Document:

EXHIBIT
      10.40

    
 

    AMENDED
      AND RESTATED SUBSIDIARY GUARANTY

    

    September
      1, 2005

    

    Reference
      is made to (i) the Senior Secured Bridge Note Purchase Agreement, dated as
      of
      July 8, 2005, among Axeda Systems Inc., a Delaware corporation (the
      “Company”),
      certain direct and indirect wholly owned subsidiaries of the Company and persons
      identified therein as “Purchasers” (the “Purchasers”)
      (as
      may be hereafter amended, modified, substituted, extended or restated from
      time
      to time, including any replacement agreement therefore, the “Senior
      Purchase Agreement”)
      and
      (ii) the Senior Subordinated Secured Bridge Note Purchase Agreement, dated
      as of
      September 1, 2005, among the Company, certain direct and indirect wholly owned
      subsidiaries of the Company and the Purchasers (as may be hereafter amended,
      modified, substituted, extended or restated from time to time, including any
      replacement agreement therefore, the “Senior
      Subordinated Purchase Agreement,”
      and
      together with the Senior Purchase Agreement, the “Purchase
      Agreements”).

    

    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 the
      Company by the Purchasers pursuant to the Purchase Agreements, 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, each of Axeda Systems Operating Company, Inc., a Massachusetts
      corporation and an indirect wholly owned subsidiary of the Company
      (“ASOC”),
      and
      Axeda IP, Inc., a Nevada corporation and an indirect wholly owned subsidiary
      of
      the Company (“AIP”
      and,
      together with ASOC, the “Guarantors”),
      jointly and severally, unconditionally guaranty 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 Agreements and (ii) each of the other
      Bridge Loan Documents (as defined in the Purchase Agreements), 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 Agreements. In furtherance of the foregoing, the
      Guarantors hereby jointly and severally agree 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 Guarantors, 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.

     

    2.    Guaranty
      Absolute.
      Subject
      to Section 5(c), each of 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. Each of the Guarantors 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. Each of the Guarantors 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
      Guarantors 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 Guarantors 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
      Guarantors. Any amounts due from the Guarantors 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.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    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 Guarantors being obligated
      to
      perform as agreed herein and the Guarantors hereby waive any and all rights
      which it may have by statute or otherwise which would require the Purchasers
      to
      do any of the foregoing. Each of the Guarantors 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. Each
      of
      the Guarantors 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 Guarantors with respect to the Guarantors’ 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)  Each
      of
      the Guarantors 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 Guarantors 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 Guarantors 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 Guarantors hereunder, or any setoff or
      application of funds of the Guarantors by the Purchasers, the Guarantors 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 Guarantors
      seek
      or be entitled to seek any contribution or reimbursement from the Company in
      respect of payments made by the Guarantors 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 Guarantors
      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 Guarantors in trust for the Purchasers, segregated
      from other funds of the Guarantors, and shall forthwith upon, and in any event
      within two (2) business days of, receipt by the Guarantors, be turned over
      to
      the Purchasers in the exact form received by the Guarantors (duly endorsed
      by
      the Guarantors 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 Guarantors 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. 

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    4.    Security.
      All
      sums at any time to the credit of any of the Guarantors and any property of
      any
      of the Guarantors 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 Guarantors’ 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.
      Each of
      the Guarantors 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 state of its incorporation 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.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    (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.

     

    (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 Guarantors 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
      Guarantors will promptly notify the Purchasers of any default by the any
      Guarantor in its performance or observance of any term or condition of any
      material agreement to which a 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 the Guarantors’ obligations hereunder. 

     

    7.    Payments
      from Guarantors.
      The
      Purchasers, in their sole and absolute discretion, with or without notice to
      the
      Guarantors, may apply on account of the Obligations any payment from the
      Guarantors 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
      Guarantors 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.

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    9.    No
      Termination.
      This is
      a continuing irrevocable guaranty and shall remain in full force and effect
      and
      be binding upon the Guarantors, and each of the Guarantors’ 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 Guarantors, 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.

