<PAGE>
As filed with the Securities and Exchange Commission on October 27, 1998
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SONIC SOLUTIONS
----------------------
(Exact name of registrant as specified in its charter)
California 93-0925818
------------------ ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
101 Rowland Way, Suite 110, Novato, California 94945
----------------------------------------------------
(Address of principal executive offices)
1989 STOCK OPTION PLAN
1994 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
1998 STOCK OPTION PLAN
----------------------
(Full title of the plan)
Robert J. Doris
Sonic Solutions
101 Rowland Way, Suite 110
Novato, California 94945
---------------------------
(Name and address of agent for service)
(415) 893-8000
--------------
(Telephone number, including area code, of agent for service)
Copy to: August J. Moretti
Heller Ehrman White & McAuliffe
2500 Sand Hill Road
Menlo Park, California 94025
(415) 234-4200
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================
Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered share (1) price fee
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 4,140,000 $ 1.532 $6,342,480 $ 1,763.21
(no par value)
===========================================================================================================
</TABLE>
(1) Estimated (solely for the purpose of calculating the registration fee)
on the basis of the average of the high and low sales reported of the
registrant's Common Stock on the Nasdaq National Market on October 21,
1998.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed or to be filed with the Commission by the
registrant are incorporated by reference in this registration statement:
(a) The registrant's latest annual report (Form 10-K) filed pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or the latest prospectus filed pursuant to Rule 424(b)
under the Securities Act of 1933, as amended (the "Securities Act"), that
contains audited financial statements for the registrant's latest fiscal year
for which such statements have been filed;
(b) All other reports filed by the registrant pursuant to Section
13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by
the annual report or prospectus referred to in (a) above;
(c) The description of the Common Stock of the registrant contained
in the registration statement filed under the Exchange Act registering such
Common Stock under Section 12 of the Exchange Act.
All documents subsequently filed by the registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment which indicates that all securities offered hereby have been
sold or which deregisters all securities then remaining unsold shall be deemed
to be incorporated by reference in this registration statement and to be part
thereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 204(a) and 317 of the California Corporations Code,
as amended, the registrant has included in its articles of incorporation and by-
laws provisions regarding the indemnification of officers and directors of the
registrant. Article III of registrant's Restated Articles of Incorporation, as
amended, provides as follows:
<PAGE>
"ARTICLE III
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Unless applicable law otherwise provides, any amendment, repeal or
modification of this Article III shall not adversely affect any right or
protection of a director under this Article III that existed at or prior to
the time of such amendment, repeal or modification. If, after the
effective date of this Article, California law is amended in a manner which
permits a corporation to limit the monetary or other liability of its
directors or to authorize indemnification of, or advancement of defense
expenses to, its directors or other persons, in any such case to a greater
extent than is permitted on such effective date, the references in this
Article to "California law" shall to that extent be deemed to refer to
California law as so amended."
Section 29(a) of the registrant's By-Laws, as amended, provides as follows:
"Indemnification of Directors and Officers.
(a) Indemnification. As authorized by the Articles of Incorporation, to
---------------
the fullest extent permissible under California law, and in excess of that
which is expressly permitted by Section 317 of the Code, the corporation
shall indemnify its directors and officers against all expenses, judgments,
fines, settlements, and other amounts actually and reasonably incurred by
them in connection with any proceeding, including an action by or in the
right of the corporation, by reason of the fact that such person is or was
a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, trustee, employee, or
agent of another corporation, or of a partnership, joint venture, trust, or
other enterprise (including service with respect to employee benefit
plans). To the fullest extent permissible under California law, expenses
incurred by a director or officer seeking indemnification under this Bylaw
in defending any proceeding shall be advanced by the corporation as they
are incurred upon receipt by the corporation of an undertaking by or on
behalf of the director or officer to repay such amount if it shall
ultimately be determined that the director or officer is not entitled to be
indemnified by the corporation for those expenses. If, after the effective
date of this Bylaw, California law is amended in a manner which permits the
corporation to authorize indemnification of, or advancement of expenses to,
its directors or officers, in any such case to a greater extent than is
permitted on such effective date, the references in this Bylaw to
"California law" shall to that extent be deemed to refer to California law
as so amended. The rights granted by this Bylaw are contractual in nature
and, as such, may not be altered with respect to any present or former
director or officer without the written consent of that person."
3
<PAGE>
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
5 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Heller, Ehrman, White & McAuliffe
(filed as part of Exhibit 5)
24 Power of Attorney (see page 6)
99.1 1989 Stock Option Plan, as amended
99.2 1994 Nonemployee Directors Stock Option Plan, as amended
99.3 1998 Stock Option Plan
ITEM 9. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
the registration statement.
4
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining liability under the Securities Act, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 6, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
5
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in San Rafael, State of California, on this 27th day of October
1998.
SONIC SOLUTIONS
By: /s/ Robert J. Doris
---------------------
Robert J. Doris
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY TO SIGN AMENDMENTS
------------------------------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint Robert J. Doris and A. Clay Leighton,
and either of them, with full power of substitution and full power to act
without the other such person's true and lawful attorney-in-fact and agent for
such person in such person's name, place and stead, in any and all capacities,
to sign any or all amendments (including post-effective amendments) to this
registration statement on Form S-8 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully, to all intents and purposes, as they or such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-8 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Robert J. Doris Chairman of the Board and Chief October 27, 1998
- ------------------------------------- Executive Officer (Principal
Robert J. Doris Executive Officer)
/s/ James A. Moorer Senior Vice President of Audio October 27, 1998
- ------------------------------------- Development and Director
James A. Moorer
/s/ Mary C. Sauer Senior Vice President of Marketing October 27, 1998
- ------------------------------------- and Sales and Director
Mary C. Sauer
/s/ A. Clay Leighton Vice President and Chief Financial October 27, 1998
- ------------------------------------- Officer (Principal Accounting
A. Clay Leighton Officer)
/s/ Michael C. Child Director October 27, 1998
- -------------------------------------
Michael C. Child
/s/ Robert L. Greber Director October 27, 1998
- -------------------------------------
Robert L. Greber
/s/ Peter J. Marguglio Director October 27, 1998
- -------------------------------------
Peter J. Marguglio
</TABLE>
6
<PAGE>
Index to Exhibits
-----------------
Exhibit No. Description of Exhibit
- ---------- ----------------------
5 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Heller Ehrman White & McAuliffe
(See Exhibit 5)
24 Power of Attorney (See page 6)
99.1 1989 Stock Option Plan, as amended
99.2 1994 Nonemployee Directors Stock Option Plan, as amended
99.3 1998 Stock Option Plan
<PAGE>
EXHIBIT 5
[Letterhead of Heller Ehrman White & McAuliffe]
October 27, 1998
14050-0001
Sonic Solutions
101 Rowland Way, Suite 110
Novato, California 94945
Registration Statement on Form S-8
----------------------------------
Dear Ladies and Gentlemen:
We have acted as counsel to Sonic Solutions, a California corporation
(the "Company"), in connection with the Registration Statement on Form S-8
(the "Registration Statement") which the Company proposes to file with the
Securities Exchange Commission on October 27, 1998 for the purposes of
registering under the Securities Act of 1933, as amended, 4,140,000 shares of
its Common Stock, no par value (the "Shares"). The Shares are issuable under
the Company's 1989 Stock Option Plan, as amended, (the "1989 Plan"), the 1994
Nonemployee Directors Stock Option Plan, as amended, (the "Directors' Plan")
and the 1998 Stock Option Plan (the "1998 Plan" and, together with the 1989
Plan and the Directors Plan, the "Plans").
We have assumed the authenticity of all records, documents and
instruments submitted to us as originals, the genuineness of all signatures,
the legal capacity of natural persons and the conformity to the originals of
all records, documents and instruments submitted to us as copies.
In rendering our opinion, we have examined the following records,
documents and instruments:
(a) The Restated Articles of Incorporation of the Company, as amended
by that Certificate of Amendment to Restated Articles of
Incorporation dated as of January 20, 1994 and the Certificate of
Determination of Series C Preferred Stock dated as of March 31,
1998, certified by the California Secretary of State as of
October 19, 1998, and certified to us by an officer of the
Company as being complete and in full force as of the date of
this opinion;
<PAGE>
Sonic Solutions
October 27, 1998
Page 2
(b) The Bylaws of the Company certified to us by an officer of the
Company as being complete and in full force and effect as of the
date of this opinion;
(c) A Certificate of an officer of the Company (i) attaching records
certified to us as constituting all records of proceedings and
actions of the Board of Directors, including any committee
thereof, and shareholders of the Company relating to the Shares,
and the Registration Statement, and (ii) certifying as to certain
factual matters;
(d) The Registration Statement;
(e) The Plans; and
(f) A letter from Chase Mellon Shareholder Services, the Company's
transfer agent, dated October 23, 1998, as to the number of
shares of the Company's common stock that were outstanding on
October 23, 1998.
