Document:

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                                                                   EXHIBIT 10.13

                         PRIVATE EQUITY LINE AGREEMENT

                                by and between

                          KINGSBRIDGE CAPITAL LIMITED

                                      and

                                SONIC SOLUTIONS

                            dated as of May 4, 2000

     This PRIVATE EQUITY LINE AGREEMENT is entered into as of the 4th day of
May, 2000 (this "Agreement"), by and between Kingsbridge Capital Limited (the
"Investor"), an entity organized and existing under the laws of the British
Virgin Islands and Sonic Solutions, a corporation organized and existing under
the laws of the State of California (the "Company").

     WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from the
Company, up to $20,000,000 of the Common Stock (as defined below); and

     WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.

     NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I
                              Certain Definitions

     Section 1.1  "Adjustment Period" See Section .2.4(b).
                   -----------------
     Section 1.2  "Bid Price" shall mean the closing bid price (as reported by
                   ---------
Bloomberg L.P.) of the Common Stock on the Principal Market.

     Section 1.3 "Capital Shares" shall mean the Common Stock and any shares of
                   --------------
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.

     Section 1.4  "Closing" shall mean one of the closings of a purchase and
                   -------
sale of the Common Stock pursuant to Section 2.1.

     Section 1.5  "Closing Date" shall mean, with respect to a Closing, the
                   ------------
third Trading Day following the Put Date related to such Closing, provided all
conditions to such Closing have been satisfied on or before such Trading Day.

     Section 1.6  "Commitment Period" shall mean the period commencing on the
                   -----------------
earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have purchased Put
Shares pursuant to this Agreement for an aggregate Investment Amount of
$20,000,000, (y) the date
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this Agreement is terminated pursuant to Section 2.5(b), or (z) the date
occurring twenty-four (24) months from the date of commencement of the
Commitment Period.

     Section 1.7  "Common Stock" shall mean the Company's common stock, no par
                   ------------
value per share.

     Section 1.8  "Common Stock Equivalents" shall mean any securities that are
                   ------------------------
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities.

     Section 1.9  "Condition Satisfaction Date" See Section 7.2.
                   ---------------------------

     Section 1.10  "Damages" shall mean any loss, claim, damage, liability,
                    -------
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).

     Section 1.11  "Effective Date" shall mean the date on which the SEC first
                    --------------
declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).

     Section 1.12  "Exchange Act" shall mean the Securities Exchange Act of
                    ------------
1934, as amended and the regulations promulgated thereunder.

     Section 1.13  "Investment Amount" shall mean the dollar amount specified in
                    -----------------
a Put Notice to be paid by the Investor to purchase Put Shares in accordance
with Section 2.2 hereof.

     Section 1.14  "Legend" See Section 8.1.
                    ------

     Section 1.15  "Market Price" on any given date shall mean the average of
                    ------------
the lowest intra-day prices of the Common Stock over the Valuation Period.
"Lowest intra-day price" shall mean the lowest trade price of the Common Stock
(as reported by Bloomberg L.P.) during any Trading Day; provided, however, that
                                                        --------  -------
in the event that the volume of Common Stock traded on any such Trading Day is
less than five thousand (5000) shares at the actual lowest intra-day price, then
"lowest intra-day price" for such Trading Day shall mean the next lowest intra-
day price, regardless of the volume of Common Stock traded at such next lowest
intra-day price.

     Section 1.16  "Material Adverse Effect" shall mean any effect on the
                    -----------------------
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company or to the Company and such
other entities controlling or controlled by the Company, taken as a whole,
and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to enter into and perform
its obligations under any of (a) this Agreement and (b) the Registration Rights
Agreement.

     Section 1.17  "Maximum Commitment Amount" shall mean $20,000,000.
                    -------------------------

     Section 1.18  "Maximum Put Amount" shall mean with respect to each Put,
                    ------------------
subject to the provisions of Section 2.4 hereof, (i) $500,000 if the average
daily volume of shares of Common Stock traded during the preceding ten (10)
Trading Days (the "Average Trading Volume") is 40,000 shares or less; (ii)
$750,000 if the Average Trading Volume greater than 40,000 shares and less than
60,000 shares; and (iii) $1,000,000 if the Average Trading Volume equal to or
greater than 60,000 shares. Notwithstanding the foregoing, (i) in the event that
the Market Price is less than three dollars ($3.00) in connection with any Put,
the Maximum Put Amount shall be $150,000 and (ii) in the event that the Market
Price is less than one dollar ($1.00) in connection with any Put, the Maximum
Put Amount shall be $50,000.

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     Section 1.19  "NASD" shall mean the National Association of Securities
                    ----
Dealers, Inc.

     Section 1.20  "Outstanding" when used with reference to Common Shares or
                    -----------
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
--------  -------
directly or indirectly owned or held by or for the account of the Company.

     Section 1.21  "Person" shall mean an individual, a corporation, a
                    ------
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.

     Section 1.22  "Principal Market" shall mean the Nasdaq National Market, the
                    ----------------
Nasdaq Small-Cap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.

     Section 1.23  "Purchase Price" shall mean (i) in the event that the Market
                    --------------
Price is equal to or less than five dollars ($5.00), eighty-eight percent (88%)
of the Market Price of the Common Stock in respect of any Put Notice, or (ii) in
the event that the Market Price is greater than five dollars ($5.00) but less
than nine dollars ($9.00), ninety percent (90%) of the Market Price of the
Common Stock in respect of any Put Notice, or (iii) in the event that the Market
Price is equal to or greater than nine dollars ($9.00) but less than thirteen
dollars ($13.00), ninety-one percent (91%) of the Market Price of the Common
Stock in respect of any Put Notice, or (iv) in the event that the Market Price
is equal to or greater than thirteen dollars ($13.00), ninety-two percent (92%)
of the Market Price of the Common Stock in respect of any Put Notice.

     Section 1.24  "Put" shall mean each occasion on which the Company elects to
                    ---
tender Put Notice requiring the Investor to purchase a specified discretionary
amount of the Company's Common Stock, subject to the terms of this Agreement.

     Section 1.25  "Put Date" shall mean the Trading Day during the Commitment
                    --------
Period that a Put Notice is deemed delivered to the Investor pursuant to Section
2.2(b) hereof.

     Section 1.26  "Put Notice" shall mean a written notice to the Investor
                    ----------
setting forth the Investment Amount.

     Section 1.27  "Put Shares" shall mean all shares of Common Stock issued or
                    ----------
issuable pursuant to a Put that has occurred or may occur in accordance with the
terms and conditions of this Agreement.

     Section 1.28  "Registrable Securities" shall mean the Put Shares until (i)
                    ----------------------
the Registration Statement has been declared effective by the SEC and all Put
Shares have been disposed of pursuant to the Registration Statement, (ii) all
Put Shares have been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act ("Rule 144") are met, (iii) all Put Shares have been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend or
(iv) such time as, in the opinion of counsel to the Company, which counsel shall
be reasonably acceptable to the Investor, all Put Shares may be sold without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act.

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     Section 1.29  "Registration Rights Agreement" shall mean the agreement
                    -----------------------------
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor as of
the Subscription Date.

     Section 1.30  "Registration Statement" shall mean a registration statement
                    ----------------------
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement, and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.

     Section 1.31  "Regulation D" shall have the meaning set forth in the
                    ------------
recitals of this Agreement.

     Section 1.32  "SEC" shall mean the Securities and Exchange Commission.
                    ---
     Section 1.33  "Section 4(2)" shall have the meaning set forth in the
                    ------------
recitals of this Agreement.

     Section 1.34  "Securities Act" shall have the definition ascribed to it in
                    --------------
the recitals of this Agreement.

     Section 1.35  "SEC Documents" shall mean the Company's latest Form 10-K as
                    -------------
of the time in question, all Forms 10-Q and 8-K filed thereafter, and the Proxy
Statement for its latest fiscal year as of the time in question until such time
the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.

     Section 1.36  "Subscription Date" shall mean the date on which this
                    -----------------
Agreement is executed and delivered by the parties hereto.

     Section 1.37  "Trading Cushion" shall mean, at any time (subject to the
                    ---------------
provisions of Section 2.4 hereof), (i) the mandatory fifteen (15) Trading Days
between Put Dates if at such time the immediately preceding Put was consummated
for an Investment Amount of $650,000 or less and (ii) the mandatory twenty (20)
Trading Days between Put Dates if at such time the immediately preceding Put was
consummated for an Investment Amount of more than $650,000.

     Section 1.38  "Trading Day" shall mean any day during which the New York
                    -----------
Stock Exchange shall be open for business.

     Section 1.39  Reserved

     Section 1.40  "Valuation Event" shall mean an event in which the Company at
                    ---------------
any time during a Valuation Period takes any of the following actions:

          (a)  subdivides or combines its Common Stock;

          (b)  pays a dividend in its Capital Stock or makes any other
          distribution of its Capital Shares;

          (c)  issues any additional Capital Shares ("Additional Capital
          Shares"), otherwise than as provided in the foregoing Subsections (a)
          and (b) above, at a price per share less, or for other consideration
          lower, than the Bid Price in effect immediately prior to such
          issuance, or without consideration;

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          (d)  issues any warrants, options or other rights to subscribe for or
          purchase any Additional Capital Shares and the price per share for
          which Additional Capital Shares may at any time thereafter be issuable
          pursuant to such warrants, options or other rights shall be less than
          the Bid Price in effect immediately prior to such issuance;

          (e)  issues any securities convertible into or exchangeable for
          Capital Shares and the consideration per share for which Additional
          Capital Shares may at any time thereafter be issuable pursuant to the
          terms of such convertible or exchangeable securities shall be less
          than the Bid Price in effect immediately prior to such issuance;

          (f)  makes a distribution of its assets or evidences of indebtedness
          to the holders of its Capital Shares as a dividend in liquidation or
          by way of return of capital or other than as a dividend payable out of
          earnings or surplus legally available for dividends under applicable
          law or any distribution to such holders made in respect of the sale of
          all or substantially all of the Company's assets (other than under the
          circumstances provided for in the foregoing subsections (a) through
          (e); or

          (g)  takes any action affecting the number of Outstanding Capital
          Shares, other than an action described in any of the foregoing
          Subsections (a) through (f) hereof, inclusive, which in the opinion of
          the Company's Board of Directors, determined in good faith, would have
          a materially adverse effect upon the rights of the Investor at the
          time of a Put.

     Section 1.41  "Valuation Period" shall mean the period of five Trading Days
                    ----------------
during which the Purchase Price of the Common Stock is valued, which period
shall be with respect to the Purchase Price on any Put Date, the two Trading
Days preceding and the two Trading Days following the Trading Day on which a Put
Notice is deemed to be delivered, as well as the Trading Day on which such
notice is deemed to be delivered; provided, however, that if a Valuation Event
                                  --------  -------
occurs during any Valuation Period, a new Valuation Period shall begin on the
Trading Day immediately after the occurrence of such Valuation Event and end on
the fifth Trading Day thereafter.

                                  ARTICLE II
                       Purchase and Sale of Common Stock

     Section 2.1  Investments.
                  -----------

          (a)  Puts. Upon the terms and conditions set forth herein (including,
          without limitation, the provisions of Article VII hereof), on any Put
          Date the Company may deliver a Put Notice. The number of Put Shares
          that the Investor shall receive pursuant to such Put shall be
          determined by dividing the Investment Amount specified in the Put
          Notice by the Purchase Price on such Put Date.

          (b)  Intentionally Omitted.

          (c)  Maximum Amount of Put Shares.  Unless the Company obtains the
          requisite approval of its shareholders in accordance with the
          corporate laws of California and the applicable rules of the Principal
          Market, no more than 19.9% of the Outstanding shares of Common Stock
          may be issued and sold in the aggregate pursuant to this Agreement.

     Section 2.2  Mechanics.
                  ---------

          (a)  Put Notice.  At any time during the Commitment Period, the
          Company may deliver a Put Notice to the Investor, subject to the
          conditions set forth in Section 7.2;

                                       5
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          provided, however, the Investment Amount for each Put as designated by
          --------  -------
          the Company in the applicable Put Notice shall not be greater than the
          Maximum Put Amount.

