EXHIBIT 10.4

STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT (this “Agreement”) is entered into effective as of
the effective date (the “Grant Date”) set forth in the Notice of Grant of Stock
Options and Option Agreement attached hereto (the “Notice of Grant”), by
RealNetworks, Inc., a Washington corporation (the “Company”), and you (the
“Holder”).

RECITALS

A.   The Company has adopted the RealNetworks, Inc. 2000 Stock Option Plan, as
amended and restated (the “Plan”), a copy of which has been provided to the
Holder (capitalized terms that are used but not defined in this Agreement will
have the meanings given those terms in the Plan).   B.   The Holder is an
employee of the Company or one of its Affiliates (as defined in the Plan), and
has been designated by the Administrative Committee to receive a stock option
under the Plan.

NOW, THEREFORE, the Company and the Holder covenant and agree as follows:

1.   Grant of the Option. Subject to the terms of this Agreement and the Plan,
the Company hereby grants to the Holder a stock option (the “Option”) to acquire
from the Company the number of shares of the Common Stock, par value $.001, of
the Company (the “Common Stock”) set forth in the Notice of Grant, at the price
set forth in the Notice of Grant (the “Option Price”). The Option is not
intended to qualify as an “incentive stock option”, as that term is defined in
Section 422 of the Internal Revenue Code of 1986, as amended.   2.   Term of the
Option. Unless earlier terminated in accordance with the provisions of the Plan,
the Option will terminate on the earliest to occur of (a) the expiration of
Twenty (20) years from the Grant Date; (b) the expiration of ninety (90) days
following termination of the Holder’s employment with the Company for any reason
other than death, Disability or Cause (as defined in Section 7.2(b) of the
Plan); (c) the expiration of One (1) year following termination of the Holder’s
employment with the Company on account of death or Disability; and (d) the date
of termination of the Holder’s employment with the Company for Cause (as defined
in Section 7.2(b) of the Plan); provided, however, that, in the case of
termination of the Holder’s employment with the Company for any reason other
than death, Disability or Cause (as defined in Section 7.2(b) of the Plan), if
the Holder dies after such termination but prior to termination of the Option as
set forth in this Section 2 above, the Option will not terminate as set forth in
this Section 2 above, but rather shall terminate on the earlier to occur of the
expiration of Twenty (20) years from the Grant Date or the expiration of One
(1) year following the Holder’s death.   3.   Vesting. The vesting schedule
applicable to the Option shall be as set forth in the Notice of Grant, subject
to sub-paragraphs (a) and (b) below. On any scheduled vesting date, vesting
actually will occur only if you remain an employee of the Company or any of its
Affiliates (as defined in the Plan) through the vesting date.

  (a)   Notwithstanding anything in this Agreement to the contrary, if the
Company terminates Holder’s employment for any reason other than for Cause (as
defined in Section 7.2(b) of the Plan) and Holder executes and delivers a
Settlement Agreement and Release (“Release”) satisfactory to the Company on or
before the Effective Date (as defined in the Release), the vesting schedule set
forth below shall apply instead of the vesting schedule described in the Notice
of Grant.

  Vesting Upon Execution of Release. 1/60 of the shares subject to the Option
shall vest upon the completion of one month of employment following the date on
which the

 

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  vesting of the Option commences, and an additional 1/60 of the shares subject
to the Option shall vest upon the completion of each successive month of
employment thereafter, up to the Holder’s date of termination (as defined in the
Release).

  (b)   If the Holder’s employment with the Company terminates for any reason
other than the Holder’s death, the Option will not vest further following such
termination. If the Holder’s employment with the Company terminates due to the
Holder’s death, the Option will fully vest on the date of termination of
employment. In either case, to the extent the Option is vested, it shall be
exercisable only prior to its termination as provided in Section 2.

