EXHIBIT 10.41

 
AMENDED AND RESTATED SUBORDINATION AGREEMENT

This Amended and Restated Subordination Agreement, dated as of September 1, 2005
(the “Subordination Agreement”), by and among (i) Axeda Systems Inc., a Delaware
corporation (“Axeda”), (ii) JMI Equity Fund V, L.P. and JMI Equity Fund V (AI),
L.P. (the “Purchasers”), and (iii) Laurus Master Fund, Ltd. (“Laurus”):

WITNESSETH:

WHEREAS, Laurus has extended credit to the Company pursuant to the Securities
Purchase Agreement, dated as of October 5, 2004, by and between Laurus and the
Company (as amended, modified or supplemented from time to time, the “Laurus
Securities Purchase Agreement”);

WHEREAS, Axeda, the Guarantors (defined below) and the Purchasers have entered
into the Senior Secured Bridge Note Purchase Agreement, dated as of July 8, 2005
(as may be hereafter amended, modified, substituted, extended or restated from
time to time, including any replacement agreement therefor, the “Senior Purchase
Agreement”), pursuant to which the Purchasers have made loans and otherwise
extended credit to the Company by purchasing Axeda’s 7% Senior Secured Bridge
Notes in the original aggregate principal amount of $600,000 (individually, a
“Senior Note” and collectively, the “Senior Notes”), upon the terms and subject
to the conditions contained therein;

WHEREAS, the Company, the Purchasers and Laurus entered into the Subordination
Agreement, dated as of July 8, 2005 (the “Original Subordination Agreement”);

WHEREAS, Axeda, the Guarantors and the Purchasers have entered into the Senior
Subordinated Secured Bridge Note Purchase Agreement, dated as of the date hereof
(as may be hereafter amended, modified, substituted, extended or restated from
time to time, including any replacement agreement therefor, the “Senior
Subordinated Purchase Agreement”), pursuant to which the Purchasers have agreed
to make loans and otherwise extend credit to the Company by purchasing Axeda’s
7% Senior Subordinated Secured Bridge Notes in the original aggregate principal
amount of up to $900,000 (individually, a “Senior Subordinated Note” and
collectively, the “Senior Subordinated Notes”), upon the terms and subject to
the conditions contained therein;

WHEREAS, it was a condition precedent to the Purchaser’s willingness to make
loans and otherwise extend credit to the Company pursuant to the Senior Purchase
Agreement that Axeda and Laurus enter into the Original Subordination Agreement;
and

WHEREAS, in order to induce the Purchasers to make the additional loans and
otherwise extend additional credit to the Company pursuant to the Senior
Subordinated Purchase Agreement, and to induce the Senior Holders and Laurus
Creditors to consent to such loans, the parties have agreed to amend and restate
the Original Subordination Agreement in its entirety by entering into this
Subordination Agreement.

 
 

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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.    Definitions. Terms not otherwise defined herein shall have the meaning
assigned such terms in the Senior Purchase Agreement. The following terms shall
have the meanings given to such terms as set forth below:
 
“Asset Purchase Agreement” means the Asset Purchase Agreement, dated as of the
date hereof and from time to time amended, restated or otherwise modified, among
ASOC Acquisition Corp. (“Buyer”), Axeda, Axeda Systems Operating Company, Inc.,
a Massachusetts corporation and an indirect wholly owned subsidiary of Axeda
(“ASOC”), and Axeda IP, Inc., a Nevada corporation and an indirect wholly owned
subsidiary of Axeda (“AIP”).
 
“Company” means, for purposes hereof, Axeda and all of its direct and indirect
subsidiaries, whether now or hereafter existing, including without limitation
the Guarantors.

“Guarantors” means ASOC and AIP.
 
“Guaranty” means the Amended and Restated Subsidiary Guaranty dated as of the
date hereof made by the Guarantors in favor of Senior Holders and the Senior
Subordinated Creditors (including the Purchasers) (including any prior version
thereof and as it may be hereafter amended, modified, substituted, extended or
restated from time to time, including any replacement agreement therefor).

“Laurus Consent Letter” means that certain letter agreement between Axeda and
Laurus dated as of July 8, 2005 which, among other things, refers to the
repayment of the Laurus Debt and release of liens in connection with the
consummation of the sale of assets pursuant to the Asset Purchase Agreement.

“Laurus Creditors” means Laurus and its successors and assigns of the notes and
other securities issued under the Laurus Securities Purchase Agreement.

“Laurus Debt” means all principal, interest, fees, costs, enforcement expenses
(including legal fees and disbursements), collateral protection expenses and
other reimbursement and indemnity obligations created or evidenced by any of the
Laurus Documents (as defined below) or any prior, concurrent or subsequent
notes, instruments or agreements, or indebtedness, liabilities or obligations of
any type or form whatsoever relating thereto, in favor of the Laurus Creditors
with respect to the Company in connection with the Laurus Documents. Laurus Debt
shall expressly include any and all interest accruing or costs or expenses
(including legal fees and expenses) incurred on or after the date of any filing
by or against the Company of any petition under the United States Bankruptcy
Code or any other bankruptcy, insolvency or reorganization act regardless of
whether the Laurus Creditors’ claim therefor is allowed or allowable in the case
or proceeding relating thereto.

