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 (Date of earliest event reported):  October 7, 2010

SONIC SOLUTIONS

(Exact name of registrant as specified in its charter)

California	23190	93-0925818
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer Identification No.)
organization)

7250 Redwood Blvd., Suite 300, Novato, CA	94945
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number,	(415) 893-8000
including area code:

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On October 7, 2010, in connection with the completion of the merger of Sonic Solutions (“Sonic” or the “Company”) and DivX, Inc. (“DivX”), the board of directors of Sonic (the “Sonic Board” or the “Board”) approved the adoption of the 2010 Inducement Equity Compensation Plan (the “2010 Plan”).  The 2010 Plan provides for the issuance of up to 1,000,000 shares of common stock pursuant to awards granted as a material inducement to an employee to enter into employment with the Company and to promote the success of the Company’s business.  The 2010 Plan provides for awards of non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units.  The 2010 Plan is administered generally by the Board and its Compensation Committee, which determines the number of shares underlying each award, the vesting period for such shares and other important terms of the award.  The 2010 Plan has a ten-year term.  The 2010 Plan and awards to be issued thereunder are intended to meet the inducement grant exception pursuant to NASDAQ listing rule 5635(c)(4).  On October 8, 2010, in accordance with Nasdaq’s listing standards, Sonic announced options and restricted stock units granted to new employees under the 2010 Plan in a press release, a copy of which is filed as Exhibit 10.1 hereto and is incorporated by reference.

The foregoing description of the 2010 Plan is a summary and does not purport to be complete and is qualified in its entirety by reference to the complete 2010 Plan, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On October 7, 2010, Sonic and DivX completed the merger (the “Merger”) contemplated by the Agreement and Plan of Merger, dated as of June 1, 2010, among Sonic, Siracusa Merger Corporation, Siracusa Merger LLC and DivX, as amended by Amendment No. 1 thereto, dated August 25, 2010 (as amended, the “Merger Agreement”).  At the effective time of the Merger (the “Effective Time”), by virtue of the Merger and without any action on the part of any stockholder, each share of DivX common stock issued and outstanding immediately prior to the Effective Time was converted into the right to receive 0.514 shares of Sonic common stock and $3.75 in cash.

The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 and Exhibit 2.2 hereto and is incorporated herein by reference.

The Merger Agreement contains representations and warranties that Sonic and DivX made to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the Merger Agreement between Sonic and DivX and may be subject to important qualifications and limitations agreed to by Sonic and DivX in connection with negotiating its terms. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders or may have been used for the purpose of allocating risk between Sonic and DivX rather than establishing matters as facts. For the foregoing reasons, no person should rely on the representations and warranties as statements of factual information at the time they were made or at any other time.

Sonic’s common stock continues to trade on the NASDAQ Global Select Market under the symbol “SNIC.”  Following completion of the Merger, DivX common stock was delisted from trading on the NASDAQ Global Select Market.

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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Immediately following the Annual Meeting of Shareholders on October 7, 2010, the Sonic Board held its annual meeting at which it addressed various administrative and organizational matters.  At that meeting, pursuant to the Merger Agreement and based on the recommendation of Sonic’s Nominating Committee, the Sonic Board adopted resolutions offering James Brailean and Kevin Hell, former members of DivX’s board of directors (the “New Directors”), positions on the Board.  The New Directors accepted these offers effective as of the Effective Time on October 7, 2010.  Contingent on this acceptance and in accordance with the recommendation of Sonic’s Nominating Committee of the Board, the Board appointed David C. Habiger, Sonic’s President and Chief Executive Officer to the Board effective as of the Effective Time.  In connection with these appointments and also effective as of the Effective Time, the number of directors on the Sonic Board was increased from five to eight and the New Directors were each appointed to the Board and to serve as members of the Audit, Compensation and Nominating Committees of the Sonic Board.  The service of the New Directors is governed by Sonic’s standard policies regarding its board of directors, including its standard director compensation policy, as further described below.  No family relationships exist between either of the New Directors or Mr. Habiger and any of Sonic’s other directors or executive officers. Other than the Merger Agreement (with respect to the New Directors), there are no arrangements between either of the New Directors or Mr. Habiger and any other person pursuant to which either of the New Directors or Mr. Habiger was selected as a director, nor are there any transactions to which Sonic is or was a participant in which either of the New Directors or Mr. Habiger has a material interest subject to disclosure under Item 404(a) of Regulation S-K.

The Sonic Board also confirmed that Mr. Doris would continue to act as Chairman of the Board, that Ms. Sauer would continue in her capacity as Secretary of the Board, and that the Audit, Compensation and Nominating Committees of the Board would each continue to be comprised of Messrs. Greber, Marguglio and Langley, together with the New Directors, with Mr. Greber as chair.

Further, on October 7, 2010, the Compensation Committee approved and the Board (a) granted 50,000, 25,000, 12,500, 25,000 and 18,750 restricted stock units to Messrs. Habiger, Leighton, Ely, Norris and DiMaria, respectively, all of such restricted stock units vesting semi-annually over three years, (b) granted 20,000 options to Mr. Ely, such options vesting monthly over two years, and (c) in accordance with the Board Compensation Policy, (i) granted 9,868 options to each of Messrs. Doris and Greber and 7,895 options to each of Messrs. Marguglio, Langley, Brailean and Hell, and Ms. Sauer, all of such options vesting monthly over one year, and (ii) set their cash compensation for the year at $75,000 for each of Messrs. Doris and Greber and $60,000 for each of Messrs. Marguglio, Langley, Brailean and Hell, and Ms. Sauer, (d) increased the annual base compensation of Messrs. Habiger (to $450,000 from $350,000), Leighton (to $380,000 from $300,000), Ely (to $380,000 from $300,000), Norris (to $380,000 from $300,000) and DiMaria (to $300,000 from $250,000), and (e) promoted Mr. Leighton to the position of President – Operations and Mr. Ely to the position of President - Strategy.  All of the above-described options granted have an exercise price of $11.48 per share (the closing price of Sonic’s common stock on October 7, 2010) and all are subject to change of control vesting according to Sonic’s policy for directors and executive officers. In addition, the Compensation Committee and the Board (excluding Mr. Doris and Ms. Sauer and Messrs Brailean, Hell and Habiger, who had not yet been appointed to the Board) considered the current exceptional level of involvement of Mr. Doris and Ms. Sauer in providing strategic guidance to the Company's executive officers and management team as well as the standard level of director compensation provided pursuant to the Board Compensation Policy and reconfirmed its determination that Mr. Doris shall continue to receive additional cash compensation at the rate of $37,500 per quarter and Ms. Sauer shall receive additional cash compensation at the rate of $20,000 per quarter, until such time as either Mr. Doris or Ms. Sauer reports that he or she is no longer providing such extra involvement, or until such time as the Board directs otherwise.

On October 7, 2010, Sonic shareholders approved the amendment and restatement of Sonic’s 2004 Equity Compensation Plan (the “2004 Plan”) to (i) increase the maximum number of shares of Sonic’s common stock authorized for issuance over the term of the 2004 Plan by 6,000,000 from 3,000,000 shares to 9,000,000 shares, (ii) remove the current limit of 600,000 on the number of shares that may be granted subject to awards of restricted stock and restricted stock units, (iii) include a “fungible” share limit, pursuant to which shares of Sonic’s common stock that are subject to stock options or stock appreciation rights shall be counted toward the overall 2004 Plan share limit as one share for every share granted, and shares of common stock that are subject to restricted stock, restricted stock units and other share-based awards shall be accounted against the overall limit as two shares for every share granted, (iv) remove the current “recycling” provisions that do not count shares of Sonic’s common stock issued (a) in payment of an option or other award’s purchase price or (b) in satisfaction of tax withholding obligations against the overall share limit under the 2004 Plan, (v) provide that modifications to the exercise price of options awarded under the 2004 Plan shall be subject to shareholder approval, (vi) eliminated dividend equivalent rights, and (vii) make certain other administrative changes.

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The foregoing description of the amendments to the 2004 Plan is a summary and does not purport to be complete and is qualified in its entirety by reference to the complete 2004 Plan, which is filed as Exhibit 10.2 hereto and is incorporated herein by reference.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On October 7, 2010, Sonic shareholders approved an amendment to Sonic’s Bylaws to increase the number of directors from a range of five to seven to a range of five to nine, which amendment was effective upon the approval of the shareholders.  The complete Sonic Bylaws, as amended, are filed as Exhibit 3.1 to this Current Report on Form 8-K and are incorporated herein by reference.

