<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Sonic Foundry, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Sonic Foundry, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
Sonic Foundry, Inc.
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(4) Date Filed:
1-27-99
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Notes:
<PAGE>
SONIC FOUNDRY, INC.
754 Williamson Street
Madison, Wisconsin 53703
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held March 10, 1999
The Annual Meeting of Stockholders of SONIC FOUNDRY, INC. will be held at
the Monona Terrace Community and Convention Center, One John Nolen Drive,
Madison, Wisconsin 53703 on March 10, 1999 at 2:00 p.m. for the following
purposes:
1. To elect one director to hold office for a term of five years.
2. To ratify adoption of the 1995 Stock Option Plan and the options granted
thereunder.
3. To ratify adoption of the Non-Employee Directors Stock Option Plan and the
options granted thereunder.
4. To ratify appointment of Ernst & Young LLP as independent auditors of the
Company for the fiscal year ending September 30, 1999.
5. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Only holders of record of the common stock and the Series B 5% cumulative
convertible preferred stock at the close of business on February 5, 1999 are
entitled to notice of, and to vote at, this meeting or any adjournment or
adjournments thereof.
By Order of the Board of Directors,
Kenneth A. Minor
Assistant Secretary
Madison, Wisconsin
February 9, 1999
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If you cannot personally attend the meeting, it is earnestly requested that you
promptly indicate your vote on the issues included on the enclosed proxy and
date, sign and mail it in the enclosed self-addressed envelope, which requires
no postage if mailed in the United States. Doing so will save the Company the
expense of further mailings. If you sign and return your proxy card without
marking choices, it will be understood that you wish to have your shares voted
in accordance with the recommendations of the Board of Directors.
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<PAGE>
SONIC FOUNDRY, INC.
754 Williamson Street
Madison, WI 53703
February 9, 1999
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Sonic Foundry,
Inc., a Maryland corporation (the "Company"). Unless instructed to the contrary
on the proxy, it is the intention of the persons named in the proxy to vote the
proxies FOR the election as a director of the nominee listed below for a term
expiring in 2004; FOR the ratification of adoption of the 1995 Stock Option Plan
and the options granted thereunder; FOR the ratification of adoption of the Non-
Employee Directors' Stock Option Plan and the options granted thereunder; and
FOR the ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the year ending September 30, 1999. In the event
that a nominee for director becomes unavailable to serve, which management does
not anticipate, the persons named in the proxy reserve full discretion to vote
for any other person who may be nominated. Any stockholder giving a proxy may
revoke the same at any time prior to the voting of such proxy. This Proxy
Statement and the accompanying proxy are being mailed on or about February 9,
1999.
Each stockholder of the Company will be entitled to one vote for each share
of common stock and each share of Series B 5% cumulative convertible preferred
stock, standing in his or her name on the books of the Company at the close of
business on February 5, 1999. On that date, the Company had outstanding and
entitled to vote 2,665,935 shares of common stock and 7,223,719 shares of Series
B 5% cumulative convertible preferred stock.
PROPOSAL 1: ELECTION OF DIRECTOR
Pursuant to the Company's Articles of Incorporation and By-Laws, as
amended, the Board of Directors currently consists of five classes of directors.
Each of the current directors was elected in December 1997 to one of these five
classes. David C. Kleinman was elected to Class 1 with a term expiring at the
current annual stockholders meeting; Arnold B. Pollard was elected to Class 2
with a term expiring at the annual stockholders meeting to be held in the year
2000; Frederick H. Kopko, Jr. was elected to Class 3 with a term expiring at the
annual stockholders meeting to be held in the year 2001; Rimas Buinevicius was
elected to Class 4 with a term expiring at the annual stockholders meeting to be
held in the year 2002; and Monty R. Schmidt and Curtis J. Palmer were elected to
Class 5 with terms expiring at the annual stockholders meeting to be held in the
year 2003. Commencing with the current annual stockholders meeting and
continuing thereafter, each newly elected director shall serve for a term ending
at the fifth annual meeting of stockholders following such director's election.
Nominee for Director--Term Expires in 1999
DAVID C. KLEINMAN
Mr. Kleinman, age 63, has been a director of the Company since December
1997 and has taught at the Graduate School of Business at the University of
Chicago since 1971, where he is now Adjunct Professor of Strategic Management.
Mr. Kleinman has been a director (trustee) of the Acorn Funds since
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1972 (of which he is also chairman of the Audit Committee and a member of the
Committee on the Investment Advisory Agreement), a director since 1984 of the
Irex Corporation, a contractor and distributor of insulation materials (where he
is chairman of the Governance Committee), a director since 1994 of Wisconsin
Paper and Products Company, a jobber of paper and paper products, with
operations in Milwaukee and Madison, a director since 1993 of Plymouth Tube
Company, a manufacturer of metal tubing and metal extrusions (where he serves on
the Audit Committee), a director since 1997 of FirstCom Corporation, a
developer, builder and operator of telecommunications companies in Latin America
(where he is chairman of the Audit Committee, chairman of the Compensation
Committee and Chairman of the Nominating Committee), and a director of the
Organics Management Company, an operator of organic waste processing facilities.
From 1964 to 1971, Mr. Kleinman was a member of the finance staff of the Ford
Motor Company. Mr. Kleinman received a B.S. in mathematical statistics and a
Ph.D. in business from the University of Chicago.
The election of the Class 1 Director requires the approval of a plurality
of the votes cast by holders of the shares of the Company's common stock and the
Company's Series B 5% Cumulative convertible preferred stock, voting together as
a single class. Any shares not voted, whether by broker non-vote or otherwise,
will have no impact on the outcome of the election.
The Board of Directors unanimously recommends a vote FOR the election of
Mr. Kleinman as Class 1 Director.
