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EXHIBIT 1
COMPANY OPTION AGREEMENT
This COMPANY OPTION AGREEMENT (this "AGREEMENT") is entered into as
of December 23, 1996, by and between StarSight Telecast, Inc., a California
corporation ("ISSUER"), and Gemstar International Group Limited, a British
Virgin Islands corporation
("GRANTEE").
BACKGROUND
A. Issuer, Grantee and a wholly-owned subsidiary of Grantee (the
"PURCHASER"), are entering into an Agreement and Plan of Merger of even date
herewith (the "MERGER AGREEMENT") providing for, among other things, the merger
of Purchaser with and into Issuer.
B. To induce Grantee and Purchaser to enter into the Merger
Agreement, Issuer has agreed to grant this Option to Grantee.
AGREEMENT
In consideration of the foregoing, and of the representations,
warranties, covenants and agreements contained herein, Issuer and Grantee hereby
agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "OPTION") to
purchase 5,276,034 shares (the "OPTION SHARES") of Common Stock, no par value,
of Issuer ("ISSUER COMMON STOCK") in the manner set forth below at a purchase
price of $10.46 per Option Share (the "PURCHASE PRICE").
2. EXERCISE OF OPTION.
2.1 Grantee may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event (as
defined below) and prior to termination as set forth in SECTION 10.11.
2.2 As used herein, a "PURCHASE EVENT" means any termination of the
Merger Agreement pursuant to Section 7.1(h), (j) or (l) thereof.
2.3 If Grantee wishes to exercise the Option at such time as the
Option is exercisable, it shall send to Issuer a written notice (the date of
which being herein referred to as the "NOTICE DATE") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than 15
business days from the Notice Date for the closing of such purchase (the
"CLOSING DATE"); provided that if the closing of
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the purchase and sale pursuant to the Option (the "CLOSING") cannot be
consummated by reason of any applicable judgment, decree, order, law or
regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
limiting the foregoing, that if prior notification to or approval of any
regulatory authority or shareholders of the Issuer is required in connection
with such purchase, Grantee shall promptly file the required notice or
application for approval and shall expeditiously process the same (and Issuer
shall cooperate with Grantee in the filing of any such notice or application and
the obtaining of any such approval), and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which, as the
case may be, (A) any required notification period has expired or been terminated
or (B) such approval has been obtained, and in either event, any requisite
waiting period has passed.
2.4 Notwithstanding SUBSECTION 2.3, in no event shall any Closing
Date be more than six months after the related Notice Date, and if the Closing
Date shall not have occurred within six months after the related Notice Date due
to the failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired. In the event (i)
Grantee receives official notice that an approval of any regulatory authority
required for the purchase of Option Shares would not be issued or granted or
(ii) a Closing Date shall not have occurred within six months after the related
Notice Date due to the failure to obtain any such required approval, Grantee
shall nevertheless be entitled to exercise its right as set forth in SECTION 7
or to exercise the Option in connection with the resale of Issuer Common Stock
or other securities pursuant to a registration statement as provided in SECTION
8. The provisions of this SECTION 2 and SECTION 3 shall apply with appropriate
adjustments to any such exercise.
3. PAYMENT AND DELIVERY OF CERTIFICATES.
3.1 On each Closing Date, Grantee shall pay to Issuer in immediately
available funds by wire transfer to a bank account designated by Issuer an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date.
3.2 At each Closing, simultaneously with the delivery of immediately
available funds as provided in SUBSECTION 3.1, Issuer shall deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Closing, which Option Shares shall be free and clear of all liens, claims,
charges and encumbrances of any kind whatsoever, and Grantee shall deliver to
Issuer a letter making the representations set forth in Section 5.2 hereinbelow
and agreeing that Grantee shall
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not offer to sell or otherwise dispose of such Option Shares in violation of
applicable law and shall represent and warrant that it and/or its advisors have
sufficient knowledge and experience in business and financial matters to
evaluate the Issuer, to evaluate the risk of an investment in the Option Shares,
to make an informed investment decision with respect thereto, and to protect its
interests in connection with its investment in the Option Shares without need
for the additional information which would be required to be included in a more
complete registration statement effective under the Securities Act. The Grantee
shall further acknowledge and agree that it and/or its advisors have had an
opportunity to ask questions of and to receive answers from officers and other
representatives of the Issuer and to obtain additional information in writing to
the extent that the Issuer possesses such information or could acquire it
without unreasonable effort or expense; (i) relative to the Issuer and the
Option Shares; and (ii) necessary to verify the accuracy of any information,
documents, projections, and books and records furnished.
