-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CbMPqI7UtfmKaj9xiR/t/n5wzekkCgC382G9ivYsHhg6+A9uD26h7Tteo9/wpivb vHdPqy/ky4FPSFz41WNjsg== 0001021408-01-511561.txt : 20020413 0001021408-01-511561.hdr.sgml : 20020413 ACCESSION NUMBER: 0001021408-01-511561 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20011210 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONIC SOLUTIONS/CA/ CENTRAL INDEX KEY: 0000916235 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 930925818 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23190 FILM NUMBER: 1817879 BUSINESS ADDRESS: STREET 1: 101 ROWLAND WAY STREET 2: STE 110 CITY: NOVATO STATE: CA ZIP: 94945 BUSINESS PHONE: 4158938000 MAIL ADDRESS: STREET 1: 101 ROWLAND WAY STREET 2: STE 110 CITY: NOVATO STATE: CA ZIP: 94945 8-K 1 d8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 Date of Report: December 19, 2001 Date of earliest event reported: December 10, 2001 SONIC SOLUTIONS (Exact name of registrant as specified in its charter) California 72870 93-0925818 (State or other jurisdiction of (Commission File (I.R.S.Employer incorporation or organization) Number) Identification No.) 101 Rowland Way, Suite 110 Novato, CA 94945 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 893-8000 INFORMATION INCUDED IN THIS REPORT Items 1 through 4, and items 6, 8 and 9 Not Applicable. ITEM 5. OTHER EVENTS. On December 10, 2001, Sonic Solutions announced that Sanshin Electronics Co., Ltd. made a $1 million equity investment in Sonic Solutions on December 3, 2001. Sanshin acquired 250,000 shares of Series E preferred stock convertible into common stock at $4.00 per share which carries a cumulative dividend of 4% annually until such time as the shares of Series E Preferred Stock have been converted in shares of common stock. In addition to the equity investment, Sonic Solutions and Sanshin Electronics Co. Ltd., agreed to extend Sanshin's current Distributor Agreement with the Company. Forward looking statements made in this periodic report on Form 8-K, including those in the press release attached hereto as exhibit 99.1, that are not statements of historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements involve risks and uncertainties, some of which are more fully described in our filings with the Securities and Exchange Commission, including the Registration Statement filed on November 8, 2001. ITEM 7. EXHIBITS. 3.1 Certificate of Determination of Series E Preferred Stock of Sonic Solutions, effective as of November 28, 2001 10.1 Preferred Stock Purchase Agreement by and between Registrant and Sanshin Electronics Co., Ltd., dated as of November 28, 2001 10.2 Registration Rights Agreement between Registrant and Sanshin Electonics Co., Ltd., dated as of November 28, 2001 99.1 Press Release dated December 10, 2001 -2- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Sonic Solutions, has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized, in the City of Novato, State of California, on the 19th day of December, 2001. SONIC SOLUTIONS Signature Date --------- ---- /s/ Robert J. Doris December 19, 2001 ------------------- Robert J. Doris President and Director (Principal Executive Officer) /s/ A. Clay Leighton December 19, 2001 -------------------- A. Clay Leighton Senior Vice President of Worldwide Operations and Finance and Chief Financial Officer (Principal Financial Accounting Officer) EXHIBIT INDEX Exhibit Description ------- ----------------------------------------------------------------- 3.1 Certificate of Determination of Series E Preferred Stock of Sonic Solutions, effective as of November 28, 2001 10.1 Preferred Stock Purchase Agreement by and between Registrant and Sanshin Electronics Co., Ltd., dated as of November 28, 2001 10.2 Registration Rights Agreement between Registrant and Sanshin Electronics Co., Ltd., dated as of November 28, 2001 99.1 Press Release dated December 10, 2001 -3- EX-3.1 3 dex31.txt CERTIFICATE OF DETERMINATION OF SERIES E STOCK EXHIBIT 3.1 CERTIFICATE OF DETERMINATION OF SERIES E PREFERRED STOCK OF SONIC SOLUTIONS 1. The undersigned, Robert J. Doris and Mary C. Sauer, hereby certify that: 2. They are the duly elected and President and Secretary, respectively, of Sonic Solutions, a California corporation (the "Corporation"). 3. The Corporation hereby designates Three Hundred Thousand (300,000) shares of Series E Preferred Stock (the "Series E Preferred Stock"). 4. None of the shares of Series E Preferred Stock have been issued. 5. Of the 850,000 shares of Series D Preferred Stock (the "Series D Preferred Stock"), 716,609 remain issued and outstanding. 6. None of the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock (collectively, the "Series A, B and C Preferred") were issued and outstanding as of the date hereof. 7. Pursuant to authority given by the Corporation's Restated Articles of Incorporation (the "Restated Articles of Incorporation"), the Board of Directors of the Corporation (the "Board of Directors") has duly adopted the following recitals and resolutions: WHEREAS, the Restated Articles of Incorporation provide for a class of shares known as Preferred Shares (the "Preferred Shares"), issuable from time to time in one or more series; WHEREAS, the Board of Directors is authorized within the limitations and restrictions stated in the Restated Articles of Incorporation to determine or alter the rights, preferences, privileges and restrictions granted to or imposed on any wholly unissued series of Preferred Shares, to fix the number of shares constituting any such series, and to determine the designation thereof, or any of them; and WHEREAS, the Corporation has not issued any shares of Series E Preferred Stock and the Board of Directors desires to determine the rights, preferences, privileges and restrictions relating to the Series E Preferred Stock, and the number of shares constituting said Series and the designation of said Series. NOW, THEREFORE, BE IT RESOLVED: That the President and the Secretary of this Corporation are each authorized to execute, verify and file a certificate of determination of preferences with respect to the Series E Preferred Stock in accordance with the laws of the State of California. RESOLVED FURTHER: That the Board of Directors hereby determines the rights, preferences, privileges and restrictions relating to the Series E Preferred Stock shall be as set forth below: "Three Hundred Thousand (300,000) of the authorized shares of the Preferred Stock, none of which have been issued or are outstanding, are hereby designated "Series E Preferred Stock" (the "Series E Preferred Stock"). The rights, preferences, privileges, restrictions and other matters relating to the Series E Preferred Stock are as follows: 1. Dividend Rights. The holders of Series E Preferred Stock shall be --------------- entitled to receive in any fiscal year when, as and if declared by the Board of Directors, out of any assets at the time legally available therefor, after all accumulated dividends have been paid to the holders of Series D Preferred Stock, distributions in cash, per share of Series E Preferred Stock (as adjusted for any stock dividends, combinations, splits, reclassifications or the like with respect to such shares), at the annual rate of $0.16, until such shares have been converted into Common Stock of the Corporation (the "Common Stock") or redeemed by the Corporation as provided in Section 5 hereunder. Such distributions shall be payable, when, as and if declared, quarterly in arrears for each calendar quarter of each fiscal year. Distributions may be declared or paid upon shares of Common Stock in any fiscal year only if distributions shall have been paid or declared and set apart upon all shares of Series E Preferred Stock at such applicable annual rate for each quarter of such fiscal year including the quarter in which such distributions on Common Stock are declared. Dividends on Series E Preferred Stock may be paid, at the election of the Corporation, in cash or in shares of Series E Preferred Stock at a price equal to the then applicable "Conversion Rate" (as defined in Section 4 below). The right to such dividends on Series E Preferred Stock, if not declared and paid, shall accrue in each fiscal year whether or not there are any assets legally available therefor, and such right shall be cumulative. 2. Voting Rights. Except as otherwise provided herein or by law, each ------------- holder of Series E Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Series E Preferred Stock could be converted and shall have voting rights and powers equal to the voting rights and powers of the Common Stock. 3. Liquidation, Dissolution or Winding Up. In the event of any -------------------------------------- liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a "Liquidation Event"), after full payment has been made to the holders of Series D Preferred Stock, which shall be prior and in preference to any distribution of the assets or surplus funds of the Corporation to the holders of Series A, B C, Preferred, Series E Preferred Stock and the Common Stock, by reason of their ownership thereof, the amount specified in the Certificate of Determination for such Series D Preferred Stock, the holders of the Series E Preferred Stock shall be entitled to receive, prior and in preference to any distribution of the assets or surplus funds of the Corporation to the holders of Series A, B and C Preferred and of the Common Stock by reason of their ownership thereof, the amount of $4.00 per share (as adjusted for any stock dividends, combinations, splits, reclassifications or the like with respect to such shares) plus all accrued but unpaid dividends on such share for each share of Series E Preferred Stock then held by them (the "Liquidation Preference"). If, upon the occurrence of such event the assets and funds thus distributed among 2 the holders of the Series E Preferred Stock shall be insufficient to permit the holders of the Series E Preferred Stock the full Liquidation Preference, then the entire assets and funds of the Corporation legally available for distribution shall be distributed among the holders of the Series E Preferred Stock in proportion to the number of shares of Series E Preferred Stock held by each such holder. After payment has been made to the holders of the Series E Preferred Stock of the Liquidation Preference, the holders of the Common Stock shall be entitled to receive the remaining assets of the Corporation in proportion to the number of shares of Common Stock held by each such holder. For the purposes of this Section 3, (i) any acquisition of the Corporation by means of merger or other form of corporate reorganization in which outstanding shares of the Corporation are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale of all or substantially all of the assets of the Corporation, shall be treated as a Liquidation Event and shall entitle the holders of Series E Preferred Stock to receive upon such Liquidation Event, payment of the Liquidation Preference. 4. Conversion Rights. Subject to the redemption rights of the Corporation ----------------- as set forth in Section 5 below, each holder of Series E Preferred Stock may, at any time, upon surrender of the certificates therefor, convert each share of Series E Preferred Stock (and all accrued and unpaid dividends thereon) held by such holder into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Liquidation Preference for each share of Series E Preferred Stock by the Conversion Rate applicable to such share, determined as hereinafter provided, in effect on the date the certificate is surrendered for conversion. The price at which shares of Common Stock shall be deliverable upon conversion of shares of the Series E Preferred Stock (the "Conversion Rate") shall initially be $4.00 per share of Common Stock. Such initial Conversion Rate shall be adjusted as hereinafter provided. 