SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
MACROVISION CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
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):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
[_] 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:
<PAGE>
NOTICE OF
1999 ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY STATEMENT
[LOGO]
<PAGE>
[LOGO]
MACROVISION CORPORATION
1341 Orleans Drive
Sunnyvale, CA 94089
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
Macrovision Corporation, a Delaware corporation, will be held at The Wyndham
Garden Hotel, 1300 Chesapeake Terrace, Sunnyvale, California at 10:00 a.m. on
Tuesday, May 18, 1999, for the following purposes:
Proposal 1. To elect six directors for terms expiring at the 2000 Annual
Meeting;
Proposal 2. To ratify the selection of KPMG LLP as independent auditors for
1999
and to transact such other business as may properly come before the meeting or
any adjournments or postponements of the meeting.
The record date for the determination of stockholders entitled to notice of
and to vote at the meeting is March 22, 1999.
We cordially invite all stockholders to attend the meeting in person. To
assure your representation at the meeting, however, you are urged to mark, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ John O. Ryan
John O. Ryan, Secretary
Dated:April 12, 1999
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Whether or not you expect to attend the annual meeting, please complete, sign,
date and promptly mail your proxy in the envelope provided for your convenience.
You may revoke this proxy at any time prior to the annual meeting and, if you
attend the annual meeting, you may vote your shares in person.
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<PAGE>
MACROVISION CORPORATION
1341 Orleans Drive
Sunnyvale, CA 94089
PROXY STATEMENT
--------------
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of Macrovision Corporation for use at the
annual meeting of stockholders to be held on May 18, 1999, or at any
adjournments or postponements of the meeting, for the purposes set forth in this
proxy statement and the notice of the meeting. This proxy statement and the
accompanying proxy are being mailed to stockholders on or about April 12, 1999.
Macrovision's Annual Report for 1998 is enclosed with this proxy statement.
At the close of business on March 22, 1999, the record date for determining
those stockholders entitled to vote at the annual meeting, there were 8,925,229
shares of common stock entitled to vote. Each share has one vote.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares entitled to vote at the meeting will constitute a quorum.
Directors will be elected by a plurality of the votes of the shares represented
in person or by proxy at the meeting and entitled to vote on the election of
directors. The other proposal requires the affirmative vote of the majority of
shares of common stock present in person or represented by proxy at the meeting
and entitled to vote. Abstentions and "broker non-votes" are counted as shares
represented at the meeting in determining whether a quorum is present, but do
not count as votes cast with respect to any proposal. "Broker non-votes" are
shares held by a broker or nominee as to which instructions have not been
received from the beneficial owners of persons entitled to vote and the broker
or nominee does not have discretionary voting power.
The persons named as proxies will vote all signed, returned proxies in
accordance with the instructions contained in the proxy. If a signed, returned
proxy does not give instructions as to how it should be voted on a particular
proposal, the shares represented by the proxy will be voted for the proposal. If
sufficient votes in favor of the proposals are not received by the date of the
meeting, the persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitations of proxies. Any adjournment requires
the affirmative vote of the majority of the shares present in person or
represented by proxy at the meeting and entitled to vote.
Any person signing a proxy in the form accompanying this proxy statement
has the power to revoke it before the meeting or at the meeting before it is
voted. A stockholder may revoke a proxy by delivering to Macrovision a written
statement that the proxy is revoked, by signing a later proxy and presenting it
at the meeting, or by attending the meeting and voting in person. Attendance at
the meeting by itself, however, does not revoke a proxy. Stockholders whose
shares are held of record by a broker, bank or other nominee must bring to the
meeting a letter from the nominee confirming that the stockholder is the
beneficial owner of the shares before the stockholder may vote at the meeting.
Macrovision will pay the expenses of soliciting proxies for the meeting.
Following the original mailing of the soliciting materials, Macrovision will
request that brokers, custodians, nominees and other record holders forward
copies of the soliciting materials to persons for whom they hold shares and
request authority for the exercise of proxies. In such cases, Macrovision, upon
the request of the record holders, will reimburse the record holders for their
reasonable expenses. Macrovision may supplement the original solicitation of
proxies by telephone or personal solicitation by its directors, officers and
employees.
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees
The board consists of six directors, all of whom are to be elected at the
meeting. Each director will be elected to hold office until the next annual
meeting and until a successor is elected and qualified. If any nominee for any
reason is unable to serve or for good cause will not serve, the proxies may be
voted for such substitute nominee as the proxy holder may determine. Macrovision
is not aware of any nominee who will be unable to or for good cause will not
serve as a director. The names of the nominees and certain information about
them are set forth below, under the heading "Directors and Executive Officers".
