EXHIBIT 3.1
CERTIFICATE OF DETERMINATION OF
SERIES E PREFERRED STOCK OF
SONIC SOLUTIONS
1. The undersigned, Robert J. Doris and Mary C. Sauer, hereby certify that:
2. They are the duly elected and President and Secretary, respectively, of
Sonic Solutions, a California corporation (the "Corporation").
3. The Corporation hereby designates Three Hundred Thousand (300,000)
shares of Series E Preferred Stock (the "Series E Preferred Stock").
4. None of the shares of Series E Preferred Stock have been issued.
5. Of the 850,000 shares of Series D Preferred Stock (the "Series D
Preferred Stock"), 716,609 remain issued and outstanding.
6. None of the shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock (collectively, the "Series A, B and C Preferred")
were issued and outstanding as of the date hereof.
7. Pursuant to authority given by the Corporation's Restated Articles of
Incorporation (the "Restated Articles of Incorporation"), the Board of Directors
of the Corporation (the "Board of Directors") has duly adopted the following
recitals and resolutions:
WHEREAS, the Restated Articles of Incorporation provide for a class of
shares known as Preferred Shares (the "Preferred Shares"), issuable from time to
time in one or more series;
WHEREAS, the Board of Directors is authorized within the limitations and
restrictions stated in the Restated Articles of Incorporation to determine or
alter the rights, preferences, privileges and restrictions granted to or imposed
on any wholly unissued series of Preferred Shares, to fix the number of shares
constituting any such series, and to determine the designation thereof, or any
of them; and
WHEREAS, the Corporation has not issued any shares of Series E Preferred
Stock and the Board of Directors desires to determine the rights, preferences,
privileges and restrictions relating to the Series E Preferred Stock, and the
number of shares constituting said Series and the designation of said Series.
NOW, THEREFORE, BE IT RESOLVED: That the President and the Secretary of
this Corporation are each authorized to execute, verify and file a certificate
of determination of preferences with respect to the Series E Preferred Stock in
accordance with the laws of the State of California.
RESOLVED FURTHER: That the Board of Directors hereby determines the rights,
preferences, privileges and restrictions relating to the Series E Preferred
Stock shall be as set forth below:
"Three Hundred Thousand (300,000) of the authorized shares of the Preferred
Stock, none of which have been issued or are outstanding, are hereby designated
"Series E Preferred Stock" (the "Series E Preferred Stock").
The rights, preferences, privileges, restrictions and other matters
relating to the Series E Preferred Stock are as follows:
1. Dividend Rights. The holders of Series E Preferred Stock shall be
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entitled to receive in any fiscal year when, as and if declared by the Board of
Directors, out of any assets at the time legally available therefor, after all
accumulated dividends have been paid to the holders of Series D Preferred Stock,
distributions in cash, per share of Series E Preferred Stock (as adjusted for
any stock dividends, combinations, splits, reclassifications or the like with
respect to such shares), at the annual rate of $0.16, until such shares have
been converted into Common Stock of the Corporation (the "Common Stock") or
redeemed by the Corporation as provided in Section 5 hereunder. Such
distributions shall be payable, when, as and if declared, quarterly in arrears
for each calendar quarter of each fiscal year. Distributions may be declared or
paid upon shares of Common Stock in any fiscal year only if distributions shall
have been paid or declared and set apart upon all shares of Series E Preferred
Stock at such applicable annual rate for each quarter of such fiscal year
including the quarter in which such distributions on Common Stock are declared.
Dividends on Series E Preferred Stock may be paid, at the election of the
Corporation, in cash or in shares of Series E Preferred Stock at a price equal
to the then applicable "Conversion Rate" (as defined in Section 4 below). The
right to such dividends on Series E Preferred Stock, if not declared and paid,
shall accrue in each fiscal year whether or not there are any assets legally
available therefor, and such right shall be cumulative.
2. Voting Rights. Except as otherwise provided herein or by law, each
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holder of Series E Preferred Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such shares of Series E
Preferred Stock could be converted and shall have voting rights and powers equal
to the voting rights and powers of the Common Stock.