DIRECTORS CONTINUING IN OFFICE
ARNOLD B. POLLARD Term Expires in 2000
Mr. Pollard, age 55, has been a director of the Company since December 1997
and a director of GKN Securities Corp. since August 1996. Since 1993, he has
been the President and Chief Executive Officer of Chief Executive Group, which
publishes "Chief Executive" magazine. For nearly 20 years, he has been
President of Decision Associates, a management consulting firm specializing in
organizational strategy and structure. Since 1996, Mr. Pollard has served as a
director and a member of the compensation committee of Delta Financial Corp., a
public company engaged in the business of home mortgage lending and the
International Management Education Foundation, a non-profit educational
organization. He also serves on the advisory board of Sequel Technology. From
1989 to 1991, Mr. Pollard served as Chairman and Chief Executive Officer of
Biopool International, a biodiagnostic public company focusing on blood related
testing; and previously served on the boards of Lillian Vernon Corp. and DEBE
Systems Corp. From 1970 to 1973, Mr. Pollard served as adjunct professor at the
Columbia Graduate School of Business. Mr. Pollard graduated from Cornell
University (Tau Beta Pi), and holds a doctorate in Engineering-Economics Systems
from Stanford University.
FREDERICK H. KOPKO, JR. Term Expires in 2001
Mr. Kopko, age 42, has been the Secretary of the Company since April 1997
and a director of the Company since December 1995. Mr. Kopko is a partner of
the law firm of McBreen, McBreen & Kopko, Chicago, Illinois, and has been a
partner of that firm since January, 1990. Mr. Kopko practices in the area of
corporate law. He has been a director of Butler International, Inc. since 1985
and a
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director of Mercury Air Group, Inc. since 1992. Mr. Kopko received a B.A.
degree in economics from the University of Connecticut, a J.D. degree from Notre
Dame Law School, and an M.B.A. degree from the University of Chicago.
RIMAS P. BUINEVICIUS Term Expires in 2002
Mr. Buinevicius, age 35, has been the Chairman of the Board since October,
1997 and Chief Executive Officer since January, 1997. Mr. Buinevicius joined
the Company in 1994 as General Manager and Director of Marketing. Prior to
joining the Company, from 1991 to 1994, Mr. Buinevicius was employed by Alkar,
Division of DEC International, in Lodi, Wisconsin, where he was responsible for
project development and management of industrial control systems. From 1990 to
1991, Mr. Buinevicius was employed as a Senior Electrical Engineer with Arzco
Medical Electronics in Vernon Hills, Illinois, where he was responsible for both
hardware and software design of cardiac pacing equipment. Mr. Buinevicius has
an M.B.A. degree from the University of Chicago; a Master's degree in Electrical
Engineering from the University of Wisconsin, Madison; and a Bachelor's degree
in Electrical Engineering from the Illinois Institute of Technology, Chicago.
MONTY R. SCHMIDT Term Expires in 2003
Mr. Schmidt, age 34, has been President since March 1994 and a director of
the Company since February 1994. From October 1991 to February 1994, Mr.
Schmidt performed certain pre-incorporation services for the Company. From
March 1991 to September 1991, Mr. Schmidt worked with Lunar Corporation,
Madison, Wisconsin where he was involved in the design of ultrasonic bone
densitometry equipment. From 1988 to 1991 Mr. Schmidt held a position as a
design engineer, designing hardware and software for the Berg Company in
Madison, Wisconsin. Mr. Schmidt has a B.S. degree in Electrical Engineering
from the University of Wisconsin, Madison. Mr. Schmidt is a co-founder of the
Company.
CURTIS J. PALMER Term Expires in 2003
Mr. Palmer, age 29, has been the Chief Technology Officer since January
1997 and a director of the Company since February 1994. From June 1990 to
January 1994, Mr. Palmer was employed by Microsoft as a Software Design Engineer
in the Multimedia Technologies group, where he worked on the Windows 3.0 and 3.1
operating system support for multimedia applications. In 1990, Mr. Palmer held
a position as a Software Development Support Engineer at Microsoft, where he was
responsible for assisting third party Windows driver developers in their
development of communications, network and sound drivers for Windows 3.0. Mr.
Palmer studied software engineering at the Oregon Institute of Technology. Mr.
Palmer is a co-founder of the Company.
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors met three times during Fiscal 1998. The Board of
Directors has three standing committees, the Audit Committee, the Executive
Compensation Committee, and the Stock Option Committee. The Company does not
have a nominating committee of the Board of Directors.
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The Audit Committee consists of Messrs. Kopko, Pollard and Kleinman. The
functions of the Audit Committee are to review with the Company's independent
public auditors the scope and adequacy of the audit to be performed by such
independent public auditors; the accounting practices, procedures, and policies
of the Company; and to review all related party transactions. The Committee met
one time in Fiscal 1998.
The Executive Compensation Committee consists of Messrs. Kopko, Pollard and
Kleinman. The Committee makes recommendations to the Board with respect to
salaries of employees and is responsible for determining the amount and
allocation of any incentive bonuses among the employees. The Committee did not
meet in Fiscal 1998.
The Stock Option Committee, which was formed in January 1999, consists of
Messrs. Pollard and Kleinman. The Committee is authorized to grant stock
options under the Company's Non-qualified Stock Option Plan. The Committee did
not meet in Fiscal 1998.
Each member of the Board attended at least 75% of the appropriate board and
committee meetings.
DIRECTORS COMPENSATION
The directors of the Company, who are not also full-time employees of the
Company, receive a fee of $1,500 for attendance at each meeting of the Board of
Directors and $850 per Committee meeting attended. The cash compensation paid
to the three non-employee directors combined in Fiscal 1998 was $16,050.
