Board of Directors Compensation Policy
 
This Compensation Policy (the “Policy”) is effective June 12, 2008. The Policy
is intended to govern compensation for individuals serving as directors of Sonic
Solutions (the “Company”). This Policy amends and restates the Board of
Directors Compensation Policy dated January 23, 2007.
 

1.
Definitions

 
As used in this Policy, the following terms shall have the indicated meanings:
 
1.1 “Outside Director” means an individual serving as a member of the board of
directors who is not employed by the Company as an Executive Officer.
 
1.2 “Chairman” means an Outside Director who serves as chairman of either the
board or a standing committee of the board.
 
1.3 “Annual Board Meeting” means that meeting of the board of directors that is
held immediately following the annual meeting of shareholders.
 
1.4 “Change of Control” shall have the meaning defined in the Company’s 2004
Equity Compensation Plan.
 

2.
Compensation Targets

 
2.1 Annual Compensation Targets. The board shall consider the current annual
compensation targets for Outside Directors and Chairmen and the cash
compensation target percentage at the Annual Board Meeting and revise them if
the board considers such revision desirable. The board may revise the annual
compensation targets of Outside Directors or Chairmen or the cash compensation
target percentage at any time in its sole discretion.
 
2.2 Compensation Targets. Until otherwise determined by the board pursuant to
Section 2.1 above, the annual compensation target for an Outside Director shall
be $120,000 and the annual compensation target for a Chairman shall be 125% of
the annual compensation target for an Outside Director. The cash compensation
target percentage for both Outside Directors and Chairmen is set at 50% of the
applicable annual compensation target.
 

3.
Calculation and Payment of Compensation

 

3.1
Calculation and Payment of Cash Compensation.

 
(a) Standard Calculation. Annual cash compensation for Outside Directors and
Chairmen shall be set by taking the annual compensation target, multiplying by
the cash compensation target percentage, and then rounding to the next highest
thousand dollar increment.
 
(b) Special Calculation. In the event the Annual Board Meeting is scheduled
later than October 1 in any year, then, in light of the inability to calculate
the next year’s annual equity compensation target percentage as contemplated
hereunder until such Annual Meeting is held, effective on October 1 of that
year, the equity compensation target percentage for both Outside Directors and
Chairmen shall be shall be reduced to 0% and the cash compensation target
percentage for both Outside Directors and Chairmen shall be increased to 100%,
each until the occurrence of such Annual Board Meeting.
 

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(c) Payment. Cash compensation shall be paid to Outside Directors and Chairmen
on a calendar quarter basis. The Company’s Chief Financial Officer is authorized
to adjust cash compensation paid for days served (in the case of individuals
joining or leaving the board, or assuming or leaving a chairmanship), or for
rates which vary in any particular quarter.
 

3.2
Calculation and Payment of Equity Compensation.

 
(a) Type of Equity Compensation; When Granted; How Valued. Equity compensation
may take the form of stock options, restricted stock, or other equity based
units at the discretion of the board, and within limits imposed by applicable
regulations, and shareholder authorization. Unless the board in its sole
discretion determines otherwise, the same form of equity compensation used in
the compensation plans of executive officers shall be used for compensation of
Outside Directors and Chairmen. Annual equity compensation for Outside Directors
and Chairmen shall be granted by board action at the Annual Board Meeting.
Valuation of such equity compensation shall be performed using the closing price
of the Company’s stock on the day of the Annual Board Meeting, or, if the Annual
Board Meeting is held on a day on which the Company’s stock is not traded, using
the closing price on the last day on which the Company’s stock traded preceding
the day of the Annual Board Meeting. Valuation of equity units shall be made
using methodologies comparable to those utilized by the Company for calculating
stock compensation for financial reporting purposes.
 
(b) Calculation of Equity Compensation. Equity compensation for Outside Director
or Chairmen shall be calculated by multiplying the applicable annual
compensation target by the reciprocal of the cash compensation target
percentage. The resulting dollar amount shall then be divided by the value
calculated for an equity based unit. The resulting number of units shall then be
rounded up to the next even hundred units. Let us consider an example for an
Outside Director: assume the form of equity compensation to be used is a stock
option, that the Company’s shares are trading at $20, and that the application
of the standard valuation formula yields a value of $9 per stock option. Taking
the reciprocal of the target cash compensation percentage, that is, 50%, and
multiplying the annual target by this amount, yields a value of $60,000.
Dividing by the unit value yields 60,000 ÷ 9 = 6,666.67. Rounding up results in
an option on 6,700 shares of the Company’s stock.
 
(c) Terms of Equity Compensation. Units of equity compensation for Outside
Directors or Chairmen shall vest over one year in equal monthly installments.
 

3.3
Compensation for New Board Members.

 
(a) Special Equity Grant. Outside Directors or Chairmen who join the Company’s
board (whether at the time of the Annual Board Meeting or another time) may
receive, at the discretion of the board, a one-time grant of equity units
greater than that made to directors at the most recent Annual Board Meeting.
 
(b) Cash Compensation. Outside Directors or Chairmen who join the Company’s
board at a time other than the Annual Board Meeting shall have their cash
compensation set at the same level as that currently being paid to serving
Outside Directors or Chairmen.
 
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