Sonic Foundry and Handleman Company Sign Letter of Intent

Sonic Foundry, Inc. (Nasdaq: SOFO), the leading developer and marketer of digital media and Internet software tools, services, and systems, today announced that Handleman Company (NYSE: HDL) and Sonic Foundry have signed a letter of intent to establish a preferred vendor relationship where Handleman would engage Sonic Foundry Media Services[TM] to facilitate their audio encoding. This agreement follows Handleman's announcement today of their new Global Entertainment Utility (GEU), a business-to-business Internet-based operation that will supply secure digital distribution of music and provide on-demand CD manufacturing for online and traditional retailers. The new operation has also partnered with IBM, (NYSE: IBM); Rimage Corporation, (NASDAQ: RIMG); and Muze, Inc.

"We are looking forward to utilizing Sonic Foundry Media Services state-of-the-art technologies, including content extraction, encoding, and digital rights management preparation," stated Stephen Strome, president and chief executive officer of Handleman Company. "Sonic Foundry is able to meet our demanding needs and can assist us in our efforts to provide the latest in music marketability and distribution."

"Sonic Foundry is looking forward to assisting Handleman in its new, innovative approach to the music industry and its digital evolution providing consumers with new ways to purchase and enjoy music," said Curtis Palmer, chief technical officer and co-founder for Sonic Foundry.

About Handleman Company

Handleman Company is comprised of two operating segments: Handleman Entertainment Resources (H.E.R.) and North Coast Entertainment (NCE). H.E.R. is a category manager and distributor of prerecorded music to mass merchants in the United States, Canada, United Kingdom, Mexico, and Brazil. As a category manager, H.E.R. manages a broad assortment of titles to optimize sales in retail stores and provides direct-to-store shipments, marketing of the selections and in-store merchandising. NCE has three companies in its portfolio. Anchor Bay Entertainment is a leading independent home video label, which markets a vast collection of popular titles that range from horror to exercise to children's classics. Madacy Entertainment, a major independent record label, markets an exciting range of music and video products with a catalog spanning all genres. The itsy bitsy Entertainment Company is a leading provider of preschool entertainment, both on and off the screen, for the youngest of children and their caregivers.