Exhibit 10.1

FOURTH AMENDMENT

TO

SECOND AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

This Fourth Amendment to Second Amended and Restated Loan and Security Agreement
(this “Amendment”) is entered into this         th day of January, 2015 (the
“Fourth Amendment Effective Date”), by and between Silicon Valley Bank (“Bank”),
SONIC FOUNDRY, INC., Maryland corporation (“Sonic Foundry”), and SONIC FOUNDRY
MEDIA SYSTEMS, INC., a Maryland corporation (“Sonic Systems” and together with
Sonic Foundry, jointly and severally, individually and collectively, the
“Borrower”).

RECITALS

A. Bank and Borrower have entered into that certain Second Amended and Restated
Loan and Security Agreement, dated as of June 27, 2011, as amended by that
certain First Amendment, dated as of May 31, 2013, as further amended by that
certain Second Amendment, dated as of January 10, 2014 and as further amended by
that certain Third Amendment, dated as of March 24, 2014 (as the same may from
time to time be further amended, modified, supplemented or restated, the “Loan
Agreement”).

B. Bank has extended credit to Borrower for the purposes permitted in the Loan
Agreement.

C. Borrower has requested that Bank amend the Loan Agreement to (i) add a new
term loan facility; (ii) revise the financial covenants and (iii) make certain
other revisions to the Loan Agreement as more fully set forth herein.

D. Bank has agreed to so amend certain provisions of the Loan Agreement, but
only to the extent, in accordance with the terms, subject to the conditions of,
and in reliance upon, the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

 

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2. Amendments to Loan Agreement.

2.1 Section 2.1.8 (Term Loan 2015). The following new Section 2.1.8 shall be
inserted immediately following Section 2.1.7 thereof:

“2.1.8 Term Loan 2015.

(a) Availability. Bank shall make one (1) term loan available to Borrower in an
amount up to Two Million Five Hundred Thousand Dollars ($2,500,000) (the “Term
Loan 2015 Amount”), on the Fourth Amendment Effective Date, subject to the
satisfaction of the terms and conditions of this Agreement.

(b) Repayment. Commencing on the first day of the month following the month in
which the Funding Date occurs, Borrower shall (i) make monthly payments of
interest with respect to the Term Loan 2015, and thereafter, on the first day of
each successive calendar month until the Term Loan 2015 is paid in full; and
(ii) repay the principal amount of the Term Loan 2015 in thirty-six (36) equal
installments of principal, based on a thirty-six (36) month amortization
schedule (each payment of principal and/or interest being a “Term Loan 2015
Payment”). Borrower’s final Term Loan 2015 Payment, due on the Term Loan 2015
Maturity Date, shall include all outstanding principal and accrued and unpaid
interest under the Term Loan 2015. Once repaid, the Term Loan 2015 may not be
reborrowed.

(c) Prepayment. Borrower may prepay all but not less than all of the Term Loan
2015 prior to the Term Loan 2015 Maturity Date, effective three (3) Business
Days after written notice of such prepayment is given to Bank. Notwithstanding
any such prepayment, Bank’s lien and security interest in the Collateral shall
continue until Borrower fully satisfies its Obligations. If such prepayment is
at Borrower’s election or at Bank’s election due to the occurrence and
continuance of an Event of Default, Borrower shall pay to Bank, in addition to
the payment of any other expenses or fees then-owing, a prepayment fee in an
amount equal to (i) if such prepayment occurs after the Fourth Amendment
Effective Date but on or prior to the day that is 365 days after the Fourth
Amendment Effective Date (the “Term Loan 2015 First Anniversary”), one percent
(1.00%) of the principal amount of the Term Loan 2015 (i.e. Twenty Five Thousand
Dollars ($25,000)); (ii) if such prepayment occurs after the Term Loan 2015
First Anniversary but on or prior to the day that is 365 days after the Term
Loan 2015 First Anniversary (the “Term Loan 2015 Second Anniversary”), one-half
of one percent (0.50%) of the principal amount of the Term Loan 2015 (i.e.
Twelve Thousand Five Hundred Dollars ($12,500)); and (iii) Zero Dollars ($0.00)
if such prepayment occurs after the Term Loan 2015 Second Anniversary; provided
that no termination fee shall be charged if the Term Loan 2015 is replaced with
a new facility from another division of Silicon Valley Bank. Upon payment in
full of the Obligations and at such time as Bank’s obligation to make Credit
Extensions has terminated, Bank shall terminate and release its liens and
security interests in the Collateral and all rights therein shall revert to
Borrower.