          (b)  Date of Delivery of Put Notice.  A Put Notice shall be deemed
          delivered on (i) the Trading Day it is received by facsimile or
          otherwise by the Investor if such notice is received prior to 12:00
          noon New York time, or (ii) the immediately succeeding Trading Day if
          it is received by facsimile or otherwise after 12:00 noon New York
          time on a Trading Day or at any time on a day which is not a Trading
          Day. No Put Notice may be deemed delivered, on a day that is not a
          Trading Day.

     Section 2.3  Closings.  On each Closing Date for a Put, the Company shall
                  --------
deliver into escrow one or more certificates, at the Investor's option,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor or, at the Investor's option,
deposit such certificate(s) into such account or accounts previously designated
by the Investor and (ii) the Investor shall deliver to escrow the Investment
Amount specified in the Put Notice by wire transfer of immediately available
funds to an account or accounts designated by the Company on or before the
Closing Date.  In addition, on or prior to the Closing Date, each of the Company
and the Investor shall deliver all documents, instruments and writings required
to be delivered or reasonably requested by either of them pursuant to this
Agreement in order to implement and effect the transactions contemplated herein.
Payment of funds to the Company and delivery of the certificates to the Investor
shall occur out of escrow in accordance with the escrow agreement referred to in
Section 7.2(p) following (x) the Company's deposit into escrow of the
certificates representing the Put Shares and (y) the Investor's deposit into
escrow of the Investment Amount; provided, however, that to the extent the
                                 --------  -------
Company has not paid the fees, expenses and disbursements of the Investor's
counsel in accordance with Section 13.1, the amount of such fees, expenses and
disbursements shall be paid in immediately available funds, at the direction of
the Investor, to Investor's counsel with no reduction in the number of Put
Shares issuable to the Investor on such Closing Date; provided, further, that so
                                                      --------  -------
long as the Investor shall maintain professional liability, errors and omissions
liability and/or directors' and officers' liability insurance for its activities
related to the Put Shares or the Blackout Shares, one and three quarters of one
percent (1.75%) of such Investment Amount shall be either (i) retained by the
Investor in respect of premium payments for such insurance or (ii) paid in
immediately available funds, at the direction of the Investor in respect of such
premium payments, in either case, with no reduction in the number of Put Shares
to be issued and/or sold to the Investor on such Closing Date.

     Section 2.4  Special Circumstances; Adjustment Period.
                  ----------------------------------------

          (a)  Adjustment Period Notice. In the event that the Company shall in
          good faith anticipate executing an agreement of acquisition, merger or
          consolidation within ninety (90) days after giving the Investor
          Adjustment Period Notice (as defined below), the Company may, at its
          sole discretion, give the Investor at least twenty-one (21) days'
          irrevocable advance notice, in the form of Exhibit A hereto
          ("Adjustment Period Notice"), that the Company shall initiate an
          Adjustment Period (as defined below). The giving of such Adjustment
          Period Notice shall not constitute the disclosure of non-public
          information to the Investor under this Agreement.

          (b)  During the Adjustment Period:

               1.   The Maximum Put Amount shall be $1,000,000;

               2.   the Purchase Price shall be eighty-three percent (83%) of
               the Market Price upon a Put Date;

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               3.   the duration of the Trading Cushion shall be shortened to
               ten (10) Trading Days until the expiration of five consecutive
               weeks (the "Adjustment Period");

               4.   the Company shall not deliver a Put Notice such that the
               number of Put Shares to be purchased by the Investor upon the
               applicable Closing, when aggregated with all other shares of
               Common Stock then owned by the Investor beneficially or deemed
               beneficially owned by the Investor, would result in the Investor
               owning more than 4.9% of all of such Common Stock as would be
               outstanding on such Closing Date, as determined in accordance
               with Section 13(d) of the Exchange Act and the regulations
               promulgated thereunder. For purposes of this Section 2.4(b), in
               the event that the amount of Common Stock outstanding as
               determined in accordance with Section 13(d) of the Exchange Act
               and the regulations promulgated thereunder is greater on a
               Closing Date than on the date upon which the Put Notice
               associated with such Closing Date is given, the amount of Common
               Stock outstanding on such Closing Date shall govern for purposes
               of determining whether the Investor, when aggregating all
               purchases of Common Stock made pursuant to this Agreement, would
               own more than 4.9% of the Common Stock following such Closing
               Date.

     Section 2.5  Termination of Investment Obligation.  The obligation of the
                  ------------------------------------
Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to any Put, when a Put Notice has been given, but the
applicable Closing Date has not yet occurred) in the event that (i) the
Registration Statement is not effective within ninety (90) days following the
date required therefor in the Registration Rights Agreement, (ii) there shall
occur any stop order or suspension of the effectiveness of the Registration
Statement for an aggregate of thirty (30) Trading Days during the Commitment
Period, for any reason other than deferrals or suspension in accordance with
Section 1.1(f) of the Registration Rights Agreement, as a result of corporate
developments subsequent to the Subscription Date that would require such
Registration Statement to be amended to reflect such event in order to maintain
its compliance with the disclosure requirements of the Securities Act or (iii)
the Company shall at any time fail to comply with the requirements of Section
6.3, 6.4, 6.5 or 6.6; provided, however, that, in the event that the
                      --------  -------
Registration Statement is not declared effective on or before the date required
therefor in the Registration Rights Agreement solely due to the SEC's
determination that the transactions contemplated hereby do not qualify for
effective registration, then either party may, by five Business Days' prior
written notice to the other party, terminate this Agreement and all of the
rights and obligations of the parties hereunder.

     Section 2.6  Blackout Shares.  In the event that, (a) within five Trading
                  ---------------
Days of any Closing Date, the Company gives notice ("Blackout Notice") to the
Investor of an impending blackout period ("Blackout Period") in accordance with
Section 1.1(f) of the Registration Rights Agreement, and (b) the Bid Price on
the Trading Day immediately preceding such Blackout Period ("Old Bid Price") is
greater than the Bid Price on the first Trading Day following such Blackout
Period" that the Investor may sell its Registrable Securities pursuant to an
effective Registration Statement ("New Bid Price"), then the Company shall issue
to the Investor a number of additional shares of Registrable Securities (the
Blackout Shares") equal to the difference between (X) the product of the number
of Registrable Securities held by Investor immediately prior to the Blackout
Period" multiplied by the Old Bid Price, divided by the New Bid Price and (Y)
the number of Registrable Securities held by Investor immediately prior to the
Blackout Period."

     Section 2.7  Liquidated Damages.  The parties hereto acknowledge and agree
                  ------------------
that the obligation to issue Blackout Securities under Section 2.6 above shall
constitute liquidated damages and

                                       7
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not penalties.  The parties further acknowledge that (a) the amount of loss or
damages likely to be incurred is incapable or is difficult to precisely
estimate, (b) the amounts specified in such Section bears a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred by the Investor in connection with a Blackout Period under
Section 1.1(f) of the Registration Rights Agreement, and (c) the parties are
sophisticated business parties and have been represented by sophisticated and
able legal and financial counsel and negotiated this Agreement at arm's length.

                                  ARTICLE III
                  Representations and Warranties of Investor

The Investor represents and warrants to the Company that:

     Section 3.1  Intent.  The Investor is entering into this Agreement for its
                  ------
own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.

     Section 3.2  Sophisticated Investor. The Investor is a sophisticated
                  ----------------------
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.

     Section 3.3  Authority. This Agreement has been duly authorized and validly
                  ---------
executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.

     Section 3.4  Not an Affiliate. The Investor is not an officer, director or
                  ----------------
"affiliate" (as that term is defined in Rule 405 promulgated under the
Securities Act) of the Company.

     Section 3.5  Organization and Standing. Investor is duly organized, validly
                  -------------------------
existing, and in good standing under the laws of the British Virgin Islands.

     Section 3.6  Absence of Conflicts.  The execution and delivery of this
                  --------------------
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (b) (a) violate any provision of any indenture,
instrument or agreement to which Investor is a party or is subject, or by which
Investor or any of its assets is bound, (c) conflict with or constitute a
material default thereunder, (d) result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by Investor to any third party,
or (e) require the approval of any third-party (which has not been obtained)
pursuant to any material contract, agreement, instrument, relationship or legal
obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.

     Section 3.7  Disclosure; Access to Information. Investor has received all
                  ---------------------------------
documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested

                                       8
<PAGE>

by Investor.  The Company is subject to the periodic reporting requirements of
the Exchange Act, and Investor has reviewed or received copies of any such
reports that have been requested by it.

     Section 3.8  Manner of Sale.  At no time was Investor presented with or
                  --------------
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.

                                  ARTICLE IV
                 Representations and Warranties of the Company

The Company represents and warrants to the Investor that:

     Section 4.1  Organization of the Company. The Company is a corporation duly
                  ---------------------------
organized and existing in good standing under the laws of the State of
California and has all  requisite corporate authority to own, lease and operate
its properties and to carry on its business as now being conducted.  Except as
set forth in the SEC Documents, the Company does not have any subsidiaries.
Except as set forth in the SEC Documents, the Company does not own more than
fifty percent (50%) of or control any other business entity.  The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.

     Section 4.2  Authority. (i) The Company has the requisite corporate power
                  ---------
and authority to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and to issue the Put Shares and any Blackout
Shares; (ii) the execution, issuance and delivery of this Agreement and the
Registration Rights Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required; and (iii) this Agreement and the Registration
Rights Agreement have been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.

     Section 4.3  Capitalization.  The authorized capital stock of the Company
                  --------------
consists of 30,000,000 shares of Common Stock, of which 11,259,720 shares were
issued and outstanding as of December 31, 1999, and 10,000,000 shares of
Preferred Stock, of which 155,544 were issued and outstanding on December 31,
1999.  Except as disclosed in the audited financial statements of the Company
included in the annual report on Form 10-K for the fiscal year ended March 31,
1999; options to purchase not more than 1,000,000 shares of Common Stock granted
in the ordinary course of business and with purchase prices equal to the fair
market value of such Common Stock on the date of grant; and warrants to purchase
90,100 shares of Common Stock in exchange for 90,100 shares of Common Stock,
there are no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company.  All of the
outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.

     Section 4.4  Common Stock.  The Company has registered its Common Stock
                  ------------
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or

                                       9
<PAGE>

quotation of its Common Stock, and such Common Stock is currently listed or
quoted on the Principal Market. As of the date hereof, the Principal Market is
the Nasdaq National Market.

     Section 4.5  SEC Documents.  The Company has delivered or made available to
                  -------------
the Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).

     Section 4.6  Valid Issuances.  The Put Shares and any Blackout Shares may
                  ---------------
and will be properly issued and/or sold pursuant to Rule 4(2), Regulation D
and/or another exemption from registration under the Securities Act and any
applicable state law. When issued and/or sold, the Put Shares and the Blackout
Shares shall be duly and validly issued, fully paid, and nonassessable, free and
clear of any and all liens, charges, claims or other encumbrances. Neither the
sales of the Put Shares and the Blackout Shares pursuant to, nor the Company's
performance of its obligations under, this Agreement or the Registration Rights
Agreement will (i) result in the creation or imposition of any liens, charges,
claims or other encumbrances upon the Put Shares or any of the assets of the
Company, or (ii) entitle the holders of Outstanding Capital Shares to preemptive
or other rights to subscribe to or acquire the Capital Shares or other
securities of the Company. The Put Shares and the Blackout Shares shall not
subject the Investor to personal liability by reason of the ownership thereof.

     Section 4.7  No General Solicitation or Advertising in Regard to this
                  --------------------------------------------------------
Transaction. Neither the Company nor any of its affiliates nor any distributor
-----------
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares and the Blackout
Shares, or (ii) made any offers or sales of any security or solicited any offers
to buy any security under any circumstances that would require registration of
the Common Stock under the Securities Act.

     Section 4.8  Corporate Documents.  The Company has furnished or made
                  -------------------
available to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof, and the Company's
By-Laws, as amended and in effect on the date hereof (the "By-Laws").

