ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Our executive officers, directors and key employees are as follows:
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Name
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Age
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Position
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Gary R. Weis
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71
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Chief Executive Officer, Chief Technology Officer and Director
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Michael Norregaard
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57
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Chief Operating Officer (Appointed March 2019)
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Kenneth A. Minor
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57
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Chief Financial Officer and Secretary
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Robert M. Lipps
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47
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Executive Vice President - Sales
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Mark D. Burish(2)(3)(4)
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65
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Non-Executive Chair and Director
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Frederick H. Kopko, Jr.(4)
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63
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Director
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Nelson A. Murphy(1)
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58
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Director
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David F. Slayton(1)
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50
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Director
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Brian T. Wiegand(1)(2)(3)
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50
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Director
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(1)
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Member Audit Committee
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(2)
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Member Compensation Committee
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(3)
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Member Nominations Committee
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(4)
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Member Governance Committee
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Gary R. Weis
has been Chief Executive Officer since March 2011, Chief Technology Officer since September 2011 and a Director of Sonic since February 2004. Prior to joining Sonic, he served as President, Chief Executive Officer and a Director of Cometa Networks, a wireless broadband Internet access company from March 2003 to April 2004. From May 1999 to February 2003 he was Senior Vice President of Global Services at AT&T where he was responsible for one of the world's largest data and IP networks, serving more than 30,000 businesses and providing Internet access to more than one million individuals worldwide. While at AT&T, Mr. Weis also was CEO of Concert, a joint venture between AT&T and British Telecom. Previously, from January 1995 to May 1999 he was General Manager of IBM Global Services, Network Services. Mr. Weis served as a Director from March 2001 to February 2003 of AT&T Latin America, a facilities-based provider of telecom services in Brazil, Argentina, Chile, Peru and Columbia. Mr. Weis earned BS and MS degrees in Applied Mathematics and Computer Science at the University of Illinois, Chicago.
Michael Norregaard
has been Chief Operating Officer since March 2019 and joined the Company in January 2013. During Mr. Norregaard’s tenure with the Company he served in various sales and operations roles including as Vice President of Business Development and Senior Vice President of Sales Operations. From 2007 to January 2013 Mr. Norregaard served as Managing Director / Divisions Director Outsourcing Services for Logica PLC, a multinational IT and management consulting company headquartered in the United Kingdom. Prior to his role with Logica, Mr. Norregaard held various other executive roles in European
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
technology companies as well as client manager and sales executive at IBM and general manager at AT&T. Mr. Norregaard has a Bachelor of Business from the Copehagen Business School and a Master of Social Economics from the University of Copenhagen.
Kenneth A. Minor
has been our Chief Financial Officer since June 1997, Assistant Secretary from December 1997 to February 2001 and Secretary since February 2001. From September 1993 to April 1997, Mr. Minor was employed as Vice President and Treasurer for Fruehauf Trailer Corporation, a manufacturer and global distributor of truck trailers and related aftermarket parts and service where he was responsible for financial, treasury and investor relations functions. Prior to 1993, Mr. Minor served in various senior accounting and financial positions for public and private corporations as well as the international accounting firm of Deloitte Haskins and Sells. Mr. Minor is a certified public accountant and has a B.B.A. degree in accounting from Western Michigan University.
Robert M. Lipps
has been Executive Vice President of Sales since April 2008, joining Sonic Foundry in April 2006 as Vice President of International Sales and assuming expanded responsibility for U.S. central sales in 2007. Mr. Lipps leads the company’s global sales organization including oversight of domestic, international and channel sales. He holds 15 years of sales leadership, business development and emerging market entry expertise in the technology and manufacturing sectors, including sales and channel management. From January 2004 to March 2006 he served as General Manager of Natural Log Homes LLC, a New Zealand based manufacturer of log homes. From July 1999 to Dec 2002 he served as Latin America Regional Manager of Adaytum, a software publisher of planning and performance management solutions, (acquired by Cognos Software, an IBM Company, in January 2003) and from May 1996 to July 1999 he served as International Sales Manager for Persoft, a software publisher of host access and mainframe connectivity solutions (acquired by Esker software in 1998). Mr. Lipps has a B.S. degree in Marketing from the University of Wisconsin at La Crosse.
Mark D. Burish
has been a director since March 2010 and has served as Non-Executive Chair since April 2011. Mr. Burish is a shareholder of the law firm of Hurley, Burish & Stanton, Madison, WI, which he helped start in 1983. He is the founder and CEO of Our House Senior Living, LLC, Milestone Senior Living, LLC and Milestone Management Services, LLC which he started in 1997. Mr. Burish received his BA degree in communications from Marquette University in 1975 and his JD degree from the University of Wisconsin in 1978.
