SECURITIES & EXCHANGE COMMISSION EDGAR FILING SONIC FOUNDRY INC. Form: 8-K. Date Filed:

Transcription

1 SECURITIES & EXCHANGE COMMISSION EDGAR FILING SONIC FOUNDRY INC Form: 8-K Date Filed: Corporate Issuer CIK: Copyright 2017, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the terms of use.

2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 June 5, 2017 (May 30, 2017) Date of Report (Date of earliest event reported) Sonic Foundry, Inc. (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.) 222 W. Washington Ave Madison, WI (Address of principal executive offices) (608) (Registrant's telephone number) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c)) Item Entry into a Material Definitive Agreement. On May 30, 2017 (the Agreement Date ), the Company entered into a Subscription Agreement (the Subscription Agreement ) with Mark D. Burish, pursuant to which Mr. Burish agreed to purchase, and the Company agreed to issue and sell, an aggregate of $750,000 of shares (the Purchased Shares ) of the Company s 9% Cumulative Voting Convertible Preferred Stock, Series A, $.01 par value per share (the Series A Preferred Stock ), at a price per share of $910. The Company closed on the issuance and sale of $500,000 of the Purchased Shares (the Initial Share Purchase ) on the Agreement Date. Pursuant to the terms of the Subscription Agreement, the Company has the right to require Mr. Burish, or an assignee acceptable to the Company, to purchase an additional $250,000 of shares, at the same price, at any time prior to September 1, 2017 (the Second Share Purchase ). Upon the closing of the Initial Share Purchase, and assuming full conversion of all of the Series A Preferred Stock then outstanding, Mr. Burish will increase his beneficial stock ownership interest in the Company from 9.4% to 11.9%. Upon the closing of the Second Share Purchase, and assuming full conversion of all of the Series A Preferred Stock then outstanding, Mr. Burish will increase his beneficial stock ownership interest in the Company an additional 1.2%, to 13.1%.

3 Item Unregistered Sales of Equity Securities. The description of the Share Purchase Agreement set forth under Item 1.01 is incorporated by reference in this Item The shares issued pursuant to the Share Purchase Agreement were issued without registration under the Securities Act, in reliance upon the exemption provided in Section 4(a)(2) thereunder ( Section 4(a)(2) ). Due to, among other reasons, his affiliation with the Company, Mr. Burish is an accredited investor as that term is defined in Rule 501 under the Securities Act. Item Amendments to Articles of Incorporation. In connection with the completion of the private placement described in Item 3.02 above, the Company created a new series of preferred stock entitled 9% Cumulative Voting Convertible Preferred Stock, Series A which became effective by filing Article Supplementary (the Articles Supplementary ) to the Articles of Incorporation of the Company with the Maryland Department of Assessments and Taxation. Description of Series A Preferred Stock This section describes the general terms and provisions of the Series A Preferred Stock. A copy of the Articles Supplementary is filed with this report as Exhibit 3.1 and is incorporated herein by reference. Although the Company believes this summary covers the material terms and provisions of the Series A Preferred Stock as contained in the Articles, it may not contain all of the information that is important to investors. Authorized Shares, Stated Value and Liquidation Preference. One thousand shares are designated as the Series A Preferred Stock with a stated value and liquidation preference of $1,000 per share. Ranking. The Series A Preferred Stock ranks senior to future classes or series of preferred stock established after the issue date of the Series A1 Preferred Stock which do not expressly provide that such class or series will rank senior to the Series A Preferred Stock. The Series A Preferred Stock ranks senior to the Company s common stock. Dividends. Holders of Series A Preferred Stock will receive monthly dividends at an annual rate of 9%, payable in additional shares of Series A Preferred Stock, based on the number of shares of Series A Preferred Stock held. Voting Rights. The holders of the Series A Preferred Stock will vote together with the holders of common stock as a single class on all matters upon which the holders of common stock are entitled to vote. Each share of Series A Preferred Stock will be entitled to such number of votes as the number of shares of common stock into which such share of Preferred Stock is convertible. In addition, the holders of the Series A Preferred Stock will vote as a separate class with respect to any charter amendment that would alter the contract rights of the Series A Preferred Stock, as expressly set forth in the Company s charter. Liquidation. In the event the Company voluntarily or involuntarily liquidates, dissolves or winds up, the holders of the Series A Preferred Stock will be entitled, before any distribution or payment out of our assets may be made to or set aside for the holders of any of the junior capital stock and subject to the rights of creditors, to receive a liquidation distribution in an amount equal to $1,000 per share ( the Liquidation Amount ). Redemption. The Series A Preferred Stock is not redeemable. Preemptive Rights. Holders of the Series A Preferred Stock do not have preemptive rights. Optional Conversion by Investors. At any time, each holder of Series A Preferred Stock has the right, at such holder s option, to convert all or any portion of such holder s Series A Preferred Stock into shares of the Company s common stock prior to the mandatory conversion of the Series A Preferred Stock. Optional Conversion by the Company. At any time on or after May 30, 2018, the Series A Preferred Stock may be converted into Common Stock at the option of the Company. Conversion Amount. Each share of Series A Preferred Stock is convertible into that number of shares of common stock determined by dividing $4.23 into the Liquidation Amount of the shares of Series A Preferred Stock being converted,, subject to customary anti-dilution adjustments, including in connection with stock dividends and distributions, stock splits, subdivisions and combinations. Registration Rights. Holders of the Series A Preferred Sock do not have registration rights.

