EXHIBIT 10.37
 
 
SENIOR SUBORDINATED SECURED BRIDGE NOTE PURCHASE AGREEMENT
 
This Senior Subordinated Secured Bridge Note Purchase Agreement, dated as of
September 1, 2005 (the “Agreement”), by and among Axeda Systems Inc., a Delaware
corporation (the “Company”), Axeda Systems Operating Company, Inc., a
Massachusetts corporation and an indirect wholly owned subsidiary of the Company
(“ASOC”), and Axeda IP, Inc., a Nevada corporation and an indirect wholly owned
subsidiary of the Company (“AIP” and, together with ASOC, the “Guarantors”), and
the persons listed on Schedule 1 hereto (the “Purchasers”):
 
WITNESSETH:

WHEREAS, pursuant to the terms of the Senior Secured Bridge Note Purchase
Agreement, dated as of July 8, 2005 and as amended from time to time, among the
Company, the Guarantors and the Purchasers (the “Senior Bridge Agreement”), the
Purchasers made senior secured loans to, and received promissory notes
representing an aggregate principal amount of $600,000 (the “Senior Bridge
Notes”) from, the Company (the “Senior Bridge Debt”);
 
WHEREAS, the Company, ASOC and AIP (“Sellers”) and ASOC Acquisition Corp., an
affiliate of the Purchasers (“Buyer”), entered into the Asset Purchase Agreement
dated as of the date hereof (as it may be amended from time to time, the “Asset
Purchase Agreement”), pursuant to which the Buyer has agreed to purchase
substantially all of the assets of Sellers’ device relationship management
software and applications business subject to the terms and conditions set forth
in the Asset Purchase Agreement; and
 
WHEREAS, in connection with the execution of the Asset Purchase Agreement, the
Purchasers have agreed to make senior subordinated secured loans of up to an
aggregate principal amount of $900,000 to the Company and the Guarantors, upon
the terms and subject to the conditions set forth herein;
 
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby agree as follows:
 
1.    The Notes and the Guaranty.
 
(a)    The Company has authorized the issuance and sale, in accordance with the
terms hereof, of the Company’s 7% Senior Subordinated Secured Bridge Notes in
the original aggregate principal amount of up to $900,000 (each individually, a
“Note” and collectively, the “Notes”). Each Note will be substantially in the
form set forth in Exhibit A hereto.
 
(b)    The Company’s obligations under the Notes shall be guarantied by the
Guarantors. The Guarantors shall execute and deliver to the Purchasers the
Amended and Restated Subsidiary Guaranty (the “Guaranty”) in substantially the
form set forth in Exhibit B hereto.
 
 
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2.    Purchase and Sale of Notes. At the Closing (as defined below), the Company
shall issue and sell to the Purchasers, and, subject to and in reliance upon the
representations, warranties, terms and conditions contained herein, each
Purchaser, severally and not jointly, shall purchase from the Company, a Note in
up to the aggregate principal amount set forth opposite such Purchaser’s name on
Schedule 1 hereto under the heading “Maximum Principal Amount.” Subject to the
terms and conditions hereof, the Maximum Principal Amount for each Purchaser
shall be payable in separate installments by each Purchaser in the amounts set
forth opposite such Purchaser’s name on Schedule 1 hereto under the headings
“First Installment Amount” and “Subsequent Installment Amount,” respectively
(collectively for each Purchaser, the “Installment Amounts”). The Installment
Amounts shall be payable in accordance with the terms of Sections 3 and 4
hereof.
 
3.    Closing.
 
(a)    The consummation of the purchase and sale of the Notes (the “Closing”)
shall be held at 10:00 a.m. on September 1, 2005 (the “Closing Date”), or such
other date and time as shall be mutually agreed upon. At the Closing, (i) the
Company shall issue the Notes, dated as of the Closing Date, payable to the
order of each Purchaser in the aggregate principal amount set forth opposite
such Purchaser’s name on Schedule 1 hereto under the heading “Maximum Principal
Amount,” and (ii) the Guarantors shall execute and deliver to the Purchasers the
Guaranty. Promptly following the Closing (but in any event within five (5) days
following the Closing), in exchange for the issuance of the Notes and the
Guaranty, each Purchaser shall deliver to the Company, by way of wire transfer
of immediately available United States funds, the amount set forth opposite such
Purchaser’s name on Schedule 1 hereto under the heading “First Installment
Amount” (the “First Installment”).
 