3. Liquidation, Dissolution or Winding Up. In the event of any
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liquidation, dissolution or winding up of the Corporation, either voluntary or
involuntary (a "Liquidation Event"), after full payment has been made to the
holders of Series D Preferred Stock, which shall be prior and in preference to
any distribution of the assets or surplus funds of the Corporation to the
holders of Series A, B C, Preferred, Series E Preferred Stock and the Common
Stock, by reason of their ownership thereof, the amount specified in the
Certificate of Determination for such Series D Preferred Stock, the holders of
the Series E Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of the assets or surplus funds of the Corporation
to the holders of Series A, B and C Preferred and of the Common Stock by reason
of their ownership thereof, the amount of $4.00 per share (as adjusted for any
stock dividends, combinations, splits, reclassifications or the like with
respect to such shares) plus all accrued but unpaid dividends on such share for
each share of Series E Preferred Stock then held by them (the "Liquidation
Preference"). If, upon the occurrence of such event the assets and funds thus
distributed among
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the holders of the Series E Preferred Stock shall be insufficient to permit the
holders of the Series E Preferred Stock the full Liquidation Preference, then
the entire assets and funds of the Corporation legally available for
distribution shall be distributed among the holders of the Series E Preferred
Stock in proportion to the number of shares of Series E Preferred Stock held by
each such holder. After payment has been made to the holders of the Series E
Preferred Stock of the Liquidation Preference, the holders of the Common Stock
shall be entitled to receive the remaining assets of the Corporation in
proportion to the number of shares of Common Stock held by each such holder. For
the purposes of this Section 3, (i) any acquisition of the Corporation by means
of merger or other form of corporate reorganization in which outstanding shares
of the Corporation are exchanged for securities or other consideration issued,
or caused to be issued, by the acquiring corporation or its subsidiary (other
than a mere reincorporation transaction) or (ii) a sale of all or substantially
all of the assets of the Corporation, shall be treated as a Liquidation Event
and shall entitle the holders of Series E Preferred Stock to receive upon such
Liquidation Event, payment of the Liquidation Preference.
4. Conversion Rights. Subject to the redemption rights of the Corporation
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as set forth in Section 5 below, each holder of Series E Preferred Stock may, at
any time, upon surrender of the certificates therefor, convert each share of
Series E Preferred Stock (and all accrued and unpaid dividends thereon) held by
such holder into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing the Liquidation Preference for each share of
Series E Preferred Stock by the Conversion Rate applicable to such share,
determined as hereinafter provided, in effect on the date the certificate is
surrendered for conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of shares of the Series E Preferred Stock (the
"Conversion Rate") shall initially be $4.00 per share of Common Stock. Such
initial Conversion Rate shall be adjusted as hereinafter provided.
5. Redemption Rights of the Corporation.
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(a) Time of Redemption. At any time after the issuance of Series
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E Preferred Stock, the Corporation may elect to redeem the whole or any part of
the Series E Preferred Stock (the "Corporation Redemption"), for cash at a price
per share equal to the Liquidation Preference, plus any accrued but unpaid
dividends on such shares (the "Redemption Price"); provided, however, that the
closing price of the Corporation's Common Stock, as reported by Bloomberg, L.P.,
for each of the ten (10) consecutive trading days immediately preceding the date
on which the Corporation delivers a notice of redemption (a "Notice of
Redemption") is equal to or more than $4.00 per share. A Notice of Redemption
shall be mailed by overnight courier not earlier than 30 days prior to the
redemption date indicated in the Notice of Redemption (the "Redemption Date") to
the holders of record of such Series E Preferred Stock, addressed to each such
holder at the holder's address appearing on the records of the Corporation. The
Notice of Redemption shall set forth the number of shares of Series E Preferred
Stock which the Corporation intends to redeem, the Redemption Date, the
Redemption Price and the place at which shareholders may obtain payment upon
surrender of their certificates.
(b) Mechanics of Corporation Redemption. If the Corporation
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elects to limit the number of Series E Preferred Stock which it will redeem
under a Notice of Redemption, the Corporation shall allocate for redemption from
each holder of Series E Preferred Stock a number
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of shares equal to such holder's pro-rata amount (based on the number of Series
E Preferred Stock held by such holder on the Redemption Date relative to the
total number of Series E Preferred Stock outstanding on such date).
(c) Payment of Redemption Price. The Corporation shall pay the
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applicable Redemption Price to the holder of the Series E Preferred Stock being
redeemed in cash on the Redemption Date (if the shares have not been submitted
for conversion).
(d) Right to Convert. Notwithstanding the fact that said shares
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have been called for redemption, the holders of such shares shall have the right
to convert said shares in accordance with Section 4 above. This right to convert
shall terminate at the close of business on the day prior to the Redemption
Date.