Frederick H. Kopko, Jr.
served as Sonic Foundry’s Secretary from April 1997 to February 2001 and has been a Director since December 1995. Mr. Kopko is a partner of the law firm of McBreen & Kopko, Chicago, Illinois, and has been a partner of that firm since January 1990. Mr. Kopko practices in the area of corporate law. He is the Managing Director, Neltjeberg Bay Enterprises LLC, a merchant banking and business consulting firm and has been a Director of Mercury Air Group, Inc. since 1992. Mr. Kopko received a B.A. degree in Economics from the University of Connecticut, a J.D. degree from the University of Notre Dame Law School and an M.B.A. degree from the University of Chicago.
Nelson A. Murphy
has been a Director since November 2017. Since January 2015, Mr. Murphy has been the Executive VP, Finance & Operations for Catawba College, a private liberal arts college. From August 2013 to June 2015 Mr. Murphy was VP, International Finance at Syniverse Technologies, Inc. in Luxembourg, a provider of mobile technologies, and from October 2010 to August 2013 served as VP - Finance, Defensive Systems Division at Northrop Grumman Corporation, a global security company. Previously, Mr. Murphy served in various senior finance roles at AT&T including responsibility for finance in operations located in Europe, the Middle East and Latin America. Mr. Murphy has a B.S. in Accounting from Wake Forest University.
David F. Slayton
has been a Director since November 2017. Since April 2013, Mr. Slayton has been the Chief Financial Officer of Ovative Group, a digital media agency and analytics firm. From July 2008 to March 2013, Mr. Slayton was co-founder, Executive Vice President - CFO and a member of the board of Alice.com, an e-commerce retail marketplace. Prior to his service at Alice.com, Mr. Slayton served in senior financial management roles at numerous companies including as Chief Financial Officer at Shavlik Technologies from June 2005 to July 2008, Managing Director and co-founder at Haviland Partners Inc. from August 2003 to February 2005 and as Chief Financial of NameProtect Inc. from July 2000 to July 2003. Mr. Slayton earned a BS in Economics from the Massachusetts Institute of Technology (June 1991) and an MBA in Business Administration from Harvard University (June 1996).
Brian T. Wiegand
has been a director of the Company since July 2012, and is a serial entrepreneur who successfully founded and sold several internet-based companies. He is currently the founder and CEO of Gavy, Inc., a live video shopping platform. Mr. Wiegand founded and served as CEO of Hopster, a company that links digital marketing efforts with real-world shopping behavior by rewarding consumer purchase loyalty, engagement and advocacy. Hopster announced in October 2014 that it was acquired by Inmar, Incorporated, where Mr. Wiegand served as SVP of Growth and Strategy from the date of purchase to August 2016. Mr.
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
Wiegand co-founded and served as executive chair of the board of Alice.com, an online retail platform that connects manufacturers and consumers in the consumer packaged goods market. Alice.com filed for receivership in August 2013. Mr. Wiegand also co-founded Jellyfish.com, a shopping search engine, in June of 2006. He served as CEO until October 2007 when the company was sold to Microsoft. Mr. Wiegand continued with Microsoft as the General Manager of Social Commerce until May 2008. He also co-founded NameProtect, a trademark research and digital brand protection services company in August 1997 which was sold to Corporation Services Company in March 2007. In addition, Mr. Wiegand founded BizFilings in 1996, the Internet’s leading incorporation Services Company. He served as the president and CEO until 2002 when the company was acquired by Wolters Kluwer. Mr. Wiegand attended the University of Wisconsin - Madison.
When considering whether the Board of Directors and nominees thereto have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of our business and structure, the Board of Directors focused primarily on the information discussed in each of the Board members' biographical information set forth above. Each of the Company's directors possesses high ethical standards, acts with integrity and exercises careful, mature judgment. Each is committed to employing his skills and abilities to aid the long-term interests of the stakeholders of the Company. In addition, each of our directors has exhibited judgment and skill, and has either been actively involved with the Company for a considerable period of time or has experience with other organizations of comparable or greater size. In particular, Mr. Kopko has had extensive experience with companies comparable in size to Sonic Foundry, including serving as a director of Mercury Air Group, Inc. and fills a valuable need with experience in securities and other business law. Mr. Weis has had experience in both developing and established companies, having served as a CEO and Director of Cometa Networks and in several positions at AT&T and IBM, including Senior Vice President of Global Services. While at AT&T, Mr. Weis also was CEO of Concert, a joint venture between AT&T and British Telecom. Mr. Burish brings additional valuable legal experience to the Board as well as experience obtained through founding multiple companies. Mr. Wiegand has significant experience in founding and operating technology companies and building brand awareness with both businesses and consumers. Mr. Murphy has significant experience in finance and accounting both in the higher education field as well as with technology companies and Mr. Slayton has substantial financial experience in growing technology companies.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Sonic's officers and directors, and persons who own more than ten percent of the Common Stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3 and Forms 4 furnished to us pursuant to Rule 16a-3 under the Exchange Act during our most recent fiscal year, to Sonic Foundry's knowledge, all reporting persons complied with all applicable filing requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.
