**EXHIBIT 10.68**

 

**SECOND LOANMODIFICATION AGREEMENT**

 

This Second Loan Modification Agreement (this “LoanModification Agreement”) is entered into as of March 28, 2005, by and between **SILICON VALLEY BANK**, a California-charteredbank, with its principal place of business at 3003 Tasman Drive, SantaClara, California 95054 and with a loan production office located at 400Madison Avenue, Suite 15A, New York, New York 10017 (“Bank”) and **AXS-ONE INC.**, a Delaware corporation withits chief executive office located at 301 Route 17 North, Rutherford, NewJersey 07070 (“Borrower”).

 

# 1.             DESCRIPTION OF EXISTINGINDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligationswhich may be owing by Borrower to Bank, Borrower is indebted to Bank pursuantto a loan arrangement dated as of August 11, 2004, evidenced by, among otherdocuments, a certain Loan and Security Agreement dated as of August 11, 2004,between Borrower and Bank, as amended pursuant to a certain First LoanModification Agreement dated as of January 27, 2005 (as amended, the “LoanAgreement”). Capitalized terms used but not otherwise defined herein shall havethe same meaning as in the Loan Agreement.

#  

# 2.             DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is secured bythe Collateral as described in the Loan Agreement (together with any othercollateral security granted to Bank, the “Security Documents”).

#  

Hereinafter, the Security Documents, together with allother documents evidencing or securing the Obligations shall be referred to asthe “Existing Loan Documents”.

 

# 3.             DESCRIPTION OF CHANGE IN TERMS.

#  

## A.                                   Modificationsto Loan Agreement.

##  

### 1.                                       TheLoan Agreement shall be amended by deleting Section 6.6 thereof, entitled“Financial Covenants”:

###  

“**6.6        FinancialCovenants**.

 

(a)           Adjusted Quick Ratio.  Borrower shall maintain at all times, to betested as of the last day of each: (i) quarter, and (ii) month when a CreditExtension is requested or Obligations are outstanding, a ratio of Quick Assetsto Current Liabilities minus Deferred Revenue 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)($3,400,000.00), 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 ending September 30, 2005, (F)$2,000.000.00 for the twelve (12) month period ending December 31, 2005, (G)$500,000.00, for the three (3) month period ending March 31, 2006, and (H)$1,000,000.00 for the six (6) month period ending June 30, 2006, and (ii)beginning with the quarter ending June 30, 2005 and for each calendar quarterthereafter, EBITDA of at least $1.00, provided, however, that at any time ortimes during any one (1) quarter ending June 30, 2005 and thereafter throughDecember 31, 2005, Borrower may have a maximum net EBITDA loss of no greaterthan $500,000,00 so long as the required EBITDA in clause (i) for the periodending in the quarter in which the loss was sustained continues to besatisfied.”

 

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and inserting in lieu thereof the following:

 

“**6.6        FinancialCovenants**.

 

(a)           Adjusted Quick Ratio.  Borrower shall maintain at all times, to betested as of the last day of each: (i) quarter, and (ii) month when a CreditExtension is requested or Obligations are outstanding, a ratio of Quick Assetsto Current Liabilities minus Deferred Revenue of at least 1.75 to 1.0.Notwithstanding the foregoing, from the period commencing on the 2005 ClosingDate and ending on November 30, 2005, Borrower shall maintain at all times, tobe tested as of the last day of each: (i) quarter, and (ii) month when a CreditExtension is requested or Obligations are outstanding, a ratio of Quick Assetsto Current Liabilities minus Deferred Revenue of at least 1.50 to 1.0.

 

(b)           EBITDA.  Borrower shall maintain, to be tested as ofthe last day of each quarter, beginning with the quarter ending September 30,2004, EBITDA of at least: (A) ($500,000.00), for the three (3) month periodending September 30, 2004, (B) ($3,400,000.00), for the six (6) month period endingDecember 31, 2004, (C) ($2,900,000.00), for the three (3) month period endingMarch 31, 2005, (D) ($2,400,000.00), for the six (6) month period ending June30, 2005, (E) ($1,800,000.00), for the nine (9) month period ending September30, 2005, (F) ($100,000.00) for the twelve (12) month period ending December31, 2005, (G) $500,000.00, for the three (3) month period ending March 31,2006, and (H) $1,000,000.00 for the six (6) month period ending June 30, 2006.”

