Document:

Exhibit 10.4

AMENDMENT TO SERIES A 6% SECURED CONVERTIBLE PROMISSORY NOTE 

DUE MAY 29, 2009

This Amendment, dated November 16, 2007, (the “Amendment”) amends certain provisions of the Series A 6% Secured Convertible Promissory Note in the original principal amount of $_________, issued by AXS-One, Inc., a Delaware corporation (the “Company”) (No. PN-2007-A-__), due May 29, 2009 and dated as of May 29, 2007 (the “Note”), and is by and between the Company and ____________ (“Holder”). Terms not otherwise defined herein which are defined in the Note shall have the same respective meanings herein as therein.

WHEREAS, on the date hereof, the Company issued in favor of certain purchasers (the “Purchasers”) promissory notes, in the aggregate principal amount of ________ Dollars ($________)(collectively the “November 2007 Notes”), and such November 2007 Notes were issued pursuant to the terms of a Convertible Note and Warrant Purchase Agreement dated as of the date hereof, between the Company and such Purchasers; and         

WHEREAS, the Company and Holder have agreed to modify certain terms and conditions of the Note as specifically set forth in this Amendment.

NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendment to the Note. The following Section 6(e) is added to Section 6 of the Note immediately following Section 6(d) thereof: 

“(e) The occurrence of any Event of Default under the November 2007 Notes (as Event of Default is defined in such November 2007 Notes). “November 2007 Notes” shall mean those Series C 6% Secured Convertible Promissory Notes issued and sold by the Company pursuant to that certain Convertible Note and Warrant Purchase Agreement by and among the Company and those purchasers as listed therein, dated on or around November 12, 2007.”

2. Ratification, Etc. Except as expressly amended hereby, all terms and conditions of the Note, as amended, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The obligations under the Note shall be deemed to be continuously outstanding and shall not be deemed to have been repaid and readvanced or refinanced hereunder or hereby. The Note and this Amendment shall be read and construed as a single agreement. All references to the Note shall hereafter refer to such Note, as amended hereby.

3. No Novation. THE COMPANY AND HOLDER HAVE ENTERED INTO THIS AMENDMENT SOLELY TO AMEND CERTAIN OF THE TERMS OF 

 

 

THE NOTE. THEY DO NOT INTEND THIS NOTE NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS NOTE AND THE TRANSACTION CONTEMPLATED HEREBY SHALL NOT BE CONSTRUED TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING UNDER OR IN CONNECTION WITH THE NOTE.

4. No Waiver. Nothing contained herein shall constitute a waiver of, impair or otherwise affect, any obligation of the Company under any Note or any rights of any Holder consequent thereon.

5. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument.

6. Governing Law. This amendment shall be governed by, and construed in accordance with, the laws of the State of New York (without reference to conflict of laws).

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a document under seal as of the date first above written.

 

	
                         
 	
                         
 	
                        Company:
 
	
                         
 	
                         
 	
                        

AXS-ONE INC.
 
	
                          
 	
                         
 	
      By: 
 	
                        
 /s/ William P. Lyons
 
	
                         
 	
                         
 	
                        Name:
 	
                        William P. Lyons
 
	
                         
 	
                         
 	
                        Title:
 	
                        CEO
 

 

	
                         
 	
                         
 	
                        [HOLDER]
 
	
                          
 	
                         
 	
                        

      By: 
 	
                          
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 
	
                         
 	
                         
 	
                         
 	
                        Title:Exhibit 10.5

AMENDMENT TO SERIES B 6% SECURED CONVERTIBLE PROMISSORY NOTE 

DUE MAY 29, 2009

This Amendment, dated November 16, 2007, (the “Amendment”) amends certain provisions of the Series B 6% Secured Convertible Promissory Note in the original principal amount of $________, issued by AXS-One, Inc., a Delaware corporation (the “Company”) (No. PN-2007-B-__), due May 29, 2009 and dated as of May 29, 2007 (the “Note”), and is by and between the Company and ____________ (“Holder”). Terms not otherwise defined herein which are defined in the Note shall have the same respective meanings herein as therein.

WHEREAS, on the date hereof, the Company issued in favor of certain purchasers (the “Purchasers”) promissory notes, in the aggregate principal amount of ________ Dollars ($________)(collectively the “November 2007 Notes”), and such November 2007 Notes were issued pursuant to the terms of a Convertible Note and Warrant Purchase Agreement dated as of the date hereof, between the Company and such Purchasers; and 

WHEREAS, the Company and Holder have agreed to modify certain terms and conditions of the Note as specifically set forth in this Amendment.

 NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendment to the Note. The following Section 6(e) is added to Section 6 of the Note immediately following Section 6(d) thereof: 

“(e) The occurrence of any Event of Default under the November 2007 Notes (as Event of Default is defined in such November 2007 Notes). “November 2007 Notes” shall mean those Series C 6% Secured Convertible Promissory Notes issued and sold by the Company pursuant to that certain Convertible Note and Warrant Purchase Agreement by and among the Company and those purchasers as listed therein, dated on or around November 12, 2007.”