(b)    The obligations of the Purchasers to purchase the Notes and pay the First
Installment Amount at the Closing are subject to the following conditions:
 
(i)    The representations and warranties of the Company set forth in this
Agreement, the Security Agreement (defined below) and in the Asset Purchase
Agreement shall be true and correct on and as of the date hereof and on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, and the President of the
Company shall have certified to the Purchasers in writing to such effect;
 
(ii)  The Company shall have performed and complied with all agreements
contained in this Agreement and the other Bridge Loan Documents (defined below)
required to be performed or complied with by it prior to or at the date of such
Closing, and the President of the Company shall have certified to the Purchasers
in writing to such effect;
 
(iii)  The Company and the Guarantors shall have duly executed and delivered to
the Purchasers an Amended and Restated Security Agreement substantially in the
form attached as Exhibit C (the “Security Agreement”);
 
 
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(iv)  The Guarantors shall have duly executed and delivered to the Purchasers
the Guaranty;
 
(v)  The Purchasers shall have received evidence in form and substance
reasonably satisfactory to them that all filings, recordings and registrations,
including, without limitation, the filing of duly executed financing statements
on form UCC-1 and the requisite filings with the U.S. Patent & Trademark Office,
necessary or desirable to perfect the liens created by the Security Agreement
shall have been completed;
 
(vi)  The Company shall have obtained and delivered to the Purchasers, in form
satisfactory to the Purchasers, all necessary consents of governmental agencies
and third parties (including Laurus Master Fund, Ltd. (“Laurus”)) to permit the
Company to enter into and perform its obligations under this Agreement, the
other Bridge Loan Documents and the Asset Purchase Agreement;
 
(vii)  All corporate and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in form and substance to the Purchasers, and the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as they reasonably may request;
 
(viii)  The Company and Laurus shall have duly executed and delivered to the
Purchasers an Amended and Restated Subordination Agreement substantially in the
form attached as Exhibit D (the “Subordination Agreement”); and
 
(ix)  The Company and the Guarantors shall have (A) duly executed and delivered
to the Buyer the Asset Purchase Agreement and (B) delivered to the Buyer the
Voting Agreements (as defined in the Asset Purchase Agreement) (the Asset
Purchase Agreement and the Voting Agreement collectively, the “Acquisition
Documents”) duly executed and delivered by the parties thereto other than the
Buyer.
 
For purposes of this Agreement, “Bridge Loan Documents” shall mean this
Agreement, the Notes, the Senior Bridge Agreement, the Senior Bridge Notes, the
Security Agreement, the Guaranty, the Subordination Agreement and that certain
Grant of Security Interest in Patents and Trademarks, dated as of July 8, 2005
(the “P&T Security Agreement”), in each case as may be amended from time to
time.
 
4.    Subsequent Installments.
 
(a)    Each of the Purchasers shall, subject to the terms and conditions hereof,
make one or more additional advances to the Company in the aggregate amount up
to (and not to exceed) the amount set forth opposite such Purchaser’s name on
Schedule 1 hereto under the heading “Subsequent Installment Amount,” in one or
more fundings from time to time from the Closing Date through the business day
immediately preceding the Maturity Date (as defined below) (each such advance, a
“Subsequent Installment” and, collectively, the “Subsequent Installments”).
 
 
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(b)    If the Company desires the Purchasers to make a Subsequent Installment,
it shall deliver a written request to the Purchasers, which request shall
specify the amount of such Subsequent Installment (which shall be in minimum
increments of no less than $100,000), the intended use of such Subsequent
Installment funds and shall certify that the none of the events specified in
clauses (i) through (iv) in Section 4(c) below shall have occurred (the “Funding
Request Notice”); provided, however, that in no event shall the Company make a
request for a Subsequent Installment sooner than fifteen (15) days following the
funding of the most recent First Installment or any Subsequent Installment, as
the case may be.
 
