Exhibit 10.1

FIRST LOAN MODIFICATION AGREEMENT

This First Loan Modification Agreement (this “Loan Modification Agreement”) is
entered into as of December 17, 2007, by and between SILICON VALLEY BANK, a
California corporation, with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at 230 W. Monroe, Suite 720, Chicago, Illinois 60606 (“Bank”) and SONIC FOUNDRY,
INC., Maryland corporation (“Sonic Foundry”), and SONIC FOUNDRY MEDIA SYSTEMS,
INC., a Maryland corporation (“Sonic Systems”) (Sonic Foundry and Sonic Systems,
jointly, severally, and collectively, “Borrower”).

1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of May 2, 2007,
evidenced by, among other documents, a certain Loan and Security Agreement dated
as of May 2, 2007, between Borrower and Bank (as amended, the “Loan Agreement”).
Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement and the Intellectual Property
Collateral as described in the Intellectual Property Security Agreements dated
May 2, 2007 (collectively, the “IP Agreement”) (together with any other
collateral security granted to Bank, the “Security Documents”).

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the “Existing
Loan Documents”.

3. DESCRIPTION OF CHANGE IN TERMS.

 

  A. Modifications to Loan Agreement.

 

  1 The Loan Agreement shall be amended by deleting the following provision
appearing in Section 6.2(a) thereof:

“(a) Deliver to Bank: (i) as soon as available, but no later than thirty
(30) days after the last day of each month (except for the last month of the
calendar quarter), a company prepared consolidated balance sheet and income
statement covering Borrower’s consolidated operations during the period
certified by a Responsible Officer and in a form acceptable to Bank.”

and inserting in lieu thereof the following:

“(a) Deliver to Bank: (i) as soon as available, but no later than thirty
(30) days after the last day of each month (except for the month ending
September 30th for each fiscal year, which shall be delivered no later than
sixty (60) days after the last day of such month), a company prepared
consolidated balance sheet and income statement covering Borrower’s consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank.”

 

  2 The Loan Agreement shall be amended by deleting the following provision
appearing in Section 6.2(c) thereof:

“(c) Within thirty (30) days after the last day of each month, deliver to Bank
with the monthly financial statements, a duly completed Compliance Certificate
signed by a Responsible Officer setting forth calculations showing compliance
with the financial covenants set forth in this Agreement.”

and inserting in lieu thereof the following:

“(c) Within thirty (30) days after the last day of each month (except for the
month ending September 30th for each fiscal year, which shall be delivered no
later than sixty (60) days after the last day of such month), deliver to Bank
with the monthly financial statements, a duly completed Compliance Certificate
signed by a Responsible Officer setting forth calculations showing compliance
with the financial covenants set forth in this Agreement.”

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  3 The Loan Agreement shall be amended by deleting the following provision
appearing in Section 6.2(d) thereof:

“(d) Allow Bank to audit Borrower’s Collateral at Borrower’s expense. Such
audits shall be conducted no more often than once every twelve (12) months
unless a Default or an Event of Default has occurred and is continuing.
Notwithstanding the foregoing, no Advances in excess of One Million Dollars
($1,000,000.00) may be requested prior to the Initial Audit.”

and inserting in lieu thereof the following:

“(d) Allow Bank to audit Borrower’s Collateral at Borrower’s expense. Such
audits shall be conducted no more often than once every twelve (12) months
unless a Default or an Event of Default has occurred and is continuing.”

 

  4 The Loan Agreement shall be amended by deleting the following provision
appearing in Section 6.7 thereof:

“(b) Tangible Net Worth. Beginning with the quarter ending March 31, 2007, and
as of the last day of each quarter thereafter, a Tangible Net Worth of at least
(a) Eight Million Dollars ($8,000,000.00), plus (b) fifty percent (50.0%) of
Borrower’s Net Income or new equity or Subordinated Debt, on a quarterly basis.”

and inserting in lieu thereof the following:

“(b) Tangible Net Worth. Beginning with the quarter ending March 31, 2007, and
as of the last day of each quarter thereafter through and including the quarter
ending September 30, 2007, a Tangible Net Worth of at least (a) Eight Million
Dollars ($8,000,000.00), plus (b) fifty percent (50.0%) of Borrower’s Net Income
or new equity or Subordinated Debt, on a quarterly basis. Beginning with the
quarter ending December 31, 2007, and as of the last day of each quarter
thereafter, a Tangible Net Worth of at least (a) Five Million Five Hundred
Thousand Dollars ($5,500,000.00), plus (b) fifty percent (50.0%) of Borrower’s
Net Income or new equity or Subordinated Debt, on a quarterly basis.”

