Document:

Unassociated Document

    
       

      June
        29,
        2005

      

      Axeda
        Systems Inc.

      21
        Oxford
        Road

      Mansfield,
        MA 02048

      
        
          	
                  Attention:

                	
                  Bruce
                    J. Ryan

                
	 	
                  Board
                    of Directors

                

        

         

      

      Dear
        Mr.
        Ryan:

      

      We
        are
        pleased to express our interest in acquiring substantially all of the assets
        of
        Axeda Systems Inc. and its subsidiaries (collectively “Seller”) used in Seller’s
        device relationship management (or DRM) business (the “Business”) through a new
        company (“Buyer”) to be formed and financed by JMI Equity Fund V, L.P. and its
        affiliates (“JMI”). The following is an outline of the basic terms and
        conditions on which Buyer would be willing to acquire the assets of the Business
        (the “Proposed Transaction”): 

       

      1.    Acquisition
        of Assets; Assumption of Liabilities

       

      A
        copy of
        Seller’s consolidated balance sheet as of May 31, 2005 that identifies Seller’s
        assets and liabilities as of that date, but not necessarily as of the date
        of
        closing of Seller’s acquisition of the Business, that relate to the Business and
        Seller’s other businesses appears as Exhibit
        A
        to this
        letter (the “Seller Balance Sheet”). Buyer would acquire substantially all of
        the assets of Seller used in the Business on the closing date of such
        acquisition (collectively, the “Assets”), including computer software programs
        and related documentation, intellectual property rights (including patents,
        copyrights, trademarks and trade secrets), contract rights, customer lists,
        accounts receivable, equipment and the goodwill associated with the Business,
        including all the assets listed under the heading “DRM Buyer”on the Seller
        Balance Sheet then owned by Seller. The proposed Purchase Price contemplates
        that Buyer would assume only those liabilities of Seller listed under the
        heading “DRM Buyer”on the Seller Balance Sheet (to the extent that the same
        shall exist on the closing date of Buyer’s acquisition of the Business);
provided,
        however,
        that
        Buyer would only assume the accrued expenses for royalties only if the related
        license agreement were successfully assigned to Buyer by Seller. The specific
        assets to be purchased, and liabilities to be assumed, will be determined
        after
        completion of Buyer’s diligence review of the Business and prior to entering
        into the Definitive Documents (as defined below).

       

      2.    Purchase
        Price

       

      The
        total
        purchase price for the Assets would be $7 million (the “Purchase Price”). The
        Purchase Price would be paid in cash or, if Buyer has made any Bridge Loans
        (as
        defined below), by surrendering the instruments representing the Bridge Loans
        for credit equal to the principal and accrued interest (if any) due on those
        Bridge Loans. 

       

      3.    Employment
        Arrangements

       

      Buyer
        anticipates offering employment with Buyer in connection with closing the
        Proposed Transaction to specified employees of Seller who are employed in
        the
        Business at the time of the closing, including certain members currently
        engaged
        in the management of the Business. Notwithstanding the foregoing, Buyer in
        its
        sole discretion may choose to not offer employment to any such employees
        and
        Buyer shall not responsible for any severance obligations related thereto.
        As a
        condition to closing, Seller shall agree not to solicit or hire any employee
        who
        accepts employment with Buyer. Post-closing, Buyer shall endeavor to put
        an
        attractive incentive program in place for management.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              2

          

        

      

      Buyer
        and
        Seller would work with the key managers of the Business to have them waive
        any
        rights they may have to severance payments from Seller, or to have Buyer
        assume
        those severance payment obligations under equitable arrangements determined
        by
        Buyer, in either case upon completion of the Proposed Transaction. 

       

      4.    Definitive
        Documents

       

      Promptly
        following Seller’s execution of this letter of intent: (i) Buyer will begin its
        due diligence investigation of Seller, the Business and the Assets; and (ii)
        Buyer and Seller, together with their authorized representatives, will begin
        negotiating in good faith a definitive acquisition agreement and related
        agreements (the “Definitive Documents”). 

       

      The
        Definitive Documents will contain terms consistent with this letter of intent
        (unless otherwise agreed upon between Buyer and Seller), together with customary
        representations, warranties, covenants, indemnities, releases, conditions,
        and
        agreements of Seller. Buyer’s obligation to enter into the Definitive Documents
        is subject to Buyer being satisfied in its sole discretion with the results
        of
        its due diligence investigations, and Seller obtaining and delivering to
        Buyer
        (i) all consents from Laurus Master Fund, Ltd., Special Situations Private
        Equity Fund, L.P. and their affiliates and associates necessary for Seller
        to
        enter into and perform the Definitive Documents, consummate the Proposed
        Transaction and permit the Bridge Loans to be made and (ii) all other third
        party consents necessary for Seller to enter into the Definitive Documents
        and
        permit the Bridge Loans to be made. The initial drafts of the Definitive
        Documents will be prepared by Buyer. 

       

      Buyer’s
        obligation to consummate the Proposed Transaction at closing would be subject
        to
        customary conditions and would include the following:

       

      (a)    Seller
        obtaining and delivering to Buyer all governmental and third party consents
        necessary to complete the Proposed Transaction, assign the assumed contracts
        and
        to enable Buyer to continue the operation of the Business following the closing;
        

       

      (b)   the
        absence of any material adverse change in the Assets, the Business, or the
        results of operations, financial condition or prospects of the Business,
        or in
        any law or regulation which could materially adversely affect the Business;
        and

       

      (c)   Seller
        obtaining and delivering to Buyer releases from third parties who have claims
        or
        liens against any of the Assets. 

       

      5.    Closing
        Matters 

       

      JMI
        desires to complete the Proposed Transaction as soon as possible. JMI is
        willing
        to proceed with the goal of entering into the Definitive Documents by July
        31,
        2005 and closing the Proposed Transaction as soon thereafter as possible.
        If,
        however, consummation of the Proposed Transaction requires the prior approval
        of
        Seller’s stockholders or would otherwise be delayed:

       

      (a)   As
        a
        condition to Buyer entering into the Definitive Documents, Seller’s directors
        and officers (other than members of Seller’s independent committee of directors
        shall enter into an agreement with Buyer pursuant to which those holders
        would
        agree, for so long as the Definitive Documents remain in effect, to vote
        all of
        Seller’s outstanding voting securities beneficially owned by them (i) in favor
        of the Proposed Transaction and any other matters related thereto, and (ii)
        against any competing transaction or corporate action.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              3

          

        

      

