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                                                                   EXHIBIT 10.11

               SECOND AMENDED AND RESTATED 1998 STOCK OPTION PLAN
                                       OF
                                  INTERVU INC.

                InterVU Inc., a Delaware corporation (the "Company"), has
adopted The 1998 Stock Option Plan of InterVU Inc. (the "Plan"), effective
February 25, 1998, as amended September 17, 1999 and October __, 1999, for the
benefit of its eligible employees, consultants and directors. The Plan consists
of two plans, one for the benefit of key Employees (as such term is defined
below) and consultants and one for the benefit of Independent Directors (as such
term is defined below).

                The purposes of this Plan are as follows:

                (1) To provide an additional incentive for directors, key
Employees and consultants to further the growth, development and financial
success of the Company by personally benefiting through the ownership of Company
stock which recognizes such growth, development and financial success.

                (2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company which will reflect the growth, development and financial success of the
Company.

                                   ARTICLE I.

                                   DEFINITIONS

        1.1 General. Wherever the following terms are used in this Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.

        1.2 Award Limit. "Award Limit" shall mean 100,000 shares of Common
Stock, as adjusted pursuant to Section 8.3.

        1.3 Board. "Board" shall mean the Board of Directors of the Company.

        1.4 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.

        1.5 Committee. "Committee" shall mean the Compensation Committee of the
Board, or another committee of the Board, appointed as provided in Section 7.1.

        1.6 Common Stock. "Common Stock" shall mean the common stock of the
Company, $.001 par value per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock. Debt
securities of the Company convertible into Common Stock shall be deemed equity
securities of the Company.

        1.7 Company. "Company" shall mean InterVU Inc., a Delaware corporation.

        1.8 Corporate Transaction. "Corporate Transaction" shall mean any of the
following stockholder-approved transactions to which the Company is a party:

                (a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated, to form a holding company
or to effect a similar reorganization as to form whereupon this Plan and all
Options are assumed by the successor entity;

                (b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions to
clause (a) above; or

                (c) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's

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outstanding securities are transferred or issued to a person or persons
different from those who held such securities immediately prior to such merger.

        1.9 Director. "Director" shall mean a member of the Board.

        1.10 Disability. "Disability" shall mean, with respect to any Optionee,
(i) the suffering of any mental or physical illness, disability or incapacity
that shall in all material aspects preclude such Optionee from performing his or
her directorial, employment or consultant duties, or (ii) the absence of such
Optionee from his or her directorial, employment or consultant duties by reason
of any mental or physical illness, disability or incapacity for a period of six
(6) months during any twelve (12) month period; provided, however, in either
case, that such illness, disability or incapacity shall be reasonably determined
to be of a permanent nature by the Committee (or the Board in the case of
Options granted to Independent Directors).

        1.11 Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.

        1.12 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.

        1.13 Fair Market Value. "Fair Market Value" of a share of Common Stock
as of a given date shall be: (i) the closing sale price of a share of Common
Stock on the principal exchange on which the Common Stock is then trading, if
any, on such date, or, if shares were not traded on such date, then on the next
preceding trading day during which a sale occurred; (ii) if the Common Stock is
not traded on an exchange but is quoted on Nasdaq or a successor quotation
system, (1) the last sales price (if the Common Stock is then quoted on the
Nasdaq National Market or the Nasdaq SmallCap Market) or (2) the mean between
the closing representative bid and asked prices (in all other cases) for a share
of the Common Stock on such date, or, if shares were not traded on such date,
then on the next preceding trading day during which a sale occurred, as reported
by Nasdaq or such successor quotation system; (iii) if the Common Stock is not
publicly traded on an exchange and not quoted on Nasdaq or a successor quotation
system, the mean between the closing bid and asked prices for a share of Common
Stock on such date, or, if shares were not traded on such date, then on the next
preceding trading day during which a sale occurred, as determined in good faith
by the Committee; or (iv) if the Common Stock is not publicly traded, the fair
market value of a share of Common Stock established by the Committee (or Board
in the case of Options granted to Independent Directors) acting in good faith.

        1.14 Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.

        1.15 Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.

        1.16 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee.

        1.17 Option. "Option" shall mean a stock option granted under Article
III of this Plan. An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however that Options granted to Independent Directors and consultants
shall be Non-Qualified Stock Options.

        1.18 Option Shares. "Option Shares" shall mean shares of Common Stock
acquired by Optionees through the exercise of Options under this Plan.

        1.19 Optionee. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.

        1.20 Person. "Person" shall mean a corporation, an association, a
partnership, a trust, a limited liability company, an organization, a business
or an individual.

        1.21 Plan. "Plan" shall mean The 1998 Stock Option Plan of InterVU Inc.

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        1.22 QDRO. "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.

        1.23 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.

        1.24 Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.

        1.25 Subsidiary. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one (1) of the other corporations in such chain.

        1.26 Termination of Consultancy. "Termination of Consultancy" shall mean
the time when the engagement of an Optionee as a consultant to the Company or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death, Disability or
retirement; but excluding terminations where there is a simultaneous
commencement of employment with the Company or any Subsidiary. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Consultancy, including, but not by way of limitation,
the question of whether a Termination of Consultancy resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Consultancy. Notwithstanding any other provision of
this Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.

        1.27 Termination of Directorship. "Termination of Directorship" shall
mean the time when an Optionee who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death, Disability or retirement. The
Board, in its sole and absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Directorship with respect to
Independent Directors.

        1.28 Termination of Employment. "Termination of Employment" shall mean
the time when the employee-employer relationship between an Optionee and the
Company or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, Disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an Optionee by
the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary severance of the employee-employer
relationship, and (iii) at the discretion of the Committee, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, unless otherwise
determined by the Committee in its discretion, a leave of absence, change in
status from an employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of Employment if,
and to the extent that, such leave of absence, change in status or other change
interrupts employment for the purposes of Section 422(a)(2) of the Code and the
then applicable regulations and revenue rulings under said Section.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate an Employee's employment at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.

        1.29 Termination for Cause. "Termination for Cause" shall mean the time
when the Independent Director-employer, employee-employer or consultant-employer
relationship between an Optionee and the Company or any Subsidiary is terminated
for cause, as termination for cause is defined in the Optionee's directorial,
employment or consultancy agreement; provided however, that if termination for
cause is not therein defined, it shall have such meaning, in conformance with
applicable law, as the

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Committee (or the Board in the case of termination for cause of an Independent
Director) shall determine is appropriate.

                                   ARTICLE II.

                             SHARES SUBJECT TO PLAN

        2.1 Shares Subject to Plan.

                (a) The shares of stock subject to Options shall be Common
Stock. The aggregate number of such shares which may be issued upon exercise of
such options under the Plan shall be 2,000,000. The shares of Common Stock of
the Company issuable upon exercise of such options may be either previously
authorized but unissued shares or treasury shares.

                (b) The maximum number of shares which may be subject to Options
granted under the Plan to any individual in any fiscal year of the Company shall
not exceed the Award Limit. To the extent required by Section 162(m) of the
Code, shares subject to Options which are canceled continue to be counted
against the Award Limit and if, after grant of an Option, the price of shares
subject to such Option is reduced, the transaction is treated as a cancellation
of the Option and a grant of a new Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the Award
Limit.

        2.2 Add-back of Options. If any Option to acquire shares of Common Stock
under this Plan expires or is canceled without having been fully exercised, the
number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration, cancellation or exercise may again be
available for the granting of Options hereunder, subject to the limitations of
Section 2.1. Furthermore, any shares subject to Options which are adjusted
pursuant to Section 8.3 and become exercisable with respect to shares of stock
of another corporation shall be considered cancelled and may again be available
for the granting of Options hereunder, subject to the limitations of Section
2.1. Shares of Common Stock which are delivered by the Optionee or withheld by
the Company upon the exercise of any Option under this Plan, in payment of the
exercise price thereof, may again be available for the granting of Options
hereunder, subject to the limitations of Section 2.1. Notwithstanding the
provisions of this Section 2.2, no shares of Common Stock may again be available
for the granting of Options if such action would cause an Incentive Stock Option
to fail to qualify as an incentive stock option under Section 422 of the Code.

                                  ARTICLE III.

                               GRANTING OF OPTIONS

        3.1 Eligibility. Any Independent Director, Employee or consultant
selected by the Committee (or the Board in the case of Options granted to
Independent Directors) pursuant to Section 3.4(a)(i) shall be eligible to be
granted an Option.

        3.2 Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.

        3.3 Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.

        3.4 Granting of Options.

                (a) The Committee (or the Board in the case of Options granted
to Independent Directors) shall from time to time, in its absolute discretion,
and subject to applicable limitations of this Plan:

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                        (i) Determine which Employees are key Employees and
        select from among the Independent Directors, key Employees and
        consultants (including Independent Directors, Employees and consultants
        who have previously received Options or other awards under this Plan)
        such of them as in its opinion should be granted Options;

                        (ii) Subject to the Award Limit, determine the number of
        shares to be subject to such Options granted to the selected Independent
        Directors, key Employees and consultants;

                        (iii) Subject to Section 3.3, determine whether such
        Options are to be Incentive Stock Options or Non-Qualified Stock Options
        and whether such Options are to qualify as performance-based
        compensation as described in Section 162(m)(4)(C) of the Code; and

                        (iv) Determine the terms and conditions of such Options,
        consistent with this Plan; provided, however, that the terms and
        conditions of Options intended to qualify as performance-based
        compensation as described in Section 162(m)(4)(C) of the Code shall
        include, but not be limited to, such terms and conditions as may be
        necessary to meet the applicable provisions of Section 162(m) of the
        Code.

                (b) Upon the selection of an Independent Director, key Employee
or consultant to be granted an Option, the Committee (or the Board in the case
of Options granted to Independent Directors) shall instruct the Secretary of the
Company to issue the Option and may impose such conditions on the grant of the
Option as it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee (or the Board in the case of Options granted to
Independent Directors) may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option to an Independent
Director, Employee or consultant that such Independent Director, Employee or
consultant surrender for cancellation some or all of the unexercised Options or
other rights which have been previously granted to such Independent Director,
Employee or consultant under this Plan or otherwise. An Option, the grant of
which is conditioned upon such surrender, may have an option price lower (or
higher) than the exercise price of such surrendered Option or other award, may
cover the same (or a lesser or greater) number of shares as such surrendered
Option or other award, may contain such other terms as the Committee (or the
Board in the case of Options granted to Independent Directors) deems
appropriate, and shall be exercisable in accordance with its terms, without
regard to the number of shares, price, exercise period or any other term or
condition of such surrendered Option or other award.

