SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Definitive Proxy Statement [ ] Confidential, for Use of the Commission
[ ] Preliminary Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SONIC SOLUTIONS
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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SONIC SOLUTIONS
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 4, 2001
TO THE SHAREHOLDERS OF SONIC SOLUTIONS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Sonic
Solutions, a California corporation (the "Company"), will be held on September
4, 2001 at 3:00 p.m., California time, at the Company's principal executive
offices at 101 Rowland Way, Suite 110, Novato, California 94945 for the
following purposes:
1. To elect five directors to serve for the ensuing year and until their
successors are elected.
2. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on July 10, 2001 (the
"Record Date") are entitled to notice of and to vote at the meeting and any
adjournments thereof.
All shareholders are cordially invited to attend the meeting in person. Any
shareholder attending the meeting may vote in person even if such shareholder
previously signed and returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Mary C. Sauer
Secretary
Novato, California
July 18, 2001
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. THANK YOU FOR ACTING
PROMPTLY.
SONIC SOLUTIONS
101 ROWLAND WAY, SUITE 110
NOVATO, CALIFORNIA 94945
(415) 893-8000
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of Sonic Solutions (the "Company") for use at the Company's Annual
Meeting of Shareholders (the "Annual Meeting") to be held September 4, 2001 at
3:00 p.m., California time, or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting
of Shareholders. The Annual Meeting will be held at the Company's principal
executive offices which are located at 101 Rowland Way, Suite 110, Novato,
California 94945. The telephone number at that address is (415) 893-8000.
These proxy solicitation materials were mailed on or about July 24, 2001 to
all shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date and Shares Outstanding
Shareholders of record at the close of business on July 10, 2001 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting.
At the Record Date, 13,762,111 shares of the Company's common stock (the
"Common Stock") and 702,489 shares of Preferred Stock were outstanding and
entitled to vote at the meeting.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person. Mere
attendance at the Annual Meeting will not serve to revoke a proxy.
Voting and Solicitation
Every shareholder voting for the election of directors may exercise
cumulative voting rights and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
the shareholder's shares are entitled, or distribute such shareholder's votes
on the same principle among as many candidates as the shareholder may select,
provided that votes cannot be cast for more than four candidates. However, no
shareholder shall be entitled to cumulate votes unless a shareholder gives
notice at the Annual Meeting prior to the voting of the intention to cumulate
votes, and no votes may be cast in favor of a candidate unless the candidate's
name has been placed in nomination prior to the voting. On all other matters
each share is entitled to one vote on each proposal or item that comes before
the Annual Meeting.
The Company intends to include abstentions and broker non-votes as present
or represented for purposes of establishing a quorum for the transaction of
business. However, broker non-votes will not be counted as votes cast on a
proposal, while abstentions have the same effect as votes against a proposal.
Solicitation of proxies may be made by directors, officers and other
employees of the Company by personal interview, telephone or telegraph. No
additional compensation will be paid for any such services. Costs of
solicitation, including preparation, assembly, printing and mailing of this
proxy statement, the proxy and any other information furnished to the
shareholders, will be borne by the Company. The Company will, upon request,
reimburse the reasonable charges and expenses of brokerage houses or other
nominees or fiduciaries for forwarding proxy materials to, and obtaining
authority to execute proxies from, beneficial owners for whose account they
hold shares of Common Stock.
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
The Bylaws of the Company currently provide for a Board consisting of not
less than five nor more than seven directors. Unless otherwise instructed, the
proxy holders will vote the proxies received by them for the five nominees
named below, all of whom are presently directors of the Company. If any
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board to fill the vacancy. It is not expected that any nominee
will be unable or will decline to serve as a director. If additional persons
are nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner in accordance with cumulative voting
as will ensure the election of as many of the nominees listed below as
possible. In such event, the specific nominees for whom such votes will be
cumulated will be determined by the proxy holders. The term of office of each
person elected as a director will continue until the next Annual Meeting of
Shareholders or until his successor has been elected and qualified.