The Company has granted to each Non-Employee Director, upon initial
appointment to the Board of Directors, in the case of Messrs. Pollard and
Kleinman, and on December 1, 1997, in the case of Mr. Kopko, a stock option to
purchase 10,000 shares of Common Stock pursuant to the Directors' Stock Option
Plan, at a price of $5.00 per share. In addition, on the date of the 1998
annual meeting and each subsequent annual meeting of the Company's stockholders,
the Company will grant to each Non-Employee director who is then reelected or
who is continuing as a member of the Board of Directors a stock option to
purchase 10,000 shares of Common Stock. The exercise price of each stock option
will be equal to the market price of Common Stock on the date the stock option
is granted. Stock options issued under the Directors' Stock Option Plan
generally will vest fully on the first anniversary of the date of grant and
expire after five years. An aggregate of 90,000 shares are reserved for
issuance under the Directors' Stock Option Plan.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, who are appointed by the Board of
Directors, hold office for one-year terms or until their respective successors
have been duly elected and have qualified.
Rimas P. Buinevicius is the Chairman of the Board of Directors and Chief
Executive Officer of the Company. (See "Directors Continuing in Office".)
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<PAGE>
Monty R. Schmidt is the President and a director of the Company. (See
"Directors Continuing in Office".)
Curtis J. Palmer is the Chief Technology Officer and a director of the
Company. (See "Directors Continuing in Office".)
Kenneth A. Minor, age 36, has been the Chief Financial Officer of the
Company since June 1997 and Assistant Secretary since December 1997. From
September 1993 to April 1997, Mr. Minor was employed as Vice President and
Treasurer for Fruehauf Trailer Corporation, a manufacturer and global
distributor of truck trailers and related after market parts and service. From
May 1988 to September 1993 he was employed as Assistant Treasurer and Controller
for Autodie Corporation, an automotive stamping die company. From 1984 to 1987
Mr. Minor was employed with Deloitte Haskins & Sells as a staff accountant. Mr.
Minor is a certified public accountant and has a B.B.A. degree in accounting
from Western Michigan University.
Roy G. Elkins, age 39, has been the Vice President of Sales and Marketing
of the Company since February 1997. From April 1987 to January 1997, Mr. Elkins
was employed with Ensoniq Corporation, a manufacturer of music and multimedia
hardware located in Malvern, Pennsylvania. At Ensoniq, Mr. Elkins held various
positions including Director of Training, Artist Relations, Video Services and
Product Marketing. Other responsibilities included international and domestic
dealer relations, product and project management, and other sales and marketing
related activities.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock and the Series B Preferred Stock of the Company as
of February 5, 1999, by (a) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock or
the Series B Preferred Stock, (b) each of the Company's executive officers,
directors and key employees, and (c) all executive officers, directors, and key
employees of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares
of Class Percent
Name of Beneficial Owner(1) Beneficially Owned of Class
- --------------------------- ------------------ --------
<S> <C> <C>
Common Stock(2)
Rimas P. Buinevicius(3) 572,326 9.0%
754 Williamson Street
Madison, WI 53703
Monty R. Schmidt(4) 1,491,511 23.4
754 Williamson Street
Madison, WI 53703
Curtis J. Palmer(4) 1,491,511 23.4
754 Williamson Street
Madison, WI 53703
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
Kenneth A. Minor(5) 10,000 *
754 Williamson Street
Madison, WI 53703
Roy G. Elkins(6) 22,500 *
754 Williamson Street
Madison, WI 53703
Frederick H. Kopko, Jr.(7) 96,512 1.5
20 North Wacker Drive
Chicago, IL 60606
Arnold B. Pollard(8) 10,000 *
733 Third Avenue
New York, NY 10017
David C. Kleinman(8) 10,000 *
1101 East 58/th/ Street
Chicago, IL 60637 ------------- ---------
All Executive Officers and Directors as a Group
(8 persons)(9) 3,704,360 58.1%
============= =========
Series B Preferred Stock(10)
Rimas P. Buinevicius
754 Williamson Street
Madison, WI 53703 1,124,651 15.6
Monty R. Schmidt
754 Williamson Street
Madison, WI 53703 2,963,022 41.0
Curtis J. Palmer
754 Williamson Street
Madison, WI 53703 2,963,022 41.0
Frederick H. Kopko
20 North Wacker Drive
Chicago, IL 60606 173,024 2.4
------------- ---------
All Executive Officers and Directors as a group
(4 persons) 7,223,719 100.0%
============= =========
</TABLE>
*less than 1%
(1) The Company believes that the persons named in the table above, based upon
information furnished by such persons, have sole voting and investment
power with respect to the number of shares indicated as beneficially owned
by them.
(2) Beneficial ownership of the Common Stock is presented as if the shares of
Series B Preferred Stock have been converted into shares of Common Stock.
(3) Consists of 562,326 shares of Common Stock issuable upon conversion of
1,124,651 shares of Series B Preferred Stock, and 10,000 shares of Common
Stock subject to presently exercisable stock options.
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(4) Consists of 1,481,511 shares of Common Stock issuable upon conversion of
2,963,022 shares of Series B Preferred Stock, and 10,000 shares of Common
Stock subject to presently exercisable stock options.
(5) Consists of 10,000 shares of Common Stock issuable pursuant to presently
exercisable stock options. Does not include 25,000 shares of Common Stock
subject to stock options, 10,000 shares of which will become exercisable on
each of June 1, 1999, and June 1, 2000, 1,667 shares of which will become
exercisable on each of October 21, 1999 and October 21, 2000, and 1,666
shares of which will become exercisable on October 21, 2002.
(6) Consists of 22,500 shares of Common Stock issuable pursuant to presently
exercisable stock options. Does not include 30,000 shares of Common Stock
subject to stock options, 10,000 shares of which will become exercisable on
each of February 1, 2000, and February 1, 2001, 3,333 shares of which will
become exercisable on January 1, 2000 and January 1, 2001 and 3,334 shares
of which will become exercisable on January 1, 2002.
