<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Sonic Solutions
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
SONIC SOLUTIONS
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 2, 1997
TO THE SHAREHOLDERS OF SONIC SOLUTIONS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Sonic
Solutions, a California corporation (the "Company"), will be held on Tuesday,
September 2, 1997 at 3:00 p.m., California time, at the Company's principal
executive offices at 101 Rowland Way, Suite 110, Novato, California 94945 for
the following purposes:
1. To elect six directors to serve for the ensuing year and until their
successors are elected.
2. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only shareholders of record at the close of business on July 7, 1997 (the
"Record Date") are entitled to notice of and to vote at the meeting and any
adjournments thereof.
All shareholders are cordially invited to attend the meeting in person. Any
shareholder attending the meeting may vote in person even if such shareholder
previously signed and returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Mary C. Sauer
Secretary
Novato, California
July 30, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE>
SONIC SOLUTIONS
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of Sonic Solutions (the "Company") for use at the Company's Annual
Meeting of Shareholders (the "Annual Meeting") to be held Tuesday, September
2, 1997 at 3:00 p.m., California time, or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. The Annual Meeting will be held at the
Company's principal executive offices which are located at 101 Rowland Way,
Suite 110, Novato, California 94945. The telephone number at that address is
(415) 893-8000.
These proxy solicitation materials were mailed on or about July 30, 1997 to
all shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on July 7, 1997 (the "Record
Date") are entitled to notice of, and to vote at, the Annual Meeting. At the
Record Date, 7,598,397 shares of the Company's common stock (the "Common
Stock") were outstanding and entitled to vote at the meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person. Mere
attendance at the Annual Meeting will not serve to revoke a proxy.
VOTING AND SOLICITATION
Every shareholder voting for the election of directors may exercise
cumulative voting rights and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the shareholder's shares are entitled, or distribute such shareholder's votes
on the same principle among as many candidates as the shareholder may select,
provided that votes cannot be cast for more than six candidates. However, no
shareholder shall be entitled to cumulate votes unless a shareholder gives
notice at the Annual Meeting prior to the voting of the intention to cumulate
votes, and no votes may be cast in favor of a candidate unless the candidate's
name has been placed in nomination prior to the voting. On all other matters
each share is entitled to one vote on each proposal or item that comes before
the Annual Meeting.
The Company intends to include abstentions and broker non-votes as present
or represented for purposes of establishing a quorum for the transaction of
business. However, broker non-votes will not be counted for purposes of
determining whether a proposal has been approved, while abstentions will be
counted as votes against a proposal.
Solicitation of proxies may be made by directors, officers and other
employees of the Company by personal interview, telephone or telegraph. No
additional compensation will be paid for any such services. Costs of
solicitation, including preparation, assembly, printing and mailing of this
proxy statement, the proxy and any other information furnished to the
shareholders, will be borne by the Company. The Company will, upon request,
reimburse the reasonable charges and expenses of brokerage houses or other
nominees or fiduciaries for forwarding proxy materials to, and obtaining
authority to execute proxies from, beneficial owners for whose account they
hold shares of Common Stock.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
The Bylaws of the Company provide for a Board consisting of not fewer than
five nor more than seven directors. The size of the Board presently is set at
six directors, and six directors are to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received
by them for the six nominees named below, all of whom are presently directors
of the Company. If any nominee is unable or declines to serve as a director at
the time of the Annual Meeting, the proxies will be voted for any nominee who
shall be designated by the present Board to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a
director. If additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting as will ensure the election of as many of
the nominees listed below as possible. In such event, the specific nominees
for whom such votes will be cumulated will be determined by the proxy holders.
The term of office of each person elected as a director will continue until
the next Annual Meeting of Shareholders or until his successor has been
elected and qualified.
The name of and certain other information regarding each nominee is set
forth in the table below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION WITH THE COMPANY SINCE
--------------- --- ------------------------- --------
<S> <C> <C> <C>
Robert J. Doris......... 44 President and Chief Executive Officer 1986
James A. Moorer......... 51 Senior Vice President of Audio Development and Director 1987
Mary C. Sauer........... 44 Senior Vice President of Business Development, Secretary
and Director 1986
Michael C. Child........ 42 Director 1993
Robert M. Greber........ 58 Director 1993
Peter J. Marguglio...... 50 Director 1986
</TABLE>
Mr. Doris is married to Ms. Sauer. There are no other family relationships
between any director or executive officer of the Company.
