be grants of three
million three hundred thirty thousand one hundred and eighty
(3,330,180) shares of Common Stock (such number to be adjusted
appropriately to reflect any future stock spilt or stock dividend with
respect to the Company's Common Stock). For purposes of the vesting
of Annual Options, three million three hundred thirty thousand one
hundred and eighty (3,330,180) Annual Options (such number to be
adjusted appropriately to reflect any future stock spilt or stock
dividend with respect to the Company's Common Stock) shall be deemed
vested as of February 28, 2001 (i.e., the last day of the Transition
Compensation Period) and three million three hundred thirty thousand
one hundred and eighty (3,330,180) Annual Options (such number to be
adjusted appropriately to reflect any future stock spilt or stock
dividend with respect to the Company's Common Stock) shall vest in
full and become immediately exercisable on each February 28 (February
29 in leap years) thereafter; provided, however, that on the February
28 (or February 29, as the case may be) on which the Transition
Options vest (or if, for any reason, not all of the Transition Options
vest on the same date, on the first such date only), two million four
hundred and ninety-seven thousand six hundred and thirty-five
(2,497,635) Annual Options (such number to be adjusted appropriately
to reflect any future stock spilt or stock dividend with respect to
the Company's Common Stock) shall vest in full and become immediately
exercisable.
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(v) Section 3(k). The table (and only the table, with no change to the text
preceding the table) in Section 3(k) of the Employment Agreement, as
amended, is hereby amended to read in its entirety as follows:
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Compensation Period Cash Maximum
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June 1, 1997 to May 31, 1998 $2,500,000
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June 1, 1998 to May 31, 1999 $4,000,000
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June 1, 1999 to May 31, 2000 $5,000,000
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June 1, 2000 to February 28, 2001 $4,687,500
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March 1, 2001 to February 28, 2002 $10,000,000
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March 1, 2002 to February 28, 2003 $15,000,000
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March 1, 2003 to February 28, 2004 $18,750,000
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March 1, 2004 to February 28, 2005 $27,500,000
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Each subsequent Compensation Period 1.25 times the maximum
amount for the preceding
Compensation Period
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4. Amendment of Section 3(a)(ii) of the Employment Agreement and Section 4
of the First Amendment. The amendment of Section 3(a)(ii) of the Employment
Agreement provided for in Section 4 of the First Amendment shall not be
effective and Section 4 of the First Amendment is hereby deleted in its
entirety. Section 3(a)(ii) of the Employment Agreement is hereby amended to read
in its entirety as follows:
"On the first day of each Compensation Period (the "Salary
Adjustment Date"), the Base Salary for such Compensation Period shall be
adjusted by adding to the Base Salary for the previous Compensation Period
the amount obtained by multiplying such Base Salary for the previous
Compensation Period by the Adjusted Percentage (as defined below);
provided, however, that, in computing the adjustment to the Base Salary to
be effective as of March 1, 2001 as provided below, the Base Salary for
the Transition Compensation Period shall be multiplied by 75% of the
Adjusted Percentage.
For the purpose of this Agreement, the "Adjusted Percentage" means
the percentage equal to the product of (1) the sum of "R1" plus "R2" plus
"Pl" plus "P2" multiplied by (2) twenty-five hundredths (0.250) where (i)
"R1" is the percentage increase, if any, in GMST's consolidated revenues,
as
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shown on the consolidated financial statements of GMST (the "Financial
Statements"), for the twelve month period ended on the last day of the Fiscal
Year ended immediately prior to such Salary Adjustment Date (the "Most Recent
Year") over GMST's consolidated revenues for the twelve-month period ended on
the day immediately prior to the first day of the Most Recent Year (the "Base
Year") (e.g., in computing the Adjusted Percentage for the increase in the Base
Salary to be effective as of March 1, 2002, Rl will be equal to the percentage
increase, if any, in GMST's consolidated revenues for the twelve-month period
ended December 31, 2001, which would be the Most Recent Year, as compared to
GMST's consolidated revenues for the twelve-month period ended December 31,
2000, which would be the Base Year), (ii) "R2" is the percentage increase, if
any, in the combined revenues of GMST's Technology and Licensing Sector and
GMST's Interactive Platform Sector (as such terms are defined below), for the
Most Recent Year over such combined revenues for the Base Year, (iii) "Pl" is
the percentage increase, if any, in GMST's consolidated operating income before
stock compensation expense, depreciation and amortization and nonrecurring
expenses ("EBITDA"), as shown on the Financial Statements, for the Most Recent
Year over such consolidated EBITDA for the Base Year and (iv) "P2" is the
percentage increase, if any, in the combined EBITDA of GMST's Technology and
Licensing Sector and GMST's Interactive Platform Sector for the Most Recent Year
over such combined EBITDA for the Base Year.