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Directors and Executive Officers
The following table and biographical summaries give information as to each
person nominated for election as a director and as to each of Macrovision's
executive officers:
Directors
Director
Name Age Since Position
- ---- --- ---- ------
John O. Ryan 53 1987 Chairman of the Board of Directors,
Chief Executive Officer, and Secretary
William A. Krepick 53 1995 President, Chief Operating Officer
and Director
Richard S. Matuszak 55 1992 Vice President, Special Interest
Copy Protection and Director
Donna S. Birks 43 1997 Director
William Stirlen 60 1997 Director
Thomas Wertheimer 60 1997 Director
Mr. Ryan is a co-founder of Macrovision and an inventor of its core copy
protection and video scrambling technologies. He has served as Chairman of the
Board of Directors and Secretary since June 1991 and Chief Executive Officer
since 1995. He has been a director since June 1987 and served as Vice-Chairman
of the Board of Directors from 1987 until June 1991. He also served as General
Partner of the partnership predecessor of Macrovision from 1985 to 1987 and as
President and Secretary of Macrovision's corporate predecessor from 1983 to
1985. Prior to founding Macrovision, Mr. Ryan was Director of Research and
Development of Ampex Corporation's broadcast camera group. Mr. Ryan holds over
45 U.S. patents in the fields of video copy protection, video scrambling and
television camera technology and is the author of several other pending
applications. Mr. Ryan took undergraduate courses in Physics and Math at the
University of Galway in Ireland and received a Full Technological Certificate in
Telecommunications from the City and Guilds Institute of London.
Mr. Krepick has served as a director since November 1995 and as President
and Chief Operating Officer since July 1995. He has been with Macrovision since
November 1988, and served as Vice President, Sales and Marketing until June 1992
and Senior Vice President, Theatrical Copy Protection from July 1992 to June
1995. Prior to joining Macrovision, Mr. Krepick held several executive marketing
management positions over a ten-year period with ROLM Corporation, a
telecommunications equipment manufacturing company. He holds a B.S. degree in
Mechanical Engineering from Rensselear Polytechnic Institute and an M.B.A. from
Stanford University.
Mr. Matuszak has served as Vice President, Special Interest Copy Protection
since June 1992, and as a director since May 1992. He joined Macrovision in
August 1985 and held various sales and marketing positions from August 1985 to
June 1992. From June 1984 to August 1985, Mr. Matuszak was a Sales Manager for
the Broadcast Products Division of Hitachi Corporation. He holds an Associate
degree in Applied Technologies and Electronics from DeVry Institute of
Technology.
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<PAGE>
Ms. Birks has served as a director since May 1997. Since December 1997, she
has served as Executive Vice President and Chief Financial Officer at California
Microwave, Inc., a satellite and wireless telecommunications company, and from
August 1994 to June 1997, she served as Vice President, Finance and
Administration and Chief Financial Officer at ComStream. She has also held
senior management positions at Macrovision, GTE Spacenet and Contel ASC. Ms.
Birks holds a B.A. degree in Business Administration from George Mason
University and an M.S. degree in Finance from American University. She is a
certified public accountant.
Mr. Stirlen has served as a director since May 1997. Under a consulting
arrangement, he held various executive offices with Open Text Corporation, an
intranet software company headquartered in Waterloo, Ontario, from June 1996,
serving as Chief Financial Officer until October 1997 and as Executive Vice
President of Corporate Development from October 1997 through October 1998. Mr.
Stirlen has been a consultant to technology companies from February 1994 to the
present. From March 1993 to February 1994, he served as Chief Financial Officer
of Supercuts Inc. He has also held senior management positions at Computer
Consoles Inc. and Trimble Navigation Ltd. Mr. Stirlen holds a B.A. degree from
Yale University and an M.B.A. in Finance from Northwestern University.
Mr. Wertheimer has served as a director since July 1997. He served as
Executive Vice President and Chairman of the Home Video and Television Groups of
MCA, Inc. from 1992 to January 1996. From January 1996 to the present, Mr.
Wertheimer has served as a consultant to Universal Studios and USA, Inc. He is a
board member of 4MC Corp. and of the Columbia Law School Board of Visitors. He
also serves as President of the KCRW Foundation. Mr. Wertheimer holds a B.A.
degree from Princeton University and an L.L.B. from Columbia University School
of Law.
Other Officers
Name Age Position
---- --- ------
Victor A. Viegas 42 Vice President, Finance and Administration
and Chief Financial Officer
Mark S. Belinsky 42 Sr. Vice President, New Business Development
Patrice J. Capitant 50 Vice President, Engineering
Brian R. Dunn 42 Vice President, Computer Software Copy
Protection
Whit T. Jackson 38 Vice President, Encryption Technologies Group
Carl Jorgensen 43 Vice President, Operations
Mr. Viegas has served as Vice President, Finance and Administration and
Chief Financial Officer of Macrovision since June 1996. From October 1986 to
June 1996, he served as Vice President of Finance and Chief Financial Officer at
Balco Incorporated, a manufacturer of advanced automotive service equipment,
and, since May 1991, a subsidiary or division of Snap-On Tools. He holds a B.S.
degree in Accounting and an M.B.A. from Santa Clara University. Mr. Viegas is
also a certified public accountant.
Mr. Belinsky has served as Senior Vice President, New Business Development
since December 1998, Senior Vice President, Worldwide Theatrical and
Pay-Per-View Copy Protection from October 1997 to December 1998, and Vice
President, Theatrical and Pay-Per-View Copy Protection from October 1995 to
October 1997. Between June and September 1995, he was Chief Operating Officer of
the McKinley Group, Inc., an Internet directory services company. From May 1993
to June 1995, Mr. Belinsky was Vice President and General Manager of the
Electronic Marketplace Systems Division of International Data Group, a developer
of online shopping malls for personal computer and software products. He was an
independent consultant between February and May 1993, and, from October 1988 to
January 1993, he was Vice President and General Manager of the Interop Company,
a division of Ziff-Davis Publishing Company. He holds a B.A. degree in Business
Administration from Wayne State University and an M.B.A. from Harvard Business
School.