                (c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.

                (d) During the term of the Plan, each person who is an
Independent Director shall be granted an Option to purchase five thousand
(5,000) shares of Common Stock (subject to adjustment as provided in Section
8.3) on the date of each annual meeting of stockholders (other than the 1998
Annual Meeting of Stockholders); provided that such Independent Director is then
serving as a member of the Board and, if applicable, has been reelected to serve
for an additional term as a member of the Board. During the term of the Plan, a
person who is initially elected to the Board after the adoption of the Plan by
the Board and who is an Independent Director at the time of such initial
election automatically shall be granted (i) an Option to purchase twenty
thousand (20,000) shares of Common Stock (subject to adjustment as provided in
Section 8.3) on the date of such initial election and (ii) an Option to purchase
five thousand (5,000) shares of Common Stock (subject to adjustment as provided
in Section 8.3) on the date of each annual meeting of stockholders; provided
that such Independent Director is then serving as a member of the Board and, if
applicable, has been reelected to serve for an additional term as a member of
the Board. Members of the Board who are employees of the Company who
subsequently retire from the Company and remain on the Board will not receive an
initial Option grant pursuant to clause (i) of the preceding sentence, but to
the extent that they are otherwise eligible, will receive, after retirement from
employment with the Company, Options as described in clause (ii) of the
preceding sentence. All the foregoing Option grants authorized by this Section
3.4(d) are subject to stockholder approval of the Plan.

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                                   ARTICLE IV.

                                TERMS OF OPTIONS

        4.1 Option Agreement. Each Option shall be evidenced by a written Stock
Option Agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee (or the Board in the case of Options granted to Independent Directors)
shall determine, consistent with this Plan. Stock Option Agreements evidencing
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may
be necessary to meet the applicable provisions of Section 162(m) of the Code.
Stock Option Agreements evidencing Incentive Stock Options shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 422 of the Code.

        4.2 Option Price. The price per share of the shares subject to each
Option shall be set by the Committee (or the Board in the case of Options
granted to Independent Directors); provided, however, that:

                (a) Unless otherwise permitted by applicable securities laws,
such price shall be not less than eighty-five percent (85%) of the Fair Market
Value of the stock at the time the option is granted, except that the price
shall be one hundred and ten percent (110%) of the Fair Market Value of the
stock in the case of any person possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or its
Subsidiary;

                (b) In the case of Incentive Stock Options and Options intended
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code, such price shall not be less than one hundred percent
(100%) of the Fair Market Value of a share of Common Stock on the date the
Option is granted; and

                (c) In the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Subsidiary such price shall not be less than one
hundred and ten percent (110%) of the Fair Market Value of a share of Common
Stock on the date the Option is granted.

        4.3 Option Term. The term of an Option shall be set by the Committee (or
the Board in the case of Options granted to Independent Directors) in its
discretion; provided, however, that:

                (a) No Option may have a term that extends beyond the expiration
of ten (10) years from the date the Option was granted;

                (b) In the case of Incentive Stock Options, the term shall not
be more than ten (10) years from the date the Incentive Stock Option is granted,
or five (5) years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Subsidiary;

                (c) Except as limited by requirements of Section 422 of the Code
and regulations and rulings thereunder applicable to Incentive Stock Options,
the Committee (or the Board in the case of Options granted to Independent
Directors) may extend the term of any outstanding Option in connection with any
Termination of Directorship, Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such Option
relating to such a termination.

        4.4 Option Vesting.

                (a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee (or the
Board in the case of Options granted to Independent Directors) and the Committee
(or the Board in the case of Options granted to Independent Directors) may
determine that an Option may not be exercised in whole or in part for a
specified period after it is granted;

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provided, however, that, unless the Committee otherwise provides in the terms of
the Option or otherwise, no Option shall be exercisable by any Optionee who is
then subject to Section 16 of the Exchange Act within the period ending six (6)
months and one day after the date the Option is granted; and provided, further,
that Options granted to Independent Directors shall become exercisable in
cumulative annual installments of 25% on each of the first, second, third, and
fourth anniversaries of the date of the Option grant, without variation or
acceleration hereunder except as provided in section 8.3. At any time after the
grant of an Option, the Committee may, in its sole and absolute discretion and
subject to whatever terms and conditions it selects, accelerate the period
during which an Option (except an Option granted to an Independent Director)
vests.

                (b) No portion of an Option which is unexercisable at
Termination of Directorship, Termination of Employment or Termination of
Consultancy shall thereafter become exercisable, except as may be otherwise
provided by the Committee (or the Board in the case of Options granted to
Independent Directors) either in the Stock Option Agreement or by action of the
Committee (or the Board in the case of Options granted to Independent Directors)
following the grant of the Option.

                (c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the meaning of Section
422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth in
the preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the time the Option with respect
to such stock is granted.

        4.5 Consideration. In consideration of the granting of an Option, the
Optionee shall agree, in the written Stock Option Agreement, to remain in the
employ (or to consult for or serve as an Independent Director, as applicable) of
the Company or any Subsidiary for a period of at least one (1) year (or such
shorter period as may be fixed in the Stock Option Agreement or by action of the
Committee (or the Board in the case of Options granted to Independent Directors)
following grant of the Option) after the Option is granted (or, in the case of
an Independent Director, until the next annual meeting of the stockholders of
the Company). Nothing in this Plan or in any Stock Option Agreement hereunder
shall confer upon any Optionee any right to continue in the employ (or to
consult for or serve as an Independent Director, as applicable) of the Company
or any Subsidiary or shall interfere with or restrict in any way the rights of
the Company or any Subsidiary, which are hereby expressly reserved, to discharge
any Optionee at any time for any reason whatsoever, with or without good cause.

                                   ARTICLE V.

                               EXERCISE OF OPTIONS

        5.1 Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares, and the Committee (or the Board in the case of Options granted to
Independent Directors) may require that, by the terms of the Option, a partial
exercise be with respect to a minimum number of shares.

        5.2 Manner of Exercise. All or a portion of an exercisable Option shall
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or such Secretary's office:

                (a) A written notice complying with the applicable rules
established by the Committee (or the Board in the case of Options granted to
Independent Directors) stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;

                (b) Such representations and documents as the Committee (or the
Board in the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee (or the Board in the case of
Options granted to Independent Directors) may, in its absolute discretion, also
take whatever additional actions it deems appropriate to

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effect such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;

                (c) In the event that the Option shall be exercised pursuant to
Section 8.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and

                (d) Full cash payment to the Secretary of the Company for the
shares and for payment of any applicable withholding or other applicable
employment taxes with respect to which the Option, or portion thereof, is
exercised. However, the Committee (or the Board in the case of Options granted
to Independent Directors), may in its discretion (i) allow a delay in payment up
to thirty (30) days from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of shares of
Common Stock owned by the Optionee, duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee (or the Board in the case of Options
granted to Independent Directors); (vi) allow payment, in whole or in part,
through the delivery of a notice that the Optionee has placed a market sell
order with a broker with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price and any applicable withholding or
other employment taxes; or (vii) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and
(vi). In the case of a promissory note, the Committee (or the Board in the case
of Options granted to Independent Directors) may also prescribe the form of such
note and the security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is prohibited by
law.

        5.3 Conditions to Issuance of Stock Certificates. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

                (a) The admission of such shares to listing on all stock
exchanges, if any, on which such class of stock is then listed;

                (b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Committee or the Board shall, in its absolute discretion, deem
necessary or advisable;

                (c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee or the Board shall, in
its absolute discretion, determine to be necessary or advisable;

                (d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee or the Board may establish from time to
time for reasons of administrative convenience; and

                (e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.

        5.4 Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.

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                                   ARTICLE VI.

              RIGHTS AND RESTRICTIONS WITH RESPECT TO OPTION SHARES

        6.1 Ownership and Transfer Restrictions. The Committee (or Board, in the
case of Options granted to Independent Directors), in its absolute discretion,
may impose such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any such
restriction shall be set forth in the respective Stock Option Agreement and may
be referred to on the certificates evidencing such shares. The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two (2) years from the date of granting such Option to such Employee or (ii)
one year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.

        6.2 Limitation on Exercise of Options Granted to Independent Directors.
No Option granted to an Independent Director may be exercised to any extent by
anyone after the first to occur of the following events:

                (a) The expiration of twelve (12) months from the date of the
Optionee's death;

                (b) The expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent and total
disability (within the meaning of section 22(e)(3) of the Code);

                (c) The expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than such Optionee's
death or his permanent and total disability, unless the Optionee dies within
said three month period; or

                (d) The expiration of ten (10) years from the date the Option
was granted.

                                  ARTICLE VII.

                                 ADMINISTRATION

        7.1 Compensation Committee. The Compensation Committee (or another
committee of the Board assuming the functions of the Committee under this Plan)
shall consist solely of two or more Independent Directors appointed by and
holding office at the pleasure of the Board, each of whom is both a
"non-employee director" as defined by Rule 16b-3 and an "outside director" for
purposes of Section 162(m) of the Code. Appointment of Committee members shall
be effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.

        7.2 Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options are granted or awarded, and to adopt
such rules for the administration, interpretation, and application of this Plan
as are consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant or award
under this Plan need not be the same with respect to each Optionee. Any such
interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.

        7.3 Majority Rule; Unanimous Written Consent. The Committee shall act by
a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.

                                       9
<PAGE>   10

        7.4 Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee shall receive such compensation for their services as members
as may be determined by the Board. All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall be
borne by the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other persons. The
Committee, the Company and the Company's officers and Directors shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Optionees, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or Options, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.

                                  ARTICLE VIII.

                            MISCELLANEOUS PROVISIONS

        8.1 Not Transferable. Options under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such options have been
exercised, or the shares underlying such Options have been issued, and all
restrictions applicable to such shares have lapsed. No Option or interest or
right therein shall be liable for the debts, contracts or engagements of the
Optionee or the Optionee's successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.

                During the lifetime of the Optionee, only such Optionee may
exercise an Option (or any portion thereof) granted to such Optionee under the
Plan, unless the Option has been disposed of pursuant to a QDRO. After the death
of the Optionee, any exercisable portion of an Option may, prior to the time
when such portion becomes unexercisable under the Plan or the applicable Stock
Option Agreement or other agreement, be exercised by the Optionee's personal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.