This opinion is limited to the federal law of the United States of
America and the law of the State of California, and we disclaim any opinion as
to the laws of any other jurisdiction. We further disclaim any opinion as to
any other statute, rule, regulation, ordinance, order or other promulgation of
any other jurisdiction or any regional or local governmental body or as to any
related judicial or administrative opinion.
Based on the foregoing and our examination of such questions of law as
we have deemed necessary or appropriate for the purpose of this opinion, and
assuming that (i) the Registration Statement becomes and remains effective
during the period when the Shares are offered and issued, (ii) the full
consideration stated in the Plans is paid for each Share and that such
consideration in respect of each Share includes payment of cash or other
lawful consideration, (iii) appropriate certificates evidencing the Shares are
executed and delivered by the Company, and (iv) all applicable securities laws
are complied with, it is our opinion that, when issued and sold by the
Company, after payment therefore in the manner provided in the Plans and the
Registration Statement, the Shares will be legally issued, fully paid and
nonassessable.
<PAGE>
Sonic Solutions
October 27, 1998
Page 3
This opinion is rendered to you in connection with the Registration
Statement and is solely for your benefit. This opinion may not be relied upon
by you for any other purpose, or relied upon by any other person, firm,
corporation or other entity for any purpose, without our prior written
consent. We disclaim any obligation to advise you of any change of law that
occurs, or any facts of which we may become aware, after the date of this
opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Heller Ehrman White & McAuliffe
<PAGE>
EXHIBIT 23.1
The Board of Directors
Sonic Solutions:
We consent to incorporation by reference in the registration statement on Form
S-8 of Sonic Solutions of our report dated April 24, 1998, relating to the
balance sheets of Sonic Solutions as of March 31, 1998 and 1997, and the related
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended March 31, 1998, and the related financial
statement schedule, which report appears in the March 31, 1998 annual report on
Form 10-K of Sonic Solutions.
KPMG Peat Marwick LLP
Oakland, California
October 23, 1998
<PAGE>
EXHIBIT 99.1
SONIC SOLUTIONS 1989
STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. -- The purposes of the Stock option Plan (the "Plan")
of Sonic Solutions, a California corporation (the "Company") are to:
(a) Encourage employees, consultants, officers and directors to improve
operations and increase profits of the Company;
(b) Encourage employees to accept or continue employment with the Company
or its Affiliates;
(c) Increase the interest of employees, consultants, officers and
directors in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422A of
the Internal Revenue Code of 1986, as amended (the "Code"), or
"nonstatutory options" ("NSOs").
2. ELIGIBLE PERSONS. -- Every person who at the date of grant of an Option is
an employee, consultant, officer or director of the Company or of any
Affiliate (as defined below) of the Company is eligible to receive NSOs or
ISOs under this Plan. The term "Affiliate" as used in the Plan means a
parent or subsidiary corporation as defined in the applicable provisions
(currently (S)(S) 425(e) and (f), respectively) of the Code. The term
"employee" includes an officer or director who is an employee, as well as
a non-officer, non-director regular employee of the Company.
3. STOCK SUBJECT TO THIS PLAN. -- The total number of shares of stock which
may be granted pursuant to this Plan is 2,090,000 shares of Common Stock.
The shares covered by the portion of any grant under the Plan which
expires unexercised shall become available again for grants under the
Plan. Shares issued pursuant to an Option granted under the Plan which are
repurchased by the Company in accordance with the terms of the Plan shall
become available again for grants as NSOs under the Plan. The number of
shares reserved for purchase under the Plan is subject adjustment in
accordance with the provisions for adjustment in the Plan.
4. ADMINISTRATION. --
(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board") or by the Chief Executive Officer of the Company to
whom administration of the Plan is hereby delegated (in either case, the
"Administrator").
(b) To the extent required by Rule 16b-3 promulgated by the Securities
and Exchange Commission ("Rule 16b-3") no Option shall be granted to (i) a
director of the Company except by the Board when a majority of the members
of the Board, and a majority of the directors acting in the matter, are
"disinterested persons" (as defined below), or (ii) to an officer of the
Company not a member of the Board except by the Board. "Disinterested
person," for the purpose, shall have the same meaning as in Rule 16b-3 or
any successor rule under the Securities Exchange Act or 1934, as amended
(the "Exchange Act").
(c) Subject to the other provisions of this Plan, the Administrator shall
have the authority, in its discretion: (i) to grant Options; (ii) to
determine the fair market value of the Common Stock subject to Options:
(iii) to determine the exercise price of Options granted; (iv) to
determine the persons to whom, and the time or times at which, Options
shall be granted, and the number of shares subject to each Option; (v) to
interpret this Plan; (vi) to prescribe, amend, and rescind rules and
regulations relating to this Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical, including
but not limited to, the time or times at which Options shall be
exercisable; (viii) with the consent of the Optionee, to modify or amend
any Option; (ix) to defer (with the consent of the Optionee) or accelerate
the exercise date of any Option; (x) to
SONIC SOLUTIONS 1989 STOCK OPTION PLAN
PAGE 1 OF 6
<PAGE>
authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an Option; and (xi) to make all other
determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative
duties to such employees of the Company as it deems proper.
(d) All questions of interpretation, implementation, and application of
this Plan shall be determined by the Administrator. Such determinations
shall be final and binding on all persons.
5. GRANTING OF OPTIONS; OPTION AGREEMENT. -- No Options shall be granted
under this Plan after ten years from the date of adoption of this Plan by
the Board of Directors.
Each option shall be evidenced by a written stock option agreement, in
form satisfactory to the Company, executed by the Company and the person
to whom such Option is granted; provided, however, that the failure by the
Company, the Optionee, or both to execute such an agreement shall not
invalidate the granting of an Option. The agreement shall specify whether
each Option it evidences is a NSO or an ISO.
The Administrator may approve the grant of Options under the Plan to
persons who are expected to become employees of the Company, but are not
employees at the date or approval. In such cases, the Option shall be
deemed granted, without further approval, on the date the grantee becomes
an employee and must satisfy all requirements of this Plan for Options
granted on that date.
6. TERMS AND CONDITIONS OF OPTIONS. -- Each Option granted under this Plan
shall be designated as an NSO or an ISO. Each Option shall be subject to
the terms and conditions set forth in (S) 6.1. NSOs shall be also subject
to the terms and conditions set forth in (S) 6.2, but not those set forth
in (S) 6.3. ISOs shall also be subject to the terms and conditions set
forth in (S) 6.3, but not those set forth in (S) 6.2.
6.1 TERMS AND CONDITIONS TO WHICH ALL OPTIONS ARE SUBJECT. -- All Options
granted under this Plan shall be subject to the following terms and
conditions:
6.1.1 CHANGES IN CAPITAL STRUCTURE. -- Subject to (S) 6.1.2, if the
stock of the Company is changed by reason of a stock split,
reverse stock split, stock dividend, or recapitalization, or
converted into or exchanged for other securities as a result of
a merger, consolidation or reorganization, appropriate
adjustments shall be made in (a) the number and class of shares
of stock subject to this Plan and each Option outstanding under
this Plan, and (b) the exercise price of each outstanding
Option; provided, however, that the Company shall not be
required to issue fractional shares as a result of any such
adjustments. Each such adjustment shall be subject to approval
by the Board or Directors in its sole discretion.
6.1.2 CORPORATE TRANSACTIONS. -- New option rights may be substituted
for the option rights granted under this Plan, or the Company's
obligations as to Options outstanding under this Plan may be
assumed, by an employer corporation other than the Company, or
by a parent or subsidiary of such employer corporation, in
connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation or like occurrence in
which the Company is involved, in such manner that the then
outstanding Options which are ISOs will continue to be
"incentive stock options" within the meaning or (S) 422A of the
Code to the full extent permitted thereby. Notwithstanding the
foregoing or the provisions or (S) 6.1.1, if such employer
corporation, or parent or subsidiary or such employer
corporation, does not substitute new and substantially
equivalent option rights for the option rights granted
hereunder, or assume the option rights granted hereunder, the
option rights granted hereunder shall terminate (a) upon
dissolution or liquidation or the Company, or similar
occurrence, or (b) upon any merger, consolidation, acquisition,
separation, or similar occurrence, where the Company will not
be a surviving corporation; provided, however, that each
Optionee shall be mailed notice at least thirty-five (35) days
prior to such dissolution, liquidation, merger, consolidation,
acquisition, separation, or similar occurrence, and shall have
at least
SONIC SOLUTIONS 1989 STOCK OPTION PLAN
PAGE 2 OF 6
<PAGE>
thirty (30) days after the mailing or such notice to exercise
any unexpired option rights granted hereunder to the extent
exercisable on the date of such event.