Item 5.07 Submission of Matters to a Vote of Security Holders

The Company’s Annual Meeting of Shareholders was held at the Company’s headquarters at 7250 Redwood Blvd., Suite 300, Novato, California on October 7, 2010. Out of 30,787,257 shares of Common Stock (as of the record date of August 16, 2010) entitled to vote at the meeting, 27,802,762 shares were present in person or by proxy.  The following proposals were considered:

Proposal	Number of shares voted in favor		Percentage of outstanding shares voted in favor			Percentage of quorum voted in favor			Number of shares voted against		Number of shares abstaining		Broker nonvotes
1.  To approve the Merger and Merger Agreement, including the issuance of shares of Sonic Common Stock pursuant to the Merger Agreement		23,299,095		75.68	%		83.80	%		30,779		11,477		4,461,411
2.  To approve an amendment to Sonic’s Bylaws		27,360,861		88.87	%		98.41	%		422,453		19,448		—
3. To approve the amendment and restatement of Sonic’s 2004 Equity Compensation Plan		18,793,346		61.04	%		67.60	%		4,107,870		440,135		4,461,411
4.  To elect directors (see below)		—		—			—			—		—		—
5.  To approve motion to adjourn or postpone the Annual Meeting		26,182,944		—			—			1,603,311		16,507		—

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Election of Directors

Director	Number of shares voting in favor		Number of shares withheld		Broker nonvotes
Robert J. Doris		21,837,761		1,503,590		4,461,411
Robert M. Greber		21,873,250		1,468,101		4,461,411
R. Warren Langley		22,622,328		719,023		4,461,411
Peter J. Marguglio		22,617,788		723,563		4,461,411
Mary C. Sauer		21,835,963		1,505,388		4,461,411

Item 8.01 Other Events.

Mr. David J. Richter, formerly the Executive Vice President, Business & Legal Affairs and General Counsel of DivX, commenced employment as the Executive Vice President, Business Development of Sonic on the first business day following the consummation of the Merger.  In addition, Mr. Matthew Milne, formerly Executive Vice President, Sales and Marketing of DivX, commenced employment with Sonic as its Executive Vice President and General Manager, DivX Division on the first business day following the consummation of the Merger.

On October 8, 2010, the Company issued a press release announcing the completion of the Merger, a copy which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

On October 13, 2010, the Company issued a press release announcing the appointment of Messrs. Brailean, Hell and Habiger as Sonic directors.  A copy of such press release is filed as Exhibit 99.3 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01  Financial Statements and Exhibits

(a)           Financial Statements of Business Acquired

· The Report of Independent Registered Public Accounting Firm is incorporated herein by reference to Exhibit 99.4 to this Current Report on Form 8-K.

· The audited consolidated balance sheets of DivX as of December 31, 2008 and 2009 and the consolidated statements of income, consolidated statements of stockholders’ equity and consolidated statements of cash flows of DivX for each of the three years in the period ended December 31, 2009, and the notes related thereto, are incorporated herein by reference to Exhibit 99.5 to this Current Report on Form 8-K.

· The unaudited consolidated balance sheet of DivX as of June 30, 2010 and the consolidated statements of income and consolidated statements of cash flows of DivX for the three and six months ended June 30, 2010, and the notes related thereto, are incorporated herein by reference to Exhibit 99.6 to this Current Report on Form 8-K.

(b)           Pro Forma Financial Information

The pro forma financial information required by this item has not been filed on this initial Current Report on Form 8-K. Instead, the pro forma financial information will be filed by amendment on or before December 23, 2010.

(c)           Exhibits

See Exhibit Index attached hereto.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 13, 2010

SONIC SOLUTIONS
By:	/s/ Paul F. Norris
Name:  Paul F. Norris Title:    Executive Vice President,              Chief Financial Officer and General Counsel

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EXHIBIT INDEX

Exhibit	Description
2.1	Agreement and Plan of Merger dated June 1, 2010; incorporated by reference to Exhibit 1.1 to Sonic’s Current Report on Form 8-K filed with the SEC on June 2, 2010
2.2	Amendment No. 1, dated August 25, 2010, to the Agreement and Plan of Merger dated June 1, 2010; incorporated by reference to Exhibit 2.1 to Sonic’s Current Report on Form 8K filed with the SEC on August 26, 2010
3.1	Restated Bylaws, effective as of October 7, 2010
10.1	Sonic Solutions 2010 Inducement Equity Compensation Plan
10.2	Sonic Solutions 2004 Equity Compensation Plan, Amended and Restated July 2010; incorporated by reference to Annex G to the registrant’s joint proxy statement/prospectus filed with the SEC on September 8, 2010
99.1	Press Release issued October 8, 2010 with respect to completion of the Merger
99.2	Press Release dated October 8, 2010 with respect to inducement option grants
99.3	Press Release dated October 13, 2010 with respect to appointment of directors
99.4	Report of Ernst & Young, LLP, independent registered public accounting firm; incorporated by reference to DivX’s Annual Report on Form 10-K (File No. 001-33029) for the fiscal year ended December 31, 2009
99.5	Audited consolidated balance sheets of DivX as of December 31, 2008 and 2009 and the consolidated statements of income, consolidated statements of stockholders’ equity and consolidated statements of cash flows of DivX for each of the three years in the period ended December 31, 2009; incorporated by reference to DivX’s Annual Report on Form 10-K (File No. 001-33029) for the fiscal year ended December 31, 2009
99.6	Unaudited consolidated balance sheet of DivX as of June 30, 2010 and the consolidated statements of income and consolidated statements of cash flows of DivX for the three and six months ended June 30, 2010, and the notes related thereto; incorporated by reference to DivX’s Quarterly Report on Form 10-Q (File No. 001-33029 ) for the fiscal quarter ended June 30, 2010

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EX-3.1

Exhibit 3.1

RESTATED BYLAWS

OF

SONIC SOLUTIONS

SHAREHOLDERS

1.           Annual Meeting.  Unless the Board of Directors or the President of the corporation selects a different time or date, the annual meeting of shareholders shall be held at 11:00 a.m. on the first Tuesday of the fifth calendar month following the end of the corporation’s fiscal year if such day is not a legal holiday, and, if a legal holiday, on the next succeeding business day not a legal holiday..  The annual meeting shall be for the purpose of electing a Board of Directors and transacting such other business as may properly be brought before the meeting.

2.           Special Meeting.  Special meetings of shareholders may be called at any time by the Board of Directors, the Chairman of the Board, the President, or the holders of shares entitled to cast not less than one-tenth of the votes at the meeting.

3.           Place.

(a)           Meetings of shareholders shall be held at the principal executive office of the corporation or at any other place, within or without California designated by the Board of Directors or the President, or, to the extent permitted by and in accordance with Section 3(b), by electronic transmission by and to the corporation (used throughout as those terms are defined in the California Corporations Code (“CCC”)) or by electronic video screen communication, as designated by the Board of Directors or the President.

(b)           A meeting of shareholders may be conducted, in whole or in part, by electronic transmission by and to the corporation  or by electronic video screen communication (i) if the corporation implements measures to provide shareholders (in person or by proxy) an opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings, and (ii) if any shareholder votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation.  If authorized by the Board of Directors in its sole discretion, and subject to the statutory requirements of shareholder consent then in effect and those guidelines and procedures as the Board of Directors may adopt, shareholders not physically present in person or by proxy at a meeting of shareholders may, by electronic transmission by and to the corporation or by electronic video screen communication, participate in a meeting of shareholders, be deemed present in person or by proxy, and vote at a meeting of shareholders whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with this Section 3(b).  A shareholder’s participation in a meeting of shareholders by electronic communication by and to the corporation is predicated upon the consent of such shareholder to electronic communication by the corporation, as required by the CCC.  Unless all of the shareholders have consented to the use of electronic transmission by and to the corporation for the purposes of a shareholders meeting (or to the use of such transmissions for such meetings generally) a shareholders’ meeting shall include a physical location determined in accordance with Section 3(a).

4.           Notice.

(a)           Annual and Special Meetings.  A written notice of each meeting of shareholders shall be given not more than 60 days and, except as provided below, not less than 10 (or, if sent by third-class mail, 30) days before the meeting to each shareholder entitled to vote at the meeting.  The notice shall state the place (unless the meeting is to be conducted solely by electronic transmission by and to the corporation), date, and hour of the meeting and, if directors are to be elected at the meeting, the names of the nominees intended to be presented by the Board of Directors for election.  If the meeting is to be conducted in whole or in part by means of electronic communication by and to the corporation, the notice shall provide (i) the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which shareholders may participate in that meeting and (ii) notice that, absent the valid consent of all of the shareholders of the corporation for the utilization of electronic transmission by and to the corporation, the meeting shall include a physical location.  The notice shall also state (i) the general nature of a proposal, if any, to take action with respect to approval of (A) a contract or other transaction with an interested director, (B) an amendment of the Articles of Incorporation, (C) a reorganization of the corporation as defined in Section 181 of the CCC, (D) a voluntary dissolution of the corporation, or (E) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, if any; (ii) in the case of an annual meeting, those matters that the Board ofDirectors intends to present for action by the shareholders, and (iii) in the case of a special meeting, the general nature of the business to be transacted and that no other business may be transacted.  Notice shall be delivered personally, by electronic transmission by the corporation, by mail, or other means addressed to each such shareholder at the address ofthe shareholder appearing on the books ofthe corporation, the address given by the shareholder to the corporation for the purpose ofnotice, or as otherwise provided by law.  Notice given by electronic transmission by the corporation shall be valid only if such notice complies with the procedures set forth in such definition in the CCC and as long as neither of the following has occurred:  (i) the corporation is unable to deliver two consecutive notices to the shareholder by that means; or (ii) the inability to so deliver the notices to the shareholder becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.  If the circumstances described in either clauses (i) or (ii) above occurs with respect to a shareholder, the corporation shall again obtain the consent of such shareholder as required by the definition of “electronic transmission by the corporation” set forth in the CCC prior to utilizing electronic transmission by the corporation to provide notices of shareholders’ meetings to such shareholder.  Upon written request to the Chairman of the Board, the President, the Secretary, or any Vice President of the corporation by any person (other than the Board of Directors) entitled to call a special meeting of shareholders, the person receiving such request shall cause notice to be given to the shareholders entitled to vote that a meeting will be held at a time requested by the person calling the meeting not less than 35 nor more than 60 days after receipt of the request.

