Document:

EX-10.3

Exhibit 10.3

THIS NOTE AND THE RIGHTS PROVIDED HEREIN ARE SUBJECT IN ALL RESPECTS TO THE TERMS OF THE SECOND
AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE AGENT OF THE PAYEE
AND SAND HILL FINANCE, LLC.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE COMPANY SHALL
HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

AXS-ONE INC.

SERIES E 6% SECURED CONVERTIBLE PROMISSORY NOTE

	 	 	 
	U.S. $______________

	 	Rutherford, NJ
	No.: PN-2008-E-____

	 	October 30, 2008

          FOR VALUE RECEIVED, the undersigned, AXS-ONE INC., a Delaware corporation (the
“Company”), hereby promises to pay to the order of __________________
or any future
holder of this promissory note (the “Payee”), at the principal office of the Payee set
forth herein, or at such other place as the holder may designate in writing to the Company, the
principal sum of [Amount] (U.S. $________), or such other amount as may be outstanding hereunder
(the “Principal Amount”), together with all accrued but unpaid interest, in such coin or
currency of the United States of America as at the time shall be legal tender for the payment of
public and private debts and in immediately available funds, as provided in this promissory note
(the “Note”).

     This Note is one of a duly authorized issue of Series E 6% Secured Convertible Promissory
Notes of the Company, in aggregate principal amount of One Million One Hundred Thousand Dollars
($1,100,000) (collectively, the “Promissory Notes”) issued pursuant to the Convertible Note
and Warrant Purchase Agreement dated as of October 30, 2008 (the “Purchase Agreement”;
capitalized terms used herein without definition shall have the meanings assigned in the Purchase
Agreement). The Promissory Notes rank pari passu in priority of payment and in all other respects
with one another, as well as with (i) all of the Series A 6% Secured Convertible Promissory Notes
and the Series B 6% Secured Convertible Promissory Notes sold and issued by the Company for the
aggregate amount of $5,000,000 on May 29, 2007, pursuant to a Convertible Note and Warrant Purchase
Agreement (the “May 2007 Notes”), (ii) all of the

 

 

Series C 6% Secured Convertible Promissory Notes sold and issued by the Company for the
aggregate amount of $3,750,000 on November 16, 2008, pursuant to a Convertible Note and Warrant
Purchase Agreement (the “November 2007 Notes”) and (iii) all of the Series D 6% Secured
Convertible Promissory Notes sold and issued by the Company for the aggregate amount of $2,100,000
on July 24, 2008, pursuant to a Convertible Note and Warrant Purchase Agreement (the “July 2008
Notes”).

     No payment, including any prepayment, shall be made hereunder unless payment, including any
prepayment, is offered with respect to the other Promissory Notes in an amount which bears the same
ratio to the then unpaid principal amount of such Promissory Notes as the payment made hereon bears
to the then unpaid principal amount under this Note.

          1. Principal and Interest Payments.

               (a) The Company shall repay in full the entire principal balance then outstanding under this
Note plus all accrued and unpaid interest on the first to occur (the “Maturity Date”) of:
(i) May 29, 2009; (ii) such time as there occurs a Sale Transaction (as defined below) or (iii) the
acceleration of the obligations as contemplated by this Note.

     “Sale Transaction” shall mean (i) the sale or other disposition of all or
substantially all of the Company’s assets, or (ii) the acquisition of the Company by another entity
by means of any transaction or series of related transactions to which the Company is party
(including, without limitation, any stock acquisition, reorganization, merger or consolidation but
excluding any sale of stock for capital raising purposes) other than a transaction or series of
transactions in which the holders of the voting securities of the Company outstanding immediately
prior to such transaction continue to retain (either by such voting securities remaining
outstanding or by such voting securities being converted into voting securities of the surviving
entity), as a result of shares in the Company held by such holders prior to such transaction, at
least fifty percent (50%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such transaction or series of
transactions.

               (b) Interest on the outstanding principal balance of this Note shall accrue at a rate of six
percent (6.00%) per annum, compounded quarterly. Interest on the outstanding principal balance of
this Note shall be computed on the basis of the actual number of days elapsed and a year of three
hundred sixty (360) days and shall be payable on the Maturity Date, upon earlier prepayment of this
Note or in the form of shares of common stock, par value $0.01 per share, of the Company (the
“Common Stock”) upon conversion of this Note as set forth in Section 8 below. Furthermore,
upon the occurrence and during the continuance of an Event of Default, then to the extent permitted
by law, the Company will pay interest to the Payee, payable on demand, on the outstanding principal
balance of this Note from the date of the Event of Default until cure thereof or payment in full,
at a per annum rate equal to the lower of (i) five percent (5%) above the rate charged or then
eligible to be charged by Sand Hill Finance, LLC or any other senior lender to the Company, or (ii)
the maximum rate permitted by law, in either case compounded quarterly.

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               (c) The Company may not prepay the outstanding principal amount of this Note or the interest
thereon prior to the Maturity Date (a “Prepayment”) without the written consent of the
Payee, unless the Company shall provide at least thirty (30) days prior written notice of the date
on which the Company intends to make such Prepayment (a “Prepayment Notice”). Any partial
Prepayment shall be applied first to accrued but unpaid interest and second to unpaid principal.
Nothing in this Section 1(c) shall limit the right of the Payee to convert this Note into Common
Stock at any time after receipt of the Prepayment Notice and prior to the time at which such
Prepayment is made.

          2. Non-Business Days. Whenever any payment to be made shall be due on a non-Business
Day, such payment may be due on the next succeeding Business Day and such next succeeding day shall
be included in the calculation of the amount of accrued interest payable on such date.

          3. Security. This Note is secured pursuant to the terms of a Security Agreement dated
as of May 29, 2007 between the Company and the other parties set forth therein as amended pursuant
to a Security Agreement Amendment dated as of November 16, 2007, a Second Security Agreement
Amendment dated as of July 24, 2008 and a Third Security Agreement Amendment dated as of October
30, 2008 between the Company and the holders of the Promissory Notes (such Security Agreement, as
amended, the “Security Agreement”) by a security interest in the Collateral (as such term
is defined in the Security Agreement), which security interest will rank pari passu with the
security interests granted in connection with the May 2007 Notes, the November 2007 Notes and the
July 2008 Notes. This Note is subject to the provisions of the Security Agreement.