        8.2 Amendment, Suspension or Termination of this Plan. Except as
otherwise provided in this Section 8.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 8.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, alter or impair any rights or obligations
under any Options theretofore granted or awarded, unless the award itself
otherwise expressly so provides. No Options may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:

                (a) The expiration of ten (10) years from the date the Plan is
adopted by the Board; or

                (b) The expiration of ten (10) years from the date the Plan is
approved by the Company's stockholders under Section 8.4.

        8.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.

                                       10
<PAGE>   11

                (a) Subject to Section 8.3(d), in the event that the Committee
(or the Board in the case of Options granted to Independent Directors)
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company
(including, but not limited to, a Corporate Transaction), or exchange of Common
Stock or other securities of the Company, issuance of warrants or other rights
to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee's sole discretion (or, in the
case of Options granted to Independent Directors, the Board's sole discretion),
affects the Common Stock such that an adjustment is determined by the Committee
(or the Board in the case of Options granted to Independent Directors) to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to an Option, then the Committee (or the Board in the case of Options granted to
Independent Directors) shall, in such manner as it may deem equitable, adjust
any or all of:

                        (i) the number and kind of shares of Common Stock (or
other securities or property) with respect to which Options may be granted under
the Plan, (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),

                        (ii) the number and kind of shares of Common Stock (or
other securities or property) subject to outstanding Options, and

                        (iii) the grant or exercise price with respect to any
Option.

                (b) Subject to Sections 8.3(b)(vi) and 8.3(d), in the event of
any Corporate Transaction or other transaction or event described in Section
8.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board in the case of Options
granted to Independent Directors) in its discretion is hereby authorized to take
any one (1) or more of the following actions whenever the Committee (or the
Board in the case of Options granted to Independent Directors) determines that
such action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any option under this Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:

                        (i) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee (or the Board in the
case of Options granted to Independent Directors) may provide, either by the
terms of the agreement or by action taken prior to the occurrence of such
transaction or event and either automatically or upon the Optionee's request,
for either the purchase of any such Option for an amount of cash equal to the
amount that could have been attained upon the exercise of such Option, or
realization of the Optionee's rights had such Option been currently exercisable
or payable or fully vested or the replacement of such Option with other rights
or property selected by the Committee (or the Board in the case of Options
granted to Independent Directors) in its sole discretion;

                        (ii) In its sole and absolute discretion, the Committee
(or the Board in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised after such
event;

                        (iii) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee (or the Board in the
case of Options granted to Independent Directors) may provide, either by the
terms of such Option or by action taken prior to the occurrence of such
transaction or event, that for a specified period of time prior to such
transaction or event, such Option shall be exercisable as to all shares covered
thereby, notwithstanding anything to the contrary in (i) Section 4.4 or (ii) the
provisions of such Option;

                        (iv) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee (or the Board in the
case of Options granted to Independent Directors) may provide, either by the
terms of such Option or by action taken prior to the occurrence of such

                                       11
<PAGE>   12

transaction or event, that upon such event, such Option be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or shall
be substituted for by similar options covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices;

                        (v) In its sole and absolute discretion, and on such
terms and conditions as it deems appropriate, the Committee (or the Board in the
case of Options granted to Independent Directors) may make adjustments in the
number and type of shares of Common Stock (or other securities or property)
subject to outstanding Options and/or in the terms and conditions of (including
the grant or exercise price), and the criteria included in, outstanding Options
and Options which may be granted in the future;

                        (vi) In the event the Company undergoes a Corporate
Transaction and the successor or survivor corporation, or a parent or subsidiary
thereof, does assume such Options (or substitutes similar options for those
outstanding under the Plan), then, with respect to each Option held by persons
then performing services as Employees or Directors, the vesting of each such
Option (and, if applicable, the time during which such Option may be exercised)
shall be accelerated and such Option shall become fully vested and exercisable,
if, as a result of the occurrence of the Corporate Transaction, any of the
following events occurs: (1) a Termination of Employment or Termination of
Directorship of an Optionee by the Company or its successor without Cause or (2)
the Employee holding such Option effects a Termination of Employment due to the
fact that there is a material reduction in such Employee's salary (excluding
bonuses (whether or not payable in cash), employee benefits or other non-cash
compensation) without the Employee's express consent; provided that this Section
8.3(b)(vi) shall not apply to a Corporate Transaction involving an exchange of
all of the Common Stock of the Company for capital stock of another company,
whether effected by merger or otherwise, if negotiations relating to such
Corporate Transaction commence within six (6) months after Board or Committee
approval of the amendment to the Plan which adds this Section 8.3(b)(vi) to the
Plan; and

                        (vii) None of the foregoing discretionary actions taken
under this Section 8.3(b) shall be permitted with respect to Options granted to
Independent Directors to the extent that such discretion would be inconsistent
with the applicable exemptive conditions of Rule 16b-3. In the event of a
Corporate Transaction, to the extent that the Board does not have the ability
under Rule 16b-3 to take or to refrain from taking the discretionary actions set
forth in Section 8.3(b)(iii) above, each Option granted to an Independent
Director shall be exercisable as to all shares covered thereby during the five
days immediately preceding the consummation of such Corporate Transaction and
subject to such consummation, notwithstanding anything to the contrary in
Section 4.4 or the vesting schedule of such Options. In the event of a Corporate
Transaction, to the extent that the Board does not have the ability under Rule
16b-3 to take or to refrain from taking the discretionary actions set forth in
Section 8.3(b)(ii) above, no Option granted to an Independent Director may be
exercised following such Corporate Transaction unless such Option is, in
connection with such Corporate Transaction, either assumed by the successor or
survivor corporation (or parent or subsidiary thereof) or replaced with a
comparable right with respect to shares of the capital stock of the successor or
survivor corporation (or parent or subsidiary thereof).

                (c) Subject to Section 8.3(d) and 8.8, the Committee (or the
Board in the case of Options granted to Independent Directors) may, in its
discretion, include such further provisions and limitations in any Option as it
may deem equitable and in the best interests of the Company.

                (d) With respect to Incentive Stock Options and Options intended
to qualify as performance-based compensation under Section 162(m), no adjustment
or action described in this Section 8.3 or in any other provision of the Plan
shall be authorized to the extent that such adjustment or action would cause the
Plan to violate Section 422(b)(1) of the Code or would cause such option to fail
to so qualify under Section 162(m), as the case may be, or any successor
provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in short-swing
profits liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Committee (or the Board in the case of Options granted to
Independent Directors) determines that the Option is not to comply with such
exemptive conditions. The number of shares of Common Stock subject to any Option
shall always be rounded to the next whole number.

                                       12
<PAGE>   13

        8.4 Approval of Plan by Stockholders. This Plan will be submitted for
the approval of the Company's stockholders within twelve months after the date
of the Board's initial adoption of this Plan. Options may be granted prior to
such stockholder approval, provided that such Options shall not be exercisable
prior to the time when this Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said
twelve-month period, all Options previously granted under this Plan shall
thereupon be canceled and become null and void.

        8.5 Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting or exercise of any Option. The Committee (or the Board in the
case of Options granted to Independent Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee to elect to have
the Company withhold shares of Common Stock otherwise issuable under such Option
(or allow the return of shares of Common Stock) having a Fair Market Value equal
to the sums required to be withheld.

        8.6 Loans. The Committee may, in its discretion, extend one (1) or more
loans to key Employees in connection with the exercise or receipt of an Option
granted under this Plan. The terms and conditions of any such loan shall be set
by the Committee.

        8.7 Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board in the case of Options granted to Independent Directors)
shall have the right (to the extent consistent with the applicable exemptive
conditions of Rule 16b-3 and to the extent permitted under applicable state law)
to provide, in the terms of Options made under the Plan, or to require the
recipient to agree by separate written instrument, that (i) any proceeds, gains
or other economic benefit actually or constructively received by the recipient
upon any receipt or exercise of an Option, or upon the receipt or resale of any
Common Stock underlying such Option, must be paid to the Company, and (ii) the
Option shall terminate and any unexercised portion of such Option (whether or
not vested) shall be forfeited, if (a) a Termination of Directorship,
Termination of Employment or Termination of Consultancy occurs prior to a
specified date, or within a specified time period following receipt or exercise
of the Option, or (b) the recipient at any time, or during a specified time
period, engages in any activity in competition with the Company, or which is
inimical, contrary or harmful to the interests of the Company, as further
defined by the Committee (or the Board, as applicable).

        8.8 Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, this Plan, and
any Option granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Options granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan, any Option intended to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in Section 162(m)
of the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.

        8.9 Effect of Plan Upon Options and Compensation Plans. The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of incentives or
compensation for Employees, directors or consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate purpose including but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, limited liability
company, firm or association.

        8.10 Compliance with Laws. This Plan, the granting and vesting of
Options under this Plan and the issuance and delivery of shares of Common Stock
and the payment of money under this Plan or

                                       13
<PAGE>   14

under Options granted hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan and
Options granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.

        8.11 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.

        8.12 Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.

                                       14<PAGE>

                                   EXHIBIT 4.2

                                 SONIC SOLUTIONS
                    PRIVATE SECURITIES SUBSCRIPTION AGREEMENT

     THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter the
"Agreement") is made as of October 15, 1999, by and between Sonic Solutions, a
California corporation ("Sonic Solutions" or the "Company"), and Hambrecht &
Quist Guaranty Finance, LLC, a California limited liability company (the
"Investor"), in connection with the sale by the Company to the Investor in a
private placement pursuant to Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"), of certain shares of Series C Preferred Stock
(the "Preferred Stock"), convertible into shares of common stock of the Company
(the "Common Stock").

     THE PARTIES AGREE AS FOLLOWS:

     1.   AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.

     (i)  Sonic Solutions and the Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission ("SEC") under the Securities Act; and

     (ii) Subject to the terms and conditions hereof and in reliance upon the
representations and warranties contained herein, the Company will issue and sell
to the Investor at the Closing (as defined in Section 7 hereof), and the
Investor will purchase from the Company 153,846 shares of Preferred Stock (the
"Shares") convertible into Common Stock at the rate of 1.625 shares of Common
Stock for each share of Series C Preferred in accordance with the terms set
forth in the Certificate of Amendment to the Certificate of Determination and
the Certificate of Determination attached as Exhibit A to this Agreement, for an
aggregate purchase price of U.S. $500,000 (the "Purchase Price") payable at the
Closing by cancellation of the Company's indebtedness to the Investor in an
amount equal to the amount of the Purchase Price (the "Cancellation of
Indebtedness").