 
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“Laurus Documents” means, collectively, the Laurus Securities Purchase
Agreement, any promissory notes executed in connection therewith and any and all
guaranties and security interests, mortgages and other liens directly or
indirectly guarantying or securing any of the Laurus Debt, and any and all other
documents or instruments executed in connection with the Laurus Securities
Purchase Agreement or otherwise evidencing or further guarantying or securing
directly or indirectly any of the Laurus Debt, whether now existing or hereafter
created.

“Letter of Intent” means the letter of intent dated June 29, 2005 between an
affiliate of the Purchasers and Axeda (on behalf of itself and its
subsidiaries), as amended, modified or supplemented from time to time.

“Security Agreement” means the Amended and Restated Security Agreement dated as
of the date hereof by and among Axeda, the Guarantors and the Purchasers
(including any prior version thereof and as it may be hereafter amended,
modified, substituted, extended or restated from time to time, including any
replacement agreement therefor).

“Senior Debt” means all principal (which principal shall not exceed $600,000),
interest, fees, costs, enforcement expenses (including legal fees and
disbursements), collateral protection expenses and other reimbursement or
indemnity obligations created or evidenced by any of the other Senior Documents
(as defined below), or any prior, concurrent or subsequent notes, instruments or
agreements, or indebtedness, liabilities or obligations of any type or form
whatsoever relating thereto, in favor of the Senior Holders with respect to the
Company in connection with any of the Senior Documents. Notwithstanding anything
herein to the contrary, Senior Debt shall not include any termination or
break-up fees or expense reimbursement amounts payable to the Senior Holders by
the Company under either of the Letter of Intent and/or the Asset Purchase
Agreement. Senior Debt shall expressly include any and all interest accruing or
costs or expenses (including legal fees and expenses) incurred on or after the
date of any filing by or against the Company of any petition under the United
States Bankruptcy Code or any other bankruptcy, insolvency or reorganization act
regardless of whether the Senior Holders’ claim therefor is allowed or allowable
in the case or proceeding relating thereto.

“Senior Documents” means, collectively, the Senior Purchase Agreement, the
Senior Notes, the Security Agreement, the Guaranty, any promissory notes
executed in connection therewith (subject to the aggregate principal not
exceeding $600,000) and any and all guaranties and security interests, mortgages
and other liens directly or indirectly guarantying or securing any of the Senior
Debt, and any and all other documents or instruments otherwise evidencing or
further guarantying or securing directly or indirectly any of the Senior Debt,
whether now existing or hereafter created.

“Senior Holders” means the Purchasers and any subsequent holders of the Senior
Notes.

“Senior Subordinated Creditors” means the Purchasers and any subsequent holders
of the Senior Subordinated Notes.

 
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“Senior Subordinated Debt” means all principal (which principal shall not exceed
$900,000), interest, fees, costs, enforcement expenses (including legal fees and
disbursements), collateral protection expenses and other reimbursement and
indemnity obligations created or evidenced by any of the Senior Subordinated
Documents (as defined below), or any prior, concurrent or subsequent notes,
instruments or agreements, or indebtedness, liabilities or obligations of any
type or form whatsoever relating thereto, in favor of the Senior Subordinated
Creditors with respect to the Company in connection with any of the Senior
Subordinated Documents. Notwithstanding anything herein to the contrary, Senior
Subordinated Debt shall not include any termination or break-up fees or expense
reimbursement amounts payable to the Senior Subordinated Creditors by the
Company under either of the Letter of Intent or the Asset Purchase Agreement.
Senior Subordinated Debt shall expressly include any and all interest accruing
or costs or expenses (including legal fees and expenses) incurred on or after
the date of any filing by or against the Company of any petition under the
United States Bankruptcy Code or any other bankruptcy, insolvency or
reorganization act regardless of whether the Senior Subordinated Creditors’
claim therefor is allowed or allowable in the case or proceeding relating
thereto.

“Senior Subordinated Documents” means, collectively, the Senior Subordinated
Purchase Agreement, the Security Agreement (solely to the extent relating to the
loans and extension of credit under the Senior Subordinated Purchase Agreement),
the Senior Subordinated Notes, the Guaranty (solely to the extent relating to
the loans and extension of credit under the Senior Subordinated Purchase
Agreement), any promissory notes executed in connection therewith (subject to
the aggregate principal not exceeding $900,000) and any and all guaranties and
security interests, mortgages and other liens directly or indirectly guarantying
or securing any of the Senior Subordinated Debt, and any and all other documents
or instruments otherwise evidencing or further guarantying or securing directly
or indirectly any of the Senior Subordinated Debt, whether now existing or
hereafter created.

“Subordinated Creditors” means, collectively, the Senior Subordinated Creditors
and the Laurus Creditors.

“Subordinated Debt” means, collectively, the Laurus Debt and the Senior
Subordinated Debt.

“Subordinated Documents” means, collectively, the Laurus Documents and the
Senior Subordinated Documents.