ROBERT J. DORIS. Mr. Doris founded Sonic Solutions in 1986 and has served as
President, Chief Executive Officer and Director of the Company since that
time. Prior to 1986 he was President of The Droid Works, a subsidiary of
Lucasfilm Ltd., which produced computer-based video and digital audio systems
for the film and television post-production and music recording industries.
Prior to founding The Droid Works, Mr. Doris was a Vice President of Lucasfilm
and General Manager of the Lucasfilm Computer Division. Mr. Doris received
B.A., J.D. and M.B.A. degrees from Harvard University.
JAMES A. MOORER. Dr. Moorer joined Sonic Solutions in 1987 and has served as
a Vice President and Director of the Company since that time. Dr. Moorer
became Senior Vice President of Audio Development in February 1993. Dr. Moorer
was the principal developer of the NoNOISE and Sonic Systems. From 1986 to
1987, Dr. Moorer consulted for NeXT, Inc. on DSP software architecture for
audio processing. From 1985 to 1986, he was the Chief Technical Officer at The
Droid Works. From 1980 to 1985, he was the digital audio project leader at
Lucasfilm, Ltd. Dr. Moorer holds a Ph.D. in Computer Science from Stanford
University and S.B. degrees in Applied Mathematics and Electrical Engineering
from MIT. In 1991, he won the Audio Engineering Society Bronze Award for
lifetime achievement.
MARY C. SAUER. Ms. Sauer founded Sonic Solutions in 1986 and has served as a
Vice President and Director of the Company since that time. Ms. Sauer became
Senior Vice President of Marketing and Sales in February 1993. Prior to 1986,
Ms. Sauer was Vice President of Marketing for The Droid Works, and prior to
joining The Droid Works, Ms. Sauer was Director of Marketing for the Lucasfilm
Computer Division. Ms. Sauer received an M.B.A. in Finance and Marketing from
the Wharton School of the University of Pennsylvania and a B.F.A. from
Washington University in St. Louis.
2
<PAGE>
MICHAEL C. CHILD. Mr. Child has served as a Director of the Company since
August 1993. Mr. Child has been employed by TA Associates, a venture capital
firm, or its predecessor, since 1982, has been a partner of affiliated venture
funds since January 1986 and is currently a Managing Director of TA
Associates, Inc. Mr. Child also serves on the Board of Directors of Artisoft,
Inc., Ultratech Stepper, Inc. and OnTrak Systems, Inc.
ROBERT M. GREBER. Mr. Greber has served as a director of the Company since
August 1993. Mr. Greber served as president and Chief Operating Officer of The
Pacific Stock Exchange since July 1990 and in January 1996 he was elected
Chairman and Chief Executive Officer. Prior to joining The Pacific Stock
Exchange, he was from 1985 to 1987 President and Chief Executive Officer of
Diagnostic Networks, Inc., a network of Magnetic Resonance Imaging Centers
which was merged into NMR America in 1987. Prior to DNI, Mr. Greber was
President and Chief Executive Officer of Lucasfilm Ltd. from 1981 to 1985
where, among other duties, he oversaw development of digital technologies for
video, film, audio, and special effects and video games applications. Before
joining Lucasfilm, Mr. Greber was associated with the firm of Merrill Lynch
where he was Vice President and Manager of the Los Angeles Institutional
Office. Mr. Greber holds a B.S. in Finance from Temple University. Mr. Greber
also serves on the Board of Bay View Capital Corp.
PETER J. MARGUGLIO. Mr. Marguglio has served as a Director of the Company
since August 1986. Since January 1990, Mr. Marguglio has worked at Eatec
Corporation, a software company located in Berkeley, California where he is
now President. Prior to joining Eatec, Mr. Marguglio was President of Resource
Marketing, Inc., an equipment leasing firm he founded in 1981. Mr. Marguglio
holds a Mechanical Engineering degree from the University of Washington and an
M.B.A. degree from Stanford University.
BOARD MEETINGS AND COMMITTEES
The Board held a total of four meetings during the fiscal year ended March
31, 1997. All directors attended all Board meetings and all meetings of the
committees if any, upon which they served.