Audit Committee Composition and Expert
Sonic has a standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Members of the Audit Committee are Messrs. Murphy (chair), Slayton and Wiegand. Sonic’s Board of Directors has determined that all members of Sonic’s Audit Committee are “independent” as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act and as defined under Nasdaq listing standards. The Audit Committee provides assistance to the Board in fulfilling its oversight responsibility including: (i) internal and external financial reporting, (ii) risks and controls related to financial reporting, and (iii) the internal and external audit process. The Audit Committee is also responsible for recommending to the Board the selection of our independent public accountants and for reviewing all related party transactions. The Audit Committee met five times in Fiscal 2018. A copy of the charter of the Audit Committee is available on Sonic’s website.
Sonic's Board of Directors has determined that, due to his experience serving in senior financial roles at several companies as well as his degree in accounting and designation as a certified public accountant, Mr. Murphy meets the definition of audit committee financial expert as that term is defined under the rules of the Securities and Exchange Commission. The members of the Audit Committee also meet the Nasdaq Stock Market requirements regarding the financial sophistication and the financial literacy of members of the Audit Committee.
Code of Ethics
Sonic has adopted a Code of Ethics (as defined in Item 406 of Regulation S-K) that applies to its principal executive, financial and accounting officers. Sonic Foundry will provide a copy of its code of ethics, without charge, to any investor who requests it. Requests should be addressed in writing to Mr. Kenneth Minor, Corporate Secretary, 222 West Washington Ave, Madison, WI 53703.
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis describes our compensation strategy, policies, programs and practices for the executive officers identified in the Summary Compensation Table. Throughout this proxy statement, we refer to these individuals, who serve as our Chief Executive Officer, Chief Financial Officer and Executive Vice President of Sales as the “Named Executive Officers.”
The Executive Compensation Committee (“Committee”) establishes and oversees our compensation and employee benefits programs and approves the elements of total compensation for the executive officers. The day-to-day design and administration of our retirement and employee benefit programs available to our employees are handled by our Human Resources and Finance Department employees. The Committee is responsible for reviewing these programs with management and approving fundamental changes to them.
Overview and Objectives of our Executive Compensation Program
The compensation program for our executive officers is designed to attract, motivate, reward and retain highly qualified individuals who can contribute to Sonic’s growth with the ultimate objective of increasing stockholder value. Our compensation program consists of several forms of compensation: base salary, annual bonus, long-term incentives and limited perquisites and benefits.
Base salary and annual bonus are cash-based while long-term incentives consist of stock option awards. The Committee does not have a specific allocation goal between cash and equity-based compensation or between annual and long-term incentive compensation. Instead, the Committee relies on the process described in this discussion and analysis in its determination of compensation levels and allocations for each executive officer.
The Committee established performance metrics for each of its Named Executive Officers in fiscal 2018 designed to match Company performance to the amount of incentive compensation paid to such officers following completion of the fiscal year.
The recommendations of the Chief Executive Officer play a significant role in the compensation-setting process. The Chief Executive Officer provides the Committee with an annual overall assessment of Sonic’s achievements and performance, his evaluation of individual performance and his recommendations for annual compensation and long-term incentive awards. The Committee has discretion to accept, reject or modify the Chief Executive Officer’s recommendations. The Committee determines the compensation for the Chief Executive Officer in an executive session.
Market Competitiveness
The Committee’s target is for total cash compensation to average between the 50th and 75th percentile of published compensation data derived from two sources: (i) a peer group of companies that are in our industry, competitors for key talent, or with similar financial characteristics; and (ii) published market survey data for companies within our revenue range. The peer group data was obtained from the most recently filed proxy statement of 12 publicly-traded technology companies with annual revenues ranging from approximately $10 million to just under $100 million; market capitalization from approximately $10 million to approximately $200 million and approximately 300 employees or less. The following companies comprised the peer group for the study: Adesto Technologies, Corp, Asure Software Inc., Bsquare Corporation, Datawatch Corp., FalconStor Software Inc., GlobalSCAPE Inc., Glowpoint Inc., GSE Systems Inc., Inuvo Inc., MAM Software Group, Inc., Qumu Corporation and Smith Micro Software Company. Given competitive recruiting pressures, the Committee retains its discretion to deviate from this target under appropriate circumstances. The Committee periodically receives updates of the published compensation data.