“Triggering Event” means the occurrence and continuation of any of the following
events:
 
(i)    the asset acquisition contemplated under the Asset Purchase Agreement
shall not have been consummated by January 15, 2006;
 
(ii)    the Asset Purchase Agreement shall have been amended to reduce the cash
portion of the purchase price to an amount less than the aggregate principal and
accrued interest of the Laurus Debt (which principal and accrued interest shall
not include any default interest, penalties, premiums, fees or other amounts
otherwise due and owing under the Laurus Documents) payable pursuant to the
terms of the Laurus Consent Letter upon the consummation of the asset
acquisition set forth in the Asset Purchase Agreement;
 
 
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(iii)    the asset acquisition contemplated under the Asset Purchase Agreement
shall have failed to receive the requisite vote for approval by Axeda’s
stockholders upon the holding of a duly convened stockholders meeting (or any
properly adjourned and reconvened meeting thereof) pursuant to Section 5.05 of
the Asset Purchase Agreement; and
 
(iv)    the Asset Purchase Agreement is effectively terminated in accordance
with its terms.
 
2.    Subordination. Each Subordinated Creditor, for itself, its executors,
administrators, personal representatives, heirs, devisees, legatees, successors
and assigns, covenants and agrees that the payment of the principal of and
interest on all Subordinated Debt now or hereafter outstanding is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
to the payment in full in cash of the Senior Debt; provided, however, that the
Company shall be permitted to make certain payments in the form of equity on
account of the Laurus Debt in accordance with Section 3 below.
 
3.    No Payment. As long as any of the Senior Debt is outstanding, no payment
of principal of, interest on, or premiums, fees, costs, expenses or other
amounts with respect to, any Subordinated Debt shall be made by the Company or
accepted by any Subordinated Creditor and the Company shall not set off, contra
or otherwise apply all or any part of any obligation of any Subordinated
Creditor to the Company toward satisfaction of the Subordinated Debt, or
acquire, redeem or otherwise purchase any Subordinated Debt; provided, however,
that the Company shall be permitted (but not obligated) to make payments on the
Laurus Debt payable solely in the form of shares of common stock of the Company
or warrants or options to purchase shares of common stock of the Company in
accordance with the terms of the Laurus Securities Purchase Agreement so long as
no Event of Default has occurred under the Senior Documents. Notwithstanding
anything herein to the contrary, this Agreement shall not restrict or adversely
affect the ability of, and this Section 3 shall not apply to any action taken
by, the Senior Subordinated Creditors, or any of their respective affiliates to
surrender to the Company the promissory notes evidencing the Senior Subordinated
Debt as partial payment of the purchase price under the Asset Purchase
Agreement, so long as the Asset Purchase Agreement has not been amended in the
manner set forth in clause (ii) of the definition of Triggering Event.
 
4.    Payments Held in Trust. If any payment of principal of, interest on, or
premiums, fees, costs, expenses or other amounts with respect to, any
Subordinated Debt is received by a Subordinated Creditor before all Senior Debt
shall have been paid or satisfied in full, despite or in violation or
contravention of the terms of this Subordination Agreement, the Subordinated
Creditor will hold the same in trust for the Senior Holders and forthwith pay
the same to the Senior Holders, to be held by the Senior Holders as additional
security for the Senior Debt or applied by the Senior Holders to payment of the
Senior Debt in such manner as the Senior Holders may choose in their sole
discretion. Any such payment of principal of, interest on, or premiums, fees,
costs, expenses or other amounts with respect to, any Subordinated Debt paid
over to the Senior Holders and held by the Senior Holders as additional security
pursuant to the immediately preceding sentence shall, to the extent not applied
to the payment of the Senior Debt, be paid over to the Subordinated Creditors
after the Senior Debt has been finally paid in full in cash. Until the Senior
Debt has been finally paid in full in cash, no Subordinated Creditor shall have
any right of subrogation, reimbursement, restitution, contribution or indemnity
whatsoever from any assets of the Company or any guarantor of or provider of
collateral security for the Senior Debt. Notwithstanding anything to the
contrary contained herein, following the payment in full of the Senior Debt,
each Senior Holder hereby agrees that in the event such Senior Holder receives
as a result of its exercise of remedies under the Senior Documents any amount on
account of the Senior Debt in excess of the outstanding Senior Debt, such Senior
Holder shall pay over such excess amount to the Subordinated Creditors as
promptly as practicable.
 
