Document:

<PAGE>

                                                                     Exhibit 4.2

                           SHARE EXCHANGE AGREEMENT

          MEMORANDUM OF AGREEMENT made as of August 24, 2000.

B E T W E E N:

          SONIC FOUNDRY, INC., a corporation existing under the laws of the
          State of Maryland,

          (hereinafter referred to as "SOFO")

                                    - and -

          SONIC FOUNDRY (NOVA SCOTIA), INC., a corporation incorporated under
          the laws of the Province of Nova Scotia,

          (hereinafter referred to as the "Corporation")

                                    - and -

          CHARLES FERKRANUS, MICHAEL FERKRANUS, 1096159 ONTARIO LIMITED, and
          1402083 ONTARIO LIMITED,

          (such person or any permitted transferee(s) hereinafter sometimes
          referred to as the "Non-Voting Exchangeable Shareholders", or
          "Holders")

                                    - and -

          such other person or persons (who shall also be referred to as Non-
          Voting Exchangeable Shareholders or Holders) as may become bound by
          this Agreement upon exercise of any options exercisable into Non-
          Voting Exchangeable Shares.

          WHEREAS pursuant to a share purchase agreement entered into as of June
1, 2000 (the "Share Purchase Agreement") among the Holders, Dan McLellan
("McLellan"), Curtis Staples ("Staples"), Bank of Montreal Capital Corp., RoyNat
Inc., DGC Entertainment Ventures Corp. and SOFO (the "Agreement"), the
Corporation has acquired all of the shares of Magnetiscope Inc. together with
all of the shares of International Image Services, Inc. which are not owned by
Magnetiscope Inc.;
<PAGE>

                                      -2-

          AND WHEREAS SOFO, B. Andrus Wilson, the Holders, McLellan, Staples,
Bank of Montreal Capital Corp., RoyNat Inc. and DGC Entertainment Ventures Corp.
have entered into a stock registration rights agreement dated as of August 24,
2000 (the "Stock Registration Rights Agreement");

          AND WHEREAS the authorized capital of the Corporation consists of
10,000,000 non-voting exchangeable shares (the "Non-Voting Exchangeable Shares")
and 10,000,000 common shares (the "Common Shares");

          AND WHEREAS SOFO subscribed for 297,385 Common Shares of the
Corporation in consideration of the payment by SOFO to the Corporation of Four
Million, One Hundred and Seventy-Four Thousand, Eight Hundred and Eighty-Two
(C$4,174,882.00) Dollars in cash, which Common Shares have been duly issued to
SOFO as fully paid and non-assessable;

          AND WHEREAS pursuant to the Share Purchase Agreement, the Holders
received an aggregate of four hundred and twelve thousand, three hundred and
thirty-six (412,336) Non-Voting Exchangeable Shares;

          AND WHEREAS the parties hereto desire to make appropriate provision
and to establish a procedure whereby SOFO or its Affiliates will take certain
actions and make certain payments and deliveries necessary to ensure that the
Corporation will be able to make certain payments and to deliver common shares
of SOFO (the "SOFO Common Shares"), in satisfaction of the obligations of the
Corporation under the Corporation Articles;

          AND WHEREAS SOFO and the Corporation have entered into a support
agreement dated as of August 24, 2000 (the "Support Agreement");

          AND WHEREAS McLellan and Staples have each entered into an option
agreement with the Corporation dated as of August 24, 2000 (each, a "Buyer Non-
Voting Exchangeable Share Option Agreement"), whereby the Corporation has
granted McLellan 48,510 options and Staples 24,255 options to purchase Non-
Voting Exchangeable Shares;

          AND WHEREAS capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed thereto in the memorandum and articles
of association of the Corporation dated August 16, 2000 (the "Corporation
Articles");

          AND WHEREAS the aforementioned transfer of the shares of Magnetiscope
Inc. and International Image Services, Inc. by certain Holders to the
Corporation is being carried out in order to ensure that eligible Holders may
take advantage of the provisions of subsection 85(1) of the Income Tax Act
(Canada);

          NOW THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the parties agree as follows:
<PAGE>

                                      -3-

                                   ARTICLE 1
                         DEFINITIONS AND INTERPRETATION

1.1  In this Agreement, unless the context otherwise requires, the following
words and expressions shall have the meanings set forth below:

(a)  "Affiliate" of any person means any person directly or indirectly
     controlled by, or under common control of, that person.  For the purposes
     of this definition, "control" (including, with correlative meanings, the
     terms "controlled by" and "under common control of") as applied to any
     person, means the possession by another person, directly or indirectly, of
     the power to direct or cause the direction of the management and policies
     of that first mentioned person, whether through the ownership of voting
     securities, by contract or otherwise.

(b)  "Automatic Exchange Right" means the benefit of the obligation of SOFO to
     effect the automatic exchange of SOFO Common Shares for Non-Voting
     Exchangeable Shares pursuant to Section 2.2.

(c)  "Date of Expiry" means the fifth anniversary of the date of this Agreement
     first indicated above;

(d)  "Exchange Right" has the meaning ascribed thereto in Section 2.1 hereof;

(e)  "Insolvency Event" means (i) the institution by the Corporation of any
     proceeding to be adjudicated a bankrupt or insolvent or to be wound up;
     (ii) the consent of the Corporation to the institution of bankruptcy,
     insolvency or winding-up proceedings against it; (iii) the filing of a
     petition, answer or consent seeking dissolution or winding-up under any
     bankruptcy, insolvency or analogous laws, including without limitation the
     Companies' Creditors' Arrangement Act (Canada) and the Bankruptcy and
     Insolvency Act (Canada), and the failure by the Corporation to contest in
     good faith any such proceedings commenced in respect of the Corporation
     within 30 days of becoming aware thereof; (iv) the consent by the
     Corporation to the filing of any such petition or to the appointment of a
     receiver; or (v) the Corporation not being permitted, pursuant to solvency
     requirements of applicable law, to redeem any Retracted Shares pursuant to
     Section 5.6 of the rights, privileges, restrictions and conditions
     attaching to the Non-Voting Exchangeable Shares as set out in the
     Corporation Articles; and

(f)  "Share Exchange" has the meaning ascribed thereto in Section 4.2.
<PAGE>

                                      -4-

                                   ARTICLE 2
                    EXCHANGE RIGHT AND AUTOMATIC EXCHANGE ON
                              LIQUIDATION OF SOFO

2.1       Exchange Right.

     (a)  SOFO agrees with the Holders from time to time of the Non-Voting
          Exchangeable Shares that upon the occurrence and during the
          continuance of an Insolvency Event, any Holder may require, with
          respect to all but not less than all of the Non-Voting Exchangeable
          Shares held by such Holder, SOFO to acquire each such Non-Voting
          Exchangeable Share then held by such Holder and tendered to SOFO in
          exchange, on a per share basis, for the following consideration (the
          "Exchange Right"):

          (i)  one SOFO Common Share for each such Non-Voting Exchangeable
               Share, which SOFO shall cause to be delivered to such Holder
               (less any taxes required to be deducted or withheld therefrom);
               plus

          (ii) the amount by which the declared dividends on each such SOFO
               Common Share exceeds, if at all, the declared and paid dividends
               on each Non-Voting Exchangeable Share, which amount shall be paid
               in cash (less any tax required to be deducted or withheld
               therefrom by SOFO), provided that if the record date for any
               declared but unpaid dividend occurs after Exchange Effective
               Date, the amount payable to the Holder shall not include such
               additional amount equal to the declared but unpaid dividends.

