FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
|_| TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-22023
Macrovision Corporation
(Exact name of registrant as specified in its charter)
DELAWARE 77-0156161
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1341 Orleans Drive
Sunnyvale, California 94089
(Address of principal executive offices) (Zip code)
(408) 743-8600
(Registrant's telephone number including area code)
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
Indicate by check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein and will not be contained, to the best of
the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. |X|
As of March 20, 2000, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant, based on the closing
price for the registrant's common stock on that day, was approximately
$2,307,852,545.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
As of March 20, 2000, there were 40,136,566 shares of the Registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III of the Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 of Macrovision Corporation (the "Company" or
the "Registrant") previously filed with the Securities and Exchange Commission
("SEC") are hereby amended and restated to read in their entirety as follows:
1
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
The executive officers and directors of Macrovision, and their ages and
positions as of December 31, 1999, are as follows:
Director/
Officer
Name Age Since Positions held with Macrovision
---- --- ----- -------------------------------
John O. Ryan 54 1987 Chairman of the Board of
Directors, Chief Executive
Officer
William A. Krepick 54 1995 President and Chief Operating
Officer and Director
Ian R. Halifax 39 1999 Vice President, Finance and
Administration, Chief Financial
Officer and Secretary
Richard S. Matuszak 56 1992 Vice President, Special Interest
Copy Protection and Director
Mark S. Belinsky 42 1995 Senior Vice President, New
Business Development
Brian R. Dunn 43 1995 Senior Vice President, Computer
Software Copy Protection
Carol Flaherty 47 1999 Vice President, Video Copy
Protection
Patrice J. Capitant 51 1996 Vice President, Engineering
Donna S. Birks (1) 44 1997 Director
William N. Stirlen (1) 60 1997 Director
Thomas Wertheimer (1) 61 1997 Director
(1) Member, Audit Committee and Compensation Committee.
MR. RYAN is a co-founder of Macrovision and an inventor of our core copy
protection and video scrambling technologies. He has served as our Chairman of
the Board of Directors since June 1991 and has served as our Chief Executive
Officer since June 1995. He has been a director since June 1987 and served as
our Vice-Chairman of the Board of Directors from 1987 until June 1991and as our
Secretary from June 1991 to May 1999. He also served as General Partner of the
partnership predecessor of Macrovision from 1985 to 1987 and as President and
Secretary of the corporate predecessor of Macrovision 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 more than 46 patents
and has 11 patent applications pending in the fields of video copy protection,
video scrambling and television camera technology. 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. Ryan is also a director of Command Audio Corporation.
MR. KREPICK has served as a director since November 1995 and as our
President and Chief Operating Officer since July 1995. He has been with
Macrovision since November 1988, and served as our 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 Rensselaer Polytechnic Institute
and an M.B.A. from Stanford University.
MR. HALIFAX has served as our Vice President, Finance and Administration,
Chief Financial Officer and Secretary since October 1999. From February 1999 to
September 1999, he served as Chief Financial Officer of S-Vision, a private
semiconductor display technology company. From October 1997 to January 1999, he
was Director, Corporate Transactions for KPMG LLP, providing advisory services
to technology companies in the areas of technology licensing, financing, and
strategic partnering. From November 1994 to September 1997, he was Chief
Financial Officer for Thomson/Sun Interactive, the predecessor for OpenTV, Inc.,
a Sun Microsystems/THOMSON multimedia joint venture in the field of interactive
TV operating systems. He also held finance and business development positions at
Sun Microsystems in Europe and the United States. He holds a B.A. degree in
English from the University of York and an
2
<PAGE>
M.B.A. in Finance from Henley Management College. Mr. Halifax is a Certified
Public Accountant and a Certified Management Accountant.
MR. MATUSZAK has served as our 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.