 
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5.    Sharing of Payments and Property. Subject to Section 3, if a Subordinated
Creditor shall (a) receive or obtain any payment in respect of any of its
Subordinated Debt or (b) receive or obtain any property in respect of such
Subordinated Debt through the exercise of any remedy or right (whether arising
by operation of law or under any agreement) or otherwise with respect to such
Subordinated Debt, it shall (i) receive and hold such payment or property in
trust for all Subordinated Creditors, (ii) deliver such payment or property (or
the proceeds thereof) to all Subordinated Creditors pro-rata in accordance with
their respective percentage of outstanding Subordinated Debt, and (iii) make
such other adjustments from time to time as shall be equitable to the end that
all the Subordinated Creditors shall share the benefit of such payment or
property (net of any expenses which may be incurred by such Subordinated
Creditor in obtaining or preserving such benefit) pro-rata in accordance with
their respective percentage of the outstanding Subordinated Debt.
Notwithstanding anything herein to the contrary, (a) payments made to the Laurus
Creditors in the form of equity made in accordance with Section 3 above, and
(b) payments received by any Subordinated Creditor under Section 7(d) and/or
Section 10 on account of the sale and/or transfer of their respective
Subordinated Debt, in each case, are not subject to this Section 5.
Notwithstanding anything herein to the contrary, this Agreement shall not
restrict or adversely affect the ability of, and this Section 5 shall not apply
to any action taken by, the Senior Holders, the Senior Subordinated Creditors,
or any of their respective affiliates to surrender to the Company the promissory
notes evidencing the Senior Debt or Senior Subordinated Debt as partial payment
of the purchase price under the Asset Purchase Agreement, so long as the Asset
Purchase Agreement has not been amended in the manner set forth in clause (ii)
of the definition of Triggering Event.
 
6.    Bankruptcy. In the event of any receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization (whether or not pursuant
to bankruptcy laws), sale of all or substantially all of the assets,
dissolution, liquidation, winding up of the business or affairs of the Company
or any other marshalling of the assets and liabilities of the Company (each a
“proceeding”):
 
(a)    each Subordinated Creditor will prove (including filing appropriate
proofs of claim), enforce and endeavor to obtain payment of the principal of,
interest on and all other amounts payable with respect to all Subordinated Debt
and will pay over to the Senior Holders amounts thereof sufficient for payment
of principal of and interest on, or other payments with respect to, the Senior
Debt, to pay in full the Senior Debt. If a Subordinated Creditor has not filed
appropriate proofs of claim at least eight (8) business days prior to the
deadline date for filing such claims, the Senior Holders may file such claims in
any such proceeding on such Subordinated Creditor’s behalf. In no event shall
any Subordinated Creditor waive, forgive or cancel any claim it may now or
hereafter have against the Company.
 
 
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(b)  the Senior Holders may, at their option, claim directly from the trustee or
representative of the Company’s estate in such proceeding. In the event that the
Senior Holders do so elect to claim directly against the trustee or
representative of the Company’s estate, each Subordinated Creditor shall be
obligated to do the same.
 
(c)  each Subordinated Creditor hereby grants to the Senior Holders an
irrevocable proxy to vote its claims in any such proceeding or at any meeting of
creditors, and agrees to execute all further documents requested by the Senior
Holders to facilitate exercise of this proxy. This Section 6(c) shall terminate
in the event all of the following conditions are satisfied: (i) the Purchase
Options (as defined in Section 10(c)) under Section 10 shall have expired
unexercised, (ii) the Company shall be subject to a proceeding and (iii) Laurus
shall have purchased from the Senior Holders at least 50% of the outstanding
Senior Notes for a cash purchase price equal to the aggregate principal and
accrued interest on such Senior Notes.
 
7.    Certain Prohibited Actions. Until the payment or satisfaction in full of
the Senior Debt, without the prior written consent of the Senior Holders
(subject to the last sentence of this Section 7):
 
(a)    no Subordinated Creditor shall from and after the date hereof, request,
demand or seek to obtain from the Company, and the Company shall not grant or
deliver to the Subordinated Creditor, any collateral or other security for the
Subordinated Debt (the parties hereto acknowledge that this clause (a) does not
require the Subordinated Creditors to terminate the liens granted prior to this
date under the Subordinated Documents);
 
(b)    no Subordinated Creditor shall, (i) accelerate the maturity of any
Subordinated Debt, (ii) demand payment of any Subordinated Debt or (iii)
exercise any right or remedy, or take any action, against the Company or any of
the assets or property of the Company to enforce its rights with respect to any
Subordinated Debt;
 
(c)    no Subordinated Creditor shall, amend or modify any of the terms of any
of the Subordinated Debt or any of the Subordinated Documents in a manner that
is materially adverse to the interests of the Senior Holders (including those
interests relating to the Senior Documents and the transactions contemplated by
the Letter of Intent); provided, however, that the Subordinated Creditors shall
provide the Senior Holders at least five business days’ prior notice of any
proposed amendment or modification to afford the Senior Holders an opportunity
to object to such proposed amendment or modification as being materially adverse
to their interests; and
 
(d)    no Subordinated Creditor shall sell, assign or otherwise transfer or
further encumber any Subordinated Debt or interest therein without first
procuring and delivering to the Senior Holders and the other Subordinated
Creditors evidence in writing of the consent and agreement of the purchaser,
pledgee, assignee or transferee of such Subordinated Debt or interest therein to
comply with all terms, conditions and provisions of this Subordination
Agreement. The rights of the Senior Holders under this Section 7 shall inure to
the benefit of their successors and assigns.
 