          SOFO acknowledges receipt from the Holders of good and valuable
          consideration (and the adequacy thereof) for the grant of the Exchange
          Right to the Holders.

     (b)  If any Holder wishes to exercise the Exchange Right in respect of all
          the Non-Voting Exchangeable Shares registered in such Holder's name,
          the Holder shall deliver to SOFO, in person or by certified or
          registered mail, at the principal corporate office of SOFO, the
          certificates representing such Non-Voting Exchangeable Shares
          accompanied by one or more share transfer powers endorsed in blank
          executed by such Holder, together with a notice:

          (i)  specifying the number of Non-Voting Exchangeable Shares in
               respect of which the Exchange Right is being exercised; and

          (ii) representing and warranting that such Holder is not a non-
               resident of Canada within the meaning of the Income Tax Act
               (Canada) and, if the Holder does not so represent and warrant,
               the provisions of Section 5.6 shall apply.

     (c)  The exchange with SOFO of the Non-Voting Exchangeable Shares in
          respect of which a Holder shall have exercised such Holder's Exchange
          Right shall be deemed for all purposes to be completed on the date
          that the certificates
<PAGE>

                                      -5-

          representing such Non-Voting Exchangeable Shares, the share powers and
          notice referred to in Section 2.1(b) are received by SOFO (the
          "Exchange Effective Date") and, in particular, as of and with effect
          from the Exchange Effective Date:

          (i)  such Holder shall be deemed to have transferred to SOFO all of
               such Holder's right, title and interest in and to, and SOFO shall
               be deemed to have acquired, such Non-Voting Exchangeable Shares;
               and

          (ii) such Holder shall be deemed to have become the holder of the SOFO
               Common Shares issued upon such exchange,

          notwithstanding any failure by SOFO to comply with the delivery
          requirements of Section 2.1(d).

     (d)  Subject to compliance with the provisions of Section 5.6, within five
          Business Days after an Exchange Effective Date with respect to a
          Holder's exercise of the Exchange Right, SOFO shall deliver or cause
          to be delivered to each Holder the certificates for the number of SOFO
          Common Shares issued upon exercise of such Exchange Right.

     (e)  All Holders who duly exercise the Exchange Right as provided hereunder
          on the same Exchange Effective Date shall be treated equally, without
          preference or distinction, regardless of any differences in the
          respective times on such Exchange Effective Date at which they
          exercise such Exchange Right.

2.2       Automatic Exchange on Liquidation of SOFO.

     (a)  SOFO will give each Holder written notice of each of the following
          events at the time set forth below:

          (i)  in the event of any determination by the board of directors of
               SOFO to institute voluntary liquidation, dissolution or winding-
               up proceedings with respect to SOFO or to effect any other
               distribution of the assets of SOFO among its shareholders for the
               purpose of winding-up its affairs, at least 45 days prior to the
               proposed effective date of such liquidation, dissolution or
               winding-up or other distribution; and

          (ii) as soon as practicable, upon the earlier of (x) receipt by SOFO
               of notice of, or (y) SOFO otherwise becoming aware of any
               threatened or instituted claim, suit, petition or other
               proceedings with respect to the involuntary liquidation,
               dissolution or winding-up of SOFO or to effect any other
               distribution of the assets of SOFO among its shareholders for the
               purpose of winding-up its affairs.

     (b)  In order that the Holders (other than SOFO or any Affiliate) will be
          able to participate on a pro rata basis with the holders of SOFO
          Common Shares in the distribution of assets of SOFO in connection with
          an event contemplated by Section 2.2(a)(i) or Section 2.2(a)(ii) above
          (the "SOFO Liquidation Event"),
<PAGE>

                                      -6-

          on the fifth Business Day prior to the effective date of a SOFO
          Liquidation Event or such other date as may be desirable or necessary
          to ensure that the Holders shall participate on a pro-rata basis with
          the holders of SOFO Common Shares in the distribution of assets of
          SOFO (the "SOFO Liquidation Event Effective Date") all of the then
          outstanding Non-Voting Exchangeable Shares shall be automatically
          exchanged for SOFO Common Shares (the "Automatic Exchange"). To effect
          the Automatic Exchange, SOFO shall acquire each Non-Voting
          Exchangeable Share outstanding on the SOFO Liquidation Event Effective
          Date held by Holders (other than SOFO or an Affiliate of SOFO), and
          each Holder shall transfer the Non-Voting Exchangeable Shares held by
          him at such time, in exchange, on a per share basis, for the following
          consideration (the "SOFO Liquidation Amount"):

          (i)  one SOFO Common Share for each such Non-Voting Exchangeable
               Share, which SOFO shall cause to be delivered to such Holder
               (less any taxes required to be deducted or withheld therefrom);
               plus

          (ii) the amount by which the declared dividends on each such SOFO
               Common Share exceeds, if at all, the declared and paid dividends
               on each such Non-Voting Exchangeable Share, which amount shall be
               paid in cash (less any tax required to be deducted or withheld
               therefrom).

     (c)  On or promptly after the SOFO Liquidation Event Effective Date, SOFO
          shall deliver or cause to be delivered to each Holder at the address
          of the Holder recorded in the securities register of the Corporation
          for the Non-Voting Exchangeable Shares, or by holding for pick-up by
          the Holder, at the principal corporate office of SOFO, payment of the
          total SOFO Liquidation Amount for each such Non-Voting Exchangeable
          Share upon:

          (i)  presentation and surrender of the certificates representing such
               Non-Voting Exchangeable Shares, together with one or more share
               transfer powers endorsed in blank executed by such Holder; and

          (ii) representation and warranty by such Holder that the Holder is not
               a non-resident of Canada within the meaning of the Income Tax Act
               (Canada) and, if the Holder does not so represent and warrant,
               the provisions of Section 5.6 shall apply.

     (d)  SOFO shall have the right at any time after the sending of the notice
          pursuant to Section 2.2(a) to deposit or cause to be deposited the
          total SOFO Liquidation Amount in respect of the Non-Voting
          Exchangeable Shares represented by certificates that have not at the
          date of such deposit been surrendered by the Holders thereof in
          connection with such Automatic Exchange, in a custodial account with
          any chartered bank or trust company in Canada in trust for the Holder.
          Upon the later of such deposit being made and the SOFO Liquidation
          Event Effective Date:
<PAGE>

                                      -7-

          (i)  the Non-Voting Exchangeable Shares in respect whereof such
               deposit shall have been made shall be exchanged and the rights of
               the Holders thereof after such deposit or the SOFO Liquidation
               Event Effective Date, as the case may be, shall be limited to
               receiving the proportionate part of the total SOFO Liquidation
               Amount for such Non-Voting Exchangeable Shares so deposited,
               against presentation and surrender of the said certificates held
               by them, respectively, in accordance with the foregoing
               provisions; and

          (ii) upon such payment or deposit of the total SOFO Liquidation
               Amount, the Holders shall thereafter be considered and deemed for
               all purposes to be holders of the SOFO Common Shares delivered to
               them.