The name of and certain other information regarding each nominee is set
forth in the table below.
Director
Name of Nominee Age Position with the Company Since
--------------- --- ------------------------- --------
Robert J. Doris......... 48 President, Chief Executive Officer and Director 1986
Mary C. Sauer........... 48 Senior Vice President of Business Development, 1986
Secretary and Director
Robert M. Greber........ 63 Director 1993
Peter J. Marguglio...... 54 Director 1986
R. Warren Langley....... 58 Director 2001
Mr. Doris is married to Ms. Sauer. There are no other family relationships
between any director or executive officer of the Company.
Robert J. Doris. Mr. Doris founded Sonic Solutions in 1986 and has served
as President, Chief Executive Officer and Director of the Company since that
time. Prior to 1986 he was President of The Droid Works, a subsidiary of
Lucasfilm Ltd., which produced computer-based video and digital audio systems
for the film and television post-production and music recording industries.
Prior to founding The Droid Works, Mr. Doris was a Vice President of Lucasfilm
and General Manager of the Lucasfilm Computer Division. Mr. Doris received
B.A., J.D. and M.B.A. degrees from Harvard University.
Mary C. Sauer. Ms. Sauer founded Sonic Solutions in 1986 and has served as
a Vice President and Director of the Company since that time. Ms. Sauer became
Senior Vice President of Marketing and Sales in February 1993. Prior to 1986,
Ms. Sauer was Vice President of Marketing for The Droid Works, and prior to
joining The Droid Works, Ms. Sauer was Director of Marketing for the Lucasfilm
Computer Division. Ms. Sauer received an M.B.A. in Finance and Marketing from
the Wharton School of the University of Pennsylvania and a B.F.A. from
Washington University in St. Louis.
Robert M. Greber. Mr. Greber has served as a director of the Company since
August 1993. Mr. Greber served as president and Chief Operating Officer of The
Pacific Stock Exchange since July 1990, until January 1996 when he was elected
Chairman and Chief Executive Officer. In December 1999, Mr. Greber retired
from The Pacific Stock Exchange. Prior to joining The Pacific Stock Exchange,
he was from 1985 to 1987 President and Chief Executive Officer of Diagnostic
Networks, Inc., a network of Magnetic Resonance Imaging Centers which was
merged into NMR America in 1987. Prior to DNI, Mr. Greber was President and
Chief Executive Officer of Lucasfilm Ltd. from 1981 to 1985 where, among other
duties, he oversaw development of digital technologies for video, film, audio,
and special effects and video games applications. Before joining Lucasfilm,
2
Mr. Greber was associated with the firm of Merrill Lynch where he was Vice
President and Manager of the Los Angeles Institutional Office. Mr. Greber
holds a B.S. in Finance from Temple University. Mr. Greber also serves on the
Board of Bay View Capital Corp.
Peter J. Marguglio. Mr. Marguglio has served as a Director of the Company
since August 1986. Since January 1990, Mr. Marguglio has worked at Eatec
Corporation, a software company located in Berkeley, California where he is
now President. Prior to joining Eatec, Mr. Marguglio was President of Resource
Marketing, Inc., an equipment leasing firm he founded in 1981. Mr. Marguglio
holds a Mechanical Engineering degree from the University of Washington and an
M.B.A. degree from Stanford University.