 
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Upon expiration of the Purchase Option Period (defined in Section 10(c)) during
which period no party has exercised its respective Purchase Option under Section
10, then in such event Sections 7(a), (b) and (c) above shall cease to be
effective and binding upon the Subordinated Creditors.
 
8.    Subordinated Creditors’ Security.
 
(a)    Each Subordinated Creditor hereby confirms that, regardless of the
relative times and method of attachment or perfection thereof (or any failure to
perfect) or the order of filing of financing statements, mortgages or other
security agreements or documents, or anything in the Subordinated Documents or
this Subordination Agreement to the contrary, the security interests and liens
granted or to be granted from time to time to secure the Senior Debt, shall in
all respects be first and senior security interests and liens, superior to any
security interests and liens granted or to be granted to Subordinated Creditor
in assets of, or ownership interests in, the Company or any other person
pursuant to the Subordinated Documents or otherwise, it being the express
intention of the parties that, notwithstanding anything in this Subordination
Agreement to the contrary, all liens and security interests granted to Senior
Holders from time to time shall be prior and superior to any liens or security
interests granted to Subordinated Creditor. In foreclosing on Senior Holders’
security interests and liens in the collateral described in or purportedly
covered by the Security Agreement and any other documents and/or instruments
securing the Senior Debt (as defined in the Senior Purchase Agreement) (the
“Collateral”), the Senior Holders may proceed to foreclose on their security
interests and liens in any manner which the Senior Holders, in their sole
discretion, choose, even though a higher price might have been realized if
Senior Holders had proceeded to foreclose on their security interests and liens
in another manner.
 
(b)    Except as set forth in the last sentence of Section 4 and the last
sentence of Section 8(c), each Subordinated Creditor hereby consents and agrees
that the Senior Holders shall be under no obligation with respect to marshaling
collateral security for the Senior Debt in favor of Subordinated Creditors or in
payment of indebtedness of the Company to the Subordinated Creditors.
 
(c)    Without limiting any of the rights (including any of the foreclosure
rights) of Senior Holders under the Senior Purchase Agreement, the Security
Agreement, the Guaranty or any documents delivered to secure the obligations of
the Company to the Senior Holders in connection therewith or under the
provisions of any applicable law, and without placing any obligation on the part
of the Senior Holders to follow any of the following provisions in order to
retain their priority status hereunder, in the event that the Senior Holders
release or discharge their security interests in, or liens upon, any Collateral
which is subject to a lien or security interest in favor of any Subordinated
Creditor, in each case in connection with exercising the Senior Holders’ rights
under the Security Agreement, such Collateral shall thereupon be deemed to have
been released from all such liens and security interests. Each Subordinated
Creditor agrees that within two Business Days’ following Senior Holder’s written
request therefor, it will execute, deliver and file any and all such termination
statements, lien releases and other agreements and instruments as Senior Holders
reasonably deem necessary or appropriate in order to give effect to the
preceding sentence. Each Subordinated Creditor hereby irrevocably appoints the
Senior Holders the true and lawful attorney of such Subordinated Creditor for
the purpose of effecting any such executions, deliveries and filings. Without
limiting the foregoing, and without implying that any Senior Holder is obligated
to undertake any special investigation with respect to its good faith belief as
to the fair value of any property, the parties hereto agree to be bound as to
the fair value of any property as determined by any independent appraisal of
such property that may be conducted at the Senior Holders’ request. The cost of
any such appraisal shall be borne by the Company and, if funded by the Senior
Holders, shall constitute Senior Debt. Each Senior Holder agrees that if, as a
result of a release of its liens on Collateral which is subject to a lien or
security interest in favor of any Subordinated Creditor, such Senior Holder
receives any amount on account of the Senior Debt in excess of the outstanding
Senior Debt, such Senior Holder shall in accordance with the last sentence of
Section 4 above pay over such excess amount to the Subordinated Creditors as
promptly as practicable following payment in full of the Senior Debt.
 
