Skymall Inc – ‘PREM14A’ on 5/29/01

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Preliminary Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Notice and Proxy Statement                           141    693K 

Document Table of Contents

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          SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities 
Exchange Act of 1934  

Filed by the Registrant [X]                                                     

Filed by a Party other than the Registrant [_]                                  

Check the appropriate box:                                                      

[X]  Preliminary Proxy Statement               [_]  Confidential, for use of the
                                  Commission

[_]  Definitive Proxy Statement                                                 

[_]  Definitive Additional Materials                                            

[_]  Soliciting Material Pursuant to Rule 14A-11(c) or Rule 14a-12              

SKYMALL, INC.*  
------------    
(Name of Registrant as Specified In Its Charter)  

------------------------------------------------  

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)  

Payment of Filing Fee (Check the appropriate box):                              

[_]  No fee required                                                            

[X]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.   

(1) Title of each class of securities to which transaction applies:   

Common Stock, par value $.001 per share                       
---------------------------------------                       

(2) Aggregate number of securities to which transaction applies:      

16,723,953 (A)                                                
--------------                                                

(3) Per unit price or other underlying value of transaction computed  
   pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

$2.81 (B)                                                     
---------                                                     

(4) Proposed maximum aggregate value of transaction:                  

$46,994,308 (B)                                               
---------------                                               

(5) Total fee paid:                                                   

$9,398.86                                                     
---------                                                     

         (A) Based on the sum of 15,821,711 shares of SkyMall, Inc. common stock
       outstanding and 902,242 shares of SkyMall, Inc. common stock issuable
         upon the exercise of certain options and warrants and other contractual
arrangements.                                                 

       (B) Based on the average of the high and low sales prices of SkyMall,
    Inc. common stock on the Nasdaq National Market tier of the Nasdaq
   Stock Market ("Nasdaq") on May 24, 2001, as reported in published
financial sources.                                            

[_]  Fee paid previously with preliminary materials.                            

_______________________________________________________________                 

[_]  Check box if any part of the fee is offset as provided by Exchange         
  Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
     was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.           

(1) Amount Previously Paid: $______________                           

(2) Form, Schedule or Registration Statement No.:________________     

(3) Filing Party:________________                                     

(4) Date Filed:__________________                                     

_________                                                                       

*    This proxy statement also constitutes the prospectus of Gemstar - TV Guide 
International, Inc. ("Gemstar"). Accordingly, Gemstar is the registrant with    
respect to the Form S-4 registration statement to be filed under the Securities 
Act of 1933, as amended, with the Securities and Exchange Commission to register
the shares of Gemstar common stock to be issued under the Agreement and Plan of 
Merger to which this proxy statement relates, included as Annex A to this proxy 
statement.                                                                      

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PRELIMINARY COPY  

SKYMALL, INC. 
1520 East Pima Street 
Phoenix, AZ 85034 

June __, 2001 

To Our Stockholders:                                                            

       You are cordially invited to attend a special meeting of stockholders
of SkyMall, Inc. to be held at SkyMall's corporate offices located at 1520 East 
Pima Street, Phoenix, Arizona 85304 on June ___, 2001 at 9:00 a.m. local time.  

         At the special meeting, you will be asked to vote on the approval of an
Agreement and Plan of Merger, dated as of May 14, 2001, among Gemstar -TV Guide 
International, Inc. ("Gemstar"), GSky Acquisition Sub, Inc., a wholly owned     
subsidiary of Gemstar, and SkyMall, under which SkyMall will merge with and into
GSky Acquisition Sub. GSky Acquisition Sub will continue as the surviving       
corporation and change its name to "SkyMall, Inc."                              

         As a result of the merger, you will be entitled to receive 0.03759 of a
share of Gemstar common stock and $1.50 in cash for each share of SkyMall common
stock you own immediately prior to the merger.                                  

         Our board of directors has approved the merger agreement and the merger
and believes it is in the best interests of SkyMall and its stockholders.       
Accordingly, the board of directors recommends that you vote FOR the proposal to
approve the merger agreement and the merger at the special meeting.             

       The attached notice of special meeting and proxy statement/prospectus
explain the proposed merger and provide specific information concerning the     
special meeting. Please read these materials carefully. Do not send any         
certificates representing your SkyMall common stock at this time.               

      The affirmative vote of the holders of a majority of the outstanding
shares of SkyMall's common stock is required to approve the merger agreement and
the merger. My family and I control approximately 30% of the common stock       
outstanding, and we have agreed to vote all of our shares in favor of the       
proposal to approve the merger agreement and the merger. It is a requirement of 
Gemstar that all of our shares be exchanged for Gemstar common stock, which we  
will then hold according to the terms of a five-year lock-up agreement. Unlike  
other stockholders, my family and I will not receive any cash in the merger. For
each share of SkyMall common stock we hold, my family and I will receive 0.03759
of a share of Gemstar common stock plus an additional fraction of a share       
determined by dividing $1.50 by the volume weighted average sale price of a     
share of Gemstar common stock on the closing date of the merger.                

       Whether or not you plan to attend the special meeting, we urge you to
complete, sign and promptly return the enclosed proxy card to assure that your  
shares will be voted at the special meeting. Failure to return a properly       
executed proxy card and/or to vote at the special meeting will have the same    
effect as a vote against approval of the merger agreement and the merger.       

Sincerely,  

     Robert M. Worsley
           Chief Executive Officer

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WE URGE YOU TO CONSIDER THOSE MATTERS SET FORTH UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE __ OF THE ACCOMPANYING PROXY  
STATEMENT/PROSPECTUS. 

      Neither the United States Securities and Exchange Commission nor any
state securities commission has approved or disapproved the shares of Gemstar   
common stock to be issued in the merger or determined if this proxy             
statement/prospectus is accurate or adequate. Any representation to the contrary
is a criminal offense.                                                          

     This proxy statement/prospectus is dated June __, 2001 and is first
expected to be mailed to SkyMall stockholders on or about June __, 2001.        

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REFERENCE TO ADDITIONAL INFORMATION 

       This proxy statement/prospectus "incorporates by reference" important
business and financial information about SkyMall and Gemstar from documents that
are not included in or delivered with this proxy statement/prospectus. You may  
obtain documents incorporated by reference in this proxy statement/prospectus   
without charge by requesting them in writing or by telephone from the           
appropriate company at the following addresses:                                 

       SkyMall, Inc.                  Gemstar-TV Guide International, Inc.
    1520 East Pima Street             135 North Los Robles Avenue, Suite 800
Phoenix, AZ 85034                         Pasadena, CA 91101    
Tel: (602) 254-9777                       Tel: (626) 792-5700     
Attn: Corporate Secretary                 Attn: Corporate Secretary     

       In order to obtain the documents in time for the special meeting, you
must request the documents from us by June __, 2001, which is five business days
prior to the date of the special meeting.                                       

    For a more detailed description of the information incorporated by
reference into this proxy statement/prospectus and how you may obtain it, see   
"Summary - Where You Can Find More Information" on page __.                     

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SKYMALL, INC. 
1520 East Pima Street 
Phoenix, AZ 85034 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 
To Be Held on June __, 2001 

To the Stockholders of SkyMall, Inc.:                                           

    A special meeting of stockholders of SkyMall, Inc. will be held at
SkyMall's corporate offices located at 1520 East Pima Street, Phoenix, Arizona  
85304 on June __, 2001 at 9:00 a.m. local time, for the following purposes:     

  1. To consider and vote upon a proposal to approve the merger of
SkyMall with a wholly-owned subsidiary of Gemstar-TV Guide    
     International, Inc. ("Gemstar") and adopt the Agreement and Plan of
       Merger, dated as of May 14, 2001, among Gemstar GSky Acquisition Sub,
Inc., and SkyMall, under which:                               

             .    SkyMall will be merged with GSky Acquisition Sub, and GSky
            Acquisition Sub will continue as the surviving corporation and
      change its name to "SkyMall, Inc." and be a wholly-owned
subsidiary of Gemstar; and                        

            .    each issued and outstanding share of SkyMall common stock
               will be converted into and represent the right to receive 0.03759
            of a share of Gemstar common stock and $1.50 in cash; however,
               each share of SkyMall common stock held by Robert M. Worsley, his
          spouse and a trust for the benefit of their children will be
               entitled to receive the same 0.03759 of a share of Gemstar common
               stock to be received by other stockholders plus the fraction of a
               share of Gemstar common stock determined by dividing $1.50 by the
             volume weighted average sale price of a share of Gemstar common
stock on the closing date of the merger; and      

   2. To transact any other business as may properly come before the
   special meeting or any adjournment or postponement of the special
meeting.                                                      

         Our board of directors has approved the merger agreement and the merger
and recommends that you vote FOR approval of the merger agreement and the       
merger. These proposals are described in more detail in the accompanying proxy  
statement/prospectus, which you should read in its entirety before voting. A    
copy of the merger agreement is attached as Annex A to the accompanying proxy   
statement/prospectus.                                                           

       Only stockholders of record at the close of business on June __, 2001
are entitled to notice of the special meeting and to vote at the special meeting
and at any adjournments thereof. For ten days prior to the special meeting, a   
complete list of stockholders entitled to vote at the special meeting will be   
available for examination by any stockholder for any purpose germane to the     
special meeting during ordinary business hours at the principal executive       
offices of SkyMall located in Phoenix, Arizona.                                 

      All SkyMall stockholders are cordially invited to attend the special
meeting in person. However, to ensure your representation at the special        
meeting, you are urged to complete, sign and return the enclosed proxy card as  
promptly as possible in the enclosed postage-prepaid envelope or to vote        
telephonically or electronically via the Internet as provided on the attached   
proxy card. You may revoke your proxy in the manner described in the            
accompanying proxy statement/prospectus at any time before it is voted at the   
special meeting. If you fail to return a properly executed proxy card or to vote
telephonically, electronically, or in person at the special meeting, the effect 
will be a vote against the proposal to approve the merger agreement and the     
merger.                                                                         

                         By order of the board of directors,

           Christine A. Aguilera
Secretary 

Phoenix, Arizona                                                                
June __, 2001                                                                   

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 TABLE OF CONTENTS

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                                                                                                                     Page
                                                                                                                     ----
                                                                                                                         
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS...............................................................................1
SUMMARY ................................................................................................................4
RISK FACTORS...........................................................................................................17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS......................................................................23
THE COMPANIES INVOLVED IN THE MERGER...................................................................................24
         SkyMall, Inc..................................................................................................24
         Gemstar-TV Guide International, Inc...........................................................................24
         Gsky Acquisition Sub, Inc.....................................................................................25
THE SPECIAL MEETING....................................................................................................26
THE MERGER.............................................................................................................29
         Background of the Merger......................................................................................29
         SkyMall's Reasons for the Merger..............................................................................30
         Recommendation of SkyMall's Board of Directors................................................................32
         Opinion of SkyMall's Financial Advisor........................................................................32
         Gemstar's Reasons for the Merger..............................................................................38
         Accounting Treatment..........................................................................................38
         Interests of SkyMall's Officers and Directors in the Merger...................................................39
         Indemnification and Insurance.................................................................................40
         Material U.S. Federal Income Tax Consequences of the Merger...................................................40
         Delisting and Deregistration of SkyMall Common Stock..........................................................43
         Regulatory Matters............................................................................................43
         Restrictions on Sales by Affiliates of SkyMall................................................................43
THE MERGER AGREEMENT...................................................................................................45
         Structure of Merger...........................................................................................45
         Merger Consideration..........................................................................................45
         Effective Time of the Merger..................................................................................45
         Conversion of Shares in the Merger............................................................................45
         Exchange Agent; Procedures for Exchange of Certificates.......................................................46
         Treatment of SkyMall Stock Options in the Merger..............................................................46
         Treatment of Warrants in the Merger...........................................................................47
         Conditions to Completing the Merger...........................................................................47
         Conduct of SkyMall's Business Pending the Merger..............................................................49
         Other Covenants...............................................................................................51
         Indemnification of SkyMall Directors and Officers.............................................................52
         Termination...................................................................................................53
         No Solicitation; Termination Fee..............................................................................54
         Representations and Warranties................................................................................55
         Amendment, Extension and Waiver...............................................................................56
         Expenses......................................................................................................56
OTHER AGREEMENTS.......................................................................................................58
         Voting Agreement..............................................................................................58

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                                                        [Enlarge/Download Table]
                                                                                                                         
         Lock-up Agreement.............................................................................................58
         Option Agreement..............................................................................................58
         Worsley Employment Agreement..................................................................................59
COMPARISON OF RIGHTS OF STOCKHOLDERS...................................................................................60
SUBMISSION OF STOCKHOLDER PROPOSALS....................................................................................70
EXPERTS................................................................................................................70
LEGAL MATTERS..........................................................................................................70
ANNEX A-Agreement and Plan of Merger..................................................................................A-1
ANNEX B-Opinion of Robertson Stephens, Inc............................................................................B-1

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QUESTION AND ANSWERS ABOUT THE PROPOSALS? 

Q:   What will I receive in the merger?                                         

A:   If we complete the merger, you will receive 0.03759 of a share of Gemstar  
     common stock and $1.50 in cash in exchange for each share of SkyMall common
     stock that you hold on the date of the merger. We will not issue fractional
 shares of Gemstar common stock in the merger. Instead, you will receive
    cash in an amount determined by multiplying the fraction of Gemstar common
stock by $39.90. However, to ensure that the merger qualifies as a    
  reorganization within the meaning of Section 368 of the Internal Revenue
     Code, the consideration you receive may be adjusted to ensure that at least
   45% in value of the consideration paid to all SkyMall stockholders at the
  time of the merger consists of Gemstar common stock. Had the merger been
   effected on June __, 2001, the Gemstar stock issuable in the merger would
have represented approximately ___% of the overall value of the merger
consideration payable to SkyMall stockholders as of that date.        

Q:   Why will Robert Worsley receive different consideration in the merger for  
his SkyMall shares?                                                   

A:   Mr. Worsley will continue as SkyMall's CEO after the merger, and it is a   
condition of Gemstar that he receive only Gemstar stock in the merger.
  Therefore, unlike other SkyMall stockholders, Mr. Worsley and his family
    will receive no cash in the merger. To encourage Mr. Worsley to contribute
     to the long-term goals of the merger, his shares, as well as those owned by
    his wife and a trust for the benefit of their children, will be subject to
 a five-year lock-up agreement with Gemstar. In order to ensure that the
     different consideration being received by the Worsleys is fair to SkyMall's
    public stockholders, the additional number of shares of Gemstar stock they
  will receive will equal the number of shares of Gemstar stock they could
   purchase at the time of the merger with the cash consideration they would
 receive were they treated the same as other SkyMall stockholders in the
merger.                                                               

    For a more complete description of what you will receive in the merger and
   what Robert M. Worsley and his family will receive in the merger, see the
section entitled "The Merger - Consideration."                        

Q:   Does SkyMall's board of directors recommend voting in favor of the merger  
agreement and the merger?                                             

A:   Yes. After careful consideration, your board of directors has determined   
    that the merger is fair to you and in your best interests as a stockholder
of SkyMall. SkyMall's board of directors has unanimously approved the 
     merger agreement and the merger and unanimously recommends that you vote in
favor of the merger agreement and the merger.                         

For a more complete description of the recommendation of and factors  
   considered by SkyMall's board of directors, see the section entitled "The
Merger- SkyMall's Reasons for the Merger."                            

Q:   Will I recognize a taxable gain or loss for U.S. federal income tax        
purposes in the merger?                                               

A:   It is a non-waivable condition of the merger that SkyMall and Gemstar      
    receive an opinion at closing from their respective legal counsel that the
merger will qualify for U.S. federal income tax purposes as a         
  reorganization within the meaning of Section 368 of the Internal Revenue
Code. Assuming that the merger so qualifies, in general, a SkyMall    
    stockholder will not recognize loss, but will recognize gain to the extent
of the lesser of:                                                     

.    the cash received; or                                            

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   .    the excess of the sum of the fair market value of the Gemstar common
         stock and the amount of cash received over the stockholder's adjusted
        tax basis in the shares of SkyMall common stock that the stockholder
  surrenders in exchange for that Gemstar common stock and cash.

   Under certain circumstances, gain recognized by a SkyMall stockholder may
be treated as a dividend, and thus as ordinary income rather than as  
capital gain.                                                         

    Tax matters are very complicated and the tax consequences of the merger to
    each SkyMall stockholder will depend on the stockholder's particular facts
and circumstances. We strongly encourage you to consult your own tax  
advisor to determine your particular tax consequences.                

    For a more complete description of the tax consequences of the merger, see
the section entitled "The Merger - Material U.S. Federal Income Tax   
Consequences of the Merger."                                          

Q:   Are there risks I should consider in deciding whether to vote for the      
merger?                                                               

A:   Yes. For example, the number of shares of Gemstar common stock that you    
 will receive in the merger will not be adjusted based on changes in the
   market price of Gemstar common stock before the completion of the merger.
    As a result, you will not know the value of the shares you will receive in
    the merger at the time you vote on the merger. SkyMall is not permitted to
     "walk away" from the merger or resolicit the vote of its stockholders based
on changes in the market price of Gemstar common stock. We urge you to
     obtain current market quotations of Gemstar common stock (Nasdaq: GMST) and
   SkyMall common stock (Nasdaq: SKYM). In evaluating the merger, you should
carefully consider these and other factors discussed in the section   
 entitled "Risk Factors." You should also see the sections entitled "The
Merger - SkyMall's Reasons for the Merger" and "-Recommendation of    
SkyMall's Board of Directors."                                        

Q:   What do I need to do now?                                                  

A:   We urge you to read this proxy statement/prospectus carefully, including   
   its annexes, and to consider how the merger affects you as a stockholder.
You may also want to review the documents referenced under "Summary   
Where You Can Find More Information."                                 

Q:   How do I vote?                                                             

A:   Simply indicate on your proxy card how you want to vote, and sign and mail 
     your proxy card in the enclosed return envelope as soon as possible so that
your shares may be represented at the special meeting. If you do not  
  include instructions on how to vote your proxy, we will vote your shares
   "FOR" approval and adoption of the merger agreement and the merger unless
your shares are held in a brokerage account (see the next Question and
   Answer regarding shares held by brokers in "street name"). If you fail to
return your proxy card or to vote in person, the effect will be a vote
     against the merger agreement and the merger. You may also vote by telephone
or the Internet, as described on your proxy card. For a more complete 
     description of voting at the meeting, see the section entitled "The Special
Meeting-Proxies."                                                     

Q:   If my shares are held in "street name" by my broker, will my broker vote my
shares for me?                                                        

A:   Your broker will vote your shares only if you provide instructions on how  
   to vote in accordance with the information and procedures provided to you
    by your broker. If you do not instruct your broker to vote your shares, it
   will be equivalent to voting against the merger agreement and the merger.

     For a more complete description of voting shares held in "street name," see
the section entitled "The Special Meeting-Proxies."                   

Q:   What do I do if I want to change my vote?                                  

A:   If you want to change your vote, send the secretary of SkyMall a later-    
   dated, signed proxy card before the special meeting or attend the meeting
and vote in person. You may also                                      

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 revoke your proxy by sending written notice to the secretary of SkyMall
before the meeting.                                                   

     For a more complete description of how to change your vote, see the section
entitled "The Special Meeting-Proxies."                               

Q.   Should I send in my stock certificates now?                                

A:   No. After we complete the merger, we will send you written instructions for
exchanging your SkyMall stock certificates for Gemstar common stock   
   certificates and the cash portion of the merger consideration, which will
be paid by check.                                                     

Q:   When do you expect to complete the merger?                                 

A:   Subject to stockholder approval, we expect to complete the merger promptly 
after the special meeting.                                            

  For a description of the conditions to completion of the merger, see the
section entitled "The Merger Agreement-Conditions to Completing the   
Merger."                                                              

Q:   Am I entitled to appraisal rights?                                         

A:   Under Nevada law, you do not have the right to an appraisal of the value of
your shares of SkyMall common stock in connection with the merger.    

Q:   Whom should I call with questions?                                         

A:   You should call SkyMall's Investor Relations department at (602) 254-9777  
with any questions about the merger.                                  

   You may also obtain additional information about SkyMall and Gemstar from
documents filed by them with the Securities and Exchange Commission by
    following the instructions in the section entitled "Summary--Where You Can
Find More Information.".                                              

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SUMMARY 

This summary highlights selected information from this proxy
statement/prospectus and may not contain all the information that is important  
to you. To better understand the merger, you should read this entire document   
carefully, including the Agreement and Plan of Merger, which is attached as     
Annex A, and the other documents to which we refer you. In addition, we         
incorporate by reference in this proxy statement/prospectus important business  
and financial information about SkyMall and Gemstar. You may obtain the         
information incorporated by reference into this proxy statement/prospectus      
without charge by following the instructions in the section entitled "-Where You
Can Find More Information" on page __.                                          

The Companies:                                                                  

SkyMall, Inc.                                                                   
1520 East Pima Street                                                           
Phoenix, Arizona 85034                                                          
Tel: (602) 254-9777                                                             

SkyMall is a multi-channel specialty retailer that provides a large selection of
premium-quality products and services to consumers from a wide variety of       
merchants and partners. SkyMall is best known for its in-flight catalog, which  
is available on more than 73% of all domestic airlines, reaching approximately  
540 million domestic airline passengers annually. Through its skymall.com, inc. 
subsidiary, which operates the skymall.com Web site, SkyMall offers an expanded 
selection of products and services to online shoppers.                          

Gemstar- TV Guide International, Inc.                                           
135 North Los Robles Avenue                                                     
Suite 800                                                                       
Pasadena, California 91101                                                      
Tel: (626) 792-5700                                                             

Gemstar is a leading global technology and media company focused on consumer    
entertainment. Gemstar has three major business sectors: the Technology and     
Licensing Sector, the Interactive Platform Sector and the Media and Services    
Sector. Gemstar acquired TV Guide, Inc. ("TV Guide") on July 12, 2000. TV Guide 
is now a wholly owned subsidiary of Gemstar.                                    

The Proposed Merger (see page __)                                               

In the proposed merger, Gemstar will acquire SkyMall by merging SkyMall with a  
wholly owned subsidiary of Gemstar. Each SkyMall stockholder (other than the    
Worsleys) will be entitled to receive, for each share of SkyMall common stock   
owned by them immediately prior to the merger, $1.50 in cash and 0.03759 of a   
share of Gemstar common stock (plus cash in lieu of any fractional share after  
taking into account the total number of shares of Gemstar common stock issuable 
to them in the merger). In lieu of the cash portion of the merger consideration 
the Worsleys will receive additional shares of Gemstar common stock, equal to   
that number which they could purchase, as of the close of business on the date  
the proposed merger is closed, with the cash they otherwise would have received 
had they received the same merger consideration as all other SkyMall            
stockholders. All of the shares received by the Worsleys will be subject to the 
terms of a five-year lock-up agreement with Gemstar.                            

Recommendation of SkyMall's Board of Directors (see page __)                    

After careful consideration, your board of directors has determined that the    
merger is fair to you and in your best interests as a stockholder of SkyMall.   
SkyMall's board of directors has unanimously approved the merger agreement and  
the merger and unanimously recommends you vote in favor of the merger agreement 
and the merger.                                                                 

SkyMall's Reasons for the Merger (see page __)                                  

SkyMall's board of directors believes that the terms of the merger agreement and
the merger are fair to, and in the best interests of, SkyMall and its public    
stockholders. In reaching its decision, SkyMall's board of directors considered 
numerous factors, including the following:                                      

.    SkyMall's business, operations, prospects, projected financial   
   performance, and competitive position and current trends in the
catalog and specialty retailer industries;                  

.    the opinion of Robertson Stephens, Inc. to the board of directors
      dated May 14, 2001 as to the fairness of the merger consideration,
        from a financial point of view as of that date, to holders of shares
     of SkyMall common stock (other than Robert M. Worsley, Christi M.
          Worsley and/or Robert Merrill Worsley and Christi Marie Worsley Family
         Revocable Trust dated July 29, 1998, Gemstar or any of its affiliates
          and any dissenting stockholders) pursuant to the merger agreement; and

     .    the fact that Robert M. Worsley and Christi M. Worsley and a trust for
the                                                         

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   benefit of their children (SkyMall's principal stockholders and
     beneficial owners of approximately 30% of the outstanding shares)
          indicated that they were prepared to endorse the merger agreement, and
          that they expressly agreed to vote all of their shares in favor of the
merger.                                                     

Opinion of SkyMall's Financial Advisor (see page __)                            

SkyMall's financial advisor, Robertson Stephens, Inc., has rendered a written   
opinion to SkyMall's board of directors that, as of May 14, 2001, the merger    
consideration was fair, from a financial point of view, to holders of shares of 
SkyMall common stock (other than Robert M. Worsley, Christi M. Worsley and/or   
Robert Merrill Worsley and Christi Marie Worsley Family Revocable Trust dated   
July 29, 1998, Gemstar or any of its affiliates and any dissenting              
stockholders). The opinion is subject to the considerations,qualifications and  
limitations set forth in the opinion. The opinion is attached to this proxy     
statement/prospectus as Annex B and we urge you to read it in its entirety.     

The Merger Agreement (see page __)                                              

We have attached the merger agreement, which is the legal document that governs 
the merger, to this proxy statement/prospectus as Annex A. We encourage you to  
read the merger agreement carefully.                                            

Conditions to the Merger (see page __)                                          

We will complete the merger only if a number of mutual conditions are satisfied 
or waived, including the following:                                             

.    the merger agreement and the merger must be approved and adopted by      
SkyMall's stockholders at the special meeting; and                              

.    no law, judgement or other legal restraint is in effect preventing the   
merger from occurring as described in the merger agreement.                     

Gemstar's obligation to complete the merger is conditioned on the satisfaction  
or waiver of a number of conditions. These conditions may be waived only by     
Gemstar and include the following:                                              

 .    The representations and warranties by SkyMall in the merger agreement must
be true in all material respects;                                               

 .    SkyMall must have performed and complied in all material respects with all
its obligations under the merger agreement;                                     

.    no law may be in effect that:                                            

(1)  prohibits the parties from completing the merger;                

   (2)  imposes material damages or penalties in connection with the merger;

   (3)  as a result of completing the merger, requires Gemstar or SkyMall to
divest a material portion of its business or assets;        

 (4)  materially limits Gemstar's ability to own the common stock of the
surviving corporation in the merger;                        

    (5)  as a result of completing the merger, prohibits Gemstar from engaging
in any material business; or                                

   (6)  after completing the merger, is reasonably likely to have a material
   adverse effect on the business, financial condition, results of
operations or prospects of Gemstar;                         

.    SkyMall must have obtained all required consents and approvals from      
government authorities; and                                                     

.    nothing has occurred since the date of signing the merger agreement (May 
14, 2001) which could reasonably be expected to have a material adverse effect  
on the business, financial condition, results of operations or prospects of     
SkyMall.                                                                        

It is also a nonwaiveable condition that Gemstar receive an opinion from its    
counsel that the merger will qualify as a "reorganization" under Section 368 of 
the Internal Revenue Code.                                                      

SkyMall's obligation to complete the merger is conditioned on the satisfaction  
or waiver of a number of conditions, including the following:                   

 .    The representations and warranties by Gemstar in the merger agreement must
be true in all material respects;                                               

 .    Gemstar must have performed and complied in all material respects with its
obligations under the merger agreement; and                                     

.    no law may be in effect that:                                            

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(1)  prohibits the parties from completing the merger;                          

(2)  imposes material damages or penalties in connection with the merger;       

(3)  as a result of completing the merger, requires Gemstar to divest a material
portion of its business or assets, or materially limits Gemstar from engaging in
any material business; or                                                       

(4)  after completing the merger, is reasonably likely to have a material       
adverse effect on the business, financial condition, results of operations or   
prospects of Gemstar.                                                           

It is also a nonwaiveable condition that SkyMall receive an opinion from its    
counsel that the merger will qualify as a "reorganization" under Section 368 of 
the Internal Revenue Code.                                                      

Termination (see page __)                                                       

SkyMall and Gemstar can mutually agree to terminate the merger agreement at any 
time before the merger is completed.                                            

In addition, either SkyMall or Gemstar may terminate the merger agreement if any
of the following occurs:                                                        

 .   the parties do not complete the merger by September 30, 2001; however, this
right to terminate is not available to any party who is responsible for the     
failure of the merger to occur by that date or who has breached the merger      
agreement;                                                                      

.    a court or other governmental body permanently prohibits the merger; or  

.    SkyMall's stockholders do not approve and adopt the merger agreement and 
the merger at the special meeting; however, this right is not available to      
SkyMall if a third party takeover proposal is publicly announced prior to the   
special meeting unless SkyMall pays to Gemstar a $1,940,000 termination fee and 
reimburses Gemstar for certain of its expenses up to $500,000.                  

Gemstar may terminate the merger agreement if:                                  

.    SkyMall breaches any of its representations, warranties or obligations in
the merger agreement and cannot cure the breach within the time period specified
in the merger agreement; or                                                     

.    after May 14, 2001, a third party takeover proposal is publicly announced
or received by SkyMall, and either:                                             

(1)  SkyMall fails to submit the merger agreement and the merger to a           
stockholder vote at a meeting of SkyMall stockholders;                          

(2)  SkyMall's board of directors withholds, withdraws or modifies its          
recommendation to its stockholders to approve the merger agreement and the      
merger, in a manner that is adverse to Gemstar; or                              

(3)  the special meeting of SkyMall stockholders has been held and the SkyMall  
stockholders do not approve and adopt the merger agreement and the merger.      

SkyMall may terminate the merger agreement if:                                  

.    Gemstar breaches any of its representations, warranties or obligations in
the merger agreement and cannot cure the breach within the time period specified
in the merger agreement.                                                        

Termination Fees (see page __)                                                  

SkyMall will be obligated to pay Gemstar a termination fee of $1,940,000 and    
certain expense reimbursements up to $500,000 if the merger agreement is        
terminated under specified circumstances set forth in the merger agreement.     

Option Agreement (see page __)                                                  

SkyMall has granted Gemstar an option to acquire 19.9% of SkyMall's common stock
for $3.00 per share if the merger agreement is terminated after another takeover
proposal has been publicly announced for SkyMall.                               

SkyMall Not to Engage in Discussions for Alternative Transactions (see page __) 

Until the parties complete the merger or terminate the merger agreement, SkyMall
has agreed not to take any of the following actions:                            

.    initiate, solicit, encourage or facilitate the making of any offer or    
proposal that is or is reasonably likely to lead to an alternative transaction; 
or                                                                              

.    enter into any agreement regarding any alternative transaction.          

However, if after May 14, 2001, SkyMall receives an unsolicited proposal for an 
alternative transaction, it may participate in discussions regarding the        
transaction if SkyMall's board of directors reasonably determines it is a       
superior proposal and notifies Gemstar, as described in the merger agreement.   

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Regulatory Matters (see page __)                                                

If we determine it is necessary, we will make filings and take other actions    
necessary to obtain required approvals from governmental authorities in         
connection with the proposed merger, including U.S. antitrust authorities, with 
a view to completing the merger as soon as possible. We are not aware of any    
government approvals that need to be obtained in connection with the merger at  
this time.                                                                      

Accounting Treatment (see page __)                                              

The merger will be accounted for as a purchase in accordance with generally     
accepted accounting principles.                                                 

Interests of SkyMall's Officers and Directors in the Merger (see page ____)     

When considering the recommendation of SkyMall's board of directors, you should 
be aware that members of SkyMall's management and board of directors may be     
deemed to have interests in the merger that are different from, or in addition  
to, yours as a stockholder of SkyMall. A significant number of SkyMall's        
directors and executive officers hold SkyMall options under SkyMall's stock     
option plans. Those options will become exercisable for the same consideration  
as that received by SkyMall's public stockholders, or may be exchanged, at the  
election of the holder, for cash with the equivalent value. For a more complete 
description of how SkyMall stock options will be treated in the merger, see the 
section entitled "The Merger Agreement - Treatment of SkyMall Stock Options in  
the Merger."                                                                    

SkyMall's Chief Executive Officer, Robert M. Worsley, as well as his wife and a 
trust for the benefit of his children, will receive solely Gemstar common stock 
for their shares of SkyMall common stock in the merger. The shares of Gemstar   
common stock received by the Worsleys in the merger will be held by them in     
accordance with a five-year lock-up agreement with Gemstar. Mr. Worsley has also
entered into a new employment agreement with SkyMall, which will take effect    
upon completion of the merger. The employment agreement provides for base salary
and bonus payments that are consistent with Mr. Worsley's compensation by       
SkyMall prior to the merger. The employment agreement contains an agreement to  
grant an option to acquire 105,000 shares of Gemstar common stock to Mr. Worsley
as compensation for his future services to Gemstar after the merger. See "Other 
Agreements - Worsley Employment Agreement."                                     

Additionally,as an inducement to Mr. Worsley to endorse the merger, Gemstar has 
agreed, subject to certain conditions, to advance up to $5.1 million in cash to 
SkyMall for purposes of making a payment to a charitable foundation as directed 
by a former stockholder of SkyMall. This payment will result in, among other    
things, a release of Mr. Worsley and his wife from an obligation to make certain
contributions to the charitable foundation designated by such former            
stockholder. See the section entitled "The Merger - Interests of SkyMall's      
Officers and Directors in the Merger."                                          

Indemnification and Insurance (see page __)                                     

The merger agreement provides for the indemnification of SkyMall's officers,    
directors and employees and for the continuation of directors and officers      
liability insurance for three years following the merger.                       

Vote Required for the Merger                                                    

The affirmative vote of the holders of a majority of the shares of SkyMall      
common stock outstanding on the record date for the special meeting is required 
to approve the merger agreement and the merger. As described below, shares of   
common stock controlled by Robert M. Worsley, SkyMall's CEO, representing       
approximately 30% of the shares entitled to vote at the special meeting, are    
subject to the terms of a voting agreement with Gemstar, and are required to be 
voted in favor of approval of the merger agreement and the merger. Other        
directors and executive officers of SkyMall, beneficially owning an additional  
4.2% of the shares entitled to vote at the special meeting, have indicated their
intention to vote in favor of approval of the merger agreement and the merger at
the special meeting.                                                            

Voting Agreement (see page __)                                                  

Robert M. Worsley, SkyMall's CEO, as an inducement to Gemstar to enter into the 
merger agreement, has entered into a voting agreement with Gemstar under which  
he has agreed to cause all of the shares of SkyMall common stock beneficially   
owned by him, representing approximately 30% of the SkyMall shares entitled to  
vote at the special meeting, to be voted in favor of the merger agreement and   
the merger. We will file this voting agreement as an exhibit to Gemstar's       
registration statement for the shares of Gemstar common stock to be issued in   
the merger.                                                                     

Dividends                                                                       

Gemstar does not expect to pay any dividends on its common stock for the        
foreseeable future.                                                             

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Restrictions on Your Ability to Sell Gemstar Common Stock                       

All shares of Gemstar common stock received by you in connection with the merger
will be freely transferable unless you are considered an "affiliate" of SkyMall 
under the Securities Act of 1933. If you are an affiliate of SkyMall, then prior
to the first anniversary of the merger sales may be made by you only under a    
registration statement or an exemption under the Securities Act, including Rule 
145.                                                                            

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION  

Gemstar                                                                         

    The table below provides you with selected consolidated historical
financial data for Gemstar. The financial data as of March 31, 2001 and for the 
three months ended March 31, 2001 and 2000 are derived from the unaudited       
condensed consolidated financial statements of Gemstar included in Gemstar's    
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, incorporated
by reference into this proxy statement/prospectus. The financial data as of     
December 31, 2000 and March 31, 2000, for the nine months ended December 31,    
2000 and for the years ended March 31, 2000 and 1999 are derived from the       
audited consolidated financial statements of Gemstar included in Gemstar's      
Transition Report on Form 10-K, as amended, for the transition period from April
1, 2000 to December 31, 2000, incorporated by reference into this proxy         
statement/prospectus. The financial data as of March 31, 1999, 1998 and 1997 and
for the years ended March 31, 1998 and 1997 are derived from the consolidated   
financial statements of Gemstar not included or incorporated by reference into  
this proxy statement/prospectus. This information is only a summary and you     
should read it together with the financial information incorporated by reference
into this proxy statement/prospectus. For copies of the information incorporated
by reference, see "-Where You Can Find More Information."                       

Gemstar-Selected Consolidated Historical Financial Information  
(in thousands, except per share data) 

                                                        [Enlarge/Download Table]

                                                             Nine months                                                     
                                        Three months           ended                                                         
                                       ended March 31,        Dec. 31,                    Year ended March 31,               
                                  -------------------------               ---------------------------------------------------
                                    2001 (1)       2000      2000 (1)(2)      2000         1999         1998         1997    
                                  ------------ ------------ ------------  ------------ ------------ ------------ ------------
                                                                                                                             
Statement of Operations Data:                                                                                                
Revenues                             $352,468      $83,993     $731,109     $241,439      $168,166     $126,552      $82,997 
Operating (loss) income              (127,739)      39,478     (219,436)     110,925        81,598       48,243       (5,558)
Net (loss) income                    (123,240)      27,331     (213,114)      81,317        60,145       35,127       (8,766)
(Loss) earnings per share:                                                                                                   
   Basic                                (0.30)        0.13        (0.64)        0.40          0.30         0.18        (0.05)
   Diluted                              (0.30)        0.11        (0.64)        0.33          0.26         0.17        (0.05)
Other Data:                                                                                                                  
EBITDA (3)                            119,974       56,965      242,170      132,683        88,128       64,367       (1,600)

                                                March 31,     Dec. 31,                         March 31,                     
                                                                          ---------------------------------------------------
                                                  2001          2000         2000         1999         1998         1997     
                                               ------------ ------------  ------------ ------------ ------------ ------------
Balance Sheet Data:                                                                                                          
Total assets                                   $10,589,174  $10,789,477     $467,171      $256,979     $187,200     $131,525 
Long-term debt less current portion                565,993      586,485            -             -            -            - 
Total stockholders' equity                       7,935,263    8,055,963      385,657       185,160      103,630       53,631 

(1) Effective July 12, 2000, Gemstar's consolidated operating results include   
 the operating results of TV Guide. TV Guide was acquired in a transaction
accounted for as a purchase.                                            

(2) In November 2000, Gemstar's Board of Directors approved the change of       
Gemstar's fiscal year end from March 31 to December 31.                 

(3) EBITDA means operating income before depreciation and amortization, stock   
compensation expense related to assumed TV Guide stock options and      
nonrecurring expenses. Due to purchase accounting related to Gemstar's  
   acquisition of TV Guide on July 12, 2000, the operating results for periods
    subsequent to July 12, 2000 reflect significant increases in amortization of
   goodwill and other intangible assets. EBITDA is presented supplementally as
   Gemstar believes it is a standard measure commonly reported and widely used
by analysts, investors and others associated with its industry. However,
   EBITDA does not take into account substantial costs of doing business, such
   as income taxes and interest expense. While many in the financial community
consider EBITDA to be an important measure of comparative operating     
    performance, it should be considered in addition to, but not as a substitute
for, operating income, net income, cash flow provided by operating      
activities and other measures of financial performance prepared in      
accordance                                                              

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with generally accepted accounting principles. Additionally, Gemstar's  
 calculation of EBITDA may be different than the calculation used by other
companies and, therefore, comparability may be affected.                

SkyMall                                                                         

    The table below provides you with selected consolidated historical
financial data for SkyMall. The financial data as of March 31, 2001 and for the 
three months ended March 31, 2001 and 2000 are derived from the unaudited       
condensed consolidated financial statements of SkyMall included in SkyMall's    
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, incorporated
by reference into this proxy statement/prospectus. The financial data as of     
December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999, and 
1998 are derived from the audited consolidated financial statements of SkyMall  
included in SkyMall's Annual Report on Form 10-K, as amended, for the year ended
December 31, 2000, incorporated by reference into this proxy                    
statement/prospectus. The financial data as of December 31, 1998, 1997 and 1996 
and for the years ended December 31, 1997 and 1996 are derived from the         
consolidated financial statements of SkyMall not included or incorporated by    
reference into this proxy statement/prospectus. This information is only a      
summary and you should read it together with the financial information          
incorporated by reference into this proxy statement/prospectus. For copies of   
the information we incorporated by reference, see "-Where You Can Find More     
Information."                                                                   

SkyMall-Selected Consolidated Historical Financial Information  
(in thousands, except per share data) 

                                                        [Enlarge/Download Table]

                           Three Months Ended                                                                       
                               March 31,                                        Year Ended December 31,             
                         -------------------------  ----------------------------------------------------------------
                            2001          2000          2000         1999          1998         1997         1996   
                        ------------   -----------  -----------  ------------   -----------  -----------  ----------
                                                                                                                    
Statement of                                                                                                        
Operations Data:                                                                                                    

Merchandise sales, net   $13,539       $15,645       $62,474     $  60,665      $  49,320    $  42,844    $ 30,978  
Placement fees and                                                                                                  
  other                    4,631         4,362        19,595        18,275         22,722       23,532      14,921  
                        ------------   -----------  -----------  ------------   -----------  -----------  ----------
     Total revenues       18,170        20,007        82,069        78,941         72,042       66,376      45,899  

Cost of goods sold        10,973        12,761        47,983        46,422         39,292       40,657      26,471  
                        ------------   -----------  -----------  ------------   -----------  -----------  ----------
     Gross Margin          7,197         7,246        34,086        32,519         32,750       25,719      19,428  
                        ------------   -----------  -----------  ------------   -----------  -----------  ----------
Media expenses             2,513         3,026        12,745        13,599         11,353        9,082       7,670  
Selling expenses           1,152         1,086         4,656         4,482          3,474        3,450       2,476  
Customer service and                                                                                                
  fulfillment expenses     1,309         1,743         5,371         6,657          5,332        4,297       2,823  
General and                                                                                                         
  administrative                                                                                                    
  expenses                 4,630         8,638        26,702        32,604          9,002        6,481       3,340  
                        ------------   -----------  -----------  ------------   -----------  -----------  ----------
Total operating                                                                                                     
    expenses               9,604        14,493        49,474        57,341         29,161       23,310      16,309  
                        ------------   -----------  -----------  ------------   -----------  -----------  ----------

Income (loss) from                                                                                                  
  operations              (2,407)       (7,247)      (15,388)      (24,822)         3,589        2,409       3,119  

Interest and other                                                                                                  
  income (expense),                                                                                                 
   net                       (94)         (211)         (654)         (231)           404          462        (651) 
                        ------------   -----------  -----------  ------------   -----------  -----------  ----------

Income (loss) before                                                                                                
  income taxes            (2,501)       (7,458)      (16,042)      (25,053)         3,993        2,871       2,468  

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                                                        [Enlarge/Download Table]

                            Three Months Ended                                                                    
                                 March 31,                                       Year Ended December 31,          
                           --------------------       ------------------------------------------------------------
                            2001          2000          2000          1999          1998         1997         1996
                           ------       -------       -------       -------        ------       ------       -----
                                                                                                                  
Provision (benefit)                                                                                               
  for income taxes              -             -             0          (913)        1,707          300         280
                           ------       -------       -------       -------        ------       ------       -----

Net income (loss)          (2,501)       (7,458)      (16,042)      (24,140)        2,286        2,571       2,188

Preferred stock                                                                                                   
  dividends                     0             0             0             0             0            0          77
                           ------       -------       -------       -------        ------       ------       -----

Net income (loss)                                                                                                 
  available for                                                                                                   
  common shares           $(2,501)      $(7,458)     $(16,042)     $(24,140)       $2,286       $2,571      $2,111
                          =======       =======      ========      ========        ======       ======       =====
Diluted net income                                                                                                
  (loss) per common                                                                                               
  share                    $(0.16)      $ (0.57)      $ (1.11)      $ (2.60)       $  .27       $  .30       $ .38
                           ======       =======       =======       =======        ======       ======       =====
Diluted weighted                                                                                                  
  average shares                                                                                                  
  outstanding          15,818,711    12,983,824    14,480,314     9,271,330     8,602,177    8,675,803   5,599,443
                      ===========    ==========   ===========    ==========     =========   ==========  ==========


                                 March 31,                                   December 31,                         
                           --------------------       ------------------------------------------------------------
                            2001          2000          2000          1999          1998         1997         1996
                           ------       -------       -------       -------        ------       ------       -----
                                                                                                                  
Balance Sheet Data:                                                                                               

Cash and cash                                                                                                     
  equivalents             $ 5,108       $ 9,938       $ 9,938       $16,060       $ 7,951      $ 9,412     $11,491
Working capital (deficit)  (2,871)          615           615         3,795         5,007        6,050       6,692
Total assets               28,474        33,872        33,872        50,249        31,925       26,634      19,721
Long-term debt              7,400         8,400         8,400         5,190           242           66         139
Shareholders' equity        4,416         6,916         6,916        15,618        14,234       10,307       8,601

  In September 1999, SkyMall completed a merger with Disc Publishing, Inc.
The merger qualified as a tax-free exchange and was accounted for as a pooling  
of interests. Accordingly, the SkyMall Statement of Operations Data has been    
restated to include the combined financial results of SkyMall and Disc          
Publishing.                                                                     

    Certain reclassifications have been made to the 1999, 1998, 1997, and 1996
SkyMall Statement of Operations Data to conform with the 2000 presentation.     
Shipping costs which were previously netted against shipping revenue and        
recorded in placement fees and other revenue have been reclassified from        
placement fees and other revenue to cost of goods sold. Shipping revenue is     
included in placement fees and other revenue. Settlement expenses that were     
previously classified in customer service and fulfillment have been reclassified
to general and administrative.                                                  

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Unaudited Comparative Per Share Data                                            

     The table below provides historical and pro forma per share information for
Gemstar as of and for the three months ended March 31, 2001 and for the nine    
months ended December 31, 2000. In November 2000, Gemstar's Board of Directors  
approved the change of Gemstar's fiscal year end from March 31 to December 31.  
Gemstar's most recent fiscal year is the transition period from April 1, 2000 to
December 31, 2000.                                                              

                                   Three months        Nine months
                                    ended              ended
                                   March 31, 2001      Dec. 31, 2000
                                   --------------      -------------

Basic and diluted loss per share                                                
Historical                               $(0.30)           $(0.64)    
Pro forma                                 (0.31)            (0.67)    

                March 31, 2001
                --------------
Book value per common share                                                     
Historical                               $19.29                       
Pro forma                                $19.34                       

  No cash dividends were declared by Gemstar during the periods presented.

The table below provides historical and equivalent pro forma per share
information for SkyMall as of March 31, 2001, and for the three months ended    
March 31, 2001 and for the nine months ended December 31, 2000. In order to     
facilitate comparison to Gemstar, the SkyMall information below is shown for the
nine months ended December 31, 2000 instead of twelve months.                   

                                   Three months        Nine months
                                    ended              ended
                                   March 31, 2001      Dec. 31, 2000
                                   --------------      -------------

Basic and diluted loss per share                                                
Historical                               $(0.16)           $(0.54)    
Equivalent pro forma                      (0.01)            (0.03)    

                March 31, 2001
                --------------
Book value per common share                                                     
Historical                               $ 0.28                       
Equivalent pro forma                       0.73                       

No cash dividends were declared by SkyMall during the periods 
presented.                                                                      

     It is important that when you read this information, you read along
with it the consolidated financial statements and accompanying notes of Gemstar 
and SkyMall included in the documents that are described under "-Where You Can  
Find More Information" and are incorporated in this proxy statement/prospectus  
by reference.                                                                   

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Comparative Per Share Market Price and Dividend Information                     

   Shares of SkyMall common stock and Gemstar common stock are traded on the
Nasdaq National Market under the symbols "SKYM" and "GMST," respectively.       

     The following table sets forth, for the fiscal quarters indicated, the high
and low sales prices for a share of each of SkyMall common stock and Gemstar    
common stock, as reported on Nasdaq.                                            

    Gemstar announced its proposed acquisition of TV Guide on October 4, 1999,
and closed the acquisition on July 12, 2000. Accordingly, the sales prices of   
the Gemstar common stock before and after those dates may not be comparable.    