(c)    No Purchaser shall be obligated to fund any Subsequent Installment if any
of the following shall have occurred: (i) any representation or warranty by the
Company contained in the Bridge Loan Documents or in the Acquisition Documents
shall be untrue or incorrect in any way on the date of such Subsequent
Installment; (ii) the Company has not performed or has otherwise breached the
covenants set forth in the Acquisition Documents required to be performed on or
before the date of such Subsequent Installment; (iii) any breach or default
(including an Event of Default (defined below)) shall have occurred and be
continuing under this Agreement or any of the Bridge Loan Documents, or (iv) the
Company shall have received any proposal or expression of interest relating to
an Acquisition Proposal (as defined in the Asset Purchase Agreement) which
Acquisition Proposal has not been rejected by the Company within five (5)
business days of receipt (or prior to delivery of the Funding Request Notice (if
earlier)).
 
(d)    Subject to the satisfaction of the conditions contained in this Section
4, the funding of any Subsequent Installment shall occur within five business
days after the receipt of the applicable Funding Request Notice by delivery by
Purchasers to the Company via wire transfer of immediately available United
States funds, the amount listed in the Funding Request Notice delivered to such
Purchaser. All Installment Amounts and all payments of principal and interest
under each Note (or any portion, installment or drawdown thereon) shall be
recorded by the applicable Purchaser and endorsed on the grid which is part of
such Purchaser’s Note. The entries on the grid which is part of such Note shall
be prima facie evidence of amounts outstanding thereunder. The failure to make
any such endorsement or any error in any such endorsement shall not affect the
obligations of the Company or the Guarantors in respect of the First Installment
or any Subsequent Installment. In no event shall the aggregate amount of all
Subsequent Installments advanced by any Purchaser exceed the amount set forth
opposite such Purchaser’s name on Schedule 1 hereto under the heading
“Subsequent Installment Amount.” On or before the date of any Subsequent
Installment, the Company shall deliver to the Purchasers such documents as may
be requested by them.
 
5.    Terms of the Notes.
 
(a)    Maturity. The aggregate principal amount of the Notes, together with all
accrued interest thereon, shall be due and payable in full (without notice,
demand or presentment) on the earliest to occur of the following (the earliest
of such events, the “Maturity Date”): (i) the date on which the Asset Purchase
Agreement shall have been terminated (the payment in full of the Notes shall be
a condition precedent to such termination of the Asset Purchase Agreement); (ii)
the date on which the Company or any of its subsidiaries or affiliates enters
into a letter of intent, written understanding or definitive agreement relating
to an Acquisition Proposal or the Company otherwise takes any action adverse to
the transactions contemplated under the Asset Purchase Agreement; (iii) the date
on which the Asset Sale (as defined in the Asset Purchase Agreement) is
consummated; (iv) the occurrence of an Event of Default (as defined below) and
(v) December 15, 2005.
 
 
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(b)    Interest. The aggregate principal amount of the Notes, from time to time
outstanding, shall bear interest at a rate per annum equal to seven percent
(7%). All accrued interest on the Notes shall be due and payable on the Maturity
Date. All interest shall be computed for the actual number of days elapsed on
the basis of a 360-day year and shall compound annually. From and after the
occurrence of an Event of Default, the unpaid principal balance of the Notes
and, to the extent permitted by law, the overdue interest thereon, shall bear
interest at a rate per annum equal to ten percent (10%).
 
(c)    Payment; Usury.
 
(i)    All payments by the Company under this Agreement shall be made in United
States dollars without set-off or counterclaim and be free and clear and without
any deduction or withholding for any taxes or fees of any nature whatever,
unless the obligation to make such deduction or withholding is imposed by law.
The Company, to the extent permitted by applicable law, waives presentment for
payment, protest and demand, and notice of protest, demand and/or dishonor and
nonpayment of the Notes, notice of any Event of Default, and all other notices
or demands otherwise required by law that the Company may lawfully waive. If any
day on which a payment is due pursuant to the terms of this Note is not a day on
which banks in the Commonwealth of Massachusetts are generally open (a “Business
Day”), such payment shall be due on the next Business Day following, and such
extension of time shall in such case be included in the computation of payment
of interest due.
 