 
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9.    Consents and Waivers. Each Laurus Creditor hereby irrevocably (subject to
the last parenthetical clause set forth in the clause (g) of this Section 9
below) consents to (a) the Company entering into the Senior Purchase Agreement
and the other Senior Documents, the Company’s incurrence of the Senior Debt and
the Company’s performance of its obligations thereunder and irrevocably waives
any rights it may have to participate in, receive notice of or otherwise
prohibit the issuance of the Senior Debt, (b) the Company entering into the
Senior Subordinated Purchase Agreement and the other Senior Subordinated
Documents, the Company’s incurrence of the Senior Subordinated Debt and the
Company’s performance of its obligations thereunder and irrevocably waives any
rights it may have to participate in, receive notice of or otherwise prohibit
the issuance of the Senior Subordinated Debt, (c) any waiver of the terms of the
Senior Debt, the Senior Documents, the Senior Subordinated Debt or the Senior
Subordinated Documents, (d) any renewal, extension or postponement of the time
of payment of the Senior Debt or the Senior Subordinated Debt or any other
indulgence with respect to the Senior Debt or the Senior Subordinated Debt, (e)
any substitution, exchange or release of collateral for the Senior Debt or the
Senior Subordinated Debt, (f) the addition or release of any person primarily or
secondarily liable on the Senior Debt or the Senior Subordinated Debt made or
effected by the Senior Holders or the Senior Subordinated Creditors, and (g) the
execution, delivery and performance by the Company (including Axeda, ASOC and
AIP) of the Asset Purchase Agreement and the consummation of the transactions
contemplated thereby, including the transfer of the Business and the Purchased
Assets (as each such term is defined in the Asset Purchase Agreement) to the
Purchasers or one or more of their affiliates (consent to such performance and
consummation being subject to the payment to Laurus of the outstanding principal
and accrued interest under the Laurus Dept in accordance with the immediately
succeeding sentence). In connection with the consummation of the transactions
contemplated by the Asset Purchase Agreement, each Laurus Creditor shall release
and terminate all claims, security interests, pledges, liens and other
encumbrances on all of the Company’s assets that are to be transferred to the
Purchasers or one or more of their affiliates as contemplated by the Asset
Purchase Agreement at the closing of such transactions, which releases and
terminations shall be effective concurrently with the payment in full in cash by
Axeda of the outstanding principal and accrued and unpaid interest owed by the
Company to Laurus under the Laurus Debt (which principal and accrued interest
amount shall not include any default interest, penalties, premiums, fees or
other amounts otherwise due or owing under the Laurus Documents) as contemplated
by the Laurus Consent Letter. The Senior Holders may exercise, fail to exercise,
waive or amend any of their rights under any instrument evidencing or securing
or under any agreement delivered in connection with any Senior Debt, and in
reference thereto may make and enter into such agreements as to them may seem
proper or desirable, all without notice to or further assent from the
Subordinated Creditors, and any such action shall not in any manner impair or
affect this Subordination Agreement or any of the Senior Holders’ rights
hereunder. Notwithstanding anything herein to the contrary, neither the Senior
Documents nor the Senior Subordinated Documents shall be amended or modified to
(x) increase the aggregate principal of, or increase the rates of interest,
fees, other premiums or similar amounts payable on, either of (i) the Senior
Debt from that in effect on July 8, 2005 or (ii) the Senior Subordinated Debt
from that in effect on the date hereof, (y) cause any termination or break up
fees or expense reimbursement amounts payable to any Purchaser (or any affiliate
thereof) under the Asset Purchase Agreement to be secured by the security
interests granted to either of the Senior Holders under the Senior Documents or
the Senior Subordinated Creditors under the Senior Subordinated Documents, as
the case may be or (z) restrict the Company from entering into an amendment or
modification to the terms of the Subordinated Debt which amendment or
modification is in accordance with the terms and conditions of Section 7(c)
hereof, in each case without the consent of the Laurus Creditors representing at
least a majority of the aggregate principal amount of the Laurus Debt then
outstanding. Notwithstanding anything herein to the contrary, the Laurus
Documents shall not be amended or modified to increase the aggregate principal
of, or increase the rate of interest, fees, or other premiums or similar amounts
payable on, the Laurus Debt from that in effect on July 8, 2005 without the
consents of the Senior Subordinated Creditors representing at least a majority
of the aggregate principal amount of the Senior Subordinated Debt then
outstanding and the Senior Holders representing at least a majority of the
aggregate principal amount of the Senior Notes then outstanding. Each
Subordinated Creditor hereby irrevocably waives (i) presentment, notice and
protest in connection with all negotiable instruments evidencing Senior Debt or
Subordinated Debt, (ii) notice of the acceptance of this Subordination Agreement
by the Senior Holders, (iii) notice of any extensions of credit made, extensions
granted or other action taken in reliance hereon, and (iv) all demands and
notices of every kind in connection with this Subordination Agreement. Each
Subordinated Creditor hereby waives and agrees not to assert against the Senior
Holders any rights which a guarantor or surety with respect to any indebtedness
of the Company could exercise; but nothing in this Subordination Agreement shall
constitute the Subordinated Creditor a guarantor or surety.
 
 
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10.    Purchase Rights of Certain Debt.
 
(a)    Upon the occurrence of a Triggering Event, for a period of ten (10)
business days following such Triggering Event, the Purchasers shall be entitled
to purchase the Laurus Debt from the Laurus Creditors by paying in full in
immediately available U.S. funds by wire transfer to the Laurus Creditors the
aggregate principal and accrued interest of the Laurus Debt (which principal and
accrued interest shall not include any default interest, penalties, premiums,
fees or other amounts otherwise due and owing under the Laurus Documents) (the
“JMI Purchase Option”). If the Purchasers exercise their right under this
Section 10(a) to purchase the Laurus Debt and pay the purchase price therefor,
the Laurus Creditors will assign to the Purchasers all right, title and interest
they have to the Laurus Documents concurrently with the transfer of the
promissory notes evidencing the Laurus Debt. Axeda hereby consents in advance to
an assignment contemplated by this Section 10(a).
 
