Document:

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                                                                     Exhibit 4.1
                                                                     -----------

                          SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "Agreement") is entered into
as of October 25, 2001, by and between Electric Fuel Corporation, a Delaware
corporation (the "Company"), and Orsay Services Inc (the "Purchaser").

         WHEREAS, the Company has registered with the Securities and Exchange
Commission (the "Commission") the issuance of certain shares of its common
stock, US$0.01 par value per share ("Common Stock"), under a registration
statement on Form S-3 (Registration No. 333-63514) (the "Registration
Statement").

         WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to sell to the Purchaser and the Purchaser
desires to purchase from the Company certain shares of Common Stock under the
Registration Statement ("Shares").

         NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company and the
Purchaser agree as follows:

         1.  Closing; Sale of Shares.
             ------------------------

         (a) The closing, if any, of the purchase and sale of the Shares under
this Agreement (the "Closing") will take place at the offices of Robinson
Silverman Pearce Aronsohn & Berman LLP ("Robinson Silverman"), 1290 Avenue of
the Americas, New York, New York 10104, on the 24/th/ trading day immediately
following (and including) October 23, 2001 or on such date as the parties may
agree in writing. The date of the Closing, if any, is hereinafter referred to as
the "Closing Date."

         (b) The purchase price for each Share under this Agreement ("Per Share
Purchase Price") equals 90% of the average of the Closing Prices for the
twenty-one trading days immediately following (and including) October 23, 2001,
but in no event less than US$1.28. For example, if 90% of the average of the
Closing Prices for the twenty-one trading days immediately following (and
including) October 23, 2001 equals US$1.10, and the Purchaser shall have elected
to acquire Shares under Section 1(d), then the Per Share Purchase Price will
equal US$1.28. "Closing Price" on any trading day means the average of the
closing bid price and the offer price of the Common Stock on such trading day on
the Nasdaq National Market (as reported by Bloomberg L.P.) for the close of
regular session trading for such trading day.

         (c) Subject to the provisions of Section 1(d), by 12:00 p.m. (New York
time) on the 22/nd/ trading day immediately following (and including) October
23, 2001, the Purchaser will deliver to the Company notice of the number of
Shares that it will acquire under this Agreement. The Purchaser agrees that, if
the conditions to its performance hereunder as described in this Agreement have
been satisfied, then subject to Section 1(d), it will set forth in its notice
under this Section 1(c) a number of Shares with an aggregate purchase price
equal to not less than US$1,000,000 and not more than US$3,000,000. The Company
agrees that it will issue and sell to the Purchaser in accordance with the
provisions of this Agreement the number of Shares set forth in the Purchaser's
notice under and in accordance with this Section 1(c).

<PAGE>

         (d) Notwithstanding anything to the contrary set forth in this
Agreement, if the Per Share Purchase Price would be less than US$1.28, then the
Purchaser will have no obligation to purchase any Shares under this Agreement;
but may, at its sole option, elect to purchase a number of Shares up to (but not
exceeding) the quotient obtained by dividing (x) US$1,000,000 by (y) $1.28. To
avail itself of this right to purchase, the Purchaser must deliver to the
Company notice of its election by 12:00 p.m. (New York time) on the 22/nd/
trading day immediately following (and including) October 23, 2001. Failure to
so notify the Company will be deemed an irrevocable waiver by the Purchaser of
this right to purchase. If such notice shall have been timely delivered by the
Purchaser, then the Company shall issue and sell to the Purchaser in accordance
with the provisions of this Agreement, the number of Shares set forth in the
Purchaser's notice under and in accordance with this Section 1(d).

         (e) On the Closing Day: (x) the Company will (i) deliver to the
Purchaser, via the Purchaser's DTC Account through the Depository Trust Company
DWAC system, the number Shares set forth in the Purchaser's notice under Section
1(c) or 1(d) (as the case may be), and (ii) file with the Commission a
prospectus supplement to the Registration Statement to disclose the sale of
Shares under this Agreement (the "Supplement"); and (y) the Purchaser will
deliver to the Company an amount in United States dollars equal to the product
of the number of Shares that it is acquiring at the Closing, multiplied by the
Per Share Purchase Price for such Shares, via wire transfer of immediately
available funds to an account designated in writing by the Company for such
purpose.