5. Redemption Rights of the Corporation. ------------------------------------ (a) Time of Redemption. At any time after the issuance of Series ------------------ E Preferred Stock, the Corporation may elect to redeem the whole or any part of the Series E Preferred Stock (the "Corporation Redemption"), for cash at a price per share equal to the Liquidation Preference, plus any accrued but unpaid dividends on such shares (the "Redemption Price"); provided, however, that the closing price of the Corporation's Common Stock, as reported by Bloomberg, L.P., for each of the ten (10) consecutive trading days immediately preceding the date on which the Corporation delivers a notice of redemption (a "Notice of Redemption") is equal to or more than $4.00 per share. A Notice of Redemption shall be mailed by overnight courier not earlier than 30 days prior to the redemption date indicated in the Notice of Redemption (the "Redemption Date") to the holders of record of such Series E Preferred Stock, addressed to each such holder at the holder's address appearing on the records of the Corporation. The Notice of Redemption shall set forth the number of shares of Series E Preferred Stock which the Corporation intends to redeem, the Redemption Date, the Redemption Price and the place at which shareholders may obtain payment upon surrender of their certificates. (b) Mechanics of Corporation Redemption. If the Corporation ----------------------------------- elects to limit the number of Series E Preferred Stock which it will redeem under a Notice of Redemption, the Corporation shall allocate for redemption from each holder of Series E Preferred Stock a number 3 of shares equal to such holder's pro-rata amount (based on the number of Series E Preferred Stock held by such holder on the Redemption Date relative to the total number of Series E Preferred Stock outstanding on such date). (c) Payment of Redemption Price. The Corporation shall pay the --------------------------- applicable Redemption Price to the holder of the Series E Preferred Stock being redeemed in cash on the Redemption Date (if the shares have not been submitted for conversion). (d) Right to Convert. Notwithstanding the fact that said shares ---------------- have been called for redemption, the holders of such shares shall have the right to convert said shares in accordance with Section 4 above. This right to convert shall terminate at the close of business on the day prior to the Redemption Date. 6. Adjustment of Conversion Rate. The number of and kind of securities to ----------------------------- which the holder of Series E Preferred Stock is entitled upon conversion shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and Other Issuances. If the ---------------------------------------------- Corporation shall at any time after the date hereof, but prior to the conversion or redemption of the Series E Preferred Stock, subdivide its outstanding securities as to which rights under this Agreement exist, by split-up, spin-off, or otherwise, or combine its outstanding securities as to which rights under this Agreement exist, the number of shares of Common Stock as to which the holder of Series E Preferred Stock is entitled, upon conversion as of the date of such subdivision, split-up, spin-off or combination, shall forthwith be proportionately increased in the case of a subdivision, or proportionately decreased in the case of a combination. (b) Stock Dividend. If at any time after the date hereof the -------------- Corporation declares a dividend or other distribution on Common Stock payable in Common Stock or other securities or rights convertible into or exchangeable for Common Stock ("Common Stock Equivalents"), without payment of any consideration by holders of Common Stock for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon exercise or conversion thereof), then the number of shares of Common Stock, to which the holders of Series E Preferred Stock is entitled upon conversion, shall be increased as of the record date (or the date of such dividend distribution if no record date is set) for determining which holders of Common Stock shall be entitled to receive such dividends, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable upon conversion of all Common Stock Equivalents) of Common Stock as a result of such dividend. (c) Other Distributions. If at any time after the date hereof ------------------- the Corporation distributes to holders of its Common Stock, other than as part of a dissolution or liquidation or the winding up of its affairs, cash, any securities (other than the Corporation's own Common Stock or Common Stock Equivalents), any evidence of indebtedness or any of its assets, then, in any such case, the holders of Series E Preferred Stock shall be entitled to receive, upon conversion of the Series E Preferred Stock, with respect to each share of Common Stock issuable upon such conversion, the amount evidencing such indebtedness, cash or other securities or assets (excluding cash and the Corporation's own Common Stock or Common Stock 4 Equivalents) which such holders of Series E Preferred Stock would have been entitled to receive as a result of the happening of such event with respect to each such share of Common Stock the holders of Series E Preferred Stock would have held had all the outstanding Series E Preferred Stock still held by such holders been converted immediately prior to the record date or other date determining the shareholders entitled to participate in such distribution. (d) Merger, Consolidation, etc. If at any time after the date -------------------------- hereof there shall be a merger or consolidation of the Corporation with or into, or a transfer of all or substantially all of the assets of the Corporation to, another entity (a "Consolidation Event"), then each holder of Series E Preferred Stock shall be entitled to receive upon such transfer, merger or consolidation becoming effective, the number of shares or other securities or property of or cash or other consideration from the Corporation, or of the successor corporation resulting from such merger or consolidation, to which such holders of Series E Preferred Stock would have been entitled to receive as a result of the happening of such event, with respect to each such shares of Common Stock as the holders of Series E Preferred Stock would have held had all the outstanding Series E Preferred Stock still held by such holders been converted immediately prior to such transfer, merger or consolidation becoming effective or to the applicable record date thereof, as the case may be. The Corporation shall not effect any Consolidation Event unless the resulting successor or acquiring entity (if not the Corporation) assumes by written instrument the obligation to deliver to the holders of Series E Preferred Stock such shares of stock and/or securities as the holder of Series E Preferred Stock is entitled to receive had the Series E Preferred Stock been converted in accordance with the foregoing. (e) Reclassification, Etc. If at any time after the date hereof --------------------- there shall be a reclassification of any securities as to which purchase rights under this Certificate exist, into the same or a different number of securities of any other class or classes, then the holders of Series E Preferred Stock shall thereafter be entitled to receive, upon conversion of such Series E Preferred Stock, the number of shares or other securities or property or cash or other consideration resulting from such reorganization or reclassification, which would have been received by the holders of Series E Preferred Stock, for the shares of stock subject to this Certificate, had the Series E Preferred Stock been converted at such time. (f) Adjustments: Additional Shares, Securities or Assets. If at ---------------------------------------------------- any time, as a result of an adjustment made pursuant to this Section 6, the holders of Series E Preferred Stock shall become entitled to receive shares and/or other securities or assets other than Common Stock, then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 6. (g) Notice of Adjustments; Notices. Whenever the number of ------------------------------ shares of Common Stock due upon conversion shall be adjusted pursuant to this Section 6, the Corporation shall execute and deliver to the holders of Series E Preferred Stock, a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the number of shares Common Stock due upon 5 conversion after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holders of Series E Preferred Stock. 7. Mechanisms for Effecting Conversions. Subject to the Corporation's ------------------------------------ rights of redemption in Section 5, each holder of Series E Preferred Stock shall effect conversions by surrendering the certificate or certificates representing such shares of Series E Preferred Stock to be converted to the Corporation together with a written conversion notice (the "Conversion Notice") which shall specify the number of shares of Series E Preferred Stock, and the date on which such conversion is to be effected, which date may not be prior to the date the holder delivers such Conversion Notice by facsimile (the "Conversion Date"). If no Conversion Date is specified in a Conversion Notice, the Conversion Date shall be the first business day after the date that the Conversion Notice is transmitted to the Corporation by facsimile or the third business day after the Conversion Notice is mailed to the Corporation by first class US mail. If the holder is converting less than all shares of Series E Preferred Stock represented by the certificate(s) tendered by the holder with the Conversion Notice, or if a conversion hereunder cannot be effected in full for any reason, the Corporation shall convert up to the number of shares of Series E Preferred Stock which is specified in the Conversion Notice and may be so converted and shall promptly deliver to such holder a certificate for such number of shares as have not been converted. 8. Delivery of Stock Certificates. ------------------------------ (a) Subject to the terms and conditions herein, as soon as practicable after a request for conversion, the Corporation at its expense (including, without limitation, the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holders of Series E Preferred Stock, or as the holders of the Series E Preferred Stock may lawfully direct, a certificate or certificates for the number of fully paid and non-assessable shares of Common Stock to which the holders of Series E Preferred Stock shall be entitled on such conversion, together with any other stock or other securities or property (including cash, where applicable) to which the holders of Series E Preferred Stock are entitled upon such conversion in accordance with the provisions hereof. (b) In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Corporation's Transfer Agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the holders of Series E Preferred Stock and pursuant to this Section 8, the Corporation shall use its best efforts to cause its Transfer Agent to electronically transmit the Common Stock issuable upon conversion to the holder by crediting the account of holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic transmittals described herein. (c) In lieu of any fractional shares to which the holders of the Series E Preferred Stock would otherwise be entitled, this Corporation shall pay cash equal to such fraction multiplied by the Fair Market Value of one share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of 6 Series E Preferred Stock of each holder at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. 