(ii)  For so long as any of the Notes remain outstanding, the Company covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Agreement; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Purchasers, but will suffer and permit the
execution of every such power as though no such law has been enacted.
 
(iii)  Notwithstanding anything herein or in the Notes which may be to the
contrary, in no event, contingency, or circumstances whatsoever shall the
interest or any amount deemed to be interest payable by the Company hereunder
with respect to the Notes exceed the maximum amount permitted by applicable law
and, to the extent that any payments in excess of such permitted amount are
finally determined to have been received by the Purchasers, such excess shall be
considered payments in respect of the principal of the Notes and, if the
principal of the Notes has been paid in full, shall be refunded to the Company.
 
 
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(d)    Security. The Notes shall be secured by and entitled to the benefits of
the Security Agreement and the P&T Security Agreement.
 
6.    Use of Proceeds. The Company shall use, and shall cause it subsidiaries
(including the Guarantors) to use, the proceeds from the sale of the Notes first
to pay the accounts payable, operating expenses and other liabilities directly
attributable to the operation of the Business (as defined in the Asset Purchase
Agreement) and thereafter to pay such other expenses and liabilities of the
Company and the Guarantors incurred or as may be incurred in the ordinary course
of business; provided, that the Company and the Guarantors shall, and shall
cause their respective subsidiaries to, use a portion of the proceeds to retain
the services of employees and consultants involved in the Business to assure
that the Business has sufficient personnel to continue operating in the ordinary
course consistent with historical practice. If requested, the Company shall
promptly provide the Purchasers with an accounting detailing the use of proceeds
from the Senior Bridge Notes and the Notes.
 
7.    Priority. The Notes shall be subordinate only to the Senior Bridge Debt
and shall be pari passu with the Laurus Debt (defined below) pursuant to the
Subordination Agreement. The Notes are senior in all other respects (including
the right of payment) to all other indebtedness of the Company and the
Guarantors, now existing or hereafter incurred. All other indebtedness for
borrowed money of the Company or the Guarantors, now existing or hereafter
incurred, shall be unsecured (other than the Senior Bridge Debt and the Laurus
Debt) and shall be subordinated to the Notes.
 
8.    No Prepayment. The Notes may not be prepaid by the Company.
 
9.    Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers that as of the Closing Date and the
date of each Subsequent Installment (a “Subsequent Installment Date”):
 
(a)    The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. Each of the Company and the Guarantors is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification.
 
(b)    The Bridge Loan Documents have been duly authorized, executed and
delivered by each of the Company and the Guarantors (to the extent a party
thereto) and constitute the legal, valid and binding obligations of the Company
and the Guarantors (to the extent a party thereto), enforceable in accordance
with their respective terms.
 
 
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(c)    Neither the execution and delivery of the Bridge Loan Documents nor the
performance thereof has constituted or resulted in, nor will constitute or
result in, a default or violation in any respect of any law or regulation
applicable to the Company or the Guarantors or any term or provision of the
organizational documents (including charter and by-laws) of the Company or the
Guarantors, or any agreement or instrument by which either the Company or the
Guarantors is bound or to which their properties or assets are subject.
 
(d)    No authorization, consent, approval, license, exemption of, or filing or
registration with, any court or governmental department, commission, board,
bureau, agency or instrumentality, is or will be necessary for, or in connection
with, the offer, issuance, sale, execution or delivery by the Company or the
Guarantors of, or for the performance by the Company and the Guarantors of their
obligations under, the Bridge Loan Documents.
 
(e)    There is no litigation or governmental proceeding or investigation
pending or, to the knowledge of the Company, threatened against the Company or
the Guarantors or affecting any of their properties or assets, nor has there
occurred any event or does there exist any condition on the basis of which any
litigation, proceeding or investigation might properly be instituted, that would
prevent, restrict or impair the transactions contemplated by the Bridge Loan
Documents or the performance by the Company and the Guarantors of their
obligations under the Bridge Loan Documents.
 
