Exhibit 10.62


 


LOAN AND SECURITY AGREEMENT


 


This
LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of
August 11, 2004, 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 (“Borrower”), provides the terms on which Bank shall lend
funds to Borrower and Borrower shall repay Bank. The parties agree as follows:


 


1                                         ACCOUNTING
AND OTHER TERMS


 


Accounting terms not
defined in this Agreement shall be construed following GAAP.  Calculations and determinations must be made
following GAAP.  The term “financial
statements” includes the notes and schedules. 
The terms “including” and “includes” always mean “including (or
includes) without limitation,” in this or any Loan Document.  Capitalized terms in this Agreement shall
have the meanings set forth in Article 13.  All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code, to the extent such
terms are defined therein.


 


2                                         LOAN
AND TERMS OF PAYMENT


 


2.1                               Promise
to Pay.  Borrower hereby
unconditionally promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions
as and when due in accordance with this Agreement.


 


2.1.1                     Revolving
Advances.


 


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


 


(b)                                 Borrowing
Procedure.  To obtain an Advance,
Borrower must notify Bank (which notice shall be irrevocable) by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made.  If such notification is by
telephone, Borrower must promptly confirm the notification by delivering to
Bank 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 Agreement
based on instructions from a Responsible Officer or his or her designee or
without instructions if the Advances are necessary to meet Obligations which
have become due.  Bank may rely on any
telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee. Borrower shall indemnify Bank for any loss
Bank suffers due to such reliance, except to the extent such reliance was
effected through gross negligence or willful misconduct by Bank.


 


(c)                                  Interest
Rate.   The principal amounts
outstanding under the Revolving Line shall accrue interest at a per annum rate
equal 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.


 


(d)                                 Termination;
Repayment.  The Revolving Line
terminates on the Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable. Provided that all Obligations
hereunder have been repaid, the Borrower may terminate this Agreement without
penalty or premium at any time upon not less than five (5) Business Days prior
written notice to Bank.


 


2.1.2                     Letters of
Credit Sublimit.


 


(a)                                  Bank
shall issue or have issued Letters of Credit for Borrower’s account not
exceeding (i) the lesser of (A) the Revolving Line or (B) the Borrowing Base
minus (ii) the outstanding principal balance of any Advances (including any
Cash Management Services), minus (iii) the FX Reserve, minus (iv) the
outstanding 


 

















 


balance of all Letters of
Credit undrawn or unreimbursed, plus an amount equal to any Letter of Credit
Reserves.  The face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed $1,000,000.00.  Borrower’s Letter of Credit reimbursement
obligation 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 Default
hereunder.  All Letters of Credit shall
be in form and substance acceptable to Bank in its sole discretion, and shall
be subject to the terms and conditions of Bank’s standard Application and
Letter of Credit Agreement (“Letter of Credit Application”).  Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.


 


(b)                                 The
obligation of Borrower to immediately reimburse Bank for drawings made under
Letters of Credit shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement and such
Letters of Credit, and such Letter of Credit Application.  Borrower shall indemnify, defend,
protect,  and hold Bank harmless from
any loss, cost, expense or liability, including, without limitation, reasonable
attorneys’ 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 to
Bank’s gross negligence or willful misconduct.


 


(c)                                  Borrower
may request that Bank issue a Letter of Credit payable in a currency other than
United States Dollars.  If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand
as an Advance to Borrower of the equivalent of the amount thereof (plus fees
and charges in connection therewith such as wire, cable, SWIFT or similar
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for transfer to the
country of which it is the currency.


 


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


 


2.1.3                     Foreign
Exchange Sublimit. The Borrower may enter into foreign exchange forward
contracts with the Bank under which Borrower commits to purchase from or sell
to Bank a set amount of foreign currency more than one (1) business day after
the 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 maximum
of $1,000,000.00.  The total FX Forward
Contracts at any one time may not exceed 10 times the amount of the FX
Reserve.  Bank may terminate the FX
Forward Contracts if an Event of Default occurs.  The Obligations of Borrower relating to this section may
not exceed: (i) the lesser of (A) the Revolving Line, or (B) the Borrowing
Base, minus (ii) the outstanding balance of all undrawn or unreimbursed Letters
of Credit, minus (iii) the FX Reserve, and minus (iv) the aggregate outstanding
Advances hereunder (including any Cash Management Services).


 


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


 


2.1.5                     Undisbursed
Credit Extensions.  The Bank’s
obligation to lend the undisbursed portion of the Revolving Line shall
terminate if, in Bank’s sole discretion, there has been a Material Adverse
Change.


 


2.2                               Overadvances.  If Borrower’s Obligations under
Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the lesser of either (i) the
Revolving Line or (ii) the Borrowing Base, Borrower must immediately pay in
cash to Bank such excess, provided, however, that if such overage was due to
the Bank’s changing any reserve or eligibility standard for an Eligible
Account, Borrower shall have three (3) Business Days to pay such excess.


 


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2.3                               Interest
Rate.


 


(a)                                  Default
Rate. After an Event of Default, Obligations shall bear interest at three
percent (3.0%) above the rate effective immediately before the Event of
Default.


 


(b)                                 Adjustment
to Interest Rate.  The applicable
interest rate hereunder shall increase or decrease when the Prime Rate changes.