      (b)    During
        the 45 day period commencing on the date of acceptance of this letter of
        intent
        by Seller (as designated on its signature block below), Seller will not (and
        it
        will assure that its officers, directors, employees, agents, representatives,
        financial advisors, attorneys and affiliates do not) take any action to (i)
        directly or indirectly through any other party solicit or encourage any proposal
        relating to the acquisition of the Business, or other transaction which would
        make consummation of the Proposed Transaction reasonably unlikely to occur
        (any
        such transaction, an “Alternative Transaction”), (ii) directly or
        indirectly through any other party engage in any negotiations with or provide
        any information to any person or entity (other than Buyer and its
        representatives) with respect to an Alternative Transaction, or
        (iii) dispose of any assets pertaining to the Business other than
        in the
        ordinary course of business consistent with past practice; provided
        that,
        if,
        after the date hereof and before the date 14 days after the first public
        announcement of the Proposed Transaction (but in no event after obtaining
        the
        approval of Seller’s stockholders of the Proposed Transaction), Seller’s board
        of directors receives an unsolicited, bona fide written proposal relating
        to an
        Alternative Transaction (a “Takeover Proposal”) in circumstances not involving a
        breach of this letter of intent, the Definitive Documents (if any are entered
        into) or any standstill or similar agreement, and Seller’s board of directors
        reasonably determines in good faith that such Takeover Proposal constitutes
        a
        Superior Proposal and with respect to which Seller’s board of directors
        determines in good faith, after considering applicable provisions of state
        law
        and after consulting with and receiving the advice of outside counsel, that
        the
        taking of such action is necessary for Seller’s board of directors to comply
        with its fiduciary duties to Seller’s stockholders under the Delaware General
        Corporation Law, then Seller may, at any time prior to the date 14 days after
        the first public announcement of the Proposed Transaction (but in no event
        after
        obtaining the approval of Seller’s stockholders of the Proposed Transaction) and
        after providing Buyer not less than 48 hours written notice of its intention
        to
        take such actions, (A) furnish information with respect to Seller to the
        person
        making such Takeover Proposal, but only after such person enters into a
        customary confidentiality agreement with Seller (which confidentiality agreement
        must be no less favorable to Seller (i.e., no less restrictive with respect
        to
        the conduct of such person) than the Confidentiality Agreement between Seller
        and JMI), provided that such confidentiality agreement may not include any
        provision calling for an exclusive right to negotiate with Seller, and (B)
        participate in discussions and negotiations with such person regarding such
        Takeover Proposal. A “Superior
        Proposal”
        shall
        be a bona fide written offer obtained not in breach of this letter of intent,
        the Definitive Documents (if any are entered into) or any standstill or similar
        agreement to acquire, directly or indirectly, all or substantially all the
        assets of the Business or to enter into an Alternative Transaction made by
        a
        third party which is not subject to a financing contingency and which is
        otherwise on terms and conditions that the Seller’s board of directors
        determines in its good faith and reasonable judgment (after consultation
        with
        its financial advisor) to be more favorable to the Company’s stockholders from a
        financial point of view than the Proposed Transaction, taking into account
        at
        the time of determination any changes to the terms of the Proposed Transaction
        that as of that time had been proposed by Buyer and the ability of the third
        party making such proposal to consummate the transactions contemplated by
        such
        proposal (based upon, among other things, the availability of financing and
        the
        expectation of obtaining required approvals). 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              4

          

        

      

      During
        such 45-day period, Seller agrees to promptly notify Buyer of the receipt
        of any
        proposal or expression of interest relating to an Alternative Transaction
        and
        any determination made by the Seller board that it has received a Superior
        Proposal, describing in each case the identity of the person making such
        proposal, offer, inquiry or other contact and the terms and conditions of
        any
        proposals or offers or the nature of any inquiries or contacts (and shall
        include with such notice copies of any written materials received from or
        on
        behalf of such person relating to such proposal, offer, inquiry or request),
        and
        thereafter shall promptly keep Buyer fully informed of all material developments
        affecting the status and terms of any such proposals, offers, inquiries or
        requests. Seller shall not (i)(A) withdraw or modify, or propose publicly
        to
        withdraw or modify, in a manner adverse to Buyer, the recommendation of Seller’s
        board of directors in favor of the Proposed Transaction or (B) approve or
        recommend, or propose publicly to approve or recommend, any Takeover Proposal
        or
        (ii) approve or recommend, or propose publicly to approve or recommend, or
        cause
        or authorize Seller to enter into, any letter of intent, agreement in principle,
        memorandum of understanding, merger, acquisition, purchase or joint venture
        agreement or other agreement related to any Takeover Proposal (other than
        a
        confidentiality agreement in accordance with the preceding paragraph) (each,
        a
“Company
        Acquisition Agreement”).
        Notwithstanding the foregoing, (x) Seller’s Board of Directors may withdraw or
        modify its recommendation, or recommend a Takeover Proposal, if such Board
        determines in good faith, after reviewing applicable provisions of state
        Law and
        after consulting with and receiving advice from outside counsel, that the
        failure to make such withdrawal, modification or recommendation would constitute
        a breach by Seller’s board of directors of its fiduciary duties to Seller’s
        stockholders under the Delaware General Corporation Law and (y) if Seller’s
        Board of Directors receives an unsolicited, bona fide written Takeover Proposal
        that was made after the date hereof and before the date 14 days after the
        first
        public announcement of the Proposed Transaction (but in no event after obtaining
        the approval of Seller’s stockholders of the Proposed Transaction) in
        circumstances not involving a breach of this letter of intent, the Definitive
        Documents (if any are entered into) or any standstill or similar agreement
        and
        that such Board determines in good faith constitutes a Superior Proposal,
        Seller’s board of directors may, in response to such Superior Proposal and
        within 48 hours after the expiration of the three business day period described
        below, enter into a definitive agreement with respect to such Superior Proposal
        but only if Seller shall have concurrently with entering into such definitive
        agreement terminated this letter of intent or the Definitive Documents (if
        any)
        and prior thereto or concurrently therewith paid the termination fee required
        pursuant to paragraph 5(c) and the expenses required pursuant to paragraph
        5(d)
        and repaid all outstanding Bridge Loans, but in any event only after the
        third
        business day following Buyer’s receipt of written notice (the “Notice”)
        from
        Seller advising Buyer that the Seller’s board of directors is prepared to enter
        into a definitive agreement with respect to such Superior Proposal and terminate
        this letter of intent or the Definitive Documents (if any), and only if,
        during
        such three business day period, Seller and its representatives shall have
        negotiated in good faith with Buyer to make such adjustments in the terms
        of
        Proposed Transaction as would enable Buyer to proceed with the Proposed
        Transaction on such adjusted terms and, at the end of such three business
        day
        period, after taking into account any such adjusted terms as may have been
        proposed by Parent since its receipt of such Notice, the Seller’s board of
        directors has again in good faith made the determination referred to above
        in
        this clause (y).

       

      (c)    Except
        to
        the extent provided in this paragraph 5(c) and (d), each party will be
        responsible for the payment of its respective professional services expenses,
        including lawyers and accountants fees and expenses, incurred in connection
        with
        this letter of intent and the Proposed Transaction, including in the event
        that
        definitive documentation for the Proposed Transaction is not executed.
        If
        the
Proposed
        Transaction
        is not
        completed, then in order to compensate JMI and Buyer for lost opportunities,
        time and resources, Seller shall pay JMI Management, Inc. a termination fee
        of
        $500,000 in the following circumstances: 

       

      (i)    Prior
        to
        the execution of the Definitive Documents, the termination fee will become
        payable if and only if Seller receives a Takeover Proposal and does not reject
        such proposal within five (5) calendar days after the receipt thereof.