 

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(b)           Adjourned Meetings.  When any shareholders’ meeting, either annual or special, is adjourned for more than 45 days, or if after adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting.  Except as provided above, it shall not be necessary to give any notice of the time and place of the adjourned meeting (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which the shareholders may participate), or of the business to be transacted thereat, other than by announcement of the time and place (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which the shareholders may participate) thereof at the meeting at which such adjournment is taken.

5.           Shareholder Proposals.

(a)           At an annual meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting.  To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors or otherwise properly brought before the meeting by a shareholder.

 

(b)           In addition to any other applicable requirements for business to be properly brought before an annual meeting by a shareholder, whether or not the shareholder is seeking to have a proposal included in the corporation’s proxy statement or information statement under any applicable rule of the Securities and Exchange Commission, including, but not limited to, Regulation 14A or Regulation 14C under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), the shareholder must have given timely notice thereof in writing to the Secretary of the corporation.  If the shareholder is not seeking inclusion in the corporation’s proxy statement or information statement of a proposal for a director nomination or other business that is proposed to be voted on at an annual meeting, timely notice shall consist of a shareholder’s notice delivered to or mailed and received at the principal executive offices of the corporation, not less than 90 days nor more than 150 days prior to the one year anniversary of the date on which the corporation first mailed or sent by electronic transmission its proxy materials for the previous year’s annual meeting of shareholders (or a reasonable time before the date on which the corporation mails or sends by electronic transmission its proxy materials for the current year if, during the prior year, the corporation did not hold an annual meeting or if the date of the annual meeting was changed by more than 30 days from the date of the prior year’s annual meeting).  In the case of a shareholder seeking to have a proposal included in the corporation’s proxy statement or information statement, timely notice consists of a shareholder’s notice delivered to or mailed and received at the principal executive offices of the corporation not less than 120 days nor more than 180 days prior to the one year anniversary of the date on which the corporation first mailed or sent by electronic transmission its proxy materials for the previous year’s annual meeting of shareholders (or a reasonable time before the date on which the corporation mails or sends by electronic transmission its proxy materials for the current year if, during the prior year, the corporation did not hold an annual meeting or if the date of the annual meeting was changed by more than 30 days from the date of the prior year’s annual meeting).  A shareholder’s notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the shareholder proposing such business, (iii) the class and number of shares of the corporation that are beneficially owned by the shareholder, (iv) any material interest of the shareholder in such business, (v) as to the shareholder giving the notice and any Shareholder Associated Person (as defined below) or any member of such shareholder’s immediate family sharing the same household, whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including, but not limited to, any short position or any borrowing or lending of shares of stock) has been made, the effect or intent of which is to mitigate loss or increase profit to or manage the risk or benefit of stock price changes for, or to increase or decrease the voting power of, such shareholder, such Shareholder Associated Person or family member with respect to any share of stock of the corporation (each, a “Relevant Hedge Transaction”), and (vi) as to the shareholder giving the notice and any Shareholder Associated Person or any member of such shareholder’s immediate family sharing the same household, to the extent not set forth pursuant to the immediately preceding clause, (a) whether and the extent to which such shareholder, Shareholder Associated Person or family member has direct or indirect beneficial ownership of any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the corporation or otherwise, or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the corporation (a “Derivative Instrument”), (b) any rights to dividends on the shares of the corporation owned beneficially by such shareholder, Shareholder Associated Person or family member that are separated or separable from the underlying shares of the corporation, (c) any proportionate interest in shares of the corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder, Shareholder Associated Person or family member is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (d) any performance-related fees (other than an asset-based fee) that such shareholder, Shareholder Associated Person or family member is entitled to based on any increase or decrease in the value of shares of the corporation or Derivative Instruments, if any, as of the date of such notice (which information shall be supplemented by such shareholder and beneficial owner, if any, not later than 10 days after the record date for the meeting to disclose such ownership as of the record date).

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(c)           With respect to shareholder proposals relating to director nominations, in addition to the information above, the shareholder’s notice shall set forth as to each person whom the shareholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the corporation that are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Exchange Act.

(d)           For purposes of this Section 5, “Shareholder Associated Person” of any shareholder shall mean (i) any person controlling or controlled by, directly or indirectly, or acting in concert with, such shareholder, (ii) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such shareholder and (iii) any person controlling, controlled by or under common control with such Shareholder Associated Person

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6.           Record Date.  The Board of Directors may fix in advance a record date for the determination of the shareholders entitled to notice of any meeting, to vote, to receive any dividend or other distribution or allotment of rights, or to exercise any rights.  The record date shall be not more than 60 nor less than 10 days prior to the date of the meeting nor more than 60 days prior to such other action.  If no record date is fixed, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, the close of business on the business day next preceding the day on which the meeting is held.  The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors has been taken, shall be the day on which the first written consent is given.  Except as otherwise provided by law, only shareholders at the close of business on the record date are entitled to notice and to vote, to receive the dividend, distribution or allotment of rights, or to exercise rights, as the case may be, notwithstanding any transfer of shares on the books of the corporation occurring after the record date.  Except as otherwise provided by law, the corporation shall be entitled to treat the holder of record of any shares as the holder in fact of such shares and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not the corporation shall have express or other notice of such claim or interest.  A determination of shareholders of record entitled to notice ofor to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board ofDirectors fixes a new record date.  The Board of Directors shall fix a new record date if the adjourned meeting takes place more than 45 days after the date set for the original meeting.  The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the 60th day prior to the date of such other action, whichever is later.

7.           Meeting Without Regular Call and Notice.  The transactions of any meeting of shareholders, however called and noticed and wherever held, are as valid as though had at a meeting duly held after regular call and notice if a quorum is present in person or by proxy and if, either before or after the meeting, each of the persons entitled to vote who is not present at the meeting in person or by proxy signs a written waiver of notice, a consent to the holding of the meeting, or an approval of the minutes of the meeting.  All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.  Attendance of a shareholder at a shareholders’ meeting shall constitute a waiver of notice of such meeting unless, at the beginning of the meeting, the shareholder objects to the transaction of any business because the meeting was not properly called or convened or, with respect to the consideration of a matter required to be included in the notice for the meeting that was not so included, the shareholder expressly objects to such consideration at the meeting.  Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the Articles of Incorporation or these Bylaws, or unless the meeting involves the election of directors.

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8.           Quorum and Required Vote.  A majority of the shares entitled to vote, represented in person or by proxy, constitutes a quorum for the transaction of business.  No business may be transacted at a meeting in the absence of a quorum other than the adjournment of the meeting, except that if a quorum is present at the commencement of the meeting, business may be transacted until the meeting is adjourned even though the withdrawal of shareholders results in less than a quorum.  If a quorum is present at a meeting, the affirmative vote of the holders of shares having a majority of the voting power of the shares represented and voting at the meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders unless the vote of a larger number or voting by classes is required by law, the Articles of Incorporation, or these Bylaws.  If a quorum is present at the commencement of a meeting but the withdrawal of shareholders results in less than a quorum, the affirmative vote of a majority of shares required to constitute a quorum shall be the act of the shareholders unless the vote of a larger number or voting by classes is required by law, the Articles of Incorporation, or these Bylaws.  Any meeting of shareholders, whether or not a quorum is present, may be adjourned by the vote of a majority of the shares represented at the meeting.

9.           Proxies.  Every person entitled to vote shares (including voting by written consent) may authorize another person or other persons to act by proxy with respect to such shares.  “Proxy” means a written authorization signed or an electronic transmission authorized by a shareholder or the shareholder’s attorney-in-fact giving another person or persons power to vote with respect to the shares of such shareholder.  “Signed” for the purpose of this Section 9 means the placing of the shareholder’s name or other authorization on the proxy (whether by manual signature, typewriting, telegraphic, or electronic transmission or otherwise) by the shareholder or the shareholder’s attorney-in-fact.  A proxy may be transmitted by an oral telephone transmission if it is submitted with information from which it may be determined that the proxy was authorized by the shareholder, or his or her attorney-in-fact.  Any proxy duly executed is not revoked and continues in full force and effect until (i) a written instrument revoking it is filed with the Secretary of the corporation prior to the vote pursuant thereto, (ii) a subsequent proxy executed by the person executing the prior proxy is presented to the meeting, (iii) the person executing the proxy attends the meeting and votes in person, or (iv) written notice of the death or incapacity of the maker of such proxy is received by the corporation before the vote pursuant thereto is counted; provided that no such proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless otherwise provided in the proxy.  Notwithstanding the foregoing sentence, a proxy that states that it is irrevocable, is irrevocable for the period specified therein to the extent permitted by Section 705(e) and (f) of the CCC.  The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed.