 


(c)                                  360-Day
Year.  Interest is computed on the
basis of a 360 day year for the actual number of days elapsed.


 


(d)                                 Debit
of Accounts.  Bank may debit any of
Borrower’s deposit or operating accounts at Bank for principal and interest
payments when due, or any other amounts Borrower owes Bank hereunder or
pursuant hereto, when due. Bank shall promptly notify Borrower after it debits
Borrower’s accounts.  These debits shall
not constitute a set-off.


 


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


 


2.4                               Fees.  Borrower shall pay to Bank:


 


(a)                                  Commitment
Fee.  A non-refundable commitment
fee as follows: (i) $30,000.00 due and payable on the Closing Date which shall
be deemed earned on the Closing Date, and (ii) if this Agreement has not been
terminated, $30,000.00 due and payable on August 10, 2005 which shall be
deemed earned on August 10, 2005; and


 


(b)                                 Letter
of Credit Fee.  The Borrower shall
pay the Bank’s customary fees and expenses for the issuance or renewal of
Letters of Credit, including, without limitation, a Letter of Credit Fee of one
percent (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


 


(c)                                  Unused
Revolving Line Facility Fee.  In
addition to the foregoing, as compensation for the Bank’s maintenance of
sufficient funds available for such purpose, the Bank shall have earned a fee
for 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 paid
quarterly, in arrears, on a calendar year basis, in an amount equal to one
quarter of one percent (0.25%) per annum of the average unused portion of the
Revolving Line, as determined by the Bank. The Borrower shall not be entitled
to any credit, rebate or repayment of any Unused Revolving Line Facility Fee
previously paid to the Bank pursuant to this Section. Notwithstanding the
foregoing, an Unused Revolving Line Facility Fee shall not be due provided that
Borrower 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 event
that the Borrower does not maintain at least $800,000.00 in average balances
with Bank, Borrower shall be entitled to a pro-rata fee reduction to the extent
of the balances maintained in such accounts at bank, on average, during the
subject quarterly period; and


 


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


 


3                                         CONDITIONS
OF LOANS


 


3.1                               Conditions
Precedent to Initial Credit Extension. 
The Bank’s obligation to make the initial Credit Extension is subject to
the condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, such documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate, including, without
limitation, subject to the condition precedent that Bank shall have received,
in form and substance satisfactory to Bank, the following:


 


 


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(a)                                  this
Agreement;


 


(b)                                 a
certificate of the Secretary of Borrower with respect to articles, bylaws,
incumbency and resolutions authorizing the execution and delivery of this
Agreement;


 


(c)                                  Perfection
Certificate by Borrower;


 


(d)                                 a
legal opinion of Borrower’s counsel (authority and enforceability), in form and
substance acceptable to Bank;


 


(e)                                  insurance
certificate;


 


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


 


(g)                                 Certificate
of Foreign Qualification (New Jersey);


 


(h)                                 Certificate
of Good Standing/Legal Existence (Delaware); and


 


(i)                                     such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.


 


3.2                               Conditions
Precedent to all Credit Extensions. 
Bank’s obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:


 


(a)                                  timely
receipt of any Payment/Advance Form; and


 


(b)                                 the
representations and warranties in Section 5 shall be true in all material
respects on the date of the Payment/Advance Form and on the effective date of
each Credit Extension and no Event of Default shall have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that the representations
and warranties in Section 5 remain true in all material respects.


 


4                                         CREATION
OF SECURITY INTEREST


 


4.1                               Grant
of Security Interest.  Borrower
hereby grants Bank, to secure the payment and performance in full of all of the
Obligations and the performance of each of Borrower’s duties under the Loan
Documents, a continuing security interest in, and pledges and assigns to the
Bank, the Collateral (except Excluded Collateral), wherever located, whether
now owned or hereafter acquired or arising, and all proceeds and products
thereof.  Borrower warrants and
represents that the security interest granted herein shall be a first priority
security interest in the Collateral (except Excluded Collateral), subject to
Permitted Liens. The Collateral shall also be subject to permitted Subordinated
Debt.


 


Except as noted on the
Perfection Certificate, Borrower is not a party to, nor is bound by, any
material license (other than over the counter software that is commercially
available to the public) or other material agreement with respect to which the
Borrower is the licensee which is reasonably likely to have a material impact
on Borrower’s business or financial condition. Borrower shall provide written
notice to Bank within ten (10) days of entering or becoming bound by, any such
license or agreement which is reasonably likely to have a material impact on
Borrower’s business or financial condition.


 


If the Agreement is
terminated, Bank’s lien and security interest in the Collateral shall continue
until 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 the
brief details thereof and grant to Bank in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance reasonably satisfactory to Bank.


 


4

















 


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


 


4.2                               Authorization
to File Financing Statements. 
Borrower hereby authorizes Bank to file financing statements, without
notice to Borrower, with all appropriate jurisdictions in order to perfect or
protect Bank’s interest or rights hereunder.