Dr. Capitant has served as Vice President, Engineering since October 1996.
He joined Macrovision in October 1995 as Director of Engineering. He served as
Manager of Video Engineering at Radius, Inc., a computer equipment manufacturer,
from December 1994 to September 1995. Dr. Capitant held engineering positions at
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<PAGE>
Compression Labs, Inc., a telecommunications equipment manufacturer, from
September 1993 to December 1994 and Sony Corporation of America, Advanced Video
Technology Center, from September 1989 to September 1993. He completed his
undergraduate and post-graduate work in engineering and automatic control at
Institut Industrial du Nord, Lille, France and University of Lille. He holds a
Ph.D. degree in Electrical Engineering from Stanford University.
Mr. Dunn has served as Vice President, Computer Software Copy Protection
since April 1998, and was Vice President, Business Development from January 1995
to December 1998. From January 1989 to December 1994, he served as Vice
President, Operations, Corporate Counsel and Chief Financial Officer of Phase 2
Automation, a factory automation company. Mr. Dunn holds a B.A. degree in
Accounting from the University of Notre Dame and a J.D. degree from Santa Clara
University School of Law. He is a certified public accountant and a member of
the California bar.
Mr. Jackson has served as Vice President, Encryption Technologies Group
since September 1992. He joined Macrovision in August 1990 as Sales Manager for
Macrovision's line of encryption products. From January 1989 to August 1990, Mr.
Jackson managed the satellite service business for the Galaxy/Westar satellite
fleet of Hughes Communications, Inc., a satellite communications company. He
holds a B.A. degree in International Relations from Northwestern University and
an M.B.A. from the J.L. Kellogg Graduate School of Management at Northwestern
University.
Mr. Jorgensen joined Macrovision in July 1990 to head up the Manufacturing
Department. He currently serves as Vice President, Operations responsible for
the Manufacturing, IS and Facilities departments. Mr. Jorgensen has over 20
years experience in the commercial and consumer electronics industry.
Immediately prior to joining Macrovision, he was the Manufacturing/Engineering
Manager at Digital F/X, Inc. He has held various management positions in the
manufacturing/engineering field at companies such as Gould Electronics, Inc.,
Atlas Electronics (where he set up their facility in Malaysia), Ampex
Corporation and Underwriters Laboratories. Mr. Jorgensen received a B.S. degree
with honors in Electronics from San Jose State University in 1979 and has taken
numerous post graduate courses in computer electronics.
Board Committees and Meetings
During 1998, the board of directors met six times. Each board member
attended at least 75% of the board meeting that were held during the time he or
she served as a member of the board and 75% of all meetings of the committees of
the board of directors on which he or she served.
Standing committees of the board of directors include the compensation
committee and the audit committee. There is no nominating committee.
The compensation committee was established in 1997. The members of the
compensation committee are Donna S. Birks, William Stirlen and Thomas
Wertheimer, none of whom are employees of Macrovision. The compensation
committee makes recommendations with respect to compensation of senior officers
and granting of stock options and stock awards. The compensation committee met
five times in 1998.
The members of the audit committee are Donna S. Birks, William Stirlen and
Thomas Wertheimer. The audit committee meets with the independent auditors to
review the adequacy of Macrovision's internal control systems and financial
reporting procedures; reviews the general scope of the annual audit and the fees
charged by the independent auditors; reviews and monitors the performance of
non-audit services by the auditors; reviews the fairness of any proposed
transaction between any officer, director or other affiliate of Macrovision and
Macrovision, and after such review, makes recommendations to the full board; and
performs such further functions as may be required by any market upon which
Macrovision's common stock may be listed. The audit committee met five times
during 1998.
4
<PAGE>
Director Compensation
Mr. Matuszak receives a fee of $1,000 for each board meeting he attends.
Each of the non-employee directors receives a fee of $1,000 for each board
meeting and $750 for each compensation and audit committee meeting he or she
attends. No other member of the board of directors currently receives a fee for
attending board or committee meetings. The following non-employee directors also
were granted options to purchase common stock pursuant to the 1996 Directors
Stock Option Plan during 1998:
Name Number of Shares Exercise Price
---- ---------------- --------------
Donna Birks ......................... 3,000 $20.00
William Stirlen ..................... 3,000 $20.00
Thomas Wertheimer ................... 3,000 $25.13
PROPOSAL 2:
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The board of directors has selected KPMG LLP as Macrovision's independent
auditors for 1999. KPMG LLP was first appointed independent auditors of
Macrovision in November 1995. Representatives of KPMG LLP are expected to be
present at the meeting, will have an opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG LLP as Macrovision's
independent auditors is not required. However, the board is submitting the
selection of KPMG LLP to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the selection, the board
will reconsider whether to retain that firm. Even if the selection is ratified,
the board in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the board determines
that such a change would be in the best interests of Macrovision and its
stockholders.
MANAGMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the common stock as of March 22, 1999 by (a) each person known to
Macrovision to be the owner of more than 5% of the common stock, (b) each
director and nominee (c) each executive officer, and (d) all directors and
executive officers as a group. As of March 22, 1999, 8,925,229 shares of common
stock were issued and outstanding. Unless otherwise indicated in the footnotes
to the table, the persons and entities named in the table have sole voting and
sole investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of common stock subject to
options that are exercisable at or within 60 days of March 22, 1999 are deemed
to be outstanding and to be beneficially owned by the person holding such
options for the purpose of computing the percentage ownership of such person but
are not treated as outstanding for the purpose of computing the percentage of
ownership of any other person.
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Percent of
Name and Address or Identity of Group Beneficially Owned Beneficial Ownership
- ------------------------------------- ------------------ --------------------
<S> <C> <C>
Victor Company of Japan, Limited (1) ................................. 1,587,988 17.8%
12, 3-chome, Moriya-cho, Karagawa-ku
Yokohama 221, Japan
Kopp Investment Advisors(2) .......................................... 668,300 7.5%
7701 France Avenue South, Suite 500
Edina, MN 55435
John O. Ryan (3) ..................................................... 583,006 6.5%
1341 Orleans Drive
Sunnyvale, CA 94089
TCW Group (4) ........................................................ 454,400 5.1%
865 South Figueroa Street
Los Angeles, CA 90017
</TABLE>
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<TABLE>
<CAPTION>
Number of Shares
of Common Stock Percent of
Name and Address or Identity of Group Beneficially Owned Beneficial Ownership
- ------------------------------------- ------------------ --------------------
<S> <C> <C>
Nicholos-Applegate Capital Mgmt.(5) .................................. 450,300 5.0%
600 West Broadway, 29th Floor
San Diego, CA 92101
William A. Krepick (6) ............................................... 125,635 1.4%
Richard S. Matuszak (7) .............................................. 68,117 *
Victor A. Viegas (8) ................................................. 61,135 *
Whit T. Jackson (9) .................................................. 46,916 *
Carl S. Jorgensen (10) ............................................... 18,680 *
Brian R. Dunn (11) ................................................... 14,690 *
Patrice J. Capitant (12) ............................................. 9,433 *
William Stirlen (13) ................................................. 5,509 *
Donna S. Birks (14) .................................................. 5,250 *
Mark S. Belinsky ..................................................... 3,230 *
Thomas Wertheimer (15) ............................................... 2,749 *
All executive officers and directors as a group (12 persons) (16) .... 944,350 10.4%
</TABLE>
- ----------
* Represents less than 1%.
(1) These shares are held of record by Pacific Media, an indirect, wholly owned
subsidiary of JVC .
(2) According to a Schedule 13G filed with the SEC on January 26, 1999, these
shares are held of record by Kopp Investment Advisors, Inc., a Minnesota
corporation and by Kopp Holding Company, a Minnesota corporation, of which
Kopp Investment Advisors, Inc. is a wholly-owned subsidiary; and by an
individual, LeRoy C. Kopp, who holds 100% of the outstanding capital stock
of Kopp Holding Company.
(3) Includes 443,555 shares held of record by a trust of which Mr. Ryan and his
wife are the trustees, 100,289 shares held of record by Mr. Ryan, 16,330
shares held of record by Mr. Ryan as custodian for various family members;
11,666 shares held of record by Mr. Ryan's son and 11,166 shares held of
record by Mr. Ryan's daughter.
(4) According to a Schedule 13G filed with the SEC on February 12, 1999, these
shares are held of record by The TCW Group Inc., a Nevada corporation and
by an individual, Robert Day, who may be deemed to control The TCW Group
Inc. and other holders of Macrovision's common stock.
(5) According to a Schedule 13G filed with the SEC on February 5, 1999, these
shares are held of record by Nicholas-Applegate Capital Mgmt., a California
limited partnership.
(6) Includes 45,034 shares subject to options exercisable as of March 22, 1999
or within 60 days thereafter.
(7) Represents 14,835 shares held of record by Mr. Matuszak, 15,766 shares held
of record jointly with his wife and 37,516 shares subject to stock options
exercisable as of March 22, 1999 or within 60 days thereafter.
(8) Includes 12,725 shares subject to stock options exercisable as of March 22,
1999 or within 60 days thereafter.
(9) Includes 30,916 shares subject to stock options exercisable as of March 22,
1999 or within 60 days thereafter.
(10) Represents shares subject to stock options exercisable as of March 22, 1999
or within 60 days thereafter.
(11) Includes 13,190 shares subject to stock options exercisable as of March 22,
1999 or within 60 days thereafter.
(12) Includes 8,377 shares subject to stock options exercisable as of March 22,
1999 or within 60 days thereafter.
(13) Includes 4,509 shares subject to stock options exercisable as of March 22,
1999 or within 60 days thereafter.
(14) Represents 2,000 shares held of record by Thomas E. and Donna S. Birks
Trust dated August 26, 1992 and 3,250 shares subject to stock options
exercisable as of March 22, 1999 or within 60 days thereafter.
(15) Represents shares subject to stock options exercisable as of March 22, 1999
or within 60 days thereafter.