 

### 2.                                       TheLoan Agreement shall be amended by deleting the following text appearing in thedefinition of “Eligible Accounts” appearing in Section 13.1, thereof:

###  

“(a)         Accounts that the account debtor hasnot paid within ninety (90) days of invoice date;

 

(b)           Accountsfor an account debtor, fifty percent (50%) or more of whose Accounts have notbeen paid within ninety (90) days of invoice date;

 

(c)           Credit balances over ninety (90) daysfrom invoice date;

 

(d)           That portion of Accounts for anaccount debtor, including Affiliates, whose total obligations to Borrowerexceed thirty percent (30%) of all Accounts, except for Pfizer, for which thepercentage shall be forty percent (40%) for the amounts that exceed thatpercentage, unless Bank otherwise approves in writing;”

 

and inserting in lieu thereof the following:

 

“(a)         Accounts that the account debtor hasnot paid within ninety (90) days of invoice date (except for accounts withrespect to which Sun Microsystems is the account debtor which shall be onehundred twenty (120) days of invoice date);

 

(b)           Accountsfor an account debtor, fifty percent (50%) or more of whose Accounts have notbeen paid within ninety (90) days of invoice date (except for such accountswith respect to which Sun Microsystems is the account debtor, which shall beone hundred twenty (120) days of invoice date);

 

(c)           Credit balances over ninety (90) daysfrom invoice date;

 

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(d)           That portion of Accounts for anaccount debtor, including Affiliates, whose total obligations to Borrowerexceed thirty percent (30%) of all Accounts, except for (i) Sun Microsystems,for which the percentage shall be thirty-five percent (35%), and (ii) Pfizer,for which the percentage shall be forty percent (40%), for the amounts thatexceed that percentage, unless Bank otherwise approves in writing;”

 

### 3.                                       TheLoan Agreement shall be amended by inserting the following definition, inalphabetical order, in Section 13.1 thereof:

###  

““**2005 Closing Date**” is March 28, 2005.”

 

### 4.                                       TheBorrowing Base Certificate appearing as Exhibit C to the Loan Agreementis hereby replaced with the Compliance Certificate attached as Exhibit Ahereto.

###  

### 5.                                       TheCompliance Certificate appearing as Exhibit D to the Loan Agreement ishereby replaced with the Compliance Certificate attached as Exhibit Bhereto.

###  

# 4.             FEES.  Borrower shall pay to Bank a modification feeequal to Five Thousand Dollars ($5,000.00) (the “Modification Fee”), whichModification Fee shall be due on the date hereof and shall be deemed fullyearned as of the date hereof. The Borrower shall also reimburse Bank for alllegal fees and expenses incurred in connection with this amendment to theExisting Loan Documents.

#  

# 5.             RATIFICATION OF PERFECTIONCERTIFICATE.  Borrower herebyratifies, confirms and reaffirms, all and singular, the terms and disclosurescontained in a certain Perfection Certificate dated as of August 11, 2004between Borrower and Bank, and acknowledges, confirms and agrees thedisclosures and information above Borrower provided to Bank in the PerfectionCertificate has not changed, as of the date hereof.

#  

# 6.             AUTHORIZATION TO FILE.  Borrower hereby authorizes Bank to filefinancing statements without notice to Borrower, with all appropriatejurisdictions, as Bank deems appropriate, in order to further perfect orprotect Bank’s interest in the Collateral, including a notice that anydisposition of the Collateral, by either the Borrower or any other Person,shall be deemed to violate the rights of the Bank under the Code.

#  

# 7.             CONSISTENT CHANGES.  The Existing Loan Documents are herebyamended wherever necessary to reflect the changes described above.

#  

# 8.             RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, andreaffirms all terms and conditions of all security or other collateral grantedto the Bank, and confirms that the indebtedness secured thereby includes,without limitation, the Obligations.

#  

# 9.             NO DEFENSES OF BORROWER.  Borrower hereby acknowledges and agrees thatBorrower has no offsets, defenses, claims, or counterclaims against Bank withrespect to the Obligations, or otherwise, and that if Borrower now has, or everdid have, any offsets, defenses, claims, or counterclaims against Bank, whetherknown or unknown, at law or in equity, all of them are hereby expressly WAIVEDand Borrower hereby RELEASES Bank from any liability thereunder.

#  

# 10.           CONTINUING VALIDITY.  Borrower understands and agrees that inmodifying the existing Obligations, Bank is relying upon Borrower’srepresentations, warranties, and agreements, as set forth in the Existing LoanDocuments.  Except as expressly modifiedpursuant to this Loan Modification Agreement, the terms of the Existing LoanDocuments remain unchanged and in full force and effect.  Bank’s agreement to modifications to theexisting Obligations pursuant to this Loan Modification Agreement in no wayshall obligate Bank to make any future modifications to the Obligations.  Nothing in this Loan Modification Agreementshall constitute a satisfaction of the Obligations.  It is the intention of Bank and Borrower toretain as liable parties all makers of Existing Loan Documents, unless theparty is expressly released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.

 

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# 11.           COUNTERSIGNATURE.  This Loan Modification Agreement shall becomeeffective only when it shall have been executed by Borrower and Bank.

