**Exhibit 10.62**

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**LOAN AND SECURITY AGREEMENT**

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**ThisLOAN AND SECURITY AGREEMENT** (this “Agreement”) dated as ofAugust 11, 2004, between **SILICON VALLEYBANK**, a California chartered bank, with its principal place ofbusiness at 3003 Tasman Drive, Santa Clara, California 95054 and with a loanproduction office located at 400 Madison Avenue, Suite 15A, New York, New York10017 (“Bank”) and **AXS-ONE INC.**, aDelaware corporation (“Borrower”), provides the terms on which Bank shall lendfunds to Borrower and Borrower shall repay Bank. The parties agree as follows:

 

**1****                                         ACCOUNTINGAND OTHER TERMS**

 

Accounting terms notdefined in this Agreement shall be construed following GAAP.  Calculations and determinations must be madefollowing GAAP.  The term “financialstatements” includes the notes and schedules. The terms “including” and “includes” always mean “including (orincludes) without limitation,” in this or any Loan Document.  Capitalized terms in this Agreement shallhave the meanings set forth in Article 13.  All other terms contained in this Agreement, unless otherwiseindicated, shall have the meaning provided by the Code, to the extent suchterms are defined therein.

 

**2****                                         LOANAND TERMS OF PAYMENT**

 

## **2.1****                               Promiseto Pay**.  Borrower herebyunconditionally promises to pay Bank the unpaid principal amount of all CreditExtensions and interest on the unpaid principal amount of the Credit Extensionsas and when due in accordance with this Agreement.

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### **2.1.1****                     RevolvingAdvances**.

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#### (a)                                  Availability.  Bank shall make Advances not exceeding (i)the lesser of (A) the Revolving Line or (B) the Borrowing Base minus (ii) theoutstanding balance of all undrawn or unreimbursed Letters of Credit, minus(iii) the FX Reserve, and minus (iv) the aggregate outstanding Advanceshereunder (including any Cash Management Services).  Amounts borrowed under this Section may be repaid andreborrowed during the term of this Agreement.

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#### (b)                                 BorrowingProcedure.  To obtain an Advance,Borrower must notify Bank (which notice shall be irrevocable) by facsimile ortelephone by 3:00 p.m. Eastern time on the Business Day the Advance is to bemade.  If such notification is bytelephone, Borrower must promptly confirm the notification by delivering toBank a completed Payment/Advance Form in the form attached as **Exhibit B**.  Bank shall credit Advances to Borrower’s deposit account.  Bank may make Advances under this Agreementbased on instructions from a Responsible Officer or his or her designee orwithout instructions if the Advances are necessary to meet Obligations whichhave become due.  Bank may rely on anytelephone notice given by a person whom Bank reasonably believes is aResponsible Officer or designee. Borrower shall indemnify Bank for any lossBank suffers due to such reliance, except to the extent such reliance waseffected through gross negligence or willful misconduct by Bank.

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#### (c)                                  InterestRate.   The principal amountsoutstanding under the Revolving Line shall accrue interest at a per annum rateequal to the aggregate of the Bank’s Prime Rate and one half of one percent(0.5%), which interest shall be payable monthly, in arrears.

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#### (d)                                 Termination;Repayment.  The Revolving Lineterminates on the Maturity Date, when the principal amount of all Advances, theunpaid interest thereon, and all other Obligations relating to the RevolvingLine shall be immediately due and payable. Provided that all Obligationshereunder have been repaid, the Borrower may terminate this Agreement withoutpenalty or premium at any time upon not less than five (5) Business Days priorwritten notice to Bank.

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### **2.1.2****                     Letters ofCredit Sublimit**.

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#### (a)                                  Bankshall issue or have issued Letters of Credit for Borrower’s account notexceeding (i) the lesser of (A) the Revolving Line or (B) the Borrowing Baseminus (ii) the outstanding principal balance of any Advances (including anyCash Management Services), minus (iii) the FX Reserve, minus (iv) theoutstanding 

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#### balance of all Letters ofCredit undrawn or unreimbursed, plus an amount equal to any Letter of CreditReserves.  The face amount ofoutstanding Letters of Credit (including drawn but unreimbursed Letters ofCredit and any Letter of Credit Reserve) may not exceed $1,000,000.00.  Borrower’s Letter of Credit reimbursementobligation shall be secured by cash on terms acceptable to Bank on and after(i) the Maturity Date, or (ii) the occurrence of an Event of Defaulthereunder.  All Letters of Credit shallbe in form and substance acceptable to Bank in its sole discretion, and shallbe subject to the terms and conditions of Bank’s standard Application andLetter of Credit Agreement (“Letter of Credit Application”).  Borrower agrees to execute any furtherdocumentation in connection with the Letters of Credit as Bank may reasonablyrequest.

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#### (b)                                 Theobligation of Borrower to immediately reimburse Bank for drawings made underLetters of Credit shall be absolute, unconditional and irrevocable, and shallbe performed strictly in accordance with the terms of this Agreement and suchLetters of Credit, and such Letter of Credit Application.  Borrower shall indemnify, defend,protect,  and hold Bank harmless fromany loss, cost, expense or liability, including, without limitation, reasonableattorneys’ fees, arising out of or in connection with any Letters of Credit,except to the extent any such loss, cost, expense or liability was due toBank’s gross negligence or willful misconduct.

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#### (c)                                  Borrowermay request that Bank issue a Letter of Credit payable in a currency other thanUnited States Dollars.  If a demand forpayment is made under any such Letter of Credit, Bank shall treat such demandas an Advance to Borrower of the equivalent of the amount thereof (plus feesand charges in connection therewith such as wire, cable, SWIFT or similarcharges) in United States currency at the then prevailing rate of exchange inSan Francisco, California, for sales of that other currency for transfer to thecountry of which it is the currency.

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#### (d)                                 Uponthe issuance of any letter of credit payable in a currency other than UnitedStates Dollars, Bank shall create a reserve (the “Letter of Credit Reserve”)under the Revolving Line for letters of credit against fluctuations in currencyexchange rates, in an amount equal to ten percent (10%) of the face amount ofsuch letter of credit.  The amount ofsuch reserve may be amended by Bank from time to time on notice to Borrower toaccount for fluctuations in the exchange rate. The availability of funds under the Revolving Line shall be reduced bythe amount of such reserve for as long as such letter of credit remainsoutstanding.

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### **2.1.3****                     ForeignExchange Sublimit**. The Borrower may enter into foreign exchange forwardcontracts with the Bank under which Borrower commits to purchase from or sellto Bank a set amount of foreign currency more than one (1) business day afterthe contract date (the “FX Forward Contract”). Bank shall subtract 10% of each outstanding FX Forward Contract (the“F/X Reserve”) from the foreign exchange sublimit, which sublimit is a maximumof $1,000,000.00.  The total FX ForwardContracts at any one time may not exceed 10 times the amount of the FXReserve.  Bank may terminate the FXForward Contracts if an Event of Default occurs.****The Obligations of Borrower relating to this section maynot exceed: (i) the lesser of (A) the Revolving Line, or (B) the BorrowingBase, minus (ii) the outstanding balance of all undrawn or unreimbursed Lettersof Credit, minus (iii) the FX Reserve, and minus (iv) the aggregate outstandingAdvances hereunder (including any Cash Management Services).

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### **2.1.4****                     CashManagement Services Sublimit**. In Borrower’s sole discretion, Borrower may use up to $1,000,000.00 forthe Bank’s Cash Management Services (the “Cash Management Services Sublimit”),which may include merchant services, direct deposit of payroll, business creditcard, and check cashing services identified in the various cash managementservices agreements related to such Cash Management Services (the “CashManagement Services”).  Such aggregateamounts utilized under the Cash Management Services Sublimit shall at all times,until repaid, reduce the amount otherwise available for Credit Extensions underthe Revolving Line.  Any amounts Bankpays on behalf of Borrower or any amounts that are not paid by Borrower for anyCash Management Services will be treated as Advances under the Revolving Lineand will accrue interest at the interest rate applicable to Advances.

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### **2.1.5****                     UndisbursedCredit Extensions**.  The Bank’sobligation to lend the undisbursed portion of the Revolving Line shallterminate if, in Bank’s sole discretion, there has been a Material AdverseChange.

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## **2.2****                               Overadvances**.  If Borrower’s Obligations underSection 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the lesser of either (i) theRevolving Line or (ii) the Borrowing Base, Borrower must immediately pay incash to Bank such excess, provided, however, that if such overage was due tothe Bank’s changing any reserve or eligibility standard for an EligibleAccount, Borrower shall have three (3) Business Days to pay such excess.

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## **2.3****                               InterestRate.**

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#### (a)                                  DefaultRate. After an Event of Default, Obligations shall bear interest at threepercent (3.0%) above the rate effective immediately before the Event ofDefault.

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#### (b)                                 Adjustmentto Interest Rate.  The applicableinterest rate hereunder shall increase or decrease when the Prime Rate changes.

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#### (c)                                  360-DayYear.  Interest is computed on thebasis of a 360 day year for the actual number of days elapsed.

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#### (d)                                 Debitof Accounts.  Bank may debit any ofBorrower’s deposit or operating accounts at Bank for principal and interestpayments when due, or any other amounts Borrower owes Bank hereunder orpursuant hereto, when due. Bank shall promptly notify Borrower after it debitsBorrower’s accounts.  These debits shallnot constitute a set-off.

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#### (e)                                  Payments.  Interest is payable monthly on the firstcalendar day of each month.  Paymentsreceived after 12:00 noon Eastern time are considered received at the openingof business on the next Business Day. When a payment is due on a day that is not a Business Day, the paymentis due the next Business Day and additional fees or interest, as applicable,shall continue to accrue to the date of payment.