6.1.3 TIME OF OPTION EXERCISE. -- Except as necessary to satisfy the
requirements of (S) 422A of the Code and subject to (S)(S) 5
and 6.1.8, Options granted under this Plan shall be exercisable
(a) immediately as of the effective date of the stock option
agreement granting the Option, or (b) at such other times as
are specified in the written stock Option agreement relating to
such Option; provided, however, that if the Optionee is a
director, such Option may not be exercisable, in whole or in
part, at any time prior to the first anniversary of the date of
Option grant, unless the Administrator determines that the
foregoing provision is not necessary to comply with the
provisions of Rule 16b-3 or that Rule 16b-3 is not applicable
to the Plan.
6.1.4 OPTION GRANT DATE. -- Except in the case of advance approvals
described in (S) 5, the date of grant of an Option under this
Plan shall be the date as of which the Administrator approves
the grant. No Option shall be exercisable, however, until a
written stock option agreement in form satisfactory to the
Company is executed by the Company and the Optionee.
6.1.5 NONASSIGNABILITY OF OPTION RIGHTS. -- No Option granted under
this Plan shall be assignable or otherwise transferable by the
Optionee except by will or by the laws of descent and
distribution. During the life of the Optionee, an Option shall
be exercisable only by the Optionee.
6.1.6 PAYMENT. -- Except as provided below, payment in full, in cash,
shall be made for all stock purchased at the time written
notice of exercise of an Option is given to the Company, and
proceeds of any payment shall constitute general funds of the
Company. At the time an Option is granted or exercised, the
Administrator, in the exercise of its absolute discretion, may
authorize any one or more the following additional methods of
payment:
(a) Acceptance of the Optionee's full recourse promissory
note for all or part of the option price, payable on such terms
and bearing such interest rate as determined by the
Administrator (but in no event less than the minimum interest
rate specified by federal tax law at which no additional
interest on debt instruments of such type would be imputed),
which promissory note may be either secured or unsecured in
such manner as the Administrator shall approve (including,
without limitation, by a security interest in the shares of the
Company); and
(b) Delivery by the Optionee of Common Stock already owned
by the Optionee for all or part of the option price, provided
the value (determined as set forth in (S) 6.1.11) of such
Common Stock is equal on the date of exercise to the option
price, or such portion thereof as the Optionee is authorized to
pay by delivery of such stock.
6.1.7 TERMINATION OF EMPLOYMENT OR SERVICE. -- Unless determined
otherwise by the Administrator in its absolute discretion, to
the extent not already expired or exercised, an Option shall
terminate: (i) for Optionees not subject to (S) 16(b) of the
Exchange Act at the earlier of (a) the Expiration Date or (b)
three months after termination of employment or service as a
consultant with the Company or any Affiliate; (ii) for
Optionees who are non-employee directors, at the earlier of (a)
the Expiration Date (as defined in (S) 6.1.12) or (b) seven
months after the last day served as a director of the Company
or any Affiliate; and (iii) for Optionees who are employees and
either directors or otherwise subject to (S) 16(b) of the
Exchange Act, at the earlier of (a) the Expiration Date, (b)
three months after termination of employment with the Company
or any Affiliate in the case of ISOs, and (c) in the case of
NSOs, seven months after the later of termination of employment
or services as a consultant with the Company or any Affiliate
or the last day served as a director of the Company or any
Affiliate; provided,
SONIC SOLUTIONS 1989 STOCK OPTION PLAN
PAGE 3 OF 6
<PAGE>
that an Option shall be exercisable after the date of
termination of employment or service as a consultant only to
the extent exercisable on the date of termination; and provided
further, that if termination of employment or service as a
consultant is due to the Optionee's death or "disability" (as
determined in accordance with (S) 22(e)(3) of the Code), the
Optionee, or the Optionee's personal representative (or any
other person who acquires the Option from the Optionee by will
or the applicable laws of descent and distribution), may at any
time within 12 months after the termination of employment or
service as a consultant (or such lesser period as is specified
in the option agreement but in no event after the Expiration
Date of the Option), exercise the rights to the extent they
were exercisable on the date of the termination. A transfer of
an Optionee from the Company to an Affiliate or vice versa, or
from one Affiliate to another, or a leave of absence due to
sickness, military service, or other cause duly approved by the
Company, shall not be deemed a termination of employment or
service as a consultant for purposes of this Plan.
6.1.8 REPURCHASE OF STOCK .-- Unless otherwise determined by the
Administrator at the time of grant, the stock to be delivered
pursuant to the exercise of any Option granted to an Optionee
under this Plan will be subject to a right or repurchase in
favor of the Company with respect to any Optionee whose
employment or service with the Company is terminated. Such
right of repurchase shall be at the option exercise price and,
unless otherwise determined by the Administrator at the time of
grant, shall expire in accordance with the following schedule
related to the date of the grant of the Option, the date of
first employment, or such other date as may be set by the
Administrator (in any case, the "Vesting Base Date") with
respect to each Option grant:
. One year after the Vesting Base Date the
repurchase right shall expire with respect to 25% of
the stock subject to grant.
. Thereafter, the repurchase right shall expire
with respect to 2.0833 1/3% of the shares subject
to grant at the end of each succeeding calendar
month.
Determination of the number of shares subject to such right of
repurchase shall be made as of the date the employee's
employment by or consultant's service with the Company
terminates. The Company's repurchase right may be waived by the
Board.
6.1.9 WITHHOLDING AND EMPLOYMENT TAXES. -- At the time of exercise of
an Option, the Optionee shall remit to the Company in cash all
applicable federal and state withholding and employment taxes.
The Administrator may, in the exercise of its sole discretion,
permit an Optionee to pay some or all of such taxes by means of
a promissory note on such terms as the Administrator deems
appropriate.
6.1.10 TAX STATUS OF COMPANY. -- Notwithstanding any other term or
condition of the Plan, no option shall be exercisable if
issuance of shares upon exercise would cause the Company to
cease to be a Subchapter S corporation under the relevant
provisions of the Code.
6.1.11 OTHER PROVISIONS. -- Each Option granted under this Plan may
contain such other terms, provisions, and conditions not
inconsistent with this Plan as may be determined by the
Administrator, and each ISO granted under this Plan shall
includes such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the
meaning of (S) 422A of the Code. If Options provide for a right
of first refusal in favor of the Company with respect to stock
acquired by employees, such Options shall further provide that
the right of first refusal shall terminate upon the earlier of
(i) the closing of the Company's initial registered public
offering to the public generally, or (ii) the date ten (10)
years after the grant date as set forth in (S) 6.1.4.
SONIC SOLUTIONS 1989 STOCK OPTION PLAN
PAGE 4 OF 6
<PAGE>
6.1.12 DETERMINATION OF VALUE. -- For purposes of the Plan, the value
of Common Stock or other securities of the Company shall be
determined as follows:
(a) If the stock of the Company is listed on any
established stock exchange or a national market system,
including without limitation the National Market System
of the National Association of Securities Dealers
Automated Quotation System, its fair market value shall
be the closing sales price for such stock or the
closing bid if no sales were reported, as quoted on
such system or exchange (or the largest such exchange)
for the date the value is to be determined (or if there
are no sales for such date, then for the last preceding
business day on which there were sales), as reported in
the Wall Street Journal or similar publication.
(b) If the stock of the Company is regularly quoted
by a recognized securities dealer but selling prices
are not reported, its fair market value shall be the
mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if
there are no quoted prices for the date of grant, then
for the last preceding business day on which there were
quoted prices).
(c) In the absence of an established market for the
stock, the fair market value thereof shall be
determined by the Administrator, with reference to the
Company's net worth, prospective earning power,
dividend-paying capacity, and other relevant factors,
including the goodwill of the Company, the economic
outlook in the Company's industry, the Company's
position in the industry and its management, and the
values of stock of other corporation in the same or a
similar line of business.