2.3       Exercise of Exchange Right Subsequent to Retraction.  In the event
that a Holder has exercised such Holder's right under Article 5 of the
Corporation Articles to require the Corporation to redeem any or all of the Non-
Voting Exchangeable Shares held by such Holder (the "Retracted Shares") and is
notified by the Corporation pursuant to Section 5.6 of the Corporation Articles
that the Corporation will not be permitted by virtue of the provisions of the
Act to redeem all such Retracted Shares, and provided that SOFO shall not have
exercised the Retraction/Redemption Call Right with respect to the Retracted
Shares, the Retraction Request will constitute and will be deemed to constitute
notice from the Holder to SOFO that the Holder is exercising the Exchange Right
with respect to those Retracted Shares which the Corporation is unable to
redeem. In any such event, the Corporation hereby agrees to notify SOFO as soon
as practicable of such prohibition against the Corporation redeeming all of the
Retracted Shares and to forward or cause to be forwarded to SOFO all relevant
materials delivered by the Holder to the Corporation (including without
limitation a copy of the Retraction Request) in connection with such proposed
redemption of the Retracted Shares, and SOFO agrees to purchase the Retracted
Shares (by issuing SOFO Common Shares in exchange therefor) that the Corporation
is not permitted to redeem in accordance with the provisions of the Corporation
Articles.

                                   ARTICLE 3
                       CERTAIN RIGHTS OF SOFO TO ACQUIRE
                         NON-VOTING EXCHANGEABLE SHARES

3.1       SOFO Liquidation Call Right.

     (a)  In the event (1) of the liquidation, dissolution or winding-up of the
          Corporation, whether voluntary or involuntary, or any other
          distribution of assets of the Corporation among its shareholders for
          the purpose of winding-up its affairs, or (2) the Corporation passes a
          resolution (the "Resolution") to sell, lease or exchange all or
          substantially all the property of the Corporation other than in the
          ordinary course of business, SOFO shall have the overriding right (the
          "Liquidation Call Right") to purchase immediately prior to the
          effective date of such liquidation, dissolution or winding-up or the
          implementation of the
<PAGE>

                                      -8-

          Resolution, as the case may be (the "Corporation Liquidation Date"),
          all but not less than all of the Non-Voting Exchangeable Shares from
          all but not less than all of the Holders (other than SOFO or any
          Affiliate of SOFO) in exchange, on a per share basis, for the
          following consideration (the "Liquidation Call Price"):

          (i)  one SOFO Common Share for each such Non-Voting Exchangeable
               Share, which SOFO shall cause to be delivered to such Holder
               (less any taxes required to be deducted or withheld therefrom);
               plus

          (ii) the amount by which the declared dividends on each such SOFO
               Common Share exceeds, if at all, the declared and paid dividends
               on each Non-Voting Exchangeable Share, which amount shall be paid
               in the same manner as the dividend on the Non-Voting Exchangeable
               Shares (less any tax required to be deducted or withheld
               therefrom by SOFO), provided that if the record date for any
               declared but unpaid dividends occurs after the Corporation
               Liquidation Date, the Liquidation Amount shall not include such
               additional amount equal to the declared but unpaid dividends.

     (b)  To exercise the Liquidation Call Right, SOFO must notify (or cause the
          Corporation to notify) the Holders and the Corporation of SOFO's
          intention to exercise such right at least 30 days before the
          Corporation Liquidation Date in the case of a voluntary liquidation,
          dissolution or winding-up of the Corporation and at least five
          Business Days before the Corporation Liquidation Date in the case of
          an involuntary liquidation, dissolution or winding-up of the
          Corporation. If SOFO exercises the Liquidation Call Right, immediately
          prior to the Corporation Liquidation Date, SOFO will purchase and the
          Holders will sell all of the Non-Voting Exchangeable Shares then
          outstanding for a price per share equal to the Liquidation Call Price.

3.2       Retraction/Redemption Call Right.

     (a)  In the event that (A) a Holder has exercised such Holder's right (the
          "Retraction Right") under Article 5 of the Corporation's Articles to
          require the Corporation to redeem any or all Retracted Shares, or (B)
          the Corporation proposes to redeem the Non-Voting Exchangeable Shares
          on or after the Date of Expiry under Article 6 of the Corporation's
          Articles, then in either case, SOFO shall have the overriding right
          (the "Retraction/Redemption Call Right") to acquire such Non-Voting
          Exchangeable Shares from such Holder in exchange, on a per share
          basis, for the following consideration (the "Retraction/Redemption
          Call Price"):

          (i)  one SOFO Common Share for each such Non-Voting Exchangeable
               Share, which SOFO shall cause to be delivered to such Holder
               (less any taxes required to be deducted or withheld therefrom);
               plus

          (ii) the amount by which the declared dividends on each such SOFO
               Common Share exceed, if at all, the declared and unpaid dividends
               on each Non-Voting Exchangeable Share, which amount shall be paid
               in the same
<PAGE>

                                      -9-

               manner as the dividend on the Non-Voting Exchangeable Shares
               (less any tax required to be deducted or withheld therefrom by
               SOFO), provided that if the record date for any declared but
               unpaid dividends occurs after the Redemption Date or Retraction
               Date, as the case may be, the Retraction/Redemption Call Price
               shall not include such additional amount equal to the declared
               but unpaid dividends.

     (b)  To exercise the Retraction/Redemption Call Right, SOFO must notify (or
          cause the Corporation to notify) such Holders as are exercising their
          Retraction Right or whose Non-Voting Exchangeable Shares are proposed
          to be redeemed, and notify the Corporation, of SOFO's intention to
          exercise such right within no more than 5 Business Days after SOFO has
          been notified by the Corporation or the Holder, as the case may be,
          that he or it is exercising such Holder's Retraction Right or that the
          Corporation proposes to redeem such Non-Voting Exchangeable Shares. If
          SOFO exercises the Retraction/Redemption Call Right, on the Retraction
          Date or the Redemption Date, as the case may be, SOFO will purchase
          and the Holders (other than SOFO or an Affiliate) will sell such Non-
          Voting Exchangeable Shares for a price per share equal to the
          Retraction/Redemption Call Price.

3.3       Procedure for Payment of Liquidation Call Price and
          Retraction/Redemption Call Price.

     (a)  In the event SOFO has exercised the Liquidation Call Right or the
          Retraction/Redemption Call Right, as the case may be, as provided
          herein, then immediately prior to the Corporation Liquidation Date or
          on or after the Retraction Date or the Redemption Date, as the case
          may be, SOFO shall deliver or cause to be delivered to each Holder
          (other than SOFO or an Affiliate) at the address of the Holder
          recorded in the securities register of the Corporation for the Non-
          Voting Exchangeable Shares, or as the Holder may otherwise direct,
          payment of the Liquidation Call Price or the Retraction/Redemption
          Call Price, as the case may be, for each such Non-Voting Exchangeable
          Share upon:

          (i)  presentation and surrender of the certificates representing such
               Non-Voting Exchangeable Shares to SOFO at its principal corporate
               office, in person or by certified or registered mail, together
               with one or more share transfer powers endorsed in blank executed
               by such Holder; and

          (ii) a representation and warranty by such Holder that the Holder is
               not a non-resident of Canada within the meaning of the Income Tax
               Act (Canada) and, if such Holder does not so represent and
               warrant, the provisions of Section 5.6 shall apply.