Pay for Performance
The Committee believes that both long and short term compensation of executive officers should correlate to Sonic’s overall financial performance. Incentive payouts will be larger with strong performance and smaller if Sonic’s financial results decline. From time to time, extraordinary Board-approved initiatives in a fiscal year, such as a restructuring, acquisition, or divestiture, are considered by the Committee in its overall evaluation of Sonic’s performance.
Peer Group Analysis
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
Compensation data came from a peer group of twelve public companies that we consider similar to our market for sales, or for key talent, or with similar financial or other characteristics such as number of employees. The companies in the peer group are described above.
Components of Executive Compensation
Base Salary
The Committee seeks to pay the executive officers a competitive base salary in recognition of their job responsibilities for a publicly held company. As noted above, the target compensation range for an executive’s total cash compensation (salary and bonus) is between the 50th and 75th percentile of the market data reviewed by the Committee.
As part of determining annual compensation review, the Committee also considers the Chief Executive Officer’s recommendation regarding individual performance as well as internal equitable considerations.
In evaluating individual performance, the Committee considers initiative, leadership, tenure, experience, skill set for the particular position, knowledge of industry and business, and execution of strategy in placing the individual within the range outlined.
The Committee met on February 1, 2019 for consideration of base wage changes for Messrs. Weis, Minor and Lipps which have been frozen since December 1, 2016. At the recommendation of management, the Committee agreed to reduce compensation for Messrs. Weis and Minor and Lipps. Base wages for Messrs. Weis and Minor were reduced to $350,000 and $250,000 on an annual basis from $489,880 and $301,986, respectively. Base wages for Mr. Lipps were maintained at $242,810 but his incentive compensation was capped at $7,190 on an annual basis. After its review of all sources of market data as described above, the Committee believes that the base salaries and the bonuses described are below its targeted range for total cash compensation.
Annual Performance-Based Variable Compensation
The performance-based variable compensation reported for each executive officer represents compensation that was earned based on incentive plans. The following describes the methodologies used by the Compensation Committee to determine the final annual performance-based variable compensation earned by each executive officer:
Selection of Performance Metrics.
For fiscal 2018, the Compensation Committee designed a short-term incentive program (“STIP”) driven by four performance measures that it determined were appropriate to drive desired business behavior for the Company and would correlate positively with total shareholder return. These measures were the Company’s results with respect to (1) customer billings and (2) adjusted EBITDA. Messrs. Weis, Minor and Lipps were included in the plan. Mr. Lipps’ short term incentive plan included a separate component based solely on the level of customer billings achieved.
Payout Based on Performance Against Goals.
For fiscal 2018 the Company’s performance, as evaluated by the Compensation Committee, lead to the determination that none of the objectives were met with regard to financial performance of the Company and therefore, no incentives were earned under the STIP compensation plan. Total billings - based incentives paid to Mr. Lipps during fiscal 2018 was $68,862. No variable compensation plan was approved for fiscal 2019.
Stock Options
The Committee has a long-standing practice of providing long-term incentive compensation grants to the executive officers. The Committee believes that such grants, in the form of stock options, help align our executive officers’ interests with those of Sonic’s stockholders. All stock options have been granted under our 1995 Stock Option Plan, the 1999 Non-Qualified Plan or the 2009 Stock Incentive Plan (“Employee Plans”). All but the 2009 Stock Incentive Plan are now terminated.
The Committee reviews option grant recommendations by the Chief Executive Officer for each executive officer, but retains full discretion to accept, reject or revise each recommendation. The Committee’s policy is to grant options on the date it approves them or such other future date as the Committee may agree at the time of approval. The exercise price is determined in accordance with the terms of the Employee Plan and cannot be less than the Fair Market Value, as defined in the Plan, of Sonic’s common stock. The Committee typically grants options once a year, but may grant options to newly hired executives at other times.
In making its determinations, the Committee considers the number of options or shares owned by the executive officers.
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
No additional option grants were made to Messrs. Weis, Minor and Lipps following the end of fiscal 2018. At a compensation committee meeting held February 1, 2019, the executive management team proposed cancelling certain vested stock options they held in order to make them available for future employee grants. The impact was to cancel 175,764 options for Mr. Weis and 109,690 options each for Messrs. Minor and Lipps. The committee accepted the management recommendation and authorized cancelation immediately.
