Exhibit 10.12
RealNetworks, Inc. 2005 Stock Incentive Plan
Restricted Stock Units Terms and Conditions
     Restricted Stock Units Terms and Conditions (the “Agreement”) made and
entered into as of the effective date (the “Grant Date”) set forth in the Notice
of Grant of Restricted Stock Units and Restricted Stock Units Agreement attached
hereto (the “Notice of Grant”), by and between RealNetworks, Inc., a Washington
corporation (the “Company”), and you (the “Participant”) pursuant to the
RealNetworks, Inc. 2005 Stock Incentive Plan (the “Plan”). Capitalized terms not
defined in this Agreement have the meanings ascribed to them in the Plan.
     1. Grant of Restricted Stock Units. The Company hereby grants to the
Participant pursuant to the Plan Restricted Stock Units, subject to the terms of
this Agreement and the Plan. Each Restricted Stock Unit shall be deemed to be
the equivalent of one Share.
     2. Account. The Company shall credit to a bookkeeping account (the
“Account”) maintained by the Company for the Participant’s benefit the
Restricted Stock Units. On each date that cash dividends are paid on the Shares,
the Company will credit the Account with a number of additional Restricted Stock
Units equal to the result of dividing (i) the product of the total number of
Restricted Stock Units credited to the Account on the record date for such
dividend and the per Share amount of such dividend by (ii) the Fair Market Value
of one Share on the date such dividend is paid by the Company to shareholders.
The additional Restricted Stock Units shall be or become vested to the same
extent as the Restricted Stock Units that resulted in the crediting of such
additional Restricted Stock Units.
     3. Vesting. Except as otherwise provided herein, the vesting schedule
applicable to the Restricted Stock Units credited to the Account shall be as set
forth in the Notice of Grant. The Restricted Stock Units shall cease to vest
upon the Participant’s termination of employment. Notwithstanding the foregoing,
the Committee may, in its discretion, accelerate the date that any installment
of the Restricted Stock Units vests.
     4. Termination of Employment.
          (a) Termination by Company Other Than for Cause. If the Company
terminates the employment of the Participant for any reason other than for Cause
(as defined in paragraph (c) of this Section) and the Restricted Stock Units
credited to the Account are not fully vested, the next installment of the
Restricted Stock Units credited to the Account scheduled to vest (if any) shall
vest on a pro rata basis for the portion of the year elapsed since the date on
which the vesting of the Restricted Stock Units credited to the Account
commences or the last anniversary thereof, expressed in full months (the “Pro
Rata Portion”), provided that the Participant executes and delivers a Settlement
Agreement and Release (“Release”) satisfactory to the Company before the
Effective Date (as defined in the Release). For purposes hereof, employment
shall not be considered as having terminated during any leave of absence if the
leave of absence has been approved in writing by the Company; in the event of
any unpaid leave of absence, vesting of the Restricted Stock Units credited to
the Account shall be suspended (and the unpaid portion of the leave of absence
shall be added to all vesting installment dates) unless otherwise determined by
the Committee.
          (b) Termination by Company for Cause. If the employment of the
Participant is terminated by the Company for Cause (as defined below), the
Restricted Stock Units credited to the Account that were not vested on the date
of such termination of employment shall be immediately forfeited.
          (c) Cause. For purposes of this Agreement, “Cause” means conduct
involving one or more of the following: (i) the conviction of the Participant,
or plea of nolo contendere by the Participant to, a felony or misdemeanor
involving moral turpitude; (ii) the indictment of the Participant for a felony
or misdemeanor involving moral turpitude under the federal securities laws;
(iii) the substantial and continuing failure of the Participant after written
notice thereof to render services to the Company in accordance with the terms or
requirements of the Participant’s employment for reasons other than illness or
incapacity; (iv) the willful misconduct or gross negligence by the Participant;
(v) fraud, embezzlement, theft, misrepresentation or dishonesty by the
Participant involving the Company or any Subsidiary, or willful violation by the
Participant of a policy or procedure of the Company, resulting in any case in
significant harm to the Company; or (vi) the Participant’s violation of any
confidentiality or non-competition agreements with the Company or its
Subsidiaries.
          (d) Termination by Participant. If the Participant terminates his or
her employment for any reason other than death or disability, the Restricted
Stock Units credited to the Account that were not vested on the date of such
termination of employment shall be immediately forfeited.