       

      (ii)   If
        the
        Definitive Documents for the Proposed
        Transaction
        are
        executed and after the date hereof Seller receives a Takeover Proposal, the
        termination fee will become payable if the transaction contemplated by the
        Definitive Documents does not close for any reason other than a failure of
        Seller’s stockholders to approve the Proposed Transaction or a breach of the
        Definitive Documents by Buyer. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              5

          

        

      

      (d)    In
        addition, if this letter of intent or the Definitive Documents are terminated
        for any reason, Seller will also reimburse Buyer and JMI Management, Inc.
        with
        respect to the reasonable fees and expenses for legal, accounting and financial
        advisory services that it shall have incurred prior to the termination of
        this
        letter of intent or the Definitive Documents, as the case may be.

       

      6.    Interim
        Financing Matters 

       

      JMI
        and
        Buyer would be willing to make up to an aggregate principal amount of $1,500,000
        of loans (the “Bridge Loans”) available to Seller to fund expenditures of Seller
        directly attributable to the operation of the Business in the ordinary course
        as
        follows:

       

      (a)   Upon
        the
        entry into this letter of intent, Buyer would commit to make Bridge Loans
        available to Seller (i) on or before July 1, 2005 of up to $250,000 and (ii)
        or
        before July 31, 2005 of up to $350,000, in immediately available funds, which
        Bridge Loan would:

      

      
        	·  	
                be
                  immediately due and payable on, and as a condition precedent to,
                  the
                  termination of this letter of intent, Seller entering into a letter
                  of
                  intent or definitive agreement relating to a competing transaction
                  or
                  Seller taking any action adverse to the Proposed
                  Transaction,

              

      

      
        	·  	
                be
                  senior to all other indebtedness of Seller,

              

      

      
        	·  	
                be
                  secured by all the Assets, and

              

      

      
        	·  	
                be
                  conditioned on Seller obtaining and delivering to Buyer all third
                  party
                  consents necessary for Seller to enter into and perform the definitive
                  documents relating to these Bridge Loans and permit these Bridge
                  Loans to
                  be made (including any required from Laurus Master Fund, Ltd.,
                  Special
                  Situations Private Equity Fund, L.P. and their affiliates and
                  associates).

              

      

      

      (b)   The
        Definitive Documents will provide for Buyer to commit to make additional
        Bridge
        Loans available to Seller between signing and closing of up to an additional
        aggregate principal amount of $900,000, which Bridge Loans would:

      

      
        	·  	
                be
                  made in increments based on requests by Seller provided that (1)
                  Buyer
                  will have five days to fund the request and (2) Seller will not
                  make
                  funding requests sooner than 15 days following the date of funding
                  any
                  prior loan increment. Notwithstanding the foregoing, Buyer shall
                  not be
                  required to loan any increment on or after the Maturity Date (as
                  defined
                  below) or if Seller has given a notice of receipt of a Takeover
                  Proposal
                  and it has not given notice that Seller has rejected the Takeover
                  Proposal, 

              

      

      
        	·  	
                be
                  made only if, at the time each tranche is to be advanced, the
                  representations and warranties set forth in the Definitive Documents
                  are
                  accurate and Seller has performed all covenants set forth in the
                  Definitive Documents required to be performed at or before that
                  time,
                  

              

      

      
        	·  	
                be
                  pari
                  passu
                  with any indebtedness currently owed to Laurus Master Fund, Ltd.
                  and its
                  affiliates and associates, and senior to all other indebtedness
                  of Seller,
                  

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              6

          

        

      

       

      
        	·  	
                be
                  secured by a second priority lien against all the Assets (second
                  in
                  priority only to the liens currently securing indebtedness currently
                  owed
                  to Laurus Master Fund, Ltd. and its affiliates and associates),
                  and

              

      

      
        	·  	
                be
                  conditioned on Seller obtaining and delivering to Buyer all third
                  party
                  consents necessary for Seller to enter into and perform the definitive
                  documents relating to the Bridge Loans and permit the Bridge Loans
                  to be
                  made (including those required from Laurus Master Fund, Ltd., Special
                  Situations Private Equity Fund, L.P. and their affiliates and
                  associates).

              

      

      

      (c)    All
        Bridge Loans would also have the following principal terms and conditions,
        among
        others: 

      

      
        	·  	
                bear
                  interest at the rate of 7% per annum,

              

      

      
        	·  	
                be
                  immediately due and payable upon the earliest to occur of (a) October
                  31,
                  2005, (b) the date on which this letter of intent or definitive
                  acquisition agreement for the Proposed Transaction is terminated
                  (the date
                  any termination fee becomes due being deemed a termination thereof
                  even if
                  no formal written termination notice has been given) (the earlier
                  of (a)
                  or (b) being herein, the “Maturity Date”), or (c) the closing date of the
                  Proposed Transaction.

              

      

      

      
        	·  	
                Promptly
                  following Seller’s execution of this letter of intent, Buyer will begin
                  preparing the definitive documents for implementing the Bridge
                  Loans.
                  

              

      

      

      7.    Non-Solicitation
        and Exclusive Negotiations

       

      In
        consideration of the substantial time, effort, and expense to be expended
        by
        Buyer in the course of its due diligence investigation, for a period of 45
        days
        following the effective date of this letter of intent, Seller and its officers,
        directors, financial advisors, attorneys, representatives and other advisors
        and
        agents (collectively, “representatives”) (i) will negotiate exclusively with
        Buyer with respect to any transaction relating to the sale of the Business;
        (ii)
        will not, directly or indirectly, solicit, entertain, or encourage offers
        from,
        negotiate with, or in any manner encourage, discuss, accept, or consider
        any
        proposal of, or enter into any agreement with, any other person relating
        to the
        purchase or sale of Seller or the Business (in whole or in part), whether
        through direct purchase of shares or assets, merger, consolidation, or other
        business combination (other than sales of inventory in the ordinary course
        of
        business), and (iii) will not, directly or indirectly, furnish non-public
        information about Seller or the Business to any other person in connection
        with
        any such proposal. Seller will promptly inform Buyer of any such inquiries
        or
        proposals and provide Buyer with copies of all related documentation. Upon
        Seller’s execution of this letter of intent, Seller will terminate any
        negotiations, discussions or understandings it may currently have with respect
        to a transaction that would be inconsistent with the transactions contemplated
        by this letter of intent. 

       

      8.    Conduct
        of Business

       

      Following
        the date hereof and through the closing of the Proposed Transaction, Seller
        will
        operate the Business only in the ordinary course consistent with past practices,
        including with respect to the collection of accounts receivable, payment
        of
        accounts payable and other expenses, accounting practices (particularly with
        respect to revenue and expense recognition methods), and the maintenance
        of its
        relationships with employees, sales representatives, customers, and suppliers.
        All cash collected by Seller from accounts receivable reflected on the Balance
        Sheet or generated by the Business after May 31, 2005 shall be used by Seller
        to
        pay the accounts payable, operating expenses and other liabilities directly
        related to the Business. Seller will not enter into any transaction other
        than
        in the ordinary course of business consistent with past practices, or any
        transaction that is not at arm’s length with affiliated persons or entities. In
        addition, Seller will (a) provide Buyer with monthly financial statements,
        (b)
        maintain the overall marketing effort of the Business at levels consistent
        with
        its past practices and in accordance with its plans for the rest of the calendar
        year, (c) continue to offer its products at prices and upon terms and conditions
        similar to those currently being offered, and (d) continue to spend monies
        to
        create new versions of products in the ordinary course of business.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              7

          

        

      

      9.    Access

       

      Seller
        will provide Buyer with full and complete access at all reasonable times
        and
        upon reasonable prior notice to all of its representatives and to its
        facilities, books, and records (including marketing statistics) and will
        cause
        its representatives to cooperate fully with Buyer and Buyer’s representatives in
        connection with Buyer’s due diligence review of Seller, the Assets and the
        Business.

