Document:

Unassociated Document

    

      SECURITY
        AGREEMENT

      

      This
        Security Agreement, dated as of July 8, 2005 (the “Security
        Agreement”),
        by
        and among Axeda Systems, Inc., a Delaware corporation (the “Company”),
        Axeda
        Systems Operating Company, Inc., a Massachusetts corporation (the “Guarantor”
        and
        together with the Company, the “Obligors”),
        and
        the purchasers named in Schedule
        1
        hereto
        (the “Purchasers”).

      

      WITNESSETH:

      

      WHEREAS,
        the Obligors 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 therefore, the “Purchase
        Agreement”),
        pursuant to which the Company will issue to the Purchasers its 7% Senior
        Secured
        Bridge Notes with an aggregate principal amount of $600,000 (the “Notes”);
        and

      

      WHEREAS,
        the Obligors, as an inducement to the Purchasers to purchase the Notes pursuant
        to the Purchase Agreement, desire to give the Purchasers a first priority
        security interest in the Collateral (as defined below);

      

      NOW,
        THEREFORE, in consideration of the premises and the mutual covenants hereinafter
        set forth, and for other good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged by the Obligors, the Obligors
        hereby agree with the Purchasers as follows:

      

      1.    Certain
        Definitions.
        The
        following terms used herein shall have the meanings ascribed to them under
        the
        Uniform Commercial Code in effect in the Commonwealth of Massachusetts on
        the
        date hereof: Accounts, Chattel Paper, Documents, Equipment, Fixtures, General
        Intangibles, Goods, Instruments, Inventory, Investment Property and Proceeds.
        Terms not otherwise defined herein shall have the meaning assigned such terms
        in
        the Purchase Agreement.

       

      2.    Security
        Agreement.
        Each
        Obligor hereby grants to the Purchasers a first priority security interest
        in
        all of the following property now owned or at any time hereafter acquired
        by the
        Obligor or in which the Obligor now has or at any time in the future may
        acquire
        any right, title or interest: (i) Accounts; (ii) Chattel Paper;
        (iii) Deposit Accounts; (iv) Documents; (v) Equipment; (vi)
        Fixtures;
        (vii) General Intangibles (including without limitation patents, letters
        patent,
        patent applications, trademarks, service marks, trade names and copyrights
        and
        any applications therefor or registrations, recordings, divisions,
        continuations, continuations-in-part, renewals, reissues or extensions thereof);
        (viii) Investment Property; (ix) Goods; (x) Instruments;
        (xi) Inventory; (xii) insurance claims and proceeds; (xiii) books
        and records, computer programs, databases and other computer materials of
        the
        Obligor pertaining to any and all of the foregoing; and (xiv) to the
        extent
        not otherwise included, Proceeds and products of any and all of the foregoing
        (all such property described above being referred to hereinafter collectively
        as
        the “Collateral”).

       

      
        
           

        

        
           

          
            

          

        

        
          
            Security
              Agreement - Page 2

             

          

        

      

      3.    Obligations
        Secured.
        The
        security interest granted hereby secures payment of all amounts owed pursuant
        to
        the Notes issued pursuant to the Purchase Agreement and all other obligations
        of
        the Obligors to the Purchasers under the Bridge Loan Documents.

       

      4.    Obligors’
        Representations, Warranties and Covenants.
        The
        Obligors represent, warrant and covenant that:

       

      (a)    Each
        of
        the Obligors’ principal place of business is 21 Oxford Road, Mansfield,
        Massachusetts 02048 and the Obligors keep their records concerning accounts,
        contract rights and other property at that location. The Obligors will promptly
        notify the Purchasers in writing of the establishment of any new place of
        business where any of their Inventory or records, or any of the Collateral,
        are
        kept.

       

      (b)    The
        Obligors will at all times keep in a manner reasonably satisfactory to the
        Purchasers accurate and complete records of the Obligors’ Inventory and Accounts
        and will keep such Inventory insured. The Purchasers shall be entitled, at
        reasonable times and intervals after reasonable notice to the Company, and
        without undue disruption to the Company’s business to enter any of the Obligors’
        premises for purposes of inspecting the Collateral and the Obligors’ books and
        records relating thereto.