3.3 Certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
EITHER (I) THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR (II) ANY
APPLICABLE STATE LAW GOVERNING THE OFFER AND SALE OF SECURITIES. NO
TRANSFER OR OTHER DISPOSITION OF THESE SHARES, OR OF ANY INTEREST THEREIN,
MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND SUCH OTHER STATE LAWS OR PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THE ACT, SUCH OTHER STATE LAWS, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF ISSUER. Except as set forth in
the Company Disclosure Letter (as defined in the Merger Agreement), Issuer
hereby represents and warrants to Grantee as follows:
4.1 DUE AUTHORIZATION. Issuer has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all
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necessary corporate action on the part of Issuer. This Agreement has been duly
executed and delivered by Issuer and constitutes a valid and binding obligation
of Issuer, enforceable against Issuer in accordance with its terms.
4.2 AUTHORIZED STOCK. Issuer has taken all necessary corporate and
other action to authorize and reserve for issuance, upon exercise of the Option,
shares of Issuer Common Stock necessary for Grantee to exercise the Option, and
Issuer will take all necessary corporate action to authorize and reserve for
issuance all additional shares of Issuer Common Stock or other securities which
may be issued pursuant to SECTION 6 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock or other securities which may be
issuable pursuant to SECTION 6 upon issuance pursuant hereto, shall be duly and
validly issued, fully paid and nonassessable, and shall be delivered free and
clear of all liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any shareholder of Issuer.
4.3 NO CONFLICTS. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with or violate any provision of the Articles of Incorporation or
By-laws of Issuer or any material agreement or obligation of Issuer.
5. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby
represents and warrants to Issuer that:
5.1 DUE AUTHORIZATION. Grantee has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee and constitutes a valid and binding
obligation of Grantee, enforceable against Grantee in accordance with its terms.
5.2 PURCHASE NOT FOR DISTRIBUTION. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will be acquired for
investment and not with a view to the public distribution thereof and will not
be transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
6.1 In the event of any change in Issuer Common Stock by reason of a
stock dividend, split-up, recapitalization, combination, exchange of shares or
similar transaction, the type and number of shares or securities subject to the
Option shall be
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adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction, so that Grantee shall receive upon exercise of the
Option and payment of the aggregate Purchase Price hereunder the number and
class of shares or other securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been exercised in full
immediately prior to such event, or the record date therefor, as applicable.
Whenever the number of shares of Issuer Common Stock purchasable upon exercise
of the Option is adjusted as provided in this SECTION 6, the Purchase Price
shall be adjusted by multiplying the Purchase Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Issuer Common Stock purchasable after the adjustment.
6.2 (a) In the event that Issuer shall enter into an agreement
(other than the Merger Agreement) (a) to consolidate with or merge into any
person, other than Purchaser or one of its subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (b) to
permit any person other than Purchaser or one of its subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Issuer Common Stock
shall be changed into or exchanged for stock or other securities of Issuer or
any other person or cash or any other property or then outstanding shares of
Issuer Common Stock shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the surviving corporation or (c) to
sell or otherwise transfer all or substantially all of its assets to any person,
other than Purchaser or one of its subsidiaries, then, and in each such case,
proper provision shall be made in the agreements governing such transaction so
that Purchaser shall receive upon exercise of the Option the number and class of
shares or other securities or property that Purchaser would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such transaction, or the record date thereof, as applicable, and
elected, to the fullest extent it would have been permitted to elect, to receive
such securities, cash or other property.
(b) The provisions of this Agreement, including, without limitation,
Sections 7 and 8, shall apply with appropriate adjustments to any securities for
which the Option becomes exercisable pursuant to Section 6.2(a).
7. REPURCHASE.
7.1 If a Purchase Event shall have occurred, Purchaser shall have
the right, upon five business days' prior written notice to Issuer (or any
successor in interest to Issuer by merger, sale of all or substantially all of
the assets, or otherwise) (the "Put Notice"), to cause Issuer (or any successor
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in interest to Issuer by merger, sale of all or substantially all of the assets,
or otherwise) to have a Closing and to pay at such closing (and Issuer and such
successor, jointly and severally, shall be obligated to pay to Purchaser in
consideration for the cancellation of the Option) an aggregate cancellation
price (the "Cancellation Price") equal to the product of (x) the number of
shares of Issuer Common Stock as to which the Option remains exercisable
multiplied by (y) the excess of (i) the average per share closing price of
shares of Issuer Common Stock as quoted on NASDAQ (NMS) (or if not then quoted
thereon, on such other quotation system or exchange on which Issuer Common Stock
is quoted) for the period of five trading days ending on the trading day
immediately prior to the occurrence of the Put Notice over (ii) the Purchase
Price.
7.2 At any closing contemplated by the Put Notice, Issuer shall pay
to Purchaser the Cancellation Price for the number of shares of Issuer Common
Stock as to which the Option is to be cancelled by delivering to Purchaser a
certified or bank check payable to or on the order of Purchaser in an amount
equal to the Cancellation Price.