(7) Consists of 86,512 shares of Common Stock issuable upon conversion of
173,024 shares of Series B Preferred Stock, and 10,000 shares of Common
Stock subject to presently exercisable stock options.
(8) Consists of 10,000 shares subject to presently exercisable stock options.
(9) Includes 92,500 shares of Common Stock issuable pursuant to presently
exercisable stock options.
(10) Series B 5% Cumulative Convertible Preferred Stock ("Series B Preferred
Stock") consists of 7,223,719 outstanding shares, convertible into
3,611,860 shares of Common Stock.
SUMMARY COMPENSATION TABLE
The following table sets forth all the cash compensation paid by the
Company during the year ended September 30, 1998 to the Company's Chief
Executive Officer and all other executive officers.
<TABLE>
<CAPTION>
Annual Compensation Long Term
------------------- Compensation
------------
Awards of
Other Securities
Annual Underlying
Compen- Option All Other
Name and Principal Salary Bonus sation /SARs Compensation
Position Year ($) ($) ($) (#) ($)
-------- ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Rimas P. Buinevicius(1) 1998 96,154 500 2,947(4) 10,000 -
Chief Executive 1997(3) 54,808 - - - -
Officer and 1996 64,616 37,149 - - -
Chairman
Monty R. Schmidt(2) 1998 96,154 500 - 10,000 -
President and 1997(3) 54,808 - - - -
Director 1996 64,616 6,462 - - -
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Curtis J. Palmer 1998 96,154 500 - 10,000 -
Chief Technology 1997(3) 54,808 - - - -
Officer and Director 1996 64,616 6,462 - - -
Kenneth A. Minor 1998 102,692 500 - 20,000 10,000(5)
Chief Financial 1997(3) 27,000 - - 10,000 8,290(6)
Officer and 1996 - - - - -
Assistant Secretary
Roy G. Elkins 1998 109,384 500 - 20,000 -
Vice President, 1997(3) 53,942 - - 20,000 5,805(6)
Sales and Marketing 1996 - - - - -
</TABLE>
(1) Mr. Buinevicius has been serving as Chief Executive Officer since
January, 1997.
(2) Mr. Schmidt served as Chief Executive Officer from February 1994 (inception
of the Company) until January 1997.
(3) Represents nine months ended September 30, 1997.
(4) Consists of personal use of company vehicle included as portion of
executive's taxable compensation.
(5) Consists of closing costs associated with the sale of a former residence
reimbursed to Mr. Minor in 1998.
(6) Consists of moving and relocation costs reimbursed to Mr. Minor and Mr.
Elkins in 1997.
Employment Agreements
The Company has entered into employment agreements with Rimas Buinevicius,
the Company's Chairman and Chief Executive Officer, Monty R. Schmidt, the
Company's President, and Curtis Palmer, the Company's Chief Technology Officer.
Each agreement continues in effect until January 1, 2001, unless earlier
terminated pursuant to its terms. The salary of each of Messrs. Buinevicius,
Schmidt and Palmer is $125,000 per year, subject to increase each year at the
discretion of the Board of Directors. Messrs. Buinevicius, Schmidt, and Palmer
are also entitled to incidental benefits of employment under the agreements.
Each of the employment agreements provides that if (i) the Company breaches its
duty under such employment agreement, (ii) the employee's status or
responsibilities with the Company has been reduced, (iii) the Company fails to
perform its obligations under such employment agreement, or (iv) after a Change
in Control of the Company, the financial prospects of the Company have
significantly declined, the employee may terminate his employment and receive
all salary and bonus owed to him at that time, prorated, plus three times the
highest annual salary and bonus paid to him in any of the three years
immediately preceding the termination. If the employee becomes disabled, he may
terminate his employment and receive all salary owed to him at that time,
prorated, plus a lump sum equal to the highest annual salary and bonus paid to
him in any of the three years immediately preceding the termination. Pursuant to
the employment agreements, each of Messrs. Buinevicius, Schmidt and Palmer has
agreed not to disclose the Company's confidential information and not to compete
against the Company during the term of his employment
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agreement and for a period of two years thereafter. Such non-compete clauses may
not be enforceable, or may only be partially enforceable, in state courts of
relevant jurisdictions.
A "Change in Control" is defined in the employment agreements to mean:
(i) a change in control of a nature that would have to be reported in the
Company's proxy statement, ; (ii) the Company is merged or consolidated or
reorganized into or with another corporation or other legal person and as a
result of such merger, consolidation or reorganization less than 75% of the
outstanding voting securities or other capital interests of the surviving,
resulting or acquiring corporation or other legal person are owned in the
aggregate by the stockholders of the Company immediately prior to such merger,
consolidation or reorganization; (iii) the Company sells all or substantially
all of its business and/or assets to any other corporation or other legal
person, less than 75% of the outstanding voting securities or other capital
interests of which are owned in the aggregate by the stockholders of the
Company, directly or indirectly, immediately prior to or after such sale; (iv)
any person (as the term "person" is used in Section 13(d) (3) or Section 14(d)
(2) of the Securities Exchange Act of 1934 (the "Exchange Act")) had become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3
or any successor rule or regulation promulgated under the Exchange Act) of 25%
or more of the issued and outstanding shares of voting securities of the
Company; or (v) during any period of two consecutive years, individuals who at
the beginning of any such period constitute the directors of the Company cease
for any reason to constitute at least a majority thereof unless the election, or
the nomination or election by the Company's stockholders, of each new director
of the Company was approved by a vote of at least two-thirds of such directors
of the Company then still in office who were directors of the Company at the
beginning of any such period.