9. Reservation of Stock Issuable Upon Conversion. The Corporation shall --------------------------------------------- at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Series E Preferred Stock, such number of shares of Common Stock as shall be necessary to effect the conversion of the Series E Preferred Stock into Common Stock. 10. Replacement of Certificate. Upon receipt of evidence reasonably -------------------------- satisfactory to the Corporation of the loss, theft, destruction or mutilation of this Certificate and, in the case of any such loss, theft or destruction of the Certificate, upon delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Corporation or, in the case of any such mutilation, on surrender and cancellation of such Certificate, the Corporation at its expense will execute and deliver, in lieu thereof, a new Certificate of like tenor. 11. Vote to Change the Terms of Series E Preferred Stock; Preferred Rank. -------------------------------------------------------------------- The approval of the Board of Directors and the affirmative vote at a meeting duly called by the Board of Directors for such purpose (or the written consent without a meeting) of the holders of not less than a majority of the then outstanding shares of the Series E Preferred Stock shall be required (a) to amend, alter, change or repeal any of the powers, designations, preferences and rights of the Series E Preferred Stock, (b) to authorize the issuance of additional shares of Series E Preferred Stock, and (c) for the Corporation to authorize or issue additional or other capital stock that is of senior or equal rank to the Series E Preferred Stock in respect of the preferences as to distributions and payments upon the liquidation, dissolution and winding up of the Corporation." 7 IN WITNESS WHEREOF, the undersigned each declares under penalty of perjury that the matters set out in the foregoing certificate are true of his or her own knowledge, and the undersigned have executed this certificate at Novato, California as of the 28th day of November, 2001. /s/ Robert J. Doris ------------------- Robert J. Doris, President /s/ Mary C. Sauer ----------------- Mary C. Sauer, Secretary 8 EX-10.1 4 dex101.txt PREFERRED STOCK PURCHASE AGREEMENT EXHIBIT 10.1 PREFERRED STOCK PURCHASE AGREEMENT THIS PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made and --------- entered into as of November 28, 2001 by and between Sanshin Electronics Co., Ltd., a corporation organized under the laws of Japan ("Purchaser"), and Sonic --------- Solutions, a California corporation (the Company"). ------- Background A. The Board of Directors of the Company has adopted the Certificate of Determination (the "Certificate") in the form attached hereto as Exhibit A ----------- --------- which, among other matters, establishes the rights, preferences, and privileges of the Company's Series E Preferred Stock (the "Series E Preferred Stock"). ------------------------ B. The Company desires to sell up to 250,000 shares of Preferred Stock to the Purchaser, and the Purchaser desires to purchase up to 250,000 shares of Series E Preferred Stock from the Company, subject to the terms and conditions set forth in this Agreement. Agreement 1. PURCHASE AND SALE OF PREFERRED STOCK 1.1. Issuance of Preferred Stock. Subject to the terms and conditions of --------------------------- this Agreement, the Company shall issue and sell to the Purchaser and the Purchaser shall purchase from the Company, at the purchase price of $4.00 per share, a total of 250,000 shares of Series E Preferred Stock (the "Shares"). ------ 1.2. Closing. The closing of the purchase and sale of the Shares shall ------- take place at the offices of Heller Ehrman White & McAuliffe LLP, 275 Middlefield Road, Menlo Park, California 94025-3506, on December 3, 2001, at 9 a.m. (the "Closing") or at such other place ------- and time as the Company and the Purchaser mutually agree. The date of the Closing shall constitute the "Closing Date." At the Closing, ------------ the Company will deliver to the Purchaser a certificate representing the Shares which the Purchaser is obtaining and an executed counterpart of the Transactional -4- Agreements. At the Closing, the Purchaser will deliver to the Company an executed counterpart of the Transactional Agreements and the purchase price of the Shares by wire transfer or by a check payable to the Company. 2. DEFINITIONS. For the purposes of this Agreement, the definitions below shall be applicable. 2.1. "Act" shall be as defined in Section 3.6. --- ----------- 2.2. "Agreement" shall be as defined in the opening paragraph of this --------- Agreement. 2.3. "Purchaser" shall be as defined in the opening paragraph of this --------- Agreement. 2.4. "Certificate" shall be as defined in the Background section of ----------- this Agreement. 2.5. "Company" shall be as defined in the opening paragraph to this ------- Agreement. 2.6. "Company's Damages" shall be as defined in Section 5.1. ----------------- ----------- 2.7. "SEC Reports" shall be as defined in Section 4.6. ----------- ----------- 2.8. "Series E Preferred" shall be as defined in the Background ------------------ section of this Agreement. 2.9. "Shares" shall be as defined in Section 1.1. ------ ----------- 2.10. "Closing" shall be as defined in Section 1.2. ------- ----------- 2.11. "Closing Date" shall be as defined in Section 1.2. ------------ ----------- 2.12. "Damages" shall be as defined in Section 5.2. ------- ----------- 2.13. "Established Damages" shall be as defined in Section 5.3. ------------------- ----------- 2.14. "Exchange Act" shall be as defined in Section 4.6. ----------- ----------- 2.15. "Indemnitee" shall be as defined in Section 5.3. ---------- ----------- 2.16. "Indemnitor" shall be as defined in Section 5.3. ---------- ----------- 2.17. "Liquidation Event" shall be as defined in the Certificate. ----------------- 2.18. "Notice of Claim" shall be as defined in Section 5.3. --------------- ----------- 2.19. "Resolution Period" shall be as defined in Section 5.4. ----------------- ----------- -5- 2.20. "SEC" shall be as defined in Section 4.6. --- ----------- 2.21. "Purchaser's Damages" shall be as defined in Section 5.2. ------------------- ----------- 2.22. "Third Party Claims" shall be as defined in Section 5.4. ------------------ ----------- 2.23. "Transactional Agreements" shall mean this Agreement and the ------------------------ Registration Rights Agreement between the Company and the Purchaser dated as of the Closing Date. 2.24. All references to currency herein are to lawful money of the United States of America, unless otherwise specified. 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents and warrants to the Company that: 3.1. Organization and Authority. The Purchaser (i) is a corporation -------------------------- duly organized, validly existing under the laws of Japan; (ii) has all necessary corporate power to own and lease its properties, to carry on its business as now being conducted and to enter into and perform the Transactional Agreements; and (iii) is qualified to do business in all jurisdictions in which the failure to so qualify would have a material adverse effect on its business. 3.2. Authority Relating to the Transactional Agreements; No Violation ---------------------------------------------------------------- of Other Instruments. -------------------- (a) The execution and delivery of the Transactional Agreements and the performance of the Transactional Agreements by Purchaser have been duly authorized by all necessary corporate action on the part of Purchaser and, assuming execution of the Transactional Agreements by the Company, the Transactional Agreements will constitute legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with their terms, subject as to enforcement: (i) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (ii) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. (b) Neither the execution of the Transactional Agreements nor the performance of the transactions contemplated thereby by Purchaser will: (i) conflict with or result in any breach or violation of the terms of any decree, judgment, order, law or regulation of any court or other governmental body now in effect applicable to the Purchaser or any -6- federal, state or local law, rule or regulation now in effect applicable to the Purchaser (including without limitation any law for the protection of employees); (ii) violate or conflict with any provision of Purchaser's Articles of Incorporation or Bylaws or constituent documents. (c) No consent from any third party and no consent, approval or authorization of, or declaration, filing or registration with, any government or regulatory authority is required to be made or obtained by Purchaser in order to permit the execution, delivery or performance of the Transactional Agreements by Purchaser, or the consummation of the transactions contemplated by the Transactional Agreements, except such consents, approvals, authorizations, declarations, filings or registrations the failure of which to obtain or make could not reasonably be expected to have a material adverse effect on the transactions contemplated by this Agreement. 3.3. Compliance with Law. Purchaser is not in violation of any ------------------- decree, judgment, order, law or regulation of any court or other governmental body (including without limitation, applicable environmental protection legislation and regulations, equal employment and civil rights regulations, legislation related to wages, hours and the payment of social security taxes and occupational health and safety legislation), which violation could reasonably be expected to have a material adverse effect on the assets or business of the Purchaser. 3.4. Brokers and Finders. The Purchaser shall pay or satisfy any ------------------- commission, fee or payment required to be made to any broker or finder retained by the Purchaser in connection with the transactions contemplated by the Transactional Agreements. The Purchaser will indemnify and hold the Company harmless against all claims for brokers' or finders' fees made or asserted by any party claiming to have been employed by the Purchaser or any shareholder, director, officer, employee or agent of the Purchaser and all costs and expenses (including the reasonable fees of counsel) of investigating and defending such claims. 3.5. Investment. This Agreement is made with the Purchaser in ---------- reliance upon its representation to the Company, hereby confirmed by the execution of this Agreement by the Purchaser, that the Shares will be acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing any of the Shares. By executing this Agreement, the Purchaser further represents that it has no contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participation to such person or to any third person, with respect to any of the Shares. -7- 3.6. Unregistered Securities. The Purchaser must bear the economic ----------------------- risk of investment for an indefinite period of time because the Shares have not been registered under the Securities Act of 1933, as amended (the "Act") and therefore cannot and will not --- be sold unless they are subsequently registered under the Act or an exemption from such registration is available, if applicable. The Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the securities purchased hereunder except in compliance with the Act, applicable blue sky laws, and the rules and regulations promulgated thereunder. 3.7. Experience. The Purchaser represents that: (i) it has such ---------- knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the Shares; (ii) it believes it has received all the information it has requested from the Company and considers necessary or appropriate for deciding whether to obtain the Shares; (iii) it has had the opportunity to discuss the Company's business, management, and financial affairs with the Company's management, (iv) it has the ability to bear the economic risks of its prospective investment; and (v) it is able, without materially impairing its financial condition, to hold the Shares for an indefinite period of time and to suffer a complete loss on its investment. 