1

--------------------------------------------------------------------------------

 

     5. Death; Disability.
          (a) Death. If the Participant’s employment terminates due to the
Participant’s death, the Restricted Stock Units credited to the Account will
fully vest on the date of termination of employment.
          (b) Disability. If the Participant’s employment is terminated by
reason of his or her disability and the Restricted Stock Units credited to the
Account are not fully vested, the Pro Rata Portion of the next installment of
the Restricted Stock Units credited to the Account scheduled to vest (if any)
shall vest. For purposes hereof, “disability” means “permanent and total
disability” as defined in Section 22(e)(3) of the Code.
     6. Payment of Restricted Stock Units. The Company shall make a payment to
the Participant of the vested Restricted Stock Units credited to the Account as
provided in Section 7 upon the date the Restricted Stock Units vest. The
Participant may elect, in accordance with procedures adopted by the Company, to
change the payment date determined in accordance with the first sentence of the
preceding paragraph by written notice to the Company at least 12 months prior to
the payment date, provided that the new payment date must be at least five years
after the previously applicable payment date. Notwithstanding the foregoing,
upon:
          (a) The death of the Participant prior to the new payment date,
payment shall be accelerated to the date of the Participant’s death and paid in
accordance with the provisions of Section 9; and
          (b) The occurrence of a Section 409A CIC (as defined in Appendix B),
payment shall be accelerated to the date of such Section 409A CIC and paid in
Shares (or, if applicable, in shares of the common stock of the Surviving
Corporation or the Parent Corporation).
     7. Form of Payment. Payment pursuant to Section 6 shall be made in Shares
equal to the number of vested Restricted Stock Units credited to the Account.
Payment shall be made as soon as practicable after the applicable payment date,
but in no event later than 30 days after the date established pursuant to
Section 7.
     8. Beneficiary. In the event of the Participant’s death prior to payment of
the Restricted Stock Units credited to the Account, payment shall be made to the
last beneficiary designated in writing that is received by the Company prior to
the Participant’s death or, if no designated beneficiary survives the
Participant, such payment shall be made to the Participant’s estate.
     9. No Obligation to Continue Employment. Neither the Plan, this Agreement,
nor the grant of the Restricted Stock Units imposes any obligation on the
Company or its Subsidiaries to continue the Participant’s employment, or limit
in any way the rights of the Company or a Subsidiary to terminate the
Participant’s employment at any time.
     10. No Rights as Shareholder. The Participant shall have no rights as a
stockholder with respect to any Shares subject to the Restricted Stock Units
until such Shares have been issued.
     11. Adjustment for Capital Changes. The Plan contains provisions covering
the treatment of options in the event of mergers, stock splits, spin-offs and
certain other corporate transactions. Provisions in the Plan for such adjustment
are hereby made applicable hereunder and are incorporated herein by reference.
     12. Change in Control; Corporate Transaction. Provisions regarding a Change
in Control and a Corporate Transaction are set forth on Appendix A.
     13. Withholding. Prior to the issuance of Shares in payment of the
Restricted Stock Units credited to the Account the Participant must pay to the
Company, or make satisfactory provision to the Company for payment of, any
federal, state or local withholding taxes required by law to be withheld in
respect of the payment of such Restricted Stock Units. The Participant agrees
that the Company may withhold such taxes from the Participant’s wages or other
remuneration. In the discretion of the Company, the taxes may be withheld in
kind from the Shares otherwise deliverable to the Participant on payment of the
Restricted Stock Units credited to the Account.
     14. Policy on the Avoidance of Insider Trading. The Participant
acknowledges that he/she has received and read the RealNetworks Policy on the
Avoidance of Insider Trading, and, if applicable, the Addendum to the Policy on
the Avoidance of Insider Trading, and the Participant agrees to comply with the
Policy’s terms, together with the Addendum, if applicable.