10.         Voting.

(a)           Except as may be otherwise provided in the Articles of Incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of shareholders.  Any holders of shares entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, other than elections to office, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholder’s approving vote is with respect to all shares such shareholder is entitled to vote.

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(b)           Subject to the provisions of Sections 702 through 704 of the CCC (relating to voting of shares held by a fiduciary, receiver, pledgee, or minor, in the name of a corporation, or in joint ownership), persons in whose names shares entitled to vote stand on the stock records of the corporation at the close of business on the record date shall be entitled to vote at the meeting of shareholders.  Such vote may be viva voce or by ballot; provided, however, that all elections for directors must be by ballot upon demand made by a shareholder at any election and before the voting begins.

(c)           The candidates for directors receiving the highest number of affirmative votes of shares entitled to be voted for them, up to the number of directors to be elected by such shares, shall be elected, and votes against a director and votes withheld shall have no legal effect.

11.         Election Inspectors.  One or three election inspectors may be appointed by the Board of Directors in advance of a meeting of shareholders or at the meeting by the chairman of the meeting.  If not previously chosen, one or three inspectors shall be appointed by the chairman of the meeting if a shareholder or proxyholder so requests.  When inspectors are appointed at the request of a shareholder or proxyholder, the majority of shares represented in person or by proxy shall determine whether one or three inspectors shall be chosen.  The election inspectors shall determine all questions concerning the existence of a quorum and the right to vote, shall tabulate and determine the results of voting, and shall do all other acts necessary or helpful to the expeditious and impartial conduct of the vote.  If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all.  Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

12.         Action Without Meeting.  Except as provided below or by the Articles of Incorporation, any action that may be taken at a meeting of shareholders may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present and voted.  Any shareholder giving a written consent, or the shareholder’s proxyholders, or a transferee of the shares or a personal representative of the shareholder or their respective proxyholders, may revoke the consent personally or by proxy by a writing received by the corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the corporation, but may not do so thereafter.  Such revocation is effective upon its receipt by the Secretary of the corporation.  Unless the consents of all shareholders entitled to vote have been solicited in writing, the corporation shall give to those shareholders entitled to vote who have not consented in writing (i) a written notice at least 10 days before consummation of an action authorized by shareholders without a meeting covered by the following sections of the CCC: 310 (certain transactions involving interested directors), 317 (indemnification of corporate agents), 1152 (conversions), 1201 (reorganizations) and 2007 (certain distributions of assets) and (ii) a written notice promptly after the taking of any other action approved by shareholders without a meeting.

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13.         Reports.

(a)           The Board of Directors of the corporation shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year, and at least 15 days (or, if sent by third-class mail, 35 days) prior to the annual meeting of shareholders to be held during the next fiscal year.  If approved by the Board of Directors, the report and any accompanying material may be sent by electronic transmission by the corporation.  This report shall contain a balance sheet as of the end of that fiscal year and an income statement and statement of cashflows for that fiscal year, accompanied by any report thereon of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.  This report shall also contain such other matters as required by Section 1501(b) of the CCC, unless the corporation is subject to the reporting requirements of Section 13 of the Exchange Act, and is not exempted therefrom under Section 12(g)(2) thereof.  As long as the corporation has less than 100 holders of record of its shares (determined as provided in Section 605 of the CCC), the foregoing requirement of an annual report is hereby waived.

(b)           If no annual report for the last fiscal year has been sent to shareholders, the corporation shall, upon the written request of any shareholder made more than 120 days after the close of such fiscal year, deliver (including by electronic transmission if such transmission is permitted to such shareholder pursuant to such definition) by the corporation or mail to the person making the request within 30 days thereafter the financial statements for such year as required by Section 1501(a) of the CCC.  A shareholder or shareholders holding at least five percent of the outstanding shares of any class of the corporation may make a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the current fiscal year ended more than 30 days prior to the date of the request and a balance sheet of the corporation as of the end of such period and, in addition, if no annual report for the last fiscal year has been sent to shareholders, the financial statements for the last fiscal year as required by Section 1501(a) of the CCC.  The statements shall be delivered (including by electronic transmission by the corporation if such transmission is permitted to such shareholder pursuant to such definition) or mailed to the person making the request within 30 days thereafter.  A copy of any such statements shall be kept on file in the principal executive office of the corporation for 12 months, and they shall be exhibited at all reasonable times to any shareholder demanding an examination of the statements, or a copy shall be mailed to the shareholder.

(c)           The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report thereon, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.

14.         Lost Stock Certificates.  No new certificate for shares shall be issued in lieu of an old certificate unless the latter is surrendered and canceled at the same time; provided, however, that a new certificate will be issued without the surrender and cancellation of the old certificate if (1) the old certificate is lost, apparently destroyed or wrongfully taken; (2) the request for the issuance of the new certificate is made within a reasonable time after the owner of the old certificate has notice of its loss, destruction, or theft; (3) the request for the issuance of a new certificate is made prior to the receipt of notice by the corporation that the old certificate has been acquired by a bona fide purchaser; (4) the owner of the old certificate files a sufficient indemnity bond with or provides other adequate security to the corporation; and (5) the owner satisfies any other reasonable requirement imposed by the corporation.  In the event of the issuance of a new certificate, the rights and liabilities of the corporation, and of the holders of the old and new certificates, shall be governed by the provisions of Sections 8104 and 8405 of the California Commercial Code.

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BOARD OF DIRECTORS

15.         Number.  The authorized number of directors of this corporation shall not be less than five nor more than nine.  The exact number of directors shall be five until changed within the limits specified above, by the Board of Directors, by a bylaw amending this Section 15 duly adopted by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of the holders of a majority of the outstanding shares entitled to vote.  The indefinite number of directors may be changed or a definite number fixed without provision for an indefinite number by an amendment to these Bylaws duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.  An amendment reducing the number of directors to a number less than five cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of action by written consent, are equal to more than 16-2/3% of the outstanding shares entitled to vote.

16.         Powers.  Subject to the limitations imposed by law or contained in the Articles of Incorporation, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the ultimate direction of the Board of Directors.

17.         Election, Term of Office, and Vacancies.  At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting.  If any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose.  Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which the director was elected and until a successor has been elected.  The Board of Directors may declare vacant the office of any director who has been declared to be of unsound mind by court order or convicted of a felony.  Vacancies on the Board of Directors not caused by removal may be filled by a sole remaining director, by a majority of the directors then in office or by the unanimous written consent of the directors then in office, in all cases regardless of whether the directors then in office constitute a quorum.  The shareholders may elect a director at any time to fill any vacancy not filled, or that cannot be filled, by the Board of Directors.  A vacancy in the Board of Directors created by the removal of a director may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of all of the holders of the outstanding shares. Any election by written consent other than to fill a vacancy created by removal shall require the consent of holders of a majority of the outstanding shares entitled to vote.  No reduction in the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office.

18.         Removal.  Except as provided below, any or all of the directors may be removed without cause if such removal is approved by the affirmative vote or written consent of a majority of the outstanding shares entitled to vote.  Unless the entire Board of Directors is so removed, no director may be removed if (i) the votes cast against removal, or not consenting in writing to such removal in the case of written consent, would be sufficient to elect such director if voted cumulatively at an election at which the same total number of votes was cast or, if such action is taken by written consent, all shares entitled to vote were voted and (ii) the entire number of directors authorized at the time of the director’s most recent election were then being elected.

 

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19.         Resignation.  Any director may resign by giving notice to the Chairman of the Board, the President, the Secretary or the Board of Directors.  The resignation of a director shall be effective when given unless the director specifies a later time.  The resignation shall be effective regardless of whether it is accepted by the corporation.

20.         Compensation.  If the Board ofDirectors so resolves, the directors, including the Chairman of the Board, shall receive compensation and expenses of attendance for meetings of the Board of Directors and of committees of the Board.  Nothing herein shall preclude any director from serving the corporation in another capacity and receiving compensation for such service.

21.         Committees.  The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the Board.  The Board may designate one or more directors as alternate members of a committee who may replace any absent member at any meeting of the committee.  To the extent permitted by the resolution of the Board of Directors, a committee may exercise all of the authority of the Board except:

(a)           the approval of any action that, under the CCC, must be approved by the outstanding shares or approved by the shareholders;

(b)           the filling of vacancies on the Board or any committee;

(c)           the fixing of compensation of the directors for serving on the Board or any committee;

(d)           the adoption, amendment or repeal of Bylaws;

(e)           the amendment or repeal of any resolution of the Board that by its express terms is not so amendable or repealable;

(f)           a distribution to the shareholders of the corporation, except at a rate, in a periodic amount, or within a price range determined by the Board; and

(g)           the appointment of any other committees of the Board or the members of such committees.

22.         Inspection of Records and Properties.  Each director may inspect all books, records, documents, and physical properties of the corporation and its subsidiaries at any reasonable time.  Inspections may be conducted either by the director or the director’s agent or attorney.  The right of inspection includes the right to copy and make extracts.