MR. BELINSKY has served as our Senior Vice President, New Business
Development since January 1999. From October 1997 to December 1998 he was our
Senior Vice President, Theatrical and Pay-Per-View Copy Protection. Mr. Belinsky
was our Vice President, Theatrical and Pay-Per-View Copy Protection from October
1995 to October 1997. Between June and September 1995, he was a consultant to
various companies in the Internet services and electronic commerce fields, and,
between June 1995 and August 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.
MR. DUNN has served as our Senior Vice President, Computer Software Copy
Protection since June 1999. He has been with Macrovision since January 1995 and
served as our Vice President Computer Software Copy Protection and Vice
President, Business Development in his prior roles. 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 State Bar.
MS. FLAHERTY has served as our Vice President, Video Copy Protection,
since April of 1999. From September 1997 to April 1999, she was Director of
Business Development for Digital Link Corporation. From April 1996 to September
1997, Ms. Flaherty was Vice President of Sales for Multipoint Networks, a
company that provided wireless transmission equipment to international carriers.
From April 1995 to March 1996, she was Vice President of Business Development
for a division of California Microwave. Prior to joining California Microwave,
Ms. Flaherty spent nine years with GTE, serving first as Controller of GTE
Telenet's Public Data Network division and, later, as Director of Program
Management for satellite system sales under GTE Spacenet. Ms. Flaherty holds a
B.A. degree in Economics from the University of Virginia and an M.B.A. from
Golden Gate University.
DR. CAPITANT has served as our 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 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 the
University of Lille. Dr. Capitant holds a Ph.D. degree in Electrical Engineering
from Stanford University.
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
Adaptive Broadband Corp., a satellite and wireless communications 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 GTE Spacenet, Macrovision Corporation and Contel
ASC. Ms. Birks holds a B.A. degree in Business Administration from George Mason
University in Fairfax, Virginia and an M.S. degree in Finance from American
University in Washington, D.C. She is a Certified Public Accountant.
MR. STIRLEN has served as a director since May 1997. Mr. Stirlen has been
a consultant to technology companies from February 1994 to the present. As a
consultant he has held various executive offices with Open Text Corporation, an
intranet software company headquartered in Waterloo, Ontario, since June 1996,
serving as Chief Financial Officer until October 1997 and as Executive Vice
President of Corporate Development since October 1998. Mr. Stirlen was a
consultant to technology companies from February 1994 to June 1996. 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
3
<PAGE>
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 has served as
a consultant to Universal Studios since January 1996. From 1992 to January 1996,
Mr. Wertheimer served as Executive Vice President and Chairman of the Home Video
and Television Groups of MCA, Inc. He is a member 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.
Each director holds office until our next annual meeting of stockholders
or until his or her successor is duly elected and qualified. Officers are chosen
by, and serve at the discretion of, our Board of Directors. There are no family
relationships among our directors and officers, nor are there any arrangements
or understandings among the directors, officers and/or any other person
regarding the selection of directors, nominees or officers. None of the
directors or officers are involved in any legal proceedings as described in
Section 401(f) of Regulation S-K.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16 (a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers, and persons who own more
than ten percent of a registered class of the Company's equity securities, to
file with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent shareholders are required by Commission
regulation to furnish the Company with copies of all Section 16 (a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports and amendments thereto furnished to the Company and written
representations from the reporting persons that no other reports were required,
the Company believes that all Section 16 (a) filing requirements applicable to
its officers, directors and greater than ten percent beneficial owners were
complied with during the year ended December 31, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation for 1999, 1998 and 1997
awarded to, earned by, or paid for services rendered to Macrovision in all
capacities by Macrovision's chief executive officer and our next four most
highly compensated executive officers, who, together, are our "Named Officers":
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- Securities Other
Underlying Compensation
Name and Principal Position Year Salary Bonus (1) Options(2) (3)
--------------------------- ---- ------ --------- ---------- ---
<S> <C> <C> <C> <C> <C>
John O. Ryan ................ 1999 $225,000 $ -- $ 2,852
Chairman and Chief Executive 1998 225,000 69,041 -- 9,984
Officer .................. 1997 204,801 52,603 -- 5,543
William A. Krepick .......... 1999 $245,833 $ 94,154 -- $ 12,607
President and Chief Operating 1998 225,000 88,161 80,000 17,684
Officer ................... 1997 204,801 54,303 133,600 8,372
Brian R. Dunn ............... 1999 $159,105 $ 82,265 40,000 $ 2,754
SVP, Computer Software Copy 1998 144,943 47,327 39,272 8,242
Protection ................ 1997 137,455 18,503 -- 5,763
Mark S. Belinsky ............ 1999 $131,503 $ 65,475 60,000 $ 3,630
SVP, New Business Development 1998 140,825 55,179 -- 3,510
1997 137,507 36,803 72,000 3,382
Richard S. Matuszak
VP, Special Interest Copy
Protection and Director 1999 $117,500 $ 54,003 20,000 $ 16,481
1998 111,417 30,923 28,436 15,736
1997 104,417 18,200 24,000 11,104
</TABLE>
4
<PAGE>
- ----------
(1) Represents bonuses pursuant to the Executive Incentive Plan earned for
services rendered in each year indicated although paid in a subsequent
year. Mr. Ryan elected to waive the 1999 bonus for which he was eligible.