4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Sonic Foundry, Inc. (Registrant) June 5, 2017 By: /s/ Kenneth A. Minor By: Kenneth A. Minor Title: Chief Financial Officer

5 SUBSCRIPTION AGREEMENT This Subscription Agreement (this Agreement ), dated May 30, 2017, is being delivered to Mark D. Burish (the Subscriber ) in connection with his investment in the securities of Sonic Foundry, Inc. a Maryland corporation ( Sonic Foundry ). Sonic Foundry is selling $750,000 of shares (individually, a Share and collectively, the Shares ) of Series A Preferred Stock, $.01 par value, at a purchase price of $ 910 per Share (the Per Share Purchase Price ). The terms of the Series A Preferred Stock shall be set forth on Exhibit A attached hereto. This Subscription Agreement is on the terms and conditions set forth below. WHEREAS, Sonic Foundry is desirous of seeking private equity financing; and WHEREAS, Mark Burish has expressed a desire to provide financing to the Sonic Foundry; and WHEREAS, a special committee of disinterested directors of Sonic Foundry had previously formed a committee to discuss and negotiate the terms of an investment in preferred stock by Mark Burish; and WHEREAS, the committee has met several times to discuss and negotiate such terms; and WHEREAS, such terms have now been finalized and the committee of disinterested directors have unanimously approved such terms; and WHEREAS, the terms of the Series A Preferred Stock issuance have also been agreed to by Mark Burish; and WHEREAS, Sonic Foundry and Burish have agreed that Burish shall commit $ 750,000 for the Shares consisting of a first tranche of $500,000, and, at Sonic Foundry s election, a second tranches of $250,000; NOW, THEREFORE, the undersigned agrees with Sonic Foundry as follows: 1. SUBSCRIPTION AND PURCHASE PRICE (a) Subscription. Subject to the conditions set forth in Section 2 hereof, the Subscriber hereby subscribes for and agrees to purchase that number of Shares determined by dividing $750,000 (the Aggregate Purchase Price ) by the Per Share Purchase Price set forth on the first page of this Agreement, on the terms and conditions described herein. (b) Purchase of First Tranche of Shares. The Subscriber understands and acknowledges that the purchase price to be remitted to Sonic Foundry in exchange for the issuance of the first tranche of Shares shall be $500,000 (the Aggregate First Tranche Purchase Price ) for the number of Shares determined by dividing $500,000 by the Per Share Purchase Price. The Subscriber s delivery of this Agreement to Sonic Foundry shall be accompanied by payment of $500,000, payable in United States Dollars, by wire transfer of immediately available funds delivered to Sonic Foundry. The Subscriber understands and agrees that, subject to Section 2 and applicable laws, by executing this Agreement, it is entering into a binding agreement to purchase a total of $ 750,000 of Shares. ( c ) Purchase of Second Tranche of Shares. The Subscriber understands and acknowledges that, upon notice given to Subscriber by Sonic Foundry at any time prior to September 1, 2017, the Subscriber shall, within three business days of such notice, remit to Sonic Foundry the amount of $250,000 (the Second Tranche Purchase Price ) in exchange for the issuance of the second tranche of Shares. The number of Shares to be issued in exchange for Second Tranche Purchase Price shall be determined by dividing $250,000 by the Per Share Purchase Price. (d) Assignment of Subscription. The subscriber may assign his agreement to purchase all or a portion of the $750,000 Shares hereunder to one or more third parties, subject to the consent of Sonic Foundry, which shall not be unreasonably withheld. Subscriber shall not be relieved from his obligations hereunder until such third part(ies) close on any such purchase of Shares 2. ACCEPTANCE AND CLOSING PROCEDURES ( a ) Acceptance. Subject to full, faithful and punctual performance and discharge by Sonic Foundry of all of its duties, obligations and responsibilities as set forth in this Agreement, the Subscriber shall be legally bound to purchase the Shares pursuant to the terms and conditions set forth in this Agreement.

