ITEM 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On July 27, 2022, RealNetworks, Inc. (the "Company") entered into an Agreement
and Plan of Merger (the "Merger Agreement") with Greater Heights LLC, a
Washington limited liability company ("Parent"), Greater Heights Acquisition
LLC, a Washington limited liability company and wholly owned subsidiary of
Parent ("Merger Sub"), and exclusively for purposes of Section 8.15 thereof,
Robert Glaser, providing for, amongst other things, the merger of the Company
with and into Merger Sub (the "Merger"), with Merger Sub surviving the Merger as
a wholly owned subsidiary of Parent. Parent is an entity wholly owned and
controlled by Robert Glaser, the Company's Founder, Chairman and Chief Executive
Officer.
The Merger Agreement and the Merger were approved by all members of the
Company's Board of Directors (other than Mr. Glaser who recused himself from the
meeting called to discuss and approve the Merger Agreement and the Merger), upon
the recommendation of a special committee consisting solely of independent,
outside directors (the "Special Committee"). The Special Committee unanimously
determined that the Merger Agreement and the Merger were fair to and in the best
interests of the Company and its shareholders (other than Mr. Glaser and his
affiliates ("the Founder Shareholders")), based in part on a fairness opinion
issued to it by its financial advisor, Houlihan Lokey Capital, Inc., and
recommended that the Company's Board of Directors approve the Merger Agreement
and the Merger and resolve to recommend that the Company's shareholders vote for
the adoption of the Merger Agreement and approval of the Merger.
At the effective time of the Merger, (i) each share of the Company's Common
Stock issued and outstanding as of immediately prior to such effective time,
other than shares held by the Founder Shareholders and any dissenting shares of
the Company's Common Stock, will be cancelled and retired and converted into the
right to receive cash in an amount equal to $0.73, without interest and subject
to any applicable withholding taxes (the "Merger Consideration"), (ii) each
share of the Company's Common Stock and the Company's Preferred Stock owned by
the Founder Shareholders will be cancelled and retired and no consideration will
be delivered in exchange therefor, (iii) each issued, outstanding and vested
Company Stock Option will be cancelled and converted into the right to receive
the Merger Consideration (less the aggregate exercise price for such Company
Stock Options and applicable taxes), (iv) each vested Company RSU will be
cancelled and converted into the right to receive the Merger Consideration less
any applicable taxes, and (v) all unvested Company equity awards under any
Company Stock Plan will be treated in accordance with the terms of the
applicable Company Stock Plan and form of award issued thereunder.
Shareholders of the Company will be asked to vote on the adoption of the Merger
Agreement and approval of the Merger at a special shareholders' meeting called
for such purpose that will be held on a date to be announced. The closing of the
Merger is subject to, among other conditions (i) adoption of the Merger
Agreement and approval of the Merger by (A) holders of a majority of the issued
and outstanding shares of Company Common Stock and Company Preferred Stock, each
voting as a separate class, and (B) holders of a majority of the issued and
outstanding shares of Company Common Stock held by shareholders other than the
Founder Shareholders, (ii) the Company delivering evidence that the Amended and
Restated Shareholder Rights Plan of RealNetworks, Inc., dated as of November 30,
2018 (the "Rights Agreement"), by and between the Company and Computershare Inc.
be inapplicable to the Merger and other transactions contemplated by the Merger
Agreement, and (iii) not more than 15% of the Company Common Stock outstanding
as of immediately prior to the effective time of the Merger being dissenting
shares. Consummation of the Merger is also subject to certain other closing
conditions, including the accuracy of each party's representation and warranties
(subject to certain qualifiers, as applicable) and each party's compliance with
its covenants and agreements contained in the Merger Agreement in all material
respects and that since the date of the Merger Agreement there shall not have
occurred a Company Material Adverse Effect (as defined in the Merger Agreement)
that is continuing. The Merger Agreement does not include a financing condition.
The Merger Agreement provides that the Company may not solicit takeover
proposals provided that the Company, subject to compliance with certain
requirements set forth in the Merger Agreement, may provide information to, and
may engage or participate in discussions or negotiations, with respect to an
unsolicited takeover proposal that the Company's Board of Directors has
determined, in good faith and after consultation with its financial advisors and
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outside legal counsel, individually or in the aggregate with any other
unsolicited takeover proposals, constitutes or could reasonably be expected to
result in a Superior Proposal (as defined in the Merger Agreement).
The Company and Parent may mutually agree to terminate the Merger Agreement.
Additionally, the Merger Agreement contains other termination rights exercisable
by the Company and Parent. If the Merger Agreement is terminated under certain
circumstances as provided in the Merger Agreement, the Company could be required
to pay Parent a termination fee equal to one of (i) $1,043,971, (ii)
$521,985.50, or (iii) the lesser of (A) Parent's fees and expenses incurred in
connection with the Merger Agreement and the Merger and (B) $500,000.
