-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D0K85zVByL/0fvwVLTZjIZTLKf/G5VJVLcA30SpAGD7LUVaUW5ksUPAuqPTcdiOE l+kgwBxRFGK/pg05qFOoyQ== 0000950131-01-504649.txt : 20020413 0000950131-01-504649.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950131-01-504649 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20011221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONIC FOUNDRY INC CENTRAL INDEX KEY: 0001029744 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 391783372 STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-75894 FILM NUMBER: 1822002 BUSINESS ADDRESS: STREET 1: 1617 SHERMAN AVE CITY: MADISON STATE: WI ZIP: 53704 BUSINESS PHONE: 6082563133 MAIL ADDRESS: STREET 1: 1617 SHERMAN AVE CITY: MADISON STATE: WI ZIP: 53704 S-3 1 ds3.txt FORM S-3 As filed with the Securities and Exchange Commission on December 21, 2001 Registration No. _______________ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- SONIC FOUNDRY, INC. (Exact Name of Registrant as specified in its charter) Maryland 39-1783372 (State of Incorporation) (I.R.S. Employer Identification No.) 1617 Sherman Avenue Madison, WI 53704 (608) 256-3133 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) RIMAS BUINEVICIUS Chairman and Chief Executive Officer 1617 Sherman Avenue Madison, WI 53704 (608) 256-3133 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Frederick H. Kopko, Jr., Esq. McBreen & Kopko 20 N. Wacker Dr., Suite 2520 Chicago, IL 60606 ----------------- Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an Offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same Offering. [__] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same Offering. [_] ______________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------- Title of Each Class of Proposed Maximum Proposed Maximum Securities to be Amount to be Offering Price Per Aggregate Offering Amount of Registered Registered Share (1) Price (1) Registration Fee - ---------------------------------------------------------------------------------------------------------------------- Common Stock $.01 par 3,574,601 $2.69 $ 9,615,677 $2,298 value - ---------------------------------------------------------------------------------------------------------------------- Common Stock $.01 par value, underlying 370,000 $2.69 $ 995,300 $238 Warrants (2) - ---------------------------------------------------------------------------------------------------------------------- Total 3,944,601 $2.69 $10,610,977 $2,536 ======================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c), based on the average of the high and low sales price, as reported on the NASDAQ National Market, on December 19, 2001. 2 (2) Represents the number of shares of common stock issuable upon exercise of certain warrants. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective, on such date as the Commission, acting pursuant to Section 8(a), may determine. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there by any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. 3 PROSPECTUS SONIC FOUNDRY, INC. 3,944,601 Shares of Common Stock, Par Value $.01 per Share This prospectus is part of a registration statement that covers 3,944,601 shares of our Common Stock (the "Shares"), consisting of (i) 3,574,601 Shares currently outstanding and (ii) 370,000 Shares issuable upon exercise of certain warrants. These Shares may be offered and sold from time to time by certain of our stockholders (the "Selling Stockholders"). We will not receive any of the proceeds from the sale of the Shares. The Selling Stockholders may sell the Shares from time to time on the Nasdaq National Market in regular brokerage transactions, in transactions directly with market makers or in certain privately negotiated transactions. See "Plan of Distribution". Each Selling Stockholder has advised us that no sale or distribution other than as disclosed herein will be effected until after this Prospectus shall have been appropriately amended or supplemented, if required, to set forth the terms thereof. We will not receive any proceeds from the sale of the Shares by the Selling Stockholders. Selling commissions, brokerage fees, any applicable stock transfer taxes and any fees and disbursements of counsel to the Selling Stockholders are payable individually by the Selling Stockholders. Each of the Selling Stockholders may be deemed to be an "Underwriter", as such term is defined in the Securities Act of 1933, as amended (the "Securities Act"). Our Common Stock is quoted on the Nasdaq National Market under the symbol "SOFO". On December 19, 2001, the average of the high and low price for the Common Stock was $2.69 per share. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. - -------------------------------------------------------------------------------- The date of this Prospectus is December 21, 2001 WHERE YOU CAN FIND MORE INFORMATION We file reports, proxy statements and other documents with the Securities and Exchange Commission. You may read and copy any document we file at the SEC's public reference room at Judiciary Plaza Building, 450 Fifth Street, N.W., Room 1024 Washington, D.C. 20549. You should call 1-800-SEC-0330 for more information on the public reference room. Our SEC filings are also available to you on the SEC's Internet site at http://www.sec.gov. 1 This prospectus is part of the registration statement and does not contain all of the information included in the registration statement. Whenever a reference is made in this prospectus to any contract or other document of Sonic Foundry, the reference may not be complete and you should refer to the exhibits that are a part of the registration statement for a copy of the contract or document. INFORMATION INCORPORATED BY REFERENCE The SEC allows us to "incorporate by reference" into this prospectus information that we file with the SEC in other documents. This means that we can disclose important information to you by referring to other documents that contain that information. The information incorporated by reference is considered to be part of this prospectus, and information that we file with the SEC in the future and incorporate by reference will automatically update and may supersede the information contained in this prospectus. We incorporate by reference the documents listed below and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, prior to the sale of all the shares covered by this prospectus. - Our Annual Report on Form 10-K for the fiscal year ended September 30, 2001; - Our Current Report on Form 8-K filed on October 30, 2001; - All of our filings pursuant to the Exchange Act after the date of the filing of the initial registration statement and prior to the effectiveness of the registration statement; and - The description of our common stock contained in our Exchange Act Registration Statement on Form 8-A, filed on April 20, 2000. You may request free copies of these filings by writing or telephoning us at the following address: Investor Relations, 1617 Sherman Avenue, Madison, Wisconsin 53704, Telephone (608) 256-3133. FORWARD-LOOKING INFORMATION This prospectus contains or incorporates forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. You can identify these forward-looking statements by our use of the words "believes", "anticipates", "plans", "expects", "may", "will", "would", "intends", "estimates" and similar expressions, whether in the negative or affirmative. We cannot guarantee that we actually will achieve these plans, intentions or expectations. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements in this prospectus, particularly under the heading "Risk Factors", that we believe could cause our actual results to differ materially from the forward-looking statements that we make. The forward-looking statements do not reflect the potential impact of any future acquisitions, mergers or dispositions. We do not assume any obligation to update any forward-looking statement we make. 2 SUMMARY OF THE BUSINESS Company Overview Sonic Foundry(R), Inc. was founded in 1991, incorporated in Wisconsin in March 1994 and merged into a Maryland corporation of the same name in October 1996. We conduct our business through Sonic Foundry, Inc. and three subsidiaries: Sonic Foundry Media Services, Inc., International Image Services Corporation, Inc. d/b/a Sonic Foundry Media Services and Sonic Foundry Systems Group, Inc. d/b/a Sonic Foundry Media Systems, which was created as the result of an acquisition completed in October 2001. Our executive offices are located at 1617 Sherman Avenue, Madison, Wisconsin, 53704 and our telephone number is (608) 256-3133. Our corporate website is http://www.sonicfoundry.com. Our Media Software division writes software code and develops solutions for the creation, manipulation, and delivery of digital media. Sonic Foundry's digital audio and video software tools include the award-winning ACID(TM), Sound Forge(R), Vegas(R) Audio, Vegas(R) Video, VideoFactory(TM), Stream Anywhere(TM), SIREN(TM) Jukebox, Viscosity(TM), and a variety of compatible music loop libraries and DirectX Audio Plug-Ins. Our Media Services division incorporates our existing technology and a wide array of audio and video signal processing algorithms, including our unreleased proprietary automation tools. Primary services include translating analog or digital tapes, CDs, films and other audio and video media into various compression and Internet streaming file formats, including multiple compression rates. Add-on services involve cleaning or filtering recordings for improved quality. In addition, we are one of North America's leading suppliers of technical services to the television program distribution market. These services include a