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EXHIBIT 10.18
This Agreement (this "Agreement") is entered into as of September 26,
1997 by and between Progressive Networks, Inc., a Washington corporation the
name of which is to be changed to RealNetworks, Inc. (the "Company") and Xxxxxx
Xxxxxx, the founder, principal shareholder, Chairman of the Board, Chief
Executive Officer and a Director of the Company ("Xx. Xxxxxx").
RECITALS
A. Xx. Xxxxxx owns approximately 14,000,000 shares of preferred stock of
the Company, each of which shares is entitled to 15 votes.
B. Xx. Xxxxxx, in consideration in part for the Company's covenants
under this Agreement, has agreed that the Company's Articles of Incorporation
may be amended to cause his shares of preferred stock to be converted (the
"Conversion") upon the closing of the Company's initial public offering, (as
defined in the Company's Amended and Restated Articles of Incorporation, the
"Qualified Public Offering") into shares of Common Stock, each share of which
would be entitled to one vote.
C. Xx. Xxxxxx will, as a result of the Conversion and the Qualified
Public Offering, dilute his ability to direct the Company as a shareholder, and
give up a significant degree of influence as a shareholder over a change of
control of the Company. Xx. Xxxxxx'x investment in the Company has grown over
100 times in value from inception through September 24, 1997, and the dilution
to Xx. Xxxxxx'x ability to prevent a change of control could, in his judgment,
damage his continued return on investment.
NOW THEREFORE, in consideration of Xx. Xxxxxx'x significant economic
concessions described above, and the mutual covenants and agreements set forth
in this Agreement, and Xx. Xxxxxx'x consent to the Conversion, Xx. Xxxxxx and
the Company agree as follows:
1. Acknowledgment of Concession in Value
The Company acknowledges and agrees that Xx. Xxxxxx has given up
significant economic value in agreeing to the Conversion, and the diminution of
his voting rights.
2. Specific Enforcement
In addition to any and all rights as a shareholder of the Company, Xx.
Xxxxxx shall have a direct contractual right to require the Company to abide by
and perform all terms of Article 7.1 (Strategic Transactions Committee) of the
Company's Articles of Incorporation (the "Strategic Transactions Article"). The
Company represents that its violation of or failure to abide by the Strategic
Transactions Article will violate this Agreement and will cause Xx. Xxxxxx to
suffer direct irreparable harm for which there be no adequate legal remedy. The
parties hereto therefore acknowledge and agree that immediate injunctive relief,
including but not limited to specific enforcement of this Agreement, is an
appropriate and necessary remedy for violation of the Agreement, and that Xx.
Xxxxxx shall have the right to obtain such judicial relief.
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3. Election of Directors
So long as Xx. Xxxxxx shall own at least 3,500,000 shares of Common
Stock (such number of shares to be equitably adjusted to reflect stock splits,
stock dividends and recapitalizations), the Company shall use its best efforts,
as permitted under applicable law, to cause Xx. Xxxxxx to be nominated to, not
removed from, and elected to the Company's board of directors.
4. Miscellaneous
Nothing in this Agreement is intended to require or shall be construed
as requiring the Company to take or fail to take any action in violation of
applicable law. The Company's inability to perform its obligations under this
Agreement pursuant to court order (other than any such order obtained at the
request of the Company) shall not constitute a breach of this Agreement. The
provisions of this Agreement shall be severable, as provided in this Section 4.
If a court of competent jurisdiction should decline to enforce any of the
provisions of this Agreement, the Company and Xx. Xxxxxx agree that such
provisions shall be deemed to be reformed to provide Xx. Xxxxxx with the
benefits intended by the partner to the maximum extent permitted by the other
portions of this Agreement that are not unenforceable, and the remainder of this
Agreement shall not be affected, and its Agreement shall continue in force. This
Agreement shall be interpreted and enforced in accordance with the laws of the
State of Washington. This Agreement shall be binding up Xx. Xxxxxx and upon the
Company, its successors and assigns, and shall inure to the benefit of the
Company, its successors and assigns. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
each of the parties hereto.
IN WITNESS WHEROF, the parties have executed and delivered this
Agreement effective as of the day and year first set forth above.
PROGRESSIVE NETWORKS, INC.
/s/ Xxxxx Xxxxxxxx
By___________________________________
XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
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