(b)    If the Purchasers do not exercise the JMI Purchase Option in accordance
with Section 10(a), then for a period of ten (10) business days following
expiration of the JMI Purchase Right, the Laurus Creditors shall be entitled to
purchase all, but not less than all, of the Senior Notes and Senior Subordinated
Notes representing the entire amount of the Senior Debt and Senior Subordinated
Debt from the Senior Holders and the Senior Subordinated Holders by paying in
full in immediately available U.S. funds by wire transfer to the Senior Holders
and Senior Subordinated Holders the aggregate amount of all principal, interest
and other amounts payable under the Senior Notes, the Senior Subordinated Notes
and the Bridge Loan Documents then outstanding (the “Laurus Purchase Option”);
provided, however, that the Laurus Creditors shall not have the right to
purchase the Senior Notes and the Senior Subordinated Notes prior to the
Maturity Date (as defined in the Senior Purchase Agreement on the date hereof)
if any Laurus Creditor is (i) purchasing the Senior Notes and Senior
Subordinated Notes in connection with the provision by the Laurus Creditors of
financing for the acquisition of the stock or assets of the Company or any of
its subsidiaries by any person other than the Purchasers or their affiliates, or
(ii) acting directly with a person other than the Purchasers and their
affiliates to take any action that could reasonably be expected to prevent,
interfere with, delay or postpone the acquisition of the stock or assets of the
Company or any of its subsidiaries by the Purchasers or their affiliates.
Furthermore, each Laurus Creditor agrees that, at no time prior to the Maturity
Date (as defined in the Senior Purchase Agreement on the date hereof), shall
such Laurus Creditor provide direct assistance to any person attempting to
acquire the stock or assets of the Company or any of its subsidiaries other than
the Purchasers or their affiliates. If the Laurus Creditors exercise their right
under this Section 10(b) to purchase the Senior Notes and the Senior
Subordinated Notes and pay the purchase price therefor, the Senior Holders and
the Senior Subordinated Creditors will assign to the Laurus Creditors all right,
title and interest they have to each of the Senior Documents and the Senior
Subordinated Documents concurrently with the transfer of the Senior Notes and
the Senior Subordinated Notes.
 
(c)    For purposes of this Agreement, (i) the JMI Purchase Option and the
Laurus Purchase Option shall collectively be referred to as the “Purchase
Options” and (ii) the aggregate twenty (20) business day period during which the
Purchase Options may be exercised in accordance with this Section 10 shall be
referred to as the “Purchase Option Period.” During the Purchase Option Period,
the provisions of Sections 7(a) and 7(b) of this Agreement shall apply, in
addition to the Subordinated Creditors, to the Senior Holders with respect to
the Senior Debt.
 
11.    No Obligations of Senior Holders. The rights granted to the Senior
Holders hereunder are solely for their protection and, except to the extent
explicitly provided herein, nothing herein contained shall impose on the Senior
Holders any duties with respect to the Subordinated Debt or any property of the
Subordinated Creditor or the Company received hereunder beyond reasonable care
while in the Senior Holders’ custody and redelivery upon expiration of this
Subordination Agreement.
 
12.    Specific Performance. The Senior Holders are hereby authorized to demand
specific performance of this Subordination Agreement, whether or not the Company
shall have complied with the provisions hereof applicable to it, at any time
when the Subordinated Creditor shall have failed to comply with any provision
hereof.
 
 
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13.    Amendment. This Subordination Agreement may not be amended or waived
except by an instrument in writing signed by (i) Axeda, (ii) the Laurus
Creditors representing at least a majority of the aggregate principal amount of
the Laurus Debt then outstanding, (iii) the Senior Subordinated Creditors
representing at least a majority of the aggregate principal amount of the Senior
Subordinated Debt then outstanding and (iv) the Senior Holders representing at
least a majority of the aggregate principal amount of the Senior Notes then
outstanding; provided, however, that Sections 9 and 10 of this Subordination
Agreement may not be amended or waived without the written consent of the
Purchasers, regardless of whether the Purchasers continue to hold any Senior
Debt or Senior Subordinated Debt.
 
14.    Notices. All notices, requests, demands and other communications provided
for hereunder shall be in writing (including telecopy communication) and
telecopied or delivered: (i) if to a Senior Holder or the Senior Subordinated
Creditor, c/o JMI Management, Inc., 1119 St. Paul Street, Baltimore, MD 21202,
Attn: Bradford D. Woloson or at such other address as to which such Senior
Holder or Senior Subordinated Creditor, as the case may be, may inform the other
parties in writing in compliance with the terms of this Section 13, with a copy
to Goodwin Procter LLP, Exchange Place, 53 State Street, Boston, MA 02109, Attn:
Mark H. Burnett, Esq., Fax. No.: (617) 523-1231; (ii) if to the Company, at 21
Oxford Road, Mansfield, Massachusetts 02048, 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 13, with a copy to Arent Fox PLLC,
1675 Broadway, New York, New York 10019-5820, Attn: Steven D. Dreyer, Fax No.
(212) 484-3990; and (iii) if to the Laurus Creditor, at c/o Laurus Capital
Management LLC, 825 Third Avenue, 14th Floor, New York, New York 10022, Attn:
Jason Ban, Esq., Fax No.: (212) 541-4434 or at such other address as shall be
designated by the Laurus Creditor in a written notice to the other parties
complying as to delivery with the terms of this Section 13.
 