                                                        [Enlarge/Download Table]

                                                  SkyMall                          Gemstar            
                                                Common Stock                     Common Stock         
                                      -------------------------------  -------------------------------
                                         High                  Low        High                  Low   
                                                                                                      
Year Ended December 31, 1998                                                                          
         First Quarter                   $5.38                $4.00        $9.34                $5.19 
         Second Quarter                   7.50                 4.00        11.44                 7.19 
         Third Quarter                    5.63                 2.25        12.06                 7.75 
         Fourth Quarter                   4.80                 1.88        17.30                 9.63 

Year Ended December 31, 1999                                                                          
         First Quarter                  $27.13               $11.38       $18.97               $13.88 
         Second Quarter                  23.13                 9.00        33.81                18.00 
         Third Quarter                   12.63                 5.55        40.56                24.63 
         Fourth Quarter                  13.13                 5.25        79.50                33.31 

Year Ended December 31, 2000                                                                          
         First Quarter                  $10.19                $7.00      $107.44               $60.94 
         Second Quarter                   6.63                 2.31        86.06                33.50 
         Third Quarter                    3.63                 2.00        91.63                52.00 
         Fourth Quarter                   2.50                 1.06        90.00                34.50 

Year Ended December 31, 2001                                                                          
         First Quarter                  $ 2.63                $1.00       $59.56               $25.25 
         Second Quarter (to June __)    $   --                $  --       $   --               $   -- 

The following table sets forth the closing prices per share of SkyMall
common stock and Gemstar common stock, as reported on Nasdaq, on:               

.    May 14, 2001, the last full trading day prior to the public      
announcement of the execution of the merger agreement, and  

    .    May 25, 2001, the last full trading day for which closing prices were
       available prior to the printing of this proxy statement/prospectus.

The following table also sets forth the equivalent prices per share of
Gemstar common stock to SkyMall common stock on those dates. The equivalent     
price per share of Gemstar common stock to SkyMall common stock is equal to the 
sum of (a) $1.50 cash plus (b) the closing price of a share of Gemstar common   
stock on the applicable date multiplied by 0.03759, the share of Gemstar common 
stock to be issued in the merger for each share of SkyMall common stock other   
than those held by the Worsleys. These equivalent per share prices reflect the  
cash portion of the merger consideration and the market value of the Gemstar    
common stock you would have received for each share of your SkyMall common stock
if the                                                                          

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merger were completed on the specified dates. Because the market price of       
Gemstar common stock may increase or decrease before the merger is completed,   
you are urged to obtain current market quotations.                              

                                                        [Enlarge/Download Table]

                                                                                    Equivalent Price
                                                                                           Per      
                                                          Gemstar       SkyMall     Share of Gemstar
Dates                                                   Common Stock  Common Stock    Common Stock  
-----                                                   ------------  ------------    ------------  
                                                                                                    
May 14, 2001...........................................     $35.87        $2.70          $2.85      
May 25, 2001...........................................      40.69         2.85           3.03      

Neither SkyMall nor Gemstar has declared a cash dividend on its common
stock since it became a public company. It is the current policy of SkyMall's   
board of directors to retain any earnings to finance operations and expand      
SkyMall's business. Gemstar intends to retain future earnings for use in its    
business. Neither SkyMall nor Gemstar anticipates paying any dividends on its   
common stock in the foreseeable future.                                         

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Where You Can Find More Information                                             

SkyMall and Gemstar file annual, quarterly and special reports, proxy 
statements and other information with the SEC. You may read and copy any        
reports, statements or other information they file at the SEC's public reference
rooms at the following locations:                                               

  Public Reference Room     New York Regional Office     Chicago Regional Office
450 Fifth Street, N.W.      7 World Trade Center          Citicorp Center   
      Room 1024                  Suite 1300            500 West Madison Street
Washington, D.C. 20549      New York, NY 10048               Suite 1400     
                                                          Chicago, IL 60661-2511

     Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. SkyMall's and Gemstar's SEC filings are also available to the  
public from commercial document retrieval services and at the Internet world    
wide web site maintained by the SEC at www.sec.gov.                             

     Gemstar will file a registration statement on Form S-4 to register with the
SEC the Gemstar common stock to be issued to SkyMall stockholders in the merger.
This proxy statement/prospectus will be a part of that registration statement   
and constitutes a prospectus of Gemstar, as well as a proxy statement of SkyMall
for the special meeting. As allowed by SEC rules, this proxy                    
statement/prospectus does not contain all the information you can find in the   
registration statement or the exhibits to the registration statement.           

     The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to 
you by referring you to another document filed separately with the SEC. The     
information incorporated by reference is deemed to be a part of this proxy      
statement/prospectus, except for any information superseded by information      
contained directly in this proxy statement/prospectus. This proxy               
statement/prospectus incorporates by reference the documents set forth below    
that we have previously filed with the SEC. These documents contain important   
information about our companies and their financial condition and the stock     
involved in the merger proposal.                                                

                                                        [Enlarge/Download Table]

SkyMall SEC Filings                       Period                                                                    
-------------------                       ------                                                                    
                                                                                                                    
Amended Annual Report on Form 10-K/A      Year ended December 31, 2000 (filed April 30, 2001)                       
Quarterly Report on Form 10-Q             Quarter ended March 31, 2001 (filed May 15, 2001)                         
Current Report on Form 8-K                Filed May 15, 2001                                                        
Registration Statement on Form 8-A        Filed October 31, 1996                                                    

Gemstar SEC Filings                       Period                                                                    
-------------------                       ------                                                                    
Amended Transition Report on Form 10-K/A  Transition period from April 1, 2000 to December 31, 2000 (filed April 30,
                                          2001)                                                                     
Transition Report on Form 10-K            Transition period from April 1, 2000 to December 31, 2000 (filed April 2, 
                                          2001)                                                                     
Quarterly Report on Form 10-Q             Quarter ended March 31, 2001 (filed May 15, 2001)                         
Registration Statement on Form 8-A        Filed July 13, 1998                                                       

SkyMall and Gemstar also incorporate by reference into this proxy     
statement/prospectus any and all additional documents that may be filed with the
SEC from the date of this proxy statement/prospectus to the date of the special 
meeting. These include periodic reports, such as Annual Reports on Form 10-K,   
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.                 

     SkyMall has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to SkyMall and Gemstar has supplied 
all information contained or incorporated by reference in this proxy            
statement/prospectus relating to Gemstar.                                       

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You may have previously received some of the documents incorporated by
reference in this proxy statement/prospectus, but you can obtain any of them    
through us, the SEC or the SEC's Internet world wide web site as described      
above. Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an 
exhibit in this proxy statement/prospectus. You may obtain documents            
incorporated by reference in this proxy statement/prospectus by requesting them 
in writing or by telephone from the appropriate company at the following        
addresses:                                                                      

             SkyMall, Inc.                Gemstar-TV Guide International, Inc.
           1520 E. Pima Street            135 North Los Robles Avenue, Suite 800
  Phoenix, AZ 85034                       Pasadena, CA 91101
 Tel: (602) 254-9777                     Tel: (626) 792-5700
 Attn: Corporate Secretary               Attn: Corporate Secretary

  If you would like to request documents from us, please do so by June __,
2001, to receive them before the special meeting.                               

You should rely only on the information contained or incorporated by  
reference in this proxy statement/prospectus to vote on the merger agreement and
the merger. We have not authorized anyone to provide you with information that  
is different from what is contained in this proxy statement/prospectus or       
incorporated herein by reference. This proxy statement/prospectus is dated June 
__, 2001. You should not assume that the information contained in this proxy    
statement/prospectus is accurate as of any date other than that date, and       
neither the mailing of this proxy statement/prospectus to stockholders nor the  
issuance of Gemstar common stock in the merger shall create any implication to  
the contrary.                                                                   

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RISK FACTORS  

    The merger, and your investment in Gemstar common stock, involve risks. In
addition to the other information we include in or incorporate by reference into
this proxy statement/prospectus, you should consider the following risk factors 
in deciding whether to vote for the merger.                                     

Risks Relating to the Merger                                                    

The value of the Gemstar common stock you will receive in the merger may        
fluctuate.                                                                      

     The number of shares of Gemstar common stock you will receive in the merger
will not be adjusted based on changes in the market price of Gemstar common     
stock. Accordingly, because the market price of Gemstar common stock may        
fluctuate, the value of the consideration you receive when we complete the      
merger will depend on the market price of Gemstar common stock at that time. We 
cannot assure you as to the market value of the stock consideration you will    
receive when the merger is completed. SkyMall is not permitted to "walk away"   
from the merger or resolicit the vote of its stockholders based solely on       
changes in the market price of Gemstar common stock before completion of the    
merger. For historical and current market prices of Gemstar common stock, see   
"Summary - Comparative Per Share Market Price and Dividend Information."        

     In addition, it is an unwaivable condition of the obligation of Gemstar and
SkyMall that they obtain an opinion of their respective counsel that the merger 
qualifies as a reorganization under the Internal Revenue Code. In order to      
render their opinions, no less than 45% of the value of the merger consideration
on the date the merger is effected must consist of Gemstar common stock. If that
percentage is not achieved, due to a decline in the market price of the Gemstar 
common stock or for any other reason, the merger agreement provides that the    
fraction of a share of Gemstar common stock issued as part of the merger        
consideration for each share of SkyMall common stock will be increased until the
45% threshold is achieved. This would result in SkyMall stockholders receiving a
greater proportion of Gemstar common stock in the merger than that anticipated  
at the time the board of directors of SkyMall approved the merger agreement.    

The price of Gemstar common stock may be affected by factors different from     
those affecting the price of SkyMall common stock.                              

 When we complete the merger, you will become a holder of Gemstar common
stock. The businesses of Gemstar and its affiliates differ from the historical  
businesses of SkyMall, and the results of operations of Gemstar, as well as the 
market price of Gemstar common stock, may be affected by factors different from 
those affecting SkyMall's results of operations and the market price of SkyMall 
common stock. As a result, factors that had little or no effect on the price of 
SkyMall common stock may adversely affect the price of Gemstar common stock.    

Gemstar may not be able to successfully integrate SkyMall's operations.         

 When the merger is completed, SkyMall's operations will be in a company
that is a wholly-owned subsidiary of Gemstar instead of an independent company. 
The process of integrating SkyMall's operations into the consolidated activities
of Gemstar could cause an interruption of, or loss of momentum in, the          
activities of one or more of the combined activities and key personnel of       
Gemstar and SkyMall. The diversion of management's attention and any delays or  
difficulties in connection with the merger and integration of operations could  
have an adverse effect on the business, results of operations or financial      
condition of the combined companies.                                            

If we do not complete the merger, it could negatively impact SkyMall and the    
price of its common stock.                                                      

If the merger is not completed, SkyMall may be subject to a number of 
material risks, including the following:                                        

 .    the market price of SkyMall common stock may decline to the extent
    that the current market price of SkyMall common stock reflects a
market assumption that the merger will be completed;        

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.    SkyMall, in some circumstances, may be required to pay Gemstar a 
  termination fee of $1,940,000, and reimburse Gemstar for up to
$500,000 of certain expenses; and                           

 .    costs related to the merger, such as legal and accounting fees and
     expenses and financial advisor expenses, must be paid even if the
merger is not completed.                                    

Further, if the merger agreement is terminated and SkyMall's board of 
directors seeks another merger or business combination, we cannot assure you    
that SkyMall will be able to find a party willing to pay an equivalent or more  
attractive price than that which will be paid in the merger. In addition, while 
the merger agreement is in effect, subject to limited exceptions, SkyMall is    
prohibited from soliciting, cooperating with, or furnishing non-public          
information regarding SkyMall to, or negotiating or entering into an agreement  
with, any party other than Gemstar regarding any proposal for an alternative    
transaction. For additional information regarding SkyMall's ability to enter    
into an alternative transaction, see "The Merger Agreement-No Solicitation."    

Risks Relating to the Business of Gemstar                                       

Gemstar may experience slower growth and decreased profit margins and require   
greater capital expenditures.                                                   

Prior to the acquisition of TV Guide in July 2000, Gemstar experienced
significant revenue growth and produced substantial profit margins. Subsequent  
to the acquisition, while revenues have been greater due to the addition of TV  
Guide, our profit margins have been lower due to the impacts of the lower       
margins contributed by the TV Guide businesses. We do not expect to experience, 
in percentage terms, the rapid revenue growth that we experienced before the    
merger. We expect that our capital expenditures will be greater than we         
experienced before the merger due to the capital equipment needs of some of the 
TV Guide businesses. Because the TV Guide acquisition was accounted for as a    
purchase, net income will be adversely impacted by the amortization of          
intangible assets recorded in that transaction.                                 

Gemstar faces competition in many areas.                                        

We face competition from a wide range of other companies in the       
communications, advertising, media, entertainment, information, Internet        
services, software and technology fields. The competitive environment could,    
among other results, require price reductions for our products, require         
increased spending on marketing and product development, limit our ability to   
develop new products and services, limit our ability to expand our customer base
or even result in attrition in our customer base. These results could negatively
impact our operating results.                                                   

New products and rapid technological change may affect Gemstar's operations.    

The emergence of new consumer entertainment products and technologies,
changes in consumer preferences and other factors may limit the life cycle of   
our technologies and any future products we might develop. Our future operations
could be impacted by our ability to identify emerging trends in our markets and 
to develop and market new products and services that respond to competitive     
offerings, technological changes and changing consumer preferences in a timely  
manner and at competitive costs.                                                

Gemstar's interactive program guides may not be accepted by the market.         

  The market for our interactive program guides has only recently begun to
develop, is rapidly evolving and is increasingly competitive. Demand and market 
acceptance for our interactive program guides are subject to uncertainty and    
risk. We cannot predict whether, or how fast, this market will grow or how long 
it can be sustained. If the market for our interactive program guides develops  
more slowly than expected or becomes saturated with competitors, our operating  
results could be adversely impacted.                                            

Advertising revenues may be impacted by technology, consumer acceptance of      
Gemstar's products, competition, adverse economic conditions and seasonality.   

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    We expect to derive a significant portion of our revenues from the sale of
advertising. Our interactive program guides must have the technology to         
effectively deliver advertising, consumers must accept our products to create a 
broad advertising base and advertisers must accept our interactive program      
guides as an effective medium for advertising delivery. We compete with other   
media for advertising placements, which can result in lower prices and reduction
in advertising revenues. Adverse economic conditions can significantly impact an
advertiser's ability and willingness to spend additional amounts on advertising 
generally. Additionally, advertising revenue is subject to seasonal             
fluctuations.                                                                   

Gemstar's business may be affected by changes in the consumer electronics       
market.                                                                         

  We derive a substantial portion of our revenue from manufacturer license
fees for our VCR Plus+ and interactive program guide technologies. Demand for   
new consumer electronics devices, such as television sets, VCRs, integrated     
satellite receiver decoders, personal computers and Internet appliances, may be 
adversely impacted by increasing market saturation, durability of products in   
the market place, new competing products and alternate consumer entertainment   
options. Our future operating results are substantially dependent on continued  
growth in consumer electronics employing our technologies and any decline in    
sales of consumer electronics products employing our technologies could have an 
adverse impact on our operating results.                                        

Reliance on third-party manufacturers may affect Gemstar's licensing revenues.  

We depend on the cooperation of third-party consumer electronics      
manufacturers to incorporate our technology into their products. We do not      
manufacture such hardware. Many of our license agreements do not require the    
inclusion of our technology into any specific number or percentage of units     
shipped by the licensees, and only a few of these agreements guarantee a minimum
licensing fee over their term. Accordingly, we cannot control or predict the    
number of models or units shipped by any manufacturer employing our technology. 

Dependence on the cooperation of cable systems, television broadcasters,        
publications and data providers could affect Gemstar's revenue.                 

    Program guide and advertising data is delivered to network headends, cable
headends, and broadcast stations for inclusion in the vertical blanking interval
of television signals and to local affiliate cable systems for delivery to set- 
top boxes in subscribers' homes via the out-of-band frequencies of local cable  
systems. There can be no assurance that these delivery mechanisms will          
distribute the data without error or that the agreements governing certain of   
these relationships can be maintained on economical terms. Our data broadcast   
through the vertical blanking interval can be, and has been in certain markets, 
deleted or modified by some of the local cable systems. No court or agency of   
authority has yet determined whether such actions are legal. We purchase some of
our program guide information from commercial vendors. The quality, accuracy or 
timeliness of such data may not continue to meet our standards or be acceptable 
to consumers. Our VCR Plus+ system relies on consumer access to PlusCode numbers
through licensed publications. We are dependent on the maintenance and renewal  
of agreements governing the PlusCode publications to ensure the distribution of 
the PlusCodes.                                                                  

Seasonality and variability may affect Gemstar's revenues and results of        
operations on a quarterly or annual basis.                                      

   Shipments of consumer electronics products tend to be higher in the third
and fourth calendar quarters. In addition, manufacturer shipments vary from     
quarter to quarter depending on a number of factors, including retail inventory 
levels and retail promotional activities. Newsstand sales of our print products 
tend to be higher in the first and fourth calendar quarters. This seasonality in
newsstand sales contributes to seasonality of advertising sales as the          
advertising base fluctuates. As a result, we may experience variability in our  
licensing and advertising revenue.                                              

Growth of VCR Plus+ revenue may be limited due to full penetration of the       
product in an increasingly saturated market.                                    

  While VCR Plus+ license fees have increased in each year since Gemstar's
inception, future growth of revenues derived from VCR Plus+ may be limited by   
the fact that virtually all major VCR and television manufacturers have licensed
the VCR Plus+ technology and the fact that we have already expanded into most   
major markets worldwide. Any further                                            

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growth in VCR Plus+ license revenue will come only from further penetration of  
increasingly saturated markets. Accordingly, our future success depends to a    
significant extent upon our ability to develop, market and license emerging and 
new products and services, including our interactive program guide technologies.

TV Guide Magazine, which is a significant business, has experienced significant 
declines in circulation and EBITDA and such declines may continue.              

  We provide TV Guide Magazine to households and newsstands and customized
monthly program guides to customers of cable and satellite service providers. TV
Guide Magazine has seen circulation decline significantly over the past several 
years. The primary causes of these declines have been the continued effects of  
increased competition from television listings included in local newspapers,    
free television listings supplements in Sunday newspapers, electronic program   
guides and other sources. Declines in TV Guide Magazine's circulation and EBITDA
may continue, and the declines could be significant.                            

Paper and postal price increases can materially raise our costs associated with 
the production and delivery of the TV Guide print products, including TV Guide  
Magazine.                                                                       

The price of paper can be a significant factor affecting TV Guide     
Magazine's operating performance. We do not hedge against increases in paper    
costs. If paper prices do increase and we cannot pass these costs on to our     
customers, the increases may have a material adverse effect on us. Postage for  
product distribution and direct mail solicitations are also a significant,      
uncontrollable expense to us. Postal rates increased in January 2001 and will   
increase in the future.                                                         

Gemstar's C-band business, which is a significant business, is declining. These 
declines may accelerate due to competing technologies and the subscriber        
conversion arrangement with EchoStar.                                           

 We market entertainment services to C-band satellite dish owners in the
United States through our approximately 80% owned subsidiary, Superstar/Netlink 
Group. The C-band satellite industry is shrinking generally due to the continued
expansion of cable systems and direct broadcast satellite services. C-band      
satellite dishes are substantially larger and less attractive than direct       
broadcast satellite dishes, which are small and less obtrusive. Recently enacted
legislation may permit direct broadcast satellite programmers to offer more     
attractive programming than Superstar/Netlink Group. We expect the decline in   
the C-band industry to continue.                                                

In November 1999, TV Guide announced an exclusive direct broadcast    
satellite marketing alliance agreement with EchoStar to convert the existing and
inactive C-band customers of Superstar/Netlink Group to the high power (small   
satellite dish) DISH Network service. Under the conversion process, EchoStar    
will compensate Superstar/Netlink Group on a per subscriber basis, both upon    
successful conversion and with residual payments over time. We anticipate that  
implementation of this agreement will accelerate the subscriber decline in our  
C-band business.                                                                

Leverage associated with the debt assumed by Gemstar in the TV Guide acquisition
may impact our financial operations.                                            

   As of March 31, 2001, we had approximately $566 million of TV Guide long-
term debt, which we acquired in the TV Guide merger. TV Guide's debt is         
significant and could have a number of potential consequences, such as:         

.    the ability to obtain any necessary financing in the future for  
     working capital, capital expenditures, acquisitions, debt service
requirements and other purposes may be limited;             

   .    a significant amount of our earnings may be dedicated to the payment
        of principal and interest on debt and therefore would be unavailable
for financing operations and other business activities;     

 .    the debt level and the covenants contained in the debt instruments
       could limit flexibility in planning for, or reacting to, changes in
business because certain financing options may be limited or
prohibited;                                                 

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   .    the degree of leverage may be more than that of competitors, placing
us at a competitive disadvantage; and                       

    .    the debt level may make us more vulnerable in the event of a downturn
in our business or the economy in general.                  

The stock price of Gemstar has been volatile.                                   

     The market price of Gemstar common stock has historically been volatile. It
is likely that the market price of our common stock will continue to be subject 
to significant fluctuations. We believe that future announcements concerning us,
our competitors or our principal customers, including technological innovations,
new product introductions, governmental regulations, litigation or changes in   
earnings estimated by analysts, may cause the market price of our common stock  
to fluctuate substantially in the future. Sales of substantial amounts of       
outstanding common stock in the public market could materially adversely affect 
the market price of our common stock. Further, in recent years the stock market 
has experienced extreme price fluctuation in equity securities of high          
technology companies. Such price and volume fluctuations often have been        
unrelated to the operating performance of those companies. These fluctuations as
well as general economic, political and market conditions, such as recessions,  
international currency fluctuations, or tariffs and other trade barriers, may   
materially and adversely affect the market price of our common stock.           

Any infringement by Gemstar on patent rights of others could result in          
litigation.                                                                     

  Patents of third parties may have an important bearing on our ability to
offer certain of our products and services. Many of our competitors as well as  
other companies and individuals have obtained, and may be expected to obtain in 
the future, patents that concern products or services related to the types of   
products and services we plan to offer. We cannot provide assurance that we will
be aware of all patents containing claims that may pose a risk of infringement  
by our products and services. In addition, patent applications in the U.S. are  
generally confidential until a patent is issued and so we cannot evaluate the   
extent to which our products and services may be covered or asserted to be      
covered by claims contained in pending patent applications. In general, if one  
or more of our products or services were to infringe patents held by others, we 
may be required to stop developing or marketing the products or services, to    
obtain licenses to develop and market the services from the holders of the      
patents or to redesign the products or services in such a way as to avoid       
infringing the patent claims. We cannot assess the extent to which we may be    
required in the future to obtain licenses with respect to patents held by       
others, whether the licenses would be available or, if available, whether we    
would be able to obtain the licenses on commercially reasonable terms. If we    
were unable to obtain the licenses, we may not be able to redesign our products 
or services to avoid infringement.                                              

Dependence on key employees could affect Gemstar's future success.              

   We are dependent on certain key members of our management, operations and
development staff, including Henry C. Yuen, our Chief Executive Officer, the    
loss of whose services could have a material adverse effect on Gemstar. Although
we have employment contracts with certain such key employees, such employment   
contracts would generally not restrict the employee's ability to leave Gemstar. 
Furthermore, recruiting and retaining additional qualified engineering,         
marketing, and operations personnel will be critical to our success. In         
addition, we may not be able to recruit or retain such personnel on acceptable  
terms. Failure to attract and retain key personnel could have a material adverse
effect on our business, operating results and financial condition.              

Gemstar's corporate governance structure is unusual and requires stockholders   
and directors to meet specified voting requirements before taking certain       
actions.                                                                        

     There is no assurance that the arrangements contained in our certificate of
incorporation or bylaws will prove to be a successful model for managing our    
company.                                                                        

    Our bylaws provide that Henry C. Yuen is Chairman of the Board (so long as
he is a director) and Chief Executive Officer until July 2005 unless he dies,   
resigns or is terminated for disability or for cause in accordance with his     
employment                                                                      

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agreement. This bylaw requirement can only be changed with the approval of nine 
of the twelve members of the board of directors or by the affirmative vote of 66
2/3% or more of the voting power of our common stock. It may be difficult for   
any such amendment to the bylaws to be made, however, because Mr. Yuen is       
entitled to select six members of the board of directors; and Liberty Media     
Corporation and The News Corporation Limited (who collectively beneficially own 
approximately 42% of our outstanding common stock) have agreed to vote their    
shares of our common stock for, or to use their best efforts to cause their     
respective designees on the board of directors to vote for, the election of Mr. 
Yuen as a director, the appointment of Mr. Yuen as Chairman of the Board and    
Chief Executive Officer and the election of five other designees of Mr. Yuen as 
directors. Moreover, Liberty Media and The News Corporation, if they voted      
together, would also be able to prevent us from taking such actions. On May 2,  
2001, Liberty Media transferred a significant portion of its Gemstar common     
stock to The News Corporation, and has assigned to The News Corporation most of 
its rights under a stockholders agreement among Liberty, The News Corporation,  
Mr. Yuen and Gemstar, including its right to designate directors to Gemstar's   
board.                                                                          

    Our bylaws require approval of seven of the twelve members of the board of
directors for certain itemized fundamental decisions. As a result, if all six   
directors designated by Mr. Yuen or all six directors designated by The News    
Corporation vote to oppose any fundamental decision identified in the bylaws,   
then we will not be able to take such action.                                   

     In addition, our bylaws provide that, except for matters delegated to board
committees, matters identified in the bylaws as "fundamental decisions" and     
matters that require approval by supermajority vote of stockholders, if a matter
is brought before the board of directors and if there is a tie vote with respect
to such matter, then the exclusive power to approve or disapprove that matter   
will generally be exercised by the Tie-breaking Committee (of which Mr. Yuen is 
the sole member) until the earlier of July 2005 or the date Mr. Yuen ceases to  
be Chief Executive Officer. Thereafter, until the third annual board of         
directors' meeting following (1) the date Mr. Yuen ceases to be Chief Executive 
Officer or, if later, (2) July 2005, the TVG Director Committee, the members of 
which are directors who were designated by TV Guide immediately before our      
acquisition of TV Guide or their successors, will generally have the ability to 
resolve tie votes.                                                              

The interests of Gemstar's substantial stockholders may differ from those of its
public stockholders.                                                            

The News Corporation, Liberty Media and Henry C. Yuen have significant
influence over our business and affairs as a result of a stockholders agreement,
their respective beneficial ownership of our common stock, and, in Mr. Yuen's   
case, his officer positions. Due to the significant value of their respective   
investments in Gemstar, and Mr. Yuen's role as Chairman and Chief Executive     
officer, it is unlikely that their interests would diverge significantly from   
ours. Nevertheless, investor interests can in some limited circumstances differ 
from each other and from other corporate interests and it is possible that these
significant stockholders with a stake in corporate management may have interests
that differ from those of other stockholders and of Gemstar itself.             

On May 2, 2001, Liberty Media transferred a significant portion of its
Gemstar common stock to The News Corporation. As of May 17, 2001, The News      
Corporation owned approximately 38.5% of the outstanding shares of Gemstar's    
common stock. No assurance can be given as to the effect of this transaction on 
Gemstar or the trading price of its common stock.                               

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

     Statements in this proxy statement/prospectus that are not historical facts
are forward-looking statements. These forward-looking statements relate to the  
financial condition, results of operations, cash flows, dividends, financing    
plans, business strategies, operating efficiencies or synergies, budgets,       
capital and other expenditures, competitive positions, growth opportunities for 
existing products, benefits from new technology, plans and objectives of        
management, markets for SkyMall's and Gemstar's stock, and other matters.       

    When we use the words "estimate," "project," "intend," "expect," "believe"
and similar expressions, we are making forward-looking statements. These        
forward-looking statements are found at various places throughout this proxy    
statement/prospectus and the other documents we incorporate by reference in this
proxy statement/prospectus.                                                     

   These forward-looking statements, including statements relating to future
business prospects, revenue, working capital, liquidity, capital needs, interest
costs and income wherever they occur in this proxy statement/prospectus         
(including in the documents incorporated by reference), are estimates reflecting
the best judgment of the senior management of Gemstar and SkyMall, respectively.
These forward-looking statements involve a number of risks and uncertainties    
that could cause actual results to differ materially from those suggested by the
forward-looking statements. Forward-looking statements should, therefore, be    
considered in light of various important factors, including those set forth in  
this proxy statement/prospectus. Important factors that could cause actual      
results to differ materially from estimates or projections contained in the     
forward-looking statements include, without limitation:                         

   .    expected synergies and cost savings from the merger may not be fully
realized or realized at all within the expected time frame; 

.    revenue following the merger may be lower than expected;         

    .    costs or difficulties related to the integration of the businesses of
SkyMall and Gemstar may be greater than expected;           

.    changes in technology that may increase the number of competitors
        Gemstar or SkyMall faces or require significant capital expenditures
to provide competitive services;                            

 .    general economic or business conditions that may be less favorable
        than expected, resulting in, among other things, lower than expected
revenue;                                                    

    .    legislative or regulatory changes may adversely affect the businesses
in which Gemstar and SkyMall are engaged;                   

 .    the rate of customer bankruptcies and other defaults may increase;

    .    necessary technological changes may be more difficult or expensive to
make than anticipated;                                      

.    adverse changes may occur in the securities markets; and         

    .    other factors, including, but not limited to, economic, key employee,
          competitive, regulatory, governmental and technological factors, which
may affect Gemstar or SkyMall.                              

We caution you not to place undue reliance on these forward-looking   
statements, which speak only as of the date of this proxy statement/prospectus. 
We do not undertake any obligation to publicly release any revisions to these   
forward-looking statements to reflect events or circumstances after the date of 
this proxy statement/prospectus or to reflect the occurrence of unanticipated   
events.                                                                         

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THE COMPANIES INVOLVED IN THE MERGER  

SkyMall, Inc.                                                                   

    Founded in 1989, SkyMall is a specialty retailer that markets high-quality
products and services through a number of unique channels and partnerships.     
SkyMall offers its products and services via various media, including the       
SkyMall in-flight print catalogs and on the Internet at www.skymall.com. SkyMall
is best known for its in-flight catalog, which is available on more than 73% of 
all domestic airlines, reaching approximately 540 million domestic airline      
passengers annually. Through its skymall.com, inc. subsidiary, which operates   
the skymall.com web site, SkyMall offers an expanded selection of products and  
services to online shoppers. SkyMall provides a merchandise redemption program  
for a number of loyalty programs, allowing consumers to purchase SkyMall        
merchandise with loyalty points earned in other programs.                       

SkyMall operates two distinct segments, its business-to-consumer and  
business-to business initiatives. The business-to-consumer segment provides     
retail merchandise through SkyMall's in-flight catalogs placed in domestic      
airlines and through SkyMall's web site. The business-to-business segment       
provides merchandise redemption offerings for a number of point-based loyalty   
programs.                                                                       

Gemstar-TV Guide International, Inc.                                            

Gemstar is a leading global technology and media company focused on   
consumer entertainment. We have three major business sectors:                   

.    Technology and Licensing Sector, which is responsible for the    
      development, licensing and protection of intellectual property and
    proprietary technologies, including our VCR Plus+(R) system, the
    interactive program guides marketed under the GUIDE Plus+ and TV
 Guide Interactive(SM) brands and the electronic book "Gemstar
eBook(TM)";                                                 

.    Interactive Platform Sector, which owns, operates and derives    
          recurring income from advertising, interactive services and e-commerce
on our proprietary interactive platforms; and               

  .    Media and Services Sector, which operates TV Guide(R) magazines, TV
      Guide Channel(SM), TV Games Network(SM) and other television media
   properties, provides programming to C-band subscribers and data
  transmission services, and operates the media sales group that
services all of our media platforms.                        

     Our technologies and media properties are primarily directed toward serving
the evolving entertainment needs of consumers worldwide, with special emphasis  
on television-viewing needs. We seek to have our technologies widely licensed,  
incorporated and accepted as the technologies and systems of choice by consumer 
electronics manufacturers, service providers (such as owners or operators of    
cable systems, telephone networks, Internet service providers, direct broadcast 
satellite providers, wireless systems and other multi-channel video programming 
distributors), software developers and consumers.                               

   On July 12, 2000, we acquired TV Guide, Inc. in a transaction in which TV
Guide became a wholly owned subsidiary of Gemstar. With the completion of the TV
Guide merger, our television guidance properties reach over 100 million people  
in the U.S. under the TV Guide brand, one of the most recognized and trusted    
brands in America. Taken as a whole, our television guidance products serve     
distinct but equally important needs of the TV viewer. For planning and         
editorial purposes, our TV Guide magazine currently reaches over 31.4 million   
readers each week based on a circulation of nearly 10 million; for video        
previewing, the TV Guide Channel reaches approximately 50 million households;   
for navigating through the hundred-plus channel universe of digital television, 
our interactive program guides, the TV Guide Interactive and GUIDE Plus+        
systems, now reach over 12 million homes and are growing rapidly at a rate of   
tens of thousands of new households per day; and for searching, voting and      
chatting regarding any TV-related issues, TVGuide.com, with its 3 million unique
monthly users, is one of the most popular entertainment sites on the Internet.  

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Gsky Acquisition Sub, Inc.                                                      

   GSky Acquisition Sub, Inc. is a Delaware corporation formed by Gemstar in
May 2001 solely for the purpose of the merger with SkyMall and is wholly owned  
by Gemstar. It has conducted no other business. The mailing address of GSky     
Acquisition Sub's principal executive offices is c/o Gemstar-TV Guide           
International, Inc., 135 North Los Robles Avenue, Suite 800, Pasadena,          
California 91101 and its telephone number is (626) 792-5700.                    

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THE SPECIAL MEETING 

Special Meeting to Vote on the Proposed Merger                                  

We are furnishing this proxy statement/prospectus to stockholders of  
SkyMall as part of the solicitation of proxies by SkyMall's board of directors  
for use at the special meeting. We are first mailing this proxy                 
statement/prospectus and the accompanying form of proxy to SkyMall stockholders 
on or about June __, 2001.                                                      

Date, Time and Place                                                            

    We will hold the special meeting at SkyMall's corporate offices located at
1520 East Pima Street, Phoenix, Arizona 85304 at 9:00 a.m., local time, on June 
__, 2001.                                                                       

Purpose of the Special Meeting                                                  

  At the special meeting, we are asking holders of SkyMall common stock to
approve and adopt the merger agreement and the merger. SkyMall's board of       
directors has determined that the merger agreement and the merger are fair to,  
and in the best interests of, SkyMall stockholders, has unanimously approved the
merger agreement and the merger, and unanimously recommends that SkyMall        
stockholders vote FOR approval and adoption of the merger agreement and the     
merger.                                                                         

Record Date                                                                     

    The record date for shares entitled to vote at the special meeting is June
__, 2001. As of June __, 2001, ________________ shares of SkyMall common stock  
were outstanding.                                                               

List of Stockholders                                                            

  For 10 days prior to the special meeting, a list of SkyMall stockholders
entitled to vote at the meeting will be available for inspection by any         
stockholder for purposes germane to the special meeting during normal business  
hours at SkyMall's executive offices. The list will also be available for       
inspection by stockholders present at the special meeting.                      

Shares Entitled to Vote                                                         

  Only shares of SkyMall common stock held at the close of business on the
record date are entitled to vote at the special meeting. Each holder of SkyMall 
common stock is entitled to one vote for each share of SkyMall common stock held
by the stockholder on the record date.                                          

Quorum Requirement                                                              

    A quorum of stockholders is necessary to hold a valid meeting. A quorum be
present at the special meeting if a majority of the total number of votes       
entitled to be cast by holders of SkyMall's common stock on the record date are 
represented in person or by proxy. If a quorum is not present at the special    
meeting, it is expected that the meeting will be adjourned or postponed to      
solicit additional proxies. Abstentions and broker "non-votes" count as present 
for establishing a quorum. A broker "non-vote" occurs on an item when a broker  
is not permitted to vote on that item without instruction from the beneficial   
owner of the shares and no instruction is given.                                

Shares Beneficially Owned by SkyMall's Directors and Executive Officers         

On the record date, directors and executive officers of SkyMall       
beneficially owned and are entitled to vote approximately ______________ shares 
of SkyMall common stock, representing approximately ____% of the total number of
votes entitled to be cast at the special meeting. These directors and officers, 
including Robert M. Worsley, who is a party to the voting agreement described in
the section "Other Transaction Agreements-Voting Agreement," have indicated a   

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present intention to vote in favor of the merger agreement and the merger. Mr.  
Worsley is obligated by the terms of the voting agreement to so vote.           

Vote Necessary to Approve the Merger Agreement and the Merger                   

   Approval and adoption of the merger agreement and the merger requires the
affirmative vote of a majority of the total number of votes entitled to be cast 
by holders of shares of SkyMall common stock outstanding on the record date.    

   If a SkyMall stockholder abstains from voting or does not vote, either in
person or by proxy, it will have the effect of a vote against approval and      
adoption of the merger agreement and the merger.                                

Moreover, under the rules of the National Association of Securities   
Dealers, Inc., if your broker holds your shares in its name, your broker may not
vote your shares on the merger proposal absent instructions from you. Without   
your voting instructions, a broker non-vote will occur on the merger proposal   
and will have the effect of a vote against approval and adoption of the merger  
agreement and the merger.                                                       

Proxies                                                                         

Voting Your Proxy                                                               

     You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the special meeting. You can always change your
vote at the meeting.                                                            

   Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as 
your proxy will vote your shares as you have directed.                          

    If you sign and timely return your proxy card but do not indicate how your
shares are to be voted, your shares will be voted in favor of the merger        
agreement and the merger, and the individuals named in the proxy card will have 
discretionary authority to vote upon any adjournment or postponement of the     
meeting, including for the purpose of soliciting additional proxies.            

How to Vote by Proxy                                                            

 You may vote by proxy by completing, signing, dating and returning your
proxy card in the enclosed envelope or by following the instructions on the     
proxy card for voting by telephone or the Internet. If you hold your shares     
through a broker or other custodian, you should check the voting form used by   
that firm to see if it offers telephone or Internet voting.                     

Revoking Your Proxy                                                             

You may revoke your proxy before it is voted by:                      

.    sending in a new proxy with a later date;                        

    .    notifying the secretary of SkyMall in writing before the meeting that
you have revoked your proxy; or                             

.    voting in person at the meeting.                                 

Voting in Person                                                                

    If you plan to attend the meeting and wish to vote in person, we will give
you a ballot at the meeting. However, if your shares are held in the name of    
your broker, bank or other nominee, you must bring a proxy from your nominee    
authorizing you to vote the "street name" shares owned by you on June __, 2001, 
the record date for voting.                                                     

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Proxy Solicitation                                                              

Gemstar will bear the costs and expenses incurred in connection with  
printing and mailing this proxy statement/prospectus, except that SkyMall will  
bear one-half of those costs and expenses in certain circumstances if the merger
agreement and the merger are not approved at the special meeting. SkyMall will  
pay the cost of the solicitation of proxies from its stockholders.              

     In addition to solicitation by mail, the directors and employees of SkyMall
and its subsidiaries may solicit proxies from stockholders by telephone or other
electronic means or in person. Any director or employee of SkyMall or its       
subsidiaries used to solicit proxies will not receive additional compensation   
for these services. SkyMall will request brokerage houses and other custodians, 
nominees and fiduciaries to forward solicitation materials to the beneficial    
owners of stock held of record by such persons. SkyMall will reimburse          
custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
in doing so.                                                                    

  A transmittal form with instructions for the surrender of SkyMall common
stock certificates will be mailed to SkyMall stockholders as soon as practicable
after completion of the merger. Stockholders should not send stock certificates 
with their proxies.                                                             

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THE MERGER  

Background of the Merger                                                        

     Both Gemstar and SkyMall regularly evaluate different strategies to improve
their competitive positions and enhance their respective stockholder values,    
including opportunities for acquisitions of other companies or their assets,    
possible partnerships or alliances, and other significant transactions.         

In February 2001, at the request of and on behalf of SkyMall, a       
representative of Robertson Stephens, Inc. ("Robertson Stephens") approached Dr.
Henry C. Yuen, Gemstar's Chief Executive Officer and Chairman of the Board,     
regarding a potential relationship between the companies. A brief telephonic    
meeting was held on February 21, 2001 between Dr. Yuen and Mr. Robert M.        
Worsley, SkyMall's Chief Executive Officer and Chairman of the Board. Other     
SkyMall management team members who participated in this meeting included Mr.   
Cary Deacon, President and Chief Operating Officer, and Ms. Christine A.        
Aguilera, Chief Financial Officer and General Counsel. During the initial       
telephonic meeting, SkyMall discussed with Gemstar various general information  
about its business, including its financial information, its key relationships  
with airlines, merchant partners and other third parties, and its technology and
business infrastructure. The parties concluded the initial telephonic meeting by
scheduling an in-person meeting at Gemstar's corporate offices in Pasadena,     
California. A confidentiality agreement between Gemstar and SkyMall was executed
on February 26, 2001.                                                           

At a board of directors meeting held on February 23, 2001, SkyMall's  
management advised the board that SkyMall was engaged in initial discussions    
with Gemstar about a possible merger. SkyMall management discussed with the     
board various considerations relative to the potential relationship with        
Gemstar.                                                                        

   SkyMall and Gemstar met at the offices of Gemstar in Pasadena, California
on March 3, 2001. Representatives of Gemstar that attended the meeting included 
Dr. Yuen, Elsie Leung, Chief Financial Officer and Co-President, Mike Jeffress, 
Vice President of Business Development, and Jim Gregg and Eric Jue, both of     
Gemstar's Business Development Group. SkyMall management that participated in   
the meeting included Mr. Worsley, Mr. Deacon and Ms. Aguilera. A representative 
from Robertson Stephens, SkyMall's financial advisor, also attended the meeting.
At this meeting, the SkyMall management team provided more detailed information 
to Gemstar about its business and financial model. Gemstar's management         
presented SkyMall with an overview of Gemstar's business. The parties also      
discussed various potential synergies between the companies that focused        
primarily on using SkyMall and its assets to support the e-commerce initiatives 
of Gemstar's various media properties, especially its interactive platforms.    

  Following the initial meeting in Pasadena and over the next three weeks,
SkyMall and Gemstar negotiated a letter of intent that outlined the terms of the
merger. A non-binding letter of intent was signed on March 28, 2001, subject    
to the approval of SkyMall's board of directors. SkyMall's board of directors   
held a meeting on March 30, 2001, at which time the term sheet was discussed at 
length and approved. At the meeting, SkyMall's management and financial and     
legal advisors were authorized to negotiate a definitive agreement for the      
merger consistent with the term sheet.                                          

   During the next six weeks, Gemstar and SkyMall conducted their respective
due diligence investigations. Dr. Yuen and Ms. Leung, together with other       
Gemstar business analysts and accountants, visited the corporate offices of     
SkyMall in Phoenix, Arizona on April 12, 2001. At the meeting, SkyMall's        
management presented Gemstar with detailed information about SkyMall business   
operations, its technology infrastructure, and various commerce strategies that 
it had developed. During this period, in addition to the meetings between       
Gemstar's and SkyMall's senior management teams, numerous other accountants,    
lawyers and Gemstar business representatives visited SkyMall and performed due  
diligence investigations. In addition, during this period, representatives of   
Robertson Stephens and SkyMall's senior management conducted various due        
diligence investigations of Gemstar and its business.                           

    Throughout the period from March 28, 2001 to the signing of the definitive
merger agreement on May 14, 2001, Mr. Worsley and Ms. Aguilera, together with   
their legal advisors, held numerous conversations, reviewed and revised drafts  
of the merger agreement and related agreements, and negotiated various terms of 
the transaction and provisions of the agreements. This process involved         
representatives of the law firm of Greenberg Traurig, LLP, SkyMall's legal      
counsel, representatives of Baker Botts, LLP, Gemstar's legal counsel, and      

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Robertson Stephens on behalf of SkyMall.                                        

      At board meetings held on April 13, 2001 and May 4, 2001, management
updated the board on the status of the negotiations with Gemstar. On May 9,     
2001, the SkyMall board of directors held a telephonic meeting at which they    
discussed the status of the negotiations and the likely timing for a definitive 
agreement with SkyMall's management and representatives of Greenberg Traurig and
Robertson Stephens. The board discussed the principal terms of the agreement and
provided guidance to the management team relating to further negotiations.      

      During the afternoon of May 12, 2001, the SkyMall board of directors
reviewed with its senior management and Greenberg Traurig the material terms and
conditions of the merger agreement, the stock option agreement, the voting      
agreement, and the other matters contemplated by those agreements. In addition, 
representatives of Robertson Stephens presented to the SkyMall board of         
directors certain financial analyses of the proposed transaction. At this       
meeting of the SkyMall board of directors, representatives of Robertson Stephens
delivered its oral opinion, subsequently confirmed in writing as of May 14,     
2001, that as of the date of its opinion, and based on the assumptions made, the
matters considered and the limitations on the review undertaken set forth in its
opinion, the merger consideration to be received by holders of SkyMall common   
stock in the merger (other than Robert M. Worsley, Christi M. Worsley and/or    
Robert Merrill Worsley and Christi Marie Worsley Family Revocable Trust dated   
July 29, 1998, Gemstar and any of its affiliates and any dissenting             
stockholders) was fair, from a financial point of view, to such stockholders.   
The SkyMall board of directors discussed the information presented by senior    
management and by its financial and legal advisors. After discussion and due    
consideration, the SkyMall board of directors unanimously approved, contingent  
upon satisfactory resolution of certain additional provisions to be negotiated  
with Gemstar, the merger agreement, the stock option agreement, the voting      
agreement, and the other matters contemplated by those agreements, unanimously  
recommended that the merger agreement be approved by the SkyMall stockholders,  
and directed that the merger agreement be submitted to the SkyMall stockholders 
for approval.                                                                   

     After the Nasdaq National Market closed on May 14, 2001, the merger
agreement and related agreements were finalized and signed. SkyMall issued a    
press release to announce the execution of the definitive merger agreement and  
the related agreements at that time.                                            

SkyMall's Reasons for the Merger                                                

The SkyMall board of directors consulted with SkyMall senior  
management, as well as its financial advisor and legal counsel, in reaching its 
decision to approve the merger agreement. Among the factors the SkyMall board of
directors considered in its deliberations were the following:                   

.   the board of directors' knowledge of SkyMall's business,  
     operations, prospects, projected financial performance, and
    competitive position and current trends in the catalog and
specialty retailer industries;                        

.   the financial and other terms and conditions of the merger
           agreement and the fact that they were the product of arms'-length
negotiations among the parties;                       

        .   current financial market conditions and the fact that the cash and
             stock consideration to be received by SkyMall's stockholders in the
            merger represents a premium over the recent trading prices for the
            shares, including a premium over the closing market price of $2.56
per share on May 11, 2001;                            

         .   the financial analyses of Robertson Stephens presented to the board
        of directors of SkyMall at its special meeting on May 12, 2001
           relating to the merger and the oral opinion of Robertson Stephens
         delivered to the board of directors of SkyMall on May 12, 2001,
        subsequently confirmed in writing as of May 14, 2001 as to the
         fairness, from a financial point of view, as of the date of its
             opinion and subject to the assumptions made, the matters considered
       and the limitations on the review undertaken set forth in its
           opinion, of the merger consideration to be received by holders of
            shares of SkyMall common stock in the merger (other than Robert M.
       Worsley, Christi M. Worsley and/or Robert Merrill Worsley and
            Christi Marie Worsley Revocable Trust dated July 29, 1998, Gemstar
     and any of its affiliates and any dissenting shareholders);

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     .   the results of the process undertaken by SkyMall management and
            Robertson Stephens to identify and solicit indications of interest
           from selected potential acquirors with respect to the purchase of
             SkyMall, including the fact that no potential acquiror or strategic
     partner had expressed an interest in engaging in a business
            combination or other strategic transaction that would likely be on
      terms as favorable to SkyMall's stockholders as those in the
merger;                                               

        .   the fact that Robert M. Worsley and Christi M. Worsley and a trust
             for the benefit of their children (SkyMall's principal stockholders
       and beneficial owners of approximately 30% of the outstanding
         shares) indicated that they were prepared to endorse the merger
        agreement, and that they expressly agreed to vote all of their
shares in favor of the merger;                        

   .   the fact that the merger was not expressly conditioned on the
        availability of financing which, combined with the experience,
      reputation and financial condition of Gemstar, increased the
   likelihood that the proposed merger would be consummated;

         .   the advice of SkyMall's legal advisors with respect to the terms of
the merger agreement and the merger;                  

.   the terms of the merger agreement, including the parties' 
         representations, warranties and covenants and the conditions to
their respective obligations;                         

        .   the fact that, to the extent required by the fiduciary obligations
        of the board of directors of SkyMall to the stockholders under
            Nevada law, SkyMall may terminate the merger agreement in order to
          approve a tender offer for the shares or other proposed business
           combination by a third party on terms more favorable to SkyMall's
        stockholders than the merger, upon the payment of a $1,940,000
          termination fee plus one-half of certain Gemstar expenses (up to
$500,000);                                            

        .   the status of SkyMall's relationship with its principal lender and
         prospects for SkyMall to comply with financial covenants in its
line of credit with that lender;                      

.   the listing status of SkyMall's shares on, and the listing
requirements of, Nasdaq; and                          

  .   the effect of the merger on SkyMall's relationships with its
employees and customers.                              