4.   Other Limitations of the Option. The Option is subject to all of the
provisions of the Plan, including but not limited to Section 4.2 (which permits
adjustments to the Option upon the occurrence of certain corporate events such
as stock dividends, extraordinary cash dividends, reclassifications,
recapitalizations, reorganizations, split-ups, spin-offs, combinations,
exchanges of shares, and warrants or rights offerings) and Section 7.1 (which
applies in the event of an Approved Transaction or Control Purchase).   5.  
Exercise of the Option. To exercise the Option, the Holder must do the
following:

  (a)   deliver to the Company a written notice, in the form attached to this
Agreement as Exhibit A, specifying the number of shares of Common Stock for
which the Option is being exercised;     (b)   surrender this Agreement to the
Company;     (c)   tender payment of the aggregate Option Price for the shares
for which the Option is being exercised, which payment may be made (i) in cash
or by check; or (ii) by such other means as the Administrative Committee, in its
sole discretion, shall permit at the time of exercise;     (d)   pay, or make
arrangements satisfactory to the Administrative Committee for payment to the
Company of all federal, state and local taxes, if any, required to be withheld
by the Company in connections with the exercise of the Option; and     (e)  
execute and deliver to the Company the documents required by the Plan and any
other documents required from time to time by the Administrative Committee in
order to promote compliance with applicable laws, rules and regulations.

6.   Delivery of Share Certificate. As soon as practicable after the Option has
been duly exercised, the Company will deliver to the Holder a certificate for
the shares of Common Stock for which the Option was exercised. Unless the Option
has expired or been exercised in full, the Company and the Holder agree to
execute a new Stock Option Agreement, covering the remaining shares of Common
Stock that may be acquired upon exercise of the Option, which will be identical
to this Agreement except as to the number of shares of Common Stock subject
thereto. In lieu of replacing this Agreement in such manner, the Company may
affix to this Agreement an appropriate notation indicating the number of shares
for which the Option was exercised and return this Agreement to the Holder.   7.
  Nontransferability. The Option is not transferable other than by will or the
laws of descent and distribution, and the Option may be exercised during the
lifetime of the Holder only by the Holder or the Holder’s court appointed legal
representative.   8.   Development, Confidentiality and Noncompetition
Covenants. By executing this Agreement and in consideration for and as a
condition for receiving the Option represented by this Agreement, the Holder
hereby agrees to be bound by the terms of the Development, Confidentiality and
Noncompetition Covenants attached as Exhibit B hereto (the “Employee Covenants”)
whether or not the Employee Covenants are signed separately. Neither the
termination of this Agreement nor the termination of the Option shall cause
termination of the obligations of the Holder under the Employee Covenants, which
shall survive as provided therein.

 

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9.   Warranties and Representations of the Holder. By executing this Agreement,
the Holder accepts the Option, acknowledges receipt of a copy of the Plan and
the Prospectus, and agrees to comply with all of the provisions of this
Agreement, the Plan and the Employee Covenants.   10.   Rights of the
Shareholder. The Holder will have no rights as a shareholder of the Company on
account of the Option or on account of shares of Common Stock which will be
acquired upon exercise of the Option (but with respect to which no certificates
have been issued).   11.   Tax Withholding. The Holder agrees to pay, or to make
arrangements satisfactory to the Administrative Committee for payment to the
Company of, all federal, state and local income and employment taxes, if any,
required to be withheld by the Company in connection with the exercise of the
Option or any sale, transfer or other disposition of any shares of Common Stock
acquired upon exercise of the Option. If the Holder fails to do so, then the
Holder hereby authorizes the Company to deduct all or any portion of such taxes
from any payment of any kind otherwise due to the Holder.   12.   Further
Assurances. The Holder agrees from time to time to execute such additional
documents as the Company may reasonably require to effectuate the purposes of
the Plan and this Agreement.   13.   Binding Effect. This Agreement shall be
binding upon the Holder and the Holder’s heirs, successors and assigns.   14.  
Entire Agreement; Modifications. This Agreement and the exhibits hereto,
together with the Plan and agreements referenced in this Agreement and/or the
Plan, constitutes the entire agreement and understanding between the Company and
the Holder regarding the subject matter hereof. Except as otherwise provided in
the Plan, no modification of the Option or this Agreement, or waiver of any
provision of this Agreement or the Plan, shall be valid unless in writing and
duly executed by the Company and the Holder. The failure of any party to enforce
any of that party’s rights against the other party for breach of any of the
terms of this Agreement shall not be construed as a waiver of such rights as to
any continued or subsequent breach.   15.   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 judgement 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.   16.   Governing Law. This Agreement shall be
governed by the laws of the State of Washington.   17.   Severability. If any
provision of this Agreement or the Employee Covenants shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