R. Warren Langley. Mr. Langley was appointed as a member of the Board of
Directors and as a member of the Audit Committee on June 7, 2001. Since
January 2000, Mr. Langley has been a consultant and the Managing Principal of
the GuruWizard Fund, LLC. From January 2000 to May 2000, he served as interim
CEO of Brush Dance, a creator of Mind-Body-Spirit products. From September
1996 until March 1999, Mr. Langley served as President and Chief Operating
Officer of The Pacific Stock Exchange in San Francisco. Prior to that from
August 1987 to January 1998, he was a Principal and Chief Operating Officer of
Hull Trading in Chicago, a proprietary derivatives trading firm. Mr. Langley
has also worked as Director of Operations Research and Industrial Engineering
at United Airlines and worked in several capacities in the software, energy,
and defense consulting industries after serving in the United States Air Force
for fifteen years. Mr. Langley holds degrees from the United States Air Force
Academy, Massachusetts Institute of Technology, and Georgia Institute of
Technology.
Board Meetings and Committees
The Board held a total of four meetings during the fiscal year ended March
31, 2001. No incumbent director participated in fewer than 75% of the total
number of meetings of the Board and all meetings of the committees, if any,
upon which such director served.
During the fiscal year ended March 31, 2001, the audit committee of the
Board consisted of Mr. Marguglio and Mr. Greber. Mr. R. Warren Langley was
appointed as a member of the Audit Committee on June 7, 2001. All of the audit
committee members are independent directors as defined in the National
Association of Securities Dealers listing standards. The principal functions
of the audit committee are to recommend engagement of the Company's
independent auditors, to consult with the Company's auditors concerning the
scope of the audit and to review with them the results of their examination,
to review and approve any material accounting policy changes affecting the
Company's operating results and to review the Company's financial control
procedures and personnel. The audit committee held four meetings during the
fiscal year ended March 31, 2001.
The Board does not have a nominating committee or a compensation committee.
Audit Committee Report
The Audit Committee has reviewed and discussed the audited consolidated
financial statements for the year ended March 31, 2001 with the Company's
management and has discussed the matters required to be discussed pursuant to
Statement on Auditing Standards No. 61 (Communications with Audit Committees)
with the representatvies of KPMG LLP, the independent auditors of the Company.
The independent auditors have provided a written disclosure to the Audit
Committee in compliance with Independence Standards Board No. 1 (Independence
Discussions with Audit Committees). The Audit Committee has discussed the
auditors' independence with KPMG LLP. Based on the review of the audited
consolidated financial statements for the year ended March 31, 2001 and the
discussions between the Audit Committee, the Company's management and the
independent auditors, the Audit Committee has recommended to the Board of
Directors that the audited consolidated financial statements for the year
ended March 31, 2001 be included in the Company's Annual Report to
Stockholders and in the Company's Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission.
3
The Audit Committee acts under a written charter that was first adopted and
approved by the Company's Board of Directors on June 1, 2000. In performing
its functions, the Committee acts only in an oversight capacity and
necessarily relies on the work and assurances of the Company's management,
which has the primary responsibility for financial statements and reports, and
of the independent auditor, who, in its report, expresses on opinion on the
conformity of the Company's annual financial statements to generally accepted
accounting principals. A copy of the charter is attached as Exhibit A to this
Proxy Statement.
Newly Appointed Board and Committee Member
On June 7, 2001, Mr. R. Warren Langley was appointed as a member of the
Board of Directors and as a member of the Audit Committee.
Compensation of Directors
The Company does not pay fees to its directors for attendance at meetings.
The Company does reimburse its directors for their out-of-pocket expenses
incurred in the performance of their duties as directors of the Company.
Directors of the Company who are not, and have not been during the preceding
twelve months, employees, and who do not directly or indirectly own more than
5% of the Company's Common Stock, are eligible to receive an initial grant and
thereafter annual grants of options to purchase shares of the Company's Common
Stock in accordance with the Company's Non-employee Directors Stock Option
Plan.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of May 31, 2001 (i) by each person who is
known by Sonic Solutions to own beneficially more than five percent of the
Common Stock, (ii) by each of Sonic Solutions' directors, (iii) by each of
Sonic Solutions' executive officers named in the Summary Compensation Table
under the caption "Executive Compensation" below, and (iv) by all directors
and executive officers as a group.