6.1.13 OPTION TERM. -- No Option shall be exercisable more than ten
years after the date of grant, or such lesser period of time
as is set forth in the option agreement (the end of the
maximum exercise period stated in the option agreement is
referred to in this Plan as the "Expiration Date"). No Option
granted to a Ten Percent Shareholder (as defined in (S)
6.2.1) shall be exercisable more than five years after the
date of grant.
6.2 TERMS AND CONDITIONS TO WHICH ONLY NSOS ARE SUBJECT. -- Options granted
under this Plan which are designated as NSOs shall be subject to the
following terms and conditions:
6.2.1 EXERCISE PRICE. -- The exercise price of a NSO shall be not less
than 85 percent of the fair market value (determined in
accordance with (S) 6.1.11) of the stock subject to the Option
on the date of grant, except that the exercise price of a NSO
granted to any person who owns, directly or by attribution,
stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or of any
Affiliate (a "Ten Percent Shareholder"), shall in no event be
less than 110 percent of such fair market value.
6.3 TERMS AND CONDITIONS TO WHICH ONLY ISOS ARE SUBJECT. -- Options granted
under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
6.3.1 EXERCISE PRICE. -- The exercise price of an ISO, which shall be
approved by the Board of Directors, shall be determined in
accordance with the applicable provisions of the
SONIC SOLUTIONS 1989 STOCK OPTION PLAN
PAGE 5 OF 6
<PAGE>
Code and shall in no event be less than the fair market value
(determined as described in (S) 6.1.11) of the stock covered by
the Option at the time the Option is granted, except that the
exercise price of an ISO granted to any Ten Percent Shareholder
shall in no event be less than 110 percent of such
fair market value.
6.3.2 DISQUALIFYING DISPOSITIONS. -- If stock acquired upon exercise
of an ISO is disposed of in a "disqualifying disposition"
within the meaning of (S) 422A of the Code, the holder of the
stock immediately before the disposition shall notify the
Company in writing of the date and terms of the disposition and
comply with any other requirements imposed by the Company in
order to enable the Company to secure any related income tax
deduction to which it is entitled.
6.3.3 LIMITATIONS ON ISO EXERCISABILITY. -- To the extent required to
cause ISOs granted under this Plan to constitute "incentive
stock options" within the meaning of (S) 422A(b) of the Code,
notwithstanding any other provision in this Plan, all ISOs
taken together granted to an Optionee under this Plan and under
all incentive stock option plans of the Company or its
Affiliates may not first become exercisable ("vest") at a rate
of more than $100,000 worth of stock (measured on the grant
date(s)) in any calendar year.
7. MANNER OF EXERCISE. -- An Optionee wishing to exercise an Option shall
give written notice to the Company at its principal executive office, to
the attention of the officer of the Company designated by the
Administrator, accompanied by payment of the exercise price as provided in
(S) 6.1.6. The date the Company receives written notice of an exercise
hereunder accompanied by payment of the exercise price and, if required,
by payment of any federal or state withholding or employment taxes
required to be withhold by virtue of exercise of the Option will be
considered as the date such Option was exercised.
Promptly after receipt of written notice of exercise of an Option, the
Company shall, without stock issue or transfer taxes to the Optionee or
other person entitled to exercise the Option, deliver to the Optionee or
such other person a certificate or certificates for the requisite number
of shares of stock. An Optionee or transferee of an Option shall not have
any privileges as a shareholder with respect to any stock covered by the
Option until the date of issuance of a stock certificate.
8. EMPLOYMENT RELATIONSHIP. -- Nothing in this Plan or any Option granted
thereunder shall interfere with or limit in any way the right of the
Company or of any of its Affiliates to terminate any Optionee's employment
or consulting at any time, nor confer upon any Optionee any right to
continue in the employ or as a consultant of the Company or any of its
Affiliates.
9. AMENDMENTS TO PLAN. -- The Board may amend this Plan at any time. Without
the consent of an Optionee, no amendment may affect outstanding Options
except to conform this Plan and ISOs granted under this Plan to federal or
other tax laws relating to incentive stock options. No amendment shall
require shareholder approval unless shareholder approval is required to
preserve incentive stock option treatment for federal income tax purposes
of the Board otherwise concludes that shareholder approval is advisable.
10. SHAREHOLDER APPROVAL; TERM. -- This Plan shall become effective upon
adoption by the Board of Directors, provided, however, that no Option shall
be exercisable unless and until written consent of the shareholders of the
Company, or approval by shareholders of the Company voting at a validly
called shareholders' meeting and holding a majority (or such greater number
as may be required by law or applicable governmental regulations or orders)
of the shares entitled to vote is obtained within 12 months after adoption
by the Board of Directors. This Plan shall terminate ten years after
adoption by the Board unless terminated earlier by the Board. the Board may
terminate this Plan at any time without shareholder approval. No Options
shall be granted after termination of this Plan, but termination shall not
affect rights and obligations under then outstanding Options. Options may
be granted and exercised under this Plan only after there has been
compliance with all applicable federal and state securities laws.
SONIC SOLUTIONS 1989 STOCK OPTION PLAN
PAGE 6 OF 6
<PAGE>
EXHIBIT 99.2
SONIC SOLUTIONS
1994 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
(as amended through June 1998)
1. Purpose.
-------
The purpose of this Plan is to offer Nonemployee Directors of Sonic
Solutions an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, by purchasing shares of the
Company's Common Stock. This Plan provides for the grant of Options to
purchase Shares. Options granted hereunder shall be "Nonstatutory Options,"
and shall not include "incentive stock options" intended to qualify for
treatment under Sections 421 and 422 of the Internal Revenue Code of 1986, as
amended.
2. Definitions.
-----------
As used herein, the following definitions shall apply:
(a) "Administrator" shall mean the entity, either the Board or the
-------------
committee of the Board, responsible for administering this Plan, as provided
in Section 3.
(b) "Affiliate" means a parent or subsidiary corporation as defined
---------
in the applicable provisions (currently, Sections 424(e) and (f),
respectively) of the Code.
(c) "Board" shall mean the Board of Directors of the Company, as
-----
constituted from time to time.
(d) "Beneficially Own" shall mean (a) any interest in a security
----------------
which entitles a person to any of the rights or benefits of ownership even
though such person may not be the owner of record or (b) securities owned by a
person directly or indirectly, including (i) securities held by such person
for such person's own benefit (regardless of how registered), (ii) securities
held by others for such person's benefit (regardless of how registered), such
as by custodians, brokers, nominees, pledgees, etc., (iii) securities held by
an estate or trust in which such person has an interest as legatee or
beneficiary, (iv) securities owned by a partnership of which such person is a
partner, (v) securities held by a personal holding company of which such
person is a shareholder, etc., (vi) securities held in the name of such
person's spouse,
<PAGE>
minor children and any other family member (sharing the same home) and (vii)
securities held by such person as trustee for the benefit of family members
(whether or not sharing the same household). A "beneficial owner" of a
security includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise has or shares:
(a) voting power which includes the power to vote, or to direct the voting of,
such security; and/or (b) investment power which includes the power to
dispose, or to direct the disposition, of such security.
(e) "Change in Control" shall mean the occurrence of any one of the
-----------------
following:
(i) any "person", as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company, an Affiliate, or a Company
employee benefit plan, including any trustee of such plan acting as trustee)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities;
(ii) the solicitation of proxies (within the meaning of Rule
14a-1(k) under the Exchange Act and any successor rule) with respect to the
election of any director of the Company where such solicitation is for any
candidate who is not a candidate proposed by a majority of the Board in office
prior to the time of such election; or
(iii) the dissolution or liquidation (partial or total) of the
Company or a sale of assets involving 30% or more of the assets of the
Company, or any merger or reorganization of the Company, whether or not
another entity is the survivor, or other transaction pursuant to which the
holders, as a group, of all of the shares of the Company outstanding prior to
the transaction hold, as a group, less than 70% of the shares of the Company
outstanding after the transaction.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended
----
from time to time, and any successor statute.
(g) "Company" shall mean Sonic Solutions, a California corporation.
-------
2
<PAGE>
(h) "Common Stock" shall mean the Common Stock of the Company.
------------
(i) "Disability" means permanent and total disability as determined
----------
by the Administrator in accordance with the standards set forth in Section
22(e)(3) of the Code.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended from time to time, and any successor statute.
(k) "Expiration Date" shall mean the last day of the term of an Option
---------------
established under Section 6(c).
(l) "Fair Market Value" means as of any given date (a) the closing
-----------------
price of the Common Stock on the Nasdaq National Market as reported in the
Wall Street Journal, or (b) if the Common Stock is no longer quoted on the
- -------------------
Nasdaq National Market but is listed on an established stock exchange or
quoted on any other established interdealer quotation system, the closing
price for the Common Stock on such exchange or system, as reported in the Wall
----
Street Journal, or if not so reported, as reported by any such exchange or
- --------------
system.
