EXHIBIT 10.68


 


SECOND LOAN
MODIFICATION AGREEMENT


 


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


 


1.             DESCRIPTION OF EXISTING
INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations
which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant
to a loan arrangement dated as of August 11, 2004, evidenced by, among other
documents, a certain Loan and Security Agreement dated as of August 11, 2004,
between Borrower and Bank, as amended pursuant to a certain First Loan
Modification Agreement dated as of January 27, 2005 (as amended, the “Loan
Agreement”). Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Agreement.


 


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


 


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


 


3.             DESCRIPTION OF CHANGE IN TERMS.


 


A.                                   Modifications
to Loan Agreement.


 


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


 


“6.6        Financial
Covenants.


 


(a)           Adjusted Quick Ratio.  Borrower shall maintain 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 are outstanding, a ratio of Quick Assets
to Current Liabilities minus Deferred Revenue of at least 1.75 to 1.0.


 


 (b)          EBITDA.  Borrower shall maintain, to be tested as of
the 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 quarter
thereafter, EBITDA of at least $1.00, provided, however, that at any time or
times during any one (1) quarter ending June 30, 2005 and thereafter through
December 31, 2005, Borrower may have a maximum net EBITDA loss of no greater
than $500,000,00 so long as the required EBITDA in clause (i) for the period
ending in the quarter in which the loss was sustained continues to be
satisfied.”


 





















 


and inserting in lieu thereof the following:


 


“6.6        Financial
Covenants.


 


(a)           Adjusted Quick Ratio.  Borrower shall maintain 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 are outstanding, a ratio of Quick Assets
to Current Liabilities minus Deferred Revenue of at least 1.75 to 1.0.
Notwithstanding the foregoing, from the period commencing on the 2005 Closing
Date and ending on November 30, 2005, Borrower shall maintain 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 are outstanding, a ratio of Quick Assets
to Current Liabilities minus Deferred Revenue of at least 1.50 to 1.0.


 


(b)           EBITDA.  Borrower shall maintain, to be tested as of
the 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 period
ending September 30, 2004, (B) ($3,400,000.00), for the six (6) month period ending
December 31, 2004, (C) ($2,900,000.00), for the three (3) month period ending
March 31, 2005, (D) ($2,400,000.00), for the six (6) month period ending June
30, 2005, (E) ($1,800,000.00), for the nine (9) month period ending September
30, 2005, (F) ($100,000.00) 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.”


 


2.                                       The
Loan Agreement shall be amended by deleting the following text appearing in the
definition of “Eligible Accounts” appearing in Section 13.1, thereof:


 


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


 


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


 


(c)           Credit balances over ninety (90) days
from invoice date;


 


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


 


and inserting in lieu thereof the following:


 


“(a)         Accounts that the account debtor has
not paid within ninety (90) days of invoice date (except for accounts with
respect to which Sun Microsystems is the account debtor which shall be one
hundred twenty (120) days of invoice date);


 


(b)           Accounts
for an account debtor, fifty percent (50%) or more of whose Accounts have not
been paid within ninety (90) days of invoice date (except for such accounts
with respect to which Sun Microsystems is the account debtor, which shall be
one hundred twenty (120) days of invoice date);


 


(c)           Credit balances over ninety (90) days
from invoice date;


 





















 


(d)           That portion of Accounts for an
account debtor, including Affiliates, whose total obligations to Borrower
exceed 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 that
exceed that percentage, unless Bank otherwise approves in writing;”


 


3.                                       The
Loan Agreement shall be amended by inserting the following definition, in
alphabetical order, in Section 13.1 thereof:


 


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


 


4.                                       The
Borrowing Base Certificate appearing as Exhibit C to the Loan Agreement
is hereby replaced with the Compliance Certificate attached as Exhibit A
hereto.


 


5.                                       The
Compliance Certificate appearing as Exhibit D to the Loan Agreement is
hereby replaced with the Compliance Certificate attached as Exhibit B
hereto.


 


4.             FEES.  Borrower shall pay to Bank a modification fee
equal to Five Thousand Dollars ($5,000.00) (the “Modification Fee”), which
Modification Fee shall be due on the date hereof and shall be deemed fully
earned as of the date hereof. The Borrower shall also reimburse Bank for all
legal fees and expenses incurred in connection with this amendment to the
Existing Loan Documents.


 


5.             RATIFICATION OF PERFECTION
CERTIFICATE.  Borrower hereby
ratifies, confirms and reaffirms, all and singular, the terms and disclosures
contained in a certain Perfection Certificate dated as of August 11, 2004
between Borrower and Bank, and acknowledges, confirms and agrees the
disclosures and information above Borrower provided to Bank in the Perfection
Certificate has not changed, as of the date hereof.


 


6.             AUTHORIZATION TO FILE.  Borrower hereby authorizes Bank to file
financing statements without notice to Borrower, with all appropriate
jurisdictions, as Bank deems appropriate, in order to further perfect or
protect Bank’s interest in the Collateral, including a notice that any
disposition 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 hereby
amended wherever necessary to reflect the changes described above.


 


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


 


9.             NO DEFENSES OF BORROWER.  Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.


 


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


 





















 


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


 





















 


This Loan Modification Agreement is executed as a
sealed instrument under the laws of the State of New York as of the date first
written 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

  	
   

  
										



 





















 


EXHIBIT A


 


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. 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 and
warrants that, this is true, complete and correct, and that the information in
this Borrowing Base Certificate complies with the representations and
warranties in the Loan and Security Agreement between the undersigned and
Silicon Valley Bank.


 


	
  COMMENTS:

  	
   

  	
  BANK
  USE ONLY

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  authorized signer

  
	
   

  	
  Authorized
  Signer

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
   

  	
  authorized signer

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
  Compliance Status:

  	
  Yes

  	
  No

  
										



 





















 


EXHIBIT B


 


COMPLIANCE
CERTIFICATE


 


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 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 Events
of Default, and all representations and warranties in the Agreement are true
and correct in all material respects on this date.  Attached are the required documents
supporting the certification.  The
Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.  The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined 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

  



 










*Monthly w/in 30 days
when 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

  



 










*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