Number of Percentage
Shares of Shares
Beneficially Beneficially
Name and Address(1) Owned(2) Owned(2)
------------------- ------------ ------------
Robert J. Doris(3)............................... 1,643,722 12.2%
Mary C. Sauer(4)................................. 803,995 6.0%
Peter J. Marguglio(5)............................ 226,235 1.7%
Robert M. Greber(6).............................. 10,000 *
Christopher A. Kryzan(7)......................... 206,333 1.5%
A. Clay Leighton(8).............................. 278,292 2.1%
All directors and executive officers as a group
(12 persons).................................... 3,557,666 26.3%
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* Less than one percent.
(1) The address of the persons set forth above is c/o Sonic Solutions, 101
Rowland Way, Suite 110, Novato, CA 94945.
(2) This table is based upon information supplied by directors, officers and
principal shareholders. Applicable percentage ownership for each
shareholder is based on 13,510,703 shares of Common Stock outstanding as
of May 31, 2001, together with applicable options for such shareholders.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities, subject to the community
property laws where applicable. Shares of Common Stock subject to options
are deemed outstanding for the purpose of computing the percentage
ownership of the person holding such options, but are not treated as
outstanding for computing the percentage ownership of any other person.
(3) Includes 1,227,889 shares owned by Mr. Doris, and 415,833 shares issuable
upon exercise of options which will be exercisable within 60 days of May
31, 2001.
(4) Includes 593,662 shares owned by Ms. Sauer, and 210,333 shares issuable
upon exercise of options which will be exercisable within 60 days of May
31, 2001.
(5) Includes 208,443 shares owned by Mr. Marguglio, and 17,792 shares issuable
upon exercise of options which will be exercisable within 60 days of May
31, 2001.
(6) Consists of shares issuable upon exercise of options which will be
exercisable within 60 days of May 31, 2001, all of which were granted
pursuant to the Company's Nonemployee Director Stock Option Plan.
(7) Consists of shares issuable upon exercise of options which will be
exercisable within 60 days of May 31, 2001.
(8) Includes 38,500 shares owned by Mr. Leighton and 239,792 shares issuable
upon exercise of options which will be exercisable within 60 days of
May 31, 2001.
5
EXECUTIVE COMPENSATION
The following table sets forth the total compensation for the fiscal years
ended March 31, 2001, 2000 and 1999 for the Chief Executive Officer and each
of the three other most highly compensated executive officers of Sonic
Solutions who served as executive officers at fiscal year end and who received
salary and bonuses of $100,000 or more. None of the named executive officers
earned any bonuses or compensation for these fiscal years other than as set
forth in the table or received any restricted stock awards, stock appreciation
rights or long-term incentive plan payouts.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Annual Number of
Compensation Securities
Fiscal Year ------------------ Underlying
Ended March Salary Options
Name and Principal Position 31, ($) Bonus ($) (#)(1)
- --------------------------- ----------- -------- --------- ------------
Robert J. Doris..................... 2001 $225,000 $ 0 85,000
President (Chief Executive Officer) 2000 $221,250 $ 0 85,000
and Director 1999 $138,750 $ 0 85,000
Mary C. Sauer....................... 2001 $127,875 $ 0 40,000
Senior Vice President, Business 2000 $112,675 $ 0 40,000
Development, Secretary and Director 1999 $111,000 $ 0 40,000
Christopher A. Kryzan............... 2001 $187,000 $38,917 48,000
Senior Vice President, 2000 $185,500 $45,031 25,000
Engineering and Marketing 1999 $175,000 $32,300 40,000
A. Clay Leighton.................... 2001 $180,000 $15,000 50,000
Senior Vice President Worldwide
Operations 2000 $176,250 $15,000 65,000
Finance and Chief Financial Officer 1999 $112,920 $15,000 25,000
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(1) All figures in this column represent options to purchase the Company's
Common Stock.