 

  5 The Loan Agreement shall be amended by inserting the following definition to
appear alphabetically in Section 13.1 thereof:

““Eligible Foreign Accounts” are Accounts otherwise meeting the criteria for
Eligible Accounts owing from an Account Debtor which does not have its principal
place of business in the United States or Canada, that Bank approves in writing
on a case by case basis. The total aggregate Eligible Foreign Accounts may not,
at any time, exceed Seven Hundred Fifty Thousand Dollars ($750,000.00).”

 

  6 The Loan Agreement shall be amended by deleting the following definitions
appearing in Section 13.1 thereof:

““Eligible Accounts” are Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right, at any time and from time to time after
the Effective Date, to adjust any of the criteria set forth below and to
establish new criteria in its good faith business judgment. Unless Bank agrees
otherwise in writing, Eligible Accounts shall not include:

(a) Accounts for which the Account Debtor has not been invoiced;

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(b) Accounts that the Account Debtor has not paid within ninety (90) days of
invoice date;

(c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;

(d) Credit balances over ninety (90) days from invoice date;

(e) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five (25%) of all Accounts, for the
amounts that exceed that percentage, unless Bank approves in writing;

(f) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States;

(g) Accounts owing from an Account Debtor which is a federal, state or local
government entity or any department, agency, or instrumentality thereof;

(h) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise - sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

(i) Accounts for demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”,
“bill and hold”, or other terms if Account Debtor’s payment may be conditional;

(j) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;

(k) Accounts in which the Account Debtor disputes liability or makes any claim
(but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;

(l) Accounts owing from an Account Debtor with respect to which Borrower has
received deferred revenue (but only to the extent of such deferred revenue);

(m) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful; and

(n) other Accounts Bank deems ineligible in the exercise of its good faith
business judgment.”

““Quick Assets” is, on any date, Borrower’s unrestricted cash and Cash
Equivalents, plus net billed accounts receivable.”

““Revolving Line” is an Advance or Advances in an aggregate amount of up to
Three Million Dollars ($3,000,000.00) outstanding at any time. Notwithstanding
the foregoing, the Borrower may only request Credit Extensions under the
Revolving Line in an aggregate amount of up to One Million Dollars
($1,000,000.00) prior to the occurrence of the Initial Audit.”

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and inserting in lieu thereof the following:

““Eligible Accounts” are Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right, at any time and from time to time after
the Effective Date, to adjust any of the criteria set forth below and to
establish new criteria in its good faith business judgment. Unless Bank agrees
otherwise in writing, Eligible Accounts shall not include:

(a) Accounts for which the Account Debtor has not been invoiced;

(b) Accounts that the Account Debtor has not paid within ninety (90) days of
invoice date;

(c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;

(d) Credit balances over ninety (90) days from invoice date;

(e) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five (25%) percent of all Accounts, except
for Synnex Corporation, for which such percentage is fifty percent (50%) of all
Accounts, each for the amounts that exceed that percentage, unless Bank approves
in writing;

(f) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States or Canada, except for Eligible Foreign
Accounts;

(g) Accounts owing from an Account Debtor which is a federal, state or local
government entity or any department, agency, or instrumentality thereof;

(h) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise - sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

(i) Accounts for demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”,
“bill and hold”, or other terms if Account Debtor’s payment may be conditional;

(j) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;

(k) Accounts in which the Account Debtor disputes liability or makes any claim
(but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;

(l) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful; and

(m) other Accounts Bank deems ineligible in the exercise of its good faith
business judgment.”

““Quick Assets” is, on any date, Borrower’s unrestricted cash and Cash
Equivalents maintained at Bank, plus net billed accounts receivable.”