          4. Subordination of Future Debt; Payment of Dividends. Except as provided in the
Transaction Documents, any debt incurred after the date hereof to any creditor shall be
subordinated to the indebtedness evidenced by this Note. The Company shall not declare or pay any
dividend or distribution with respect to any preferred stock or Common Stock of the Company other
than a pro rata dividend with respect to the Common Stock payable solely in shares of Common Stock.

          5. Representations and Warranties of the Company. The Company represents and warrants
to the Payee as follows:

               (a) The Company has been duly incorporated and is validly existing and in good standing under
the laws of the state of Delaware, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as currently conducted.

               (b) This Note has been duly authorized, validly executed and delivered on behalf of the
Company and is a valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to limitations on enforcement by general principles of equity
and by bankruptcy or other laws affecting the enforcement of creditors’ rights generally, and the
Company has full power and authority to execute and deliver this Note and to perform its
obligations hereunder.

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          6. Events of Default. The occurrence of any of the following events shall be an
“Event of Default” under this Note:

               (a) the Company shall fail to pay the principal or any accrued interest hereunder, or under
any other Note, the May 2007 Notes, the November 2007 Notes or the July 2008 Notes after the date
such payment shall become due and payable hereunder or thereunder; or

               (b) if default shall be made in the performance or observance of any representation, warranty,
covenant, or agreement contained in this Note, in the Security Agreement, in the Purchase
Agreement, in the Investor Rights Agreement, in any other Note, in any May 2007 Note, in any
November 2007 Note, in any July 2008 Note, or in any other agreement between the Company and the
Payee relating to indebtedness of the Company to the Payee or any of its affiliates for borrowed
money and such default shall have continued for a period of five (5) days after Company’s receipt
of written notice of such default (unless such default is on account of failure to give a required
notice, in which event such 5 day cure period shall commence with the date of such default); or

               (c) the Company shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or assets, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the United States Bankruptcy Code (the “Bankruptcy
Code”) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or
other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under the Bankruptcy Code or under
the comparable laws of any jurisdiction (foreign or domestic), or (vi) take any action under the
laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing; or

               (d) a proceeding or case shall be commenced in respect of the Company or any of its
subsidiaries without its application or consent, in any court of competent jurisdiction, seeking
(i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like of it or of all or any substantial part of its assets or (iii) similar relief in respect
of it under any law providing for the relief of debtors, and such proceeding or case described in
clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of
thirty (30) consecutive days or any order for relief shall be entered in an involuntary case under
the Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or domestic) against
the Company or any of its subsidiaries or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the Company or any of
its subsidiaries and shall continue undismissed, or unstayed and in effect for a period of ninety
(90) consecutive days.

          7. Remedies Upon an Event of Default. If an Event of Default shall have occurred and
shall be continuing, the Payee of this Note may at any time at its option, declare the

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entire unpaid principal balance of this Note, together with all interest accrued hereon, due
and payable, and thereupon, the same shall be accelerated and so due and payable; provided,
however, that upon the occurrence of an Event of Default described in (i) Sections 6(c) and
(d), without presentment, demand, protest, or notice, all of which are hereby expressly
unconditionally and irrevocably waived by the Company, the outstanding principal balance and
accrued interest hereunder shall be automatically due and payable, and (ii) Sections 6(a) and (b)
the Payee may exercise or otherwise enforce any one or more of the Payee’s rights, powers,
privileges, remedies and interests under this Note or applicable law. No course of delay on the
part of the Payee shall operate as a waiver thereof or otherwise prejudice the right of the Payee.
No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.

          8. Conversion.

          (a) General. The holder of this Note shall have the right at any time, at such
holder’s option, to convert all or any lesser portion of the Principal Amount plus accrued and
unpaid interest thereon into such number of fully paid and non-assessable shares of Common Stock as
is determined by dividing (i) the portion of the Principal Amount to be converted plus accrued and
unpaid interest thereon by (ii) the Conversion Rate (as defined below) then in effect for this
Note. The initial conversion rate shall be $1.00, such rate to be subject to adjustment in
accordance with the provisions of this Section 8. Such conversion rate in effect from time to time,
as adjusted pursuant to this Section 8, is referred to herein as a “Conversion Rate.” All
of the remaining provisions of this Section 8 shall apply separately to each Conversion Rate in
effect from time to time with respect to this Note.

          (b) Mechanics of Conversion.

          (i) Such right of conversion shall be exercised by the Payee by delivering to the Company a
conversion notice in the form attached hereto as Exhibit A (the “Conversion
Notice”), appropriately completed and duly signed, and by surrender not later than two (2)
Business Days thereafter of this Note. The Conversion Notice shall also contain a statement of the
name or names (with addresses and tax identification or social security numbers) in which the
certificate or certificates for Common Stock shall be issued, if other than the name in which this
Note is registered. Promptly after the receipt of the Conversion Notice, the Company shall issue
and deliver, or cause to be delivered, to the Payee or such Payee’s nominee, a certificate or
certificates for the number of shares of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected as of the close of business on the date of receipt
by the Company of the Conversion Notice (the “Conversion Date”), and the person or persons
entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all
purposes as the holder or holders of record of such shares of Common Stock as of the close of
business on the Conversion Date. If the Payee has not converted the entire amount of this Note
pursuant to the Conversion Notice, then the Company shall execute and deliver to the Payee a new
Note instrument identical in terms to this Note, but with a principal amount reflecting the
unconverted portion of this Note. The new Note instrument shall be delivered subject to the same
timing terms as the certificates for the Common Stock.

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          (ii) The Company shall effect such issuance of Common Stock within three (3) trading days
following the Conversion Date and shall transmit the certificates by messenger or reputable
overnight delivery service to reach the address designated by such holder within three (3) trading
days after the receipt by the Company of such Conversion Notice. Provided that the holder complies
with all of the provisions of this Note relating to the conversion hereof, if certificates
evidencing the Common Stock are not received by the holder (through no fault or negligence of the
holder) within five (5) Business Days following the Conversion Date, then the holder will be
entitled to revoke and withdraw its Conversion Notice, in whole or in part, at any time prior to
its receipt of those certificates.