     The SkyMall board of directors also considered potentially negative
factors relating to the merger, including:                                      

  .   the risk that the per share value of the consideration to be
           received in the merger could decline significantly from the value
          immediately prior to the announcement of the merger, because the
             exchange ratio will not be adjusted for changes in the market price
of SkyMall common stock or Gemstar common stock;      

     .   the merger may not be consummated as a result of either party's
failure to satisfy the conditions to closing;         

      .   there is no provision in the merger agreement for the payment by
       Gemstar of a termination or break-up fee if the merger is not
consummated;                                          

      .   the difficulty and potential for significant dilution in quickly
            obtaining necessary private equity to fund SkyMall's operations if
the merger is not consummated;                        

         .   the risk that the potential benefits sought in the merger might not
be fully realized;                                    

      .   the possibility that the merger might not be consummated and the
         effect of a public announcement of the merger or any failure to
consummate the merger on:                             

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-   SkyMall's operating results and stock price; and  

           -   SkyMall's ability to attract and retain customers, suppliers,
     and key management, sales, and marketing personnel;

        .   that the termination fee of $1,940,000 million required to be paid
          by SkyMall under the merger agreement, and the option granted to
        Gemstar to acquire 19.9% of SkyMall's outstanding common stock
   exercisable by Gemstar under certain circumstances, might
   discourage a third party from seeking to acquire SkyMall;

         .   risks associated with fluctuations in Gemstar's common stock price;
and                                                   

         .   other applicable risks described in this proxy statement/prospectus
under "Risk Factors."                                 

        This discussion is not exhaustive of all the factors considered by the
SkyMall board of directors. In view of the wide variety of factors considered in
connection with the board's evaluation of the merger and the complexity of these
matters, the SkyMall board did not quantify or otherwise assign relative weights
to the factors described above. Rather, the SkyMall board of directors made its 
determination based on the totality of the information it considered. The       
members of the board were aware that, as described below under "Interests of 11 
SkyMall's Officers and Directors in the Merger," directors and executive        
officers of SkyMall have interests in the merger in addition to, or different   
from, their interests as stockholders of SkyMall, and the board considered this 
in deciding to recommend the transaction.                                       

        SkyMall cannot assure you that any of the expected results, synergies,
opportunities, or other benefits described in this section will be achieved as a
result of the merger.                                                           

Recommendation of SkyMall's Board of Directors                                  

 After careful consideration, the SkyMall board of directors has
unanimously determined that the terms of the merger agreement and the merger are
fair to, and in the best interests of, SkyMall and its public stockholders. The 
SkyMall board of directors has unanimously approved the merger agreement,       
recommended that the merger agreement be approved by SkyMall's stockholders, and
directed that the merger agreement be submitted to SkyMall's stockholders for   
approval. The SkyMall board of directors recommends that SkyMall's stockholders 
vote "FOR" the approval of the merger agreement.                                

   In considering the recommendation of SkyMall's board of directors
relating to the merger agreement and the merger, you should be aware that some  
of its directors and officers have interests in the merger that are different   
from, or in addition to, the interests of SkyMall's stockholders generally.     
Please see the section entitled "Interests of SkyMall's Officers and Directors  
in the Merger" below for additional information regarding these interests.      

Opinion of SkyMall's Financial Advisor                                          

         SkyMall engaged Robertson Stephens, Inc. to render an opinion as to the
fairness of the merger consideration, from a financial point of view, to holders
of shares of SkyMall common stock (other than Robert M. Worsley, Christi M.     
Worsley and/or Robert Merrill Worsley and Christi Marie Worsley Family Revocable
Trust dated July 29, 1998, Gemstar or any of its affiliates and any dissenting  
stockholders).                                                                  

         On May 12, 2001, at a meeting of the SkyMall board held to evaluate the
proposed merger, Robertson Stephens delivered to the SkyMall board its oral     
opinion, subsequently confirmed in writing as of May 14, 2001, that, as of that 
date and based on the assumptions made, the matters considered and the          
limitations on the review undertaken described in the opinion, the merger       
consideration was fair, from a financial point of view, to the holders of shares
of SkyMall common stock (other than Robert M. Worsley, Christi M. Worsley and/or
Robert Merrill Worsley and Christi Marie Worsley Family Revocable Trust dated   
July 29, 1998, Gemstar or any of its affiliates and any dissenting              
stockholders). The merger consideration was determined through negotiations     
between the respective managements of SkyMall and                               

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Gemstar. Although Robertson Stephens did assist the management of SkyMall in    
these negotiations, it was not asked to, and did not, recommend to SkyMall that 
any specific merger consideration constituted the appropriate consideration for 
the merger. Robertson Stephens assisted SkyMall's management in the negotiations
leading to an agreement on principal structural terms of the merger.            

    The full text of the Robertson Stephens opinion, which sets forth,
among other things, assumptions made, matters considered and limitations on the 
review undertaken, is attached as Annex B and is incorporated in this proxy     
statement/prospectus by reference. We urge SkyMall stockholders to read the     
Robertson Stephens opinion in its entirety. The Robertson Stephens opinion was  
prepared for the benefit and use of the SkyMall board in connection with its    
evaluation of the merger and does not constitute a recommendation to            
stockholders of SkyMall as to how they should vote, or take any other action,   
with respect to the merger.                                                     

The Robertson Stephens opinion does not address:              

         .   the relative merits of the merger and the other business strategies
         that the SkyMall board has considered or may be considering; or

      .   the underlying business decision of the SkyMall board to proceed
with the merger.                                      

       The summary of the Robertson Stephens opinion set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the full text 
of the Robertson Stephens opinion.                                              

       In connection with the preparation of the Robertson Stephens opinion,
Robertson Stephens, among other things:                                         

        .   reviewed certain publicly available financial statements and other
    business and financial information of SkyMall and Gemstar,
respectively;                                         

        .   reviewed certain internal financial statements and other financial
             and operating data, including certain financial forecasts and other
         forward-looking information, concerning SkyMall prepared by the
management of SkyMall;                                

  .   reviewed with SkyMall and Gemstar certain publicly available
estimates of research analysts relating to Gemstar;   

     .   held discussions with the respective managements of SkyMall and
         Gemstar concerning the businesses, past and current operations,
      financial condition and future prospects of both SkyMall and
             Gemstar, independently and combined, including discussions with the
             managements of SkyMall and Gemstar concerning their views regarding
the strategic rationale for the merger;               

        .   reviewed the financial terms and conditions set forth in the draft
of the merger agreement dated May 11, 2001;           

    .   reviewed the stock price and trading history of SkyMall common
stock and Gemstar common stock;                       

      .   compared the financial performance of SkyMall and the prices and
             trading activity of SkyMall common stock with that of certain other
publicly traded companies comparable with SkyMall;    

      .   compared the financial performance of Gemstar and the prices and
             trading activity of Gemstar common stock with that of certain other
publicly traded companies comparable with Gemstar;    

   .   compared the financial terms of the merger with the financial
             terms, to the extent publicly available, of other transactions that
it deemed relevant;                                   

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       .   reviewed the pro forma impact of the merger on Gemstar's earnings
          before interest, taxes, depreciation and amortization per share,
cash earnings per share and GAAP earnings per share;  

.   prepared a discounted cash flow analysis of SkyMall;      

        .   participated in discussions and negotiations among representatives
            of SkyMall and Gemstar and their financial and legal advisors; and

    .   made such other studies and inquiries, and reviewed such other
data, as it deemed relevant.                          

       In its review and analysis, and in arriving at its opinion, Robertson
Stephens assumed and relied upon the accuracy and completeness of all of the    
financial and other information provided to it (including information furnished 
to it orally or otherwise discussed with it by the managements of SkyMall and   
Gemstar) or publicly available and neither attempted to verify, nor assumed     
responsibility for verifying, any of such information. Robertson Stephens relied
upon the assurances of SkyMall's and Gemstar's respective managements that they 
were not aware of any facts that would make such information inaccurate or      
misleading. Furthermore, Robertson Stephens did not obtain or make, or assume   
any responsibility for obtaining or making, any independent evaluation or       
appraisal of the properties, assets or liabilities (contingent or otherwise) of 
SkyMall or Gemstar, nor was Robertson Stephens furnished with any such          
evaluation or appraisal.                                                        

  With respect to the financial forecasts and projections (and the
assumptions and bases therefor) for SkyMall that Robertson Stephens reviewed,   
Robertson Stephens assumed that such forecasts and projections:                 

.   had been reasonably prepared in good faith on the basis of
reasonable assumptions;                               

 .   reflected the best available estimates and judgments of the
        management of SkyMall as to the future financial condition and
performance of SkyMall; and                           

        .   will be realized in the amounts and in the time periods estimated.

       With respect to Gemstar, Robertson Stephens discussed with management
of Gemstar certain publicly available estimates of research analysts relating to
Gemstar, and Robertson Stephens was advised, and it assumed, that such estimates
represented reasonable estimates and judgments as to the future financial       
condition and performance of Gemstar and that such estimates would be realized  
in the amounts and in the time periods estimated.                               

In addition, Robertson Stephens assumed that:                 

    .   the merger will be consummated upon the terms set forth in the
          merger agreement without material alteration thereof, including,
        among other things, that the merger will be accounted for as a
      purchase method business combination in accordance with U.S.
 generally accepted accounting principles ("U.S. GAAP");

         .   the merger will be treated as a tax-free reorganization pursuant to
the Internal Revenue Code of 1986, as amended; and    

        .   the historical financial statements of each of SkyMall and Gemstar
             reviewed by it had been prepared and fairly presented in accordance
with U.S. GAAP consistently applied.                  

    Although developments following the date of the Robertson Stephens
opinion may affect the opinion, Robertson Stephens assumed no obligation to     
update, revise or reaffirm its opinion. The Robertson Stephens opinion is       
necessarily based upon market, economic and other conditions as in effect on,   
and information made available to Robertson Stephens as of, the date of the     
Robertson Stephens opinion. It should be understood that subsequent developments
may affect the conclusion expressed in the Robertson Stephens opinion and that  
Robertson Stephens disclaims any undertaking or obligation to advise any person 
of any change in any matter affecting the opinion which may come or be brought  
to its                                                                          

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attention after the date of the opinion. The Robertson Stephens opinion is      
limited to the fairness, from a financial point of view and as of the date      
thereof, of the merger consideration to holders of shares of SkyMall common     
stock (other than Robert M. Worsley, Christi M. Worsley and/or Robert Merrill   
Worsley and Christi Marie Worsley Family Revocable Trust dated July 29, 1998,   
Gemstar or any of its affiliates and any dissenting stockholders). Robertson    
Stephens does not express any opinion as to:                                    

    .    the value of any employee agreement or other arrangement entered into
in connection with the merger;                              

  .    any tax or other consequences that might result from the merger; or

.    what the value of Gemstar common stock will be when issued to    
       SkyMall's stockholders pursuant to the merger or the price at which
      the shares of Gemstar common stock that are issued pursuant to the
merger may be traded in the future.                         

    The following is a summary of the material financial analyses performed by
Robertson Stephens in connection with rendering the Robertson Stephens opinion, 
and reviewed with the board of directors of SkyMall at its meeting on May 12,   
2001. For purposes of the financial analyses reviewed with the board at this    
meeting, Robertson Stephens assumed that the merger consideration would be, for 
each share of SkyMall common stock, 0.0375 shares of Gemstar common stock and   
$1.50 in cash. The summary of the financial analyses is not a complete          
description of all of the analyses performed by Robertson Stephens. Certain of  
the information in this section is presented in a tabular form. In order to     
better understand the financial analyses performed by Robertson Stephens, these 
tables must be read together with the text of each summary. The Robertson       
Stephens opinion is based upon the totality of the various analyses performed by
Robertson Stephens and no particular portion of the analyses has any merit      
standing alone.                                                                 

Comparable Companies Analysis. Using publicly available information,  
Robertson Stephens analyzed, among other things, the trading multiples of       
SkyMall and eight (8) selected publicly traded companies in the specialty       
retailer and catalog industries.                                                

Multiples compared by Robertson Stephens included total enterprise    
value to total revenues and total enterprise value to EBITDA. All multiples were
based on closing stock prices as of May 9, 2001. Using the ranges of multiples  
set forth in the table below that Robertson Stephens derived from multiples for 
the public comparable companies, the following SkyMall equity values were       
implied based upon SkyMall's 2000 revenue and EBITDA and 2001 and 2002 estimated
revenue and EBITDA:                                                             

                                                       Implied SkyMall
                               Multiple range           Equity Value
                                 -------------------  ------------------------
        2000 Revenue                0.2x - 1.0x        $ 8.9 - $74.6 million
        2001E Revenue               0.2x - 0.8x        $ 9.0 - $58.4 million
        2002E Revenue               0.2x - 0.3x        $ 9.7 - $18.3 million

     2000 EBITDA                 2.2x - 7.8x            Not Meaningful
        2001E EBITDA                2.4x - 5.8x        $ 1.6 - $16.8 million
        2002E EBITDA                2.6x - 3.3x        $10.7 - $15.7 million

             Reference Range                           $ 8.0 - $36.8 million

Precedent Acquisition Analysis. Using publicly available information, 
Robertson Stephens analyzed the consideration offered, the premiums paid and the
implied transaction value multiples paid in selected public acquisition         
transactions in the specialty retailer and catalog industries.                  

   In analyzing these "precedent transactions", Robertson Stephens compared,
among other things, the aggregate value (equity value plus debt less cash) as a 
multiple of revenue and EBITDA for the latest 12 months prior to the            
transaction. All multiples for the precedent transactions were based on public  
information available at the time of the announcement. Based on this information
and other publicly available information, the following table illustrates the   

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implied SkyMall equity valuations derived from applying a range of multiples    
that Robertson Stephens derived from the precedent transactions to SkyMall's    
2000 revenue and EBITDA and 2001 estimated revenue and EBITDA:                  

                                               Implied SkyMall
                        Multiple range          Equity Value
                           -----------------  ------------------------
    2000 Revenue              0.2x - 0.5x      $ 8.9 - $33.6 million
    2001E Revenue             0.2x - 0.5x      $ 9.0 - $33.7 million

2000 EBITDA               5.2x - 6.2x            Negative   
    2001E EBITDA              4.7x - 9.0x      $10.4 - $26.7 million

            Reference Range                    $ 9.4 - $31.3 million

  No company, business or transaction compared in the comparable companies
analysis or precedent transaction analysis is identical to SkyMall or Gemstar.  
Accordingly, an analysis of the results of the foregoing is not entirely        
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics and other factors that   
could affect the acquisition, public trading and other values of the comparable 
companies, precedent transactions or the business segment, company or           
transactions to which they are being compared.                                  

Premiums Paid Analysis. Robertson Stephens also took an average of the
control premium paid in all public transactions for the 12 months ending May 1, 
2001 with a transaction value between $10 million and $100 million for which    
premium information was available from Securities Data Corporation. Based on    
this information and other publicly available information, the following table  
illustrates the implied SkyMall equity values derived from applying a range of  
premiums that Robertson Stephens derived from these precedent transactions:     

                                                        [Enlarge/Download Table]

                   Premium of the Implied                                                      
                    Value of the Merger          Average Deal        SkyMall Per Share Value   
                     Consideration over       Premiums Over Last   Implied by the Average Deal 
  Premium to:     SkyMall Per Share Price         12 Months                  Premium           
--------------  --------------------------  --------------------  -----------------------------
                                                                                               
     1-day                 15.4%                    52.8%                     $3.97            
     20-day                61.3%                    61.5%                     $3.00            
     30-day                78.6%                    63.7%                     $2.75            
     60-day                50.0%                    66.7%                     $3.33            

  Discounted Cash Flow Analysis. Robertson Stephens conducted a discounted
cash flow analysis based on SkyMall's estimated net cash flows for calendar     
years 2001 through 2005. Robertson Stephens applied EBITDA exit multiples       
ranging from 3.0x to 5.0x and discount rates ranging from 15.0% to 25.0%. The   
following table summarizes the results of this analysis:                        

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                                                                [Download Table]

                        Implied SkyMall        Implied SkyMall 
                         Equity Value          Price Per Share 
                     ---------------------  -------------------
                                                               
15.0% Discount Rate  $29.0 - $38.5 million     $1.81 - $2.40   
20.0% Discount Rate  $24.0 - $31.8 million     $1.50 - $1.98   
25.0% Discount Rate  $19.9 - $26.4 million     $1.25 - $1.65   

Average              $24.3 - $32.2 million     $1.52 - $2.01   

   Pro Forma Analysis. Robertson Stephens analyzed certain pro forma effects
resulting from the merger, including, among other things, the impact of the     
merger on the projected revenue per share and earnings per share of the combined
company for fiscal years 2000 and 2001. The following table summarizes the      
results of such analysis:                                                       

                                                                [Download Table]
                                                                              
Fiscal year 2001 estimated EBITDA per share accretion:                    1.1%
Fiscal year 2001 estimated cash earnings per share accretion:             0.8%
Fiscal year 2001 estimated GAAP earnings per share accretion:             0.2%

Fiscal year 2002 estimated EBITDA per share accretion:                    1.5%
Fiscal year 2002 estimated cash earnings per share accretion:             1.0%
Fiscal year 2002 estimated GAAP earnings per share accretion:             2.1%

     The actual results achieved by the combined company may vary from projected
results and the variations may be material.                                     

 While the foregoing summary describes certain analyses and factors that
Robertson Stephens deemed material in its presentation to the SkyMall board, it 
is not a comprehensive description of all analyses and factors considered by    
Robertson Stephens. The preparation of a fairness opinion is a complex process  
that involves various determinations as to the most appropriate and relevant    
methods of financial analysis and the application of these methods to the       
particular circumstances and, therefore, such an opinion is not readily         
susceptible to summary description. Robertson Stephens believes that its        
analyses must be considered as a whole and that selecting portions of its       
analyses and of the factors considered by it, without considering all analyses  
and factors, would create an incomplete view of the evaluation process          
underlying the Robertson Stephens opinion. Several analytical methodologies were
employed and no one method of analysis should be regarded as critical to the    
overall conclusion reached by Robertson Stephens. Each analytical technique has 
inherent strengths and weaknesses, and the nature of the available information  
may further affect the value of particular techniques. The conclusions reached  
by Robertson Stephens are based on all analyses and factors taken as a whole and
also on application of Robertson Stephens' own experience and judgment. Such    
conclusions may involve significant elements of subjective judgment and         
qualitative analysis. Robertson Stephens therefore gives no opinion as to the   
value or merit standing alone of any one or more parts of the analysis that it  
performed. In performing its analyses, Robertson Stephens considered general    
economic, market and financial conditions and other matters, many of which are  
beyond the control of SkyMall and Gemstar. The analyses performed by Robertson  
Stephens are not necessarily indicative of actual values or future results,     
which may be significantly more or less favorable than those suggested by such  
analyses. Accordingly, analyses relating to the value of a business do not      
purport to be appraisals or to reflect the prices at which the business actually
may be purchased. Furthermore, no opinion is being expressed as to the prices at
which shares of SkyMall common stock or Gemstar common stock may be traded at   
any future time.                                                                

The engagement letter between Robertson Stephens and SkyMall provides 
that Robertson Stephens is entitled to receive a fee for its services, a        
substantial portion of which is contingent upon the consummation of the merger. 
SkyMall has also agreed to reimburse Robertson Stephens for certain of its      
out-of-pocket expenses, including legal fees, and to indemnify and hold harmless
Robertson Stephens and its affiliates and any director, employee or agent of    
Robertson Stephens or any of its affiliates, or any person controlling Robertson
Stephens or its affiliates for certain losses, claims,                          

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damages, expenses and liabilities relating to or arising out of services        
provided by Robertson Stephens as financial advisor to SkyMall. The terms of the
fee arrangement with Robertson Stephens, which SkyMall and Robertson Stephens   
believe are customary in transactions of this nature, were negotiated at arm's  
length between SkyMall and Robertson Stephens, and the SkyMall board was aware  
of such fee arrangements, including the fact that a significant portion of the  
fees payable to Robertson Stephens is contingent upon completion of the merger. 
Robertson Stephens maintains a market in the shares of Gemstar common stock. In 
the ordinary course of its business, Robertson Stephens may trade in SkyMall's  
securities and Gemstar's securities for its own account and the account of its  
customers and, accordingly, may at any time hold a long or short position in    
SkyMall's securities or Gemstar's securities.                                   

 Robertson Stephens was retained based on Robertson Stephens' experience
as a financial advisor in connection with mergers and acquisitions and in       
securities valuations generally, as well as Robertson Stephens' investment      
banking relationship and familiarity with SkyMall.                              

Robertson Stephens is an internationally recognized investment banking
firm. As part of its investment banking business, Robertson Stephens is         
frequently engaged in the valuation of businesses and their securities in       
connection with mergers and acquisitions, negotiated underwritings, secondary   
distributions of securities, private placements and other purposes.             

Gemstar's Reasons for the Merger                                                

Gemstar is seeking to acquire SkyMall because it believes SkyMall will
greatly enhance Gemstar's television-based T-commerce and e-commerce            
initiatives, especially in Gemstar's interactive TV strategy. Gemstar's         
principal reasons for the merger are as follows:                                

   .    T-commerce and e-commerce are major aspects of Gemstar's interactive
     TV strategy. With the acquisition of SkyMall, Gemstar will obtain
   proven back-office infrastructure and fulfillment capacities to
         support and accelerate Gemstar's T-commerce and e-commerce platforms.

    .    SkyMall's "virtual inventory" model, which leverages the fullfillment
         infrastructure of other merchants, represents a proven model on which
  Gemstar can build out and expand its T-commerce and e-commerce
    strategies across its various media properties without incurring
inventory costs or risks.                                   

.    The acquisition of SkyMall will afford Gemstar the opportunity to
        greatly extend the SkyMall brand and leverage its relationships with
     airlines and premium merchants. Gemstar expects to leverage these
    relationships by extending SkyMall's sales channels to Gemstar's
       portfolio of media properties, including TV Guide Magazine with its
    circulation of approximately 10 million, tvguide.com with over 3
     million unique monthly visitors and Gemstar's Interactive Program
     Guides with its approximately 12 million and growing viewer base.

.    SkyMall's access to over 70% of all domestic airline seats will  
        provide Gemstar with a significant, captive audience with an upscale
        demographic - airline passengers. Gemstar believes that SkyMall will
        provide Gemstar with a unique opportunity to expose this demographic
          to Gemstar's various media products, services and platforms, including
its Gemstar eBook offerings.                                

Accounting Treatment                                                            

   The merger will be accounted for under the purchase method of accounting,
with Gemstar treated as the acquiror. As a result, Gemstar will record the      
assets and liabilities of SkyMall at their estimated fair values and will record
as goodwill the excess of the purchase price over the estimated fair values.    
From the date of the merger, the operating results of SkyMall will be combined  
with the results of Gemstar for financial accounting purposes.                  

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Interests of SkyMall's Officers and Directors in the Merger                     

    In considering the recommendation of SkyMall's board regarding the merger,
you should be aware that several members of SkyMall's management and board of   
directors may be deemed to have interests in the merger that are different from,
or in addition to, the interests of SkyMall stockholders generally. SkyMall's   
board of directors was aware of these interests and considered them, among other
matters, in approving the merger agreement and the merger.                      

Different Merger Consideration to be Paid to Robert M. Worsley        

  In connection with the merger, all holders of SkyMall common stock other
than Robert M. Worsley, his wife and a trust for the benefit of their children  
will receive a combination of Gemstar common stock and cash. As requested by    
Gemstar, Mr. Worsley will continue as SkyMall's CEO after the merger, and it is 
a requirement of Gemstar that all shares of SkyMall common stock beneficially   
owned by him be exchanged solely for Gemstar common stock in the merger. To     
encourage Mr. Worsley to contribute to the long-term goals of the merger, his   
shares, as well as those owned by his wife and a trust for the benefit of their 
children, will be subject to the five-year lock up agreement with Gemstar       
described under the caption "Other Transaction Agreements - Lock-up Agreement." 
In order to ensure that the different consideration being received by the       
Worsleys is fair to SkyMall's public stockholders, the additional number of     
shares of Gemstar stock they will receive will effectively equal the number of  
shares of Gemstar stock they could have purchased with the cash consideration   
they would have received had they been treated the same as other SkyMall        
stockholders in the merger. However, while SkyMall's public stockholders will   
generally recognize gain for income tax purposes on the cash consideration      
received by them in the merger, it is not anticipated that the Worsleys will not
recognize gain with respect to their exchange of SkyMall common stock for       
Gemstar common stock in the merger.                                             

Stock Options                                                         

     SkyMall's directors and executive officers hold options to purchase SkyMall
common stock. At the effective time of the merger, each option to acquire       
SkyMall common stock outstanding under the 1994 Employee Stock Option Plan will 
become fully vested and exercisable for 0.03759 of a share of Gemstar common    
stock and $1.50 in cash for each underlying share of SkyMall common stock. See  
"The Merger Agreement - Treatment of SkyMall Stock Options."                    

Non-employee directors hold options issued under the Non-employee     
Director Plan. These options will be assumed by Gemstar and will convert into   
the right to acquire Gemstar common stock and cash in the amount the holder     
would have received if such option had been exercised immediately prior to the  
merger.                                                                         

Immediately after the effective time of the merger, all holders of    
SkyMall options will be offered the substitute cash payment described under "The
Merger Agreement - Treatment of SkyMall Stock Options."                         

Voting Agreement                                                      

  As of the record date for the special meeting, the Worsleys collectively
held approximately 30% of the outstanding shares of SkyMall common stock. Under 
the voting agreement, which is described in more detail under the caption "Other
Transaction Agreements - Voting Agreement", the Worsleys have agreed to vote all
of their shares at the special meeting in favor of the merger agreement and the 
merger, and against any inconsistent proposal.                                  

Worsley Employment Agreement                                          

 At the time the merger agreement was signed, SkyMall entered into a new
employment agreement with Mr. Worsley that will become effective at the         
effective time of the merger. The agreement has a term of five years and        
provides that Mr. Worsley will continue to serve as the Chief Executive Officer 
of SkyMall following the merger at an initial salary of $315,000 per year. The  
agreement also provides that within thirty days after the merger Mr. Worsley    
will receive options to acquire 105,000 shares Gemstar common stock at an       
exercise price equal to the fair market value of Gemstar common stock on the    
grant date, such options to vest in equal annual installments over the five year
period following the date of the                                                

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merger. For a description of this employment agreement, see "Other Agreements --
Worsley Employment Agreement."                                                  

Release Agreement                                                     

   In December 1998, Robert and Christi Worsley exercised an option under an
agreement among the Worsleys, SkyMall and Alan C. and Karen Ashton to purchase  
2,386,798 shares of SkyMall common stock. In connection with the exercise of the
option, the Worsleys agreed to make charitable contributions to the Ashtons'    
family foundation over a five-year period commencing in 2003 totaling           
approximately $7 million, which contributions have a present value of           
approximately $3,500,000 to $5,000,000 using interest rates of 10% to 20% per   
annum. It is a requirement of Gemstar, and a covenant in the merger agreement,  
that SkyMall seek to enter into an agreement with the Ashtons, as long as the   
amount paid by SkyMall thereunder does not exceed $5.1 million, which includes a
complete release by the Ashtons of all claims (none of which have been asserted 
to date) that the Ashtons may have against SkyMall or any of its affiliates,    
control persons, officers, directors, shareholders, employees, agents or        
representatives. SkyMall intends to enter into an agreement on these terms, and 
Gemstar has agreed to fund payment of the amount due thereunder at or           
immediately prior to the effective time of the merger. The proposed agreement   
would result in the release of the Worsleys from their obligation to make       
contributions to the Ashtons' foundation.                                       

Indemnification and Insurance                                                   

The merger agreement provides that, following the merger:             

.    The certificate of incorporation and bylaws of the surviving     
         corporation in the merger will contain indemnification provisions for
   directors and officers that are substantially identical to such
          provisions in SkyMall's current articles of incorporation for at least
six years after completion of the merger.                   

    .    For a period of three years after the merger is completed, Gemstar is
         required to cause the surviving corporation in the merger to maintain
   in effect SkyMall's existing officers' and directors' liability
  insurance, or to provide equivalent insurance covering acts or
        omissions occurring prior to completion of the merger. The surviving
          corporation in the merger is not required to pay an annual premium for
         this insurance in excess of two times the last annual premium paid by
          SkyMall prior to the date of the merger agreement, but in such case it
      will be required to purchase as much coverage as possible for that
amount.                                                     

Material U.S. Federal Income Tax Consequences of the Merger                     

Scope of Discussion                                                   

The following discussion summarizes the material U.S. federal income  
tax consequences of the merger. It is not a complete analysis of all potential  
tax effects relevant to the merger. This discussion assumes that you hold your  
shares of SkyMall common stock as capital assets within the meaning of Section  
1221 of the Internal Revenue Code.                                              

This discussion is addressed only to SkyMall stockholders who receive 
both Gemstar common stock and cash. This discussion does not address the tax    
consequences that may be relevant to a particular SkyMall stockholder subject to
special treatment under U.S. federal income tax laws, such as dealers in        
securities, banks, insurance companies, tax-exempt organizations, non-U.S.      
persons, stockholders who acquired their SkyMall shares pursuant to the exercise
of options or otherwise as compensation, or stockholders who hold their stock as
part of a hedge, constructive sale, wash sale, straddle or conversion           
transaction, nor does the discussion address any consequences arising under the 
laws of any state, local or foreign jurisdiction. Moreover, the tax consequences
to holders of SkyMall options and warrants, and the tax consequences of the     
Ashton settlement, are not discussed. The discussion is based on and subject to 
the Internal Revenue Code of 1986, as amended, Treasury regulations thereunder, 
and administrative rulings and court decisions as of the date hereof. All of the
foregoing are subject to change, which may be retroactive, and any such change  
could affect the continuing validity of this discussion. We urge you to consult 
your own tax advisors concerning the U.S. federal, state and local and foreign  
tax consequences of the merger to you.                                          

Tax Opinions                                                                    

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It is a non-waivable condition of the merger that SkyMall receive an  
opinion at closing from Greenberg Traurig LLP, counsel to SkyMall, that:        

.    the merger will qualify for U.S. federal income tax purposes as a
    reorganization within the meaning of Section 368 of the Internal
Revenue Code; and                                           

   .    each of Gemstar, GSky Acquisition Sub and SkyMall will be a party to
        the reorganization within the meaning of Section 368 of the Internal
Revenue Code.                                               

It is a non-waivable condition of the merger that Gemstar receive an  
opinion at closing from Baker Botts LLP, counsel to Gemstar, that:              

.    the merger will qualify for U.S. federal income tax purposes as a
    reorganization within the meaning of Section 368 of the Internal
Revenue Code; and                                           

   .    each of Gemstar, GSky Acquisition Sub and SkyMall will be a party to
        the reorganization within the meaning of Section 368 of the Internal
Revenue Code.                                               

Opinions of counsel are not binding on the Internal Revenue Service or
the courts. There is no assurance that the IRS will not successfully challenge  
the conclusions expressed in such opinions. In rendering their opinions,        
respective counsel for the companies will rely upon factual representations made
by Gemstar, GSky Acquisition Sub, and SkyMall in the merger agreement and       
related documents and in certificates to be executed in connection with the     
merger. Any inaccuracy or change in the representations could adversely affect  
the conclusions reached in the opinions and the tax discussion below. The       
opinions will be subject to the qualifications and assumptions set forth above  
and to the further assumption that the consideration per share received by      
dissenting shareholders, if any, will have a value which is not materially      
different from the value of the consideration per share received by the public  
shareholders.                                                                   

   Assuming that the merger qualifies as a reorganization within the meaning
of Section 368 of the Internal Revenue Code, the following discussion summarizes
the material U.S. federal income tax consequences of the merger to the SkyMall  
stockholders. SkyMall has received the opinion of Greenberg Traurig LLP, and    
Gemstar has received the opinion of Baker Botts LLP to the effect that the      
discussion under this section "-Material U.S. Federal Income Tax Consequences of
the Merger" is accurate in all material respects. These opinions are subject to 
the qualifications and assumptions set forth above and to the further assumption
that the merger will qualify as a reorganization as described above.            

     Tax Consequences to SkyMall Stockholders Receiving Gemstar Common Stock and
Cash                                                                            

    If you receive both Gemstar common stock and cash in the merger, including
any cash received instead of fractional shares of Gemstar common stock, you will
not recognize any loss on the exchange. In general, you will recognize gain     
equal to the lesser of either the amount of cash received or the gain realized. 
The gain realized will be the excess, if any, of:                               

.    the sum of:                                                      

    .    the fair market value, as of the date of the merger, of the
 Gemstar common stock you receive in the merger; and

.    the amount of cash you receive in the merger; over     

.    your adjusted tax basis in your SkyMall common stock.            

SkyMall stockholders must calculate gain or loss separately for each  
identifiable block of shares of SkyMall common stock exchanged, and the loss    
recognized on one block of stock may not be offset against gain recognized on   
another block of stock.                                                         

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Any gain recognized by a SkyMall stockholder will generally be treated
as capital gain, unless, as discussed below, the receipt of the cash has the    
effect of the distribution of a dividend for U.S. federal income tax purposes.  
In such case, the gain recognized by the stockholder will be treated as ordinary
dividend income to the extent of the stockholder's ratable share of the         
accumulated earnings and profits of SkyMall. Any gain that is treated as capital
gain will be long-term capital gain if the holding period for shares of SkyMall 
common stock that are surrendered in the exchange is more than one year as of   
the date of the merger.                                                         

 For purposes of determining whether the cash received has the effect of
a distribution of a dividend for U.S. federal income tax purposes, a SkyMall    
stockholder is treated as if the stockholder first exchanged all of the         
stockholder's shares of SkyMall common stock solely for Gemstar common stock and
then Gemstar immediately redeemed a portion of the Gemstar common stock in      
exchange for the cash the stockholder actually received. This is called a       
"deemed redemption." Under this analysis, in general, if the receipt of cash by 
the stockholder in the deemed redemption results in a "substantially            
disproportionate" reduction in the stockholder's voting stock interest in       
Gemstar or is "not essentially equivalent to a dividend," the receipt of the    
cash will not have the effect of the distribution of a dividend.                

The deemed redemption will be "substantially disproportionate," and,  
therefore, will not have the effect of a distribution of a dividend with respect
to a SkyMall stockholder if the percentage of the outstanding Gemstar common    
stock that is actually and constructively owned by the stockholder immediately  
after the deemed redemption is less than 80% of the percentage of the           
outstanding Gemstar common stock that is considered to be actually and          
constructively owned by the stockholder immediately before the deemed           
redemption. The deemed redemption will not be "essentially equivalent to a      
dividend," and, therefore, will not have the effect of a distribution of a      
dividend with respect to a SkyMall stockholder if it results in a "meaningful   
reduction" in the stockholder's proportionate interest in Gemstar. If a         
stockholder that is considered to have a relatively minimal stock interest in   
Gemstar and no right to exercise control over corporate affairs suffers a       
reduction in the stockholder's proportionate interest in Gemstar, the           
stockholder should be regarded as having suffered a meaningful reduction of his 
or her interest in Gemstar. For example, the Internal Revenue Service has held  
in a published ruling that, in the case of a less than 1% stockholder who does  
not have management control over the corporation, any reduction in the          
stockholder's proportionate interest will constitute a "meaningful reduction."  

For purposes of this deemed redemption analysis, certain attribution  
rules apply in determining a SkyMall stockholder's ownership interest in Gemstar
immediately after the acquisition, but before the deemed redemption, and after  
the deemed redemption. Under those rules, a SkyMall stockholder is deemed to own
stock held by certain family members, estates and trusts of which the           
stockholder is a beneficiary, a partnership in which the stockholder is a       
partner, and a corporation in which the stockholder is a direct or indirect 50% 
stockholder, as well as stock subject to options that are held by the           
stockholder or the entities. Because these constructive ownership rules are     
complex, each SkyMall stockholder who believes that he or she may be subject to 
these rules should consult his or her tax advisor.                              

   The aggregate tax basis of the Gemstar common stock received by a SkyMall
stockholder will be the same as the aggregate tax basis of the shares SkyMall   
common stock surrendered in the exchange, decreased by the amount of cash       
received, and increased by the amount of gain recognized, including any portion 
of the gain that is treated as a dividend. The holding period of the Gemstar    
common stock received will include the holding period of the shares of SkyMall  
common stock surrendered in exchange therefor. If a SkyMall stockholder has     
differing tax bases and/or holding periods with respect to the stockholder's    
shares of SkyMall common stock that the stockholder surrenders in the exchange, 
the stockholder should consult a tax advisor in order to identify the particular
tax bases and/or holding periods of the particular shares of Gemstar common     
stock received in the exchange.                                                 

Consequences of Failure to Qualify as a Reorganization                

If the merger did not qualify as a reorganization under Section 368 of
the Internal Revenue Code:                                                      

     .    SkyMall would recognize gain on the merger which would, in general, be
equal to the excess of:                                     

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   .    the sum of the fair market value on the merger date of the
Gemstar common stock received by SkyMall stockholders in the merger, the  
  total amount of cash received by SkyMall stockholders in the merger, and the
  amount of liabilities of SkyMall assumed by the surviving corporation in the
merger; over                                                              

.    SkyMall's basis in its assets; and                     

.    SkyMall stockholders would recognize capital gain or loss on the 
 merger in an amount equal to the difference between the sum of the cash and
the fair market value, as of the date of the merger, of the Gemstar common
stock received in the merger and the stockholder's basis in the SkyMall   
common stock surrendered.                                                 

Backup Withholding                                                    

  Payments of cash to a SkyMall stockholder surrendering shares of SkyMall
common stock in the merger generally will be subject to information reporting to
the IRS. In addition, they generally will be subject to backup withholding at a 
rate of 31% of the cash payable to the SkyMall stockholder, unless the SkyMall  
stockholder furnishes their taxpayer identification number in the manner        
prescribed in applicable Treasury regulations, certifies that the number is     
correct, certifies as to no loss of exemption from backup withholding, and meets
other specified conditions. Appropriate documentation for this purpose will be  
provided to SkyMall stockholders with the transmittal letter that will be sent  
to them by the exchange agent. Any amounts withheld from payments to a          
stockholder under the backup withholding rules will be allowed as a refund or   
credit against the SkyMall stockholder's U.S. federal income tax liability,     
provided the required information is furnished to the IRS.                      

  THE ABOVE DISCUSSION MAY NOT APPLY TO CERTAIN CATEGORIES OF STOCKHOLDERS
SUBJECT TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE. STOCKHOLDERS ARE  
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC TAX           
CONSEQUENCES OF THE MERGER TO THEM, INCLUDING ANY FEDERAL STATE OR OTHER TAX    
CONSEQUENCES OF THE MERGER.                                                     

Delisting and Deregistration of SkyMall Common Stock                            

SkyMall common stock is currently listed on the Nasdaq National Market
under the symbol "SKYM." Upon the completion of the acquisition, SkyMall common 
stock will be delisted from Nasdaq and deregistered under the Securities        
Exchange Act.                                                                   

Regulatory Matters                                                              

At this time we do not expect the merger to be subject to the         
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as    
amended, and the rules promulgated under that Act by the Federal Trade          
Commission, which prevent some transactions from being completed until required 
information and materials are furnished to the Antitrust Division of the U.S.   
Department of Justice and the U.S. Federal Trade Commission and the waiting     
periods are terminated or expire.                                               

Restrictions on Sales by Affiliates of SkyMall                                  

   The shares of Gemstar common stock that will be issued in the merger will
be registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares of Gemstar common stock issued to any person  
who is deemed to be an "affiliate" of SkyMall at the time of the special        
meeting. Persons who may be deemed to be affiliates include individuals or      
entities that control, are controlled by or are under common control with,      
SkyMall and may include some of its officers and directors, as well as its      
principal stockholders. Any person deemed to be an affiliate of SkyMall at the  
time of the special meeting may not sell their shares of Gemstar common stock   
acquired in the merger except pursuant to:                                      

    .    an effective registration statement under the Securities Act covering
the resale of those shares;                                 

     .    an exemption under paragraph (d) of Rule 145 under the Securities Act;
or                                                          

.    any other applicable exemption under the Securities Act.         

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    Gemstar's registration statement, of which this proxy statement/prospectus
will form a part, does not cover the resale of shares of Gemstar common stock to
be received by affiliates of SkyMall in the merger.                             

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THE MERGER AGREEMENT  

     The following description summarizes the material provisions of the
merger agreement, a copy of which is attached as Annex A to this proxy          
statement/prospectus and incorporated by reference in this proxy                
statement/prospectus. We urge you to read the complete merger agreement for the 
precise terms of the merger agreement and other information that may be         
important to you.                                                               

Structure of Merger                                                             

      At the time the merger becomes effective SkyMall will merge with and
into GSky Acquisition Sub, with GSky Acquisition Sub as the surviving           
corporation. GSky Acquisition Sub will change its name to "SkyMall, Inc.", with 
the result that SkyMall will then be a wholly owned subsidiary of Gemstar.      

Merger Consideration                                                            

  In the merger, SkyMall stockholders other than the Worsleys will
receive, for each share of SkyMall common stock held, 0.03759 of a share of     
Gemstar common stock and $1.50 in cash, subject to adjustment for tax purposes  
as described below. The Worsleys will receive, for each share of SkyMall stock  
held by them, 0.03759 of a share of Gemstar common stock and a fraction of a    
share of Gemstar stock determined by dividing $1.50 by the volume weighted      
average sale price of a share of Gemstar common stock on the closing date of the
merger. The number of shares of Gemstar common stock stockholders will receive  
in the merger will be appropriately adjusted for any stock splits, combinations 
and other similar events that occur between the date of the merger agreement and
the completion of the merger.                                                   

         Gemstar will not issue fractional shares of Gemstar common stock in the
merger. Instead, each SkyMall stockholder otherwise entitled to a fractional    
share will receive cash, without interest, in an amount determined by           
multiplying the fraction of a share of Gemstar common stock by $39.90.          

     The merger is intended to qualify as a reorganization under Section
368(a) of the Internal Revenue Code. To ensure that the merger will so qualify, 
the merger agreement provides that the Gemstar common stock to be issued in the 
merger must constitute at least 45% of the overall value of the consideration   
paid by Gemstar for SkyMall common stock in connection with the merger. Hence,  
if the market value of the Gemstar common stock to be issued in the merger does 
not, as of the date the merger is effected, represent at least 45% of the value 
of the merger consideration as of that date, then the amount of Gemstar stock to
be issued to SkyMall stockholders will be increased, and the cash to be paid to 
those stockholders will be decreased, until the 45% requirement is achieved.    

Effective Time of the Merger                                                    

      The merger will become effective when (1) a certificate of merger is
filed with the Delaware Secretary of State or articles of merger are filed with 
the Nevada Secretary of State, whichever is later, or (2) at a later time as may
be specified in the certificate of merger and articles of merger filed by       
Gemstar and SkyMall. The closing date of the merger will occur as soon as       
practicable after the last of the conditions in the merger agreement has been   
satisfied or waived.                                                            

Conversion of Shares in the Merger                                              

  At the effective time of the merger, by virtue of the merger and
without any additional action on the part of SkyMall stockholders or Gemstar:   

      .     each share of outstanding common stock of GSky Acquisition Sub
               will remain outstanding and continue as one share of common stock
of the surviving corporation; and                 

      .     each share of SkyMall common stock held by SkyMall, Gemstar or
            GSky Acquisition Sub will be cancelled and retired without any
conversion or the payment of any consideration.   

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Exchange Agent; Procedures for Exchange of Certificates                         

       Gemstar will appoint American Stock Transfer & Trust Company to serve
as exchange agent and will deliver to the exchange agent cash and certificates  
representing shares of Gemstar common stock in an amount sufficient to pay the  
cash and deliver the shares to be issued in the merger as well as cash in       
sufficient amount for payment in lieu of fractional shares. The exchange agent  
will deliver to SkyMall stockholders cash and shares of Gemstar common stock    
(including all rights attached to such shares) and any cash in lieu of          
fractional shares.                                                              

      The exchange agent will mail to each SkyMall stockholder a letter of
transmittal and instructions to surrender his or her certificates representing  
shares of SkyMall stock in exchange for cash, certificates representing Gemstar 
common stock and cash in lieu of any fractional shares. After a SkyMall         
stockholder surrenders his or her SkyMall stock certificate along with a duly   
executed and properly completed letter of transmittal and other required        
documents, the exchange agent will deliver to such stockholder the following:   

  .     the cash portion of the merger consideration to which such
stockholder is entitled;                          

        .     a certificate representing the number of whole shares of Gemstar
 common stock to which such stockholder is entitled;

        .     cash in lieu of any fractional shares of Gemstar common stock to
     which such stockholder would otherwise be entitled; and

      .     the amount of any dividends or other distributions declared on
     Gemstar common stock with a record date on or after the
              completion of the merger and a payment date before the surrender
              of the certificates representing shares of SkyMall common stock.

SkyMall stockholders should not forward their SkyMall stock certificates with   
the enclosed proxy card nor should they forward their SkyMall stock certificates
to the exchange agent until they have received the packet of information,       
including the letter of transmittal, described above.                           

Treatment of SkyMall Stock Options in the Merger                                

       Options to acquire SkyMall common stock issued under the SkyMall 1994
Employee Stock Option Plan will become fully vested at the effective time of the
merger and will terminate 30 days after the effective time of the merger.       
Options under the 1994 Employee Stock Option Plan that are exercised after the  
effective time but within 30 days shall be exercisable for 0.03759 of a share   
of Gemstar common stock and $1.50 in cash for each share of SkyMall common stock
subject to such option.                                                         

    Stock options issued by SkyMall apart from the 1994 Employee Stock
Option Plan (including those issued to SkyMall's directors under the            
Non-Employee Director Option Plan ) will be assumed by Gemstar at the effective 
time of the merger. Each such option will be exercisable for the amount of cash 
and Gemstar common stock that the holder would have received if the option had  
been exercised immediately before the merger.                                   

         Immediately after the effective time of the merger, Gemstar shall offer
to all SkyMall option holders the right to receive a substitute cash payment    
instead of the combination of Gemstar common stock and cash received by SkyMall 
stockholders in the merger. The substitute cash payment will be the product of  
(1) the number of shares of SkyMall common stock underlying the option          
immediately prior to the merger and (2) the excess, if any, of:                 

(A) the sum of                                                

(x) $1.50, plus                             

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           (y) 0.03759 multiplied by the volume weighted average trading
      price of Gemstar common stock at the closing date, minus

         (B) the exercise price per share of the option immediately prior to the
merger.                                                                         

Treatment of Warrants in the Merger                                             

 Each warrant to acquire SkyMall common stock outstanding at the
effective time of the merger will be converted to a warrant to acquire the cash 
and Gemstar common stock that the holder of such warrant would have received if 
the warrant had been exercised for shares of SkyMall common stock immediately   
prior to the merger. The terms and conditions of warrants for SkyMall common    
stock shall remain substantially the same after the merger as before the merger.