6 (b) Closing. The closing of the purchase and sale of the First Tranche of Shares hereunder (the Initial Closing ) shall take place upon execution of this Agreement. The closing of the purchase and sale of the second tranche of Shares hereunder (the Subsequent Closing ) shall take place as soon as practicable after Sonic Foundry s receipt of the Second Tranche Purchase Price. The Shares purchased by the Subscriber in each closing will be delivered promptly at the Initial Closing and at the Subsequent Closing. ( c ) Extraordinary Events Regarding Common Stock. In the event that, after the date of this Agreement, Sonic Foundry shall (a) issue additional shares of Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Per Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Per Share Purchase Price then in effect. The Per Share Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein. The number of Shares that the Subscriber shall thereafter be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section) be issuable on such exercise by a fraction of which (a) the numerator is the Per Share Purchase Price that would otherwise (but for the provisions of this Section) be in effect, and (b) the denominator is the Per Share Purchase Price then in effect. 3. THE SUBSCRIBER S REPRESENTATIONS, WARRANTIES AND COVENANTS The Subscriber, hereby acknowledges, agrees with and represents, warrants and covenants to Sonic Foundry, as follows: (a) The Subscriber has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized, if applicable, and this Agreement constitutes a valid and legally binding obligation of the Subscriber, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law). (b) The Subscriber represents and warrants to Sonic Foundry and its affiliates as follow (i) The Subscriber is acquiring the Shares solely for the Subscriber s own beneficial account, for investment purposes, and not with a view towards, or resale in connection with, any distribution of the Shares. (ii) The Subscriber (together with his Advisors, if any) has received all documents requested by the Subscriber, if any, and has carefully reviewed them and understands the information contained therein, prior to the execution of this Agreement. (c) The Subscriber understands that the Shares have not been registered under the Securities Act of 1933 (the Securities Act ), the securities laws of any state or the securities laws of any other jurisdiction, nor is such registration contemplated. (d) The Subscriber (i) will not transfer, deliver or assign the Shares, or any interest therein, except in accordance with state and federal securities laws and (ii) is acquiring the Shares to be acquired hereunder for the Subscriber s own account for investment purposes only and not with a view to assignment, resale or distribution. The Subscriber will not transfer the Shares unless such Shares are registered under the Securities Act and applicable state securities laws or the transfer is exempt therefrom. The Subscriber understands that Sonic Foundry is making no representation as to the availability of Rule 144 under the Securities Act or any other exemption from registration. (e) The Subscriber has carefully considered the potential risks relating to Sonic Foundry and a purchase of the Shares, and fully understands that the Shares are a speculative investment that involve a high degree of risk of loss of the Subscriber s entire investment. (f) No oral or written representations or warranties have been made, or information furnished, to the Subscriber or his Advisors, if any, by Sonic Foundry or any of its officers, employees, agents, sub-agents, affiliates, advisors or subsidiaries in connection with the purchase of the Shares hereby, other than any representations of Sonic Foundry contained herein, and in subscribing for the Shares the Subscriber is not relying upon any representations other than those contained herein. (g) The Subscriber has taken no action that would give rise to any claim by any person for brokerage commissions,

