SUBORDINATION AGREEMENT

This Subordination Agreement is made as of May 29, 2007, by and between BLUELINE
CAPITAL PARTNERS, LP, as Agent for the secured parties, with an office at 4115
Blackhawk Plaza Circle, Suite 100, Danville, CA 94596 (“Creditor”), and SILICON
VALLEY BANK, a California-chartered bank, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at 2221 Washington Street, Suite 200, Newton, Massachusetts 02462
(“Bank”).

Recitals

A. AXS-ONE INC. (“Borrower”) has requested and/or obtained certain loans or
other credit accommodations from Bank to Borrower which are or may be from time
to time secured by assets and property of Borrower.

B. Creditor has extended loans or other credit accommodations to Borrower,
and/or may extend loans or other credit accommodations to Borrower from time to
time.

C. In order to induce Bank to extend credit to Borrower and, at any time or from
time to time, at Bank’s option, to make such further loans, extensions of
credit, or other accommodations to or for the account of Borrower, or to
purchase or extend credit upon any instrument or writing in respect of which
Borrower may be liable in any capacity, or to grant such renewals or extension
of any such loan, extension of credit, purchase, or other accommodation as Bank
may deem advisable, Creditor is willing to subordinate: (i) all of Borrower’s
indebtedness and obligations to Creditor, whether presently existing or arising
in the future (the “Subordinated Debt”) to all of Borrower’s indebtedness and
obligations to Bank; and (ii) all of Creditor’s security interests, if any, to
all of Bank’s security interests in the Borrower’s property.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. Creditor subordinates to Bank any security interest or lien that Creditor may
have in any property of Borrower. Notwithstanding the respective dates of
attachment or perfection of the security interest of Creditor and the security
interest of Bank, the security interest of Bank in the Collateral (the
“Collateral”), as defined in a certain Amended and Restated Loan and Security
Agreement between Borrower and Bank dated as of September 13, 2005, as amended
by a certain First Loan Modification Agreement dated as of March 14, 2006, as
further amended by a certain Second Loan Modification Agreement dated as of
October 31, 2006, as further amended by a certain Third Loan Modification
Agreement dated as of November 11, 2006, as further amended by a certain Fourth
Loan Modification Agreement dated as of March 6, 2007, as further affected by a
certain Forbearance Agreement dated as of May 15, 2007, and as may be further
amended from time to time (the “Loan Agreement”), shall at all times be senior
to the security interest of Creditor.

2. All Subordinated Debt is subordinated in right of payment to all obligations
of Borrower to Bank now existing or hereafter arising, together with all costs
of collecting such obligations (including attorneys’ fees), including, without
limitation, all interest accruing after the commencement by or against Borrower
of any bankruptcy, reorganization or similar proceeding, and all obligations
under the Loan Agreement (the “Senior Debt”).

3. Without Bank’s prior written consent, Creditor will not demand or receive
from Borrower (and Borrower will not pay to Creditor) all or any part of the
Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise,
nor will Creditor exercise any remedy with respect to the Collateral, nor will
Creditor accelerate the Subordinated Debt, or commence, or cause to commence,
prosecute or participate in any administrative, legal or equitable action
against Borrower, until such time as both (i) the Senior Debt is fully paid in
cash, (ii) Bank has no commitment or obligation to lend any further funds to
Borrower, and (iii) all financing agreements between Bank and Borrower are
terminated. Nothing in the foregoing paragraph shall prohibit Creditor from
converting all or any part of the Subordinated Debt into equity securities of
Borrower.

 

 

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4. Creditor shall promptly deliver to Bank in the form received (except for
endorsement or assignment by Creditor where required by Bank) for application to
the Senior Debt any payment, distribution, security or proceeds received by
Creditor with respect to the Subordinated Debt other than in accordance with
this Agreement.

5. In the event of Borrower’s insolvency, reorganization or any case or
proceeding under any bankruptcy or insolvency law or laws relating to the relief
of debtors, these provisions shall remain in full force and effect, and Bank’s
claims against Borrower and the estate of Borrower shall be paid in full before
any payment is made to Creditor.

6. Until the Senior Debt is fully paid in cash and Bank’s arrangements to lend
any funds to Borrower has been terminated, Creditor irrevocably appoints Bank as
Creditor’s attorney-in-fact, and grants to Bank a power of attorney with full
power of substitution, in the name of Creditor or in the name of Bank, for the
use and benefit of Bank, without notice to Creditor, to perform at Bank’s option
the following acts in any bankruptcy, insolvency or similar proceeding involving
Borrower:

(i) To file the appropriate claim or claims in respect of the Subordinated Debt
on behalf of Creditor if Creditor does not do so prior to 30 days before the
expiration of the time to file claims in such proceeding and if Bank elects, in
its sole discretion, to file such claim or claims; and

(ii) To accept or reject any plan of reorganization or arrangement on behalf of
Creditor and to otherwise vote Creditor’s claims in respect of any Subordinated
Debt in any manner that Bank deems appropriate for the enforcement of its rights
hereunder.