The audit committee of the Board currently consists of Mr. Child, Mr.
Marguglio and Mr. Greber. The principal functions of the audit committee are
to recommend engagement of the Company's independent auditors, to consult with
the Company's auditors concerning the scope of the audit and to review with
them the results of their examination, to review and approve any material
accounting policy changes affecting the Company's operating results and to
review the Company's financial control procedures and personnel. The audit
committee held four meetings during the fiscal year ended March 31, 1997.
The Board does not have a nominating committee or a compensation committee.
COMPENSATION OF DIRECTORS
The Company does not pay fees to its directors for attendance at meetings.
The Company does reimburse its directors for their out-of-pocket expenses
incurred in the performance of their duties as directors of the Company.
Directors of the Company who are not, and have not been during the preceding
twelve months, employees, and who do not directly or indirectly own more than
5% of the Company's Common Stock, are eligible to receive an initial grant and
thereafter annual grants of options to purchase 2,000 shares of the Company's
Common Stock in accordance with the Company's Nonemployee Directors Stock
Option Plan.
3
<PAGE>
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of July 7, 1997 (i) by each person who is
known by the Company to own beneficially more than five percent of the Common
Stock, (ii) by each of the Company's directors, (iii) by each of the Company's
executive officers named in the Summary Compensation Table under the caption
"Executive Compensation" below, and (iv) by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED(1)
---- ------------ -------------
<S> <C> <C>
Robert J. Doris ................................. 1,276,183 16.8%
c/o Sonic Solutions
101 Rowland Way, Suite 110
Novato, California 94945
James A. Moorer(2) .............................. 659,428 8.7%
c/o Sonic Solutions
101 Rowland Way, Suite 110
Novato, California 94945
Mary C. Sauer.................................... 611,258 8.0%
c/o Sonic Solutions
101 Rowland Way, Suite 110
Novato, California 94945
Entities Affiliated with TA Associates(3)........ 932,966 12.3%
435 Tasso Street,
Palo Alto, California 94301
Peter J. Marguglio............................... 605,685 8.0%
c/o Sonic Solutions
101 Rowland Way, Suite 110
Novato, California 94945
Michael C. Child(4).............................. 1,618 *
Robert M. Greber(5).............................. 24,500 *
Christopher A. Kryzan(6)......................... 80,000 *
A. Clay Leighton(7).............................. 83,500 *
All directors and executive officers as a
group(8)........................................ 4,388,702 57.8%
</TABLE>
- --------
*Less than one percent.
(1) This table is based upon information supplied by directors, officers and
principal shareholders. Applicable percentage ownership for each
shareholder is based on 7,598,397 shares of Common Stock outstanding as
of July 7, 1997, together with applicable options for such shareholders.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities, subject to the community
property laws where applicable. Shares of Common Stock subject to options
are deemed outstanding for the purpose of computing the percentage
ownership of the person holding such options, but are not treated as
outstanding for computing the percentage ownership of any other person.
(2) Includes 7,140 shares owned by Mr. Moorer's wife individually and as
trustee for their minor children.
(3) Includes 1,618 shares held by Mr. Child as described in footnote (4)
below and 931,348 shares held by the following entities affiliated with
TA Associates: Advent VI L.P. (528,254); Advent Atlantic and Pacific II
L.P. (241,920); Advent New York L.P. (66,034); Advent Industrial II L.P.
(87,217); and TA Venture Investors Limited Partnership (7,923).
4
<PAGE>
(4) Excludes all but 1,618 shares described in footnote 3 above. Mr. Child, a
director of the Company, is a general partner of TA Venture Investors
Limited Partnership and a Managing Director of TA Associates, but
disclaims beneficial ownership of all other shares beneficially owned by
entities affiliated with TA Associates.
(5) All shares issuable upon exercise of options, 15,750 of which will be
exercisable within 60 days of July 7, 1997, and 4,000 of which were
granted pursuant to the Sonic Solutions Nonemployee Director Stock Option
Plan.
(6) All shares issuable upon exercise of options, 30,000 of which will be
exercisable within 60 days of July 7, 1997.
(7) Includes 2,500 shares owned by Mr. Leighton and 81,000 shares issuable
upon exercise of options, 60,373 of which will be exercisable within 60
days of July 7, 1997.