 


5                                         REPRESENTATIONS
AND WARRANTIES


 


Borrower represents and
warrants as follows:


 


5.1                               Due
Organization and Authorization. 
Borrower and each domestic Subsidiary is duly existing and in good
standing in its state of formation and qualified and licensed to do business
in, and in good standing in, any state in which the conduct of its business or
its ownership of property requires that it be qualified except where the
failure to do so could not reasonably be expected to cause a Material Adverse
Change.  In connection with this
Agreement, the Borrower delivered to the Bank a certificate signed by the
Borrower and entitled “Perfection Certificate”.  The Borrower represents and warrants to the Bank that: (a) the
Borrower’s exact legal name is that indicated on the Perfection Certificate and
on the signature page hereof; and (b) the Borrower is an organization of the
type, and is organized in the jurisdiction, set forth in the Perfection
Certificate; and (c) the Perfection Certificate accurately sets forth the
Borrower’s organizational identification number or accurately states that the
Borrower has none; and (d) the Perfection Certificate accurately sets forth the
Borrower’s place of business, or, if more than one, its chief executive office
as well as the Borrower’s mailing address if different, and (e) all other
information set forth on the Perfection Certificate pertaining to the Borrower
is accurate and complete.  If the
Borrower does not now have an organizational identification number, but later
obtains one, Borrower shall forthwith notify the Bank of such organizational
identification number.


 


The execution, delivery
and performance of the Loan Documents have been duly authorized, and do not
conflict with Borrower’s organizational documents, nor constitute an event of
default under any material agreement by which Borrower is bound.  Borrower is not in default under any
agreement to which or by which it is bound in which the default could
reasonably 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 with
Bank and deposit accounts described in the Perfection Certificate delivered to
the Bank in connection herewith.  The
Accounts are bona fide, existing obligations, and the service or property has
been performed or delivered to the account debtor or its agent for immediate
shipment to the account debtor. The Collateral is not in the possession of any
third party bailee (such as a warehouse). 
Except as hereafter disclosed to the Bank in writing by Borrower, none
of the components of the Collateral shall be maintained at locations other than
as provided in the Perfection Certificate. 
In the event that Borrower, after the date hereof, intends to store or
otherwise deliver any portion of the Collateral to a bailee, then Borrower will
first receive the written consent of Bank, not to be unreasonably withheld, and
such bailee must acknowledge in writing that the bailee is also holding such
Collateral for the benefit of Bank (in addition to the Borrower). Borrower has
no knowledge of any actual or imminent Insolvency Proceeding of any account
debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. Borrower is the sole owner of or has all necessary rights and
interests to the Intellectual Property, except for non-exclusive licenses (or
exclusive licenses for a particular field of use or geographic area) granted to
its customers in the ordinary course of business.


 


5.3                               Litigation.  Except as shown in the Perfection
Certificate, there are no actions or proceedings pending or, to the knowledge
of Borrower’s Responsible Officers, threatened by or against Borrower or any
Subsidiary in which an adverse decision could reasonably be expected to cause a
Material Adverse Change.


 


5.4                               No
Material Deviation in Financial Statements.  All consolidated financial statements for Borrower and any
Subsidiary delivered to Bank fairly present, in accordance with GAAP, in all
material respects Borrower’s consolidated financial condition and Borrower’s
consolidated results of operations. 
There has not been 


 


5

















 


any material
deterioration in Borrower’s consolidated financial condition since the date of
the most recent financial statements submitted to Bank.


 


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


 


5.6                               Regulatory
Compliance.  Borrower is not an
“investment company” or a company “controlled” by an “investment company” under
the Investment Company Act.  Borrower is
not engaged as one of its important activities in extending credit for margin
stock (under Regulations T and U of the Federal Reserve Board of
Governors).  Borrower has complied in
all material respects with the Federal Fair Labor Standards Act.  Borrower has not knowingly violated any
laws, ordinances or rules, the violation of which could reasonably be expected
to cause a Material Adverse Change. 
None of Borrower’s or any Subsidiary’s properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. 
Borrower and each Subsidiary has timely filed all required tax returns
and paid, or made adequate provision to pay, all material taxes, except those
being contested in good faith with adequate reserves under GAAP.  Borrower and each domestic Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all government authorities that are
necessary to continue its business as currently conducted except where the
failure to make such declarations, notices or filings would not reasonably be
expected to cause a Material Adverse Change.


 


5.7                               Subsidiaries.  Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.


 


5.8                               Full
Disclosure.  No written
representation, warranty or other statement of Borrower in any certificate or
written statement given to Bank by Borrower, or its agents, taken together with
all such written certificates and written statements given to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are
not viewed as facts and that actual results during the period or periods
covered by such projections and forecasts may differ from the projected or
forecasted results).


 


6                                         AFFIRMATIVE
COVENANTS


 


Borrower shall do all of
the following:


 


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


 


6.2                               Financial
Statements, Reports, Certificates.


 


(a)                                  Borrower
shall deliver to Bank:  (i) as soon as
available, but no later than: (A) thirty (30) days after the last day of each
month 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 prepared
consolidated balance sheet and income statement covering Borrower’s
consolidated operations during the period certified by a Responsible Officer and
in a form acceptable to Bank; (ii) as soon as available, but no later than one
hundred twenty (120) days after the last day of Borrower’s fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm, which is currently KPMG; (iii)
within five (5) days of filing, copies of all statements, reports and notices
made available to Borrower’s security holders or to any holders of Subordinated
Debt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission which reports shall be deemed to have been delivered on the
date on which Borrower posts any such report or provides a link thereto on
Borrower’s website on the Internet; (iv) a prompt report of any legal actions
pending or threatened against Borrower or any Subsidiary that 


 


6

















 


could reasonably be
expected to result in damages or costs to Borrower or any Subsidiary of Two
Hundred Fifty Thousand Dollars ($250,000.00) or more; and (v)  other financial information reasonably
requested by Bank.