       

      (c)    The
        Obligors will not 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 their 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) for taxes, assessments or governmental charges
        or
        levies on property of the Obligors 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, (ii) imposed by law,
        such as carriers’, warehousemen’s and mechanics’ liens and other similar liens
        arising in the ordinary course of business or (iii) granted prior to the
        date
        hereof to Laurus Master Fund, Ltd. pursuant to that certain Master Security
        Agreement, dated as of October 4, 2004, and those other security and pledge
        agreements related to the Laurus Debt (as defined in the Purchase Agreement).
        

       

      (d)    The
        Obligors shall not use the Collateral in violation of any applicable statute,
        ordinance, law or regulation or in violation of any insurance policy maintained
        by the Obligors with respect to the Collateral.

       

      
        
           

        

        
           

          
            

          

        

        
          
            Security
              Agreement - Page 3

             

          

        

      

      5.    Financing
        Statements.
        The
        Obligors shall execute any financing statements, or other notices appropriate
        under applicable law (including without limitation the filing of notices
        with
        the Patent and Trademark Office), in respect of any security interest created
        pursuant to this Security Agreement which may at any time be required or
        which,
        in the reasonable opinion of the Purchasers, may at any time be desirable.
        In
        the event that any recording or filing thereof (or the filing of any statements
        of continuation or assignment of any financing statement) is required to
        protect
        and preserve such lien or security interest, the Obligors shall execute the
        same
        at the time and in the manner requested by the Purchasers.

       

      6.    Obligors’
        Rights Until Default.
        In the
        absence of any Event of Default (as defined in the Purchase Agreement), the
        Obligors shall have the right to possess the Collateral, manage their property
        and sell their inventory in the ordinary course of business.

       

      7.    Purchasers’
        Rights Upon Default.
        Upon an
        Event of Default and at any time thereafter, the Purchasers of at least a
        majority of the aggregate principal amount of the Notes then outstanding
        may
        exercise any of the remedies available to them, including without limitation,
        those available to a secured party under the Uniform Commercial Code as from
        time to time in effect in the Commonwealth of Massachusetts. The Obligors
        shall
        pay to the Purchasers of at least a majority of the aggregate principal amount
        of the Notes then outstanding on demand any and all reasonable counsel fees
        and
        other expenses incurred by the Purchasers in exercising their available remedies
        upon an Event of Default hereunder.

       

      8.    Amendment.
        Any
        provision in this Security Agreement or the Purchase Agreement to the contrary
        notwithstanding, amendments to this Security Agreement may be made, and
        compliance with any covenant or provision set forth herein may be omitted
        or
        waived, only with the prior written consent thereto of the Purchasers of
        at
        least a majority of the aggregate principal amount of all Notes then outstanding
        and, in the case of amendments only, the Company. Any waiver or consent may
        be
        given subject to satisfaction of conditions stated therein and any waiver
        or
        consent shall be effective only in the specific instance and for the specific
        purpose for which given. No failure or delay on the part of any of the
        Purchasers, or any other holder of any Note, 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. Written notice of any waiver or consent effected under this Section
        8
        shall promptly be delivered by the Company to any Purchasers who did not
        execute
        the same.

       

      9.    Notices.
        All
        notices and other communications required or permitted hereunder shall be
        in
        writing and shall be given as provided in Section 15 of the Purchase
        Agreement.

       

      10.   Cumulation
        of Remedies.
        The
        rights and remedies under this Security Agreement are cumulative and not
        exclusive of any rights, remedies, powers and privileges that may otherwise
        be
        available to the Purchasers.

       

      11.   Binding
        Effect.
        This
        Security Agreement shall be binding upon and inure to the benefit of the
        successors and assigns of the parties hereto, including without limitation,
        all
        future holders of the Notes. This Security Agreement constitutes the entire
        agreement with respect to the matter set forth herein and supersedes any
        prior
        agreements or understandings with respect thereto.