OPTIONS GRANTED IN FISCAL 1998
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates Price
Appreciation or
Individual Grants Option Term
----------------- -----------
Number of
securities % of Total
Underlying Options/SARs Exercise
Options/SARs Granted to or Base
Granted Employees in Price Expiration
(#) Fiscal Year ($/Sh) Date 5%($) 10%($)
------------ ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Rimas P. Buinevicius 10,000 12 5.00 10/31/07 81,445 129,687
Monty R. Schmidt 10,000 12 5.00 10/31/07 81,445 129,687
Curtis J. Palmer 10,000 12 5.00 10/31/07 81,445 129,687
Kenneth A. Minor 20,000 25 5.00 02/01/07 162,289 259,374
Roy G. Elkins 20,000 25 5.00 06/01/07 162,889 259,374
</TABLE>
10
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1998 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options/SARs at Fiscal Options/SARs at Fiscal
Year-End(#) Year-End($)
----------- -----------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Rimas P. Buinevicius 0 10,000 0 9,375
Monty R. Schmidt 0 10,000 0 9,375
Curtis J. Palmer 0 10,000 0 9,375
Kenneth A. Minor 10,000 20,000 9,375 18,750
Roy G. Elkins 10,000 30,000 9,375 28,125
</TABLE>
No shares were acquired on exercise of options by the named executive
officers in Fiscal 1998.
CERTAIN TRANSACTIONS
During Fiscal 1998, the Company paid the Chicago law firm of McBreen,
McBreen & Kopko $196,441 as compensation for legal services rendered. Frederick
H. Kopko, Jr., a director and preferred stockholder of the Company, is a partner
in McBreen, McBreen & Kopko. Pursuant to the Directors' Stock Option Plan, Mr.
Kopko was granted an option to purchase 10,000 shares of Common Stock at an
exercise price of $5.00 per share on December 1, 1997.
In June 1998, the disinterested members of the board of directors
unanimously approved the issuance of Company guaranties of certain obligations
of Monty Schmidt and Rimas Buinevicius. The guaranties were executed in June
and July of 1998 to a bank in order to facilitate the purchase of personal
residences by Mr. Schmidt and Mr. Buinevicius. The guarantees carry an
aggregate maximum right of recovery of approximately $300,000.
PROPOSAL 2: PROPOSAL TO RATIFY ADOPTION
OF THE 1995 STOCK OPTION PLAN
The Board of Directors recommends ratification of adoption of the Company's
1995 Stock Option Plan (the "Stock Option Plan").
The purpose of the Stock Option Plan is to promote the interests of the
Company and its stockholders by strengthening the Company's ability to attract
and retain experienced and knowledgeable employees and to furnish additional
incentives to those employees upon whose
11
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judgment, initiative and efforts the Company largely depends. 1,000,000 shares
were subject to Options under the Plan. Since adoption of the Plan on January
1, 1995 and through September 30, 1998, the Company has granted options for
708,550 shares under the Plan and canceled 4,850 options, leaving a balance
available of 296,300.
A copy of the Plan is available upon request to the Secretary of the
Company. The following is a summary of the Plan.
Summary of the 1995 Stock Option Plan
Administration. The Stock Option Plan is administered by the Executive
Compensation Committee. The Executive Compensation Committee has all powers and
discretion necessary or appropriate to administer the Stock Option Plan and to
control its operation, including, but not limited to, the power to (a) determine
which employees shall be granted options, and the number and type of options to
be granted (b) prescribe the terms and conditions of the options, (c) accelerate
the exercisability of options, (d) interpret the Stock Option Plan and the
options granted thereunder, (e) adopt such procedures and subplans as are
necessary or appropriate to permit participation in the Stock Option Plan by
employees who are foreign nationals or employed outside of the United States,
(f) adopt rules for the administration, interpretation and application of the
Stock Option Plan as are consistent therewith, and (g) interpret, amend or
revoke any such rules.
The Stock Option Plan provides that the Executive Compensation Committee,
in its sole discretion and on such terms and conditions as it may provide, may
delegate all or any part of its authority and powers thereunder to one or more
directors or officers of the Company; provided, however, that unless otherwise
determined by the Board, the Committee may not delegate its authority and powers
in any way which would jeopardize the Plan's qualification under section 162(m)
of the Internal Revenue Code (the "Code") or Rule 16b-3 promulgated under the
Exchange Act. On January 4, 1998, the Executive Compensation Committee
delegated all of its authority and power under the Plan to the Stock Option
Committee.
Eligibility. All individuals who, in the judgment of the Executive
Compensation Committee, have made significant contributions to the Company
(including directors and officers who are full or part-time employees of the
Company, but excluding directors who are not employees of the Company), are
eligible for participation under the Plan. Notwithstanding the above, incentive
stock options may be granted only to persons who are employees of the Company on
the date of grant.
Type of Options. Either nonqualified stock options or incentive stock
options may be issued under the Stock Option Plan.
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Options Exercise Price. Subject to the provisions set forth below, the
Stock Option Plan provides that the exercise price for each option shall be
determined by the Executive Compensation Committee in its sole discretion.
Exercise Price of Nonqualified Stock Options. In the case of a
nonqualified stock option, the exercise price shall be not less than one hundred
percent (100%) of the fair market value of a share on the date of grant.
Exercise Price of Incentive Stock Options. In the case of an incentive
stock option, the exercise price shall be not less than one hundred percent
(100%) of the fair market value of a share on the date of grant; provided,
however, that if on the date of grant the optionee (together with persons whose
stock ownership is attributed to the optionee pursuant to Section 424(d) of the
Code) owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, the exercise price shall be not less than
one hundred and ten percent (110%) of the fair market value of a share on the
date of grant.
Exercise of Incentive Stock Options. The aggregate fair market value
(determined on the date of grant) of the shares with respect to which incentive
stock options are exercisable for the first time by an employee during any
calendar year is not to exceed $100,000.