(d) Use of Proceeds. Proceeds of the Term Loan 2015 shall be utilized (i) to
repay in full all of the outstanding principal amount of and accrued and unpaid
interest on the Term Loan 2014; (ii) to pay all or a portion of the Permitted
Earnout Payments (to the extent otherwise permitted under the Agreement); and
(iii) as working capital to fund its general business requirements, and not for
personal, family, household or agricultural purposes.”

 

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2.2 Section 2.3(a) (Payment of Interest on the Credit Extensions).
Section 2.3(a) is amended in its entirety and replaced with the following:

“(a) Interest Rate.

(i) Advances. Subject to Section 2.3(b), the principal amount outstanding under
the Revolving Line shall accrue interest at a floating per annum rate equal to
the Prime Rate plus three-quarters of one percent (0.75%), which interest shall
be payable monthly, in arrears, in accordance with Section 2.3(f) below.

(ii) Term Loan 2015. Subject to Section 2.3(b), the principal amount outstanding
under the Term Loan 2015 shall accrue interest at a floating per annum rate
equal to the greater of the Prime Rate plus two and one-quarter percent (2.25%),
which interest shall be payable monthly, in arrears in accordance with
Section 2.1.8(b).”

2.3 Section 6.2(a)(i) (Transaction Reports). Section 6.2(a)(i) is amended in its
entirety and replaced with the following:

“(i) (A) within fifteen (15) days after the end of each month, and (B) upon each
request for an Advance, a Transaction Report;”

2.4 Section 6.3(c) (Collection of Accounts). Section 6.3(c) is amended in its
entirety and replaced with the following:

“(c) Collection of Accounts. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. All payments on, and proceeds of, Accounts shall be deposited
directly by the applicable Account Debtor into a lockbox account, or such other
“blocked account” as Bank may specify, pursuant to a blocked account agreement
in form and substance satisfactory to Bank in its sole discretion. Whether or
not an Event of Default has occurred and is continuing, Borrower shall
immediately deliver all payments on and proceeds of Accounts to an account
maintained with Bank to be (i) prior to an Event of Default, transferred to an
account of Borrower maintained at Bank or, at Borrower’s discretion, applied to
reduce the outstanding Obligations under the Revolving Line pursuant to the
terms of Section 2.5(b) hereof, and (ii) after the occurrence and during the
continuance of an Event of Default, applied pursuant to the terms of Section 9.4
hereof; provided that so long as an Event of Default has not occurred and is not
continuing, subject to Section 6.8(a) and Section 6.8(b), Borrower may maintain
amounts sent by the applicable Account Debtor in its U.S. Bank Account (which
U.S. Bank Account is subject to a Control Agreement in favor of Bank), in an
aggregate amount not to exceed One Hundred Thousand Dollars ($100,000) at all
times for each such Account Debtor.”

 

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2.5 Section 6.9(a) and Section 6.9(b) (Financial Covenants). Sections 6.9(a) and
(b) are amended in their entirety and replaced with the following:

“(a) Adjusted Quick Ratio. Commencing with the monthly compliance period ending
December 31, 2014 and thereafter, an Adjusted Quick Ratio, tested with respect
to Borrower only, of at least the following as of the last day of each monthly
period as indicated below:

 

Monthly Periods Ending    Minimum Adjusted Quick Ratio  

March 31, June 30, September 30 and December 31

     1.25:1.00   

January 31, February 28, April 30, May 31, July 31, August 31, October 31 and
November 30