       

      
        
           

        

        
           

          
            

          

        

        
          
            Security
              Agreement - Page 4

             

          

        

      

      12.   Governing
        Law.
        This
        Security Agreement shall be governed by, and construed in accordance with
        the
        laws of the Commonwealth of Massachusetts, without giving effect to the
        principles of conflict of laws thereof. 

       

      13.   Counterparts.
        This
        Security Agreement may be executed and delivered (including by facsimile
        transmission) in more than one counterpart, each of which shall be deemed
        to be
        an original and which, together, shall constitute one and the same
        instrument.

       

      14.   Severability.
        If any
        provision of this Security Agreement shall be held to be illegal, invalid
        or
        unenforceable, such illegality, invalidity or unenforceability shall attach
        only
        to such provision and shall not in any manner affect or render illegal, invalid
        or unenforceable any other provision of this Security Agreement, and this
        Security Agreement shall be carried out as if any such illegal, invalid or
        unenforceable provision were not contained herein.

       

      

      [REMAINDER
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            Security
              Agreement - Signature Page

             

          

        

      

       

      IN
        WITNESS WHEREOF, this Security Agreement has been executed by the parties
        hereto
        as of the date first above written.

       

      
        	 	 	 
	 	THE
                COMPANY:
	 	 
	 	AXEDA SYSTEMS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Karen
                F. Kupferberg
	 	
                
Name: Karen
                F. Kupferberg
	 	Title: Chief
                Financial Officer

      

       

      
        	 	 	 
	 	THE
                GUARANTOR:
	 	 
	 	AXEDA SYSTEMS OPERATING COMPANY,
                INC.
	 
 	 
 	 
 
	 	By:  	/s/ Karen
                F. Kupferberg
	 	
                
Name: Karen
                F. Kupferberg
	 	Title: Chief
                Financial Officer

      

      

      
        	 	 	 
	 	THE
                PURCHASERS:
	 	 
	 	
                JMI
                  EQUITY
                  FUND V, L.P.

                By:
                  JMI Associates V, L.L.C.

                its
                  General Partner

              
	 
 	 
 	 
 
	 	By:  	/s/ Bradford
                D. Woloson
	 	
                
Bradford
                D. Woloson
	 	Managing
                Member

      
        	 	 	 
	 	
                JMI
                  EQUITY
                  FUND V (AI), L.P.

                By:
                  JMI Associates V, L.L.C.

                its
                  General Partner

              
	 
 	 
 	 
 
	 	By:  	/s/ Bradford
                D. Woloson
	 	
                
Bradford
                D. Woloson
	 	
                Managing
                  Member

              

      

      
         

        
           

        

        
           

          
            

          

        

        
           

          
            Security
              Agreement - Schedule I

             

          

        

      

      Schedule
        1

      

      PURCHASERS:

      

      
        	
                JMI
                  EQUITY
                  FUND V, L.P.

                1119
                  St.
                  Paul Street

                Baltimore,
                  MD 21202

              
	 
	
                JMI
                  EQUITY
                  FUND V (AI), L.P.

                1119
                  St.
                  Paul Street

                Baltimore,
                  MD 21202Unassociated Document

    

      SUBSIDIARY
        GUARANTY

      

      July
        8,
        2005

      