(16) Includes the shares referenced in footnotes (3) and (6) through (15).
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the directors and executive
officers, and persons who own more than 10% of a registered class of
Macrovision's equity securities, to file with the Commission initial reports of
ownership and reports of changes in ownership of common stock. Officers,
directors and greater than 10% stockholders are required by regulation to
furnish Macrovision with copies of all Section 16(a) forms they file.
To the knowledge of Macrovision, based solely on a review of the copies of
such forms furnished to Macrovision and written representations that no other
reports were required, Macrovision believes that all Section 16(a) filing
requirements were complied with during 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1998, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which Macrovision was or is
to be a party in which the amount involved exceeds $60,000 and in which any
director, executive officer or holder of more than 5% of the Macrovision's
common stock had or will have a direct or indirect material interest other than
(a) compensation agreements, which are described, where required, elsewhere in
this proxy statement, and (b) the transactions described below.
Transactions with Pacific Media Development, Inc. and Victor Company of Japan,
Limited, and Matsushita Electric Industrial Co., Ltd.
The following transactions involve Victor Company of Japan, Limited ("JVC")
and entities that are owned by JVC and Matsushita Electric Industrial Co., Ltd.
("Matsushita") which owns approximately 52% of JVC. Through a wholly-owned
subsidiary, JVC owns 100% of Pacific Media Development, Inc. ("Pacific Media").
JVC is a beneficial owner of the shares of Macrovision's common stock that are
held of record by Pacific Media and represent more than 5% of the common stock.
Under the terms of the purchase agreement entered into in 1991 when Pacific
Media acquired its interest in Macrovision, Macrovision may not divide or assign
any rights to its patents that were existing or pending in June 1991, without
the prior written consent of Pacific Media, which consent may not be
unreasonably withheld.
Macrovision and JVC are parties to a Technology Application Agreement dated
November 29, 1988 (the "Application Agreement"), a Duplicator Agreement dated
June 1, 1988 (the "Duplicator Agreement") and an Agreement dated July 15, 1994
(the "Video Agreement"). Pursuant to the Application Agreement, JVC has applied
Macrovision's copy protection process to prerecorded videocassettes manufactured
and distributed in Japan by JVC. Pursuant to the Duplicator Agreement, JVC has
applied Macrovision's copy protection process to prerecorded videocassettes
manufactured and distributed in Japan by certain of Macrovision's licensees.
Pursuant to the Video Agreement, JVC developed a prototype of equipment to apply
a copy protection process to prerecorded videocassettes, and granted Macrovision
exclusive rights to purchase such equipment from JVC for resale and to
sublicense the copy protection technology for use with the equipment. In 1998,
Macrovision recorded revenue from JVC of approximately $211,000 and recorded
expenses payable to JVC of approximately $36,000 under these agreements.
In connection with a license agreement dated September 26, 1995 between
Macrovision, Victor Technobrain Co., Ltd. ("Techno"), a wholly owned subsidiary
of JVC, and an unrelated party, Macrovision has paid Techno a development fee of
$50,000 which has been recorded as an offset to the revenue recognized from the
unrelated party. Macrovision paid an additional $50,000 to Techno in 1997 upon
receipt of the final license payment from the unrelated party. The license
granted to Techno is for the development and manufacture of products using
Macrovision's copy protection and PhaseKrypt technologies.
Macrovision's Japanese subsidiary and Techno are parties to a Technical
Consulting Agreement dated as of July 1, 1996 (the "Consulting Agreement"),
pursuant to which Techno agreed to provide technical consulting services as
assigned by certain officers of Macrovision or Macrovision Japan in connection
with technical support to licensed duplicators, rights owners and system
operators, set-top decoder manufacturers and semiconductor companies that
provide integrated circuits for set-top decoders in certain Asian countries. The
Consulting Agreement provides for Macrovision Japan to pay a consulting fee of
approximately $85 per hour, subject to a minimum consulting fee of approximately
$1,700 per quarter, and to reimburse Techno for its expenses in performing
services under the Consulting Agreement. In 1998 , Macrovision paid to Techno
approximately $6,100
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<PAGE>
in consulting fees. (Amounts paid and payable under the Consulting Agreement are
denominated in yen, and the dollar equivalents stated above are based on then
current exchange rates.)
In July 1996, Macrovision entered into a Copy Protection Technology License
Agreement with Matsushita. In June 1997, Macrovision entered into a Copy
Protection Technology License Agreement with Daiichikosho Co. Ltd and
Matsushita. Also in June 1997, Macrovision entered into a Copy Protection
Technology License Agreement with JVC. These agreements authorize the licensee
to include integrated circuits incorporating Macrovision's copy protection
technology in digital set-top decoders it manufactures. Each licensee paid to
Macrovision an initial fee of $50,000 and pays a standard per unit royalty for
each set top decoder manufactured. Under the agreement with Daiichikosho and
Matsushita, Matsushita paid the initial fee and Daiichikosho is obligated to pay
the per unit royalty. In 1998, Macrovision received approximately $128,000 under
these agreements.