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## **2.4****                               Fees**.  Borrower shall pay to Bank:

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#### (a)                                  CommitmentFee.  A non-refundable commitmentfee as follows: (i) $30,000.00 due and payable on the Closing Date which shallbe deemed earned on the Closing Date, and (ii) if this Agreement has not beenterminated, $30,000.00 due and payable on August 10, 2005 which shall bedeemed earned on August 10, 2005; and

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#### (b)                                 Letterof Credit Fee.  The Borrower shallpay the Bank’s customary fees and expenses for the issuance or renewal ofLetters of Credit, including, without limitation, a Letter of Credit Fee of onepercent (1.0%) per annum of the face amount of each Letter of Credit issued,upon the issuance or renewal of such Letter of Credit by the Bank; and

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#### (c)                                  UnusedRevolving Line Facility Fee.  Inaddition to the foregoing, as compensation for the Bank’s maintenance ofsufficient funds available for such purpose, the Bank shall have earned a feefor so long as this Agreement is in effect and has not been terminated (the“Unused Revolving Line Facility Fee”), which fee shall be due and paidquarterly, in arrears, on a calendar year basis, in an amount equal to onequarter of one percent (0.25%) per annum of the average unused portion of theRevolving Line, as determined by the Bank. The Borrower shall not be entitledto any credit, rebate or repayment of any Unused Revolving Line Facility Feepreviously paid to the Bank pursuant to this Section. Notwithstanding theforegoing, an Unused Revolving Line Facility Fee shall not be due provided thatBorrower maintains an average for the subject quarterly period, of at least$800,000.00 in a non-interest bearing checking account with Bank. In the eventthat the Borrower does not maintain at least $800,000.00 in average balanceswith Bank, Borrower shall be entitled to a pro-rata fee reduction to the extentof the balances maintained in such accounts at bank, on average, during thesubject quarterly period; and

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#### (d)                                 BankExpenses.  All Bank Expenses(including reasonable attorneys’ fees and expenses) incurred through and afterthe Closing Date, when due.

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**3****                                         CONDITIONSOF LOANS**

 

## **3.1****                               ConditionsPrecedent to Initial Credit Extension**. The Bank’s obligation to make the initial Credit Extension is subject tothe condition precedent that Bank shall have received, in form and substancesatisfactory to Bank, such documents, and completion of such other matters, asBank may reasonably deem necessary or appropriate, including, withoutlimitation, subject to the condition precedent that Bank shall have received,in form and substance satisfactory to Bank, the following:

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#### (a)                                  thisAgreement;

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#### (b)                                 acertificate of the Secretary of Borrower with respect to articles, bylaws,incumbency and resolutions authorizing the execution and delivery of thisAgreement;

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#### (c)                                  PerfectionCertificate by Borrower;

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#### (d)                                 alegal opinion of Borrower’s counsel (authority and enforceability), in form andsubstance acceptable to Bank;

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#### (e)                                  insurancecertificate;

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#### (f)                                    paymentof the fees and Bank Expenses then due specified in Section 2.4 hereof;

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#### (g)                                 Certificateof Foreign Qualification (New Jersey);

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#### (h)                                 Certificateof Good Standing/Legal Existence (Delaware); and

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#### (i)                                     suchother documents, and completion of such other matters, as Bank may reasonablydeem necessary or appropriate.

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## **3.2****                               ConditionsPrecedent to all Credit Extensions**. Bank’s obligations to make each Credit Extension, including the initialCredit Extension, is subject to the following:

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#### (a)                                  timelyreceipt of any Payment/Advance Form; and

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#### (b)                                 therepresentations and warranties in Section 5 shall be true in all materialrespects on the date of the Payment/Advance Form and on the effective date ofeach Credit Extension and no Event of Default shall have occurred and becontinuing, or result from the Credit Extension. Each Credit Extension isBorrower’s representation and warranty on that date that the representationsand warranties in Section 5 remain true in all material respects.

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**4****                                         CREATIONOF SECURITY INTEREST**

 

## **4.1****                               Grantof Security Interest**.  Borrowerhereby grants Bank, to secure the payment and performance in full of all of theObligations and the performance of each of Borrower’s duties under the LoanDocuments, a continuing security interest in, and pledges and assigns to theBank, the Collateral (except Excluded Collateral), wherever located, whethernow owned or hereafter acquired or arising, and all proceeds and productsthereof.  Borrower warrants andrepresents that the security interest granted herein shall be a first prioritysecurity interest in the Collateral (except Excluded Collateral), subject toPermitted Liens. The Collateral shall also be subject to permitted SubordinatedDebt.

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Except as noted on thePerfection Certificate, Borrower is not a party to, nor is bound by, anymaterial license (other than over the counter software that is commerciallyavailable to the public) or other material agreement with respect to which theBorrower is the licensee which is reasonably likely to have a material impacton Borrower’s business or financial condition. Borrower shall provide writtennotice to Bank within ten (10) days of entering or becoming bound by, any suchlicense or agreement which is reasonably likely to have a material impact onBorrower’s business or financial condition.

 

If the Agreement isterminated, Bank’s lien and security interest in the Collateral shall continueuntil Borrower fully satisfies its Obligations. If Borrower shall at any time,acquire a commercial tort claim in the aggregate amount of at least $100,000,Borrower shall promptly notify Bank in a writing signed by Borrower of thebrief details thereof and grant to Bank in such writing a security interesttherein and in the proceeds thereof, all upon the terms of this Agreement, withsuch writing to be in form and substance reasonably satisfactory to Bank.

 

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## **The Bankcovenants that so long as: (i) no Event of Default pursuant to Section 8.1occurs and is continuing, (ii) no Event of Default pursuant to Section 8.5occurs and is continuing, or (iii) the Bank has not accelerated any portion ofthe Obligations, Bank shall not, without the consent of Borrower, notifycustomers of Borrower as to assignment of accounts as collateral security ordirect payment of accounts to any specific lockbox.**

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## **4.2****                               Authorizationto File Financing Statements**. Borrower hereby authorizes Bank to file financing statements, withoutnotice to Borrower, with all appropriate jurisdictions in order to perfect orprotect Bank’s interest or rights hereunder.

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**5****                                         REPRESENTATIONSAND WARRANTIES**

 

Borrower represents andwarrants as follows:

 

## **5.1****                               DueOrganization and Authorization**. Borrower and each domestic Subsidiary is duly existing and in goodstanding in its state of formation and qualified and licensed to do businessin, and in good standing in, any state in which the conduct of its business orits ownership of property requires that it be qualified except where thefailure to do so could not reasonably be expected to cause a Material AdverseChange.  In connection with thisAgreement, the Borrower delivered to the Bank a certificate signed by theBorrower and entitled “Perfection Certificate”.  The Borrower represents and warrants to the Bank that: (a) theBorrower’s exact legal name is that indicated on the Perfection Certificate andon the signature page hereof; and (b) the Borrower is an organization of thetype, and is organized in the jurisdiction, set forth in the PerfectionCertificate; and (c) the Perfection Certificate accurately sets forth theBorrower’s organizational identification number or accurately states that theBorrower has none; and (d) the Perfection Certificate accurately sets forth theBorrower’s place of business, or, if more than one, its chief executive officeas well as the Borrower’s mailing address if different, and (e) all otherinformation set forth on the Perfection Certificate pertaining to the Borroweris accurate and complete.  If theBorrower does not now have an organizational identification number, but laterobtains one, Borrower shall forthwith notify the Bank of such organizationalidentification number.

 

The execution, deliveryand performance of the Loan Documents have been duly authorized, and do notconflict with Borrower’s organizational documents, nor constitute an event ofdefault under any material agreement by which Borrower is bound.  Borrower is not in default under anyagreement to which or by which it is bound in which the default couldreasonably be expected to cause a Material Adverse Change.

 

## **5.2****                               Collateral**.  Borrower has good title to the Collateral,free of Liens except Permitted Liens. Borrower has no deposit account, other than the deposit accounts withBank and deposit accounts described in the Perfection Certificate delivered tothe Bank in connection herewith.  TheAccounts are bona fide, existing obligations, and the service or property hasbeen performed or delivered to the account debtor or its agent for immediateshipment to the account debtor. The Collateral is not in the possession of anythird party bailee (such as a warehouse). Except as hereafter disclosed to the Bank in writing by Borrower, noneof the components of the Collateral shall be maintained at locations other thanas provided in the Perfection Certificate. In the event that Borrower, after the date hereof, intends to store orotherwise deliver any portion of the Collateral to a bailee, then Borrower willfirst receive the written consent of Bank, not to be unreasonably withheld, andsuch bailee must acknowledge in writing that the bailee is also holding suchCollateral for the benefit of Bank (in addition to the Borrower). Borrower hasno knowledge of any actual or imminent Insolvency Proceeding of any accountdebtor whose accounts are an Eligible Account in any Borrowing BaseCertificate. Borrower is the sole owner of or has all necessary rights andinterests to the Intellectual Property, except for non-exclusive licenses (orexclusive licenses for a particular field of use or geographic area) granted toits customers in the ordinary course of business.

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## **5.3****                               Litigation**.  Except as shown in the PerfectionCertificate, there are no actions or proceedings pending or, to the knowledgeof Borrower’s Responsible Officers, threatened by or against Borrower or anySubsidiary in which an adverse decision could reasonably be expected to cause aMaterial Adverse Change.

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## **5.4****                               NoMaterial Deviation in Financial Statements**.  All consolidated financial statements for Borrower and anySubsidiary delivered to Bank fairly present, in accordance with GAAP, in allmaterial respects Borrower’s consolidated financial condition and Borrower’sconsolidated results of operations. There has not been 

 

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## any materialdeterioration in Borrower’s consolidated financial condition since the date ofthe most recent financial statements submitted to Bank.

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## **5.5****                               Solvency**.  The fair salable value of Borrower’s assets(including goodwill minus disposition costs) exceeds the fair value of itsliabilities; the Borrower is not left with unreasonably small capital after thetransactions in this Agreement; and****Borroweris able to pay its debts (including trade debts) as they mature.

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## **5.6****                               RegulatoryCompliance**.  Borrower is not an“investment company” or a company “controlled” by an “investment company” underthe Investment Company Act.  Borrower isnot engaged as one of its important activities in extending credit for marginstock (under Regulations T and U of the Federal Reserve Board ofGovernors).  Borrower has complied inall material respects with the Federal Fair Labor Standards Act.  Borrower has not knowingly violated anylaws, ordinances or rules, the violation of which could reasonably be expectedto cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s properties or assets has beenused by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, byprevious Persons, in disposing, producing, storing, treating, or transportingany hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returnsand paid, or made adequate provision to pay, all material taxes, except thosebeing contested in good faith with adequate reserves under GAAP.  Borrower and each domestic Subsidiary hasobtained all consents, approvals and authorizations of, made all declarationsor filings with, and given all notices to, all government authorities that arenecessary to continue its business as currently conducted except where thefailure to make such declarations, notices or filings would not reasonably beexpected to cause a Material Adverse Change.