(2) Represents number of shares of Common Stock subject to options granted in
each year indicated and adjusted for the 2 for 1 stock splits in August
1999 and March 2000.
(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 in 1997 and 1998,
and $300 in 1999 given to all employees, (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
international business trip traveled in coach class and (vii) director
fees.
Option Exercises and Holdings.
The following table sets forth information regarding option grants
pursuant to Macrovision's 1996 Equity Incentive Plan during 1999 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.
We have retroactively updated the share numbers in this table to take into
account all of our stock splits and stock dividends, including the stock
dividend distributed on March 17, 2000.
Options Grants in Last Fiscal Year
(Individual Grants)
<TABLE>
<CAPTION>
Number
of Percent of Potential
Shares Total Realizable Value
Underlying Options Exercise at Assumed Annual
Options Granted to Price Rates of Stock
Granted Employees Per Expiration Price Appreciation
Name (1) In 1999 Share Date for Option Term (2)
---- --- ------- ----- ---- -------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
John O. Ryan -- -- -- -- -- --
William A. Krepick -- -- -- -- -- --
Brian R. Dunn 40,000 2.1% 8.785 04/05/2009 $220,994 $560,041
Mark S. Belinsky 60,000 3.1% 8.785 04/05/2009 $331,490 $840,062
Richard S. Matuszak 20,000 1.1% 8.785 04/05/2009 $110,496 $280,021
</TABLE>
- -----------
(1) Options granted under the 1996 Equity Incentive Plan in 1999 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 1999 and the number of shares
covered by both exercisable and unexercisable stock options held by each Named
Officer at December 31, 1999. Also reported are values of "in-the-money"
options, which represent the positive spread between the respective exercise
prices of outstanding stock options and $37.00 per share, which was the closing
5
<PAGE>
price of the common stock on the Nasdaq National Market on December 31, 1999. We
have retroactively updated the share numbers in this table to take into account
all of our stock splits and stock dividends, including the stock dividend
distributed on March 17, 2000.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End
Shares
Acquired
On Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Ryan -- -- -- -- -- --
William A. Krepick 154,068 $1,244,834 220,132 133,468 $7,755,910 $4,273,690
Brian R. Dunn 62,760 $1,346,567 -- 72,728 $ -- $2,216,806
Mark S. Belinsky 52,664 $ 862,182 -- 96,000 $ -- $2,894,400
Richard S. Matuszak 40,000 $ 686,800 110,064 55,696 $3,966,099 $1,770,692
</TABLE>
Compensation Committee Interlocks and Insider Participation.
During 1999, none of the members of the compensation committee was an
officer or employee of Macrovision or any of its subsidiaries. From 1992 to
1994, however, Donna Birks served as Chief Financial Officer of Macrovision,
(although she was not a member of the compensation committee during that time).
The compensation committee made all decisions regarding compensation of
executive officers during 1999.