In November 1996, Macrovision entered into a Digital Versatile Disc
Player/Digital Video Cassette Recorder License Agreement for Anticopy Technology
with Matsushita. In February 1997, Macrovision and JVC entered into a Digital
Versatile Disc Player/Digital Video Cassette Recorder License Agreement for
Anticopy Technology. These agreements authorize the licensee to include
integrated circuits incorporating Macrovision's copy protection technology in
DVD players and digital VCRs that it manufactures. This provides a royalty-free,
non-exclusive and non-transferable license in the technology licensed from
Macrovision, for which the licensee must make the VCRs or television sets that
it manufactures compatible with Macrovision's copy protection technology.
In January 1997, Macrovision and JVC entered into a Copy Protection
Technology Agreement (the "Technology Agreement"), pursuant to which Macrovision
agreed to license its copy protection technologies to JVC for use in territories
in which Macrovision has issued patents, on terms and conditions comparable to
those provided under agreements between Macrovision and parties situated
similarly to JVC. Additionally, Macrovision agreed to continue to make its copy
protection technologies generally available for license to third parties on
terms commercially reasonable to Macrovision in the venues and for the purposes
that Macrovision currently license such technologies. The Technology Agreement
gives JVC the right to sublicense Macrovision's copy protection technologies to
certain third parties on terms and conditions comparable to those provided in
similar agreements previously entered into by Macrovision, with 95% of the
royalties from such sublicenses payable to Macrovision or its successor, in the
event that a party other than JVC acquires a majority interest in Macrovision or
acquires its copy protection business or patents, and following such acquisition
Macrovision or its successor refuses to continue to license Macrovision's copy
protection technologies on a nondiscriminatory basis to its current customers
and similarly situated parties.
In May 1997, Macrovision entered into a Replicator Agreement with JVC Disc
America Company, a wholly owned subsidiary of JVC America which is wholly owned
by JVC. This agreement gives authority to JVC Disc America to replicate discs
containing titles for which copy protection trigger bits have been applied.
Macrovision pays JVC Disc America a service fee to defray certain costs incurred
by it under this agreement. In 1998, Macrovision paid no such service fees.
In December 1997, Macrovision entered into a Component Supplier
Non-Assertion and Technical Services Agreement with Matsushita. Under this
agreement, Macrovision agreed not to assert against Matsushita the apparatus
claims for the technology that Matsushita incorporates into devices that it
manufactures and distributes to authorized suppliers of electronic video
products. Under this agreement, Matsushita has paid Macrovision an initial fee
of $15,000 and is obligated to pay an additional $5,000 for implementation of
the apparatus into each different device.
In May 1998, Macrovision entered into an Authoring and Replicator Agreement
with Matsushita. This agreement authorizes Matsushita to set the trigger bits on
a master digital linear tape or master digital disc to "on" such that the copy
protection is activated and to replicate discs containing titles for which copy
protection trigger bits have been applied. Macrovision pays Matsushita a service
fee to defray certain costs incurred by it under this agreement. For 1998,
Macrovision paid no service fees under this contract.
In May 1998, Macrovision entered into a DVD Copy Protection Technology
Application Agreement with Matsushita. The agreement allows Matsushita to have
Macrovision's copy protection technology applied to discs containing material
for which Matsushita is the title holder. Matsushita agreed to pay a replication
fee for the copy protected discs on a per unit basis inclusive of a minimum
annual number. In 1998, Macrovision recorded no revenue pursuant to this
contract.
8
<PAGE>
In October 1998, Macrovision entered into a Copy Protection Technology
Application and Duplicator Agreement with JVC and a third party duplicator by
which JVC agrees to pay all fees to Macrovision on behalf of the duplicator. JVC
is required to pay Macrovision a $2,000 non-refundable minimum payment every six
months and also application fees on a per unit basis over the minimum amount. In
1998, JVC paid Macrovision $2,000 under this agreement.
Capitalization and Spinoff of Command Audio Corporation ("CAC")
CAC was incorporated in October 1995 as a wholly-owned subsidiary of
Macrovision. As of January 1, 1998, Macrovision held 19.8% of the voting stock
of CAC. CAC also granted to Macrovision a right of first refusal to purchase
additional CAC stock to maintain its 19.8% ownership if and when CAC offers
additional stock, subject to certain exceptions. In 1998, Macrovision invested
$500,000 in CAC in connection with a round of external third-party financing
obtained by CAC. This investment by Macrovision was less than 19.8% of the total
investment financing made and thus reduced Macrovision's previous 19.8%
ownership of CAC to 11.9%. In 1998, CAC paid in full the note due Macrovision
for reimbursable expenses including accrued interest in the amount of $310,000.
John O. Ryan, Chairman of the Board and Chief Executive Officer of Macrovision,
is a director of CAC.
In 1996, Macrovision and CAC entered into a Technology Transfer and Royalty
Agreement, as amended. Under this agreement, Macrovision assigned to CAC all
rights in certain technology and released its reversion rights in technology
that Macrovision had previously assigned to CAC. In consideration of such
assignment and release, CAC agreed to pay to Macrovision royalties equal to 2.0%
of CAC's gross revenues (as defined in the agreement) for 12 years, beginning
when CAC has operating revenues from certain sources or, at the election of
Macrovision, at any time prior thereto.