     Section 4.9  No Conflicts. The execution, delivery and performance of this
                  ------------
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including, without limitation, the issuance and sale of the
Put Shares and any Blackout Shares do not and will not (i)

                                       10
<PAGE>

result in a violation of the Company's Articles of Incorporation or By-Laws or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect) nor is
the Company otherwise in violation of, conflict with or in default under any of
the foregoing; provided that, for purposes of the Company's representations and
warranties as to violations of foreign law, rule or regulation referenced in
clause (iii), such representations and warranties are made only to the best of
the Company's knowledge insofar as the execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby are or may be affected by the status of the
Investor under or pursuant to any such foreign law, rule or regulation. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock in accordance with the terms hereof
(other than any SEC, NASD or state securities filings that may be required to be
made by the Company subsequent to any Closing, any registration statement that
may be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Nasdaq National Market
referenced in Section 5.1); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of the Investor herein.

     Section 4.10  No Material Adverse Change. Since March 31, 1999, no Material
                   --------------------------
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents.

     Section 4.11  No Undisclosed Liabilities. The Company has no liabilities or
                   --------------------------
obligations which are material, individually or in the aggregate, and are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
incurred in the ordinary course of the Company's businesses since March 31, 1999
and which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company.

     Section 4.12  No Undisclosed Events or Circumstances.  Since March 31,
                   --------------------------------------
1999, no event or circumstance has occurred or exists with respect to the or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.

     Section 4.13  No Integrated Offering.  Neither the Company, nor any of its
                   ----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.

     Section 4.14  Litigation and Other Proceedings.  Except as may be set forth
                   --------------------------------
in the SEC Documents, there are no lawsuits or proceedings pending or to the
best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such

                                       11
<PAGE>

action, suit, proceeding or investigation, which might have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which might
result in a Material Adverse Effect.

     Section 4.15  No Misleading or Untrue Communication.  The Company, any
                   -------------------------------------
Person representing the Company, and, to the knowledge of the Company, any other
Person selling or offering to sell the Put Shares in connection with the
transactions contemplated by this Agreement, have not made, at any time, any
oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.

     Section 4.16  Material Non-Public Information.  The Company is not in
                   -------------------------------
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, an effect on the price of the Common Stock or
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.

                                   ARTICLE V
                           Covenants of the Investor

     Section 5.1  Compliance with Law.  The Investor's trading activities with
                  -------------------
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the Principal Market on which the Company's Common
Stock is listed.

     Section 5.2  Limitation on Short Sales.  The Investor and its affiliates
                  -------------------------
shall not engage in short sales of the Company's Common Stock; provided,
                                                               --------
however, that the Investor may enter into any short sale or other hedging or
-------
similar arrangement it deems appropriate with respect to Put Shares after it
receives a Put Notice with respect to such Put Shares so long as such sales or
arrangements do not involve more than the number of such Put Shares (determined
as of the date of such Put Notice).

                                  ARTICLE VI
                           Covenants of the Company

     Section 6.1  Registration Rights. The Company shall cause the Registration
                  -------------------
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.

     Section 6.2  Reservation of Common Stock.  As of the date hereof, the
                  ---------------------------
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the Put
Shares; such amount of shares of Common Stock to be reserved shall be calculated
based upon the minimum Purchase Price therefor under the terms of this
Agreement. The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the numbers of
shares actually delivered hereunder.

     Section 6.3  Listing of Common Stock.  The Company shall maintain the
                  -----------------------
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period) to list
the Put Shares and any Blackout Shares. The Company further shall, if the
Company applies to have the Common Stock traded on any other Principal Market,
include in such application the Put Shares, and shall take such other action as
is necessary or desirable in the opinion of the Investor to cause the Common
Stock to be listed on such other Principal Market as

                                       12
<PAGE>

promptly as possible.  The Company shall take all action necessary to continue
the listing and trading of its Common Stock on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and the Principal Market.

     Section 6.4  Exchange Act Registration.  The Company shall (i) cause its
                  -------------------------
Common Stock to continue to be registered under Section 12(g) or 12(b) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under said Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act. The Company will take all action to continue the
listing and trading of its Common Stock on the Principal Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and the Principal Market.

     Section 6.5  Legends.  The certificates evidencing the Common Stock to be
                  -------
sold by the Investor pursuant to Section 9.1 shall be free of legends, except as
set forth in Article IX.

     Section 6.6  Corporate Existence.  The Company will take all steps
                  -------------------
necessary to preserve and continue the corporate existence of the Company.

     Section 6.7  Additional SEC Documents.  The Company will deliver to the
                  ------------------------
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.

     Section 6.8  Blackout Period. (a) The Company will immediately notify the
                  ---------------
Investor upon the occurrence of any of the following events in respect of a
Registration Statement or related prospectus in respect of an offering of
Registrable Securities; (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement, or for amendments or supplements
to the Registration Statement or related prospectus; (ii) the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the registration
statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.

     Section 6.9  Expectations Regarding Put Notices.  Within ten (10) days
                  ----------------------------------
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes to notify the
Investor as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such

                                       13
<PAGE>

notification shall constitute only the Company's good faith estimate and shall
in no way obligate the Company to raise such amount, or any amount, or otherwise
limit its ability to deliver Put Notices.  The failure by the Company to comply
with this provision can be cured by the Company's notifying the Investor at any
time as to its reasonable expectations with respect to the current calendar
quarter.

     Section 6.10  Consolidation; Merger.  The Company shall not, at any time
                   ---------------------
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.

     Section 6.11  Issuance of Put Shares and Blackout Shares.  The sale and
                   ------------------------------------------
issuance of the Put Shares shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state law.

     Section 6.12  Legal Opinion on Subscription Date.  The Company's
                   ----------------------------------
independent counsel shall deliver to the Investor on the Subscription Date an
opinion substantially in the form of Exhibit B, except for paragraph 6 thereof.

                                  ARTICLE VII
                           Conditions to Delivery of
                     Put Notices and Conditions to Closing

     Section 7.1  Conditions Precedent to the Obligation of the Company to Issue
                  --------------------------------------------------------------
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
---------------------
the Put Shares to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.

          (a)  Accuracy of the Investor's Representation and Warranties. The
          representations and warranties of the Investor shall be true and
          correct in all material respects as of the date of this Agreement and
          as of the date of each such Closing as though made at each such time.

          (b)  Performance by the Investor. The Investor shall have performed,
          satisfied and complied in all respects with all covenants, agreements
          and conditions required by this Agreement to be performed, satisfied
          or complied with by the Investor at or prior to such Closing.

     Section 7.2  Conditions Precedent to the Right of the Company to Deliver a
                  -------------------------------------------------------------
Put Notice and the Obligation of the Investor to Purchase the Put Shares. The
------------------------------------------------------------------------
right of the Company to deliver a Put Notice and the obligation of the Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on (i) the date of delivery of such Put Notice and (ii) the
applicable Closing Date (each a "Condition Satisfaction Date"), of each of the
following conditions:

          (a)  Registration of the Registrable Securities with the SEC. As set
          forth in the Registration Rights Agreement, the Company shall have
          filed with the SEC a Registration Statement with respect to the resale
          of the Registrable Securities that shall have been declared effective
          by the SEC prior to the first Put Date, but in no event later than one
          hundred twenty (120) days after Subscription Date.

          (b)  Effective Registration Statement.  As set forth in the
          Registration Rights Agreement, the Registration Statement shall have
          previously become effective and shall

                                       14
<PAGE>

          remain effective on each Condition Satisfaction Date and (i) neither
          the Company nor the Investor shall have received notice that the SEC
          has issued or intends to issue a stop order with respect to the
          Registration Statement or that the SEC otherwise has suspended or
          withdrawn the effectiveness of the Registration Statement, either
          temporarily or permanently, or intends or has threatened to do so
          (unless the SEC's concerns have been addressed and the Investor is
          reasonably satisfied that the SEC no longer is considering or intends
          to take such action), and (ii) no other suspension of the use or
          withdrawal of the effectiveness of the Registration Statement or
          related prospectus shall exist.

          (c)  Accuracy of the Company's Representations and Warranties. The
          representations and warranties of the Company shall be true and
          correct in all material respects as of each Condition Satisfaction
          Date as though made at each such time (except for representations and
          warranties specifically made as of a particular date) with respect to
          all periods, and as to all events and circumstances occurring or
          existing to and including each Condition Satisfaction Date, except for
          any conditions which have temporarily caused any representations or
          warranties herein to be incorrect and which have been corrected with
          no continuing impairment to the Company or the Investor.

          (d)  Performance by the Company.  The Company shall have performed,
          satisfied and complied in all material respects with all covenants,
          agreements and conditions required by this Agreement and the
          Registration Rights Agreement to be performed, satisfied or complied
          with by the Company at or prior to each Condition Satisfaction Date.

          (e)  No Injunction. No statute, rule, regulation, executive order,
          decree, ruling or injunction shall have been enacted, entered,
          promulgated or adopted by any court or governmental authority of
          competent jurisdiction that prohibits or directly and adversely
          affects any of the transactions contemplated by this Agreement, and no
          proceeding shall have been commenced that may have the effect of
          prohibiting or adversely affecting any of the transactions
          contemplated by this Agreement.

          (f)  Adverse Changes. Since the date of filing of the Company's most
          recent SEC Document, no event that had or is reasonably likely to have
          a Material Adverse Effect has occurred.

          (g)  No Suspension of Trading In or delisting of Common Stock. The
          trading of the Common Stock (including without limitation the Put
          Shares) shall not have been suspended by the SEC, the Principal Market
          or the NASD and the Common Stock (including without limitation the Put
          Shares) shall have been approved for listing or quotation on and shall
          not have been delisted from the Principal Market. The issuance of
          shares of Common Stock with respect to the applicable Closing, if any,
          shall not violate the shareholder approval requirements of the
          Principal Market.

          (h)  Legal Opinions. The Company shall have caused to be delivered to
          the Investor, within five (5) Trading Days of the Effective Date of
          the Registration Statement, an opinion of the Company's independent
          counsel in the form of Exhibit B hereto, addressed to the Investor;
          provided, however, that in the event that such an opinion cannot be
          --------  -------
          delivered by the Company's independent counsel to the Investor, the
          Company shall promptly revise the Registration Statement and shall not
          deliver a Put Notice. If a Put Notice shall have been delivered in
          good faith without knowledge by the Company that an opinion of
          independent counsel cannot be delivered as required, at the option of
          the Investor, either the applicable Closing Date shall automatically
          be postponed for a period

                                       15
<PAGE>

          of up to five (5) Trading Days until such an opinion is delivered to
          the Investor, or such Closing shall otherwise be canceled. In the
          event of such a postponement, the Purchase Price of the Common Stock
          to be issued at such Closing as determined pursuant of Section 2.2
          shall be the lower of the Purchase Price as calculated as of the
          originally scheduled Closing Date and as of the actual Closing Date.
          The Company's independent counsel shall also deliver to the Investor
          upon execution of this Agreement an opinion in form and substance
          reasonably satisfactory to the Investor addressing, among other
          things, corporate matters and the exemption from registration under
          the Securities Act of the issuance of the Registrable Securities by
          the Company to the Investor under this Agreement and the Registration
          Rights Agreement.

          (i)  Due Diligence. No dispute between the Company and the Investor
          shall exist pursuant to Section 8.2(c) as to the adequacy of the
          disclosure contained in the Registration Statement.

          (j)  Ten Percent Limitation. On each Closing Date, the number of Put
          Shares then to be purchased by the Investor shall not exceed the
          number of such shares that, when aggregated with all other shares of
          Registrable Securities then owned by the Investor beneficially or
          deemed beneficially owned by the Investor, would result in the
          Investor owning no more than 9.9% of all of such Common Stock as would
          be outstanding on such Closing Date, as determined in accordance with
          Section 16 of the Exchange Act and the regulations promulgated
          thereunder. For purposes of this Section 3.2(k), in the event that the
          amount of Common Stock outstanding as determined in accordance with
          Section 16 of the Exchange Act and the regulations promulgated
          thereunder is greater on a Closing Date than on the date upon which
          the Put Notice associated with such Closing Date is given, the amount
          of Common Stock outstanding on such Closing Date shall govern for
          purposes of determining whether the Investor, when aggregating all
          purchases of Common Stock made pursuant to this Agreement and, if any,
          Blackout Shares, would own more than 9.9% of the Common Stock
          following such Closing Date.