Conditions to Completing the Merger                                             

Conditions to the obligations of each party. Each party's obligations to        
complete the merger are subject to the satisfaction or waiver, on or prior to   
the closing date of the merger, of each of the following conditions:            

    .    the merger agreement and the merger must be approved by the
           holders of a majority of the issued and outstanding shares of
       SkyMall common stock as of the record date of the special
meeting;                                          

      .    there must not be any law, judgment, permanent or preliminary
               injunction, restraining order or other order in effect or pending
              or threatened that would prevent the completion of the merger on
the terms in the merger agreement;                

        .    Gemstar's registration statement relating to the merger must be
        effective and must not be the subject of any stop order or
proceedings seeking a stop order; and             

          .    any waiting period applicable to the merger under the Hart-Scott-
            Rodino Antitrust Improvements Act of 1976 must have expired or
been terminated.                                  

Conditions to the obligations of Gemstar and GSky Acquisition Sub. The          
obligations of Gemstar and GSky Acquisition Sub to complete the merger are      
subject to the satisfaction or waiver of each of the following additional       
conditions (except that the delivery of an opinion by Baker Botts L.L.P. that   
the merger will qualify as a "reorganization" under Section 368 of the Internal 
Revenue Code is a condition that cannot be waived):                             

          .    SkyMall's representations and warranties must be true and correct
in all material respects;                         

         .    SkyMall must have performed or complied in all material respects
             with all of its agreements and covenants required by the merger
               agreement to be complied with by SkyMall on or before the closing
date;                                             

        .    SkyMall must have delivered to Gemstar a compliance certificate
      certifying that SkyMall has complied with the conditions
described above;                                  

    .    there must not be any law, judgment, proceeding or order in
effect which:                                     

              (1)   makes or is reasonably likely to make the merger or any of
                     the other transactions contemplated by the merger agreement
illegal;                              

              (2)   imposes or is reasonably likely to impose material damages
                     or penalties on SkyMall, Gemstar or GSky Acquisition Sub by
               reason of the consummation of any of the transactions
contemplated by the merger agreement; 

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     (3)   imposes, or is reasonably likely to result in the
            imposition of, material limits on the ownership or
                     operation of any material portion of the business or assets
                   of SkyMall, Gemstar, GSky Acquisition Sub or any of their
              subsidiaries, or requires or is reasonably likely to
                   require any of them to hold separate any material portion
               of any of their business or assets as a result of the
                    merger or any other transaction contemplated by the merger
agreement;                            

     (4)   imposes, or is reasonably likely to result in the
                     imposition of, material limits on the ability of Gemstar or
                GSky Acquisition Sub to acquire, hold or exercise full
                   rights of ownership of any shares of capital stock of the
surviving corporation in the merger;  

      (5)   prohibits or is reasonably likely to result in the
               prohibition of Gemstar effectively controlling in any
            material respect the business or operations of the
                   surviving corporation or its subsidiaries, or requires or
                   is reasonably likely to require Gemstar, SkyMall or their
               subsidiaries to cease or refrain from engaging in any
          material business if the merger is completed; or

               (6)   after completing the merger, is reasonably likely to have a
                  Material Adverse Effect on Gemstar (as defined below) or
  the surviving corporation in the merger.

         .    Gemstar must receive satisfactory evidence that all governmental
               approvals and consents required in connection with completing the
        merger have been obtained and are in full force and effect
         without any condition, limitation or restriction that would
         result in any of the limitations described in the preceding
              clause, or which would have a Material Adverse Effect on Gemstar
or SkyMall after completion of the merger;        

        .    no event or circumstance has occurred since May 14, 2001, which
        has had or could reasonably be expected to have a Material
Adverse Effect on SkyMall;                        

         .    Baker Botts L.L.P. has given Gemstar its opinion that the merger
         will qualify as a "reorganization" under Section 368 of the
Internal Revenue Code;                            

          .    Greenberg Traurig, LLP, counsel to SkyMall, has given its opinion
          to Gemstar as to matters relating to SkyMall and the merger;

       .    all rights outstanding under the SkyMall Rights Plan have been
         redeemed, terminated or otherwise rendered ineffective with
respect to the merger; and                        

        .    SkyMall has not received from dissenting stockholders perfected
             demands for payment with respect to more than 5% of the SkyMall
common stock outstanding.                         

Conditions to the obligations of SkyMall. SkyMall's obligation to complete the  
merger is subject to the satisfaction or waiver of each of the following        
conditions (except that the delivery of an opinion by Greenberg Traurig, LLP    
that the merger will qualify as a "reorganization" under Section 368 of the     
Internal Revenue Code is a condition that cannot be waived):                    

.    the representations and warranties of Gemstar and GSky 
            Acquisition Sub contained in the merger agreement must be true
and correct in all material respects;             

        .    each of GSky Acquisition Sub and Gemstar must have performed or
              complied in all material respects with all of its agreements and
               covenants required by the merger agreement to be complied with by
it on or before the closing date;                 

        .    Gemstar must have delivered to SkyMall a compliance certificate
              signed by an appropriate officer certifying that it has complied
with the conditions described above;              

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     .    there must not be any law, judgement, proceeding or order in
effect which:                                     

            (1)   makes or is reasonably likely to make the merger and the
                 other transactions contemplated by the merger agreement
illegal;                              

              (2)   imposes or is reasonably likely to impose material damages
                  or penalties on SkyMall, Gemstar or GSky Acquisition Sub
                that would be material to Gemstar and its subsidiaries
             taken as a whole after giving effect to the merger;

     (3)   imposes, or is reasonably likely to result in the
            imposition of, material limits on the ownership or
                operation by Gemstar or any of its subsidiaries of any
                  material portion of the business or assets of Gemstar or
                 any subsidiary, or compels or may compel Gemstar or any
                subsidiary to dispose of or hold separate any material
             portion of the assets or business of Gemstar or any
           subsidiary as a result of the merger or any other
              transaction contemplated by the merger agreement; or

             (4)   is reasonably likely to have a Material Adverse Effect on
    Gemstar after giving effect to the merger.

        .    no event of circumstance has occurred since May 14, 2001, which
        has had or could reasonably be expected to have a Material
Adverse Effect on Gemstar (as defined below);     

         .    SkyMall has received an opinion from Greenberg Traurig, LLP that
             the merger will qualify as a "reorganization" under Section 368
of the Internal Revenue Code; and                 

        .    Baker Botts L.L.P., counsel to Gemstar, has given an opinion to
       SkyMall as to matters relating to Gemstar and the merger.

"Material Adverse Effect" on SkyMall means an event which,  
individually or in the aggregate, has had or could reasonably be expected to    
have a material adverse effect on:                                              

               (1)   the business, financial condition, results of operations or
                     prospects of SkyMall and its subsidiaries taken as a whole;
or                                    

               (2)   the ability of SkyMall to complete the merger in accordance
 with the terms in the merger agreement.

       A decline in the trading price of SkyMall's common stock alone does
not constitute a Material Adverse Effect.                                       

       "Material Adverse Effect" on Gemstar means an event or circumstance
which, individually or in the aggregate, has had or could reasonably be expected
to have a material adverse effect on:                                           

               (1)   the business, financial condition, results of operations or
                     prospects of Gemstar and its subsidiaries taken as a whole;
or                                    

               (2)   the ability of Gemstar to complete the merger in accordance
 with the terms in the merger agreement.

         A decline in the trading price of Gemstar common stock alone does not
constitute a Material Adverse Effect.                                           

Conduct of SkyMall's Business Pending the Merger                                

       SkyMall agreed in the merger agreement that, except as specifically
contemplated by the merger agreement and the other transaction documents, until 
the merger is completed or the merger agreement is terminated, SkyMall and its  

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subsidiaries will operate their businesses in the ordinary and usual course of  
business consistent with past practices and use their reasonable best efforts   
to:                                                                             

.    preserve intact their present business organizations;  

      .    keep available the services of their present officers and key
employees; and                                    

         .    preserve their relationships with material customers, suppliers,
           licensors, licensees and others having business dealings with
them.                                             

    SkyMall also agreed that, except as specifically contemplated or
expressly permitted by the merger agreement and the other transaction documents,
until the merger is completed or the merger agreement is terminated, neither    
SkyMall nor its subsidiaries will take any of the following actions, unless     
Gemstar consents in writing:                                                    

    .    issue, deliver, sell, grant, pledge or transfer or agree to
        issue, deliver, sell, grant, pledge or transfer any of its
         securities (other than the issuance of SkyMall common stock
             pursuant to warrants or options to acquire SkyMall common stock
outstanding at May 14, 2001);                     

      .    amend any of its organizational documents or the terms of any
SkyMall stock options, warrants or stock plans;   

      .    split, combine or reclassify its outstanding capital stock or
     issue or authorize or propose the issuance of any other
     securities in exchange for shares of its capital stock;

     .    declare, set aside or pay any dividend or other distribution
payable in cash, stock or property;               

         .    redeem, purchase or otherwise acquire any securities of SkyMall;

        .    take any action that would cause any of the representations and
         warranties of SkyMall to be untrue in any material respect;

      .    take any action that would cause any of the conditions to the
completion of the merger not to be fulfilled;     

          .    dispose of or encumber any material intellectual property, except
              pursuant to existing agreements or through non-exclusive license
      agreements granted in the ordinary course of business in
              connection with the performance of services by SkyMall or any of
its subsidiaries;                                 

          .    incur additional debt, guarantee any debt, issue or sell any debt
             securities or warrants or rights to acquire any debt securities
          of SkyMall or any of its subsidiaries, or guarantee any debt
          security of any other person, other than drawdowns under its
existing revolving credit facility;               

 .    sell, lease, mortgage, encumber, license or exchange, or
        otherwise dispose of, any assets or properties, other than
        pursuant to existing agreements and sales or non-exclusive
           licensing of inventory in the ordinary course of business and
         other than liens incurred in connection with purchase money
              indebtedness relating to permitted capital expenditures securing
only tangible assets;                             

         .    incur any liability or obligation, or contribute any asset, to a
       subsidiary of SkyMall that is material to SkyMall and its
          subsidiaries, other than in the ordinary course of business;

         .    acquire or agree to acquire by merging or consolidating with, or
             by purchasing a substantial interest in or assets of, or by any
           other manner, any business or any corporation, partnership or
other business or division thereof;               

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  .    acquire or agree to acquire any assets that are material to SkyMall
     and its subsidiaries (except in the ordinary course of business);

   .    make or rescind any tax election, settle any legal claim relating to
          taxes, or change methods of reporting income or deductions for federal
income tax purposes;                                        

   .    make or agree to make any capital expenditure in excess of $250,000;

     .    increase compensation of any director, officer or employee, except for
         normal increases in the ordinary course of business to non-management
         employees and increases required under current employment agreements;

  .    amend or renew any material contract in a manner that is materially
       less favorable to SkyMall, or terminate or waive any rights under a
material contract;                                          

   .    pay or establish any benefit not provided under any existing plan or
arrangement;                                                

 .    settle any litigation involving SkyMall or any of its directors or
        officers for an amount over $500,000 or for consideration other than
cash or SkyMall common stock;                               

 .    make any advance (other than advances to employees in the ordinary
   course of business consistent with past practice) or loan to or
capital investments in any person other than SkyMall or its 
subsidiaries;                                               

   .    form any subsidiary or acquire any capital, equity, participation or
other interest in any person or entity;                     

.    change its fiscal year;                                          

 .    enter into any employment, indemnification or consulting agreement
   other than as required by law and pursuant to standard forms of
agreements previously disclosed to Gemstar; and             

  .    authorize, commit to or agree to take any of the foregoing actions.

Other Covenants                                                                 

Stockholder Meeting. SkyMall will call and hold a special meeting of  
stockholders to approve the merger and the merger agreement.                    

     Rights. SkyMall will redeem all rights outstanding under its rights plan or
otherwise terminate or render ineffective such rights with respect to the merger
agreement, the merger, the voting agreement and the option agreement or any     
exercise thereof.                                                               

Notice.  Each party will promptly notify the other in writing of:     

.    the discovery by such party of any circumstance that would render
         untrue in any material respect any representation or warranty by such
party in the merger agreement;                              

     .    any material breach of any covenant or obligation of such party in the
merger agreement;                                           

.    any circumstance that would make the timely satisfaction of any  
condition to the merger unlikely; and                       

     .    the occurrence of any circumstance that has had or is likely to have a
material adverse effect on such party.                      

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Contract Consents. SkyMall will use commercially reasonable efforts to
deliver all notices required to be delivered, and obtain all consents required  
to be obtained, in connection with the merger under the terms of any material   
contract to which SkyMall is a party.                                           

     Additional Insurance. At any time prior to the stockholders meeting Gemstar
may require SkyMall to obtain additional insurance covering SkyMall and its     
directors and officers in respect of any litigation pending against SkyMall.    
Gemstar must specify the litigation for which such insurance must be obtained   
and the amount of the policy, provided that the policy amount will not exceed   
$10 million and the premium will not exceed $200,000. Gemstar will promptly     
reimburse SkyMall for the cost of such additional insurance if the merger       
agreement is terminated.                                                        

Release Agreement. Gemstar has consented to SkyMall entering into an  
agreement with Alan and Karen Ashton, as long as the total amount payable by    
SkyMall under the agreement does not exceed $5.1 million, the agreement contains
a full and unconditional release by the Ashtons of any claims against SkyMall   
(none of which have been asserted to date), and the form and substance of the   
agreement is otherwise acceptable to Gemstar. At or immediately prior to the    
effective time of the merger, Gemstar will advance to SkyMall the funds         
necessary to pay the amount owed by SkyMall to the Ashtons under the agreement. 

     Company Employees. If any person that has been, as of the effective time of
the merger, continuously employed by SkyMall as a full time employee for at     
least a year is terminated without cause within a year after the merger, then   
the surviving corporation in the merger will pay to such employee a cash        
severance payment in an amount equal to the base compensation of such employee  
at the time of termination for the greater of (1) two weeks for each year of    
continuous service as a full time employee or (2) 90 days.                      

  Access to Information; Confidentiality. SkyMall will, and will cause its
subsidiaries to, afford to Gemstar and its officers, employees, accountants,    
counsel, financial advisors and other representatives, reasonable access to all 
of their properties, books, contracts, commitments, personnel and records.      
Gemstar will keep such information confidential in accordance with the          
confidentiality agreement entered into between Gemstar and SkyMall in connection
with the negotiation of the merger agreement.                                   

   Filings; Other Actions. Before we can complete the merger we must satisfy
all regulatory requirements and obtain the approval of all regulatory agencies  
having jurisdiction over the merger. We have agreed to use all reasonable       
efforts to make all necessary filings and obtain all necessary government       
approvals and to take all actions necessary to complete the merger. At present, 
we do not believe any regulatory approvals or filings are required other than   
filing with the Securities and Exchange Commission the registration statement on
Form S-4 of which this proxy statement/prospectus will be a part. However, if   
the market price of Gemstar common stock rises sufficiently to cause the total  
value of the merger consideration to exceed $50 million, then we may be required
to make filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. 

Indemnification of SkyMall Directors and Officers                               

  The certificate of incorporation and bylaws of the surviving corporation
shall contain provisions with respect to indemnification and exculpation from   
liability substantially identical to those currently set forth in the SkyMall   
articles of incorporation and bylaws, and those provisions are not to be amended
for a period of six years from the effective time of the merger in any manner   
that would affect the rights of individuals who prior to the merger were        
directors, officers, employees or agents of SkyMall, unless required by law.    

   Gemstar will cause the surviving corporation to cause to be maintained in
effect the current policy of directors and officers insurance maintained by     
SkyMall for events occurring prior to the merger for three years, provided that 
the surviving corporation will not be required to expend more than 200% of the  
current annual premiums paid by SkyMall for such insurance, but in such case    
will purchase as much coverage as possible for such amount.                     

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Termination                                                                     

The merger agreement and the transactions contemplated in the merger  
agreement may be terminated at any time prior to completing the merger, whether 
before or after approval of the merger agreement and the merger by SkyMall's    
stockholders, in the following situations:                                      

.    by mutual consent of Gemstar and SkyMall;                        

.    by either Gemstar or SkyMall if:                                 

         (1)  the merger has not occurred by September 30, 2001; however, this
              right to terminate is not available to any party whose action or
        failure to act has resulted in the merger not occurring by
       September 30, 2001 and constitutes a breach of the merger
agreement;                                        

     (2)  after May 14, 2001 but before the special meeting of SkyMall
     stockholders if SkyMall has not received, and no public
         announcement has been made, of a Takeover Proposal, and the
           special meeting of SkyMall stockholders has been held but the
          merger has not been approved by the SkyMall stockholders; or

  (3)  any court of competent jurisdiction or other governmental
     authority has issued an injunction or order permanently
           prohibiting the merger and the injunction or order has become
              final and nonappealable; however, this right to terminate is not
               available to any party that failed to use commercially reasonable
           efforts to lift or rescind such injunction or order before it
became permanent.                                 

.    by Gemstar if:                                                   

   (1)  SkyMall breaches any of its representations, warranties or
           covenants in the merger agreement which (i) would result in a
               failure of a condition to the merger agreement and (ii) cannot or
              has not been cured within 30 days after giving written notice to
SkyMall or, if earlier, September 30, 2001;       

          (2)  after May 14, 2001, SkyMall receives, or a public announcement is
          made, of a Takeover Proposal and any of the following occur:

              .    SkyMall does not submit the merger to its stockholders at a
special meeting;                        

            .    the board of directors of SkyMall withholds, withdraws or
                   changes in any manner adverse to Gemstar its recommendation
         to SkyMall stockholders to approve the merger; or

              .    the special meeting of SkyMall stockholders is held and the
                 merger agreement and merger are not adopted and approved.

.    by SkyMall if:                                                   

   (1)  Gemstar breaches any of its representations, warranties or
           covenants in the merger agreement which (i) would result in a
               failure of a condition to the merger agreement and (ii) cannot or
              has not been cured within 30 days after giving written notice to
Gemstar, or, if earlier by September 30, 2001; or 

          (2)  after May 14, 2001, SkyMall receives, or a public announcement is
         made, of a Takeover Proposal and (i) the special meeting of
           SkyMall stockholders is held and the merger agreement and the

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            merger have not been approved by the SkyMall stockholders, and
               (ii) SkyMall has paid a termination fee and expense reimbursement
to Gemstar.                                       

No Solicitation; Termination Fee                                                

    SkyMall has agreed that, except as described below, during the period from
May 14, 2001 until completion of the merger or termination of the merger        
agreement, it will not, and will use its best efforts to ensure that its        
officers, directors, employees and other agents or affiliates do not, directly  
or indirectly, take any of the following actions:                               

.    initiate, solicit or encourage the submission of any Takeover    
Proposal;                                                   

.    enter into an agreement in connection with a Takeover Proposal;  

     .    facilitate any inquiries or proposals reasonably expected to lead to a
Takeover Proposal, or amend, waive or release any standstill
agreement.                                                  

   SkyMall will immediately notify Gemstar of any request for information or
of any Takeover Proposal or any inquiry with respect to or which could          
reasonably lead to a Takeover Proposal. SkyMall will promptly provide Gemstar   
with the material terms of any such request, Takeover Proposal or inquiry and   
the identity of the person making such request, Takeover Proposal or inquiry.   
SkyMall will keep Gemstar informed of the status and details of any such        
request, Takeover Proposal or inquiry. Gemstar will be obligated to keep all    
such information confidential.                                                  

  However, if, prior to approval of the merger and the merger agreement by
SkyMall's stockholders, SkyMall receives an unsolicited Takeover Proposal which 
the SkyMall board of directors reasonably determines in good faith (after       
consulting with its independent financial advisor) is a Superior Proposal, then 
SkyMall may participate in discussions with and provide information to the      
proposing party, as long as SkyMall enters into a non-disclosure agreement with 
such party on terms that are at least as restrictive as those contained in the  
confidentiality agreement it entered into with Gemstar in connection with the   
negotiation of the merger agreement.                                            

    If Gemstar terminates the merger agreement because a Takeover Proposal has
been made or announced, and (a) SkyMall fails to submit the merger agreement to 
its stockholders for approval, (b) SkyMall's board withdraws or amends its      
recommendation of the merger agreement in a manner adverse to Gemstar or (c) the
SkyMall stockholders fail to approve the merger at a special meeting called for 
that purpose, then SkyMall must pay to Gemstar a termination fee of $1,940,000  
and reimburse those expenses described in "--Expenses" below.                   

   "Takeover Proposal" means any proposal other than the merger described in
this proxy statement/prospectus regarding any of the following transactions:    

      (1)  a merger, consolidation, purchase of 20% or more of SkyMall's
        assets (or assets which generated 20% or more of SkyMall's
      revenue or cash flow from operations), or other business
combination or similar transaction with SkyMall;  

         (2)  the acquisition from SkyMall of any equity interest in or voting
       securities of SkyMall which constitute 20% or more of the
             applicable class of such equity interests or voting securities;

          (3)  any tender or exchange offer which, if completed, would result in
           the acquisition of beneficial ownership of 20% or more of the
SkyMall common stock outstanding at that time;    

 (4)  any public announcement of an intention to do any of the
       foregoing or any agreement or engagement to do any of the
foregoing.                                        

"Superior Proposal" means a Takeover Proposal which:                  

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         (1)  would result in SkyMall stockholders receiving consideration per
               share of SkyMall common stock (valuing any non-cash consideration
         at its fair market value as determined in good faith by the
    SkyMall board of directors after consultation with its
               independent financial advisors) that is superior from a financial
            point of view to the consideration per share to be received in
the merger;                                       

(2)  is not subject to a financing contingency; and         

    (3)  is made by a person which the board of directors of SkyMall
              reasonably determines in good faith (after consultation with its
            independent financial advisors) has the financial resources to
complete the transaction.                         

Representations and Warranties                                                  

SkyMall, Gemstar and GSky Acquisition Sub each made a number of       
representations and warranties in the merger agreement, including               
representations and warranties relating to, among other things:                 

.    corporate organization, qualification to do business and similar 
   corporate matters of SkyMall, Gemstar and GSky Acquisition Sub;

     .    SkyMall's subsidiaries and their corporate organization, qualification
to do business and similar corporate matters;               

    .    authorization, execution, delivery, performance and enforceability of
      the merger agreement by SkyMall, Gemstar and GSky Acquisition Sub;

.    capital structure of SkyMall, Gemstar and GSky Acquisition Sub;  

.    Gemstar's formation and ownership of GSky Acquisition Sub;       

  .    the accuracy of information contained in SEC filings by SkyMall and
         Gemstar, and the absence of undisclosed liabilities in those filings;

.    required consents, approvals, orders and authorizations of       
  governmental authorities and of other parties to SkyMall's and
     Gemstar's contracts and relating to execution and delivery of the
merger agreement and related matters;                       

.    absence of material conflicts and violations of SkyMall's and    
    Gemstar's organizational documents and laws, rules, regulations,
        orders, judgments or decrees applicable to SkyMall or Gemstar or any
          of their respective subsidiaries or any of their respective properties
or assets;                                                  

     .    absence of material adverse changes or events concerning SkyMall's and
Gemstar's respective businesses since December 31, 2000;    

 .    the accuracy of the information supplied by SkyMall and Gemstar in
   connection with this proxy statement/prospectus and the related
registration statement;                                     

.    SkyMall's relationships with significant vendors;                

.    material litigation involving SkyMall, Gemstar and Gemstar's     
subsidiaries;                                               

 .    possession of and compliance with all licenses required to conduct
SkyMall's business and compliance with applicable regulatory
requirements by SkyMall;                                    

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.    engagement and payment of fees of brokers, investment bankers and
financial advisors by SkyMall and Gemstar;                  

.    filing of tax returns and payment of taxes by SkyMall;           

.    SkyMall's labor matters and employee benefits;                   

   .    receipt by SkyMall of a fairness opinion of Robertson Stephens, Inc.
regarding the merger consideration;                         

    .    approval and recommendation of the merger agreement and the merger by
SkyMall's board of directors;                               

.    required vote of SkyMall stockholders to approve the merger;     

   .    SkyMall's real property and intangible property and the condition of
its personal and real property;                             

.    SkyMall's ownership of intellectual property and absence of      
infringement claims;                                        

.    transactions and contracts with affiliates of SkyMall;           

   .    absence of noncompetition restrictions on the parties as a result of
the merger;                                                 

.    SkyMall not being subject to regulation as an investment company;

.    SkyMall's insurance policies;                                    

.    absence of excise tax obligations on behalf of SkyMall;          

  .    absence of excess parachute payments to employees of SkyMall in the
merger; and                                                 

  .    accurate disclosure by SkyMall to Gemstar and GSky Acquisition Sub.

Amendment, Extension and Waiver                                                 

    The parties may amend the merger agreement at any time before or after the
merger agreement and the merger are approved by SkyMall's stockholders; provided
that the merger agreement may not be amended in a manner that requires          
stockholder approval after SkyMall stockholder approval has been obtained       
without further approval from the SkyMall stockholders.                         

At any time before the merger is completed, any party may, by written 
instrument signed by the waiving party, extend the time for performance of the  
obligations of any other party to the merger agreement, waive inaccuracies in   
representations and warranties of any other party contained in the merger       
agreement, waive compliance by any other party with any agreements or covenants 
in the merger agreement, or waive any condition to the waiving party's          
obligation to complete the transactions contemplated in the merger agreement or 
to any of the waiving party's other obligations under the merger agreement      
(except that neither party may waive the condition that its counsel deliver an  
opinion that the merger will qualify as a "reorganization" under Section 368 of 
the Internal Revenue Code).                                                     

Expenses                                                                        

Except as described below, whether or not the merger is completed, all
costs and expenses incurred in connection with the merger agreement and the     
transactions contemplated by the merger agreement will be paid by the party     
incurring the cost or expense.                                                  

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     If Gemstar terminates the merger agreement following a Takeover Proposal or
because of a breach by SkyMall of any of its representations, warranties or     
covenants in the merger agreement, then SkyMall must reimburse Gemstar for one- 
half of the expenses incurred by Gemstar in connection with printing this proxy 
statement/prospectus and the registration statement of which it will be a part  
and one-half of the filing fee incurred in connection with any required filing  
under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 (except that the
total amount that SkyMall would have to pay for such reimbursable expenses will 
not exceed $500,000).                                                           

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OTHER AGREEMENTS  

Voting Agreement                                                                

     As an inducement for it to enter into the merger agreement, Gemstar
required Robert M. Worsley, his spouse and a trust for the benefit of their     
children to enter into a voting agreement. Mr. Worsley is the Chief Executive   
Officer of SkyMall.                                                             

        In the voting agreement, the Worsleys have agreed with Gemstar to vote
their shares of SkyMall common stock in favor of the merger agreement and the   
merger and against any inconsistent proposals or transactions involving SkyMall.

As of the record date for the special meeting, the Worsleys   
beneficially owned collectively 4,830,280 shares of SkyMall common stock,       
representing approximately 30% of the total number of votes entitled to be cast 
at the special meeting by holders of SkyMall common stock.                      

     The Worsleys have agreed not to sell, transfer, pledge or otherwise
dispose of the shares of SkyMall common stock directly or indirectly owned by   
them and covered by the voting agreement. The Worsleys have also granted to     
Gemstar an irrevocable proxy with respect to their shares for the purpose of    
voting those shares in accordance with the covenant of the Worsleys described   
above. The voting agreement will terminate upon the earlier of the date we      
complete the merger or termination of the merger agreement in accordance with   
its terms. The voting agreement will be filed as an exhibit to Gemstar's        
registration statement of which this proxy statement/prospectus will form a     
part.                                                                           

Lock-up Agreement                                                               

     As an inducement to Gemstar to enter into the merger agreement, the
Worsleys have entered into a five-year lock-up agreement with Gemstar covering  
all shares of Gemstar common stock to be received by the Worsleys in the merger.
The Worsleys have agreed not to sell, pledge, make any short sale or enter into 
a derivative transaction involving the shares of Gemstar common stock they      
receive in the merger, without the prior written consent of Gemstar, for so long
as they are subject to the lock-up agreement.                                   

     The lock-up agreement provides for one-fifth of the total number of
shares subject to the lock-up agreement to be released on each anniversary of   
the effective time of the merger. The lock-up agreement will terminate at the   
end of five years or, if earlier, on the first anniversary of Mr. Worsley no    
longer being employed by SkyMall or Gemstar. Mr. Worsley may, for tax and estate
planning purposes, monetize up to one-half of the shares initially subject to   
the lock-up agreement.                                                          

Option Agreement                                                                

       In order to induce Gemstar and GSky Acquisition Sub to enter into the
merger agreement, SkyMall granted Gemstar an option to purchase up to 3,929,992 
shares of SkyMall common stock for $3.00 per share in cash, for a total amount  
of up to $11,789,976. If the option were exercised in full, Gemstar would own   
19.9% of the total issued and outstanding common stock of SkyMall, based on the 
total number of shares outstanding as of April 30, 2001.                        

The option may be exercised if any of the following occur:    

        .     prior to termination of the merger agreement, a party other than
               Gemstar has made a Takeover Proposal (as defined above under "The
               Merger Agreement - No Solicitation; Termination Fee") or publicly
               announced an intention to do so, and then the SkyMall stockholder
            meeting is held but stockholder approval of the merger and the
merger agreement is not obtained;                 

       .     Gemstar terminates the merger agreement after SkyMall receives,
               or public announcement is made of, a Takeover Proposal and either
             (i) SkyMall fails to submit the merger agreement and the merger
            to a vote of the SkyMall stockholders, (ii) SkyMall's board of
              directors withholds, withdraws or modifies in any manner adverse
              to Gemstar its recommendation to its stockholders to approve the
merger and the merger                             

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              agreement, or (iii) the SkyMall stockholders meeting is held but
            stockholder approval of the merger and the merger agreement is
not obtained; or                                  

       .     SkyMall terminates the merger agreement after SkyMall receives,
            or public announcement is made, of a Takeover Proposal and (i)
            the SkyMall stockholders meeting has been held but stockholder
             approval of the merger and the merger agreement is not obtained
       and (ii) SkyMall has paid the termination fee and expense
           reimbursement to Gemstar as required in the merger agreement.

         The option agreement terminates on the earlier of the effective time of
the merger or 180 days after it becomes exercisable, except that the exercise   
period will be extended as necessary to obtain all required regulatory approvals
and for the expiration of all statutory waiting periods, to the extent necessary
to avoid liability under Section 16(b) of the Securities Exchange Act of 1934   
and during any period in which Gemstar is precluded from exercising the option  
due to an injunction or other legal restriction.                                

        If Gemstar desires to sell any shares of SkyMall common stock acquired
by exercise of the option within two years after Gemstar acquires them, and such
sale requires registration under the Securities Act of 1933, then SkyMall is    
required to cooperate with Gemstar and any underwriters in effecting such       
registration, including filing and maintaining the effectiveness of a           
registration statement.                                                         

Worsley Employment Agreement                                                    

         At the time the merger agreement was signed, SkyMall entered into a new
employment agreement with Robert M. Worsley which will become effective at the  
effective time of the merger. A copy of this agreement will be filed as an      
exhibit to the registration statement of which this proxy statement/prospectus  
will form a part.                                                               

       The agreement has a term of five years, but can be terminated earlier
with or without cause. During the term of the agreement and after the merger,   
Mr. Worsley will continue to serve as the Chief Executive Officer of SkyMall. He
will receive an annual salary of $315,000 per year, subject to annual increases 
for inflation, which is substantially the same salary he currently receives from
SkyMall. Within thirty days after the effective time of the merger, he will     
receive options to acquire 105,000 shares of Gemstar common stock at an exercise
price equal to the fair market value of Gemstar common stock at the grant date. 
These options will vest in equal annual installments over five years. This      
option grant is of a similar size and with similar provisions as Gemstar has    
made to similarly situated executives of Gemstar. SkyMall will provide Mr.      
Worsley with the health and welfare benefits generally made available to        
executives of SkyMall. He will be reimbursed for reimbursable travel and        
business expenses and receive an automobile allowance of $750 per month. He will
be entitled to three weeks vacation per year and will be eligible to receive an 
annual bonus at the discretion of the Co-President, or if necessary the         
Compensation Committee, of Gemstar.                                             

         If SkyMall terminates Mr. Worsley without cause, he will be entitled to
a lump sum payment of twenty-four months' salary and the cash equivalent of any 
unused vacation time. In addition, if less than 40% of his Gemstar options are  
vested at the time of termination, a number of unvested options will accelerate 
and vest so that 40% of such options are vested. It will be a constructive      
termination without cause if SkyMall relocates its office to a new location over
50 miles outside the city limits of Phoenix, Arizona. Cause for termination is: 

       .     any illegal or other wrongful conduct substantially detrimental
          to the business of Gemstar or any subsidiary, or a charge or
conviction of any felony;                         

    .     refusal or failure to act in accordance under the reasonable
          direction of the Co-President of Gemstar and such refusal or
               failure is not corrected within five days after receiving written
notice; or                                        

        .     fraud, embezzlement, misappropriation or similar conduct against
Gemstar or a direct or indirect subsidiary.       

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  For a period of three years after termination of employment, Mr.
Worsley will not use any proprietary information of SkyMall or Gemstar to       
compete with Gemstar or SkyMall and will not attempt to direct any business from
Gemstar or SkyMall or solicit for employment, employ or recommend for employment
any employee of Gemstar or SkyMall. Mr. Worsley will assign to SkyMall any      
inventions or intellectual property rights resulting from his work for SkyMall  
or relating to SkyMall's business.                                              

COMPARISON OF RIGHTS OF STOCKHOLDERS  

         If the merger is completed, stockholders of SkyMall will hold shares of
Gemstar common stock and their rights as holders of Gemstar common stock will be
governed by Gemstar's charter and bylaws, which differ in several material      
respects from SkyMall's charter and bylaws. As holders of Gemstar common stock, 
the rights of former SkyMall stockholders will also be governed by Delaware law 
instead of Nevada law. Delaware is Gemstar's jurisdiction of incorporation and  
Nevada is SkyMall's jurisdiction of incorporation.                              

      The following comparison summarizes the material differences between
the rights of SkyMall stockholders and the rights of Gemstar stockholders. It is
not a complete description of the differences between the rights of SkyMall     
stockholders and Gemstar stockholders. The summary is qualified in its entirety 
by reference to Delaware law, Nevada law, Gemstar's charter and bylaws,         
SkyMall's charter and bylaws and SkyMall's rights plan and Gemstar's rights     
plan.                                                                           

Authorized Capital Stock                                                        

SkyMall                                                                         

.     50,000,000 shares of SkyMall common stock               

.     10,000,000 shares of SkyMall preferred stock            

Gemstar                                                                         

.     2,350,000,000 shares of Gemstar common stock            

.     150,000,000 shares of Gemstar preferred stock           

Size of Board of Directors                                                      

SkyMall                                                                         

   SkyMall's articles of incorporation provide for a maximum of nine
directors. The bylaws allow the board of directors to fix the number of         
directors from time to time, and that number is currently fixed at five.        

Gemstar                                                                         

       Gemstar's certificate of incorporation provides for twelve directors,
four of which must be "independent directors." Mr. Henry C. Yuen, Gemstar's     
Chairman and Chief Executive Officer, is entitled to designate six members of   
the board of directors, including himself, and The News Corporation Limited     
("News Corp.") is entitled to designate six members of the board of directors.  
The size of Gemstar's board of directors may be changed by an affirmative vote  
of nine of the twelve directors.                                                

Classes of Directors                                                            

  Both SkyMall and Gemstar have three classes of directors serving
staggered three-year terms.                                                     

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    Delaware law permits a board of directors to be divided into up to
three classes with staggered terms, with only one class elected each year.      
Nevada law requires at least one-fourth of the directors to be elected annually.

Authority of Directors                                                          

        Delaware and Nevada law give directors broad authority in managing the
affairs of a corporation. Gemstar's bylaws enumerate specific matters to be     
decided by the board, leaving management with broad authority in other matters. 
SkyMall's bylaws provide that the business and affairs of the corporation shall 
be managed by the board of directors.                                           

Filling Vacancies on the Board                                                  

SkyMall                                                                         

   Nevada law provides that all vacancies, including those vacancies
caused by an increase in the number of directors of a Nevada corporation, may be
filled by a majority of the remaining directors, even though less than a quorum,
unless otherwise provided in the articles of incorporation of the corporation.  

        SkyMall's bylaws provide that vacancies may be filled by a majority of
directors then in office or by a sole remaining director. If no directors are in
office, vacancies may be filled by stockholders at a special meeting.           

Gemstar                                                                         

 Delaware law provides that, unless the governing documents of a
Delaware corporation provide otherwise, vacancies and newly-created             
directorships resulting from a resignation or an increase in the authorized     
number of directors elected by all of the stockholders having the right to vote 
as a single class may be filled by a majority of the directors then in office.  
If a vacancy is filled by less than a majority of the entire board of directors 
(measured before an increase in the size of the board), the Delaware Chancery   
Court may, upon application of stockholders holding at least ten percent of the 
voting shares outstanding, summarily order an election to fill vacancies or     
replace directors chosen by the directors then in office.                       

         Gemstar's bylaws allow vacancies to be filled by a majority of a quorum
of directors, or by unanimous written consent. Vacancies of News Corp. designees
are to be filled by the TV Guide Director Committee, and vacancies of Mr. Yuen  
designees are to be filled by the Gemstar Director Committee.                   

Removal of Directors                                                            

SkyMall                                                                         

        Under Nevada law, a director of a Nevada corporation may be removed by
the vote of the holders of not less than two-thirds of the voting power of the  
issued and outstanding stock entitled to vote at an election of directors,      
unless the articles of incorporation of the corporation provide for a greater   
percentage. Nevada law does not distinguish between removal for cause and       
without cause. SkyMall's bylaws provide that a director may be removed with or  
without cause by the affirmative vote of holders of at least 51% of the common  
stock outstanding and entitled to vote.                                         

Gemstar                                                                         

        Delaware law provides that a director or the entire board of directors
of a Delaware corporation may be removed, with or without cause, by the holders 
of a majority of the shares then entitled to vote at an election of directors,  
unless otherwise stated in the corporation's certificate of incorporation.      
Gemstar's certificate of incorporation provides that directors may be removed   
from office, with or without cause, by the affirmative vote of the holders of at
least 66 2/3% of the total voting securities outstanding, voting as a single    
class at a meeting called for such purpose.                                     

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Nomination of Directors for Election                                            

         Nominations for the SkyMall and Gemstar boards of directors may be made
at a meeting of stockholders, by the respective board of directors or by any    
stockholder entitled to vote for directors that complies with the notice        
procedures. Notice to SkyMall must be not less than 30 days, nor more than 60   
days, prior to the meeting. Notice to Gemstar must be not less than 60 days, nor
more than 90 days, prior to the meeting.                                        

Anti-Takeover Provisions                                                        

SkyMall                                                                         

      Nevada law contains provisions that restrict the ability of a Nevada
corporation to engage in any combination with an interested stockholder for     
three years after the interested stockholder's date of acquiring the shares that
cause the stockholder to become an interested stockholder, unless the           
combination or the purchase of shares by the interested stockholder is approved 
by the board of directors of the corporation before that date. If the           
combination was not previously approved, the interested stockholder may effect  
the combination after the three-year period only if that stockholder receives   
approval from a majority of the disinterested shares or the offer meets various 
fair price criteria. An "interested stockholder" means any person who is:       

       .     the beneficial owner, directly or indirectly, of 10% or more of
the voting power of the corporation; or           

     .     an affiliate or associate of the corporation that at any time
            within three years immediately before the date in question was
             the beneficial owner, directly or indirectly, of 10% or more of
the voting power of the corporation.              

   A Nevada corporation may elect not to be subject to the foregoing
restrictions, and SkyMall has elected not to be subject to these restrictions.  
However, SkyMall's articles of incorporation contain provisions having a similar
effect.                                                                         

         Under Nevada law, a person that acquires or offers to acquire ownership
of "control shares" of a corporation (defined as shares obtained pursuant to a  
transaction in which an acquiring person reaches the 20%, 33% or majority       
ownership levels) has the right to vote those shares, and shares acquired within
the previous 90 days, only to the extent granted by a resolution of the         
stockholders approved at a special or annual meeting, unless otherwise provided 
in the articles of incorporation or bylaws in effect on the tenth day following 
the control acquisition.                                                        

The corporation must, within 50 days after delivery of certain
information by the acquiring person, hold a special meeting to consider a       
resolution authorizing voting rights for the control shares, unless the         
acquiring person consents in writing to holding a meeting after 50 days. Unless 
the corporation's articles of incorporation provide otherwise, a resolution     
granting voting rights must be approved by a majority vote.                     

        The corporation may adopt a provision in its articles of incorporation
or bylaws allowing mandatory redemption of the control shares if:               

        .     the acquiring party fails to make certain disclosures within ten
days of acquiring the control shares, or          

     .     the control shares are not accorded full voting rights at the
meeting held for such purpose.                    

   Unless the articles of incorporation or bylaws of the corporation
provide otherwise, if the acquiring party has:                                  

.     acquired a majority (or larger) stake, and              

.     been accorded full voting rights,                       

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    any holder that did not vote in favor of granting voting rights is
entitled to put his or her shares to the corporation for "fair value" (defined  
as the highest price paid by the acquiring party for control shares).           

    Nevada law allows a corporation to elect not to be subject to this
statute. A corporation may impose stricter requirements than those established  
by this statute through a charter or bylaw amendment or by resolution. SkyMall's
articles of incorporation state that SkyMall is not subject to this statute, but
SkyMall's articles of incorporation contain provisions having a similar effect. 

     The provisions of Nevada law relating to the acquisition of control
shares of a Nevada corporation do not apply to an acquisition of stock in good  
faith, without an intention to avoid the statutory requirements, including      
acquisitions:                                                                   

     .     by an acquiring person to the extent that the new acquisition
             does not result in the acquiring person obtaining a controlling
interest greater than that previously authorized; 

         .     pursuant to the laws of descent and distribution, the enforcement
             of a judgment or the satisfaction of a pledge or other security
interest; or                                      

       .     pursuant to a merger or reorganization to which the corporation
              is a party that is effected in compliance with the provisions of
Nevada law.                                       

         Nevada law provides that the board of directors of a Nevada corporation
may take action to protect the interests of the corporation and its             
stockholders, including adopting or executing a rights plan. SkyMall has adopted
a rights plan. The board has agreed that the transactions with Gemstar          
contemplated in the merger agreement will not be subject to the SkyMall rights  
plan.                                                                           

        Under Nevada law, when evaluating a change in control opportunity, the
board of directors of a Nevada corporation may consider a number of             
constituencies, including the interests of employees, suppliers, creditors and  
customers, the economy of the state and nation, the interests of the community  
and of society, and the long-term and short-term interests of the corporation   
and its stockholders and is not required to consider the effect of a change of  
control on any particular group having an interest in the corporation as a      
dominant factor.                                                                

    SkyMall's articles of incorporation contain a supermajority voting
provision for mergers, consolidations, sales or leases of substantially all of  
SkyMall's assets, or any similar transactions, with beneficial owners of 10% or 
more of the voting stock outstanding unless the transaction is approved by a    
majority of directors not affiliated with the 10% stockholder.                  

Gemstar                                                                         

    Delaware law contains a business combination statute that protects
Delaware corporations from hostile takeovers, and from actions following the    
takeover, by prohibiting some transactions once an acquiror has gained a        
significant holding in the corporation. Section 203 of the Delaware General     
Corporation Law prohibits "business combinations," including mergers, sales and 
leases of assets, issuances of securities and similar transactions by a         
corporation or a subsidiary with an interested stockholder that beneficially    
owns 15% or more of a corporation's voting stock, within three years after the  
person becomes an interested stockholder, unless:                               

.     the transaction that will cause the person to become an 
             interested stockholder is approved by the board of directors of
the target prior to the transaction;              

   .     after the completion of the transaction in which the person
           becomes an interested stockholder, the interested stockholder
           holds at least 85% of the voting stock of the corporation not
including:                                        

    -  shares held by officers and directors of interested
stockholders, and                           

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    -  shares held by specified employee benefit plans; or

        .     after the person becomes an interested stockholder, the business
      combination is approved by the board of directors of the
            corporation and holders of at least 66-2/3% of the outstanding
   voting stock, excluding shares held by the interested
stockholder.                                      

         A Delaware corporation may elect not to be governed by Section 203 by a
provision contained in the original certificate of incorporation of the         
corporation or an amendment thereto or to the bylaws of the corporation, which  
amendment must be approved by a majority of the shares entitled to vote and may 
not be further amended by the board of directors of the corporation. This       
amendment is not effective until 12 months following its adoption. Gemstar has  
not made this election.                                                         

         Gemstar's certificate of incorporation requires the affirmative vote of
66 2/3% of the outstanding shares entitled to vote for the following actions:   

  .     amendment or repeal of any provision in the certificate of
              incorporation or bylaws (although the board can alter the bylaws
without a stockholder vote);                      

     .     a merger, consolidation, or any binding share exchange (other
than a merger of a subsidiary);                   

       .     the sale, lease or exchange of all or a substantial part of the
assets of Gemstar and its subsidiaries;           

.     dissolution, liquidation or winding up of Gemstar; and  

         .     any other matter required to be submitted to stockholder approval
by state law or the SEC.                          

Stockholder Action without a Meeting                                            

SkyMall                                                                         

         In accordance with Nevada law, SkyMall's bylaws provide that any action
required or permitted to be taken at a stockholders meeting may be taken without
a meeting pursuant to the written consent of the holders of the number of shares
of SkyMall common stock that would have been required to effect the action at an
actual meeting of SkyMall stockholders.                                         

Gemstar                                                                         

       Gemstar's certificate of incorporation does not allow stockholders to
act by written consent, and generally provides that except as otherwise provided
in the terms of any series of preferred stock, no stockholder action may be     
taken without a meeting.                                                        

Calling Special Meetings of Stockholders                                        

SkyMall                                                                         

        Nevada law does not specifically address who may call special meetings
of stockholders of a Nevada corporation. SkyMall's bylaws provide that a special
meeting of stockholders may be called by the board of directors, chairman of the
board, the president, or holders of at least 10% of the outstanding common      
stock.                                                                          

Gemstar                                                                         

     Under Delaware law, a special meeting of stockholders of a Delaware
corporation may be called by the board of directors of the corporation or by any
other person authorized to do so in the certificate of incorporation or the     
bylaws of the                                                                   

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corporation. Gemstar's bylaws provide for special meetings to be called by the  
secretary upon written request of holders of at least a majority of the voting  
stock outstanding, or at the request of six directors.                          

Submission of Stockholder Proposals                                             

SkyMall                                                                         

       SkyMall's articles of incorporation and bylaws do not specify advance
notice requirements for the submission of stockholder proposals by SkyMall      
stockholders.                                                                   

Gemstar                                                                         

     Gemstar's bylaws require stockholders to give written notice to the
secretary not less than 60 nor more than 90 days prior to the meeting. The      
notice must specify the matters for the meeting.                                

Stockholder Vote Required for Mergers                                           

         Under both Delaware and Nevada law, a merger, share exchange or sale of
all of a Nevada corporation's assets (that is not otherwise governed by an      
anti-takeover statute) must be adopted by the board of directors of the         
corporation and approved by a majority of the corporation's voting power, unless
stockholders of a class of stock are entitled to vote as a class, in which case 
the approval of each class is also required. However, no vote of stockholders of
a constituent corporation surviving a merger is required if:                    

         .     the merger agreement does not amend the articles of incorporation
of the surviving corporation;                     

    .     each share of stock of the surviving corporation outstanding
             before the merger is an identical outstanding or treasury share
after the merger; and                             

         .     either no shares of common stock of the surviving corporation are
             to be issued or delivered pursuant to the merger, or, if common
         stock will be issued or delivered, it will not increase the
               number of shares of common stock outstanding immediately prior to
the merger by more than 20%.                      