EXECUTIVE COMPENSATION
The following table sets forth all compensation for 1998, 1997 and 1996
awarded to, earned by, or paid for services rendered to Macrovision in all
capacities by Macrovision's chief executive officer and Macrovision's four other
executive officers who were most highly compensated during 1998 (together, the
"Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Securities
--------------------------- Underlying Other
Name and Principal Position Year Salary Bonus(1) Options(2) Compensation(3)
- --------------------------- ---- ------ -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
John O. Ryan ...................................... 1998 $225,000 $69,041 -- $9,984
Chairman, Chief Executive 1997 204,801 52,603 -- 5,543
Officer and Secretary 1996 200,000 49,449 -- 4,886
William A. Krepick ................................ 1998 $225,000 $88,161 20,000 $17,684
President and Chief Operating Officer 1997 204,801 54,303 33,400 8,372
1996 200,000 49,268 -- 6,002
Victor A. Viegas .................................. 1998 $148,644 $53,389 9,682 $5,270
Vice President, Finance and Administration 1997 140,158 38,703 22,222 3,142
and Chief Financial Officer(4) 1996 70,313 17,321 -- --
Brian R. Dunn ..................................... 1998 $144,943 $47,327 9,818 $8,242
Vice President, Computer Software Copy 1997 137,455 18,503 -- 5,763
Protection 1996 131,204 16,605 -- 5,321
Mark S. Belinsky .................................. 1998 $140,825 $55,179 -- $3,510
Sr. Vice President, New Business 1997 137,507 36,803 18,000 3,382
Development 1996 127,026 31,292 8,333 2,189
</TABLE>
- ----------
(1) Represents bonuses pursuant to the Executive Incentive Plan earned for
services rendered in each year indicated although paid in a subsequent
year.
(2) Represents number of shares of Common Stock subject to options granted in
each year indicated.
9
<PAGE>
(3) Includes for each Named Officer some or all of the following: (i) company
contributions to the 401(k) Plan, (ii) taxable compensation for value of
life insurance coverage over $50,000, (iii) buy-back of accrued vacation
over allowable annual maximum, (iv) taxable health club membership
incentive reimbursement, (v) cash holiday gift of $200 given to all
employees, and (vi) travel incentives in the form of a reimbursement for
one-third of the difference between business class and coach class air
travel up to a maximum of $1,000 for each business trip traveled in coach
class.
(4) Victor A. Viegas joined Macrovision in June 1996 as Vice President, Finance
and Administration and Chief Financial Officer.
The following table sets forth information regarding option grants pursuant
to Macrovision's 1996 Equity Incentive Plan during 1998 to each of the Named
Officers. In accordance with the rules of the Securities and Exchange
Commission, the table sets forth the hypothetical gains or "option spreads" that
would exist for the options at the end of their respective ten-year terms. These
gains are based on assumed rates of annual compound stock price appreciation of
5% and 10% from the date the option was granted to the end of the option term.
<TABLE>
<CAPTION>
Options Grants in Last Fiscal Year
(Individual Grants)
Potential Realizable
Percent of Value at Assumed
Number of Total Annual Rates of Stock
Shares Options Price Appreciation for
Underlying Granted to Option Term(2)
Options Employees Exercise Price Expiration ------------------------
Name Granted(1) in 1998 Per Share Date 5% 10%
- ---- ------- ------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
John O. Ryan ................... -- -- -- -- -- --
William A. Krepick ............. 5,851 3.0% $27.75 10/22/08 $123,555 $292,914
14,149 7.2% $27.75 10/22/08 298,782 708,331
Victor A. Viegas ............... 2,947 1.5% $15.00 02/12/08 $27,200 $69,496
6,735 3.4% $15.00 02/12/08 62,163 158,824
Brian R. Dunn .................. 9,818 5.0% $15.00 02/12/08 $90,618 $231,527
Mark S. Belinsky ............... -- -- -- -- -- --
</TABLE>
- ----------
(1) Options granted under the 1996 Equity Incentive Plan in 1998 were incentive
stock options or nonstatutory stock options that were granted at fair
market value and that vest annually over a three-year vesting period.
Options expire ten years from the date of grant, subject to earlier
termination upon termination of the optionee's employment.
(2) The 5% and 10% assumed annual rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent Macrovision's estimate or projection of future common stock
prices.
The following table sets forth the number of shares acquired by each Named
Officer upon the exercise of stock options during 1998 and the number of shares
covered by both exercisable and unexercisable stock options held by each Named
Officer at December 31, 1998. Also reported are values of "in-the-money"
options, which represent the positive spread between the respective exercise
prices of outstanding stock options and $42.25 per share, which was the closing
price of the common stock on the Nasdaq National Market on December 31, 1998.