(f)    No person has or will have, as a result of the transactions contemplated
by this Bridge Loan Documents, any right, interest or valid claim against or
upon the Company for any commission, fee or other compensation as a finder or
broker because of any act or omission by the Company or any agent of the
Company.
 
(g)    Other than indebtedness for borrowed money of the Company payable to
Laurus pursuant to that certain Securities Purchase Agreement, dated as of
October 4, 2004, between the Company and Laurus (the “Laurus Debt”) and the
Senior Bridge Debt, there is no other indebtedness for borrowed money of the
Company or the Guarantors.
 
10.    Covenants of the Company. Each of the Company and the Guarantors hereby
covenants and agrees that, as long as any of the Notes are outstanding, it will
not, and will cause each of its direct and indirect subsidiaries (if any) not
to:
 
(a)  (i) Incur any additional indebtedness or (ii) repay any outstanding
indebtedness for borrowed money other than cash payments on the Senior Bridge
Debt, pro rata payment on the Laurus Debt in accordance with Section 5 of the
Subordination Agreement or payments on the Laurus Debt in the form of equity
permitted under Section 3 of the Subordination Agreement;
 
(b)    Create, incur, assume or suffer to exist, or permit any subsidiary to
create, incur, assume or suffer to exist, any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance (including the lien or
retained security title of a conditional vendor) of any nature, upon or with
respect to any of its properties, now owned or hereinafter acquired, or assign
or otherwise convey any right to receive income, except that the foregoing
restrictions shall not apply to liens, security interests or other charges or
encumbrances (i) granted to the Purchasers pursuant to the Notes, (ii) granted
in connection with the incurrence of the Senior Bridge Debt or the Laurus Debt,
(iii) for taxes, assessments or governmental charges or levies on property of
the Company or any subsidiary if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings or (iv) imposed by law, such as carriers’,
warehousemen’s and mechanics’ liens and other similar liens arising in the
ordinary course of business;
 
 
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(c)    Merge or consolidate with, or sell, assign, lease or otherwise dispose of
or voluntarily part with the control of (whether in one transaction or in a
series of transactions) any portion of its assets associated with the Business
(whether now owned or hereinafter acquired) or sell, assign or otherwise dispose
of (whether in one transaction or in a series of transactions) any of its
accounts receivable associated with the Business (whether now in existence or
hereinafter created), to, any person, or permit any subsidiary to do any of the
foregoing (other than pursuant to the Asset Purchase Agreement);
 
(d)    Declare or pay any dividends, purchase, redeem, retire, or otherwise
acquire for value any of its capital stock (or rights, options or warrants to
purchase such shares) now or hereafter outstanding, return any capital to its
stockholders as such, or make any distribution of assets to its stockholders as
such, or permit any subsidiary to do any of the foregoing;
 
(e)    Enter into any transaction with any holder of 5% or more of any class of
capital stock of the Company, or any member of their families or any corporation
or other entity in which any one or more of such stockholders or members of
their immediate families directly or indirectly holds five percent (5%) or more
of any class of capital stock except in the ordinary course of business and on
terms not less favorable to the Company or the subsidiary than it would obtain
in a transaction between unrelated parties; or
 
(f)    Amend or modify any of the terms of any of the agreements or instruments
relating to any indebtedness for money borrowed, except the Senior Bridge Debt;
provided, however, that the terms of the agreements and instruments relating to
the Laurus Debt may be amended and modified solely in accordance with Section
6(c) of the Subordination Agreement.
 