number of preprocessing algorithms and technologies used for standards conversions as well as improving analog to digital conversions. Our Media Systems division was formed on October 15, 2001, when our wholly owned subsidiary, Sonic Foundry Systems Group, Inc. acquired the assets and assumed certain liabilities of MediaSite, Inc., a global pioneer in providing automated rich media publishing, management and access solutions. MediaSite derived its core technology from a Carnegie Mellon University research effort funded by leading government agencies and private corporations. MediaSite's proven technology (hereafter, the "Media Systems technology") provides for the indexing, searching and retrieving of digital media. In addition, we believe MediaSite's existing corporate, education and government client base provides immediate marketing opportunities in the media management area. 3 RISK FACTORS Operating History Risks Our business, financial condition and results of operations have been, and in the future may be, affected by a variety of factors, including those set forth below and elsewhere in this prospectus. We have a history of losses and we may never attain profitability. We have incurred significant losses since our inception, $49.9 million in 2001; $34.9 million in 2000; $6.0 million in 1999; and $0.6 million in 1998, and we may never become profitable. As of September 30, 2001, we had an accumulated deficit of $148 million. We cannot assure you that we will achieve or maintain profitability in the future. We have a limited operating history upon which you can evaluate our business and our future prospects and our operating results will likely fluctuate significantly. We were incorporated in March 1994 and we have a limited operating history and limited financial results upon which you can assess our future success. We have a very limited history of digital media services operations upon which you can evaluate our digital media services business model and the prospects for that business. As a result of our limited operating history and the rapidly changing nature of the markets in which we compete, our quarterly and annual revenues and operating results are difficult to predict and may fluctuate significantly from quarter to quarter and from year to year. You should therefore not rely upon our revenues and our operating results for any one quarter or year as an indication of our future revenues or operating results. Our stock price has been and will in all likelihood continue to be extremely volatile. You should evaluate our chances of financial and operational success in light of the risks, uncertainties, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving markets. Industry Risks The market for our products and services is relatively new, and we cannot assure you that the market will develop as we expect. Because the market for our products and services is relatively new and rapidly changing, it is difficult to predict future financial results. Our research and development and sales and marketing efforts, and business expenditures are partially based on predictions regarding certain developments for software products and media services. To the extent that these predictions prove inaccurate, we may not achieve the level of revenues and operating expenses that we expect at the time that we expect them and our revenues and operating expenses may fluctuate. 4 Our markets are highly competitive, and we may not be able to compete effectively in our business. Competition in the markets for digital media software, products and services is intense. We compete with several companies engaged in the software and digital media businesses and we expect competition to increase as new companies enter the market and our current competitors expand their products and services. This could mean lower prices or reduced demand for our products. Many of our current and potential competitors have longer operating histories, greater name recognition, more employees and significantly greater financial, technical, marketing, public relations and distribution resources than we do, and we may not be able to successfully compete with them. Any of these developments would have an adverse effect on our operating results. Lack of commercial acceptance of, or decreased demand for, complementary products and technologies developed by third parties may lead to a decreased demand for our digital media software products and services. The success of some of our digital media software products and planned digital media services depends, in part, upon the commercial acceptance of products, the Internet and technologies developed by other companies that our digital media software products and services may complement, including compact disc recorders, Digital Versatile Disc players and compression technology for streaming or storing media files. These complementary products help drive the demand for digital media and if businesses and consumers do not accept these products, the demand for our products and services may decrease or fail to grow and our business may suffer. The success of our business depends, in part, upon strategic relationships that we have with other companies. Our business depends, in part, upon relationships that we have with strategic partners such as Microsoft, RealNetworks, Sony, Carnegie Mellon University and Fraunhofer Institute. We rely, in part, on strategic relationships to help us: . maximize the acceptance of our products by customers through distribution arrangements; . increase the amount and availability of compelling media content on the Internet to help boost demand for our products and services; . increase awareness of our Sonic Foundry and MediaSite brands; and . increase the performance and utility of our products and services. We would be unable to realize many of these goals without the cooperation of these partners. We anticipate that the efforts of our strategic partners will become more important as the availability and use of multimedia content on the Internet increases. For example, we may become more reliant on strategic partners to provide multimedia content, provide more secure 5 and easy-to-use electronic commerce solutions and build out the necessary infrastructure for media delivery. The loss of these strategic relationships, the inability to find other strategic partners or the failure of our existing relationships to achieve meaningful positive results could harm our business. We rely upon a number of distributors to increase our market penetration domestically and internationally. We rely upon 30 distributors in 30 countries to sell and market our digital media software products internationally. We generally do not have contracts with these distributors. If these distributors were to cease the sale and marketing of our products, our international sales may decrease. We have contracts with Navarre Corporation, and other U.S. companies, that distribute our software products to various computer resellers, value-added resellers, catalog distributors and smaller retail outlets. Our contracts with these distributors require us to accept the return of any of our products that they do not sell and to credit them for the value of these products. Our contracts also protect certain distributors for the value of inventory in the event that we lower our prices. If these distributors fail to continue to carry our products, return large quantities of our products to us, or competitive pressures require us to lower the prices of the products that we supply to them, our business will suffer. The growth of our business depends upon the increased use of the Internet or convergence of TV and Internet, for communications, commerce and advertising. The growth of our business depends upon the continued growth of the Internet as a medium for communications. The Internet may not be accepted as a viable commercial medium for broadcasting digital and multimedia content or digital media delivery for a number of reasons, including: . potentially inadequate development of the necessary infrastructure to accommodate growth in the number of users and Internet traffic; . unavailability of compelling multimedia content; and . delays in the development or adoption of new technological standards and protocols or increased governmental regulations, which could inhibit the growth and use of the Internet. In addition, we believe that other Internet-related issues, including security of transactions, reliability of data transmission, cost and ease of use, are not fully resolved and may affect the amount of business that is conducted over the Internet. 