          (k)  Intentionally omitted.

          (l)  Minimum Average Trading Volume.  The average trading volume for
          the Common Stock over the previous fifteen (15) Trading Days equals or
          exceeds 10,000 shares per Trading Day.

          (m)  No Knowledge.  The Company shall have no knowledge of any event
          more likely than not to have the effect of causing such Registration
          Statement to be suspended or otherwise ineffective (which event is
          more likely than not to occur within the fifteen Trading Days
          following the Trading Day on which such Notice is deemed delivered).

          (n)  Trading Cushion.  The Trading Cushion shall have elapsed since
          the immediately preceding Put Date.

          (o)  Shareholder Vote.  The issuance of shares of Common Stock with
          respect to the applicable Closing, if any, shall not violate the
          shareholder approval requirements of the Principal Market.

          (p)  Escrow Agreement.  The parties hereto shall have entered into a
          mutually acceptable escrow agreement for the Purchase Prices due
          hereunder, providing for reasonable interest on any funds deposited
          into the escrow account established under such agreement.

                                       16
<PAGE>

          (q)  Other.  On each Condition Satisfaction Date, the Investor shall
          have received such other certificates and documents as shall have been
          reasonably requested by the Investor in order for the Investor to
          confirm the Company's satisfaction of the conditions set forth in this
          Section 7.2., including, without limitation, a certificate in
          substantially the form and substance of Exhibit C hereto, executed in
          either case by an executive officer of the Company and to the effect
          that all the conditions to such Closing shall have been satisfied as
          at the date of each such certificate.

                                 ARTICLE VIII
        Due Diligence Review; Non-Disclosure of Non-Public Information

     Section 8.1  Due Diligence Review.  The Company shall make available for
                  --------------------
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.

     Section 8.2  Non-Disclosure of Non-Public Information.
                  ----------------------------------------

          (a)  The Company represents and warrants that the Company and its
          officers, directors, employees and agents have not disclosed any non-
          public information to the Investor or advisors to or representatives
          of the Investor. The Company covenants and agrees that it shall
          refrain from disclosing, and shall cause its officers, directors,
          employees and agents to refrain from disclosing, (including, without
          limitation, in connection with the giving of the Adjustment Period
          Notice pursuant to Section 2.4), unless prior to disclosure of such
          information the Company identifies such information as being non-
          public information and provides the Investor, such advisors and
          representatives with the opportunity to accept or refuse to accept
          such non-public information for review. The Company may, as a
          condition to disclosing any non-public information hereunder, require
          the Investor's advisors and representatives to enter into a
          confidentiality agreement in form reasonably satisfactory to the
          Company and the Investor.

          (b)  Nothing herein shall require the Company to disclose non-public
          information to the Investor or its advisors or representatives, and
          the Company represents that it does not disseminate non-public
          information to any investors who purchase stock in the Company in a
          public offering, to money managers or to securities analysts,
          provided, however, that notwithstanding anything herein to the
          contrary, the Company will, as herein above provided, immediately
          notify the advisors and representatives of the Investor and, if any,
          underwriters, of any event or the existence of any circumstance
          (without any obligation to disclose the specific event or
          circumstance) of which it becomes aware, constituting non-

                                       17
<PAGE>

          public information (whether or not requested of the Company
          specifically or generally during the course of due diligence by such
          persons or entities), which, if not disclosed in the prospectus
          included in the Registration Statement would cause such prospectus to
          include a material misstatement or to omit a material fact required to
          be stated therein in order to make the statements, therein, in light
          of the circumstances in which they were made, not misleading. Nothing
          contained in this Section 8.2 shall be construed to mean that such
          persons or entities other than the Investor (without the written
          consent of the Investor prior to disclosure of such information) may
          not obtain non-public information in the course of conducting due
          diligence in accordance with the terms of this Agreement and nothing
          herein shall prevent any such persons or entities from notifying the
          Company of their opinion that based on such due diligence by such
          persons or entities, that the Registration Statement contains an
          untrue statement of a material fact or omits a material fact required
          to be stated in the Registration Statement or necessary to make the
          statements contained therein, in light of the circumstances in which
          they were made, not misleading.

                                  ARTICLE IX
                                    Legends

     Section 9.1  Legends.  Unless otherwise provided below, each certificate
                  -------
representing Registrable Securities will bear the following legend (the
"Legend"):

          THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
          UNDER THE U.S.  SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
          ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
          RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
          SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.  NEITHER THIS SECURITY
          NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
          ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
          DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
          UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
          FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.  THE HOLDER OF THIS
          CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY
          SET FORTH IN A PRIVATE EQUITY LINE AGREEMENT BETWEEN SONIC SOLUTIONS
          AND KINGSBRIDGE CAPITAL LIMITED DATED MAY 3RD, 2000.  A COPY OF THE
          PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE
          OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES.

     Prior to the execution and delivery hereof, the Company has issued to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit D hereto with a copy to the Investor.  Such instructions shall be
irrevocable by the Company from and after the date hereof or from and after the
issuance thereof to any such substitute or replacement transfer agent, as the
case may be, except as otherwise expressly provided in the Registration

                                       18
<PAGE>

Rights Agreement.  It is the intent and purpose of such instructions, as
provided therein, to require the transfer agent for the Common Stock from time
to time upon transfer of Registrable Securities by the Investor to issue
certificates evidencing such Registrable Securities free of the Legend during
the following periods and under the following circumstances and without
consultation by the transfer agent with the Company or its counsel and without
the need for any further advice or instruction or documentation to the transfer
agent by or from the Company or its counsel or the Investor:

          (a)  at any time after the Effective Date, upon surrender of one or
          more certificates evidencing Common Stock that bear the Legend, to the
          extent accompanied by a notice requesting the issuance of new
          certificates free of the Legend to replace those surrendered; provided
          that (i) the Registration Statement shall then be effective; (ii) the
          Investor confirms to the transfer agent that it has sold, pledged or
          otherwise transferred or agreed to sell, pledge or otherwise transfer
          such Common Stock in a bona fide transaction to a third party that is
          not an affiliate of the Company; and (iii) the Investor confirms to
          the transfer agent that the Investor has complied with the prospectus
          delivery requirement; and

          (b)  at any time upon any surrender of one or more certificates
          evidencing Registrable Securities that bear the Legend, to the extent
          accompanied by a notice requesting the issuance of new certificates
          free of the Legend to replace those surrendered and containing
          representations that (i) the Investor is permitted to dispose of such
          Registrable Securities without limitation as to amount or manner of
          sale pursuant to Rule 144(k) under the Securities Act or (ii) the
          Investor has sold, pledged or otherwise transferred or agreed to sell,
          pledge or otherwise transfer such Registrable Securities in a manner
          other than pursuant to an effective registration statement, to a
          transferee who will upon such transfer be entitled to freely tradeable
          securities.

     Any of the notices referred to above in this Section 9.1 may be sent by
facsimile to the Company's transfer agent.

     Section 9.2  No Other Legend or Stock Transfer Restrictions.  No legend
                  ----------------------------------------------
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.

     Section 9.3  Investor's Compliance.  Nothing in this Article VIII shall
                  ---------------------
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.

                                   ARTICLE X
                                 Choice of Law

     Section 10.1  Choice of Law. This Agreement shall be construed under the
                   -------------
laws of the State of California, without giving effect to provisions regarding
conflicts of law or choice of law.

                                  ARTICLE XI
             Assignment; Entire Agreement, Amendment; Termination

     Section 11.1  Assignment.  Neither this Agreement nor any rights of the
                   ----------
Investor or the Company hereunder may be assigned by any party to any other
Person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of

                                       19
<PAGE>

any of the Common Stock purchased or acquired by the Investor hereunder with
respect to the Common Stock held by such person, and (b) the Investor's interest
in this Agreement may be assigned at any time, in whole or in part, to any other
person or entity (including any affiliate of the Investor) upon the prior
written consent of the Company, which consent shall not to be unreasonably
withheld.

     Section 11.2  Termination.  This Agreement shall terminate twenty-four (24)
                   -----------
months after the commencement of the Commitment Period; provided, however, that
                                                        --------  -------
the provisions of Articles VI, VII, VIII, X, XI, and XII shall survive the
termination of this Agreement.

     Section 11.3  Entire Agreement, Amendment; Waiver.  This Agreement and the
                   -----------------------------------
Registration Rights Agreement constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth in
this Agreement or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by both parties hereto. Any
term or condition of this Agreement may be waived at any time by the party that
is entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition.  No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.

                                  ARTICLE XII
                           Notices; Indemnification

     Section 12.1  Notices.  All notices, demands, requests, consents,
                   -------
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

     If to the Company:

          Robert J. Doris
          President and Chief Executive Officer
          Sonic Solutions
          101 Rowland Way, Suite 110
          Novato, California 94945
          Telephone: (415) 893-8000
          Facsimile: (415) 893-8008

     with a copy to (which communication shall not constitute notice):

          Kyle Guse, Esq.

                                       20
<PAGE>

          Heller Ehrman White & McAuliffe
          2500 Sand Hill Road, Suite 100
          Menlo Park, California 94025-7063
          Telephone: (650) 234-4200
          Facsimile: (650) 234-4299

     If to the Investor:

          Adam Gurney
          Kingsbridge Capital Limited
          c/o Kingsbridge Corporate Services Limited
          Main Street
          Kilcullen, County Kildare
          Republic of Ireland
          Telephone: 011-353-45-481-811
          Facsimile: 011-353-45-482-003

     with a copy to (which communication shall not constitute notice):

          Keith M. Andruschak, Esq.
          Clifford Chance Rogers & Wells
          200 Park Avenue
          New York, NY 10166
          Telephone: (212) 878-8000
          Facsimile: (212) 878-8375

     Either party hereto may from time to time change its address or facsimile
number for notices under this Section 12.1 by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the other
party hereto.

     Section 12.2  Indemnification.
                   ---------------

          (a)  The Company agrees to indemnify and hold harmless the Investor,
          its partners, affiliates, officers, directors, employees, and duly
          authorized agents, and each Person or entity, if any, who controls the
          Investor within the meaning of Section 15 of the Securities Act or
          Section 20 of the Exchange Act, together with the Controlling Persons
          (as defined in the Registration Rights Agreement) from and against any
          Damages, joint or several, and any action in respect thereof to which
          the Investor, its partners, affiliates, officers, directors,
          employees, and duly authorized agents, and any such Controlling Person
          becomes subject to, resulting from, arising out of or relating to any
          misrepresentation, breach of warranty or nonfulfillment of or failure
          to perform any covenant or agreement on the part of Company contained
          in this Agreement as such Damages are incurred.

          (b)  The Investor agrees to indemnify and hold harmless the Company,
          its partners, affiliates, officers, directors, employees, and duly
          authorized agents, and each Person or entity, if any, who controls the
          Investor within the meaning of Section 15 of the Securities Act or
          Section 20 of the Exchange Act, together with the Controlling Persons
          (as defined in the Registration Rights Agreement) from and against any
          Damages, joint or several, and any action in respect thereof to which
          the Company, its partners, affiliates, officers, directors, employees,
          and duly authorized agents, and any such Controlling Person becomes
          subject to, resulting from, arising out of or relating to any

                                       21
<PAGE>

          misrepresentation, breach of warranty or nonfulfillment of or failure
          to perform any covenant or agreement on the part of Investor contained
          in this Agreement in an aggregate amount not to exceed $140,000.

