EXHIBIT 10-39
GEMSTAR INTERNATIONAL GROUP LIMITED
Trust Under the Deferred Compensation Plan
(Rabbi Trust)
TRUST UNDER THE DEFERRED COMPENSATION PLAN OF
GEMSTAR INTERNATIONAL GROUP LIMITED
This Agreement made by and between Gemstar International Group Limited and any
appointed Subsidiary ("Company") and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Trust Company of California
(Trustee);
WHEREAS, Company has adopted the Deferred Compensation Plan (Plan) as listed in
Appendix A;
WHEREAS, Company has incurred or expects to incur liability under the terms of
such Plan with respect to the individuals participating in such Plan;
WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of Company's creditors in the event of Company's Insolvency, as herein defined,
until paid to Plan participants and their beneficiaries in such manner and at
such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall constitute an
unfunded arrangement for ERISA and shall not affect the status of the Plan as a
funded plan maintained for the purpose of providing deferred compensation for a
select group of management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company to make contributions to the Trust equal
to the amounts deferred pursuant to each respective Participant's deferral
elections to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the
Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
(a) Company hereby deposits with Trustee in trust a sum certain in dollars to be
determined at the time of deposit, which shall become the principal of the Trust
to be held, administered and disposed of by Trustee as provided in this Trust
Agreement.
(b) The Trust hereby established is revocable by Company; it shall become
irrevocable upon a Change of Control, as defined herein.
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
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(d) The principal of the Trust, and any earnings thereon shall be held separate
and apart from other funds of Company and shall be used exclusively for the uses
and purposes of Plan participants and general creditors as herein set forth.
Plan participants and their beneficiaries shall have no preferred claim on, or
any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time to time, make
additional deposits of cash or other property in trust with Trustee to augment
the principal to be held, administered and disposed of by Trustee as provided in
this Trust Agreement. Neither Trustee nor any Plan participant or beneficiary
shall have any right to compel such additional deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that
indicates the amounts payable in respect of each Plan participant (and his or
her beneficiaries), that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which such amount is
to be paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Plan Participants and their beneficiaries in
accordance with such Payment Schedule or other instructions as provided. The
Trustee shall make provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with respect to the
payment of benefits pursuant to the terms of the Plan and shall pay amounts
withheld to the appropriate taxing authorities or determine that such amounts
have been reported, withheld and paid by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it shall
designate under the Plan, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan participants or their
beneficiaries as they become due under the terms of the Plan. Company shall
notify Trustee of its decision to make payment of benefits directly prior to the
time amounts are payable to participants or their beneficiaries. In addition, if
the principal of the Trust, and any earnings thereon, are not sufficient to make
payments of benefits in accordance with the terms of the Plan, Company shall
make the balance of each such payment as it falls due. Trustee shall notify
Company where principal and earnings are not sufficient.
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Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When
Company Is Insolvent.
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay
its debts as they become due, (ii) Company is subject to a pending proceeding as
a debtor under the United States Bankruptcy Code, or (iii) Company is determined
to be insolvent by a Federal or State Regulatory Banking Agency.
(b) At all times during the continuance of this Trust, as provided in Section
1(d) hereof, the principal and income of the Trust shall be subject to claims of
general creditors of Company under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive Officer of Company shall
have the duty to inform Trustee in writing of Company's Insolvency. If a
person claiming to be a creditor of Company alleges in writing to Trustee
that Company has become Insolvent, Trustee shall determine whether Company
is Insolvent and, pending such determination, Trustee shall discontinue
payment of benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or has
received notice from Company (notice shall be made pursuant to paragraph 1
above) or a person claiming to be a creditor alleging that Company is
Insolvent, Trustee shall on such evidence conerning Company's solvency as
maybe furnished to Trustee and that provides Trustee with a reasonable basis
for making a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent, Trustee
shall discontinue payments to Plan participants or their beneficiaries and
shall hold the assets of the Trust for the benefit of Company's general
creditors. Nothing in this Trust Agreement shall in any way diminish any
rights of Plan participants or their beneficiaries to pursue their rights as
general creditors of Company with respect to benefits due under the Plan or
otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants or
their beneficiaries in accordance with Section 2 of this Trust Agreement
only after Trustee has determined that Company is not Insolvent (or is no
longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any
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payments made to Plan participants or their beneficiaries by Company in lieu of
the payments provided for hereunder during any such period of discontinuance.
Section 4. Payments to Company.
Except as provided in Section 3 hereof, after the Trust has become irrevocable,
Company shall have no right or power to direct Trustee to return to Company or
to divert to others any of the Trust assets before all payment of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms of
the Plan.