     

    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 Guarantors’ 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 Guarantors 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.
      EACH
      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, EACH 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. EACH 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.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    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. 

     

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

     

    18.    Successors.
      The
      Purchasers may, from time to time, without notice to the Guarantors, 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.    Prior
      Agreements.
      This
      Guaranty constitutes the entire agreement with respect to the matter set forth
      herein and supersedes the original Guaranty dated July 8, 2005 (as amended)
      of
      ASOC and AIP, and any prior agreements or understandings with respect
      thereto.

     

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

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    

    

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, this Guaranty has been executed by the Guarantors 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

     

     

    AXEDA
      IP,
      INC.

     

    By:  
      /s/
      Lynn
      Magnani

    
      
        

      

    

    Name:
      Lynn Magnani

    Title:
      Secretary

    Address:      
      21
      Oxford
      Road

    Mansfield,
      MA 02048

    Telephone:   
      508-337-9200

    Facsimile:     
      508-337-9201

    State
      of
      Incorporation: Nevada

     

     

    
      
         

      

        -8-EXHIBIT
      10.41

    
 

    AMENDED
      AND RESTATED SUBORDINATION AGREEMENT

    

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

    

    WITNESSETH:

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    NOW,
      THEREFORE, in consideration of the foregoing premises and the mutual covenants
      hereinafter set forth, and for other good and valuable consideration, the
      receipt and sufficiency of which is hereby acknowledged, the parties hereto,
      intending to be legally bound, do hereby agree as follows: 

    

    1.    Definitions.
      Terms
      not otherwise defined herein shall have the meaning assigned such terms in
      the
      Senior Purchase Agreement. The following terms shall have the meanings given
      to
      such terms as set forth below:

     

    “Asset
      Purchase Agreement”
      means
      the Asset Purchase Agreement, dated as of the date hereof and from time to
      time
      amended, restated or otherwise modified, among ASOC Acquisition Corp.
      (“Buyer”),
      Axeda, Axeda Systems Operating Company, Inc., a Massachusetts corporation and
      an
      indirect wholly owned subsidiary of Axeda (“ASOC”),
      and
      Axeda IP, Inc., a Nevada corporation and an indirect wholly owned subsidiary
      of
      Axeda (“AIP”).

     

    “Company”
      means,
      for purposes hereof, Axeda and all of its direct and indirect subsidiaries,
      whether now or hereafter existing, including without limitation the Guarantors.
      

    

    “Guarantors”
      means
      ASOC and AIP.

     

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

    

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

    

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

    

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

    

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

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

    

    “Triggering
      Event”
      means
      the occurrence and continuation of any of the following events:

     

    (i)    the
      asset
      acquisition contemplated under the Asset Purchase Agreement shall not have
      been
      consummated by January 15, 2006;

     

    (ii)    the
      Asset
      Purchase Agreement shall have been amended to reduce the cash portion of the
      purchase price to an amount less than the aggregate principal and accrued
      interest of the Laurus Debt (which principal and accrued interest shall not
      include any default interest, penalties, premiums, fees or other amounts
      otherwise due and owing under the Laurus Documents) payable pursuant to the
      terms of the Laurus Consent Letter upon the consummation of the asset
      acquisition set forth in the Asset Purchase Agreement;

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    (iii)    the
      asset
      acquisition contemplated under the Asset Purchase Agreement shall have failed
      to
      receive the requisite vote for approval by Axeda’s stockholders upon the holding
      of a duly convened stockholders meeting (or any properly adjourned and
      reconvened meeting thereof) pursuant to Section 5.05 of the Asset Purchase
      Agreement; and

     

    (iv)    the
      Asset
      Purchase Agreement is effectively terminated in accordance with its
      terms.