     Section 12.3  Method of Asserting Indemnification Claims.  All claims for
                   ------------------------------------------
indemnification by any Indemnified Party (as defined below) under Section 12.2
will be asserted and resolved as follows:

          (a)  In the event any claim or demand in respect of which any person
          claiming indemnification under any provision of Section 12.2 (an
          "Indemnified Party") might seek indemnity under Section 12.2 is
          asserted against or sought to be collected from such Indemnified Party
          by a person other than the Company, the Investor or any affiliate of
          the Company or (a "Third Party Claim"), the Indemnified Party shall
          deliver a written notification, enclosing a copy of all papers served,
          if any, and specifying the nature of and basis for such Third Party
          Claim and for the Indemnified Party's claim for indemnification that
          is being asserted under any provision of Section 12.2 against any
          person (the "Indemnifying Party"), together with the amount or, if not
          then reasonably ascertainable, the estimated amount, determined in
          good faith, of such Third Party Claim (a "Claim Notice") with
          reasonable promptness to the Indemnifying Party. If the Indemnified
          Party fails to provide the Claim Notice with reasonable promptness
          after the Indemnified Party receives notice of such Third Party Claim,
          the Indemnifying Party will not be obligated to indemnify the
          Indemnified Party with respect to such Third Party Claim to the extent
          that the Indemnifying Party's ability to defend has been irreparably
          prejudiced by such failure of the Indemnified Party. The Indemnifying
          Party will notify the Indemnified Party as soon as practicable within
          the period ending thirty (30) calendar days following receipt by the
          Indemnifying Party of either a Claim Notice or an Indemnity Notice (as
          defined below) (the "Dispute Period") whether the Indemnifying Party
          disputes its liability or the amount of its liability to the
          Indemnified Party under Section 12.2 and whether the Indemnifying
          Party desires, at its sole cost and expense, to defend the Indemnified
          Party against such Third Party Claim.

               (i)  If the Indemnifying Party notifies the Indemnified Party
               within the Dispute Period that the Indemnifying Party desires to
               defend the Indemnified Party with respect to the Third Party
               Claim pursuant to this Section 12.3(a), then the Indemnifying
               Party will have the right to defend, with counsel reasonably
               satisfactory to the Indemnified Party, at the sole cost and
               expense of the Indemnifying Party, such Third Party Claim by all
               appropriate proceedings, which proceedings will be vigorously and
               diligently prosecuted by the Indemnifying Party to a final
               conclusion or will be settled at the discretion of the
               Indemnifying Party (but only with the consent of the Indemnified
               Party in the case of any settlement that provides for any relief
               other than the payment of monetary damages or that provides for
               the payment of monetary damages as to which the Indemnified Party
               will not be indemnified in full pursuant to Section 12.2). The
               Indemnifying Party will have full control of such defense and
               proceedings, including any compromise or settlement thereof;
               provided, however, that the Indemnified Party may, at the sole
               --------  -------
               cost and expense of the Indemnified Party, at any time prior to
               the Indemnifying Party's delivery of the notice referred to in
               the first sentence of this clause (i), file any motion, answer or
               other pleadings or take any other action that the Indemnified
               Party reasonably believes to be necessary or appropriate to
               protect its interests; and provided further, that if requested by
               the Indemnifying Party, the Indemnified Party will, at

                                       22
<PAGE>

               the sole cost and expense of the Indemnifying Party, provide
               reasonable cooperation to the Indemnifying Party in contesting
               any Third Party Claim that the Indemnifying Party elects to
               contest. The Indemnified Party may participate in, but not
               control, any defense or settlement of any Third Party Claim
               controlled by the Indemnifying Party pursuant to this clause (i),
               and except as provided in the preceding sentence, the Indemnified
               Party will bear its own costs and expenses with respect to such
               participation. Notwithstanding the foregoing, the Indemnified
               Party may take over the control of the defense or settlement of a
               Third Party Claim at any time if it irrevocably waives its right
               to indemnity under Section 12.2 with respect to such Third Party
               Claim.

               (ii)   If the Indemnifying Party fails to notify the Indemnified
               Party within the Dispute Period that the Indemnifying Party
               desires to defend the Third Party Claim pursuant to Section
               12.3(a), or if the Indemnifying Party gives such notice but fails
               to prosecute vigorously and diligently or settle the Third Party
               Claim, or if the Indemnifying Party fails to give any notice
               whatsoever within the Dispute Period, then the Indemnified Party
               will have the right to defend, at the sole cost and expense of
               the Indemnifying Party, the Third Party Claim by all appropriate
               proceedings, which proceedings will be prosecuted by the
               Indemnified Party in a reasonable manner and in good faith or
               will be settled at the discretion of the Indemnified Party (with
               the consent of the Indemnifying Party, which consent will not be
               unreasonably withheld). The Indemnified Party will have full
               control of such defense and proceedings, including any compromise
               or settlement thereof; provided, however, that if requested by
               the Indemnified Party, the Indemnifying Party will, at the sole
               cost and expense of the Indemnifying Party, provide reasonable
               cooperation to the Indemnified Party and its counsel in
               contesting any Third Party Claim which the Indemnified Party is
               contesting. Notwithstanding the foregoing provisions of this
               clause (ii), if the Indemnifying Party has notified the
               Indemnified Party within the Dispute Period that the Indemnifying
               Party disputes its liability or the amount of its liability
               hereunder to the Indemnified Party with respect to such Third
               Party Claim and if such dispute is resolved in favor of the
               Indemnifying Party in the manner provided in clause (iii) below,
               the Indemnifying Party will not be required to bear the costs and
               expenses of the Indemnified Party's defense pursuant to this
               clause (ii) or of the Indemnifying Party's participation therein
               at the Indemnified Party's request, and the Indemnified Party
               will reimburse the Indemnifying Party in full for all reasonable
               costs and expenses incurred by the Indemnifying Party in
               connection with such litigation. The Indemnifying Party may
               participate in, but not control, any defense or settlement
               controlled by the Indemnified Party pursuant to this clause (ii),
               and the Indemnifying Party will bear its own costs and expenses
               with respect to such participation.

               (iii)  If the Indemnifying Party notifies the Indemnified Party
               that it does not dispute its liability or the amount of its
               liability to the Indemnified Party with respect to the Third
               Party Claim under Section 12.2 or fails to notify the Indemnified
               Party within the Dispute Period whether the Indemnifying Party
               disputes its liability or the amount of its liability to the
               Indemnified Party with respect to such Third Party Claim, the
               Loss in the amount specified in the Claim Notice will be
               conclusively deemed a liability of the Indemnifying Party under
               Section 12.2 and the Indemnifying Party shall pay the amount of
               such Loss to the

                                       23
<PAGE>

               Indemnified Party on demand.  If the Indemnifying Party has
               timely disputed its liability or the amount of its liability with
               respect to such claim, the Indemnifying Party and the Indemnified
               Party will proceed in good faith to negotiate a resolution of
               such dispute, and if not resolved through negotiations within the
               Resolution Period, such dispute shall be resolved by arbitration
               in accordance with paragraph (c) of this Section 12.3.

          (b)  In the event any Indemnified Party should have a claim under
          Section 12.2 against the Indemnifying Party that does not involve a
          Third Party Claim, the Indemnified Party shall deliver a written
          notification of a claim for indemnity under Section 12.2 specifying
          the nature of and basis for such claim, together with the amount or,
          if not then reasonably ascertainable, the estimated amount, determined
          in good faith, of such claim (an "Indemnity Notice") with reasonable
          promptness to the Indemnifying Party. The failure by any Indemnified
          Party to give the Indemnity Notice shall not impair such party's
          rights hereunder except to the extent that the Indemnifying Party
          demonstrates that it has been irreparably prejudiced thereby. If the
          Indemnifying Party notifies the Indemnified Party that it does not
          dispute the claim or the amount of the claim described in such
          Indemnity Notice or fails to notify the Indemnified Party within the
          Dispute Period whether the Indemnifying Party disputes the claim or
          the amount of the claim described in such Indemnity Notice, the Loss
          in the amount specified in the Indemnity Notice will be conclusively
          deemed a liability of the Indemnifying Party under Section 12.2 and
          the Indemnifying Party shall pay the amount of such Loss to the
          Indemnified Party on demand. If the Indemnifying Party has timely
          disputed its liability or the amount of its liability with respect to
          such claim, the Indemnifying Party and the Indemnified Party will
          proceed in good faith to negotiate a resolution of such dispute, and
          if not resolved through negotiations within the Resolution Period,
          such dispute shall be resolved by arbitration in accordance with
          paragraph (c) of this Section 12.3.

          (c)  Any dispute under this Agreement (including, without limitation,
          in connection with this Section 12.3) or the Registration Rights
          Agreement shall be submitted to arbitration and shall be finally and
          conclusively determined by the decision of a single arbitrator who
          shall be a retired San Francisco Superior Court Judge with experience
          in civil litigation involving interpretation of stock purchase
          agreements (the "Arbitrator"). The arbitration shall be governed by
          the United States Arbitration Act, 9 U.S.C. (S)(S) 1-16, 201-208 and
          judgment upon the award rendered by the Arbitrator may be entered by
          any United States federal or state court in and of the State of
          California, to the non-exclusive jurisdiction of which each of the
          parties hereto irrevocably submits. The parties agree to cooperate and
          use their reasonable best efforts to cause the Arbitrator render a
          decision in any dispute within thirty (30) days following the
          commencement of proceedings with respect thereto and, to the extent
          practicable, the decision of the Arbitrator shall be rendered no more
          than thirty (30) calendar days following such commencement. The
          Arbitrator shall cause its written decision to be delivered to the
          Indemnified Party and the Indemnifying Party within three (3) business
          days following such decision. Any decision made by the Arbitrator
          (either prior to or after the expiration of such thirty (30) calendar-
          day period) shall be final, binding and conclusive on the Indemnified
          Party and the Indemnifying Party and shall be entitled to be enforced
          to the fullest extent permitted by law and entered in any court of
          competent jurisdiction. Each party to any arbitration shall bear its
          own expense in relation thereto, including but not limited to such
          party's attorneys' fees, if any, and the expenses and fees of the
          Arbitrator shall be divided between the Indemnifying Party and the
          Indemnified Party in the same proportion as the

                                       24
<PAGE>

          portion of the related claim determined by the Arbitrator to be
          payable to the Indemnified Party bears to the portion of such claim
          determined not to be so payable.

                                 ARTICLE XIII
                                 Miscellaneous

     Section 13.1  Fees and Expenses.  Each of the Company and the Investor
                   -----------------
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of the Investor's counsel up to an aggregate maximum of $10,000 in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the Registration Rights Agreement.

     Section 13.2  Brokerage.  Each of the parties hereto represents that it has
                   ---------
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other harmless from any and all liabilities to
any persons claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.

     Section 13.3  Counterparts. This Agreement may be executed in multiple
                   ------------
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.

     Section 13.4  Entire Agreement. This Agreement, the Exhibits hereto and the
                   ----------------
Registration Rights Agreement set forth the entire agreement and understanding
of the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous agreements, negotiations and understandings between the
parties, both oral and written relating to the subject matter hereof.  The terms
and conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as if fully set forth
herein.

     Section 13.5  Survival; Severability.  The representations, warranties,
                   ----------------------
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.

     Section 13.6  Title and Subtitles. The titles and subtitles used in this
                   -------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

     Section 13.7  Reporting Entity for the Common Stock. The reporting entity
                   -------------------------------------
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.

                                       25
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.

                                       KINGSBRIDGE CAPITAL LIMITED

                                       By:______________________________________
                                           Valentine O'Donoghue
                                           Director

                                       SONIC SOLUTIONS

                                       By:______________________________________
                                           Robert J. Doris
                                           President and Chief Executive Officer
<PAGE>

                                   EXHIBIT A

                           ADJUSTMENT PERIOD NOTICE
                                SONIC SOLUTIONS

     Notice is hereby granted that the Board of Directors of Sonic Solutions
(the "Company") anticipates executing a merger or acquisition agreement within
ninety (90) days of the date hereof.

     The following five-week period is hereby designated as an Adjustment Period
pursuant to Section 2.4 of the Private Equity Line Agreement, dated as of May
__, 2000, by and between the Company and Kingsbridge Capital Limited.

     Beginning: ______________________

     (no sooner that twenty-one (21) days from the date this notice is deemed to
be delivered)

     Expiring:_______________________

     The undersigned has executed this Certificate this ____ day of ________,
200_.

                                       _________________________________________
                                       Robert J. Doris
                                       Chairman and Chief Executive Officer
<PAGE>

                                   EXHIBIT B

             FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL

                [FORM TO BE PROVIDED BY COUNSEL TO THE COMPANY]
<PAGE>

                                   EXHIBIT C

                            COMPLIANCE CERTIFICATE
                                SONIC SOLUTIONS

     The undersigned, Robert J. Doris, hereby certifies, with respect to shares
of common stock of the Sonic Solutions (the "Company") issuable in connection
with the Put Notice, dated _____________ (the "Notice"), delivered pursuant to
Article II of the Private Equity Line Agreement, dated May __,2000, by and
between the Company and Kingsbridge Capital Limited (the "Agreement"), as
follows:

     1.   The undersigned is the duly elected Chairman and Chief Executive
Officer of the Company.

     2.   The representations and warranties of the Company set forth in Article
IV of the Agreement are true and correct in all material respects as though made
on and as of the date hereof.