7 finders fees or the like relating to this Agreement or the transactions contemplated hereby. 4. SONIC FOUNDRY S REPRESENTATIONS, WARRANTIES AND COVENANTS Sonic Foundry hereby acknowledges, agrees with and represents, warrants and covenants to the Subscriber, as follows: (a) Organization and Qualification. Sonic Foundry is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. All actions on the part of Sonic Foundry and its officers and directors necessary for the authorization, execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby, and the performance of all of Sonic Foundry's obligations under this Agreement, have been taken or will be taken prior to the Closing. This Agreement has been duly executed and delivered by Sonic Foundry, and this Agreement is a legal, valid and binding obligation of Sonic Foundry, enforceable against Sonic Foundry in accordance with its terms, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law). (b) Issuance of Shares. The Shares to be issued to the Subscriber pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued and will be fully paid and non-assessable. 5. MISCELLANEOUS PROVISIONS (a) All parties hereto have been represented by counsel, and no inference shall be drawn in favor of or against any party by virtue of the fact that such party s counsel was or was not the principal draftsman of this Agreement. (b) Each of the parties hereto shall be responsible to pay the costs and expenses of its own legal counsel in connection with the preparation and review of this Agreement and related documentation. (c) Neither this Agreement, nor any provisions hereof, shall be waived, modified, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, modification, discharge or termination is sought. (d) The representations, warranties and agreement of the Subscriber and Sonic Foundry made in this Agreement shall survive the execution and delivery of this Agreement and the delivery of the Securities. (e) Any party may send any notice, request, demand, claim or other communication hereunder to the Subscriber at the address set forth on the signature page of this Agreement or to Sonic Foundry at its primary office (including personal delivery, expedited courier, messenger service, fax, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties written notice in the manner herein set forth. (f) Except as otherwise provided herein, this Agreement shall be binding upon, and inure to the benefit of, the parties to this Agreement and their heirs, executors, administrators, successors, legal representatives and assigns. This 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. (g) This Agreement is not transferable or assignable by the Subscriber. (i) Except as otherwise provided herein, this Agreement shall not be changed, modified or amended except in writing signed by both Sonic Foundry and the Subscriber. (j) law principles. This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, without giving effect to conflicts of (k) Sonic Foundry and the Subscriber hereby agree that any dispute that may arise between them arising out of or in connection with this Agreement shall be adjudicated before a court located in the City of Madison, Wisconsin and they hereby submit to the exclusive jurisdiction of the federal and state courts of the State of Wisconsin located in the City of Madison, with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is

8 an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, postage prepaid, in care of the address set forth herein or such other address as either party shall furnish in writing to the other. (l) WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. (m) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [Signature Pages Follow]

9 IN WITNESS WHEREOF, the Subscriber has executed this Agreement on the 30th day of May /s/ Mark D. Burish Mark D. Burish ACCEPTED this 30th day of May, 2017, on behalf of Sonic Foundry, Inc. By: /s/ Gary Weis Name: Gary Weis Title: CEO

10 SONIC FOUNDRY, INC. ARTICLES SUPPLEMENTARY Sonic Foundry, Inc., a Maryland corporation (the Corporation ), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Under a power contained in Article Fourth, Paragraph C of the charter of the Corporation, the board of directors of the Corporation (the Board of Directors ), by the following resolution duly adopted by the Board of Directors, classified and designated a series of one thousand (1,000) shares of preferred stock of the Corporation designated as 9% Cumulative Voting Convertible Preferred Stock, Series A (the Series A Preferred Stock ): RESOLVED, that pursuant to the provisions of the charter of the Corporation and applicable law, a series of preferred stock, par value $0.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares of such series, and the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, of the shares of such series, are as follows: Section 1. Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Company a series of preferred stock designated as the 9 % Cumulative Voting Convertible Preferred Stock, Series A (the Series A Preferred Stock ). The number of shares constituting such series shall be 1,000. The Series A Preferred Stock shall have a par value of $0.01 per share. Section 2. Ranking. The Series A Preferred Stock will, with respect to dividend rights and rights on liquidation, winding-up and dissolution, rank Senior to each class or series of equity securities of the Company the terms of which do not expressly provide that such class or series will rank senior to the Series A Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company including the Company s common stock, par value $0.01 per share (the Common Stock ) (collectively referred to as Junior Securities ), and junior to each other class or series of capital stock outstanding or established after the Effective Date by the Company the terms of which expressly provide that it ranks senior to the Series A Preferred Stock as to dividend rights and/or as to rights on liquidation, winding-up and dissolution of the Company (collectively referred to as Senior Securities ). Section 3. Definitions. Unless the context or use indicates another meaning or intent, the following terms shall have the following meanings, whether used in the singular or the plural: (a) (b) Articles Supplementary means these articles supplementary to the Company s charter, which relate to the Series A Preferred Stock. Board of Directors means the board of directors of the Company. (c) Business Day means any day other than a Saturday, Sunday or any other day on which banks in the State of New York are generally required or authorized by law to be closed. (d) Common Stock has the meaning set forth in Section 2. (e) (f) (g) Company means Sonic Foundry, Inc., a Maryland corporation. Conversion Date has the meaning set forth in Section 8(c). Conversion Price means $ 4.23, subject to adjustment under Section 10(a). (h) Demand Conversion Date means May 30, 2018 (i) Dividend Payment Date has the meaning set forth in Section 4. (a) Dividend Period has the meaning set forth in Section 4. (k) Dividend Record Date has the meaning set forth in Section 4. (l) Effective Date means the date on which shares of the Series A Preferred Stock are first issued.