 


(b)                                 Within
(i) thirty (30) days after the last day of each month when a Credit Extension
is 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 Borrowing
Base Certificate signed by a Responsible Officer in the form of Exhibit C, with aged listings of
accounts receivable (by invoice date).


 


(c)                                  Within
(i) thirty (30) days after the last day of each month when a Credit Extension
is 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 with the financial statements a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit
D.


 


(d)                                 Allow
Bank to audit Borrower’s Collateral at Borrower’s expense.  Such audits shall be conducted (prior to an
Event of Default, at normal business hours) no more often than once every
twelve (12) months (which shall not be the first calendar quarter, if no Event
of Default has occurred or is continuing) unless an Event of Default has occurred
and is continuing.  Notwithstanding the
foregoing, Borrower shall allow Bank to audit Borrower’s Collateral at
Borrower’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 audit
are not satisfactory to the Bank in its reasonable business discretion, the
Bank may, on notice to Borrower, at its reasonable business discretion, reduce
the amount of the Revolving Line, or not make any Credit Extensions hereunder,
except pursuant to terms satisfactory to Bank.


 


6.3                               Taxes.  Borrower shall make, and cause each
Subsidiary to make, timely payment of all material federal, state, and local
taxes or assessments (other than taxes and assessments which Borrower is
contesting in good faith, with adequate reserves maintained in accordance with
GAAP) and will deliver to Bank, on demand, appropriate certificates attesting
to such payments.


 


6.4                               Insurance.  Borrower shall keep its business and the
Collateral insured for risks and in amounts as are customary for Borrower’s
industry.  Insurance policies shall be
in a form, with companies, and in amounts that are satisfactory to Bank.  All property policies shall have a lender’s
loss payable endorsement showing Bank as an additional loss payee and all
policies 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 policies
and evidence of all premium payments. Proceeds received by the Bank under any
policy shall, at Bank’s option, be payable to Bank on account of the
Obligations. Notwithstanding the foregoing, so long as no Event of Default has
occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy toward the replacement or repair of destroyed
or damaged property (and Bank shall execute such documentation as may be
reasonably necessary to instruct the Borrower’s insurance company to release
such proceeds from the Bank’s lien); provided that (i) any such replaced or
repaired property (a) shall be of equal or like value as the replaced or
repaired Collateral and (b) shall be deemed Collateral in which Bank has been
granted a first priority security interest and (ii) after the occurrence and
during the continuation of an Event of Default all proceeds payable under such
casualty policy shall, at the option of the Bank, be payable to Bank on account
of the Obligations. If Borrower fails to obtain insurance as required under
Section 6.5 or to pay any amount or furnish any required proof of payment
to third persons and the Bank, Bank may make all or part of such payment or
obtain such insurance policies required in Section 6.5, and take any
action under the policies Bank deems prudent.


 


6.5                               Accounts.


 


(a)                                  In
order to permit the Bank to monitor the Borrower’s financial performance and
condition, Borrower shall maintain with Bank, or an affiliate: (i) Borrower’s
primary operating accounts, and (ii) all of Borrower’s depository and
securities accounts. Borrower’s cash or securities in excess of that amount
used for Borrower’s operations shall be maintained or administered through the
Bank, or an affiliate.


 


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


 


7

















 


sentence shall not apply
to deposit accounts exclusively used for payroll, payroll taxes and other
salary, compensation, wage and benefit payments to or for the benefit of the
Borrower’s employees and directors.  The
Borrower shall have thirty (30) calendar days from the Closing Date to transfer
the above-referenced accounts to Bank.


 


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) ($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 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.


 


6.7                               Further
Assurances.  Borrower shall
execute any further instruments and take further action as Bank reasonably
requests to perfect or continue Bank’s security interest in the Collateral or
to effect the purposes of this Agreement.


 


7                                         NEGATIVE COVENANTS


 


Borrower shall not do any
of the following without the Bank’s prior written consent which shall not be
unreasonably withheld or delayed.


 


7.1                               Dispositions.  Convey, sell, lease, transfer or otherwise
dispose of (collectively a “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property including, without
limitation, the Intellectual Property, except for Transfers (i) of Inventory in
the ordinary course of business; (ii) of non-exclusive licenses (or exclusive
licenses for a particular field of use or geographical area) and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary 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                               Changes
in Business, Ownership, or Business Locations.


 


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


 


(b)           Borrower shall not, without prior
written notice to Bank: (i) relocate its chief executive office, or add any new
offices or business locations, including warehouses (unless such new offices or
business locations contain less than Fifty Thousand Dollars ($50,000.00) in
Borrower’s assets or property), or (ii) change its jurisdiction of
organization, 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

















 


7.3                               Mergers
or Acquisitions.  Merge or
consolidate, or permit any of its Subsidiaries to merge or consolidate, with
any other Person, or acquire, or permit any of its Subsidiaries to acquire, all
or substantially all of the capital stock or property of another Person except
where (i) no Event of Default has occurred and is continuing or would exist
after giving effect to the transactions; and (ii) the Borrower (or the
Subsidiary if the Borrower is not a party to such transaction) is the surviving
legal entity; provided, however, that the total consideration paid, including
assumption of indebtedness, in connection with such merger or acquisition shall
not exceed $2,000,000.00. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.