     3.   The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in Article VII of the Agreement.

     The undersigned has executed this Certificate this ____ day of ________,
200_.

                                       _________________________________________
                                       Robert J. Doris
                                       Chairman and Chief Executive Officer
<PAGE>

                                   EXHIBIT D

                        INSTRUCTIONS TO TRANSFER AGENT
                                SONIC SOLUTIONS

                                            [DATE]

[Name, address and phone and fax number of Transfer Agent]

Dear Sirs:

     Reference is made to the Private Equity Line Agreement (the "Agreement"),
dated as of May __, 2000 between Kingsbridge Capital Limited (the "Investor")
and Sonic Solutions (the "Company").  Pursuant to the Agreement, subject to the
terms and conditions set forth in the Agreement the Investor has agreed to
purchase from the Company and the Company has agreed to sell to the Investor
from time to time during the term of the Agreement shares of Common Stock of the
Company, no par value (the "Common Stock").  As a condition to the effectiveness
of the Agreement, the Company has agreed to issue to you, as the transfer agent
for the Common Stock (the "Transfer Agent"), these instructions relating to the
Common Stock to be issued to the Investor (or a permitted assignee) pursuant to
the Agreement. All terms used herein and not otherwise defined shall have the
meaning set forth in the Agreement.

     1.   ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND

     Pursuant to the Agreement, the Company is required to prepare and file with
the Commission, and maintain the effectiveness of, a registration statement or
registration statements registering the resale of the Common Stock to be
acquired by the Investor under the Agreement.  The Company will advise the
Transfer Agent in writing of the effectiveness of any such registration
statement promptly upon its being declared effective. The Transfer Agent shall
be entitled to rely on such advice and shall assume that the effectiveness of
such registration statement remains in effect unless the Transfer Agent is
otherwise advised in writing by the Company and shall not be required to
independently confirm the continued effectiveness of such registration
statement. In the circumstances set forth in the following two paragraphs, the
Transfer Agent shall deliver to the Investor certificates representing Common
Stock not bearing the Legend without requiring further advice or instruction or
additional documentation from the Company or its counsel or the Investor or its
counsel or any other party (other than as described in such paragraphs).

     At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon any surrender of
one or more certificates evidencing Common Stock which bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered, the Transfer Agent shall deliver to
the Investor the certificates representing the Common Stock not bearing the
Legend, in such names and denominations as the Investor shall request, provided
that:

     (a)  in connection with such event, the Investor (or its permitted
     assignee) shall confirm in writing to the Transfer Agent that (i) the
     Investor confirms to the transfer agent that it has sold, pledged or
     otherwise transferred or agreed to sell, pledge or otherwise transfer such
     Common Stock in a bona fide transaction to a designated transferee that is
     not an affiliate of the Company; and (ii) the Investor confirms to the
     transfer agent that the Investor has complied with the prospectus delivery
     requirement;
<PAGE>

     (b)  the Investor (or its permitted assignee) shall represent that it is
     permitted to dispose thereof with limitation as to amount of manner of sale
     pursuant to Rule 144(k) under the Securities Act; or

     (c)  the Investor, its permitted assignee, or either of their brokers
     confirms to the transfer agent that (i) the Investor has held the shares of
     Common Stock for at least one year, (ii) counting the shares surrendered as
     being sold upon the date the unlegended Certificates would be delivered to
     the Investor (or the Trading Day immediately following if such date is not
     a Trading Day), the Investor will not have sold more than the greater of
     (a) one percent (1%) of the total number of outstanding shares of Common
     Stock or (b) the average weekly trading volume of the Common Stock for the
     preceding four weeks during the three months ending upon such delivery date
     (or the Trading Day immediately following if such date is not a Trading
     Day), and (iii) the Investor has complied with the manner of sale and
     notice requirements of Rule 144 under the Securities Act.

     Any advice, notice or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of (___)-___-____.

     2.   MECHANICS OF DELIVERY OF CERTIFICATES
          REPRESENTING COMMON STOCK

     In connection with any Closing pursuant to which the Investor acquires
Common Stock under the Agreement, the Transfer Agent shall deliver certificates
representing Common Stock (with or without the Legend, as appropriate) as
promptly as practicable, but in no event later than three business days, after
such Closing.

     3.   FEES OF TRANSFER AGENT; INDEMNIFICATION

     The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.

     4.   THIRD PARTY BENEFICIARY

     The Company and the Transfer Agent acknowledge and agree that the Investor
is an express third party beneficiary of these Irrevocable Instructions and
shall be entitled to rely upon, and enforce, the provisions hereof.

                                       SONIC SOLUTIONS

                                       By:____________________________________
                                          Robert J. Doris
                                          Chairman and Chief Executive Officer
AGREED:

[NAME OF TRANSFER AGENT]

By:__________________________
  Name:
  Title:

                                       2
<PAGE>

                                                                  EXECUTION COPY

                         PRIVATE EQUITY LINE AGREEMENT

                                by and between

                          KINGSBRIDGE CAPITAL LIMITED

                                      and

                                SONIC SOLUTIONS

       ________________________________________________________________
                            Dated as of May 4, 2000
       ________________________________________________________________
<PAGE>

<TABLE>

<S>                                                                       <C>
ARTICLE I      CERTAIN DEFINITIONS......................................   1

     Section 1.1    "Adjustment Period".................................   1

     Section 1.2    "Bid Price".........................................   1

     Section 1.3    "Capital Shares"....................................   1

     Section 1.4    "Closing"...........................................   1

     Section 1.5    "Closing Date"......................................   1

     Section 1.6    "Commitment Period".................................   1

     Section 1.7    "Common Stock"......................................   2

     Section 1.8    "Common Stock Equivalents"..........................   2

     Section 1.9    "Condition Satisfaction Date".......................   2

     Section 1.10   "Damages"...........................................   2

     Section 1.11   "Effective Date"....................................   2

     Section 1.12   "Exchange Act"......................................   2

     Section 1.13   "Investment Amount".................................   2

     Section 1.14   "Legend"............................................   2

     Section 1.15   "Market Price"......................................   2

     Section 1.16   "Material Adverse Effect"...........................   2

     Section 1.17   "Maximum Commitment Amount".........................   2

     Section 1.18   "Maximum Put Amount"................................   2

     Section 1.19   "NASD"..............................................   3

     Section 1.20   "Outstanding".......................................   3

     Section 1.21   "Person"............................................   3

     Section 1.22   "Principal Market"..................................   3

     Section 1.23   "Purchase Price"....................................   3

     Section 1.24   "Put"...............................................   3

     Section 1.25   "Put Date"..........................................   3

     Section 1.26   "Put Notice"........................................   3

     Section 1.27   "Put Shares"........................................   3

     Section 1.28   "Registrable Securities"............................   3

     Section 1.29   "Registration Rights Agreement".....................   4

     Section 1.30   "Registration Statement"............................   4

     Section 1.31   "Regulation D"......................................   4

     Section 1.32   "SEC"...............................................   4

     Section 1.33   "Section 4(2)"......................................   4
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                <C>
     Section 1.34   "Securities Act"..............................................................   4

     Section 1.35   "SEC Documents"...............................................................   4

     Section 1.36   "Subscription Date"...........................................................   4

     Section 1.37   "Trading Cushion".............................................................   4

     Section 1.38   "Trading Day".................................................................   4

     Section 1.39   Reserved......................................................................   4

     Section 1.40   "Valuation Event".............................................................   4

     Section 1.41   "Valuation Period"............................................................   5

ARTICLE II     PURCHASE AND SALE OF COMMON STOCK..................................................   5

     Section 2.1    Investments...................................................................   5

     Section 2.2    Mechanics.....................................................................   5

     Section 2.3    Closings......................................................................   6

     Section 2.4    Special Circumstances; Adjustment Period......................................   6

     Section 2.5    Termination of Investment Obligation..........................................   7

     Section 2.6    Blackout Shares...............................................................   7

     Section 2.7    Liquidated Damages............................................................   8

ARTICLE III    REPRESENTATIONS AND WARRANTIES OF INVESTOR.........................................   8

     Section 3.1    Intent........................................................................   8

     Section 3.2    Sophisticated Investor........................................................   8

     Section 3.3    Authority.....................................................................   8

     Section 3.4    Not an Affiliate..............................................................   8

     Section 3.5    Organization and Standing.....................................................   8

     Section 3.6    Absence of Conflicts..........................................................   8

     Section 3.7    Disclosure; Access to Information.............................................   9

     Section 3.8    Manner of Sale................................................................   9

ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................   9

     Section 4.1    Organization of the Company...................................................   9

     Section 4.2    Authority.....................................................................   9

     Section 4.3    Capitalization................................................................   9

     Section 4.4    Common Stock..................................................................  10

     Section 4.5    SEC Documents.................................................................  10

     Section 4.6    Valid Issuances...............................................................  10

     Section 4.7    No General Solicitation or Advertising in Regard to this Transaction..........  10

     Section 4.8    Corporate Documents...........................................................  10
</TABLE>

                                       2
<PAGE>

<TABLE>
<S>                                                                            <C>
     Section 4.9    No Conflicts............................................    11

     Section 4.10   No Material Adverse Change..............................    11

     Section 4.11   No Undisclosed Liabilities..............................    11

     Section 4.12   No Undisclosed Events or Circumstances..................    11

     Section 4.13   No Integrated Offering..................................    11

     Section 4.14   Litigation and Other Proceedings........................    12

     Section 4.15   No Misleading or Untrue Communication...................    12

     Section 4.16   Material Non-Public Information.........................    12

ARTICLE V      COVENANTS OF THE INVESTOR....................................    12

     Section 5.1    Compliance with Law.....................................    12

     Section 5.2    Limitation on Short Sales...............................    12

ARTICLE VI     COVENANTS OF THE COMPANY.....................................    12

     Section 6.1    Registration Rights.....................................    12

     Section 6.2    Reservation of Common Stock.............................    12

     Section 6.3    Listing of Common Stock.................................    13

     Section 6.4    Exchange Act Registration...............................    13

     Section 6.5    Legends.................................................    13

     Section 6.6    Corporate Existence.....................................    13

     Section 6.7    Additional SEC Documents................................    13

     Section 6.8    Blackout Period.........................................    13

     Section 6.9    Expectations Regarding Put Notices......................    14

     Section 6.10   Consolidation; Merger...................................    14

     Section 6.11   Issuance of Put Shares and Blackout Shares..............    14

     Section 6.12   Legal Opinion on Subscription Date......................    14

ARTICLE VII    CONDITIONS TO DELIVERY OF  PUT NOTICES AND CONDITIONS
               TO CLOSING...................................................    14

     Section 7.1    Conditions Precedent to the Obligation of the
                    Company to Issue and Sell Common Stock..................    14

     Section 7.2    Conditions Precedent to the Right of the Company
                    and the Selling Shareholder to Deliver a Put
                    Notice and the Obligation of the Investor to
                    Purchase the Put Shares.................................    14

ARTICLE VIII   DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC
               INFORMATION..................................................    17

     Section 8.1    Due Diligence Review....................................    17

     Section 8.2    Non-Disclosure of Non-Public Information................    17

ARTICLE IX     LEGENDS......................................................    18
</TABLE>

                                       3
<PAGE>

<TABLE>
<S>                                                                       <C>
     Section 9.1    Legends.............................................   18

     Section 9.2    No Other Legend or Stock Transfer Restrictions......   19

     Section 9.3    Investor's Compliance...............................   20

ARTICLE X      CHOICE OF LAW............................................   20

     Section 10.1   Choice of Law.......................................   20

ARTICLE XI     ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; TERMINATION.....   20

     Section 11.1   Assignment..........................................   20

     Section 11.2   Termination.........................................   20

     Section 11.3   Entire Agreement, Amendment; Waiver.................   20

ARTICLE XII    NOTICES; INDEMNIFICATION.................................   20

     Section 12.1   Notices.............................................   20

     Section 12.2   Indemnification.....................................   21

     Section 12.3   Method of Asserting Indemnification Claims..........   22

ARTICLE XIII   MISCELLANEOUS............................................   25

     Section 13.1   Fees and Expenses...................................   25

     Section 13.2   Brokerage...........................................   25

     Section 13.3   Counterparts........................................   25

     Section 13.4   Entire Agreement....................................   25

     Section 13.5   Survival; Severability..............................   25

     Section 13.6   Title and Subtitles.................................   26

     Section 13.7   Reporting Entity for the Common Stock...............   26
</TABLE>

                                       4<PAGE>

                                                                   EXHIBIT 10.14

                         REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 4,
2000, is made and entered into between SONIC SOLUTIONS, a California corporation
(the "Company"), and KINGSBRIDGE CAPITAL LIMITED (the "Investor").