2

--------------------------------------------------------------------------------

 

     15. 10b5-1 Trading Plan. Participant acknowledges that he or she is
responsible for paying any applicable taxes required by law to be withheld in
respect of the issuance of the Shares upon vesting of the Restricted Stock Units
even if the Participant does not sell any Shares issuable upon the vesting of
the Restricted Stock Units. Because Participant may be prevented from selling
Shares pursuant to the Company’s Policy on the Avoidance of Insider Trading (the
“Policy”) at the time of the vesting of the Restricted Stock Units, Participant
should consider entering into a 10b5-1 trading plan that ensures the Participant
will be permitted to sell Shares sufficient to cover his or her tax liability
even if the trading window is closed or the Participant would otherwise be
prohibited from selling Shares under the terms of the Policy. The Participant
acknowledges that the Company will not release Shares to the Participant until
the applicable taxes required by law to be withheld upon vesting of the
Restricted Stock Units have been paid in full. The Company will not be
responsible for any losses or damages resulting from any delay in releasing the
Shares to the Participant upon the vesting of the Restricted Stock Units as a
result of the Participant’s failure to make full payment of the required taxes
in a timely manner upon the vesting of the Restricted Stock Units.
     16. Compliance with Section 409A of the Code.
          (a) Automatic Delay of Payment. Notwithstanding anything contained in
this Agreement to the contrary, if the Company determines that as of the date of
payment the Participant is a “specified employee” (as such term is defined under
Section 409A of the Code), any Shares (or shares of the common stock of the
successor company in the event of a Change in Control) payable by reason of the
Participant’s termination of employment with the Company and its Subsidiaries
for any reason other than death or “disability” (as such term is defined under
Section 409A of the Code) will not be paid until the date that is six months
following the date of termination of employment (or such earlier time permitted
under Section 409A of the Code without the imposition of any accelerated or
additional taxes under Section 409A of the Code).
          (b) General. This Agreement is intended to comply and shall be
administered in a manner that is intended to comply with section 409A of the
Code and shall be construed and interpreted in accordance with such intent.
Payment under this Agreement shall be made in a manner that will comply with
section 409A of the Code, including regulations or other guidance issued with
respect thereto, as determined by the Committee. Any provision of this Agreement
that would cause the payment or settlement thereof to fail to satisfy section
409A of the Code shall be amended to comply with section 409A of the Code on a
timely basis, which may be made on a retroactive basis, in accordance with
regulations and other guidance issued under section 409A of the Code.
     17. Miscellaneous.
          (a) Notices. All notices hereunder shall be in writing and shall be
deemed given when sent by certified or registered mail, postage prepaid, return
receipt requested, if to the Participant, to the address indicated on the
signature page below or at the most recent address shown on the records of the
Company, and if to the Company, to the Company’s principal office, attention of
the Corporate Secretary.
          (b) Entire Agreement; Modification. This Agreement and the Plan
constitute the entire agreement between the parties relative to the subject
matter hereof, and supersedes all understandings between the parties relating to
the subject matter of this Agreement. This Agreement may be modified, amended or
rescinded only by a written agreement executed by both parties.
          (c) Cost of Litigation. In any action at law or in equity to enforce
any of the provisions or rights under this Agreement, the unsuccessful party to
such litigation, as determined by the court in a final judgment or decree, shall
pay the successful party or parties all costs, expenses and reasonable
attorneys’ fees incurred by the successful party or parties (including without
limitation costs, expenses and fees in any appellate proceedings), and if the
successful party recovers judgment in any such action or proceeding, such costs,
expenses and attorney’s fees shall be included as part of the judgment.
          (d) Severability. The invalidity, illegality or unenforceability of
any provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision.
          (e) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, including the Participant’s heirs, executors, administrators and legal
representatives.
          (f) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Washington, without giving effect to
the principles of the conflicts of laws thereof.

3

--------------------------------------------------------------------------------

 