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23.         Time and Place ofMeetings and Telephone Meetings.  Unless the Board of Directors determines otherwise, the Board shall hold a regular meeting during each quarter of the corporation’s fiscal year.  One such meeting shall take place immediately following the annual meeting of shareholders.  Notice of such meeting is hereby dispensed with.  All meetings of directors shall be held at the principal executive office of the corporation or at such other place, within or without California, as shall be designated in the notice of the meeting or in a resolution of the Board of Directors.  Directors may participate in a meeting through use of conference telephone, electronic video screen communication, electronic transmission by and to the corporation, or similar communications equipment, provided that all members so participating can communicate with all of the other members concurrently and each member is provided the means of participating in all matters before the Board of Directors, including, without limitation, the capacity to propose, or to interpose an objection to, a specific action to be taken by the corporation.

24.         Call.  Meetings of the Board of Directors, whether regular or special, may be called by the Chairman of the Board, the President, the Secretary, any Vice President, or any two directors.

25.         Notice.

(a)           Regular meetings of the Board of Directors may be held without notice if the times and places of such meetings have been fixed by the Board. Notice of the time and place of special meetings shall be delivered personally to each director or communicated to each director by telephone, telegraph, facsimile, electronic transmission by the corporation, or mail, charges prepaid, addressed to the director at the director’s address as it is shown upon the records of the corporation or, if it is not so shown on such records or is not readily ascertainable, at the place at which the meetings of the directors are regularly held.  In case such notice is mailed, it shall be deposited in the United States mail at least 4 days prior to the time of the holding of the meeting.  In case such notice is delivered personally or by telephone, telegraph, facsimile, electronic mail message or other electronic transmission by the corporation, it shall be so delivered at least 48 hours prior to the time of the holding of the meeting.  Any such transmission of notice, as above provided, shall be due, legal and personal notice to such director.  As used herein, notice by telephone shall be deemed to include a voice messaging system or other system or technology designed to record and communicate messages, or wireless, to the recipient, including the recipient’s designated voice mailbox or address on such a system.

(b)           Notice of a meeting need not be given to any director who provides a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof in writing, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director.  All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meetings.

26.         Meeting Without Regular Call and Notice.  The actions taken at any meeting of the Board of Directors, however called and noticed or wherever held, are as valid as though taken at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to the holding of the meeting, or an approval of the minutes of the meeting.  For such purposes, a director shall not be considered present at a meeting if, although in attendance at the meeting, the director protests the lack of notice prior to the meeting or at its commencement.

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27.         Action Without Meeting.  Any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all of the members of the Board individually or collectively consent in writing to such action.  Such action, consent or consents shall be filed with the minutes of the proceedings of the Board of Directors, and the action or actions authorized therein shall have the same force and effect as a unanimous vote of such directors.

28.         Quorum and Required Vote.  A majority of the authorized number of directors shall constitute a quorum for the transaction of business, provided that the number constituting a quorum shall not be less than the greater of one-third of the authorized number of directors or two.  Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the Board, unless a greater number, or the same number after disqualifying one or more directors from voting, is required by law, by the Articles of Incorporation, or by these Bylaws.  A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors if any action taken is approved by at least a majority of the required quorum for such meeting.  A majority of the directors present at a meeting, whether or not a quorum is present, may adjourn the meeting to another time and place.

29.         Committee Meetings.  The principles set forth in Sections 23 through 28 of these Bylaws shall apply to committees of the Board of Directors and to actions taken by such committees.

30.         Indemnification of Directors and Officers.

(a)           Indemnification of Directors and Officers. Each person who was or is a party or is threatened to be made a party to or is involved (as a party, witness, or otherwise), in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereafter a “Proceeding”), by reason of the fact that such person, or another person of whom such person is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, or was a director or officer of a foreign or domestic corporation that was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, including service with respect to employee benefit plans, whether the basis of the Proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer (for the purposes of this section 30, “Officers” or “Directors”), shall be indemnified and held harmless by the corporation to the fullest extent authorized by statutory and decisional law, as the same exists or may hereafter be interpreted or amended (but, in the case of any such amendment or interpretation, only to the extent that such amendment or interpretation permits the corporation to provide broader indemnification rights than were permitted prior thereto) against all expenses, liability, and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties, amounts paid or to be paid in settlement, any interest, assessments, or other charges imposed thereon, and any federal, state, local, or foreign taxes imposed on any director or officer as a result of the actual or deemed receipt of any payments under this Section 30) reasonably incurred or suffered by such person in connection with investigating, defending, being a witness in, or participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding (hereafter “Expenses”). The right to indemnification conferred in this Article shall be a contract right.  It is the corporation’s intention that these Bylaws provide indemnification of officers and directors in excess of that expressly permitted by Section 317 of the CCC, as authorized by the corporation’s Articles of Incorporation.

 

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(b)           Indemnification of Others: The corporation shall have the power to indemnify and hold harmless each person who was or is a party or is threatened to be made a party to or is involved (as a party, witness, or otherwise), in any Proceeding, by reason of the fact that such person, or another person of whom such person is the legal representative, is or was a an employee or agent of the corporation or is or was serving at the request of the corporation as an employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, or was an employee or agent of a foreign or domestic corporation that was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, including service with respect to employee benefit plans, whether the basis of the Proceeding is alleged action in an official capacity as an employee or agent or in any other capacity while serving as an employee or agent (for the purposes of this section 30, “Employees” or “Agents”). Such persons may be indemnified and held harmless by the corporation to the fullest extent authorized by statutory and decisional law, as the same exists or may hereafter be interpreted or amended (but, in the case of any such amendment or interpretation, only to the extent that such amendment or interpretation permits the corporation to provide broader indemnification rights than were permitted prior thereto) against all Expenses.  It is the corporation’s intention that these Bylaws permit indemnification of employees and agents in excess of that expressly permitted by Section 317 of the CCC, as authorized by the corporation’s Articles of Incorporation.

(c)           Actions by the Corporation. Notwithstanding the foregoing, the corporation shall not be required to advance such Expenses to any Director or Officer who is party to a Proceeding brought by the corporation and approved by a majority of the Board of Directors that alleges willful misappropriation of corporate assets by such Director or Officer, wrongful disclosure of confidential information, or any other willful and deliberate breach in bad faith of such Director’s or Officer’s duty to the corporation or its shareholders.

(d)           Authority to Advance Expenses. Expenses incurred by Officers or Directors (acting in their capacity as such) in defending a Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding, provided, however, that if required by the CCC then in effect, such Expenses shall be advanced only upon delivery to the corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Section 30 or otherwise.  Expenses incurred by Employees or Agents of the corporation (or by the Directors or Officers not acting in their capacity as such, including service with respect to employee benefit plans) may be advanced upon the receipt of a similar undertaking, if required by law, and upon such other terms and conditions as the Board of Directors deems appropriate.  Any obligation to reimburse the corporation for Expense advances shall be unsecured, and no interest shall be charged thereon.

 

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(e)           Provision Nonexclusive. The rights conferred on any person by this Section 30 shall not be exclusive of any other rights that such person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office.  To the extent that any provision of the Articles of Incorporation, agreement, or vote of the shareholders or disinterested directors is inconsistent with these Bylaws, the provision, agreement, or vote shall take precedence.

(f)           Authority to Insure. The corporation may purchase and maintain insurance to protect itself and any Directors, Officers, Employees or Agents, as the case may be, against any Expense asserted against or incurred by such person or persons, whether or not the corporation would have the power to indemnify such person or persons against such Expense under applicable law or the provisions of this Section 30, provided that, in cases where the corporation owns all or a portion of the shares of the company issuing the insurance policy, the company and/or the policy must meet one of the two sets of conditions set forth in Section 317 of the CCC.

(g)           Survival of Rights. The rights provided by this Section 30 shall continue as to a person who has ceased to be an Officer or Director and shall inure to the benefit of the heirs, executors, and administrators of such Officer or Director.

(h)           Settlement of Claims. The corporation shall not be liable to indemnify any Director or Officer under this Section 30 for (i) any amounts paid in settlement of any action or claim effected without the corporation’s written consent, which consent shall not be unreasonably withheld; or (ii) any judicial award, if the corporation was not given a reasonable and timely opportunity to participate, at its expense, in the defense of such action.

(i)           Effect of Amendment. Any amendment, repeal, or modification of this Section 30 shall not adversely affect any right or protection of any Director or Officer existing at the time of such amendment, repeal, or modification.

OFFICERS

31.         Titles and Authority.  The officers of the corporation shall include a Chairman of the Board or a President or both, a Secretary, and a Chief Financial Officer.  The Board of Directors may also choose one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers, or other Officers.  Any number of offices may be held by the same person.  All officers shall perform their duties and exercise their powers subject to the direction of the Board of Directors.  Deeds, notes, contracts, and any other instrument or document may be executed on behalf of this corporation by the single signature of the President or any Vice President or by the signatures of any two other officers, provided that the signing officers shall not both be Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers or other subordinate officers.  Notwithstanding the foregoing, any officer is authorized to sign (i) a proxy or consent solicited by the directors or management of any company in which the corporation owns shares or (ii) any notice given by the corporation to any other person.

 

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32.         Election, Term of Office and Vacancies.  At its regular meeting after each annual meeting of shareholders, the Board of Directors shall choose the officers of the corporation.  The Board may choose additional officers or fill vacant offices at any other time.  No officer must be a member of the Board of Directors except the Chairman of the Board.  The officers shall hold office until their successors are chosen, except that the Board of Directors may remove any officer at any time.