         2.  Conditions. The obligation of the Purchaser to purchase and acquire
             ----------
Shares under this Agreement is subject to the fulfillment (or waiver by the
Purchaser) of each of the following conditions:

     (a) The Company shall have filed the Supplement with the Commission (which
may occur concurrently with the Closing).

         (b) The Registration Statement (x) shall be effective on the Closing
Date as to all Shares, not subject to any threatened or actual stop order and
(y) will not on the Closing Date contain any untrue statement of material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

         (c) The Company shall have secured the listing of the Shares on the
Nasdaq National Market (subject to official notice of issuance).

         (d) The representations and warranties of the Company made in this
Agreement shall be true and correct as of and on each of the date of this
Agreement and the Closing Date, as if first made and restated on each such
dates.

         3.  Representations and Warranties of the Company. The Company hereby
             ---------------------------------------------
makes the following representations and warranties to the Purchaser:

         (a) Organization and Qualification. The Company is a corporation duly
             ------------------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary.

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         (b) Authorization. The Company has the requisite corporate power and
             ------------
authority to enter into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations thereunder. The execution
and delivery of this Agreement by the Company and the consummation of the
transaction contemplated hereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company or its shareholders for the Company to execute and consummate this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed by the Company and, when delivered in accordance with the terms hereof,
and assuming the valid execution hereof by the Purchaser, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification and contribution
provisions may be limited under the federal and state securities laws and public
policy, and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.

         (c) No Conflicts. The execution, delivery and performance of this
             ------------
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby does not and will not: (i) conflict with or violate any
provision of the Company's certificate of incorporation or bylaws (each as
amended through the date hereof), or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment or acceleration
(with or without notice, lapse of time or both) of, any material agreement or
indebtedness to which the Company is a party or by which any material property
or asset of the Company is bound or affected, or (iii) result in a violation of
any law, rule, regulation, order, judgment, decree or other restriction of any
court, governmental authority or stock market to which the Company or the Common
Stock is subject.

         (d) Issuance of the Shares. The Shares are duly authorized and, when
             ----------------------
issued and paid for in accordance with the terms hereof, will be legally issued,
fully paid and nonassessable, free and clear of all liens and encumbrances
(other than any that are the result of any action or inaction of the Purchaser).
On the Closing Date the Company shall have secured the listing of the Shares on
the Nasdaq National Market (subject to official notice of issuance).

         (e) Registration Statement. The Registration Statement is effective and
             ----------------------
the Company has not received notice that the Commission has issued or intends to
issue a stop order with respect to the Registration Statement or that the
Commission otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened in writing to do so. The Registration Statement (including the
information or documents incorporated by reference therein), as of the time it
was declared effective, and any amendments or supplements thereto, each as of
the time of filing, did not contain any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Shares are registered under the Securities Act of 1933
(the "Securities Act"), as amended, by the Registration Statement.

         (f) Listing and Maintenance Requirements. The Company has not, in the
             ------------------------------------
twelve months preceding the Execution Date, received notice from the Nasdaq
National Market to the effect that the Company is not in compliance with the
listing or maintenance requirements thereof. The Company is, and has no reason
to believe that it will not in the foreseeable future continue to be, in
compliance with the listing and maintenance requirements for continued trading
of the Common Stock on the Nasdaq

<PAGE>

National Market (except as a result of a decline in the market price of the
Common Stock) and currently meets the standard prescribed therein with regard to
net tangible assets.

         (g) Certain Fees. No fees or commissions will be payable by the Company
             ------------
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchaser will have no obligation with
respect to any fees incurred by the Company or any other Person (other than the
Purchaser, if the Purchaser has agreed in writing to pay such fees) or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by this Agreement. The Company will indemnify and hold harmless the
Purchaser, its employees, officers, directors, agents, partners, and affiliates,
from and against all claims, losses, damages, costs (including the costs of
preparation and reasonable attorney's fees) and expenses suffered in respect of
any such claimed or existing fees incurred by the Company or any other Person,
as such fees and expenses are incurred. "Person" means any court or other
federal, state, local or other governmental authority or other individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.

         (h) Disclosure. Neither the Company nor any other Person acting on its
             ----------
behalf has provided the Purchaser or their agents or counsel with any
information that constitutes or may, in the Company's opinion, constitute
material non-public information.

         (i) SEC Reports; Financial Statements. The Company has filed all
             ---------------------------------
reports required to be filed by it under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for the twelve months preceding the date hereof
(collectively, "SEC Reports") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal year-end audit
adjustments.