APPENDIX A
Change in Control; Corporate Transaction
I. Change in Control
     Notwithstanding anything contained herein to the contrary, if (i) the
Restricted Stock Units credited to the Account are assumed or substituted for on
substantially the same terms and conditions (which may include payment in shares
of the common stock of the Surviving Corporation or the Parent Corporation)
immediately following the Change in Control and (ii) within twenty-four
(24) months after a Change in Control the Participant’s employment is terminated
by the Company or its successor without Cause or by the Participant for Good
Reason, all of the Shares subject to the Option shall be vested immediately.
Furthermore and notwithstanding anything contained herein to the contrary, if
the Restricted Stock Units credited to the Account are not assumed or
substituted for immediately following the Change in Control on substantially the
same terms and conditions (which may include payment in shares of the common
stock of the Surviving Corporation or the Parent Corporation), all of the Shares
subject to the Restricted Stock Units credited to the Account shall vest
immediately upon the Change in Control. If the Company is the Surviving
Corporation or the Parent Corporation, if applicable, it shall be deemed to have
assumed the Restricted Stock Units unless it takes explicit action to the
contrary.
     For purposes of this Agreement:
          “Change in Control” means the occurrence of any one of the following
events:
          (i) during any period of twenty-four (24) consecutive months,
individuals who, at the beginning of the period constitute the Board (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of
the Board, provided that any person becoming a director subsequent to the
initial public offering whose election or nomination for election was approved
by a vote of at least a majority of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director; provided, however,
that no individual initially elected or nominated as a director of the Company
as a result of an actual or threatened election contest with respect to
directors or as a result of any other actual or threatened solicitation of
proxies by or on behalf of any person other than the Board shall be deemed to be
an Incumbent Director;
          (ii) any “person” (as such term is defined in the Exchange Act and as
used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 35% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board (the “Company Voting Securities”); provided,
however, that the event described in this paragraph (ii) shall not be deemed to
be a Change in Control by virtue of any of the following acquisitions: (A) by
the Company or any subsidiary, (B) by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of such
securities, (D) pursuant to a Non-Qualifying Transaction, as defined in
paragraph (iii), or (E) by any person of Voting Securities from the Company, if
a majority of the Incumbent Board approves in advance the acquisition of
beneficial ownership of 35% or more of Company Voting Securities by such person;
          (iii) the consummation of a merger, consolidation, statutory share
exchange, reorganization or similar form of corporate transaction involving the
Company or any of its subsidiaries that requires the approval of the Company’s
stockholders, whether for such transaction or the issuance of securities in the
transaction (a “Business Combination”), unless immediately following such
Business Combination: (A) more than 50% of the total voting power of (x) the
corporation resulting from such Business Combination (the “Surviving
Corporation”), or (y) if applicable, the ultimate parent corporation that
directly or indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Corporation (the “Parent
Corporation”), is represented by Company Voting Securities that were outstanding
immediately prior to such Business Combination (or, if applicable, is
represented by shares into which such Company Voting Securities were converted
pursuant to such Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of such
Company Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly or indirectly,
of 35% or more of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least half of the members of
the board of directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation of the
Business Combination were Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria
specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying
Transaction”); or

4

--------------------------------------------------------------------------------

 

          (iv) the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or the consummation of a sale of all
or substantially all of the Company’s assets.
     Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any person acquires beneficial ownership of more than 35%
of the Company Voting Securities as a result of the acquisition of Company
Voting Securities by the Company which reduces the number of Company Voting
Securities outstanding; provided, that if after such acquisition by the Company
such person becomes the beneficial owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, a Change in Control of the Company shall then
occur.
          “Good Reason” means:
          (i) a reduction by the Company or its successor of more than 10% in
the Participant’s rate of annual base salary as in effect immediately prior to
such Change in Control;
          (ii) a reduction by the Company or its successor of more than 10% of
the Participant’s individual annual target or bonus opportunity; or
          (iii) any requirement of the Company that Participant be based
anywhere more than fifty (50) miles from Participant’s primary office location
at the time of the Change in Control and more than fifty (50) miles from
Participant’s principal residence at the time of the Change in Control.
II. Corporate Transaction
     Notwithstanding anything contained herein to the contrary, in the event of
a Corporate Transaction that is not a Change in Control, the surviving
corporation or acquiring corporation may assume, continue or substitute for the
Restricted Stock Units credited to the Account on substantially the same terms
and conditions (which may include payment in shares of the common stock of the
surviving corporation or acquiring corporation, or the parent company of the
surviving or acquiring corporation). In the event of a Corporate Transaction
that is not a Change in Control, then notwithstanding anything contained herein
to the contrary, to the extent that the surviving corporation or acquiring
corporation (or its parent company) does not assume, continue or substitute for
the Restricted Stock Units credited to the Account on substantially the same
terms and conditions (which may include payment in shares of the common stock of
the surviving corporation, acquiring corporation, or the surviving or acquiring
corporation’s parent company), then all of such Restricted Stock Units shall
become fully vested immediately prior to the Corporate Transaction if the
Participant is then an Employee.
     For purposes of this Agreement, “Corporate Transaction” means (i) the
consummation of a merger, consolidation or similar transaction following which
the Company is not the surviving corporation; or (ii) the consummation of a
merger, consolidation or similar transaction following which the Company is the
surviving corporation but the Shares outstanding immediately preceding the
merger, consolidation or similar transaction are converted or exchanged by
virtue of the merger, consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise. Notwithstanding the
foregoing, a “Corporate Transaction” shall not include a transaction that is
effected exclusively for the purpose of changing the domicile of the Company.
III. Form and Timing of Payment
     Payment of Restricted Stock Units that vest pursuant to the first sentence
of Part I of this Appendix A shall be made in Shares (or, if applicable, in
shares of the common stock of the Surviving Corporation or Parent Corporation)
as soon as practicable following the termination of employment referred to in
such sentence. Payment of Restricted Stock Units that vest pursuant to the
second sentence of Part I of Appendix A shall be made in Shares (or, if
applicable, in shares of the common stock of the Surviving Corporation or the
Parent Corporation), as soon as practicable following the earliest of (i) the
date of the Change in Control if such Change in Control is also a Section 409A
CIC (as defined in Appendix B), (ii) the applicable date on which the Restricted
Stock Units vest or (iii) the date of the Participant’s termination of
employment with the Company and its Subsidiaries for any reason. Payment of
Restricted Stock Units that vest pursuant to the second sentence of Part II of
this Appendix A shall be made in Shares (or, if applicable, in shares of the
common stock of the surviving corporation, acquiring corporation, or the
surviving or acquiring corporation’s parent company), as soon as practicable
following the earliest of (i) the date of the Corporate Transaction if such
Corporate Transaction is also a Section 409A CIC, (ii) the applicable on which
the Restricted Stock Units vest or (iii) the date of the Participant’s
termination of employment with the Company and its Subsidiaries for any reason.