(m) "Nonemployee Director" shall mean any person who is (a) a member
--------------------
of the Board but is not an employee of the Company or any Affiliate of the
Company, (b) has not been an employee of the Company or any Affiliate of the
Company at any time during the preceding twelve months and (c) does not
directly or indirectly beneficially own more than 5% of the Company's Common
Stock. Service as a director does not in itself constitute employment for
purposes of this definition.
(n) "Option" shall mean a stock option granted pursuant to this
------
Plan. Each Option shall be a nonstatutory option not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "Option Agreement" shall mean the written agreement described in
----------------
Section 6 evidencing the grant of an Option to a Nonemployee Director and
containing the terms, conditions and restrictions pertaining to such Option.
(p) "Optionee" shall mean a Nonemployee Director who holds an Option.
--------
3
<PAGE>
(q) "Plan" shall mean this Sonic Solutions 1994 Nonemployee
----
Directors Stock Option Plan, as it may be amended from time to time.
(r) "Section" unless the context clearly indicates otherwise, shall
-------
refer to a Section of this Plan.
(s) "Shares" shall mean the shares of Common Stock subject to an
------
Option granted under this Plan.
(t) "Tax Date" means the date defined in Section 7(c).
--------
(u) "Termination" means, for purposes of the Plan, with respect to an
-----------
Optionee, that the Optionee has ceased to be, for any reason, a director of
the Company.
(v) "Window Period" means any 10-day period beginning on the third
-------------
business day following the date of release for publication of the Company's
quarterly or annual summary statements of earnings or such other period as is
specified in Rule 16b-3(e) under the Exchange Act, as such rule may be amended
from time to time, or any successor to such rule.
3. Administration.
--------------
(a) Administrator. The Plan shall be administered by the Board or,
-------------
upon delegation by the Board, by a committee consisting of not less than two
directors (in either case, the "Administrator"). Subject to the other
provisions of this Plan, the Administrator shall have the authority, in its
discretion: (i) with the consent of the optionee, to modify, amend or cancel
any Option; (ii) to defer (with the consent of the optionee) or to accelerate
the exercise date of any Option or to defer (with the consent of the optionee)
or to accelerate the expiration of any right of repurchase which the Company
may have with respect to shares issued or issuable upon exercise of any
Option; (iii) to authorize any person to execute on behalf of the Company any
instrument evidencing the grant of an Option; and (iv) to make all other
determinations deemed necessary or advisable for the administration of this
Plan. In connection with the administration of the Plan, the Administrator
shall have the powers possessed by the Board. The Administrator may act only
by a majority of its members. The Administrator may delegate administrative
duties to such employees of the Company as it deems proper, so long as such
delegation is not otherwise prohibited by
4
<PAGE>
Rule 16b-3 under the Exchange Act. The Board at any time may terminate the
authority delegated to any committee of the Board pursuant to this Section
3(a) and revest in the Board the administration of the Plan.
(b) Administrator Determinations Binding. Subject to the
------------------------------------
limitations set forth in Section 3(a), the Administrator may adopt, alter and
repeal administrative rules, guidelines and practices governing the Plan as it
from time to time shall deem advisable, may interpret the terms and provisions
of the Plan, any Option and any Option Agreement and may otherwise supervise
the administration of the Plan. All decisions made by the Administrator under
the Plan shall be binding on all persons, including the Company and Optionees.
No member of the Administrator shall be liable for any action that he or she
has in good faith taken or failed to take with respect to this Plan or any
Option.
4. Eligibility.
-----------
Only Nonemployee Directors may receive Options under this Plan.
5. Shares Subject to Plan.
----------------------
(a) Aggregate Number. Subject to Section 9, the total number of
----------------
shares of Common Stock reserved and available for issuance pursuant to Options
under this Plan shall be 50,000 shares. Such shares may consist, in whole or
in part, of authorized and unissued shares or shares reacquired in private
transactions or open market purchases, but all shares issued under the Plan
regardless of source shall be counted against the 50,000 share limitation. If
any Option terminates or expires without being exercised in full, the shares
issuable under such Option shall again be available for issuance in connection
with other Options. If shares of Common Stock issued pursuant to an Option are
repurchased by the Company, such Common Stock shall not again be available for
issuance in connection with Options. To the extent the number of shares of
Common Stock issued pursuant to an Option is reduced to satisfy withholding
tax obligations, the number of shares withheld to satisfy the withholding tax
obligations shall not be available for later grant under the Plan.
(b) No Rights as a Shareholder. An Optionee shall have no rights as
--------------------------
a shareholder with respect to any Shares covered by his or her Option until
the issuance (as evidenced by the appropriate entry on the
5
<PAGE>
books of the Company or its duly authorized transfer agent) of a stock
certificate evidencing such Shares. Subject to Section 9, no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property), distributions, or other rights for which the record date
is prior to the date the certificate is issued.
6. Grant of Options.
----------------
(a) Mandatory Initial Option Grants. Subject to the terms and
-------------------------------
conditions of this Plan, if any Nonemployee Director who is not, and has not
been in the preceding twelve months, an officer or employee of the Company and
who either (i) is a member of the Board of Directors at the date of adoption
of this Plan by the Board or (ii) has not previously been a member of the
Board and is elected or appointed as a member of the Board, then on the date
of adoption of this Plan by the Board or the effective date of such
appointment or election as the case may be, the Company shall grant to such
Nonemployee Director an Option to purchase 5,000 Shares at an exercise price
equal to the Fair Market Value of such Shares on the date of such option
grant.
(b) Mandatory Annual Option Grants. Subject to the terms and
------------------------------
conditions of this Plan, on the date of the first meeting of the Board
immediately following the annual meeting of shareholders of the Company (even
if held on the same day as the meeting of shareholders) commencing with the
annual meeting of shareholders held in 1995, the Company shall grant to each
such Nonemployee Director then in office an Option to purchase 5,000 Shares at
an exercise price equal to the Fair Market Value of such Shares on the date of
such option grant.
(c) Terms; Vesting. Subject to the terms and conditions of this
--------------
Plan, each Option granted pursuant to this Plan shall be for a term of ten
years. Each Option granted under Section 6(a) and Section 6(b) shall become
exercisable with respect to 1/48th of the number of Shares covered by such
Option for each calendar month which elapses after the date of grant, so that
such Option shall be fully exercisable on the fourth anniversary of the date
such Option was granted.
(d) [deleted]
(e) Option Agreement. As soon as practicable after the grant of an
----------------
Option, the Optionee and the Company shall enter into a written
6
<PAGE>
Option Agreement which specifies the date of grant, the number of Shares, the
option price, the vesting period and the other terms and conditions applicable
to the Option.
(f) Transferability. No Option shall be transferable other than by
---------------
will or the laws of descent and distribution, and an Option shall be
exercisable during the Optionee's lifetime only by the Optionee.
(g) Limits on Exercise. Subject to the other provisions of this
------------------
Plan, an Option shall be exercisable in such amounts as are specified in the
Option Agreement.
(h) Exercise Procedures. To the extent the right to purchase Shares
-------------------
has accrued, Options may be exercised, in whole or in part, from time to time,
by written notice from the Optionee to the Company stating the number of
Shares being purchased, accompanied by payment of the exercise price for the
Shares, and other applicable amounts, as provided in Section 7.
(i) Termination. In the event of Termination, Options held at the
-----------
date of Termination (and only to the extent then exercisable) may be exercised
in whole or in part at any time within three months after the date of
Termination (but in no event after the Expiration Date), but not thereafter.
Notwithstanding the foregoing, if Termination is due to retirement or to death
or Disability, Options held at the date of Termination (and only to the extent
then exercisable) may be exercised in whole or in part by the Optionee in the
case of retirement or Disability, by the participant's guardian or legal
representative or by the person to whom the Option is transferred by will or
the laws of descent and distribution, at any time within two years from the
date of Termination (but in no event after the Expiration Date).
7. Payment and Taxes upon Exercise of Options.
------------------------------------------
(a) Purchase Price. The purchase price of Shares issued under this
--------------
Plan shall be paid in full at the time an Option is exercised.
(b) Tax Withholding. The Optionee shall pay to the Company, promptly
---------------
upon exercise of an Option or, if later, the date that the amount of such
obligations becomes determinable (in either case, the "Tax Date"), all
applicable federal, state, local and foreign withholding taxes that the
Administrator, in its discretion, determines to result upon exercise of an
7
<PAGE>
Option or from a transfer or other disposition of shares of Common Stock
acquired upon exercise of an Option or otherwise related to an Option or
shares of Common Stock acquired in connection with an Option.