6
The following table sets forth certain information regarding grants of
stock options made during the fiscal year ended March 31, 2001 to the
executive officers named in the Summary Compensation Table. Since inception,
Sonic Solutions has not granted any stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise or for Option Term
Options Employees in Base Expiration ---------------------
Name Granted (#) Fiscal Year Price ($/sh) Date 5% 10%
---- ----------- ------------- ------------ ---------- ---------- ----------
Robert J. Doris......... 85,000 8% $3.0000 9/5/10 $ 12,750 $ 25,000
Mary C. Sauer........... 40,000 4% $ 3.000 9/5/10 $ 6,000 $ 12,000
Christopher A. Kryzan... 48,000 5% $1.5630 4/1/10 $ 3,751 $ 7,502
A. Clay Leighton........ 50,000 5% $1.5630 9/1/10 $ 3,907 $ 7,815
The exercise price is equal to the fair market value of Sonic Solutions'
Common Stock on the date of grant, as determined by reference to the closing
price of Sonic Solutions' Common Stock on the Nasdaq National Market. The
options are subject to earlier expiration in the event of the officer's
termination of employment with Sonic Solutions. Potential realizable value is
based on an assumption that the fair market value of the stock on the date of
grant appreciates at the stated rate, compounded annually, from the date of
grant until the end of the option terms. These values are calculated based on
requirements promulgated by the Securities and Exchange Commission and do not
relect Sonic Solutions' estimate of future stock price appreciation. All of
the options in the above table were granted under Sonic Solutions' Stock
Option Plan, and vest over a period of one year at a rate of 8.3333 percent
per month.
The following table sets forth information regarding the number and value
of options exercised during the fiscal year ended March 31, 2001 and of
unexercised options held by the named executive officers on March 31, 2001.
Value is considered to be the difference between exercise price and the
closing price of $1.313 per share of the Common Stock as quoted on the Nasdaq
National Market on March 31, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities
Shares Aggregate Underlying Unexercised Value of In-the-Money
Acquired on Value Option at Fiscal Year End at Fiscal Year End
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- ------------ ------------ ------------------------- ----------------------------
Robert J. Doris......... 0 0 387,500/42,500 $0/0
Mary C. Sauer........... 0 0 197,000/35,000 $0/0
Christopher A. Kryzan... 0 0 190,083/22,917 $0/0
A. Clay Leighton........ 33,000 $68,357 216,771/28,229 $0/0
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(1) These values have not been, and may not be, realized, and are based on the
positive spread between the respective exercise prices of the outstanding
stock options and the closing price of Sonic Solutions' Common Stock at
March 31, 2001 ($1.313).
Sonic Solutions did not make any awards during the fiscal year ended March
31, 2001 to any of the executive officers named in the Summary Compensation
Table under any long-term incentive plan providing compensation intended to
serve as incentive for performance to occur over a period longer than one
fiscal year, excluding the stock options set forth above.
7
REPORT OF THE BOARD REGARDING EXECUTIVE COMPENSATION
The Board does not have a Compensation Committee. Accordingly, it is the
responsibility of the entire Board to determine the most effective total
executive compensation strategy, based upon the business needs of the Company
and consistent with shareholders' interests, to administer the Company's
executive compensation plans, programs and policies, to monitor corporate
performance and its relationship to compensation of executive officers, and to
take other appropriate actions concerning matters of executive compensation.
Compensation Philosophy
The Company was formed in 1986 as a private company and initially offered
Common Stock to the public in February 1994. Four key goals form the basis for
compensation decisions for all employees of the Company:
1. To attract and retain the most highly qualified management and
employee team;
2. To pay competitively compared to similar audio and video software and
hardware companies and to provide appropriate reward opportunities for
achieving high levels of performance compared to similar organizations in
the marketplace;
3. To emphasize sustained performance by aligning rewards with
shareholder interests; and
4. To motivate executives and employees to achieve the Company's annual
and long-term business goals and encourage behavior toward the fulfillment
of those objectives.