     

    2.    Subordination.
      Each
      Subordinated Creditor, for itself, its executors, administrators, personal
      representatives, heirs, devisees, legatees, successors and assigns, covenants
      and agrees that the payment of the principal of and interest on all Subordinated
      Debt now or hereafter outstanding is hereby expressly subordinated, to the
      extent and in the manner hereinafter set forth, to the payment in full in cash
      of the Senior Debt; provided,
      however,
      that
      the Company shall be permitted to make certain payments in the form of equity
      on
      account of the Laurus Debt in accordance with Section 3 below. 

     

    3.    No
      Payment.
      As long
      as any of the Senior Debt is outstanding, no payment of principal of, interest
      on, or premiums, fees, costs, expenses or other amounts with respect to, any
      Subordinated Debt shall be made by the Company or accepted by any Subordinated
      Creditor and the Company shall not set off, contra or otherwise apply all or
      any
      part of any obligation of any Subordinated Creditor to the Company toward
      satisfaction of the Subordinated Debt, or acquire, redeem or otherwise purchase
      any Subordinated Debt; provided,
      however,
      that
      the Company shall be permitted (but not obligated) to make payments on the
      Laurus Debt payable solely in the form of shares of common stock of the Company
      or warrants or options to purchase shares of common stock of the Company in
      accordance with the terms of the Laurus Securities Purchase Agreement so long
      as
      no Event of Default has occurred under the Senior Documents. Notwithstanding
      anything herein to the contrary, this Agreement shall not restrict or adversely
      affect the ability of, and this Section 3 shall not apply to any action
      taken by, the Senior Subordinated Creditors, or any of their respective
      affiliates to surrender to the Company the promissory notes evidencing the
      Senior Subordinated Debt as partial payment of the purchase price under the
      Asset Purchase Agreement, so long as the Asset Purchase Agreement has not been
      amended in the manner set forth in clause (ii) of the definition of Triggering
      Event.

     

    4.    Payments
      Held in Trust.
      If any
      payment of principal of, interest on, or premiums, fees, costs, expenses or
      other amounts with respect to, any Subordinated Debt is received by a
      Subordinated Creditor before all Senior Debt shall have been paid or satisfied
      in full, despite or in violation or contravention of the terms of this
      Subordination Agreement, the Subordinated Creditor will hold the same in trust
      for the Senior Holders and forthwith pay the same to the Senior Holders, to
      be
      held by the Senior Holders as additional security for the Senior Debt or applied
      by the Senior Holders to payment of the Senior Debt in such manner as the Senior
      Holders may choose in their sole discretion. Any such payment of principal
      of,
      interest on, or premiums, fees, costs, expenses or other amounts with respect
      to, any Subordinated Debt paid over to the Senior Holders and held by the Senior
      Holders as additional security pursuant to the immediately preceding sentence
      shall, to the extent not applied to the payment of the Senior Debt, be paid
      over
      to the Subordinated Creditors after the Senior Debt has been finally paid in
      full in cash. Until the Senior Debt has been finally paid in full in cash,
      no
      Subordinated Creditor shall have any right of subrogation, reimbursement,
      restitution, contribution or indemnity whatsoever from any assets of the Company
      or any guarantor of or provider of collateral security for the Senior Debt.
      Notwithstanding anything to the contrary contained herein, following the payment
      in full of the Senior Debt, each Senior Holder hereby agrees that in the event
      such Senior Holder receives as a result of its exercise of remedies under the
      Senior Documents any amount on account of the Senior Debt in excess of the
      outstanding Senior Debt, such Senior Holder shall pay over such excess amount
      to
      the Subordinated Creditors as promptly as practicable. 