11 (m) Holder means the Person in whose name the shares of the Series A Preferred Stock are registered, which may be treated by the Company as the absolute owner of the shares of Series A Preferred Stock for the purpose of making payment and settling conversions and for all other purposes. (n) Junior Securities has the meaning set forth in Section 2. (o) Liquidation Amount shall mean $1,000 per share of Series A Preferred Stock. (p) Person means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein. (q) Preferred Stock means any and all series of preferred stock of the Company, including the Series A Preferred Stock. (r) Senior Securities has the meaning set forth in Section 2. (s) the election of directors. Voting Securities means, at any time, shares of any class of capital stock of the Company that are then entitled to vote generally in Section 4. Dividends. (a) Rate. Holders of Series A Preferred Stock shall receive, on each share cumulative in-kind dividends, payable in additional shares of Series A Preferred Stock, with respect to each month beginning from the date such share is issued (the Original Issue Date ) and ending on the last day of the end of the month following the Original Issue Date occurs, and continuing every month thereafter (each a Dividend Period ) at the rate of nine percent (9%) per annum, calculated on the number of shares of Series A Preferred Stock then outstanding (the Applicable Dividend Rate ). (b) Payment. Dividends shall begin to accrue and be cumulative on each share of Series A Preferred Stock from the Original Issue Date, shall compound on the last day of each Dividend Period (each a Dividend Payment Date ), and shall be payable monthly in arrears on each Dividend Payment Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. Dividends that are payable on Series A Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Series A Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month. Dividends that are payable on Series A Preferred Stock on any Dividend Payment Date will be payable to Holders of record of Series A Preferred Stock as they appear on the stock register of the Company on the applicable record date, which shall be the last day of the applicable Dividend Period (each, a Dividend Record Date ). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day. Section 5. Liquidation. (a) Priority. Upon the voluntary or involuntary liquidation, dissolution or winding up of the Company, the Holders of the shares of the Series A Preferred Stock shall be entitled to receive out of the assets of the Company available for distribution to stockholders under applicable law, before any payment or distribution of assets shall be made on any class or series of capital stock of the Company ranking junior to the Series A Preferred Stock upon liquidation, an amount equal to the Liquidation Amount per share plus a sum equal to all dividends accrued but unpaid for the then applicable Dividend Period to the extent not included in the calculation of the Liquidation Amount. For purposes of this Section 5, the merger or consolidation of the Company into or with any other corporation or association, the merger or consolidation of any other corporation or association into or with the Company, or the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Company shall not be deemed a dissolution, liquidation or winding up of the Company, unless such sale, conveyance, exchange or transfer shall be in connection with and intended to be a plan of complete liquidation, dissolution or winding up of the Company. (b) Limitation on Payment. After the payment in cash to the Holders of the shares of the Series A Preferred Stock of the full preferential amounts for the shares of the Series A Preferred Stock, as set forth in Section 5(a), the