          (d) Fractional Shares. The Company shall not be required to issue a fractional share
of Common Stock upon conversion of this Note. As to any fraction of a share which the holder of
this Note would otherwise be entitled to acquire upon such conversion, the Company shall pay an
amount in cash equal to the Current Market Price (as defined below) per share of Common Stock on
the date of conversion, multiplied by such fraction.

     “Current Market Price” means, in respect of any share of Common Stock on any date
herein specified:

     (1) if there shall not then be a public market for the Common Stock, the higher
of (a) the book value per share of Common Stock at such date, and (b) the fair
market value per share of Common Stock as determined in good faith by the Board, or

     (2) if there shall then be a public market for the Common Stock, the average of
the daily market prices for the 20 consecutive trading days immediately before such
date. The daily market price for each such trading day shall be (i) the closing bid
price on such day on the principal stock exchange (including Nasdaq) on which such
Common Stock is then listed or admitted to trading, or quoted, as applicable, (ii)
if no sale takes place on such day on any such exchange, the last reported closing
bid price on such day as officially quoted on any such exchange (including Nasdaq),
(iii) if the Common Stock is not then listed or admitted to trading on any stock
exchange, the last reported closing bid price on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers Automatic
Quotation System or the Pink Sheets LLC, (iv) if neither such corporation at the
time is engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the National Association of Securities Dealers, Inc. (the
“NASD”) selected mutually by holders of a majority in interest of the
Promissory Notes and the Company or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall be selected by holders
of a majority in interest of the Promissory Notes and one of which shall be selected
by the Company (as applicable, the “Daily Market Price”).

          (e) Stock Dividends, Subdivisions and Combinations. If at any time while

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this Note is outstanding, the Company shall:

          (i) cause the holders of its Common Stock to be entitled to receive a dividend payable
in, or other distribution of, additional shares of Common Stock,

          (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of
Common Stock, or

          (iii) combine its outstanding shares of Common Stock into a smaller number of shares of
Common Stock,

then in each such case the Conversion Rate shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this
Section 8(e) shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to
clauses (ii) or (iii) of this Section 8(e) shall become effective immediately after the effective
date of such subdivision or combination. If any event requiring an adjustment under this paragraph
occurs during the period that a Conversion Rate is calculated hereunder, then the calculation of
such Conversion Rate shall be adjusted appropriately to reflect such event.

          (f) Certain Other Distributions. If at any time while this Note is outstanding the
Company shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:

          (i) cash,

          (ii) any evidences of its indebtedness, any shares of stock of any class or any other
securities or property or assets of any nature whatsoever (other than cash or additional
shares of Common Stock as provided in Section 8(e) hereof), or

          (iii) any warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property or assets
of any nature whatsoever (in each case set forth in subparagraphs 8(f)(i), 8(f)(ii) and
8(f)(iii) hereof, the “Distributed Property”),

then upon any conversion of this Note that occurs after such record date, the holder of this Note
shall be entitled to receive, in addition to the Conversion Shares, the Distributed Property that
such holder would have been entitled to receive in respect of such number of Conversion Shares had
the holder been the record holder of such Conversion Shares as of such record date. Such
distribution shall be made whenever any such conversion is made. In the event that the Distributed
Property consists of property other than cash, then the fair value of such Distributed Property
shall be as determined in good faith by the Board and set forth in reasonable detail in a written
valuation report (the “Valuation Report”) prepared by the Board. The Company shall

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give written notice of such determination and a copy of the Valuation Report to the holder of this
Note, and if the holder objects to such determination within twenty (20) Business Days following
the date such notice is given, the Company shall submit such valuation to an investment banking
firm of recognized national standing selected by the holder of this Note and acceptable to the
Company in its reasonable discretion, whose opinion shall be binding upon the Company and the
holder of this Note. A reclassification of the Common Stock (other than a change in par value, or
from par value to no par value or from no par value to par value) into shares of Common Stock and
shares of any other class of stock shall be deemed a distribution by the Company to the holders of
its Common Stock of such shares of such other class of stock within the meaning of this Section
8(f) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of Common Stock within
the meaning of Section 8(e).

          (g) Common Stock Reserved. The Company shall at all times reserve and keep available
for issuance upon the conversion of the Promissory Notes, such number of its authorized but
unissued shares of Common Stock as shall from time to time be issuable upon the conversion of all
Promissory Notes at the time outstanding.

          9. Other Provisions Applicable to Adjustments. The following provisions shall be
applicable to the making of adjustments of the number of shares of Common Stock into which this
Note is convertible and the current Conversion Rate provided for in Section 8:

          (a) When Adjustments to Be Made. The adjustments required by Section 8 shall be made
whenever and as often as any specified event requiring an adjustment shall occur, except that any
adjustment to the Conversion Rate that would otherwise be required may be postponed (except in the
case of a subdivision or combination of shares of the Common Stock, as provided for in Section
8(e)) up to, but not beyond the Conversion Date if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock into
which this Note is convertible immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as aforesaid) which is postponed
shall be carried forward and made as soon as such adjustment, together with other adjustments
required by Section 8 and not previously made, would result in a minimum adjustment or on the
Conversion Date. For the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.

          (b) Fractional Interests. In computing adjustments under Section 8, fractional
interests in Common Stock shall be taken into account to the nearest 1/100th of a share.

          (c) When Adjustment Not Required. If the Company undertakes a transaction contemplated
under Section 8(f) and as a result takes a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or distribution or subscription or purchase rights
or other benefits contemplated under Section 8(f) and shall, thereafter and before the distribution
to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights or other benefits contemplated under Section 8(f),

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then thereafter no adjustment shall be required by reason of the taking of such record and any
such adjustment previously made in respect thereof shall be rescinded and annulled.