6 Technology Risks We depend upon access to Microsoft software codes to develop our digital media software products. Quick access to Microsoft's software codes enables us to develop Microsoft Windows-based software products in a timely manner. Although, in the past, Microsoft consistently has given us quick access to its software codes, Microsoft is under no obligation to do so and may refuse us this access in the future at its discretion. If we do not continue to receive quick access to Microsoft's software codes, the development of our software products will be delayed and our business may suffer. MediaSite's core technology is dependent on licensed technology from Carnegie Mellon University. As part of the MediaSite transaction we assumed a License Agreement pursuant to which Carnegie Mellon granted MediaSite a worldwide, nonexclusive license to use certain technology. We are currently in the process of re-negotiating the License Agreement for an exclusive license in a defined field of use. This business is dependent on the continuation of the License Agreement and the availability to us of the technology licensed thereunder. If we are unsuccessful in obtaining an exclusive license, there is a risk that Carnegie Mellon could license the technology to another party, including a competitor. Moreover, if the License Agreement were to terminate, our business, results of operations and prospects would be adversely affected. We may not be successful in our attempts to keep pace with rapid technological change and evolving industry standards. The markets for digital media products and digital media services are characterized by rapidly changing customer requirements, evolving technologies and industry standards, and frequent new product and service introductions. Our future success will depend, in part, upon our ability to: . use leading technologies effectively; . enhance our current software products and services; . identify, develop, and market new software products and service opportunities; and . influence and respond to emerging industry standards and other technological changes. We must accomplish these objectives in a timely and cost-effective manner. We have experienced development delays and cost overruns in our development efforts in the past and we may encounter such problems in the future. Delays and cost overruns could affect our ability to respond to technological changes, evolving industry standards, competitive developments or customer requirements. Our products also may contain undetected errors that could cause increased development costs, loss of revenues, adverse publicity, reduced market acceptance of those products or lawsuits by customers. If we fail to develop products that achieve widespread market acceptance or that fail to generate significant revenues to offset development costs, our business and operating results would suffer. We may not timely and successfully identify, develop and market new product and service opportunities. If we introduce new products and 7 services, they may not attain broad market acceptance or contribute meaningfully to our revenues or profitability. Any of these developments would have an adverse effect on our operating results. Demand for our digital media software products might decrease or fail to grow if commercial acceptance of the Microsoft Windows computer operating system declines. Our digital media software products work exclusively on the Microsoft Windows computer operating system. Some of our competitors offer products for the Apple Macintosh and other computer operating systems. If the Macintosh computer operating system, which is popular with many musicians and videographers, or other competing operating systems, including Linux and Java, were to become dominant in the marketplace at the expense of the Microsoft Windows computer operating system, demand for our digital media software products may decrease or fail to grow. Moreover, if we were unable to adapt our current digital media software products or develop new digital media software products in a timely and cost-effective manner to work on these different operating systems, our business might suffer. Development of new standards for the electronic delivery of digital media could significantly affect our growth and the way we do business. The onset of competing industry standards for the electronic delivery of digital media could slow the growth of our business or force us to adjust the way in which we do business. If standard delivery technology does not achieve widespread commercial acceptance and we are unable to adapt our digital media software products accordingly in a timely and cost-effective manner, our business may suffer. Our business will suffer if our systems fail or become unavailable. A reduction in the performance, reliability and availability of our website and network infrastructure will harm our ability to market and distribute our products and services to our users, as well as our reputation and ability to attract and retain users, customers, advertisers and content providers. Our systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, Internet breakdown, earthquake and similar events. Our systems are also subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. We do not have fully redundant systems or a formal disaster recovery plan, and we do not carry adequate business interruption insurance to compensate us for losses that may occur from a system outage. Our electronic commerce and digital distribution activities are managed by sophisticated software and computer systems. We are in the process of integrating our enterprise resource planning system, which handles all of our accounting, operations, sales and information systems at business units acquired last year. We may encounter delays in adopting this or other systems that we use. Furthermore, these systems may contain undetected errors that could cause the systems to fail. Any system error or failure that causes interruption in availability of products or content or an increase in response time could result in a loss of potential or existing business services customers. If we suffer sustained or repeated interruptions, our products, services and website could be less attractive and our business may suffer. 8 A sudden and significant increase in traffic on our website could strain the capacity of the software, hardware and telecommunications systems that we deploy or use. This could lead to slower response times or system failures. We depend on Web browsers, ISPs and online service providers to provide Internet users access to our website. Many of these providers have experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our systems. Intellectual Property Risks We may not be successful in protecting our intellectual property and proprietary rights. Our inability to protect our proprietary rights, and the costs of doing so, could harm our business. Our success and ability to compete partly depends on the superiority, uniqueness or value of our technology, including both internally developed technology and technology licensed from third parties. To protect our proprietary rights, we rely on a combination of trademark, patent, copyright and trade secret laws, confidentiality agreements with our employees and third parties and "shrink wrap" licenses. Recently, we have undertaken additional efforts to identify which of our proprietary processes and algorithms may be patentable, and we currently have several patent applications pending with the U.S. Patent and Trademark Office. There can be no assurances that we will ultimately receive issued patents as a result of any of these applications, or to the extent that we do, that we can always afford to enforce them. Despite our efforts to protect our proprietary rights, unauthorized parties may copy or infringe aspects of our technology, products, services or trademarks, or obtain and use information we regard as proprietary. In addition, others may independently develop technologies that are similar or superior to ours, which could reduce the value of our intellectual property. Companies in the computer industry have frequently resorted to litigation regarding intellectual property rights. We may have to litigate to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of other parties' proprietary rights. From time to time, other parties' proprietary rights, including patent rights, have come to our attention and on several occasions we have received notice of claims of infringement of other parties' proprietary rights, and we may receive such notices in the future. Our intellectual property may infringe the rights of others. Because we have historically protected our proprietary rights with a combination of trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties and "shrink wrap" licenses and only recently have begun to apply for patents, our intellectual property may unintentionally infringe upon the proprietary rights of others. If a third party's claim of intellectual property right infringement were to prevail, we could be forced to pay damages, comply with injunctions, or halt distribution of our products while we re-engineer them or seek licenses to necessary technology, which might not be available on reasonable terms. We could also be subject to claims for indemnification resulting from infringement claims made against our customers and strategic partners, which could increase our defense costs and 9 potential damages. In addition, we have agreed to indemnify certain distributors and original equipment manufacturers, or OEMs, for infringement claims of other parties. If these other parties sue the distributors or OEMs, we may be responsible for defending the lawsuit and for paying any judgment that may result. Any of these events could harm our business. We may be unable to retain technology licensed or obtained from third parties and strategic partners. We rely upon licenses from third parties and strategic partners for some of our technologies. These companies that license the technologies to us may decide to discontinue the licenses at any time. If they do so, our business may suffer. Further, the Internet and software industries have experienced substantial consolidation and a proliferation of strategic transactions. We expect this consolidation and strategic partnering to continue. Acquisitions or strategic relationships could harm us in a number of ways. For example: . Our competitors could acquire or form partnerships with companies with which we have strategic relationships and discontinue our relationship, resulting in the loss of distribution opportunities for our products and services or the loss of certain enhancements or value-added features to our products and services; or . A party with significant resources and experience could acquire a competitor of ours, increasing the ability of the competitor to compete with our products and services. Management Risks Our business could suffer if we lose the services of key personnel. Our success depends in significant part upon a number of key management and technical employees. The loss of the services of one or more key employees, particularly Rimas Buinevicius, our Chairman of the Board and Chief Executive Officer, Monty R. Schmidt, our President, and Curtis Palmer, our Chief Technology Officer, could seriously impede our success. Although we have employment agreements with each of these individuals, a state court may determine not to enforce, or to only partially enforce, these agreements. We do not have employment agreements with any other of our key employees. Our success also depends upon our ability to retain highly skilled technical, managerial, marketing, and customer service personnel. Competition for highly skilled personnel is intense. Our failure to retain these personnel could adversely affect our business. In addition, due to the recent significant drop in our stock price, our ability to attract and retain experienced employees may be reduced. 