Equity participation and a strong alignment to shareholders' interests are
key elements of the Company's executive compensation philosophy. As a result
of this philosophy, the Company's executive compensation program consists of
base salary, cash bonuses, incentive stock options and standard benefits.
Base Salary and Cash Bonuses. The Board recognizes the importance of
maintaining compensation practices and levels of compensation competitive with
those offered by audio and video software and hardware companies in comparable
stages of development. For external marketplace comparison purposes, a
significant group of companies operating in our industry are utilized for
determining competitive compensation levels.
Base salary represents the fixed component of the executive compensation
program. The Company's philosophy regarding base salaries is conservative,
maintaining base salaries at or somewhat below the competitive industry
approximate median. Determination of base salary levels is established on an
annual review of marketplace competitiveness with similar audio and video
software and hardware companies, and on individual performance. Periodic
increases in base salary relate to individual contributions evaluated against
established objectives, relative marketplace competitiveness levels, length of
service, and the industry's annual competitive pay practice movement.
Cash bonuses are based primarily on the Company's financial performance for
the year and also include an assessment of individual performance.
Equity Ownership--Stock Options. The Board strongly believes that it is
important for key employees who have significant responsibility for the
management, growth, and future success of the company to have significant
equity ownership interest in the Company and have the potential to gain
financially from Company stock price increases. The interests of shareholders,
executives and employees should thereby be closely aligned. The Board seeks to
provide such ownership interest to executives and key employees, giving them
the right to purchase shares of Common Stock of the Company in the future at a
price equal to fair market value at the date of grant. The Company generally
grants such stock options throughout the year.
Under the Company's Stock Option Plan, shares of the Company's Common Stock
may be purchased at the option price set by the Company. All grants must be
exercised according to the provisions of the Company's
8
Stock Option Plan. All outstanding options expire on the earlier of ten years
after the date of grant or 90 days after termination of service with the
Company.
Other Benefits. The Company's philosophy is to provide adequate health- and
welfare-oriented benefits to executives and employees. The Company provides no
other executive benefits.
The Company's Chief Executive Officer, Mr. Doris, is also a founder of the
Company with a significant equity interest. The Board seeks to compensate Mr.
Doris primarily through base salary. In fiscal 2001, Mr. Doris was eligible to
receive a base salary of $225,000, which was consistent with fiscal 2000. Mr.
Doris did not receive a cash bonus in the fiscal year ended March 31, 2001. In
establishing Mr. Doris' salary the Board considered the Company's past growth
in revenue and profitability, the Company's experience in achieving product
development goals, domestic and international sales and the Company's ability
to develop the current management team. The total cash compensation paid to
Mr. Doris in the fiscal year ended March 2001 is less than that paid to chief
executive officers of the competitive industry comparative group; however, the
Board believes that this compensation is appropriate in light of his equity
interest.
Summary
The Board believes that the compensation of executives by the Company is
appropriate and competitive with the compensation programs provided by other
audio and video software and hardware companies with which the Company
competes for executives and employees in light of the equity interests of the
Company's founders. The Board believes its compensation strategy, principles,
and practices result in a compensation program tied to shareholder returns and
linked to the achievement of annual and longer-term financial and operational
results of the Company on behalf of the Company's shareholders.
The Board of Directors
--Robert J. Doris
--Robert M. Greber
--Peter J. Marguglio
--Mary C. Sauer
--R. Warren Langley
Compensation Committee Interlocks and Insider Participation
The Board does not have a Compensation Committee. Accordingly, the entire
Board determines executive compensation. Robert J. Doris and Mary C. Sauer are
directors and are the founders and principal executive officers of the
Company.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Securities and Exchange Commission and the National Association of Securities
Dealers. Such officers, directors and ten percent shareholders are also
required by Securities and Exchange Commission rules to furnish the Company
with copies of all Section 16(a) forms that they file.
