Item 8.01 Other Events
As previously disclosed, on July 27, 2022, RealNetworks, Inc., a Washington
corporation (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 Acquisitions 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.
On September 19, 2022, the Company filed a preliminary proxy statement with the
Securities and Exchange Commission ("SEC") (which was amended by the filing of a
revised preliminary proxy statement with the SEC on October 20, 2022, the
"Preliminary Proxy Statement"). On November 7, 2022, the Company filed a
definitive proxy statement with the SEC (the "Definitive Proxy Statement"), as
such may be supplemented from time to time, for the solicitation of proxies in
connection with the special meeting of the Company's shareholders to be held on
December 14, 2022 (the "Special Meeting"), for purposes of voting, amongst other
things, on a proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger.
Following announcement of the Merger, three purported shareholders of the
Company filed complaints alleging claims under (i) federal securities laws
(ii) the Washington Business Corporation Act and/or (iii) Washington state
common law (the "Complaints"), in the U.S. District Court for the Southern
District of New York. All of the Complaints remain pending. The Complaints
allege that the Company made false or misleading disclosures, or omitted
material information in the Preliminary Proxy Statement or the Definitive Proxy
Statement relating to, among other things, the analyses performed by Houlihan
Lokey Capital, Inc. ("Houlihan Lokey"), as the financial advisor to the special
committee of the board of directors of the Company; the data and inputs
underlying the financial valuation analyses performed by Houlihan Lokey; the
sales process; and alleged conflicts of interest with respect to Company
management and/or members of the board of directors (the "Board") of the
Company. The Complaints generally name the Company and the Board as defendants
and seek injunctive relief, damages, costs, expenses, and other relief.
Additional lawsuits arising out of or relating to the Merger Agreement or the
Merger may be filed in the future. The Company also has received shareholder
demands for the inspection of books and records and shareholder demands
requesting that the Company provide additional information before the Special
Meeting.
The Company believes the Complaints and the disclosure demands are without
merit, that each of the Preliminary Proxy Statement and the Definitive Proxy
Statement fully comply with the Securities Exchange Act of 1934 (the "Exchange
Act") and all other applicable law, and that no further disclosure is required.
However, solely in order to reduce the risk of delaying or otherwise adversely
affecting the consummation of the Merger and to minimize the expense and
distraction of defending such actions, and provide additional information to its
shareholders, the Company is filing this Current Report on Form 8-K to amend and
supplement the Definitive Proxy Statement. Nothing in the supplemental
disclosures set forth below should be deemed an admission of any inadequacy of
the Company's earlier disclosures, the legal necessity of the present
disclosures, or the materiality of the Company's prior and present disclosures
under any applicable laws.
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The Board unanimously recommends that the Company's shareholders vote "FOR" each
of the proposals at the Special Meeting, each as described in the Definitive
Proxy Statement.
The information contained in this Current Report on Form 8-K is incorporated by
reference into the Definitive Proxy Statement. All page references in this
Current Report on Form 8-K are to pages of the Definitive Proxy Statement, and
all terms used in this Current Report on Form 8-K, but not otherwise defined,
shall have the meanings ascribed to such terms in the Definitive Proxy
Statement. The following information should be read in conjunction with the
Definitive Proxy Statement, which should be read in its entirety. To the extent
that information in this Current Report on Form 8-K differs from or updates
information contained in the Definitive Proxy Statement, the information in this
Current Report on Form 8-K shall supersede or supplement such information in the
Definitive Proxy Statement.
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Supplemental Disclosures to the Definitive Proxy Statement
The Company makes these supplemental disclosures to the Definitive Proxy
Statement. This supplemental information should be read in conjunction with the
Definitive Proxy Statement, which should be read in its entirety. Defined terms
used but not defined below have the meanings set forth in the Definitive Proxy
Statement. All page references in the information below are to pages in the
Definitive Proxy Statement. Paragraph references used herein refer to the
Definitive Proxy Statement before any additions or deletions resulting from the
supplemental disclosures. Underlined text shows text being added to a referenced
disclosure in the Definitive Proxy Statement. The information contained herein
speaks only as of December 2, 2022 unless the information indicates another date
applies.
1. The final paragraph beginning on page 19 of the Definitive Proxy
Statement is hereby amended and supplemented by adding the following
sentence immediately after the second sentence in such paragraph:
The Special Committee noted that pursuant to the Company's Charter, Mr. Glaser
is named as a member of the Strategic Transactions Committee and that neither
the Board nor the Company's shareholders are authorized to remove any member of
the Strategic Transactions Committee or to otherwise reconstitute the Strategic
Transactions Committee or its membership.
2. The first full paragraph on page 24 of the Definitive Proxy Statement is
hereby amended and supplemented by adding the following sentence
immediately after the third sentence of such paragraph:
At no point did any of these unsolicited, inbound inquiries regarding potential
alternative transactions result in any indications of value or a formal
acquisition proposal for the acquisition of the Company or any segment thereof.
3. The first full paragraph on page 26 of the Definitive Proxy Statement is
hereby amended and supplemented by adding the following sentence as the
last sentence of such paragraph:
Accordingly, Mr. Glaser did not present, nor did the Board discuss, Mr. Glaser's
proposed alternative financial forecast.