The Board of Directors and Committees
The board of directors oversees our business and affairs. The Board also
has two committees, a compensation committee and an audit committee. There is no
nominating committee. The procedures for nominating directors, other than by the
Board of Directors itself, are set forth in our bylaws. During 1999, the board
of directors met eight times. Each board member attended at least 75% of the
board meetings 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.
Compensation Committee.
We established the compensation committee 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
eight times in 1999.
Audit Committee
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 four times
during 1999.
6
<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. In 1999, the board approved the following
changes to the "Macrovision Corporation 1996 Directors Stock Option Plan" and
outside directors' compensation, which have been adjusted to reflect the two for
one stock splits in August 1999 and March 2000:
1. The initial option grant to new outside directors will increase from
20,000 to 40,000 shares.
2. The option granted on each outside director's anniversary date after the
initial option grant increased from 12,000 to 30,000 shares.
3. The vesting for all such options is monthly over a 3 year period (reduced
from 4 years).
4. Each outside director is paid in addition to meeting fees, a retainer of
$10,000 in stock or at the director's option, in equal amounts of cash and
stock, on an annual basis.
The following non-employee directors were granted options to purchase
common stock pursuant to the 1996 Directors Stock Option Plan, which have been
adjusted to reflect the two for one stock splits in August 1999 and March 2000:
Number of
Name Shares Exercise Price
------------------------------- --------------- ---------------
Donna Birks................ 30,000 $ 9.625
William Stirlen............ 30,000 $ 9.625
Thomas Wertheimer.......... 30,000 $ 18.657
The following non-employee directors received retainers of $10,000 each in
stock and cash as indicated, with the number of shares and the per share value
of $12.469 adjusted to reflect the two for one stock splits in August 1999 and
March 2000:
Number of
Name Shares Cash Amount
------------------------------- --------------- ---------------
Donna Birks................ 800 $ 25
William Stirlen............ 400 $ 5,013
Thomas Wertheimer.......... 800 $ 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of the common stock as of April 13, 2000 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 April 13, 2000, 40,183,608 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 April 13, 2000 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.
7
<PAGE>
Number of
Shares Percent of
Beneficially Beneficially
Name and Address or Identity of Group Owned Ownership
------------------------------------- ----- ---------
Kopp Investment Advisors (1)
7701 France Avenue South, Suite 500
Edina, MN 55435 3,648,084 9.1%
Victor Company of Japan, Limited (2)
12, 3-chome, Moriya-cho, Karagawa-ku
Yokohama 221, Japan 3,161,952 7.9%
TCW Group (3)
865 South Figueroa Street
Los Angeles, CA 90017 2,610,390 6.5%
John O. Ryan (4)
1341 Orleans Drive
Sunnyvale, CA 94089 2,105,038 5.2%
William A. Krepick(5)
Director, President and Chief
Operating Officer 432,276 1.1%
Richard S. Matuszak(5)
Director, Vice President - Special
Interest Copy Protection 225,280 *
Ian R. Halifax
Vice President -Finance and
Administration; Chief Financial Officer - *
Carol Flaherty(5)
Vice President - Video Copy Protection 10,000 *
Brian R. Dunn(5)
Vice President - Computer Software Copy
Protection 29,520 *
Patrice J. Capitant(5)
Vice President - Engineering 17,028 *
William Stirlen(5)
Director 30,335 *
Donna S. Birks(5)
Director 35,299 *
Mark S. Belinsky(5)
Sr. Vice President - New Business
Development 29,098 *
Thomas Wertheimer(5)
Director 16,716 *
All executive officers and directors
as a group (11 persons) (6) 2,930,590 7.3%
(1) According to information provided by the Kopp Investment Advisors, Inc. as
of March 24, 2000, 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.
(2) According to a Form 4 filed with the Securities and Exchange Commission on
February 8, 2000, these shares are held of record by Pacific Media
Development Inc., an indirect wholly-owned subsidiary of JVC.
(3) According to information provided by the TCW Group Inc. as of March 27,
2000 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.