 


7.4                               Indebtedness.  Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.


 


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


 


7.6                               Distributions;
Investments.  Other than
Permitted Investments, directly or indirectly acquire or own any Person, or
make any Investment in any Person, or permit any of its Subsidiaries to do so.


 


7.7                               Transactions
with Affiliates.  Directly or
indirectly enter into or permit to exist any material transaction with any
Affiliate of Borrower, except for transactions that are in the ordinary course
of Borrower’s business, upon fair and reasonable terms that are no less
favorable to Borrower than would be obtained in an arm’s length transaction
with a non-affiliated Person.


 


7.8                               Subordinated
Debt.  Make or permit any
payment on any Subordinated Debt, except under the terms of the Subordinated
Debt, or amend any material provision in any document relating to the
Subordinated Debt, without Bank’s prior written consent not to be unreasonably
withheld.


 


7.9                               Compliance.  Become an “investment company” or a company
controlled by an “investment company”, under the Investment Company Act of 1940
or undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower’s business or operations or would reasonably be
expected to cause a Material Adverse Change, or permit any of its Subsidiaries
to do so.


 


8                                         EVENTS
OF DEFAULT


 


Any one of the following
is an Event of Default:


 


8.1                               Payment
Default.  Borrower fails to pay
any of the Obligations within three (3) days after their due date. During such
three (3) day period the failure to cure the default shall not constitute an
Event of Default (but no Credit Extension shall be made during such period);


 


8.2                               Covenant
Default.  (i)  Borrower fails or neglects to perform any
obligation in Sections 6.2, 6.6, or 6.7, or violates any covenant in
Section 7;  or (ii)  Borrower fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant or agreement
contained in this Agreement, any Loan Documents, and as to any default under
such other material term, provision, condition, covenant or agreement that can
be cured, has failed to cure the default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely
to be cured within a reasonable time, then Borrower shall have an additional
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to cure the
default shall not be deemed an Event of Default (but no Credit Extensions shall
be made during such cure period).  Grace
periods provided under this section shall not apply, among other things,
to financial covenants or any other covenants that are required to be
satisfied, completed or tested by a date certain;


 


9

















 


8.3                               Material
Adverse Change.  A Material
Adverse Change occurs;


 


8.4                               Attachment.  (i) Any material portion of Borrower’s
assets is attached, seized, levied on, or comes into possession of a trustee or
receiver and the attachment, seizure or levy is not removed in ten (10)
Business Days; (ii) Borrower is enjoined, restrained, or prevented by court
order from conducting a material part of its business; (iii) a judgment or
other 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 assets
by any government agency and not paid within ten (10) Business Days after
Borrower receives notice.  These are not
Events 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 is
begun against Borrower and not dismissed or stayed within thirty (30) days (but
no Credit Extensions shall be made before any Insolvency Proceeding is
dismissed);


 


8.6                               Other
Agreements.  If there is a
default in any agreement to which Borrower is a party with a third party or
parties resulting in the acceleration of the maturity of any Indebtedness in an
amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) or that could
reasonably be expected to result in a Material Adverse Change;


 


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


 


8.8                               Misrepresentations.  If any warranty or representation in this
Agreement or in any writing delivered by or on behalf of Borrower to Bank shall
have been incorrect in any material respect when made; and


 


8.9                               Subordinated
Debt. A default or breach occurs under any agreement between Borrower
and any creditor of Borrower that signed a subordination agreement with Bank,
or any creditor that has signed a subordination agreement with Bank breaches
any terms of the subordination agreement and the Bank in its reasonable
judgment, determines that such breach can reasonably be expect to adversely
affect the Bank’s rights hereunder.


 


9                                         BANK’S
RIGHTS AND REMEDIES


 


9.1                               Rights
and Remedies.  When an Event of
Default occurs and continues Bank may, without notice or demand, do any or all
of the following:


 


(a)                                  Declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);


 


(b)                                 Stop
advancing money or extending credit for Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Bank;


 


(c)                                  Demand
that the Borrower (i) deposit cash with Bank in an amount equal to the
aggregate amount of any Letters of Credit remaining undrawn, as collateral
security 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 in
advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of any Letters of Credit;


 


(d)                                 Settle
or adjust disputes and claims directly with account debtors for amounts, on
terms and in any order that Bank considers advisable and notify any Person
owing Borrower money of Bank’s security interest in such funds and verify the
amount of such account;


 


(e)                                  Make
any payments and do any acts it considers necessary or reasonable to protect
its security interest in the Collateral. 
Borrower shall assemble the Collateral if Bank requests and make it
available as 


 


10

















 


Bank designates to the
extent not prohibited by applicable law. Borrower will not interfere with Bank
entering any premises where the Collateral is located to take and maintain
possession of any part of the Collateral. Bank may pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. To the extent it is not prohibited from
doing so, Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to lawfully exercise any of Bank’s rights or
remedies;


 


(f)                                    Apply
to 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, advertise
for sale, and sell the Collateral in any commercially reasonably means;


 


(h)                                 Place
a “hold” on any account maintained with Bank and/or deliver a notice of
exclusive control, any entitlement order, or other directions or instructions
pursuant to any control agreement or similar agreements providing control of
any Collateral; and


 


(i)                                     Exercise
all rights and remedies and dispose of the Collateral according to the Code.