3.8. Accredited Investor. The Purchaser presently qualifies as an ------------------- "accredited investor" within the meaning of Regulation D of the rules and regulations promulgated under the Act. 3.9. Legend. The Purchaser acknowledges that the Shares shall bear ------ the following legend and any other legend deemed reasonably necessary by the Company: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR, IN THE OPINION OF COUNSEL FOR THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT OR UNLESS SOLD PURSUANT TO RULE 144 OF THE ACT. 3.10. Accuracy of Documents and Information. The copies of ------------------------------------- instruments, agreements and other documents set forth or referenced in Schedules or Exhibits to the Transactional Agreements furnished by the Purchaser to the Company and the copies of instruments, agreements and other documentation specifically required to be furnished by the Purchaser to the Company pursuant to the Transactional -8- Agreements are and will conform to the original of such instruments, agreements and documents in all material respects. No representations or warranties made by Purchaser in the Transactional Agreements, nor any Schedule or Exhibit attached thereto nor any document or certificate required to be provided by the Purchaser directly to the Company hereunder, contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements or facts contained herein not misleading. 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in the disclosure schedules attached hereto as Schedule 4 and incorporated herein by this reference, the Company hereby - ---------- represents and warrants to the Purchaser that: 4.1. Organization and Authority. The Company: (i) is a corporation -------------------------- duly organized, validly existing and in good standing under the laws of the State of California; (ii) has all necessary corporate power to own and lease its properties, to carry on its business as described in the SEC Reports (the "Company's --------- Business") and to enter into and perform the Transactional -------- Agreements; and (iii) is qualified to do business in all jurisdictions in which the failure to so qualify would have a material adverse effect on the Company's Business. 4.2. Authority Relating to the Transactional Agreements; No Violation ---------------------------------------------------------------- of Other Instruments. -------------------- (a) The execution and delivery of the Transactional Agreements and the performance of the Transactional Agreements by the Company has been duly authorized by all necessary corporate action on the part of the Company and, assuming execution of the Transactional Agreements by the Purchaser, the Transactional Agreements will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject as to enforcement: (i) to bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws of general applicability relating to or affecting creditors' rights; and (ii) to general principles of equity, whether such enforcement is considered in a proceeding in equity or at law. (b) Neither the execution of the Transactional Agreements nor the performance of the transactions contemplated thereby by the Company will: (i) conflict with or result in any breach or violation of the terms of any decree, judgment, order, law or regulation now in effect applicable to the Company or any federal, state or local law, rule or regulation now in effect applicable to the Company, (ii) materially conflict with, or result in, -9- with or without the passage of time or the giving of notice, any material breach of any of the terms, conditions and provisions of, or constitute a material default under, or result in the creation of any material lien, charge, or encumbrance upon any of its assets pursuant to, any indenture, mortgage, lease, agreement or other instrument to which the Company is a party or by which it or any of the assets are bound; (iii) permit the acceleration of the maturity of any material indebtedness of the Company or of any other person secured by its assets or other property; or (iv) violate or conflict with any provision of the Articles of Incorporation or Bylaws of the Company. (c) No consent from any third party and no consent, approval or authorization of, or declaration, filing or registration with, any governmental or regulatory authority is required to be made or obtained by the Company in order to permit the execution, delivery or performance of the Transactional Agreements by the Company, or the consummation of the transactions contemplated by the Transactional Agreements, except such consents, approvals, authorizations, declarations, filings or registrations the failure of which to obtain or make could not reasonably be expected to have a material adverse effect on the transactions contemplated by this Agreement. 4.3. Validity of Shares. The Shares, when issued, sold and delivered ------------------ in accordance with the terms and for the consideration expressed in this Agreement, will be duly and validly authorized and issued (including, without limitation, issued in compliance with applicable federal and state securities laws) and fully paid and non-assessable; provided, however, that such Shares shall be subject to restrictions on transfer under state and/or federal securities laws. The Shares are not subject to any preemptive rights or rights of first refusal, except as otherwise specifically agreed to by the holders thereof. 4.4. Authorized and Issued Capital of the Company. Schedule 4.4 sets -------------------------------------------- ------------ forth all outstanding agreements of the Company to allot or issue securities entered into by the Company on or after September 30, 2001 and all allotments and issuances of securities of the Company which have occurred since September 30, 2001. 4.5. Other Registration Rights. Except as described in Schedule 4.5, ------------------------- ------------ there are no contracts, agreements or understandings between the Company and any person granting such person the right (other than rights which have been waived or satisfied) to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to simultaneously register such securities or include such securities in the securities to be registered pursuant to -10- the Registration Rights Agreement or with or in any securities being registered pursuant to any other registration statement filed by the Company under the Act. 4.6. SEC Reports. The Company has filed with the Securities and ----------- Exchange Commission (the "SEC") all required forms, reports, --- registration statements and documents required to be filed by it with the SEC (collectively, all such forms, reports, registration statements and documents filed since January 1, 1999 are referred to herein as the "SEC Reports"). All of the ----------- SEC Reports complied as to form, when filed (or, if amended or superseded by filing prior to the date hereof, then on the date of such filing), in all material respects with the applicable provisions of the Act and the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"). The SEC Reports ------------ (including all exhibits and schedules thereto and documents incorporated by reference therein) did not, at the time they were filed (or, if amended or superseded by filing prior to the date hereof, then on the date of such filing), contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.7. No Material Adverse Change. (i) Neither the Company nor any of -------------------------- its subsidiaries has sustained, since September 30, 2001, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree and (ii) since September 30, 2001, except as disclosed in the SEC Reports, there has not been any material change in the share capital or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development which is not public knowledge that in the Company's reasonable judgment as of this date is reasonably likely to give rise to a material adverse change in or affecting the general affairs, management, financial position, shareholders' equity or results of operations of the Company and its subsidiaries and (iii) there is no Liquidation Event in respect of the Company pending or threatened and, to the knowledge of the Company, no basis for such Liquidation Event exists. 4.8. Compliance with Law. The Company is not in violation of any ------------------- decree, judgment, order, law or regulation of any court or other governmental body (including without limitation, applicable environmental protection legislation and regulations, equal employment and civil rights regulations, legislation related to wages, hours and the payment of social security taxes and occupational health and safety legislation), which violation could reasonably be expected to have a material adverse effect on its assets or business. -11- 4.9. Litigation. None of the Company, its subsidiaries or, to the ---------- Company's knowledge, any officer, director, shareholder, employee or agent of the Company and its subsidiaries are a party to any pending or, to the Company's knowledge, threatened, action, suit, proceeding or investigation, at law or in equity or otherwise in, for or by any court or other governmental body which could reasonably be expected to have a material adverse impact on the Company's or its subsidiaries assets or business or the transactions contemplated by the Transactional Agreements nor, to the Company's knowledge, does any basis exist for any such action, suit, proceeding or investigation. The Company is not subject to any decree, judgment or, order of any court or other governmental body which could reasonably be expected to have a material adverse impact on the Company's assets or business. 4.10. Brokers and Finders. Neither the Company nor any shareholder, ------------------- director, officer, employee or agent of the Company has retained any broker or finder in connection with the transactions contemplated by the Transactional Agreements. The Company will indemnify and hold the Purchaser harmless against all claims for brokers' or finders' fees made or asserted by any party claiming to have been employed by the Company or any shareholder, director, officer, employee or agent of the Company and all costs and expenses (including the reasonable fees of counsel) of investigating and defending such claims. 4.11. Nasdaq Listing. The Company shall have filed any necessary -------------- application or notice with the NASDAQ National Market to have the common stock issuable upon conversion of the Series E Preferred approved for listing. 5. INDEMNITY. 5.1. Indemnity of the Company. The Purchaser shall hold harmless the ------------------------ Company from and against any and all losses, costs, expenses, liabilities, obligations, claims, demands, causes of action, suits, settlements and judgments of every nature, suffered and incurred by the Company, including the costs and expenses associated therewith and reasonable attorneys' and witness fees incurred ("Company's Damages") which arise out of or are related ----------------- to: (i) the breach by the Purchaser of this Agreement, or any third-party allegation thereof; and (ii) the non-performance, partial or total, of any covenant in this Agreement. 