          (d) Escrow of Stock. If after any property becomes distributable pursuant to Section 8
by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence
of the event for which such record is taken, a holder of this Note converts this Note during such
period, the holder of this Note shall continue to be entitled to receive any shares of Common Stock
issuable upon conversion under Section 8 by reason of such adjustment (as if this Note were not yet
converted) and such shares or other property shall be held in escrow for the holder of this Note by
the Company to be issued to holder of this Note upon and to the extent that the event actually
takes place. Notwithstanding any other provision to the contrary herein, if the event for which
such record was taken fails to occur or is rescinded, then such escrowed shares shall be canceled
by the Company and escrowed property returned to the Company.

          10. Replacement. Upon receipt of a duly executed, notarized and unsecured written
statement from the Payee with respect to the loss, theft or destruction of this Note (or any
replacement hereof), and, if requested by the Company, an indemnity bond customary in the industry,
or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the
Company shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed
or mutilated Note.

          11. Parties in Interest, Transferability. This Note shall be binding upon the Company
and its successors and permitted assigns and the terms hereof shall inure to the benefit of the
Payee and its successors and assigns. This Note may be transferred or sold, subject to the
provisions of Section 19 of this Note, or pledged, hypothecated or otherwise granted as security by
the Payee.

          12. Amendments. This Note may not be modified or amended in any manner except in
writing executed by the Company and the Payee.

          13. Notices. Any notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery
by telecopy or facsimile at the address or number designated below (if delivered on a Business Day
during normal business hours where such notice is to be received), or the first Business Day
following such delivery (if delivered other than on a Business Day during normal business hours
where such notice is to be received) or (b) on the second Business Day following the date of
mailing by express courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The Company will give written notice to the
Payee at least twenty (20) days prior to the date on which dissolution, liquidation or winding-up
will take place and in no event shall such notice be provided to the Payee prior to such
information being made known to the public. Notices to the Payee shall be made to the address set
forth in the Purchase Agreement. Notices to the Company shall be made to the following:

	 	 	 
	Address of the Company:

	 	AXS-One Inc.
	 

	 	301 Route 17 North

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	 	Rutherford, New Jersey 07070
	 

	 	Attention: Chief Financial Officer
	 

	 	Facsimile No.: (201) 935-5230
	 
	 	 
	with a copy to:

	 	Wiggin and Dana LLP
	 

	 	400 Atlantic Street
	 

	 	Stamford, Connecticut 06901
	 

	 	Attention: Michael Grundei
	 

	 	Facsimile No.: (203) 363-7676

          14. Governing Law. This Note shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to the choice of law provisions.
This Note shall not be interpreted or construed with any presumption against the party causing this
Note to be drafted.

          15. Headings. Article and section headings in this Note are included herein for
purposes of convenience of reference only and shall not constitute a part of this Note for any
other purpose.

          16. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.
The remedies provided in this Note shall be cumulative and in addition to all other remedies
available under this Note, at law or in equity (including, without limitation, a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein shall limit a Payee’s
right to pursue actual damages for any failure by the Company to comply with the terms of this
Note. Amounts set forth or provided for herein with respect to payments and the like (and the
computation thereof) shall be the amounts to be received by the Payee and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable and material harm to the Payee and that the remedy at law for any such breach may be
inadequate. Therefore the Company agrees that, in the event of any such breach or threatened
breach, the Payee shall be entitled, in addition to all other available rights and remedies, at law
or in equity, to such equitable relief, including but not limited to an injunction restraining any
such breach or threatened breach, without the necessity of showing economic loss and without any
bond or other security being required.

          17. Failure or Indulgence Not Waiver. No failure or delay on the part of the Payee in
the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.

          18. Enforcement Expenses. The Company agrees to pay all costs and expenses of
enforcement of this Note, including, without limitation, reasonable attorneys’ fees and expenses.

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          19. Compliance with Securities Laws. The Payee of this Note acknowledges that this
Note is being acquired solely for the Payee’s own account and not as a nominee for any other party,
and for investment, and that the Payee shall not offer, sell or otherwise dispose of this Note
other than in compliance with the laws of the United States of America and as guided by the rules
of the Securities and Exchange Commission. This Note and any Note issued in substitution or
replacement therefore shall be stamped or imprinted with legends, as applicable, in substantially
the following form:

“THIS NOTE AND THE RIGHTS PROVIDED HEREIN ARE SUBJECT IN ALL
RESPECTS TO THE TERMS OF THE SECOND AMENDED AND RESTATED
SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE AGENT OF
THE PAYEE AND SAND HILL FINANCE, LLC.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.”

          20. Severability. The provisions of this Note are severable, and if any provision
shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall not in any manner affect such provision in any other
jurisdiction or any other provision of this Note in any jurisdiction.

          21. Consent to Jurisdiction. Each of the Company and the Payee (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the Southern District of
New York and the courts of the State of New York located in New York county for the purposes of any
suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the
Company and the Payee consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address set forth in Section 13 hereof and agrees that
such service shall constitute good and sufficient service of process and notice thereof. Nothing
in this Section 21 shall affect or limit any right to serve process in any other manner permitted
by law.

11

 

          22. Company Waivers.

               (a) Except as otherwise specifically provided herein, the Company and all others that may
become liable for all or any part of the obligations evidenced by this Note, hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and notices in connection
with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to
any number of renewals of extensions of the time or payment hereof and agree that any such renewals
or extensions may be made without notice to any such persons and without affecting their liability
herein and do further consent to the release of any person liable hereon, all without affecting the
liability of the other persons, firms or Company liable for the payment of this Note, AND DO HEREBY
WAIVE TRIAL BY JURY.

               (b) No delay or omission on the part of the Payee in exercising its rights under this Note, or
course of conduct relating hereto, shall operate as a waiver of such rights or any other right of
the Payee, nor shall any waiver by the Payee of any such right or rights on any one occasion be
deemed a waiver of the same right or rights on any future occasion.

               (c) THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND
HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE PAYEE OR ITS SUCCESSORS OR ASSIGNS MAY
DESIRE TO USE.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

12

 

          IN WITNESS WHEREOF, the Company has executed and delivered this Promissory Note as of the date
first written above.