 


9.2                               Power
of Attorney.  Borrower hereby
irrevocably appoints Bank as its lawful attorney-in-fact, to be effective upon
the 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 or
drafts against account debtors; (iii) settle and adjust disputes and claims
about the Accounts directly with account debtors, for amounts and on terms Bank
determines to be commercially reasonable; (iv) make, settle, and adjust all
claims under Borrower’s insurance policies; and (v) transfer the Collateral
into the name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful attorney-in-fact
to sign Borrower’s name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of Default
has occurred until all Obligations have been satisfied in full and Bank is
under no further obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an
interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions terminates.


 


9.3                               Accounts
Notification/Collection.  In the
event that either: (i) an Event of Default pursuant to Section 8.1 occurs
and is continuing, (ii) an Event of Default pursuant to Section 8.5 occurs
and is continuing, or (iii) the Bank accelerates any portion of the
Obligations, Bank may notify any Person owing Borrower money of Bank’s security
interest 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 to
Bank in the form received from the account debtor, with proper endorsements for
deposit.


 


9.4                               Bank
Expenses.  Any reasonable
amounts paid by Bank as provided herein shall constitute Bank Expenses and are
immediately due and payable upon presentation of an invoice to Borrower with
detail if obtainable, and shall bear interest at the then applicable rate and
be secured by the Collateral.  No
payments by Bank shall be deemed an agreement to make similar payments in the
future or Bank’s waiver of any Event of Default.


 


9.5                               Remedies
Cumulative.  Bank’s rights and
remedies under this Agreement, the Loan Documents, and all other agreements are
cumulative.  Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank’s exercise of one
right or remedy is not an election, and Bank’s waiver of any Event of Default
is not a continuing waiver. Bank’s delay is not a waiver, election, or
acquiescence. No waiver hereunder shall be effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it was
given.


 


9.6                               Demand
Waiver.  Except as otherwise
specifically provided herein, Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at maturity, release, compromise, settlement, extension, or renewal of
accounts, documents, instruments, chattel paper, and guarantees held by Bank on
which Borrower is liable.


 


11

















 


10                                  NOTICES


 


All notices or demands by
any party to this Agreement or any other related agreement must be in writing
and be personally delivered or sent by an overnight delivery service, by
certified mail, postage prepaid, return receipt requested, or by telefacsimile
at the addresses listed below.  Either
Bank or Borrower may change its notice address by giving the other party prior
written 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                                  CHOICE
OF LAW, VENUE AND JURY TRIAL WAIVER


 


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


 


BORROWER
AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER
INTO THIS AGREEMENT.  EACH PARTY HAS
REVIEWED THIS WAIVER WITH ITS COUNSEL.


 


12                                  GENERAL
PROVISIONS


 


12.1                        Successors
and Assigns.  This Agreement
binds and is for the benefit of the successors and permitted assigns of each
party.  Borrower may not assign this
Agreement or any rights or Obligations under it 


 


12

















 


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


 


12.2                        Indemnification.  Borrower hereby indemnifies, defends and
holds the Bank and its directors, officers, employees and agents harmless
against:  (a) all obligations, demands,
claims, and liabilities asserted by any other Person in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys’ fees
and expenses), except for losses caused by Bank’s gross negligence or willful
misconduct.


 


12.3                        Right
of Set-Off.   Borrower hereby
grants to Bank, a lien, security interest and right of setoff as security for
all Obligations to Bank, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under the
control of the Bank (including a Bank subsidiary) (to the extent not prohibited
by applicable law) or in transit to any of them.  At any time after the occurrence and during the continuance of an
Event of Default, without demand or notice, Bank may set off the same or any
part thereof and apply the same to any liability or obligation of Borrower when
due regardless of the adequacy of any other collateral securing the
Obligations.  ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.


 


12.4                        Time of
Essence.  Time is of the essence
for the performance of all Obligations in this Agreement.


 


12.5                        Severability
of Provision.  Each provision of
this Agreement is severable from every other provision in determining the
enforceability of any provision.


 


12.6                        Amendments
in Writing; Integration.  All
amendments to this Agreement must be in writing signed by both Bank and
Borrower.  This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.


 


12.7                        Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, are an original, and all taken together,
constitute one Agreement. Delivery of an executed signature page of this
Agreement by telecopy and delivery of executed copies of documents required by
Section 3.1 by telecopy shall be as effective as delivery of a manually executed
counterpart of each such document.


 


12.8                        Survival.  All covenants, representations and
warranties made in this Agreement continue in full force while any Obligations
remain outstanding.  The obligation of
Borrower in Section 12.2 to indemnify Bank shall survive until the statute
of limitations with respect to such claim or cause of action shall have run.