     1.10:1.00   

(b) Debt Service Coverage Ratio. Commencing with the quarterly compliance period
ended December 31, 2014 and thereafter, measured as of the last day of each
fiscal quarter, on a trailing twelve (12) month basis ending as of the date of
measurement, maintain a ratio of (x) (i) EBITDA plus (ii) up to Four Hundred
Fifty Thousand Dollars ($450,000) of transaction expenses actually incurred
during such measurement period by Borrower in connection with the Media
Acquisitions, plus (iii) up to Five Hundred Thousand Dollars ($500,000) of
expenses actually incurred during such measurement period by Borrower in
connection with the Astute Settlement, plus (iv) the net change in Deferred
Revenue during such measurement period; divided by (y) Debt Service, of at least
the following for the quarterly periods indicated below:

 

Quarterly Periods Ending    Minimum Debt Service Coverage Ratio  

December 31, 2014 and March 31, 2015

     1.00:1.00   

June 30, 2015

     1.25:1.00   

September 30, 2015, and each quarterly period ending thereafter

     1.50:1.00”   

2.6 Section 8.1 (Payment Default). Section 8.1 is amended in its entirety and
replaced with the following:

“8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day cure period shall not apply to payments
due on the Revolving Line Maturity Date and/or the Term Loan 2015 Maturity
Date). During the cure period, the failure to make or pay any payment specified
under clause (a) or (b) hereunder is not an Event of Default (but no Credit
Extension will be made during the cure period);”

 

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2.7 Section 12.1 (Termination Prior to Revolving Line Maturity Date).
Section 12.1 is amended in its entirety and replaced with the following:

“12.1 Termination Prior to Maturity Date. This Agreement may be terminated prior
to the Revolving Line Maturity Date by Borrower, effective three (3) Business
Days after written notice of termination is given to Bank or if Bank’s
obligation to fund Credit Extensions terminates pursuant to the terms of
Section 2.1.1(b). Notwithstanding any such termination, Bank’s lien and security
interest in the Collateral shall continue until Borrower fully satisfies all
Obligations and Bank’s obligation to make Credit Extensions has terminated. If
such termination is at Borrower’s election or at Bank’s election due to the
occurrence and continuance of an Event of Default, Borrower shall pay to Bank,
in addition to the payment of any other expenses or fees then-owing, a
termination fee in an amount equal to Twenty Thousand Dollars ($20,000) (i.e.
one-half percent (0.50%) of Four Million Dollars ($4,000,000)); provided that no
termination fee shall be charged if the credit facility hereunder is replaced
with a new facility from another division of Silicon Valley Bank. Upon payment
in full of the Obligations and at such time as Bank’s obligation to make Credit
Extensions has terminated, Bank shall release its liens and security interests
in the Collateral and all rights therein shall revert to Borrower.”

2.8 Section 13.1 (Definitions – “Eligible Accounts”). Clause (v) of the
definition of “Eligible Accounts” set forth in Section 13.1 is amended in its
entirety and replaced with the following:

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

2.9 Section 13.1 (Definitions – “Permitted Liens”). Clause (c) of the definition
of “Permitted Liens” set forth in Section 13.1 is amended in its entirety and
replaced with the following:

“(c) purchase money Liens (including, without limitation, capital lease
obligations) securing no more than Eight Hundred Thousand Dollars ($800,000) in
the aggregate amount outstanding (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment, or (ii) existing on
Equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the Equipment;

2.10 Section 13.1 (Definitions). The following terms and their respective
definitions set forth in Section 13.1 are amended in their entirety and replaced
with the following:

“Credit Extension” is any Advance, Letter of Credit, Term Loan 2015, foreign
exchange forward contracts, amount utilized for cash management services, or any
other extension of credit by Bank for Borrower’s benefit.

 

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“Debt Service” means, for any period of measurement, all regularly scheduled
payments of principal and interest of Indebtedness of Borrower and its
Subsidiaries, other than Permitted Earnout Payments, determined on a
consolidated basis due within the trailing twelve (12) month period ended as of
such date of measurement.

“EBITDA” shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to the
extent deducted in the calculation of Net Income, depreciation expense and
amortization expense, plus (d) income tax expense, plus (e) non-cash stock
compensation expense, plus (f) other non-cash and non-recurring expenses
acceptable to Bank, in its reasonable discretion.

