3.  The first paragraph of the section of the Offer    Letter entitled “Change of Control” is deleted and the    following substituted therefor: **“Change of Control:**In the event of a termination of    your employment hereunder by the Company without Cause or by you    for Good Reason (as defined below) and, in either case, under    circumstances constituting an Involuntary Separation from    Service within the meaning of Treasury    Regulation Section 1.409A-1(n)    on or within 12 months following a Change of Control, the    Company will pay you any earned but unpaid salary and any    unreimbursed business expenses, plus a Change in Control    Severance Benefit equal to one-half of your annual rate of base    salary (as of your Separation from Service date). The Change in    Control Severance Benefit shall be paid on the    30th day    following your Separation from Service date, in a lump sum. In    addition, if COBRA continuation coverage under any Company    healthcare plan is elected, the Company shall provide such    coverage at no cost to you for the period of the COBRA coverage    or six months, whichever is shorter.”     4.  The third paragraph of the section of the Offer    Letter entitled “Change of Control” is deleted and the    following substituted therefor:     “Termination for Good Reason means a resignation of    employment and Separation from Service (as defined for purposes    of Code Section 409A) within 180 days following the    initial existence of one or more of the following conditions    arising without your consent:     (i) a material reduction in your base salary or benefits,    other than an across-the-board reduction affecting all members    of senior management;     (ii) a material reduction in your duties and significant    responsibilities hereunder (not including reasonable changes in    title or in corporate structure); or     (iii) the Company requires you to change the location of    your principal office, so that you will be based at a location    more than 50 miles from the Company’s current    executive offices located at 301 Route 17 North,    Rutherford, New Jersey 07070;     provided, in any such case, that (1) a prior written notice    specifying the reasons within ninety (90) after the initial    existence of the condition and an opportunity to cure such    condition (if curable) shall be afforded the Company, and    (2) “Good Reason” shall exist only if the Company    shall fail to cure such condition within 31 days after its    receipt of such prior written notice. In addition, until the    actual Separation from Service you must remain willing and able    to continue to perform services in accordance with the terms of    this Offer Letter and you must not be in breach of any of your    obligations to the Company.”     5.  A new section is hereby added to the Offer Letter    after the section entitled “Benefits” and before the    section entitled “Covenant Not to Compete” to read as    follows: **“Code Section 409A Compliance:**Certain    compensation that you may become entitled to in connection with    your employment with the Company may be affected by    Section 409A of the Internal Revenue Code and guidance    issued thereunder. The parties hereto intend that this Offer    Letter, as amended, be consistent with IRS Notice    2007-78, IRS    Notice    2007-86 and    other Code Section 409A transition relief, and it shall be    interpreted accordingly. Notwithstanding anything herein to the    contrary, it is expressly understood that at any time the    Company (or any related employer treated with the Company as the    service recipient for purposes of Code Section 409A) is publicly    traded on an established securities market (as defined for    purposes of Code Section 409A), if a payment or provision    of an amount or benefit constituting a deferral of compensation    is to be made to you on account of a Separation from Service at    a time when you are a Specified Employee (as defined for    purposes of Code Section 409A(a)(2)(B)(i)), such deferred    compensation shall not be paid to you prior to the date that is    six (6) months after the Separation from Service or as    otherwise permitted under Treasury Regulations    Section 1.409A-3(i)(2).”

 
     6.  Exhibit A of the Offer Letter is amended by    deleting the last sentence of the first paragraph thereof and    substituting the following therefor:     “In the event that Company Payments must be reduced, Change    of Control Severance Payments shall be reduced to the extent    necessary.”     Except as expressly amended herein, all provisions of the Offer    Letter remain in full force and effect.     If you concur with all of the above, please indicate your    agreement by signing and dating a copy of this letter in the    spaces indicated below.     Sincerely,     AXS-One, Inc.      By: /s/  William    P. Lyons    William P. Lyons    Chief Executive Officer    AXS-One Inc.     Acknowledged and Accepted:      /s/  Philip    L. Rugani     PHILIP L. RUGANI     Date: August 12, 2008