       

      10.   Miscellaneous

       

      (a)  This
        letter of intent shall become effective as of the date of receipt by Buyer
        of a
        duly-signed counterpart of this letter from Seller. This letter of intent
        shall
        be construed in accordance with the internal laws of the Commonwealth of
        Massachusetts, without giving effect to the principles of conflicts of laws
        thereof.

       

      (b)  Each
        of
        the parties will bear its own expenses in connection with the evaluation,
        negotiation and consummation of the Proposed Transaction. 

       

      (c)  This
        letter of intent is not a binding agreement of the parties nor does it describe
        all matters on which agreement must be reached for the Proposed Transaction
        to
        be consummated. Any agreement relating to the Proposed Transaction will only
        become binding upon the execution of the Definitive Documents. Notwithstanding
        anything contained herein to the contrary, the parties agree to be bound
        by
        paragraphs 5(b), 5(c), 5(d), 6(a), 6(c), 7, 8, 9 and 10 upon execution of
        this
        letter. 

      

      (d)  Neither
        party shall, without the prior written consent of the other party, disclose
        to
        any third party the existence of this letter of intent, the identity of Buyer
        or
        Seller or the transactions contemplated by this letter of intent, except
        as
        required by law or by any applicable listing agreement with a national
        securities exchange or market as determined in the good faith judgment of
        the
        party proposing to make such release (in which case such party shall not
        issue
        or cause the publication of such press release or other public announcement
        without prior consultation with the other party).

      ________________________

       

      This
        letter merely states the intentions of the parties and does not create any
        legal
        obligations, except for the provisions of paragraphs
        5(b), 5(c), 5(d), 6(a), 6(c), 7, 8, 9 and 10 hereof.
        The
        proposal made in this letter of intent will be terminated without further
        notice
        unless it is accepted, 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              8

          

        

      

      signed
        and returned to JMI by not later than noon, EST, on June 29, 2005. If the
        foregoing correctly sets forth the understanding and intentions of Seller,
        please acknowledge your agreement by signing and returning a duplicate of
        this
        letter to Bradford D. Woloson of JMI at 1119 St. Paul Street, Baltimore,
        MD
        21202, Fax: (410) 385-2641. We look forward to working with you on this matter.
        

      

       

      Very
        truly yours,

      

      

      By:  /s/
        Bradford Woloson   

      Bradford
        D. Woloson

      General
        Partner

      

      

      Accepted
        and Agreed to by Axeda Systems Inc., 

      on
        behalf
        of itself and its subsidiaries:

      

      AXEDA
        SYSTEMS INC.

      

      

      By:  
        /s/
        Bruce J. Ryan

      Bruce
        J.
        Ryan

      Board
        Member 

      Chair
        of
        the Special Committee

      

      Date: 
        June
        29, 2005

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              9

          

        

      

      Exhibit
        A

      

      

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
            Axeda
              Systems Inc.

            June
              29,
              2005

            Page
              10

          

        

      

      Exhibit
        A
        - cont.Unassociated Document

    

      SENIOR
        SECURED BRIDGE NOTE PURCHASE AGREEMENT

       

      This
        Senior Secured Bridge Note Purchase Agreement, dated as of July 8, 2005 (the
        “Agreement”),
        by
        and among Axeda Systems, Inc., a Delaware corporation (the “Company”),
        Axeda
        Systems Operating Company, Inc., a Massachusetts corporation and an indirect
        wholly owned subsidiary of the Company (the “Guarantor”),
        and
        the persons listed on Schedule
        1
        hereto
        (the “Purchasers”).

       

      The
        Company, the Guarantor and the Purchasers hereby agree as follows:

       

      1.    The
        Notes and the Guaranty.
        

       

      (a)    The
        Company has authorized the issuance and sale, in accordance with the terms
        hereof, of the Company’s 7% Senior Secured Bridge Notes in the original
        aggregate principal amount of up to $600,000 (individually, a “Note”
        and
        collectively, the “Notes”).
        Each
        Note will be substantially in the form set forth in Exhibit A
        hereto.

       

      (b)    The
        Company’s obligations under the Notes shall be guarantied by the Guarantor. The
        Guarantor shall execute and deliver to the Purchasers the Guaranty (the
“Guaranty”) in substantially the form set forth in Exhibit B
        hereto.

       

      2.    Purchase
        and Sale of Notes.
        At the
        Closing (as defined below), the Company shall issue and sell to the Purchasers,
        and, subject to and in reliance upon the representations, warranties, terms
        and
        conditions contained herein, each Purchaser, severally and not jointly, shall
        purchase from the Company, a Note in up to the aggregate principal amount
        set
        forth opposite such Purchaser’s name on Schedule 1
        hereto
        under the heading “Maximum
        Principal Amount.”
        Subject to the terms and conditions hereof, the Maximum Principal Amount
        for
        each Purchaser shall be payable in separate installments by each Purchaser
        in
        the amounts set forth opposite such Purchaser’s name on Schedule
        1
        hereto
        under the headings “First
        Installment Amount”
        and
“Subsequent
        Installment Amount,”
        respectively (collectively for each Purchaser, the “Installment
        Amounts”).
        The
        Installment Amounts shall be payable in accordance with the terms of Sections
        3
        and 4 hereof. 

       

      3.    Closing.
        

       

      (a)    The
        consummation of the purchase and sale of the Notes (the “Closing”)
        shall
        be held at 10:00 a.m. on July 8, 2005 (the “Closing
        Date”),
        or
        such other date and time as shall be mutually agreed upon. At the Closing,
        (i)
        the Company shall issue the Notes, dated as of the Closing Date, payable
        to the
        order of each Purchaser in the aggregate principal amount set forth opposite
        such Purchaser’s name on Schedule
        1
        hereto
        under the heading “Maximum
        Principal Amount,”
        and
        (ii) the Guarantor shall execute and deliver to the Purchasers the Guaranty.
        At
        the Closing, in exchange for the issuance of the Notes and the Guaranty,
        each
        Purchaser shall deliver to the Company, by way of wire transfer of immediately
        available United States funds, the amount set forth opposite such Purchaser’s
        name on Schedule
        1
        hereto
        under the heading “First
        Installment Amount”
        (the
“First
        Installment”).
        