“Eligible Foreign Accounts” are Accounts for which the Account Debtor does not
have its principal place of business in the United States but are otherwise
Eligible Accounts that are owing from (i) Content Bank (Australia),
(ii) Comm-Vertrievsgesellschaft (Germany) and (iii) Visionaire (UAE).

“Revolving Line” is an Advance or Advances in an amount not to exceed Four
Million Dollars ($4,000,000) outstanding at any time.

“Revolving Line Maturity Date” is January 31, 2017.

2.11 Section 13.1 (Definitions). The following new terms and their respective
definitions are hereby inserted in Section 13.1, each in its applicable
alphabetical order:

“Astute Settlement” is a settlement agreement by and among Sonic Foundry,
Learners Digest International and Astute Technology, LLC, dated on or about
June 30, 2014.

“Fourth Amendment Effective Date” is January [        ], 2015.

“Term Loan 2015” is a loan made by Bank pursuant to the terms of Section 2.1.8
hereof:

“Term Loan 2015 Amount” is defined in Section 2.1.8(a).

“Term Loan 2015 Payment” is defined in Section 2.1.8(b).

“Term Loan 2015 Maturity Date” is January 1, 2018.

2.12 Section 13.1 (Definitions). The following terms and their respective
definitions are hereby deleted in their entirety from Section 13.1:

“Streamline Period” is, on and after the Second Amendment Effective Date,
provided no Default or Event of Default has occurred and is continuing, the
period (i) beginning on the first (1st) day of the month following the month in
which Borrower has, as of the last day of each of the immediately preceding two
(2) Subject Months, maintained an Adjusted Quick Ratio of not less than
1.75:1.00, as determined by Bank, in its sole discretion (the “Streamline
Threshold”); and (ii) ending on the earlier to occur of (A) the occurrence of a

 

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Default or an Event of Default; and (B) the first day thereafter in which
Borrower fails to maintain the Streamline Threshold, as determined by Bank, in
its sole discretion. Upon the termination of a Streamline Period, Borrower must
maintain the Streamline Threshold for two (2) consecutive Subject Months, as
determined by Bank, in its sole discretion, prior to entering into a subsequent
Streamline Period. Borrower shall give Bank prior-written notice of Borrower’s
intention to enter into any such Streamline Period.

“Term Loan Reserve Amount” is, (i) during a Term Loan Reserve Period, an amount
equal to all outstanding amounts under the Term Loan 2014 and (ii) at any other
time, Zero Dollars ($0.00).

“Term Loan Reserve Period” is the period commencing on the earlier of (i) the
occurrence and continuance of an Event of Default, and (ii) the date that that
Borrower reports, or Bank otherwise determines, in its sole discretion, that
Borrower has failed to maintain a Debt Service Coverage Ratio greater than or
equal to 1.25:1.00 (the “Term Loan Reserve Threshold”) and terminating on the
first day of the quarter following the quarter in which Borrower reports that it
has maintained the Term Loan Reserve Threshold for the then-prior quarterly
period.

2.13 Compliance Certificate. The Compliance Certificate attached as Exhibit C to
the Loan Agreement is deleted in its entirety and replaced with Exhibit A
attached hereto.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes
set forth herein and shall be limited precisely as written and shall not be
deemed to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Loan Document, or (b) otherwise prejudice any right or
remedy which Bank may now have or may have in the future under or in connection
with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan
Documents and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.

4. Waivers. Bank hereby waives Borrower’s existing defaults under the Loan
Agreement by virtue of Borrower’s failure to comply with the minimum Adjusted
Quick Ratio financial covenant contained in former Section 6.9(a) thereof for
the compliance period ended November 30, 2014. Bank’s waiver of Borrower’s
compliance of said financial covenant shall apply only to such dates of
non-compliance which occurred prior to the date hereof. Borrower hereby
acknowledges and agrees that except as specifically provided herein, nothing in
this Section or anywhere in this Amendment shall be deemed or otherwise
construed as a waiver by Bank of any of its rights and remedies pursuant to the
Loan Documents, applicable law or otherwise.