4. The third full paragraph on page 26 of the Definitive Proxy Statement is
hereby amended and restated in its entirety as follows:
On both May 27 and May 29, 2022, the Special Committee held meetings at which
its advisors from K&S and Houlihan Lokey participated to discuss the financial
forecast prepared by Company management. The Special Committee and its advisors
acknowledged that the forecast prepared by management assumed the Company would
raise additional capital to fund operations, but that achievement of such
forecast was uncertain given that there was no source of such funding identified
nor any apparent strategy to raise such capital. Nevertheless, the Special
Committee and its advisors concluded that such forecast represented the best
estimates of future financial performance available to the Special Committee and
the Special Committee initially instructed Houlihan Lokey to use such financial
forecast for purposes of its financial analysis. On July 22, 2022, the Special
Committee approved the updated financial forecast prepared by Company management
and instructed Houlihan Lokey to use such financial forecast for purposes of its
financial analysis.
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5. The first sentence of the first full paragraph on page 54 of the
Definitive Proxy Statement is hereby amended and supplemented by adding
the following parenthetical at the end of such sentence:
(these amounts were negative $3.4 million, negative $6.6 million and negative
$0.7 million for estimated calendar years 2022, 2023 and 2024, respectively).
6. The second full paragraph on page 54 of the Definitive Proxy Statement is
hereby amended and restated in its entirety as follows:
The foregoing implied per share value reference ranges (I) reflect a corporate
overhead deduction range of $25.0 million to $33.2 million and (II) were
calculated using (a) net debt of $(14.4) million for the Company as of June 30,
2022 and (b) outstanding securities of the Company as of June 30, 2022, as
adjusted for certain negotiated reductions and based on the treasury method as
applicable, as follows: (i) approximately 8.1 million outstanding shares of
Series B Preferred Stock, (ii) approximately 47.3 million outstanding shares of
Common Stock, (iii) approximately 1.7 million RSUs and awards (pro forma to
account for the negotiated reduction of such units held by a former executive)
and (iv) approximately 6.8 million outstanding Common Stock options, to the
extent in-the-money.
7. The third full paragraph on page 59 of the Definitive Proxy Statement is
hereby amended and restated in its entirety as follows:
As discussed above, in connection with its consideration of the proposed
transaction, the Board and the Special Committee were provided, prior to
finalizing the Merger Agreement, the Projections, prepared as of July 22, 2022,
which information was also provided to Houlihan Lokey and approved by the
Special Committee for Houlihan Lokey's use and reliance for purposes of its
financial analyses in connection with its opinion as described in "Special
Factors - Opinion of the Special Committee's Financial Advisor."
8. The final paragraph beginning on page 59 of the Definitive Proxy
Statement is hereby amended and supplemented by adding the following two
sentences immediately after the second sentence in such paragraph:
Earlier versions of the Projections were prepared in January 2022 and May 2022,
which were updated in July 2022 to reflect developments in the Company's
business segments. Prior to finalizing the Projections, Company management
discussed the Projections with Mr. Glaser, as Chief Executive Officer of the
Company.
9. The first sentence of the final paragraph on page 60 of the Definitive
Proxy Statement is hereby amended and restated in its entirety as
follows:
Certain of the Projections summarized below were not prepared in accordance with
United States generally accepted accounting principles ("GAAP"), including
EBITDA, which is shown in the table below as Total Revenue less Total Cost of
Sales less Total Operating Expenses.
10. The second full paragraph beginning on page 64 of the Definitive Proxy
Statement is hereby amended and supplemented by replace the final
sentence with the following:
As of the date of this Proxy Statement, no employment arrangements between such
persons and Parent and/or its affiliates have been established, and no
negotiations regarding employment arrangements have occurred between such
persons and Parent and/or its affiliates.
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11. The table on page 76 of the Definitive Proxy Statement is hereby amended
and restated in its entirety as follows:
Description Amount
Financial advisory fees and expenses(1) $ 2,056,000
Legal fees and expenses
$ 3,145,000
SEC filing fees $ 3,400
EDGAR filing, printing and mailing expenses $ 135,000
Exchange Agent fees and expenses
$ 38,000
Proxy Solicitor $ 162,500
Board Fees $ 195,000
Total $ 5,734,900
(1) Includes a transaction fee payable to Imperial upon consummation of the
Merger of $300,000 cash and $200,000 in the form of warrants to purchase
equity interests of Parent at an exercise price of $0.01 per equity interest.
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 Merger,
considerations taken into account by the Board of Directors of RealNetworks in
approving the Merger and expectations for RealNetworks following the closing of
the Merger. 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 Merger are not satisfied, including the risk
that required shareholder approval for the Merger is not obtained, potential
litigation relating to the Merger, uncertainties as to the timing of the
consummation of the Merger, the ability of each party to consummate the Merger,
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.
Additional Information and Where to Find It
This communication is being made in connection with the Merger. In connection
with the Merger, the Company has filed the Definitive Proxy Statement with the
SEC. The Company may also file other relevant documents with the SEC regarding
the Merger. This communication is not a substitute for any proxy statement or
any other document that may be filed with the SEC in connection with the Merger.
INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE DEFINITIVE
PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC,
AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN
THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
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Investors and security holders may obtain free copies of the Definitive Proxy
Statement and other documents containing important information about the Company
and the Merger through the website maintained by the SEC at http://www.sec.gov.
Copies of the documents filed with the SEC by the Company will be available free
of charge on the Company's website at http://www.realnetworks.com.
Participants in the Solicitation
The Company, its directors and certain of its executive officers and employees
may be deemed to be participants in the solicitation of proxies from the
Company's shareholders in connection with the proposed transaction. Information
regarding the persons who may, under the rules of the SEC, be deemed
participants in the solicitation of the Company's shareholders in connection
with the proposed transaction, including a description of their direct or
indirect interests, by security holdings or otherwise, are set forth in the
Definitive Proxy Statement that has been filed with the SEC. Information about
these persons is included in the Company's annual proxy statement and in other
documents subsequently filed with the SEC, including the Definitive Proxy
Statement.
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