Health and Welfare Benefits
Our officers are covered under the same health and welfare plans, including our 401(k) plan, as salaried employees.
Employment Agreements
The Company has employment agreements with Messrs. Norregaard, Minor and Lipps. Pursuant to such employment agreements, Messrs. Minor and Lipps receive annual base salaries subject to increase each year at the discretion of the Board of Directors. Messrs. Minor and Lipps are also entitled to incidental benefits of employment under the agreements. Each of the employment agreements provides that a cash severance payment be made upon termination, other than for cause, or upon death or disability. In each case, such cash severance is equal to the highest cash compensation paid in any of the last three fiscal years immediately prior to termination. In addition, Messrs. Norregaard, Minor and Lipps will receive immediate vesting of all previously unvested common stock and stock options and have the right to voluntarily terminate their employment, and receive the same severance arrangement detailed above following (i) any “person” becoming a “ beneficial” owner of stock of Sonic Foundry representing 50% or more of the total voting power of Sonic Foundry’s then outstanding stock; or, (ii) Sonic Foundry is acquired by another entity through the purchase of substantially all of its assets or securities; or (iii) Sonic Foundry is merged with another entity, consolidated with another entity or reorganized in a manner in which any “person” is or becomes a “beneficial” owner of stock of the surviving entity representing 50% or more of the total voting power of the surviving entity’s then outstanding stock; and, within two years and ninety days of any such event, Messrs. Norregaard, Minor or Lipps, as the case may be, is demoted without cause or his title, authority, status or responsibilities are substantially altered, their salary is reduced or the principal office is more than 50 miles outside the Madison metropolitan area. Pursuant to the employment agreements, each of Messrs. Norregaard, Minor and Lipps has agreed not to disclose our confidential information and not to compete against us during the term of his employment agreement and for a period of one year thereafter. Such non-compete clauses may not be enforceable, or may only be partially enforceable, in state courts of relevant jurisdictions.
The Company also has an employment agreement with Mr. Weis for his services as Chief Executive Officer and Chief Technology Officer. Pursuant to the terms of the amended and restated employment agreement, Mr. Weis receives an annual base salary subject to increase at the discretion of the Board. Mr. Weis may also receive a performance bonus at the discretion of the Board.
The employment agreement continues in effect until terminated as set forth therein. In the event Mr. Weis’s employment is terminated without cause, as defined in the employment agreement, or in the event his employment is constructively terminated, Mr. Weis will be entitled to receive, in equal bi-weekly installments over a one-year period, compensation equal to one and five hundredths (1.05) multiplied by the highest cash compensation paid to Mr. Weis in any of the last three years immediately prior to his termination. In the event of a Change of Control, as defined in the amended and restated employment agreement, Mr. Weis is entitled to terminate the agreement within one year following such Change of Control, in which event he shall be entitled to receive, in a lump sum payable within thirty days of such termination, compensation equal to two and one-tenth (2.1) multiplied by the highest cash compensation paid to Mr. Weis in any of the last three fiscal years immediately prior to his termination. In any of the above events, (i) all of Mr. Weis’s unvested stock options and stock grants will vest immediately upon termination, and (ii) Mr. Weis will receive health insurance continuation as required by COBRA, salary accrued to the date of termination, and any accrued vacation pay. Mr. Weis has further agreed not to disclose the Company’s proprietary information, and, until one year following the termination of his employment agreement, not to compete with the Company or solicit the Company’s employees. Such non-compete clause may not be enforceable, or may be only partially enforceable, in state courts of relevant jurisdiction.
For illustrative purposes, if Sonic terminated the employment of Mr. Weis (not for cause) on September 30, 2018, Sonic would be obligated to pay $599,275, representing 1.05 times the cash compensation paid Mr. Weis during fiscal 2016 (fiscal year with highest cash compensation in three year period preceding September 30, 2018) and $1,198,550 if Mr. Weis elected to terminate his employment on September 30, 2018, following a change of control as defined in the employment agreement. If Sonic terminated Messrs. Minor, Norregaard and Lipps on September 30, 2018, (not for cause), or if Messrs. Minor, Norregaard and Lipps elected to terminate their employment following a demotion or alteration of duties on September 30, 2018, and a change of control as defined in the employment agreements had occurred, Sonic would be obligated to pay $334,237, $232,186 and $329,018, respectively (based on fiscal 2016 compensation which was the fiscal year with highest cash compensation in three year period
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
preceding September 30, 2018 for Messrs. Minor and Lipps and fiscal 2018 for Mr. Norregaard). In addition, any non-vested rights of Messrs. Weis, Minor, Norregaard and Lipps under the Employee Plans, would vest as of the date of employment termination. The value of accelerated vesting of the options under these circumstances would be $122,000 for Mr. Weis, $13,000 for Mr. Norregaard and $67,000 for both Messrs. Minor and Lipps.