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EXHIBIT A

FORM OF EXERCISE OF OPTION

To:   RealNetworks, Inc.
         2601 Elliott Avenue, #1000
         Seattle, WA 98121

The undersigned holds Option Number NQ-     (the “Option”), represented by a
Stock Option Agreement dated effective as of      (the “Agreement”), granted to
the undersigned pursuant to the RealNetworks, Inc. 2000 Stock Option Plan, as
Amended and Restated (the “Plan”). The undersigned hereby exercises the Option
and elects to purchase      shares (the “Shares”) of Common Stock of
RealNetworks, Inc. (the “Company”) pursuant to the Option. This notice is
accompanied by full payment of the Option Price of $          per share for the
Shares in cash or by check or in another manner permitted by Section 5(c) of the
Agreement. The undersigned has also paid, or made arrangements satisfactory to
the Administrative Committee administering the Plan for payment of, all federal,
state and local taxes, if any, required to be withheld by the Company in
connection with the exercise of the Option.

          Date:          

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                    Signature of Holder                  

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EXHIBIT B

REALNETWORKS, INC.

DEVELOPMENT, CONFIDENTIALITY AND NONCOMPETITION COVENANTS

     In consideration of your receipt of the stock option grant described in the
accompanying Stock Option Agreement, and the mutual promises made herein, you
and RN agree as follows:

1.   Company Property. “Company Property” means all records, files, notebooks,
manuals, objects, devices, supplies, materials, recordings, drawings, models,
computer programs, prototypes, equipment, inventory and other materials, or
copies thereof, in electronic or paper form, that have been created, used or
obtained by RN, as well as Trade Secrets, Confidential Information and Employee
Developments and all business revenues and fees produced or transacted through
your efforts. You agree that all Company Property is and shall remain the
property of RN. You will preserve and use the Company Property only for the
benefit of RN and the RN business, and you will return all Company Property to
RN upon RN request or upon termination of your employment (whether voluntary or
involuntary).   2.   Confidential Information and Employee Developments.

          As used in these Covenants, the following terms shall have the
meanings shown.

       “Employee Development” means all technological, financial and operating
ideas, processes, and materials, including all inventions, discoveries,
concepts, ideas, enhancements to existing technology or business processes,
computer program ideas and expressions, computer circuit designs, computer
hardware concepts and implementations, formulae, algorithms, techniques, written
materials, graphics, photographs, literary works, and any other ideas or
original works of authorship relating to software or hardware development that
you may develop or conceive of while employed by RN, alone or with others and
which (i) relate directly to RN’s actual or demonstrably anticipated business or
(ii) incorporate or are developed using Trade Secrets or Confidential
Information or (iii) are conceived or developed with use of any RN equipment,
supplies or facilities including RN personnel or (iv) result from work performed
by you for RN, regardless of whether it is technically eligible for protection
under patent, copyright, or trade secret law.

       “Trade Secret” means the whole or any portion of any scientific or
technical information that is valuable and not generally known to competitors of
RN. Trade Secrets include without limitation the specialized information and
technology that RN may develop or acquire with respect to program materials
(including without limitation program and project ideas, source and object code,
codecs, program listings, programming notes and documentation, flow-charts, and
system and user documentation), system designs, operating processes, know-how,
equipment designs, blue prints and product specifications.