33.         Resignation.  Any officer may resign at any time upon notice to the corporation without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.  The resignation of an officer shall be effective when given unless the officer specifies a later time.  The resignation shall be effective regardless of whether it is accepted by the corporation.

34.         Chairman of the Board; President.  If the Board of Directors elects a Chairman of the Board, such officer shall preside over all meetings of the Board of Directors and of shareholders.  If there is no Chairman of the Board, the President shall perform such duties.  The Board of Directors shall designate either the Chairman of the Board or the President as the chief executive officer and may prescribe the duties and powers of the chief executive officer.  If there is no Chairman of the Board, the President shall be the chief executive officer.

35.         Secretary.  Unless otherwise determined by the Board of Directors or the chief executive officer, the Secretary shall have the following powers and duties:

(a)           Record of Corporate Proceedings.  The Secretary shall attend meetings of shareholders and the Board of Directors and its committees and shall record all votes and the minutes of such meetings in a book to be kept at the principal executive office of the corporation or at such other place as the Board may determine.  The Secretary shall keep the original or a copy of these Bylaws at the corporation’s principal executive office, if in California, or at its principal business office in California if the principal executive office is not in California.

(b)           Record of Shares.  Unless a transfer agent is appointed by the Board of Directors to keep a share register, the Secretary shall keep a share register at the principal executive office of the corporation showing the names of the shareholders and their addresses, the number and class of shares held by each, the number and date of certificates issued, and the number and date of cancellation of each certificate surrendered for cancellation.

(c)           Notices.  The Secretary shall give such notices as may be required by law or these Bylaws.

36.         Chief Financial Officer.  The Chief Financial Officer shall be the chief financial officer of the corporation.  Unless otherwise determined by the Board of Directors or the chief executive officer, the Chief Financial Officer shall have custody of the corporate funds and securities, shall keep adequate and correct accounts of the corporation’s properties and business transactions, shall disburse such funds of the corporation as may be ordered by the Board or the chief executive officer (taking proper vouchers for such disbursements), and shall render to the chief executive officer and the Board, at regular meetings of the Board or whenever the Board may require, an account of all transactions and the financial condition of the corporation.

 

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37.         Other Officers.  The other officers of the corporation, if any, shall exercise such powers and perform such duties as the Board of Directors or the chief executive officer shall prescribe.

38.         Salaries.  The Board of Directors shall fix the salary of the chief executive officer and may fix the salaries of other employees of the corporation, including the other officers.  If the Board does not fix the salaries of the other officers, the chief executive officer shall fix such salaries.

39.         Officer Loans and Guarantees.  Without limiting any other powers of the corporation or the Board of Directors with respect to loans, guaranties, or employee benefit plans, if the corporation has outstanding shares held of record by 100 or more persons (determined as provided in the CCC) on the date of approval by the Board of Directors, the corporation may make loans of money or property to, or guarantee the obligations of, any officer of the corporation, or any parent or subsidiary of the corporation, whether or not the officer is also a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties, upon the approval of the Board of Directors alone (by a vote sufficient without counting the vote of any interested director or directors) if the Board of Directors determines that such a loan or guaranty or plans may reasonably be expected to benefit the corporation and is otherwise made in compliance with all applicable laws.

AMENDMENT OF BYLAWS

40.         Bylaws may be adopted, amended, or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote or by the Board of Directors, except that an amendment changing the authorized number of directors may only be adopted as provided in Section 15.

*   *   *

This is to certify that the foregoing is a true and correct copy of the Restated Bylaws of Sonic Solutions and that the Restated Bylaws were duly adopted by the Board of Directors of the corporation on July [●], 2010.

/s/

Mary C. Sauer, Secretary

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EX-10.1

Exhibit 10.1

SONIC SOLUTIONS

2010 INDUCEMENT EQUITY COMPENSATION PLAN

October 2010

1.           Purposes of the Plan.  The purposes of this Plan are to provide a material inducement to an employee to enter into the employ of the Company and to promote the success of the Company’s business.  Awards granted hereunder are granted not under a shareholder approved plan but rather pursuant to a NASDAQ inducement grant exception.

2.           Definitions.  The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement.  In the event a term is separately defined in an individual Award Agreement, such definition shall supercede the definition contained in this Section 2.

(a)           “Administrator” means the Board or the Compensation Committee.

(b)           “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

(c)           “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

(d)           “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

(e)           “Award” means the grant of an Option, SAR, Restricted Stock, Restricted Stock Unit or other right or benefit under the Plan.

(f)            “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

(g)           “Board” means the Board of Directors of the Company.

(h)           “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term (or word of like import) is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s:  (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person; provided, however, that with regard to any agreement that defines “Cause” on the occurrence of or in connection with a Corporate Transaction or a Change in Control, such definition of “Cause” shall not apply until a Corporate Transaction or a Change in Control actually occurs.

(i)            “Change in Control”means a change in ownership or control of the Company effected through either of the following transactions:

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(i)           the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such shareholders accept, or

(ii)         a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

(j)            “Code” means the Internal Revenue Code of 1986, as amended.

(k)           “Common Stock” means the common stock of the Company.

(l)            “Company” means Sonic Solutions, a Californiacorporation, or any successor corporation that adopts the Plan in connection with a Corporate Transaction.

(m)          “Compensation Committee” means the Compensation Committee of the Board.

(n)           “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

(o)           “Continuing Directors” means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

(p)           “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated.  In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws.  A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity.  Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement).  Notwithstanding the foregoing, except as otherwise determined by the Administrator, in the event of any spin-off of a Related Entity, service as an Employee, Director or Consultant for such Related Entity following such spin-off shall be deemed to be Continuous Service for purposes of the Plan and any Award under the Plan.  An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.

(q)           “Corporate Transaction” means any of the following transactions, provided, however, that the Administrator shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

(i)           a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

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(ii)          the sale, transfer or other disposition of all or substantially all of the assets of the Company;

(iii)         the complete liquidation or dissolution of the Company;

(iv)        any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger,but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

(v)         acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

(r)            “Director” means a member of the Board or the board of directors of any Related Entity.

(s)           “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy.  If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days.  A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

(t)            “Employee” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance.  The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

(u)           “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(v)           “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i)           If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The Nasdaq Global Select Market, The NASDAQ Global Market, or The NASDAQ Capital Market of The NASDAQ Stock Market, LLC, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(ii)          If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

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(iii)         In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

(w)           “Grantee” means an Employee who receives an Award under the Plan.

(x)            “Non-Qualified Stock Option” means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(y)           “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(z)            “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

(aa)         “Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

(bb)         “Plan” means this 2010 Inducement Equity Compensation Plan.

(cc)         “Related Entity” means any Parent or Subsidiary of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary of the Company holds a substantial ownership interest, directly or indirectly.

(dd)         “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award.  The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

(ee)         “Restricted Stock” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

(ff)           “Restricted Stock Units” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

(gg)         “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

(hh)         “SAR” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.

(ii)           “Share” means a share of the Common Stock.

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(jj)           “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

3.           Stock Subject to the Plan.

(a)           Subject to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards is 1,000,000 Shares.  Notwithstanding the foregoing, any Shares issued in connection with Awards other than Options and SARs shall be counted against the limit set forth herein as two (2) Shares for every one (1) Share issued in connection with such Award (and shall be counted as two (2) Shares for every one (1) Share returned or deemed not to have been issued from the Plan pursuant to Section 3(b) below in connection with Awards other than Options and SARs).  The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.

(b)           Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan.  Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan.

4.           Administration of the Plan.

(a)           Plan Administrator.

(i)           Administration with Respect to Officers.  With respect to grants of Awards to Employees who are also Officers or Directors of the Company, the Plan shall be administered by the Board or the Compensation Committee, which Compensation Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3.

(ii)           Administration With Respect to Other Employees.  With respect to grants of Awards to Employees who are neither Directors nor Officers of the Company, the Plan shall be administered by the Board or the Compensation Committee, which Compensation Committee shall be constituted in such a manner as to satisfy the Applicable Laws.

(iii)           Administration Errors.  In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

(b)           Powers of the Administrator.  Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

(i)           subject to Section 5 of the Plan, to select the Employees to whom Awards may be granted from time to time hereunder;

(ii)          to determine whether and to what extent Awards are granted hereunder;

(iii)         to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

(iv)        to approve forms of Award Agreements for use under the Plan;

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(v)         to determine the terms and conditions of any Award granted hereunder;

(vi)         to amend the terms of any outstanding Award granted under the Plan, including as provided in Section 10 below, provided that (A) any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, (B) the reduction of the base appreciation amount of any SAR awarded under the Plan shall be subject to shareholder approval, (C) the modification of the exercise price of any Option awarded under the Plan shall be subject to shareholder approval, and (D) canceling an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock, or other Award or cash shall be subject to shareholder approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction.  Notwithstanding the foregoing, canceling an Option (other than an Option granted to an Officer or Director) or SAR in exchange for another Option, SAR, Restricted Stock, or other Award with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original Option or SAR shall not be subject to shareholder approval;

(vii)        to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to thePlan;

(viii)       to grant Awards to Employees employed outside the United States on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and

(ix)         to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator may not exercise any right or power reserved to the Board.  Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.