	 	 	 	 	 
	 	AXS-ONE INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

13

 

EXHIBIT A

FORM OF CONVERSION NOTICE

(To be executed by the registered holder in order to convert the Note)

The undersigned hereby irrevocably elects to convert the Series E 6% Secured Convertible Promissory
Note (the “Note”) of AXS-One Inc., a Delaware corporation (the “Company”), due May
29, 2009 held by the undersigned into shares of Common Stock, according to the terms and conditions
of the Note and the conditions hereof, as of the date written below. The undersigned hereby
requests that certificates for the shares of Common Stock to be issued to the undersigned pursuant
to this Conversion Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. If the shares of Common Stock are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. A copy of the Note being converted is attached hereto (and the original Note shall be
transmitted to the Company pursuant to the terms thereof). All capitalized terms used in this
Conversion Notice, but not otherwise defined herein shall have the meanings assigned in the Note.

 

Date of Conversion (Date of Notice)

 

Principal Amount of Note to be Converted

 

Principal Amount of Note not to be Converted (Principal Amount Remaining after Conversion)

 

Amount of accumulated and unpaid interest on principal amount of Note to be Converted

 

Number of shares of Common Stock to be Issued (including conversion of accrued but unpaid interest on Notes to be Converted)

 

Applicable Conversion Value

	 	 	 
	Conversion Information: [NAME OF HOLDER]
	 
	 	 
	 
	 
	 
	 
	Address of Holder:
	 	 
	 
	 
	 
	 
	 
	 
	Issue Common Stock to (if different than above):

 

 

Name: ______________________________

Address: ___________________________

_____________________________

Tax ID #: ______________________

	 	 	 	 	 
	 	 	 
	Name of Holder
 	 	 
	 	 	 
	 	 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

15EX-10.4

Exhibit 10.4

			
	 	 	 
	Void after October 30, 2015
	 	Warrant No. 2008-E-_____

THIS SECURITY AND ANY SHARES ISSUED UPON THE EXERCISE OR CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS
OR BLUE SKY LAWS.

AXS-ONE INC.

COMMON STOCK PURCHASE WARRANT

     AXS-One Inc. (the “Company”), having its principal office as of the date hereof at 301
Route 17 North, Rutherford, New Jersey 07070, hereby certifies that, for value received,
______________________________________ or registered assigns (the “Holder”), is entitled, subject to the
terms and conditions set forth below, to purchase from the Company at any time on or from time to
time on or after the date hereof, and before 5:00 P.M., New York City time, on October 30, 2015
(the “Expiration Date”), [Number of Shares]1 (__________) fully paid and
non-assessable shares of Common Stock (as defined below), at the initial Purchase Price per share
(as defined below) of $0.01. The number of such shares of Common Stock and the Purchase Price per
share are subject to adjustment as provided in Section 5.

     The Company agreed to issue warrants, including this Warrant, to purchase an aggregate of
3,600,000 shares of Common Stock (subject to adjustment as provided in Section 5) in connection
with the issuance by the Company to the holders of an aggregate original principal amount of
$1,100,000 of Series E 6% Secured Convertible Promissory Notes, due May 29, 2009 (the
“Promissory Notes”).

     As used herein the following terms, unless the context otherwise requires, have the following
respective meanings:

 

			
	1	 	Purchasers shall receive a warrant to purchase 3 shares
of Common Stock for each $1 principal amount of Notes Purchased.

 

 

          “Aggregate Purchase Price” has the meaning set forth in Section 3.1.

          “Blue Sky Laws” means any state securities or “blue sky” laws.

          “Board of Directors” means the board of directors of the Company.

          “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in New Jersey are authorized or required by law to remain closed.

          “Company” includes the Company and any corporation which shall succeed to or assume
the obligations of the Company hereunder. The term “corporation” shall include an association,
joint stock company, business trust, limited liability company or other similar organization.

          “Common Stock” means the Company’s Common Stock, $.01 par value per share, authorized
as of the date hereof, and any stock of any class or classes (however designated) hereafter
authorized upon reclassification thereof, which, if the Board of Directors declares any dividends
or distributions, has the right to participate in the distribution of earnings and assets of the
Company after the payment of dividends or other distributions on any shares of capital stock of the
Company entitled to a preference and in the voting for the election of directors of the Company.

          “Convertible Securities” means (i) options to purchase or rights to subscribe for
Common Stock, (ii) securities by their terms convertible into or exchangeable for Common Stock or
(iii) options to purchase or rights to subscribe for such convertible or exchangeable securities.

          “Exchange Act” means the Securities Exchange Act of 1934 as the same shall be in
effect at the time.

          “Holder” means any record owner of Warrants or Underlying Securities.

          “Investor Rights Agreement” has the meaning set forth in Section 1.

          “Market Price” means with respect to any securities at any date (i) if the principal
trading market for such securities is an exchange, the average of the closing sale prices per share
for the last ten previous trading days in which a sale was reported, as officially reported on any
consolidated tape, (ii) if the principal market for such securities is the over-the-counter market,
the average of the closing sale prices per share on the last ten previous trading days in which a
sale was reported as set forth by the over the counter bulletin board or, (iii) if the security is
not listed on another exchange or the over the counter bulletin board, the average of the closing
sale prices per share on the last ten previous trading days in which a sale was reported as set
forth in the National Quotation Bureau sheet listing such securities for such days.
Notwithstanding the foregoing, if there is no reported closing sale price, as the case may be,
reported on any of the ten trading days preceding the event requiring a determination of Market
Price hereunder, then the Market Price shall be the average of the high bid and asked prices for
the last ten previous trading days in which a sale was reported; and if there is no reported high
bid and asked prices,

2

 

as the case may be, reported on any of the ten trading days preceding the event requiring a
determination of Market Price hereunder, then the Market Price shall be determined in good faith by
resolution of the Board of Directors.

          “Nasdaq” means the Nasdaq Capital Market or Nasdaq Global Market.

          “Notice” has the meaning set forth in Section 20.

          “Original Issue Date” means October 30, 2008.