10 Risks Associated With Acquisitions We may pursue acquisitions and investments that could adversely affect our business. If we identify an acquisition candidate, we may not be able to successfully negotiate or finance the acquisition or integrate the acquired businesses, products or technologies into our existing business and products. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, amortization expenses or write-downs of acquired assets including goodwill and other intangible assets. Other than the MediaSite transaction, we currently have no commitments or agreements with respect to any business acquisitions or investments. Our acquisition of the assets of MediaSite, Inc. involves risks. On October 15, 2001, the Company completed the acquisition of certain assets, and the assumption of certain liabilities, of MediaSite, Inc. Although the Company purchased the assets of MediaSite primarily to benefit from its existing customer relationships and technology, there can be no assurance that revenues from these relationships will materialize or that competitors won't develop technologies superior to those acquired. Due to these and other factors, there can be no assurance that we will obtain benefits from the purchase of the assets of MediaSite. In addition, although the Company purchased only certain scheduled liabilities of MediaSite, and in fact obtained indemnification from MediaSite with respect to all unscheduled liabilities, it is possible that an unforeseen liability may arise and result in a claim against the Company. Our past and future acquisitions may involve the write down of intangible assets. In the first quarter of 2002, the Company plans to adopt new accounting rules regarding business combinations and the amortization of intangible assets. Under the new rules, the Company would cease the amortization of goodwill and would annually assess its carrying value. See footnote 1, Accounting Pronouncements for further details. Risks Associated With The Operation Of Our Business Our international operations involve risks. We are subject to the normal risks of doing business internationally. These risks include: . Unexpected changes in regulatory requirements. . Export and import restrictions. . Tariffs and trade barriers and limitations on fund transfers. . Longer payment cycles and problems in collecting accounts receivable. 11 . Potential adverse tax consequences. . Exchange rate fluctuations. . Increased risk of piracy and limits on our ability to enforce our intellectual property rights. Any of these factors could harm our business. We do not currently hedge our foreign currency exposure. We may be subject to assessment of sales and other taxes for the sale of our products, license of technology or provision of services. We may have to pay past sales or other taxes that we have not collected from our customers. We do not currently collect sales or other taxes on the sale of our products, license of technology or provision of services in states and countries other than Wisconsin. The federal Internet Tax Freedom Act, passed in 1998, imposes a three-year moratorium on discriminatory sales taxes on electronic commerce, which was recently extended for 2 additional years. We cannot assure you that this moratorium will be re-extended. Further, foreign countries or, following the moratorium, one or more states, may seek to impose sales or other tax obligations on companies that engage in such activities within their jurisdictions. Our business would suffer if one or more states or any foreign country were able to require us to collect sales or other taxes from current or past sales of products, licenses of technology or provision of services, particularly because we would be unable to go back to customers to collect sales taxes for past sales and may have to pay such taxes out of our own funds. Corporate Governance Risks Stockholders may be unable to exercise control because our management controls a large percentage of our stock. Our directors, officers and affiliated persons own nearly 40% of our common stock and have significant influence over stockholder voting matters. If our directors, officers and affiliated persons act together, they will be able to influence the composition of our board of directors, and will continue to have significant influence over our affairs in general. Provisions of our charter documents and Maryland law could discourage an acquisition of our company that would benefit our stockholders. Provisions of our articles of incorporation and by-laws may make it more difficult for a third party to acquire control of our company, even if a change in control would benefit our stockholders. Our articles authorize our board of directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. Furthermore, our articles of incorporation provide for classified voting, which means that our stockholders may vote upon the retention of only one or two of our six directors each year. Moreover, Maryland corporate law restricts certain business combination transactions with "interested stockholders." 12 Market Risks Our stock price has been and may continue to be volatile. The trading price of our common stock has been and is likely to continue to be highly volatile. For example, during the 52-week period ended November 30, 2001, the closing price of our common stock ranged from $1.01 to $5.688 per share. In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may further reduce our stock price, regardless of our operating performance. Exercise of outstanding options and warrants will result in further dilution. The issuance of shares of common stock upon the exercise of our outstanding options and warrants will result in dilution to the interests of our stockholders and you as an investor in the Offering, and may reduce the trading price and market for our common stock. As of September 30, 2001, we had outstanding options and warrants to acquire 4,019,540 shares of common stock, 1,952,529 of which are subject to future vesting. Included in the foregoing are 2,974,314 options which have been granted under our 1995 Employee Stock Option Plan, our 1999 Non-Qualified Stock Option Plan and our Non-Employee Director Stock Option Plan, 1,021,785 of which are immediately exercisable. To the extent that these stock options or warrants are exercised, the dilution to the interests of our stockholders and you as an investor will likely occur. Additional options and warrants may be issued in the future at prices not less than 85% of the fair market value of the underlying security on the date of grant. Exercise of these options or warrants, or even the potential of their exercise or conversion may have an adverse effect on the trading price and market for our common stock. The holders of our options or our warrants are likely to exercise them at times when the market price of the common stock exceeds the exercise price of the securities. Accordingly, the issuance of shares of common stock upon exercise of the options or our warrants will likely result in dilution of the equity represented by the then outstanding shares of common stock held by other stockholders. Holders of our options or our warrants can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms which are more favorable to us than the exercise terms provided by these options or warrants. Substantial sales of our common stock could lower our stock price. The market price for our common stock could drop as a result of sales of a large number of our presently outstanding shares, or the perception that these sales could occur. These factors also could make it more difficult for us to raise funds through future offerings of our common stock. 13 USE OF PROCEEDS We will not receive any proceeds from the sale of the Shares by the Selling Stockholders; all proceeds will go to the Selling Stockholders. MARKET FOR COMMON EQUITY, DIVIDEND POLICY, AND RELATED STOCKHOLDER MATTERS Our common stock was traded on the American Stock Exchange under the symbol "SFO" since our initial public offering in April of 1998 until April 21, 2000. On April 24, 2000, our common stock began trading on the Nasdaq National Market under the symbol "SOFO". The following table sets forth, for the periods indicated, the high and low sale prices per share of our common stock as reported on the American Stock Exchange or the NASDAQ National Market. Price per share data and share data set forth below and otherwise in this prospectus reflect a two-for-one stock split distributed to stockholders of record on April 7, 2000.