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    5.    Sharing
      of Payments and Property.
      Subject
      to Section 3, if a Subordinated Creditor shall (a) receive or obtain any payment
      in respect of any of its Subordinated Debt or (b) receive or obtain any property
      in respect of such Subordinated Debt through the exercise of any remedy or
      right
      (whether arising by operation of law or under any agreement) or otherwise with
      respect to such Subordinated Debt, it shall (i) receive and hold such payment
      or
      property in trust for all Subordinated Creditors, (ii) deliver such payment
      or
      property (or the proceeds thereof) to all Subordinated Creditors pro-rata
      in
      accordance with their respective percentage of outstanding Subordinated Debt,
      and (iii) make such other adjustments from time to time as shall be equitable
      to
      the end that all the Subordinated Creditors shall share the benefit of such
      payment or property (net of any expenses which may be incurred by such
      Subordinated Creditor in obtaining or preserving such benefit) pro-rata
      in
      accordance with their respective percentage of the outstanding Subordinated
      Debt. Notwithstanding anything herein to the contrary, (a) payments
      made to
      the Laurus Creditors in the form of equity made in accordance with Section
      3
      above, and (b) payments received by any Subordinated Creditor under
      Section
      7(d) and/or Section 10 on account of the sale and/or transfer of their
      respective Subordinated Debt, in each case, are not subject to this
      Section 5. Notwithstanding anything herein to the contrary, this Agreement
      shall not restrict or adversely affect the ability of, and this Section 5
      shall not apply to any action taken by, the Senior Holders, the Senior
      Subordinated Creditors, or any of their respective affiliates to surrender
      to
      the Company the promissory notes evidencing the Senior Debt or Senior
      Subordinated Debt as partial payment of the purchase price under the Asset
      Purchase Agreement, so long as the Asset Purchase Agreement has not been amended
      in the manner set forth in clause (ii) of the definition of Triggering
      Event.

     

    6.    Bankruptcy.
      In the
      event of any receivership, insolvency, bankruptcy, assignment for the benefit
      of
      creditors, reorganization (whether or not pursuant to bankruptcy laws), sale
      of
      all or substantially all of the assets, dissolution, liquidation, winding up
      of
      the business or affairs of the Company or any other marshalling of the assets
      and liabilities of the Company (each a “proceeding”): 

     

    (a)    each
      Subordinated Creditor will prove (including filing appropriate proofs of claim),
      enforce and endeavor to obtain payment of the principal of, interest on and
      all
      other amounts payable with respect to all Subordinated Debt and will pay over
      to
      the Senior Holders amounts thereof sufficient for payment of principal of and
      interest on, or other payments with respect to, the Senior Debt, to pay in
      full
      the Senior Debt. If a Subordinated Creditor has not filed appropriate proofs
      of
      claim at least eight (8) business days prior to the deadline date for filing
      such claims, the Senior Holders may file such claims in any such proceeding
      on
      such Subordinated Creditor’s behalf. In no event shall any Subordinated Creditor
      waive, forgive or cancel any claim it may now or hereafter have against the
      Company.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    (b)  the
      Senior Holders may, at their option, claim directly from the trustee or
      representative of the Company’s estate in such proceeding. In the event that the
      Senior Holders do so elect to claim directly against the trustee or
      representative of the Company’s estate, each Subordinated Creditor shall be
      obligated to do the same.

     

    (c)  each
      Subordinated Creditor hereby grants to the Senior Holders an irrevocable proxy
      to vote its claims in any such proceeding or at any meeting of creditors, and
      agrees to execute all further documents requested by the Senior Holders to
      facilitate exercise of this proxy. This Section 6(c) shall terminate in the
      event all of the following conditions are satisfied: (i) the Purchase Options
      (as defined in Section 10(c)) under Section 10 shall have expired unexercised,
      (ii) the Company shall be subject to a proceeding and (iii) Laurus shall have
      purchased from the Senior Holders at least 50% of the outstanding Senior Notes
      for a cash purchase price equal to the aggregate principal and accrued interest
      on such Senior Notes. 