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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              Secured Bridge Note Purchase Agreement - Page 2

             

          

        

      

      (b)    The
        obligations of the Purchasers to purchase the Notes and pay the First
        Installment Amount at the Closing are subject to the following
        conditions:

       

      (i)  The
        representations and warranties of the Company set forth in this Agreement
        shall
        be true and correct on and as of the date hereof and on and as of the Closing
        Date with the same effect as though such representations and warranties had
        been
        made on and as of such date, and the President of the Company shall have
        certified to the Purchasers in writing to such effect;

       

      (ii)  The
        Company shall have performed and complied with all agreements contained in
        this
        Agreement required to be performed or complied with by it prior to or at
        the
        date of such Closing, and the President of the Company shall have certified
        to
        the Purchasers in writing to such effect;

       

      (iii)  The
        Company and the Guarantor shall have duly executed and delivered to the
        Purchasers a Security Agreement substantially in the form attached as
Exhibit C
        (the
“Security
        Agreement”);

       

      (iv)  The
        Guarantor shall have duly executed and delivered to the Purchasers the
        Guaranty;

       

      (v)  The
        Purchasers shall have received evidence in form and substance reasonably
        satisfactory to them that all filings, recordings and registrations, including,
        without limitation, the filing of duly executed financing statements on form
        UCC-1 and the requisite filings with the U.S. Patent & Trademark Office,
        necessary or desirable to perfect the liens created by the Security Agreement
        shall have been completed; 

       

      (vi)  The
        Company shall have obtained and delivered to the Purchasers, in form
        satisfactory to the Purchasers, all necessary consents of governmental agencies
        and third parties (including Laurus Master Fund, Ltd. (“Laurus”))
        to
        permit the Company to enter into and perform its obligations under this
        Agreement and the Security Agreement; 

       

      (vii)  All
        corporate and other proceedings to be taken by the Company in connection
        with
        the transactions contemplated hereby and all documents incident thereto shall
        be
        satisfactory in form and substance to the Purchasers, and the Purchasers
        shall
        have received all such counterpart originals or certified or other copies
        of
        such documents as they reasonably may request; and

       

      (viii)  The
        Company and Laurus shall have duly executed and delivered to the Purchasers
        a
        Subordination Agreement substantially in the form attached as Exhibit D
        (the
“Subordination
        Agreement”).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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              Secured Bridge Note Purchase Agreement - Page 3

             

          

        

      

      4.    Subsequent
        Installments.
        Each of
        the Purchasers shall, subject to the terms and conditions hereof, make one
        or
        more additional advances to the Company in the aggregate amount up to (and
        not
        to exceed) the amount set forth opposite such Purchaser’s name on Schedule
        1
        hereto
        under the heading “Subsequent
        Installment Amount,”
        in one
        or more fundings from time to time from the Closing Date through July 31,
        2005
        (each such advance, a “Subsequent
        Installment”
        and,
        collectively, the “Subsequent
        Installments”).
        If
        the Company desires the Purchasers to make a Subsequent Installment, it shall
        deliver a written request to the Purchasers, which request shall specify
        the
        amount of such Subsequent Installment, the intended use of such Subsequent
        Installment funds and shall certify that the none of the events specified
        in
        clauses (i) through (iii) in the subsequent sentence shall have occurred
        (the
“Funding
        Request Notice”).
        No
        Purchaser shall be obligated to fund any Subsequent Installment if (i) any
        representation or warranty by the Company contained herein shall be untrue
        or
        incorrect in any way on the date of such Subsequent Installment, (ii) that
        certain letter of intent dated June 29, 2005 between an affiliate of the
        Purchasers and the Company (the “Letter
        of Intent”)
        shall
        have been terminated or the conditions to the payment of the termination
        fee
        contemplated by paragraph 5(c) of the Letter of Intent shall have occurred
        (the
        date any termination fee becomes due being deemed a termination thereof even
        if
        no formal written termination notice has been given), or (iii) any breach
        or
        default (including an Event of Default (defined below)) shall have occurred
        and
        be continuing under this Agreement, any Note, the Guaranty, the Security
        Agreement, the Subordination Agreement or the Letter of Intent (collectively,
        the “Bridge
        Loan Documents”).
        The
        funding of any Subsequent Installment shall occur within five business days
        after the receipt of the applicable Funding Request Notice by delivery by
        Purchasers to the Company via wire transfer of immediately available United
        States funds, the amount listed in the Funding Request Notice delivered to
        such
        Purchaser. All Installment Amounts and all payments of principal and interest
        under each Note (or any portion, installment or drawdown thereon) shall be
        recorded by the applicable Purchaser and endorsed on the grid which is part
        of
        such Purchaser’s Note. The entries on the grid which is part of such Note shall
        be prima
        facie
        evidence
        of amounts outstanding thereunder. The failure to make any such endorsement
        or
        any error in any such endorsement shall not affect the obligations of the
        Company or the Guarantor in respect of the First Installment or any Subsequent
        Installment. In no event shall the aggregate amount of all Subsequent
        Installments advanced by any Purchaser exceed the amount set forth opposite
        such
        Purchaser’s name on Schedule
        1
        hereto
        under the heading “Subsequent
        Installment Amount.”
        On or
        before the date of any Subsequent Installment, the Company shall deliver
        to the
        Purchasers such documents as may be requested by them.

       

      5.    Terms
        of the Notes.
        

       

      (a)    Maturity.
        The
        aggregate principal amount of the Notes, together with all accrued interest
        thereon, shall be due and payable in full (without notice, demand or
        presentment) on the earliest to occur of the following (the earliest of such
        events, the “Maturity
        Date”):
        (i)
        the date on which the Letter of Intent or the Definitive Documents (as such
        term
        is defined in the Letter of Intent) for the Proposed Transaction (as such
        term
        is defined in the Letter of Intent) shall have been terminated or the conditions
        to the payment of the termination fee contemplated by paragraph 5(c) of the
        Letter of Intent shall have occurred (the date any termination fee becomes
        due
        being deemed a termination thereof even if no formal written termination
        notice
        has been given) (the payment in full of the Notes shall be a condition precedent
        to such termination of the Letter of Intent); (ii) the date any termination
        fee
        becomes due under the Letter of Intent or the definitive acquisition agreement
        for the Proposed Transaction; (iii) the date on which the Company or any
        of its
        subsidiaries or affiliates enters into a letter of intent, written understanding
        or definitive agreement relating to an Alternative Transaction (as such term
        is
        defined in the Letter of Intent) or the Company otherwise takes any action
        adverse to the Proposed Transaction; (iv) the date on which the Proposed
        Transaction is consummated; (v) the occurrence of an Event of Default (as
        defined below) and (vi) October 31, 2005.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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              Secured Bridge Note Purchase Agreement - Page 4

             

          

        

      

      (b)    Interest.
        The
        aggregate principal amount of the Notes, from time to time outstanding, shall
        bear interest at a rate per annum equal to seven percent (7%). All accrued
        interest on the Notes shall be due and payable on the Maturity Date. All
        interest shall be computed for the actual number of days elapsed on the basis
        of
        a 360-day year and shall compound annually. From and after the occurrence
        of an
        Event of Default, the unpaid principal balance of the Notes and, to the extent
        permitted by law, the overdue interest thereon, shall bear interest at a
        rate
        per annum equal to ten percent (10%). 

       

      (c)    Payment;
        Usury.
        

       

      (i)  All
        payments by the Company under this Agreement shall be made in United States
        dollars without set-off or counterclaim and be free and clear and without
        any
        deduction or withholding for any taxes or fees of any nature whatever, unless
        the obligation to make such deduction or withholding is imposed by law. The
        Company, to the extent permitted by applicable law, waives presentment for
        payment, protest and demand, and notice of protest, demand and/or dishonor
        and
        nonpayment of the Notes, notice of any Event of Default, and all other notices
        or demands otherwise required by law that the Company may lawfully waive.
        If any
        day on which a payment is due pursuant to the terms of this Note is not a
        day on
        which banks in the Commonwealth of Massachusetts are generally open (a
“Business
        Day”),
        such
        payment shall be due on the next Business Day following, and such extension
        of
        time shall in such case be included in the computation of payment of interest
        due.