     SkyMall's articles provide that business combinations not involving
interested parties require only an affirmative vote by the majority of the      
voting power. Gemstar's certificate of incorporation requires the affirmative   
vote of 66 2/3% of the voting power for a business combination other than a     
merger of a subsidiary.                                                         

Dividends                                                                       

SkyMall                                                                         

    Except as otherwise provided in the articles of incorporation of a
Nevada corporation, Nevada law authorizes the corporation to make distributions 
to its stockholders, unless:                                                    

         .     the corporation would not be able to pay its debts as they become
due in the usual course of business, or           

        .     the corporation's total assets would be less than the sum of its
         total liabilities plus any amount owed to stockholders with
               preferential rights superior to those receiving the distribution,
            if the corporation were dissolved at the time of distribution,
     unless such distribution is specifically allowed by the
corporation's articles of incorporation.          

    SkyMall's bylaws provide that dividends may be declared or paid in
accordance with Nevada law.                                                     

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Gemstar                                                                         

     Under Delaware law, a Delaware corporation may pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in   
which declared and for the preceding fiscal year. Delaware law also provides    
that dividends may not be paid out of net profits if, after the payment of the  
dividend, capital is less than the capital represented by the outstanding stock 
of all classes having a preference upon the distribution of assets. Gemstar's   
certificate of incorporation provides that dividends are payable only as and    
when declared by the board of directors out of assets legally available for     
payment of dividends.                                                           

Appraisal Rights                                                                

SkyMall                                                                         

        Nevada law provides stockholders of a Nevada corporation involved in a
merger the right to demand and receive payment of the fair value of their stock 
in certain mergers. However, unless otherwise provided in the articles of       
incorporation of the corporation (and SkyMall's articles of incorporation do not
otherwise provide), appraisal rights are not available to holders of shares:    

.  listed on a national securities exchange,                  

       .  included in the national market system by the National Association
of Securities Dealers or                                

.  held of record by at least 2,000 stockholders,             

       unless holders of stock are required to accept in the merger anything
other than any combination of:                                

     .  cash, owner's interests or owner's interests and cash in lieu of
fractional shares of:                                   

-   the surviving or acquiring entity in the merger, or 

          -   another entity that, at the effective date of the merger, will
be:                                             

-   listed on a national securities exchange, 

            -   included in the national market system by the National
Association of Securities Dealers, or 

   -   held of record by at least 2,000 stockholders

        Dissenters' appraisal rights are not available to SkyMall stockholders
with respect to the merger because SkyMall's common stock is included in the    
Nasdaq National Market System.                                                  

Gemstar                                                                         

       Delaware law provides stockholders of a Delaware corporation involved
in a merger the right to demand and receive payment of the fair value of their  
stock in certain mergers. However, appraisal rights are not available to holders
of shares:                                                                      

.  listed on a national securities exchange,                  

      .  designated as a national market system security on an interdealer
           quotation system operated by the National Association of Securities
Dealers, or                                             

.  held of record by more than 2,000 stockholders,            

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       unless holders of stock are required to accept in the merger anything
other than any combination of:                                

        .  shares of stock or depository receipts of the surviving corporation
in the merger,                                          

        .  shares of stock or depository receipts of another corporation that,
at the effective date of the merger, will be:           

-  listed on a national securities exchange,            

            -  designated as a national market system security on an interdealer
      quotation system operated by the National Association of
Securities Dealers, or                            

-  held of record by more than 2,000 holders; and       

 .  cash instead of fractional shares of the stock or depository
receipts received.                                      

Inspection of Stockholder Lists                                                 

SkyMall                                                                         

        Under Nevada law any person that has been a stockholder of record of a
Nevada corporation for at least six months, or any person holding or            
representing at least 5% of its outstanding shares, upon at least five days'    
written demand, may inspect its stock ledger and make copies from it. A         
corporation must allow stockholders of record that own or represent at least 15%
of a corporation's shares the right, upon at least five days' written demand, to
inspect the books of accounting and financial records of the corporation, to    
make copies from them and to conduct an audit of those records, except that any 
corporation listed and traded on any recognized stock exchange or any           
corporation that furnishes to its stockholders a detailed, annual financial     
statement is exempt from this requirement.                                      

Gemstar                                                                         

         Delaware law allows any stockholder to inspect the stock ledger and the
other books and records of a Delaware corporation for a purpose reasonably      
related to that person's interest as a stockholder.                             

Stockholder Class Voting Rights                                                 

SkyMall                                                                         

         With respect to mergers, Nevada law requires voting by separate classes
and series of shares if the plan of merger contains a provision that if         
contained in an amendment to the articles of incorporation of the corporation   
would entitle the particular class of stockholders to vote as a class on the    
proposed amendment.                                                             

     With respect to share exchanges, Nevada law requires voting by each
separate class or series of shares included in the exchange, with each class    
constituting a separate voting class.                                           

         Nevada law also requires, in addition to the affirmative vote otherwise
required, voting and approval by the separate classes of shares for any         
amendment to the articles of incorporation if the amendment would alter or      
change any preference or relative or other right given to any such class or     
series of outstanding shares.                                                   

 SkyMall has two classes of stock authorized, but only one class
currently outstanding.                                                          

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Gemstar                                                                         

      Delaware law requires voting by separate classes of shares only with
respect to amendments to a Delaware corporation's certificate of incorporation  
that adversely affect the holders of those classes or that increase or decrease 
the aggregate number of authorized shares or the par value of the shares of any 
of those classes.                                                               

 Gemstar has two classes of stock authorized, but only one class
currently outstanding. Gemstar's certificate of incorporation provides that     
holders of common stock and preferred stock shall vote together as a single     
class to elect directors and on all other matters (unless otherwise required by 
Delaware law or provided in the designation of a series of preferred stock),    
including amendments that would increase or decrease the number of shares of any
class or series of stock.                                                       

Indemnification                                                                 

SkyMall                                                                         

         Nevada law provides that, subject to certain limitations in the case of
derivative suits brought by a corporation's stockholders in its name, a         
corporation may indemnify any individual who is made a party to any third-party 
suit or proceeding on account of being a director, officer, employee or agent of
the corporation against expenses, including attorneys' fees, judgments, fines   
and amounts paid in settlement reasonably and actually incurred by him or her in
connection with the action, through, among other things, a majority vote of a   
quorum consisting of directors who were not parties to the suit or proceeding,  
if the individual:                                                              

         .  acted in good faith and in a manner he or she reasonably believed to
            be in or not opposed to the best interests of the corporation or, in
       some circumstances, at least not opposed to its best interests,
        provided that the termination of any action or suit by judgment,
         order, settlement, conviction or on a plea of nolo contendre does
          not create a presumption by itself that the individual did not act
in good faith, and                                      

        .  in a criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful.                               

       To the extent a director, officer, employee or agent is successful on
the merits or otherwise in the defense of this action, suit or proceeding, the  
corporation is required by Nevada law to indemnify the individual for reasonable
and actual expenses incurred thereby.                                           

    SkyMall's articles of incorporation provide for indemnification of
former and current officers and directors of SkyMall to the fullest extent of   
the law.                                                                        

Gemstar                                                                         

        Delaware law provides that, subject to certain limitations in the case
of derivative suits brought by a corporation's stockholders in its name, a      
corporation may indemnify any individual who is made a party to any third-party 
suit or proceeding on account of being a director, officer, employee or agent of
the corporation against expenses, including attorneys' fees, judgments, fines   
and amounts paid in settlement reasonably incurred by him or her in connection  
with the action, through, among other things, a majority vote of a quorum       
consisting of directors who were not parties to the suit or proceeding, if the  
individual:                                                                     

         .  acted in good faith and in a manner he or she reasonably believed to
            be in or not opposed to the best interests of the corporation or, in
           some circumstances, at least not opposed to its best interests; and

        .  in a criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful.                               

       To the extent a director, officer, employee or agent is successful in
the defense of the action, suit or proceeding, the corporation is required by   
Delaware law to indemnify such individual for reasonable expenses incurred      
thereby.                                                                        

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         Gemstar's certificate of incorporation provides for indemnification, to
the fullest extent authorized by law, for former and current directors and      
officers of Gemstar, and for a person serving as a director, officer, employee  
or agent of another corporation at the request of Gemstar. Gemstar is required  
to indemnify or make advances in connection with a proceeding initiated by the  
indemnified person only if the proceeding was authorized by the Gemstar board of
directors.                                                                      

 Gemstar must pay expenses incurred in defending the proceedings
specified above in advance of their final disposition, provided that the        
advancement of expenses to a director or officer shall be made only if such     
person undertakes to repay all amounts so advanced if it is ultimately          
determined that such person is not entitled to be indemnified.                  

Charter Amendments                                                              

SkyMall                                                                         

      Under Nevada law, amendments to the articles of incorporation may be
adopted if recommended by the board of directors of the corporation and approved
by a majority of the outstanding shares entitled to vote.                       

       SkyMall's articles of incorporation require an affirmative vote of 66
2/3% of the outstanding voting power to amend, alter, repeal or adopt any       
provision inconsistent with the articles of incorporation.                      

Gemstar                                                                         

  Under Delaware law, amendments to a certificate of incorporation
require the approval of the board of directors of the corporation and           
stockholders holding a majority of the outstanding stock of the class entitled  
to vote on the amendment as a class, unless a different proportion is specified 
in the certificate of incorporation or by other provisions of Delaware law.     

         Gemstar's certificate of incorporation requires at least 66 2/3% of the
outstanding voting power to amend the certificate of incorporation.             

Amendment of Bylaws                                                             

SkyMall                                                                         

        Under Nevada law, the board of directors of the corporation may adopt,
amend and repeal the bylaws of the corporation, subject to any bylaws adopted by
the stockholders.                                                               

   SkyMall's bylaws provide that the board of directors may amend or
repeal the bylaws by a majority vote. SkyMall's bylaws also may be amended or   
repealed by the affirmative vote of a majority of the voting stock outstanding; 
however, changes to bylaw provisions addressing director nomination and         
indemnification of officers and directors require approval of 66 2/3% of the    
voting stock outstanding.                                                       

Gemstar                                                                         

    Under Delaware law, holders of a majority of the voting power of a
corporation, and, when provided in the certificate of incorporation, the        
directors of the corporation, have the power to adopt, amend and repeal the     
bylaws of a corporation.                                                        

      Gemstar's bylaws may be adopted, amended or repealed by action of at
least nine of the twelve directors, without stockholder approval. Subject to the
rights of holders of any preferred stock, stockholders may adopt, amend or      
repeal the bylaws by the affirmative vote of at least 66 2/3% of the voting     
power.                                                                          

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SUBMISSION OF STOCKHOLDER PROPOSALS 

    Due to the contemplated completion of the merger, SkyMall does not
currently expect to hold a 2001 annual meeting of stockholders. If an annual    
meeting is held (as a result of a failure to consummate the merger or           
otherwise), stockholder proposals for inclusion in proxy materials for the      
meeting must be submitted to SkyMall's secretary in writing and received at     
SkyMall's executive offices by _______________, 2001. Any proposal must also    
meet the other requirements of the rules of the Securities and Exchange         
Commission relating to the stockholder proposals.                               

EXPERTS 

        The consolidated financial statements and financial statement schedule
of Gemstar - TV Guide International, Inc. as of December 31, 2000 and March 31, 
2000, and for the nine months ended December 31, 2000 in the years ended March  
31, 2000 and 1999, have been incorporated by reference herein in reliance upon  
the reports of KPMG LLP, independent auditors, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.      

         The audited financial statements of SkyMall, Inc. as of and for each of
the three years in the period ended December 31, 2000, incorporated by reference
in this "proxy statement/prospectus" and elsewhere in the registration          
statement, have been audited by Authur Andersen LLP, independant public         
accountants, as indicated in their report thereto, and are incorporated by      
reference herein in reliance upon the authority of said firm as experts in      
giving said report.                                                             

LEGAL MATTERS 

        An opinion regarding the legality of Gemstar common stock to be issued
in the merger is being provided by Baker Botts L.L.P., counsel to Gemstar.      

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                                                                         Annex A

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of May 14, 2001 (this
"Agreement"), by and among Gemstar-TV Guide International, Inc., a Delaware     
----------                                                                      
corporation ("Parent"), GSky Acquisition Sub, Inc., a Delaware corporation      
------                                              
wholly owned by Parent ("Merger Sub"), and SkyMall, Inc., a Nevada corporation  
----------                    
(the "Company").                                                                
-------                                                             

RECITALS  

        A.   Parent desires to acquire the Company by means of the merger of
the Company with and into the Parent's wholly owned subsidiary, Merger Sub (the 
"Merger"), with Merger Sub being the surviving corporation of the Merger and    
------                                                                        
continuing as a wholly owned subsidiary of Parent.                              

          B.   The Company desires to be so acquired by Parent, on the terms and
conditions set forth in this Agreement.                                         

          C.   In the Merger, each issued and outstanding share of the Company's
common stock, par value $0.001 per share ("Company Common Stock"), owned by     
                          --------------------
stockholders other than Robert M. Worsley, Christi M. Worsley and trusts for the
benefit of their children (the "Worsleys"), will be converted into and represent
--------        
the right to receive, subject to adjustment as provided herein, (1) $1.50 in    
cash and (2) 0.03759 of a share (the "Public Share Fraction") of common stock,  
                 ---------------------
par value $0.01 per share, of Parent ("Parent Common Stock").                   
                 -------------------

      D.   As a condition to the willingness of Parent and Merger Sub to
enter into this Agreement, in the Merger each issued and outstanding share of   
Company Common Stock that is owned by the Worsleys will be converted into and   
represent the right to receive an amount of Parent Common Stock equal to the sum
of (1) the Public Share Fraction plus (2) that fraction of a share of Parent    
Common Stock that could be purchased on the closing date of the Merger for      
$1.50.                                                                          

      E.   The boards of directors of Parent, Merger Sub and the Company
have approved this Agreement, and deem it advisable and in the best interests of
their respective stockholders to consummate the Merger on the terms and         
conditions set forth herein.                                                    

      F.   As a condition to the willingness of Parent and Merger Sub to
enter into this Agreement, concurrently with the execution and delivery of this 
Agreement the Worsleys have entered into a voting agreement (the "Voting        
                                                          ------
Agreement") with Parent pursuant to which they have agreed, among other things, 
---------                                                                       
to vote their shares of Company Common Stock in favor of this Agreement and the 
Merger at a meeting of the stockholders of the Company to be called for such    
purpose.                                                                        

      G.   As a condition to the willingness of Parent and Merger Sub to
enter into this Agreement, concurrently with the execution and delivery of this 
Agreement the Company has entered into a stock option agreement (the "Option    
                                                                  ------
Agreement") with Parent pursuant to which                                       
---------                                                                       

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the Company has granted to Parent an option to purchase shares of Company Common
Stock on the terms and conditions set forth in the Option Agreement.            

         H.   It is intended that, for federal income tax purposes, the Merger
shall qualify as a "reorganization" within the meaning of the provisions of     
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").   
                                                                ----

AGREEMENT 

          The parties to this Agreement, intending to be legally bound, agree as
follows:                                                                        

ARTICLE 1 
DEFINITIONS 

        Section 1.1  Definitions.  The following terms, as used herein, have
-----------                       
the following meanings:                                                         

        "Affiliate" means, with respect to any Person, any other Person that
---------                                                 
directly or indirectly, through one or more intermediaries, controls, is        
controlled by, or is under common control with such first Person.               

       "Airline Contract" means a Company Contract with an airline company
----------------                                          
pursuant to which the Company or any Company Subsidiary is permitted to place   
the Company's catalogues in seat pockets on board such airline's aircraft.      

         "Business Day" means a day other than a Saturday, Sunday or other day
------------                                              
on which commercial banks in New York City are authorized or required by law to 
close.                                                                          

    "Company 10-K/A" means the Company's amended and restated Annual
--------------                                            
Report on Form 10-K/A for the year ended December 31, 2000, as filed with the   
SEC on April 30, 2001.                                                          

        "Company Balance Sheet" means the audited consolidated balance sheet
---------------------                                     
of the Company as of December 31, 2000 and 1999, including the footnotes        
thereto, included in the Company 10-K/A.                                        

"Company Balance Sheet Date" means December 31, 2000.       
--------------------------                                

      "Company Common Stock" means the common stock, par value $.001 per
--------------------                                      
share, of the Company.                                                          

       "Company Contracts" means all of the Contracts to which the Company
-----------------                                         
or any of the Company Subsidiaries is a party, nominee, signatory or beneficiary
or to which they, or any of their respective properties or assets, are or may be
subject, bound or affected, including, without limitation, the contracts listed 
on the Company Disclosure Schedule and the Company Stock Plans.                 

       "Company Disclosure Schedule" means the disclosure schedules, dated
---------------------------                               
the date hereof, delivered by the Company to Parent.                            

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     "Company Stock Plans" means the SkyMall 1994 Employee Stock Option Plan and
-------------------                                                 
the SkyMall Non-Employee Director Stock Option Plan.                            

    "Company Subsidiaries" means the subsidiaries of the Company identified in
--------------------                                                
Section 4.1(a) of the Company Disclosure Schedule.                              

"Confidentiality Agreement" means the Confidential Information Non-   
-------------------------                                           
disclosure Agreement, dated February 26, 2001, between the Company and Parent.  

  "Contract"  means any written, oral or other binding contract, mortgage,
--------                                                            
deed of trust, bond, indenture, insurance policy, purchase order, warranty,     
lease, license, commitment, note, instrument, document or other agreement,      
right, arrangement or undertaking.                                              

 "Daily Per Share Price" means, for any trading day, the volume weighted
---------------------                                               
average sales price of a share of Parent Common Stock for such day, as reported 
by Bloomberg Financial Services.                                                

"DGCL" means the General Corporation Law of the State of Delaware.    
----                                                                

"DOJ" means the Antitrust Division of the Department of Justice.      
---                                                                 

"Equipment" means all fixed assets, computers, peripherals, equipment 
---------                                                           
(including coding and decoding equipment, office equipment, etc.) furniture and 
furnishings, fixtures and other leasehold improvements, vehicles, inventory and 
other tangible personal property and facilities owned by the Company or any of  
the Company Subsidiaries or used, held for use or usable in connection with the 
business of the Company and the Company Subsidiaries.                           

"ERISA" means the Employee Retirement Income Security Act of 1974.    
-----                                                               

"FTC" means the Federal Trade Commission.                             
---                                                                 

     "GAAP" means generally accepted accounting principles in the United States.
----                                                                

"Governmental Authority" means any: (a) nation, state, commonwealth,  
----------------------                                              
province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other government; or   
(c) governmental or quasi-governmental authority of any nature (including any   
governmental division, department, agency, commission, instrumentality,         
official, organization, unit, body or other entity and any court or other       
tribunal).                                                                      

   "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
-------                                                             

 "Judgment" means any judgment, injunction, order or decree of or by any
--------                                                            
arbitrator, court, judge, justice or magistrate, including any bankruptcy court 
or judge.                                                                       

   "Law" means the common law and any statute, ordinance, code or other law,
---                                                                 
rule or regulation enacted, adopted or promulgated by any Governmental          
Authority.                                                                      

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"Lien" means any security interest, mortgage, pledge, hypothecation,  
----                                                                
charge, claim, option, right to acquire, adverse interest, assignment, deposit  
arrangement, encumbrance, restriction, lien (statutory or other), or preference 
priority or other security agreement or preferential arrangement of any kind or 
nature whatsoever (including any conditional sale or other title retention      
agreement, any financing lease involving substantially the same economic effect 
as any of the foregoing, and the filing of any financing statement under the    
Uniform Commercial Code or comparable law of any jurisdiction).                 

   "Material Adverse Effect" means, when used in connection with the Company
-----------------------                                             
or any of the Company Subsidiaries, an event, violation, inaccuracy,            
circumstance or other matter which, individually or in the aggregate, has had or
could reasonably be expected to have a material adverse effect on (i) the       
business, financial condition, results of operations or prospects of the Company
and the Company Subsidiaries taken as a whole, or (ii) the ability of the       
Company to consummate the Merger in accordance with the terms of this Agreement;
provided, however, that a decline in the trading price of Company Common Stock, 
in and of itself, shall not be deemed to have a Material Adverse Effect on the  
Company.  An event, violation, inaccuracy, circumstance or other matter will be 
deemed to have a "Material Adverse Effect" on Parent if such event, violation,  
-----------------------                     
inaccuracy, circumstance or other matter, individually or in the aggregate, has 
had or could reasonably be expected to have a material adverse effect on (i) the
business, financial condition, results of operations or prospects of Parent and 
its Subsidiaries taken as a whole or (ii) the ability of Parent to consummate   
the Merger in accordance with the terms of this Agreement; provided, however,   
that a decline in the trading price of Parent Common Stock, in and of itself,   
shall not be deemed to have a Material Adverse Effect on Parent.                

    "Nevada Corporation Law" means the General Corporation Law of the State of
----------------------                                              
Nevada.                                                                         

"1933 Act" means the Securities Act of 1933.                          
--------                                                            

"1934 Act" means the Securities Exchange Act of 1934.                 
--------                                                            

"Parent Balance Sheet" means the audited consolidated balance sheet of
--------------------                                                
Parent and its consolidated subsidiaries as of December 31, 2000 and March 31,  
2000, including the footnotes thereto, included in the Parent 10-K.             

"Parent Balance Sheet Date" means December 31, 2000.                  
-------------------------                                           

    "Parent 10-K" means Parent's Transition Report on Form 10-K for the period
-----------                                                         
from April 1, 2000 to December 31, 2000, as filed with the SEC on April 2, 2001 
and amended on April 30, 2001.                                                  

"PBGC" means the Pension Benefit Guaranty Corporation.                
----                                                                

   "Person" means an individual, corporation, partnership, limited liability
------                                                              
company, joint venture, association, trust or other entity or organization,     
including a Governmental Authority.                                             

"Public Shares" means all shares of Company Common Stock issued and   
-------------                                                       
outstanding at the Effective Time, other than (i) the Worsley Shares, (ii)      
Dissenting Shares and (iii) shares to be cancelled in accordance with Section   
3.1(b) or 3.1(c) of this Agreement.                                             

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"Real Property" means all realty, fixtures, easements, rights-of-way, 
-------------                                                       
leasehold and other interests in real property, buildings, improvements and     
construction-in-progress, owned, leased, occupied or used by the Company or any 
of the Company Subsidiaries.                                                    

   "Restriction" means, with respect to any capital stock or other security,
-----------                                                         
any voting or other trust or agreement, option, warrant, escrow arrangement,    
proxy, buy-sell agreement, power of attorney or other Contract, or any Law or   
Judgment, which, conditionally or unconditionally, (a) grants to any Person the 
right to purchase or otherwise acquire, or obligates any Person to sell or      
otherwise dispose of or issue, or otherwise results or, whether upon the        
occurrence of any event or with notice or lapse of time or both or otherwise,   
may result in any Person acquiring, (i) any of such capital stock or other      
security; (ii) any of the proceeds of, or any distributions paid or which are or
may become payable with respect to, any of such capital stock or other security;
or (iii) any interest in such capital stock or other security or any such       
proceeds or distributions; (b) restricts or, whether upon the occurrence of any 
event or with notice or lapse of time or both or otherwise, may restrict the    
transfer or voting of, or the exercise of any rights or the enjoyment of any    
benefits arising by reason of ownership of, any such capital stock or other     
security or any such proceeds or distributions; or (c) creates or, whether upon 
the occurrence of any event or with notice or lapse of time or both or          
otherwise, may create a Lien or purported Lien affecting such capital stock or  
other security, proceeds or distribution.                                       

     "Revolving Credit Facility"  means the Credit and Security Agreement, dated
-------------------------                                           
as of June 30, 1999, among the Company, SkyMall.com, inc., Durham & Company and 
Imperial Bank, as amended.                                                      

"SEC" means the Securities and Exchange Commission.                   
---                                                                 

  "Significant Subsidiaries" means skymall.com, inc., a Nevada corporation
------------------------                                            
and SkyMall Ventures, Inc., a Nevada corporation, each a wholly-owned subsidiary
of the Company.                                                                 

  "Subsidiary" means, with respect to any Person, any entity of which such
----------                                                          
Person owns, directly or indirectly, through one or more intermediaries, (i)    
securities or other ownership interests having ordinary voting power to elect a 
majority of the board of directors or other Persons performing similar functions
or (ii) at least 50% of the outstanding equity or financial interests of such   
entity.                                                                         

     "Vendor Contract" means a Company Contract with a catalog company, retailer
---------------                                                     
or other merchant whose products are showcased in any of the Company's          
catalogues.                                                                     

"Worsley Shares" means all shares of Company Common Stock issued and  
--------------                                                      
outstanding at the Effective Time and beneficially owned by Robert M. Worsley,  
Christi M. Worsley and/or the Robert Merrill Worsley and Christi Marie Worsley  
Family Revocable Trust dated July 29, 1998.                                     

    Section 1.2  Interpretation.  The definitions in Section 1.1 and elsewhere
--------------                              
in this Agreement apply equally to both the singular and plural forms of the    
terms defined. When a reference is made in this Agreement to an Article,        
Section, Exhibit or Schedule, such this Agreement unless otherwise indicated.   
The table of contents and headings contained in this Agreement are for          

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reference purposes only and shall not affect in any way the meaning or          
interpretation of this Agreement. Whenever the words "include," "includes" or   
"including" are used in this Agreement, they shall be deemed to be followed by  
the words "without limitation." Any reference to the "knowledge of the Company" 
or to the "Company's knowledge" with respect to any representation, warranty or 
provision herein shall mean to the actual knowledge of any of the following     
officers of the Company, after reasonable inquiry by such person: Robert M.     
Worsley, Christine A. Aguilera, Carey Deacon or Martin Smith. Any reference in  
this Agreement to a statute shall be to such statute as amended from time to    
time and to the rules and regulations promulgated thereunder. Whenever the      
context requires, any pronoun shall include the corresponding masculine,        
feminine and neuter forms.                                                      

ARTICLE 2 
THE MERGER  

Section 2.1  The Merger.                                          
----------                              

         (a)  Merger; Surviving Corporation.  At the Effective Time,
-----------------------------           
the Merger shall be effected by merging the Company with and into Merger Sub in 
accordance with the Nevada Corporation Law and the DGCL and upon the terms set  
forth in this Agreement, whereupon the separate existence of the Company shall  
cease and Merger Sub shall be the surviving corporation (the "Surviving         
                                                     ---------
Corporation").                                                                  
-----------                                                                     

    (b)  Closing; Effective Time.  The consummation of the
-----------------------                 
transactions contemplated by this Agreement (the "Closing") shall take place at 
                           -------
the offices of Baker Botts L.L.P., 599 Lexington Avenue, New York, New York, at 
10:00 a.m. on a date to be designated by Parent (the "Closing Date"), which     
                                        ------------
shall be promptly following but not later than the second Business Day after the
satisfaction or waiver of the last to be satisfied or waived of the conditions  
set forth in Article 8 (other than those conditions that by their nature are to 
be satisfied at the Closing, but subject to the satisfaction or waiver of such  
conditions). Subject to the provisions of this Agreement, articles of merger    
("Articles of Merger") satisfying the applicable requirements of the Nevada     
------------------                                                          
Corporation Law and a certificate of merger (the "Certificate of Merger")       
                                         ---------------------
satisfying the applicable requirements of the DGCL shall be duly executed and   
filed, simultaneously with or as soon as practicable following the Closing, in  
accordance with the applicable requirements of the Nevada Corporation Law and   
the DGCL, respectively. The Merger shall become effective upon the later of: (a)
the date and time of the filing in the appropriate office of the later of the   
Articles of Merger and the Certificate of Merger; or (b) such other date and    
time as may be specified in the Articles of Merger and Certificate of Merger    
with the consent of Parent and the Company (the "Effective Time").              
                                --------------

               (c)  Effect of the Merger. From and after the Effective Time, the
--------------------                    
Surviving Corporation shall possess all the rights, powers, privileges and      
franchises and be subject to all of the obligations, liabilities, restrictions  
and disabilities of the Company and Merger Sub, all as provided under the Nevada
Corporation Law and the DGCL.                                                   

   Section 2.2  Certificate of Incorporation and Bylaws of the Surviving
   -----------  --------------------------------------------------------
Corporation.  At the Effective Time, and without any further action on the part 
-----------                                                                     
of the Company and Merger Sub, (i) the certificate of incorporation of Merger   
Sub as in effect immediately prior to the Effective                             

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Time shall be the certificate of incorporation of the Surviving Corporation     
until thereafter changed or amended as provided therein or by applicable law,   
provided that such certificate of incorporation shall be amended to reflect     
"SkyMall, Inc." as the name of the Surviving Corporation, and (ii) the bylaws of
Merger Sub as in effect immediately prior to the Effective Time shall be the    
bylaws of the Surviving Corporation until thereafter changed or amended as      
provided therein or by applicable law, provided that such bylaws shall be       
amended to reflect "SkyMall, Inc." as the name of the Surviving Corporation.    

      Section 2.3  Directors and Officers of the Surviving Corporation .  From
           ---------------------------------------------------
and after the Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (i) the directors of Merger Sub at 
the Effective Time shall be the directors of the Surviving Corporation and (ii) 
the officers of Merger Sub at the Effective Time shall be the officers of the   
Surviving Corporation.                                                          

ARTICLE 3 
CONVERSION OF SECURITIES  

       Section 3.1  Conversion of Securities .  At the Effective Time, by virtue
------------------------                
of the Merger and without any action on the part of Parent, Merger Sub, the     
Company or the holders of any of the securities of Parent, Merger Sub or the    
Company:                                                                        

              (a)  Common Stock of Merger Sub.  Each share of the common stock
--------------------------              
par value $0.01 per share, of Merger Sub issued and outstanding at the Effective
Time shall remain outstanding and continue as one share of common stock, par    
value $0.01 per share, of the Surviving Corporation, and each certificate       
evidencing ownership of shares of Merger Sub immediately prior to the Effective 
Time shall evidence ownership of the same number of shares of the Surviving     
Corporation from and after the Effective Time.                                  

               (b)  Cancellation of Treasury Stock. Each share of Company Common
------------------------------          
Stock and Company Preferred Stock that is held by the Company at the Effective  
Time shall be cancelled and retired without any conversion thereof and no       
consideration shall be delivered with respect thereto.                          

             (c)  Cancellation of Parent Owned Stock.  Each share of Company
----------------------------------      
Common Stock that is held by Parent or Merger Sub at the Effective Time shall be
cancelled and retired without any conversion thereof and no consideration shall 
be delivered with respect thereto.                                              

             (d)  Conversion of Company Common Stock.  (i) Each Public Share
----------------------------------      
shall be converted into the right to receive, subject to adjustment as provided 
in Section 3.1(e), the following (the "Public Merger Consideration"):           
                         ---------------------------

                  (A)  a fraction of a share of Parent Common Stock equal to
the Public Share Fraction; and                    

(B)  $1.50 in cash, without interest.   

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        (ii) Each Worsley Share shall be converted into the right to receive the
     following (the "Worsley Merger Consideration," and together with the Public
----------------------------          
Merger Consideration, the "Merger Consideration"):                    
    --------------------

       (A) a fraction of a share of Parent Common Stock equal to the
Public Share Fraction; and                                  

        (B) a fraction of a share of Parent Common Stock determined by
    dividing $1.50 by the Daily Per Share Price on the Closing Date.

          (e) Section 368(a) Tax Adjustment.  The parties intend that the Merger
-----------------------------                       
shall qualify as a "reorganization" within the meaning of Section 368(a) of the 
Code. In furtherance of such intention, the total value of the shares of Parent 
Common Stock issued in the Merger, determined by reference to the Daily Per     
Share Price on the Closing Date (the "Minimum Share Value"), shall be no less   
               -------------------
than the product of 0.45 multiplied by the sum of (1) the total amount of cash  
paid in the Merger pursuant to Section 3.1(d)(i)(B) plus (2) the product of (x) 
the number of shares of Parent Common Stock issued in the Merger pursuant to    
Section 3.1(d)(i)(A) and 3.1(d)(ii) multiplied by (y) the Daily Per Share Price 
of Parent Common Stock on the Closing Date plus (3) the product of (w) the      
number of Dissenting Shares multiplied by (z) the sum of (A) $1.50 plus (B) the 
product of the Public Share Fraction multiplied by the Daily Per Share Price of 
Parent Common Stock on the Closing Date plus (4) the Ashton Settlement Amount   
(as defined in Section 6.8).  If, absent the application of this Section 3.1(e),
the number of shares of Parent Common Stock to be issued in the Merger pursuant 
to Section 3.1(d) would be less than the number ( the "Minimum Share Number")   
                                                  --------------------
determined by dividing the Minimum Share Value by the Daily Per Share Price of  
Parent Common Stock on the Closing Date, then the Public Merger Consideration   
shall be adjusted such that each Public Share shall be converted into the right 
to receive the following:                                                       

       (A) a fraction of a share of Parent Common Stock equal to the
Public Share Fraction;                                      

           (B) an amount in cash, without interest, equal to (1) $1.50 minus
        (2) an amount equal to the product of (x) the Cash Proration Factor,
         multiplied by (y) the Daily Per Share Price of Parent Common Stock on
the Closing Date; and                                       

       (C) a fraction of a share of Parent Common Stock equal to the
Cash Proration Factor.                                      

     The "Cash Proration Factor" means a fraction, of which (x) the numerator is
---------------------                                       
the Minimum Share Number minus the aggregate number of shares of Parent Common  
Stock issuable in the Merger pursuant to Section 3.1(d) before giving effect to 
this Section 3.1(e), and (y) the denominator is the total number of Public      
Shares.                                                                         

  Section 3.2  Exchange and Payment.  (a) Prior to the Effective Time,
--------------------                    
parent, after consultation with the Company, shall appoint an agent (the        
"Exchange Agent") for the purpose of exchanging certificates representing shares
--------------                                                                
of Company Common Stock ("Certificates") for the Merger Consideration. Within   
------------                
two Business Days after the Effective Time (or earlier if requested by the      
Exchange Agent), Parent will deposit with the Exchange Agent the aggregate      

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Merger Consideration (including cash (in lieu of fractional shares) in the      
amount required to be paid pursuant to Section 3.3) required to be paid in      
respect of shares of Company Common Stock (the "Exchange Fund").                
                             -------------

          (b)   Promptly after the Effective Time, Parent will send, or will
cause the Exchange Agent to send, to each record holder of shares of Company    
Common Stock at the Effective Time a letter of transmittal, including           
instructions (the "Letter of Transmittal"), for use in the exchange of          
---------------------                     
Certificates for the appropriate Merger Consideration (which shall specify that 
the delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the Certificates to the Exchange Agent).                     

            (c)   Upon delivery to the Exchange Agent of a Letter of Transmittal
properly completed and executed (with the signature or signatures thereon       
guaranteed to the extent required by the Letter of Transmittal) by a holder of  
Company Common Stock accompanied by such holder's Certificates,  each holder of 
Company Common Stock will be entitled to receive (i) the appropriate Merger     
Consideration in respect of the shares of Company Common Stock represented by   
its Certificates, and (ii) any dividends and distributions payable pursuant to  
Section 3.8.  Until so surrendered, each Certificate shall represent after the  
Effective Time, for all purposes, only the right to receive the Merger          
Consideration.                                                                  

           (d)   If any portion of the Merger Consideration is to be paid to a
Person other than the Person in whose name the Certificate surrendered is       
registered, it shall be a condition to such payment that such Certificate shall 
be properly endorsed or otherwise be in proper form for transfer and that the   
Person requesting such payment shall pay to the Exchange Agent any transfer or  
other taxes required as a result of such payment to a Person other than the     
registered holder of such Certificate, or establish to the satisfaction of the  
Exchange Agent that such tax has been paid or is not applicable.                

(e)   After the Effective Time there shall be no further
registration or transfers of the Company Common Stock. If, after the Effective  
Time, Certificates are presented to the Surviving Corporation, they shall be    
cancelled and exchanged for the Merger Consideration provided for, and in       
accordance with the procedures set forth, in this Article 3.                    

            (f)   Any portion of the Exchange Fund that remains undistributed to
the holders of Certificates twelve months after the Effective Time shall be     
delivered to Parent, upon demand, and any holders of Certificates who have not  
theretofore complied with this Article 3 shall thereafter look as a general     
creditor only to Parent for payment of the Merger Consideration, any cash in    
lieu of fractional shares of Parent Common Stock and any dividends or           
distributions with respect to Parent Common Stock to which they are entitled.   

      (g)   Any portion of the Merger Consideration delivered to the
Exchange Agent pursuant to Section 3.2(a) in respect of Dissenting Shares shall 
be returned to Parent on demand.                                                

 Section 3.3  Payment for Fractional Interests.  No fractional shares of
--------------------------------            
Parent Common Stock shall be issued in connection with the Merger, and no       
certificates or scrip for any such fractional shares shall be issued. Any holder
of Company Common Stock who would otherwise be entitled to receive a fraction of
a share of Parent Common Stock (after aggregating all                           

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fractional shares of Parent Common Stock issuable to such holder) shall, in lieu
of such fraction of a share, be paid in cash the dollar amount (rounded to the  
nearest whole cent), without interest, determined by multiplying such fraction  
by $39.90.                                                                      

    Section 3.4  Restrictions on Company Stock .  If any shares of Company
-----------------------------           
Common Stock outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition under 
any applicable restricted stock purchase agreement, Company Stock Plan or other 
agreement with the Company or under which the Company has any rights, then,     
except to the extent that the terms governing such Company Common Stock provide 
that such restriction, repurchase right or risk of forfeiture will be           
automatically waived (or such restriction, repurchase right or risk of          
forfeiture is waived with the consent of Parent) in connection with the         
transactions contemplated by this Agreement, the shares of Parent Common Stock  
issued in exchange for such shares of Company Common Stock will also be unvested
or subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Parent Common Stock may        
accordingly be marked with appropriate legends.                                 

   Section 3.5  No Further Rights as Stockholder of the Company.  At the
       -----------------------------------------------
Effective Time, all shares of Company Common Stock outstanding immediately prior
to the Effective Time shall no longer be outstanding and shall automatically be 
cancelled and retired and shall cease to exist, and the holders of Certificates 
shall cease to have any rights with respect thereto, except as otherwise        
provided herein and pursuant to the Nevada Corporation Law. At the Effective    
Time, the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall be made thereafter. No holder of           
Certificates shall be entitled to receive any portion of the Merger             
Consideration to which such holder is entitled pursuant to Section 3.1(d) except
upon surrender of such holder's Certificates as provided herein.                

     Section 3.6  Adjustment to Merger Consideration.  If, during the period
----------------------------------      
beginning on the date of this Agreement and ending on the Closing Date, the     
outstanding shares of Parent Common Stock shall be changed into a different     
number of shares or a different class by reason of any reclassification,        
recapitalization, split-up, stock dividend, stock combination, exchange of      
shares, readjustment or otherwise, then the number of shares of Parent Common   
Stock to be issued pursuant to Section 3.1(d) (as adjusted pursuant to Section  
3.1(e)) shall be correspondingly adjusted.                                      

   Section 3.7  Replacement Certificates.  If any Certificate shall have
------------------------                
been lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any Merger Consideration therefor, require the     
record holder of such lost, stolen or destroyed Certificate to provide an       
appropriate affidavit and to deliver a bond (in such sum as Parent may          
reasonably direct) as indemnity against any claim that may be made against      
Parent or the Surviving Corporation with respect to such Certificate.           

Section 3.8  Dividends and Distributions.  No dividends or other  
---------------------------             
distributions declared or made with respect to Parent Common Stock with a record
date after the Effective Time shall be paid to the holder of any unsurrendered  
Certificate with respect to the shares of Parent Common Stock that such holder  
has the right to receive in the Merger until such holder surrenders such        
Certificate as provided in Section 3.2 (at which time such holder shall be      

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entitled, subject to the effect of applicable escheat or similar Law, to receive
such dividends and distributions, without interest).                            

Section 3.9   Abandoned Property; Withholding.                        
-------------------------------           

        (a)    None of Parent, the Surviving Corporation or the Exchange
Agent shall be liable to any stockholder or former stockholder of the Company   
for any property delivered to a public official pursuant to any applicable      
abandoned property, escheat or similar Law.                                     

         (b)    Each of Parent, the Surviving Corporation and the Exchange
Agent shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable under this Agreement to any securityholder of the Company 
such amounts as may be required to be deducted or withheld therefrom under the  
Code or any provision of state, local or foreign tax Law or other legal         
requirement. To the extent such amounts are so deducted or withheld, such       
amounts shall be treated for all purposes of this Agreement as having been paid 
to the Person to whom such amounts would have otherwise been paid.              

Section 3.10  Dissenting Shares                                       
-----------------                         

        (a)    If dissenters' right are available in connection with the
Merger under Sections 92A.300 to 92A.500 of the Nevada Corporation Law, then,   
notwithstanding any provision of this Agreement to the contrary, each           
outstanding share of Company Common Stock with respect to which the holder      
thereof has validly exercised such dissenters' rights in accordance therewith   
and, as of the Effective Time, has not effectively withdrawn or lost such       
dissenters' rights (the "Dissenting Shares"), shall not be converted into or    
-----------------             
represent a right to receive the Merger Consideration, but the holder thereof   
shall be entitled only to such rights as are granted by the Nevada Corporation  
Law.                                                                            

         (b)    Notwithstanding the foregoing, if any holder of Dissenting
Shares shall effectively withdraw its objection to the Merger or lose its right 
to demand appraisal of such holder's shares of Company Common Stock then, as of 
the later of the Effective Time or the occurrence of such event, such holder's  
shares shall automatically be converted into and represent only the right to    
receive, following surrender of the Certificate(s) representing such shares, the
Merger Consideration as provided in Section 3.1.                                

           (c)    The Company shall give Parent (i) prompt written notice upon
receipt of any written objection to the Merger and/or demand for appraisal of   
Company Common Stock pursuant to Section 92A.440 of the Nevada Corporation Law, 
and of withdrawals of such demands, and (ii) the opportunity to participate in  
all negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, which consent shall not   
unreasonably be withheld, voluntarily make any payment with respect to any such 
demands or offer to settle or settle any such demands.                          

     (d)    Each holder of Dissenting Shares who becomes entitled,
pursuant to the Nevada Corporation Law, to payment of the fair value of its     
shares of Company Common Stock shall receive payment therefor from the Surviving
Corporation (but only after the amount thereof shall have been agreed upon or at
the times and in the amounts required by the Nevada Corporation Law), and such  
shares of Company Common Stock shall be cancelled.                              

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Section 3.11  Treatment of Options                                
--------------------                  

       (a)    At the Effective Time, each Company Stock Option (as
defined in Section 4.2(b)) then outstanding and unexercised, whether vested or  
unvested, shall be by assumed by Parent (each, an "Assumed Company Stock        
                                           ---------------------
Option"). Thereafter, each Assumed Company Stock Option shall be deemed to      
------                                                                          
constitute an option to acquire, on substantially the same terms and conditions 
as were applicable under such Company Stock Option immediately prior to the     
Effective Time, for each share of Company Common Stock the holder of such       
Company Stock Option would have received had such holder exercised such Company 
Stock Option in full, including as to unvested shares, immediately prior to the 
Effective Time, the Public Merger Consideration, against payment of an exercise 
price equal to the exercise price per share for the shares of Company Common    
Stock otherwise purchasable pursuant to such Company Stock Option immediately   
prior to the Effective Time. Any restriction on the exercise of a Company Stock 
Option in effect at the Effective Time shall continue as to the Assumed Company 
Stock Option in full force and effect after the Effective Time and the term,    
exercisability, vesting schedule and other provisions of such Assumed Company   
Stock Option shall otherwise remain unchanged from those applicable to such     
Company Stock Option immediately prior to the Effective Time, except to the     
extent that any restriction on exercise, term, exercisability, vesting schedule 
and other provisions of such Assumed Company Stock Option (as supplemented by   
the applicable Company Stock Plan) are automatically waived or accelerated (or  
waived or accelerated with the consent of Parent) in connection with the Merger.
The total number of shares of Parent Common Stock subject to any Assumed Company
Stock Option immediately after the Effective Time shall be rounded to the       
nearest whole integer. No fractional share of Parent Common Stock shall be      
issuable upon exercise of an Assumed Company Stock Option. Any holder of an     
Assumed Company Stock Option who would otherwise be entitled to receive a       
fraction of a share of Parent Common Stock (after aggregating all fractional    
shares of Parent Common Stock otherwise issuable to such holder under such      
Assumed Company Stock Option) shall, in lieu of such fraction of a share, be    
paid in cash the dollar amount (rounded to the nearest whole cent), without     
interest, determined by multiplying such fraction by the Daily Per Share Price  
on the date such Assumed Company Stock Option is exercised; provided that no    
cash shall be paid in lieu of a fraction of a share resulting from a partial    
exercise of an Assumed Company Stock Option; any such fraction of a share shall 
instead remain subject to such Assumed Company Option and aggregated, to the    
extent applicable, with any fractional shares resulting from any future exercise
of such Assumed Company Stock Option.                                           

            (b)    Parent shall, immediately after the Effective Time, offer
to each holder of an Assumed Company Stock Option the right to receive, in lieu 
of the Public Merger Consideration upon exercise thereof pursuant to Section    
3.11(a), cash (a "Substitute Cash Payment") in an amount equal to the product of
-----------------------                     
(1) the total number of shares of Company Common Stock underlying such Assumed  
Company Stock Option immediately prior to the Effective Time, multiplied by (2) 
the excess, if any, of (A) the sum of (x) $1.50 plus (y) the product of the     
Public Share Fraction multiplied by the Daily Per Share Price as of the Closing 
Date, less (B) the exercise price per share of such Assumed Company Stock Option
immediately prior to the Effective Time.                                        

            (c)    Prior to the Effective Time, the Company and Parent shall
take all action necessary (under the Company Stock Plans or otherwise) to       
effectuate the provisions of this                                               

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Section 3.11 and to ensure that, from and after the Effective Time, holders of  
Company Stock Options have no rights with respect thereto other than those      
specifically set forth in this Section 3.11. All options issued under the       
SkyMall Non-Employee Director Stock Option Plan shall remain outstanding for the
balance of their respective terms if not earlier exercised, notwithstanding the 
removal or resignation from the board of directors of the Company or the        
Surviving Corporation of the holder of any such options.                        

          (d)    As soon as practicable after the Effective Time, Parent
shall file a registration statement on Form S-8, or another appropriate form, to
permit (i) the public resale of the shares of Parent Common Stock subject to the
Assumed Company Stock Options after the Effective Time and (ii) the receipt of  
Substitute Cash Payments, and shall use commercially reasonable efforts to      
maintain the effectiveness of such registration statement on Form S-8 through   
the termination of such Assumed Company Stock Options.                          

         (e)    No further stock options, stock appreciation rights or
other incentives or awards shall be granted, or shares of stock or other        
securities or property issued or delivered, under any of the Company Stock Plans
subsequent to the Effective Time.                                               

 Section 3.12  Company Warrants. Each Company Warrant (as defined in
----------------                      
Section 4.2(b)) outstanding at the Effective Time, which has not theretofore    
been exercised or cancelled, shall be converted into and represent solely the   
right to receive, unless otherwise agreed by Parent and the holder of such      
Company Warrant, upon exercise thereof and payment of any exercise price        
therefor, for each share of Company Common Stock the holder of such Company     
Warrant would have been entitled to receive had such Company Warrant been       
exercised immediately prior to the Effective Time, the Public Merger            
Consideration. Without limiting the generality of the foregoing, immediately    
after the Effective Time each Company Warrant shall be deemed to constitute a   
warrant to acquire, on substantially the same terms and conditions as were      
applicable under such Company Warrant immediately prior to the Effective Time,  
for each share of Company Common Stock the holder of such Company Warrant would 
have been entitled to receive had such holder exercised such Company Warrant in 
full, including as to unvested shares, immediately prior to the Effective Time, 
the Public Merger Consideration, against payment of an exercise price equal to  
the exercise price per share for the shares of Company Common Stock otherwise   
purchasable pursuant to such Company Warrant immediately prior to the Effective 
Time, with such exercise price being rounded to the nearest whole cent. Any     
restriction on the exercise, conversion or exchange of a Company Warrant in     
effect at the Effective Time shall continue in full force and effect after the  
Effective Time and the exercisability and the term and vesting schedule and     
other provisions of such Company Warrant shall otherwise remain unchanged,      
except to the extent that any restriction on the exercise or on the term,       
vesting schedule and other provisions of such Company Warrant are automatically 
waived or accelerated (or waived or accelerated with the consent of Parent) in  
connection with the Merger. No fractional share of Parent Common Stock shall be 
issuable upon exercise of a Company Warrant. Any holder of a Company Warrant who
would otherwise be entitled to receive a fraction of a share of Parent Common   
Stock (after aggregating all fractional shares of Parent Common Stock otherwise 
issuable to such holder under such Company Warrant) shall, in lieu of such      
fraction of a share, be paid in cash the dollar amount (rounded to the nearest  
whole cent), without interest, determined by multiplying such fraction by the   
Daily Per Share Price on the date such Company Warrant is exercised; provided   
that no cash shall be                                                           

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paid in lieu of a fraction of a share resulting from a partial exercise of a    
Company Warrant; any such fraction of a share shall instead remain subject to   
such Company Warrant and aggregated, to the extent applicable, with any         
fractional shares resulting from any future exercise of such Company Warrant.   