12 Holders of the Series A Preferred Stock as such shall have no further right or claim to any of the remaining assets of the Company. (c) Shortfall of Liquidation Proceeds. In the event the assets of the Company available for distribution to the Holders of shares of the Series A Preferred Stock upon any voluntary or involuntary liquidation, dissolution or winding up of the Company shall be insufficient to pay in full all amounts to which such Holders are entitled pursuant to Section 5(a), no distribution shall be made on account of any shares of any other series of Preferred Stock or any other class of capital stock of the Company ranking on a parity with the shares of the Series A Preferred Stock upon such liquidation, dissolution or winding up unless proportionate amounts shall be paid on account of the shares of the Series A Preferred Stock, ratably, in proportion to the full amounts to which holders of all such shares which are on a parity with the shares of the Series A Preferred Stock are respectively entitled upon such dissolution, liquidation or winding up. Section 6 Maturity. The Series A Preferred Stock shall be perpetual unless converted in accordance with these Articles Supplementary. Section 7. Redemptions; Sinking Fund. The shares of Series A Preferred Stock are not redeemable. The Series A Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Series A Preferred Stock will have no right to require redemption of any shares of Series A Preferred Stock. Section 8. Conversion. (a) At the Holder s Option. Each Holder of Series A Preferred Stock shall have the right, at such Holder s option, to be exercised at any time after the date hereof, to convert all or a portion of such Holder s Series A Preferred Stock at any time into that number of shares of Common Stock determined by dividing the Conversion Price in effect on such date into the Liquidation Amount of the shares of Series A Preferred Stock being converted. (b) At the Company s Option. Effective as of the close of business on the Demand Conversion Date or on any business day thereafter, the Company may automatically convert each Holder s shares of Series A Preferred Stock into the number of shares of Common Stock determined by dividing the Conversion Price in effect on such date into that number of shares of Common Stock determined by dividing the Conversion Price in effect on such date into the Liquidation Amount of the shares of Series A Preferred Stock being converted. (c) Procedures. In order to effect a conversion under Section 8(a), such Holder must: (i) complete and manually sign an irrevocable conversion notice in the form provided by the Company or an agent appointed by the Company, and deliver such conversion notice to the Company or such agent; (ii) if the shares of Series A Preferred Stock are in certificated form, surrender the shares of Series A Preferred Stock being converted; and (iii) if required, furnish appropriate endorsements and transfer documents. The Conversion Date in the case of a conversion by a Holder of Series A Preferred Stock under Section 8(a) shall be the date when all of the conditions in clauses (i) through (iii) above have been satisfied, and in the case of a conversion under Section 8(b), shall be the date on which the Company has elected to automatically convert the shares of Series A Preferred Stock. The Company or such agent shall, on a Holder s behalf, convert the Series A Preferred Stock into shares of Common Stock, in accordance with the terms of the notice delivered by such Holder pursuant to clause (i) or without any action by the Holder pursuant to Section 8(b) hereunder. (c) No Dividends After Conversion. Effective immediately prior to the close of business on any applicable Conversion Date, dividends shall no longer be declared on any such converted shares of Series A Preferred Stock, and such shares of Series A Preferred Stock shall represent only the right to receive shares of Common Stock issuable upon conversion of such shares, provided that Holders of Series A Preferred Stock shall have the right to receive any declared and unpaid dividends on such shares and any other payments to which they are otherwise entitled pursuant to the terms hereof. No

13 allowance or adjustment, except pursuant to Section 10(b), shall be made in respect of dividends payable to holders of the Common Stock of record as of any date prior to the close of business on any applicable Conversion Date. (d) Record Holders for Conversion. The person or persons entitled to receive the Common Stock issuable upon conversion of Series A Preferred Stock on any Conversion Date shall be treated for all purposes as the record holder(s) of such shares of Common Stock as of the close of business on such Conversion Date. In the event that a Holder shall not by written notice designate the name in which shares of Common Stock and/or cash, securities or other property (including payments of cash in lieu of fractional shares) to be issued or paid upon conversion of shares of Series A Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Company shall be entitled to register and deliver such shares, and make such payment, in the name of the Holder and in the manner shown on the records of the Company. (e) No Fractional Shares. No fractional shares of Common Stock will be issued to Holders of the Series A Preferred Stock upon any conversion. In lieu of fractional shares otherwise issuable, the Holders will be entitled to receive an amount in cash equal to the fraction of a share of Common Stock at the Conversion Price in effect on the applicable Conversion Date. Section 9. Voting. (a) Notwithstanding anything to the contrary contained herein, a Holder of Series A Preferred Stock shall be entitled to vote together with the Holders of Common Stock on all matters upon which the Holders of Common Stock are entitled to vote. Each share of Series A Preferred Stock shall be entitled to such number of votes as the number of shares of Common Stock into which such share of Series A Preferred Stock is convertible at the Conversion Price at the time of the record date for any such vote, and for the purpose of such calculation, shares of Common Stock sufficient for the full conversion of all shares of Series A Preferred Stock shall be deemed to be authorized for issuance under the Company s charter on such date and shall be included in such calculation. (b) The holders of the Series A Preferred Stock shall have exclusive voting rights on any charter amendment that would alter the contract rights of the Series A Preferred Stock, as expressly set forth in the Company s charter. Section 10. Anti-Dilution Adjustments. (a) Subdivision of Common Stock. If the Company at any time after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time after the Effective Date combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. (b) Purchase Rights. If at any time the Company grants, issues or sells any options to purchase shares of Common Stock, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of its Common Stock (the Purchase Rights ) prior to a Conversion Date, then each Holder of Series A Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights that such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of such Holder s shares of Series A Preferred Stock immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. (c) No Preemptive Rights. Except as provided in this Section 10, Holders of the Series A Preferred Stock are not entitled to any preemptive rights to acquire any unissued shares of any capital stock of the Company, now or hereafter authorized, or any other securities of the Company, whether or not convertible into shares of capital stock of the Company or carrying a right to subscribe to or acquire any such shares of capital stock. Section 11. Change of Control Events. (a) In the event there are shares of Series A Preferred Stock still outstanding and any of the following occurs: (i) a sale by the Company of substantially all of its assets,