     2.   INVESTOR'S REPRESENTATIONS AND AGREEMENTS. The Investor represents,
warrants and agrees as follows:

     (i)  The Investor understands that the Preferred Stock and the warrant to
purchase 120,000 shares of Common Stock issued to the Investor on the date
hereof and the Common Stock issuable upon conversion and exercise thereof
(together the "Securities") have not been registered under the Securities Act or
any other applicable securities law, and, accordingly, none of the Securities
may be offered, sold, transferred, pledged, hypothecated or otherwise disposed
of unless registered pursuant to, or in a transaction exempt from registration
under, the Securities Act and any other applicable securities law;

     (ii) The Investor is a "sophisticated investor" as described in Rule
506(b)(2)(ii) of Regulation D, and an "accredited investor" within the meaning
of Rule 501 of Regulation D. The Investor has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Securities. The Investor is aware that it may be
required to bear the economic risk of an investment in the Securities for an
indefinite period, and it is
<PAGE>

able to bear such risk for an indefinite period. The Investor acknowledges that
an investment in the Securities is speculative and involves a high degree of
risk;

     (iii)  The Investor is not subscribing for the Securities as a result of or
pursuant to any advertisement, article, notice, or other communication published
in any newspaper, magazine, or similar media or broadcast over television or
radio;

     (iv)   The Investor has received all information requested with respect to
an investment in the Securities, including but not limited to Sonic Solutions'
latest Form 10-K, the Registration Statement on Form S-1 with the Securities and
Exchange Commission on August 12, 1999, all Forms 10-Q and 8-K filed thereafter,
(but prior to the date hereof), and the Proxy Statement for its latest fiscal
year (collectively, the "Public Documents"). In addition, the Investor has had a
reasonable opportunity to ask questions of and receive answers from Sonic
Solutions concerning Sonic Solutions and the offering of the Preferred Stock;

     (v)    The Investor is acquiring the Securities for investment purposes and
not with a view to, or for offer or sale in connection with, any distribution
thereof, except pursuant to an effective registration statement under the
Securities Act covering the sale, assignment or transfer of the Securities or an
exemption from the registration requirements of the Securities Act and
applicable state securities laws;

     (vi)   The Investor is acquiring the Securities for its own account and has
full power to make the acknowledgments, representations and agreements as
described in this Section 2;

     (vii)  The Investor agrees to offer, sell or otherwise transfer any
Securities in conformity with the prospectus delivery requirements, if any, of
the Securities Act, and with the restrictions on transfer set forth on the
certificate(s) evidencing the Securities pursuant to Section 4(b);

     (viii) The Investor acknowledges that Sonic Solutions and others will rely
upon the truth and accuracy of the foregoing acknowledgments, representations
and agreements and further agrees that if, prior to the Closing, any of such
acknowledgments, representations and agreements made by the Investor are no
longer accurate, the Investor will promptly notify Sonic Solutions;

     (ix)   This Agreement has been duly authorized, validly executed, and
delivered on behalf of the Investor and is a valid and binding agreement
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally;

     (x)    There is no action, suit, notice of violation, proceeding or
investigation pending or, to the best knowledge of the Investor, threatened
against the Investor which would materially and adversely affect the Investor or
the performance of its obligations hereunder; and

     (xi)   So long as any Securities are outstanding, the Investor shall comply
at all times with the provisions of Section 9 of the Securities Exchange Act of
1934 (the "Exchange Act"), as amended, and the rules promulgated thereunder with
respect to transactions involving securities of the Company.

     3.     COMPANY'S REPRESENTATIONS AND AGREEMENTS. Except as set forth in the
Schedule of Exceptions attached as Exhibit 3 hereto, Sonic Solutions represents,
warrants and agrees as follows:

                                       2
<PAGE>

     (i)    The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. The Company has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. The Company is qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where failure to so
qualify would have a Material Adverse Effect upon this financing, the Company's
performance of its obligations under this Agreement and the related agreements,
or upon the business, financial condition or results of operations of the
Company (a "Material Adverse Effect"). Sonic Solutions has only one subsidiary:
Sonic Solutions International, which is organized under the laws of the U.S.
Virgin Islands, as a foreign sales corporation. All of the outstanding capital
stock of Sonic Solutions International is owned by Sonic Solutions;

     (ii)   The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock, of which 10,331,864 shares were issued and outstanding
as of the date hereof, and 10,000,000 shares of Preferred Stock, 461,538 of
which are designated as Series C Preferred and 271,538 of which are outstanding
on the date hereof. The Company has reserved: (A) 153,846 shares of Series C
Preferred Stock for issuance pursuant to the terms of this Agreement; (B)
691,249 shares of Common Stock for issuance upon conversion of the Series C
Preferred Stock; (C) 1,800,000 shares of Common Stock for issuance pursuant to
the Private Equity Line of Credit Agreement between Kingsbridge Capital Limited
and the Company dated as of May 20, 1998; (D) 3,256,045 shares of Common Stock
for issuance under the Company's 1998 and 1989 Employee Stock Option Plan and
(E) a total of 160,100 shares of Common Stock issuable to the Investor pursuant
to the exercise of Warrants. Except as disclosed in footnotes 7 and 8 to the
audited financial statements of the Company included in the annual report on
Form 10-K for the year ended March 31, 1999 and not more than 3,256,045 options
granted in the ordinary course of business and with purchase prices equal to
fair market value of such Common Stock on the date of grant; and except as
otherwise disclosed in the Public Documents, there are no outstanding rights of
first refusal, preemptive rights or other rights, warrants, options, conversion
privileges, subscriptions, or other rights or agreements, either directly or
indirectly, to purchase or otherwise acquire or issue any equity securities of
the Company;

     (iii)  The Company has sufficient trademarks, trade names, patent rights,
copyrights, licenses, approvals, and governmental authorizations to conduct its
business as described in the Public Documents. The expiration of any trademarks,
trade names, patent rights, copyrights, licenses, approvals, or governmental
authorizations would not have a Material Adverse Effect. The Company has no
knowledge of any material infringement by it of trademark, trade name rights,
patent rights, copyrights, licenses, trade secret or other similar rights of
others, and there is no claim being made against the Company regarding
trademark, trade name rights, patent rights, copyrights, licenses, trade secret
or other infringement which would reasonably be expected to have a Material
Adverse Effect;

     (iv)   The Company possesses all certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory authorities
necessary to conduct its business with such exceptions as would not have a
Material Adverse Effect;

     (v)    The Company is not subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which has a
Material Adverse Effect, nor is the Company party to any contract or agreement
which has a Material Adverse Effect;

     (vi)   The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (a) transactions are executed in
accordance with management's general or specified authorizations, (b)
transactions are recorded as necessary to permit preparation of financial

                                       3
<PAGE>

statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (c) access to assets is permitted only in
accordance with management's general or specific authorization, and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
discrepancies;

     (vii)  The Company has filed all material federal, state, local and foreign
income tax returns which have been required to be filed and have paid all
material taxes indicated by said returns and all assessments received by it to
the extent that such taxes have become due and are not being contested in good
faith. All tax liabilities have been adequately provided for in the Company's
financial statements;

     (viii) The Company maintains insurance of the types and in the amounts
generally deemed adequate for its business, all of which insurance is in full
force and effect;

     (ix)   The Company has the requisite corporate power and authority to enter
into this Agreement and all related agreements and to consummate the
transactions contemplated by this Agreement and all related agreements;

     (x)    The Company is and, at the Closing will be, eligible to register
securities for resale with the SEC under Form S-3;

     (xi)   This Agreement and all related agreements have been duly authorized,
validly executed and delivered by the Company, and are valid and binding
agreements, and are enforceable against the Company in accordance with their
terms, subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally;

     (xii)  There is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company which would materially and adversely affect the Company or
the performance of its obligations hereunder;

     (xiii) Since the last day of the period covered in the Company's last
report on Form 10-K, filed with the SEC, there has been no material adverse
change and no material adverse development in the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiary. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law, nor does the Company or its subsidiary have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings;

     (xiv)  The execution and delivery of this Agreement and related agreements
and the consummation of the issuance of the Securities and the transactions
contemplated by this Agreement and related agreements do not and will not
conflict with, result in a breach by the Company of any of the terms or
provisions of, or constitute a default under the articles of incorporation (or
charter) or bylaws of the Company, or any material indenture, mortgage, deed of
trust or other material agreement or instrument to which Sonic Solutions is a
party or by which it or any of its properties or assets are bound, or any
existing applicable decree, judgment or order of any court, federal or state
regulatory body, administrative agency or other governmental body having
jurisdiction over the Company or any of its properties or assets;

     (xv)   No authorization, approval, consent, license, exemption from or
filing or registration with any federal, state or local governmental or
regulatory body of the United States is legally required

                                       4
<PAGE>

for the issuance and sale of the Shares as contemplated by this Agreement,
except for the filing of the Certificate of Determination with the California
Secretary of State;

     (xvi)   The Securities will be issued in compliance with all applicable
federal and state securities laws;

     (xvii)  The Securities, when issued, sold, and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly
authorized, validly issued, fully paid and nonassessable, free and clear of any
liens, encumbrances, charges, or adverse claims of any nature whatsoever, and
will not subject the holders thereof to personal liability by reason of being
such holders;

     (xviii) Sonic Solutions has not conducted any general solicitation or
general advertising (as defined in Regulation D) with respect to any of the
transactions or securities contemplated hereby;

     (xix)   Neither Sonic Solutions, 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 under
circumstances that would require registration of the Securities under the
Securities Act or cause this offering to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable shareholder
approval provisions;

     (xx)    Sonic Solutions has filed all reports required to be filed by it
under all applicable securities laws for the three years preceding the date
hereof or such shorter period as Sonic Solutions was required by law to file
such material on a timely basis or received an extension and completed all
filings within the time period granted by such extension. As of their respective
dates, such documents complied in all material respects with the requirements of
all applicable securities laws. When filed, none of the documents contained any
untrue statement of material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances under which such statements were made.
The Company's financial statements included with the above referenced filings
comply in all material respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto. Such financial statements
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise specifically indicated in such financial statements of the notes
thereto, and fairly present in all material respects the financial position of
the Company as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject to normal year-end adjustments in
the case of unaudited statements;

     (xxi)   No class of equity securities is senior to the Series C Preferred
Stock in right of payment, whether upon liquidation, dissolution, or otherwise;

     (xxii)  The Company has not in the two years prior to the date hereof
received written notice from any stock exchange or market on which the Common
Stock is or has been listed (or on which it is or has been quoted) to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market and to the knowledge of the Company no
such notice is threatened;

     (xxiii) There are no preemptive rights of any shareholder of Sonic
Solutions with respect to the Common Stock; and

                                       5
<PAGE>

     (xxiv)  Neither Sonic Solutions nor any of its subsidiaries (i) is in
default under or in violation of any indenture, loan, credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound, (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is in violation of any statute, rule
or regulation of any governmental authority, except as could not have or result
in a Material Adverse Effect.