 

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5. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

5.1 Immediately after giving effect to this Amendment (a) the representations
and warranties contained in the Loan Documents are true, accurate and complete
in all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are
true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;

5.2 Borrower has the power and authority to execute and deliver this Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;

5.3 The organizational documents of Borrower previously delivered to Bank remain
true, accurate and complete and have not been amended, supplemented or restated
and are and continue to be in full force and effect, or updated copies have
otherwise been delivered to Bank in connection with the execution of this
Amendment;

5.4 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized;

5.5 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on
Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or
(d) the organizational documents of Borrower;

5.6 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
either Borrower, except as already has been obtained or made; and

5.7 This Amendment has been duly executed and delivered by Borrower and is the
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors’
rights.

6. Ratification of Intellectual Property Security Agreement. Borrower hereby
ratifies, confirms and reaffirms, all and singular, the terms and conditions of
each Intellectual Property Security Agreement, each dated as of June 16, 2008
between each respective Borrower and Bank, and acknowledges, confirms and agrees
that said Intellectual Property Security Agreements (a) contain an accurate and
complete listing of all respective Intellectual Property Collateral, as defined
in such Intellectual Property Security Agreement, and (b) shall remain in full
force and effect.

 

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7. 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, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.

8. Integration. This Amendment and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or
agreements. All prior agreements, understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Amendment
and the Loan Documents merge into this Amendment and the Loan Documents.

9. Counterparts. This Amendment may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.

10. Effectiveness. This Amendment shall be deemed effective upon (a) the due
execution and delivery to Bank of this Amendment by each party hereto,
(b) updated Secretary’s Corporate Borrowing Certificates for each Borrower (with
updated attachments, if necessary), (c) Certificates of Good Standing and
Foreign Qualification, as applicable, (d) updated evidence of insurance, in form
and substance acceptable to Bank, (e) payment by Borrower of (i) a
non-refundable Term Loan 2015 commitment fee in an amount equal to Twenty
Thousand Dollars ($20,000) and (ii) an non-refundable amendment fee equal to
Five Thousand Dollars ($5,000), which commitment fee and amendment fee shall be
fully-earned when paid, and (f) payment of Bank’s legal fees and expenses
incurred in connection with the existing Loan Documents and this Amendment.

11. Post-Closing Matters. (i) On or before June 16, 2015, Borrower shall pay to
Bank a fully earned, non-refundable Revolving Line anniversary fee in an amount
equal to Twenty Six Thousand Six Hundred Sixty Seven Dollars ($26,667); and
(ii) on or before June 16, 2016, Borrower shall pay to Bank an additional fully
earned, non-refundable Revolving Line anniversary fee in an amount equal to
Twenty Six Thousand Six Hundred Sixty Seven Dollars ($26,667).

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

 

BANK

SILICON VALLEY BANK

By

/s/ Tom Hertzberg

Name:

Tom Hertzberg

Title:

Vice President

BORROWER

SONIC FOUNDRY, INC.

 

By

/s/ Ken Minor

Name:

Ken Minor

Title:

CFO

SONIC FOUNDRY MEDIA SYSTEMS, INC.

 

By

/s/ Ken Minor

Name:

Ken Minor

Title:

CFO

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Exhibit A to Fourth Amendment

EXHIBIT C

COMPLIANCE CERTIFICATE

 

TO:    SILICON VALLEY BANK    Date:   

                     

FROM:    SONIC FOUNDRY, INC.          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 (as amended, 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, if any, 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 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    Yes    No

Annual financial statement (CPA Audited) + CC

   FYE within 120 days    Yes    No

10-Q, 10-K and 8-K

   Within 5 days after filing with SEC    Yes    No

A/R & A/P Agings

   Monthly within 15 days    Yes    No

Transaction Reports

   Monthly within 15 days and with each request for a Credit Extension   
Yes    No

Projections

   Within fifteen (15) following approval by the Borrower’s board of directors,
and in any event within fifteen (15) days after the end of each fiscal year of
Borrower, and as amended and/or updated    Yes    No

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The following Intellectual Property was registered after the Effective Date (if
no registrations, state “None”)

 

 

Financial Covenant

   Required   Actual      Complies  

Maintain as indicated:

       

Minimum Adjusted Quick Ratio (monthly)

   [1.10][1.25] :1.00     _____:1.0         Yes    No   

Minimum Debt Service Coverage Ratio (quarterly)

   *     _____:1.0         Yes    No   

Maximum Subsidiary Indebtedness (at all times)

   <$500,000   $                          Yes    No   

 

* See Section 6.9(b)

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.”)