Based solely on representations from certain reporting persons, the Company
believes that, during the fiscal year ended March 31, 2001, each of the
following persons failed to file a Form 5 within the time period required by
the rules and regulations of the Securities and Exchange Commission: Robert J.
Doris, Mary C. Sauer, Peter J. Marguglio, Robert M. Greber, Christopher A.
Kryzan and A. Clay Leighton. The Company also believes R. Warren Langley
failed to file a Form 3 within the time period required.
9
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return on our common stock with the cumulative total return of of the Standard
and Poors 500 Index and the JP Morgan H&Q Technology Index. The total
stockholder return reflects the change in share price during the period,
assuming an investment of $100 on March 31, 1996 plus the reinvestment of
dividends, if any. No dividends were paid on the common stock during the
period shown. The stock price performance shown below is not necessarily
indicative of future stock price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG SONIC SOLUTIONS, THE S&P 500 INDEX
AND THE JP MORGAN H&Q TECHNOLOGY INDEX
[Graph]
FYE 03/96 FYE 03/97 FYE 03/98 FYE 03/99 FYE 03/00 FYE 03/01
- --------------------------------------------------------------------------------
Sonic Solutions.. $100.00 $ 90.91 $ 44.55 $ 60.00 $134.55 $ 19.10
S&P 500 Index.... $100.00 $119.82 $177.34 $210.07 $247.77 $194.06
H&Q Technology... $100.00 $116.23 $173.10 $242.17 $560.21 $224.50
10
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected KPMG LLP as independent public accountants to audit
the financial statements of the Company for the 2002 fiscal year. KPMG LLP has
acted as the Company's auditors since March 31, 1993. Representatives of KPMG
LLP are expected to be present at the Annual meeting and will have an
opportunity to make a statement if they desire to do so. The representatives
of KPMG LLP also will be available to respond to questions raised during the
meeting. The Audit Committee approved non-audit services performed by KPMG LLP
in fiscal year 2001, and determined that such services were compatible with
maintaining KPMG LLP's independence with respect to the Company. A summary of
the fees paid to KPMG LLP for services in fiscal year 2001 appears below.
Financial Information
Audit Systems Design and
Fees Fees Implementation Fees All Other
---- ----- --------------------- ---------
KPMG LLP............................ $122,950 $0 $76,570
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
at the Company's 2001 annual meeting of shareholders must be received by the
Secretary of the Company no later than June 4, 2002 in order to be included in
the proxy soliciting material relating to that meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the enclosed proxy to vote the shares
they represent as the Board may recommend.
THE BOARD OF DIRECTORS
Dated: July 18, 2001
11
EXHIBIT A
AUDIT COMMITTEE CHARTER
ADOPTED BY THE BOARD OF DIRECTORS OF
SONIC SOLUTIONS
Purposes:
The purposes of the audit committee are to:
Monitor the integrity of the financial statements of the company.
Oversee the independence of the company's independent auditor.
Recommend to the board of directors the selection of the independent
auditor, evaluate the independent auditor and, where appropriate, recommend
the replacement of the independent auditor; it being understood that the
independent auditor is ultimately accountable to the board of directors and
the audit committee, and that the board of directors and the audit
committee have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent auditor (or to
propose the independent auditor for stockholder approval).
Composition:
By June 14, 2001 (or earlier if possible), the audit committee shall be
composed of three or more directors, as determined by the board of
directors, each of whom shall be meet the independence and financial
literacy requirements of NASDAQ, and at least one of whom shall have past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or
background which results in the individual's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities.
Unless a chair is designated by the board of directors, the committee
members may appoint their own chair by majority vote.
Responsibilities
Recommend to the board of directors the selection of the independent
auditor, which shall ultimately be accountable to the audit committee and
the board of directors.