     (xxv)   All information relating to or concerning the Company or any of its
Subsidiaries set forth in this Agreement and provided to the Investor pursuant
to this Agreement and otherwise in connection with the transaction contemplated
hereby is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to the Company or any of its subsidiary or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purposes that the Company's reports filed under the Exchange
Act are being incorporated into an effective registration statement filed by the
Company under the Securities Act).

     4.      RESTRICTED SECURITIES.

     (i)     Registration or Exemption Required. The Preferred Shares are being
             ----------------------------------
issued in a transaction exempt from the registration requirements of the Act in
reliance upon the provisions of Section 4(2) promulgated by the SEC under the
Securities Act. The shares of Preferred Stock and the underlying Common Stock
may not be resold except pursuant to an effective registration statement or an
exemption to the registration requirements of the Act and applicable state laws.

     (ii)    Legend. The Preferred Stock and the underlying shares of Common
             ------
Stock shall bear the following legend, until and unless (a) the SEC has declared
effective a registration statement registering such securities for resale
without restriction, (b) the holder of such securities provides Sonic Solutions
with an opinion of counsel reasonably acceptable to Sonic Solutions to the
effect that a public sale or a transfer of such security may be made without
registration under the Securities Act, or (c) such holder has provided Sonic
Solutions with reasonable assurances that such security can be sold free of any
volume limitations pursuant to Rule 144 under the Securities Act or a successor
thereto:

     "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT" OR 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 RE-OFFERED, SOLD, ASSIGNED,
     TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF,
     EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
     PURSUANT TO A TRANSACTION WHICH 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 SECURITIES SUBSCRIPTION
     AGREEMENT BETWEEN SONIC SOLUTIONS AND THE INVESTOR NAMED THEREIN DATED
     OCTOBER 15, 1999, A COPY OF THE PORTION OF THE AFORESAID SUBSCRIPTION
     AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE COMPANY'S
     EXECUTIVE OFFICES."

                                       6
<PAGE>

     Upon conversion of the Preferred Stock, Sonic Solutions shall issue a
Common Stock certificate without such legend to the holder of such shares if one
or more of the conditions described in this Section (b) are satisfied.

     5.      COVENANTS.

     (i)     Each party shall use its reasonable best efforts timely to satisfy
each of the conditions to Closing to be satisfied by it as provided in this
Agreement.

     (ii)    Sonic Solutions shall have authorized and reserved for the purpose
of issuance pursuant to the conversion of the Shares 250,000 shares of Common
Stock.

     (iii)   Within 15 days after the Closing, Sonic Solutions shall have
secured the listing of the underlying Common Stock upon the Nasdaq National
Market and shall maintain such listing until the later of such time as all
shares of the Common Stock issuable upon conversion of the Preferred Stock shall
be freely tradable or the Investor no longer holds any shares of Preferred Stock
or Common Stock received through conversion thereof.

     (iv)    The Company shall give prompt written notice to the Investor, and
the Investor shall give prompt written notice to the Company of (i) any breach
of any representation, warranty or other agreement related to the transaction
contemplated herein as well as any events or occurrences arising after the date
hereof which could reasonably be likely to cause any representation, warranty of
other agreement to be incorrect or breached or (ii) any notice or claim that the
consummation of the transaction contemplated herein violates or would violate
any other agreements, obligations, contracts, or responsibilities. Neither the
Company nor any Investor shall take any action that is intended to make any
representation or warranty of the Company or such Investor inaccurate in any
respect except as is consented to in writing by the other party.

     (v)     Sonic Solutions will issue one or more certificates representing
the Preferred Stock in the name of the Investor in such denominations to be
specified by the Investor prior to Closing. The Preferred Stock will bear the
restrictive legend specified in Section 4 of this Agreement. Sonic Solutions
further agrees that no instructions other than these instructions and stop
transfer instructions to give effect to Section 2(i) hereof will be given to the
transfer agent and also agrees that the Securities shall otherwise be
transferable on the books and records of Sonic Solutions as and to the extent
provided in this Agreement, subject to compliance with federal and state
securities laws. As soon as practicable after the date hereof, but prior to
Closing, Sonic Solutions agrees to furnish new instructions to the transfer
agent instructing them to issue the Common Stock without a legend so long as
such Common Stock is registered under the Securities Act. The Company shall
immediately notify the transfer agent of the effectiveness or suspension of a
registration statement registering the Common Stock for resale. Nothing in this
Section shall affect in any way the Investor's obligations and agreement to
comply with all applicable securities laws upon resale of the Shares.

     (vi)    The Company currently meets, and will take all necessary action to
continue to meet, the "registrant eligibility" requirements set forth in the
General Instructions I to Form S-3.

     (vii)   The Company shall have complied with and be effective under the
securities laws of the State of California and any other applicable states as
necessary to offer and sell the Preferred Stock to the Investor.

                                       7
<PAGE>

     6.      CLOSING. Certificates evidencing the Preferred Stock shall be
delivered to the Investor and the Cancellation of Indebtedness shall be
delivered to Sonic Solutions at the offices of Heller Ehrman White & McAuliffe
at 2500 Sand Hill Road, Menlo Park, California 94025-7063 at 10 a.m. California
time on October 15, 1999 (the Closing") or at such other time to be mutually
agreed.

     7.      CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE. The obligation of
the Investor hereunder to purchase the Preferred Stock at the Closing is subject
to the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for Investor's sole benefit and
may be waived by the Investor at any time in its sole discretion.

     (i)     The Company shall have executed the Registration Rights Agreement
in substantially the form of Exhibit B hereto, and delivered the same to the
Investor;

     (ii)    The Certificate of Determination shall have been filed with the
Secretary of State of the State of California, and a copy thereof certified by
such Secretary of State shall have been delivered to the Investor;

     (iii)   The Common Stock shall be authorized for quotation on the Nasdaq
National Market and trading in the Common Stock shall not have been suspended by
the SEC or the Nasdaq Stock Market, Inc.;

     (iv)    The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Investor shall have received a
certificate, executed by the President of the Company, dated as of the Closing
Date, to the foregoing effect and to such other matters as may be reasonably
requested by the Investor;

     (v)     The Investor shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Investor and in substantially the form of Exhibit C attached
hereto;

     (vi)    The Company shall have executed and delivered to the Investor the
stock certificates (in such denominations as the Investor shall request) for the
shares of Preferred Stock being purchased by the Investor at the Closing;

     (vii)   The Company shall have reserved out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Series C
Preferred Shares, 250,000 shares of Common Stock;

     (viii)  The Company shall have delivered to the Investor a certificate
evidencing the incorporation and good standing of the Company in California
issued by the Secretary of State of such state as of a date within 15 days of
the Closing;

                                       8
<PAGE>

     (ix)    The Company shall have delivered to the Investor a secretary's
certificate certifying as to (a) the resolutions, (b) the articles of
incorporation of the Company, and (c) bylaws of the Company, each as in effect
at the Closing;

     (x)     The Board of Directors of the Company shall have adopted
resolutions in a form reasonably acceptable to the Investor;

     (xi)    The Company shall have delivered to such Investor such other
documents relating to the transactions contemplated by this Agreement as such
Investor or its counsel may reasonably request.

     8.      CONDITIONS TO CLOSING OF SONIC SOLUTIONS. The obligation of Sonic
Solutions to sell and issue the Preferred Stock at the Closing is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing the
Investor with prior written notice thereof:

     (i)     Delivery of the Purchase Price by way of delivery to the Company of
the Cancellation of Indebtedness in a form satisfactory to Sonic Solutions;

     (ii)    The Investor shall have executed the Registration Rights Agreement
in substantially the form of Exhibit B hereto and shall have delivered the same
to Sonic Solutions; and

     (iii)   The Certificate of Determination shall have been filed with the
Secretary of State of the State of California.

     9.      EXPENSES. Sonic Solutions shall bear its own expenses and legal
fees with respect to this Agreement and the transactions contemplated hereby,
and reimburse Investor for its out-of-pocket expenses, including legal fees,
with respect to this Agreement and the transactions contemplated thereby in an
amount not to exceed $5,000.

     10.     GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
without giving effect to the provisions governing conflict of laws.

     11.     NOTICE. 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, telex 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 at the address or number designated below (if delivered on a business
day during normal business hours (ending not earlier than 5:00 p.m. local time)
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
(ending not earlier than 5:00 p.m. local time) 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:

                                       9
<PAGE>

     A. Clay Leighton
     Chief Financial Officer
     Sonic Solutions
     101 Rowland Way
     Novato, CA  94945
     Fax No.  (415) 893-8008

     with a copy to:

     August J. Moretti, Esq.
     (shall not constitute notice)
     Heller Ehrman White & McAuliffe
     2500 Sand Hill Road, Suite 100
     Menlo Park, CA  94025-7063
     Fax No.  (650) 234-4299

     if to the Investor:

     Andrew W. Kahn
     Hambrecht & Quist Guaranty Finance, LLC
     One Bush Street
     San Francisco, CA  95104
     Fax No. 415 439-3804

     Either party hereto may from time to time change its address or facsimile
number for notices under this Section 12 by giving at least 10 days prior
written notice of such changed address or facsimile number to the other party
hereto.

     12.     REMEDIES. In the event of a breach or threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach or threatened 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 other 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.     ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Registration
Rights Agreement contain the entire understanding of the parties with respect to
the matters covered herein and therein. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.

     14.     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.

     15.     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.