 

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This Loan Modification Agreement is executed as asealed instrument under the laws of the State of New York as of the date firstwritten above.

 
| **BORROWER:**     | **BANK:**                |
|-------------------|--------------------------|
|              |                     |
| **AXS-ONE  INC.** | **SILICON  VALLEY BANK** |
|              |                     |
| By:               | /s/ J.P. Dwyer           |   | By: | /s/ Melissa Stepanis |   |
|              |                     |   |   |   |   |
| Name:             | Joseph P. Dwyer          |   | Name: | Melissa Stepanis |   |
|              |                     |   |   |   |   |
| Title:            | CFO                      |   | Title: | Vice President |   |
|                   |                          |  |  |  |  |  |  |  |  |

 

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**EXHIBIT A**

 

**BORROWINGBASE 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. Accounts over  90 days from invoice date (120 days for Sun Microsystems accounts)    |   | $      |         |   |
| 5. Balance of  50% over 90 day accounts (120 days for Sun Microsystems accounts)        |   | $      |         |   |
| 6. Credit  balances over 90 days                                                        |   | $      |         |   |
| 7. Concentration  Limits (30% except: (i) 35% for Sun Microsystems (ii) 40% for Pfizer) |   | $      |         |   |
| 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)                                           |   | $      |         |   |

 

*The undersigned represents andwarrants that, this is true, complete and correct, and that the information inthis Borrowing Base Certificate complies with the representations andwarranties in the Loan and Security Agreement between the undersigned andSilicon Valley Bank.*

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

 

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**EXHIBIT B**

 

**COMPLIANCECERTIFICATE**

** **

TO:         SILICON VALLEY BANK

FROM:   AXS-ONE INC.

 

The undersigned authorized officer of AXS-ONE INC.certifies that under the terms and conditions of the Loan and SecurityAgreement between Borrower and Bank (the “Agreement”), (i) Borrower is incompliance 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 documentssupporting the certification.  TheOfficer certifies that these are prepared in accordance with Generally AcceptedAccounting Principles (GAAP) consistently applied from one period to the nextexcept as explained in an accompanying letter or footnotes.  The Officer acknowledges that no borrowingsmay be requested at any time or date of determination that Borrower is not incompliance with any of the terms of the Agreement, and that compliance isdetermined not just at the date this certificate is delivered.

 
| **Please  indicate compliance status by circling Yes/No under “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 45  days*           |       | Yes  No |

 

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*Monthly w/in 30 dayswhen borrowing.

 
| **Financial Covenant**                     | ** ** | **Required**                       | ** ** | **Actual** | ** ** | **Complies**      |
|--------------------------------------------|------------|------------------------------------|------------|------------|------------|-------------------|
| Minimum Adjusted Quick  Ratio (quarterly*) |       | 1.75:1.0**                         |       | :1.0       |       | Yes  No |
| Minimum EBITDA                             |       |                               |       |       |       |              |
| (cumulative  - beginning Q-ending 9/30/04) |       | ($500,000) 7/1/04 thru  9/30/04    |       | $          |       | Yes  No |
|                                       |       | ($3,400,000) 7/1/04  thru 12/31/04 |       | $          |       | Yes  No |
|                                       |       | ($2,900,000) 1/1/05  thru 3/31/05  |       | $          |       | Yes  No |
|                                       |       | ($2,400,000) 1/1/05  thru 6/30/05  |       | $          |       | Yes  No |
|                                       |       | ($1,800,000) 1/1/05  thru 9/30/05  |       | $          |       | Yes  No |
|                                       |       | ($100,000) 1/1/05 thru  12/31/05   |       | $          |       | Yes  No |
|                                       |       | $500,0001/1/06 thru  3/31/06       |       | $          |       | Yes  No |
|                                       |       | $1,000,0001/1/06 thru  6/30/06     |       | $          |       | Yes  No |

 

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*Monthly when borrowing.**1.50:1.0 from the 2005 Closing Date through 11/30/05.

 
| ** **                                                   | **BANK  USE ONLY** |
|--------------------------------------------------------------|--------------------|
| **Comments  Regarding Exceptions:** See Attached. Sincerely, |               |
| ** **                                                   | ** **         | Received by: | ** ** |
| Signature                                                    | ** **         | ** ** | authorized signer |
| ** **                                                   | ** **         | ** ** |
| Title                                                        | ** **         | Date: | ** ** |
| ** **                                                   | ** **         | ** ** |
| Date                                                         | ** **         | Verified: | ** ** |
|                                                         | ** **         |   | authorized signer |
|                                                         | ** **         |   |
|                                                         | ** **         | Date: |   |
|                                                         | ** **         | Compliance Status: | Yes | No |
|                                                              |                    |  |  |  |  |  |  |  |

 

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