      FOR
        VALUE
        RECEIVED, and in consideration of note purchases from, loans made or to be
        made
        or credit otherwise extended or to be extended to or for the account of Axeda
        Systems Inc., a Delaware corporation (the “Company”)
        by the
        persons identified as “Purchasers” (the “Purchasers”)
        in
        that certain Senior Secured Bridge Note Purchase Agreement, dated as of
        July 8, 2005, among the Company, the Guarantor (defined below) and
        the
        Purchasers (as may be hereafter amended, modified, substituted, extended
        or
        restated from time to time, including any replacement agreement therefore,
        the
“Purchase
        Agreement”),
        from
        time to time and at any time and for other good and valuable consideration
        and
        to induce the Purchasers, in their discretion, to purchase such notes, make
        such
        loans or extensions of credit and to make or grant such renewals, extensions,
        releases of collateral or relinquishments of legal rights as the Purchasers
        may
        deem advisable, Axeda Systems Operating Company, Inc., a Massachusetts
        corporation and indirect wholly-owned subsidiary of the Company (the
“Guarantor”),
        unconditionally guaranties to the Purchasers, their successors, endorsees
        and
        assigns the prompt payment when due (whether by acceleration or otherwise)
        of
        all present and future obligations and liabilities of any and all kinds of
        the
        Company to the Purchasers and of all instruments of any nature evidencing
        or
        relating to any such obligations and liabilities upon which the Company or
        one
        or more parties and the Company is or may become liable to the Purchasers,
        whether incurred by the Company as maker, endorser, drawer, acceptor,
        guarantors, accommodation party or otherwise, and whether due or to become
        due,
        secured or unsecured, absolute or contingent, joint or several, and however
        or
        whenever acquired by the Purchasers, whether arising under, out of, or in
        connection with (i) the Purchase Agreement and (ii) each of the other Bridge
        Loan Documents (as defined in the Purchase Agreement), or any documents,
        instruments or agreements relating to or executed in connection with the
        Bridge
        Loan Documents or any documents, instruments or agreements referred to therein
        or otherwise, or any other indebtedness, obligations or liabilities of the
        Company to the Purchasers, whether now existing or hereafter arising, direct
        or
        indirect, liquidated or unliquidated, absolute or contingent, due or not
        due and
        whether under, pursuant to or evidenced by a note, agreement, guaranty,
        instrument or otherwise (all of which are herein collectively referred to
        as the
“Obligations”),
        and
        irrespective of the genuineness, validity, regularity or enforceability of
        such
        Obligations, or of any instrument evidencing any of the Obligations or of
        any
        collateral therefor or of the existence or extent of such collateral, and
        irrespective of the allowability, allowance or disallowance of any or all
        of the
        Obligations in any case commenced by or against the Company under Title 11,
        United States Code, including, without limitation, obligations or indebtedness
        of the Company for post-petition interest, fees, costs and charges that would
        have accrued or been added to the Obligations but for the commencement of
        such
        case. Terms not otherwise defined herein shall have the meaning assigned
        such
        terms in the Purchase Agreement. In furtherance of the foregoing, the Guarantor
        hereby agrees as follows:

      

      1.    No
        Impairment.
        The
        Purchasers may at any time and from time to time, either before or after
        the
        maturity thereof, without notice to or further consent of the Guarantor,
        extend
        the time of payment of, exchange or surrender any collateral for, renew or
        extend any of the Obligations or increase or decrease the interest rate thereon,
        or any other agreement with the Company or with any other party to or person
        liable on any of the Obligations, or interested therein, for the extension,
        renewal, payment, compromise, discharge or release thereof, in whole or in
        part,
        or for any modification of the terms thereof or of any agreement between
        the
        Purchasers and the Company or any such other party or person, or make any
        election of rights the Purchasers may deem desirable under the United States
        Bankruptcy Code, as amended, or any other federal or state bankruptcy,
        reorganization, moratorium or insolvency law relating to or affecting the
        enforcement of creditors' rights generally (any of the foregoing, an
“Insolvency
        Law”)
        without in any way impairing or affecting this Guaranty. This instrument
        shall
        be effective regardless of the subsequent incorporation, merger or consolidation
        of the Company, or any change in the composition, nature, personnel or location
        of the Company and shall extend to any successor entity to the Company,
        including a debtor in possession or the like under any Insolvency Law.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Subsidiary
              Guaranty - Page 2

             

          

        

      