5.2. Indemnity of the Purchaser. The Company shall indemnify and hold -------------------------- harmless the Purchaser from and against any and all losses, costs, expenses, liabilities, obligations, claims, demands, causes of action, suits, settlements and judgments of every nature, suffered and incurred by the Purchaser, including the costs and expenses associated therewith and reasonable attorneys' and witness fees incurred (the "Purchaser's Damages" ------------------- and when used together with or in the alternative to -12- the Company's Damages, "Damages"), which arise out of or are ------- related to: (i) the breach by the Company of any of this Agreement or any third-party allegation thereof; or (ii) the non-performance, partial or total, of any covenant made by the Company pursuant to this Agreement. 5.3. Notice. In the event that any party suffers Damages, the party ------ making a claim for indemnification ("Indemnitee") shall within ---------- sixty (60) days of discovering or incurring such Damage give the indemnifying party ("Indemnitor") written notice thereof ---------- ("Notice of Claim"). The Notice of Claim shall state in --------------- reasonable detail the nature of the claim, the specific provisions in this Agreement alleged to have been breached (if applicable), and the amount of the claim for indemnification. Such amount shall represent the Indemnitee's good faith estimate of the Damages. The Indemnitor shall have thirty (30) days from receipt of the Notice of Claim to accept or reject the claim for indemnification. The Indemnitee shall be deemed to have waived its right to indemnification for any Damages for which notice is not given in a timely manner as set forth herein if and to the extent that the Indemnitor can show that such failure to give timely notice has materially prejudiced the Indemnitor's ability to defend or otherwise respond to such claim. Any claim for Damages accepted by the Indemnitor or any claim determined as valid under the claim procedure set forth below, shall be deemed "Established Damages" for the purposes of this Agreement. ------------------- 5.4. Claims. If a Notice of Claim is given pursuant to Section 5.3 ------ ----------- above, and no rejection is received within the thirty (30) day period specified above, then the Indemnitor shall be deemed to have accepted such claim. If the Indemnitor rejects a claim within such thirty (30) day period, the parties shall, in good faith, attempt to negotiate a resolution of such claim within sixty (60) days thereafter (the "Resolution Period"). If the ----------------- parties do not reach resolution during the Resolution Period, then the Indemnitee may, within thirty (30) days after the end of the Resolution Period proceed to submit the controversy to mediation by providing notice to the Indemnitor. Such mediation shall be governed by the rules of the Center for Public Resources. Promptly thereafter, a mutually acceptable mediator shall be chosen by the parties, who shall share the cost of mediation services equally. If the dispute has not been resolved by mediation within 60 days after the date of written notice requesting mediation, then either party may initiate litigation and pursue all and any remedies at law or at equity that such party is entitled to. If the Indemnitor acknowledges in writing its obligation to indemnify the Indemnitee against any Damages that may result from claims of third parties ("Third Party ----------- Claims"), then the Indemnitor shall be entitled to assume and ------ control the defense of such Third Party Claim at its expense and through counsel of its choice if it gives notice of its intention to do so to the Indemnitee within five days of the receipt of such notice from the Indemnitee; provided, however, that if there exists or is reasonably likely to exist a conflict of interest that would make it -13- inappropriate in the judgment of the Indemnitee for the same counsel to represent both the Indemnitee and the Indemnitor, then the Indemnitee shall be entitled to retain its own counsel. In the event the Indemnitor exercises the right to undertake any such defense against any such Third Party Claim as provided above, the Indemnitee shall cooperate with the Indemnitor in such defense and make available to the Indemnitor, at the Indemnitor's expense, all witnesses, pertinent records, materials and information in the Indemnitee's possession or under the Indemnitee's control relating thereto as is reasonably required by the Indemnitor. Similarly, in the event the Indemnitee is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnitor shall cooperate with the Indemnitee in such defense and make available to the Indemnitee, at the Indemnitee's expense, all such witnesses, records, materials and information in the Indemnitor's possession or under the Indemnitor's control relating thereto as is reasonably required by the Indemnitee. No such Third Party Claim may be settled by the Indemnitee without the written consent of the Indemnitor. 5.5. Exclusivity of Indemnification Remedy. From and after the Closing, ------------------------------------- the exclusive remedy of (i) the Company for breaches by the Purchaser and (ii) the Purchaser for breaches by the Company, of this Agreement, shall be pursuant to the indemnification provisions set forth in this Section 5. --------- 5.6. Survival of Representations and Warranties. The representations and ------------------------------------------ warranties of the parties contained in this Agreement shall survive the Closing solely for purposes of this Section 5 until the second --------- anniversary of the Closing Date. If written notice of a claim has been given prior to the expiration of the applicable representations and warranties by a party to the other parties, then the relevant representations and warranties shall survive as to such claim, until such claim has been finally resolved. 5.7. Limit on Indemnities. -------------------- (a) Notwithstanding anything to the contrary contained in this Section 5, the liability of the Purchaser and the Company --------- pursuant to this Section 5 will terminate two years after the --------- Closing Date except in respect of any claim made by any indemnified Party pursuant to this Section 5 in respect of --------- which notice is given by the Company and the Purchaser prior to such date. (b) No indemnifying party shall be required to make any indemnification payment pursuant to this Section 5 until such --------- time as the total amount of all Damages suffered or incurred by the indemnified party, or to the indemnified party shall have otherwise become subject, exceeds $50,000 in the aggregate. If the total amount of such Damages exceeds $50,000 in -14- the aggregate, the indemnified party shall be entitled to be indemnified against and compensated and reimbursed for the entire amount of such Damages, and not merely the portion of such Damages exceeding $50,000. (c) The aggregate liability of the Purchaser to the Company, and the aggregate liability of the Company to the Purchaser, arising under this Section 5 shall not in any event exceed $1,000,000. 6. Conditions of Investors' Obligations at Closing. The obligations of ----------------------------------------------- Purchaser under Section 1 of this Agreement are subject to the fulfillment at or before the Closing of each of the following conditions, any of which may be waived in writing by Purchaser: 6.1. Representations and Warranties. The representations and warranties of ------------------------------ the Company contained in Section 4 shall be true in all material respects on and as of the Closing with the same effect as if made on and as of the Closing. 6.2. Performance. The Company shall have performed or fulfilled in all ----------- material respects all agreements, obligations, and conditions contained herein required to be performed or fulfilled by the Company before the Closing. 6.3. Registration Rights Agreement. The Company and the Purchaser shall ----------------------------- have entered into the Registration Rights Agreement in substantially the form attached as Exhibit 6.3 (the "Rights Agreement"). ----------- ---------------- 6.4. Blue Sky Compliance. The Company shall have complied with and be ------------------- effective under the federal securities laws of the United States (including the Act) and the securities laws of the State of California and any other applicable states as necessary to offer and sell the Shares to the Purchaser. 6.5. Certificate of Determination. The Company shall have filed the ---------------------------- Certificate of Determination for Series E Preferred Stock (the "Certificate of -------------- Determination" the Secretary of State of the State of California, which - ------------- Certificate of Determination shall be in full force and effect on the Closing Date. 7. Conditions of the Company's Obligations at Closing. The obligations of the -------------------------------------------------- Company under Section 1 of this Agreement are subject to the fulfillment at or before the Closing of each of the following conditions, any of which may be waived in writing by the Company: 7.1. Representations and Warranties. The representations and warranties of ------------------------------ the Purchaser contained in Section 3 shall be true in all material respects on and as of the Closing with the same effect as though said representations and warranties had been made on and as of the Closing. -15- 8. MISCELLANEOUS. 8.1. Confidentiality; Press Releases. Neither party shall issue a press ------------------------------- release or otherwise publicize the transactions contemplated by this Agreement or otherwise disclose the nature or contents of this Agreement on or prior to the Closing Date except as otherwise required by applicable law, regulation, or stock exchange requirement. No information, documents or reports provided to or obtained by either party, either orally or in writing, in connection with the transactions contemplated by the Transactional Agreements shall be disclosed to any non-party except as required in carrying out the transactions contemplated hereby or as required by applicable law, regulation or stock exchange requirement. 8.2. Assignment. This Agreement shall be binding upon and inure to the ---------- benefit of the successors and assigns of the parties. the Company may assign, in whole or in part and to one or more third parties, any of its benefits or rights but the obligations of the Company under this Agreement shall not be assigned or assumed without the consent of the Purchaser. 8.3. Expenses. Except as otherwise expressly provided herein, each party -------- will pay its own costs and expenses, including legal and accounting expenses, related to the transactions provided for herein, irrespective of when incurred. 8.4. Notices. Any notice or other communication required or permitted ------- hereunder shall be in writing and shall be deemed to have been duly given on the date of service if served personally, by recognized expedited delivery service, or by facsimile (with confirmation copies of any facsimile notice to be provided by at least one other method of delivery permitted hereunder), or five (5) days after the date of mailing if mailed, by first class mail, registered or certified, postage prepaid. Notices shall be addressed as follows: To the Purchaser at: Japan Attn: with a copy (which shall not constitute notice) to: -16- To the Company at: Sonic Solutions 101 Rowland Way Novato, California 94945 Attn: Chief Financial Officer with a copy (which shall not constitute notice) to: Heller Ehrman White & McAuliffe LLP 2500 Sand Hill Road, Suite 100 Menlo Park, California 94025 Attn: Kyle Guse or to such other address as a party has designated by notice in writing to the other party in the manner provided by this Section. 8.5. Entire Agreement and Modification. This Agreement together with the --------------------------------- other Transactional Agreements constitute and contain the entire agreement of the parties and supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties respecting the subject matter hereof. This Agreement may only be amended by written instrument signed by the parties. 