ARTICLE 4 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

  The Company represents and warrants to Parent and Merger Sub as follows:

   Section 4.1  Organization and Authority. The Company and each Company
--------------------------              
Subsidiary is a corporation duly organized, validly existing and in good        
standing under the laws of the jurisdiction of its incorporation; has full      
corporate power and authority to carry on its business as currently conducted   
and to own, lease, use and operate its assets and properties at the places      
currently located and in the manner currently used and operated; and is duly    
qualified to transact business, and is in good standing, in each jurisdiction in
which the properties owned, leased, used or operated by it or the nature of the 
business conducted by it requires it to be so qualified, except where the       
failure to be so qualified or in good standing has not had, and would not       
reasonably be expected to have, a Material Adverse Effect on the Company.       
Section 4.1(a) of the Company Disclosure Schedule sets forth the name and state 
of incorporation of each Company Subsidiary. No Company Subsidiary other than   
the Significant Subsidiaries has any material business or operations.           

Section 4.2  Capitalization                                       
--------------                          

         (a)   The authorized capital stock of the Company consists of
60,000,000 shares, of which 50,000,000 shares are Company Common Stock and      
10,000,000 shares are preferred stock, par value $0.001 per share (the "Company 
                                                                       -------
Preferred Stock"). As of April 30, 2001, 15,818,711 shares of Company Common    
---------------                                                                 
Stock were issued and outstanding and no shares of Company Preferred Stock were 
issued or outstanding. As of the date hereof, 164,400 shares of Company Common  
Stock are held in the Company's treasury, and no shares of capital stock of the 
Company are held by any Company Subsidiary. All issued and outstanding shares of
Company Common Stock have been duly authorized and validly issued, are fully    
paid and nonassessable, were not issued in violation of any preemptive rights,  
and were offered, issued and sold in all material respects in compliance with   
all applicable state and federal securities laws and Company Contracts. There   
are no outstanding bonds, debentures, notes or other indebtedness of the Company
or any of the Company Subsidiaries having the right to vote (or convertible into
or exchangeable for other securities having the right to vote) on any matters on
which stockholders of the Company or any Company Subsidiary may vote ("Voting   
                                                                    ------
Debt").                                                                         
----                                                                            

              (b)   Section 4.2(b) of the Company Disclosure Schedule sets forth
a complete and accurate list of (i) all outstanding options to purchase shares  
of Company Common Stock (each, a "Company Stock Option"), and (ii) all          
        --------------------
outstanding stock purchase warrants to purchase shares of Company Common Stock  
(each, a "Company Warrant"), together with, in each case, the holders thereof,  
---------------                                             
the date of issuance, the expiration or maturity date, the exercise, conversion 
or exchange price, the maximum number of shares of Company Common Stock covered 
thereby, and the vesting schedule (both before and after giving effect to the   
Merger), if any, thereof. Each                                                  

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of the Company Stock Options was granted under a Company Stock Plan. The Company
has made available to Parent true and complete copies (including all amendments)
of all Company Contracts setting forth the terms of, or which relate to, the    
outstanding Company Stock Options or Company Warrants, which copies set forth   
all the terms, conditions, provisions, agreements, obligations and undertakings 
of the Company with respect thereto. All outstanding Company Stock Options and  
Company Warrants were offered, issued and sold in all material respects in      
compliance with all applicable federal and state securities laws and Company    
Contracts, and are not subject to the preemptive rights of any Person. Upon     
exercise, conversion or exchange of the Company Stock Options and Company       
Warrants for Company Common Stock in accordance with the terms thereof, such    
shares will be duly authorized and validly issued, fully paid and nonassessable 
and will not be subject to, or issued in violation of, the preemptive rights of 
any Person and will have been offered, issued and sold in all material respects 
in compliance with all applicable federal and state securities laws and Company 
Contracts. As of April 30, 2001: (i) 1,430,620 shares of Company Common Stock   
were issuable, and reserved for issuance, upon exercise of all outstanding      
Company Stock Options, (ii) 704,380 shares of Company Common Stock were reserved
for issuance upon exercise of stock options available for grant under the       
Company Stock Plans, and (iii) 2,405,752 shares of Company Common Stock were    
issuable, and reserved for issuance, upon exercise of all outstanding Company   
Warrants. Except as set forth above or in Section 4.2(b) of the Company         
Disclosure Schedule, and except for issuances of Company Common Stock upon      
exercise of Company Stock Options or Company Warrants outstanding as of April   
30, 2001, as of the close of business on the date hereof, no shares of capital  
stock or other equity securities of the Company have been issued or are reserved
for issuance or are outstanding. The Company has reserved for issuance a        
sufficient number of shares of Company Common Stock to satisfy the exercise of  
all Company Stock Options and Company Warrants outstanding as of the date hereof
and the exercise of all Company Stock Options issuable upon exercise of stock   
options available for grant under the Company Stock Plans as of the date hereof,
taking into account the application of all antidilution and other adjustment    
provisions applicable to such Company Stock Options and Company Warrants through
the date hereof.                                                                

       (c)   Except for Company Stock Options and Company Warrants
outstanding as of the date hereof and listed in Section 4.2(b) of the Company   
Disclosure Schedule, there are not any outstanding or authorized subscriptions, 
options, warrants, calls, preemptive rights, rights of first refusal,           
participation rights or other rights, commitments or any similar agreements or  
undertakings to or by which the Company or any of the Company Subsidiaries is a 
party or is bound which, directly or indirectly, obligate the Company or any    
Company Subsidiary to issue, deliver or sell or cause to be issued, delivered or
sold any shares of Company Common Stock, Company Preferred Stock or any other   
capital stock, equity interest or Voting Debt of the Company or any Company     
Subsidiary, any securities convertible into, or exercisable or exchangeable for,
or evidencing the right to subscribe for any such shares, interests or Voting   
Debt, or any phantom shares, phantom equity interests or stock or equity        
appreciation rights (full or limited), or obligating the Company or any Company 
Subsidiary to grant, extend or enter into any of the foregoing. Neither the     
Company nor any Company Subsidiary is subject to any obligation (contingent or  
otherwise) to repurchase, redeem or otherwise acquire or retire any shares of   
capital stock (or options or warrants to acquire any such shares) of the Company
or any Company Subsidiary, or to make any investment (in the form of a loan,    
capital contribution or otherwise) in any Equity Affiliate or other Person.     
Immediately after the Effective Time, there                                     

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will be no subscription, option, warrant, call, preemptive right, right of first
refusal, participation right or other right, commitment, agreement or           
undertaking of any character which will entitle (conditionally or               
unconditionally) any Person to purchase or otherwise acquire, or will obligate  
(conditionally or unconditionally) the Surviving Corporation (as the Company's  
successor) or any Subsidiary of the Surviving Corporation that was a Subsidiary 
of the Company to sell, issue or deliver, any shares of capital stock, any other
equity interest or any Voting Debt of the Surviving Corporation or any such     
Subsidiary or obligating the Surviving Corporation or any such Subsidiary to    
grant, extend or enter into any such subscription, option, warrant, call, right,
commitment, agreement or undertaking. Except for the Company Stock Plans,       
neither the Company nor any Company Subsidiary has adopted, authorized or       
assumed any plans, arrangements or practices for the benefit of its officers or 
employees or directors which require or permit the issuance, sale, purchase or  
grant of any capital stock, other equity interests or Voting Debt of the Company
or any Company Subsidiary, any other securities convertible into, or exercisable
or exchangeable for, any such stock, interests or Voting Debt, or any phantom   
shares, phantom equity interests or stock or equity appreciation rights (full or
limited).                                                                       

            (d)    The Company does not have any Subsidiaries other than the
Company Subsidiaries. Except for the Company Subsidiaries and except as set     
forth on Section 4.2(d) of the Company Disclosure Schedule, the Company does not
have any capital, equity, participation or other interest in any Person. All    
shares of capital stock of each Company Subsidiary are owned of record and      
beneficially by the Company and free and clear of any Lien or Restriction,      
except for Liens created under the Revolving Credit Facility, and are validly   
issued, fully paid and non-assessable. Except as set forth in Section 4.2(d) of 
the Company Disclosure Schedule, there are no outstanding or authorized         
subscriptions, options, warrants, calls, preemptive rights, rights of first     
refusal, participation rights or other rights, commitments or other agreements  
or undertakings of any character that, directly or indirectly, (x) call for or  
relate to the sale, pledge, transfer or other disposition by the Company or any 
Company Subsidiary of any shares of capital stock or other equity interests or  
any Voting Debt of any Company Subsidiary, or (y) relate to the voting or       
control of such capital stock, other equity interests or Voting Debt. Except as 
set forth in Section 4.2(d) of the Company Disclosure Schedule, there are no    
Company Contracts of any character (contingent or otherwise) pursuant to which  
any Person is or may be entitled to receive any payment reasonably likely to be 
in excess of $25,000 based on the revenues, earnings or financial performance of
the Company or any of the Company Subsidiaries during the year 2000 or any      
subsequent fiscal year, or their respective assets and properties as calculated 
in accordance therewith. Except as set forth in Section 4.2(d) of the Company   
Disclosure Schedule, there are no Company Contracts of any character (contingent
or otherwise) pursuant to which, after the Effective Time, any Person may be    
entitled to cause Parent to file a registration statement under the 1933 Act, or
which otherwise relate to the registration of any securities of Parent.         

Section 4.3   Charter Documents. The Company heretofore has made  
-----------------                     
available to Parent true and complete copies of the Articles of Incorporation   
("Company Charter") and Bylaws ("Company Bylaws"), each as currently in effect, 
---------------                --------------                               
of the Company. The Company has also made available to Parent complete and      
correct copies of the certificate of incorporation and by-laws or other         
constitutive, governing or organizational documents of each Company Subsidiary, 
in each case as amended and currently in effect.                                

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    Section 4.4   Corporate Records. All material actions and transactions
-----------------                     
taken or entered into by the Company or any Company Subsidiary and requiring    
action by its board of directors (or other governing body) or stockholders have 
been duly authorized or ratified as necessary by all necessary board and        
stockholder action, as applicable. The corporate minute books and stock records 
of the Company and each Company Subsidiary, as made available to Parent, are    
true and complete in all material respects.                                     

      Section 4.5   Authority; Noncontravention. The Company has the requisite
---------------------------           
corporate power and authority to enter into this Agreement and, subject to      
Company Stockholders Approval, to consummate the transactions contemplated by   
this Agreement. The execution and delivery of this Agreement by the Company and 
the consummation by the Company of the transactions contemplated hereby have    
been duly authorized by all necessary corporate action on the part of the       
Company, subject to Company Stockholders Approval. This Agreement has been duly 
executed and delivered by the Company and constitutes a valid and binding       
obligation of the Company, enforceable against the Company in accordance with   
its terms, subject to (i) bankruptcy, insolvency, reorganization, moratorium or 
other similar laws affecting or relating to creditors rights generally, and (ii)
the availability of injunctive relief and other equitable remedies. The         
execution and delivery of this Agreement does not, and the consummation of the  
transactions contemplated hereby and compliance with the provisions hereof and  
thereof will not, conflict with, or result in any violation of or default (with 
or without notice or lapse of time, or both) under, or give rise to a right of  
termination, cancellation or acceleration of any obligation or to loss of a     
material benefit under, or result in the creation of any Lien upon any of the   
properties or assets of the Company or any of the Company Subsidiaries under,   
(w) the Company Charter or Company Bylaws or the comparable constitutive,       
governing or organizational documents of any of the Company Subsidiaries, (x)   
subject to the Company providing the notices to, or obtaining the approval or   
consent of, the parties to those Company Material Contracts listed in Section   
4.5(x) of the Company Disclosure Schedule, any Company Material Contract, or (y)
subject to the governmental filings and other matters referred to in the        
following sentence, any Judgment or Law applicable to the Company or any of the 
Company Subsidiaries or their respective properties or assets, other than, in   
the case of clauses (x) or (y), any such conflicts, violations, defaults, rights
or Liens that, individually or in the aggregate, would not (A) have a Material  
Adverse Effect on the Company, or (B) prevent or materially delay the           
consummation of the Merger. No consent, approval, order or authorization of, or 
registration, declaration or filing with, any Governmental Authority is required
by or with respect to the Company or any of the Company Subsidiaries in         
connection with the execution and delivery of this Agreement or the consummation
by the Company of the transactions contemplated by this Agreement, except for   
(1) the filing with the FTC and the DOJ of any required premerger notification  
and report form by the Company under the HSR Act and the expiration or earlier  
termination of the waiting period under that Act, (2) the filing of the Form S-4
Registration Statement by Parent with the SEC and the declaration by the SEC of 
the effectiveness of the Form S-4 Registration Statement, (3) the filing of the 
Articles of Merger with the Secretary of State of the State of Nevada and the   
Certificate of Merger with the Secretary of State of the State of Delaware, (4) 
the consents, approvals, orders and authorizations of, and registrations,       
declarations and filings with, the Governmental Authorities identified in       
Section 4.5(4) of the Company Disclosure Schedule and (5) such other consents,  
approvals, orders, authorizations, registrations, declarations and filings,     
including under (x) the laws of any foreign country in which the Company or any 
Company Subsidiary conducts any business or                                     

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owns any property or assets or (y) the "takeover" laws of various states, the   
failure of which to be obtained or made would not, individually or in the       
aggregate, have a Material Adverse Effect on the Company or prevent or          
materially delay the Merger. The Company, the Merger and the other transactions 
contemplated by this Agreement are not subject to Sections 78.411 to 78.444 of  
the Nevada Corporation Law, Sections 10-2721 to 10-2727 of the Arizona Revised  
Statutes or, to the knowledge of the Company, any other state or foreign        
"takeover" or similar Law. Neither the execution and delivery of this Agreement 
and the Voting Agreement nor the consummation of the Merger shall result in     
Parent being an Acquiring Person (as defined in the Rights Agreement, dated as  
of September 15, 1999, between the Company and Continental Stock Transfer &     
Trust Company (the "Rights Agreement")) or in any Rights (as defined in the     
----------------                        
Rights Agreement) being separable or exercisable.                               

Section 4.6  Voting Requirements; Board Approval.                 
-----------------------------------     

        (a)   Pursuant to the Nevada Corporation Law and the Company
Charter, the only securities of the Company that entitle the holders to vote on 
this Agreement and the Merger is the Company Common Stock. The Merger requires  
the approval (the "Company Stockholders Approval") of the holders of a majority 
-----------------------------             
of the issued and outstanding shares of Company Common Stock as of the record   
date for a meeting of stockholders of the Company duly called for the purpose of
voting upon this Agreement and the Merger (together with any adjournment or     
postponement thereof, a "Company Stockholders Meeting").                        
----------------------------  

             (b)   The board of directors of the Company, by unanimous vote at
a meeting duly called and held, (i) has approved this Agreement and the Merger  
and determined that the Merger is fair to and in the best interests of the      
stockholders of the Company, and (ii) has adopted resolutions recommending      
approval and adoption of this Agreement, and the transactions contemplated      
hereby, including, without limitation, the Merger, by the stockholders of the   
Company and its submission to the stockholders of the Company for their         
consideration and vote at a Company Stockholders Meeting.                       

       (c)   The board of directors of the Company has received an
opinion from Robertson Stephens, Inc., financial advisor to the Company, that   
the proposed consideration to be received by the holders of Company Common Stock
in the Merger is fair, from a financial point of view, to such holders, and a   
signed copy of such opinion has been, or promptly upon receipt thereof will be, 
delivered by the Company to Parent.                                             

Section 4.7  Financial Statements; Books of Account.              
--------------------------------------  

         (a)   The Company has heretofore made available to Parent the
following consolidated financial statements of the Company, all of which have   
been prepared in accordance with GAAP consistently applied throughout the       
periods indicated (except to the extent indicated in the notes thereto and      
subject, in the case of the interim financial statements, to normal year end    
audit adjustments) and present fairly, in all material respects, the financial  
position and results of operations of the Company and the Company Subsidiaries  
on a consolidated basis as of the dates and for the periods stated:             

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              (i)    the unaudited consolidated balance sheet of the Company and
    the Company Subsidiaries as of March 31, 2001 and the related consolidated
statements of operation for the three months then ended; and          

             (ii)   the audited consolidated balance sheets of the Company and
the Company Subsidiaries as at December 31, 2000 and 1999 and the     
    consolidated statements of operations, changes in shareholders' equity and
     cash flows of the Company and its consolidated Subsidiaries for each of the
     years in the three-year period ended December 31, 2000, certified by Arthur
Andersen LLP, whose opinion thereon is included therewith.            

        (b)    The books and records of the Company and each Company
Subsidiary, including the periods covered by the consolidated financial         
statements listed in Section 4.7(a), are true and complete in all material      
respects, and accurately and fairly reflect, in all material respects, all of   
the properties, assets, liabilities and transactions of the Company and each    
Company Subsidiary in accordance with GAAP consistently applied.                

       (c)    Arthur Andersen LLP are independent certified public
accountants with respect to the Company and the Company Subsidiaries within the 
meaning of Regulation S-X of the SEC.                                           

   Section 4.8   No Undisclosed Liabilities. There are no liabilities or
--------------------------            
obligations ("Liabilities") of the Company, except (i) Liabilities described in 
-----------                                         
Section 4.8 of the Company Disclosure Schedule or otherwise disclosed in the    
Company Disclosure Schedule or this Agreement, (ii) Liabilities reflected in the
Company Balance Sheet, (iii) Liabilities with respect to matters otherwise      
addressed by any of the representations, warranties, covenants or agreements    
made by the Company in this Agreement, (iv) Liabilities under this Agreement or 
any document entered into in connection herewith or therewith, (v) Liabilities  
incurred in the ordinary course of business since the Company Balance Sheet Date
and (vi) other Liabilities which, individually or in the aggregate, would not   
result in a Material Adverse Effect.                                            

Section 4.9   Receivables; Vendors.                               
--------------------                  

         (a)    Section 4.9(a) of the Company Disclosure Schedule sets
forth a list of all Airline Contracts and Vendor Contracts (the counterparty to 
each such contract, a "Significant Vendor") that accounted for 5% or more of the
------------------                
consolidated total revenues of the Company, during the year ended December 31,  
2000. Neither the Company nor any Company Subsidiary has received any written   
notice or other written (including electronic) communication indicating that any
Significant Vendor could reasonably be expected to cease dealing with the       
Company or could reasonably be expected to otherwise materially reduce the      
volume of business transacted by such Significant Vendor with the Company below 
historical levels.                                                              

              (b)    Section 4.9(b) of the Company Disclosure Schedule describes
all barter transactions which, individually or in the aggregate, accounted for  
5% or more of the Company's consolidated total revenues during the year ended   
December 31, 2000.                                                              

     Section 4.10  Absence of Certain Changes or Events. Except as set forth
------------------------------------  
in Section 4.10 of the Company Disclosure Schedule, since the Company Balance   
Sheet Date, the Company and                                                     

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each of the Company Subsidiaries has, in all material respects, conducted its   
business only in the ordinary course consistent with prior practice, and there  
has not been:                                                                   

       (i)     any Material Adverse Effect on the Company and no event has
 occurred or circumstance has arisen that, in combination with any other
events or circumstances, could reasonably be expected to result in any
Material Adverse Effect on the Company,                               

        (ii)    any declaration, setting aside or payment of any dividend or
     other distribution (whether in cash, stock or property) with respect to any
of the Company's capital stock,                                       

    (iii)   any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any   
issuance of any other securities in respect of, in lieu of or in      
substitution for shares of the Company's capital stock,               

          (iv)    any granting by the Company or any of the Company Subsidiaries
to any officer or employee of the Company or any of the Company       
     Subsidiaries of any increase in compensation, except in the ordinary course
of business consistent with prior practice or as was required under   
employment agreements in effect as of the Company Balance Sheet Date, 

          (v)     any granting by the Company or any of the Company Subsidiaries
to any officer or employee of the Company or any of the Company       
     Subsidiaries of any increase in severance or termination pay, except as was
required under any employment, severance or termination agreements in 
  effect as of the Company Balance Sheet Date or in the ordinary course of
business,                                                             

        (vi)    any entry into, or renewal or modification by the Company or
   any of the Company Subsidiaries of, any employment, consulting, severance
     or termination agreement with any officer or employee of the Company or any
of the Company Subsidiaries,                                          

      (vii)   any damage, destruction or loss, whether or not covered by
    insurance, that has had or could reasonably be expected to have a Material
Adverse Effect on the Company,                                        

         (viii)  any material change in (A) the manner or timing of collecting
 accounts receivable or satisfying accounts payable, (B) any assumptions
underlying or methods of calculating any bad debt, contingency, tax or
   other reserves or (C) any accounting methods, principles or practices, in
     each case by the Company or any of the Company Subsidiaries, except insofar
as may have been required by GAAP,                                    

        (ix)    any material assets of the Company or any Company Subsidiary
made subject to any Lien (other than the Lien of the Revolving Credit 
Facility or any Permitted Encumbrances (as defined in Section 4.13),  

        (x)     any claims, liabilities or obligations (absolute, accrued or
contingent) paid, discharged or satisfied, other than the payment,    
discharge or satisfaction, in the ordinary                            

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course of business and consistent with past practice, of claims,      
  liabilities and obligations reflected or reserved against in the Company
     Balance Sheet or incurred in the ordinary course of business and consistent
with past practice since the Company Balance Sheet Date,              

       (xi)      any single capital expenditure or commitment in excess of
$150,000 for additions to property or equipment, or aggregate capital 
expenditures and commitments in excess of $250,000 (on a consolidated 
basis) for additions to property or equipment,                        

(xii)     written off as uncollectible any notes or accounts
receivable, except write-offs in the ordinary course of business and  
consistent with past practice,                                        

      (xiii)    written down the value of any asset or investment on the
    Company's books or records, except for depreciation and amortization taken
in the ordinary course of business and consistent with past practice, 

         (xiv)     cancellation of any debts or waiver of any claims or rights
in excess of $150,000, or sale, transfer or other disposition of any  
   properties or assets (real, personal or mixed, tangible or intangible) in
excess of $150,000, except, in each such case, in transactions in the 
ordinary course of business and consistent with past practice, or     

(xv)      any agreement to do any of the foregoing.         

Section 4.11   Taxes                                                  
-----                                   

 Except as set forth in Section 4.11 of the Company Disclosure Schedule:

(a)       As used in this Agreement, (i) the term "Tax" or, 
                                             ---
collectively, "Taxes" shall mean any and all federal, state, local and foreign  
-----                                             
taxes and other assessments, governmental charges, duties, impositions and      
liabilities in the nature of a tax, including taxes based upon or measured by   
gross receipts, income, profits, sales, use and occupation, value added, ad     
valorem, transfer, franchise, withholding, payroll, recapture, employment,      
excise and property taxes, together with all interest, penalties and additions  
imposed with respect to such amounts, and (ii) the term "Tax Return" or,        
                                            ----------
collectively, "Tax Returns" shall mean any and all reports, returns or other    
-----------                                       
information required to be supplied to or filed with a Governmental Authority   
with respect to any Tax, including an information return, claim for refund,     
amended tax return or declaration of estimated tax. For the purposes of this    
Section 4.11, references to the Company and each of the Company Subsidiaries    
shall include former Subsidiaries of the Company for the periods during which   
any such corporations were included in any consolidated federal income Tax      
Return of the Company or any consolidated or unitary group of the Company in any
state, local or foreign jurisdiction.                                           

          (b)       The Company and each of the Company Subsidiaries have timely
filed all material federal, state, local and foreign Tax Returns required to be 
filed by them through the date hereof, and shall timely file all such Tax       
Returns required to be filed on or before the Effective Time. All such Tax      
Returns that have been filed are, and all such Tax Returns to be filed on or    
before the Effective Time will be, true, complete and correct in all material   
respects. The Company and each of the Company Subsidiaries have paid and        
discharged (or the Company                                                      

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has paid and discharged on such Company Subsidiary's behalf) all Taxes due from 
them, other than such Taxes as are being or will be contested in good faith by  
appropriate proceedings and are adequately reserved for on the Company Balance  
Sheet in accordance with GAAP. The financial statements referred to in Section  
4.7(a) and heretofore delivered to Parent properly reflect in accordance with   
GAAP all Taxes payable by the Company and the Company Subsidiaries, whether     
asserted or unasserted, contingent or otherwise, for all taxable periods and    
portions thereof through the date of such financial statements. Since the       
Company Balance Sheet Date, the Company and each of the Company Subsidiaries    
have not incurred any liability for Taxes other than as a result of the         
operation of the business of the Company and the Company Subsidiaries in the    
ordinary course of business consistent with past practice.                      

      (c)  As of the Effective Time, the Company and each of the Company
Subsidiaries will have paid all Taxes they are required to pay with respect to  
workers and all other third parties and will have withheld with respect to their
employees and contract workers all income Taxes, Federal Insurance Contribution 
Act, Federal Unemployment Tax Act and other Taxes required to be withheld.      

          (d)  No audit or other examination of any Tax Return of the Company or
any of the Company Subsidiaries is presently in progress, nor has the Company or
any of the Company Subsidiaries been notified in writing of any request for such
an audit or other examination.                                                  

      (e)  There are (and immediately following the Effective Time there
will be) no material Liens on any of the assets of the Company or any of the    
Company Subsidiaries relating to or attributable to Taxes other than Liens for  
Taxes not yet due and payable. The Company has no knowledge of any claim        
relating or attributable to Taxes which, if adversely determined, would result  
in any material Lien on the assets of the Company or any of the Company         
Subsidiaries.                                                                   

(f)  No claim or deficiency for any Taxes has been proposed,
threatened, asserted or assessed by the Internal Revenue Service ("IRS") or any 
                                                         ---
other taxing authority or agency in writing against the Company or any of the   
Company Subsidiaries.                                                           

    (g)  Neither the Company nor any of the Company Subsidiaries has
waived any statute of limitations in respect of any Taxes or agreed to any      
extension of time that has not yet expired with respect to a Tax assessment or  
deficiency.                                                                     

          (h)  Neither the Company nor any of the Company Subsidiaries has filed
a consent under Code Section 341(f) concerning collapsible corporations.        

    (i)  Neither the Company nor any of the Company Subsidiaries has
knowingly taken any position on their federal income Tax Returns that could give
rise to a substantial understatement of federal income Tax within the meaning of
Code Section 6662.                                                              

    (j)  The Company is not, and has not been at any time during the
period specified in Section 897(c)(1)(A)(ii) of the Code, a "United States Real 
Property Holding Corporation" within the meaning of Section 897(c)(2) of the    
Code.                                                                           

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          (k)  There is no contract, agreement, plan or arrangement to
which the Company or any of the Company Subsidiaries is a party which could give
rise to the payment of any amount that would not be deductible pursuant to      
Section 162(m) of the Code.                                                     

              (l)  Neither the Company nor any of the Company Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock qualifying for tax-free treatment under Section 355 of  
the Code (x) in the two (2) years prior to the date of this Agreement or (y) in 
a distribution which could otherwise constitute part of a "plan" or "series of  
related distributions" (within the meaning of Section 355(e) of the Code) in    
conjunction with the Merger.                                                    

             (m)  There are no material "deferred intercompany transactions"
or "intercompany transactions," the income, gain or loss from which has not yet 
been taken into account under the U.S. federal income Tax Returns filed by the  
Company and each of the Company Subsidiaries consolidated in such Tax Returns.  

               (n)  Neither the Company nor any of the Company Subsidiaries is a
party to any Tax allocation, Tax sharing, Tax indemnity or similar Contract     
(other than customary agreements to indemnify lenders or other security holders 
in respect of Taxes, other than income Taxes).                                  

              (o)  Neither the Company nor any of the Company Subsidiaries has
any liability for the Taxes of any Person (other than any of the Company and the
Company Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by    
Contract, or otherwise (other than pursuant to customary agreements to indemnify
lenders or other security holders in respect of Taxes, other than income Taxes).
The Company has never been a member of an affiliated group filing a consolidated
federal income Tax Return, other than a group consisting of the Company and the 
Company Subsidiaries of which the Company is the common parent.                 

              (p)  Neither the Company nor any of the Company Subsidiaries has
any income which is effectively connected with a permanent establishment in any 
country, other than the country in which such entity is incorporated, as        
determined in accordance with any applicable income tax treaty and/or such local
country's Tax laws.                                                             

               (q)  The Company does not have, and following the consummation of
the Merger the Surviving Corporation will not have, any obligation to make      
payments to any past or present employees of the Company or the Company         
Subsidiaries as a result of the imposition of any excise taxes pursuant to      
Section 4999 of the Code or the imposition of any excise or similar taxes       
pursuant to any similar provision of foreign, state or local law.               

Section 4.12   No Excess Parachute Payments. Any amount that could be 
----------------------------            
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Agreement or otherwise by any      
employee, member, officer or director of, or any independent contractor or other
Person who performs personal services for, the Company or any of its Affiliates 
who is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination     

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agreement, other compensation arrangement or Benefit Plan applicable to the     
Company or any Company Subsidiaries currently in effect would not be            
characterized as an "excess parachute payment" (as such term is defined in      
Section 280G(b)(1) of the Code).                                                

Section 4.13  Title to Properties                                 
-------------------                   

     (a)   The properties and assets (including all material
Equipment) owned or leased by the Company and the Company Subsidiaries are, in  
all material respects, suitable and adequate for the conduct of their respective
businesses and operations and include all properties and assets reasonably      
necessary for the performance of the Company Contracts. The Company and the     
Company Subsidiaries have good and marketable title to, or valid leasehold      
interests in, all their properties and assets, except for such as are no longer 
used or useful in the conduct of their businesses or as have been disposed of in
the ordinary course of business and except for defects in title, easements,     
restrictive covenants and similar encumbrances or impediments that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company.   
All of such properties and assets, other than properties and assets in which the
Company or any of the Company Subsidiaries has leasehold interests, are owned   
free and clear of all Liens, other than Permitted Encumbrances and the Liens    
identified in Section 4.13(a) of the Company Disclosure Schedule. For this      
purpose "Permitted Encumbrances" means any of the following: (a) Liens for      
----------------------                                        
Taxes, assessments or other governmental charges or levies not at the time      
delinquent or thereafter payable without penalty or being contested in good     
faith by appropriate proceedings and for which adequate reserves in accordance  
with GAAP shall have been set aside on the Company's books; (b) Liens of        
carriers, warehousemen, mechanics, materialmen and landlords incurred in the    
ordinary course of business for sums not overdue or being contested in good     
faith by appropriate proceedings and for which adequate reserves in accordance  
with GAAP shall have been set aside on the Company's books; (c) Liens incurred  
in the ordinary course of business in connection with workmen's compensation,   
unemployment insurance or other forms of governmental insurance or benefits, or 
to secure performance of tenders, statutory obligations, leases and contracts   
(other than for borrowed money) entered into in the ordinary course of business 
or to secure obligations on surety or appeal bonds; (d) purchase money security 
interests or Liens on property acquired or held by the Company in the ordinary  
course of businesses to secure the acquisition of such property; and (e)        
easements, restrictions and other minor defects of title which are not, in the  
aggregate, material and which do not, individually or in the aggregate,         
materially and adversely affect the value of the property affected thereby.     

        (b)   Each of the Company and the Company Subsidiaries has
complied with the terms of all material leases to which it is a party and under 
which it is in occupancy, and all such leases are in full force and effect,     
except for such failures to comply or to be in full force and effect which would
not, individually or in the aggregate, have Material Adverse Effect on the      
Company. The Company and each of the Company Subsidiaries enjoy peaceful and    
undisturbed possession under all such material leases.                          

           (c)   Section 4.13(c) of the Company Disclosure Schedule sets
forth a true and complete list of all Real Property owned, leased, occupied or  
used by the Company or any Company Subsidiary as of the date of this Agreement. 
The Company or such Company Subsidiary has title in fee simple to all such owned
Real Property; all the Real Property is, in all material respects, structurally 
sound and in reasonably good operating condition and repair and                 

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conforms in all material respects, including usage, with all applicable         
contractual requirements and building, zoning, subdivision, environmental, land-
use, fire and other Laws. All necessary occupancy and other certificates and    
permits for the lawful use and occupancy of the Real Property and the Equipment 
thereon have been issued, except where the failure to obtain any such           
certificate or permit would not materially interfere with the ability of the    
Company or any of the Company Subsidiaries to occupy and/or use such Real       
Property or Equipment. All notices or orders to correct violations of Law issued
by any Governmental Authority have been complied with in all material respects. 

              (d)   All of the material Equipment used by the Company is being
operated and maintained in all material respects in accordance with the         
requirements of all applicable Company Contracts and Laws, is in all material   
respects in good operating condition and repair (wear and tear excepted), and is
in all material respects usable and adequate for the current operations of the  
business of the Company and the Company Subsidiaries.                           

Section 4.14  Intellectual Property                               
---------------------                 

         (a)   Except as described in Section 4.14(a) of the Company
Disclosure Schedule, the Company and the Company Subsidiaries hold or have a    
right to hold all right, title and interest to, or hold valid and enforceable   
licenses or sublicenses for, all patents, patent rights, trademarks, trademark  
rights, trade names, trade name rights, copyrights, servicemarks, trade secrets,
applications for trademarks and for servicemarks, know-how and other proprietary
rights and information that are used in the business of the Company or any      
Company Subsidiary as currently conducted (the "Company Intellectual Property"),
                                             -----------------------------
and the consummation of the transactions contemplated hereby will not materially
alter or impair any such rights.                                                

               (b)   Neither the Company nor any of the Company Subsidiaries own
any patents or patent applications. Section 4.14(b) of the Company Disclosure   
Schedule sets forth a correct and complete list of all trademarks and service   
marks and corresponding registrations and applications for registration thereof,
trade names, copyrights and corresponding registrations and applications for    
registrations thereof owned by the Company or any Company Subsidiary; and,      
except for trademarks and service marks used to showcase companies or products  
in the Company's catalogues, all patents, trademarks, trade names and           
copyrights, technology and processes which are used by the Company or any       
Company Subsidiary pursuant to a license or other right granted by a third party
(other than licenses of commercial off-the-shelf and shrink-wrap computer       
software, and click-wrap agreements).                                           

         (c)   Except as described in Section 4.14(c) of the Company
Disclosure Schedule, no claim, action, suit or proceeding against the Company or
any Company Subsidiary has been made or is pending or, to the knowledge of the  
Company, threatened, and neither the Company nor any Company Subsidiary has     
received any written notice of any such claim, action, suit or proceeding in    
connection with the operation of the business of the Company or any Company     
Subsidiary or any of the material assets or properties of the Company or any    
Company Subsidiary, either (i) based upon, challenging or seeking to deny or    
restrict the use of any Company Intellectual Property in the operation of the   
Company's or such Company Subsidiary's business, or (ii) alleging that any of   
the Company's or such Company Subsidiary's activities, services provided or     
products sold, or Company Intellectual Property used, are being                 

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conducted, provided, sold or used in violation of any intellectual property     
rights of any third person.                                                     

         (d)   Except as described in Section 4.14(d) of the Company
Disclosure Schedule, (i) to the knowledge of the Company, there are no third    
person's intellectual property rights that infringe upon the Company            
Intellectual Property, or any Company Intellectual Property or any product or   
service sold by the Company that violates or infringes upon any intellectual    
property right owned by, or other right of, a third person, and (ii) there are  
no pending claims or charges brought by the Company or any Company Subsidiary   
against any Person with respect to the use of any Company Intellectual Property 
or the enforcement of any of the Company's and or any Company Subsidiary's      
rights relating to the Company Intellectual Property.                           

         (e)   Except as set forth on Section 4.14(e) of the Company
Disclosure Schedule, (i) the Company or the Company Subsidiaries own all right, 
title and interest in all material Company Intellectual Property conceived,     
developed or reduced to practice by the employees, consultants and independent  
contractors of the Company or any of the Company Subsidiaries for all work done 
related to the business of the Company or any Company Subsidiary during their   
time of employment, consultancy or engagement, free of any Lien; (ii) all       
current and former employees, consultants and independent contractors who are or
were involved in, or who have contributed to, the creation or development of any
material Company Intellectual Property have executed and delivered to the       
Company an appropriate written agreement assigning to the Company all right,    
title and interest in any material Company Intellectual Property they may have  
contributed to or developed; and (iii) to the Company's knowledge, all such     
agreements continue to be in full force and effect in accordance with their     
respective terms with respect to all employees, consultants and independent     
contractors actively engaged in the research and development of intellectual    
property for the Company or any Company Subsidiary. No current or former        
employee, consultant, director, officer, stockholder or independent contractor  
has made a claim to or, to the knowledge of the Company, has any right, claim or
interest in or with respect to any Company Intellectual Property.               

      Section 4.15  Noncompetition. Except as set forth in Section 4.15 of the
--------------                        
Company Disclosure Schedule, after the Effective Time, neither Parent nor any of
its Subsidiaries other than the Surviving Corporation and the Company           
Subsidiaries will be (by reason of any Company Contract, Judgment or Law binding
on the Company, any Company Subsidiary or any of their respective assets or     
properties prior to the Effective Time), subject to any non-competition or      
similar restriction on their respective businesses or subject to any limitation 
or restriction on the Persons with whom they may do business.                   

Section 4.16  Legal Proceedings; Judgments.                       
----------------------------          

      (a)   Except as set forth in Section 4.16 of the Company
Disclosure Schedule, there is no suit, action, investigation, audit or          
proceeding (each a "Legal Proceeding") pending and, to the knowledge of the     
----------------                        
Company, no Person has threatened to commence any Legal Proceeding: (i) that    
involves the Company or any of the Company Subsidiaries or any of the assets or 
properties owned or used by the Company or any of the Company Subsidiaries      
which, if adversely determined, would have a Material Adverse Effect on the     
Company, (ii) that                                                              

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involves any director or officer of the Company or any Company Subsidiary and   
his relationship with, or actions on behalf of, the Company or any Company      
Subsidiary or (iii) that challenges, or that could reasonably be expected to    
have the effect of preventing, delaying, making illegal or otherwise interfering
with, the Merger or any of the other transactions contemplated by this          
Agreement. Except as set forth in Section 4.16 of the Disclosure Schedule, the  
Company has not received any opinion or memorandum from legal counsel to the    
effect that it is exposed, from a legal standpoint, to any liability which could
reasonably be expected to be material to its business.                          

               (b)   There is no Judgment outstanding against the Company or any
of the Company Subsidiaries or any of the assets or properties owned by the     
Company or any of the Company Subsidiaries. To the knowledge of the Company, no 
director, officer or key employee of the Company or any of the Company          
Subsidiaries is subject to any Judgment or Contract that prohibits such officer 
or key employee from engaging in or continuing any conduct, activity or practice
relating to the business of the Company or any of the Company Subsidiaries.     

      Section 4.17  Absence of Changes in Benefit Plans. "Benefit Plans" means
             -----------------------------------   -------------
each "employee benefit plan," as defined in Section 3(3) of ERISA and each other
bonus, pension, profit sharing, deferred compensation, incentive compensation,  
stock ownership, stock purchase, stock option, phantom stock, retirement,       
vacation, severance, disability, death benefit, hospitalization, medical,       
dental, life insurance, long-term care or supplemental unemployment benefits    
plan, fringe benefit plan or arrangement or other plan, arrangement, contract or
understanding, whether or not insured and whether or not written or oral, that  
(i) provides or is intended to provide compensation or benefits to any current  
or former employee, officer, director, retiree, consultant or independent       
contractor of the Company or any Company Subsidiary and (ii) was maintained or  
contributed to, or required to be maintained or contributed to, by the Company  
or any Company Subsidiary during the five-year period preceding the Effective   
Time. For purposes of this Section 4.17 and Section 4.18, the term "Company     
                                                               -------
Subsidiary" shall mean a Company Subsidiary or any other Person or entity that, 
----------                                                                      
together with the Company, is treated as a single employer under Section 414 of 
the Code or pursuant to Title IV of ERISA. Except as required by applicable Law 
and as set forth in Section 4.10 or 4.17 of the Company Disclosure Schedule,    
since October 31, 2000, there has not been any adoption or amendment, or any    
contractual or other commitment or obligation to adopt or amend, by the Company 
or any Company Subsidiary of any collective bargaining agreement or Benefit     
Plan. Except for the Contracts listed in Section 4.10 or 4.17 of the Company    
Disclosure Schedule, there exist no employment, collective bargaining,          
consulting, severance, termination or indemnification agreements, arrangements  
or understandings, whether written or oral, between the Company or any Company  
Subsidiary and any current or former employee, officer, independent contractor, 
consultant, retiree or director of the Company or any Company Subsidiary as to  
which unsatisfied or potential obligations of the Company or any Company        
Subsidiary exist. Since October 31, 2000, neither the Company nor any Company   
Subsidiary (x) has taken any action to accelerate any rights or benefits under  
any collective bargaining agreement or Benefit Plan for the benefit of any      
current or former employee, officer, independent contractor, consultant, retiree
or director or any group thereof or (y) has any commitment or obligation to     
establish or adopt any new or additional plan, contract or arrangement that     
would meet the definition of Benefit Plan, if it were currently in existence, or
to materially increase the benefits under any existing Benefit Plan.            

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Section 4.18  ERISA Compliance.                                   
----------------                      

             (a)   Benefit Plans Provided. Each Benefit Plan, including each
----------------------                
employment, termination, consulting, severance or other Contract for the benefit
of any individual current or former employee, officer, independent contractor,  
consultant, retiree or director of the Company or any Company Subsidiary as to  
which unsatisfied or potential obligations of the Company or any Company        
Subsidiary exist, is listed in Section 4.18(a) of the Company Disclosure        
Schedule. The Company has made available to Parent true, complete and correct   
copies of all written Benefit Plans, including all amendments thereto, and true,
complete and correct descriptions of all unwritten Benefit Plans (including all 
oral commitments made to employees as to any terms of their employment).  The   
Company has made available to Parent true, complete and correct copies of (v)   
the most recent annual report on Form 5500 filed with the IRS with respect to   
each Benefit Plan (if any such report was required), (w) the most recently      
prepared actuarial report for each Benefit Plan (if any such report was required
or prepared), (x) the most recent summary plan description for each Benefit Plan
(if any such summary plan description was required or prepared), (y) the most   
recently received IRS determination letter for each Benefit Plan (if any such   
determination letter was received) and (z) each trust agreement, insurance      
policy, group annuity contract and any other funding instrument, if any,        
relating to any such Benefit Plan, including all amendments thereto.            

               (b)   Compliance.  Each Benefit Plan has been administered in all
----------                            
material respects in accordance with its terms.  The Company, each Company      
Subsidiary and each Benefit Plan has been and is in compliance, in all material 
respects, with all applicable provisions of ERISA and the Code and all other    
Laws of any applicable jurisdiction that apply to the Benefit Plans, including  
all applicable reporting and disclosure requirements.  No Benefit Plan is       
subject to ongoing audit investigation or other administrative proceeding by the
IRS, Department of Labor ("DOL") or any other Governmental Authority and no     
---                       
Benefit Plan is the subject of any pending application for administrative relief
or self-correction (when permitted) under any voluntary compliance or correction
program of the IRS, DOL or any other Governmental Authority.                    

               (c)   Qualified Plans. Each Benefit Plan intended to be qualified
---------------                       
under Section 401(a) of the Code is identified as such in Section 4.18(c) of the
Company Disclosure Schedule and has been the subject of a determination letter  
from the IRS to the effect that such Benefit Plan and its related trust are     
qualified and exempt from federal income taxes under Code Section 401(a) and    
501(a), respectively. No such determination letter has been revoked nor, to the 
knowledge of the Company, has the revocation of such termination letter been    
threatened, nor has any such Benefit Plan been amended since the date of its    
most recent determination letter or application therefor in any respect that    
could reasonably be expected to adversely affect its qualification or materially
increase its costs.                                                             

              (d)   Absence of Certain Status. No Benefit Plan is, or has ever
-------------------------             
at any time in the past been, (1) covered by Title IV of ERISA, (2) subject to  
the minimum funding requirements of Section 412 of the Code, (3) a              
"multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA 
or a plan of the type described in Section 4063 of ERISA or Section 413(c) of   
the Code, or (4) a voluntary employees' beneficiary association within the      
meaning of Code Section 501(c)(9), and neither the Company nor any Company      
Subsidiary has                                                                  

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ever at any time maintained, contributed to or been required to contribute to   
any of the plans or arrangements described in the foregoing clauses (1) through 
(4).                                                                            

           (e)   Absence of Certain Liabilities. To the knowledge of the
------------------------------        
Company, no Person has engaged in a non-exempt "prohibited transaction" (as such
term is defined in Section 406 of ERISA or Section 4975 of the Code) or breach  
of fiduciary responsibility that could reasonably be expected to subject the    
Company or any Company Subsidiary or any officer of the Company or any Company  
Subsidiary to tax or penalty under ERISA, the Code or other applicable Law that 
has not been fully and properly corrected. No civil or criminal action or claim 
(other than uncontested claims for benefits) is pending or, to the knowledge of 
the Company, threatened with regard to any Benefit Plan. There are no pending   
or, to the knowledge of the Company, threatened or anticipated claims against   
any of the Benefit Plans by any employee, former employee or retiree or         
beneficiary covered under any Benefit Plan or otherwise related to any Benefit  
Plan (other than routine claims for benefits).                                  