     (b)  SOFO shall have the right at any time after the sending of the notice
          of its intention to exercise the Liquidation Call Right or
          Retraction/Redemption Call Right, as the case may be, to deposit or
          cause to be deposited the Liquidation Call Price or the
          Retraction/Redemption Call Price, as the case may be, in respect of
          the Non-Voting Exchangeable Shares represented by certificates that
          have not at

<PAGE>

                                      -10-

          the date of such deposit been surrendered by the Holders thereof in
          connection with such Liquidation Call Right or Retraction/Redemption
          Call Right, as the case may be, in a custodial account with any
          chartered bank or trust company in Canada in trust for the Holder.
          Upon the later of such deposit being made and the Corporation
          Liquidation Date or Retraction Date or Redemption Date, as the case
          may be:

          (i)  the Non-Voting Exchangeable Shares in respect whereof such
               deposit shall have been made shall be exchanged and the rights of
               the Holders thereof after such deposit or the Corporation
               Liquidation Date or the Retraction Date or Redemption Date, as
               the case may be, shall be limited to receiving the proportionate
               part of the total Liquidation Call Price or Retraction/Redemption
               Call Price, as the case may be (less any taxes required to be
               deducted or withheld therefrom), for such Non-Voting Exchangeable
               Shares so deposited, against presentation and surrender of the
               said certificates held by them, respectively, in accordance with
               the foregoing provisions; and

          (ii) upon such payment or deposit of the Liquidation Call Price or
               Retraction/Redemption Call Price, as the case may be, the Holders
               shall thereafter be considered and deemed for all purposes to be
               holders of the SOFO Common Shares delivered to them. Payment of
               the Liquidation Call Price or the Retraction/Redemption Call
               Price, as the case may be, which remains unclaimed within six (6)
               years from the date of deposit of such payment by or on behalf of
               SOFO with any chartered bank or trust company in Canadian trust
               for the Holder shall be forfeited to SOFO or any Affiliate as
               SOFO may direct.

3.4       The Liquidation Call Right and the Retraction/Redemption Call Right
that are exercisable under certain circumstances under this Agreement by SOFO
shall also, at SOFO's option, be exercisable by any Affiliate of SOFO, with the
result that all references to SOFO in connection with the exercise of the
Liquidation Call Right and the Retraction/Redemption Call Right and the right of
SOFO to purchase the Non-Voting Exchangeable Shares pursuant to the exercise of
such rights shall be deemed to refer to such Affiliate, and further, an
Affiliate of SOFO shall, at SOFO's option, be entitled to enforce and/or fulfil
SOFO's and the Corporation's rights and obligations under the Liquidation Call
Right, the Retraction/Redemption Call Right, the Exchange Right, the Automatic
Exchange Right and under Articles 4, 5 and 6 of the Corporation Articles and in
exercising such rights, such Affiliate will not be required to purchase Non-
Voting Exchangeable Shares from itself, SOFO or any other Affiliate of SOFO. For
greater certainty, notwithstanding any such assignment, SOFO shall not be
released from its obligations hereunder if the Affiliate fails to perform SOFO's
obligations hereunder.

<PAGE>

                                      -11-

                                   ARTICLE 4
                            CERTAIN SOFO COVENANTS

4.1       Exchange Right. As long as Non-Voting Exchangeable Shares are
outstanding, SOFO will take all actions and do all such things as are necessary
or desirable to perform the obligations of SOFO with respect to the exercise by
the Holders of the Exchange Right, including the delivery of SOFO Common Shares
to the Holders of the Non-Voting Exchangeable Shares in accordance with the
provisions of the Corporation Articles and the terms and provisions hereof.

4.2       Encumbrances, Liens. SOFO hereby represents, warrants and covenants
that all SOFO Common Shares issued under this Agreement, including pursuant to
the exercise by a Holder of such Holder's Exchange Right, the Automatic
Exchange, the exercise of such Holder's rights pursuant to the provisions of the
Corporation Articles, or the exercise by SOFO of the Liquidation Call Right or
the Retraction/Redemption Call Right (each, a "Share Exchange") shall be duly
issued as fully paid and non-assessable and shall be free and clear of any lien,
claim or encumbrance.

4.3       Transfer Agent. SOFO covenants that it will supply or will cause to be
supplied to its transfer agent with duly executed share certificates for the
purpose of completing a Share Exchange.

4.4       Notice of Insolvency Event. As soon as practicable following the
occurrence of an Insolvency Event or any event that with the giving of notice or
the passage of time or both would be an Insolvency Event, SOFO and the
Corporation shall give written notice thereof to each Holder, which notice shall
contain a brief statement of the rights of the Holders with respect to the
Exchange Right.

4.5       Obligation to Pay Dividends. In the event that a dividend is declared
but not paid on the Non-Voting Exchangeable Shares prior to the occurrence of a
Share Exchange because the record date (the "Record Date") for such dividend
falls on a date subsequent to the date of such Share Exchange, SOFO shall pay
the amount equivalent to such dividend or cause such amount to be paid to the
Holder of the Non-Voting Exchangeable Shares subject to the Share Exchange in
respect of the SOFO Common Shares received by such Holder. If SOFO does not pay
or cause such amount to be paid to the Holder on the Record Date, the
Corporation shall be required to make a payment of such amount forthwith to such
Holder.

4.6       Registration of SOFO Common Shares. SOFO covenants to register the
SOFO Common Shares received by the Holders hereunder in accordance with the
provision of the Stock Registration Rights Agreement.

4.7       Compliance with Support Agreement. SOFO covenants that it will comply
with its obligations under the Support Agreement.

<PAGE>

                                      -12-

                                   ARTICLE 5
                                    GENERAL

5.1       SOFO and the Corporation.

     (a)  The provisions of this Agreement shall be binding upon, and inure to
          the benefit of, the respective transferees, successors, assigns,
          executors, administrators and legal representatives of SOFO, the
          Corporation and the Holders, provided, however, that this Agreement
          may not be assigned by the Holders. This Agreement may not be assigned
          by SOFO or the Corporation, in whole or in part, except to one or more
          of their Affiliates designated to perform their obligations hereunder,
          or except as expressly provided herein. For greater certainty,
          notwithstanding any such assignment, SOFO shall not be released from
          its obligations hereunder if an Affiliate fails to perform SOFO's
          obligations hereunder.