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## **5.7****                               Subsidiaries**.  Borrower does not own any stock, partnershipinterest or other equity securities except for Permitted Investments.

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## **5.8****                               FullDisclosure**.  No writtenrepresentation, warranty or other statement of Borrower in any certificate orwritten statement given to Bank by Borrower, or its agents, taken together withall such written certificates and written statements given to Bank contains anyuntrue statement of a material fact or omits to state a material fact necessaryto make the statements contained in the certificates or statements notmisleading (it being recognized by Bank that the projections and forecastsprovided by Borrower in good faith and based upon reasonable assumptions arenot viewed as facts and that actual results during the period or periodscovered by such projections and forecasts may differ from the projected orforecasted results).

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**6****                                         AFFIRMATIVECOVENANTS**

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Borrower shall do all ofthe following:

 

## **6.1****                               GovernmentCompliance**.  Borrower shallmaintain its and all Subsidiaries’ legal existence and good standing in itsjurisdiction of formation and maintain qualification in each jurisdiction inwhich the failure to so qualify would reasonably be expected to have a materialadverse effect on Borrower’s business or operations.  Borrower shall comply, and have each Subsidiary comply, with alllaws, ordinances and regulations to which it is subject, noncompliance withwhich could have a material adverse effect on Borrower’s business or operationsor would reasonably be expected to cause a Material Adverse Change.

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## **6.2****                               FinancialStatements, Reports, Certificates**.

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#### (a)                                  Borrowershall deliver to Bank:  (i) as soon asavailable, but no later than: (A) thirty (30) days after the last day of eachmonth when a Credit Extension is requested or Obligations are outstanding, and(B) forty-five (45) days after the last day of each quarter, a company preparedconsolidated balance sheet and income statement covering Borrower’sconsolidated operations during the period certified by a Responsible Officer andin a form acceptable to Bank; (ii) as soon as available, but no later than onehundred twenty (120) days after the last day of Borrower’s fiscal year, auditedconsolidated financial statements prepared under GAAP, consistently applied,together with an unqualified opinion on the financial statements from anindependent certified public accounting firm, which is currently KPMG; (iii)within five (5) days of filing, copies of all statements, reports and noticesmade available to Borrower’s security holders or to any holders of SubordinatedDebt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities andExchange Commission which reports shall be deemed to have been delivered on thedate on which Borrower posts any such report or provides a link thereto onBorrower’s website on the Internet; (iv) a prompt report of any legal actionspending or threatened against Borrower or any Subsidiary that 

 

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#### could reasonably beexpected to result in damages or costs to Borrower or any Subsidiary of TwoHundred Fifty Thousand Dollars ($250,000.00) or more; and (v)****other financial information reasonablyrequested by Bank.

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#### (b)                                 Within(i) thirty (30) days after the last day of each month when a Credit Extensionis requested or Obligations are outstanding, and (ii) without duplication,forty-five (45) days after the last day of each quarter,  Borrower shall deliver to Bank a BorrowingBase Certificate signed by a Responsible Officer in the form of **Exhibit C**, with aged listings ofaccounts receivable (by invoice date).

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#### (c)                                  Within(i) thirty (30) days after the last day of each month when a Credit Extensionis requested or Obligations are outstanding, and (ii) without duplication,forty-five (45) days after the last day of each quarter, Borrower shall deliverto Bank with the financial statements a Compliance Certificate signed by aResponsible Officer in the form of **ExhibitD**.

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#### (d)                                 AllowBank to audit Borrower’s Collateral at Borrower’s expense.  Such audits shall be conducted (prior to anEvent of Default, at normal business hours) no more often than once everytwelve (12) months (which shall not be the first calendar quarter, if no Eventof Default has occurred or is continuing) unless an Event of Default has occurredand is continuing.  Notwithstanding theforegoing, Borrower shall allow Bank to audit Borrower’s Collateral atBorrower’s expense, prior to the earlier of: (i) the initial Credit Extension,or (ii) sixty (60) days after the Closing Date. If the results of such auditare not satisfactory to the Bank in its reasonable business discretion, theBank may, on notice to Borrower, at its reasonable business discretion, reducethe amount of the Revolving Line, or not make any Credit Extensions hereunder,except pursuant to terms satisfactory to Bank.

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## **6.3****                               Taxes**.  Borrower shall make, and cause eachSubsidiary to make, timely payment of all material federal, state, and localtaxes or assessments (other than taxes and assessments which Borrower iscontesting in good faith, with adequate reserves maintained in accordance withGAAP) and will deliver to Bank, on demand, appropriate certificates attestingto such payments.

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## **6.4****                               Insurance**.  Borrower shall keep its business and theCollateral insured for risks and in amounts as are customary for Borrower’sindustry.  Insurance policies shall bein a form, with companies, and in amounts that are satisfactory to Bank.  All property policies shall have a lender’sloss payable endorsement showing Bank as an additional loss payee and allpolicies shall provide that the insurer must give Bank at least twenty (20)days notice before canceling its policy. At Bank’s request, Borrower shall deliver certified copies of policiesand evidence of all premium payments. Proceeds received by the Bank under anypolicy shall, at Bank’s option, be payable to Bank on account of theObligations. Notwithstanding the foregoing, so long as no Event of Default hasoccurred and is continuing, Borrower shall have the option of applying theproceeds of any casualty policy toward the replacement or repair of destroyedor damaged property (and Bank shall execute such documentation as may bereasonably necessary to instruct the Borrower’s insurance company to releasesuch proceeds from the Bank’s lien); provided that (i) any such replaced orrepaired property (a) shall be of equal or like value as the replaced orrepaired Collateral and (b) shall be deemed Collateral in which Bank has beengranted a first priority security interest and (ii) after the occurrence andduring the continuation of an Event of Default all proceeds payable under suchcasualty policy shall, at the option of the Bank, be payable to Bank on accountof the Obligations. If Borrower fails to obtain insurance as required underSection 6.5 or to pay any amount or furnish any required proof of paymentto third persons and the Bank, Bank may make all or part of such payment orobtain such insurance policies required in Section 6.5, and take anyaction under the policies Bank deems prudent.

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## **6.5****                               Accounts**.

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#### (a)                                  Inorder to permit the Bank to monitor the Borrower’s financial performance andcondition, Borrower shall maintain with Bank, or an affiliate: (i) Borrower’sprimary operating accounts, and (ii) all of Borrower’s depository andsecurities accounts. Borrower’s cash or securities in excess of that amountused for Borrower’s operations shall be maintained or administered through theBank, or an affiliate.

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#### (b)                                 Borrowershall identify to Bank, in writing, any bank or securities account opened by Borrowerwith any institution other than Bank. In addition, for each such account that the Borrower at any time opensor maintains, Borrower shall, at the Bank’s request and option, pursuant to anagreement in form and substance acceptable to the Bank and the depository bank,cause the depository bank or securities intermediary to agree that such accountis the collateral of the Bank pursuant to the terms hereunder.  The provisions of the previous 

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#### sentence shall not applyto deposit accounts exclusively used for payroll, payroll taxes and othersalary, compensation, wage and benefit payments to or for the benefit of theBorrower’s employees and directors.  TheBorrower shall have thirty (30) calendar days from the Closing Date to transferthe above-referenced accounts to Bank.

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## **6.6****                               FinancialCovenants**.

##  

(a)                                  AdjustedQuick Ratio.  Borrower shallmaintain at all times, to be tested as of the last day of each: (i) quarter,and (ii) month when a Credit Extension is requested or Obligations areoutstanding, a ratio of Quick Assets to Current Liabilities minus DeferredRevenue of at least 1.75 to 1.0.

 

 (b)                              EBITDA.  Borrower shall maintain, to be tested as ofthe last day of each quarter:  (i)beginning with the quarter ending September 30, 2004, EBITDA of at least:(A) ($500,000.00), for the three (3) month period ending September 30,2004, (B) ($100,000.00), for the six (6) month period ending December 31,2004, (C) $500,000.00, for the three (3) month period ending March 31,2005, (D) $1,000,000.00, for the six (6) month period ending June 30,2005, (E) $1,500,000.00, for the nine (9) month period endingSeptember 30, 2005, (F) $2,000.000.00 for the twelve (12) month periodending December 31, 2005, (G) $500,000.00, for the three (3) month periodending March 31, 2006, and (H) $1,000,000.00 for the six (6) month periodending June 30, 2006, and (ii) beginning with the quarter endingJune 30, 2005 and for each calendar quarter thereafter, EBITDA of at least$1.00, provided, however, that at any time or times during any one (1) quarterending June 30, 2005 and thereafter through December 31, 2005,Borrower may have a maximum net EBITDA loss of no greater than $500,000,00 solong as the required EBITDA in clause (i) for the period ending in the quarterin which the loss was sustained continues to be satisfied.

 

## **6.7****                               FurtherAssurances**.  Borrower shallexecute any further instruments and take further action as Bank reasonablyrequests to perfect or continue Bank’s security interest in the Collateral orto effect the purposes of this Agreement.

##  

**7**                                         **NEGATIVE COVENANTS**

** **

Borrower shall not do anyof the following without the Bank’s prior written consent which shall not beunreasonably withheld or delayed.

 

## **7.1****                               Dispositions**.  Convey, sell, lease, transfer or otherwisedispose of (collectively a “Transfer”), or permit any of its Subsidiaries toTransfer, all or any part of its business or property including, withoutlimitation, the Intellectual Property, except for Transfers (i) of Inventory inthe ordinary course of business; (ii) of non-exclusive licenses (or exclusivelicenses for a particular field of use or geographical area) and similararrangements for the use of the property of Borrower or its Subsidiaries in theordinary course of business; (iii) of worn-out or obsolete Equipment; or (iv)prior to an Event of Default, the sale of stock of Borrower’s Subsidiaries.

##  

## **7.2****                               Changesin Business, Ownership, or Business Locations**.

##  

(a)           (i) Engage in or permit any of itsSubsidiaries to engage in any material line of business other than those linesof business conducted by Borrower and its Subsidiaries on the date hereof andany business reasonably related, complementary, or incidental thereto orreasonable extensions thereof, or (ii) have a Change in Control, or (iii) theresignation or termination of the chief executive officer and the failure ofBorrower to obtain a replacement within one hundred twenty (120) daysthereafter.