      2.    Guaranty
        Absolute.
        Subject
        to Section 5(c), the Guarantor guarantees that the Obligations will be paid
        strictly in accordance with the terms of the Bridge Loan Documents and/or
        any
        other document, instrument or agreement creating or evidencing the Obligations,
        regardless of any law, regulation or order now or hereafter in effect in
        any
        jurisdiction affecting any of such terms or the rights of the Company with
        respect thereto. The Guarantor hereby knowingly accepts the full range of
        risk
        encompassed within a contract of “continuing guaranty” which risk includes the
        possibility that the Company will contract additional indebtedness for which
        the
        Guarantor may be liable hereunder after the Company's financial condition
        or
        ability to pay its lawful debts when they fall due has deteriorated, whether
        or
        not the Company has properly authorized incurring such additional indebtedness.
        The Guarantor acknowledges that no oral representations, including any
        representations to extend credit or provide other financial accommodations
        to
        the Company, have been made by the Purchasers to induce the Guarantor to
        enter
        into this Guaranty. The liability of the Guarantor under this Guaranty shall
        be
        absolute and unconditional, in accordance with its terms, and shall remain
        in
        full force and effect without regard to, and shall not be released, suspended,
        discharged, terminated or otherwise affected by, any circumstance or occurrence
        whatsoever, including, without limitation: (a) any waiver, indulgence, renewal,
        extension, amendment or modification of or addition, consent or supplement
        to or
        deletion from or any other action or inaction under or in respect of the
        Bridge
        Loan Documents or any other instruments or agreements relating to the
        Obligations or any assignment or transfer of any thereof; (b) any lack of
        validity or enforceability of any Bridge Loan Document or other documents,
        instruments or agreements relating to the Obligations or any assignment or
        transfer of any thereof; (c) any furnishing of any additional security to
        the
        Purchasers or their assignees or any acceptance thereof or any release of
        any
        security by the Purchasers or their assignees; (d) any limitation on any
        party's
        liability or obligation under the Bridge Loan Documents or any other documents,
        instruments or agreements relating to the Obligations or any assignment or
        transfer of any thereof or any invalidity or unenforceability, in whole or
        in
        part, of any such document, instrument or agreement or any term thereof;
        (e) any
        bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
        liquidation or other like proceeding relating to the Company, or any action
        taken with respect to this Guaranty by any trustee or receiver, or by any
        court,
        in any such proceeding, whether or not the Guarantor shall have notice or
        knowledge of any of the foregoing; (f) any exchange, release or nonperfection
        of
        any collateral, or any release, or amendment or waiver of or consent to
        departure from any guaranty or security, for all or any of the Obligations;
        or
        (g) any other circumstance which might otherwise constitute a defense available
        to, or a discharge of, the Guarantor. Any amounts due from the Guarantor
        to the
        Purchasers shall bear interest until such amounts are paid in full at the
        highest rate then applicable to the Obligations. Obligations include
        post-petition interest whether or not allowed or allowable.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Subsidiary
              Guaranty - Page 3

             

          

        

      

      3.    Waivers.

       

      (a)    This
        Guaranty is a guaranty of payment and not of collection. The Purchasers shall
        be
        under no obligation to institute suit, exercise rights or remedies or take
        any
        other action against the Company or any other person liable with respect
        to any
        of the Obligations or resort to any collateral security held by it to secure
        any
        of the Obligations as a condition precedent to the Guarantor being obligated
        to
        perform as agreed herein and the Guarantors hereby waives any and all rights
        which it may have by statute or otherwise which would require the Purchasers
        to
        do any of the foregoing. The Guarantor further consents and agrees that the
        Purchasers shall be under no obligation to marshal any assets in favor of
        Guarantor, or against or in payment of any or all of the Obligations. The
        Guarantor hereby waives all suretyship defenses and any rights to interpose
        any
        defense, counterclaim or offset of any nature and description which the
        Guarantor may have or which may exist between and among the Purchasers, the
        Company and/or the Guarantor with respect to the Guarantor's obligations
        under
        this Guaranty, or which the Company may assert on the underlying debt, including
        but not limited to failure of consideration, breach of warranty, fraud, payment
        (other than cash payment in full of the Obligations), statute of frauds,
        bankruptcy, infancy, statute of limitations, accord and satisfaction, and
        usury.

       

      (b)    The
        Guarantor further waives (i) notice of the acceptance of this Guaranty, of
        the
        making of any such loans or extensions of credit, and of all notices and
        demands
        of any kind to which the Guarantor may be entitled, including, without
        limitation, notice of adverse change in the Company's financial condition
        or of
        any other fact which might materially increase the risk of the Guarantor
        and
        (ii) presentment to or demand of payment from anyone whomsoever liable upon
        any
        of the Obligations, protest, notices of presentment, non-payment or protest
        and
        notice of any sale of collateral security or any default of any
        sort.