     16.     COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement which may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties, shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing

                                      10
<PAGE>

such counterparts and all of which together shall constitute one and the same
instrument. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

     17.     NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provisions hereof be
enforced by, any other person.

     18.     SURVIVAL. The representations and warranties of the Company and the
Investor contained in Sections 3 and 2, respectively, the agreements and
covenants set forth in Sections 4, 5, and 6 and Sections 10 through 20, shall
survive the Closing. The Investor shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

     19.     PUBLICITY. The Company and one representative selected by the
Investor shall have the right to review before issuance any press releases or
any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
review of any Investor, to make any press release or other public disclosure
with respect to such transactions as is required by applicable law and
regulations (although the representative selected by the Investor shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).

     20.     NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

     IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above.

                                       SONIC SOLUTIONS

                                       By  /s/ Robert J. Doris
                                         -------------------------
                                           Robert J. Doris
                                           President

                                       HAMBRECHT & QUIST GUARANTY FINANCE, LLC

                                       By  /s/ Andrew W. Kahn
                                         -------------------------
                                           Andrew W. Kahn
                                           Manager

                                      11
<PAGE>

                                    EXHIBIT A

                            CERTIFICATE OF AMENDMENT
                                       OF
                   CERTIFICATE OF DETERMINATION OF PREFERENCES
                           OF SERIES C PREFERRED STOCK
                                       OF
                                 SONIC SOLUTIONS

     Robert J. Doris and A. Clay Leighton certify that:

     1.   They are the President and Chief Financial Officer, respectively, of
SONIC SOLUTIONS, a California corporation.

     2.   Pursuant to authority given by the Corporation's Articles of
Incorporation, the Board of Directors of the Corporation has adopted the
following resolutions:

          "WHEREAS, the Articles of Incorporation of the Corporation provide for
          a class of Preferred Stock, comprising Ten Million (10,000,000) shares
          issuable from time to time in one or more series;

          WHEREAS, the Board of Directors of this Corporation is authorized to
          fix or alter the rights, preferences, privileges and restrictions of
          shares of any unissued series of Preferred Stock, and the number of
          shares constituting any such series and the designation thereof; and

          WHEREAS, this Corporation previously designated 461,538 shares of the
          undesignated authorized shares as Series C Preferred Stock 271,538, of
          which are currently outstanding (not including the Series C Preferred
          Stock to be issued to Hambrecht & Quist Guaranty Finance, LLC pursuant
          to the Private Securities Subscription Agreement dated on or about
          October 15, 1999); and

          WHEREAS, this Corporation previously established the rights,
          preferences, privileges, restrictions and other matters relating to
          the Series C Preferred Stock pursuant to a Certificate of
          Determination of Series C Preferred Stock filed with the California
          Secretary of State on March 31, 1998 (the "Current Certificate of
          Determination");

          RESOLVED, that the Conversion Rate, as set forth and defined in
          Section 4 of the Current Certificate of Determination, is hereby
          changed from $3.25 per share of Common Stock to $2.00 per share of
          Common Stock;

          RESOLVED FURTHER, that for purposes of determining if there has been
          an issuance of securities at a Reduced Purchase Price, as set forth
          and defined in Section 6(h) of the Current Certificate of
          Determination, only issuances of the types of securities described in
          that Section 6(h) at an effective purchase price of less than $2.00
          per share shall be considered."

                                      12

<PAGE>

     3.   The authorized number of shares of Common Stock is 30,000,000,
10,331,864 of which are issued and outstanding, and the authorized number of
shares of Preferred Stock is 10,000,000, 461,538 shares of which are designated
as Series C Preferred Stock, 271,538 of which are issued and outstanding.

     4.   Approval of the holders of Common Stock is not required. Approval of
the Series C Preferred Stock by the required vote was obtained. The percentage
vote required was at least a majority of the outstanding shares of the Series C
Preferred Stock.

     We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in the foregoing certificate are true and
correct of our knowledge.

     EXECUTED at Novato, California on October 14, 1999.

                                        /s/ Robert J. Doris
                                     -------------------------------------------
                                     Robert J. Doris, President

                                        /s/ A. Clay Leighton
                                     -------------------------------------------
                                     A. Clay Leighton, Chief Financial Officer

                                      2

<PAGE>

                                    EXHIBIT B

                          REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of October
15, 1999, is made and entered into between Sonic Solutions, a California
corporation (the "Company"), and Hambrecht & Quist Guaranty Finance, LLC, a
California limited liability company (the "Investor").

     WHEREAS, the Company and Investor have entered into that certain Private
Securities Subscription Agreement, dated as of the date hereof (the
"Subscription Agreement"), pursuant to which the Company will issue to the
Investor shares of its Series C Preferred Stock (the "Preferred Stock")
convertible as described in the Certificate of Determination to Common Stock of
the Company, no par value (the "Common Stock"); and

     WHEREAS, the Company and the Investor have entered into that certain Common
Stock Warrant Purchase Agreement, dated as of the date hereof (the "Warrant
Agreement") pursuant to which the Company will issue a warrant to the Investor
to purchase 120,000 shares of Common Stock (the "Warrant Shares").

     WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investor's agreement to enter into the Subscription Agreement and Warrant
Agreement, the Company has agreed to provide the Investor with certain
registration rights with respect to the Registrable Securities (as defined
below).

     NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein and in the Subscription
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:

                                    ARTICLE I

                                   DEFINITIONS

     SECTION 1.1. DEFINITIONS. Capitalized terms defined in the Subscription
Agreement shall have the same meanings herein as are ascribed to them therein.
In addition, the following terms shall have the meanings ascribed below:

     "Act" means the Securities Act of 1933, as amended

     "Material Event" means the happening of any event during the period that
the Registration Statement (described in Section 2 hereof) is required to be
effective as a result of which, in the reasonable judgment of the Company, such
Registration Statement or the related prospectus contains or may contain an
untrue statement of material fact or omits or may omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.

     "Registrable Securities" means all Warrant Shares and all of the Common
Stock and any other securities issued or issuable upon conversion of the
Preferred Stock and any shares of capital stock issued or issuable with respect
to such Common Stock or securities as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise, regardless
of any limitation on conversion of the Preferred Stock (together, the
"Conversion Shares") until the earliest of (i) a

                                      14

<PAGE>

Registration Statement under the Act covering the offering of such Conversion
Shares has been declared effective by the SEC and such Conversion Shares have
been disposed of pursuant to such effective Registration Statement, (ii) such
Conversion Shares are sold under circumstances in which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the Act
("Rule 144") are met, (iii) such Conversion Shares have been otherwise
transferred 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 such Conversion Shares may be sold without any time, volume or manner
limitation pursuant to Rule 144(k) (or any similar provision then in effect)
under the Act.

     "Registration Statement" shall have the meaning set forth at Section
2.1(a).

     "Rule 144" means Rule 144 promulgated under the Act.

     "SEC" means the Securities and Exchange Commission.

                                   ARTICLE II

                               REGISTRATION RIGHTS

     SECTION 2.1. FORM S-3 REGISTRATION STATEMENTS.

     (a) Filing of Form S-3 Registration Statements. Subject to the terms and
conditions of this Agreement, the Company shall file with the SEC no later than
thirty (30) days following the date of this Agreement a registration statement
on Form S-3 under the Act (the "Registration Statement") for the registration of
the resale by the Investor of the Registrable Securities, which Registration
Statement, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock (i) to
prevent dilution resulting from stock splits, stock dividends or other similar
transactions or (ii) by reason of changes in the Conversion Price of the
Preferred Stock in accordance with the terms thereof.

     (b) Effectiveness of Registration Statements. The Registration Statement
shall be declared effective by the SEC by no later than sixty (60)days following
the date of this Agreement, and shall remain in effect until the termination of
this Agreement as provided in Section 5.1.

     (c) Notwithstanding anything to the contrary set forth herein, if the
Company fails to timely file, obtain effectiveness or maintain effectiveness of
the Registration Statement to be filed pursuant to Section 2.1(a) in accordance
with the terms of this Agreement, the Investor shall have the following
additional registration rights. If at any time prior to the expiration of the
Registration Period (as hereinafter defined), the Company shall file with the
SEC a Registration Statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities
(other than (A) on Form S-4 or Form S-8 or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, or (B) in connection with the agreement between
Kingsbridge Capital Limited and the Company), the Company shall send to the
Investor who is entitled to registration rights under this Section 2.1(c)
written notice of such determination and, if within fifteen (15) days after the
effective date of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor's requests to be registered, except that
if, in connection with any underwritten public offering for

                                      15

<PAGE>

the account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in the
Registration Statement because, in such underwriter(s)' judgment, marketing or
other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Investor seeking to include Registrable Securities in
proportion to the number of Registrable Securities sought to be included by such
Investor; provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided, further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities to the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right of
registration of Registrable Securities under this Section 2.1(c) shall be
construed to limit any registration required under Section 2.1(a) hereof. If an
offering in connection with which the Investor is entitled to registration under
this Section 2.1(c) is an underwritten offering, then the Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.

     (d) Deferral. Notwithstanding the foregoing, if the Company shall furnish
to the Investor ten (10) days prior to the date by which a Registration
Statement (or if the Company shall furnish to the Investor subsequent to the
effectiveness of a Registration Statement) is required to be filed (or remain in
effect), a certificate signed by the President of the Company stating that the
Board of Directors of the Company has, by duly authorized resolution, determined
in good faith that a Material Event necessitates the deferral of the filing of
the Registration Statement or the temporary suspension of the effectiveness of
the Registration Statement because it would be seriously detrimental to the
Company and its shareholders for such Registration Statement to be filed (or
remain in effect), the Company shall have the right to defer such filing (or
suspend such effectiveness or use) for a period of not more than thirty (30)
days beyond 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 or use) and agrees to
discontinue disposition of the Registrable Securities pursuant to any
Registration Statement until the Company delivers copies of supplemented or
amended prospectuses and the Registration Statement is declared effective. The
Company may not utilize this right to defer the filing of a Registration
Statement (or suspend its effectiveness or the use of the underlying prospectus)
more than once in any twelve (12) month period.

                                   ARTICLE III

                             REGISTRATION PROCEDURES

     SECTION 3.1 FILINGS; INFORMATION. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1, the Company will use its reasonable best efforts to effect the registration
of such Registrable Securities in accordance with the

                                      16

<PAGE>

intended method of disposition thereof as quickly as practicable, and in
connection with any such request:

     (a) The Company will as expeditiously as possible but in no event later
than the time period prescribed by Section 2.1(a), prepare and file with the SEC
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
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 disposition of such Registrable Securities), and use reasonable best efforts
to cause such filed Registration Statement to become and remain effective
(pursuant to Rule 415 under the Act or otherwise), and the Company will as
expeditiously as possible 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 2.1(b) and comply with the provisions of
the 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 will, prior to filing a Registration Statement or
prospectus or any amendment or supplement thereto (excluding amendments deemed
to result from the filing of documents incorporated by reference therein),
furnish to the Investor and one firm of counsel representing the Investor,
copies of such Registration Statement as proposed to be filed, together with
exhibits thereto, which documents will be subject to review and approval by such
parties, and thereafter furnish to the Investor and its counsel for their review
and comment 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.