Expiration Dates. Under the Stock Option Plan, each option is to terminate
no later than the first to occur of the following events:
(a) The date for termination of the option set forth in a written option
agreement; or
(b) The expiration of ten (10) years from the grant date; or
(c) The expiration of three (3) months from the date of the employee's
termination of service for a reason other than the employees death, disability
or retirement; or
(d) The expiration of one (1) year from the date of the employee's
termination of service by reason of disability.
Notwithstanding the above,
(a) if an employee dies prior to the expiration of his or her options, the
Executive Compensation Committee, in its discretion, may provide that his or her
options shall be exercisable for up to one (1) year after the date of death, and
(b) in the event incentive stock options are granted, (i) no such incentive
stock options may be exercised more than three (3) months after the employee's
termination of service for any reason other than disability or death, unless
((a)) the employee dies during such three-month period, and ((b)) the option
agreement or the Executive Compensation Committee permits later exercise, and
(ii) no incentive stock option may be exercised after the expiration of ten (10)
years
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from the date of grant; provided, however, that if the option is granted to an
employee who, together with persons whose stock ownership is attributed to the
employee pursuant to section 424(d) of the Code, owns stock possessing more than
10% of the total combined voting power of all classes of the stock of the
Company, the option may not be exercised after the expiration of five (5) years
from the date of grant.
Committee Discretion. The Stock Option Plan provides that the Executive
Compensation Committee, in its sole discretion, (a) shall provide in each
option agreement when each option expires and becomes unexercisable, and (b)
may, after an option is granted, subject to the provisions set forth above,
extend the maximum term of the option.
Payment. Upon the exercise of any option, the Stock Option Plan provides
that the exercise price shall be payable to the Company in full in cash or its
equivalent. However, the Executive Compensation Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired shares
having an aggregate fair market value at the time of exercise equal to the
exercise price, or (b) by any other means which the Executive Compensation
Committee, in its sole discretion, determines to both provide legal
consideration for the shares, and to be consistent with the purposes of the
Stock Option Plan, including by execution and delivery of a promissory note.
Restrictions on Share Transferability. The Executive Compensation
Committee may impose such restrictions on any shares acquired pursuant to the
exercise of an option as it may deem advisable, including, but not limited to,
restrictions related to applicable Federal securities laws, the requirements of
any national securities exchange or system upon which such shares are then
listed or traded, or any blue sky or state securities laws.
Grant of Reload Options. The Executive Compensation Committee may provide
in an option agreement that an employee who exercises all or part of an option
by payment of the exercise price with already-owned shares, shall be granted an
additional option (a "Reload Option") for a number of shares of stock equal to
the number of shares tendered to exercise the previously granted option plus, if
the Executive Compensation Committee so determines, any shares withheld or
delivered in satisfaction of any tax withholding requirements. As determined by
the Executive Compensation Committee, each Reload Option shall have a grant date
which is the date as of which the previously granted option is exercised.
Indemnification. Under the Stock Option Plan, each person who is or has
been a member of the Executive Compensation Committee, or of the Board of
Directors, is entitled to be indemnified and held harmless by the Company
against and from (a) any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by him or her in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or failure to act
under the Stock Option Plan or any option agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company's approval,
or paid by him or her in satisfaction of any judgment in any such claim, action,
suit, or proceeding against him or her, provided he or she
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shall give the Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on his or her own
behalf.
Transferability. No option granted under the Stock Option Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will, by the laws of descent and distribution, or by designation of a
beneficiary to take effect upon the employees death. All rights with respect to
an option granted to an employee shall be available during his or her lifetime
only to the employees.
Adjustments in Options and Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, share combination, or other change in the corporate
structure of the Company affecting the shares of Common Stock, the Executive
Compensation Committee will adjust the number and class of shares which may be
delivered under the Stock Option Plan, the number, class, and price of shares
subject to outstanding options under the Stock Option Plan, and the number of
shares authorized for issuance under the Stock Option Plan, in such manner as
the Executive Compensation Committee (in its sole discretion) will determine to
be appropriate to prevent the dilution or diminution of such options.
Withholding. Prior to the delivery of any shares or cash pursuant to an
option, the Company may deduct or withhold, or require an optionee to remit to
the Company, an amount sufficient to satisfy Federal, state, and local taxes
(including such optionee's FICA obligation) required to be withheld with respect
to such option (or exercise thereof).
Amendment, Suspension, or Termination. The Board of Directors, in its sole
discretion, may amend or terminate the Stock Option Plan, or any part thereof,
at any time and for any reason. The amendment, suspension , or termination of
the Stock Option Plan shall not, without the consent of the optionee in the
Stock Option Plan, alter or impair any rights or obligations under any option
theretofore granted to such optionee. No option may be granted during any
period of suspension or after termination of the Stock Option Plan.
Duration of the Stock Option Plan. The Stock Option Plan is to remain in
effect until terminated. However, without stockholder approval, no incentive
stock option can be granted under the Stock Option Plan after January 1, 2005.
Federal Income Tax Consequences
- -------------------------------
With respect to non-qualified stock options, generally an optionee does not
realize taxable income, and the Company will not be allowed a deduction.
However, the difference between the option price and the fair market value of
the stock on the date the option is exercised will be taxable as ordinary income
to the optionee and will be deductible by the Company as compensation on such
date. Gain or loss on the subsequent sale of such stock will be eligible for
capital gain or loss treatment by the optionee and will have no federal income
tax
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consequences to the Company. Different rules may apply if an optionee, who is
an officer, director or more than 10% stockholder, exercises options within six
months of the grant date.
With respect to incentive stock options, if the optionee does not make a
disqualifying disposition of stock acquired on exercise of such options, no
income for federal income tax purposes will result to such optionee upon the
granting or exercise of the option (except that the amount by which the fair
market value of the stock at the time of exercise exceeds the option price will
be a tax preference item under the alternative minimum tax), and in the event of
any sale thereafter, any amount realized in excess of his or her cost will be
taxed as long-term capital gain and any loss sustained will be long-term capital
loss. In such case, the Company will not be entitled to a deduction for federal
income tax purposes in connection with the issuance or exercise of the option.