     (b)  The Liquidation Call Right and the Retraction/Redemption Call Right
          exercisable by SOFO shall also, at SOFO's option, be exercisable by
          any Affiliate of SOFO, with the result that all references to SOFO in
          connection with the exercise of the Liquidation Call Right and the
          Retraction/Redemption Call Right and the right of SOFO to purchase the
          Non-Voting Exchangeable Shares pursuant to the exercise of such rights
          shall be deemed to refer to such Affiliate.  An Affiliate of SOFO
          shall, at SOFO's option, be entitled to enforce and/or fulfill SOFO's
          and the Corporation's rights and obligations under the Liquidation
          Call Right, the Retraction/Redemption Call Right, the Exchange Right
          and Automatic Exchange Right and under Articles  4, 5 and 6 of the
          Corporation Articles and in exercising such rights, such Affiliate
          will not be required to purchase Non-Voting Exchangeable Shares from
          itself, SOFO or any other Affiliate of SOFO.  SOFO shall remain liable
          for its obligations hereunder if the Affiliate fails to perform or
          fulfil such obligations.

5.2       SOFO Successors. SOFO shall not voluntarily enter into any transaction
(whether by way of reconstruction, reorganization, consolidation, merger,
transfer, sale, lease or otherwise) whereby all or substantially all of its
undertaking, property and assets would become the property of any other person
or, in the case of a merger, of the continuing corporation resulting therefrom
(a "Material Transaction") unless such other person or continuing corporation
(herein called the "SOFO Successor"), by operation of law, becomes bound by the
terms and provisions of this Agreement or, if not so bound, executes, prior to
or contemporaneously with the consummation of such transaction an agreement
supplemental hereto as such other instruments (if any) that are, in the opinion
of a single legal counsel to such Holders (other than SOFO or its Affiliates),
necessary or advisable to evidence the assumption by such SOFO Successor of
liability for all moneys payable and property deliverable hereunder and the
covenant of such SOFO Successor to pay and deliver or cause to be delivered the
same and its agreement to observe and perform all the covenants and obligations
of SOFO under this Agreement.

<PAGE>

                                      -13-

5.3       Notice of Material Transactions. SOFO shall provide at least 30 days
prior written notice of the closing of any Material Transaction to the Holders.
SOFO shall also provide at least 15 days' prior written notice of the expiration
date of any tender offer made for the shares of SOFO.

5.4       Wholly-Owned Subsidiaries. Subject to Article 3 hereof, nothing herein
shall be construed as preventing the amalgamation, merger or other combination
of any wholly-owned direct or indirect subsidiary of SOFO, other than the
Corporation, with or into SOFO or the winding-up, liquidation or dissolution of
any wholly-owned subsidiary of SOFO, other than the Corporation, provided that
all of the assets of such subsidiary are transferred to, and all obligations of
such subsidiary are assumed by, SOFO or another wholly-owned direct or indirect
subsidiary of SOFO, provided that SOFO shall continue to be liable for its
obligations hereunder and the obligations of its subsidiaries.

5.5       Transfers by Holders.  Each Holder acknowledges that the Corporation
Articles and this section restrict transfers of its Non-Voting Exchangeable
Shares and accordingly, that such Holder will not be able to transfer his or its
Non-Voting Exchangeable Shares (except to the Corporation, SOFO or an Affiliate
pursuant to the Corporation Articles and/or this Agreement).  At the time a
Share Exchange occurs, the Holder shall: (a) be a resident of Ontario or British
Columbia; or (b) resident in a jurisdiction in which such Holder will be legally
entitled under applicable securities and other laws of its relevant jurisdiction
of residence to exercise their rights with respect to the Non-Voting
Exchangeable Shares and can agree to be legally bound by this Agreement and the
Stock Registration Rights Agreement, which legal rights and capacity shall, in
any event, be confirmed in writing by an opinion of legal counsel from the
relevant jurisdictions satisfactory to SOFO.

5.6       Non-Resident of Canada at Time of Exchange. Notwithstanding the
provisions of any section of this Agreement, in the event that a Holder does not
represent and warrant that such Holder is not a non-resident of Canada within
the meaning of the Income Tax Act (Canada) prior to the occurrence of any Share
Exchange, such Holder shall provide to SOFO a certificate pursuant to section
116 of the Income Tax Act (Canada) or any successor provision thereto and any
analogous provisions of provincial tax law (such certificate being hereinafter
referred to as a "Certificate") having a certificate limit which is not less
than the fair market value of the SOFO Common Shares which such Holder is
entitled to receive upon such exchange and otherwise conforming in all respects
with the provisions of section 116 of the Income Tax Act (Canada) or any
successor provisions thereto and any analogous provisions of provincial tax law,
in each case as amended or re-enacted from time to time. If such Holder does not
provide such Certificate to SOFO or its Affiliate on or before the date on which
the Share Exchange is to occur, or if the Certificate is for an amount less than
the fair market value of the SOFO Common Shares which such Holder is entitled to
receive, SOFO or its Affiliate shall be entitled to withhold such amounts,
including SOFO Common Shares, as would have a fair market value equal to the
amount of any taxes that SOFO or its Affiliate would be required to withhold and
remit to the Canada Customs and Revenue Agency on behalf of the Holder pursuant
to Section 116 of the Income Tax Act (Canada) or any successor thereto and any
analogous provisions of provincial tax law, in each case as amended or re-
enacted from time to time. SOFO or its Affiliate shall be entitled to sell such
SOFO Common Shares to the Holder or otherwise, and to remit the sale proceeds to
the Canada Customs and Revenue Agency and/or a relevant provincial tax authority

<PAGE>

                                      -14-

on account of any such taxes, as will enable it to comply with the requirements
of section 116 of the Income Tax Act (Canada) or any successor provision thereto
and any analogous provisions of provincial tax law, in each case as amended or
re-enacted from time to time. The Holder shall bear all reasonable costs and
expenses, including legal fees, associated with any such sale and remittance.

5.7       Stamp or Other Transfer Taxes. Notwithstanding any other provision of
this Agreement, upon any sale or transfer of Non-Voting Exchangeable Shares to
SOFO pursuant to the Exchange Right or the Automatic Exchange Right, the share
certificate or certificates representing SOFO Common Shares to be delivered in
connection with the payment of the total purchase price therefor shall be issued
in the name of the Holder of the Non-Voting Exchangeable Shares so sold or in
such names as such Holder may otherwise direct in writing if permitted to do so
under the Share Purchase Agreement and Stock Registration Rights Agremeent,
without charge to the Holder of the Non-Voting Exchangeable Shares so sold or
transferred; provided, however, that such Holder (a) shall pay (and neither SOFO
nor any Affiliate shall be required to pay) any documentary, stamp, transfer or
other taxes that may be payable in respect of any transfer involved in the
issuance or delivery of such shares to a person other than such Holder or (b)
shall have evidenced to the satisfaction of SOFO that such taxes, if any, have
been paid.

5.8       No Fractional Shares. No certificates representing fractional Non-
Voting Exchangeable Shares, SOFO Common Shares or securities of any other entity
shall be issued pursuant to the provisions of this Agreement, the Support
Agreement or the Corporation Articles. Such fractional interests shall not
entitle the owner thereof to exercise any rights as a securityholder of the
Corporation, SOFO, or another entity, as the case may be. In lieu of any such
fractional interests, each person entitled to a fractional interest will
receive, at the applicable time, an amount of cash (rounded to the nearest whole
cent), without interest, equal to the value of the applicable security (as
determined by the Board of Directors of SOFO or the Corporation acting in good
faith) multiplied by such fractional interest.