 

(b)           Borrower shall not, without priorwritten notice to Bank: (i) relocate its chief executive office, or add any newoffices or business locations, including warehouses (unless such new offices orbusiness locations contain less than Fifty Thousand Dollars ($50,000.00) inBorrower’s assets or property), or (ii) change its jurisdiction oforganization, or (iii) change its organizational structure or type, or (iv)change its legal name, or (v) change any organizational number (if any)assigned by its jurisdiction of organization.

 

8

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## **7.3****                               Mergersor Acquisitions**.  Merge orconsolidate, or permit any of its Subsidiaries to merge or consolidate, withany other Person, or acquire, or permit any of its Subsidiaries to acquire, allor substantially all of the capital stock or property of another Person exceptwhere (i) no Event of Default has occurred and is continuing or would existafter giving effect to the transactions; and (ii) the Borrower (or theSubsidiary if the Borrower is not a party to such transaction) is the survivinglegal entity; provided, however, that the total consideration paid, includingassumption of indebtedness, in connection with such merger or acquisition shallnot exceed $2,000,000.00. A Subsidiary may merge or consolidate into anotherSubsidiary or into Borrower.

##  

## **7.4****                               Indebtedness**.  Create, incur, assume, or be liable for anyIndebtedness, or permit any Subsidiary to do so, other than PermittedIndebtedness.

##  

## **7.5****                               Encumbrance**.  Create, incur, or allow any Lien on any ofits property, or assign or convey any right to receive income, including thesale of any Accounts, or permit any of its Subsidiaries to do so, except forPermitted Liens, or permit any Collateral not to be subject to the firstpriority security interest granted herein. The Collateral may also be subject to Permitted Liens.

##  

## **7.6****                               Distributions;Investments**.  Other thanPermitted Investments, directly or indirectly acquire or own any Person, ormake any Investment in any Person, or permit any of its Subsidiaries to do so.

##  

## **7.7****                               Transactionswith Affiliates**.  Directly orindirectly enter into or permit to exist any material transaction with anyAffiliate of Borrower, except for transactions that are in the ordinary courseof Borrower’s business, upon fair and reasonable terms that are no lessfavorable to Borrower than would be obtained in an arm’s length transactionwith a non-affiliated Person.

##  

## **7.8****                               SubordinatedDebt**.  Make or permit anypayment on any Subordinated Debt, except under the terms of the SubordinatedDebt, or amend any material provision in any document relating to theSubordinated Debt, without Bank’s prior written consent not to be unreasonablywithheld.

##  

## **7.9****                               Compliance**.  Become an “investment company” or a companycontrolled by an “investment company”, under the Investment Company Act of 1940or undertake as one of its important activities extending credit to purchase orcarry margin stock, or use the proceeds of any Credit Extension for thatpurpose; fail to meet the minimum funding requirements of ERISA, permit a ReportableEvent or Prohibited Transaction, as defined in ERISA, to occur; fail to complywith the Federal Fair Labor Standards Act or violate any other law orregulation, if the violation could reasonably be expected to have a materialadverse effect on Borrower’s business or operations or would reasonably beexpected to cause a Material Adverse Change, or permit any of its Subsidiariesto do so.

##  

**8****                                         EVENTSOF DEFAULT**

** **

Any one of the followingis an Event of Default:

 

## **8.1****                               PaymentDefault**.  Borrower fails to payany of the Obligations within three (3) days after their due date. During suchthree (3) day period the failure to cure the default shall not constitute anEvent of Default (but no Credit Extension shall be made during such period);

##  

## **8.2****                               CovenantDefault**.  (i)  Borrower fails or neglects to perform anyobligation in Sections 6.2, 6.6, or 6.7, or violates any covenant inSection 7;  or (ii)  Borrower fails or neglects to perform, keep,or observe any other material term, provision, condition, covenant or agreementcontained in this Agreement, any Loan Documents, and as to any default undersuch other material term, provision, condition, covenant or agreement that canbe cured, has failed to cure the default within ten (10) days after theoccurrence thereof; provided, however, that if the default cannot by its naturebe cured within the ten (10) day period or cannot after diligent attempts byBorrower be cured within such ten (10) day period, and such default is likelyto be cured within a reasonable time, then Borrower shall have an additionalperiod (which shall not in any case exceed thirty (30) days) to attempt to curesuch default, and within such reasonable time period the failure to cure thedefault shall not be deemed an Event of Default (but no Credit Extensions shallbe made during such cure period).  Graceperiods provided under this section shall not apply, among other things,to financial covenants or any other covenants that are required to besatisfied, completed or tested by a date certain;

##  

9

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## **8.3****                               MaterialAdverse Change**.  A MaterialAdverse Change occurs;

##  

## **8.4****                               Attachment**.  (i) Any material portion of Borrower’sassets is attached, seized, levied on, or comes into possession of a trustee orreceiver and the attachment, seizure or levy is not removed in ten (10)Business Days; (ii) Borrower is enjoined, restrained, or prevented by courtorder from conducting a material part of its business; (iii) a judgment orother claim becomes a Lien on a material portion of Borrower’s assets; or (iv)a notice of lien, levy, or assessment is filed against any of Borrower’s assetsby any government agency and not paid within ten (10) Business Days afterBorrower receives notice.  These are notEvents of Default if stayed or if a bond is posted pending contest by Borrower(but no Credit Extensions shall be made during the cure period);

##  

## **8.5****                               Insolvency**.  (i) Borrower is unable to pay its debts(including trade debts) as they become due or otherwise becomes insolvent; (ii)Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding isbegun against Borrower and not dismissed or stayed within thirty (30) days (butno Credit Extensions shall be made before any Insolvency Proceeding isdismissed);

##  

## **8.6****                               OtherAgreements**.  If there is adefault in any agreement to which Borrower is a party with a third party orparties resulting in the acceleration of the maturity of any Indebtedness in anamount in excess of Two Hundred Fifty Thousand Dollars ($250,000) or that couldreasonably be expected to result in a Material Adverse Change;

##  

## **8.7****                               Judgments**.  If a judgment or judgments for the paymentof money in an amount, individually or in the aggregate, of at least TwoHundred Fifty Thousand Dollars ($250,000) shall be rendered against Borrowerand shall remain unsatisfied and unstayed for a period of twenty (20) days(provided that no Credit Extensions will be made prior to the satisfaction orstay of such judgment);

##  

## **8.8****                               Misrepresentations**.  If any warranty or representation in thisAgreement or in any writing delivered by or on behalf of Borrower to Bank shallhave been incorrect in any material respect when made; and

##  

## **8.9****                               SubordinatedDebt**. A default or breach occurs under any agreement between Borrowerand any creditor of Borrower that signed a subordination agreement with Bank,or any creditor that has signed a subordination agreement with Bank breachesany terms of the subordination agreement and the Bank in its reasonablejudgment, determines that such breach can reasonably be expect to adverselyaffect the Bank’s rights hereunder.

##  

**9****                                         BANK’SRIGHTS AND REMEDIES**

** **

## **9.1****                               Rightsand Remedies**.  When an Event ofDefault occurs and continues Bank may, without notice or demand, do any or allof the following:

##  

#### (a)                                  Declareall Obligations immediately due and payable (but if an Event of Defaultdescribed in Section 8.5 occurs all Obligations are immediately due andpayable without any action by Bank);

####  

#### (b)                                 Stopadvancing money or extending credit for Borrower’s benefit under this Agreementor under any other agreement between Borrower and Bank;

####  

#### (c)                                  Demandthat the Borrower (i) deposit cash with Bank in an amount equal to theaggregate amount of any Letters of Credit remaining undrawn, as collateralsecurity for the repayment of any future drawings under such Letters of Credit,and the Borrower shall forthwith deposit and pay such amounts, and (ii) pay inadvance all Letter of Credit fees scheduled to be paid or payable over theremaining term of any Letters of Credit;

####  

#### (d)                                 Settleor adjust disputes and claims directly with account debtors for amounts, onterms and in any order that Bank considers advisable and notify any Personowing Borrower money of Bank’s security interest in such funds and verify theamount of such account;

####  

#### (e)                                  Makeany payments and do any acts it considers necessary or reasonable to protectits security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make itavailable as 

####  

10

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#### Bank designates to theextent not prohibited by applicable law. Borrower will not interfere with Bankentering any premises where the Collateral is located to take and maintainpossession of any part of the Collateral. Bank may pay, purchase, contest, orcompromise any Lien which appears to be prior or superior to its securityinterest and pay all expenses incurred. To the extent it is not prohibited fromdoing so, Borrower grants Bank a license to enter and occupy any of itspremises, without charge, to lawfully exercise any of Bank’s rights orremedies;

####  

#### (f)                                    Applyto the Obligations any (i) balances and deposits of Borrower it holds, or (ii)any amount held by Bank owing to or for the credit or the account of Borrower;

####  

#### (g)                                 Ship,reclaim, recover, store, finish, maintain, repair, prepare for sale, advertisefor sale, and sell the Collateral in any commercially reasonably means;

####  

#### (h)                                 Placea “hold” on any account maintained with Bank and/or deliver a notice ofexclusive control, any entitlement order, or other directions or instructionspursuant to any control agreement or similar agreements providing control ofany Collateral; and

####  

#### (i)                                     Exerciseall rights and remedies and dispose of the Collateral according to the Code.

####  

## **9.2****                               Powerof Attorney**.  Borrower herebyirrevocably appoints Bank as its lawful attorney-in-fact, to be effective uponthe occurrence and during the continuance of an Event of Default, to: (i)endorse Borrower’s name on any checks or other forms of payment or security;(ii) sign Borrower’s name on any invoice or bill of lading for any Account ordrafts against account debtors; (iii) settle and adjust disputes and claimsabout the Accounts directly with account debtors, for amounts and on terms Bankdetermines to be commercially reasonable; (iv) make, settle, and adjust allclaims under Borrower’s insurance policies; and (v) transfer the Collateralinto the name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful attorney-in-factto sign Borrower’s name on any documents necessary to perfect or continue theperfection of any security interest regardless of whether an Event of Defaulthas occurred until all Obligations have been satisfied in full and Bank isunder no further obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as Borrower’sattorney in fact, and all of Bank’s rights and powers, coupled with aninterest, are irrevocable until all Obligations have been fully repaid andperformed and Bank’s obligation to provide Credit Extensions terminates.

