FORBEARANCE AGREEMENT

FORBEARANCE AGREEMENT

This Forbearance Agreement (this “Agreement”) is entered into as of May 15, 2007, by and between SILICON VALLEY BANK, a California-chartered bank, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 535 Fifth Avenue, 27th Floor, New York, New York 10017 (“Bank”) and AXS-ONE INC., a Delaware corporation with its chief executive office located at 301 Route 17 North, Rutherford, New Jersey 07070 (“Borrower”).

1.

DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of September 13, 2005, evidenced by, among other documents, a certain Amended and Restated Loan and Security Agreement dated as of September 13, 2005, between Borrower and Bank, as amended by a certain First Loan Modification Agreement dated as of March 14, 2006, between Borrower and Bank, as further amended by a certain Second Loan Modification Agreement dated as of October 31, 2006, between Borrower and Bank, as further amended by a certain Third Loan Modification Agreement dated as of November 11, 2006, between Borrower and Bank, and as further amended by a certain Fourth Loan Modification Agreement dated as of March 6, 2007, between Borrower and Bank (as amended, the “Loan Agreement”).  Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.

2.

DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement and the Intellectual Property Collateral as described in a certain Intellectual Property Security Agreement dated as of October 31, 2006 (the “IP Security Agreement”) (together with any other collateral security granted to Bank, the  “Security Documents”).  Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.

3.

ACKNOWLEDGMENT OF DEFAULT; FORBEARANCE BY BANK.  Borrower acknowledges that it is currently in default under the Loan Agreement by virtue of its failure to comply with the financial covenant set forth in subsection (a) of Section 5 of the Schedule to the Loan Agreement (relative to Borrower’s Tangible Net Worth) as of the months ended February 28, 2007 and March 31, 2007 (the “Existing Defaults”).  In addition, Borrower acknowledges that Borrower will be unable to comply with the financial covenant set forth in subsection (a) of Section 5 of the Schedule to the Loan Agreement (relative to Borrower’s Tangible Net Worth) thereof as of the month ending April 30, 2007 (the “Future Default”) (the Existing Defaults and the Future Default are collectively referred to as the “Defaults”).  Bank, however, hereby agrees to forbear from exercising its rights and remedies with respect to the Defaults until the earlier to occur of (i) an Event of Default under the Loan Agreement (other than the Defaults) or (ii) June 15, 2007.  Borrower hereby acknowledges and agrees that except as specifically provided herein, nothing in this section or anywhere in this Agreement shall be deemed or otherwise construed as a waiver by the Bank of the Defaults or of any of its rights and remedies pursuant to the Existing Loan Documents, applicable law or otherwise.

4.

FEES.  Borrower shall pay to Bank a forbearance fee equal to Seven Thousand Five Hundred Dollars ($7,500.00) which fee shall be due on the date hereof and shall be deemed fully earned as of the date hereof.  Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with this Agreement.

5.

RATIFICATION OF IP SECURITY AGREEMENT.  Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and conditions of the IP Security Agreement and acknowledges, confirms and agrees that the IP Security Agreement contains an accurate and complete listing of all Intellectual Property Collateral as defined therein.