5.9       Term. This Agreement shall come into force and be effective as of the
date hereof and shall terminate and be of no further force and effect at such
time as the last of the outstanding Non-Voting Exchangeable Shares (or
securities or rights convertible into or exchangeable for or carrying rights to
acquire the Non-Voting Exchangeable Shares), other than Non-Voting Exchangeable
Shares held by SOFO or an Affiliate, are exchanged for SOFO Common Shares or are
purchased by SOFO or the Corporation.

5.10      Amendments and Supplements. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed on behalf of SOFO and the Corporation by their duly
authorized officers or representatives and by the Holders of all of the Non-
Voting Exchangeable Shares (other than Non-Voting Exchangeable Shares held by or
on behalf of SOFO and its Affiliates) as a class.

5.11      No Waiver. The failure of any party hereto to enforce at any time any
of the provisions of this Agreement shall in no way be construed to be a waiver
of any such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the right of such party thereafter to enforce each and
every such provision. No waiver of any breach of or non-

<PAGE>

                                      -15-

compliance with this Agreement shall be held to be a waiver of any other or
subsequent breach or non-compliance.

5.12      Governing Law and Attornment.  This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein. SOFO agrees that any action or
proceeding arising out of or relating to this Agreement shall be instituted in
the courts of Ontario, waives any objection which it may have now or hereafter
to the venue of any such action or proceeding, irrevocably submits to the
jurisdiction of the said courts in any such action or proceeding, agrees to be
bound by any judgment or order of the said courts and the enforcement thereof
and not to seek, and hereby waives, any review of the merits of any such
judgment or order by the courts of any other jurisdiction and hereby appoints
the Corporation at its registered office in the Province of Ontario as SOFO's
attorney for service of process.

5.13      Notice.  All notices requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
Business Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:

      If to SOFO:                            Copy to:
      -----------                            --------
      Sonic Foundry, Inc.                    Frederick H. Kopko, Jr.
      1617 Sherman Avenue                    McBreen & Kopko
      Madison, WI  53704                     20 North Wacker Drive,
                                             Suite 2520
      Attention:  Kenneth A. Minor           Chicago, IL  60606
      Telephone:  (608) 204-8060
      Facsimile:  (608) 204-8807             Telephone:  (312) 332-6405
                                             Facsimile:  (312) 332-2657

      If to the Corporation:                 Copy to:
      ----------------------                 --------

      Sonic Foundry, Inc.                    Frederick H. Kopko, Jr.
      1617 Sherman Avenue                    McBreen & Kopko
      Madison, WI  53704                     20 North Wacker Drive, Suite 2520
                                             Chicago, IL  60606
      Attention:  Kenneth A. Minor
      Telephone:  (608) 204-8060             Telephone:  (312) 332-6405
      Facsimile:  (608) 204-8807             Facsimile:  (312) 332-2657
<PAGE>

                                      -16-

       If to Charles Ferkranus and
       1096159 Ontario Limited:             Copy to:
       ---------------------------          --------

       10 Cygnus Drive                      J.A. Nixon
       Richmond Hill, Ontario               Loopstra Nixon
       L4C 8P2                              135 Queens Plate Drive, Suite 600
                                            Etobicoke, Ontario
       Telephone:  (905) 508-8641           M9W 6V7
       Facsimile:   .                       Telephone:  (416) 746-4710
                                            Facsimile:  (416) 746-8319

       If to Michael Ferkranus and
       1402083 Ontario Limited:             Copy to:
       ---------------------------          ---------

       19 Cygnus Drive                      J.A. Nixon
       Richmond Hill, Ontario               Loopstra Nixon
       L4C 8P4                              135 Queens Plate Drive, Suite 600
                                            Etobicoke, Ontario
       Telephone:  (905) 508-9898           M9W 6V7
       Facsimile:      .
                                            Telephone:  (416) 746-4710
                                            Facsimile:  (416) 746-8319

Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient.  Any
Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.

5.14      Surrender of Certificates.  Any presentation and surrender by a Holder
of Non-Voting Exchangeable Shares to SOFO or an Affiliate of certificates
representing Non-Voting Exchangeable Shares in connection with any Share
Exchange (other than in accordance with Articles 4, 5 and 6 of the Corporation
Articles) shall be made by registered mail (postage prepaid) to the principal
corporate office of SOFO or by delivery to the principal corporate office of
SOFO.  Any such presentation and surrender of certificates shall only be deemed
to have been made and to be effective upon actual receipt thereof by SOFO.  Any
such presentation and surrender of certificates made by registered mail shall be
at the sole risk of the Holder mailing the same.

5.15      Obligations of Holders Several. The obligations of the Holders under
this Agreement are several and not joint and several.

5.16      Construction of Agreement. A reference to an Article or a Section
shall mean an Article of or a Section in this Agreement unless otherwise
expressly stated.  The titles and
<PAGE>

                                      -17-

headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation."

5.17      Entire Agreement, Assignability, etc.  This Agreement together with
other concurrent written documentation, including the Share Purchase Agreement
and the Support Agreement, relating to the Non-Voting Exchangeable Shares
constitutes the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.  This Agreement is not intended to confer upon any person
other than the parties hereto and any rights or remedies hereunder, except as
otherwise expressly provided herein, and shall not be assignable by the Holders.

5.18      Validity.  The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.

5.19      Currency.  Except where otherwise expressly provided, all amounts in
this Agreement are stated and shall be paid in United States currency.  Any
payment to be made under this Agreement in a particular currency (the "proper
currency") that is made in a currency (the "other currency") other than the
proper currency, whether voluntarily or pursuant to a judgment or order of any
court or tribunal or otherwise, will discharge the obligations of the
undersigned under this Agreement only to the extent of the amount of the proper
currency that the party entitled to the payment (the "Payee") is able, on or
before the close of business on the business day following receipt of such
payment, to purchase with the amount of the other currency so received.  If the
amount of the proper currency that the Payee can purchase is less than the
amount of the proper currency originally due to it, the party obligated to make
the payment (the "Payor") will indemnify and save the Payee harmless from and
against any loss or damage arising because of such deficiency.  This indemnity
is an obligation separate and independent from any other obligation of the
undersigned in respect of this Agreement or otherwise, will give rise to a
separate and independent cause of action, will apply irrespective of any
indulgence granted by the Payee from time to time, will continue in full force
and effect notwithstanding any judgment in order for a liquidated sum in respect
of an amount due under this Agreement or under any judgment or order and will
not merge in any order of foreclosure made in respect of any security given by
the Payor or any other person to or for the benefit of the Payee.  The Payor
shall also indemnify the Payee against reasonable currency exchange fees
incurred by the Payee in purchasing the proper currency pursuant to this Section
6.10.
<PAGE>

                                      -18-

5.20      Counterparts.  This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same Agreement.

          IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.