(c) Delivery of Purchase Price and Tax Withholding. Optionees may
----------------------------------------------
make all or any portion of any payment due to the Company:
(i) upon exercise of an Option; or
(ii) with respect to federal, state, local or foreign tax
payable in connection with the exercise of an Option, by delivery of (x)
check, (y) a promissory note of the Optionee or (z) shares of Common Stock so
long as, if applicable, such property constitutes valid consideration for the
Common Stock under, and otherwise complies with, applicable law. No promissory
note under the Plan shall have a term (including extensions) of more than five
years or shall be of a principal amount exceeding 90% of the purchase price
paid by the borrower. Exercise of an Option may be made pursuant to a
"cashless exercise/sale" procedure pursuant to which funds to pay for exercise
of the Option are delivered to the Company by a broker upon receipt of stock
certificates from the Company, or pursuant to which Optionees obtain margin
loans from brokers to fund the exercise of the Option.
(d) Tax Payment Election. A person who has exercised an Option may
--------------------
make an election (i) to deliver to the Company a promissory note of the
Optionee on the terms set forth in Section 7(b), (ii) to tender to the Company
previously-owned shares of Common Stock held for at least six months, or (iii)
to have shares of Common Stock to be obtained upon exercise of the Option
withheld by the Company on behalf of the Optionee, to pay the amount of tax
that the Administrator, in its discretion, determines to be required to be
withheld by the Company. Any election pursuant to clause (iii) above by a
Optionee subject to Section 16 of the Exchange Act shall be subject to the
following limitations: (1) such election must be made at least six months
before the Tax Date and shall be irrevocable; or (2) such election must be
made in (or made earlier to take effect in) any Window Period (and the
withholding of the shares of Common Stock shall take place during such Window
Period) and shall be subject to approval by the Board, which approval may be
given any time after such election has been made, and the Option must be held
at least six months prior to the Tax Date; provided, that, the election
referenced in clause 7(d)(ii) above may not be made unless (A) such election
is consistent with Rule 16b-3(c)(2)(ii) under
8
<PAGE>
the Exchange Act, and (B) the Company has been subject to the reporting
requirements of Section 13(a) of the Exchange Act for at least one year and
has filed all reports and statements required to be filed pursuant to that
section for that year. The right to so withhold shares of Common Stock shall
relate separately to each Option.
(e) Valuation of Shares. Any shares tendered to or withheld by the
-------------------
Company will be valued at Fair Market Value on such date. The value of the
shares of Common Stock tendered or withheld may not exceed the required
federal, state, local and foreign withholding tax obligations as computed by
the Company.
8. Use of Proceeds.
---------------
Proceeds from the sale of Shares pursuant to this Plan shall be used
for general corporate purposes.
9. Adjustment of Shares.
--------------------
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split or other change in corporate
structure affecting the Common Stock, appropriate adjustments shall be made by
the Administrator in the aggregate number and kind of shares of Stock reserved
for issuance under the Plan and in the number, kind and exercise price of
shares subject to outstanding Options; provided, however, that the number of
shares subject to any Option shall always be a whole number.
10. Effect of Change in Control.
---------------------------
In the event of a "Change in Control," any Options outstanding as of
the date such Change in Control is determined to have occurred and not then
exercisable and vested shall become fully exercisable and vested.
11. No Right to Directorship.
------------------------
Neither this Plan nor any Option granted hereunder shall confer upon
any Optionee any right with respect to continuation of the Optionee's
membership on the Board or shall interfere in any way with provisions in the
Company's Articles of Incorporation and Bylaws relating to the nomination,
9
<PAGE>
election, appointment, terms of office, and removal of members of the Board.
12. Legal Requirements.
------------------
The Company shall not be obligated to offer or sell any Shares upon
exercise of any Option unless the Shares are at that time effectively
registered or exempt from registration under the federal securities laws and
the offer and sale of the Shares are otherwise in compliance with all
applicable securities laws and the regulations of any stock exchange on which
the Company's securities may then be listed. The Company shall have no
obligation to register the securities covered by this Plan under the federal
securities laws or take any other steps as may be necessary to enable the
securities covered by this Plan to be offered and sold under federal or other
securities laws. Upon exercising all or any portion of an Option, an Optionee
may be required to furnish representations or undertakings deemed appropriate
by the Company to enable the offer and sale of the Shares or subsequent
transfers of any interest in the Shares to comply with applicable securities
laws. Certificates evidencing Shares acquired upon exercise of Options shall
bear any legend required by, or useful for purposes of compliance with,
applicable securities laws, this Plan or the Option Agreements.
13. Duration and Amendments.
-----------------------
(a) Duration. This Plan shall become effective upon adoption by the
--------
Board provided, however, that no Option shall be exercisable unless and until
written consent of the shareholders of the Company, or approval of
shareholders of the Company voting at a validly called shareholders' meeting,
is obtained within 12 months after adoption by the Board. If such shareholder
approval is not obtained within such time, Options granted hereunder shall
terminate and be of no force and effect from and after expiration of such 12-
month period.
(b) Amendment and Termination. The Board may amend, alter or
-------------------------
discontinue the Plan or any Option, but no amendment, alteration or
discontinuance shall be made which would impair the rights of an Optionee
under an outstanding Option without the Optionee's consent. In addition, the
Board may not amend or alter the Plan without the approval of shareholders of
the Company entitled to vote at a duly held shareholders' meeting or by an
action by written consent and, if at a meeting, a quorum of
10
<PAGE>
the voting power of the Company is represented in person or by proxy, where
such amendment or alteration would, except as expressly provided in the Plan,
increase the total number of shares reserved for issuance pursuant to Options
under the Plan or in such other circumstances as the Board deems appropriate
to comply with Rule 16b-3 under the Exchange Act or otherwise. Notwithstanding
any other provision of this Section 12(b), the provisions of the Plan
governing (A) who is granted Options, (B) the number of Shares to be covered
by each Option, (C) the exercise price of each Option, (D) the timing of the
grant of each Option, or (E) the period within which each Option may be
exercised, shall not be amended more than once every six months, other than to
comport with changes in the Code or the rules thereunder, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder,
or the Exchange Act or the rules and regulations thereunder.
(c) Effect of Amendment or Termination. No Shares shall be issued
----------------------------------
or sold under this Plan after the termination hereof, except upon exercise of
an Option granted before termination. Termination or amendment of this Plan
shall not affect any Shares previously issued and sold or any Option
previously granted under this Plan.
14. Rule 16b-3.
----------
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with the applicable
conditions of Rule 16b-3 under the Exchange Act. To the extent any provision of
this Plan or action by the Administrator fails to so comply, it shall be
adjusted to comply with Rule 16b-3, to the extent permitted by law and deemed
advisable by the Administrator. It shall be the responsibility of persons
subject to Section 16 of the Exchange Act, not of the Company or the
Administrator, to comply with the requirements of Section 16 of the Exchange
Act; and neither the Company nor the Administrator shall be liable if this Plan
or any transaction under this Plan fails to comply with the applicable
conditions of Rule 16b-3, or if any such person incurs any liability under
Section 16 of the Exchange Act.
11
<PAGE>
EXHIBIT 99.3
1998 STOCK OPTION PLAN
OF
SONIC SOLUTIONS
1. PURPOSES OF THE PLAN
--------------------
The purposes of the 1998 Stock Option Plan (the "Plan") of Sonic Solutions,
a California corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to improve
operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to accept
or continue employment or association with the Company or any Affiliate (as
defined below); and
(c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").
2. ELIGIBLE PERSONS
----------------
Every person who at the date of grant of an Option is an employee of the
Company or of any Affiliate of the Company is eligible to receive NQOs or ISOs
under this Plan. Every person who at the date of grant is a director of or
consultant to the Company or to any Affiliate of the Company is eligible to
receive NQOs under this Plan. The term "Affiliate" as used in the Plan means a
parent or subsidiary corporation as defined in the applicable provisions
(currently Sections 425(e) and (f), respectively) of the Code. The term
"employee" includes an officer or director who is an employee, of the Company.
The term "consultant" includes persons employed by, or otherwise affiliated
with, a consultant.