A disqualifying disposition will occur if the optionee makes a disposition of
such shares within two years from the date of the granting of the option or
within one year after the transfer of such shares to him or her. If a
disqualifying disposition is made, the difference between the option price and
the lesser of (i) the fair market value of the stock at the time the option is
exercised or (ii) the amount realized upon disposition of the stock will be
treated as ordinary income to the optionee at the time of disposition and will
be allowed as a deduction to the Company.
The described tax consequences are based on current laws, regulations and
interpretations thereof, all of which are subject to change. In addition, the
discussion is limited to federal income taxes and does not attempt to describe
state and local tax effects that may accrue to participants or the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE EMPLOYEE AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED UNDER THE
STOCK OPTION PLAN. REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE
CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF AN
OPTIONEE'S DEATH OR THE INCOME TAX LAWS OF ANY STATE OR FOREIGN COUNTRY IN WHICH
THE PARTICIPANT MAY RESIDE.
Plan Benefits
As described above, the selection of the employees of the Company who will
receive grants under the Stock Option Plan was and is to be determined by the
Executive Compensation Committee, or its delagee, in its sole discretion.
Therefore, it is not possible to predict the amounts that will be received by
particular employees. Reference is made to "Options Granted in Fiscal 1998" for
a description of such options granted to the executive officers in Fiscal 1998.
Also in Fiscal 1998, 11,000 options were granted to non-executive officers and
employees, at an average exercise price of $5.60; such options will expire
between December 1, 2007 and July 23, 2008. Prior to Fiscal 1998, (a) Mr. Minor
was granted options to purchase 10,000 shares at $5.00; such options will expire
on June 1, 2007; (b) Mr. Elkins was granted options to purchase 20,000
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<PAGE>
shares at $5.00; such options will expire on February 1, 2007; and (c) non-
executive officers and employees as a group were granted options to purchase
597,550 shares at an average exercise price of $0.58; such options will expire
between 2005 and 2007. No dollar value was assigned to these options because
their exercise price was the fair market value of the underlying common stock on
the date of grant.
General
The Board of Directors believes that the granting of stock options is an
effective way to allow the Company's officers and employees to participate in
the growth and profitability of the Company. The Board of Directors further
believes that the Plan is necessary in order to maintain and improve the
Company's ability to attract and retain key personnel, and to serve as an
incentive to such personnel to make extra efforts to contribute to the success
of the Company's operations.
The ratification of the Stock Option Plan requires the approval of a
majority of the votes cast by holders of the shares of Common Stock and the
Company's Series B 5% Cumulative Convertible Preferred Stock, voting together as
a single class. Shares may be voted for or withheld from this matter. Shares
that are withheld and broker non-votes will have no effect on this matter
because ratification of the Stock Option Plan requires a majority of the shares
cast.
The Board of Directors unanimously recommends a vote FOR Proposal 2
ratifying adoption of the 1995 Stock Option Plan.
PROPOSAL 3: PROPOSAL TO RATIFY ADOPTION OF THE
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Board of Directors recommends ratification of adoption of the Company's
Non-Employee Directors Stock Option Plan (the "Directors Stock Option Plan").
The Directors Stock Option Plan was adopted by the Board of Directors on
December 1, 1997.
The purpose of the Directors Stock Option Plan is to promote the interests
of the Company and its stockholders by strengthening the Company's ability to
attract and retain experienced and knowledgeable non-employee directors and to
encourage them to acquire an increased proprietary interest in the Company. The
Directors Stock Option Plan is administered by the Board of Directors. The
Directors Stock Option Plan provides for a grant of options to each non-employee
director in office on the date of adoption of the Directors Stock Option Plan,
who is, to each non-employee director upon his initial appointment to the Board,
and to each non-employee director who is reelected or who is continuing in
offices as a member of the Board after the adjournment of each annual meeting.
Each option is effective to purchase 10,000 shares of Common Stock at an
exercise price equal to the fair market value on the date of grant.
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The text of the proposed Directors Stock Option Plan is available from the
Secretary of the Company. The following is a summary of the Directors Stock
Option Plan, as amended.
Payment of the option exercise price may be in cash, by delivery of
previously owned Common Stock, by any other legally permissible means acceptable
to the Board at the time of the grant of the option (including a promissory note
or cashless exercise, subject to applicable legal restrictions), or by a
combination of such means.
All options granted under the Directors Stock Option Plan are non-statutory
- -- not intended to qualify under Section 422 of the Code, as amended. The
federal income tax consequences are similar to those described above with
respect to the grant of a non-qualified stock option.
If an optionee ceases to be a director before an option vests, the option
is forfeited. Each option expires ten years from the date of its grant.
Options are not transferable during the lifetime of the optionee, except that an
option may be transferable to members of the optionee's immediate family, to a
partnership whose members are only the optionee and/or members of the optionee's
immediate family, or to a trust for the benefit of only the optionee and/or
members of the optionee's immediate family. Options that are forfeited or
terminated will again be available for grant. Shares may be authorized but
unissued, currently held or reacquired shares. The Board of Directors may
amend, terminate or suspend the Plan at any time.
Under the Directors Stock Option Plan, each of the three non-employee
directors received options to purchase 10,000 shares of Common Stock in 1997 and
will receive options to purchase an additional 10,000 shares of Common Stock on
March 10, 1999. However, no dollar value is assigned to the options because
their exercise price will be the fair market value of the common stock on the
date of grant.
The ratification of the Directors Stock Option Plan requires the approval
of a majority of the votes cast by holders of the shares of Common Stock and the
Company's Series B 5% Cumulative Preferred Stock, voting together as a single
class. Shares may be voted for or withheld from this matter. Shares that are
withheld and broker non-votes will have no effect on this matter because
ratification of the Directors Stock Option Plan requires a majority of shares
cast.