Personal Benefits
Our executives receive a limited number of personal benefits certain of which are considered taxable income to them and which are described in the footnotes to the section of this Proxy Statement entitled “Summary Compensation Table ”.
Internal Revenue Code Section 162(m)
Internal Revenue Code Section 162(m) limits the ability of a public company to deduct compensation in excess of $1 million paid annually to each of the Chief Executive Officer and each of the other executive officers named in the Summary Compensation Table. There are exemptions from this limit, including compensation that is based on the attainment of performance goals that are established by the Committee and approved by the Company stockholders. No executive officer was affected by this limitation in fiscal 2018.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of Sonic Foundry has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s 2019 Proxy Statement included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, as amended and filed in a Form 10-K.
Proxy Statement.
COMPENSATION COMMITTEE
Mark D. Burish, Chair
Brian T. Wiegand
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
The following table sets forth the compensation of our principal executive officer, our principal financial officer and our other executive officer for the fiscal year ended September 30, 2018.
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Name and Principal Position
(a)
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Year
(b)
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Salary
($)
(c)
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Bonus
($)
(d)
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Stock Awards
($)
(e)
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Option Awards
($)(1)
(f)
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Non-Equity Incentive Plan Compensation
($)(2)
(g)
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Change in Pension
Value and
Non-qualified Deferred Compensation Earnings
($)
(h)
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All Other Compen-
sation
($)(3)
(i)
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Total
($)
(j)
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Gary R. Weis
Chief Executive and Chief Technology Officer
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2018
2017
2016
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489,880
487,136
475,615
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-
-
-
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-
-
-
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-
89,143
157,350
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-
-
95,123
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-
-
-
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4,304
7,537
9,021
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494,184
583,819
737,109
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Kenneth A. Minor
Chief Financial Officer and Secretary
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2018
2017
2016
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301,990
300,298
293,190
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-
-
-
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-
-
-
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-
49,028
76,355
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-
-
41,047
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-
-
-
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17,548
13,826
17,299
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319,538
363,152
435,883
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Robert M. Lipps
Executive Vice
President - Sales
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2018
2017
2016
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242,810
241,450
235,739
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-
-
-
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-
-
-
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-
49,028
76,355
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68,862
61,997
93,279
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-
-
-
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8,614
6,149
9,950
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320,286
358,624
415,323
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(1)
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The option awards in column (f) represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for stock options granted during the fiscal year. The assumptions and methodology used in calculating the compensation expense of the option awards are provided in Sonic’s Form 10-K. See Note 1, “Accounting for Stock Based Compensation” in the Notes to the Consolidated Financial Statements in Sonic’s Form 10-K. The amounts in this column represent value attributed to the awards at the date of grant and not necessarily the actual value that will be realized by the executive. There can be no assurance that the options will ever be exercised (in which case no value will be realized by the executive) or that the value on exercise will equal the ASC Topic 718 value.
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(2)
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The amounts in column (g) represent cash bonuses which were awarded for performance during the prior fiscal year based on a pre-established formula.
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(3)
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The amount shown under column (i) for the fiscal year 2018 includes Sonic’s matching contribution under our 401(k) plan of $4,304, $10,398 and $8,614 for Messrs. Weis, Minor and Lipps. Mr. Minor receives $650 per month as a car allowance of which the taxable personal portions were $7,150. Mr. Lipps receives a car allowance of $700 per month of which there was no taxable personal portion. Mr. Weis received car and housing allowances totaling $2,500 per month, of which there was no taxable personal portion.
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Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
Grants of Plan-Based Awards
The following table shows the plan-based awards granted to the Named Executive Officers during fiscal 2018.