     

    7.    Certain
      Prohibited Actions.
      Until
      the payment or satisfaction in full of the Senior Debt, without the prior
      written consent of the Senior Holders (subject to the last sentence of this
      Section 7): 

     

    (a)    no
      Subordinated Creditor shall from and after the date hereof, request, demand
      or
      seek to obtain from the Company, and the Company shall not grant or deliver
      to
      the Subordinated Creditor, any collateral or other security for the Subordinated
      Debt (the parties hereto acknowledge that this clause (a) does not require
      the
      Subordinated Creditors to terminate the liens granted prior to this date under
      the Subordinated Documents); 

     

    (b)    no
      Subordinated Creditor shall, (i) accelerate the maturity of any Subordinated
      Debt, (ii) demand payment of any Subordinated Debt or (iii) exercise any right
      or remedy, or take any action, against the Company or any of the assets or
      property of the Company to enforce its rights with respect to any Subordinated
      Debt; 

     

    (c)    no
      Subordinated Creditor shall, amend or modify any of the terms of any of the
      Subordinated Debt or any of the Subordinated Documents in a manner that is
      materially adverse to the interests of the Senior Holders (including those
      interests relating to the Senior Documents and the transactions contemplated
      by
      the Letter of Intent); provided,
      however,
      that
      the Subordinated Creditors shall provide the Senior Holders at least five
      business days’ prior notice of any proposed amendment or modification to afford
      the Senior Holders an opportunity to object to such proposed amendment or
      modification as being materially adverse to their interests; and

     

    (d)    no
      Subordinated Creditor shall sell, assign or otherwise transfer or further
      encumber any Subordinated Debt or interest therein without first procuring
      and
      delivering to the Senior Holders and the other Subordinated Creditors evidence
      in writing of the consent and agreement of the purchaser, pledgee, assignee
      or
      transferee of such Subordinated Debt or interest therein to comply with all
      terms, conditions and provisions of this Subordination Agreement. The rights
      of
      the Senior Holders under this Section 7 shall inure to the benefit of
      their
      successors and assigns.

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    Upon
      expiration of the Purchase Option Period (defined in Section 10(c)) during
      which
      period no party has exercised its respective Purchase Option under Section
      10,
      then in such event Sections 7(a), (b) and (c) above shall cease to be effective
      and binding upon the Subordinated Creditors.

     

    8.    Subordinated
      Creditors’ Security.
      

     

    (a)    Each
      Subordinated Creditor hereby confirms that, regardless of the relative times
      and
      method of attachment or perfection thereof (or any failure to perfect) or the
      order of filing of financing statements, mortgages or other security agreements
      or documents, or anything in the Subordinated Documents or this Subordination
      Agreement to the contrary, the security interests and liens granted or to be
      granted from time to time to secure the Senior Debt, shall in all respects
      be
      first and senior security interests and liens, superior to any security
      interests and liens granted or to be granted to Subordinated Creditor in assets
      of, or ownership interests in, the Company or any other person pursuant to
      the
      Subordinated Documents or otherwise, it being the express intention of the
      parties that, notwithstanding anything in this Subordination Agreement to the
      contrary, all liens and security interests granted to Senior Holders from time
      to time shall be prior and superior to any liens or security interests granted
      to Subordinated Creditor. In foreclosing on Senior Holders’ security interests
      and liens in the collateral described in or purportedly covered by the Security
      Agreement and any other documents and/or instruments securing the Senior Debt
      (as defined in the Senior Purchase Agreement) (the “Collateral”),
      the
      Senior Holders may proceed to foreclose on their security interests and liens
      in
      any manner which the Senior Holders, in their sole discretion, choose, even
      though a higher price might have been realized if Senior Holders had proceeded
      to foreclose on their security interests and liens in another
      manner.

     

    (b)    Except
      as
      set forth in the last sentence of Section 4 and the last sentence of Section
      8(c), each Subordinated Creditor hereby consents and agrees that the Senior
      Holders shall be under no obligation with respect to marshaling collateral
      security for the Senior Debt in favor of Subordinated Creditors or in payment
      of
      indebtedness of the Company to the Subordinated Creditors.