8. REGISTRATION RIGHTS. Issuer shall, if requested by Grantee at any
time and from time to time within three years of the first exercise of the
Option, use its reasonable best efforts to, as expeditiously as possible,
prepare and file up to two registration statements under the Securities Act if
such registration is necessary in order to permit the sale or other disposition
of any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Grantee,
including a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision, and Issuer shall use its best efforts to qualify
such shares or other securities under any applicable state securities laws. Such
request shall be for a minimum of 1% of Issuer's outstanding Common Stock.
Grantee agrees to use all reasonable efforts to cause, and to cause any
underwriters of any sale or other disposition to cause, any sale or other
disposition pursuant to such registration statement to be effected on a widely
distributed basis so that upon consummation thereof no purchaser or transferee
shall own beneficially more than 2% of the then outstanding voting power of
Issuer. Issuer shall use all reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties which are required therefor and to keep such registration statement
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sale or other disposition. In the event that Grantee requests Issuer
to file a registration statement following the failure to obtain a required
approval for an exercise of the Option as described in SUBSECTION 2.4, the
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closing of the sale or other disposition of Issuer Common Stock or other
securities pursuant to such registration statement shall occur substantially
simultaneously with the exercise of the Option. Any registration statement
prepared and filed under this SECTION 8, and any sale covered thereby, shall be
at Issuer's expense except for underwriting discounts or commissions, brokers'
fees and the fees and disbursements of Grantee's counsel related thereto.
Grantee shall provide all information concerning itself and the proposed sale or
distribution as shall reasonably be required in order to ensure compliance with
the requirements of the Securities Act as reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If during the
time periods referred to in the first sentence of this SECTION 8 Issuer effects
a registration under the Securities Act of Issuer Common Stock for its own
account or for any other shareholders of Issuer (other than on Form S-4 or Form
S-8, or any successor form), it shall allow Grantee the right to participate in
such registration, and such participation shall not affect the obligation of
Issuer to effect two registration statements for Grantee under this SECTION 8;
provided that, if the managing underwriters of such offering advise Issuer in
writing that in their opinion the number of shares of Issuer Common Stock
requested to be included in such registration exceeds the number which can be
sold in such offering Grantee shall reduce the number of shares included therein
down to 20% of the number of shares intended to be included therein, if
necessary, and thereafter Issuer shall reduce the number of shares included
therein by any further amount deemed necessary by the managing underwriters, if
any. In connection with any registration pursuant to this SECTION 8, Issuer and
Grantee shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification and
contribution and holdback agreements in connection with such registration.
9. LISTING. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on any national securities
exchange or national market system, Issuer will promptly file an application to
list the shares of Issuer Common Stock or other securities to be acquired upon
exercise of the Option on such exchange or system and will use its reasonable
best efforts to obtain approval of such listing as soon as practicable.
10. MISCELLANEOUS.
10.1 EXPENSES. Except as otherwise provided in SECTION 8, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
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10.2 WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
10.3 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY,
ETC. Except as otherwise set forth in the Merger Agreement, this Agreement
(including the Merger Agreement and the other documents and instruments referred
to herein) (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a Federal or state regulatory agency 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. If for any reason such court or
regulatory agency determines that the Option does not permit Grantee to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in SECTIONS 2 and 7 (as adjusted pursuant to SECTION
6), it is the express intention of Issuer to allow Grantee to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
10.4 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of California without regard to any
applicable conflicts of law rules.
10.5 DESCRIPTIVE HEADINGS. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.6 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
10.7 COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed by
each of the
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parties and delivered to the other party, it being understood that both parties
need not sign the same counterpart.
10.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by
Issuer (whether by operation of law or otherwise) without the prior written
consent of Grantee. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
10.9 FURTHER ASSURANCES. In the event of any exercise of the Option
by Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
10.10 SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
10.11 TERMINATION. The Option shall terminate and be of no further
force and effect upon the earliest to occur of (i) the consummation of the
transactions contemplated by the Merger Agreement, (ii) the later to occur of
(a) 18 months from the date hereof, and (b) the closing date of any Company
Takeover Proposal plus 30 days, or (iii) the payment by the Company and the
receipt by Parent of the Company Termination Fee. The rights set forth in
SECTIONS 7 and 8 shall not terminate when the right to exercise the Option
terminates as set forth herein, but shall extend to such time as is provided in
SECTIONS 7 and 8, respectively. Notwithstanding the termination of the Option,
Grantee shall be entitled to purchase those Option Shares with respect to which
it has exercised the Option in accordance with the terms hereof prior to the
termination of the Option.
10.12 CERTAIN DEFINITIONS. Capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
day and year first written above.
"ISSUER"
StarSight Telecast, Inc.
By: /s/ XXXXX X. XXXXXXXX
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Name: Xxxxx X. Xxxxxxxx
Title: Chief Executive Officer
"GRANTEE"
Gemstar International Group Limited
By: /s/ XXXXX XXXX
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Name: X. Xxxx
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Title: CEO
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[Company Option Agreement]
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