     WHEREAS, the Company and the Investor have entered into that certain
Private Equity Line Agreement, dated as of the date hereof (the "Equity Line
Agreement"), pursuant to which the Company will issue and sell to the Investor
and the Investor will purchase, from time to time, up to $20,000,000 worth of
shares of Common Stock (as determined pursuant to the Equity Line Agreement);

     WHEREAS, pursuant to the terms of, and in consideration for, the Investor's
agreement to enter into the Equity Line Agreement, the Company has agreed to
provide the Investor with certain registration rights with respect to the
Registrable Securities;

     NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Equity Line
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows (capitalized terms used herein and
not defined herein shall have the meaning ascribed to such terms in the Equity
Line Agreement):

ARTICLE I

                              REGISTRATION RIGHTS

Section 1.1.  REGISTRATION STATEMENT.

              (a)  Filing of Registration Statement. Subject to the terms and
                   --------------------------------
conditions of this Agreement, the Company shall file with the SEC within thirty
(30) days following the Subscription Date a registration statement on Form S-1
or such other form acceptable to the SEC under the Securities Act for the
registration of the Registerable Securities for resale by the Investor to the
public (the "Registration Statement").

              (b)  Effectiveness of the Registration Statement. The Company
                   -------------------------------------------
shall use its reasonable best efforts to have the Registration Statement
declared effective by the SEC by no later than one hundred twenty (120) days
following Subscription Date and to ensure that the Registration Statement
remains in effect throughout the term of this Agreement as set forth in Section
4.2, subject to the terms and conditions of this Agreement; provided, however,
                                                            --------  -------
that if the Equity Line Agreement shall be terminated in accordance with
Section 2.5 thereof, the Company shall have no further obligation to cause
the Registration Statement to become effective.

              (c)  Intentionally Omitted.
<PAGE>

              (d)  Failure to Maintain Effectiveness of Registration Statements.
                   ------------------------------------------------------------
In the event the Company fails to maintain the effectiveness of a Registration
Statement (or the underlying prospectus) throughout the period set forth in
Section 4.2, other than temporary suspensions as set forth in Section 1.1(f),
and the Investor holds any Registrable Securities at any time during the period
of such ineffectiveness (an "Ineffective Period"), the Company shall pay to the
Investor in immediately available funds into an account designated by the
Investor an amount equal to one half of one percent (0.5%) of the aggregate
Purchase Price of all of the Registrable Securities then held by the Investor
for the each of the first four seven-calendar-day periods (or portion thereof)
of an Ineffective Period and one percent (1.0%) of such aggregate Purchase Price
for each subsequent seven-calendar-day periods (or pro rata portion thereof) of
such Ineffective Period. Such amounts shall not be payable with respect to
suspensions of the effectiveness of a Registration Statement (or use of the
underlying prospectus), in accordance with Section 1.1(f). Such payments shall
be made on the first Trading Day after the earliest to occur of (i) the
expiration of the Commitment Period, (ii) the expiration of an Ineffective
Period, (iii) the expiration of the first twenty-eight (28) calendar days of an
Ineffective Period and (iv) the expiration of each additional twenty-eight
calendar-day period during an Ineffective Period.

              (e)  SEC Disapproval. Sections 1.1 (b) and (c) notwithstanding,
                   ---------------
the date by which a Registration Statement is required to become effective shall
be extended for up to sixty (60) days without default or penalty in the event
that the Company's failure to obtain effectiveness of a Registration Statement
by no later than one hundred twenty (120) days after Subscription Date results
solely from the SEC's disapproval of the structure of the transactions
contemplated by the Equity Line Agreement. In such event, the parties agree to
cooperate with one another in good faith to arrive at a resolution acceptable to
the SEC and the Company shall not be in default hereunder or under the Equity
Line Agreement and no liquidated damages or penalties shall accrue against or be
owing by the Company if the parties are unable to arrive at such a resolution.

              (f)  Deferral and Suspension. Sections 1.1(b), (c) and (d)
                   -----------------------
notwithstanding, if the Company shall furnish to the Investor notice signed by
the Chairman and Chief Executive Officer of the Company stating that the Board
of Directors of the Company has, by duly authorized resolution, determined in
good faith that it would be seriously detrimental to the Company and its
shareholders for the Registration Statement to be filed (or remain in effect)
and it is therefore essential to defer the filing of such Registration Statement
(or temporarily suspend the effectiveness of such Registration Statement or use
of the related prospectus) (a "Blackout Notice"), the Company shall have the
right to defer such filing (or suspend such effectiveness) immediately for a
period of not more than thirty (30) days beyond such the date by which such
Registration Statement was otherwise required to be filed (or required to remain
in effect). The Investor acknowledges that it would be seriously detrimental to
the Company and its shareholders for such Registration Statement to be filed (or
remain in effect) and therefore essential to defer such filing (or suspend such
effectiveness) and agrees to cease any disposition of the Registrable Securities
immediately upon receipt of such notice. The Company may not utilize any of its
rights under this Section 1.1(f) to defer the filing of a Registration Statement
(or suspend its effectiveness) more than twice in any twelve (12) month period.
Following such deferral or suspension, the Investor shall be entitled to
Blackout Shares as set forth in Section 2.7 of the Equity Line Agreement.

                                       2
<PAGE>

              (g)  Liquidated Damages. The parties hereto acknowledge and agree
                   ------------------
that the sums payable under Section 1(d) above shall constitute liquidated
damages and not penalties. The parties further acknowledge that (a) the amount
of loss or damages likely to be incurred is incapable or is difficult to
precisely estimate, (b) the amounts specified in such Sections bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred in connection with any failure by the Company to obtain or
maintain the effectiveness of a Registration Statement, (c) one of the reasons
for the parties reaching an agreement as to such amounts was the uncertainty and
cost of litigation regarding the question of actual damages, and (d) the parties
are sophisticated business parties and have been represented by sophisticated
and able legal and financial counsel and negotiated this Agreement at arm's
length.

                                  ARTICLE II

                            REGISTRATION PROCEDURES

Section 2.1.  FILINGS; INFORMATION.  The Company will effect the registration
and sale of such Registrable Securities in accordance with the intended methods
of disposition thereof. Without limiting the foregoing, the Company in each such
case will do the following as expeditiously as possible, but in no event later
than the deadline, if any, prescribed therefor in this Agreement:

               (a) The Company shall (i) prepare and file with the SEC a
Registration Statement on Form S-1 (if use of such form is then available to the
Company pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC for which the Company then qualifies and which counsel
for the Company shall deem appropriate and which form shall be available for the
sale of the Registrable Securities to be registered thereunder in accordance
with the provisions of this Agreement and in accordance with the intended method
of distribution of such Registrable Securities); (ii) use reasonable best
efforts to cause such filed Registration Statement to become and remain
effective (pursuant to Rule 415 under the Act or otherwise); (iii) prepare and
file with the SEC such amendments and supplements to such Registration Statement
and the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the time periods prescribed by Section
1.1(b); and (iv) comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during such period in accordance with the intended methods of disposition by the
Investor set forth in such Registration Statement.

               (b) The Company shall file all necessary amendments to the
Registration Statement in order to effectuate the purpose of this Agreement and
the Equity Line Agreement.

               (c) If so requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Registrable
Securities being sold in connection with the filing of a Registration Statement
under the Securities Act for the offering on a continuous or delayed basis in
the future of all of the Registrable Securities (a "Shelf Registration"), the
Company shall (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters, if any,
and such holders agree should be included therein, and (ii) make all required
filings of such prospectus supplement or post-effective amendment as soon as
practicable after the Company has received notification of the matters to be
incorporated in such prospectus

                                       3
<PAGE>

supplement or post-effective amendment; provided, however, that the Company
shall not be required to take any action pursuant to this Section 2.1(c)(ii)
that would, in the opinion of counsel for the Company, violate applicable law.

              (d)  In connection with the filing of a Shelf Registration, the
Company shall enter into such agreements and take all such other reasonable
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the holders of a majority in aggregate
principal amount of the Registrable Securities being sold) in order to expedite
or facilitate the disposition of such Registrable Securities, and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration, (i) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, with respect to the business of the Company (including
with respect to businesses or assets acquired or to be acquired by the Company),
and the Registration Statement, prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm such representations and warranties if and
when requested; (ii) if an underwriting agreement is entered into, the same
shall contain indemnification provision and procedures no less favorable to the
selling holders of such Registrable Securities and the underwriters, if any,
than those set forth herein (or such other provisions and procedures acceptable
to the holders of a majority in aggregate principal amount of Registrable
Securities covered by such Registration Statement and the managing underwriters,
if any); and (iii) deliver such documents and certificates as may be reasonably
requested by the holders of a majority in aggregate principal amount of the
Registrable Securities being sold, their counsel and the managing underwriters,
if any, to evidence the continued validity of their representations and
warranties made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company.

              (e)  Five (5) Trading Days prior to filing the Registration
Statement or prospectus, or any amendment or supplement thereto (excluding
amendments deemed to result from the filing of documents incorporated by
reference therein), the Company shall deliver to the Investor and one firm of
counsel representing the Investor, in accordance with the notice provisions of
Section 4.8, copies of such Registration Statement as proposed to be filed,
together with exhibits thereto, which documents will be subject to review by
such parties, and thereafter deliver to the Investor and its counsel, in
accordance with the notice provisions of Section 4.8, such number of copies of
such Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in such Registration
Statement (including each preliminary prospectus) and such other documents or
information as the Investor or counsel may reasonably request in order to
facilitate the disposition of the Registrable Securities.

              (f)  The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to each seller of Registrable Securities covered by
such Registration Statement such number of conformed copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by

                                       4
<PAGE>

reference), such number of copies of the prospectus contained in such
Registration Statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus file under Rule 424 promulgated under the
Securities Act relating to such seller's Registrable Securities, and such other
documents, as such seller may reasonably request to facilitate the disposition
of its Registrable Securities.

             (g) After the filing of the Registration Statement, the Company
shall promptly notify the Investor of any stop order issued or threatened by the
SEC in connection therewith and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered.

             (h) The Company shall use its reasonable best efforts to (i)
register or qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the United States as the Investor may
reasonably (in light of its intended plan of distribution) request, and (ii)
cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do any and
all other acts and things that may be reasonably necessary or advisable to
enable the Investor to consummate the disposition of the Registrable Securities;
provided that the Company will not be required to qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (h), subject itself to taxation in any such jurisdiction,
or consent or subject itself to general service of process in any such
jurisdiction.

             (i) The Company shall immediately notify the Investor upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for additional information, amendments or supplements
to the Registration Statement or related prospectus; (ii) the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.

                                       5
<PAGE>

             (j) The Company shall enter into customary agreements and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities (whereupon the Investor may, at its
option, require that any or all of the representations, warranties and covenants
of the Company also be made to and for the benefit of the Investor).

             (k) The Company shall make available to the Investor (and will
deliver to Investor's counsel), subject to restrictions imposed by the United
States federal government or any agency or instrumentality thereof, copies of
all correspondence between the SEC and the Company, its counsel or auditors and
will also make available for inspection by the Investor and any attorney,
accountant or other professional retained by the Investor (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with such
Registration Statement. Records that the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which counsel
has advised the Inspectors that the Inspectors are compelled to disclose. The
Investor agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Investor after reasonable inquiry, is not prohibited
from providing such information by a contractual, legal or fiduciary obligation
to the Company) shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
affiliates unless and until such information is made generally available to the
public. The Investor further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.