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Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
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Estimated Future Payouts
Under Equity
Incentive
Plan Awards
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All other stock awards:
Number of
Shares of stock or units
(#)
(i)
|
All other option awards:
Number of
Securities
Underlying
Options
(#)
(j)
|
Exercise or base price of option awards
($/Sh)
(1)
(k)
|
Grant
Date fair
Value of
Stock and
option
awards
($)
(2)
(l)
|
|
Name
(a)
|
Grant
Date
(b)
|
Threshold
($)
(c)
|
Target
($)
(d)
|
Maximum
($)
(e)
|
Threshold
($)
(f)
|
Target
($)
(g)
|
Maximum
($)
(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary R. Weis
|
1/17/18
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
92,857
|
2.49
|
89,143
|
|
Kenneth A. Minor
|
1/17/18
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
51,071
|
2.49
|
49,028
|
|
Robert M. Lipps
|
1/17/18
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
51,071
|
2.49
|
49,028
|
|
|
|
|
(1)
|
Sonic grants employee stock options with exercise prices equal to the closing stock price on the date of grant.
|
|
|
|
|
(2)
|
The amount reported in column (l) represents the grant date fair value of the award following the required FASB ASC Topic 718 compensation methodology. Grant date fair value is calculated using the Lattice method. See Note 1, “Accounting for Stock Based Compensation” in the Notes to the Consolidated Financial Statements in Sonic’s Form 10-K for the fiscal year ended September 30, 2018 for an explanation of the methodology and assumptions used in FASB ASC Topic 718 valuation. With respect to the option grants, there can be no assurance that the options will ever be exercised (in which case no value will be realized by the executive) or that the value on exercise will equal the FASB ASC Topic 718 value.
|
Sonic grants options to its executive officers under our employee stock option plans. As of September 30, 2018, options to purchase a total of 2,029,741 shares were outstanding under the plans, and options to purchase 739,259 shares remained available for grant thereunder.
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
Outstanding Equity Awards at Fiscal Year-End
The following table shows information concerning outstanding equity awards as of September 30, 2018 held by the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
|
Name
(a)
|
Number
of
Securities Underlying Unexercised Options
(#)
Exercisable
(1)
(b)
|
Number
of
Securities Underlying Unexercised Options
(#)
Unexercisable
(1)
(c)
|
Equity Incentive
Plan
Awards:
Number
of
Securities Underlying Unexercised Unearned Options
(#)
(d)
|
Option Exercise Price
($)
(1)
(e)
|
Option Expiration Date
(1)
(f)
|
Number
of Shares
or Units
of Stock That Have
Not
Vested
(#)
(g)
|
Market Value of Shares or Units of Stock
That
Have
Not
Vested
($)
(h)
|
Equity Incentive Plan Awards:
Number
of
Unearned Shares, Units or Other Rights
That Have
Not
Vested
(#)
(i)
|
Equity Incentive Plan Awards:
Market or
Payout Value of Unearned Shares, Units or Other Rights
That Have Not
Vested
($)
(j)
|
|
Gary R. Weis
|
5,000*
2,000
2,000
2,000*
50,000*
73,000
61,500*
62,264*
33,716
25,014
92,857
|
0
0
0
0
0
0
0
0
16,858
50,028
0
|
None
|
5.00
5.50
6.90
14.83
8.68
7.80
9.45
9.36
7.17
4.75
2.49
|
11/3/2018
3/5/2019
3/4/2020
3/3/2021
9/30/2021
10/17/2022
10/28/2023
11/10/2024
11/5/2025
12/27/2026
1/17/2028
|
|
|
|
|
|
Kenneth A. Minor
|
6,000
14,120*
27,500*
40,000
33,825*
34,245*
18,546
13,758
51,071
|
0
0
0
0
0
0
9,273
27,515
0
|
None
|
5.26
15.21
9.46
7.80
9.45
9.36
7.17
4.75
2.49
|
12/2/2019
11/24/2020
10/24/2021
10/17/2022
10/28/2023
11/10/2024
11/5/2025
12/27/2026
1/17/2028
|
|
|
|
|
|
Robert M. Lipps
|
6,000
14,120*
27,500*
40,000
33,825*
34,245*
18,546
13,758
51,071
|
0
0
0
0
0
0
9,273
27,515
0
|
None
|
5.26
15.21
9.46
7.80
9.45
9.36
7.17
4.75
2.49
|
12/2/2019
11/24/2020
10/24/2021
10/17/2022
10/28/2023
11/10/2024
11/5/2025
12/27/2026
1/17/2028
|
|
|
|
|
|
|
|
|
(1)
|
All options were granted under either our stockholder approved Employee Stock Option Plans or the Non-Qualified Stock Option Plan. All unexercisable options listed in the table become exercisable over a three-year period in equal annual installments beginning one year from the date of grant.
|
* Options expired or were cancelled as of the date of this report.