         4. Representations and Warranties of the Purchaser. The Purchaser
            -----------------------------------------------
hereby represents and warrants to the Company as follows:

         (a) Organization; Authorization. The Purchaser has been organized and
             ---------------------------
is in good standing under the laws of the jurisdiction of its formation. The
Purchaser has the requisite right, power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. Upon the
execution and delivery of this Agreement, and assuming the valid execution
thereof by the Company, this Agreement shall constitute the valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms, except (a) as such enforceability may be limited by

<PAGE>

bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (b) as enforceability of any indemnification and contribution
provisions may be limited under the federal and state securities laws and public
policy, and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.

          (b) No Conflicts. The execution, delivery and performance of this
              ------------
Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby does not and will not (i) conflict with or
violate any provision of the Purchaser's or Company's certificate of
incorporation or bylaws (each as amended through the date hereof), or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment or acceleration (with or without notice, lapse of time or
both) of, any material agreement or indebtedness to which the Purchaser is a
party or by which any material property or asset of the Purchaser is bound or
affected, or (iii) result in a violation of any order, judgment or decree of any
court to which the Purchaser is subject.

          (c) Investment Representation. The Purchaser is not party to any
              -------------------------
agreement or arrangement with respect to a disposition of Shares other than this
Agreement. The Purchaser is not registered as a broker-dealer under the Exchange
Act. The Purchaser is purchasing the Shares for the Purchaser's own account, for
investment purposes only and not with a view to distribute or participate in a
distribution thereof; provided, that the foregoing representation and warranty
                      --------
is not an agreement by the Purchaser to hold the Shares for any period of time.

          5.  Certain Disclosures. The Company will not and will cause each of
              -------------------
its affiliates and other Persons acting on behalf of the Company not to divulge
to the Purchaser any information that it believes to be material non-public
information unless the Purchaser has agreed in writing to receive such
information prior to such divulgence. Neither the Company nor the Purchaser will
issue any press release or make any other public announcement relating to this
Agreement unless the content thereof is mutually agreed to by the Company and
the Purchaser, or if the Company is advised in writing by its counsel that such
press release or public announcement is required by law, other than (i) the
filing of the Supplement, and (ii) the filing of a Current Report on Form 8-K in
order to furnish an opinion of counsel as to the legality of the Shares, as
required by Item 16 of Form S-3 and Item 601(b)(5) of Regulation S-K, for
incorporation by reference into the Registration Statement.

          6.  Miscellaneous.
              -------------

          (a) Fees and Expenses. Each party will pay the fees and expenses of
              -----------------
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company will pay all
stamp and other taxes and duties levied in connection with the sale of the
Shares.

          (b) Entire Agreement; Amendments. This Agreement contains the entire
              ----------------------------
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
this Agreement. This Agreement may not be modified or amended except in a
writing for such purpose signed by the Company and the Purchaser. The waiver by
either party hereto of any right hereunder or the failure to perform or of a
breach by the other party will not be deemed a waiver of any other right
hereunder or of any other breach or failure by said other party whether of a
similar nature or otherwise.

<PAGE>

          (c) Notices. Any and all notices or other communications or deliveries
              -------
required or permitted to be provided hereunder must be in writing and will be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile or email (the parties
agree that email communication will only be used for Purchaser notices under
Section 1(c) or 1(d)) prior to 5:00 p.m. (New York City time) on a trading day,
(ii) the trading day after the date of transmission, if such notice or
communication is delivered via facsimile later than 5:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the trading day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications will be as follows (or such other address as may be designated in
writing hereafter, in the same manner, by such Person):

     If to the Company:       Electric Fuel Corporation
                              632 Broadway, Suite 301
                              New York, NY 10012
                              Facsimile No.: (212) 529-5800
                              Attn: Chief Financial Officer and General Counsel
                              Email: ehrlich@electric-fuel.com
                                     -------------------------
                                     yaakovh@electric-fuel.com
                                     -------------------------

     With a copy to:          Electric Fuel (E.F.L.) Ltd.
                              Western Industrial Zone
                              Beit Shemesh 99000, Israel
                              Facsimile No.: 011-972-2-990-6688
                              Attn.: Chief Financial Officer and General Counsel
                              Email: yaakovh@electric-fuel.com
                                     -------------------------
                                     ehrlich@electric-fuel.com
                                     -------------------------

     If to the Purchaser:        To the address set forth under the Purchaser's
                              name on the signature page hereto.