14 (ii) a sale or exchange by some or all of the stockholders of the Company in one transaction, or in a series of related transactions, as a result of which, a majority of the voting capital stock of the Company is held by a person or persons who did not hold voting capital stock of the Company prior to the transaction or transactions, (iii) a consolidation, merger or similar transaction in which the persons who held a majority of the voting capital stock of the Company prior to the transaction hold less than a majority of the voting capital stock of the Company or survivor to the merger or other transaction after the transaction, (iv) a sale or other issuance of capital stock by the Company in a single transaction, or series of transactions (other than pursuant to a public offering of capital stock of the Company), as a result of which the person or persons holding a majority of the voting capital stock of the Company prior to the transaction no longer hold a majority of the voting capital stock after the transaction, then any such event specified in this Section 11(a) shall be considered a Change of Control Event and solely for purposes of determining whether a Change of Control Event shall have occurred, all securities of the Company which are convertible at the option of the holders thereof into shares of voting capital stock of the Company shall be deemed to be issued and outstanding shares of voting capital stock of the Company. (b) In the event of a Change in Control Event in which the Company is a survivor, each share of such Holder s Series A Preferred Stock outstanding immediately prior to such Change of Control Event shall remain outstanding. Whether or not the Company is a survivor in a Change in Control Event, subject to Section 8(a), each Holder shall have the right, at its option, subject to the terms and provisions of this Section 11, to (i) convert any or all of such Holder s shares of Series A Preferred Stock, effective as of the close of business on the closing date of the Change of Control Event, into the type and amount of securities, cash and other property receivable in such Change of Control Event by the Holder (other than a counterparty to the Change of Control Event or an affiliate of such counterparty) in respect of each such share of Series A Preferred Stock equal to the number of shares of Common Stock into which one share of Series A Preferred Stock would then be convertible (such securities, cash and other property, the Exchange Property); provided, however, that: A. each Holder shall have the option to have the Exchange Property include the maximum amount of cash per share of Common Stock that could be received by any holder of Common Stock in connection with a Change of Control Event in respect of each such share of Series A Preferred Stock equal to the number of shares of Common Stock into which one share of Series A Preferred Stock would then be convertible; (ii) B. in the event that holders of the shares of Common Stock shall receive cash and securities as the consideration to be received in connection with any Change of Control Event and the securities are issued by an issuer which is not listed on the NASDAQ Stock Market or any other national securities exchange or automated quotation system, then each Holder shall have the option to receive the fair value of all of the Exchange Property to be received in connection with such Change of Control Event, as determined by the Board of Directors, in cash; and C. the aggregate cash received by the Holders pursuant to the foregoing Sections 11(b)(i)(A) and (B) shall not exceed the aggregate amount of cash available in the transaction and the balance of the Exchange Property shall be issued in Substitute Securities as hereinafter defined and the aggregate amount of cash available in such transaction shall be distributed as follows: first, on a pro rata basis to the Holders pursuant to this Section 11(b) based on the number of shares of Series A Preferred Stock held by such Holder, and second, to the holders of Common Stock; or in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, be converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent (the Substitute Securities ), that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, and such Series A Preferred Stock remaining outstanding or such Substitute Securities, as the case may be, shall have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the Holders thereof than the rights, preferences, privileges and voting powers of the Series A