       

      (ii)  For
        so
        long as any of the Notes remain outstanding, the Company covenants (to the
        extent that it may lawfully do so) that it will not at any time insist upon,
        plead, or in any manner whatsoever claim or take the benefit or advantage
        of any
        stay, extension or usury law wherever enacted, now or at any time hereafter
        in
        force, which may affect the covenants or the performance of this Agreement;
        and
        the Company (to the extent that it may lawfully do so) hereby expressly waives
        all benefit or advantage of any such law and covenants that it will not,
        by
        resort to any such law, hinder, delay or impede the execution of any power
        herein granted to the Purchasers, but will suffer and permit the execution
        of
        every such power as though no such law has been enacted. 

       

      (iii)  Notwithstanding
        anything herein or in the Notes which may be to the contrary, in no event,
        contingency, or circumstances whatsoever shall the interest or any amount
        deemed
        to be interest payable by the Company hereunder with respect to the Notes
        exceed
        the maximum amount permitted by applicable law and, to the extent that any
        payments in excess of such permitted amount are finally determined to have
        been
        received by the Purchasers, such excess shall be considered payments in respect
        of the principal of the Notes and, if the principal of the Notes has been
        paid
        in full, shall be refunded to the Company. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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              Secured Bridge Note Purchase Agreement - Page 5

             

          

        

      

      (d)   Security.
        The
        Notes shall be secured by and entitled to the benefits of the Security
        Agreement.

       

      6.    Use
        of
        Proceeds.
        The
        Company shall use (and shall cause it subsidiaries (including the Guarantor)
        to
        use) the proceeds from the sale of the Notes solely to fund expenditures
        of the
        Company directly attributable to the operation of the Business (as defined
        in
        the Letter of Intent) in the ordinary course. 

       

      7.    Priority.
        The
        Notes shall be senior in all respects (including the right of payment) to
        all
        other indebtedness of the Company and the Guarantor, now existing or hereafter
        incurred. All other indebtedness for borrowed money of the Company or the
        Guarantor, now existing or hereafter incurred, shall be unsecured (other
        than
        the Laurus Debt (defined below)) and shall be subordinated to the Notes pursuant
        to the Subordination Agreement.

       

      8.    No
        Prepayment.
        The
        Notes may not be prepaid by the Company. 

       

      9.    Representations
        and Warranties of the Company.
        The
        Company hereby represents and warrants to the Purchasers that as of the Closing
        Date and the date of each Subsequent Installment (a “Subsequent
        Installment Date”):

       

      (a)    The
        Company is a corporation duly organized, validly existing and in good standing
        under the laws of the State of Delaware. The Guarantor is a corporation duly
        organized, validly existing and in good standing under the laws of the
        Commonwealth of Massachusetts. Each of the Company and the Guarantor is duly
        licensed or qualified to transact business as a foreign corporation and is
        in
        good standing in each jurisdiction in which the nature of the business
        transacted by it or the character of the properties owned or leased by it
        requires such licensing or qualification.

       

      (b)    The
        Bridge Loan Documents have been duly authorized, executed and delivered by
        each
        of the Company and the Guarantor (to the extent a party thereto) and constitute
        the legal, valid and binding obligations of the Company and the Guarantor
        (to
        the extent a party thereto), enforceable in accordance with their respective
        terms. 

       

      (c)    Neither
        the execution and delivery of the Bridge Loan Documents nor the performance
        thereof has constituted or resulted in, nor will constitute or result in,
        a
        default or violation in any respect of any law or regulation applicable to
        the
        Company or the Guarantor or any term or provision of the organizational
        documents (including charter and by-laws) of the Company or the Guarantor,
        or
        any agreement or instrument by which either the Company or the Guarantor
        is
        bound or to which their properties or assets are subject.

       

      (d)    No
        authorization, consent, approval, license, exemption of, or filing or
        registration with, any court or governmental department, commission, board,
        bureau, agency or instrumentality, is or will be necessary for, or in connection
        with, the offer, issuance, sale, execution or delivery by the Company or
        the
        Guarantor of, or for the performance by the Company and the Guarantor of
        their
        obligations under, the Bridge Loan Documents.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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              Secured Bridge Note Purchase Agreement - Page 6

             

          

        

      

      (e)    There
        is
        no litigation or governmental proceeding or investigation pending or, to
        the
        knowledge of the Company, threatened against the Company or the Guarantor
        or
        affecting any of their properties or assets, nor has there occurred any event
        or
        does there exist any condition on the basis of which any litigation, proceeding
        or investigation might properly be instituted, that would prevent, restrict
        or
        impair the transactions contemplated by the Bridge Loan Documents or the
        performance by the Company and the Guarantor of their obligations under the
        Bridge Loan Documents. 

       

      (f)    No
        person
        has or will have, as a result of the transactions contemplated by this Bridge
        Loan Documents, any right, interest or valid claim against or upon the Company
        for any commission, fee or other compensation as a finder or broker because
        of
        any act or omission by the Company or any agent of the Company.

       

      (g)    Other
        than indebtedness for borrowed money of the Company payable to Laurus pursuant
        to that certain Securities Purchase Agreement, dated as of October 4, 2004,
        between the Company and Laurus (the “Laurus
        Debt”),
        there
        is no other indebtedness for borrowed money of the Company or the
        Guarantor.

       

      10.   Covenants
        of the Company.
        Each of
        the Company and the Guarantor hereby covenants and agrees that, as long as
        any
        of the Notes are outstanding, it will comply with and observe the following
        covenants and provisions, and will cause each of its direct and indirect
        subsidiaries (if any) to comply with and observe such of the following covenants
        and provisions as are applicable to such subsidiary, and will not: 

       

      (a)    (i)
        Incur
        any additional indebtedness other than the additional $900,000 of bridge
        loans
        referenced in the Letter of Intent or (ii) repay any outstanding indebtedness
        for borrowed money other than payments on the Laurus Debt in the form of
        equity
        permitted under Section 3 of the Subordination Agreement;

       

      (b)    Create,
        incur, assume or suffer to exist, or permit any subsidiary to create, incur,
        assume or suffer to exist, any mortgage, deed of trust, pledge, lien, security
        interest or other charge or encumbrance (including the lien or retained security
        title of a conditional vendor) of any nature, upon or with respect to any
        of its
        properties, now owned or hereinafter acquired, or assign or otherwise convey
        any
        right to receive income, except that the foregoing restrictions shall not
        apply
        to liens, security interests or other charges or encumbrances (i) granted
        to the
        Purchasers pursuant to the Notes, (ii) granted in connection with the incurrence
        of the Laurus Debt, (iii) for taxes, assessments or governmental charges
        or
        levies on property of the Company or any subsidiary if the same shall not
        at the
        time be delinquent or thereafter can be paid without penalty, or are being
        contested in good faith and by appropriate proceedings or (iv) imposed by
        law,
        such as carriers’, warehousemen’s and mechanics’ liens and other similar liens
        arising in the ordinary course of business;