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““Revolving Line” is an Advance or Advances in an aggregate amount of up to
Three Million Dollars ($3,000,000.00) outstanding at any time.”

 

  7 The Borrowing Base Certificate appearing as Exhibit C to the Loan Agreement
is hereby replaced with the Borrowing Base Certificate attached as Exhibit A
hereto.

 

  8 The Compliance Certificate appearing as Exhibit D to the Loan Agreement is
hereby replaced with the Compliance Certificate attached as Exhibit B hereto

4. FEES. Borrower shall pay to Bank a modification fee equal to Seven Thousand
Five Hundred Dollars ($7,500.00), which fee shall be due on the date hereof and
shall be deemed fully earned as of the date hereof. Borrower shall also
reimburse Bank for all legal fees and expenses incurred in connection with this
amendment to the Existing Loan Documents.

5. RATIFICATION OF IP SECURITY AGREEMENTS. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and conditions of those certain IP
Security Agreements and acknowledges, confirms and agrees that said IP Security
Agreements contain an accurate and complete listing of all Intellectual Property
Collateral as defined in said IP Security Agreements, shall remain in full force
and effect.

6. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in those
certain Perfection Certificates each dated as of May 2, 2007, between Borrower
and Bank, and acknowledges, confirms and agrees the disclosures and information
Borrower provided to Bank in the Perfection Certificate has not changed, as of
the date hereof.

7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of the Existing Loan Documents and all
Collateral granted to the Bank, and confirms that the indebtedness secured
thereby includes, without limitation, the Obligations.

9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise.

10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower’s representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank’s agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable party the Borrower. Borrower is not and will
not be released by virtue of this Loan Modification Agreement.

11. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank.

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This Loan Modification Agreement is executed as a sealed instrument under the
laws of the Commonwealth of Massachusetts as of the date first written above.

 

BORROWER: SONIC FOUNDRY, INC. By  

/s/ Kenneth A. Minor

Name:   Kenneth A. Minor Title:   CFO SONIC FOUNDRY MEDIA SYSTEMS, INC. By  

/s/ Kenneth A. Minor

Name:   Kenneth A. Minor Title:   CFO BANK: SILICON VALLEY BANK By  

/s/ Janice Galbavy

Name:   Janice Galbavy Title:   Relationship Manager

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EXHIBIT A

BORROWING BASE CERTIFICATE

 

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Borrower:   SONIC FOUNDRY, INC.   SONIC FOUNDRY MEDIA SYSTEMS, INC. Lender:  
Silicon Valley Bank

Commitment Amount:   $3,000,000.00

 

ACCOUNTS RECEIVABLE

  

1. Accounts Receivable Book Value as of                                 

   $                                

2. Additions (please explain on reverse)

   $                                

3. TOTAL ACCOUNTS RECEIVABLE

   $                                

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

  

4. Amounts over 90 days due

   $                                

5. Balance of 50% over 90 day accounts

   $                                

6. Credit balances over 90 days

   $                                

7. Concentration Limits (25% for all, except 50% for Synnex Corporation)

   $                                

8. Foreign Accounts in excess of $750,000 in the aggregate

   $                                

9. Governmental Accounts

   $                                

10. Contra Accounts

   $                                

11. Promotion or Demo Accounts

   $                                

12. Intercompany/Employee Accounts

   $                                

13. Disputed Accounts

   $                                

14. Other (please explain on reverse)

   $                                

15. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

   $                                

16. Eligible Accounts (#3 minus #15)

   $                                

17. ELIGIBLE AMOUNT OF ACCOUNTS ( 80.0% of #16)

   $                                

BALANCES

  

18. Maximum Loan Amount

   $                                

19. Total Funds Available (Lesser of #18 and #17)

   $                                

20. Present balance owing on Line of Credit

   $                                

21. Outstanding under Sublimits (L/C, Cash Mgt, Fx)

   $                                

22. RESERVE POSITION (#19 minus #20 and #21)

   $                                

The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.