In connection with the execution and delivery of the Merger Agreement, the
Founder Shareholders and Company directors who were not members of the Special
Committee entered into a Voting and Support Agreement, dated as of July 27, 2022
(the "Voting Agreement"), with the Company and Parent, pursuant to which,
amongst other things, the Founder Shareholders and such directors agreed (i) to
vote all shares of the Company's capital stock owned by them in favor of the
adoption of the Merger Agreement and the approval of the Merger and against any
takeover proposal, acquisition agreement (other than the Merger Agreement) or
any proposal, transaction, agreement or action in competition with or
inconsistent with the Merger Agreement or the Merger, (ii) not to transfer their
shares of Company Common Stock prior to the expiration of the Voting Agreement,
(iii) not to take any actions that would in any way restrict, limit or interfere
with the performance of such shareholder's obligations under the Voting
Agreement, make any representation or warranty of such shareholder in the Voting
Agreement untrue or incorrect or otherwise restrict, limit, interfere, prevent
or disable such shareholder from performing its obligations under the Voting
Agreement and the Merger Agreement and (iv) to waive, and not to assert, any
rights of appraisal or rights to dissent in connection with the Merger Agreement
and the Merger.
. . .
ITEM 3.03. Material Modification to Rights of Security Holders.
The information included in item 1.01 of this Current Report on Form 8-K under
the caption "Amendment to Second Amended and Restated Shareholder Rights Plan"
is incorporated by reference into this Item 3.03.
ITEM 8.01. Other Events.
On July 28, 2022, the Company issued a press release announcing entry into the
Merger Agreement. A copy of the press release is attached hereto as Exhibit 99.2
and is incorporated herein by reference.
Additional Information and Where to Find It
RealNetworks, its directors and certain executive officers are participants in
the solicitation of proxies from stockholders in connection with the pending
acquisition of RealNetworks (the "Transaction"). RealNetworks plans to file a
proxy statement (the "Transaction Proxy Statement") with the Securities and
Exchange Commission (the "SEC") in connection with the solicitation of proxies
to approve the Transaction. Additional information regarding such participants,
including their direct or indirect interests, by security holdings or otherwise,
will be included in the Transaction Proxy Statement and other relevant documents
to be filed with the SEC in connection with the Transaction. Information
relating to the foregoing can also be found in RealNetworks's definitive proxy
statement for its 2021 Annual Meeting of Stockholders (the "2021 Proxy
Statement"), which was filed with the SEC on October 29, 2021. To the extent
that holdings of RealNetworks's securities have changed since the amounts
printed in the 2021 Proxy Statement, such changes have been or will be reflected
on Statements of Change in Ownership on Form 4 filed with the SEC. Promptly
after filing the definitive Transaction Proxy Statement with the SEC,
RealNetworks will mail the definitive Transaction Proxy Statement to each
stockholder entitled to vote at the special meeting to consider the Transaction.
STOCKHOLDERS ARE URGED TO READ THE TRANSACTION PROXY STATEMENT (INCLUDING ANY
AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT
REALNETWORKS WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Stockholders may obtain, free of charge, the
preliminary and definitive versions of the Transaction Proxy Statement, any
amendments or supplements thereto, and any other relevant documents filed by
RealNetworks with the SEC in connection with the Transaction at the SEC's
website (http://www.sec.gov). Copies of RealNetworks's definitive Transaction
Proxy Statement, any amendments or supplements thereto, and any other relevant
documents filed by RealNetworks with the SEC in connection with the Transaction
will also be available, free of charge, from RealNetworks's website at
www.realnetworks.com.
Forward-Looking Statements
This Current Report on Form 8-K or any exhibit hereto contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, which provides a "safe harbor" for such statements in certain
circumstances. The forward-looking statements include statements or expectations
regarding timing of the closing of the Transaction, considerations taken into
account by the Board of Directors of RealNetworks in approving the Transaction
and expectations for RealNetworks following the closing of the Transaction.
These statements are based upon current expectations, beliefs and assumptions of
RealNetworks management, and there can be no assurance that such expectations
will prove to be correct. Because forward-looking statements involve risks and
uncertainties and speak only as of the date on which they are made, actual
events could differ materially from those discussed in the forward-looking
statements as a result of various factors, including but not limited to the
possibility that the conditions to the closing of the Transaction are not
satisfied, including the risk that required stockholder approval for the
Transaction is not obtained, potential litigation relating to the Transaction,
uncertainties as to the timing of the consummation of the Transaction, the
ability of each party to consummate the Transaction, risks relating to the
substantial costs and diversion of personnel's attention and resources due to
these matters and other factors discussed in greater detail in RealNetworks's
filings with the SEC. You are cautioned not to place undue reliance on such
statements and to consult RealNetworks's most recent Annual Report on Form 10-K
and other filings with the SEC for additional risks and uncertainties that may
apply to RealNetworks's business and the ownership of RealNetworks's securities.
The forward-looking statements are presented as of the date made, and
RealNetworks does not undertake any duty to update any forward-looking
statements, whether as a result of new information, future events, or otherwise.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of July 27, 2022, by and among the
Company, Greater Heights LLC, Greater Heights Acquisition LLC, and solely
for purposes of Section 8.15 thereof, Mr. Robert Glaser
4.1* Second Amended and Restated Shareholder Rights Plan of the Company, dated
as of November 30, 2018, by and between RealNetworks, Inc. and
Computershare Inc.
4.2 Amendment and Supplement, dated as of July 27, 2022, to the Second
Amended and Restated Shareholder Rights Plan of the Company
99.1 Voting and Support Agreement, dated as of July 27, 2022, by and among the
Company, Greater Heights LLC and each person identified on Exhibit A
thereto
99.2 Press Release of RealNetworks , Inc. dated July 28 , 2022
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
*Previously filed as Exhibit 4.1 to the Company's Form 8-K, filed November 30,
2018.
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