       “Confidential Information” means any data or information, other than
Trade Secrets, which has been discovered, developed (including information
conceived or developed by you) or has otherwise become known to RN, including
any parent, subsidiary, predecessor, successor or otherwise affiliated company
(“RN Company”), that is material to RN Company and not generally known to the
public. Confidential Information includes without limitation:

  i.   Sales records, profits and performance reports, pricing manuals and
lists, sales manuals and lists, training materials, selling and pricing
procedures, and financing methods of RN Company.     ii.   Customer lists or
accounts, special requirements of particular customers, and current and
anticipated requirements of customers generally for the products of RN Company;
    iii.   Research and development and specifications of any new products or
lines of business under development or consideration;     iv.   Sources of
supply of integrated components and materials used for production, assembly, and
packaging by RN Company, and the quality, price, and usage of such components
and materials;     v.   Marketing plans, strategies, sales and product
development data, and inventions;     vi.   Business plans and internal
financial statements and projections of RN Company; and

 

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  vii.   Personnel related information such as employees’ compensation,
performance reviews, or other individually identifiable information.

       You recognize and acknowledge that RN Company is engaged in a continuous
program of research, development and production respecting its software
products, its other business opportunities and for its customers. Important
assets of RN Company are its Confidential Information, Trade Secrets and
Employee Developments. You recognize that RN Company has a vital and substantial
interest in maintaining confidentiality of Trade Secrets and Confidential
Information to maintain a stable work force, continuing positive business
relationships and minimizing damage to or interference with business. You also
recognize and acknowledge that your employment exposes you to programming,
concepts, designs and other information proprietary to RN Company and third
parties with whom RN does business, and creates a relationship of trust and
confidence between you and RN with respect to any such information.

  Obligations with Respect to Employee Developments. All Employee Developments
shall be considered works made for hire by you for RN and prepared within the
scope of your employment. Under U.S. Copyright Law, all such materials shall,
upon creation, be owned exclusively by RN. To the extent that any such material,
under applicable law, shall be deemed not to be works made for hire, you hereby
assign to RN all right, title and interest in and to such materials, in the
United States and foreign countries, without further consideration, and RN shall
be entitled to register and hold in its own name all copyrights, patents and
trademarks in respect to such materials. You agree to promptly and completely
disclose in writing to RN details of all original works of your authorship,
discoveries, concepts, or ideas. You agree to apply, at RN’s request and
expense, for any patent or other legal protection of Employee Developments and
to sign and deliver any applications, assignments or other documents as RN may
reasonably require. RN shall have the exclusive right to all Employee
Developments without additional consideration to you, including but not limited
to the right to own, make, use, sell, have made, rent, lease, lend, copy,
prepare derivative works of, perform or display publicly.

  You Own Personal Inventions. You shall not be required to assign to RN any of
your rights in any personal invention you developed entirely on your own time
without using RN’s equipment, supplies, facilities, Trade Secrets or
Confidential Information, except for those inventions that either: (1) relate at
the time of conception or reduction to practice of the invention directly to
RN’s actual or demonstrably anticipated business or (2) result from any work
performed by you for RN. You acknowledge notice by RN that the prior paragraph
does not apply to any personal invention as described in this paragraph. You
agree that this satisfies the requirements of Washington state law.

  Restrictions on Use and Disclosure of Trade Secrets and Confidential
Information. During your employment with RN and for so long thereafter as the
information remains a Trade Secret or Confidential Information, you shall not
use, reproduce, disclose, or permit any person to obtain or use any Trade Secret
or Confidential Information of RN (whether or not it is in written or tangible
form), except as specifically authorized in writing by RN. You shall use the
highest degree of care in safeguarding Trade Secrets and Confidential
Information against loss, theft, or other inadvertent disclosure. You further
agree that any Trade Secrets, Confidential Information, copyrightable works or
materials or copies of them that enter into your possession, by reason of
employment, are the sole property of RN and shall not be used in any manner
adverse to RN’s best interests. You agree not to remove any Confidential
Information or Trade Secret from RN’s premises except in pursuit of RN’s
business.

  Upon RN’s request at any time, or upon your termination of employment (whether
voluntary or involuntary), you shall deliver to RN, and shall not retain for
your own or another’s use, any and all originals or copies of Employee
Developments, Trade Secrets, Confidential Information and Company Property. Your
obligations under these Covenants supplement and do not supersede or limit other
obligations you have to RN or rights or remedies of RN including without
limitation those under the Washington Uniform Trade Secrets Act.