       

      (c)    Merge
        or
        consolidate with, or sell, assign, lease or otherwise dispose of or voluntarily
        part with the control of (whether in one transaction or in a series of
        transactions) any portion of its assets associated with the Business (whether
        now owned or hereinafter acquired) or sell, assign or otherwise dispose of
        (whether in one transaction or in a series of transactions) any of its accounts
        receivable associated with the Business (whether now in existence or hereinafter
        created), to, any person, or permit any subsidiary to do any of the foregoing;
        

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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              Secured Bridge Note Purchase Agreement - Page 7

             

          

        

      

      (d)    Declare
        or pay any dividends, purchase, redeem, retire, or otherwise acquire for
        value
        any of its capital stock (or rights, options or warrants to purchase such
        shares) now or hereafter outstanding, return any capital to its stockholders
        as
        such, or make any distribution of assets to its stockholders as such, or
        permit
        any subsidiary to do any of the foregoing; 

       

      (e)    Enter
        or
        permit any subsidiary to enter into any transaction with any holder of 5%
        or
        more of any class of capital stock of the Company, or any member of their
        families or any corporation or other entity in which any one or more of such
        stockholders or members of their immediate families directly or indirectly
        holds
        five percent (5%) or more of any class of capital stock except in the ordinary
        course of business and on terms not less favorable to the Company or the
        subsidiary than it would obtain in a transaction between unrelated parties;
        or

       

      (f)    Amend
        or
        modify any of the terms of any of the agreements or instruments relating
        to any
        indebtedness for money borrowed; provided, however, that the terms of the
        agreements and instruments relating to the Laurus Debt may be amended and
        modified solely in accordance with Section 6(c) of the Subordination
        Agreement.

       

      11.   Event
        of Default.
        If,
        while any part of the principal of or interest on the Notes remains unpaid,
        any
        one of the following “Events
        of Default”
        shall
        occur:

       

      (a)    the
        failure by the Company to pay the principal of or interest and expenses on
        the
        Notes when such payment is due;

       

      (b)    the
        Company’s breach of its obligations under the Letter of Intent or any of the
        Definitive Documents; 

       

      (c)    the
        Company shall (i) have a receiver, trustee or liquidator appointed for it
        or for
        all or a substantial part of its assets; (ii) from this date forward, admit
        in
        writing to its inability to pay its debts as they mature; (iii) make a general
        assignment for the benefit of creditors; (iv) be adjudicated bankrupt or
        insolvent; (v) file a voluntary petition in bankruptcy or a petition or an
        answer seeking reorganization or an arrangement with creditors to take advantage
        of any insolvency law; (vi) file any answer admitting the material allegations
        of a petition filed against it in any bankruptcy, reorganization or insolvency
        proceeding or fail to dismiss such petition within sixty (60) days after
        the
        filing thereof; or (vii) take any action for the purpose of effecting any
        of the
        foregoing;

       

      (d)    a
        payment
        default by the Company with respect to indebtedness that results in the
        acceleration of such indebtedness; 

       

      (e)    any
        representation or warranty made by the Company in any of the Bridge Loan
        Documents or in any certificate, instrument or written statement contemplated
        by
        or made or delivered pursuant to or in connection with the Security Agreement,
        shall prove to have been incorrect when made in any material
        respect;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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      (f)    except
        as
        set forth in Section 11(a), the failure by the Company to observe and perform
        any material covenant, condition and agreement under this Agreement or the
        Bridge Loan Documents which failure is not cured within fifteen (15) days
        after
        written notice from any Purchaser or discovery by the Company; or 

       

      (g)   an
        order,
        judgment or decree shall be entered by any court of competent jurisdiction,
        approving a petition seeking reorganization or liquidation of the Company,
        or
        appointing a receiver, trustee or liquidator of the Company of all or a
        substantial part of its assets, which such order, judgment or decree has
        not
        been effectively stayed within fifteen (15) days after entry; 

       

      then
        and
        in every such event, any Purchaser may, without notice to the Company, declare
        the Notes to be forthwith due and payable, whereupon the Notes shall forthwith
        become due and payable without presentment, demand, protest or further notice
        of
        any kind, all of which are expressly waived by the Company; provided,
        however,
        that
        upon the happening of any event under subsections (c) or (g) of this Section
        11,
        then the Notes shall, without the taking of any action by the Purchasers,
        immediately become due and payable. 

       

      12.   Amendments,
        Waivers, Etc.
        Any
        provision in this Agreement and the Notes to the contrary notwithstanding,
        changes in or additions to this Agreement or the Notes may be made, and
        compliance with any covenant or provision herein or therein set forth may
        be
        omitted or waived, if the Company shall obtain consent thereto in writing
        from
        the holder or holders of at least a majority in principal amount of all Notes
        then outstanding.

       

      13.   Choice
        of Law.
        This
        Agreement shall be governed by, and construed in accordance with, the laws
        of
        the Commonwealth of Massachusetts, without giving effect to the principles
        of
        conflicts of law thereof.

       

      14.   Expenses.
        Any
        expense incurred by the Purchasers (including, without limitation, reasonable
        attorneys’ fees and disbursements) in connection with the exercise of any right
        or remedy upon the occurrence of an Event of Default, or the enforcement
        of any
        rights under any of the Bridge Loan Documents, including costs of collection
        and
        reasonable attorneys’ fees and expenses, shall be paid by the Company within
        five days of receiving written notice thereof from a Purchaser. 

       

      15.   Notices.
        All
        notices, requests, demands and other communications provided for hereunder
        shall
        be in writing (including telecopy communication) and telecopied or delivered:
        

       

      If
        to a
        Purchaser, at the address set forth in the signature pages hereto or at such
        other address as to which such Purchaser may inform the other parties in
        writing
        in compliance with the terms of this Section 15, with a copy to Goodwin
        Procter LLP, Exchange Place, 53 State Street, Boston, MA 02109, Attn: Mark
        H.
        Burnett, Fax. No.: (617) 523-1231.

      

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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
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        All
          such
          notices, requests, demands and other communications shall be in writing
          and
          shall be deemed to have been given (i) on the date of delivery, if personally
          delivered or telecopied to the party to whom notice is to be given, (ii)
          upon
          confirmed receipt after being deposited with a nationally recognized overnight
          delivery service for next business day delivery or (iii) on the third Business
          Day after mailing, if mailed to the party to whom notice is to be given,
          by
          certified mail, return receipt requested, postage prepaid, and addressed
          to the
          addressee at the address of the addressee set forth herein, or to the most
          recent address, specified by written notice, given to the sender pursuant
          to
          this paragraph.

         

      

      16.   Waiver
        of Jury Trial.
        THE
        COMPANY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION
        OR
        CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS
        OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
        EXCEPT AS PROHIBITED BY LAW, THE COMPANY HEREBY WAIVES ANY RIGHT WHICH IT
        MAY
        HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE
        ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
        OTHER
        THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE COMPANY (A) CERTIFIES THAT NO
        REPRESENTATIVE, AGENT OR ATTORNEY OF THE PURCHASERS HAS REPRESENTED, EXPRESSLY
        OR OTHERWISE, THAT THE PURCHASERS WOULD NOT, IN THE EVENT OF LITIGATION,
        SEEK TO
        ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE PURCHASERS HAVE
        BEEN
        INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS
        AND
        CERTIFICATIONS CONTAINED HEREIN.