11.    Event of Default. If, while any part of the principal of or interest on
the Notes remains unpaid, any one of the following “Events of Default” shall
occur:
 
(a)    the failure by the Company to pay the principal of or interest and
expenses on the Notes when such payment is due;
 
(b)    the Company’s breach of its obligations under any of the Bridge Loan
Documents or the Acquisition Documents;
 
(c)    the Company shall (i) have a receiver, trustee or liquidator appointed
for it or for all or a substantial part of its assets; (ii) from this date
forward, admit in writing to its inability to pay its debts as they mature;
(iii) make a general assignment for the benefit of creditors; (iv) be
adjudicated bankrupt or insolvent; (v) file a voluntary petition in bankruptcy
or a petition or an answer seeking reorganization or an arrangement with
creditors to take advantage of any insolvency law; (vi) file any answer
admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding or fail to dismiss such
petition within sixty (60) days after the filing thereof; or (vii) take any
action for the purpose of effecting any of the foregoing;
 
 
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(d)    a payment default by the Company with respect to indebtedness that
results in the acceleration of such indebtedness;
 
(e)    any representation or warranty made by the Company in any of the Bridge
Loan Documents or the Acquisition Documents or in any certificate, instrument or
written statement contemplated by or made or delivered pursuant to or in
connection with the Bridge Loan Documents or the Acquisition Documents, shall
prove to have been incorrect when made in any material respect;
 
(f)    except as set forth in Section 11(a), the failure by the Company to
observe and perform any material covenant, condition and agreement under any of
the Bridge Loan Documents or the Acquisition Documents which failure is not
cured within fifteen (15) days after written notice from any Purchaser or
discovery by the Company; or
 
(g)    an order, judgment or decree shall be entered by any court of competent
jurisdiction, approving a petition seeking reorganization or liquidation of the
Company, or appointing a receiver, trustee or liquidator of the Company of all
or a substantial part of its assets, which such order, judgment or decree has
not been effectively stayed within fifteen (15) days after entry;
 
then and in every such event, any Purchaser may, without notice to the Company,
declare the Notes to be forthwith due and payable, whereupon the Notes shall
forthwith become due and payable without presentment, demand, protest or further
notice of any kind, all of which are expressly waived by the Company; provided,
however, that upon the happening of any event under subsections (c) or (g) of
this Section 11, then the Notes shall, without the taking of any action by the
Purchasers, immediately become due and payable.
 
12.    Amendments, Waivers, Etc. Any provision in this Agreement and the Notes
to the contrary notwithstanding, changes in or additions to this Agreement or
the Notes may be made, and compliance with any covenant or provision herein or
therein set forth may be omitted or waived, if the Company shall obtain consent
thereto in writing from the holder or holders of at least a majority in
principal amount of all Notes then outstanding.
 
13.    Choice of Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without giving
effect to the principles of conflicts of law thereof.
 
14.    Expenses. Any expense incurred by the Purchasers (including, without
limitation, reasonable attorneys’ fees and disbursements) in connection with the
exercise of any right or remedy upon the occurrence of an Event of Default, or
the enforcement of any rights under any of the Bridge Loan Documents, including
costs of collection and reasonable attorneys’ fees and expenses, shall be paid
by the Company within five days of receiving written notice thereof from a
Purchaser.
 
 
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15.    Notices. All notices, requests, demands and other communications provided
for hereunder shall be in writing (including telecopy communication) and
telecopied or delivered:
 
If to a Purchaser, at the address set forth in the signature pages hereto or at
such other address as to which such Purchaser may inform the other parties in
writing in compliance with the terms of this Section 15, with a copy to Goodwin
Procter LLP, Exchange Place, 53 State Street, Boston, MA 02109, Attn: Mark H.
Burnett, Fax. No.: (617) 523-1231.

If to the Company or the Guarantors, at 21 Oxford Road, Mansfield, Massachusetts
02048, Fax No. (508) 337-9201 or at such other address as shall be designated by
the Company in a written notice to the other parties complying as to delivery
with the terms of this Section 15, with a copy to Arent Fox PLLC, 1675 Broadway,
New York, NY 10019-5820, Attn: Steven D. Dreyer, Fax No. (212) 484-3990.

All such notices, requests, demands and other communications shall be in writing
and shall be deemed to have been given (i) on the date of delivery, if
personally delivered or telecopied to the party to whom notice is to be given,
(ii) upon confirmed receipt after being deposited with a nationally recognized
overnight delivery service for next business day delivery or (iii) on the third
Business Day after mailing, if mailed to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, and
addressed to the addressee at the address of the addressee set forth herein, or
to the most recent address, specified by written notice, given to the sender
pursuant to this paragraph.
 