15 Preferred Stock, taken as a whole. In the event that the Holders of a majority of the shares of the Series A Preferred Stock elect to accept such Substitute Securities, it shall be conclusively presumed that the rights, preferences, privileges and voting powers of the Holders who did not so elect to accept such Substitute Securities, taken as a whole, were not materially less favorable than those of the Holders of a majority of the shares of the Series A Preferred Stock that did elect to accept such Substitute Securities; provided, however, that such agreement by a majority of the shares of the Series A Preferred Stock shall not be the sole or exclusive method of such determination, nor shall such agreement be required. (c) The conversion right of a Holder of Series A Preferred Stock pursuant to this Section 11 shall be exercised by the Holder by the surrender of the certificates representing the shares to be converted to the Company or to the transfer agent for the Company, accompanied by a notice of reorganization conversion, no later than the tenth day following the date of delivery to each Holder of a notice from the Company of the expected consummation or the consummation of a Change of Control Event. (d) Immediately prior to the close of business on the closing date of the Change of Control Event, each converting Holder of Series A Preferred Stock shall be deemed to be the holder of record of the number of shares of Common Stock deemed to be issuable upon conversion of such Holder s Series A Preferred Stock, notwithstanding that the share register of the Company shall then be closed or that certificates representing such Common Stock shall not then be actually delivered to such Person. (e) Upon notice from the Company, each Holder of Series A Preferred Stock so converted shall promptly surrender to the Company or its transfer agent certificates representing the shares so converted (if not previously delivered), duly endorsed in blank or accompanied by proper instruments of transfer. (f) The above provisions of this Section 11 shall similarly apply to successive Change of Control Events and the provisions of Section 10 shall apply to any shares of capital stock of the Company (or any successor) received by the holders of the Common Stock in any such Change of Control Event. (g) The Company (or any successor) shall, within seven days of the consummation of any Change of Control Event, provide written notice to the Holders of such consummation of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice shall not affect the operation of this Section 11. (h) The Company shall not enter into any agreement for a transaction constituting a Change of Control Event unless such agreement provides for or does not interfere with or prevent (as applicable) treatment of the Series A Preferred Stock in a manner that is consistent with and gives effect to this Section 11. Section 12. Reservation of Common Stock. (a) The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock or shares acquired by the Company, solely for issuance upon the conversion of shares of Series A Preferred Stock as provided in these Articles Supplementary, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series A Preferred Stock then outstanding. For purposes of this Section 12(a), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of Series A Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single Holder. (b) All shares of Common Stock delivered upon conversion of the Series A Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable, free from all preemptive rights and free and clear of all liens, claims, security interests and other encumbrances. (c) Prior to the delivery of any securities that the Company shall be obligated to deliver upon conversion of the Series A Preferred Stock, the Company shall use its reasonable best efforts to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority. (d) The Company hereby covenants and agrees that, if at any time the Common Stock shall be listed on the NASDAQ Stock Market or any other national securities exchange or automated quotation system, the Company will, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall

16 be so listed on such exchange or automated quotation system, all the Common Stock issuable upon conversion of the Preferred Stock. Section 13. Replacement Certificates. The Company shall replace any mutilated certificate at the Holder s expense upon surrender of that certificate to the Company. The Company shall replace certificates that become destroyed, stolen or lost at the Holder s expense upon delivery to the Company of satisfactory evidence that the certificate has been destroyed, stolen or lost. Section 14. Fractional Shares. Fractional shares of Series A Preferred Stock may be issued. Section 15. Miscellaneous. All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless firstclass mail shall be specifically permitted for such notice under the terms of these Articles Supplementary) with postage prepaid, addressed: (i) if to the Company, to its office at Sonic Foundry, Inc., 222 West Washington Avenue, Suite 100, Madison, Wisconsin Attention: Chief Financial Officer, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company, or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given. SECOND: The Series A Preferred Stock has been classified and designated by the Board of Directors under the authority contained in the charter of the Corporation. THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law. FOURTH: The undersigned Chief Executive Officer acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned Chief Executive Officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury. [Signature page follows]