Special Cash Bonus Awards
From time to time, we utilize discretionary signing, promotion, retention or other bonus awards as compensation tools that provide incentives
for executives to accept employment offers, to reward outstanding performance by executives and to retain key executives. We believe that these bonus awards are consistent with our overall executive compensation philosophy to achieve our recruiting
and retention objectives as well as to allow discretion to address the needs of our businesses, which operate in a constantly evolving and highly competitive environment.
Discretionary Bonus. In February 2018, in connection with his promotion to President of RealNetworks, the
Compensation Committee awarded a discretionary bonus of $25,000 to Mr. Pellegrini in recognition of his assumption of more extensive responsibility and oversight of the companys various businesses.
The Role of Long-Term Equity Awards
Because the value of an equity award is dependent on our stock price, our equity compensation program is designed to align executive
compensation with the interests of our shareholders and also with the long-term performance of RealNetworks. Equity compensation awards are also an important employee retention tool as they generally vest over a multi-year period, subject to
continued service by the award recipient.
Consistent with the past several years, awards of stock options served as our primary equity
vehicle for the 2018 executive compensation program. The rationale for this is to motivate executives to focus on increasing shareholder value.
2018 Option Awards. On March 7, 2018, in connection with his promotion to President of RealNetworks,
the Compensation Committee granted a time-based stock option to Mr. Pellegrini to acquire 500,000 shares of common stock with a per share exercise price equal to $3.43, the closing price of a share of our common stock on the grant date. The
option is scheduled to vest over four years, with 12.5% vesting on the date that is six months after the grant date, subject to continued employment, then as to an additional 12.5% at the expiration of each successive six months of continued
employment. This award is larger than a typical annual award for the role and includes an inducement to take on the enhanced leadership role, which is not expected to be continued at the same level in the future. The Compensation Committee believed
that the award was appropriate as part of the compensation package to recognize Mr. Pellegrinis promotion and increased responsibilities.
On July 26, 2018 the Compensation Committee granted a time-based stock option to each of Mr. Baker and Mr. Parham to acquire 200,000
shares and 150,000 shares, respectively, of common stock with a per share exercise price equal to $3.54, the closing price of a share of our common stock on the grant date. Each option is scheduled to vest over four years, with 12.5% vesting on the six-month anniversary of the grant date, subject to continued employment, then as to an additional 12.5% at the expiration of each successive six months of continued employment. The Compensation Committee believed
that these awards were appropriate as part of the compensation package necessary to retain and motivate Mr. Baker and Mr. Parham.
Although Mr. Patrizio received no new equity awards in 2018, in connection with his transition from RealNetworks to Napster, the
Compensation Committee approved the acceleration of vesting as of February 28, 2018 of an outstanding option as to 38,281 shares. The incremental value of this acceleration, calculated pursuant to generally accepted accounting principles, was
$32,000.
See the section entitled Chief Executive Officer Compensation for a discussion of
Mr. Glasers 2018 option awards. As discussed, he was granted an option valued at $75,000 in 2018 as a supplement to his cash salary, plus a long-term option that is scheduled to vest over four years. The option granted in December 2018
reflected the annual long-term incentive portion of Mr. Glasers 2018 compensation.
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