High Low ------------------- ------------------- Fiscal Year Ended September 30, 1999 First Quarter ................................................ 7.44 2.69 Second Quarter ............................................... 5.44 3.35 Third Quarter ................................................ 10.38 5.07 Fourth Quarter ............................................... 6.13 3.94 Fiscal Year Ended September 30, 2000 First Quarter ................................................ 12.75 4.25 Second Quarter ............................................... 64.97 11.34 Third Quarter ................................................ 49.63 9.38 Fourth Quarter ............................................... 20.81 5.75 Year Ended September 30, 2001 First Quarter ................................................ 8.31 1.09 Second Quarter ............................................... 6.00 1.25 Third Quarter ................................................ 2.59 1.13 Fourth Quarter ............................................... 2.40 1.10 Fiscal Year Ending September 30, 2002 First Quarter (through December19 2001) ...................... 4.44 1.00
The last traded price on December 19, 2001 for our common stock was $2.66. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions. 14 The Company has not paid any cash dividends and does not intend to pay any cash dividends in the foreseeable future. At December 19, 2001 there were 371 common stockholders of record. Many shares are held by brokers and other institutions on behalf of stockholders and are therefore not included in these numbers. SELLING STOCKHOLDERS On October 15, 2001, we purchased substantially all the assets of MediaSite, Inc., now known as mtmsi, Inc. We issued 3,780,000 shares of our common stock to mtmsi, or its stockholders, security holders, or former employees in connection with the transaction, of which 3,452,801 are covered by this registration statement. We also issued 100,000 shares to Covington Associates, 1,800 shares to R.J. Holmberg, and 20,000 shares to the Branding Group, LLC, which were not related to the MediaSite transaction. As part of the transaction with mtmsi, Inc., we agreed to file a registration statement covering the sale of our shares by the shareholders of mtmsi, Inc., its security holders and former employees. This Prospectus covers the 3,574,601 Shares presently issued, of which 3,452,601 were issued to mtmsi, Inc., its stockholders or security holders or former employees. This Prospectus also covers 370,000 shares to become issuable upon exercise of certain warrants, of which 300,000 Shares were issued in connection with the MediaSite transaction. The following table sets forth certain information as of December 20, 2001 with respect to the Selling Stockholders. Pursuant to certain agreements we have with mtmsi and certain key stockholders, we agreed to file a registration statement covering the Shares issued to mtmsi or its stockholders or security holders.
NUMBER OF PERCENT OF CLASS COMMON SHARES NUMBER OF SHARES OWNED AFTER BENEFICIAL OWNERS BENEFICIALLY OF COMMON STOCK OFFERING (IF OVER OWNED PRIOR TO INCLUDED IN 1% OF TOTAL OFFERING OFFERING OUTSTANDING - ------------------------------------- -------------------- -------------------- ----------------------- COMMON STOCKHOLDERS Abramson, Marc S. 557 557 Bardeen, Maxwell D. 2,241 2,241 Becker, David J. 440 440 Benzing, E. Peter and Lizzi TEN COM 668 668 Berger, Michael 668 668 Birchmere Investments, L.P. 16,199 16,199 Brodbeck, Charles R. 66,322 66,322 Brodbeck, Dr. Joseph M. II 5,951 5,951
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Brodbeck, Jill M. 528 528 Brodbeck, Linda L. 5,951 5,951 Bromberg, Howard J. 1,143 1,143 Carleton, James Terence 7,907 7,907 Carlson, Richard C. 557 557 Carnegie Mellon University (2) 6,564 6,564 Catz, Alvin J. 4,939 4,939 Centrella, Michael S. 696 696 Cohen and Grigsby, PC 111 111 Collins, John T. 39,971 39,971 Combs, Sarah 334 334 Cooper, Marc E. 11,901 11,901 Corporate Benefit Systems, Inc. Profit Sharing Plan 9,643 9,643 Critical Path, Inc. 4,455 4,455 Cross Highway Holdings LLC 1,114 1,114 CSM Partners 258,499 258,499 Dimitry, Theodore G. 19,242 19,242 Downey, Walter L. 3,435 3,435 Edwards, James M. 8,962 8,962 Farkas, Farial and Barry 6,735 6,735 Fayerweather D.P.L.P. 1,114 1,114 Fischer, Chester G. 1,099 1,099 Friedman, Dennis J. 557 557 Glinka, Charlotte E. 2,241 2,241 Harbhajan S. Paul and Gail Sekas Paul 651 651 Hastings, Thomas J. 6,735 6,735 Hedrick, Thomas F. 3,367 3,367 Hillcrest Family Partnership LP 1,336 1,336 Imbriglia, Joseph E. Irrevocable Trust, Joseph E. Imbriglia, Trustee 557 557 Isherwood, John S. 115 115 Johnson, Eleanor W. 211 211 Kahan, James S. 223 223 Kim Enterprises, L.P. 557 557 Lacoff, Don 223 223 Lange, Rita Perlow 5,568 5,568 Lardis, Dirk B. and Mary L. JT TEN 334 334 Lederman, Sanford M. MD 223 223 Lee John N. Trust U/A Dated 10/05/92 579 579 Lionel Trust 2,227 2,227 Loucas, Ronald 1,114 1,114 McCartney, James W. 7,376 7,376 McDonel, Mark E. 1,670 1,670 McKelvey, Andrew J. 22,273 22,273 mtmsi, Inc. 149,848 149,848 Michaels, J. Patrick Jr. 557 557
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MK Investors 99-1, LP 4,900 4,900 Myslinski, Mark D. 572 572 Najjar Family Limited Partnership 2,227 2,227 Najjar, Edward G. 1,448 1,448 Najjar, Elizabeth A. Trust U/A Dated 08/10/93 780 780 Najjar, Michael E. Trust U/A Dated 08/10/93 780 780 Najjar, Susan M. Trust U/A Dated 08/10/93 780 780 Nelson, David and Keith, Katherine L. 891 891 New Media Holdings Ltd. 362,676 362,676 Nimick, Jr., Thomas H. Revocable Trust U/A/D July 15, 1970, as amended 14,337 14,337 Nimick, Jr. Thomas H. Revocable Trust 633 633 Oswald, John P. 3,970 3,970 Paine Webber, Custodian f/b/o Donald V. Little IRA 1,448 1,448 Paine Webber, Custodian f/b/o Stuart McLeod IRA 445 445 Parker/Hunter, Inc. Custodian f/b/o Henry McIngram IRA 557 557 Patton, Richard G. 7,398 7,398 Pernix Equity Investments, Inc. 28,937 28,937 Price, Michael J. 2,227 2,227 Reynolds, Thomas H. 1,114 1,114 Robinson, Stephen G. 11,611 11,611 Roemer Family, LP 1,085 1,085 RRZ Private Equity Fund LP 22,273 22,273 Salend, Howard J. 1,114 1,114 Santomero, Camillo and Denise C.R. 1,497 1,497 Saturn Partners Limited Partnership 483,119 483,119 Scaife, David 1,114 1,114 Scarlata, Antonia L. 1,114 1,114 Schmid, Walter and Leslie 668 668 Schofield, Douglas F. 6,943 6,943 Schwartzbaum, David M. 3,635 3,635 Sebastian, Sean D.S. 334 334 Sullivan, Barry R. 557 557 Sullivan, Timothy P. 334 334 Sunstein, Leon C. Jr. 19,225 19,225 Tanger, Alexander M. 557 557 Thorne, John R. 445 445 Three G Company 1,670 1,670 Three Rivers Urology Pension & Profit Sharing Plan 1,114 1,114
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Unkovic, John 557 557 Vahabzadeh, Alex 13,298 13,298 Walton, Joseph C. and Molly E. as tenants by the entireties 557 557 Wasserman, Harvey 1,143 1,143 Wekstein, Walter D. 223 223 West Penn ENT Association 1,114 1,114 Western Pennsylvania Adventure Capital Fund 19,350 19,350 Windsong Partners, LP 2,227 2,227 Wolf, John M. Jr. 11,892 11,892 Zero Stage Capital Associates VI Limited Partnership 1,470,508 1,470,508 Zoe Capital LLC 1,114 1,114 Covington Associates (1) 100,000 100,000 R.J. Holmberg (1) 1,800 1,800 The Branding Group, LLC (1) 20,000 20,000 Bua, Gina 7,140 7,140 DeRiso, Michael 30,000 30,000 Goudey, Richard 6,910 6,910 Hurst II, Irwin 6,830 6,830 Macintyre, Thomas 7,130 7,130 Mehra, Vinay 75,400 75,400 Olson, Steven 30,000 30,000 Spray, Kathleen 7,115 7,115 Wactlar, Howard 69,276 69,276 Total 3,574,601 3,574,601 WARRANT HOLDERS Carnegie Mellon University (3) 100,000 100,000 Gould, Lawrence (1) 25,000 25,000 Pendyala, Krishna (4) 100,000 100,000 Rose, Stuart (1) 25,000 25,000 Wactlar, Howard (5) 100,000 100,000 Enzer, David (1) 20,000 20,000 Total 370,000 370,000