2. Ratification, Etc. Except as expressly amended hereby, all terms and conditions of the Note, as amended, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The obligations under the Note shall be deemed to be continuously outstanding and shall not be deemed to have been repaid and readvanced or refinanced hereunder or hereby. The Note and this Amendment shall be read and construed as a single agreement. All references to the Note shall hereafter refer to such Note, as amended hereby.

3. No Novation. THE COMPANY AND HOLDER HAVE ENTERED INTO THIS AMENDMENT SOLELY TO AMEND CERTAIN OF THE TERMS OF 

 

 

THE NOTE. THEY DO NOT INTEND THIS NOTE NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS NOTE AND THE TRANSACTION CONTEMPLATED HEREBY SHALL NOT BE CONSTRUED TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING UNDER OR IN CONNECTION WITH THE NOTE.

4. No Waiver. Nothing contained herein shall constitute a waiver of, impair or otherwise affect, any obligation of the Company under any Note or any rights of any Holder consequent thereon.

5. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument.

6. Governing Law. This amendment shall be governed by, and construed in accordance with, the laws of the State of New York (without reference to conflict of laws).

 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a document under seal as of the date first above written.

 

	
                         
 	
                         
 	
                         
 	
                        Company:
 
	
                         
 	
                         
 	
                         
 	
                        
 AXS-ONE INC.
 
	
       

       

      	
      By: 
 	
      
 /s/ William P. Lyons
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: 
 	
                        William P. Lyons
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: 
 	
  CEO
 

 

	
                         
 	
                         
 	
                        [HOLDER]
 
	
        
 	
       
 	
      

      By: 
 	
        
 
	
                         
 	
                         
 	
                         
 	
                        Name:
 
	
                         
 	
                         
 	
                         
 	
  Title:Exhibit 10.6

THIS NOTE AND THE RIGHTS PROVIDED HEREIN ARE SUBJECT IN ALL RESPECTS TO THE TERMS OF THE AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE AGENT OF THE PAYEE AND SILICON VALLEY BANK.

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 C 6% SECURED CONVERTIBLE PROMISSORY NOTE

 

	
                        U.S. $_______
 	
                         
 	
                        Rutherford, NJ
 
	
                        No.: PN-2007-C-_
 	
                         
 	
                        November 16, 2007
 

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 _______________ Dollars (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 C 6% Secured Convertible Promissory Notes of the Company, in aggregate principal amount of Three Million Seven Hundred and Fifth Thousand Dollars ($3,750,000) (collectively, the “Promissory Notes”) issued pursuant to the Convertible Note and Warrant Purchase Agreement of even date herewith (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 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”).

 

 

 

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 Silicon Valley Bank or any other senior lender to the Company, or (ii) the maximum rate permitted by law, in either case compounded quarterly.

(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.

 

 

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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 (the “Security Agreement”) between the Company and the holders of the Promissory Notes of even date herewith 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. 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.

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, any other Note or the May 2007 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 or in any May 2007 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

 

 

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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 fail to obtain from its stockholders all approvals necessary to increase the number of authorized shares of Common Stock of Company to 125,000,000 by November 29, 2007 (the “Common Stock Increase”), or 

(d) the Company shall fail to amend its certificate of incorporation to document the Common Stock Increase by December 3, 2007, or 

(e) 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

(f) 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 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(e) and (f), 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), (b), (c) and (d) the Payee may exercise or otherwise enforce any one or more of the Payee’s rights,

 

 

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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, subject to Section 8(g) hereof, at any time on or following December 4, 2007, 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.

(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 

 

 

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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 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

 

 

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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 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 

 

 

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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. Following the effectiveness of the Common Stock Increase, 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. Prior to the effectiveness of the Common Stock Increase, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock, solely for issuance upon the conversion of the Promissory Notes, the lesser of (i) all of its authorized but unissued Common Stock not otherwise reserved as of the Closing Date, or (ii) such number of shares of Common Stock as will be sufficient to permit the conversion
in full of all outstanding Promissory Notes and the exercise in full of all outstanding warrants issued pursuant to the Purchase Agreement (the “Warrants”). Unless a sufficient number of shares of Common Stock are reserved for issuance pursuant hereto as will be sufficient to permit the conversion in full of all outstanding Promissory Notes and the exercise in full of the Warrants, then the right to convert pursuant to Section 8 shall be limited by the number of shares of Common Stock reserved for issuance hereunder and shall be distributed pro-rata among the holders of the Promissory Notes and Warrants in proportion to the number of shares into which such holders’ Promissory Notes are convertible and Warrants are exercisable.

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.

 

 

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(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), 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 

 

 

9

 

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
 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.

 

 

10

 

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.

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 AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE AGENT OF THE PAYEE AND SILICON VALLEY BANK.

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: 
 	
                        William P. Lyons
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: 
 	
  CEO
 

 

 

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 C 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: 
 	
                         
 	
                         
 	
                         
 	
   
 

 

 

15

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