6. Adjustment of Conversion Rate. The number of and kind of securities to
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which the holder of Series E Preferred Stock is entitled upon conversion shall
be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
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Corporation shall at any time after the date hereof, but prior to the conversion
or redemption of the Series E Preferred Stock, subdivide its outstanding
securities as to which rights under this Agreement exist, by split-up, spin-off,
or otherwise, or combine its outstanding securities as to which rights under
this Agreement exist, the number of shares of Common Stock as to which the
holder of Series E Preferred Stock is entitled, upon conversion as of the date
of such subdivision, split-up, spin-off or combination, shall forthwith be
proportionately increased in the case of a subdivision, or proportionately
decreased in the case of a combination.
(b) Stock Dividend. If at any time after the date hereof the
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Corporation declares a dividend or other distribution on Common Stock payable in
Common Stock or other securities or rights convertible into or exchangeable for
Common Stock ("Common Stock Equivalents"), without payment of any consideration
by holders of Common Stock for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon exercise or conversion thereof), then the number of shares of
Common Stock, to which the holders of Series E Preferred Stock is entitled upon
conversion, shall be increased as of the record date (or the date of such
dividend distribution if no record date is set) for determining which holders of
Common Stock shall be entitled to receive such dividends, in proportion to the
increase in the number of outstanding shares (and shares of Common Stock
issuable upon conversion of all Common Stock Equivalents) of Common Stock as a
result of such dividend.
(c) Other Distributions. If at any time after the date hereof
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the Corporation distributes to holders of its Common Stock, other than as part
of a dissolution or liquidation or the winding up of its affairs, cash, any
securities (other than the Corporation's own Common Stock or Common Stock
Equivalents), any evidence of indebtedness or any of its assets, then, in any
such case, the holders of Series E Preferred Stock shall be entitled to receive,
upon conversion of the Series E Preferred Stock, with respect to each share of
Common Stock issuable upon such conversion, the amount evidencing such
indebtedness, cash or other securities or assets (excluding cash and the
Corporation's own Common Stock or Common Stock
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Equivalents) which such holders of Series E Preferred Stock would have been
entitled to receive as a result of the happening of such event with respect to
each such share of Common Stock the holders of Series E Preferred Stock would
have held had all the outstanding Series E Preferred Stock still held by such
holders been converted immediately prior to the record date or other date
determining the shareholders entitled to participate in such distribution.
(d) Merger, Consolidation, etc. If at any time after the date
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hereof there shall be a merger or consolidation of the Corporation with or into,
or a transfer of all or substantially all of the assets of the Corporation to,
another entity (a "Consolidation Event"), then each holder of Series E Preferred
Stock shall be entitled to receive upon such transfer, merger or consolidation
becoming effective, the number of shares or other securities or property of or
cash or other consideration from the Corporation, or of the successor
corporation resulting from such merger or consolidation, to which such holders
of Series E Preferred Stock would have been entitled to receive as a result of
the happening of such event, with respect to each such shares of Common Stock as
the holders of Series E Preferred Stock would have held had all the outstanding
Series E Preferred Stock still held by such holders been converted immediately
prior to such transfer, merger or consolidation becoming effective or to the
applicable record date thereof, as the case may be. The Corporation shall not
effect any Consolidation Event unless the resulting successor or acquiring
entity (if not the Corporation) assumes by written instrument the obligation to
deliver to the holders of Series E Preferred Stock such shares of stock and/or
securities as the holder of Series E Preferred Stock is entitled to receive had
the Series E Preferred Stock been converted in accordance with the foregoing.
(e) Reclassification, Etc. If at any time after the date hereof
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there shall be a reclassification of any securities as to which purchase rights
under this Certificate exist, into the same or a different number of securities
of any other class or classes, then the holders of Series E Preferred Stock
shall thereafter be entitled to receive, upon conversion of such Series E
Preferred Stock, the number of shares or other securities or property or cash or
other consideration resulting from such reorganization or reclassification,
which would have been received by the holders of Series E Preferred Stock, for
the shares of stock subject to this Certificate, had the Series E Preferred
Stock been converted at such time.
(f) Adjustments: Additional Shares, Securities or Assets. If at
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any time, as a result of an adjustment made pursuant to this Section 6, the
holders of Series E Preferred Stock shall become entitled to receive shares
and/or other securities or assets other than Common Stock, then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 6.
