Item 1.01. Entry into a Material Definitive Agreement.
RealNetworks, Inc. ("RealNetworks") entered into a Support Agreement (the
"Support Agreement"), dated August 25, 2020, by and among its 84%-owned
subsidiary, Rhapsody International Inc., which does business as Napster
("Napster"), and MelodyVR Group PLC, an English public limited company (the
"Buyer"). The Support Agreement was executed in connection with an Agreement and
Plan of Merger by and among Napster, Buyer, and Buyer's wholly owned subsidiary
("Merger Sub"). Pursuant to the Merger Agreement, Merger Sub will merge with and
into Napster, with Napster surviving and becoming a wholly owned subsidiary of
Buyer (the "Transaction"). Other than as Securityholder Representative,
RealNetworks is not a party to the Merger Agreement.
Pursuant to the Transaction, Buyer will pay aggregate consideration of $26
million to certain holders of debt and equity of Napster, subject to a $3
million indemnity escrow, and will assume liabilities of up to $44 million,
mostly related to Napster's music licensing obligations. The aggregate
consideration to be paid at closing of $23 million, which excludes the amount
paid into the 18-month escrow account, is comprised of $12 million in cash and
approximately $11 million in the form of ordinary shares of Buyer (AIM: MVR),
and a portion of the cash consideration will be used at closing to pay
transaction expenses and Napster debt. The consideration payable to RealNetworks
is subject to indemnity obligations related to the Transaction, and certain
contingent consideration obligations related to the purchase of a 42% interest
in Napster in January 2019, as well as certain transfer restrictions with regard
to the Buyer shares.
The Support Agreement requires RealNetworks to provide its consent to the
Transaction as a significant stockholder of Napster once Napster has obtained
certain consents as noted below. The Support Agreement also requires
RealNetworks to indemnify Buyer with respect to certain claims, limited in some
cases to a $3 million, 18-month escrow and in most other cases to consideration
received by RealNetworks.
The Merger Agreement contains customary representations and warranties,
covenants and agreements, including covenants regarding efforts by Napster and
Buyer to cause the closing of the Transaction to be completed. The closing of
the Transaction is subject to various customary conditions for each of Napster
and Buyer, which may be waived by the applicable party, including conditions
that Napster obtain consents from certain commercial partners and that Buyer
complete the process required in the event of a reverse merger pursuant to the
rules of the Alternative Investment Market (AIM) of the London Stock Exchange,
on which Buyer's ordinary shares are listed. There can be no assurance as to
when the closing conditions will be satisfied, if at all. Subject to certain
limitations, either Napster or Buyer may terminate the Merger Agreement if the
transaction has not been consummated by December 31, 2020.
The foregoing description of the Support Agreement is qualified in its entirety
by reference to the full text of the Support Agreement, a copy of which is filed
herewith as Exhibit 10.1 and is incorporated herein by reference.
This current report on Form 8-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 that are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
Item 8.01. Other Events.
On August 24, 2020, RealNetworks issued a press release announcing its support
for the Napster sale transaction. A copy of the press release is attached hereto
as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
10.1 Support Agreement by and among RealNetworks, Inc., Rhapsody
International Inc., and MelodyVR Group PLC, dated August 25,
99.1 Press Release of RealNetworks, Inc. dated August 24, 2020
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