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,
or (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.
 
15.    Waiver. No delay on the part of the Senior Holders or Subordinated
Creditors in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any partial exercise or waiver of any privilege or
right hereunder preclude any further exercise of such privilege or right or the
exercise of any other right, power or privilege. The rights and remedies
expressed in this Subordination Agreement are cumulative and not exclusive of
any right or remedy which the Senior Holders or Subordinated Creditors may
otherwise have.
 
16.    Further Assurances. The Subordinated Creditors and the Company shall
execute and deliver to the Senior Holders such further instruments and documents
and shall take such further action as the Senior Holders may at any time or
times reasonably request in order to carry out the provisions and intent of this
Subordination Agreement.
 
 
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17.    Prior Agreements. This Subordination Agreement constitutes the entire
agreement between the parties and supercedes any other prior understandings or
agreements, including, without limitation, the Original Subordination Agreement
concerning the subject matter hereof.
 
18.    Governing Law. This Subordination 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 laws thereof. The
Company and the Subordinated Creditors hereby consent to the jurisdiction of any
federal or state court in the Commonwealth of Massachusetts located in the
counties of Suffolk, Middlesex or Norfolk.
 
19.    Waiver of Jury Trial. EACH OF THE SENIOR HOLDERS, THE SUBORDINATED
CREDITORS AND THE COMPANY EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS SUBORDINATION AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF
THE SENIOR HOLDERS, THE SUBORDINATED CREDITORS AND 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. EACH OF THE SENIOR
HOLDERS, THE SUBORDINATED CREDITORS AND THE COMPANY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY SUCH PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT EACH SUCH PERSON HAS
BEEN INDUCED TO ENTER INTO THIS SUBORDINATION AGREEMENT BY, AMONG OTHER THINGS,
THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
 
20.    Counterparts. This Subordination Agreement may be signed in any number of
counterparts, which together will be one and the same instrument. This
Subordination Agreement shall become effective whenever each party shall have
signed at least one such counterpart. This Subordination Agreement shall be
binding upon each party hereto and its executors, administrators, personal
representatives, heirs, devisees, legatees, successors and assigns, and shall
inure to the benefit of the Senior Holders and the Subordinated Creditors and
each of their respective successors and assigns.
 
21.    Assignment by Senior Holders. No Senior Holder shall sell, assign or
otherwise transfer or further encumber any Senior Debt or interest therein
without first procuring and delivering to the Subordinated Creditors evidence in
writing of the consent and agreement of the purchaser, pledgee, assignee or
transferee of such Senior Debt or interest therein to comply with all terms,
conditions and provisions of, and be bound by, this Subordination Agreement.
 
22.    Party’s Status. Each party to this Agreement may be a party to this
Agreement (i) as a Senior Holder with respect to the Senior Debt and the Senior
Documents and shall be deemed to be, and shall have the rights and obligations
of, a Senior Holder for purposes of this Subordination Agreement with respect to
the Senior Debt and the Senior Documents, (ii) as a Senior Subordinated Creditor
with respect to other the Senior Subordinated Debt and the Senior Subordinated
Documents and shall be deemed to be, and shall have the rights and obligations
of, a Senior Subordinated Creditor for purposes of this Subordination Agreement
with respect to the Senior Subordinated Debt and the Senior Subordinated
Documents, and (iii) as a Purchaser and shall be deemed to be, and shall have
the rights and obligations of, a Purchaser for purposes of this Subordination
Agreement. The fact that a party to this Subordination Agreement is a Senior
Holder, a Senior Subordinated Creditor and a Purchaser under this Subordination
Agreement shall not preclude them from being treated differently under this
Agreement with respect to different indebtedness or rights held. For the
avoidance of doubt, each of JMI Equity Fund V, L.P. and JMI Equity Fund V (AI),
L.P. is (i) a Senior Holder with respect to the Senior Debt and the Senior
Documents and shall be deemed to be, and shall have the rights and obligations
of, a Senior Holder for purposes of this Subordination Agreement with respect to
the Senior Debt and the Senior Documents, (ii) a Senior Subordinated Creditor
with respect to other the Senior Subordinated Debt and the Senior Subordinated
Documents and shall be deemed to be, and shall have the rights and obligations
of, a Senior Subordinated Creditor for purposes of this Subordination Agreement
with respect to the Senior Subordinated Debt and the Senior Subordinated
Documents, and (iii) a Purchaser and shall be deemed to be, and shall have the
rights and obligations of, a Purchaser for purposes of this Subordination
Agreement.
 
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IN WITNESS WHEREOF, each party hereto has cause this Subordination Agreement to
be executed by its duly authorized officer as of the date first above written.
 
AXEDA SYSTEMS INC.
 
By:   /s/ Robert M. Russell, Jr.

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Name: Robert M. Russell Jr.
Title: Chief Executive Officer
 
 
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
 
 
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
 
 
LAURUS MASTER FUND, LTD.
 
By:   /s/ David Grin

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Title: Director

 
 
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