3. STOCK SUBJECT TO THIS PLAN
--------------------------
Subject to the provisions of Section 6.1(a) of the Plan, the initial
maximum aggregate number of shares of stock which may be issued on exercise of
Options granted pursuant to this Plan is 1,000,000 shares of Common Stock (the
"Share Limit"). The Share Limit shall automatically be increased on the last
business day of each fiscal year by an amount equal to 2% of the total number of
shares of Common Stock outstanding on such date; provided,
<PAGE>
however, that in no event shall such automatic share increase cause the Share
Limit to exceed 2,000,000 shares. The shares covered by the portion of any
grant under the Plan which expires unexercised shall become available again
for grants under the Plan. Shares issued pursuant to an Option which are
repurchased by the Company in accordance with the terms of the Plan shall
become available again for grants as NQOs under the Plan.
4. ADMINISTRATION
--------------
4.1 This Plan shall be administered by the Board of Directors of the
Company (the "Board"), or by a committee (the "Committee") of at least two (2)
Board members to which administration of the Plan is delegated or, with
respect to persons other than directors and "executive officers" as defined in
the Securities Exchange Act and the rules and regulations thereunder, by the
Chief Executive Officer of the Company (in each case, the "Administrator"), in
accordance with the provisions of Rule 16b-3 promulgated by the Securities and
Exchange Commission ("Rule 16b-3"), or by any successor rule thereto.
4.2 Subject to the other provisions of this Plan, the Administrator
shall have the authority, in its discretion: (i) to grant Options; (ii) to
determine the fair market value of the Common Stock subject to Options; (iii)
to determine the exercise price of Options granted; (iv) to determine the
persons to whom, and the time or times at which, Options shall be granted, and
the number of shares subject to each Option; (v) to interpret this Plan; (vi)
to prescribe, amend and rescind rules, regulations and guidelines relating to
this Plan; (vii) to determine the terms and provisions of each Option granted
(which need not be identical), including, but not limited to, the time or
times at which Options shall be exercisable; (viii) with the consent of the
optionee, to modify or amend any Option; (ix) to defer (with the consent of
the optionee) or to accelerate the exercise date of any Option or to defer
(with the consent of the optionee) or to accelerate the expiration of any
right of repurchase which the Company may have with respect to shares issued
or issuable upon exercise of any Option; (x) to authorize any person to
execute on behalf of the Company any instrument evidencing the grant of an
Option; and (xi) to make all other determinations deemed necessary or
advisable for the administration of this Plan. The Administrator may delegate
nondiscretionary administrative duties to such employees of the Company as it
deems proper.
2
<PAGE>
4.3 All questions of interpretation, implementation and application of
this Plan shall be determined by the Administrator. Such determinations shall
be final and binding on all persons, including the Company and all options.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
-------------------------------------
5.1 No Options shall be granted under this Plan after ten (10) years
from the date of adoption of this Plan by the Board.
5.2 Each Option shall be evidenced by a written stock option agreement,
in form satisfactory to the Company, executed by the Company and the person to
whom such Option is granted; provided, however, that the failure by the
Company, the optionee or both to execute such an agreement shall not
invalidate the granting of an Option.
5.3 The agreement shall specify whether each Option it evidences is a
NQO or an ISO. However, notwithstanding such designations, if the aggregate
fair market value of the shares under Options designated as ISOs would become
exercisable for the first time by any optionee at a rate in excess of $100,000
in any calendar year (under all plans of the Company), then unless otherwise
provided in the stock option agreement or by the Administrator, the
exercisability of ISOs (or portions thereof) having the highest per share
exercise price shall be delayed until the earliest time at which their
exercisability would not cause the $100,000 limitation to be exceeded. For
purposes of this Section 5.3, Options shall be taken into account in the order
in which they were granted, and the fair market value of the shares shall be
determined as of the time the Option with respect to such shares is granted.
5.4 The Administrator may approve the grant of Options under the Plan
to persons who are expected to become employees, directors or consultants of
the Company, but are not employees, directors or consultant at the date of
approval. In such cases, the Option shall be deemed granted, without further
approval, on the date the grantee assumes the employment or consulting
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option granted under this Plan shall be designated as an NQO or an
ISO. Each Option shall be subject to the terms and conditions set forth in
Section 6.1. NQOs shall also be subject to the terms and conditions set forth
in Section 6.2, but not those set forth in Section 6.3. ISOs shall also be
subject to the terms and conditions set forth in Section 6.3, but not those set
forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All Options
-----------------------------------------------------
granted under this Plan shall be subject to the following terms and
conditions:
3
<PAGE>
(a) Changes in Capital Structure. Subject to Section 6.1(b), if
----------------------------
the Common Stock of the Company is changed by reason of a stock split, reverse
stock split, stock dividend or recapitalization, or converted into or
exchanged for other securities as a result of a merger, consolidation or
reorganization, appropriate adjustments or substitutions shall be made in: (i)
the number and class of shares of Common Stock subject to this Plan and each
Option outstanding under this Plan; and (ii) the exercise price of each
outstanding Option; provided, however, that the Company shall not be required
-------- -------
to issue fractional shares as a result of any such adjustments. Each such
adjustment shall be at the discretion of and subject to approval by the
Administrator in its sole discretion.
(b) Corporate Transactions. In the event of the proposed
----------------------
dissolution or liquidation of the Company, the Administrator shall notify each
optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action. In the event of a merger or
consolidation involving the Company in which the Company is not the surviving
corporation (other than with a subsidiary of the Company solely to effect a
reincorporation) or in which the shareholders of the Company prior to such
transaction own less than 50% of the shares entitled to vote of the surviving
entity, or in the event of a sale of all or substantially all of the assets of
the Company in which the shareholders of the Company receive securities of the
acquiring entity or an affiliate thereof, all Options shall be assumed or
equivalent options shall be substituted by the successor corporation (or other
entity) or a parent or subsidiary of such successor corporation (or other
entity); provided, however, that if such successor does not agree to assume
the Options or to substitute equivalent options therefor, unless the
Administrator shall determine otherwise, all Options shall be fully
exercisable for a period of thirty (30) days from the date notice is given
under this Section 6.1(b) and shall terminate upon expiration of such 30-day
period.
(c) Time of Option Exercise. Except as necessary to satisfy the
-----------------------
requirements of Section 422 of the Code and subject to Section 5, Options
granted under this Plan shall be exercisable: (a) immediately as of the
effective date of the stock option agreement granting the Option; or (b) at
such other times as are specified in the written stock option agreement
relating to such Option. No Option shall be exercisable, however, until a
written stock option agreement in form satisfactory to the Company is executed
by the Company and the optionee.
(d) Option Grant Date. Except in the case of advance approvals
-----------------
described in Section 5.4, the date of grant of an Option under this Plan shall
be the date as of which the Administrator approves the grant.
(e) Nonassignability of Option Rights. No Option granted under
---------------------------------
this Plan shall be assignable or otherwise transferable by the optionee except
by will or by the
4
<PAGE>
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code, except, with respect to NQOs, which may be
assignable or otherwise transferable by the optionee as the Administrator may
determine in its sole discretion. During the life of the optionee, an Option
shall be exercisable only by the optionee, except, with respect to NQOs, as
the Administrator may determine in its sole discretion.
(f) Payment. Except as provided below, payment in full, in cash,
-------
shall be made for all stock purchased at the time written notice of exercise
of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion, may
authorize any one or more of the following additional methods of payment: (i)
acceptance of the optionee's full recourse promissory note for all or part of
the Option price, payable on such terms and bearing such interest rate as
determined by the Administrator (but in no event less than the minimum
interest rate specified under the Code at which no additional interest on debt
instruments of such type would be imputed), which promissory note may be
either secured or unsecured in such manner as the Administrator shall approve
(including, without limitation, by a security interest in the shares of the
Company); or (ii) delivery by the optionee of Common Stock already owned by
the optionee for all or part of the Option price, provided the value
(determined as set forth in Section 6.1(k) of such Common Stock is equal on
the date of exercise to the Option price, or such portion thereof as the
optionee is authorized to pay by delivery of such stock; provided, however,
that if an optionee has exercised any portion of any option granted by the
Company by delivery of Common Stock, the optionee may not, within six (6)
months following such exercise, exercise any Option granted under this Plan by
delivery of Common Stock.