                            SONIC FOUNDRY, INC.

                            By:_________________________________
                            Name:
                            Title:

                            By:_________________________________
                            Name:
                            Title:

                            SONIC FOUNDRY (NOVA SCOTIA), INC.

                            By:_________________________________
                            Name:
                            Title:

                            By:__________________________________
                            Name:
                            Title:

                            1096159 ONTARIO LIMITED

                            By:___________________________________
                            Name:
                            Title:

                            By:___________________________________
                            Name:
                            Title:

                            1402083 ONTARIO LIMITED

                            By:___________________________________
                            Name:
                            Title:

                            By:___________________________________
                            Name:
                            Title:

<PAGE>

                                      -19-

_______________________         __________________________________
Witness                         Charles Ferkranus

_______________________         __________________________________
Witness                         Michael Ferkranus<PAGE>

                                      -1-

                                                                     Exhibit 4.3

              BUYER NON-VOTING EXCHANGEABLE SHARE OPTION AGREEMENT
              ----------------------------------------------------

     THIS AGREEMENT made as of the 24th day of August, 2000.

B E T W E E N:

     SONIC FOUNDRY (NOVA SCOTIA), INC., a corporation
     incorporated under the laws of the Province of Nova Scotia,

     (hereinafter referred to as the "Optionor")

                                                               OF THE FIRST PART

                                    - and -

     DAN McLELLAN, of the Town of Aurora, in the
     Province of Ontario,

     (hereinafter referred to as the "Optionee")

                                                              OF THE SECOND PART

                                    - and -

     SONIC FOUNDRY INC., a corporation existing under
     the laws of the State of Maryland,

     (hereinafter referred to as the "Parent")

                                                               OF THE THIRD PART

          WHEREAS the Optionor has directly and indirectly acquired all of the
issued and outstanding shares of International Image Services Inc.
("International Image") pursuant to an agreement of purchase and sale among the
Optionor, the Optionee, the Parent and others dated as of June 1, 2000 (the
"Purchase Agreement");

          AND WHEREAS the Optionor and the Optionee wish to record the basis
upon which the Optionor has agreed to issue the Option to acquire the Optioned
Shares to the Optionee in conjunction with the Optionee's ongoing employment
with International Image and the purchase and sale transactions arising under
the Purchase Agreement;

          AND WHEREAS the Parent and the Optionor have entered into a support
agreement dated as of August 24, 2000 (the "Support Agreement");
<PAGE>

                                      -2-

          AND WHEREAS the Parent, the Optionor, the Optionee and others have
entered into a stock registration rights agreement dated as of August ______,
2000 (the "Stock Registration Rights Agreement");

          THIS AGREEMENT WITNESSES that in consideration of the sum of Ten
Dollars ($10.00) of lawful money of Canada, the Optionee's ongoing employment
with International Image and other good and valuable consideration (the receipt
and sufficiency of which is hereby acknowledged by the Optionor and the Parent),
it is agreed by and between the parties hereto as follows:

1.        In this Agreement the term "Share" or "Shares" shall mean, as the case
may be, one or more non-voting exchangeable shares in the capital of the
Optionor as constituted at the date of this Agreement, the rights, privileges,
conditions and restrictions attached to which are set forth in Schedule "A"
annexed hereto (the "Share Conditions") and "SOFO Common Shares" shall mean the
common shares of the Parent as constituted on the date hereof.  Terms not
otherwise defined herein shall have the meanings ascribed thereto in the Share
Conditions.

2.        The Optionor hereby gives and grants to the Optionee, subject to the
terms and conditions hereinafter set out, an irrevocable option (the "Option")
to purchase all or any part of 48,510 Shares in the capital of the Optionor (the
"Optioned Shares"), for an aggregate price of One Hundred Dollars Canadian
(CDN$100.00) (the "Option Price").

3.        The following provisions shall apply with respect to the exercise of
the Option and the resulting rights and obligations of the Optionee, the
Optionor and the Parent in respect of the Optioned Shares:

     (a)  the Option may be exercised by the Optionee at any time or from time
          to time  during the period from the date hereof up to but not after
          the earliest of the following dates (the "Expiry Date"):

          (i)   July 1, 2005; or

          (ii)  the 90th day following the termination of the Optionee's
                employment with the Optionor, the Parent or any Affiliate of the
                Optionor, including without limitation, International Image for
                any reason whatsoever, including death, unless such termination
                shall occur on or prior to October 3, 2000, in which case the
                Option may be exercised on or before January 1, 2001;

          (iii) thirty (30) days before the effective date of the liquidation,
                dissolution or winding-up of either the Optionor or the Parent;
                or

          (iv)  the date on which the Optionee would be required to exercise the
                Option pursuant to Section 2.7 of the Support Agreement.
<PAGE>

                                      -3-

     (b)  the Optionee shall have the right to exercise the Option at any time
          or from time to time prior to the Expiry Date with respect to all or
          any part of the Optioned Shares.  The Optionee shall provide written
          notice to the Optionor of the exercise of the Option (an "Exercise"),
          in whole or in part, accompanied by an executed counterpart of the
          Share Exchange Agreement and payment by the Optionee to the Optionor
          of the Option Price in respect of so many of the Optioned Shares as
          the Optionee shall state in such notice.  Any such Exercise shall be
          an exercise pro tanto of the Option and upon any such Exercise, the
          Optionor shall thereafter deliver to the Optionee a certificate or
          certificates registered in the name of the Optionee representing in
          the aggregate such number of the Optioned Shares as the Optionee shall
          have then paid for;

     (c)  the Option shall expire and terminate as to such of the Optioned
          Shares in respect of which the Option has not been exercised on or
          before the Expiry Date;

     (d)  upon exercise of the Option the Optioned Shares shall be issued to,
          and at all times held by the Optionee, subject to and in accordance
          with the terms and provisions of the Share Exchange Agreement and the
          Stock Registration Rights Agreement.

4.        Prior to the Expiry Date and regardless of whether the Optionee has
exercised the Option in whole or in part, the Optionor and the Parent hereby
agree to give notice to the Optionee of any of the following occurrences (and
such notice may be provided by either the Optionor or the Parent in satisfaction
of the obligations of both of them hereunder):

     (a)  any exercise by a holder of non-voting exchangeable shares of the
          Optionor (the "Holder") of the Exchange Right available to such Holder
          under the Share Exchange Agreement;

     (b)  the giving by or on behalf of the Parent of notice to the Holders of a
          SOFO Liquidation Event pursuant to Section 2.2 of the Share Exchange
          Agreement;

     (c)  the giving by or on behalf of the Parent of notice under Section
          3.1(b) of the Share Exchange Agreement of the Parent's intention to
          exercise the Liquidation Call Right;

     (d)  the giving by the Parent and the Optionor of any notice pursuant to
          Section 4.4 of the Share Exchange Agreement;

     (e)  the giving by the Parent to the Holders of any notice pursuant to
          Section 5.3 of the Share Exchange Agreement;

     (f)  the giving of notice by the Optionor to the Parent that the Optionor
          determines by resolution to redeem any Shares pursuant to Section 6.1
          of the Share Conditions;
<PAGE>

                                      -4-

     (g)  any proposal to make a SOFO Offer pursuant to subsection 2.6(a)(iv) of
          the Support Agreement;

     (h)  any Offer made to the Parent or its shareholders, as contemplated in
          Section 2.7 of the Support Agreement;

     (i)  the giving by the Optionor of notice to the Holders pursuant to
          Section 3.6 of the Support Agreement;

     (j)  the registration of the SOFO Common Shares pursuant to Section 1.2 of
          the Stock Registration Rights Agreement; and

     (k)  the giving of any notice by the Parent pursuant to paragraphs
          1.3(a)(i)(A) and 1.3(b)(i)(A) of the Stock Registration Rights
          Agreement.