(8) Includes 301,564 shares issuable upon exercise of options, 165,519 of
which will be exercisable within 60 days of July 7, 1997.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total compensation for the fiscal years
ended March 31, 1997, 1996 and 1995 of the Chief Executive Officer and each of
the four other most highly compensated executive officers of the Company who
served as executive officers at fiscal year end and who received salary and
bonuses of $100,000 or more. None of the named executive officers earned any
bonuses or compensation for these fiscal years other than as set forth in the
table or received any restricted stock awards, stock appreciation rights or
long-term incentive plan payouts.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
FISCAL YEAR ANNUAL COMPENSATION COMPENSATION
ENDED -------------------- ------------
NAME AND PRINCIPAL POSITION MARCH 31, SALARY ($) BONUS ($) OPTIONS (#)
--------------------------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Robert J. Doris .............. 1997 $165,000 $ 0 --
Chairman of the Board, 1996 $165,000 $ 0 --
President and Chief 1995 $142,500 $ 0 --
Executive Officer
Mary C. Sauer................. 1997 $135,000 $ 0 --
Senior Vice President, 1996 $135,000 $ 0 --
Business Development, 1995 $127,500 $ 0 --
Secretary and Director
James A. Moorer............... 1997 $135,000 $ 0 --
Senior Vice President, 1996 $135,000 $ 0 --
Audio Development and 1995 $127,500 $ 0 --
Director
Christopher A. Kryzan(1)...... 1997 $150,580 $75,000 --
Vice President, Marketing 1996 $ 6,250 $ 0 80,000
A. Clay Leighton.............. 1997 $137,737 $15,000 20,000
Vice President, Finance and 1996 $107,000 $10,000 25,000
Chief Financial Officer 1995 $ 95,083 $ 8,208 --
</TABLE>
- --------
(1) Mr. Kryzan was hired as Vice President, Marketing in March 1996.
6
<PAGE>
The following table sets forth certain information regarding grants of stock
options made during the fiscal year ended March 31, 1997 to the executive
officers named in the Summary Compensation Table. Since inception, the Company
has not granted any stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
--------------------------------------------------- ----------------------
% OF TOTAL
OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES PRICE EXPIRATION
NAME GRANTED (#)(1) IN FISCAL YEAR ($/SH)(2) DATE(3) 5% ($) 10% ($)
- ---- -------------- --------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Doris......... 0 0% -- -- -- --
Mary C. Sauer........... 0 0% -- -- -- --
James A. Moorer......... 0 0% -- -- -- --
A. Clay Leighton........ 20,000 6% $5.75 7/16/06 $ 72,450 $ 182,850
Christopher A. Kryzan... 0 0% 0 -- $ $
</TABLE>
- --------
(1) These options, granted under the Company's Stock Option Plan, vest over a
period of four years at a rate of 25% one year from the date of grant and
2.0833 percent per month thereafter.
(2) The exercise price is equal to the fair market value of the Company's
Common Stock on the date of grant, as determined by reference to the
closing price of the Company's Common Stock on the Nasdaq National Market.
(3) These options are subject to earlier expiration in the event of the
officer's termination of employment with the Company.
(4) Potential realizable value is based on an assumption that the fair market
value of the stock on the date of grant appreciates at the stated rate,
compounded annually, from the date of grant until the end of the option
term. These values are calculated based on requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price appreciation.
The following table sets forth information regarding the number and value of
options exercised during the fiscal year ended March 31, 1997 and of
unexercised options held by the named executive officers on March 31, 1997.
Value is considered to be the difference between exercise price and the
closing price of $6.25 per share of the Common Stock as quoted on the Nasdaq
National Market on March 31, 1997.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
EXERCISE REALIZED AT FISCAL YEAR END AT FISCAL YEAR END
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ----------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Robert J. Doris......... 0 $ 0 0/0 $ 0/0
Mary C. Sauer........... 0 $ 0 0/0 $ 0/0
James A. Moorer......... 0 $ 0 0/0 $ 0/0
Christopher A. Kryzan .. 0 $ 0 20,000/60,000 $ 15,000/45,000
A. Clay Leighton........ 0 $ 0 56,625/24,375 $179,962/ 9,844
</TABLE>
- --------
(1) These values have not been, and may not be, realized, and are based on the
positive spread between the respective exercise prices of the outstanding
stock options and the closing price of the Company's Common Stock at March
31, 1997 ($6.25).