(c)           Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

5.           Eligibility.  Awards may only be granted to Employees so long as the following requirements are met: (a) the Employee was not previously an Employee or Director of the Company or the Employee is returning to the employment of the Company following a bonafide period of non-employment or non-service to the Company and (b) the grant of an Award under the Plan is a material inducement to the Employee's decision to enter into the employment of the Company. Notwithstanding the foregoing, an Employee may be granted an Award in connection with a merger, acquisition or similar transaction, to the extent permitted by the Nasdaq rules governing stockholder approval of inducement equity compensation plans.

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6.           Terms and Conditions of Awards.

(a)           Types of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions.  Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock or Restricted Stock Units, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

(b)           Designation of Award.  Each Award shall be designated in the Award Agreement.

(c)           Conditions of Award.  Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria.  The performance criteria established by the Administrator may be based on any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total shareholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added, (xvii) market share and (xviii) other measures of performance selected by the Administrator.  The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity.  Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement.

(d)           Acquisitions and Other Transactions.  The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

(e)           Deferral of Award Payment.  The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award.  The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.  If the vesting or receipt of Shares under an Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares subject to such Award will not be treated as an increase in the number of Shares subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).

(f)            Separate Programs.  The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

(g)           Early Exercise.  The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award.  Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

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(h)           Term of Award.  The term of each Award shall be the term stated in the Award Agreement.  Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.

(i)            Transferability of Awards.  Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator.  Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

(j)            Vesting of Restricted Stock and Restricted Stock Units.  Awards of Restricted Stock and Restricted Stock Units issued under the Plan shall vest and be released from the risk of forfeiture over a period of no less than three (3) years measured from the date of issuance of the Award.  Notwithstanding the foregoing, Awards of Restricted Stock and Restricted Stock Units subject to performance-based vesting may vest and be released from the risk of forfeiture over a period of no less than one (1) year measured from the date of issuance of the Award.

(k)           Time of Granting Awards.  The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator.

7.           Award Exercise or Purchase Price, Consideration and Taxes.

(a)           Exercise or Purchase Price.  The exercise or purchase price, if any, for an Award shall be as follows:

(i)           In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(ii)          In the case of SARs, the base appreciation amount shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(iii)         In the case of other Awards, such price as is determined by the Administrator.

(iv)        Notwithstanding the foregoing provisions of this Section 7(a) in the case of an Award issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

 

(b)           Consideration.  Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator.  In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:

(i)           cash;

(ii)          check;

(iii)         surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

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(iv)        with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction;

(v)         with respect to Options, payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the Exercise Price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares); or

(vi)        any combination of the foregoing methods of payment.

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.

(c)           Taxes.  No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations.  Upon exercise or vesting of an Award the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations, including, but not limited too, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the minimum applicable tax withholding obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of Shares if such number of Shares withheld would result in withholding a fractional Share with any remaining tax withholding settled in cash).

(d)           “Net Exercise” Matters.  For purposes of the Plan, if Shares subject to Awards are surrendered in payment of the exercise price as provided in Section 7(b) above or in payment of tax obligations, as provided in Section 7(c) above, those Shares will be deemed issued pursuant to the Plan.

8.           Exercise of Award.

(a)           Procedure for Exercise; Rights as a Shareholder.

(i)           Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

(ii)          An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).

(b)           Exercise of Award Following Termination of Continuous Service.

(i)           An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.

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(ii)         Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.

9.           Conditions Upon Issuance of Shares.

(a)           If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance.  The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.

(b)           As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

10.         Adjustments Upon Changes in Capitalization.  Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”  In the event of any distribution of cash or other assets to shareholders other than a normal cash dividend, the Administrator shall also make such adjustments as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments (collectively “adjustments”).  Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards.  In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or other issuance of Shares, cash or other consideration pursuant to Awards during certain periods of time.  Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive.  Except as the Administrator determines and as provided in Section 4(b)(vi) above, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.

11.         Corporate Transactions and Changes in Control.

(a)           Termination of Award to Extent Not Assumed in Corporate Transaction.  Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate.  However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

(b)           Acceleration of Award Upon Corporate Transaction or Change in Control.

(i)           Corporate Transaction.  Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date.  The portion of the Award that is not Assumed shall terminate under subsection (a) of this Section 11 to the extent not exercised prior to the consummation of such Corporate Transaction.

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(ii)          Change in Control.  Except as provided otherwise in an individual Award Agreement, in the event of a Change in Control (other than a Change in Control which also is a Corporate Transaction), each Award which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value), immediately prior to the specified effective date of such Change in Control, for all of the Shares at the time represented by such Award, provided that the Grantee’s Continuous Service has not terminated prior to such date.

12.         Effective Date and Term of Plan.  The Plan shall become effective upon its adoption by the Board.  It shall continue in effect for a term of ten (10) years unless sooner terminated.

13.         Amendment, Suspension or Termination of the Plan.

(a)           The Board may at any time amend, suspend or terminate the Plan;

(b)           No Award may be granted during any suspension of the Plan or after termination of the Plan.

(c)           No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Awards already granted to a Grantee.

14.         Reservation of Shares.

(a)           The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

(b)           The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

15.         No Effect on Terms of Employment Relationship.  The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice.  The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

16.         No Effect on Retirement and Other Benefit Plans.  Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation.  The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

17.         Unfunded Obligation.  Grantees shall have the status of general unsecured creditors of the Company.  Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended.  Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations.  The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

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18.         Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

19.         Nonexclusivity of the Plan.  Neither the adoption of the Plan by the Board, the submission of the Plan to the shareholders of the Company for approval, nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of Awards otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

 

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EX-99.1

Exhibit 99.1

News Release

Chris Taylor

+1 408-367-5231

chris_taylor@sonic.com

Sonic Completes DivX Acquisition

Combination Will Accelerate Industry Transition to Online Video Delivery

Novato, CA (October 8, 2010) — Sonic Solutions® (NASDAQ: SNIC) today announced that it has completed the acquisition of DivX, Inc., based in San Diego, California. The addition of DivX® brings widely deployed digital media technologies, an embedded CE footprint of over 300 million devices, a strong consumer brand, and a global market presence to Sonic’s expanding position as the leading supplier of services and technologies for the distribution of premium video content over the Internet.

“The acquisition of DivX accelerates our vision to make accessing entertainment over the Internet directly from home and mobile devices as pervasive as physical disc consumption is today,” said David Habiger, President and CEO of the combined company. “With DivX, we instantly add hundreds of millions of consumer electronics devices to our footprint; make it faster and more efficient for device manufacturers, retailers, and Studios to launch digital services; and increase our global reach, particularly in the European market.”

As the world’s foremost developer and supplier of professional DVD and Blu-ray authoring systems, Sonic has worked with Hollywood for more than a decade to bring movies to consumers. Sonic’s Roxio® division leads the industry for consumer media creation and management applications with hundreds of millions of units shipped. Sonic’s RoxioNow™ division develops and licenses a universal “over-the-top” video platform for retailers, Hollywood Studios, consumer electronics manufacturers, and PC OEMs to offer movies and TV shows over the internet. Major retailers – Best Buy, Blockbuster, Sears/Kmart, Cineplex Entertainment, HP, Dell and many others – today license RoxioNow to power online video stores, while CE companies – Fujitsu, Funai Electric, LG, Panasonic, Pioneer, Samsung, Sony, and others – embed the RoxioNow platform in over 350 product models.

The acquisition of DivX brings Sonic a vast installed base of CE devices, all of which ship with Digital Rights Management (DRM) for the secure playback of Hollywood movies even when not connected to the Internet. DivX’s DRM, an important ingredient for the secure distribution of copyrighted video content, has been approved by major Hollywood Studios. DivX’s H.264 video encoding tools serve as the de-facto standard for a wide variety of premium content stored in “the cloud” for delivery over the internet. Finally, DivX’s strong global presence and recognized brand will speed Sonic’s expansion into more geographical markets.

“Our strategy is to deliver all the backend pieces that make it easy for Studios, retailers, and device manufacturers to offer over-the-top, premium entertainment experiences,” said Mark Ely, newly appointed, President, Strategy, Sonic Solutions. “We are the only company that has a true ‘plug and play’ solution for partners interested in putting custom-media storefronts on connected consumer electronics. The addition of DivX increases our capacity and capabilities, provides a solution for non-connected devices, and brings us even closer to satisfying consumers’ desire to have their Hollywood entertainment wherever, whenever, and however they want.”

Sonic Completes DivX Acquisition

“DivX and Sonic are a tremendous fit,” said Tim Bajarin, Principal Analyst, Creative Strategies, Inc. “For CE, PC and mobile manufacturers, the Sonic-DivX combination means that they can license a single solution which can be used to deploy multiple content stores rapidly across an expanding ecosystem of devices. For retailers, it means that they can more easily create their own branded stores and rely on Sonic to provide all the under-the-hood technology. And, for the content community, Sonic plus DivX helps them directly connect to consumers.” “Our partners have responded very positively to the news of the union between Sonic and DivX,” said Matt Milne, Executive Vice President and General Manager, DivX. “Moving forward, the combination of the installed base of DivX Certified products and the industry-leading RoxioNow content platform will greatly enhance the services and support we can offer partners, as well as expand the choices consumers have for the consumption of high-quality digital entertainment.”