 


12.9                        Confidentiality.              In handling any confidential information, Bank will
exercise 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 or
Affiliates, to further the purposes of this Agreement or transactions
contemplated 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 or
purchaser’s agreement to the terms of this provision), (iii) as required by
law, regulation, subpoena, or other order, (iv) as required in connection with
Bank’s examination or audit and (v) as appropriate in exercising remedies under
this Agreement.  Confidential 


 


13

















 


information does not
include information that either: (a) is in the public domain or rightfully in
Bank’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 to
Bank by a third party, if Bank does not reasonably know that the third party is
prohibited from disclosing the information.


 


13                                  DEFINITIONS


 


13.1                        Definitions.  In this Agreement:


 


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


 


“Advance” or “Advances” is a loan advance (or advances) under the Revolving
Line.


 


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


 


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


 


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


 


“Borrowing Base” is 80% of Eligible
Accounts, as determined by Bank from Borrower’s most recent Borrowing Base
Certificate; provided, however, that Bank, in its reasonable business
discretion, may lower the percentage of the Borrowing Base after performing an
audit of Borrower’s Collateral upon five (5) Business Days notice to Borrower.


 


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


 


“Cash Management Services” is defined in
Section 2.1.4.


 


“Cash Management Services Sublimit” is
defined in Section 2.1.4.


 


“Change in Control” is a transaction in
which any “person” or “group” (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended) which did not
theretofore beneficially own at least 25% of the shares of all classes of stock
then outstanding of Borrower ordinarily entitled to vote in the election of
directors becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended), directly or indirectly, of
greater than 25% of the shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors.


 


“Closing Date” is the date of this
Agreement.


 


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


 


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


 


 “Contingent
Obligation” 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

















 


directly or
indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that 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 swap
agreement (valued at the net exposure), interest rate cap or collar agreement,
or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity
prices;  but “Contingent Obligation”
does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the
stated or determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may not
exceed the maximum of the obligations under any guarantee or other support
arrangement.


 


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


 


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


 


“Deferred Revenue” is all amounts invoiced
in 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 in
the ordinary course of Borrower’s business that meet all Borrower’s
representations and warranties in Section 5.2; but Bank, in its
reasonable business judgment, may change eligibility standards by giving
Borrower five (5) days prior notice. 
Unless Bank agrees otherwise in writing, Eligible Accounts shall not
include:


 


(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;


 


(e)                                  Accounts
for which the account debtor does not have a principal place of business in the
United States;


 


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


 


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


 


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


 


15

















 


(i)                                     Accounts
for which the account debtor is Borrower’s Affiliate, officer, employee, or
agent;


 


(j)                                     Accounts
in which the account debtor disputes liability or makes any claim and Bank
believes there may be a basis for dispute (but only up to the disputed or
claimed amount), or if the account debtor is subject to an Insolvency
Proceeding, or becomes insolvent, or goes out of business;


 


(k)                                  Accounts
for which Bank reasonably determines collection to be doubtful after inquiry
and consultation with Borrower.


 


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


 


“ERISA” is the Employment Retirement Income
Security 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 in
Section 2.1.3.


 


“GAAP” is generally accepted accounting
principles.


 


“Indebtedness” is (a) indebtedness for
borrowed money or the deferred price of property or services, such as
reimbursement 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 by
or against any Person under the United States Bankruptcy Code, or any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.


 


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


 


“Inventory” is present and future inventory
in which Borrower has any interest, including merchandise, raw materials,
parts, supplies, packing and shipping materials, work in process and finished
products intended for sale or lease or to be furnished under a contract of
service, of every kind and description now or later owned by or in the custody
or possession, actual or constructive, of Borrower, including inventory
temporarily out of its custody or possession or in transit and including
returns on any accounts or other proceeds (including insurance proceeds) from
the 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 any
loan, advance or capital contribution to any Person.


 


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


 


“Letter of Credit Reserve” has the meaning
set 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, this
Agreement, any note, or notes or guaranties executed by Borrower or Guarantor,
and any other present or future agreement between Borrower and/or for the
benefit of Bank in connection with this Agreement, all as amended, extended or
restated.


 


16

















 


“Material Adverse Change”  is: 
(i) a material adverse change in the results of operation or financial
condition of Borrower; (ii) a material impairment of the value or priority of
Bank’s security interest in the Collateral (except to the extent due to
negligence, by omission or commission, of Bank or its agents); or (iii) Bank
determines, based upon information available to it and in the exercise of
commercial reasonableness, that there is a substantial likelihood that Borrower
shall fail to comply with one or more of the financial covenants in
Section 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 exchange
contracts, if any, and including interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned to Bank.


 


“Permitted Indebtedness” is:


 


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


 


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


 


(c)                                  Subordinated
Debt;


 


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


 


(e)                                  Indebtedness
consisting of interest rate, currency, or commodity swap agreements, interest
rate cap or collar agreements or arrangements designated to protect a Person
against fluctuations in interest rates, currency exchange rates, or commodity
prices;


 


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


 


(g)                                 Indebtedness
with respect to documentary letters of credit;


 


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


 


(i)                                     Refinanced
Permitted Indebtedness, provided that the amount of such Indebtedness is not
increased;


 


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


 


“Permitted Investments” are:


 


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


 


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


 


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


 


17

















 


(d)                                 Investments
in any of its Subsidiaries;


 


(e)           Investments
consisting of deposit and investment accounts;


 


(f)            Investments
consisting 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 received
in satisfaction or partial satisfaction of obligations owed by financially
troubled obligors;


 


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


 


(i)                                     Investments
consisting of interest rate, currency, or commodity swap agreements, interest
rate cap or collar agreements or arrangements designated to protect a Person
against fluctuations in interest rates, currency exchange rates, or commodity
prices;


 


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


 


(k)                                  Receivables
owing to the Borrower or Subsidiary, if created in the ordinary course and
dischargable in accordance with customary trade terms.