          “Other Securities” refers to any stock (other than Common Stock) and other securities
of the Company or any other Person (corporate or otherwise) which the Holders of the Warrants at
any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 5 or 6.

          “Person” means any individual, sole proprietorship, partnership, corporation, limited
liability company, business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity, any university or similar institution, or any government or any
agency or instrumentality or political subdivision thereof.

          “Purchase Agreement” means the Convertible Note and Warrant Purchase Agreement dated
as of October 30, 2008, among the Company and the Purchasers.

          “Purchase Price per share” means $0.01 per share, as may be adjusted from time to time
in accordance with Section 5 or 6.

          “Purchaser” has the meaning set forth in the Purchase Agreement.

          “registered” and “registration” refer to a registration effected by filing a
registration statement in compliance with the Securities Act, to permit the disposition of
Underlying Securities issued or issuable upon the exercise of Warrants, and any post-effective
amendments and supplements filed or required to be filed to permit any such disposition.

          “Securities Act” means the Securities Act of 1933 as the same shall be in effect at
the time.

          “Underlying Securities” means any Common Stock or Other Securities issued or issuable
upon exercise of Warrants.

          “Warrant” means, as applicable, (i) the Warrants dated as of the date hereof,
originally issued by the Company pursuant to the Purchase Agreement, of which this Warrant is one,
evidencing rights to purchase up to an aggregate of 3,600,000 shares of Common Stock, and all
Warrants issued upon transfer, division or combination of, or in substitution for, any thereof (all
Warrants shall at all times be identical as to terms and conditions and date, except as to the

3

 

number of shares of Common Stock for which they may be exercised) or (ii) each right as set
forth in this Warrant to purchase one share of Common Stock, as adjusted from time to time in
accordance with Section 5 or 6.

          1. Registration. The Holder shall have the rights to registration of Underlying
Securities issuable upon exercise of the Warrants that are set forth in the Investor Rights
Agreement, dated the Original Issue Date, among the Company and each of the Purchasers (the
“Investor Rights Agreement”).

          2. Sale Without Registration. If, at the time of any transfer or surrender for
exchange of a Warrant or of Underlying Securities previously issued upon the exercise of Warrants,
such Warrant or Underlying Securities shall not be registered under the Securities Act, the Company
may require, as a condition of allowing such transfer or exchange, that the Holder or transferee of
such Warrant or Underlying Securities, as the case may be, furnish to the Company an opinion of
counsel, reasonably satisfactory to the Company, to the effect that such transfer or exchange may
be made without registration under the Securities Act and without registration or qualification
under any applicable Blue Sky Laws, provided that nothing contained in this Section 2 shall relieve
(a) the Company from complying with the Investor Rights Agreement or (b) the Holder from its
obligations under the Purchase Agreement.

          3. Exercise of Warrant.

          3.1. Exercise in Full. Subject to the provisions hereof, at any time on or
following the date hereof, this Warrant may be exercised in full by the Holder hereof by
surrender of this Warrant, with the form of subscription at the end hereof duly executed by
such Holder, to the Company at its principal office set forth at the head of this Warrant
(or such other location as the Company from time to time may advise the Holder in writing),
accompanied by payment, in cash or by certified or official bank check payable to the order
of the Company, in the amount obtained (the “Aggregate Purchase Price”) by
multiplying (a) the number of shares of Common Stock then issuable upon exercise of this
Warrant by (b) the Purchase Price per share on the date of such exercise.

          3.2. Partial Exercise. Subject to the provisions hereof, at any time on or
following the date hereof, this Warrant may be exercised in part by surrender of this
Warrant in the manner and at the place provided in Section 3.1 except that the amount
payable by the Holder upon any partial exercise shall be the amount obtained by multiplying
(a) the number of shares of Common Stock designated by the Holder in the subscription at the
end hereof by (b) the Purchase Price per share on the date of such exercise. Upon any such
partial exercise, the Company at its expense shall forthwith issue and deliver to or upon
the order of the Holder hereof a new Warrant or Warrants of like tenor, in the name of the
Holder hereof or as such Holder (upon payment by such Holder of any applicable transfer
taxes and subject to the provisions of Section 2) may request, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock equal to the number of
such shares issuable prior to such partial exercise of this Warrant minus the number of such
shares designated by the Holder in the subscription at the end hereof.

4

 

          3.3. Company to Reaffirm Obligations. The Company shall, at the time of any
exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing its
continuing obligation to afford to such Holder any rights (including, without limitation,
any right to registration of the Underlying Securities, if any) to which such Holder shall
continue to be entitled after such exercise in accordance with the provisions of this
Warrant; provided, however, that if the Holder of this Warrant shall fail to make
any such request, such failure shall not affect the continuing obligation of the Company to
afford such Holder any such rights.

          3.4. Certain Exercises. If an exercise of this Warrant is to be made in
connection with a registered public offering or sale of the Company, such exercise may, at
the election of the Holder, be conditioned on the consummation of the public offering or
sale of the Company, in which case such exercise shall not be deemed effective until the
consummation of such transaction.

          3.5. Conversion Right. At any time following the first anniversary of the date
of original issuance of this Warrant that a registration statement as contemplated by the
Investor Rights Agreement is not effective with respect to the resale of the Common Stock
issuable upon exercise of this Warrant, then in lieu of exercising this Warrant at such time
as specified in Section 3.1 and Section 3.2, the Holder may convert this Warrant, in whole
or in part, into the number of shares of Common Stock determined by dividing (a) the
aggregate fair market value of the Common Stock or the Other Securities issuable upon
exercise of this Warrant minus the Aggregate Purchase Price of such shares by (b) the
current Market Price. Such conversion shall be effected by surrender of this Warrant, with
the form of subscription at the end hereof duly executed by such Holder, to the Company at
its principal office set forth at the head of this Warrant (or such other location as the
Company from time to time may advise the Holder in writing).