          (d) Governing Law. All questions concerning the construction,
              -------------
validity, enforcement and interpretation of this Agreement will be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflict of laws thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) will be exclusively commenced in
the state and federal courts sitting in the City of New York, Borough of
Manhattan. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of this Agreement), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court or that such courts are an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service will constitute good and sufficient
service of process and notice thereof. Nothing contained

<PAGE>

herein will be deemed to limit in any way any right to
serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Agreement,
then the prevailing party in such action or proceeding will be reimbursed by the
other party for its reasonable attorneys fees and other reasonable costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.

          (e) Certain Remedies. In addition to being entitled to exercise all
              ----------------
rights provided herein or granted by law, including recovery of damages, the
Purchaser and the Company will each be entitled to specific performance of the
others obligations under this Agreement. In furtherance thereof, the parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any such breach and hereby agrees to waive in any action
for specific performance of any such obligation the defense that a remedy at law
would be adequate.

          (f) Execution. This Agreement may be executed in two or more
              ---------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.

          *     *     *     *     *     *     *     *     *

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement
to be duly executed as of the date first indicated above.

                        ELECTRIC FUEL CORPORATION

                        By:         /s/ Robert S. Ehrlich
                           ----------------------------------------------
                           Robert Ehrlich
                           Chairman and Chief Financial Officer

                        ORSAY SERVICES INC

                        By:______________________________________________
                           Primeway S.A.
                           Its Authorized Signatory

                        By:            /s/ Beat Kunz
                           ----------------------------------------------
                           Beat Kunz
                           Authorized Signatory

                        By:        /s/ Philippe Robadin
                           ----------------------------------------------
                           Philippe Robadin
                           Authorized Signatory

                        Address for Notice:

                        c/o Primeway S.A.
                        7 Rue Du Rhone
                        CH-1204 Geneva, Switzerland

                        With copies to:

                        Robinson Silverman Pearce Aronsohn & Berman LLP
                        1290 Avenue of the Americas
                        New York, NY 10104
                        Facsimile No.: (212) 541-4630 and (212) 541-1432
                        Attn: Eric L. Cohen, Esq.<PAGE>

                                                                     Exhibit 4.4

                               Sonic Foundry, Inc.
                         2001 Deferred Compensation Plan

     1.   Purpose. The purpose of the Sonic Foundry, Inc. 2001 Deferred
          -------
Compensation Plan (the "Plan") is to improve the cash flow of the Company by
allowing any eligible Employee of the Company to elect a one year salary
deferral of $2,000 U.S. or more.

     2.   Effective Date. The Plan shall become effective on December 7, 2001
          --------------
(the "Effective Date").

     3.   Definitions. As used in the Plan, the following terms shall have the
          -----------
respective meanings set forth below:

          (a)  "Board" means the Board of Directors of the Company.

          (b)  "Company" means Sonic Foundry, Inc., including any successor
     thereto and any subsidiary thereof.

          (c)  "Employee" means any employee of the Company.

          (d)  "Participant" means any Employee eligible to participate in the
     Plan who elects to defer some or all of his or her salary pursuant to the
     Plan.

          (e)  "Person" means any individual or any corporation, limited
     liability company, partnership, trust or other entity.

          (f)  "Plan Administrator" means the Chief Financial Officer of the
     Company or any successor thereto designated by the Board.

          (g)  "Termination Date" means November 22, 2002

     4.   Administration. The Plan shall be administered by the Plan subject to
          --------------
the oversight of the Board. Subject to the terms of the Plan and applicable law
and with the approval of the Board, the Plan Administrator shall have full power
and authority to: (i) interpret and administer the Plan; (ii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as he deems
appropriate for the proper administration of the Plan; and (iii) make any other
determination and take any other action that he deems necessary or desirable for
the administration of the Plan. Unless otherwise expressly provided in the Plan,
all designations, determinations, interpretations and other decisions under or
with respect to the Plan shall be within the sole discretion of the Plan
Administrator, may be made at any time, and shall be final, conclusive and
binding upon all Persons.

     5.   Eligibility and Participation. To be eligible to participate in the
          -----------------------------
Plan, an Employee must be a salaried Employee (i.e., not paid on an hourly
basis), must be employed full time by the Company and must be willing to defer
$2,000 U.S. or more of his or her current base salary. To participate in the
Plan, an eligible Employee must elect to defer a portion of his or her current
base salary in accordance with the terms and conditions of the Plan.