5.        Other than as expressly provided herein, the Optionor shall not have
any rights as a holder of Shares unless and until the Option is exercised, in
whole or in part, and then only to the extent of the number of Shares held by
the Optionor at the relevant time.

6.        In the event of the occurrence of any issuance or distribution as set
forth in paragraphs 2.6(a)(i), (ii) and (iii) of the Support Agreement, the
Optionor shall deliver at the time of any Exercise thereafter, in addition to
the number of Shares that the Optionee would have been entitled to receive on
such Exercise if such issuance or distribution would not have occurred, such
number of rights, options, securities or evidences of indebtedness as would have
been payable to the Optionor on the Shares that would have been issuable on the
Exercise if they had been outstanding at the time of the issuance or
distribution.  For greater certainty, the Optionee shall not be entitled to
participate in a SOFO Offer nor receive any additional Shares or other
consideration upon on a subsequent Exercise unless the Optionee exercises the
Option, in whole or in part, and participates in or tenders the Optioned Shares
received on such Exercise to the SOFO Offer.

7.        In the event of any subdivision, consolidation, reclassification or
other change (collectively, a "Change") in the capital of the Optionor, the
Optionor shall deliver, upon any Exercise thereafter, such number of Shares or
other securities as would have been delivered to the Optionee as a result of
such Change if the Option had been exercised prior to the date of any such
Change.  In the event of any Change in the capital of the Parent which is not
reflected in the capital of the Optionor, the economic equivalent change shall
be made to the rights of the Optionee.

8.        If the Optionor shall on or before the Expiry Date pay any dividend
pursuant to Section 3 of the Share Conditions, the Optionee shall be entitled to
receive upon any Exercise thereafter (in addition to the number of Shares that
the Optionee would have been entitled to receive on such Exercise if such
dividend had not been paid) such additional number of fully paid and non-
assessable Shares or other securities or property as would have been payable on
the Shares that would have been issuable on such Exercise if they had been
outstanding on the
<PAGE>

                                      -5-

record date for the payment of such dividend, and the Optionor covenants and
agrees that, in the event of the payment of any dividend payable as aforesaid,
it will reserve and set aside a sufficient number of Shares or other securities
or property in which any such dividend shall be payable to enable it to fulfil
its obligations hereunder.

9.        The Optionor covenants that it has duly reserved, set aside and
conditionally allotted the Optioned Shares to and in favour of the Optionee, its
successors and assigns, and that upon the exercise of this Option in accordance
with the terms hereof, the Optioned Shares in respect of which the Optionee
shall have duly taken up and paid for hereunder shall be duly issued and
outstanding as fully paid and non-assessable.

10.       No certificates representing fractional Shares, SOFO Common Shares or
securities of any other entity shall be issued pursuant to the provisions of
this Agreement, the Support Agreement or the Share Conditions.  Such fractional
interests shall not entitle the owner thereof to exercise any rights as a
securityholder of the Optionor, the Parent, or another entity, as the case may
be.  In lieu of any such fractional securities, each person entitled to a
fractional interest will receive, at the applicable time, an amount of cash
(rounded to the nearest whole cent), without interest, equal to the value of the
applicable security (as determined by the Board of Directors of the Parent or
the Optionor acting in good faith) multiplied by such fractional interest.

11.       The Parent hereby covenants and agrees to cause the Optionor from time
to time to fulfil all of its duties and obligations under this Agreement.

12.       The Optionee agrees to do all acts and execute all documents and other
instruments as may be necessary or desirable to perform his obligations
hereunder and to enter into any replacement agreement as may be necessary or
desirable to allow the Parent, the Optionor or any Affiliate to fulfil its
obligations under the Support Agreement, the Share Exchange Agreement and the
Share Conditions, including pursuant to any merger, amalgamation, liquidation,
dissolution or other reorganization permitted thereunder.

13.       Nothing herein contained or done pursuant hereto shall obligate the
Optionee to purchase and/or pay for or the Optionor to issue any Optioned Shares
except those Shares in respect of which the Optionee shall have exercised his
Option to purchase hereunder in the manner hereinbefore provided.

14.       Time shall be of the essence of this Agreement.

15.       All notices, requests, demands, claims, and other communications
hereunder shall be in writing.  Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two Business
Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
<PAGE>

                                      -6-

        In the case of the Optionor or the Parent:    Copy to:
        -----------------------------------------     -------

        1617 Sherman Avenue                           James Stern
        Madison, WI 53704                             McBreen & Kopko
        U.S.A.                                        20 North Wacker Drive
        Attention: Ken Minor                          Suite 2520
        Telephone: (608) 204-8060                     Chicago, IL 60606, U.S.A.
        Facsimile: (608) 204-8807                     Telephone: (312) 332-6405
                                                      Facsimile: (312) 332-2657

        In the case of the Optionee:                  Copy to:
        ---------------------------                   -------

        53 Marsh Harbour                              J. A. Nixon
        Aurora, Ontario                               Loopstra Nixon LLP
        L4G 5Y7                                       135 Queens Plate Drive
        Telephone: (905) 713-3241                     Suite 600
                                                      Etobicoke, Ontario
                                                      M9W 6V7
                                                      Telephone: (416) 746-4710
                                                      Facsimile: (416) 746-8319

Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient.  Any
Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.

16.       This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein
without giving effect to any choice or conflict of law provision or rule
(whether of the Province of Ontario or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the Province of
Ontario.  The parties agree that the courts of the Province of Ontario will have
exclusive jurisdiction to determine all disputes and claims arising under or
pursuant to this Agreement.

17.       This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, administrators, personal
representatives and assigns, provided that no interest in this Agreement may be
assigned in whole or in part by the Optionee without the prior written consent
of the Optionor.
<PAGE>

                                      -7-

          IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto as of the date first above written.

SIGNED, SEALED AND DELIVERED  )     SONIC FOUNDRY (NOVA SCOTIA), INC.
     in the presence of:      )
                              )
                              )     Per:___________________________________
                              )          Authorized Signing Officer
                              )
                              )
                              )     _______________________________________
                              )     Dan McLellan
                              )
                              )
                              )     SONIC FOUNDRY, INC.
                              )
                              )
                              )     Per:___________________________________
                              )          Authorized Signing Officer
                              )
<PAGE>

                                  SCHEDULE "A"

                Rights, Privileges, Conditions and Restrictions
                       of Non-Voting Exchangeable Shares

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}]]