(1) Except for Covington Associates, R.J. Holmberg, Stuart Rose, Lawrence Gould, David Enzer and the Branding Group, LLC, the stockholders or warrant holders set forth above were all former stockholders, security holders or former employees of MediaSite. (2) Does not include 100,000 shares that may be acquired upon exercise of a warrant. See note (3). (3) Does not include 6,564 shares registered herein. See note (2) above. (4) Co-founder of MediaSite. (5) Co-Founder of MediaSite. 18 PLAN OF DISTRIBUTION Resales of the Shares by the Selling Stockholders may be made on the Nasdaq National Market, or in private transactions. The Shares will be offered for sale on terms to be determined when the agreement to sell is made or at the time of sale, as the case may be. The Selling Stockholders may sell some or all of the Shares in transactions involving broker-dealers who may act solely as agent and or may acquire Shares as principal. Broker-dealers participating in such transactions as agent may receive commissions from the Selling Stockholders (and, if they act as agent for the purchaser of such Shares, from such purchaser), such commissions computed in appropriate cases in accordance with the applicable rules of NASDAQ, which commissions may be at negotiated rates where permissible under such rules. Participating broker-dealers may agree with the Selling Stockholders to sell a specific number of Shares at a stipulated price per share and, to the extent such broker-dealer is unable to do so acting as agent, for the Selling Stockholders to purchase as principal any unsold shares at the price required to fulfill the broker-dealer's commitment to the Selling Stockholders. Any such sales may be by block trade. The Selling Stockholders may also engage in short sales, including short sales against the box, puts and calls and other transactions in securities of the Company or derivatives of Company securities and may sell or deliver Shares in connection with these trades. The Selling Stockholders may pledge their Shares to their brokers under the margin provisions of customer agreements. If a Selling Stockholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged Shares. In addition, pursuant to a certain Stock Restriction and Registration Agreement, each of Zero Stage Capital VI Limited Partnership, Saturn Capital, Inc., and Saturn Partners Limited Partnership (the "Restricted Holders") agreed that the Shares acquired by them pursuant to the transaction (the "Acquired Shares") shall not be transferred or disposed of by the Restricted Holders until 3 months following the Closing (which occurred on October 15, 2001). Thereafter in each succeeding 3 month period, each Restricted Holder may transfer or dispose of up to 33 1/3% of the Acquired Shares so that the restriction on the transfer or disposal of the Acquired Shares, only to 66 2/3% of the Acquired Shares after 3 months from the Closing, only to 33 1/3% of the Acquired Shares after 6 months from Closing, and to none of the Acquired Shares after 9 months from Closing. LEGAL MATTERS The legality of the issuance of the Shares offered in this prospectus will be passed upon for the Company by McBreen & Kopko, Chicago, Illinois. Frederick H. Kopko, Jr., a member of that firm and a director of the Company, beneficially owns 183,192 shares of our Common Stock and has options and warrants to purchase 180,000 shares of our Common Stock. EXPERTS The financial statements of Sonic Foundry, Inc. at September 30, 2001 and for the fiscal year then ended, incorporated by reference in this Prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their report incorporated by reference herein, 19 and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. INFORMATION CONTAINED ONLY IN PROSPECTUS We have not authorized anyone to give information beyond what is set forth in this prospectus. Sales of the Shares described in this prospectus are not directed at anyone in any jurisdiction in which an offer or solicitation of such securities is not authorized, or in which the person making the offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. The information contained in this prospectus is correct as of the date of this prospectus. Neither delivery of this prospectus nor any sale made pursuant to this prospectus shall imply that the information contained in this prospectus is correct as of any time after the date of this prospectus. Table of Contents Where You Can Find More Information ....................................... 1 Information Incorporated by Reference ..................................... 2 Forward Looking Information ............................................... 2 Summary of the Business ................................................... 3 Risk Factors .............................................................. 4 Use of Proceeds ........................................................... 14 Market for Common Equity, Dividend Policy, and Related Stockholder Matters ....................................................... 14 Selling Stockholders ...................................................... 15 Plan of Distribution ...................................................... 19 Legal Matters ............................................................. 19 Experts .................................................................. 19 Information Contained Only in Prospectus ..................................II-1 20 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth the various expenses payable by the Registrant in connection with the sale and distribution of the securities being registered hereby. Normal commission expenses and brokerage fees are payable individually by the Selling Stockholders. All amounts are estimated except the Securities and Exchange Commission registration fee. SEC registration fee .............................. $ 2,536 Legal fees and expenses ........................... 15,000.00 Accounting fees and expenses ...................... 10,000.00 --------- Total .............................................$ 27,536 ========= Item 15. Indemnification of Directors and Officers. Our Articles of Incorporation limit the liability of our directors, in their capacity as directors but not in their capacity as officers, to the fullest extent permitted by the Maryland General Corporation Law, or MGCL. Accordingly, pursuant to the terms of the MGCL as presently in effect, we may indemnify any director unless it is established that: - the act or omission of the director was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; - the director actually received an improper personal benefit in money, property or services; - or in the case of any criminal proceeding, the directors had reasonable cause to believe that the act or omission was unlawful. In addition, our Bylaws require us to indemnify each person who is or was, a director, officer, employee or agent of ours to the fullest extent permitted by the laws of the State of Maryland in the event he is involved in legal proceedings by reason of the fact that he is or was a director, officer, employee or agent of ours, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership or other enterprise. We may also advance to such persons expenses incurred in defending a proceeding to which indemnification might apply, upon terms and conditions, if any, deemed appropriate by the Board of Directors II-1 upon receipt of an undertaking by or on behalf of such director or officer to repay all such advanced amounts if it is ultimately determined that he is not entitled to be indemnified as authorized by the laws of the State of Maryland. In addition, we carry director and officer liability insurance In connection with this offering, certain of the Selling Stockholders have agreed to indemnify us, our directors and officers and each such person who controls us, against any and all liability arising from inaccurate information provided to us by the Selling Stockholders and contained herein. Item 16. Exhibits. Exhibit Number Description of Document - -------------- ---------------------- 2.1(1) Asset Purchase Agreement and Plan of Asset Transfer, dated September 6, 2001, by and among the Company, Sonic Foundry Systems Group, Inc. (formerly known as MediaSite Acquisition, Inc.), and MediaSite, Inc. 3.1(2) Amended and Restated Articles of Incorporation (2). 