         (f)   Effect of Transaction. Except as set forth in Section
---------------------                 
4.18(f) of the Company Disclosure Schedule, the execution and delivery of, and  
the consummation of the transactions contemplated by, this Agreement will not   
(either alone or upon the occurrence of any additional or subsequent events)    
constitute an event that will or may (x) result in an increase in the amount of 
compensation or benefits, or accelerate the vesting or timing of payment of any 
compensation or benefits, payable to or in respect of any employee or former    
employee or independent contractor or consultant of the Company or any Company  
Subsidiary or the beneficiary or dependent of any such employee or former       
employee or independent contractor or consultant or (y) entitle any such Person 
to severance pay, additional employment compensation or any other payment,      
benefit or award.                                                               

              (g)   Welfare Plans. With respect to any Benefit Plan that is an
-------------                         
"employee welfare benefit plan", as defined in Section 3(1) of ERISA, (x) no    
such Benefit Plan is funded through a "welfare benefit fund," as such term is   
defined in Section 419(e) of the Code, (y) each such Benefit Plan that is a     
"group health plan", as such term is defined in Section 5000(b)(1) of the Code, 
has been and is in compliance in all material respects with the applicable      
requirements of Section 4980B(f) of the Code or applicable state Law and the    
Health Insurance Portability and Accountability Act of 1996, and (z) each such  
Benefit Plan (including any such Benefit Plan covering retirees or other former 
employees) may be amended or terminated without a Material Adverse Effect on the
Company. No Benefit Plan provides for medical or other insurance benefits to    
current or future retired employees or former employees of the Company or a     
Company Subsidiary or other individual other than as provided in clause (y)     
above.                                                                          

Section 4.19  Compliance with Applicable Laws.                    
-------------------------------       

           (a)   The Company and each of the Company Subsidiaries has in
effect all federal, state, local and foreign governmental approvals,            
authorizations, certificates, filings, franchises, licenses, notices, permits   
and rights ("Permits") necessary for it to own, lease or operate its assets and 
-------                                               
properties and to carry on its business as now conducted and proposed to be     
conducted, and there has occurred no default under any such Permit, except for  
the lack of Permits and for defaults under Permits that would not, individually 
or in the aggregate, have a Material Adverse Effect on the Company. To the      
knowledge of the Company, no Governmental                                       

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Authority is considering limiting, suspending or revoking any of the Company's  
or any Company Subsidiary's material Permits. The Company and each of the       
Company Subsidiaries is in compliance with, has not violated, and has conducted 
its business so as to comply with, the terms of its Permits and with all        
applicable Laws and Judgments (including, without limitation, those relating to 
health and safety, hiring, promotion or pay of employees) of any Governmental   
Authority, except for such noncompliance, violation and/or conduct that has not 
and would not, individually or in the aggregate, have a Material Adverse Effect 
on the Company.                                                                 

         (b)  The Company and each of the Company Subsidiaries is, and has been,
in compliance with all applicable Environmental Laws, except where noncompliance
would not have a Material Adverse Effect.  The term "Environmental Laws" means  
                                            ------------------
any federal, state, local or foreign statute, code, ordinance, rule, regulation,
policy guideline, permit, consent, approval, license, judgment, order, writ,    
decree, injunction or other authorization, including the requirement to register
underground storage tanks, relating to: (A) emissions, discharges, releases or  
threatened releases of Hazardous Material (as defined below) into the           
environment, including into ambient air, soil, land surface or subsurface,      
buildings or facilities, surface water, groundwater, publicly owned treatment   
works, septic systems or land; or (B) the generation, treatment, storage,       
disposal, use, handling, manufacturing, transportation or shipment of Hazardous 
Material, and including the following statutes and their implementing           
regulations: the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et  
seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.,   
the Comprehensive Environmental Response, Compensation, and Liability Act, as   
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. (S) 9601 
et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq. and the Clean Air Act, 
42 U.S.C. (S) 7401 et seq.                                                      

         (c)  During the period of ownership or operation by the Company and the
Company Subsidiaries of any of their respective current or previously owned or  
leased properties, there have been no material releases by the Company or any   
Company Subsidiary or, to the knowledge of the Company, any other Person of     
Hazardous Material in, on, under or affecting such properties or, to the        
knowledge of the Company, any surrounding site.  Prior to the period of         
ownership or operation by the Company and the Company Subsidiaries of any of    
their respective current or previously owned or leased properties, to the       
knowledge of the Company, no material quantity of Hazardous Material was        
generated, treated, stored, disposed of, used, handled or manufactured at, or   
transported, shipped or disposed of from, such current or previously owned or   
leased properties, and there were no material releases of Hazardous Material in,
on, under or affecting any such property or any surrounding site.  The term     
"Hazardous Material" means (A) hazardous materials, contaminants, pollutants,   
------------------                                                            
constituents, medical wastes, hazardous or infectious wastes and hazardous      
substances as those terms are defined or regulated under any Environmental Law, 
(B) petroleum, including crude oil and any fractions thereof, (C) natural gas,  
synthetic gas and any mixtures thereof, (D) asbestos and/or asbestos-containing 
material and (E) polychlorinated biphenyls ("PCBs") or materials or fluids      
              ----
containing PCBs in excess of 50 parts per million.                              

 (d)  Neither the Company nor any Company Subsidiary and, to the
knowledge of the Company, no director, officer, employee or agent of the Company
or any Company Subsidiary, has (i) used any funds for unlawful contributions,   
gifts, entertainment or other unlawful expenses relating to political activity  
or (ii) made any unlawful payment to any foreign                                

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or domestic government official or employee or to any foreign or domestic       
political party or campaign or violated any provision of the Foreign Corrupt    
Practices Act.                                                                  

  Section 4.20   Contracts; Debt Instruments.  Section 4.20 of the Company
---------------------------             
Disclosure Schedule, together with Item 14 of Part IV of the Company 10-K/A,    
sets forth a true and complete list of each Company Contract, in effect on the  
date of this Agreement:                                                         

       (a)       which is required by Rule 601 of SEC Regulation S-K to be
filed as an exhibit to an Annual Report on Form 10-K of the Company or which is 
a Company Contract (i) with respect to the acquisition or disposition of a      
material amount of assets or properties of the Company or any Company Subsidiary
(unless such Company Contract has been fully performed), (ii) that contains a   
covenant not to compete with the Company or any of the Company Subsidiaries or a
covenant by the Company or any of the Company Subsidiaries not to compete with  
any other Person or (iii) that is with an Affiliate or "associate" (as such term
is defined in Rule 12b-2 under the 1934 Act) of the Company,                    

         (b)       with respect to indebtedness for money borrowed (other than
trade payables in the ordinary and usual course of business),                   

 (c)       pursuant to which the Company or any of the Company
Subsidiaries is licensing any Company Intellectual Property or pursuant to which
the Company or any of the Company Subsidiaries is a licensee of Company         
Intellectual Property of others that is material to the conduct of the business 
of the Company or any of the Company Subsidiaries,                              

    (d)       which constitutes an employment, consulting, agency or
commission agreement to which the Company or any of the Company Subsidiaries is 
a party or is bound (other than standard forms of any such agreement entered    
into by the Company or any Company Subsidiary in the ordinary course of business
pursuant to applicable Law, copies of which have previously been made available 
to Parent) and (i) provides for severance payments, termination payments,       
change-in-control payments or other similar payments, and (ii) is not terminable
without liability to the Company and the Company Subsidiaries upon 60 days' or  
less prior notice to the employee, consultant or agent and (iii) involves       
unsatisfied or potential obligations of $150,000 or more,                       

          (e)       after giving effect to the transactions contemplated hereby,
purports to restrict or bind Parent or any of its Subsidiaries (other than the  
Surviving Corporation and its Subsidiaries), in any material respect,           

       (f)       that is a labor union or collective bargaining agreement,

  (g)       that is material and the terms of which provide that
benefits of such Contract are contingent, or the terms of which are materially  
altered, upon the occurrence of a transaction of the nature contemplated by this
Agreement,                                                                      

         (h)       that is material and with any Governmental Authority (other
than Company Contracts providing benefits and subsidies in connection with      
related programs of the Company or any Company Subsidiary),                     

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  (i)       where any party is obligated to make annual payments
aggregating $500,000 or more (except for Vendor Contracts),                     

        (j)       which constitute those Vendor Contracts that accounted for
the twenty largest vendor accounts in fiscal year 2000,                         

         (k)       which constitutes a franchising, partnership, joint venture
or similar agreement,                                                           

         (l)       pursuant to which the Company or any Company Subsidiary has
advanced or loaned to any Person amounts in the aggregate exceeding $50,000, or 

(m)       which constitutes any other contractual liability 
(including, without limitation, any guarantee, surety contract, indemnity       
agreement or arrangement or similar instrument), obligation or transaction and, 
in the case of any item referred to in this clause (m), is material to the      
Company and the Company Subsidiaries or their businesses taken as a whole so    
that the breach of which could reasonably be expected to have a Material Adverse
Effect on the Company.                                                          

        The Company Contracts referred to in clauses (a) through (m) of this
Section 4.20 are referred to herein as "Company Material Contracts."  A true and
                          --------------------------
complete copy of each Company Material Contract has been made available to      
Parent or its representative.  Each Company Material Contract is a valid and    
legally binding obligation of the Company or the Company Subsidiaries, whichever
is applicable, and, to the knowledge of the Company, the other parties thereto; 
all material obligations required to be performed thereunder by the Company or  
the Company Subsidiaries, whichever is applicable, have been performed in all   
material respects, and, to the knowledge of the Company, no other party to any  
such Company Material Contract is in default in any material respect under the  
terms thereof.  Neither the Company nor any of the Company Subsidiaries has     
received any notice of termination or of intent to terminate any such Company   
Material Contract.  No event has occurred, and no circumstance or condition     
exists with respect to the Company, that (with or without notice or lapse of    
time) will, or would reasonably be expected to, (A) result in a violation or    
breach of any of the provisions of any Company Material Contract, (B) give any  
Person the right to declare a default or terminate any Company Material         
Contract, (C) give any Person the right to receive or require a material rebate,
refund, set-off, chargeback, penalty or change in delivery schedule under any   
Company Material Contract, (D) give any Person the right to accelerate the      
maturity or performance of any Company Material Contract, or (E) give any Person
the right to cancel, terminate or modify any Company Material Contract, except  
in each such case for defaults, acceleration rights, termination rights and     
other rights that have not had and would not reasonably be expected to have,    
individually or in the aggregate, a Material Adverse Effect on the Company.     

  Section 4.21   Related Transactions.  Except as described in the Company
--------------------                    
10-K/A, none of (i) any current or former director, officer, or employee of the 
Company or any Company Subsidiary, (ii) to the knowledge of the Company, any    
current or former stockholder of the Company, or (iii) to the knowledge of the  
Company, any Affiliate or "associate" (as that term is defined in Rule 12b-2    
under the 1934 Act) of any such person referred to in clause (i) or (ii) (A)    

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has any material interest in any assets or properties (whether real or personal,
tangible or intangible) of or used in the business of the Company or any Company
Subsidiary (other than as an owner of outstanding securities of the Company),   
(B) is a party to any Company Contract (other than an employment contract       
identified in Section 4.21 of the Company Disclosure Schedule or an option      
agreement entered into pursuant to a Company Stock Plan) or (C) to the Company's
knowledge, has any direct or indirect interest of any nature whatever (other    
than an interest of less than 1% of any class of publicly traded securities) in 
any Person or business which competes with, conducts any business similar to,   
has any Contract with (whether as a customer or supplier or otherwise), or is   
involved in any way with, the Company or any Company Subsidiary.                

  Section 4.22   Insurance.  The Company has insured by reputable insurers
---------                               
its assets that are of an insurable character against risks of liability,       
casualty and fire in adequate and customary amounts for its business. The       
Company has made available to Parent complete and correct copies of all such    
insurance policies. The Company and the Company Subsidiaries have paid all      
premiums currently due and neither the Company nor any Company Subsidiary is    
otherwise in default under any such policy. Except as set forth in Section 4.22 
of the Company Disclosure Schedule, neither the Company nor any Company         
Subsidiary has received and is subject to any notice of cancellation or non-    
renewal of any such policy. Neither the Company nor any of its Subsidiaries has 
ever been denied insurance.                                                     

     Section 4.23   SEC Documents.  Since January 1, 1998, the Company has filed
-------------                           
with the SEC all required reports and forms and other documents (the "Company   
                                                                   -------
SEC Documents"). As of their respective dates, except as subsequently amended in
-------------                                                                   
a Company SEC Document, the Company SEC Documents complied in all material      
respects with the requirements of the 1933 Act or the 1934 Act, as the case may 
be, and the rules and regulations of the SEC promulgated thereunder applicable  
to such Company SEC Documents and, to the Company's knowledge, none of the      
Company SEC Documents contained any untrue statement of a material fact or      
omitted to state a material fact required to be stated therein or necessary in  
order to make the statements therein, in light of the circumstances under which 
they were made, not misleading.                                                 

Section 4.24   Information Supplied.  The information supplied by the 
--------------------                    
Company for inclusion or incorporation in Parent's Registration Statement on    
Form S-4 or any amendment or supplement thereto pursuant to which shares of     
Parent Common Stock issuable in the Merger will be registered under the 1933 Act
(the "Form S-4 Registration Statement") shall not, at the time the Form S-4     
-------------------------------                                     
Registration Statement is declared effective by the SEC, contain any untrue     
statement of a material fact or omit to state any material fact required to be  
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The information   
supplied by the Company for inclusion in the prospectus/proxy statement or any  
amendment or supplement thereto included in the Form S-4 Registration Statement 
(the "Prospectus/Proxy Statement") shall not, on the date the Prospectus/Proxy  
--------------------------                                          
Statement is first mailed to the stockholders of the Company or at the Effective
Time, contain any untrue statement of a material fact or omit to state any      
material fact required to be stated therein or necessary in order to make the   
statements therein, in light of the circumstances under which they were made,   
not misleading. For this purpose, any information relating to the Company       
included or incorporated by reference in any such document will be deemed to    
have been so supplied for inclusion or incorporation therein if such document   
was                                                                             

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available for review by the Company a reasonable time before such document was  
filed with the SEC and the Company did not object to or otherwise comment on    
such information (but the foregoing shall not be the exclusive manner in which  
it may be established that such information was so supplied by the Company      
specifically for inclusion or incorporation by reference in the Form S-4        
Registration Statement or the Prospectus/Proxy Statement).                      

    Section 4.25   Financial Advisor.  Except for Robertson Stephens, Inc., no
-----------------                       
broker, finder, investment banker or other intermediary is entitled to any      
brokerage, finder's or other fee or commission in connection with the Merger or 
any of the other transactions contemplated by this Agreement based upon         
arrangements made by or on behalf of the Company or any of the Company          
Subsidiaries. The Company has made available to Parent accurate and complete    
copies of all agreements under which any such fees, commissions or other amounts
may become payable and all indemnification and other agreements related to the  
engagement of Robertson Stephens, Inc.                                          

   Section 4.26   Option Agreement.  The representations and warranties made
----------------                        
by the Company to Parent in the Option Agreement (including, without limitation,
those set forth in Section 6 of the Option Agreement) are true and correct. Such
representations and warranties are hereby incorporated by reference thereto into
this Agreement and made a part hereof.                                          

ARTICLE 5 
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB 

Parent and Merger Sub represent and warrant to the Company as follows:

Section 5.1    Organization and Authority.                            
--------------------------              

          (a)       Parent is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation; has   
full power and authority to carry on its business as currently conducted and to 
own, lease, use and operate its assets and properties at the places currently   
located and in the manner currently used and operated; and is duly qualified to 
transact business, and is in good standing, in each jurisdiction in which the   
properties owned, leased, used or operated by it or the nature of the business  
conducted by it requires it to be so qualified, except where the failure to be  
so qualified or in good standing has not had, and would not reasonably be       
expected to have, a Material Adverse Effect on Parent. Parent has made available
to the Company true and complete copies of the Restated Certificate of          
Incorporation ("Parent Charter") and Bylaws ("Parent Bylaws"), each as currently
--------------                -------------     
in effect, of Parent, which documents constitute all of the constitutive,       
governing or organizational documents of Parent.                                

          (b)       Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.   
Parent heretofore has made available to the Company true and complete copies of 
the certificate of incorporation and bylaws, each as currently in effect, of    
Merger Sub.                                                                     

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Section 5.2    Capitalization.                                        
--------------                          

(a)       The authorized capital stock of Parent consists of
2,500,000,000 shares, of which 2,350,000,000 shares are Parent Common Stock and 
150,000,000 shares are preferred stock, par value $0.01 per share ("Parent      
                                                              ------
Preferred Stock"). At the close of business April 30, 2001, 363,772,065 shares  
---------------                                                                 
of Parent Common Stock and no shares of Parent Preferred Stock were issued and  
outstanding. All shares of Parent Common Stock to be issued as the part of the  
Merger Consideration in the Merger or upon exercise of Company Stock Options or 
Company Warrants after the Effective Time have been duly authorized and will be,
when issued and delivered in accordance with the provisions of Article 3 or the 
Company Stock Options or Company Warrants assumed by Parent, as applicable,     
validly issued, fully paid and nonassessable, will not be issued in violation of
any preemptive rights, and will be offered, issued and sold in compliance with  
all applicable state and federal securities laws and Contracts to which Parent  
is a party.                                                                     

      (b)       As of the date of this Agreement, the authorized capital
stock of Merger Sub consists of 1,000 shares of common stock, par value $0.01   
per share, of which 100 shares have been validly issued, are fully paid and     
nonassessable and are owned by Parent free and clear of any Liens.              

Section 5.3    Authority; Noncontravention.  Each of Parent and Merger
---------------------------             
Sub has the requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution and       
delivery of this Agreement by Parent and Merger Sub and the consummation by     
Parent and Merger Sub of the transactions contemplated by this Agreement have   
been duly authorized by all necessary corporate action on the part of Parent and
Merger Sub. This Agreement has been duly executed and delivered by each of      
Parent and Merger Sub and constitutes its valid and binding obligation,         
enforceable against Parent and Merger Sub in accordance with its terms, subject 
to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws 
affecting or relating to creditors rights generally, and (ii) the availability  
of injunctive relief and other equitable remedies. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated  
hereby and compliance with the provisions of this Agreement will not, conflict  
with, or result in any violation of or default (with or without notice or lapse 
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, (x) the  
Parent Charter or Parent Bylaws or the certificate of incorporation or bylaws of
Merger Sub, (y) any material Contract to which Parent or any of its Subsidiaries
is a party, nominee, signatory or beneficiary or to which they, or any of their 
respective properties or assets, are or may be subject or bound or (z) subject  
to the governmental filings and other matters referred to in the following      
sentence, any Judgment or Law applicable to Parent or any of its Subsidiaries or
their respective properties or assets, other than, in the case of clauses (y) or
(z), any such conflicts, violations, defaults, rights or Liens that individually
or in the aggregate would not (A) have a Material Adverse Effect on Parent, (B) 
impair in any material respect the ability of Parent to perform its obligations 
under this Agreement or (C) prevent or materially delay the Merger. No consent, 
approval, order or authorization of, or registration, declaration or filing     
with, any Governmental Authority is required by or with respect to Parent,      
Merger Sub or any of Parent's other Subsidiaries in connection with the         
execution and delivery of this Agreement by Parent or Merger Sub or the         
consummation by Parent or Merger Sub, as the case may be, of the                

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transactions contemplated hereby, except for (1) the filing with the FTC and the
DOJ of any required premerger notification and report form by Parent under the  
HSR Act and the expiration or earlier termination of the waiting period under   
that Act, (2) the filing by Parent of the Form S-4 Registration Statement with  
the SEC and the declaration by the SEC of the effectiveness of the Form S-4     
Registration Statement, (3) the filing of the Articles of Merger with the       
Secretary of State of the State of Nevada, (4) the filing of the Certificate of 
Merger with the Secretary of State of the State of Delaware, and (5) such other 
consents, approvals, orders, authorizations, registrations, declarations and    
filings, including under (x) the laws of any foreign country in which Parent or 
any of its Subsidiaries conducts any business or owns any property or assets or 
(y) the "takeover" laws of various states, the failure of which to be obtained  
or made would not, individually or in the aggregate, have a Material Adverse    
Effect on Parent or prevent or materially delay the Merger.                     

     Section 5.4    SEC Documents; Financial Statements.  Since January 1, 1998,
-----------------------------------     
Parent (together with its predecessor) has filed with the SEC all required      
reports and forms and other documents (the "Parent SEC Documents"). As of their 
                            --------------------
respective dates, except as subsequently amended in any Parent SEC Document, the
Parent SEC Documents complied in all material respects with the requirements of 
the 1933 Act or the 1934 Act, as the case may be, and the rules and regulations 
of the SEC promulgated thereunder applicable to such Parent SEC Documents.      
Except to the extent that information contained in any Parent SEC Document has  
been revised or superseded by a later-filed Parent SEC Document, none of the    
Parent SEC Documents contains any untrue statement of a material fact or omits  
to state any material fact required to be stated therein or necessary in order  
to make the statements therein, in light of the circumstances under which they  
were made, not misleading. The financial statements of Parent included in the   
Parent SEC Documents comply as to form in all material respects with applicable 
accounting requirements and the published rules and regulations of the SEC with 
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited statements, as permitted by Form 8-K and Form 10-Q of the SEC)     
applied on a consistent basis during the periods involved (except as may be     
indicated in the notes thereto) and fairly present the consolidated financial   
position of Parent and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited interim statements, to normal year-end 
adjustments). Except as set forth in the Parent SEC Documents and for           
liabilities and obligations incurred in the ordinary course of business         
consistent with past practice since the date of the most recent consolidated    
balance sheet included in the Parent SEC Documents, neither Parent nor any of   
its Subsidiaries has any liabilities or obligations other than liabilities or   
obligations which, individually or in the aggregate, would not result in a      
Material Adverse Effect on Parent.                                              

  Section 5.5    Legal Proceedings.  Except as set forth in the Parent SEC
-----------------                       
Documents, there is no Legal Proceeding pending and, to the knowledge of Parent,
no Person has threatened to commence any Legal Proceeding: (i) that involves    
Parent or any of its Subsidiaries or any of the assets or properties owned or   
used by Parent or any of its Subsidiaries which, if determined adversely to     
Parent, could reasonably be expected to have a Material Adverse Effect on Parent
or (ii) that challenges, or that may have the effect of preventing, delaying,   
making illegal or otherwise interfering with, the Merger or any of the other    
transactions contemplated by this Agreement.                                    

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Section 5.6    Compliance with Applicable Laws.                       
-------------------------------         

   (a)       Each of Parent and its Subsidiaries has in effect all
Permits necessary for it to own, lease or operate its assets and properties and 
to carry on its business as now conducted, and there has occurred no default    
under any such Permit, except for the lack of Permits and for defaults under    
Permits that would not, individually or in the aggregate, have a Material       
Adverse Effect on Parent. To the knowledge of Parent, no Governmental Authority 
is considering limiting, suspending or revoking any of Parent's or its          
Subsidiaries' Permits. Each of Parent and its Subsidiaries is in compliance     
with, has not violated, and has conducted its business so as to comply with, the
terms of its Permits and with all applicable Laws and Judgments (including,     
without limitation, those relating to health and safety, hiring, promotion or   
pay of employees) of any Governmental Authority, except for noncompliance that  
has not and would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.                                                               

      (b)       Parent and each of its Subsidiaries is, and has been, in
compliance in all material respects with all applicable Environmental Laws,     
except for noncompliance which individually or in the aggregate would not have a
Material Adverse Effect on Parent.                                              

       (c)       During the period of ownership or operation by Parent and
its Subsidiaries of any of their respective current or previously owned or      
leased properties, there have been no releases of Hazardous Material in, on,    
under or affecting such properties or, to the knowledge of Parent, any          
surrounding site, except in each case for those which, individually or in the   
aggregate, are not reasonably likely to have a Material Adverse Effect on       
Parent. Prior to the period of ownership or operation by Parent and its         
Subsidiaries of any of their respective current or previously owned or leased   
properties, to the knowledge of Parent, no Hazardous Material was generated,    
treated, stored, disposed of, used, handled or manufactured at, or transported, 
shipped or disposed of from, such current or previously owned or leased         
properties, and there were no releases of Hazardous Material in, on, under or   
affecting any such property or any surrounding site, except in each case for    
those which individually or in the aggregate are not reasonably likely to have a
Material Adverse Effect on Parent.                                              

  Section 5.7    Information Supplied.  The information supplied by Parent
--------------------                    
for inclusion or incorporation in the Form S-4 Registration Statement shall not,
at the time the Form S-4 Registration Statement is declared effective by the    
SEC, contain any untrue statement of a material fact or omit to state any       
material fact required to be stated therein or necessary in order to make the   
statements therein, in light of the circumstances under which they were made,   
not misleading. The information supplied by Parent for inclusion in the         
Prospectus/Proxy Statement shall not, on the date the Prospectus/Proxy Statement
is first mailed to the stockholders of the Company or at the Effective Time,    
contain any untrue statement of a material fact or omit to state any material   
fact required to be stated therein or necessary in order to make the statements 
therein, in light of the circumstances under which they were made, not          
misleading. For this purpose, any information relating to Parent included or    
incorporated by reference in any such document will be deemed to have been so   
supplied for inclusion or incorporation therein if such document was available  
for review by Parent a reasonable time before such document was filed with the  
SEC and Parent did not object to or otherwise comment on such information (but  
the foregoing shall not be the exclusive manner in which it may be established  
that such information                                                           

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was so supplied by Parent specifically for inclusion or incorporation by        
reference in the Form S-4 Registration Statement or the Prospectus/Proxy        
Statement).                                                                     

    Section 5.8    Financial Advisor.  No broker, finder, investment banker or
-----------------                       
other intermediary is entitled to any brokerage, finder's or other fee or       
commission in connection with the Merger or any of the other transactions       
contemplated by this Agreement based upon arrangements made by or on behalf of  
Parent or any of its Subsidiaries.                                              

Section 5.9    Interim Operations of Merger Sub.                      
--------------------------------        

         (a)       Merger Sub was formed solely for the purpose of engaging in
the transactions contemplated hereby, has engaged in no other business          
activities and has conducted its operations only as contemplated hereby.        

      (b)       As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or     
organization and the transactions contemplated by this Agreement, Merger Sub has
not and will not have incurred, directly or indirectly through any subsidiary,  
any obligations or liabilities or engaged in any business activities of any type
or kind whatsoever or entered into any agreements or arrangements with any      
Person.                                                                         

ARTICLE 6 
COVENANTS RELATING TO CONDUCT OF BUSINESS 

    Section 6.1    Conduct of Business by the Company.  During the period from
----------------------------------      
the date of this Agreement and continuing until the earlier of the termination  
of this Agreement pursuant to its terms or the Effective Time, the Company      
shall, and shall cause the Company Subsidiaries to, in all material respects,   
carry on their respective businesses in the usual, regular and ordinary course  
in substantially the same manner as heretofore conducted and in compliance in   
all material respects with all applicable Laws and, to the extent consistent    
therewith, use all commercially reasonable efforts to preserve intact their     
current business organizations, keep available the services of their current    
officers and key employees and preserve their relationships with material       
customers, suppliers, licensors, licensees, distributors, creditors and others  
having business dealings with them. Without limiting the generality of the      
foregoing, between the date of this Agreement and the Effective Time or until   
the earlier termination of this Agreement pursuant to its terms, except (i) as  
contemplated by this Agreement, (ii) as set forth in Section 6.1 of the Company 
Disclosure Schedule, or (iii) with the prior written consent of Parent (which,  
from and after the sixtieth (60th) day after the date of this Agreement, shall  
not be unreasonably withheld), the Company shall not, and shall not permit any  
of the Company Subsidiaries to:                                                 

    (a)       (i) declare, set aside or pay (whether in cash, stock,
property or otherwise) any dividends on, or make any other distributions in     
respect of, any of its capital stock, other than dividends and distributions by 
any Company Subsidiary to the Company, (ii) split, combine or reclassify any of 
its capital stock or issue or authorize the issuance of any other securities in 
respect of, in lieu of or in substitution for shares of its capital stock       
(except as required by the terms of any security as in effect on the date       
hereof) or (iii) purchase, redeem or otherwise                                  

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acquire any shares of capital stock of the Company or any other securities      
thereof or any rights, warrants or options to acquire any such shares or other  
securities;                                                                     

      (b)       other than the issuance of Company Common Stock upon the
exercise, conversion or exchange of Company Stock Options or Company Warrants   
outstanding on the date of this Agreement in accordance with their present      
terms, (A) issue, deliver, grant, sell, award, pledge, dispose of or otherwise  
encumber or authorize or propose the issuance, delivery, grant, sale, award,    
pledge or other encumbrance (including limitations in voting rights) or         
authorization of, any shares of its capital stock, any other voting securities  
or any securities convertible into or exchangeable for, or any rights, warrants 
or options to acquire, any such shares, voting securities or convertible        
securities, (B) amend or otherwise modify the terms of any of the Company Stock 
Options, Company Stock Plans or Company Warrants or (C) accelerate the vesting  
of any of the Company Stock Options (except to the extent such vesting is       
automatically accelerated in connection with the Merger);                       

(c)       amend the Company Charter or Company Bylaws or the
certificate of incorporation, bylaws or other constitutive, governing or        
organizational documents of any Company Subsidiary;                             

         (d)       acquire or agree to acquire (for cash or shares of stock or
otherwise) (i) by merging or consolidating with, or by purchasing a substantial 
portion of the interests in or assets of, or by any other manner, any business  
or any corporation, partnership, limited liability company, joint venture,      
association or other business organization or division thereof or (ii) except in
the ordinary course of business, any assets that are material, individually or  
in the aggregate, to the Company and the Company Subsidiaries taken as a whole; 

       (e)       mortgage or otherwise encumber or subject to any Lien, or
sell, lease, license, exchange or otherwise dispose of, any of its assets or    
properties, other than pursuant to existing agreements and sales or non-        
exclusive licensing of inventory in the ordinary course of business consistent  
with past practice and other than Liens incurred in connection with purchase    
money indebtedness relating to capital expenditures permitted pursuant to       
Section 6.1(j) and securing only the tangible assets acquired with such purchase
money indebtedness;                                                             

    (f)       dispose of or subject to any Lien any material Company
Intellectual Property, except pursuant to existing agreements or through non-   
exclusive license agreements granted in the ordinary course of business in      
connection with the performance of services by the Company or any Company       
Subsidiary;                                                                     

          (g)       (i) increase the rate or terms of compensation payable or to
become payable to any of the Company's or any of the Company Subsidiary's       
directors, officers or employees, other than usual and customary salary         
increases to non-management employees and increases required under the present  
terms of any employment agreements, (ii) except as required by applicable Law,  
pay or agree to pay any pension, retirement allowance, severance, continuation  
or termination benefit or other employee benefit not provided for by any        
existing Benefit Plan or employment agreement listed in the Company Disclosure  
Schedule, (iii) establish, adopt or commit itself to any additional pension,    
profit sharing, bonus, incentive, deferred compensation, stock purchase, stock  
option, stock appreciation right, group insurance,                              

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severance pay, continuation pay, termination pay, retirement or other employee  
benefit plan, agreement or arrangement, or amend or modify or increase the rate 
or benefits under or take any action to accelerate the rights or benefits under 
any collective bargaining agreement or any employee benefit plan, agreement or  
arrangement, including the Company Stock Plans and any other Benefit Plan, (iv) 
enter into any employment, indemnification or consulting agreement with or for  
the benefit of any Person, other than as required by applicable Law and pursuant
to standard forms of agreements that have previously been disclosed to Parent,  
(v) change the terms of or renew any existing employment agreement or (vi)      
terminate any Company Stock Plan or take any action thereunder that would result
in the early vesting of any Company Stock Option;                               

(h)       change its fiscal year;                           

   (i)       (i) incur any indebtedness for borrowed money (except
pursuant to draw downs under the Revolving Credit Facility) or guarantee any    
indebtedness of another Person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any of the Company
Subsidiaries, guarantee any debt securities of another Person, enter into any   
"keep well" or other agreement to maintain any financial statement condition of 
another Person or enter into any arrangement having the economic effect of any  
of the foregoing, or (ii) make any loans, advances (other than advances to      
employees in the ordinary course of business consistent with past practice) or  
capital contributions to, or investments in, any other Person, other than to the
Company or any Company Subsidiary;                                              

         (j)       make or agree to make any capital expenditures in excess of
$250,000;                                                                       

        (k)       make or rescind any express or deemed election relating to
Taxes, settle or compromise any claim, controversy or Legal Proceeding relating 
to Taxes, or change any of its methods of reporting income or deductions for    
federal income tax purposes from those employed in the preparation of its       
federal income tax return for the taxable year ended December 31, 1999, except  
as may be required by applicable Law;                                           

       (l)       settle any litigation involving the Company or any of its
directors or officers for an amount in excess of $500,000, or settle any such   
litigation for consideration other than cash or Company Common Stock.           

   (m)       (i) make any amendment or modification to any Company
Material Contract that is materially less favorable to the Company, (ii) renew  
any Company Material Contract on terms materially less favorable to the Company 
or (iii) terminate any Company Material Contract or waive, release or assign any
material rights or claims thereunder;                                           

 (n)       form any Subsidiary or acquire any capital, equity,
participation or other interest in any Person; or                               

      (o)       authorize any of, or commit or agree to take any of, the
foregoing actions.                                                              

     Section 6.2    Redemption Rights.  The Company shall redeem all outstanding
-----------------                       
Rights (as defined in the Rights Agreement) in accordance with the applicable   
provisions of the Rights Agreement, or otherwise terminate or render ineffective
such Rights with respect to this                                                

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Agreement, the Merger, the Voting Agreement, and the Option Agreement or any    
exercise thereof, prior to the Closing Date.                                    

Section 6.3 Other Actions. During the period from the date of this
-------------                             
Agreement and continuing until the earlier of the termination of this Agreement 
pursuant to its terms or the Effective Time, except as contemplated by this     
Agreement, the Company and Parent shall not, and shall not permit any of their  
respective Subsidiaries to, voluntarily take any action that would, or that     
could reasonably be expected to, result in any of the representations or        
warranties of such party set forth in this Agreement becoming untrue in any     
material respect or any of the conditions to the Merger set forth in Article 8  
not being satisfied.                                                            

      Section 6.4 Notice of Certain Events. During the period from the date of
------------------------                  
this Agreement and continuing until the earlier of the termination of this      
Agreement pursuant to its terms or the Effective Time, each of the Company and  
Parent shall promptly notify the other in writing of: (i) the discovery by such 
party of any event, condition, fact or circumstance that causes any of the      
representations or warranties made by such party in this Agreement to be untrue 
in any material respect; (ii) any material breach of any covenant or obligation 
of such party in this Agreement; (iii) any event, condition, fact or            
circumstance that would make the timely satisfaction of any of the conditions   
set forth in Article 8 impossible or unlikely; and (iv) the occurrence of any   
event, condition, fact or circumstance which has had, or which insofar as can   
reasonably be foreseen is likely to have, a Material Adverse Effect on such     
party. No notification given to Parent or the Company pursuant to this Section  
6.4 shall (x) affect any of the representations, warranties, covenants or       
obligations of the notifying party or the conditions to the obligations of the  
parties contained in this Agreement or (y) limit or otherwise affect the        
remedies available to the other party hereunder.                                

Section 6.5 No Solicitation                                       
---------------                           

              (a)  Subject to Section 6.5(c), during the period from the date of
this Agreement and continuing until the earlier of the termination of this      
Agreement pursuant to its terms or the Effective Time, the Company shall not,   
nor shall it permit any of the Company Subsidiaries to, nor shall it authorize  
or permit any officer, director or employee of, or any investment banker,       
attorney or other advisor, representative or agent of, the Company or any of the
Company Subsidiaries to, directly or indirectly, (x) solicit or initiate, or    
encourage the submission of, any Takeover Proposal, (y) enter into any agreement
with respect to any Takeover Proposal or (z) participate in any discussions or  
negotiations regarding, or furnish to any Person any information with respect   
to, or take any other action to facilitate any inquiries or the making of any   
proposal that constitutes, or may reasonably be expected to lead to, any        
Takeover Proposal or amend or grant any waiver or release of any standstill     
agreement. For purposes of this Agreement, "Takeover Proposal" means any        
                         -----------------
proposal other than the Merger (whether or not in writing and whether or not    
delivered to stockholders of the Company generally) regarding (i) a merger,     
consolidation, purchase of 20% or more of the assets of the Company (or of      
assets which generated 20% or more of the revenue or cash flows from operating  
activities of the Company for the fiscal quarter immediately preceding the      
Company's receipt, or the public announcement, of such proposal) or other       
business combination or similar transaction involving the Company, (ii) the     
acquisition from the Company, in any manner, directly or indirectly, of any     
equity interest in or any voting securities of the Company which constitute 20% 
or more of the                                                                  

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applicable class of such equity interests or voting securities, (iii) any tender
or exchange offer which, if consummated, would result in the acquisition by any 
Person or "group" (as defined under Section 13(d) of the 1934 Act and the rules 
and regulations thereunder) of beneficial ownership of 20% or more of the then  
outstanding shares of Company Common Stock or (iv) any public announcement of a 
proposal, plan or intention to do any of the foregoing or any agreement to      
engage in any of the foregoing. Neither the Company nor any of the Company      
Subsidiaries shall, directly or indirectly, release any third party from any    
confidentiality agreement. Nothing in this Section 6.5 shall prevent the Company
or its board of directors from complying with Rule 14e-2 under the 1934 Act with
respect to a Takeover Proposal.                                                 

 (b)     During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to   
its terms or the Effective Time, the Company shall promptly advise Parent orally
and in writing of any request for information or of any Takeover Proposal, or   
any inquiry with respect to or which could reasonably be expected to lead to any
Takeover Proposal, the material terms and conditions of such request, Takeover  
Proposal or inquiry, and the identity of the Person making any such request,    
Takeover Proposal or inquiry. The Company shall keep Parent informed, in all    
material respects, of the status and details of any such request, Takeover      
Proposal or inquiry. Any information provided to Parent by the Company in       
accordance with this Section 6.5(b) shall be subject to the terms of the        
Confidentiality Agreement.                                                      

          (c)     Notwithstanding Section 6.5(a), the Company may participate in
discussions or negotiations with, afford access to the properties, books,       
records, officers, employees and representatives of the Company and provide non-
public information to a third party who, on an unsolicited basis after the date 
of this Agreement, has delivered to the Company in writing a Takeover Proposal  
which the board of directors of the Company reasonably determines in good faith 
(after consultation with its independent financial advisor) constitutes a       
Superior Proposal, provided that the Company enters into a non-disclosure       
agreement with such third party on terms regarding the protection of            
confidential information that are at least as restrictive as those contained in 
the Confidentiality Agreement.  A "Superior Proposal" is a Takeover Proposal:   
       -----------------
(i) which would result in the Company's shareholders receiving consideration per
share of Company Common Stock (valuing non-cash consideration at its fair market
value as determined in good faith by the board of directors of the Company after
consultation with its independent financial advisor) that is superior from a    
financial point of view to the Merger Consideration per share of Company Common 
Stock; (ii) which is not subject to a financing contingency; and (iii) which is 
made by a Person which the board of directors of the Company reasonably         
determines in good faith (after consultation with its independent financial     
advisor) has the financial resources necessary to carry out the transaction.    

          (d)     The Company shall immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties (other    
than Parent and Merger Sub) conducted prior to the date of this Agreement with  
respect to any of the foregoing.                                                

Section 6.6  Contract Consents. The Company shall use commercially    
-----------------                           
reasonable efforts to, prior to the Effective Time, deliver all notices required
to be delivered, and obtain all consents required to be obtained, in connection 
with the consummation of the Merger under the                                   

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terms of any Company Material Contract; provided that the Company shall not be  
required to pay any consideration in connection therewith.                      

       Section 6.7  Additional Insurance.  Parent may give written notice to the
--------------------                    
Company, at any time prior to the Company Stockholders Meeting, directing the   
Company to obtain additional insurance, covering the Company and its directors  
and officers, in respect of any litigation then pending against the Company.    
Such notice shall specify (i) any litigation for which such additional insurance
is to be obtained; and (ii) the amount of the policy; provided, that such policy
amount shall not exceed $10 million and the premium therefor shall not exceed   
$200,000. Upon receipt of such notice, the Company shall promptly obtain such   
insurance; provided, however, that Parent shall promptly reimburse the Company  
for the amount of such premium if this Agreement is subsequently terminated.    

  Section 6.8  Ashton Settlement.  The Company intends to enter into a
-----------------                       
settlement agreement with Alan C. and Karen Ashton (the "Ashtons") pursuant to  
which the Company will agree to pay to the Ashtons an amount (the "Ashton       
Settlement Amount") in cash on or about the Closing Date. Parent consents to the
Company's entering into such agreement; provided that (i) the Ashton Settlement 
Amount does not exceed $5,100,000, (ii) the agreement includes a full and       
unconditional release by the Ashtons of any and all claims, liabilities and     
causes of action of any kind or nature that the Ashtons have or may have against
the Company or any of its affiliates, control persons, officers, directors,     
shareholders, employees, agents or representatives, and (iii) the form and      
content of the agreement and any other agreements entered into in connection    
therewith are reasonably acceptable to Parent (it being agreed that the draft   
form of agreement provided to Parent on May 11, 2001 is acceptable to Parent).  
The Company shall book the full amount of the Ashton Settlement Amount as a     
liability and create an appropriate reserve therefore in accordance with GAAP   
prior to the Effective Time. At or immediately prior to the Effective Time,     
Parent shall advance immediately available funds to or on behalf of the Company 
in an amount equal to the Ashton Settlement Amount; provided that (A) such funds
are applied to the payment of the Ashton Settlement Amount pursuant to the      
settlement agreement, and (B) the Company has theretofore complied with all of  
its obligations under this Section 6.8.                                         

    Section 6.9  Company Employees.  If any person that, as of the Closing
-----------------                       
Date, has been continuously employed by the Company or any Significant          
Subsidiary as a full time employee for at least a year is terminated after the  
Effective Time for any reason other than "For Cause" prior to the first         
anniversary of the Closing Date, then the Surviving Corporation shall pay to    
such employee a cash severance payment in an amount equal to the base           
compensation amount being paid to such employee at the time of termination for  
the greater of (i) two weeks for each year of continuous service as a full time 
employee of the Company or any of its Subsidiaries (including all service prior 
to the Closing Date) and (ii) ninety (90) days. Termination shall be "For Cause"
if (i) the employee in question has engaged in illegal or other wrongful conduct
detrimental to the business or reputation of the Surviving Corporation or any   
Subsidiary or Affiliate of the Surviving Corporation, or is charged with or     
convicted of a felony; (ii) such employee refuses or fails to act in accordance 
with any reasonable direction or order of the employee's supervisor or any      
officer of the Surviving Corporation; or (iii) the employee has engaged in any  
fraud, embezzlement, misappropriation or similar conduct against the Surviving  
Corporation or any of its Subsidiaries or Affiliates. The provisions of this    
Section 6.9 shall not                                                           

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apply to any officer of the Company that has an employment contract with the    
Company or any of its Subsidiaries or with the Surviving Corporation or Parent. 

ARTICLE 7 
ADDITIONAL AGREEMENTS 

Section 7.1  Preparation of Form S-4 and Proxy Solicitation; Other
             -----------------------------------------------------
Filings; Company Stockholders Meeting.                                          
-------------------------------------                                           

           (a)  Parent shall use its reasonable best efforts to file the
Form S-4 Registration Statement with the SEC within 15 Business Days after the  
date of this Agreement. The Company shall cooperate with Parent in the          
preparation of the Prospectus/Proxy Statement, which shall form part of the Form
S-4 Registration Statement. Without limiting the generality of the foregoing,   
the Company shall furnish Parent with all information concerning the Company and
the Company Subsidiaries as may be required in connection with the preparation  
of the Form S-4 Registration Statement. As promptly as reasonably practicable   
after the date of this Agreement, Parent shall prepare and file any other       
filings required under the 1934 Act, the 1933 Act or any other Federal or state 
"blue sky" laws relating to the Merger and the other transactions contemplated  
by this Agreement (together with all amendments thereto, the "Other Filings").  
                                                         -------------
The Company shall cooperate with Parent in the preparation and filing of the    
Other Filings. Each of Parent and the Company will notify the other promptly of 
the receipt of any comments from the SEC or its staff and of any request by the 
SEC or its staff or any other government officials for amendments or supplements
to the Form S-4 Registration Statement, the Prospectus/Proxy Statement or any   
Other Filing or for additional information and will supply the other with copies
of all correspondence between such company or any of its representatives, on the
one hand, and the SEC or its staff or any other government officials, on the    
other hand, with respect to the Form S-4 Registration Statement, the            
Prospectus/Proxy Statement or any Other Filing. Each of Parent and the Company  
shall use all reasonable efforts to cause the Form S-4 Registration Statement to
become effective as promptly as reasonably practicable, and to cause to be taken
all action necessary under any applicable Federal or state "blue sky" laws in   
connection with the issuance of shares of Parent Common Stock in connection with
the Merger and the transactions contemplated by this Agreement. The Company     
authorizes Parent to utilize in the Form S-4 Registration Statement (including  
the Prospectus/Proxy Statement) and in any Other Filing the information         
concerning the Company and the Company Subsidiaries provided to the Parent in   
connection with the preparation of the foregoing documents. Parent will promptly
advise the Company when the Form S-4 Registration Statement becomes effective   
and of any supplements or amendments thereto, and the Company shall not         
distribute any written material that would constitute a "prospectus" relating to
the Merger or the Parent Common Stock within the meaning of the 1933 Act or any 
state securities law without the prior written consent of Parent, which consent 
shall not be unreasonably withheld. As promptly as reasonably practicable after 
the Form S-4 Registration Statement has been declared effective by the SEC, the 
Company shall mail the Prospectus/Proxy Statement to its stockholders and       
solicit such stockholders' proxy to vote in favor of this Agreement and the     
Merger at a Company Stockholders Meeting called for such purpose. The Company   
shall use its reasonable best efforts to solicit such proxies from its          
stockholders, and shall take all other action necessary or advisable            

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to secure the Company Stockholders Approval, by June 30, 2001, or as soon       
thereafter as practicable and in any event within 25 business days after the    
mailing of the Prospectus/Proxy Statement to the stockholders of the Company.   
Parent will cooperate with the Company in the mailing of the Prospects/Proxy    
Statement.                                                                      

         (b) The Company agrees promptly to advise Parent if at any time prior
to the Effective Time any information concerning the Company or any of the      
Company Subsidiaries that is included (or incorporated by reference) in the     
Prospectus/Proxy Statement is or has become incorrect or incomplete in any      
material respect, and to provide Parent with the information needed to correct  
such inaccuracy or omission. The Company will furnish Parent with such          
supplemental information as may be necessary in order to cause the              
Prospectus/Proxy Statement, insofar as it relates to the Company and the Company
Subsidiaries, to comply in all material respects with applicable law after the  
mailing thereof to the stockholders of the Company.  Parent agrees promptly to  
advise the Company if at any time prior to the Effective Time any information   
concerning Parent that is included (or incorporated by reference) in the        
Prospectus/Proxy Statement is or has become incorrect or incomplete in any      
material respect, and to provide the Company with the information needed to     
correct such inaccuracy or omission. Parent will furnish the Company with such  
supplemental information as may be necessary in order to cause the              
Prospectus/Proxy Statement, insofar as it relates to Parent, to comply in all   
material respects with applicable law after the mailing thereof to the          
stockholders of the Company.                                                    

      (c) In addition to the foregoing, the Company will take all action
necessary in accordance with the Nevada Corporation Law and the Company Charter 
and Company Bylaws to convene a Company Stockholders Meeting for the purpose of 
obtaining the Company Stockholder Approval for this Agreement and the Merger.   
The Company shall use its reasonable efforts to solicit such proxies from its   
stockholders, and shall take all other action necessary or advisable to secure  
such approval of the Company's stockholders and, through its board of directors,
shall recommend to its stockholders that they grant such approval; provided,    
however, that the board of directors of the Company shall be permitted to       
withdraw or modify its recommendation to the Company's stockholders in a manner 
adverse to Parent if, but only if, (i) the board of directors determines in good
faith by a majority vote, based on the advice of the Company's outside counsel, 
that it must take such action to comply with its fiduciary obligations under    
applicable Law and (ii) the Company shall have delivered to Parent a prior      
written notice advising Parent that it intends to take such action and          
describing its reasons for taking such action (such notice to be delivered not  
less than two Business Days prior to the time such action is taken).  Unless    
this Agreement is previously terminated in accordance with Article 9, however,  
nothing contained herein shall affect the obligation of the Company to submit   
this Agreement and the Merger for the consideration and vote of the Company's   
stockholders at a Company Stockholders Meeting, even if the board of directors  
of the Company determines at any time after the date hereof that the Merger is  
no longer advisable or recommends that the Company's stockholders reject the    
Merger.                                                                         

Section 7.2  Access to Information.                               
---------------------                   

        (a)  During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to   
its terms or the Effective Time, the                                            

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Company shall, and shall cause each of the Company Subsidiaries to, (a) afford  
to Parent, and to the officers, employees, accountants, counsel, financial      
advisors and other representatives of Parent ("Parent Representatives"),        
                                    ----------------------
reasonable access to all of their respective properties, books, contracts,      
commitments, personnel and records during normal business hours and (b) provide 
Parent and Parent Representatives with such information concerning the business,
properties and assets of the Company and the Company Subsidiaries as Parent or  
any Parent Representative may reasonably request. Without limiting the          
generality of the foregoing, during the period from the date of this Agreement  
and continuing until the earlier of the termination of this Agreement pursuant  
to its terms or the Effective Time, the Company shall provide to Parent copies  
of:                                                                             

       (i)    all unaudited monthly financial statements prepared by the
Company;                                                              

           (ii)   any written materials or communication sent by or on behalf of
the Company to its stockholders;                                      

          (iii)  any material notice, document or other communications sent by
     or on behalf of the Company or any of the Company Subsidiaries to any party
to a Company Material Contract; and                                   

          (iv)   any material notice, report or other document received by the
   Company or any of the Company Subsidiaries from, or any notice, report or
other document filed by the Company or any of the Company Subsidiaries
with, any Governmental Authority.                                     