5

--------------------------------------------------------------------------------

 

APPENDIX B
     For purposes of this Agreement, “Section 409A CIC” means and shall be
deemed to have occurred as of the date of the first to occur of the following
events:
          (a) Any Person or Group acquires stock of the Company that, together
with stock held by such Person or Group, constitutes more than 50% of the total
fair market value or total voting power of the stock of the Company. However, if
any Person or Group is considered to own more than 50% of the total fair market
value or total voting power of the stock of the Company, the acquisition of
additional stock by the same Person or Group is not considered to cause a
Section 409A CIC. An increase in the percentage of stock owned by any Person or
Group as a result of a transaction in which the Company acquires its stock in
exchange for property will be treated as an acquisition of stock for purposes of
this subsection. This subsection applies only when there is a transfer of stock
of the Company (or issuance of stock of the Company) and stock in the Company
remains outstanding after the transaction;
          (b) Any Person or Group acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such Person or
Group) ownership of stock of the Company possessing 35% or more of the total
voting power of the stock of the Company. However, if any Person or Group is
considered to own 35% of the total voting power of the stock of the Company, the
acquisition of additional stock by the same Person or Group is not considered to
cause a Section 409A CIC;
          (c) A majority of members of the Company’s Board is replaced during
any 12-month period by Participants whose appointment or election is not
endorsed by a majority of the members of the Company’s Board prior to the date
of the appointment or election; or
          (d) Any Person or Group acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such Person or
Group) assets from the Company that have a total gross fair market value equal
to or more than 40% of the total gross fair market value of all of the assets of
the Company immediately prior to such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of the Company,
or the value of the assets being disposed of, determined without regard to any
liabilities associated with such assets. However, no Section 409A CIC shall be
deemed to occur under this subsection (d) as a result of a transfer to:
               (i) A shareholder of the Company (immediately before the asset
transfer) in exchange for or with respect to its stock;
               (ii) An entity, 50% or more of the total value or voting power of
which is owned, directly or indirectly, by the Company;
               (iii) A Person or Group that owns, directly or indirectly, 50% or
more of the total value or voting power of all the outstanding stock of the
Company; or
               (iv) An entity, at least 50% of the total value or voting power
of which is owned, directly or indirectly, by a person described in clause
(iii) above.
     For these purposes, the term “Person” shall mean an individual, Company,
association, joint stock company, business trust or other similar organization,
partnership, limited liability company, joint venture, trust, unincorporated
organization or government or agency, instrumentality or political subdivision
thereof. The term “Group” shall have the meaning set forth in Rule 13d-5 of the
Securities Exchange Commission, modified to the extent necessary to comply with
Proposed Treasury Regulation Section 1.409A-3(g)(5)(v)(B), or any successor
thereto in effect at the time a determination of whether a Section 409A CIC has
occurred is being made.

6