Evaluate the written disclosures and the letter that the independent
auditor submits to the audit committee regarding the auditor's independence
in accordance with Independence Standards Board Standard No. 1, discuss
such reports with the auditor and, if so determined by the audit committee
in response to such reports, recommend that the board of directors take
appropriate action to oversee the independence of the independent auditor.
Discuss with the independent auditor the matters required to be discussed
by SAS 61, as it may be modified or supplemented.
Meet with management and the independent auditor to review and discuss the
annual financial statements and the report of the independent auditor
thereon and, to the extent the independent auditor or management brings any
such matters to the attention of the audit committee, to discuss
significant issues encountered in the course of the audit work, including
restrictions on the scope of activities, access to required information or
the adequacy of internal controls.
Review the management letter delivered by the independent auditor in
connection with the audit.
Following such reviews and discussions, if so determined by the audit
committee, recommend to the board of directors that the annual financial
statements be included in the company's annual report.
12
Meet quarterly with management and the independent auditor to review and
discuss the quarterly financial statements; provided that this
responsibility may be delegated to the chairman of the audit committee.
Meet at least once each year in separate executive sessions with management
and the independent auditor to discuss matters that the committee or either
of these groups believes could significantly affect the financial
statements and should be discussed privately.
Have such meetings with management as the audit committee deems appropriate
to discuss significant financial risk exposures facing the company, and
steps management has taken to monitor and control such exposures.
Review significant changes to the company's accounting principles and
practices proposed by the independent auditor or management.
Evaluate the performance of the independent auditor and, if so determined
by the audit committee, recommend to the board of directors replacement of
the independent auditor.
At the request of company counsel, review with company counsel legal and
regulatory matters that may have a significant impact on the company's
financial statements, compliance policies or programs.
Conduct or authorize such inquiries into matters within the committee's
scope of responsibility as the committee deems appropriate. The committee
shall be empowered to retain independent counsel and other professionals to
assist in the conduct of any such inquiries.
Provide minutes of audit committee meetings to the board of directors, and
report to the board of directors on any significant matters arising from
the committee's work.
At least annually, review and reassess this charter and, if appropriate,
recommend proposed changes to the board of directors.
Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the company's annual proxy statement.
It is not the responsibility of the audit committee to plan or conduct
audits, or to determine whether the company's financial statements are
complete and accurate or in accordance with generally accepted
accounting principles. It is not the responsibility of the audit
committee to conduct inquiries, to resolve disagreements, if any,
between management and the independent auditor, or to assure
compliance with laws, regulations or company compliance
policies or programs.
13
SONIC SOLUTIONS
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Robert J. Doris and A. Clay Leighton, or
either of them, each with full power of substitution, the lawful attorneys and
proxies of the undersigned to vote as designated on the reverse side, and in
their discretion, upon such other business as may properly be presented to the
meeting, all of the shares of SONIC SOLUTIONS which the undersigned shall be
entitled to vote at the Annual Meeting of Shareholders to be held September 4,
2001, and at any adjournments or postponements thereof.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. WHEN NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED ON THE REVERSE SIDE. The proxy holders in their
discretion may cumulate votes for the election of directors. This proxy may be
revoked at any time prior to the time it is voted by any means described in the
accompanying Proxy Statement.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
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FOLD AND DETACH HERE
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The Board of Directors recommends a vote FOR Item 1. Please mark your [X]
votes as indicated
in this example
Proposal 1 - ELECTION OF DIRECTORS
WITHHELD
FOR FOR ALL
[_] [_] Please complete, date and
sign this proxy and mail
it promptly in the enclosed
envelope to assure
representation of your
shares.
Nominees:
01) Robert J. Doris 02) Peter J. Marguglio 03) R. Warren Langley
04) Robert M. Greber 05) Mary C. Sauer
WITHHELD FOR: (Write that nominee's name in the space provided below).
________________________________________________________________________________
Signature______________________ Signature________________________ Date________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
FOLD AND DETACH HERE