           (b)    Parent will hold, and will cause its Parent Representatives to
hold, any confidential information obtained pursuant to this Section 7.2        
confidential in accordance with the provisions of the Confidentiality Agreement.

Section 7.3  Appropriate Actions; Consents; Filings.                  
--------------------------------------      

         (a)    Subject to Section 7.3(b), each of the parties agrees to use
all reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,  
all things necessary, proper or advisable to consummate and make effective, in  
the most expeditious manner practicable, the Merger and the other transactions  
contemplated by this Agreement, including (i) the making of all necessary       
notices to and registrations and filings with Governmental Authorities and other
third parties (including making any required filings and thereafter making any  
other required submissions under the HSR Act with respect to the transactions   
contemplated herein), (ii) the obtaining of all necessary actions or nonactions,
consents, approvals or waivers from Governmental Authorities and other third    
parties (including parties to Company Material Contracts); provided that neither
party shall be required to pay any consideration in connection with obtaining   
any third party consents, (iii) the taking of all reasonable steps as may be    
necessary to obtain an approval or waiver from, or to avoid an action or        
proceeding by, any Governmental Authority, (iv) the execution and delivery of   
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement, (v) the defending of
any Legal Proceedings challenging this Agreement or the transactions            
contemplated hereby, including the using of all commercially reasonable efforts 
necessary to lift, rescind or mitigate the effect of any injunction or          
restraining order or other order adversely affecting the ability of             

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any party hereto to consummate the transactions contemplated hereby, (vi) the   
using of all commercially reasonable efforts to fulfill all conditions to the   
obligations of Parent, Merger Sub or the Company pursuant to this Agreement;    
provided that neither party shall be required to pay any consideration in       
connection with obtaining any third party consents, and (vii) the using of all  
reasonable efforts to prevent, with respect to a threatened or pending          
temporary, preliminary or permanent injunction or other order, decree or ruling 
or statute, rule, regulation or executive order, the entry, enactment or        
promulgation thereof, as the case may be. In connection with and without        
limiting the foregoing, the Company and the members of its board of directors   
shall (i) grant such approvals and take all such other actions as may be        
necessary so that no state takeover statute or similar statute or regulation is 
or becomes applicable to the Merger, this Agreement or any of the other         
transactions contemplated by this Agreement and (ii) if any state takeover      
statute or similar statute or regulation becomes applicable to the Merger, this 
Agreement or any other transaction contemplated by this Agreement, grant such   
approvals and take all such other actions as may be necessary so that the Merger
and the other transactions contemplated by this Agreement may be consummated as 
promptly as practicable on the terms contemplated hereby and otherwise to       
eliminate or minimize the effect of such statute or regulation on the Merger and
the other transactions contemplated by this Agreement.                          

          (b)     Notwithstanding anything to the contrary contained in this
Agreement (including Section 7.3(a)), none of Parent, Merger Sub or the Company 
shall be obligated to take any action pursuant to the foregoing if the taking of
such action or the obtaining of any waiver, consent, approval or exemption is   
reasonably likely to result in Parent or the Company, as applicable, being      
obligated:  (A) to dispose of or transfer, or to cause any of its Subsidiaries  
to dispose of or to transfer, any of its assets or properties, (B) to           
discontinue, or cause any of its Subsidiaries to discontinue, offering any      
product or service, (C) to license or otherwise make available to any Person any
intellectual property owned or held by such party or any of its Subsidiaries;   
(D) to make, or cause any of its Subsidiaries to make, any commitment (to any   
Governmental Authority or otherwise) regarding its future operations; (E) to    
commit the Surviving Corporation or any of its Subsidiaries to take any action  
referred to in clauses (A) to (D) above; or (F) to take such other action as    
would impact in a manner materially adverse to Parent the economic or business  
benefits of the transactions contemplated by this Agreement.                    

      Section 7.4  Conveyance Taxes. Parent and the Company shall cooperate in
----------------                        
the preparation, execution and filing of all returns, questionnaires,           
applications or other documents regarding any real property transfer or gains,  
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become      
payable in connection with the transactions contemplated hereby that are        
required or permitted to be filed on or before the Effective Time. All of such  
taxes and expenses shall be borne by Parent.                                    

Section 7.5  Indemnification of the Company's Directors, Officers,
             -----------------------------------------------------
Employees.                                                                      
---------                                                                       

         (a)  The certificate of incorporation and the bylaws of the
Surviving Corporation shall contain provisions with respect to indemnification  
and exculpation from liability substantially identical to those set forth in the
Company Charter and the Company Bylaws on the date of this Agreement, which     
provisions shall not be amended, repealed or otherwise modified for a period of 
six years from the Effective Time in any manner that would                      

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adversely affect the rights thereunder of individuals (the "Indemnified         
                                                   -----------
Parties") who on or prior to the Effective Time were directors, officers,       
-------                                                                         
employees or agents of the Company, unless such modification is required by Law.

          (b) For a period of three years after the Effective Time, Parent shall
cause the Surviving Corporation to cause to be maintained in effect the current 
policy of directors' and officer's insurance maintained by the Company for      
events occurring at or prior to the Effective Time (provided that the Surviving 
Corporation may substitute therefor one or more policies that are no less       
favorable than such current policy or, if substantially equivalent insurance    
coverage is unavailable, the best available coverage); provided, however, that  
in no event shall the Surviving Corporation be required to expend pursuant to   
this Section 7.5(b) more than an amount equal to 200% of the current annual     
premiums paid by the Company for such insurance, but in such case shall purchase
as much coverage as possible for such amount.                                   

         (c) If the Surviving Corporation (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving corporation or    
entity of such consolidation or merger or (ii) transfers all or substantially   
all of its properties and assets to any Person, then and in each such case,     
proper provisions shall be made so that the successors of the Surviving         
Corporation shall assume the obligations set forth in this Section 7.5. This    
Section 7.5 is intended to benefit, and shall be enforceable by, the Indemnified
Parties and their respective heirs, personal representatives, successor and     
assigns and shall survive the consummation of the Merger.                       

       Section 7.6  Letter of Accountants.  The Company shall use its reasonable
---------------------                   
efforts to cause to be delivered to Parent a "comfort" letter of Arthur Andersen
LLP, the Company's independent public accountants, dated and delivered on a date
within two business days before the date on which the Prospectus/Proxy Statement
is mailed, addressed to Parent, in form and substance reasonably satisfactory to
Parent and reasonably customary in scope and substance for letters delivered by 
independent public accountants in similar circumstances.                        

      Section 7.7  Fees and Expenses.  Except as provided in Sections 6.7, 7.4
-----------------                       
and 9.5(b), whether or not the Merger is consummated, all fees, costs and       
expenses incurred in connection with the Merger, this Agreement and the         
transactions contemplated hereby shall be paid by the party incurring such fees,
costs or expenses.                                                              

  Section 7.8  Public Announcements. Parent and Merger Sub, on the one
--------------------                    
hand, and the Company, on the other hand, will consult with each other before   
issuing, and provide each other the opportunity to review and comment upon, any 
press release or other public statements with respect to the transactions       
contemplated by this Agreement, including the Merger, and shall not issue any   
such press release or make any such public statement prior to such consultation,
except as may be required by applicable Law or court process.                   

   Section 7.9  Rule 145 Affiliates.  Prior to the Closing Date, Company
-------------------                     
shall deliver to Parent a letter identifying all Persons who are, at the time   
this Agreement and the Merger are submitted for approval to Company's           
stockholders, "affiliates" of the Company for purposes of Rule 145 under the    
1933 Act. The Company shall use its reasonable best efforts to cause each       

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such Person to execute and deliver to Parent on or prior to the Closing Date a  
written agreement substantially in the form attached as Exhibit A.              

Section 7.10  Tax Matters.                                        
-----------                           

 (a)   The Merger is intended to be constituted as a
"reorganization" within the meaning of Section 368(a) of the Code, and the      
parties hereto hereby adopt this Agreement as a "plan of reorganization" within 
the meaning of Treasury Regulation (S)1.368-2(g).                               

               (b)   Neither Parent, Merger Sub nor the Company shall (except as
specifically contemplated by this Agreement) directly or indirectly take, or    
fail to take, any action that, whether before or after the Merger, could        
reasonably be expected to (i) prevent it from providing the representations     
required of it in connection with obtaining the opinions specified in Section   
8.2(h) or 8.3(f), as applicable or (ii) adversely affect the intended tax       
treatment of the Merger as a "reorganization" within the meaning of Section     
368(a) of the Code.                                                             

Section 7.11  Certificates and Other Deliveries.                  
---------------------------------     

           (a)   On or prior to the Closing Date, the Company shall have
delivered, or caused to be delivered, to Parent (i) certificates of good        
standing from the Secretary of State of the State of Nevada stating that the    
Company and the Significant Subsidiaries are validly existing corporations in   
good standing in such State and certificates from the Secretary of State of the 
State of Arizona stating that the Company and the Significant Subsidiaries are  
qualified to do business in such State; (ii) duly adopted resolutions of the    
board of directors of the Company (A) approving the Company's execution,        
delivery and performance of this Agreement and the other agreements and         
instruments contemplated hereby, and (B) determining that the Merger is in the  
best interests of the Company and its stockholders, and recommending to the     
Company's stockholders that they approve this Agreement and the Merger certified
by the Secretary of the Company; and (iii) a true and complete copy of the      
certificate of incorporation or comparable governing instruments, as amended, of
the Company and the Company Subsidiaries certified by the Secretary of the state
of incorporation or comparable authority in other jurisdictions, and a true and 
complete copy of the bylaws or comparable governing instruments, as amended, of 
the Company and each Company Subsidiary certified by the Secretary of the       
Company and of each Company Subsidiary, as applicable.                          

     (b)    On or prior to the Closing Date, Parent shall have
delivered, or caused to be delivered, to the Company (i) a good standing        
certificate from the Secretary of State of Delaware stating that Parent is a    
validly existing corporation together with a certificate of good standing from  
the Secretary of State of Delaware stating that Merger Sub is a validly existing
corporation in good standing; (ii) duly adopted resolutions of the board of     
directors of Parent and of Merger Sub, approving the execution, delivery and    
performance of this Agreement and the other agreements and instruments          
contemplated hereby, each certified by the Secretary or the Assistant Secretary 
of Parent or Merger Sub, as applicable; (iii) a true and complete copy of the   
certificate of incorporation of each of Parent and Merger Sub, certified by the 
Secretary of State of the State of state of its incorporation; and (iv) a true  
and complete copy of Parent's bylaws and Merger Sub's bylaws, each certified by 
the Secretary or Assistant Secretary of Parent or Merger Sub, as applicable.    

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ARTICLE 8 
CONDITIONS PRECEDENT  

       Section 8.1  Conditions to Each Party's Obligations to Effect the Merger.
                   -----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the  
satisfaction or waiver, to the extent permitted by applicable Law, on or prior  
to the Closing Date of each of the following conditions:                        

           (a)  Stockholder Approvals. The Company Stockholders Approval
---------------------                   
shall have been obtained and be in full force and effect.                       

             (b)  No Injunctions or Restraints.  No Law, Judgment, temporary
----------------------------            
restraining order, preliminary or permanent injunction or other order issued by 
any Governmental Authority of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger on the terms contemplated 
hereby shall be in effect.                                                      

           (c)  HSR Act. Any required waiting period (and any extensions
-------                                 
thereof) applicable to the consummation of the Merger under the HSR Act shall   
have expired or been terminated.                                                

              (d)  Form S-4 Registration Statement.  The Form S-4 Registration
-------------------------------         
Statement shall have been declared effective by the SEC under the 1933 Act.  No 
stop order suspending the effectiveness of the Form S-4 Registration Statement  
shall have been issued by the SEC, and no proceedings for that purpose shall    
have been initiated or, to the knowledge of Parent or the Company, threatened by
the SEC.                                                                        

    Section 8.2  Additional Conditions to Obligations of Parent and Merger
                 ---------------------------------------------------------
Sub. The obligations of Parent and Merger Sub to effect the Merger and          
---                                                                             
consummate the transactions contemplated hereby are also subject to the         
satisfaction or waiver by Parent (provided that the condition set forth in      
Section 8.2(h) shall not be waivable), to the extent permitted by applicable    
law, on or prior to the Closing Date of each of the following conditions:       

  (a)  Accuracy of Representations and Warranties. The
  ------------------------------------------
representations and warranties of the Company set forth in this Agreement shall 
be true and correct in all material respects, and Parent shall have received a  
certificate signed on behalf of the Company by the Chief Executive Officer of   
the Company to such effect.                                                     

             (b)  Performance of Agreements and Covenants. The Company shall
--------------------------------------- 
have performed or complied in all material respects with all agreements and     
covenants required by this Agreement to be performed or complied with by it on  
or prior to the Closing Date, and Parent shall have received a certificate of   
the Chief Executive Officer of the Company to such effect.                      

              (c) No Adverse Enactments.  There shall not have been any action
---------------------                     
taken, or any Law or Judgment enacted, promulgated, entered, issued, enforced or
deemed applicable, by any foreign or United States federal, state or local      
Governmental Authority, and there shall be no pending Legal Proceeding by any   
Governmental Authority, which (i) makes or is reasonably likely to make this    
Agreement, the Merger or any of the other transactions contemplated by this     

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Agreement illegal, (ii) imposes or is reasonably likely to result in the        
imposition of material damages or penalties on the Company, Parent or Merger Sub
by reason of the consummation of any of the transactions contemplated by this   
Agreement, (iii) prohibits or materially limits or is reasonably likely to      
result in the prohibition of or imposition of material limitations on the       
ownership or operation by the Company, any Company Subsidiary, Parent or any    
Subsidiary of Parent of any material portion of the business or assets of the   
Company, any Company Subsidiary, Parent or any Subsidiary of Parent or requires 
or is reasonably likely to require the Company, any Company Subsidiary, Parent  
or any Subsidiary of Parent to dispose of or hold separate any material portion 
of the business or assets of the Company, any Company Subsidiary, Parent or any 
Subsidiary of Parent as a result of the Merger or any of the other transactions 
contemplated by this Agreement, (iv) imposes or is reasonably likely to result  
in the imposition of material limitations on the ability of Parent or Merger Sub
to acquire or hold, or exercise full rights of ownership of, any shares of      
capital stock of the Surviving Corporation, (v) prohibits or is reasonably      
likely to result in the prohibition of Parent from effectively controlling in   
any material respect the business or operations of the Surviving Corporation or 
any of its Subsidiaries, or requires or is reasonably likely to require the     
Company, any Company Subsidiary, Parent or any Subsidiary of Parent to cease or 
refrain from engaging in any material business if the Merger is consummated, or 
(vi) after giving effect to the Merger, is reasonably likely to have a Material 
Adverse Effect on Parent or the Surviving Corporation.                          

        (d) Dissenters' Rights. The Company shall not have received pursuant
------------------                                  
to Section 92A.440 of the Nevada Corporation Law any perfected demands for      
payment in connection with the Merger with respect to more than 5% of the       
outstanding shares of Company Common Stock, which demands shall continue to be  
in effect as of the Effective Time.                                             

       (e) Consents and Approvals. Parent shall have received evidence, in
----------------------                              
form and substance reasonably satisfactory to it, that such notices to and      
licenses, permits, consents, approvals, authorization and orders of Governmental
Authorities as are required in connection with the consummation of the          
transactions hereby (collectively, "Company Approvals"), have been made or      
         -----------------
obtained by the Company and are in full force and effect, without the imposition
of any limitations, prohibitions or requirements of the type referred to in     
Section 7.3(b), other than those Company Approvals which, if not made or        
obtained, would not, either individually or in the aggregate, (A) result in the 
imposition of any limitations, prohibitions or requirements of the type referred
to in Section 7.3(b), or (B) have, after the Effective Time, a Material Adverse 
Effect on Parent or a Material Adverse Effect on the Company.                   

       (f) No Material Adverse Change. From and including the date hereof,
--------------------------                          
there shall not have occurred or arisen any event, violation, inaccuracy,       
circumstance or other matter which, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect on the Company.  

    (g) Opinion of Counsel. Parent shall have received an opinion of
------------------                                  
Greenberg Traurig, counsel to the Company, and/or other counsel reasonably      
acceptable to Parent, substantially in the form of Exhibit B.                   

     (h) Tax Opinion. Parent shall have received an opinion from Baker
-----------                                         
Botts L.L.P., dated the Closing Date, to the effect that the Merger will qualify
for federal income tax                                                          

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purposes as a "reorganization" within the meaning of Section 368 of the Code and
that each of Parent, Merger Sub and the Company will be a party to the          
reorganization within the meaning of Section 368 of the Code. In rendering such 
opinion such counsel shall be entitled to rely upon customary representations of
officers of Parent, Merger Sub and the Company and make customary assumptions   
and qualifications.                                                             

          (i)   Rights. All outstanding Rights (as defined in the Rights
------                                  
Agreement) shall have been redeemed, terminated or otherwise rendered           
ineffective to the extent required by Section 6.2.                              

Section 8.3  Additional Conditions to Obligations of Company.The  
       -----------------------------------------------
obligation of the Company to effect the Merger and consummate the transactions  
contemplated hereby are also subject to the satisfaction or waiver (provided    
that the condition provided in Section 8.3(f) shall not be waivable) by the     
Company, to the extent permitted by applicable law, on or prior to the Closing  
Date of each of the following conditions:                                       

 (a)   Accuracy of Representations and Warranties. The
  ------------------------------------------
representations and warranties of Parent and Merger Sub set forth in this       
Agreement shall be true and correct in all material respects, and the Company   
shall have received a certificate signed on behalf of Parent by the Chief       
Executive Officer (or the President) or the Chief Financial Officer of Parent to
such effect.                                                                    

            (b)   Performance of Agreements and Covenants. Parent and Merger
--------------------------------------- 
Sub shall have performed or complied in all material respects with all          
agreements and covenants required by this Agreement to be performed or complied 
with by it on or prior to the Closing Date, and the Company shall have received 
a certificate of the Chief Executive Officer (or the President) or the Chief    
Financial Officer of Parent to such effect.                                     

             (c)   No Adverse Enactments. There shall not have been any action
---------------------                   
taken, or any Law or Judgment enacted, promulgated, entered, issued, enforced or
deemed applicable, by any foreign or United States federal, state or local      
Governmental Authority, and there shall be no pending Legal Proceeding by any   
Governmental Authority, which (i) makes or is reasonably likely to make this    
Agreement, the Merger or any of the other transactions contemplated by this     
Agreement illegal, (ii) imposes or is reasonably likely to result in the        
imposition of material damages or penalties on the Company, Parent or Merger    
Sub, by reason of the consummation of any of the transactions contemplated by   
this Agreement, that are material in relation to Parent and its Subsidiaries    
taken as a whole (determined after giving effect to the Merger), (iii) prohibits
or materially limits or is reasonably likely to prohibit or impose material     
limitations on the ownership or operation by Parent or any Subsidiary of any    
material portion of the business or assets of Parent or any Subsidiary          
(determined after giving effect to the Merger) or compels or may compel Parent  
or any Subsidiary to dispose of or hold separate any material portion of the    
business or assets of Parent or such Subsidiary (determined after giving effect 
to the Merger), as a result of the Merger or any of the other transactions      
contemplated by this Agreement, or (iv) otherwise is reasonably likely to have a
Material Adverse Effect on Parent (determined after giving effect to the        
Merger).                                                                        

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         (d)   No Material Adverse Change. From and including the date
--------------------------              
hereof, there shall not have occurred or arisen any event, violation,           
inaccuracy, circumstance or other matter which, individually or in the          
aggregate, has had or could reasonably be expected to have a Material Adverse   
Effect on Parent.                                                               

        (e)   Opinion of Counsel. The Company shall have received an
------------------                      
opinion of Baker Botts L.L.P., counsel to Parent, and/or other counsel          
reasonably acceptable to the Company, substantially in the form of Exhibit C.   

              (f)   Tax Opinion. The Company shall have received an opinion from
-----------                             
Greenberg Traurig, LLP, dated the Closing Date, to the effect that the Merger   
will qualify for federal income tax purposes as a "reorganization" within the   
meaning of Section 368 of the Code and that each of Parent, Merger Sub and the  
Company will be a party to the reorganization within the meaning of Section 368 
of the Code. In rendering such opinion such counsel shall be entitled to rely   
upon customary representations of officers of Parent, Merger Sub and the Company
and make customary assumptions and qualifications.                              

ARTICLE 9 
TERMINATION, AMENDMENT AND WAIVER 

    Section 9.1  Termination. This Agreement may be terminated at any time
-----------                             
prior to the Effective Time, whether before or after the Company Stockholders   
Approval has been obtained:                                                     

         (a)   by mutual written consent of Parent and the Company, or

          (b)   by either Parent or the Company, if the Merger shall not
have occurred by September 30, 2001 (the "Reference Date"); provided, however,  
                  --------------
that the right to terminate this Agreement under this Section 9.1(b) shall not  
be available to any party whose action or failure to act has been the cause of  
or resulted in the failure of the Merger to occur on or before the Reference    
Date and such action or failure to act constitutes a breach of this Agreement;  
or                                                                              

        (c)   by either Parent or the Company, if any court or other
Governmental Authority of competent jurisdiction shall have issued an injunction
or order permanently enjoining, restraining or prohibiting the Merger and such  
injunction or order shall have become final and nonappealable; provided,        
however, that the right to terminate this Agreement under this Section 9.1(c)   
shall not be available to any party who is in breach of his obligation, pursuant
to Section 7.3(a), to use commercially reasonable efforts to lift or rescind any
such injunction or order before it became final and nonappealable.              

              (d)   by Parent, in the event of a breach by the Company of any of
its representations, warranties, covenants or other agreements contained in this
Agreement which (A) would give rise to the failure of a condition set forth in  
Section 8.2(a) or 8.2(b) and (B) cannot be or has not been cured within 30 days 
after the giving of written notice to the Company of such breach or, if earlier,
by the Reference Date (provided that Parent is not then in breach of any of its 
representations, warranties, covenants or other agreements contained in this    
Agreement which would give rise to the failure of a condition set forth in      
Section 8.3(a) or 8.3(b)); or                                                   

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              (e)   by the Company, in the event of a breach by Parent of any of
its representations, warranties, covenants or other agreements contained in this
Agreement which (A) would give rise to the failure of a condition set forth in  
Section 8.3(a) or 8.3(b) and (B) cannot be or has not been cured within 30 days 
after the giving of written notice to Parent of such breach or, if earlier, by  
the Reference Date (provided that the Company is not then in breach of any of   
its representations, warranties, covenants or other agreements contained in this
Agreement which would give rise to the failure of a condition set forth in      
Section 8.2(a) or 8.2(b)); or                                                   

         (f)   by Parent, if (i) after the date of this Agreement, the
Company receives, or a public announcement is made of, a Takeover Proposal and  
(ii) (A) the Company breaches its obligation under Section 7.1(c) to submit this
Agreement and the Merger to the Company's stockholders for their consideration  
and vote at a Company Stockholders Meeting; (B) the board of directors of the   
Company withholds, withdraws or modifies in any manner adverse to Parent its    
recommendation to the stockholders of the Company that they vote in favor of    
approval of this Agreement and the Merger; or (C) the Company Stockholders      
Meeting (including any adjournments thereof) shall have been held and completed 
and the required Company Stockholders Approval shall not have been obtained with
respect to this Agreement and the Merger.                                       

              (g)   By the Company, if (i) after the date of this Agreement, the
Company receives, or a public announcement is made of, a Takeover Proposal and  
(ii) the Company Stockholders Meeting (including any adjournments thereof) shall
have been held and completed and the required Company Stockholders Approval     
shall not have been obtained with respect to this Agreement and the Merger and  
(iii) the Company has paid to Parent the Liquidated Damages Payment and the     
Expense Reimbursement Payment.                                                  

           (h)   By either Parent or the Company, if (i) after the date of
this Agreement and prior to the Company Stockholders Meeting, the Company has   
not received, and a public announcement has not been made of, a Takeover        
Proposal, and (ii) the Company Stockholders Meeting (including any adjournments 
thereof) shall have been held and completed and the required Company            
Stockholders Approval shall not have been obtained with respect to this         
Agreement and the Merger.                                                       

     Section 9.2  Effect of Termination. In the event of termination of this
---------------------                   
Agreement by either the Company or Parent as provided in Section 9.1, this      
Agreement shall forthwith become void and have no effect, without any liability 
or obligation on the part of Parent, Merger Sub or the Company or their         
respective officers or directors, except that each of (i) Section 7.2(b),       
Section 7.7, Section 7.8, this Section 9.2, Section 9.5 and Article 11 (General 
Provisions) shall survive the termination of this Agreement, and (ii) nothing   
herein shall relieve any party from liability for any willful and material      
breach of any of its representations, warranties, covenants or other agreements 
contained in this Agreement. No termination of this Agreement shall affect the  
obligations of the parties contained in the Confidentiality Agreement, all of   
which obligations shall survive termination of this Agreement in accordance with
their terms.                                                                    

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Section 9.3  Amendment. This Agreement may be amended prior to the
---------                               
Effective Time by the parties at any time before or after the Company           
Stockholders Approval is obtained; provided, however, that after such Company   
Stockholders Approval is obtained there shall not be made any amendment that by 
Law requires further approval by the stockholders of the Company without the    
further approval of such stockholders. This Agreement may not be amended except 
by an instrument in writing signed on behalf of each of the parties.            

      Section 9.4  Extension; Waiver. At any time prior to the Effective Time,
-----------------                       
the parties may (a) extend the time for the performance of any of the           
obligations or other acts of the other parties, (b) waive any inaccuracies in   
the representations and warranties contained in this Agreement or in any        
document delivered pursuant to this Agreement or (c) subject to the proviso of  
Section 9.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing, signed on  
behalf of such party. The failure of any party to this Agreement to assert any  
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.                                                                   

Section 9.5  Termination Fee.                                     
---------------                         

       (a)   If this Agreement is terminated by Parent pursuant to
Section 9.1(f), then the Company shall pay to Parent liquidated damages in the  
amount of $1,940,000 (the "Liquidated Damages Payment").                        
--------------------------

       (b)   If this Agreement is terminated by Parent pursuant to
Section 9.1(d) or 9.1(f), then, in addition to the Liquidated Damages Payment,  
the Company shall reimburse Parent for one-half (up to an aggregate of $500,000)
of (i) those expenses, other than attorneys' and accountants' fees and expenses,
incurred by Parent in connection with printing the Form S-4 Registration        
Statement and the Prospectus/Proxy Statement and the mailing of the             
Prospectus/Proxy Statement, and (ii) the filing fee incurred in connection with 
any required filing of the premerger notification and report form pursuant to   
the HSR Act (collectively, the "Expense Reimbursement Payment").                
             -----------------------------

         (c)   Any Liquidated Damages Payment or Expense Reimbursement
Payment owed by the Company to Parent pursuant to Section 9.5(a) or (b) shall be
paid within two Business Days after the termination of this Agreement, and shall
be in lieu of other damages or expenses incurred in the event of breach of this 
Agreement. Any such payment shall be made by wire transfer of immediately       
available funds to an account designated by Parent. If the Company fails to     
timely pay any Liquidated Damages Payment or Expense Reimbursement Payment due  
to Parent hereunder, the Company shall pay all costs and expenses (including the
legal costs and expenses) incurred by Parent in connection with any action,     
including the prosecution of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of such payment at the rate of 10%
per annum from the date such payment is required to be paid to the date it is   
paid in full.                                                                   

     Section 9.6  Procedure for Termination, Amendment, Extension or Waiver.
                 ---------------------------------------------------------
A termination of this Agreement pursuant to Section 9.1, an amendment of this   
Agreement pursuant to Section 9.3 or an extension or waiver pursuant to Section 
9.4 shall, in order to be                                                       

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effective, require in the case of Parent, Merger Sub or the Company, action by  
its board of directors, acting by the affirmative vote of a majority of the     
members of the entire board of directors.                                       

ARTICLE 10  
GENERAL PROVISIONS  

    Section 10.1  Notices. All notices, requests and other communications to
-------                                 
any party hereunder shall be in writing (including facsimile transmission) and  
shall be given,                                                                 

if to Parent or Merger Sub, to:                     

Gemstar-TV Guide International, Inc.                
135 North Los Robles Avenue, Suite 800              
Pasadena, California  91101                         
Attention:  Chief Executive Officer                 
Fax:  626-792-0257                                  

with a copy to:                                     

Baker Botts L.L.P.                                  
599 Lexington Avenue                                
New York, New York 10022                            
Attention:  Robert W. Murray Jr.                    
Fax:  212-705-5125                                  

if to the Company, to:                              

SkyMall, Inc.                                       
1520 E. Pima Street                                 
Phoenix, AZ 85034                                   
Attention:  Chief Executive Officer                 
Fax:  602-724-2849                                  

with a copy to:                                     

Greenberg Traurig, LLP                              
2375 East Camelback Road, Suite 700                 
Phoenix, AZ  85016                                  
Attention:  Bruce E. Macdonough                     
Fax:  602-445-8618                                  

or such other address or facsimile number as such party may hereafter specify   
for the purpose by notice to the other parties hereto. All such notices,        
requests and other communications shall be deemed received on the date of       
receipt by the recipient thereof if delivered prior to 5 p.m. on a Business Day,
in the place of receipt. Otherwise, any such notice, request or communication   

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shall be deemed not to have been received until the next succeeding Business Day
in the place of receipt.                                                        

  Section 10.2  Successors and Assigns. The provisions of this Agreement
----------------------                  
shall be binding upon and inure to the benefit of the parties hereto and their  
respective successors and assigns; provided that no party may assign, delegate  
or otherwise transfer any of its rights or obligations under this Agreement     
without the consent of each other party hereto.                                 

Section 10.3  Governing Law. This Agreement shall be governed by and
-------------                           
construed in accordance with the laws of the State of Delaware, without regard  
to the conflicts of law rules of such State.                                    

 Section 10.4  Jurisdiction. Any suit, action or proceeding seeking to
------------                            
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby shall be brought in
any federal court located in the State of Delaware or any Delaware state court, 
and each of the parties hereby consents to the exclusive jurisdiction of such   
courts (and of the appropriate appellate courts therefrom) in any such suit,    
action or proceeding and irrevocably waives, to the fullest extent permitted by 
law, any objection that it may now or hereafter have to the laying of the venue 
of any such suit, action or proceeding in any such court or that any such suit, 
action or proceeding brought in any such court has been brought in an           
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction  
of any such court.                                                              

 Section 10.5  WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
--------------------                    
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING   
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED    
HEREBY.                                                                         

      Section 10.6  Counterparts; Effectiveness. This Agreement may be signed in
---------------------------             
any number of counterparts, each of which shall be an original, with the same   
effect as if the signatures thereto and hereto were upon the same instrument.   
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto. Except for       
Section 7.5, no provision of this Agreement is intended to confer any rights,   
benefits, remedies, obligations or liabilities hereunder upon any Person other  
than the parties hereto and their respective successors and assigns.            

Section 10.7  Entire Agreement. This Agreement, together with the   
----------------                        
Confidentiality Agreement and the other agreements contemplated hereby,         
constitutes the entire agreement between the parties with respect to the subject
matter of this Agreement and supersedes all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter of
this Agreement.                                                                 

    Section 10.8  Captions. The captions herein are included for convenience
--------                                
of reference only and shall be ignored in the construction or interpretation    
hereof.                                                                         

Section 10.9 Severability. If any term, provision, covenant or    
------------                            
restriction of this Agreement is held by a court of competent jurisdiction or   
other authority to be invalid, void or unenforceable, the remainder of the      
terms, provisions, covenants and restrictions of this                           

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Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated so long as the economic or legal substance of the       
transactions contemplated hereby is not affected in any manner materially       
adverse to any party. Upon such a determination, the parties shall negotiate in 
good faith to modify this Agreement so as to effect the original intent of the  
parties as closely as possible in an acceptable manner so that the transactions 
contemplated hereby may be consummated as originally contemplated to the fullest
extent possible.                                                                

Section 10.10 Specific Performance. The parties hereto agree that   
--------------------                    
irreparable damage would occur if any provision of this Agreement were not      
performed in accordance with the terms hereof and that each party shall be      
entitled to an injunction or injunctions to prevent breaches of this Agreement  
or to enforce specifically the performance of the terms and provisions hereof in
any federal court located in the State of Delaware or any Delaware state court, 
in addition to any other remedy to which they are entitled at law or in equity. 

   Section 10.11 Schedules. The Company has set forth information in the
---------                             
Company Disclosure Schedule in a section thereof that corresponds to the section
of this Agreement to which it relates. A matter set forth in one section of the 
Company Disclosure Schedule need not be set forth in any other section of the   
Company Disclosure Schedule so long as its relevance to the latter section of   
the Company Disclosure Schedule or section of the Agreement is apparent on the  
face of the information disclosed in the Company Disclosure Schedule or         
reasonably ascertainable by Parent from such information. The fact that any item
of information is disclosed in the Company Disclosure Schedule to this Agreement
shall not be construed to mean that such information is required to be disclosed
by this Agreement.                                                              

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    The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.      

                GEMSTAR-TV GUIDE INTERNATIONAL, INC.

By: /s/ Henry Yuen  
                               ---------------------------------------------
  Name: Henry Yuen
                Title: Chief Executive Officer

      GSKY ACQUISITION SUB, INC.

By: /s/ Henry Yuen  
                               ---------------------------------------------
  Name: Henry Yuen
                Title: Chief Executive Officer

SKYMALL, INC        

     By: /s/ Robert M. Worsley
                               ---------------------------------------------
         Name: Robert M. Worsley
       Title: CEO & Chairman

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                                                                         Annex B
May 14, 2001  

Board of Directors                                                              
SkyMall, Inc.                                                                   
1520 East Pima Street                                                           
Phoenix, AZ 85034                                                               

Members of the Board:                                                           

We understand that SkyMall, Inc. (the "Company"), Gemstar-TV Guide              
International, Inc. ("Acquiror") and GSky Acquisition Sub, Inc. (a wholly owned 
subsidiary of Acquiror, "Merger Sub") are proposing to enter into an Agreement  
and Plan of Merger (the "Agreement") which will provide, among other things, for
the merger (the "Merger") of the Company with and into Merger Sub.  Upon        
consummation of the Merger, the Company will become a wholly owned subsidiary of
Acquiror.  Under the terms, and subject to the conditions, set forth in a draft 
of the Agreement dated May 11, 2001 (the "Draft Agreement"), at the effective   
time of the Merger, each share of common stock of the Company, par value $0.001 
per share ("Company Common Stock"), outstanding immediately prior to the        
effective time of the Merger (the "Effective Time"), other than (i) shares (the 
"Worsley Shares") beneficially owned by Robert M. Worsley, Christi M. Worsley   
and/or the Robert Merrill Worsley and Christi Marie Worsley Family Revocable    
Trust dated July 29, 1998, (ii) certain shares to be canceled pursuant to the   
Agreement and (iii) shares held by stockholders who properly exercise           
dissenters' rights ("Dissenting Shares"), will be converted into the right to   
receive, subject to adjustment as provided in the Agreement, the following (the 
"Public Merger Consideration"):  (a) 0.03759 (the "Public Share Fraction") of a 
share of common stock of the Acquiror, par value $0.01 per share ("Acquiror     
Common Stock") equal to the Public Share Fraction (as defined below); and (b)   
$1.50 in cash, without interest.  Under the terms, and subject to the           
conditions, set forth in the Draft Agreement, at the effective time of the      
Merger, each Worsley Share outstanding immediately prior to the Effective Time  
will be converted into the right to receive, subject to adjustment as provided  
in the Agreement, the following (the "Worsley Merger Consideration"):  (a) a    
fraction of a share of Acquiror Common Stock equal to the Public Share Fraction;
and (b) a fraction of a share of Acquiror Common Stock determined by dividing   
$1.50 by the volume weighted average sales price of a share of Acquiror Common  
Stock on the closing date.  The terms and conditions of the Merger are set out  
more fully in the Draft Agreement.                                              

You have asked us whether, in our opinion, the Public Merger Consideration is   
fair from a financial point of view and as of the date hereof to the "Holders of
Company Common Stock".  The "Holders of Company Common Stock" shall be defined  
as all holders of Company Common Stock other than Acquiror, Merger Sub, any     
affiliates of Acquiror or Merger Sub or any holders of Worsley Shares or        
Dissenting Shares.                                                              

For purposes of this opinion we have, among other things:                       

(i)    reviewed certain publicly available financial statements and other 
   business and financial information of the Company and Acquiror,
respectively;                                               

   (ii)   reviewed certain internal financial statements and other financial and
   operating data, including certain financial forecasts and other
       forward-looking information, concerning the Company prepared by the
management of the Company;                                  

(iii)  reviewed with the Company and Acquiror certain publicly available  
estimates of research analysts relating to Acquiror;        

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Board of Directors                                                              
SkyMall, Inc                                                                    
May 14, 2001                                                                    
Page 2                                                                          

(iv)   held discussions with the respective managements of the Company and
    Acquiror concerning the businesses, past and current operations,
    financial condition and future prospects of both the Company and
        Acquiror, independently and combined, including discussions with the
  managements of the Company and Acquiror concerning their views
regarding the strategic rationale for the Merger;           

(v)    reviewed the financial terms and conditions set forth in the Draft 
Agreement;                                                  

 (vi)   reviewed the stock price and trading history of Company Common Stock
and Acquiror Common Stock;                                  

   (vii)  compared the financial performance of the Company and Acquiror and the
    prices and trading activity of Company Common Stock and Acquiror
     Common Stock with that of certain other publicly traded companies
comparable with the Company and Acquiror, respectively;     

 (viii) compared the financial terms of the Merger with the financial terms,
          to the extent publicly available, of other transactions that we deemed
relevant;                                                   

(ix)   reviewed the pro forma impact of the Merger on Acquiror's earnings 
        before interest, taxes, depreciation and amortization ("EBITDA") per
       share, cash earnings per share and GAAP (as defined below) earnings
per share;                                                  

(x)    prepared a discounted cash flow analysis of the Company;           

  (xi)   participated in discussions and negotiations among representatives of
        the Company and Acquiror and their financial and legal advisors; and

 (xii)  made such other studies and inquiries, and reviewed such other data,
as we deemed relevant.                                      

In our review and analysis, and in arriving at our opinion, we have assumed and 
relied upon the accuracy and completeness of all of the financial and other     
information provided to us (including information furnished to us orally or     
otherwise discussed with us by the managements of the Company and Acquiror) or  
publicly available and have neither attempted to verify, nor assumed            
responsibility for verifying, any of such information.  We have relied upon the 
assurances of the managements of the Company and Acquiror that they are not     
aware of any facts that would make such information inaccurate or misleading.   
Furthermore, we did not obtain or make, or assume any responsibility for        
obtaining or making, any independent evaluation or appraisal of the properties, 
assets or liabilities (contingent or otherwise) of the Company or Acquiror, nor 
were we furnished with any such evaluation or appraisal.  With respect to the   
financial forecasts and projections (and the assumptions and bases therefor) for
the Company that we have reviewed, we have assumed that such forecasts and      
projections have been reasonably prepared in good faith on the basis of         
reasonable assumptions and reflect the best currently available estimates and   
judgments of the management of the Company as to the future financial condition 
and performance of the Company and we have further assumed that such projections
and forecasts will be realized in the amounts and in the time periods currently 
estimated. With respect to the Acquiror, we have discussed with the management  
of Acquiror certain publicly available estimates of research analysts relating  
to Acquiror and we have been advised, and we have assumed, that such estimates  
represent reasonable estimates and judgments as to the future financial         
condition and performance of Acquiror and we have further assumed that such     
estimates will be realized in the amounts and in the time periods currently     
estimated. We have assumed that the Merger will be consummated upon the terms   
set forth in the Draft Agreement without material alteration thereof, including,
among other things, that the Merger will be accounted for as a purchase method  
business combination in accordance with U.S. generally accepted accounting      
principles ("GAAP") and that the Merger will be treated as a tax-free           
reorganization pursuant to the Internal Revenue Code of 1986, as amended. In    
addition, we have assumed that the historical financial statements of each of   
the Company and Acquiror reviewed by us have been prepared and fairly presented 
in accordance with U.S. GAAP consistently applied.                              

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Board of Directors                                                              
SkyMall, Inc                                                                    
May 14, 2001                                                                    
Page 3                                                                          

This opinion is necessarily based upon market, economic and other conditions as 
in effect on, and information made available to us as of, the date hereof.  It  
should be understood that subsequent developments may affect the conclusion     
expressed in this opinion and that we disclaim any undertaking or obligation to 
advise any person of any change in any matter affecting this opinion which may  
come or be brought to our attention after the date of this opinion.  Our opinion
is limited to the fairness, from a financial point of view and as of the date   
hereof, of the Public Merger Consideration to the Holders of Company Common     
Stock.  We do not express any opinion as to (i) the value of any employee       
agreement or other arrangement entered into in connection with the Merger, (ii) 
any tax or other consequences that might result from the Merger or (iii) what   
the value of Acquiror Common Stock will be when issued to the Company's         
stockholders pursuant to the Merger or the price at which the shares of Acquiror
Common Stock that are issued pursuant to the Merger may be traded in the future.
Our opinion does not address the relative merits of the Merger and the other    
business strategies that the Company's Board of Directors has considered or may 
be considering, nor does it address the decision of the Company's Board of      
Directors to proceed with the Merger.  Neither does our opinion address any     
legal or accounting matters, as to which we understand that Acquiror obtained   
such advice as it deemed necessary from qualified professionals.                

We are acting as financial advisor to the Company in connection with the Merger 
and will receive (i) a fee contingent upon the delivery of this opinion and (ii)
an additional fee contingent upon the consummation of the Merger.  In addition, 
the Company has agreed to indemnify us for certain liabilities that may arise   
out of our engagement.  We maintain a market in the shares of Acquiror Common   
Stock.  In the ordinary course of business, we may trade in the Company's       
securities and Acquiror's securities for our own account and the account of our 
customers and, accordingly, may at any time hold a long or short position in the
Company's securities or Acquiror's securities.                                  

Our opinion expressed herein is provided for the information of the Board of    
Directors of the Company in connection with its evaluation of the Merger.  Our  
opinion is not intended to be and does not constitute a recommendation to any   
stockholder of the Company as to how such stockholder should vote, or take any  
other action, with respect to the Merger.  This opinion may not be summarized,  
described or referred to or furnished to any party except with our express prior
written consent.                                                                

Based upon and subject to the foregoing considerations, it is our opinion that, 
as of the date hereof, the Public Merger Consideration is fair to the Holders of
Company Common Stock from a financial point of view.                            

                       Very truly yours,

                              ROBERTSON STEPHENS, INC.

                                  /s/ ROBERTSON STEPHENS, INC.

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PROXY 

SKYMALL, INC. 
1520 EAST PIMA STREET 
PHOENIX, ARIZONA 85034  

THIS PROXY IS SOLICITED ON BEHALF OF THE  
BOARD OF DIRECTORS OF SKYMALL, INC. 
FOR THE SPECIAL MEETING OF STOCKHOLDERS 

         The undersigned stockholder of SkyMall, Inc., a Nevada corporation (the
"Company"), hereby acknowledges receipt of the Notice of Special Meeting of     
Stockholders, dated June __, 2001, and hereby appoints Robert M. Worsley and    
Christine A. Aguilera, and each of them, proxies and attorneys-in-fact, with    
full power of substitution, on behalf and in the name of the undersigned, to    
represent the undersigned at the Special Meeting of Stockholders of SkyMall,    
Inc. to be held at the corporate offices of the Company located at 1520 East    
Pima Street, Phoenix, Arizona 85034 on June __, 2001, at 9:00 a.m., local time, 
and at any adjournment(s) or postponement(s) thereof, and to vote all shares of 
Common Stock that the undersigned would be entitled to vote if then and there   
personally present, on the matters set forth on the reverse side.               

CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE  

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[PROXY CARD INSTRUCTION SHEET AND REVERSE OF PROXY CARD]                        

SKYMALL, INC.           VOTE BY PHONE - 1-800-690-6903                          
                    Use any touch-tone telephone to transmit your voting
PROXY SERVICES          instructions. Have your proxy card in hand when you     
P. O. BOX 9079          call. You will be prompted to enter your 12-digit       
FARMINGDALE, NY 11735   Control Number which is located below and then follow   
                    the simple instructions the Vote Voice provides you.

    VOTE BY INTERNET - WWW.PROXYVOTE.COM
                       -----------------
                     Use the Internet to transmit your voting instructions
                     and for electronic delivery of information. Have your
                    proxy card in hand when you access the web site. You
                      will be prompted to enter your 12-digit Control Number
                        which is located below to obtain your records and create
      an electronic voting instruction form.

VOTE BY MAIL                    
                        Mark, sign and date your proxy card and return it in the
                 postage-paid envelope we've provided or return to
                     SkyMall, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY
11717.                          

Please sign exactly as name appears above. When shares are held by joint        
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please   
sign in full corporate name by president or other authorized officer. If a      
partnership, please sign in partnership name by authorized person.              

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:                     

                         SKYMALL          KEEP THIS PORTION FOR YOUR RECORDS
================================================================================
[REVERSE SIDE OF PROXY CARD]                DETACH AND RETURN THIS PORTION ONLY 

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED 

___________________ 

SKYMALL, INC.                                                                   

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD                               
PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE                               

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE 
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED   
FOR APPROVING THE AGREEMENT AND PLAN OF MERGER.                                 

1.   To approve the Agreement and Plan of Merger dated as of May 14, 2001 among 
Gemstar-TV Guide International, Inc., GSky Acquisition Sub, Inc., and SkyMall,  
Inc. (the "Merger Agreement") and the Merger, pursuant to which SkyMall will be 
merged with and into GSky Acquisition Sub, and GSky Acquisition Sub will        
continue as the surviving corporation and change its name to "SkyMall, Inc."    

[_] FOR           [_] AGAINST               [_] ABSTAIN             

I will attend the Special Meeting  [_]  

2.   As such proxies deem advisable upon such matters as may properly come      
before the special meeting or any adjournment or postponement thereof.          

_________________     _________________                               

Signature       Date        Signature (Joint Owners)  Date            

[PLEASE SIGN WITHIN BOX]                                              

________________________________________                                        

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PREM14A’ Filing		Date		First		Last			Other Filings
		12/31/01		20
		9/30/01		13		130
		6/30/01		122
Filed as of:		5/30/01
Filed on:		5/29/01
		5/25/01		20		21
		5/24/01		1
		5/17/01		29
		5/15/01		22					10-Q,  8-K
		5/14/01		2		141			8-K
		5/12/01		37		42
		5/11/01		37		137
		5/9/01		37		42
		5/4/01		37
		5/2/01		29
		5/1/01		43
		4/30/01		22		112			10-K/A
		4/13/01		37
		4/12/01		36					8-K
		4/2/01		22		81			10-K405
		3/31/01		16		96			10-K405,  10-Q
		3/30/01		36
		3/28/01		36					8-K
		3/3/01		36
		2/26/01		36		80
		2/23/01		36
		2/21/01		36
		12/31/00		16		96			10-K/A,  10-K405
		10/31/00		104
		7/12/00		11		31
		4/1/00		16		81
		3/31/00		16		81			10-K,  10-Q,  4
		12/31/99		17		117			10-K,  4,  8-K
		10/4/99		20
		9/15/99		95
		6/30/99		82					10-Q,  4
		3/31/99		16		77			10-K,  10-Q,  4
		12/31/98		17		20			10-K,  4
		7/29/98		11		137
		7/13/98		22
		3/31/98		16					10-Q
		1/1/98		110		113
		12/31/97		17					10-K,  10-K/A,  4
		3/31/97		16					10-K,  10-Q
		12/31/96		17					10-K,  4
		10/31/96		22					8-A12G
									List all Filings