8
<PAGE>
(4) Represents 1,644,220 shares held of record by a trust of which Mr. Ryan
and his wife are trustees, 404,156 shares held of record by Mr. Ryan,
13,998 shares held of record by Mr. Ryan as custodian for various family
members, and 42,664 shares held of record by one of his daughters.
(5) Includes 146,932, 41,552, 10,000, 19,760, 14,800, 21,535, 26,499, 10,000
and 16,716 shares subject to stock options exercisable as of April 13,
2000 or within 60 days thereafter by Krepick, Matuszak, Flaherty, Dunn,
Capitant, Stirlen, Birks, Belinsky and Wertheimer, respectively.
(6) Includes the shares referenced in footnote (5).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Transactions involving directors of Macrovision.
In January 2000, the Company consummated an offering ("offering") of
3,820,000 shares of its Common Stock, of which 2,874,000 shares were issued and
sold by the Company and 946,000 shares were sold by shareholders of the Company.
All shares were sold for $53.438 per share. The net proceeds to the Company from
the offering, after deducting the underwriting discount and other expenses of
the offering, were approximately $146 million. The Company did not receive any
proceeds from the sale of shares sold by the selling shareholders. Three
directors, including one officer, participated in the offering by selling an
aggregate of 86,000 shares in the offering. All shares and prices noted above
have been adjusted to reflect the 2 for 1 stock split effective in March 2000.
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 1999, Macrovision recorded revenue from JVC of approximately
$410,000 and recorded expenses payable to JVC of approximately $69,000 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
9
<PAGE>
for its expenses in performing services under the Consulting Agreement. In 1999,
Macrovision paid to Techno approximately $2,100 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 $189,000 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 1999, Macrovision paid no such service fees.
In December 1997 and February 1999, Macrovision entered into a Component
Supplier Non-Assertion and Technical Services Agreements with Matsushita and
JVC, respectively. Under these agreements, Macrovision agreed not to assert
against the companies the apparatus claims for the technology that they both
incorporate into devices that they manufacture and distribute to authorized
suppliers of electronic video products. Under these agreements, Matsushita and
JVC each 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 1999, the service fees paid by Macrovision under this contract
were insignificant.
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 1999, Macrovision recorded revenue of $49,000 pursuant to this
contract.
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
10
<PAGE>
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
1999, Macrovision recorded revenue of $5,000 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 11.9% of the voting stock
of CAC. In August 1999, the Company participated in a convertible bridge loan to
CAC by which investors would fund expenditures of CAC up to a predetermined
amount. Our commitment under the convertible note purchase agreement was
$836,733. In December 1999, we converted our convertible bridge loan in the
amount of $836,733 and accrued interest into preferred stock of CAC as part of a
round of third-party financing. As of December 31, 1999 Macrovision held 7.8% of
the voting stock of CAC. 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.
11
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on this 28th day of April,
2000.
MACROVISION CORPORATION
By: /s/ William Krepick
------------------------------------
William A. Krepick
President and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant, and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
Principal Executive Officer:
/s/ John O. Ryan Chairman of the Board of Directors, Chief April 28, 2000
- -------------------------------- Executive Officer, Secretary and Director
John O. Ryan
Principal Financial Officer and
Principal Accounting Officer:
/s/ Ian R. Halifax Vice President, Finance and Administration April 28, 2000
- -------------------------------- and Chief Financial Officer
Ian R. Halifax
Additional Directors:
/s/ William A. Krepick Director April 28, 2000
- --------------------------------
William A. Krepick
/s/ Richard S. Matuszak Director April 28, 2000
- --------------------------------
Richard S. Matuszak
/s/ Donna S. Birks Director April 28, 2000
- --------------------------------
Donna S. Birks
/s/ William N. Stirlen Director April 28, 2000
- --------------------------------
William N. Stirlen
/s/ Thomas Wertheimer Director April 28, 2000
- --------------------------------
Thomas Wertheimer
</TABLE>
12