 

                         

 

SONIC FOUNDRY, INC.

SONIC FOUNDRY MEDIA SYSTEMS, INC.

    BANK USE ONLY     Received by:           AUTHORIZED SIGNER By:         Date:
    Name:           Title:         Verified:             AUTHORIZED SIGNER      
Date:                   Compliance Status:    Yes    No

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Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

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

Dated:                                 

I. Adjusted Quick Ratio (Section 6.9(a))

Required: Commencing with the monthly compliance period ending December 31, 2014
and thereafter, an Adjusted Quick Ratio, tested with respect to Borrower only,
of at least the following as of the last day of each monthly period as indicated
below:

 

Monthly Periods Ending    Minimum Adjusted Quick Ratio

March 31, June 30, September 30 and December 31

   1.25:1.00

January 31, February 28, April 30, May 31, July 31, August 31, October 31 and
November 30

   1.10:1.00

 

Actual:      

A.

   Aggregate value of Borrower’s unrestricted cash at Bank     
        $                       

B.

   Aggregate value of the net billed accounts receivable of Borrower     
        $                       

C.

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

D.

   Aggregate value of Obligations to Bank              $                       

E.

   Without duplication, aggregate value of liabilities of Borrower (including
all Indebtedness) that matures within one (1) year     
        $                       

F.

   Current Liabilities (the sum of lines D plus line E)     
        $                       

G.

   The current portion of Subordinated Debt to the extent included in the
definition of Current Liabilities              $                       

H.

   Current portion of Deferred Revenue              $                       

I.

   Adjusted Current Liabilities (line F minus line G minus line H).     
        $                       

J.

   Adjusted Quick Ratio (line C divided by line I), expressed as a ratio     
                     :1.00   

Is line J equal to or greater than                      :1:00?

                     No, not in compliance
                                         
                                                         Yes, in compliance

--------------------------------------------------------------------------------

II. Debt Service Coverage Ratio (Section 6.9(b))

Required: Commencing with the quarterly compliance period ended December 31,
2014 and thereafter, measured as of the last day of each fiscal quarter, on a
trailing twelve (12) month basis ending as of the date of measurement, maintain
a ratio of (x) (i) EBITDA plus (ii) up to Four Hundred Fifty Thousand Dollars
($450,000) of transaction expenses actually incurred during such measurement
period by Borrower in connection with the Media Acquisitions, plus (iii) up to
Five Hundred Thousand Dollars ($500,000) of expenses actually incurred during
such measurement period by Borrower in connection with the Astute Settlement,
plus (iv) the net change in Deferred Revenue during such measurement period;
divided by (y) Debt Service, of at least the following for the quarterly periods
indicated below:

 

Quarterly Periods Ending    Minimum Debt Service Coverage Ratio

December 31, 2014 and March 31, 2015

   1.00:1.00

June 30, 2015

   1.25:1.00

September 30, 2015, and each quarterly period ending thereafter

   1.50:1.00

Actual: All amounts measured on a trailing twelve (12) month basis

 

A.

   EBITDA              $                       

B.

   Up to Four Hundred Fifty Thousand Dollars ($450,000) of transaction expenses
actually incurred by Borrower in connection with the Media Acquisitions     
        $                       

C.

   Up to Five Hundred Thousand Dollars ($500,000) of expenses actually incurred
during such measurement period by Borrower in connection with the Astute
Settlement              $                       

D.

   The net change in Deferred Revenue              $                       

E.

   all regularly scheduled payments of principal and interest of Indebtedness of
Borrower and its Subsidiaries, other than Permitted Earnout Payments, determined
on a consolidated basis, due within the trailing twelve (12) month period ended
as of such date of measurement.              $                       

F.

   Debt Service Coverage Ratio ((i) the sum of lines A through D; divided by
(ii)_line E)                           :1.00   

Is line F equal to or greater than 1.50:1.00?

                     No, not in compliance.
                                         
                                                         Yes, in compliance.