##  

## **9.3****                               AccountsNotification/Collection**.  In theevent that either: (i) an Event of Default pursuant to Section 8.1 occursand is continuing, (ii) an Event of Default pursuant to Section 8.5 occursand is continuing, or (iii) the Bank accelerates any portion of theObligations, Bank may notify any Person owing Borrower money of Bank’s securityinterest in the funds and verify and/or collect the amount of the Account.  After the occurrence of an Event of Default,any amounts received by Borrower shall be held in trust by Borrower for Bank,and, if requested by Bank, Borrower shall immediately deliver such receipts toBank in the form received from the account debtor, with proper endorsements fordeposit.

##  

## **9.4****                               BankExpenses**.  Any reasonableamounts paid by Bank as provided herein shall constitute Bank Expenses and areimmediately due and payable upon presentation of an invoice to Borrower withdetail if obtainable, and shall bear interest at the then applicable rate andbe secured by the Collateral.  Nopayments by Bank shall be deemed an agreement to make similar payments in thefuture or Bank’s waiver of any Event of Default.

##  

## **9.5****                               RemediesCumulative**.  Bank’s rights andremedies under this Agreement, the Loan Documents, and all other agreements arecumulative.  Bank has all rights andremedies provided under the Code, by law, or in equity. Bank’s exercise of oneright or remedy is not an election, and Bank’s waiver of any Event of Defaultis not a continuing waiver. Bank’s delay is not a waiver, election, oracquiescence. No waiver hereunder shall be effective unless signed by Bank andthen is only effective for the specific instance and purpose for which it wasgiven.

##  

## **9.6****                               DemandWaiver**.  Except as otherwisespecifically provided herein, Borrower waives demand, notice of default ordishonor, notice of payment and nonpayment, notice of any default, nonpaymentat maturity, release, compromise, settlement, extension, or renewal ofaccounts, documents, instruments, chattel paper, and guarantees held by Bank onwhich Borrower is liable.

##  

11

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**10****                                  NOTICES**

** **

All notices or demands byany party to this Agreement or any other related agreement must be in writingand be personally delivered or sent by an overnight delivery service, bycertified mail, postage prepaid, return receipt requested, or by telefacsimileat the addresses listed below.  EitherBank or Borrower may change its notice address by giving the other party priorwritten notice.

 
| If to Borrower:              |   | AXS-ONE INC.                       |
|------------------------------|--------|------------------------------------|
|                         |   | 301 Route 17 North                 |
|                         |   | Rutherford, New Jersey  07070      |
|                         |   | Attn: General Counsel              |
|                         |   | FAX: (201) 939-6955                |
|                         |   |                               |
| with a conforming copy       |   |                               |
| (which shall not  constitute |   |                               |
| or be required as  notice)   |   |                               |
| to:                          |   | Proskauer Rose LLP                 |
|                         |   | 1585 Broadway                      |
|                         |   | New York, New York  10036-8299     |
|                         |   | Attn: Charles E.  Dropkin, Esquire |
|                         |   | FAX: (212) 969-2900                |
|                         |   |                               |
| If to Bank:                  |   | Silicon Valley Bank                |
|                         |   | 400 Madison Avenue,  Suite 15A     |
|                         |   | New York, New York  10017          |
|                         |   | Attn: Mr. Michael  Moretti         |
|                         |   | Fax:  (212) 688-5994          |
|                         |   |                               |
| with a conforming copy       |   |                               |
| (which shall not  constitute |   |                               |
| or be required as  notice)   |   |                               |
| to:                          |   | Riemer & Braunstein  LLP       |
|                         |   | Three Center Plaza                 |
|                         |   | Boston, Massachusetts  02108       |
|                         |   | Attn: David A. Ephraim,  Esquire   |
|                         |   | FAX: (617) 880-3456                |

 

**11****                                  CHOICEOF LAW, VENUE AND JURY TRIAL WAIVER**

** **

New York law governs theLoan Documents without regard to principles of conflicts of law.  Borrower and Bank each submit to theexclusive jurisdiction of the State and Federal courts in New York City.  NOTWITHSTANDING THE FOREGOING, THE BANKSHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER ORITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION REQUIRED TO REALIZE ON THECOLLATERAL OR TO OTHERWISE ENFORCE THE BANK’S RIGHTS AGAINST THE BORROWER ORITS PROPERTY.

 

**BORROWERAND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTIONARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANYCONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALLOTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTERINTO THIS AGREEMENT.  EACH PARTY HASREVIEWED THIS WAIVER WITH ITS COUNSEL**.

 

**12****                                  GENERALPROVISIONS**

** **

## **12.1****                        Successorsand Assigns**.  This Agreementbinds and is for the benefit of the successors and permitted assigns of eachparty.  Borrower may not assign thisAgreement or any rights or Obligations under it 

 

12

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## without Bank’s priorwritten consent which may be granted or withheld in Bank’s discretion.  Bank has the right, without the consent ofor notice to Borrower, to sell, transfer, negotiate, or grant participation inall or any part of, or any interest in, Bank’s obligations, rights and benefitsunder this Agreement, the Loan Documents or any related agreement.  Bank will provide notice of any assignmentof Bank’s obligations, rights and benefits under this Agreement, the LoanDocuments or any related agreement. Prior to an Event of Default, the Bank may only assign this Agreement toa commercial bank or financial institution (which is not a direct competitor ofBorrower), except for assignments by Bank due to forced divestiture at therequest of any regulatory agency or a sale of the Bank or its assets.

##  

## **12.2****                        Indemnification**.  Borrower hereby indemnifies, defends andholds the Bank and its directors, officers, employees and agents harmlessagainst:  (a) all obligations, demands,claims, and liabilities asserted by any other Person in connection with thetransactions contemplated by the Loan Documents; and (b) all losses or BankExpenses incurred, or paid by Bank from, following, or consequential totransactions between Bank and Borrower (including reasonable attorneys’ feesand expenses), except for losses caused by Bank’s gross negligence or willfulmisconduct.

##  

## **12.3****                        Rightof Set-Off**.   Borrower herebygrants to Bank, a lien, security interest and right of setoff as security forall Obligations to Bank, whether now existing or hereafter arising upon andagainst all deposits, credits, collateral and property, now or hereafter in thepossession, custody, safekeeping or control of Bank or any entity under thecontrol of the Bank (including a Bank subsidiary) (to the extent not prohibitedby applicable law) or in transit to any of them.  At any time after the occurrence and during the continuance of anEvent of Default, without demand or notice, Bank may set off the same or anypart thereof and apply the same to any liability or obligation of Borrower whendue regardless of the adequacy of any other collateral securing theObligations.  ANY AND ALL RIGHTS TOREQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHERCOLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OFSETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THEBORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

##  

## **12.4****                        Time ofEssence**.  Time is of the essencefor the performance of all Obligations in this Agreement.

##  

## **12.5****                        Severabilityof Provision**.  Each provision ofthis Agreement is severable from every other provision in determining theenforceability of any provision.

##  

## **12.6****                        Amendmentsin Writing; Integration**.  Allamendments to this Agreement must be in writing signed by both Bank andBorrower.  This Agreement and the LoanDocuments represent the entire agreement about this subject matter, andsupersede prior negotiations or agreements. All prior agreements,understandings, representations, warranties, and negotiations between theparties about the subject matter of this Agreement and the Loan Documents mergeinto this Agreement and the Loan Documents.

##  

## **12.7****                        Counterparts**.  This Agreement may be executed in any numberof counterparts and by different parties on separate counterparts, each ofwhich, when executed and delivered, are an original, and all taken together,constitute one Agreement. Delivery of an executed signature page of thisAgreement by telecopy and delivery of executed copies of documents required bySection 3.1 by telecopy shall be as effective as delivery of a manually executedcounterpart of each such document.

##  

## **12.8****                        Survival**.  All covenants, representations andwarranties made in this Agreement continue in full force while any Obligationsremain outstanding.  The obligation ofBorrower in Section 12.2 to indemnify Bank shall survive until the statuteof limitations with respect to such claim or cause of action shall have run.

##  

## **12.9****                        Confidentiality**.            ** **In handling any confidential information, Bank willexercise the same degree of care that it exercises for its own proprietary information,but disclosure of information may be made (i) to Bank’s Subsidiaries orAffiliates, to further the purposes of this Agreement or transactionscontemplated hereby, whom Bank will cause to comply with this provision, (ii)to prospective transferees or purchasers of any interest in the loans(provided, however, Bank shall obtain such prospective transferee orpurchaser’s agreement to the terms of this provision), (iii) as required bylaw, regulation, subpoena, or other order, (iv) as required in connection withBank’s examination or audit and (v) as appropriate in exercising remedies underthis Agreement.  Confidential 

 

13

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## information does notinclude information that either: (a) is in the public domain or rightfully inBank’s possession when disclosed to Bank, or becomes part of the public domain,through no fault of the Bank, after disclosure to Bank; or (b) is disclosed toBank by a third party, if Bank does not reasonably know that the third party isprohibited from disclosing the information.

##  

**13****                                  DEFINITIONS**

** **

## **13.1****                        Definitions**.  In this Agreement:

 

“**Accounts**” are all existing and laterarising accounts, contract rights, and other obligations owed Borrower inconnection with its sale or lease of goods (including licensing of software andother technology) or provision of services, all credit insurance, guaranties,other security and Borrower’s Books relating to any of the foregoing, as suchdefinition may be amended from time to time according to the Code.

 

“**Advance**” or “**Advances**” is a loan advance (or advances) under the RevolvingLine.

 

“**Affiliate**” is a Person that owns orcontrols directly or indirectly the Person, any Person that controls or iscontrolled by or is under common control with the Person, and each of thatPerson’s senior executive officers, directors, partners and, for any Personthat is a limited liability company, that Person’s managers and members.

 

“**Bank Expenses**” are all reasonable auditfees and expenses and reasonable costs or expenses (including reasonableattorneys’ fees and expenses) for preparing, negotiating, defending andenforcing the Loan Documents (including appeals or Insolvency Proceedings).

 

“**Borrower’s Books**” are all Borrower’s booksand records including ledgers, records regarding Borrower’s assets orliabilities, the Collateral, business operations or financial condition and allcomputer programs or storage or any equipment containing the information.