16.    Waiver of Jury Trial. THE COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF
SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, THE COMPANY HEREBY
WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION
REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE COMPANY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
THE PURCHASERS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASERS
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(B) ACKNOWLEDGES THAT THE PURCHASERS HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED
HEREIN.
 
17.    Prior Agreements; Survivability. This Agreement, together with the other
Bridge Loan Documents and the Acquisition Documents, constitute the entire
agreement between the parties and supercedes any other prior understandings or
agreements concerning the subject matter hereof. All representations and
warranties made in this Agreement and the Bridge Loan Documents or any other
instrument or document delivered in connection herewith or therewith, shall
survive the execution and delivery hereof or thereof.
 
 
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18.    Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted
assigns. This Agreement, and the rights and obligations of each Purchaser
hereunder, may be assigned by such Purchaser to any person or entity to which
the Notes are transferred by such Purchaser, and such transferee shall be deemed
a “Purchaser” for purposes of this Agreement; provided that the transferee
provides written notice of such assignment to the Company. The Company may not
assign its rights under this Agreement.
 
19.    Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart, or facsimile of a
counterpart, of this Agreement, signed by the other parties hereto.
 
20.    No Waiver; Cumulative Remedies. No failure or delay on the part of any of
the Purchasers, or any other holder of the Notes in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
 
21.    Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
 
22.    Further Assurances. From and after the date of this Agreement, upon the
request of a Purchaser, the Company and the Guarantors each shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the other Bridge Loan Documents.
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 
 
-11-

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
 
COMPANY:
 
AXEDA SYSTEMS INC.
 
By:   /s/ Robert M. Russell Jr.

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Name: Robert M. Russell Jr.
Title: Chief Executive Officer
 
 
GUARANTORS:
 
AXEDA SYSTEMS OPERATING COMPANY, INC.
 
By:   /s/ Karen F. Kupferberg

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Name: Karen F. Kupferberg
Title: Chief Financial Officer
 
 
AXEDA IP, INC.
 
By:   /s/ Lynn Magnani

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Name: Lynn Magnani
Title: Secretary

 
 
-12-

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PURCHASERS:
 
JMI EQUITY FUND V, L.P.
By: JMI Associates V, L.L.C.
its General Partner
 
By:   /s/ Bradford D. Woloson

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Name: Bradford D. Woloson
Title: Managing Member
 
Address:       1119 St. Paul Street
Baltimore, MD 21202
 
JMI EQUITY FUND V (AI), L.P.
By: JMI Associates V, L.L.C.
its General Partner
 
By:   /s/ Bradford D. Woloson

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Name: Bradford D. Woloson
Title: Managing Member
 
Address:       1119 St. Paul Street
Baltimore, MD 21202
 
 
 
-13-

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Schedule 1
 
 
Name of Purchaser
 
Maximum Principal Amount
 
First Installment Amount
 
Subsequent Installment Amount
 
JMI Equity Fund V, L.P 
 
$
850,726.50
 
$
850,726.50
   
--
 
JMI Equity Fund V (AI), L.P 
   
49,273.50
   
49,273.50
   
--
 
Total:
 
$
900,000.00
 
$
900,000.00
   
--
 

 
 

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EXHIBIT A

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE
STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