7. Creditor shall immediately affix a legend to the instruments evidencing the
Subordinated Debt stating that the instruments are subject to the terms of this
Agreement. By the execution of this Agreement, Creditor hereby authorizes Bank
to amend any financing statements filed by Creditor against Borrower as follows:
“In accordance with a certain Subordination Agreement by and among the Secured
Party, the Debtor and Silicon Valley Bank, the Secured Party has subordinated
any security interest or lien that Secured Party may have in any property of the
Debtor to the security interest of Silicon Valley Bank in all assets of the
Debtor, notwithstanding the respective dates of attachment or perfection of the
security interest of the Secured Party and Silicon Valley Bank.”

8. No amendment of the documents evidencing or relating to the Subordinated Debt
shall directly or indirectly modify the provisions of this Agreement in any
manner which might terminate or impair the subordination of the Subordinated
Debt or the subordination of the security interest or lien that Creditor may
have in any property of Borrower. By way of example, such instruments shall not
be amended to (i) increase the rate of interest with respect to the Subordinated
Debt, or (ii) accelerate the payment of the principal or interest or any other
portion of the Subordinated Debt.

9. If, at any time after payment in full of the Senior Debt any payments of the
Senior Debt must be disgorged by Bank for any reason (including, without
limitation, the bankruptcy of Borrower), this Agreement and the relative rights
and priorities set forth herein shall be reinstated as to all such disgorged
payments as though such payments had not been made and Creditor shall
immediately pay over to Bank all payments received with respect to the
Subordinated Debt to the extent that such payments would have been prohibited
hereunder. At any time and from time to time, without notice to Creditor, Bank
may take such actions with respect to the Senior Debt as Bank, in its sole
discretion, may deem appropriate, including, without limitation, terminating
advances to Borrower, increasing the principal amount, extending the time of
payment, increasing applicable interest rates, renewing, compromising or
otherwise amending the terms of any documents affecting the Senior Debt and any
collateral securing the Senior Debt, and enforcing or failing to enforce any
rights against Borrower or any other person. No such action or inaction shall
impair or otherwise affect Bank’s rights hereunder.

10. This Agreement shall bind any successors or assignees of Creditor and shall
benefit any successors or assigns of Bank. This Agreement shall remain effective
until terminated in writing by Bank. This Agreement is solely for the benefit of
Creditor and Bank and not for the benefit of Borrower or any other party.

 

 

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Creditor further agrees that if Borrower is in the process of refinancing any
portion of the Senior Debt with a new lender, and if Bank makes a request of
Creditor, Creditor shall agree to enter into a new subordination agreement with
the new lender on substantially the terms and conditions of this Agreement.

11. Creditor hereby agrees to execute such documents and/or take such further
action as Bank may at any time or times reasonably request in order to carry out
the provisions and intent of this Agreement, including, without limitation,
ratifications and confirmations of this Agreement from time to time hereafter,
as and when requested by Bank.

12. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
instrument.

13. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to conflicts of
laws principles. Creditor and Bank submit to the exclusive jurisdiction of the
state and federal courts located in Boston, Massachusetts in any action, suit,
or proceeding of any kind, against it which arises out of or by reason of this
Agreement; provided, however, that if for any reason Bank cannot avail itself of
the Courts of The Commonwealth of Massachusetts, Creditor accepts jurisdiction
of the Courts and venue in Santa Clara County, California. CREDITOR AND BANK
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN.

14. This Agreement represents the entire agreement with respect to the subject
matter hereof, and supersedes all prior negotiations, agreements and
commitments. Creditor is not relying on any representations by Bank or Borrower
in entering into this Agreement, and Creditor has kept and will continue to keep
itself fully apprised of the financial and other condition of Borrower. This
Agreement may be amended only by written instrument signed by Creditor and Bank.

 

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.

 

“Creditor”

 

“Bank”

BLUELINE CALIPTAL PARTNERS, LP

 

SILICON VALLEY BANK

By:

BlueLine Partners, LLC, its General Partner

 

By:

/s/ Jay T. Tracy

By:

/s/ Scott Alan Shuda

 

Title: 

Vice President

Title: 

Managing Director of BlueLine Partners, LLC

 

 

 

The undersigned approves of the terms of this Agreement.

“Borrower”

 

AXS-ONE INC.

 

 

By:

/s/ William P. Lyons

 

 

 

Title:

CEO

 

 

 

 

 

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