 

“**Borrowing Base**” is 80% of EligibleAccounts, as determined by Bank from Borrower’s most recent Borrowing BaseCertificate; provided, however, that Bank, in its reasonable businessdiscretion, may lower the percentage of the Borrowing Base after performing anaudit of Borrower’s Collateral upon five (5) Business Days notice to Borrower.

 

“**Business Day**” is any day that is not aSaturday, Sunday or a day on which the Bank is closed.

 

“**Cash Management Services**” is defined inSection 2.1.4.

 

“**Cash Management Services Sublimit**” isdefined in Section 2.1.4.

 

“**Change in Control**” is a transaction inwhich any “person” or “group” (within the meaning of Section 13(d) and14(d)(2) of the Securities Exchange Act of 1934, as amended) which did nottheretofore beneficially own at least 25% of the shares of all classes of stockthen outstanding of Borrower ordinarily entitled to vote in the election ofdirectors becomes the “beneficial owner” (as defined in Rule 13d-3 under theSecurities Exchange Act of 1934, as amended), directly or indirectly, ofgreater than 25% of the shares of all classes of stock then outstanding ofBorrower ordinarily entitled to vote in the election of directors.

 

“**Closing Date**” is the date of thisAgreement.

 

“**Code**” is the Uniform Commercial Code asadopted in New York, as amended and as may be amended and in effect from timeto time.

 

 “**Collateral**”is any and all properties, rights and assets of the Borrower in which theBorrower obtains an interest, or the power to transfer rights, in the propertydescribed on **Exhibit A**, andexcluding Excluded Collateral.

 

 “**ContingentObligation**” is, for any Person, any direct or indirect liability,contingent or not, of that Person for (i) any indebtedness, lease, dividend,letter of credit or other obligation of another such as an obligation 

 

14

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directly orindirectly guaranteed, endorsed, co-made, discounted or sold with recourse bythat Person, or for which that Person is directly or indirectly liable; (ii)any obligations for undrawn letters of credit for the account of that Person;and (iii) all obligations from any interest rate, currency or commodity swapagreement (valued at the net exposure), interest rate cap or collar agreement,or other agreement or arrangement designated to protect a Person againstfluctuation in interest rates, currency exchange rates or commodityprices;  but “Contingent Obligation”does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is thestated or determined amount of the primary obligation for which the ContingentObligation is made or, if not determinable, the maximum reasonably anticipatedliability for it determined by the Person in good faith; but the amount may notexceed the maximum of the obligations under any guarantee or other supportarrangement.

 

“**Credit Extension**” is each Advance, Letterof Credit, F/X Forward Contract, or any other extension of credit by Bank forBorrower’s benefit.

 

“**Current Liabilities**” are all obligationsand liabilities of Borrower to Bank, plus, without duplication, the aggregateamount of Borrower’s Total Liabilities which mature within one (1) year.

 

“**Deferred Revenue**” is all amounts invoicedin advance of performance under contracts and not yet recognized as revenue.

 

“**EBITDA**” means earnings before interest,taxes, depreciation and amortization, in accordance with GAAP.

 

“**Eligible Accounts**” are billed Accounts inthe ordinary course of Borrower’s business that meet all Borrower’srepresentations and warranties in Section 5.2; but Bank, in itsreasonable business judgment, may change eligibility standards by givingBorrower five (5) days prior notice. Unless Bank agrees otherwise in writing, Eligible Accounts shall notinclude:

 

(a)                                  Accountsthat the account debtor has not paid within ninety (90) days of invoice date;

 

(b)                                 Accounts for an account debtor, fifty percent (50%) ormore of whose Accounts have not been paid within ninety (90) days of invoicedate;

 

(c)                                  Creditbalances over ninety (90) days from invoice date;

 

(d)                                 Thatportion of Accounts for an account debtor, including Affiliates, whose totalobligations to Borrower exceed thirty percent (30%) of all Accounts, except forPfizer, for which the percentage shall be forty percent (40%) for the amountsthat exceed that percentage, unless Bank otherwise approves in writing;

 

(e)                                  Accountsfor which the account debtor does not have a principal place of business in theUnited States;

 

(f)                                    Accountsfor which the account debtor is a federal, state or local government entity orany department, agency, or instrumentality thereof, except for Accounts of theUnited States if the payee has assigned its payment rights to Bank and theassignment has been acknowledged under the Assignment of Claims Act of 1940 (31U.S.C. 3727);

 

(g)                                 Accountsfor which Borrower owes the account debtor, but only up to the amount owed(sometimes called “contra” accounts, accounts payable, customer deposits orcredit accounts);

 

(h)                                 Accountsfor demonstration or promotional equipment, or in which goods are consigned,sales guaranteed, sale or return, sale on approval, bill and hold, or otherterms if account debtor’s payment may be conditional;

 

15

----

 

(i)                                     Accountsfor which the account debtor is Borrower’s Affiliate, officer, employee, oragent;

 

(j)                                     Accountsin which the account debtor disputes liability or makes any claim and Bankbelieves there may be a basis for dispute (but only up to the disputed orclaimed amount), or if the account debtor is subject to an InsolvencyProceeding, or becomes insolvent, or goes out of business;

 

(k)                                  Accountsfor which Bank reasonably determines collection to be doubtful after inquiryand consultation with Borrower.

 

“**Equipment**” is all present and futuremachinery, equipment, tenant improvements, furniture, fixtures, vehicles,tools, parts and attachments in which Borrower has any interest.

 

“**ERISA**” is the Employment Retirement IncomeSecurity Act of 1974, and its regulations.

 

“**Excluded Collateral**” is defined in **Exhibit A**.

 

“**FX Forward Contract**” is defined in Section 2.1.3.

 

“**FX Reserve**” is defined inSection 2.1.3.

 

“**GAAP**” is generally accepted accountingprinciples.

 

“**Indebtedness**” is (a) indebtedness forborrowed money or the deferred price of property or services, such asreimbursement and other obligations for surety bonds and letters of credit, (b)obligations evidenced by notes, bonds, debentures or similar instruments, (c)capital lease obligations and (d) Contingent Obligations.

 

“**Insolvency Proceeding**” is any proceeding byor against any Person under the United States Bankruptcy Code, or any otherbankruptcy or insolvency law, including assignments for the benefit ofcreditors, compositions, extensions generally with its creditors, orproceedings seeking reorganization, arrangement, or other relief.

 

“**Intellectual Property**” is any copyrightrights, copyright applications, copyright registrations and like protections ineach work of authorship and derivative work, whether published or unpublished,now owned or later acquired; any patents, trademarks, service marks andapplications therefor; any trade secret rights, including any rights tounpatented inventions, now owned or hereafter acquired.

 

“**Inventory**” is present and future inventoryin which Borrower has any interest, including merchandise, raw materials,parts, supplies, packing and shipping materials, work in process and finishedproducts intended for sale or lease or to be furnished under a contract ofservice, of every kind and description now or later owned by or in the custodyor possession, actual or constructive, of Borrower, including inventorytemporarily out of its custody or possession or in transit and includingreturns on any accounts or other proceeds (including insurance proceeds) fromthe sale or disposition of any of the foregoing and any documents of title.

 

“**Investment**” is any beneficial ownership of(including stock, partnership interest or other securities) any Person, or anyloan, advance or capital contribution to any Person.

 

“**Letter of Credit**” means a letter of creditor similar undertaking issued by Bank pursuant to Section 2.1.2.

 

“**Letter of Credit Reserve**” has the meaningset forth in Section 2.1.2.

 

“**Lien**” is a mortgage, lien, deed of trust,charge, pledge, security interest or other encumbrance.

 

“**Loan Documents**” are, collectively, thisAgreement, any note, or notes or guaranties executed by Borrower or Guarantor,and any other present or future agreement between Borrower and/or for thebenefit of Bank in connection with this Agreement, all as amended, extended orrestated.

 

16

----

 

“**Material Adverse Change**”  is: (i) a material adverse change in the results of operation or financialcondition of Borrower; (ii) a material impairment of the value or priority ofBank’s security interest in the Collateral (except to the extent due tonegligence, by omission or commission, of Bank or its agents); or (iii) Bankdetermines, based upon information available to it and in the exercise ofcommercial reasonableness, that there is a substantial likelihood that Borrowershall fail to comply with one or more of the financial covenants inSection 6 during the next succeeding financial reporting period.

 

“**Maturity Date**” is August 9, 2006.

 

“**Obligations**” are debts, principal,interest, Bank Expenses and other amounts Borrower owes Bank now or later,including letters of credit, cash management services, and foreign exchangecontracts, if any, and including interest accruing after Insolvency Proceedingsbegin and debts, liabilities, or obligations of Borrower assigned to Bank.

 

“**Permitted Indebtedness**” is:

 

(a)                                  Borrower’sindebtedness to Bank under this Agreement or any other Loan Document;

 

(b)                                 Indebtednessexisting on the Closing Date and shown on Schedule 7.6 hereto;

 

(c)                                  SubordinatedDebt;

 

(d)                                 Indebtednessto trade creditors or to landlords incurred in theordinary course of business or with respect to surety bonds and similar obligations in the ordinary course of business;

 

(e)                                  Indebtednessconsisting of interest rate, currency, or commodity swap agreements, interestrate cap or collar agreements or arrangements designated to protect a Personagainst fluctuations in interest rates, currency exchange rates, or commodityprices;

 

(f)                                    Indebtednessamong Borrower and/or any of Borrower’s Subsidiaries;

 

(g)                                 Indebtednesswith respect to documentary letters of credit;

 

(h)                                 Capitalizedleases and purchase money Indebtedness secured by Permitted Liens;

 

(i)                                     RefinancedPermitted Indebtedness, provided that the amount of such Indebtedness is notincreased;

 

(j)            Other Indebtednessin an amount not to exceed $250,000.00.