     (c) After the filing of the Registration Statement, the Company will
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.

     (d) The Company will use 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
their 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 (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C)
consent or subject itself to general service of process in any such
jurisdiction.

     (e) The Company will promptly notify the Investor in writing 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 amendments or supplements to the Registration
Statement or related prospectus; (ii) the issuance by

                                      17
<PAGE>

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
which 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 which requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
the Registration Statement and the related prospectus 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
in the light of the circumstances in which they were made; (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; and
(vi) the declaration of the effectiveness of a Registration Statement (which
notice of effectiveness shall be delivered to the Investor in writing within one
(1) business day of the Company being advised by the SEC of such effectiveness).

     (f) The Company will 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 (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). The Investor
understands that no sales of Shares may be underwritten and the Company is under
no obligation to enter into an underwriting agreement.

     (g) The Company will otherwise comply with all applicable rules and
regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act, and will make
available to its security holders, as soon as reasonably practicable, an earning
statement covering a period of twelve (12) months, beginning within three (3)
months after the effective date of the Registration Statement, which earning
statement shall satisfy the provisions of Section 1(a) of the Act.

     (h) The Company will use commercially reasonable efforts to secure
designation of all such Registrable Securities covered by such Registration
Statement as a NASDAQ "national market system security" within the meaning of
Rule 11Aa2-1 of the SEC.

     (i) The Company will 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.

     (j) The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investor, (iv) one firm of attorneys and
one firm of accountants or other agents retained by all other Investor, and (iv)
one firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably deemed necessary by the Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in confidence and shall not make any disclosure

                                      18
<PAGE>

(except to an Investor who has executed a confidentiality agreement as provided
for herein) of any Record or other information which the Company determines in
good faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction, or (c) the information of
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector and the Investor shall have entered
into confidentiality agreements (in form and substance satisfactory to the
Company) with the Company with respect thereto, substantially in the form of
this Section 3.1(j). The Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

     The Company may require the Investor to promptly furnish in writing to the
Company such information regarding the distribution of the Registrable
Securities as the Company may from time to time reasonably request and such
other 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, Inc.
(the "NASD"). 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' failure to timely provide such information. The Investor agrees
that, upon receipt of any written notice from the Company of the happening of
any event of the kind described in Section 3.1(e) hereof, the Investor will
forthwith discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until the Investor'
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.1(e) hereof, and, if so directed by the Company, the Investor will
deliver to the Company all copies, other than permanent file copies then in the
Investor' possession, of the most recent prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event the Company shall
give such notice, the Company shall extend the period during which such
Registration Statement shall be maintained effective (including the period
referred to in Section 3.1(a) hereof) by the number of days during the period
from and including the date of the giving of notice pursuant to Section 3.1(e)
hereof to the date when the Company shall make available to the Investor a
prospectus supplemented or amended to conform with the requirements of Section
3.1(e) hereof.

     SECTION 3.2. REGISTRATION EXPENSES. In connection with each Registration
Statement, the Company shall pay the following registration expenses incurred in
connection with the registration thereunder (the "Registration Expenses"): (i)
all registration and filing fees, (ii) fees and expenses of compliance with
securities or blue sky laws, (iii) printing 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) 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 comfort letters or costs associated with
the delivery by independent certified public accountants of a comfort letter or
comfort letters requested pursuant to Section 3.1(h) hereof), and (vii) the fees
and

                                       19
<PAGE>

expenses of any special experts retained by the Company in connection with such
registration. The Company shall have no obligation to pay any underwriting fees,
discounts or commissions attributable to the sale of Registrable Securities, or
the cost of Investor counsel or of any special audit required by the Investor,
such costs to be borne by the Investor.

                                   ARTICLE IV

                        INDEMNIFICATION AND CONTRIBUTION

     SECTION 4.1. 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 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, judgment, fine, penalty, reasonable attorneys'
fees, costs or expenses and costs and expenses of investigating and defending
any action, claim, suit, inquiry, proceeding, investigation or appeal taken from
the foregoing by or before any court or governmental, administrative or other
regulatory agency body, or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto (collectively, "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 may become subject under the Act or otherwise,
insofar as such Damages (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 solely 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 in investigating or defending or preparing to defend
against any such Damages or proceedings; provided, however, that the Company
shall not be liable to the Investor to the extent that (i) the Investor failed
to send or deliver a copy of the final prospectus 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 was made
available to the Investor and would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission upon which the
claim is asserted and from which the Damages arise.

     SECTION 4.2. INDEMNIFICATION BY THE INVESTORS. The Investor severally and
not jointly agree 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 Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, together with the partners,
affiliates, officers, directors, employees and duly authorized agents of such
Controlling Person (collectively, the "Controlling Person"), to the same extent
as the foregoing indemnity from the Company to the Investor, but only with
reference to information related to the Investor or its plan of distribution,
furnished in writing by the Investor or on the Investor' behalf expressly for
use in any Registration Statement or prospectus relating to the Registrable
Securities, or any amendment or supplement thereto, or any preliminary
prospectus. In case any action or proceeding shall be brought against the
Company or its partners, affiliates, officers, directors, employees or duly
authorized agents or

                                       20
<PAGE>

any such Controlling Person or its partners, affiliates, officers, directors,
employees or duly authorized agents, in respect of which indemnity may be sought
against the Investor, the Investor shall have the rights and duties given to the
Company, and the Company or its partners, affiliates, officers, directors,
employees or duly authorized agents, or such Controlling Person, or its
partners, affiliates, officers, directors, employees or duly authorized agents,
shall have the comparable rights and duties given to the Investor by Section
4.1. Notwithstanding the foregoing, the Investor shall be liable under this
Section 4.2 for only that amount of Damages as does not exceed the proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. The Company shall be entitled to receive indemnities on
customary terms from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above, with respect to information so furnished in writing by
such persons specifically for inclusion in any prospectus or Registration
Statement.

     SECTION 4.3. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt
by any person or entity in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2 (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 from whom such indemnity may
be sought (an "Indemnifying Party"), promptly 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 4.3
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
4.1 or 4.2 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 which it may have to an Indemnified Party other than that liability
arising under Section 4.1 or 4.2. If any such claim or action shall be brought
against and 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. 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 be liable 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.

     SECTION 4.4. CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any Damages
referred to herein, then each

                                      21
<PAGE>

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 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 4.4 were determined by pro
rata allocation or by any other method of allocation which 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 4.4, 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 pursuant to the Registration
Statement 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 Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.

                                    ARTICLE V

                                  MISCELLANEOUS

     SECTION 5.1. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at the earlier of such time as
(i) no Registrable Securities are issuable or outstanding or (ii) all
Registrable Securities may be resold without volume restriction under Rule
144(K) or a successor thereto; provided, however, that the provisions of Article
IV hereof shall survive any termination of this Agreement.

     SECTION 5.2. 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 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 5.3. AMENDMENT AND MODIFICATION. Any provision of this Agreement
may be waived, provided that such waiver is set forth in a writing executed by
the party against whom the enforcement of such waiver is sought. 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

                                      22
<PAGE>

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 5.4. 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 of Preferred
Stock or Conversion Shares, 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. This
Agreement, together with the Subscription 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.

     SECTION 5.5. 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 5.6. NOTICES. All notices, demands, requests, consents, approvals
or other communications required or permitted to be given hereunder or which are
given with respect to this Agreement shall be in writing and shall be personally
served or deposited in the mail, registered or certified, return receipt
requested, postage prepaid, or delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
addressed as set forth below, or to such other address as such party shall have
specified most recently by written notice: if to the Company, to: SONIC
SOLUTIONS, 101 Rowland Way, Novato, CA 94945; Attention: Mr. A. Clay Leighton,
Facsimile No. (415) 893-8008, with copies (which shall not constitute notice)
to: Heller Ehrman White & McAuliffe, 2500 Sand Hill Road, Menlo Park, CA
94025-7063 Attention: August J. Moretti, Esq., Facsimile No. (650) 234-4299; and
(ii) if to the investor, to: HAMBRECHT & QUIST GUARANTY FINANCE, LLC, One Bush
Street, San Francisco, CA 95104; Attention: Andrew W. Kahn, Facsimile No. (415)
439-3804. Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the third business
day following the date mailed or on the second business day following delivery
of such notice by a reputable air courier service.

     SECTION 5.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without giving
effect to the provisions governing conflicts of laws thereof.

                                      23
<PAGE>

     SECTION 5.8. 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 5.9. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement which
may be executed in multiple counterparts, each of which may be executed by less
than all of the parties, 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. This
Agreement, once executed by a party, may be delivered to the other party hereto
by facsimile transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.

     SECTION 5.10. 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 5.11. 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.

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

HAMBRECHT & QUIST GUARANTY             SONIC SOLUTIONS
FINANCE, LLC

By: /s/ Andrew W. Kahn                 By: /s/ Robert J. Doris
   --------------------------------       --------------------------------------
    Andrew W. Kahn                         Robert J. Doris
    Manager                                President and Chief Executive Officer

                                      24
<PAGE>

                    EXHIBIT C - OPINION OF COMPANY'S COUNSEL

                 [Letterhead of Heller Ehrman White & McAuliffe]

                                October 15, 1999

     To Hambrecht & Quist Guaranty Finance, LLC
     One Bush Street
     San Francisco, California  95104
     Attn:  Andrew W. Kahn, Esq.

     We have acted as counsel to Sonic Solutions, a California corporation (the
"Company"), in connection with the Private Securities Subscription Agreement
(the "Agreement"), and the Registration Rights Agreement (the "Rights
Agreement") between the Company and you, each dated as of dated October 15,
1999, (collectively, the "Transactional Agreements"). This opinion is rendered
to you pursuant to Section 7(v) of the Agreement. Capitalized terms used without
definition in this opinion have the meanings given to them in the Agreement or,
if the Agreement does not define them, in the Amended and Restated Articles of
Incorporation of the Company.