     6.   Operations. Under the Plan, each Participant shall receive a
          ----------
promissory note and a stock option from the Company on the terms and subject to
the conditions set forth in this paragraph 6.

          (a)  Scope. No more than $1,000,000 U.S. in the aggregate can
               -----
be deferred by all Participants under the Plan. If the total amount elected to
deferred by all Participants would exceed

<PAGE>

$1,000,000, all Participant deferrals shall be reduced on a pro-rata basis so
that the total amount deferred by all Participants is $1,000,000 U.S.

          (b)  Electing to Participate. An Employee who desires to become a
               -----------------------
Participant must submit the proper election forms to the Company's Human
Resources Department no later than 5:00 p.m., Central Standard Time, on the
Effective Date.

          (b)  Deferral Period. Subject to a timely submission of the proper
               ---------------
election forms, the salary deferral period for a Participant shall begin on the
Effective Date and shall end on the Termination Date.

          (c)  Post-Termination Date Salary. After the Termination Date, a
               ----------------------------
Participant's base salary shall return to its pre-deferral level, subject to the
Participant's employment status at that time and any performance reviews, salary
adjustments or evaluations.

          (d)  Promissory Note. The Company shall deliver to each Participant
               ---------------
its unsecured, subordinated promissory note with a principal amount equal to the
amount of his or her salary deferral (the "Note"). Each Note shall be a legal
promise by the Company to the Participant to pay the principal balance of the
Note, plus interest, when due.

          (e)  Term of Note. Each Participant shall select the maturity date of
               ------------
his or her Note: 24, 36 or 48 months after the date the Note is issued.

          (f)  Interest Rate. Each Note shall bear interest at an annual rate
               -------------
tied to the term of the Note: 9%, 10% or 11% for 24, 36 and 48 months,
respectively. Interest shall accrue on the full principal balance and shall be
added to the principal amount semi-annually.

          (g)  Payment Under the Note. All accrued interest on and the principal
               ----------------------
of the Note shall be payable by the Company upon the maturity or acceleration of
the Note. The Company may prepay the Note at any time without penalty to the
Company.

          (h)  Voluntary Prepayment of Note. A Participant may request that the
               ----------------------------
Company prepay his or her Note before maturity upon the voluntary termination of
his or her employment or the demonstration of a hardship. If the Company
voluntarily prepays a Note upon such a request, the Participant shall receive an
amount equal to the principal of the Note divided by 12 months, multiplied by
the number of months the Note was outstanding up to a maximum of 12, plus
accrued interest (subject to the Participant holding the Note for at least 12
months as described below), but less an early withdrawal penalty of 10% of the
principal balance plus any accrued interest. No accrued interest will be paid on
a Note for a voluntary prepayment prior to the first anniversary of the Note. In
the event of a voluntary prepayment after the first anniversary of the Note,
interest shall be accrued and paid through the most recent semi-annual interest
accrual date.

          (i)  Involuntary Prepayment of Note. If the Company voluntarily
               ------------------------------
prepays a Note after the involuntary termination of the employment of the
Participant, the prepayment shall not be subject to any early withdrawal
penalty, but shall be reduced as calculated under subparagraph (h) in the event
of a prepayment prior to the first anniversary of the Note. Accrued interest
shall be paid in connection with all prepayments following the involuntary
termination of the employment of the Participant. Interest shall accrue and be
payable only on the portion of the principal balance that is prepaid in
accordance with this subparagraph (i).

          (j)  Stock Option Grant. The Company shall grant to each Participant a
               ------------------
non-qualified option to acquire a number of shares of common stock of the
Company equal to 20% (for a 24 month

                                       2

<PAGE>

deferral), 30% (for a 36 month deferral) or 40% (for a 48 month deferral) of the
principal amount of the Note divided by the per share option exercise price of
$1.01. The option shall be granted by the Company under its Non-Qualified Stock
Option Plan. The option shall vest in 25% increments every 6 months from the
date of grant and shall be fully vested after 2 years. If a Participant's
employment with the Company is terminated, voluntarily or involuntarily, for any
reason, any unvested portion of an option shall lapse. If the Company
voluntarily prepays the Note, any remaining unvested portion of an option shall
immediately vest upon prepayment.