7
<PAGE>
The Company did not make any awards during the fiscal year ended March 31,
1997 to any of the executive officers named in the Summary Compensation Table
under any long-term incentive plan providing compensation intended to serve as
incentive for performance to occur over a period longer than one fiscal year,
excluding the stock options set forth above.
REPORT OF THE BOARD REGARDING EXECUTIVE COMPENSATION
The Board does not have a Compensation Committee. Accordingly, it is the
responsibility of the entire Board to determine the most effective total
executive compensation strategy, based upon the business needs of the Company
and consistent with shareholders' interests, to administer the Company's
executive compensation plans, programs and policies, to monitor corporate
performance and its relationship to compensation of executive officers, and to
take other appropriate actions concerning matters of executive compensation.
Compensation Philosophy
The Company was formed in 1986 as a private company and initially offered
Common Stock to the public in February 1994. Four key goals form the basis for
compensation decisions for all employees of the Company:
1. To attract and retain the most highly qualified management and
employee team;
2. To pay competitively compared to similar audio and video software and
hardware companies and to provide appropriate reward opportunities for
achieving high levels of performance compared to similar organizations in
the marketplace;
3. To emphasize sustained performance by aligning rewards with
shareholder interests; and
4. To motivate executives and employees to achieve the Company's annual
and long-term business goals and encourage behavior toward the fulfillment
of those objectives.
Equity participation and a strong alignment to shareholders' interests are
key elements of the Company's executive compensation philosophy. As a result
of this philosophy, the Company's executive compensation program consists of
base salary, cash bonuses, incentive stock options and standard benefits.
Base Salary and Cash Bonuses. The Board recognizes the importance of
maintaining compensation practices and levels of compensation competitive with
those offered by audio and video software and hardware companies in comparable
stages of development. For external marketplace comparison purposes, a
significant group of companies operating in our industry are utilized for
determining competitive compensation levels.
Base salary represents the fixed component of the executive compensation
program. The Company's philosophy regarding base salaries is conservative,
maintaining base salaries at or somewhat below the competitive industry
approximate median. Determination of base salary levels is established on an
annual review of marketplace competitiveness with similar audio and video
software and hardware companies, and on individual performance. Periodic
increases in base salary relate to individual contributions evaluated against
established objectives, relative marketplace competitiveness levels, length of
service, and the industry's annual competitive pay practice movement.
Cash bonuses are based primarily on the Company's financial performance for
the year and also include an assessment of individual performance.
Equity Ownership--Stock Options. The Board strongly believes that it is
important for key employees who have significant responsibility for the
management, growth, and future success of the company to have significant
equity ownership interest in the Company and have the potential to gain
financially from Company stock price increases. The interests of shareholders,
executives and employees should thereby be closely aligned. The Board seeks to
provide such ownership interest to executives and key employees, giving them
the right to purchase shares of Common Stock of the Company in the future at a
price equal to fair market value at the date of grant. The Company generally
grants such stock options throughout the year.
8
<PAGE>
Under the Company's Stock Option Plan, shares of the Company's Common Stock
may be purchased at the option price set by the Company. All grants must be
exercised according to the provisions of the Company's Stock Option Plan. All
outstanding options expire on the earlier of ten years after the date of grant
or 90 days after termination of service with the Company. Administration of
the Option Plan is by the Chief Executive Officer, except that to the extent
required to comply with the requirements of Rule 16b-3 or any successor rule
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Board or a Committee of the Board will administer the Option Plan.
Other Benefits. The Company's philosophy is to provide adequate health- and
welfare-oriented benefits to executives and employees. The Company provides no
other executive benefits.
Compensation for the Chief Executive Officer
The Company's Chief Executive Officer, Mr. Doris, is also a founder of the
Company with a significant equity interest. The Board seeks to compensate Mr.
Doris primarily through base salary. In fiscal 1997, the company paid Mr.