 

“**Permitted Investments**” are:

 

(a)                                  Investmentsshown on Schedule 7.4 hereto and existing on the Closing Date;

 

(b) (i)  Marketable directobligations issued or unconditionally guaranteed by the United States or itsagencies or any state maturing within 1 year from its acquisition, (ii)commercial paper maturing no more than 2 years after its creation and havingthe highest rating from either Standard & Poor’s Corporation or Moody’sInvestors Service, Inc., and (iii) certificates of deposit issued maturing nomore than 1 year after issue;

 

(c)                                  Investments(including mergers, acquisitions, or joint ventures permitted bySection 7.3) approved by the Borrower’s Board of Directors or otherwisepursuant to a Board-approved investment policy;

 

17

----

 

(d)                                 Investmentsin any of its Subsidiaries;

 

(e)           Investmentsconsisting of deposit and investment accounts;

 

(f)            Investmentsconsisting of extensions of credit in the nature of accounts receivable,prepaid royalties or notes receivable arising from the sale or lease of goods,licensing of software or the performance of services;

 

(g)           Investments receivedin satisfaction or partial satisfaction of obligations owed by financiallytroubled obligors;

 

(h)           Investments acquiredin exchange for any other Investments in connection with or as a result of abankruptcy, workout, reorganization or recapitalization;

 

(i)                                     Investmentsconsisting of interest rate, currency, or commodity swap agreements, interestrate cap or collar agreements or arrangements designated to protect a Personagainst fluctuations in interest rates, currency exchange rates, or commodityprices;

 

(j)                                     Payroll,travel and similar advances made in the ordinary course; and

 

(k)                                  Receivablesowing to the Borrower or Subsidiary, if created in the ordinary course anddischargable in accordance with customary trade terms.

 

“**Permitted Liens**” are:

 

(a)                                  Liensexisting on the Closing Date and shown on Schedule 7.5 hereto or arisingunder this Agreement or other Loan Documents;

 

(b)                                 Liensfor taxes, fees, assessments or other government charges or levies, either notdelinquent or being contested in good faith and for which Borrower maintainsadequate reserves on its Books, if they have no priority over any ofBank’s security interests;

 

(c)                                  Liens(including with respect to capital leases) (i) on property (includingaccessions, additions, parts, replacements, fixtures, improvements andattachments thereto, and the proceeds thereof) acquired or held by Borrower orits Subsidiaries incurred for financing such property (including accessions,additions, parts, replacements, fixtures, improvements and attachments thereto,and the proceeds thereof), or (ii) existing on property (and accessions,additions, parts, replacements, fixtures, improvements and attachments thereto,and the proceeds thereof) when acquired, if the Lien is confined to suchproperty (including accessions, additions, parts, replacements, fixtures,improvements and attachments thereto, and the proceeds thereof);

 

(d)                                 Liensincurred in the extension, renewal or refinancing of the indebtedness securedby Liens described in (a) through (c), but any extension, renewal orreplacement Lien must be limited to the property encumbered by the existingLien and the principal amount of the indebtedness it secures may not increase;

 

(e)           Licenses orsublicenses granted in the ordinary course of Borrower’s business and anyinterest or title of a licensor or under any license or sublicense;

 

(f)            Leases or subleasesgranted in the ordinary course of Borrower’s business, including in connectionwith Borrower’s leased premises or leased property;

 

(g)                                 Liensin favor of custom and revenue authorities arising as a matter of law to securethe payment of custom duties in connection with the importation of goods;

 

18

----

 

(h)                                 Lienson insurance proceeds securing the payment of financed insurance premiums;

 

(i)                                     CustomaryLiens granted in favor of a trustee to secure fees and other amounts owing tosuch trustee under an indenture or other similar agreement;

 

(j)                                     Liensconsisting of pledges of cash, cash equivalents or government securities tosecure swap or foreign exchange contracts or letters of credit;

 

(k)                                  Liensarising from judgments, decrees or attachments in circumstances notconstituting an Event of Default;

 

(l)                                     Carriers’,warehousemen’s, mechanics’, material men’s, repairmen’s or other like Liensarising in the ordinary course of business which are not overdue for a periodof more than 30 days or which are being contested in good faith and byappropriate proceeding if adequate reserves with respect thereto are maintainedon the books of the applicable Person;

 

(m)                               Pledgesor deposits in the ordinary course of business in connection with workers’compensation, unemployment insurance and other social security legislation;

 

(n)                                 Depositsto secure the performance of bids, trade contracts (other than for borrowedmoney), contracts for the purchase of property, leases, statutory obligations,surety and appeal bonds, performance bonds and other obligations of a likenature, in each case, incurred in the ordinary course of business and notrepresenting an obligation for borrowed money; and

 

(o)                                 Easements,rights-of-way, restrictions and other similar encumbrances affecting realproperty which do not materially detract from the value of the property subjectthereto or materially interfere with the ordinary conduct of the business ofthe applicable Person.

 

“**Person**” is any individual, soleproprietorship, partnership, limited liability company, joint venture, company,trust, unincorporated organization, association, corporation, institution,public benefit corporation, firm, joint stock company, estate, entity orgovernment agency.

 

“**Prime Rate**” is Bank’s most recentlyannounced “prime rate,” even if it is not Bank’s lowest rate.

 

“**Quick Assets**” is, on any date, theBorrower’s unrestricted cash and net billed accounts receivable.

 

“**Responsible Officer**” is each of the ChiefExecutive Officer, President, Chief Financial Officer and Controller ofBorrower.

 

“**Revolving Line**” is an Advance or Advancesof up to $4,000,000.00.

 

“**Subordinated Debt**” is debt incurred byBorrower subordinated to Borrower’s debt to Bank (pursuant to a subordinationagreement entered into between the Bank, the Borrower and the subordinatedcreditor), on terms acceptable to Bank in the exercise of commercialreasonableness.

 

“**Subsidiary**” is any Person, corporation,partnership, limited liability company, joint venture, or any other businessentity of which more than 50% of the voting stock or other equity interests isowned or controlled, directly or indirectly, by the Person or one or moreAffiliates of the Person.

 

“**Tangible Net Worth**” is, on any date, theconsolidated total assets of Borrower and its Subsidiaries minus (i) anyamounts attributable to (a) goodwill, (b) intangible items includingunamortized debt discount and expense, patents, trade and service marks andnames, copyrights and research and development expenses except prepaidexpenses, and (c) reserves not already deducted from assets, minus (ii)Total Liabilities.

 

19

----

 

“**Total Liabilities**” is on any day,obligations that should, under GAAP, be classified as liabilities on Borrower’sconsolidated balance sheet, including all Indebtedness, and current portion ofSubordinated Debt permitted by Bank to be paid by Borrower, but excluding allother Subordinated Debt.

 

“**Unused Revolving Line Facility Fee”** isdefined in Section 2.4(c).

 

*[Theremainder of this page is intentionally left blank]*

 

 

20

----

 

The parties hereto havecaused this Agreement to be executed under the laws of the State of New York asof the date first above written.

 
| BORROWER:           |
|---------------------|
|                |
| AXS-ONE INC.        |
|                |
| By                  |   /s/ William G. Levering |   |
| Name:               | William G. Levering |   |
| Title:              |   CFO |   |
|                |
| BANK:               |
|                |
| SILICON VALLEY BANK |
|                |
| By                  |   /s/ Michael  Moretti |   |
| Name:               | Michael Moretti |   |
| Title:              |   SVP |   |
|                     |  |  |  |  |

 

S-1

----

 

**EXHIBIT A**

 

The Collateral consistsof all right, title and interest of Borrower in and to the following (excludingExcluded Collateral):

 

All goods, equipment,inventory, contract rights or rights to payment of money, license agreements,franchise agreements, general intangibles (including payment intangibles),accounts (including health-care receivables), documents, instruments (includingany promissory notes), chattel paper (whether tangible or electronic), depositaccounts, fixtures, letters of credit rights (whether or not the letter ofcredit is evidenced by a writing), commercial tort claims, securities, and allother investment property supporting obligations, and financial assets, whethernow owned or hereafter acquired, wherever located; and

 

All Borrower’s Booksrelating to the foregoing and any and all claims, rights and interests in anyof the above and all substitutions for, additions, attachments, accessories,accessions and improvements to and replacements, products, proceeds andinsurance proceeds of any or all of the foregoing.

 

Excluded Collateral means(a) and (b) below:

 

(a) Any copyright rights,copyright applications, copyright registrations and like protections in eachwork of authorship and derivative work, whether published or unpublished, nowowned or later acquired and whenever and wherever arising, including allpresent and future common law and other rights in and to copyrights orcopyrightable material in any medium throughout the world; any patents,trademarks, service marks, trade styles, trade names, all other source orbusiness identification and design and applications therefor; any trade secretrights, including any rights to unpatented inventions, now owned or hereafteracquired; all inventions, designs, registrations, proprietary rights, Computronand AXS-One programs, source codes, object codes, data bases, and all otherlike intangible personal property at any time used in connection with thebusinesses of the Borrower (collectively, “Intellectual Property”); and

 

(b) Shares of stock inany Subsidiary of Borrower.

 

Notwithstanding theforegoing, the Collateral shall include all accounts, license and royalty feesand other revenues, proceeds, or income arising out of or relating to any ofthe foregoing Intellectual Property.