          4. Delivery of Stock Certificates on Exercise. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within three Business Days
thereafter, the Company at its own expense (including the payment by it of any applicable issue
taxes) shall cause to be issued in the name of and delivered to the Holder hereof, or as such
Holder (upon payment by such Holder of any applicable transfer taxes and subject to the provisions
of Section 2) may direct, a certificate or certificates for the number of fully paid and
non-assessable shares of Common Stock or Other Securities to which such Holder shall be entitled
upon such exercise, plus, in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current Market Price of one full
share.

          5. Adjustment for Dividends.

               (a) In case at any time or from time to time after the Original Issue Date, the Company shall
at any time declare or pay a dividend upon its Common Stock payable in shares of Common Stock, the
number of shares of Common Stock acquirable upon exercise

5

 

hereof shall be increased by the number of shares that would have been issued pursuant to such
dividend with respect to the shares acquirable hereunder as of the record date for such dividend.

               (b) If the number of shares of Common Stock outstanding at any time after the Original Issue
Date is decreased by a combination or reverse stock split of the outstanding shares of Common
Stock, the Purchase Price per share shall be increased in proportion to such decrease. If the
number of shares of Common Stock outstanding at any time after the Original Issue Date is increased
by a forward stock split of the outstanding shares of Common Stock or otherwise, the number of
shares of Common Stock acquirable upon exercise hereof shall be increased by the number of shares
that would have been issued had this Warrant been fully exercised as of the date of such forward
stock split or other transaction resulting in an increase in the outstanding shares of Common
Stock.

               (c) Upon each adjustment to the Purchase Price per share, the Holder of this Warrant shall
thereafter be entitled to purchase, at the Purchase Price per share resulting from such adjustment,
the number of shares of Common Stock obtained by multiplying the Purchase Price per share in effect
immediately prior to such adjustment by the number of shares of Common Stock purchasable pursuant
hereto immediately prior to such adjustment, and dividing the product thereof by the Purchase Price
per share resulting from such adjustment.

          6. Reorganization, Consolidation, Merger. In case the Company after the Original
Issue Date shall (a) effect a reorganization, (b) consolidate with or merge into any other Person,
or (c) transfer all or substantially all of its properties or assets to any other Person under any
plan or arrangement contemplating the dissolution of the Company, then, in each such case, the
Holder of this Warrant, upon the exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall be entitled to receive (and the Company or its successors or
assigns shall be entitled to deliver), in lieu of the Underlying Securities issuable upon such
exercise prior to such consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon such consummation or
in connection with such dissolution, as the case may be, if such Holder had so exercised this
Warrant immediately prior thereto. Upon receipt of such stock and other securities and property
(including cash), if any, the rights of the Holder under this Warrant shall terminate and cease and
this Warrant shall expire and be of no force and effect. In any such case, the Company (or its
successors or assigns) shall be entitled to make appropriate adjustments in the application of the
provisions of this Warrant with respect to the rights and interests of the Holder after such
reorganization, merger, consolidation or dissolution. The Company shall not effect any such
reorganization, consolidation, merger or dissolution, unless prior to or simultaneously with the
consummation thereof, the successor corporation resulting from such consolidation or merger or the
corporation purchasing such assets shall confirm or assume, by written instrument, the obligation
to deliver to each Holder the shares of stock, cash, other securities or assets to which, in
accordance with the foregoing provisions, each Holder may be entitled to and all other obligations
of the Company under this Warrant.

          7. Further Assurances; Reports. The Company shall take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue fully

6

 

paid and non-assessable shares of Underlying Securities upon the exercise of all Warrants from time
to time outstanding. For so long as the Holder holds this Warrant, the Company shall deliver to
the Holder contemporaneously with delivery to the holders of Common Stock, a copy of each report of
the Company delivered to such holders.

          8. Certificate as to Adjustments. In each case of any adjustment or readjustment in
the Underlying Securities, the Company shall, at its expense, promptly cause its Chief Financial
Officer to compute such adjustment or readjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based, and the number of shares of Common Stock or
Other Securities outstanding or deemed to be outstanding. The Company shall forthwith mail a copy
of each such certificate to the Holder.

          9. Notices of Record Date. In the event of:

     (a) any taking by the Company of a record of its stockholders for the purpose of
determining the stockholders thereof who are entitled to receive any dividend or other
distribution (other than a quarterly dividend payable solely in cash), or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, or for the purpose of
determining stockholders who are entitled to vote in connection with any proposed
capital reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any transfer of all or substantially all the assets of
the Company to or consolidation or merger of the Company with or into any other
Person, or

     (b) any voluntary or involuntary dissolution, liquidation or winding-up of the
Company,

then and in each such event the Company shall mail or cause to be mailed to each Holder of a
Warrant a notice specifying (i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of such dividend,
distribution or right and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any, as of which the Holders of record of Underlying Securities shall
be entitled to exchange their shares of Underlying Securities for securities or other property
deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up. Such notice shall be mailed at least 20 days prior
to the date therein specified.

          10. Reservation of Stock Issuable on Exercise of Warrants. The Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock (or Other Securities) as will be sufficient to
permit the exercise in full of all outstanding Warrants.

          11. Listing on Securities Exchanges; Registration; Issuance of Certain Securities. In
furtherance and not in limitation of any other provision of this Warrant, if the

7

 

Company at any time shall list any Common Stock (or Other Securities) on any national securities
exchange or Nasdaq, the Company shall, at its expense, simultaneously list the Underlying
Securities from time to time issuable upon the exercise of the Warrants on such exchange or Nasdaq,
upon official notice of issuance.

          12. Exchange of Warrants. Subject to the provisions of Section 2, upon surrender for
exchange of this Warrant, properly endorsed, to the Company, as soon as practicable (and in any
event within three Business Days) the Company at its own expense shall issue and deliver to or upon
the order of the Holder thereof a new Warrant or Warrants of like tenor, in the name of such Holder
or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face of this Warrant so surrendered.

          13. Replacement of Warrants. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction, upon delivery of an indemnity agreement or other collateral reasonably
satisfactory in form and amount to the Company and its transfer agent or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant, the Company at its expense shall
execute and deliver, in lieu thereof, a new Warrant of like tenor.