8.6. Survival of Terms. All covenants contained in this Agreement and ----------------- any certificate or other instrument delivered by or on behalf of the parties pursuant to this Agreement which by their terms are to be performed after the signing of this Agreement shall survive the signing of this Agreement. 8.7. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed in the State of California by California residents. The parties hereby waive trial by jury in connection with any action or suit under this Agreement or otherwise arising from the relationship between the parties hereto. 8.8. Severability. If any provision of this Agreement is held to be ------------ invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. -17- 8.9. Headings. The headings appearing at the beginning of several -------- sections contained herein have been inserted for the convenience of the parties and shall not be used to determine the construction or interpretation of this Agreement. 8.10. Counterparts. This Agreement may be executed in counterparts, ------------ including by facsimile, each of which shall be deemed an original, but both of which when taken together shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -18- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above set forth. Sonic Solutions a California corporation By: /s/ Robert J. Doris ------------------------------------------ Name: Robert J. Doris Title: President and Chief Executive Officer Sanshin Electronics Co., Ltd. a Japanese corporation By: /s/ Mitsumasa Matsunaga ---------------------------------------- Name: Mitsumasa Matsunaga Title: Representative Director [SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT] EX-10.2 5 dex102.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.2 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November 28, 2001, is made and entered into between (i) SONIC SOLUTIONS, a California corporation (the "Company"), and (ii) SANSHIN ELECTRONICS CO. LTD., a corporation organized under the laws of Japan (the "Investor"). WHEREAS, the Company and the Investor have entered into that certain Preferred Stock Purchase Agreement, dated as of November 28, 2001 (the "Purchase Agreement"), pursuant to which the Company desires to sell up to 250,000 shares of Preferred Stock (the "Registrable Securities") to the Investor, and the Investor desires to purchase up to 250,000 shares of Preferred Stock from the Company; and WHEREAS, pursuant to the terms of, and in consideration for, the Investor's agreement to enter into the Purchase Agreement, the Company has agreed to provide the Investor with certain registration rights: NOW, THEREFORE, in consideration of the premises, the representations, warranties, covenants and agreements contained herein and in the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I REGISTRATION RIGHTS Section 1.1 REGISTRATION STATEMENT. (a) Filing of Registration Statement. Investor shall have the -------------------------------- right to demand that the Company file a shelf registration statement on Form S-3 or such other form acceptable to the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act") for the registration of the Registrable Securities for resale by the Investor to the public (the "Registration Statement"); provided, however, that such demand (i) is in writing and states the number of shares of Registrable Securities to be disposed of by such Investor, and (ii) is delivered in accordance with the notice provisions of Section 4.8, and (iii) is subject to the terms and conditions of this Agreement. The Company shall use commercially reasonable efforts to cause such shelf registration statement to be filed within 60 days from the receipt of such demand that a registration statement be filed (the "Filing Deadline"). (b) Effectiveness of the Registration Statement. The Company shall use ------------------------------------------- its reasonable efforts to have the Registration Statement declared effective by the SEC as soon as practicable (the "Registration Deadline") and to ensure that the Registration Statement remains in effect throughout the term of this Agreement as set forth in Section 4.2, subject to the terms and conditions of this Agreement; provided, however, that if the Registration Deadline would otherwise occur while a Blackout Notice (as defined below) remains in effect, the Registration Deadline shall be extended by the number of days covered by such Blackout Notice. (c) Deferral and Suspension. If the Company shall furnish to the ----------------------- Investor notice signed by the Chairman and Chief Executive Officer of the Company stating that the Board of Directors of the Company has, by duly authorized resolution, determined in good faith that it would be seriously detrimental to the Company and its shareholders for the Registration Statement to be filed (or remain in effect) and it is therefore essential to defer the filing of such Registration Statement (or temporarily suspend the effectiveness of such Registration Statement or use of the related prospectus) (a "Blackout Notice"), the Company shall have the right to defer such filing (or suspend such effectiveness) immediately for a period of not more than thirty (30) days beyond such the date by which such Registration Statement was otherwise required to be filed (or required to remain in effect). The Investor acknowledges that it would be seriously detrimental to the Company and its shareholders for such Registration Statement to be filed (or remain in effect) and therefore essential to defer such filing (or suspend such effectiveness) and agrees to suspend any disposition of the Registrable Securities pursuant to any such Registration Statement immediately for a period of not more than thirty (30) days upon receipt of such notice. The Company may not utilize any of its rights under this Section 1.1(c) to defer the filing of a Registration Statement (or suspend its effectiveness) more than once in any eighteen (18) month period. ARTICLE II REGISTRATION PROCEDURES Section 2.1. FILINGS; INFORMATION. The Company will effect the registration and sale of such Registrable Securities in accordance with the intended methods of disposition thereof. Without limiting the foregoing, the Company in each such case will do the following as expeditiously as possible, but in no event later than the deadline, if any, prescribed therefor in this Agreement: (a) The Company shall (i) prepare and file with the SEC a Registration Statement on Form S-3 (if use of such form is then available to the Company pursuant to the rules of the SEC and, if not, on such other form promulgated by the SEC for which the Company then qualifies and which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the provisions of this Agreement and in accordance with the intended method of distribution of such Registrable Securities); (ii) use reasonable efforts to cause such filed Registration Statement to become and remain effective (pursuant to Rule 415 under the Securities Act or otherwise); (iii) as expeditiously as possible, prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the time periods prescribed by Section 1.1(b); (iv) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the Investor set forth in such Registration Statement; (v) act in good faith and use reasonable efforts to take all actions that (A) will facilitate the Registration Statement to be filed and declared effective as expeditiously as possible or (B) are reasonably necessary to implement the intentions of the parties set forth in this Agreement. (b) The Company shall file all necessary amendments to the Registration Statement in order to effectuate the purpose of this Agreement. (c) If so requested by the managing underwriters, if any, or the holders of a majority in aggregate principal amount of the Registrable Securities being sold in connection with the filing of a Registration Statement under the Securities Act for the offering on a continuous or delayed basis in the future of all of the Registrable Securities (a "Shelf Registration"), the Company shall (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters, if any, and such holders agree should be included therein, and (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; provided, however, that the Company shall not be required to take any action pursuant to this Section 2.1(c)(ii) that would, in the opinion of counsel for the Company, violate applicable law. (d) In connection with the filing of a Shelf Registration, and in connection with any underwritten public offering of the Registrable Securities, the Company shall enter into such agreements and take all such other reasonable actions in connection therewith (including those reasonably requested by the managing underwriters, if any, or the holders of a majority in aggregate principal amount of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to the holders of such Registrable Securities and the underwriters, if any, with respect to the business of the Company (including with respect to businesses or assets acquired or to be acquired by the Company), and the Registration Statement, prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and confirm such representations and warranties if and when requested; (ii) if an underwriting agreement is entered into, the same shall contain indemnification provision and procedures no less favorable to the selling holders of such Registrable Securities and the underwriters, if any, than those set forth herein (or such other provisions and procedures acceptable to the holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the managing underwriters, if any); and (iii) deliver such documents and certificates as may be reasonably requested by the holders of a majority in aggregate principal amount of the Registrable Securities being sold, their counsel and the managing underwriters, if any, to evidence the continued validity of their representations and warranties made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The Company shall also use its reasonable efforts to furnish, on the date that the Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters. (e) No less than five (5) trading days prior to filing the Registration Statement or prospectus, or any amendment or supplement thereto (excluding amendments deemed to result from the filing of documents incorporated by reference therein), the Company shall deliver to the Investor and one firm of counsel representing the Investor, in accordance with the notice provisions of Section 4.8, copies of such Registration Statement as proposed to be filed, together with exhibits thereto, which documents will be subject to review by such parties, and thereafter deliver to the Investor and its counsel, in accordance with the notice provisions of Section 4.8, such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in such Registration Statement (including each preliminary prospectus) and such other documents or information as the Investor or counsel may reasonably request in order to facilitate the disposition of the Registrable Securities. (f) The Company shall deliver, in accordance with the notice provisions of Section 4.8, to each seller of Registrable Securities covered by such Registration Statement such number of conformed copies of such Registration Statement and of each amendment and supplement thereto (in each case including all exhibits and documents incorporated by reference), such number of copies of the prospectus contained in such Registration Statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 promulgated under the Securities Act relating to such seller's Registrable Securities, and such other