As used herein, "GMST's Technology and Licensing Sector" shall mean the
Technology and Licensing Sector reportable business segment of GMST for
financial reporting purposes as reported in the notes to GMST's financial
statements for the applicable Fiscal Year (which, effective as of July 2000 was
that portion of GMST's business responsible for the development, licensing and
protection of intellectual property and proprietary technologies (including the
VCR Plus+ system, the interactive program guide marketed under the GUIDE Plus+
and TV Guide Interactive brands and the electronic book)) and "GMST's
Interactive Platform Sector" shall the Interactive Platform Sector reportable
business segment of GMST for financial reporting purposes as reported in the
notes to GMST's financial statements for the applicable Fiscal Year (which,
effective as of July 2000 was that portion of GMST's business which owns,
operates and derives recurring income from advertising, interactive services and
e-commerce on the Company's proprietary interactive platforms).
For the purposes of computing the percentage increases hereunder,
consolidated revenues and consolidated EBITDA for any periods prior to the
effective date of any merger or acquisition that does not result in a Change of
Control, including without limitation, the Merger, shall be determined by
reference to the actual reported revenues and EBITDA for GMST and not by any pro
forma combination of the revenues or EBITDA, as the case may be,
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of GMST with the merged or acquired entity for the portions of such
period prior to such transaction.
No later than June 22, 2001 GMST shall determine the adjustment
to the Base Salary to be effective as of March 1, 2001 as provided
above and the Base Salary shall be appropriately adjusted with
retroactive effect to March 1, 200l (with the unpaid amount of such
increase for the period from March 1, 200l through May 31, 200l to be
paid in a lump sum payment on or prior to June 22, 2001)."
5. Future Changes in the Fiscal Year of GMST and Company. In the event
GMST and Company change their fiscal year end at any time after the date
hereof, GMST, Company and Employee shall negotiate in good faith to enter
into a further amendment to the Employment Agreement that shall provide for
(i) a transition period of less than twelve months between the final full
fiscal year ending as of December 31 and the first full fiscal year ending
as of the new fiscal year end date and (ii) related amendments to the
Employment Agreement similar to the amendments provided herein (e.g.,
providing for the manner of computing Merit Bonuses and Annual Incentive
Bonuses for the less-than-twelve-months transition period).
6. Full Force and Effect. Except as expressly amended hereby, the
Employment Agreement, as amended by the First Amendment, shall continue in
full force and effect in accordance with the provisions thereof on the date
hereof.
7. Section Headings. Section and other headings in this Second
Amendment are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Second Amendment.
[The remainder of this page has been intentionally left blank]
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[Signature Page to Amendment No. 2 To Amended and Restated Employment Agreement]
IN WITNESS WHEREOF, the parties have executed this Second Amendment as of
the date first above written.
"GMST"
GEMSTAR-TV GUIDE INTERNATIONAL, INC.,
a Delaware corporation (formerly known as Gemstar International Group Limited),
as successor in interest to Gemstar International Group Limited, a British
Virgin Islands corporation
By: ________________________________________
Co-President and Chief Financial Officer
By: ________________________________________
Deputy General Counsel
"COMPANY"
GEMSTAR DEVELOPMENT CORPORATION
By: ________________________________________
Chief Financial Officer
By: ________________________________________
Secretary
"EMPLOYEE"
____________________________________________
HENRY C. YUEN
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