(g) Notice of Adjustments; Notices. Whenever the number of
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shares of Common Stock due upon conversion shall be adjusted pursuant to this
Section 6, the Corporation shall execute and deliver to the holders of Series E
Preferred Stock, a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated and the number of shares Common Stock due upon
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conversion after giving effect to such adjustment, and shall cause a copy of
such certificate to be mailed (by first class mail, postage prepaid) to the
holders of Series E Preferred Stock.
7. Mechanisms for Effecting Conversions. Subject to the Corporation's
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rights of redemption in Section 5, each holder of Series E Preferred Stock shall
effect conversions by surrendering the certificate or certificates representing
such shares of Series E Preferred Stock to be converted to the Corporation
together with a written conversion notice (the "Conversion Notice") which shall
specify the number of shares of Series E Preferred Stock, and the date on which
such conversion is to be effected, which date may not be prior to the date the
holder delivers such Conversion Notice by facsimile (the "Conversion Date"). If
no Conversion Date is specified in a Conversion Notice, the Conversion Date
shall be the first business day after the date that the Conversion Notice is
transmitted to the Corporation by facsimile or the third business day after the
Conversion Notice is mailed to the Corporation by first class US mail. If the
holder is converting less than all shares of Series E Preferred Stock
represented by the certificate(s) tendered by the holder with the Conversion
Notice, or if a conversion hereunder cannot be effected in full for any reason,
the Corporation shall convert up to the number of shares of Series E Preferred
Stock which is specified in the Conversion Notice and may be so converted and
shall promptly deliver to such holder a certificate for such number of shares as
have not been converted.
8. Delivery of Stock Certificates.
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(a) Subject to the terms and conditions herein, as soon as
practicable after a request for conversion, the Corporation at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the holders of Series E
Preferred Stock, or as the holders of the Series E Preferred Stock may lawfully
direct, a certificate or certificates for the number of fully paid and
non-assessable shares of Common Stock to which the holders of Series E Preferred
Stock shall be entitled on such conversion, together with any other stock or
other securities or property (including cash, where applicable) to which the
holders of Series E Preferred Stock are entitled upon such conversion in
accordance with the provisions hereof.
(b) In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Corporation's Transfer Agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holders of Series E
Preferred Stock and pursuant to this Section 8, the Corporation shall use its
best efforts to cause its Transfer Agent to electronically transmit the Common
Stock issuable upon conversion to the holder by crediting the account of
holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system. The time periods for delivery described in the immediately
preceding paragraph shall apply to the electronic transmittals described herein.
(c) In lieu of any fractional shares to which the holders of the
Series E Preferred Stock would otherwise be entitled, this Corporation shall pay
cash equal to such fraction multiplied by the Fair Market Value of one share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of
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Series E Preferred Stock of each holder at the time converting into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
9. Reservation of Stock Issuable Upon Conversion. The Corporation shall
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at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series E Preferred Stock, such number of shares of Common Stock as
shall be necessary to effect the conversion of the Series E Preferred Stock into
Common Stock.
10. Replacement of Certificate. Upon receipt of evidence reasonably
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satisfactory to the Corporation of the loss, theft, destruction or mutilation of
this Certificate and, in the case of any such loss, theft or destruction of the
Certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Corporation or, in the case of any such
mutilation, on surrender and cancellation of such Certificate, the Corporation
at its expense will execute and deliver, in lieu thereof, a new Certificate of
like tenor.
11. Vote to Change the Terms of Series E Preferred Stock; Preferred Rank.
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The approval of the Board of Directors and the affirmative vote at a meeting
duly called by the Board of Directors for such purpose (or the written consent
without a meeting) of the holders of not less than a majority of the then
outstanding shares of the Series E Preferred Stock shall be required (a) to
amend, alter, change or repeal any of the powers, designations, preferences and
rights of the Series E Preferred Stock, (b) to authorize the issuance of
additional shares of Series E Preferred Stock, and (c) for the Corporation to
authorize or issue additional or other capital stock that is of senior or equal
rank to the Series E Preferred Stock in respect of the preferences as to
distributions and payments upon the liquidation, dissolution and winding up of
the Corporation."
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IN WITNESS WHEREOF, the undersigned each declares under penalty of perjury
that the matters set out in the foregoing certificate are true of his or her own
knowledge, and the undersigned have executed this certificate at Novato,
California as of the 28th day of November, 2001.
/s/ Robert J. Doris
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Robert J. Doris, President
/s/ Mary C. Sauer
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Mary C. Sauer, Secretary
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