          (k)  Stock Grant Bonus. If and when a Participant exercises some or
               -----------------
all of his or her vested options granted pursuant to the Plan, the Company shall
pay the Participant a cash bonus equal to the total exercise price (i.e., the
number of shares for which the option is then being exercised multiplied by the
per share exercise price of the option). The exercise bonus shall only be paid
to the extent an option is vested and exercisable and is exercised by the
Participant. The right to receive the exercise bonus shall begin on the date the
option, or a portion thereof, becomes exercisable and shall end 60 days after
the earlier of either (a) the maturity of the Note or (b) the termination of the
Participant's employment for any reason. If the Company voluntarily prepays the
Note (versus the Participant requesting a voluntary prepayment, as described in
subparagraph (h) above), the right to receive the exercise bonus shall continue
until 60 days after the Participant's employment is terminated, voluntarily or
involuntarily.

     7.   Beneficiary Designation. Each Participant may, from time to time, name
          -----------------------
any beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefits under the Plan are to be paid in case of the Participant's
death before he or she receives any or all of such benefits. Each designation
will revoke all prior designations, shall be in a form prescribed by the Plan
Administrator and will be effective only when filed by the Participant in
writing with the Plan Administrator during his or her lifetime. In the absence
of any such designation, any benefits remaining unpaid at the Participant's
death shall be paid to the estate of the Participant.

     8.   Rights of Employees. Nothing in the Plan shall interfere with or limit
          -------------------
in any way the right of the Company to terminate any Participant's employment at
any time nor confer upon any Participant any right to continue in the employ of
the Company.

     9.   Amendment, Modifications and Termination of Plan. The Plan
          ------------------------------------------------
Administrator or the Board may at any time amend, alter, suspend, discontinue or
terminate the Plan. No amendment, modification or termination of the Plan shall
in any manner adversely affect any outstanding benefits hereunder without the
consent of the Participant to whom such benefits are payable. Notwithstanding
the foregoing, in the event of any corporate transaction other than in the
ordinary course of the Company's business, including, without limitation, any
acquisition, the Plan Administrator may make such equitable adjustments in the
calculation of any benefits hereunder that the Plan Administrator reasonably
determines to be necessary, appropriate or desirable in order to reflect the
purpose of the Plan.

     10.  Tax Withholding. No later than the date as of which an amount first
          ---------------
becomes includible in the gross income of a Participant for federal income tax
purposes with respect to any benefits under the Plan, the Participant shall pay
to the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and the
Company shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment otherwise due to the Participant.

     11.  General.
          -------

                                        3

<PAGE>

          (a)  Notices. All notices, claims, requests, demands and other
               -------
communications hereunder shall be deemed to be duly given when personally
delivered or when mailed, certified or registered mail, with postage prepaid:

               (1)  if to the Company or the Plan Administrator, to

                    Ken Minor
                    Chief Financial Officer
                    Sonic Foundry, Inc.
                    1617 Sherman Avenue
                    Madison, WI 53704

                    (or at such other address or with a copy to such other
                    person or address as may have been designated from time to
                    time by notice in writing); or

               (2)  if to a Participant or Beneficiary, to him or her at his or
     her last known residence address (or at such other address or with a copy
     to such other person or address as may have been designated from time to
     time by notice in writing).

          (b)  Governing Law. The Plan shall be construed in accordance with and
               -------------
governed by the laws of the State of Wisconsin to the extent such laws are not
preempted by federal law.

          (c)  Exclusive Benefit. The Plan shall be maintained for the exclusive
               -----------------
benefit of Participants and their Beneficiaries.

          (d)  Limits on Transferability. No right or interest in the Plan shall
               -------------------------
be assignable, alienable, saleable or transferable by a Participant otherwise
than by will or by the laws of descent and distribution; provided, however, that
a Participant may designate a beneficiary or beneficiaries to exercise his
rights, and to receive any benefits payable hereunder as provided in paragraph 6
hereof. No such right or interest may be pledged, alienated, attached or
otherwise encumbered, and any purported pledge, alienation, attachment or
encumbrance thereof shall be void and unenforceable against the Company.

          (e)  Headings. The headings used in the Plan are for convenience only,
               --------
and shall not constitute a part hereof.

          (f)  Severability. If any provision of the Plan is or becomes or is
               ------------
deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any
Person, or would disqualify the Plan under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Plan Administrator, materially altering the intent of
the Plan, such provision shall be stricken as to such jurisdiction or Person,
and the remainder of the Plan shall remain in full force and effect.

                                       4

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