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
Option Exercises and Stock Vested
The following table shows information concerning option exercises in fiscal 2018 by the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Number of Shares Acquired on Exercise
(#)
|
|
Value Realized on Exercise
($)
|
|
Number of Shares Acquired on Vesting
(#)
|
|
Value Realized on Vesting
($)
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation Committee Interlocks and Insider Participation
The members of the Executive Compensation Committee of Sonic's Board of Directors for fiscal 2018 were those named in the Executive Compensation Committee Report. No member of the Committee was at any time during fiscal 2018 or at any other time an officer or employee of Sonic Foundry, Inc.
No executive officer of Sonic Foundry, Inc. has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers serving as a member of the Board of Directors of Sonic Foundry.
DIRECTORS COMPENSATION
Our directors who are not also our full-time employees, receive an annual retainer of $20,000 in addition to a fee of $1,500 for attendance at each meeting of the Board of Directors and $1,000 per committee meeting attended. In addition, the chair of the Audit Committee receives an Audit Committee annual retainer of $8,000 and the chair of the Compensation Committee receives a $3,000 Compensation Committee annual retainer. Mr. Burish receives an annual retainer of $35,000 as compensation for his services as Chair of the Board of Directors. The total fee compensation earned by the four non- employee directors combined in Fiscal 2018 was $218,020. When traveling from out-of-town, the members of the Board of Directors are also eligible for reimbursement for their travel expenses incurred in connection with attendance at Board meetings and Board Committee meetings. Directors who are also employees do not receive any compensation for their participation in Board or Board Committee meetings.
Pursuant to the 2008 Sonic Foundry Non-Employee Amended Directors Stock Option Plan (the “Directors Plan”) we grant to each non-employee director who is reelected or who continues as a member of the Board of Directors at each annual stockholders meeting a stock option to purchase 2,000 shares of Common Stock. Further, the chair of our Audit Committee receives an additional stock option grant to purchase 500 shares of Common Stock per year pursuant to Sonic’s Non-Employee Amended Directors Stock Option Plan.
The exercise price of each stock option granted was equal to the market price of Common Stock on the date the stock option was granted. Stock options issued under the Directors Plan vest fully on the first anniversary of the date of grant and expire after ten years from date of grant. An aggregate of 150,000 shares are reserved for issuance under the Directors Plan.
If any change is made in the stock subject to the Directors Plan, or subject to any option granted thereunder, the Directors Plan and options outstanding thereunder will be appropriately adjusted as to the type(s), number of securities and price per share of stock subject to such outstanding options.
Sonic Foundry, Inc.
Annual Report on Form 10-K/A
For the Year Ended September 30, 2018
The options and warrants set forth above have an exercise price equal to the fair market value of the underlying common stock on the date of grant. The term of all such options is ten years.
The following table summarizes cash and equity compensation provided our non-employee directors during the fiscal year ended September 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
(a)
|
|
Fees Earned Or Paid In Cash
($)(1)
(b)
|
|
Stock Awards
($)(2)
(c)
|
|
Option Awards
($)(3)
(d)
|
|
Non-Equity Incentive
Plan Compen-sation
($)
(e)
|
|
Change in Pension
Value and
Non-qualified Deferred Compen-
sation
Earnings
($)
(f)
|
|
All Other Compensation
($)
(g)
|
|
Total
($)
(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark D. Burish
|
|
67,000
|
|
-
|
|
1,360
|
|
-
|
|
-
|
|
-
|
|
68,360
|
|
Frederick H. Kopko
|
|
30,000
|
|
-
|
|
1,360
|
|
-
|
|
-
|
|
-
|
|
31,360
|
|
Nelson A. Murphy
|
|
48,595
|
|
-
|
|
1,700
|
|
-
|
|
-
|
|
-
|
|
50,295
|
|
David F. Slayton
|
|
38,425
|
|
-
|
|
1,360
|
|
-
|
|
-
|
|
-
|
|
39,785
|
|
Brian T. Wiegand
|
|
34,000
|
|
-
|
|
1,360
|
|
-
|
|
-
|
|
-
|
|
35,360
|
|
|
|
|
(1)
|
The amount reported in column (b) is the total of retainer fees and meeting attendance fees paid in cash.
|
|
|
|
|
(2)
|
The amount reported in column (c) is the total of retainer fees and meeting attendance fees awarded in common stock.
|
|
|
|
|
(3)
|
The amount reported in column (d) is the aggregate grant date fair value of options granted during the fiscal year ended September 30, 2018 in accordance with FASB ASC Topic 718. Each director received an option award of 2,000 shares on May 17, 2018 at an exercise price of $2.24 with a grant date fair value of $1,360. In addition, Mr. Murphy received a grant of 500 shares on May 17, 2018 at an exercise price of $2.24 with a grant date fair value of $340 in connection with his position as chair of the Audit Committee.
|