8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

April 1, 2008 (March 31, 2008)

Date of Report (Date of earliest event reported)

Sonic Foundry, Inc.

(Exact name of registrant as specified in its chapter)

Maryland	1-14007	39-1783372
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

222 W. Washington Ave Madison, WI 53703	(608) 443-1600
(Address of principal executive offices)	(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

See disclosure under Item 2.03 below, which is incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

On March 31, 2008, Sonic Foundry, Inc., and its wholly-owned subsidiary, Sonic Foundry Media Systems, Inc. (“SFMS”) entered into a letter agreement dated March 25, 2008 (the “Agreement”) with Silicon Valley Bank, the primary banking subsidiary of Silicon Valley Bancshares. The Agreement reduces the tangible net worth covenant as of March 31, 2008 from $5,500,000 to $2,800,000, plus, in each case, fifty percent (50%) of the Registrant’s Net Income and new equity or Subordinated Debt (as defined).

A copy of the Agreement is attached as Exhibit 10.1 to the report and the summary above is qualified by reference to the entire document.

Item 9.01 Exhibits.

Exhibit Number	Description of Exhibit
10.1	Letter Agreement dated March 25, 2008 and entered into as of March 31, 2008 among registrant, SFMS and Silicon Valley Bank

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Sonic Foundry, Inc.
	(Registrant)
April 1, 2008	By:	/s/ Kenneth A. Minor
		Kenneth A. Minor
		Chief Financial Officer

3

EXHIBIT LIST

NUMBER	DESCRIPTION
10.1	Letter Agreement dated March 25, 2008 and entered into as of March 31, 2008 among registrant, SFMS and Silicon Valley Bank

4

EX-10.1

Exhibit 10.1

March 25, 2008

Sonic Foundry, Inc.

Sonic Foundry Media Systems, Inc.

222 W. Washington Avenue, Suite 775

Madison, Wisconsin 53703

Attn: Mr. Ken Minor

Re: Modification to Financial Covenant

Dear Ken:

This letter is written in connection with that certain Loan and Security Agreement by and among Silicon Valley Bank, as lender (“Bank”), and Sonic Foundry, Inc. and Sonic Foundry Media Systems, Inc., as borrowers (collectively, “Borrower”), dated May 2, 2007, as amended by that certain First Loan Modification Agreement dated December 17, 2007 (collectively, and may be further amended from time to time, the “Loan Agreement”). Capitalized terms used but not otherwise defined herein shall have the meaning set forth in the Loan Agreement.

Pursuant to the terms of Section 6.7(b) of the Loan Agreement, beginning December 31, 2007, and as of the last day of each quarter thereafter, Borrower is required to maintain a Tangible Net Worth of at least (a) Five Million Five Hundred Thousand Dollars ($5,500,000), plus (b) fifty percent (50%) of Borrower’s Net Income or new equity or Subordinated Debt, on a quarterly basis (the “TNW Covenant”). Borrower has requested that Bank modify the TNW Covenant. Bank and Borrower desire to amend and restate Section 6.7(b) of the Loan Agreement in its entirety as follows:

(b) Tangible Net Worth. Beginning March 31, 2008, and as of the last day of each quarter thereafter, Borrower is required to maintain a Tangible Net Worth of at least (a) Two Million Eight Hundred Thousand Dollars ($2,800,000), plus (b) fifty percent (50%) of Borrower’s Net Income or new equity or Subordinated Debt, on a quarterly basis

By signing below and returning a copy of this letter to Bank, Borrower acknowledges that the Loan Agreement is hereby modified in accordance with the provisions set forth above. Borrower further understands and agrees that in modifying the Loan Agreement, Bank is relying upon Borrower’s representations, warranties and agreement, as set forth in the Loan Agreement. Except as expressly set forth herein, the terms of the Loan Agreement shall remain unchanged and in full force and effect. Bank’s agreement to this modification shall in no way obligate Bank to make any future waivers or modifications to the Loan Agreement. Nothing in this letter shall

1

March 25, 2008

Mr. Ken Minor

Page 2

constitute satisfaction of the Borrower’s indebtedness to Bank. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of the Loan Agreement, unless the party is expressly released by Bank in writing. Unless expressly released herein, no maker, endorser or guarantor will be released by virtue of this letter. The terms of this paragraph apply not only to this letter, but to all subsequent loan modification agreements.

The provisions of this letter shall not be deemed effective until such time as Borrower shall have returned, a countersigned copy to Bank.

Very truly yours,
SILICON VALLEY BANK
By:	/s/ Adam Glick
	Adam Glick, Relationship Manager

2

March 25, 2008

Mr. Ken Minor

Page 3

By executing below, the undersigned acknowledges and confirms the effectiveness of this letter.

BORROWER:
SONIC FOUNDRY, INC., a Maryland corporation
By:	/s/ Kenneth A. Minor
Name:	Kenneth A. Minor
Its:	CFO
SONIC FOUNDRY MEDIA SYSTEMS, INC., a Maryland corporation
By:	/s/ Kenneth A. Minor
Name:	Kenneth A. Minor
Its:	Secretary

3