 


“Permitted Liens” are:


 


(a)                                  Liens
existing on the Closing Date and shown on Schedule 7.5 hereto or arising
under this Agreement or other Loan Documents;


 


(b)                                 Liens
for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on its Books, if they have no priority over any of
Bank’s security interests;


 


(c)                                  Liens
(including with respect to capital leases) (i) on property (including
accessions, additions, parts, replacements, fixtures, improvements and
attachments thereto, and the proceeds thereof) acquired or held by Borrower or
its 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 such
property (including accessions, additions, parts, replacements, fixtures,
improvements and attachments thereto, and the proceeds thereof);


 


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


 


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


 


(f)            Leases or subleases
granted in the ordinary course of Borrower’s business, including in connection
with Borrower’s leased premises or leased property;


 


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


 


18

















 


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


 


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


 


(j)                                     Liens
consisting of pledges of cash, cash equivalents or government securities to
secure swap or foreign exchange contracts or letters of credit;


 


(k)                                  Liens
arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default;


 


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


 


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


 


(n)                                 Deposits
to secure the performance of bids, trade contracts (other than for borrowed
money), contracts for the purchase of property, leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case, incurred in the ordinary course of business and not
representing an obligation for borrowed money; and


 


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


 


“Person” is any individual, sole
proprietorship, partnership, limited liability company, joint venture, company,
trust, unincorporated organization, association, corporation, institution,
public benefit corporation, firm, joint stock company, estate, entity or
government agency.


 


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


 


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


 


“Responsible Officer” is each of the Chief
Executive Officer, President, Chief Financial Officer and Controller of
Borrower.


 


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


 


“Subordinated Debt” is debt incurred by
Borrower subordinated to Borrower’s debt to Bank (pursuant to a subordination
agreement entered into between the Bank, the Borrower and the subordinated
creditor), on terms acceptable to Bank in the exercise of commercial
reasonableness.


 


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


 


“Tangible Net Worth” is, on any date, the
consolidated total assets of Borrower and its Subsidiaries minus (i) any
amounts attributable to (a) goodwill, (b) intangible items including
unamortized debt discount and expense, patents, trade and service marks and
names, copyrights and research and development expenses except prepaid
expenses, 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’s
consolidated balance sheet, including all Indebtedness, and current portion of
Subordinated Debt permitted by Bank to be paid by Borrower, but excluding all
other Subordinated Debt.


 


“Unused Revolving Line Facility Fee” is
defined in Section 2.4(c).


 


[The
remainder of this page is intentionally left blank]


 


 


20

















 


The parties hereto have
caused this Agreement to be executed under the laws of the State of New York as
of 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 consists
of all right, title and interest of Borrower in and to the following (excluding
Excluded 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 (including
any promissory notes), chattel paper (whether tangible or electronic), deposit
accounts, fixtures, letters of credit rights (whether or not the letter of
credit is evidenced by a writing), commercial tort claims, securities, and all
other investment property supporting obligations, and financial assets, whether
now owned or hereafter acquired, wherever located; and


 


All Borrower’s Books
relating to the foregoing and any and all claims, rights and interests in any
of the above and all substitutions for, additions, attachments, accessories,
accessions and improvements to and replacements, products, proceeds and
insurance 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 each
work of authorship and derivative work, whether published or unpublished, now
owned or later acquired and whenever and wherever arising, including all
present and future common law and other rights in and to copyrights or
copyrightable material in any medium throughout the world; any patents,
trademarks, service marks, trade styles, trade names, all other source or
business identification and design and applications therefor; any trade secret
rights, including any rights to unpatented inventions, now owned or hereafter
acquired; all inventions, designs, registrations, proprietary rights, Computron
and AXS-One programs, source codes, object codes, data bases, and all other
like intangible personal property at any time used in connection with the
businesses of the Borrower (collectively, “Intellectual Property”); and


 


(b) Shares of stock in
any Subsidiary of Borrower.


 


Notwithstanding the
foregoing, the Collateral shall include all accounts, license and royalty fees
and other revenues, proceeds, or income arising out of or relating to any of
the 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:

  	
   

  
												



 


LOAN
ADVANCE:


 


Complete Outgoing
Wire Request section below if all or a portion of the funds
from 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:

  	
   

  
									



 


OUTGOING
WIRE REQUEST


Complete
only if all or a portion of funds from the loan
advance 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)

  	
   

  	
  $

  	
   

  
							



 


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.


 


	
   

  	
  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-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 30 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

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (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 in
2005 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 are
listed as Additional Insureds on the Company’s Master Special Multi-Peril
insurance policy (Hartford Policy No. 13UUN UJ5809):


 


1.               CIN Meadows, LLC


2.               Linque Management Co., Inc.


3.               Sun Microsystems


 


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


 


1.               Minolta Business System


 

















 


SCHEDULE 7.6


(Existing Indebtedness)


 


None.