                                       I.

     In connection with this opinion, we have assumed the authenticity of all
records, documents, and instruments submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all records, documents, and instruments submitted
to us as copies. We have also assumed that there are no facts or circumstances
relating to you that might prevent you from enforcing any of the rights to which
our opinion relates (for example, lack of due incorporation, regulatory
prohibitions, or failure to qualify to do business in the State of California).
We have based our opinion upon our review of the following records, documents
and instruments:

     (a) The Amended and Restated Articles of Incorporation of the Company
certified by the California Secretary of State as of October 15, 1999 and
certified to us by an officer of the Company as being complete and in full force
and effect as of the date of this opinion (the "Articles");

     (b) The Certificate of Amendment to the Certificate of Determination of
Series C Preferred Stock, as amended, of the Company (Exhibit A of the
Agreement), certified by the California Secretary of State as of October 15 and
certified to us by an officer of the Company as being complete and in full force
and effect as of the date of this opinion (the "Certificate of Determination");

     (c) The Bylaws of the Company certified to us by an officer of the Company
as being complete and in full force and effect as of the date of this opinion
(the "Bylaws");

     (d) Records certified to us by an officer of the Company as constituting
all records of proceedings and actions of the Board of Directors and the
shareholders of the Company relating to the transactions contemplated by the
Transactional Agreements;

     (e) The Agreement;

     (f) The Rights Agreement;

                                      25
<PAGE>

     (g) A Certificate of Status-Domestic Corporation relating to the Company
issued by the Secretary of State of the State of California dated October 14,
1999;

     (h) A letter from the Franchise Tax Board of the State of California dated
October 14, 1999 stating that the Company is in good standing with that agency;

     (i) A Certificate of the Chief Financial Officer of the Company as to the
material agreements, material instruments, judgments, and decrees to which the
Company is a party or by which the Company's properties or assets are bound and
as to certain factual matters (the "Officer's Certificate");

     (j) The agreements and instruments identified in the Officer's Certificate;

     (k) A report of the Company's Transfer Agent, ChaseMellon Shareholder
Services dated October 14, 1999, as to the outstanding Common Stock of the
Company; and

     (l) The stock certificates representing the shares being purchased by you
(the "Shares").

     With your consent, we have based our opinion expressed in paragraph 1 below
as to the good standing of the Company under the laws of the State of California
solely upon the documents enumerated in (g) and (h) above. In addition, we have,
with your consent based our opinion expressed in paragraph 8 below regarding the
capitalization of the Company solely upon our review of the records identified
as items (a), (b), (d), (i) and (k) above, (ii) assumed for the purpose of our
opinion in paragraph 8 below that the certificates evidencing the Shares will be
delivered in California, and (iii) relied upon the Officer's Certificate with
respect to factual matters relevant to this opinion.

     In connection with our opinion relating to the agreements and instruments
identified in the Officer's Certificate, we have not reviewed, and express no
opinion on, (i) financial covenants or similar provisions requiring financial
calculations or determinations to ascertain compliance, (ii) provisions relating
to the occurrence of a "material adverse event" or words of similar import, or
(iii) parol evidence bearing on interpretation or construction. Moreover, to the
extent that any of the Transactional Agreements or any of the agreements and
instruments identified in item (j) above is governed by the laws of any
jurisdiction other than the federal laws of the United States or the laws of the
State of California, our opinion relating to those agreements and instruments is
based solely upon the plain meaning of their language without regard to
interpretation or construction that might be indicated by the laws governing
those agreements or instruments.

     Where our opinion relates to our "knowledge", such knowledge is based upon
our examination of the records, documents, instruments, and certificates
enumerated or described above and the actual knowledge of attorneys in this firm
who are currently involved in substantive legal representation of the Company.
With your consent, we have not examined any records of any court, administrative
tribunal or other similar entity in connection with our opinion expressed in
paragraph 7 below.

                                       II.

     We express no opinion as to: (i) the applicable choice of law rules that
may affect the interpretation or enforcement of the Agreement, and (ii) any
anti-fraud provisions of applicable federal or state securities laws, any tax,
anti-trust, land use, export, safety, environmental or hazardous materials laws,
rules or regulations.

                                      26
<PAGE>

     This opinion is limited to the federal laws of the United States of America
and the laws of the State of California. We disclaim any opinion as to the laws
of any other jurisdiction and we further disclaim any opinion as to any statute,
rule, regulation, ordinance, order or other promulgation of any regional or
local governmental body.

                                      III.

     Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
subject to the limitations and qualifications expressed below, it is our opinion
that:

     1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of California.

     2. The Company has all requisite corporate power and corporate authority to
enter into and perform the Transactional Agreements, to own its properties, and
to carry on its business as, to our knowledge, it is now conducted and proposed
to be conducted as contemplated by the Transactional Agreements.

     3. Each of the Transactional Agreements has been duly authorized by all
necessary corporate action on the part of the Company, its directors, and
shareholders and has been duly executed and delivered on behalf of the Company.

     4. Each of the Transactional Agreements is a valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject, as to enforcement, (i) to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other laws of general applicability relating to or
affecting creditors' rights, (ii) to general principles of equity, whether such
enforcement is considered in a proceeding in equity or at law, and (iii) to
limitations imposed by applicable law or public policy on the enforceability of
the indemnification provisions of the Rights Agreement.

     5. No governmental consents, approvals, authorizations, registrations,
declarations, or filings are required for the execution and delivery of the
Transactional Agreements on behalf of the Company, including the issuance of the
Shares, except (i) the filing of the Certificate of Amendment to the Certificate
of Determination in the Office of the Secretary of State of the State of
California, which filing has been accomplished, and (ii) the qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) for the offer and sale of the Shares (and the
Common Stock issuable upon conversion) under applicable blue sky laws.

     6. Neither the execution and delivery of the Transactional Agreements on
behalf of the Company nor the performance of the Transactional Agreements by the
Company, including the issuance of the Shares (i) conflicts with any provision
of the Articles or Bylaws, (ii) violates any law applicable to the Company, or
(iii) results in a breach or violation of, or constitutes a default under, any
term of any agreements, instruments, judgments, or decrees identified in the
Officer's Certificate.

     7. To our knowledge, there are no pending or threatened actions, suits,
proceedings, or governmental investigations against the Company.

     8. The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock and 10,000,000 shares of Preferred Stock. Of the
Preferred Stock, 165,448 shares are designated Series A Preferred Stock, 744,516
shares are designated Series B Preferred Stock, and 461,538 shares are

                                      27
<PAGE>

designated Series C Preferred Stock. Immediately prior to the Closing, the stock
records of the Company indicate that no shares of Series A Preferred Stock, no
shares of Series B Preferred Stock, and 271,538 shares of Series C Preferred
Stock were issued and outstanding.

     9. The Shares, when issued at the Closing in compliance with the Agreement,
will be duly authorized, validly issued, fully paid, and non-assessable and free
of preemptive rights set forth in the Articles, Bylaws, or of which we have
knowledge; provided, however, that the Shares may be subject to restrictions on
           --------  -------
transfer under state and federal securities laws. Upon delivery by the Company
to you of certificates for the Shares being sold by the Company and payment
therefor as provided in the Agreement, you will own such Shares free and clear
of any adverse claims, assuming that you are a protected purchaser within the
meaning of Section 8303 of Article 8 of the California Uniform Commercial Code.
The company has reserved 250,000 shares of Common Stock for issuance upon
conversion of the Shares. When issued in compliance with the provisions of the
Articles and the Certificate of Determination, such shares of Common Stock will
be validly issued, fully paid, and nonassessable; provided, however, that the
                                                  --------  -------
Common Stock issuable upon conversion of the Shares may be subject to
restrictions on transfer under state and federal securities laws as set forth in
the Agreement. Upon delivery by the Company to you of certificates for the
Common Stock being issued by the Company and your tender of the certificate for
the Shares being converted as provided in the Certificate of Determination, you
will own such shares of Common Stock free and clear of any adverse claims,
assuming that you are a protected purchaser within the meaning of Section 8303
of Article 8 of the California Uniform Commercial Code.

     10. Subject to the accuracy of your representations in Section 3 of the
Agreement and the statement in the Officer's Certificate that the Company has
not offered or sold Shares by means of advertising or public solicitation, the
offer, sale, and issuance of the Shares (and the Common Stock issuable upon
conversion thereof) in conformity with the terms of the Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended, and from the qualification requirements of
the California Corporate Securities Law of 1968, as amended.

                                       IV.

     We further advise you that:

     A. As noted, the enforceability of the Transactional Agreements is subject
to the effect of general principles of equity. These principles include, without
limitation, concepts of commercial reasonableness, materiality and good faith
and fair dealing. As applied to the Transactional Agreements, these principles
will require you to act reasonably, in good faith and in a manner that is not
arbitrary or capricious in the administration and enforcement of the
Transactional Agreements and will preclude you from invoking penalties for
defaults that bear no reasonable relation to the damage suffered or that would
otherwise work a forfeiture. In addition, the enforceability of the
Transactional Agreements is subject to the effect of Section 1670.5 of the
California Civil Code, which provides that a court may refuse to enforce, or may
limit the enforcement of, a contract or clause of a contract that the court
finds as a matter of law to have been unconscionable at the time it was made.

     B. The effectiveness of indemnities, rights of contribution, exculpatory
provisions and waivers of the benefits of statutory provisions may be limited on
public policy grounds.

     C. Section 1717 of the California Civil Code provides that, in any action
on a contract where the contract specifically provides that attorneys' fees and
costs incurred to enforce that contract

                                       28
<PAGE>

shall be awarded either to one of the parties or to the prevailing party, then
the party who is determined to be the party prevailing in the action, whether
that party is the party specified in the contract or not, shall be entitled to
reasonable attorneys' fees in addition to other costs.

     D. Any provisions of the Transactional Agreements requiring that waivers
must be in writing may not be binding or enforceable if a non-executory oral
agreement has been created modifying any such provision or an implied agreement
by trade practice or course of conduct has given rise to a waiver.

     This opinion is rendered to you in connection with the Agreement and is
solely for your benefit. This opinion may not be relied upon by you for any
other purpose, or relied upon by any other person, firm, corporation, or other
entity for any purpose, without our prior written consent. We disclaim any
obligation to advise you of any developments in areas covered by this opinion
that occur after the date of this opinion.

                                   Very truly yours,

                                   /s/ Heller Ehrman White & McAuliffe

                                       29

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