3.   Your Warranties. You agree to perform at all times faithfully,
industriously and to the best of your ability all duties and functions
consistent with your position and to abide by any general employment guidelines
or policies adopted by RN. You acknowledge that your employment is in no way
conditioned upon your disclosure to RN of confidential information or trade
secrets of others, and you agree not to improperly obtain, disclose to RN, or
induce RN to use, any confidential information or trade secrets belonging to any
third party. You represent that your agreement to abide by these Covenants, your
employment with RN, and the performance of your proposed duties to RN will not
violate any agreements or obligations you may have to any former employer or
third party and you are not subject to any restrictions which would prevent or
limit you from carrying out your duties for RN.

 

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4.   Non-Competition. You acknowledge that RN is engaged in a highly competitive
business and that by virtue of the position in which you are employed, you will
perform services that are of competitive value to RN and which if used in
competition with RN could cause it serious harm. Therefore, you agree not to
work for any Competitor during your employment with RN (including after work
hours, weekends and vacation time), even if only organizational assistance or
limited consultation is involved. During your employment with RN, you agree not
to publish, design or develop computer software that competes with RN software
products (either existing or under development). Further, you agree that for a
period of one (1) year after the termination of your employment with RN, whether
voluntary or not, you will not directly or indirectly be employed by, own,
manage, consult with or join any business or entity that is in competition with
RN or with products or services produced, sold or in development by RN during
the term of your employment. Ownership of 1% or less of the stock (publicly or
privately held) of a competitor of RN shall not be a breach of this paragraph.
You acknowledge that RN competes in a global marketplace and that the duration
and scope of this noncompetition provision is reasonable and necessary to
protect RN interests. You authorize a court to restrict you to the maximum
extent allowed.   5.   Nonsolicitation. You recognize that RN’s workforce is a
vital part of its business. You agree that for a period of one (1) year after
your employment ends, whether voluntarily or not, you will not induce or attempt
to influence, directly or indirectly, any employee of RN to terminate his/her
employment with RN or to work for you or any other entity. You agree that this
means you will not identify to a third party RN employees as potential
candidates for employment. You further agree not to, directly or indirectly,
solicit or assist in soliciting orders from any current or known prospective
customers or to encourage them to terminate their business relationship or
negotiations with RN.   6.   Deductions from Pay. You authorize RN to deduct
from your compensation the value of any Company Property not returned or the
amount of any sums owed to RN by you, and you release RN from any claims based
upon such withholding.   7.   Miscellaneous. These Covenants together with the
terms of your employment offer letter constitute the complete and entire
agreement between us, and supersedes and cancels all prior understandings,
correspondence and agreements, oral and written, express or implied, between us
relating to the subject matter hereof. These Covenants can only be amended or
waived by a written document signed by RN and you. The waiver of any breach of
these Covenants or the failure to enforce any provision shall not waive any
later breach. RN and you both consent to the other giving third parties
notification of the existence and terms of these Covenants. These Covenants
shall be binding upon and inure to the benefit of RN and you, and each of our
successors, assigns, heirs or legal representatives, except that you may not
assign or delegate any rights or duties under these Covenants. These Covenants
will be interpreted and enforced in accordance with the laws of the State of
Washington as applied to agreements made and performed in Washington, without
regard to the State’s conflict of laws provisions. Jurisdiction and venue in any
proceeding either at law or in equity, of or relating to these Covenants shall
be in King County, Washington. You agree that RN may be irreparably harmed by a
breach by you of these Covenants, that adequate remedies may not exist in law,
and that RN shall be entitled to bring an action for a preliminary or permanent
injunction or restraining order to enforce these Covenants. You acknowledge that
your experience and capabilities are such that an injunction to enforce these
Covenants will not prevent you from earning a reasonable livelihood. Your claims
against RN shall not be a defense to RN’s enforcement of these Covenants. In
case any term in these Covenants shall be held invalid, illegal or unenforceable
in whole or in part, the validity of the remaining terms of the Agreement shall
not be affected.

               You acknowledge that you have read these Covenants, have had an
opportunity to have them explained to you, understand their provisions and have
received an exact copy of them for your records. You further understand that
your employment relationship with RN is at will and nothing in these Covenants
suggests or signifies otherwise.