documents, as such seller may reasonably request to facilitate the disposition of its Registrable Securities. (g) After the filing of the Registration Statement, the Company shall promptly notify the Investor of any stop order issued or threatened by the SEC in connection therewith and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (h) The Company shall use its reasonable efforts to (i) register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States as the Investor may reasonably (in light of its intended plan of distribution) request, and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable the Investor to consummate the disposition of the Registrable Securities; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (h), subject itself to taxation in any such jurisdiction, or consent or subject itself to general service of process in any such jurisdiction. (i) The Company shall immediately notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for additional information, amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; and the Company will promptly make available to the Investor any such supplement or amendment to the related prospectus. (j) The Company shall enter into customary agreements and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities (whereupon the Investor may, at its option, require that any or all of the representations, warranties and covenants of the Company also be made to and for the benefit of the Investor). (k) The Company shall appoint a transfer agent and registrar for all such Registrable Securities covered by such Registration Statement not later than the effective date of such Registration Statement. (l) The Company may require the Investor to promptly furnish in writing to the Company such information as may be legally required in connection with such registration including, without limitation, all such information as may be requested by the SEC or the National Association of Securities Dealers. The Investor agrees to provide such information requested in connection with such registration within ten (10) business days after receiving such written request and the Company shall not be responsible for any delays in obtaining or maintaining the effectiveness of the Registration Statement caused by the Investor's failure to timely provide such information. Section 2.2. REGISTRATION EXPENSES. In connection with each Registration Statement, the Company shall pay all registration expenses incurred in connection with the registration thereunder (the "Registration Expenses"), including, without limitation: (i) all registration, filing, securities exchange listing and fees required by the National Association of Securities Dealers, (ii) all registration, filing, qualification and other fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) all word processing, duplicating, printing, messenger and delivery expenses, (iv) the Company's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing of the Registrable Securities, (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company, (vii) the fees and expenses of any special experts retained by the Company in connection with such registration, (viii) premiums and other costs of policies of insurance obtained at the discretion of the Company against liabilities arising out of any public offering of the Registrable Securities being registered, and (ix) any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting fees, discounts, transfer taxes or commissions, if any, attributable to the sale of Registrable Securities, which shall be payable by each holder of Registrable Securities pro rata on the basis of the number of Registrable Securities of each such holder that are included in a registration under this Agreement. ARTICLE III INDEMNIFICATION AND CONTRIBUTION Section 3.1. INDEMNIFICATION BY THE COMPANY. To the extent permitted by law, the Company agrees to indemnify and hold harmless the Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, and each Person or entity, if any, who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, together with the partners, Affiliates, officers, directors, employees and duly authorized agents of such controlling Person or entity (collectively, the "Controlling Persons"), from and against any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements and costs and expenses of investigating and defending any such claim) (collectively, "Damages"), joint or several, and any action or proceeding in respect thereof to which the Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, and any such Controlling Person may become subject under the Securities Act or otherwise as incurred and, insofar as such Damages (or actions or proceedings in respect thereof) arise out of, or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or prospectus relating to the Registrable Securities or any preliminary prospectus, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are based upon information furnished in writing to the Company by the Investor expressly for use therein, or (iii) any violation or alleged violation by the Company of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act, any state securities law or otherwise as incurred in connection with the offering covered by such registration statement and shall reimburse the Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, and each such Controlling Person for any legal and other expenses reasonably incurred by the Investor, its partners, affiliates, officers, directors, employees and duly authorized agents, or any such Controlling Person, as incurred, in investigating or defending or preparing to defend against any such Damages or actions or proceedings; provided, however, that the Company shall not be liable to the Investor to the extent that any such Damages arise out of or are based upon an untrue statement or omission made in any preliminary prospectus if (i) the Investor failed to send or deliver a copy of the final prospectus delivered by the Company to the Investor with or prior to the delivery of written confirmation of the sale by the Investor to the Person asserting the claim from which such Damages arise, and (ii) the final prospectus would have corrected such untrue statement or alleged untrue statement or such omission or alleged omission, and provided further, that the indemnity agreement contained in this Section 3.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld. Section 3.2. INDEMNIFICATION BY THE INVESTOR. To the extent permitted by law, the Investor agrees to indemnify and hold harmless the Company, its partners, affiliates, officers, directors, employees and duly authorized agents, and each Controlling Person, from and against any Damages, joint or several, and any action or proceeding in respect thereof to which the Company, its partners, affiliates, officers, directors, employees and duly authorized agents, and any such Controlling Person may become subject under the Securities Act or otherwise as incurred and, insofar as such Damages (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or prospectus relating to the Registrable Securities or any preliminary prospectus, or arises out of, or are based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse the Company, its partners, affiliates, officers, directors, employees and duly authorized agents, and each such Controlling Person for any legal and other expenses reasonably incurred by the Company, its partners, affiliates, officers, directors, employees and duly authorized agents, or any such Controlling Person, as incurred, in investigating or defending or preparing to defend against any such Damages or actions or proceedings; provided, however, that this section 3.2 shall apply only with respect to statements provided by the Investor; provided further, that the indemnity agreement contained in this Section 3.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Investor, which consent shall not be unreasonably withheld; and provided further, that in no event shall any indemnity under this Section 3.2 exceed the net proceeds from the offering received by the Investor. Section 3.3. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by any person or entity in respect of which indemnity may be sought pursuant to Section 3.1 or 3.2 (an "Indemnified Party") of notice of any claim or the commencement of any action, the Indemnified Party shall, if a claim in respect thereof is to be made against the person or entity against whom such indemnity may be sought (the "Indemnifying Party"), notify the Indemnifying Party in writing of the claim or the commencement of such action; in the event an Indemnified Party shall fail to give such notice as provided in this Section 3.3 and the Indemnifying Party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, the indemnification provided for in Section 3.1 or 3.2 shall be reduced to the extent of any actual prejudice resulting from such failure to so notify the Indemnifying Party; provided, that the failure to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability that it may have to an Indemnified Party otherwise than under Section 3.1 or 3.2. If any such claim or action shall be brought against an Indemnified Party, and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified Indemnifying Party, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party shall have the right to employ separate counsel to represent the Indemnified Party and its Controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, but the fees and expenses of such counsel shall be for the account of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of the Company and such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest between them, it being understood, however, that the Indemnifying Party shall not, in connection with any one such claim or action or separate but substantially similar or related claims or actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all Indemnified Parties, or for fees and expenses that are not reasonable. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding. Whether or not the defense of any claim or action is assumed by the Indemnifying Party, such Indemnifying Party will not be subject to any liability for any settlement made without its consent, which consent will not be unreasonably withheld. Section 3.4. OTHER INDEMNIFICATION. Indemnification similar to that specified in the preceding paragraphs of this Article III (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. The provisions of this Article III shall be in addition to any other rights to indemnification, contribution or other remedies which an Indemnified Party may have pursuant to law, equity, contract or otherwise. Section 3.5. CONTRIBUTION. If the indemnification provided for in this Article III is unavailable to the Indemnified Parties in respect of any Damages referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages as between the Company on the one hand and the Investor on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of the Investor in connection with such statements or omissions, as well as other equitable considerations. The relative fault of the Company on the one hand and of the Investor on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this Section 3.5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Damages referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 3.5, the Investor shall in no event be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of the Investor were sold to the public (less underwriting discounts and commissions) exceeds the amount of any damages which the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. ARTICLE IV MISCELLANEOUS Section 4.1. NO OUTSTANDING REGISTRATION RIGHTS. The Company represents and warrants to the Investor that there is not in effect on the date