       

      (c)    Notwithstanding
        any payment or payments made by the Guarantor hereunder, or any setoff or
        application of funds of the Guarantor by the Purchasers, the Guarantor shall
        not
        be entitled to be subrogated to any of the rights of the Purchasers against
        the
        Company or against any collateral or guarantee or right of offset held by
        the
        Purchasers for the payment of the Obligations, nor shall the Guarantor seek
        or
        be entitled to seek any contribution or reimbursement from the Company in
        respect of payments made by the Guarantor hereunder, until all amounts owing
        to
        the Purchasers by the Company on account of the Obligations are paid in full.
        If, notwithstanding the foregoing, any amount shall be paid to the Guarantor
        on
        account of such subrogation rights at any time when all of the Obligations
        shall
        not have been paid in full and the Purchasers' obligation to extend credit
        pursuant to the Bridge Loan Documents shall not have been terminated, such
        amount shall be held by the Guarantor in trust for the Purchasers, segregated
        from other funds of the Guarantor, and shall forthwith upon, and in any event
        within two (2) business days of, receipt by the Guarantor, be turned over
        to the
        Purchasers in the exact form received by the Guarantor (duly endorsed by
        the
        Guarantor to the Purchasers, if required), to be applied against the
        Obligations, whether matured or unmatured, in such order as the Purchasers
        may
        determine, subject to the provisions of the Bridge Loan Documents. Any and
        all
        present and future debts and obligations of the Company to the Guarantor
        are
        hereby waived and postponed in favor of, and subordinated to the full payment
        and performance of, all present and future debts and Obligations of the Company
        to the Purchasers. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Subsidiary
              Guaranty - Page 4

             

          

        

      

      4.    Security.
        All
        sums at any time to the credit of the Guarantor and any property of the
        Guarantor in the Purchasers' possession or in the possession of any bank,
        financial institution or other entity that directly or indirectly, through
        one
        or more intermediaries, controls or is controlled by, or is under common
        control
        with, the Purchasers (each such entity, an “Affiliate”)
        shall
        be deemed held by the Purchasers or such Affiliate, as the case may be, as
        security for any and all of the Guarantor's obligations to the Purchasers
        and to
        any Affiliate of the Purchasers, no matter how or when arising and whether
        under
        this or any other instrument, agreement or otherwise.

       

      5.    Representations
        and Warranties.
        The
        Guarantor hereby represents and warrants (all of which representations and
        warranties shall survive until all Obligations are indefeasibly satisfied
        in
        full and the Bridge Loan Documents have been irrevocably terminated),
        that:

       

      (a)    Corporate
        Status.
        It is a
        corporation duly organized, validly existing and in good standing under the
        laws
        of the Commonwealth of Massachusetts and has full corporate power, authority
        and
        legal right to own its property and assets and to transact the business in
        which
        it is engaged in all material respects.

       

      (b)    Authority
        and Execution.
        It has
        full corporate power, authority and legal right to execute and deliver, and
        to
        perform its obligations under, this Guaranty and has taken all necessary
        corporate, partnership or limited liability company, as the case may be,
        action
        to authorize the execution, delivery and performance of this
        Guaranty.

       

      (c)    Legal,
        Valid and Binding Character.
        This
        Guaranty constitutes its legal, valid and binding obligation enforceable
        in
        accordance with its terms, except as enforceability may be limited by applicable
        bankruptcy, insolvency, reorganization, moratorium or other laws of general
        application affecting the enforcement of creditor's rights and general
        principles of equity that restrict the availability of equitable or legal
        remedies.

       

      (d)    Violations.
        The
        execution, delivery and performance of this Guaranty will not violate any
        requirement of law applicable to it or any material contract, agreement or
        instrument to it is a party or by which it or any of its property is bound
        or
        result in the creation or imposition of any mortgage, lien or other encumbrance
        other than to the Purchasers on any of its property or assets pursuant to
        the
        provisions of any of the foregoing.