 

COMMENTS:   

BANK USE ONLY

   Received by:                                                       
AUTHORIZED SIGNER By:                                         
                        Date:                                         
                         Authorized Signer    Verified:
                                                            Date:    AUTHORIZED
SIGNER    Date:                                         
                            Compliance Status:        Yes        No

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EXHIBIT B

COMPLIANCE CERTIFICATE

 

TO:    SILICON VALLEY BANK    Date: FROM:   

SONIC FOUNDRY, INC. AND

SONIC FOUNDRY MEDIA SYSTEMS, INC.

  

The undersigned authorized officer of Sonic Foundry, Inc. and Sonic Foundry
Media Systems, Inc. (“Borrower”) certifies that under the terms and conditions
of the Loan and Security Agreement between Borrower and Bank (the “Agreement”),
(1) Borrower is in complete compliance for the period ending
                                         with all required covenants except as
noted below, (2) there are no Events of Default, (3) all representations and
warranties in the Agreement are true and correct in all material respects on
this date except as noted below ; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed
all required tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of
the Agreement, and (5) no Liens have been levied or claims made against Borrower
or any of its Subsidiaries relating to unpaid employee payroll or benefits of
which Borrower has not previously provided written notification to Bank.
Attached are the required documents supporting the certification. The
undersigned certifies that these are prepared in accordance with generally GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered. Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

  

Complies

Monthly financial statements with Compliance Certificate    Monthly within 30
days (Except month ending 9/30, in which case 60 days)    Yes    No Board
approved Projections    Annually, by 12/31 of each year    Yes    No 10-Q, 10-K
and 8-K    Within 5 days after filing with SEC    Yes    No Borrowing Base
Certificate A/R & A/P Agings    Monthly within 30 days    Yes    No Audit   
Annually    Yes    No The following Intellectual Property was registered after
the Effective Date (if no registrations, state “None”)

 

Financial Covenant

   Required     Actual    Complies Maintain on a Monthly Basis:         Minimum
Adjusted Quick Ratio              :1.0 *             :1.0    Yes    No Maintain
on a Quarterly Basis:         Minimum Tangible Net Worth    $              **  
$                 Yes    No

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* As set forth in Section 6.7(a) of the Loan Agreement

** As set forth in Section 6.7(b) of the Loan Agreement

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The following financial covenant analyses and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

 

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SONIC FOUNDRY, INC.    BANK USE ONLY      Received by:
                                                  By:      AUTHORIZED SIGNER
Name:      Date:                                                              
Title:      SONIC FOUNDRY MEDIA SYSTEMS , INC.    Verified:
                                                             AUTHORIZED SIGNER
By:  

 

   Date:                                                               Name:  

 

   Title:  

 

   Compliance Status:        Yes    No

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Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:                     

In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall control.

 

  I. Adjusted Quick Ratio (Section 6.7(a))

 

Required:

  

  .75 : 1.00 (for months ending October 31, 2006, and November 30, 2006)

1.25 : 1.0 (for months ending
January 31, February 28, April 30, May 31, July 31, and August 31 )

1.50 : 1.0 (for months ending December 31, March 31, June 30, and September 30)

Actual:

                       

 

A.

   Aggregate value of the unrestricted cash and cash equivalents of Borrower at
Silicon Valley Bank    $                

B.

   Aggregate value of the net billed accounts receivable of Borrower   
$                

C.

   Quick Assets (the sum of lines A and B)    $                

D.

   Aggregate value of Obligations to Bank    $                

E

   Aggregate value of long term and short term Obligations to Bank   
$                

F.

   Aggregate value of all amounts received or invoiced by Borrower in advance of
performance under contracts and not yet recognized as revenue   
$                

G.

   Quick Liabilities (the sum of lines D, E minus F)    $                

E.

   Adjusted Quick Ratio (line C divided by line G)        :    

 

             No, not in compliance

                Yes, in compliance                

 

  II. Tangible Net Worth (Section 6.7(b))

 

Required:

   Commencing with quarter end in 12/31/2007 and as of the last day of each
quarter thereafter, $5,500,0000.00, plus fifty percent (50.0%) of Borrower’s Net
Income, on a quarterly basis.

Actual:

   $                     

 

A.     Tangible Net Worth

   $                

 

No, not in compliance    Yes, in compliance