hereof any agreement by the Company pursuant to which any holders of securities of the Company have a right to cause the Company to register or qualify such securities under the Securities Act or any securities or blue sky laws of any jurisdiction that would conflict or be inconsistent with any provision of this Agreement, except to the extent such agreements are disclosed in documents filed with the SEC by the Company under the Exchange Act. Section 4.2. TERM. This Agreement shall terminate and be of no foce and effect if a Closing (as defined in the Purchase Agreement) shall not have occurred pursuant to the Purchase Agreement. The registration rights provided to the holders of Registrable Securities hereunder shall terminate at such time as all Registrable Securities (i) have been disposed of pursuant to the Registration Statement, (ii) have been sold under circumstances under which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act ("Rule 144") are met, (iii) have been otherwise transferred to holders who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend, or (iv) may be sold without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act in the opinion of counsel to the Company, which counsel shall be reasonably acceptable to the Investor; provided, however, that such registration rights shall not terminate sooner than two years following the date hereof. Notwithstanding the foregoing, paragraph (c) of Section 1.1, Article III, Section 4.8, and Section 4.9 shall survive the termination of this Agreement. Section 4.3. RULE 144. The Company covenants that it will file all reports required to be filed by it under the Act and the Exchange Act and that it will take such further action as holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable the Investor to sell Registrable Securities without registration under the Act within the limitation of the exemptions provided by (a) Rule 144, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. If at any time the Company is not required to file such reports, it will, upon the request of any holder of Registrable Securities, make publicly available other information so long as necessary to permit sales pursuant to Rule 144. Upon the request of the Investor, the Company will deliver to the Investor a written statement as to whether it has complied with such requirements. Section 4.4. CERTIFICATE. The Company will, at its expense, forthwith upon the request of any holder of Registrable Securities, deliver to such holder a certificate, signed by the Company's principal financial officer, stating (a) the Company's name, address and telephone number (including area code), (b) the Company's Internal Revenue Service identification number, (c) the Company's Commission file number, (d) the number of shares of each class of Stock outstanding as shown by the most recent report or statement published by the Company, and (e) whether the Company has filed the reports required to be filed under the Exchange Act for a period of at least ninety (90) days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder. Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this Agreement may be waived, provided that such waiver is set forth in a writing executed by both parties to this Agreement. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the holders of a majority of the then outstanding Registrable Securities. Notwithstanding the foregoing, the waiver of any provision hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least a majority of the Registrable Securities being sold by such holders; provided that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. No course of dealing between or among any Person having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The Investor may assign its rights under this Agreement to any subsequent holder the Registrable Securities, provided that the Company shall have the right to require any holder of Registrable Securities to execute a counterpart of this Agreement as a condition to such holder's claim to any rights hereunder; provided further that such holder is an "accredited investor" as defined in Rule 501 of Regulation D of the Securities Act. This Agreement, together with the Purchase Agreement, sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. Section 4.7. SEPARABILITY. If any provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. Section 4.8. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given on the date of service if served personally, by recognized expedited delivery service, or by facsimile (with confirmation copies of any facsimile notice to be provided by at least one other method of delivery permitted hereunder), or five (5) days after the date of mailing if mailed, by first class mail, registered or certified, postage prepaid. Notices shall be addressed as follows: To Investor at: Sanshin Electronics Co. Ltd. ------------------------- ------------------------- ------------------------- Japan Attn: ___________________ with a copy (which shall not constitute notice) to: ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- To the Company at: Sonic Solutions 101 Rowland Way Novato, California 94945 Attn: Chief Financial Officer with a copy (which shall not constitute notice) to: Heller Ehrman White & McAuliffe LLP 275 Middelfield Road, Menlo Park, California 94025 Attn: Kyle Guse or to such other address as a party has designated by notice in writing to the other party in the manner provided by this Section. Section 4.9. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed in the State of California by California residents. The parties hereby waive trial by jury in connection with any action or suit under this Agreement or otherwise arising from the relationship between the parties hereto. Section 4.10. HEADINGS. The headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement, nor shall they affect their meaning, construction or effect. Section 4.11. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original instrument and all of which together shall constitute one and the same instrument. Section 4.12. FURTHER ASSURANCES. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. Section 4.13. REMEDIES. In the event of a breach or a threatened breach by any party to this Agreement of its obligations under this Agreement, any party injured or to be injured by such breach will be entitled to specific performance of its rights under this Agreement or to injunctive relief, in addition to being entitled to exercise all rights provided in this Agreement and granted by law. The parties agree that the provisions of this Agreement shall be specifically enforceable, it being agreed by the parties that the remedy at law, including monetary damages, for breach of any such provision will be inadequate compensation for any loss and that any defense or objection in any action for specific performance or injunctive relief that a remedy at law would be adequate is waived. IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above. SONIC SOLUTIONS By: /s/ Robert J. Doris ------------------- Robert J. Doris Title: President and Chief Executive Officer SANSHIN ELECTRONICS CO. LTD. By: /s/ Mitsumasa Matsunaga ----------------------- Name: Mitsumasa Matsunaga Title: Representative Director EX-99.1 6 dex991.txt PRESS RELEASE DATED DECEMBER 10, 2001 EXHIBIT 99.1 news release SONIC(TM) FOR IMMEDIATE RELEASE FOR MORE INFORMATION, CONTACT: December 10, 2001 Paul Lefebvre, Sonic Solutions 415.893.8000 phone . 415.893.8008 fax NASDAQ:SNIC paul_lefebvre@sonic.com email - -------------------------------------------------------------------------------- Sanshin Electronics Co., Ltd. Invests $1 Million in Sonic Solutions Marin County, California (December 10, 2001) - Sonic Solutions announced today that its Japanese distributor, Sanshin Electronics Co., Ltd. made a $1 million equity investment in Sonic on December 3, 2001. Sanshin acquired 250,000 shares of Series E preferred stock convertible into common at $4 per share and carrying a 4% dividend. The preferred stock also has customary rights related to registration, liquidation and other terms. Commenting on the investment, Bob Doris, President of Sonic, said, "We are very pleased that Sanshin has decided to make this investment in Sonic. Sanshin has been a distributor of our professional and consumer products in Japan since 1998. We have been very pleased with our distribution relationship with Sanshin and believe that this investment further enhances the bonds between the two companies." Mr. Mitsumasa Matsunaga, President and Representative Director of Sanshin Electronics Co., Ltd. commented, "Sonic is the market leader in supplying professional and consumer DVD authoring systems. We believe that this market, especially the consumer segment, is about to experience explosive growth. We are very excited about the potential for these products as well as for our investment in Sonic." About Sanshin Electronics Co., Ltd. Established in 1951 and based in Tokyo, Japan, Sanshin Electronic's business is centered on electronic devices and electronic equipment. Though a commercial firm, Sanshin Electronics is equipped with a high-level development capacity and technical support system, and is engaged in the development of LSIs and application software. Thanks to these activities, Sanshin creates diverse products with added value and continues to supply high quality products meeting the requirements of its users. About Sonic Solutions (NASDAQ: SNIC) Based in Marin County, California, Sonic (http://www.sonic.com) is the leading manufacturer of solutions for DVD and audio publishing. SonicStudio(TM) HD is the leading digital workstation for preparing audio for release on CD and is the first for creating content for the new DVD-Audio format. Sonic DVD Creator(R), Sonic Scenarist(R), and Sonic DVD Fusion(R) are the most widely-used systems for professional DVD publishing, and are installed worldwide at major studios, post production facilities and in corporate marketing departments. Sonic DVDit!(R) (http://www.dvdit.com) is the first application for DVD authoring targeted at videographers and corporate video producers, and is bundled with major video editing, capture, encoding and media production systems. Sonic MyDVD(TM) (http://www.mydvd3.sonic.com) is the first DVD authoring application for consumers, making it easy to capture "your life on DVD." Sonic is a full voting member of the DVD Forum, the standards-setting body for the DVD format. Note to Editors: (c) 2001 Sonic, Sonic Solutions, the Sonic logo, MyDVD, and ReelDVD are trademarks of Sonic Solutions. DVD Creator, DVD Fusion, Scenarist, DVDit!, and SonicStudio are registered trademarks of Sonic Solutions. All other company or product names are trademarks of their respective owners. Specifications, pricing and delivery schedules are subject to change without notice. The above paragraphs of this press release contain forward looking statements that are based upon current expectations. Actual results could differ materially from those projected in the forward looking statements as a result of various risks and uncertainties including, among others, the timely introduction and acceptance of new products, costs associated with new product introductions, the transition of products to new hardware configurations and platforms and other factors, including those discussed in the Company's annual and quarterly reports on file with the Securities and Exchange Commission. This press release should be read in conjunction with the Company's most recent annual report on Form 10-K and quarterly report on Form 10-Q on file with the Securities and Exchange Commission, which contain a more detailed discussion of the Company's business including risks and uncertainties that may affect future results. -----END PRIVACY-ENHANCED MESSAGE-----