The shareholders of both Sonic and DivX separately approved the merger that was previously announced by the two companies on June 2 of this year.

About Sonic Solutions

Sonic Solutions® (NASDAQ: SNIC) enables digital media from Hollywood to home. For more than a decade, Sonic product, service, and technology brands including Roxio®, RoxioNow™, DivX®, and MainConcept,have fueled home entertainment, powered rich digital media functionality on a range of platforms for a variety of partners, and inspired unique personal media experiences for hundreds of millions of consumers. Sonic technologies are now combining to deliver a universal platform for Hollywood Studios, retailers, consumer electronics manufacturers, and PC OEMs that provides consumers instant access to premium entertainment from virtually anywhere. Sonic Solutions is headquartered in Marin County, California. Learn more at www.sonic.com.

Forward Looking Statements

This release may contain forward-looking statements that are based upon current expectations, including the expected effects of the merger on the combined operations and financial results of Sonic Solutions and DivX and other matters related to the merger as well as the launch, distribution, and market acceptance of Sonic’s applications, technologies and services.  Actual results could differ materially from those projected in the forward-looking statements as a result of various risks and uncertainties, including those discussed in Sonic Solutions' and DivX’s annual and quarterly reports filed by Sonic Solutions and DivX with the Securities and Exchange Commission (the “SEC”). This press release should be read in conjunction with most recent annual reports on Forms 10-K, Form 10-Q and other reports filed by Sonic Solutions and DivX with the SEC, which contain more detailed discussion of the businesses and risks of Sonic Solutions and DivX including risks and uncertainties that may affect future results.  Neither Sonic Solutions nor DivX undertakes to update any forward-looking statements as of Sonic Solutions and DivX except as required by law.

Sonic, the Sonic logo, Sonic Solutions, Roxio, RoxioNow, DivX and Hollywood to Home, are trademarks or registered trademarks owned by Sonic Solutions in the United States and/or other countries. All other company or product names are trademarks of their respective owners and, in some cases, are used by Sonic Solutions under license.

EX-99.2

Exhibit 99.2

News Release

Chris Taylor

+1 408-367-5231

chris_taylor@sonic.com

Sonic Issues Options in Connection with DivX Acquisition

Novato, CA (October 8, 2010) — Sonic Solutions® (NASDAQ: SNIC) announced earlier today that it has completed the acquisition of DivX, Inc., based in San Diego, California. In connection with the acquisition, on October 7, 2010, the Sonic Board of Directors approved the 2010 Inducement Equity Compensation Plan, which provides for the issuance of up to 1,000,000 shares of common stock pursuant to awards granted as a material inducement to an employee to enter into Sonic employment and to promote the success of its business.

On October 7, 2010, the following awards were granted under the 2010 Plan: Mr. David Richter, who is becoming Executive Vice President, Business Development, was granted 25,000 restricted stock units and options to acquire 250,000 shares of Sonic common stock; Mr. Matthew Milne, who is becoming Executive Vice President, Sales and Marketing of DivX, was granted options to acquire 250,000 shares of Sonic common stock; and three other former DivX employees, who are becoming Senior Vice Presidents of Sonic, were each granted options to acquire 50,000 share of Sonic common stock.  These option grants have an exercise price of $11.48 per share, the closing price on October 7, 2010, and will vest over a period of four years.  All pre-existing awards issued by DivX to these employees, including restricted stock units and options, were either cancelled or exercised upon the close of the merger.  The 2010 Plan and awards to be issued thereunder are intended to meet the exception under Nasdaq listing standards for shareholder approval of equity-based incentive awards granted to newly hired employees.  Sonic will periodically announce the options it grants to employees under the 2010 Plan.

About Sonic Solutions

Sonic Solutions® (NASDAQ: SNIC) enables digital media from Hollywood to home. For more than a decade, Sonic product, service, and technology brands including Roxio®, RoxioNow™, DivX®, and MainConcept,have fueled home entertainment, powered rich digital media functionality on a range of platforms for a variety of partners, and inspired unique personal media experiences for hundreds of millions of consumers. Sonic technologies are now combining to deliver a universal platform for Hollywood Studios, retailers, consumer electronics manufacturers, and PC OEMs that provides consumers instant access to premium entertainment from virtually anywhere. Sonic Solutions is headquartered in Marin County, California. Learn more at www.sonic.com.

Forward Looking Statements

This release may contain forward-looking statements that are based upon current expectations, including the expected effects of the merger on the combined operations and financial results of Sonic Solutions and DivX and other matters related to the merger as well as the launch, distribution, and market acceptance of Sonic’s applications, technologies and services.  Actual results could differ materially from those projected in the forward-looking statements as a result of various risks and uncertainties, including those discussed in Sonic Solutions' and DivX’s annual and quarterly reports filed by Sonic Solutions and DivX with the Securities and Exchange Commission (the “SEC”). This press release should be read in conjunction with most recent annual reports on Forms 10-K, Form 10-Q and other reports filed by Sonic Solutions and DivX with the SEC, which contain more detailed discussion of the businesses and risks of Sonic Solutions and DivX including risks and uncertainties that may affect future results.  Neither Sonic Solutions nor DivX undertakes to update any forward-looking statements as of Sonic Solutions and DivX except as required by law.

Sonic, the Sonic logo, Sonic Solutions, Roxio, RoxioNow, DivX and Hollywood to Home, are trademarks or registered trademarks owned by Sonic Solutions in the United States and/or other countries. All other company or product names are trademarks of their respective owners and, in some cases, are used by Sonic Solutions under license.

EX-99.3

News Release

Chris Taylor

+1 408-367-5231

chris_taylor@sonic.com

Sonic Solutions Appoints Three New Board Members

Dave Habiger, Kevin Hell and Jim Brailean Join Sonic’s Board of Directors

Novato, CA (October 13, 2010) — Sonic Solutions® (NASDAQ: SNIC) today announced the appointment of Dave Habiger, president and chief executive officer, Sonic Solutions, Kevin Hell, former chief executive officer, DivX, Inc., and Jim Brailean, Ph.D., chief executive officer and co-founder, PacketVideo, to its Board of Directors.

Dave Habiger has served as president and CEO of Sonic Solutions since September 2005. Mr. Habiger has held various roles at Sonic since joining the company in its early stages in 1993, including president and chief operating officer and as general manager of the company’s largest division. Prior to joining Sonic, Mr. Habiger was a product manager at the Roscor Corporation, a leading provider of professional video, audio, multimedia and computer-based products and services. He was also a founder of Providence Productions, a media production company. He is currently a member of the Silicon Valley Leadership Group and the National Association of Corporate Directors. Mr. Habiger holds an M.B.A. from the University of Chicago and a B.B.A from St. Norbert College in DePere, WI.

Kevin Hell served as DivX’s chief executive officer and as a member of its Board of Directors from July 2007 to October 2010. Prior to becoming CEO, Mr. Hell held a number of management positions at DivX, including president, chief operating officer, and chief marketing officer. Before joining DivX in 2002, he held senior executive positions at Palm, a handheld solutions company, Gateway, a personal computer manufacturing company, and the Boston Consulting Group. Early in his career, he served as a systems engineer with Hughes Aircraft Company on several satellite and interplanetary spacecraft programs. Mr. Hell received an M.B.A. from The Wharton School, and both a M.S. in Aeronautics and Astronautics and a B.S. in Mechanical Engineering from Stanford University.

Jim Brailean, Ph.D., has served as chief executive officer and co-founder of PacketVideo since its inception in 1998. Under his leadership, PacketVideo has become the world’s leading supplier of embedded multimedia solutions for mobile phones and other devices. Prior to co-founding PacketVideo, Mr. Brailean was a principal staff engineer within Motorola Corporate Research and Development Laboratories in Chicago, where he managed the Advanced Video Algorithm Group, responsible for the design and development of advanced video compression and imaging algorithms. He was also a communication system engineer for Hughes Aircraft, Space and Communications Group. Mr. Brailean received his Ph.D. in electrical engineering from Northwestern University. He holds a M.S. in electrical engineering from the University of Southern California and a B.S. in electrical engineering from the University of Michigan, Dearborn.

About Sonic Solutions

Sonic Solutions® (NASDAQ: SNIC) enables digital media from Hollywood to Home™. For more than a decade, Sonic product, service, and technology brands including Roxio®, RoxioNow™, DivX®, and MainConcept®,have fueled home entertainment, powered rich digital media functionality on a range of platforms for a variety of partners, and inspired unique personal media experiences for hundreds of millions of consumers. Sonic technologies are now combining to deliver a universal platform for Hollywood studios, retailers, consumer electronics manufacturers, and PC OEMs that provides consumers instant access to premium entertainment from virtually anywhere. Sonic Solutions is headquartered in Marin County, California. Learn more at www.sonic.com.

Forward Looking Statements

This release may 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 those discussed in Sonic Solutions' and DivX’s annual and quarterly reports filed by Sonic Solutions and DivX with the Securities and Exchange Commission (the “SEC”). Sonic, the Sonic logo, Sonic Solutions, Roxio, RoxioNow, DivX, MainConcept and Hollywood to Home, are trademarks or registered trademarks owned by Sonic Solutions in the United States and/or other countries. All other company or product names are trademarks of their respective owners and, in some cases, are used by Sonic Solutions under license.