 

----

 

**EXHIBIT B**

**Loan Payment/Advance Request Form**

**DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.**

 
| Fax To:  (617) 969-5965 |   |              | Date:  |              |
|------------------------------|--------|-------------------|--------|-------------------|
|                         |   |              |
| **LOAN  PAYMENT:**           |   |              |
|                         |   |              |
| AXS-ONE  INC. (Borrower)     |
|                         |   |              |
| From Account #               |   |              |   | To Account #      |   |
| (Deposit  Account #)         |   | (Loan  Account #) |
|                         |   |              |
| Principal $                  |   |              |   | and/or Interest $ |   |
|                         |   |              |
| **Authorized  Signature:**   |   |              |   | Phone Number:     |   |
|                              |        |                   |        |                   |  |  |  |  |  |  |  |

 

**LOANADVANCE:**

 

Complete *OutgoingWire Request* section below if all or a portion of the fundsfrom this loan advance are for an outgoing wire.

 
| From Account #                                                                                                                                                                                                                                                                                                                                                             |   |                 |   | To Account #  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|---------------|--------|
| (Loan  Account #)                                                                                                                                                                                                                                                                                                                                                          |   | (Deposit  Account #) |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                 |
| Amount of Advance $                                                                                                                                                                                                                                                                                                                                                        |   |                 |   |          |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                 |
| All Borrower’s  representation and warranties in the Loan and Security Agreement are true,  correct and complete in all material respects on the date of the telephone  transfer request for an advance, but those representations and warranties  expressly referring to another date shall be true, correct and complete in  all material respects as of such date: |
|                                                                                                                                                                                                                                                                                                                                                                       |   |                 |
| **Authorized  Signature:**                                                                                                                                                                                                                                                                                                                                                 |   |                 |   | Phone Number: |   |
|                                                                                                                                                                                                                                                                                                                                                                            |        |                      |        |               |        |  |  |  |

 

**OUTGOINGWIRE REQUEST**

**Completeonly if all or a portion of funds from the *loanadvance* above are to be wired.**

Deadline for same day processing is 3:00 pm,E.S.T.

 
| Beneficiary Name:                                                                                                                                                                                                                                                                                                |   |                              |   | Amount of Wire: $                                 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|---------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                             |   |                              |
| Beneficiary Bank:                                                                                                                                                                                                                                                                                                |   |                              |   | Account Number:                                   |   |
|                                                                                                                                                                                                                                                                                                             |   |                              |
| City and State:                                                                                                                                                                                                                                                                                                  |   |                              |   |                                              |
|                                                                                                                                                                                                                                                                                                             |   |                              |
| Beneficiary Bank Transit  (ABA) #:                                                                                                                                                                                                                                                                               |   |                              |   | Beneficiary Bank Code  (Swift, Sort, Chip, etc.): |   |
|                                                                                                                                                                                                                                                                                                             |   | **(For International Wire Only)** |
|                                                                                                                                                                                                                                                                                                             |   |                              |
| Intermediary Bank:                                                                                                                                                                                                                                                                                               |   |                              |   | Transit (ABA) #:                                  |   |
|                                                                                                                                                                                                                                                                                                             |   |                              |
| For Further Credit to:                                                                                                                                                                                                                                                                                           |   |
|                                                                                                                                                                                                                                                                                                             |   |                              |
| Special Instruction:                                                                                                                                                                                                                                                                                             |   |
|                                                                                                                                                                                                                                                                                                             |   |                              |
| *By  signing below, I (we) acknowledge and agree that my (our) funds transfer  request shall be processed in accordance with and subject to the terms and  conditions set forth in the agreements(s) covering funds transfer service(s),  which agreements(s) were previously received and executed by me (us).* |
|                                                                                                                                                                                                                                                                                                             |   |                              |
| Authorized Signature:                                                                                                                                                                                                                                                                                            |   |                              |   | 2nd Signature  (If Required):                     |   |
| Print Name/Title:                                                                                                                                                                                                                                                                                                |   |                              |   | Print Name/Title:                                 |   |
| Telephone #                                                                                                                                                                                                                                                                                                      |   |                              |   | Telephone #                                       |   |
|                                                                                                                                                                                                                                                                                                                  |        |                                   |        |                                                   |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

 

**EXHIBIT C**

**BORROWING BASE CERTIFICATE**

 
| Borrower:          |   | AXS-ONE INC.        |
|--------------------|--------|---------------------|
| Lender:            |   | Silicon Valley Bank |
| Commitment Amount: |   | $4,000,000.00       |

 
| 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                                                                                                                                                                                                                                          |   | $ |   |
| 8.                                                    |   | Foreign  Accounts                                                                                                                                                                                                                                              |   | $ |   |
| 9.                                                    |   | Governmental  Accounts                                                                                                                                                                                                                                         |   | $ |   |
| 10.                                                   |   | Contra  Accounts                                                                                                                                                                                                                                               |   | $ |   |
| 11.                                                   |   | Promotion or  Demo Accounts                                                                                                                                                                                                                                    |   | $ |   |
| 12.                                                   |   | Intercompany/Employee  Accounts                                                                                                                                                                                                                                |   | $ |   |
| 13.                                                   |   | Other  (please explain on reverse)                                                                                                                                                                                                                             |   | $ |   |
| 14.                                                   |   | TOTAL  ACCOUNTS RECEIVABLE DEDUCTIONS                                                                                                                                                                                                                          |   | $ |   |
| 15.                                                   |   | Eligible  Accounts (#3 minus #14)                                                                                                                                                                                                                              |   | $ |   |
| 16.                                                   |   | LOAN VALUE  OF ACCOUNTS (80% of #15)                                                                                                                                                                                                                           |   | $ |   |
|                                                  |   |                                                                                                                                                                                                                                                           |   |
| BALANCES                                              |   |                                                                                                                                                                                                                                                           |   |
| 17.                                                   |   | Maximum Loan  Amount                                                                                                                                                                                                                                           |   | $ | 4,000,000.00 |   |
| 18.                                                   |   | Total Funds  Available (Lesser of #17 or #16)                                                                                                                                                                                                                  |   | $ |   |
| 19.                                                   |   | Present  balance owing on Line of Credit                                                                                                                                                                                                                       |   | $ |   |
| 20.                                                   |   | Outstanding  under Sublimits (Letters of Credit, F/X, and Cash Management)                                                                                                                                                                                     |   | $ |   |
| 21.                                                   |   | RESERVE  POSITION (#18 minus #19 and #20)                                                                                                                                                                                                                      |   | $ |   |
|                                                       |        |                                                                                                                                                                                                                                                                |        |  |  |  |

 

*Theundersigned represents and warrants that, this is true, complete and correct,and that the information in this Borrowing Base Certificate complies with therepresentations and warranties in the Loan and Security Agreement between theundersigned and Silicon Valley Bank.*

 
|               | **BANK USE ONLY**  |
|--------------------|--------------------|
|               |               |
|               | Received by:       |   |
| COMMENTS:          | AUTHORIZED  SIGNER |
|               | Date:              |   |
|               | Verified:          |   |
| By:                |               |   | AUTHORIZED  SIGNER |
| Authorized  Signer |               | Date: |   |
|               | Compliance Status: | Yes | No |
|                    |                    |  |  |  |  |  |  |  |  |

 

----

 

**EXHIBIT D**

**COMPLIANCE CERTIFICATE**

 

TO:                            SILICON VALLEY BANK

FROM:         AXS-ONEINC.

 

The undersignedauthorized officer of AXS-ONE INC. certifies that under the terms andconditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”),(i) Borrower is in compliance for the period ending                      with all required covenants except as noted below and (ii) there are no Eventsof Default, and all representations and warranties in the Agreement are trueand correct in all material respects on this date.  Attached are the required documents supporting thecertification.  The Officer certifiesthat these are prepared in accordance with Generally Accepted AccountingPrinciples (GAAP) consistently applied from one period to the next except asexplained in an accompanying letter or footnotes.  The Officer acknowledges that no borrowings may be requested atany time or date of determination that Borrower is not in compliance with anyof the terms of the Agreement, and that compliance is determined not just atthe date this certificate is delivered.

 

**Please indicate compliance status by circling Yes/Nounder “Complies” column.**

 
| **Reporting  Covenant**               |   | **Required**                         |   | **Complies**      |
|---------------------------------------|--------|--------------------------------------|--------|-------------------|
| Interim financial  statements with CC |   | Quarterly within 45 days*            |   | Yes  No |
| Annual (CPA Audited)                  |   | FYE within 120 days                  |   | Yes  No |
| 10-Q, 10-K and 8-K                    |   | Within 5 days after filing  with SEC |   | Yes  No |
| BBC A/R Agings                        |   | Quarterly within 30 days*            |   | Yes  No |

 

----

*Monthly w/in 30 days whenborrowing.

 
| **Financial  Covenant**                          |   | **Required** |                  | **Actual** |   | **Complies** |              |
|--------------------------------------------------|--------|--------------|-----------------------|------------|--------|--------------|-------------------|
| Minimum Adjusted Quick Ratio (quarterly*)        |   | 1.75:1.0     |                  |       | :1.0   |         | Yes  No |   |
| Minimum EBITDA                                   |   |         |                  |       |   |         |              |   |
| (quarterly - beginning quarter ending  6/30/05)  |   | $1.00**      |                  |       | $      |         | Yes  No |   |
| (cumulative - beginning quarter ending  9/30/04) |   | ($500,000)   | 7/1/04 thru  9/30/04  |       | $      |         | Yes  No |   |
|                                             |   | ($100,000)   | 7/1/04 thru  12/31/04 |       | $      |         | Yes  No |   |
|                                             |   | $500,000     | 1/1/05 thru  3/31/05  |       | $      |         | Yes  No |   |
|                                             |   | $1,000,000   | 1/1/05 thru  6/30/05  |       | $      |         | Yes  No |   |
|                                             |   | $1,500,000   | 1/1/05 thru  9/30/05  |       | $      |         | Yes  No |   |
|                                             |   | $2,000,000   | 1/1/05 thru  12/31/05 |       | $      |         | Yes  No |   |
|                                             |   | $500,000     | 1/1/06 thru  3/31/06  |       | $      |         | Yes  No |   |
|                                             |   | $1,000,000   | 1/1/06 thru  6/30/06  |       | $      |         | Yes  No |   |

 

----

*Monthly when borrowing. 

**except for any 1 of the last 3 quarters in2005 during which Borrower may sustain a maximum net EBITDA  loss of no greater than $500,000.

 

----

 
|                                                   | **BANK USE ONLY**   |
|--------------------------------------------------------|---------------------|
| **Comments Regarding Exceptions:**  See Attached. | Received by:        |   |   |
| Sincerely,                                             |                | AUTHORIZED SIGNER |
|                                                   |                | Date: |   |   |
| SIGNATURE                                              |                |   |   |   |
|                                                   |                | Verified: |   |   |
| TITLE                                                  |                |   | AUTHORIZED SIGNER |
|                                                   |                | Date: |   |   |
| DATE                                                   |                |   |
|                                                   | Compliance  Status: | Yes   No |
|                                                        |                     |  |  |  |  |  |

 

----

 

**SCHEDULE 7.4**

**(Existing Investments)**

 

**None.**

 

----

 

**SCHEDULE 7.5**

**(Existing Liens)**

 

The following entities arelisted as Additional Insureds on the Company’s Master Special Multi-Perilinsurance policy (Hartford Policy No. 13UUN UJ5809):

 

1.               CIN Meadows, LLC

2.               Linque Management Co., Inc.

3.               Sun Microsystems

 

The following entity is listedas a Loss Payee on the Company’s Master Special Multi-Peril insurance policy(Hartford Policy No. 13UUN UJ5809):

 

1.               Minolta Business System

 

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**SCHEDULE 7.6**

**(Existing Indebtedness)**

 

**None.**

 

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