       

      (e)    Consents
        or Approvals.
        No
        consent of any other person or entity (including, without limitation, any
        creditor of the Guarantor) and no consent, license, permit, approval or
        authorization of, exemption by, notice or report to, or registration, filing
        or
        declaration with, any governmental authority, that has not been previously
        obtained, is required in connection with the execution, delivery, performance,
        validity or enforceability of this Guaranty by the Guarantor.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Subsidiary
              Guaranty - Page 5

             

          

        

      

      (f)    Litigation.
        No
        litigation, arbitration, investigation or administrative proceeding of or
        before
        any court, arbitrator or governmental authority, bureau or agency is currently
        pending or, to the best of its knowledge, threatened (i) with respect to
        this
        Guaranty or any of the transactions contemplated by this Guaranty or (ii)
        against or affecting it, or any of its property or assets, which, in each
        of the
        foregoing cases, if adversely determined, could reasonably be expected to
        prevent, restrict or impair the transactions contemplated by the Bridge Loan
        Documents or the performance by it of its obligations under the Bridge Loan
        Documents.

       

      (g)    Financial
        Benefit.
        It has
        derived or expects to derive a financial or other advantage from each and
        every
        loan, advance or extension of credit made under the Bridge Loan Documents
        or
        other Obligation incurred by the Company to the Purchasers. 

       

      6.    Acceleration.

       

      (a)    If
        any
        breach of any covenant or condition beyond any applicable cure period or
        other
        Event of Default shall occur and be continuing under any agreement made by
        the
        Company or any of the Guarantor to the Purchasers any and all Obligations
        shall
        for purposes hereof, at the Purchasers' option, be deemed due and payable
        without notice notwithstanding that any such Obligation is not then due and
        payable by the Company as set forth in the other Bridge Loan
        Documents.

       

      (b)    The
        Guarantor will promptly notify the Purchasers of any default by the Guarantor
        in
        its performance or observance of any term or condition of any material agreement
        to which the Guarantor is a party if the effect of such default is to cause,
        or
        permit the holder of any indebtedness under such agreement to cause, such
        indebtedness in excess of $100,000, to become due prior to its stated maturity
        and, if such an event occurs, the Purchasers shall have the right to accelerate
        such Guarantor's obligations hereunder. 

       

      7.    Payments
        from Guarantors.
        The
        Purchasers, in their sole and absolute discretion, with or without notice
        to the
        Guarantor, may apply on account of the Obligations any payment from the
        Guarantor or any other guarantors, or amounts realized from any security
        for the
        Obligations, or may deposit any and all such amounts realized in a non-interest
        bearing cash collateral deposit account to be maintained as security for
        the
        Obligations.

       

      8.    Costs.
        The
        Guarantor shall pay on demand, all reasonable costs, fees and expenses
        (including expenses for legal services of every kind) relating or incidental
        to
        the enforcement or protection of the rights of the Purchasers hereunder or
        under
        any of the Obligations.

       

      9.    No
        Termination.
        This is
        a continuing irrevocable guaranty and shall remain in full force and effect
        and
        be binding upon the Guarantor, and each of the Guarantor's successors and
        assigns, until all of the Obligations have been paid in full. If any of the
        present or future Obligations are guarantied by persons, partnerships or
        corporations in addition to the Guarantor, the death, release or discharge
        in
        whole or in part or the bankruptcy, merger, consolidation, incorporation,
        liquidation or dissolution of one or more of them shall not discharge or
        affect
        the liabilities of any Guarantor under this Guaranty.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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              Guaranty - Page 6

             

          

        

      

      10.   Recapture.
        Anything in this Guaranty to the contrary notwithstanding, if the Purchasers
        receive any payment or payments on account of the liabilities guaranteed
        hereby,
        which payment or payments or any part thereof are subsequently invalidated,
        declared to be fraudulent or preferential, set aside and/or required to be
        repaid to a trustee, receiver, or any other party under any Insolvency Law,
        common law or equitable doctrine, then to the extent of any sum not finally
        retained by the Purchasers, the Guarantor's obligations to the Purchasers
        shall
        be reinstated and this Guaranty shall remain in full force and effect (or
        be
        reinstated) until payment shall have been made to the Purchasers, which payment
        shall be due on demand.