7% SENIOR SUBORDINATED SECURED BRIDGE NOTE

[$______]         September 1, 2005

FOR VALUE RECEIVED, Axeda Systems, Inc., a Delaware corporation, with its
principal executive offices located at 21 Oxford Road, Mansfield, Massachusetts
02048 (“Company”), hereby promises to pay to the order of [___________]
(“Holder”), at [______________] or at such other place as may be designated from
time to time in writing by Holder, up to a maximum principal amount of
_______ Dollars ($____) or, if less, the aggregate unpaid principal amount of
the loans advanced by the Holder pursuant to the terms of the Senior
Subordinated Secured Bridge Note Purchase Agreement, dated as of September
1, 2005, among the Company, Axeda Systems Operating Company, Inc., a
Massachusetts corporation and an indirect wholly owned subsidiary of the Company
and Axeda IP, Inc., a Nevada corporation and an indirect wholly owned subsidiary
of the Company (collectively, the “Guarantors”), and the purchasers named
therein (as may be amended, restated or modified from time to time, the
“Agreement”), on the dates and terms set forth in the Agreement, together with
interest thereon on the dates and at the rates set forth in the Agreement. All
payments received by Holder hereunder will be applied first to costs of
collection, if any, then to interest and the balance to principal. All principal
and interest outstanding on this Note shall be payable in lawful money of the
United States of America.

This 7% Senior Subordinated Secured Bridge Note is one of a duly authorized
series of 7% Senior Subordinated Secured Bridge Notes (each, a “Note,” and
collectively, the “Notes”) with an original aggregate principal amount of up to
$900,000 issued pursuant to, and entitled to the benefits of, the Agreement,
which Agreement sets forth certain terms and conditions of, and certain rights,
limitations, duties and obligations relating to, the Notes. In the event any
term of this Note conflicts with the terms of the Agreement, the terms of the
Agreement shall govern. Capitalized terms used herein but not otherwise defined
herein have the meanings given to them in the Agreement. This Note is entitled
to the benefits of the Guaranty, the Security Agreement and the Subordination
Agreement.

The Notes will be senior in all respects (including the right of payment) to all
other indebtedness of the Company, now existing or hereafter incurred; provided,
however, that the Notes will be subordinate to the Senior Bridge Debt and pari
passu with the Laurus Debt.

 
 

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The Holder is authorized to endorse on the schedules annexed hereto and made a
part hereof the date and amount of the First Installment and each Subsequent
Installment made pursuant to the Agreement and the date and amount of each
payment or prepayment (if permitted) of principal or interest thereon. Each such
endorsement shall constitute prima facie evidence of the accuracy of the
information endorsed. The failure to make any such endorsement or any error in
any such endorsement shall not affect the obligations of the Company in respect
of the First Installment or any Subsequent Installment.

If this Note is not paid in accordance with its terms, Company shall pay to
Holder, in addition to principal and accrued interest thereon, all costs of
collection of the principal and accrued interest, including, but not limited to,
reasonable attorneys’ fees, court costs and other costs for the enforcement of
payment of this Note.

This Note is delivered in and shall be enforceable in accordance with the laws
of the Commonwealth of Massachusetts, without giving effect to the principles of
conflicts of laws thereof, and shall be construed in accordance therewith, and
shall have the effect of a sealed instrument.

The Company hereby expressly waives presentment, demand, and protest, notice of
demand, dishonor and nonpayment of this Note, and all other notices or demands
of any kind in connection with the delivery, acceptance, performance, default or
enforcement hereof, and hereby consents to any delays, extensions of time,
renewals, waivers or modifications that may be granted or consented to by the
holder hereof with respect to the time of payment or any other provision hereof
or of the Agreement.

In the event any one or more of the provisions of this Note shall for any reason
be held to be invalid, illegal or unenforceable, in whole or in part or in any
respect, or in the event that any one or more of the provisions of this Note
operate or would prospectively operate to invalidate this Note, then and in any
such event, such provision(s) only shall be deemed null and void and shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain operative and in full force and effect and in no way shall be
affected, prejudiced, or disturbed thereby. This Note is assignable pursuant to
the terms of the Agreement.

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

AXEDA SYSTEMS, INC.
 
 
By:

--------------------------------------------------------------------------------

Name:
Title:

 
 

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Date
 
 
Installment
Amount
 
Amount of
Principal
Paid
 
Amount of
Interest
Paid
 
Outstanding
Principal
Balance
 
 
Notation
Made By
                                                                               
                                                                               
           

 
 

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Exhibit B

 
GUARANTY

 
 
 

 
 
 

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Exhibit C

 
SECURITY AGREEMENT

 
 

 

 
 

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Exhibit D

 
SUBORDINATION AGREEMENT

 

 
 
 
 
 
 

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