          14. Warrant Agent. The Company may, by written notice to each Holder of a Warrant,
appoint an agent having an office in New York, New York, for the purpose of issuing Common Stock
(or Other Securities) upon the exercise of the Warrants pursuant to Section 3, exchanging Warrants
pursuant to Section 12, and replacing Warrants pursuant to Section 13, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.

          15. Remedies; Enforcement Expenses. The Company stipulates that the remedies at law
of the Holder of this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant may not be adequate, and
that such terms may be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction that may be sought against a violation of any of the
terms hereof or otherwise. The Company agrees to pay all costs and expenses of enforcement of this
Warrant in the event of any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant, including, without limitation, reasonable
attorneys’ fees and expenses.

          16. No Rights as Stockholder. This Warrant does not entitle the Holder hereof to any
voting rights or other rights as a stockholder of the Company prior to the exercise hereof.

          17. Negotiability. Subject to Section 2, this Warrant is issued upon the following
terms, to all of which each Holder or owner hereof by the taking hereof consents and agrees that:

8

 

     (a) subject to the provisions of this Warrant and the Purchase Agreement, title
to this Warrant may be transferred by endorsement (by the Holder hereof executing
the form of assignment at the end hereof); and

     (b) until this Warrant is transferred on the books of the Company, the Company
may treat the registered Holder hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.

          18. Governing Law; Jurisdiction. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles of conflicts of law.
Each of the Holder and the Company hereby irrevocably consents and submits to the jurisdiction of
any New York State or United States Federal Court sitting in the State of New York, County of New
York, over any action or proceeding arising out of or relating to this Warrant and irrevocably
consents to the service of any and all process in any such action or proceeding in the manner for
the giving of notices at its address specified in Section 20. Each of the Holder and the Company
further waives any objection to venue in the State of New York, County of New York and any
objection to an action or proceeding in such state and county on the basis of forum non conveniens.
Each of the Holder and the Company also waives any right to trial by jury.

          19. Headings. The headings of the sections of this Warrant are for convenience and
shall not by themselves determine the interpretation of this Warrant.

          20. Notices. Any notice or other communication required or permitted to be given
hereunder (each a “Notice”) shall be given in writing and shall be made by personal
delivery or sent by courier or certified or registered first-class mail (postage pre-paid),
addressed to a party at its address shown below or at such other address as such party may
designate by three days’ advance Notice to the other party.

          Any Notice to the Holder shall be sent to the address for such Holder set forth on books and
records of the Company.

          Any Notice to the Company shall be sent to:

AXS-One Inc.

301 Route 17 North

Rutherford, New Jersey 07070

Attention: Chief Financial Officer

          Each Notice shall be deemed given and effective upon receipt (or refusal of receipt).

          21. Severability. Whenever possible, each provision of this Warrant shall be
interpreted in such a manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be deemed prohibited or invalid under such applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, and such
prohibition

9

 

or invalidity shall not invalidate the remainder of such provision or any other provision of
this Warrant.

          22. Amendments and Waivers. Any provision of this Warrant may be amended and the
observance of any provision of this Warrant may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the Holder of the Warrant.

          23. Construction. Words (including capitalized terms defined herein) in the singular
shall be held to include the plural and vice versa as the context requires. The words
“herein”, “hereinafter”, “hereunder” and words of similar import used in
this Warrant shall, unless otherwise stated, refer to this Warrant as a whole and not to any
particular provision of this Warrant. All references to “$” in this Warrant and the other
agreements contemplated hereby shall refer to United States dollars (unless otherwise specified
expressly). Any reference to any gender includes the other genders.

[signature page follows]

10

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized
officer as of October 30, 2008.

	 	 	 	 	 
	 	AXS-ONE INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

Attest: ___________________________

11

 

FORM OF SUBSCRIPTION

(To be signed only upon exercise of Warrant)

To: AXS-ONE INC.

     The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise the
purchase right represented by such Warrant for, and to purchase thereunder,      * shares of
Common Stock of AXS-One Inc., and herewith makes payment of $__________
and requests that the certificates for such shares be issued in the name of, and delivered to,
______________, whose address is _________________________.

          The undersigned, the Holder of the within Warrant, hereby irrevocably elects to convert the
attached Warrant into shares in the manner specified in such Warrant. This conversion is exercised
with respect to _________ of the shares covered by such Warrant.

[Strike paragraph above that does not apply.]

     The undersigned represents that the undersigned is acquiring such securities for its own
account for investment and not with a view to or for sale in connection with any distribution
thereof (except for any resale pursuant to, and in accordance with a valid registration statement
effective under the Securities Act of 1933).

Dated:

	 	 	 	 	 
	 	
 	 
	 	(Signature must conform in all respects to the name of the Holder as specified on the face of the Warrant) 	 
	 	 	 
	 	 	 
	 	
 	 
	 	(Address) 	 
	 	 	 
	 

 

			
	*	 	Insert here the number of shares called for on the face of the Warrant (or, in the case of a
partial exercise, the portion thereof as to which the Warrant is being exercised).

12

 

FORM OF ASSIGNMENT

(To be signed by the Holder only upon transfer of Warrant)

     For value received, the undersigned hereby sells, assigns and transfers unto
________________________ the right represented by the within Warrant to purchase ___________ shares
of Common Stock of AXS-One Inc. to which the within Warrant relates, and hereby does irrevocably
constitute and appoint _________________________________ Attorney to transfer such right on the books of AXS-One
Inc. with full power of substitution in the premises. The Warrant being transferred hereby is one
of the Warrants issued by AXS-One Inc. as of _________, 2008 to purchase an aggregate of
3,600,000 shares of Common Stock.

Dated: _______________

	 	 	 	 	 
	 	
 	 
	 	(Signature must conform in all respects to name of 	 
	 	Holder as specified on the face of the Warrant) 	 
	 	 	 
	 	
 	 
	 	(Address) 	 
	 	 	 

	 	 	 	 	 
	 	 	 
	
 	 	 
	Signature guaranteed by a bank or trust company having its
principal office in New York City
or by a Member Firm of the New
York Stock Exchange
or American Stock Exchange 	 	 

13

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