       

      17.   Prior
        Agreements; Survivability.
        This
        Agreement, together with the other Bridge Loan Documents, constitute the
        entire
        agreement between the parties and supercedes any other prior understandings
        or
        agreements concerning the subject matter hereof. All representations and
        warranties made in this Agreement and the Bridge Loan Documents or any other
        instrument or document delivered in connection herewith or therewith, shall
        survive the execution and delivery hereof or thereof.

       

      18.   Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their respective successors and permitted assigns. This Agreement, and the
        rights and obligations of each Purchaser hereunder, may be assigned by such
        Purchaser to any person or entity to which the Notes are transferred by such
        Purchaser, and such transferee shall be deemed a “Purchaser” for purposes of
        this Agreement; provided that the transferee provides written notice of such
        assignment to the Company. The Company may not assign its rights under this
        Agreement.

       

      19.   Counterparts.
        This
        Agreement may be executed in any number of counterparts and by different
        parties
        hereto in separate counterparts, with the same effect as if all parties had
        signed the same document. All such counterparts shall be deemed an original,
        shall be construed together and shall constitute one and the same instrument.
        This Agreement shall become effective when each party hereto shall have received
        a counterpart, or facsimile of a counterpart, of this Agreement, signed by
        the
        other parties hereto.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Senior
              Secured Bridge Note Purchase Agreement - Page 10

             

          

        

      

      
        20.   No
          Waiver; Cumulative Remedies.
          No
          failure or delay on the part of any of the Purchasers, or any other holder
          of
          the Notes in exercising any right, power or remedy hereunder shall operate
          as a
          waiver thereof; nor shall any single or partial exercise of any such right,
          power or remedy preclude any other or further exercise thereof or the exercise
          of any other right, power or remedy hereunder. The remedies herein provided
          are
          cumulative and not exclusive of any remedies provided by law.

      

       

      21.   Severability.
        The
        invalidity or unenforceability of any provision hereof shall in no way affect
        the validity or enforceability of any other provision. 

       

      22.   Further
        Assurances.
        From
        and after the date of this Agreement, upon the request of a Purchaser, the
        Company and the Guarantor each shall execute and deliver such instruments,
        documents and other writings as may be necessary or desirable to confirm
        and
        carry out and to effectuate fully the intent and purposes of this Agreement
        and
        the other Bridge Loan Documents.

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Senior
              Secured Bridge Note Purchase Agreement - Signature Page

             

          

        

      

      IN
        WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
        first above written.

       

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

      

       

      
        
          	 	 	 
	 	GUARANTOR:
	 	 
	 	AXEDA SYSTEMS OPERATING COMPANY,
                  INC.
	 
 	 
 	 
 
	 	By:  	/s/ Karen
                  Kupferberg
	 	
                  

                  Name:
                    Karen Kupferberg

                
	 	Title:
                  Chief Financial Officer

        

      
        	 	 	 
	 	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

                 

                Address:   
                  1119
                  St. Paul Street
Baltimore,
                  MD 21202

              

      

      

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

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

                its
                  General Partner

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

                 

                Address:   1119
                  St. Paul Street
Baltimore,
                  MD 21202

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            Senior
              Secured Bridge Note Purchase Agreement - Schedule 1

             

          

        

      

      Schedule
        1

      

      

      
        	
                 

                Name
                  of Purchaser

              	 	
                Maximum
                  Principal Amount

              	 	
                First
                  Installment Amount

              	 	
                Subsequent
Installment
                  Amount

              	 
	
                JMI
                  Equity Fund
                  V,
                  L.P 

              	 	
                $

              	
                567,151

              	 	
                $

              	
                236,313

              	 	
                $

              	
                330,838

              	 
	
                JMI
                  Equity Fund
                  V
                  (AI), L.P 

              	 	
                $

              	
                32,849

              	 	
                $

              	
                13,687

              	 	
                $

              	
                19,162

              	 
	 	 	 	 	 	 	 	 	 	 	 
	
                Total:

              	 	
                $

              	
                600,000

              	 	
                $

              	
                250,000

              	 	
                $

              	
                350,000

              	 

      

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
        A

      

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

      

      7%
        SENIOR
        SECURED BRIDGE NOTE

      

      
        
          	[$______]	
                  July
                    __,
                    2005 

                

        
         

      

      FOR
        VALUE
        RECEIVED, Axeda Systems, Inc., a Delaware corporation, with its principal
        executive offices located at 21 Oxford Road, Mansfield, Massachusetts 02048
        (“Company”),
        hereby promises to pay to the order of [___________] (“Holder”),
        at
        [______________] or at such other place as may be designated from time to
        time
        in writing by Holder, up to a maximum principal amount of _______ Dollars
        ($____) or, if less, the aggregate unpaid principal amount of the loans advanced
        by the Holder pursuant to the terms of the Senior Secured Bridge Note Purchase
        Agreement, dated as of July 8, 2005, among the Company, Axeda Systems Operating
        Company, Inc., a Massachusetts corporation and an indirect wholly owned
        subsidiary of the Company (the “Guarantor”),
        and
        the purchasers named therein (as may be amended, restated or modified from
        time
        to time, the “Agreement”),
        on
        the dates and terms set forth in the Agreement, together with interest thereon
        on the dates and at the rates set forth in the Agreement. All payments received
        by Holder hereunder will be applied first to costs of collection, if any,
        then
        to interest and the balance to principal. All principal and interest outstanding
        on this Note shall be payable in lawful money of the United States of
        America.

      

      This
        7%
        Senior Secured Bridge Note is one of a duly authorized series of 7% Senior
        Secured Bridge Notes (each, a “Note,”
        and
        collectively, the “Notes”)
        with
        an original aggregate principal amount of $600,000 issued pursuant to, and
        entitled to the benefits of, the Agreement, which Agreement sets forth certain
        terms and conditions of, and certain rights, limitations, duties and obligations
        relating to, the Notes. In the event any term of this Note conflicts with
        the
        terms of the Agreement, the terms of the Agreement shall govern. Capitalized
        terms used herein but not otherwise defined herein have the meanings given
        to
        them in the Agreement. This Note is entitled to the benefits of the Guaranty,
        the Security Agreement and the Subordination Agreement.

      

      The
        Notes
        will be senior in all respects (including the right of payment) to all other
        indebtedness of the Company, now existing or hereafter incurred. 

      

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

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
            7%
              Senior
              Secured Bridge Note - Page 2

             

          

        

      

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

      

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

      

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

      

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

      

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

      

      AXEDA
        SYSTEMS, INC.

      

      

      By:__________________________

      Name:

      Title:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      

      
        	
                Date

              	
                Installment

                Amount

              	
                Amount
                  of

                Principal

                Paid

              	
                Amount
                  of

                Interest

                Paid

              	
                Outstanding

                Principal

                Balance

              	
                Notation

                Made
                  By

              
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Exhibit
        B

      

      GUARANTY

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      Exhibit
        C

      

      SECURITY
        AGREEMENT

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Exhibit
        D

      

      SUBORDINATION
        AGREEMENT

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