Doris a base salary of $165,000, which reflected no increase over his fiscal
1996 base salary. Mr. Doris did not receive a cash bonus in the fiscal year
ended March 31, 1997. In establishing Mr. Doris' salary the Board considered
the Company's past growth in revenue and profitability, the Company's
experience in achieving product development goals, domestic and international
sales and the Company's ability to develop the current management team. The
total cash compensation paid to Mr. Doris in the fiscal year ended March 1997
is less than that paid to chief executive officers of the competitive industry
comparative group; however, the Board believes that this compensation is
appropriate in light of his equity interest.
Summary
The Board believes that the compensation of executives by the Company is
appropriate and competitive with the compensation programs provided by other
audio and video software and hardware companies with which the Company
competes for executives and employees in light of the equity interests of the
Company's founders. The Board believes its compensation strategy, principles,
and practices result in a compensation program tied to shareholder returns and
linked to the achievement of annual and longer-term financial and operational
results of the Company on behalf of the Company's shareholders.
The Board of Directors
<TABLE>
<S> <C>
--Michael C. Child --Peter J. Marguglio
--Robert J. Doris --James A. Moorer
--Robert M. Greber --Mary C. Sauer
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board does not have a Compensation Committee. Accordingly, the entire
Board determines executive compensation. Robert J. Doris, James A. Moorer and
Mary C. Sauer are directors and are the founders and principal executive
officers of the Company.
9
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Securities and Exchange Commission and the National Association of Securities
Dealers. Such officers, directors and ten percent shareholders are also
required by Securities and Exchange Commission rules to furnish the Company
with copies of all Section 16(a) forms that they file.
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that,
during the fiscal year ended March 31, 1997, there has been no failure by any
of its officers, directors or 10 percent shareholders to file on a timely
basis any reports required by Section 16(a).
STOCK PRICE PERFORMANCE GRAPH
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG SONIC SOLUTIONS, S&P 500 INDEX
AND H&Q TECHNOLOGY
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period SONIC S&P H&Q
(Fiscal Year Covered) SOLUTIONS 500 INDEX TECHNOLOGY
- --------------------- --------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-02/10/94 $100.00 $100.00 $100.00
FYE 03/94 $104.00 $ 95.00 $ 98.00
FYE 03/95 $114.00 $110.00 $128.00
FYE 03/96 $ 72.00 $145.00 $174.00
FYE 03/97 $ 66.00 $174.00 $202.00
</TABLE>
10
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected KPMG Peat Marwick as independent public accountants
to audit the financial statements of the Company for the 1998 fiscal year.
KPMG Peat Marwick has acted as the Company's auditors since March 31, 1993.
Representatives of KPMG Peat Marwick are expected to be present at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so. The representatives of KPMG Peat Marwick also will be available to respond
to questions raised during the meeting.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
at the Company's 1998 annual meeting of shareholders must be received by the
Secretary of the Company no later than March 31, 1998 in order to be included
in the proxy soliciting material relating to that meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual Meeting.
If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board may recommend.
THE BOARD OF DIRECTORS
Dated: July 30, 1997
11
<PAGE>
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SONIC SOLUTIONS
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Robert J. Doris and A. Clay Leighton, or
either of them, each with full power of substitution, the lawful attorneys and
proxies of the undersigned to vote as designated on the reverse side, and in
their discretion, upon such other business as may properly be presented to the
meeting, all of the shares of SONIC SOLUTIONS which the undersigned shall be
entitled to vote at the Annual Meeting of Shareholders to be held September 2,
1997, and at any adjournments or postponements thereof.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. WHEN NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED ON THE REVERSE SIDE. The proxy holders in their
discretion may cumulate votes for the election of directors. This proxy may be
revoked at any time prior to the time it is voted by any means described in the
accompanying Proxy Statement.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
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FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Item 1. Please mark [X]
your votes as
indicated in
this example
Item 1 - ELECTION OF DIRECTORS WITHHELD
FOR FOR ALL
[_] [_] Please complete, date and
sign this proxy and mail
it promptly in the
enclosed envelope to
assure representation of
your shares.
Nominees.
Michael C. Child James A. Moorer
Robert J. Doris Peter J. Marguglio
Robert M. Greber Mary C. Saver
WITHHELD FOR: (Write that nominee's name in the space
provided below).
- -----------------------------------------------------
Signature_______________________________Signature__________________Date________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
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FOLD AND DETACH HERE