10
<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year-End at Fiscal Year-End
Acquired on Value -------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Ryan .................... -- -- -- -- -- --
William A. Krepick ........... 30,000 $440,250 79,084 47,833 $3,075,480 $1,129,368
Victor A. Viegas ............. -- -- 3,704 28,200 $124,566 $886,595
Brian R. Dunn ................ 11,500 $347,200 14,054 9,818 $555,836 $267,541
Mark S. Belinsky ............. 16,666 $368,177 3,000 19,166 $83,250 $581,015
</TABLE>
Employment Agreement
Macrovision entered into an employment agreement with Mr. Viegas in June
1996, in connection with Mr. Viegas' employment as Vice President, Finance and
Administration and Chief Financial Officer. The employment agreement may be
terminated by Macrovision or by Mr. Viegas at any time for any reason. Pursuant
to the employment agreement, Macrovision sold to Mr. Viegas 58,333 shares of
common stock at a price of $2.70 per share. Mr. Viegas purchased the shares with
a full recourse promissory note secured by the shares. Interest is charged at
the rate of 6.58% per year. The loan is due on June 7, 2001 or earlier on
termination of Mr. Viegas' employment with Macrovision. The largest amount of
indebtedness outstanding under the note during 1998 was $135,627.01 including
accrued interest. Macrovision has the right to repurchase unvested shares at the
original sale price in the event that Mr. Viegas ceases to be an employee of
Macrovision. The repurchase right has lapsed as to 50% of the shares and will
lapse as to the balance in June 1999. Immediately following Macrovision's
initial public offering and pursuant to the terms of the employment agreement,
Macrovision also granted to Mr. Viegas an option to acquire an additional 22,222
shares of common stock at the fair market value of such shares on the grant
date. These options vest and become exercisable over a three-year period. If
Macrovision terminates Mr. Viegas' employment without cause, all of his unvested
shares and stock options will have the benefit of one additional year of vesting
and Mr. Viegas will be entitled to severance benefits under Macrovision's
severance pay plan. If Macrovision terminates Mr. Viegas' employment without
cause or if Mr. Viegas terminates his employment for good reason within either
three months before or twelve months after a change in control, all of his
unvested shares and stock options will immediately vest.
STOCKHOLDER PROPOSALS
Macrovision must receive proposals of stockholders that are intended to be
presented at the 2000 annual meeting of stockholders by no later than December
14, 1999, in order to be included in the proxy statement and proxy relating to
the 2000 annual meeting.
11
<PAGE>
OTHER BUSINESS
The board of directors does not intend to bring any other business before
the meeting and, to the knowledge of the board, no matters are to be brought
before the meeting except as specified in the notice of the meeting. As to any
business that may properly come before the meeting, however, the proxies will be
voted in accordance with the judgment of the persons voting them.
By Order Of The Board Of Directors
/s/ John O. Ryan
John O. Ryan
Secretary
Dated: April 12, 1999
Sunnyvale, California
12
<PAGE>
Directions to Wyndham Garden Hotel
1300 Chesapeake Terrace
Phone: 408-747-0999
Fax: 408-745-0759
FROM SAN JOSE AIRPORT:
Take US 101 North to Lawrence Expressway exit. Take Lawrence Expressway North to
Baylands Park. Turn left on Baylands Park, then immediately take another left
onto Chesapeake Terrace (in the Caribbean Corporate Center). The hotel is at the
end of the cul de sac. (Travel time about 25 minutes)
FROM SAN FRANCISCO AIRPORT:
Take US 101 South to Lawrence Expressway exit. Merge onto 237 staying in the
right hand lane. Take Lawrence Expressway North to Baylands Park. Turn left on
Baylands Park, then immediately take another left onto Chesapeake Terrace (in
the Caribbean Corporate Center). The hotel is at the end of the cul de sac.
(Travel time about 35-40 minutes)SKU 1635-PS-99
[GRAPHIC]
MAP
<PAGE>
PROXY
MACROVISION CORPORATION
1341 Orleans Drive
Sunnyvale California 94089
John O. Ryan, William A. Krepick, Victor A. Viegas or any of them (each the
"Proxy"), each with the power of substitution, are hereby authorized to
represent and vote all shares of common stock of Macrovision Corporation held of
record on March 22, 1999 by the undersigned as designated below, with all the
powers which the undersigned would possess if personally present at the Annual
Meeting of Stockholders to be held on May 18, 1999, or any adjournment thereof.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
13
<PAGE>
Please mark
|X| votes as in
this example.
This Proxy is solicited on behalf of the Board of Directors of MACROVISION
CORPORATION. This Proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted FOR the nominees listed in Proposal 1 and FOR Proposals 2
and 3.
1. Election of Directors,
Nominees: John O. Ryan, William A. Krepick, Richard S. Matuszak, Donna S.
Birks, William Stirlen and Thomas Wertheimer
FOR WITHHELD
ALL |_| |_| FROM ALL
NOMINEES NOMINEES
|_|
----------------------------------------------------------
(INSTRUCTION: To withhold authority to vote for any individual
nominee please write that nominee's name on the line above.)
2. To ratify the appointment of KPMG FOR AGAINST ABSTAIN
LLP as auditors of the Company's
financial statements for the fiscal |_| |_| |_|
year ending December 31, 1999.
3. In their discretion, the Proxies are authorized to vote upon such business
as may properly come before the meeting or any adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement and hereby revokes any proxy or proxies heretofore
given. This proxy may be revoked at any time prior to the Annual Meeting. If you
received more than one proxy card, please date, sign and return all cards in the
accompanying envelope.
Please sign exactly as your name appears on the left. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Signature: __________________________________________________ Date: ____________
Signature: __________________________________________________ Date: ____________