       

      11.   Books
        and Records.
        The
        books and records of the Purchasers showing the account between the Purchasers
        and the Company shall be admissible in evidence in any action or proceeding,
        shall be binding upon the Guarantor for the purpose of establishing the items
        therein set forth (absent manifest error) and shall (absent manifest error)
        constitute prima facie proof thereof.

       

      12.   No
        Waiver.
        No
        failure on the part of the Purchasers to exercise, and no delay in exercising,
        any right, remedy or power hereunder shall operate as a waiver thereof, nor
        shall any single or partial exercise by the Purchasers of any right, remedy
        or
        power hereunder preclude any other or future exercise of any other legal
        right,
        remedy or power. Each and every right, remedy and power hereby granted to
        the
        Purchasers or allowed it by law or other agreement shall be cumulative and
        not
        exclusive of any other, and may be exercised by the Purchasers at any time
        and
        from time to time.

       

      13.   Waiver
        of Jury Trial.
        THE
        GUARANTOR 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 GUARANTOR 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 GUARANTOR (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.

       

      14.   Governing
        Law.
        THIS
        INSTRUMENT CANNOT BE CHANGED OR TERMINATED ORALLY, AND SHALL BE GOVERNED,
        CONSTRUED AND INTERPRETED AS TO VALIDITY, ENFORCEMENT AND IN ALL OTHER RESPECTS
        IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT
        HAVING
        EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. 

       

      15.   Severability.
        To the
        extent permitted by applicable law, any provision of this Guaranty which
        is
        prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
        be ineffective to the extent of such prohibition or unenforceability without
        invalidating the remaining provisions hereof, and any such prohibition or
        unenforceability in any jurisdiction shall not invalidate or render
        unenforceable such provision in any other jurisdiction. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Subsidiary
              Guaranty - Page 7

             

          

        

      

      16.   Amendments,
        Waivers.
        No
        amendment or waiver of any provision of this Guaranty nor consent to any
        departure by the Guarantor therefrom shall in any event be effective unless
        the
        same shall be in writing executed by the Guarantor and the
        Purchasers.

       

      17.   Notice.
        All
        notices and other communications required or permitted hereunder shall be
        in
        writing and shall be given in accordance with the provisions of Section 15
        of
        the Purchase Agreement. 

       

      18.   Successors.
        The
        Purchasers may, from time to time, without notice to the Guarantor, sell,
        assign, transfer or otherwise dispose of all or any part of the Obligations
        and/or rights under this Guaranty. Without limiting the generality of the
        foregoing, the Purchasers may assign, or grant participations to, one or
        more
        banks, financial institutions or other entities all or any part of any of
        the
        Obligations. In each such event, the Purchasers, their Affiliates and each
        and
        every immediate and successive purchaser, assignee, transferee or holder
        of all
        or any part of the Obligations shall have the right to enforce this Guaranty,
        by
        legal action or otherwise, for its own benefit as fully as if such purchaser,
        assignee, transferee or holder were herein by name specifically given such
        right. The Purchasers shall have an unimpaired right to enforce this Guaranty
        for their benefit with respect to that portion of the Obligations which the
        Purchasers have not disposed of, sold, assigned, or otherwise transferred.
        Notwithstanding the foregoing, the consent of holders of at least a majority
        of
        the outstanding aggregate principal amount of the Notes shall be required
        to
        amend modify or waive any provision of this Guaranty

       

      19.   Release.
        Nothing
        except payment in full of the Obligations shall release the Guarantor from
        liability under this Guaranty.

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Subsidiary
              Guaranty - Signature Page

             

          

        

      

      

      IN
        WITNESS WHEREOF, this Guaranty has been executed by the Guarantor as of the
        date
        first set forth above. 

       

      
        	 	 	 
	 	AXEDA
                SYSTEMS OPERATING COMPANY, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Karen
                F. Kupferberg
	 	
                
Name: Karen
                F. Kupferberg
	 	
                Title: Chief
                  Financial Officer

                 

                Address:      
                  21
                  Oxford Road

                Mansfield,
                  MA 02048

              
	 	
                Telephone:  
                  508-337-9200

                Facsimile:     
                  508-337-9201

                State
                  of Incorporation:
                  Massachusetts

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