            (l)  The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to the Investor a signed counterpart, addressed to
the Investor, of (1) an opinion or opinions of counsel to the Company, and (2)
to the extent required by law or reasonably necessary to effect a sale of
Registrable Securities in accordance with prevailing business practices at the
time of any sale of Registrable Securities pursuant to a Registration Statement,
a comfort letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
Investor therefor reasonably requests.

                                       6
<PAGE>

               (m) The Company shall otherwise comply with all applicable rules
and regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.

               (n) The Company shall appoint a transfer agent and registrar for
all such Registrable Securities covered by such Registration Statement not later
than the effective date of such Registration Statement.

               (o) The Company may require the Investor to promptly furnish in
writing to the Company such information as may be legally required in connection
with such registration including, without limitation, all such information as
may be requested by the SEC or the National Association of Securities Dealers.
The Investor agrees to provide such information requested in connection with
such registration within ten (10) business days after receiving such written
request and the Company shall not be responsible for any delays in obtaining or
maintaining the effectiveness of the Registration Statement caused by the
Investor's failure to timely provide such information.

Section 2.2.  REGISTRATION EXPENSES.  In connection with each Registration
Statement, the Company shall pay all registration expenses incurred in
connection with the registration thereunder (the "Registration Expenses"),
including, without limitation: (i) all registration, filing, securities exchange
listing and fees required by the National Association of Securities Dealers,
(ii) all registration, filing, qualification and other fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) all word processing, duplicating, printing,
messenger and delivery expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities, (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company (including the expenses of any special audits or comfort letters or
costs associated with the delivery by independent certified public accountants
of such special audit(s) or comfort letter(s) requested pursuant to Section
2.1(l) hereof), (vii) the fees and expenses of any special experts retained by
the Company in connection with such registration, (viii) all reasonable fees and
expenses of one firm of counsel for the Investor retained as the Investor's
counsel with respect to such Registration Statement up to an amount of $5,000,
unless a greater amount is required due the nature of the review performed by
Investor's counsel (an estimate of such greater fees and expenses of such firm
of counsel to be provided to the Company prior to the undertaking of such
counsel's review), (ix) premiums and other costs of policies of insurance
obtained at the discretion of the Company against liabilities arising out of any
public offering of the Registrable Securities being registered, and (x) any fees
and disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting fees, discounts, transfer taxes or
commissions, if any, attributable to the sale of Registrable Securities, which
shall be payable by each holder of Registrable Securities pro rata on the basis
of the number of Registrable Securities of each such holder that are included in
a registration under this Agreement.

                                       7
<PAGE>

                                  ARTICLE III
                        INDEMNIFICATION AND CONTRIBUTION

Section 3.1.  INDEMNIFICATION BY THE COMPANY.  The Company agrees to indemnify
and hold harmless the Investor, its partners, affiliates, officers, directors,
employees and duly authorized agents, and each Person or entity, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the partners, Affiliates,
officers, directors, employees and duly authorized agents of such controlling
Person or entity (collectively, the "Controlling Persons"), from and against any
loss, claim, damage, liability, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements and costs and expenses
of investigating and defending any such claim) (collectively, "Damages"), joint
or several, and any action or proceeding in respect thereof to which the
Investor, its partners, affiliates, officers, directors, employees and duly
authorized agents, and any such Controlling Person may become subject under the
Securities Act or otherwise as incurred and, insofar as such Damages (or actions
or proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or prospectus relating to the Registrable Securities or
any preliminary prospectus, or arises out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are based upon information furnished in writing to the Company by the
Investor expressly for use therein, and shall reimburse the Investor, its
partners, affiliates, officers, directors, employees and duly authorized agents,
and each such Controlling Person for any legal and other expenses reasonably
incurred by the Investor, its partners, affiliates, officers, directors,
employees and duly authorized agents, or any such Controlling Person, as
incurred, in investigating or defending or preparing to defend against any such
Damages or actions or proceedings; provided, however, that the Company shall not
be liable to the Investor to the extent that any such Damages arise out of or
are based upon an untrue statement or omission made in any preliminary
prospectus if (i) the Investor failed to send or deliver a copy of the final
prospectus delivered by the Company to the Investor with or prior to the
delivery of written confirmation of the sale by the Investor to the Person
asserting the claim from which such Damages arise, and (ii) the final prospectus
would have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission.

Section 3.2.  CONDUCT OF INDEMNIFICATION PROCEEDINGS.  Promptly after receipt by
any person or entity in respect of which indemnity may be sought pursuant to
Section 3.1 (an "Indemnified Party") of notice of any claim or the commencement
of any action, the Indemnified Party shall, if a claim in respect thereof is to
be made against the person or entity against whom such indemnity may be sought
(the "Indemnifying Party"), notify the Indemnifying Party in writing of the
claim or the commencement of such action; in the event an Indemnified Party
shall fail to give such notice as provided in this Section 3.2 and the
Indemnifying Party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was materially prejudiced by the
failure to give such notice, the indemnification provided for in Section 3.1
shall be reduced to the extent of any actual prejudice resulting from such
failure to so notify the Indemnifying Party; provided, that the failure to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability that it may have to an Indemnified Party otherwise than under Section
3.1. If any such claim or action

                                       8
<PAGE>

shall be brought against an Indemnified Party, and it shall notify the
Indemnifying Party thereof, the Indemnifying Party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any other
similarly notified Indemnifying Party, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided that the Indemnified Party shall
have the right to employ separate counsel to represent the Indemnified Party and
its Controlling Persons who may be subject to liability arising out of any claim
in respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) in the reasonable judgment of the Company and such Indemnified Party,
representation of both parties by the same counsel would be inappropriate due to
actual or potential conflicts of interest between them, it being understood,
however, that the Indemnifying Party shall not, in connection with any one such
claim or action or separate but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for all
Indemnified Parties, or for fees and expenses that are not reasonable. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any claim or pending or threatened proceeding in
respect of which the Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability arising out of such claim or proceeding. Whether or not the
defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any settlement made
without its consent, which consent will not be unreasonably withheld.

Section 3.3.  OTHER INDEMNIFICATION.  Indemnification similar to that specified
in the preceding paragraphs of this Article 3 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act.  The provisions of this Article III shall be in addition to
any other rights to indemnification, contribution or other remedies which an
Indemnified Party may have pursuant to law, equity, contract or otherwise.

Section 3.4.  CONTRIBUTION.  If the indemnification provided for in this Article
III is unavailable to the Indemnified Parties in respect of any Damages referred
to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Damages as between the Company on the one hand and the
Investor on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of the Investor in connection with such
statements or omissions, as well as other equitable considerations. The relative
fault of the Company on the one hand and of the Investor on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the

                                       9
<PAGE>

parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

The Company and the Investor agree that it would not be just and equitable if
contribution pursuant to this Section 3.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the Damages referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 3.4, the
Investor shall in no event be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of the
Investor were sold to the public (less underwriting discounts and commissions)
exceeds the amount of any damages which the Investor has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.

                                   ARTICLE IV
                                  MISCELLANEOUS

Section 4.1.  NO OUTSTANDING REGISTRATION RIGHTS.  The Company represents and
warrants to the Investor that there is not in effect on the date hereof any
agreement by the Company pursuant to which any holders of securities of the
Company have a right to cause the Company to register or qualify such securities
under the Securities Act or any securities or blue sky laws of any jurisdiction
that would conflict or be inconsistent with any provision of this Agreement or
the Equity Line Agreement.

Section 4.2.  TERM.  The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as all Put Shares
(i) have been disposed of pursuant to the Registration Statement, (ii) have been
sold under circumstances under which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act ("Rule
144") are met, (iii) have been otherwise transferred to holders who may trade
such shares without restriction under the Securities Act, and the Company has
delivered a new certificate or other evidence of ownership for such securities
not bearing a restrictive legend, or (iv) may be sold without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to the Investor; provided, however, that
                                                        --------  -------
such registration rights shall not terminate sooner than two years following the
Subscription Date. Notwithstanding the foregoing, paragraphs (c) and (d) of
Section 1.1, Article III, Section 4.8, and Section 4.9 shall survive the
termination of this Agreement.

Section 4.3.  RULE 144.  The Company covenants that it will file all reports
required to be filed by it under the Act and the Exchange Act and that it will
take such further action as holders of Registrable Securities may reasonably
request, all to the extent required from time to time to

                                       10
<PAGE>

enable the Investor to sell Registrable Securities without registration under
the Act within the limitation of the exemptions provided by (a) Rule 144, as
such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. If at any time the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144. Upon the request of the
Investor, the Company will deliver to the Investor a written statement as to
whether it has complied with such requirements.

Section 4.4.  CERTIFICATE.  The Company will, at its expense, forthwith upon the
request of any holder of Registrable Securities, deliver to such holder a
certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's
Commission file number, (d) the number of shares of each class of Stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual report
required to be filed thereunder.

Section 4.5.  AMENDMENT AND MODIFICATION.  Any provision of this Agreement may
be waived, provided that such waiver is set forth in a writing executed by both
parties to this Agreement. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of a majority
of the then outstanding Registrable Securities. Notwithstanding the foregoing,
the waiver of any provision hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and does not directly or
indirectly affect the rights of other holders of Registrable Securities may be
given by holders of at least a majority of the Registrable Securities being sold
by such holders; provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. No course of dealing between or among any
Person having any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.

Section 4.6.  SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT.  This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The Investor may
assign its rights under this Agreement to any subsequent holder the Registrable
Securities, provided that the Company shall have the right to require any holder
of Registrable Securities to execute a counterpart of this Agreement as a
condition to such holder's claim to any rights hereunder; provided further that
such holder is an "accredited investor" as defined in Rule 501 of Regulation D
of the Securities Act.  This Agreement, together with the Equity Line Agreement
and the Escrow Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.

                                       11
<PAGE>

Section 4.7.  SEPARABILITY In the event that any provision of this Agreement or
the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.

Section 4.8.  NOTICES.  All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and
shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur.  The addresses for such communications shall be:

     If to Sonic Solutions, Inc.:

               Robert J. Doris
               President and Chief Executive Officer
               Sonic Solutions
               101 Rowland Way, Suite 110
               Novato, California 94945
               Telephone: (415) 893-8000
               Facsimile: (415) 893-8008

     with a copy to (which communication shall not constitute notice):

               Kyle Guse, Esq.
               Heller Ehrman White & McAuliffe
               2500 Sand Hill Road, Suite 100
               Menlo Park, California 94025-7063
               Telephone: (650) 234-4200
               Facsimile: (650) 234-4299

     If to the Investor:

               Adam Gurney
               Kingsbridge Capital Limited
               c/o Kingsbridge Corporate Services Limited
               Main Street
               Kilcullen, County Kildare

                                       12
<PAGE>

               Republic of Ireland
               Telephone: 011-353-45-481-811
               Facsimile: 011-353-45-482-003

     with a copy to (which communication shall not constitute notice):

               Keith M. Andruschak, Esq.
               Clifford Chance Rogers & Wells LLP
               200 Park Avenue
               New York, NY 10166
               Telephone: (212) 878-8000
               Facsimile: (212) 878-8375

Either party hereto may from time to time change its address or facsimile number
for notices under this Section 4.8 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.

Section 4.9.  GOVERNING LAW.  This Agreement shall be construed under the laws
of the State of California, without giving effect to provisions regarding
conflicts of law or choice of law.

Section 4.10.  HEADINGS.  The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.

Section 4.11.  COUNTERPARTS.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.

Section 4.12.  FURTHER ASSURANCES.  Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.

Section 4.13.  REMEDIES.  In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.

                                       13
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.

                              SONIC SOLUTIONS

                              By:
                                 -----------------------------------------------
                                 Robert J. Doris
                                 President and Chief Executive Officer

                              KINGSBRIDGE CAPITAL LIMITED

                              By:
                                 -----------------------------------------------
                                 Valentine O'Donoghue
                                 Director

                                       14

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