Section 5. Investment Authority.
Trustee may invest in securities (including stock or rights to acquire stock) or
obligations issued by Company. All rights associated with assets of the Trust
shall be exercised by Trustee or the person designated by Trustee, and shall in
no event be exercisable by or rest with Plan participants. The Company shall
retain authority and instruct Trustee regarding investments.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net of
reasonable expenses and allocable taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments, receipts,
disbursements, and all other transactions required to be made, including such
specific records as shall be agreed upon in writing between Company and Trustee.
Thirty days following the close of each fiscal year and within seven days after
the removal or resignation of Trustee, Trustee shall deliver to Company a
written account of its administration of the Trust during such year or during
the period from the close of the last preceding year to the date of such removal
or resignation, setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as the case may be.
Upon the request of the Company, on a no more than semi-annual basis, the
trustee shall furnish the participant or the Company an audit statement of the
trust assets from an independent third party auditor.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such
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matters would use in the conduct of an enterprise of a like character and with
like aims, provided, however, that Trustee shall incur no liability to any
person for any action taken pursuant to a direction, request or approval given
by Company which is contemplated by, and in conformity with, the terms of the
Plan or this Trust and is given in writing by Company. In the event of a dispute
between Company and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in connection with
this Trust, Company agrees to indemnify Trustee against Trustee's costs,
expenses and liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such payments. If
Company does not pay such costs, expenses and liabilities in a reasonably timely
manner, Trustee may obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be counsel for Company
generally) with respect to any of its duties or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any of
its duties or obligations hereunder, provided only that such action shall be
approved by Company in advance.
(e) Trustee shall have, without exclusion, all powers conferred on Trustees by
applicable law, unless expressly provided otherwise herein, provided, however,
that if an insurance policy is held as an asset of the Trust, Trustee shall have
no power to name a beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different form) other
than to a successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 9. Compensation and Expenses of Trustee.
Company shall pay all administrative and Trustee's fees and expenses. If not so
paid, the fees and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to Company, which shall be
effective as agreed to by Trustee and Company but no later than thirty (30) days
after receipt of such notice.
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(b) Trustee may be removed by Company on three days notice or upon shorter
notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within fourteen days after receipt of notice of
resignation, removal or transfer, unless Company extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraph(s) (a) or (b) of this section. If no such appointment
has been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with Section 10(a) or (b)
hereof, Company may appoint any third party, such as a bank trust department or
other party that may be granted corporate trustee powers under state law, as a
successor to replace Trustee upon resignation or removal. The appointment shall
be effective when accepted in writing by the new Trustee, who shall have all of
the rights and powers of the former Trustee. The former Trustee shall execute
any instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any prior
Trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The successor Trustee shall not be responsible for and Company
shall indemnify and defend the successor Trustee from any claim or liability
resulting from any action or inaction of any prior Trustee or from any other
past event, or any condition existing at the time it becomes successor Trustee.
Section 12. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument executed by
Trustee and Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Plan or shall make the Trust revocable after it
has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan participants and
their beneficiaries are no longer entitled to benefits pursuant to the terms of
the Plan unless sooner revoked in accordance with Section 1(b) hereof. Upon
termination of the Trust any assets remaining in the Trust shall be returned to
Company.
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(c) Upon written approval of participants or beneficiaries entitled to payment
of benefits pursuant to the terms of the Plan, Company may terminate this Trust
prior to the time all benefit payments under the Plan have been made. All assets
in the Trust at termination shall be returned to Company.
(d) Sections one through fourteen of this Trust Agreement may not be amended by
Company for two years following a Change of Control, as defined herein.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be ineffective
to the extent of any such prohibition, without invalidating the remaining
provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under this
Trust agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance with
the laws of California.
(d) For purposes of this Trust, 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 or other affiliates, 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; or
(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
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adoption of this Plan, or any successor, affiliate or associate of such
owner) becomes the "beneficial owner" (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.
Section 14. Effective Date.
The effective date of this Trust Agreement shall be January 30, 2000.
IN WITNESS WHEREOF, the undersigned have executed this Trust Agreement by
written consent this ____ day of ____________, 2000
________________________________________ ________________________________
For Gemstar International Group Limited For __________________________
________________________________________ ________________________________
Title Title
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Appendix A
The following nonqualified deferred compensation plan maintained by Gemstar
International Group Limited are the object of the Trust Agreement to which this
Appendix A is attached:
. The Gemstar International Group Limited Deferred Compensation Plan
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