3.1(2) Amended and Restated By-Laws (2). 4.1(2) Specimen Common Stock Certificate. 4.2 Stock Restriction and Registration Agreement, dated as of September 6, 2001, by and among the Company, Zero Stage Capital VI Limited Partnership, Saturn Capital, Inc., and Saturn Partners Limited Partnership. 5.1 Opinion of McBreen & Kopko, regarding the legality of the securities. 23.1 Consent of McBreen & Kopko (see Exhibit 5.1). 23.2 Consent of Ernst & Young LLP. 24.1(4) Power of Attorney (see page II-4). - ------------------- (1) Incorporated by reference from Form 8-K, filed on October 30, 2001. (2) Incorporated by reference from Registration Statement No. 333-46005 on Form SB-2 filed on February 10, 1998. - ------------------- II-2 Item 17. Undertakings. 1. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. Provided, however, that the undertakings set forth in paragraphs (1)(i) and (1)(ii) above shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 2. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the II-3 foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 3. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on to Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Madison, State of Wisconsin, on December 21, 2001. SONIC FOUNDRY, INC. By: /s/ Rimas Buinevicius ------------------------------------------ Rimas P. Buinevicius, Chairman, Chief Executive Officer and Director II-4 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Rimas P. Buinevicius and Kenneth A. Minor, jointly and severally, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this amendment no. 1 to registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Rimas P. Buinevicius Chief Executive Officer and Chairman - --------------------------- Rimas P. Buinevicius December 21, 2001 /s/ Monty R. Schmidt President and Director - ------------------------------------ Monty R. Schmidt December 21, 2001 /s/ Curtis J. Palmer Chief Technology Officer and Director - --------------------------- Curtis J. Palmer December 21, 2001 /s/ Kenneth A. Minor Chief Financial Officer and - ------------------------------------ Secretary Kenneth A. Minor December 21, 2001 /s/ Frederick H. Kopko, Jr. Director - ------------------------------------ Frederick H. Kopko, Jr. December 21, 2001 /s/ Rimas P. Buinevicius* Director - --------------------------- Arnold B. Pollard II-5 December 21, 2001 /s/ Rimas P. Buinevicius* Director - --------------------------- David C. Kleinman December 21, 2001 *Pursuant to Power of Attorney II-6 Exhibit Index Exhibit Number Description of Document - -------------- ------------------------------- 2.1(1) Asset Purchase Agreement and Plan of Asset Transfer, dated September 6, 2001, by and among the Company, Sonic Foundry Systems Group, Inc. (formerly known as MediaSite Acquisition, Inc.), and MediaSite, Inc. 3.1(2) Amended and Restated Articles of Incorporation (2). 3.1(2) Amended and Restated By-Laws (2). 4.1(2) Specimen Common Stock Certificate. 4.2 Stock Restriction and Registration Agreement, dated as of September 6, 2001, by and among the Company, Zero Stage Capital VI Limited Partnership, Saturn Capital, Inc., and Saturn Partners Limited Partnership. 5.1 Opinion of McBreen & Kopko, regarding the legality of the securities. 23.1 Consent of McBreen & Kopko (see Exhibit 5.1). 23.2 Consent of Ernst & Young LLP. 24.1(4) Power of Attorney (see page II-4). - ------------------- (1) Incorporated by reference from Form 8-K, filed on October 30, 2001. (2) Incorporated by reference from Registration Statement No. 333-46005 on Form SB-2 filed on February 10, 1998. - ------------------- EX-4.2 3 dex42.txt STOCK RESTRICTION AND REGISTRATION AGREEMENT Exhibit 4.2 STOCK RESTRICTION AND REGISTRATION AGREEMENT -------------------------------------------- THIS STOCK RESTRICTION AGREEMENT dated as of October 15, 2001, is by and among Sonic Foundry, Inc., a Maryland corporation (the "Buyer") and Zero Stage Capital VI Limited Partnership ("Zero Stage"), Saturn Capital, Inc. ("Saturn"), and Saturn Partners Limited Partnership ("Saturn Partners") (collectively, "New Stockholders"). WHEREAS, the Buyer, MediaSite Acquisition, Inc., a Maryland corporation ("Acquisition") which is a wholly owned subsidiary of Buyer, and MediaSite, Inc., a Pennsylvania corporation (the "Company") are parties to an Asset Purchase Agreement and Plan of Asset Transfer and Reorganization dated as of the date hereof (the "Purchase Agreement") pursuant to which Acquisition will acquire substantially all of the assets and liabilities of the Company; and WHEREAS, the parties desire to provide for certain restrictions and other matters relating to the shares to be issued to the New Stockholders following a distribution by the Company to its shareholders (the "Shares"); NOW, THEREFORE, the parties agree as follows: ARTICLE I --------- TERM OF AGREEMENT ----------------- Term of Agreement. This Agreement and the rights and obligations of the parties under this Agreement, shall terminate on the earliest to occur of the following: (a) one year following the closing of the Purchase Agreement (the "Closing"), or (b) immediately prior to the consummation of (i) the sale of all, or substantially all, of the Buyer's assets or capital stock either through a direct sale or merger, consolidation, reorganization or any other form of business combination or acquisition in which the Buyer is the target of such acquisition, or (ii) the sale of 50% or more of the Buyer's capital stock pursuant to a "change in control" of the Buyer, provided, however, that the New Stockholders shall at all times comply with all applicable requirements of federal and state securities law, including Rule 144, with respect to the sale of the Shares. ARTICLE II ---------- LOCK-UP PROVISIONS ------------------ Section 2.1 Lock-up Provisions. The New Stockholders hereby agree that, without the prior written consent of Buyer, they will not (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Restricted Shares or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Shares. Section 2.2 Definition of Restricted Shares. Restricted Shares of each New Stockholder shall mean all Shares acquired by each New Stockholder at the Closing, provided, however, that the amount of Shares deemed "Restricted Shares" with respect to each New Stockholder shall decrease with time according to the schedule set forth below:
------------------------------------------------------------------------------------------------- Time Period Amount of Restricted Shares ----------- --------------------------- ------------------------------------------------------------------------------------------------- Until 3 months following Closing All Shares acquired by each New Stockholder at the Closing ------------------------------------------------------------------------------------------------- Beginning 3 months following Closing 66 2/3% of the Shares acquired by each New Stockholder at the Closing shall be deemed Restricted Shares. ------------------------------------------------------------------------------------------------- Beginning 6 months following Closing 33 1/3% of the Shares acquired by each New Stockholder at the Closing shall be deemed Restricted Shares. ------------------------------------------------------------------------------------------------- Beginning 9 months following Closing No Shares shall be deemed Restricted Shares. -------------------------------------------------------------------------------------------------
ARTICLE III ----------- GENERAL PROVISIONS ------------------ Section 3.1 Specific Enforcement. Because the Shares cannot be readily purchased or sold in the open market, the parties hereby acknowledge and agree that they may be irreparably damaged in the event that this Agreement is not specifically enforced. Upon a breach or threatened breach of the terms, covenants and/or conditions of this Agreement by any party, the other parties shall, in addition to all other remedies, be entitled to a temporary or permanent injunction, without showing any actual damage, and/or a decree for specific performance, in accordance with the provisions hereof. Section 3.2 Legend. All certificates evidencing any of the New Stockholder's Shares subject to this Agreement shall also bear a legend substantially as follows during the term of this Agreement: "The shares represented by this certificate are subject to restrictions on transfer and may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of except in accordance with and subject to all the terms and 2 conditions of a certain Stock Restriction and Registration Agreement, a copy of which the Company will furnish to the holder of this certificate upon request and without charge." Section 3.3 Governing Law; Successors and Assigns. This Agreement shall be construed in accordance with and governed by the laws of the State of Wisconsin and shall be binding upon the heirs, personal successor, executors, administrators, successors and assigns of the parties. Section 3.4 Notices. Notices given hereunder shall be deemed to have been duly given (i) on the date of personal delivery or (ii) one business day following delivery by express overnight courier service, to the party being notified at its address set forth herein or such other address as it may subsequently notify the other party in writing. Section 3.5 Entire Agreement and Amendments. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and may not be modified, amended or terminated except by the written consent of the Buyer and by each New Stockholder who is to be bound thereby. Section 3.6 Waivers. No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. Section 3.7 Severability. If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other severable provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein. Section 3.8 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. Section 3.9 Termination. In the event that the Purchase Agreement is terminated, this Agreement shall terminate and be of no further force or effect. ARTICLE IV REGISTRATION ------------ Section 4.1 Shelf Registration. The Buyer shall (i) file with the Securities and Exchange Commission (the "SEC") a registration statement for the Shares on Form S-3 (the "Shelf Registration") within 60 days of the date of Closing, (ii) use its best efforts to have such registration statement declared effective with the SEC as soon as practicable, and (iii) use its best 3 efforts to maintain the effectiveness of the Registration Statement for a period not less than three years from the Closing. Should the Shelf Registration not be declared effective or should its effectiveness lapse for any reason during the period set forth above, the Buyer shall use its best efforts to have the Shares registered on another registration statement as soon as reasonably practicable. Section 4.2 Survival of Restrictions. Notwithstanding any registration pursuant to Article IV hereof, the remaining provisions of this Agreement shall survive the registration of the Shares, as set forth herein. Section 4.2 Indemnification. The Buyer will indemnify and hold each New Stockholder, and their respective partners, officers, directors and agents and each person, if any, who controls (within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934) the New Stockholder or any of the foregoing, harmless to the maximum extent permitted by law, from and against any loss, claim, liability, damage or expense (including attorneys' fees) resulting from a claim that the Shelf Registration, prospectus or amendment thereof or supplement thereto, which includes Shares to be sold by such New Stockholder, contains a material misstatement or omission, unless such claim is based upon information provided by such New Stockholder; and each such New Stockholder will indemnify and hold harmless the Buyer, its directors, officers and agents and each person, if any, who controls (within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934) the Buyer against any loss, claim, liability, damage or expense (including attorneys' fees) resulting from any such claim relating to information provided by such New Stockholder. 4 IN WITNESS WHEREOF, the parties have executed this Agreement. SONIC FOUNDRY, INC. By: /s/ ------------------------------ Title: Chief Executive Officer 1617 Sherman Avenue Madison, WI 53704 NEW STOCKHOLDERS /s/ - -------------------------- /s/ - -------------------------- /s/ - -------------------------- 5 EX-5.1 4 dex51.txt OPINION OF MCBREEN & KOPKO EXHIBIT 5.1 [OPINION OF MCBREEN & KOPKO] December 21, 2001 Sonic Foundry, Inc. 1617 Sherman Avenue Madison, WI 53704 REGISTRATION STATEMENT ON FORM S-3 Ladies and Gentlemen: We have examined the Registration Statement on Form S-3 which you intend to file with the Securities and Exchange Commission on or about December 21, 2001 (the "Registration Statement") in connection with the registration under the Securities Act of 1933, as amended, of 3,944,601 shares of your Common Stock issued or issuable upon exercise of certain warrants (the "Shares") to be sold by certain stockholders described in the Registration Statement (the "Selling Stockholders"). As your legal counsel, we have examined the proceedings taken and are familiar with the proceedings proposed to be taken by you in connection with the sale of the Shares by the Selling Stockholders in the manner set forth in the Registration Statement in the section entitled "Plan of Distribution." It is our opinion that the Shares, when sold by the Selling Stockholders in the manner referred to in the Registration Statement, will be legally and validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to the use of our name wherever it appears in the Registration Statement and any amendments to it. Sincerely, MCBREEN & KOPKO /s/ MCBREEN & KOPKO - ------------------------------------ EX-23.2 5 dex232.txt CONSENT OF ERNST & YOUNG LLP. Exhibit 23.2 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and related Prospectus of Sonic Foundry, Inc. for the registration of 3,944,601 shares of its common stock issued and issuable upon exercise of certain warrants and to the incorporation by reference therein of our report dated November 9, 2001, with respect to the financial statements and schedule of Sonic Foundry, Inc. included in its Annual Report (Form 10-K) for the year ended September 30, 2001, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP ----------------------------- Milwaukee, Wisconsin December 20, 2001 -----END PRIVACY-ENHANCED MESSAGE-----