(g) Termination of Employment or Service. Unless determined
------------------------------------
otherwise by the Administrator in its absolute discretion, to the extent not
already expired or exercised, an Option shall terminate at the earlier of: (i)
the Expiration Date (as defined in Section 6.1(k); or (ii) three (3) months
after termination of employment with the Company or any Affiliate (with
respect to employees) or three (3) months after the last day served as a
director or consultant to the Company or any Affiliate (with respect to
consultants); provided, that an Option shall be exercisable after the date
--------
of termination of employment or service as a consultant only to the extent
exercisable on the date of termination; and provided further, that if
-------- -------
termination of employment or service as a consultant is due to the optionee's
death or "disability" (as determined in accordance with Section 22(e)(3) of
the Code), the optionee, or the optionee's personal representative (or any
other person who acquires the Option from the optionee by will or the
applicable laws of descent and distribution), may at any time within twelve
(12) months after the termination of employment or service as a consultant (or
such lesser period as is specified in the option agreement but in no event
after the Expiration Date of the Option), exercise the rights to the extent
they were exercisable on the date of the termination. A transfer of an
optionee from the Company to an Affiliate or vice versa, or from one Affiliate
to another, or a leave of absence due to sickness, military service or other
cause duly
5
<PAGE>
approved by the Company, shall not be deemed a termination of employment or
the consulting relationship for purposes of this Plan.
(h) Repurchase of Stock. Unless otherwise provided for by the
-------------------
Administrator in the option agreement, the Common Stock to be delivered
pursuant to the exercise of any Option granted to an employee or consultant
under this Plan may be subject to a right of repurchase in favor of the
Company, with respect to any employee or consultant whose employment or
consulting relationship with the Company is terminated, at the Option exercise
price per share, and such shares shall be held by the Company in escrow to
facilitate the Company's repurchase right. Unless otherwise provided for by
the Administrator in the option agreement, the Company's repurchase right
shall expire as to 25% of the total amount of the shares subject to the Option
on the first anniversary date of the Option grant or such other date as may be
set by the Administrator and shall expire as to an additional 2.0833-1/3% of
such shares at the end of each succeeding calendar month. Determination of the
number of shares subject to such right of repurchase shall be made as of the
date the employee's employment by or consultant's consulting relationship
with, the Company terminates, not as of the date that any Option granted to
such employee or consultant is thereafter exercised. The Company's repurchase
right may be waived by the Board.
(i) Withholding and Employment Taxes. At the time of exercise of
--------------------------------
an Option (or at such later time(s) as the Company may prescribe), the
optionee shall remit to the Company in cash all applicable federal and state
withholding and employment taxes. If and to the extent authorized by the
Committee, in its sole discretion, an optionee may make an election (i) to
deliver to the Company a promissory note of the participant on the terms set
forth in Section 6.1(f), (ii) to tender to the Company previously owned shares
of Common Stock, or (iii) to have shares of Common Stock to be obtained upon
exercise of the Option withheld by the Company on behalf of the participant,
to pay the amount of tax that the Committee, in its discretion, determines to
be required to be withheld by the Company. Any shares tendered to or withheld
by the Company shall be valued at fair market value on such date. The value of
the shares of Stock tendered or withheld may not exceed the required federal,
state, local and foreign withholding tax obligations as computed by the
Company.
(j) Other Provisions. Each Option granted under this Plan may
----------------
contain such other terms, provisions and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under
this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of
Section 422 of the Code.
(k) Option Term. No Option shall be exercisable more than ten
-----------
(10) years after the date of grant, or such lesser period of time as is set
forth in the option
6
<PAGE>
agreement (the end of the exercise period stated in the option agreement is
referred to in this Plan as the "Expiration Date"). Notwithstanding the
foregoing, no ISO granted to a Ten Percent Stockholder (as defined in Section
6.3(a) shall be exercisable more than five (5) years after the date of grant
(l) Limitation on Option Grants. The Company may not grant
---------------------------
options under the Plan for more than 500,000 shares to any one participant in
any fiscal year.
6.2 Terms and Conditions to Which Only NQOs Are Subject. The exercise
---------------------------------------------------
price of a NQO shall be determined by the Administrator and shall in no event
be less than 85% of the fair market value of the Common Stock subject to the
Option on the date of grant. For purposes of the Plan, the "Fair Market Value"
of the Common Stock means, as of any given date, the closing sales price of
the Common Stock reported on the Nasdaq National Market System or, if the
Common Stock is not traded on the Nasdaq National Market, the fair market
value of the Common Stock as determined by the Administrator in good faith.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
---------------------------------------------------
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
(a) Exercise Price. The exercise price of an ISO shall be
--------------
determined in accordance with the applicable provisions of the Code and shall
in no event be less than the Fair Market Value of the Common Stock subject to
the Option on the date of grant, except that the exercise price of an ISO
granted to any person who owns, directly or by attribution, shares possessing
more than 10% of the total combined voting power of all classes of stock of
the Company or of any Affiliate (a "Ten Percent Stockholder") shall in no
event be less than 110% of such Fair Market Value.
(b) Disqualifying Dispositions. If stock acquired upon exercise
--------------------------
of an ISO is disposed of in a "disqualifying disposition" within the meaning
of Section 422 of the Code, the holder of the stock immediately before the
disposition shall notify the Company in writing of the date and terms of the
disposition and comply with any other requirements imposed by the Company in
order to enable the Company to secure any related income tax deduction to
which it is entitled.
7. MANNER OF EXERCISE
------------------
7.1 An optionee wishing to exercise an Option shall give written notice
to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 6.1(f) and, if required, by
payment of any federal or state withholding or employment taxes required to be
withheld by virtue of exercise of the Option. The date
7
<PAGE>
the Company receives written notice of an exercise hereunder accompanied by
payment of the exercise price and any required federal or state withholding or
employment taxes will be considered as the date such Option was exercised.
There is no limit on the number of times Options may be exercised in any
calendar year, unless the President of the Company or the Board prescribes
such a limit.
7.2 Promptly after the date an Option is exercised, the Company shall,
without stock issue or transfer taxes to the optionee or other person entitled
to exercise the Option, deliver to the optionee or such other person a
certificate or certificates for the requisite number of shares of Common
Stock. An optionee or transferee of an optionee shall not have any privileges
as a shareholder with respect to any Common Stock covered by the Option until
the date of issuance of a stock certificate.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
-------------------------------------
Nothing in this Plan or any Option granted thereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
9. FINANCIAL INFORMATION
---------------------
The Company shall provide to each optionee during the period such optionee
holds an outstanding Option a copy of the financial statements of the Company as
prepared either by the Company or independent certified public accountants of
the Company. Such financial statements shall be delivered as soon as
practicable following the end of the Company's fiscal year during the period
Options are outstanding.
10. LEGAL REQUIREMENTS
------------------
The Company shall not be obligated to offer or sell any shares upon
exercise of any Option unless the shares are at that time effectively registered
or exempt from registration under the federal securities laws and the offer and
sale of the shares are otherwise in compliance with all applicable securities
laws and the regulations of any stock exchange on which the Company's securities
may then be listed. The Company shall have no obligation to register the shares
of Common Stock covered by this Plan under the federal securities laws or take
any other steps as may be necessary to enable the shares of Common Stock covered
by this Plan to be offered and sold under federal or other securities laws.
Upon exercising all or any portion of an Option, an optionee may be required to
furnish representations or undertaking deemed appropriate by the Company to
enable the offer and sale of the shares or subsequent transfers of any interest
in the shares to comply with applicable securities laws. Certificates
evidencing shares acquired
8
<PAGE>
upon exercise of Options shall bear any legend required by, or useful for
purposes of compliance with, applicable securities laws, this Plan or the
option agreements.
11. AMENDMENTS TO PLAN
------------------
The Board may amend this Plan at any time. Without the consent of an
optionee, no amendment may adversely affect outstanding Options except to
conform this Plan and ISOs granted under this Plan to federal or other tax laws
relating to incentive stock options. No amendment shall require shareholder
approval unless:
(a) shareholder approval is required to preserve incentive stock option
treatment for federal income tax purposes;
(b) shareholder approval is required to meet the exemptions provided by
Rule 16b-3, or any successor rule thereto; or
(c) the Board otherwise concludes that shareholder approval is advisable.
12. STOCKHOLDER APPROVAL; TERM
--------------------------
This Plan shall become effective upon adoption by the Board of Directors;
provided, however, that no Option shall be exercisable unless and until written
- -------- -------
consent of holders of a majority of the outstanding shares of capital stock of
the Company, or approval by holders of a majority of shares of capital stock of
the Company present, or represented, and entitled to vote at a validly called
shareholders' meeting (or such greater number as may be required by law or
applicable governmental regulations or orders) is obtained within twelve (12)
months after adoption by the Board. This Plan shall terminate ten (10) years
after adoption by the Board unless terminated earlier by the Board. The Board
may terminate this Plan at any time without shareholder approval. No Options
shall be granted after termination of this Plan, but termination shall not
affect rights and obligations under then outstanding Options.
9