The Board of Directors unanimously recommends a vote FOR Proposal 3,
ratifying adoption of the Non-Employee Directors Stock Option Plan.
PROPOSAL 4: RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP as
independent public auditors to audit the financial statements of the Company for
the year ending September 30, 1999. In the event of a vote against approval,
the Board will reconsider its selection, and in any event is entitled to change
auditors at a later date. Ernst & Young LLP have been the auditors for the
Company since the nine month period ended September 30, 1997.
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Representatives of the firm are expected to be present at the annual meeting to
respond to stockholders' questions and to have the opportunity to make any
statements they consider appropriate.
The ratification of the appointment of Ernst & Young LLP as independent
public auditors requires the approval of a majority of the votes cast by holders
of the shares of Common Stock and the Company's Series B 5% Cumulative
Convertible Preferred Stock, voting together as a single class. Shares may be
voted for or withheld from this matter. Shares that are withheld and broker non-
votes will have no effect on this matter because ratification of the appointment
of Ernst & Young LLP requires a majority of the shares cast.
The Board of Directors unanimously recommends a vote for Proposal 4
ratifying the appointment of Ernst & Young LLP as independent public auditors
for the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the Common
Stock, to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Based on this review of the copies of such forms
received by it, the Company believes that all filing requirements applicable to
its officers, directors, and greater than ten-percent beneficial owners were
complied with.
STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in the
Company's proxy statement and form of proxy relating to the Annual Meeting of
Stockholders for the year 2000, the proposal must be received by the Company no
later than November 11, 1999.
OTHER MATTERS
The Board of Directors has at this time no knowledge of any matters to be
brought before this year's Annual Meeting other than those referred to above.
However, if any other matters properly come before this year's Annual Meeting,
it is the intention of the persons named in the proxy to vote such proxy in
accordance with their judgment on such matters.
GENERAL
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended September 30, 1998 is being mailed, together with this Proxy Statement, to
each stockholder.
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Additional copies of such Annual Report and of the Notice of Annual Meeting,
this Proxy Statement and the accompanying proxy may be obtained from the
Company. The Company has retained Continental Stock Transfer and Trust Company
to assist in the solicitation of proxies, primarily from brokers, banks and
other nominees, for an estimated fee of $1,600 plus expenses. The Company will,
upon request, reimburse brokers, banks and other nominees, for costs incurred by
them in forwarding proxy material and the Annual Report to beneficial owners of
Common Stock. In addition, directors, officers and regular employees of the
Company and its subsidiaries, at no additional compensation, may solicit proxies
by telephone, telegram or in person. All expenses in connection with soliciting
management proxies for this year's Annual Meeting, including the cost of
preparing, assembling and mailing the Notice of Annual Meeting, this Proxy
Statement and the accompanying proxy, are to be paid by the Company.
The Company will provide without charge (except for exhibits) to any record
or beneficial owner of its securities, on written request, a copy of the
Company's Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission for the fiscal year ended September 30, 1998, including the financial
statements and schedules thereto. Exhibits to said report will be provided upon
payment of fees limited to the Company's reasonable expenses in furnishing such
exhibits. Written requests should be directed to Investor Relations, 754
Williamson Street, Madison, Wisconsin 53703.
In order to assure the presence of the necessary quorum at this year's
Annual Meeting, and to save the Company the expense of further mailings, please
date, sign and mail the enclosed proxy promptly in the envelope provided. No
postage is required if mailed within the United States. The signing of a proxy
will not prevent a stockholder of record from voting in person at the meeting.
By Order of the Board of Directors,
Kenneth A. Minor
Assistant Secretary
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(1) To elect one director to hold office [_] FOR [_] WITHOLD
for a term of five years.
(2) To ratify adoption of the 1995 Stock [_] FOR [_] AGAINST [_] ABSTAIN
Option Plan and the options granted
thereunder.
(3) To ratify adoption of the Non-Employee [_] FOR [_] AGAINST [_] ABSTAIN
Directors Stock Option Plan and the
options granted thereunder.
(4) To ratify appointment of Ernst & [_] FOR [_] AGAINST [_] ABSTAIN
Young LLP as independent auditors of
the Company for the fiscal year ending
September 30, 1999.
A vote for proposals 1, 2, 3 and 4 is recommended by the Board of Directors.
Please be sure to sign and date this Proxy.
Please sign this proxy exactly as your name appears
hereon. Joint owners should each sign personally.
Trustees and other fiduciaries should indicate the
capacity in which they sign. If a corporation or
partnership, this signature should be that of an
authorized officer who should state his or her
title.
---------------------------------------------------
Date:
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Stockholder sign here co-owner sign here
PLEASE VOTE, DATE, SIGN AND RETURN PROMPTLY
IN ENCLOSED ENVELOPE.
This proxy when properly executed will be voted in the manner directed by the
undersigned Stockholder(s). If no other indication is made, the proxies shall
vote "For" proposals 1, 2, 3 and 4
- --------------------------------------------------------------------------------
Sonic Foundry, Inc.
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders -- March 10, 1999
Those signing on the reverse side, revoking any prior proxies, hereby appoint(s)
R. Buinevicius and K. Minor, or each or any of them with full power of
substitution, as proxies for those signing on the reverse side to act and vote
all shares of stock of Sonic Foundry, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the 1999 Annual Meeting of
Stockholders of the Company and at any adjournment thereof as indicated upon all
matters referred to on the reverse side and described in the Proxy Statement for
the Meeting, and, in their discretion, upon any other matters which may properly
come before the Meeting. Attendance of the undersigned at the Meeting or at any
adjournment thereof will not be deemed to revoke this proxy unless those signing
on the reverse side shall revoke this proxy in writing.