     

    (c)    Without
      limiting any of the rights (including any of the foreclosure rights) of Senior
      Holders under the Senior Purchase Agreement, the Security Agreement, the
      Guaranty or any documents delivered to secure the obligations of the Company
      to
      the Senior Holders in connection therewith or under the provisions of any
      applicable law, and without placing any obligation on the part of the Senior
      Holders to follow any of the following provisions in order to retain their
      priority status hereunder, in the event that the Senior Holders release or
      discharge their security interests in, or liens upon, any Collateral which
      is
      subject to a lien or security interest in favor of any Subordinated Creditor,
      in
      each case in connection with exercising the Senior Holders’ rights under the
      Security Agreement, such Collateral shall thereupon be deemed to have been
      released from all such liens and security interests. Each Subordinated Creditor
      agrees that within two Business Days’ following Senior Holder’s written request
      therefor, it will execute, deliver and file any and all such termination
      statements, lien releases and other agreements and instruments as Senior Holders
      reasonably deem necessary or appropriate in order to give effect to the
      preceding sentence. Each Subordinated Creditor hereby irrevocably appoints
      the
      Senior Holders the true and lawful attorney of such Subordinated Creditor for
      the purpose of effecting any such executions, deliveries and filings. Without
      limiting the foregoing, and without implying that any Senior Holder is obligated
      to undertake any special investigation with respect to its good faith belief
      as
      to the fair value of any property, the parties hereto agree to be bound as
      to
      the fair value of any property as determined by any independent appraisal of
      such property that may be conducted at the Senior Holders’ request. The cost of
      any such appraisal shall be borne by the Company and, if funded by the Senior
      Holders, shall constitute Senior Debt. Each Senior Holder agrees that if, as
      a
      result of a release of its liens on Collateral which is subject to a lien or
      security interest in favor of any Subordinated Creditor, such Senior Holder
      receives any amount on account of the Senior Debt in excess of the outstanding
      Senior Debt, such Senior Holder shall in accordance with the last sentence
      of
      Section 4 above pay over such excess amount to the Subordinated Creditors as
      promptly as practicable following payment in full of the Senior Debt.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    9.    Consents
      and Waivers.
      Each
      Laurus Creditor hereby irrevocably (subject to the last parenthetical clause
      set
      forth in the clause (g) of this Section 9 below) consents to (a) the Company
      entering into the Senior Purchase Agreement and the other Senior Documents,
      the
      Company’s incurrence of the Senior Debt and the Company’s performance of its
      obligations thereunder and irrevocably waives any rights it may have to
      participate in, receive notice of or otherwise prohibit the issuance of the
      Senior Debt, (b) the Company entering into the Senior Subordinated Purchase
      Agreement and the other Senior Subordinated Documents, the Company’s incurrence
      of the Senior Subordinated Debt and the Company’s performance of its obligations
      thereunder and irrevocably waives any rights it may have to participate in,
      receive notice of or otherwise prohibit the issuance of the Senior Subordinated
      Debt, (c) any waiver of the terms of the Senior Debt, the Senior Documents,
      the
      Senior Subordinated Debt or the Senior Subordinated Documents, (d) any renewal,
      extension or postponement of the time of payment of the Senior Debt or the
      Senior Subordinated Debt or any other indulgence with respect to the Senior
      Debt
      or the Senior Subordinated Debt, (e) any substitution, exchange or release
      of
      collateral for the Senior Debt or the Senior Subordinated Debt, (f) the addition
      or release of any person primarily or secondarily liable on the Senior Debt
      or
      the Senior Subordinated Debt made or effected by the Senior Holders or the
      Senior Subordinated Creditors, and (g) the execution, delivery and performance
      by the Company (including Axeda, ASOC and AIP) of the Asset Purchase Agreement
      and the consummation of the transactions contemplated thereby, including the
      transfer of the Business and the Purchased Assets (as each such term is defined
      in the Asset Purchase Agreement) to the Purchasers or one or more of their
      affiliates (consent to such performance and consummation being subject to the
      payment to Laurus of the outstanding principal and accrued interest under the
      Laurus Dept in accordance with the immediately succeeding sentence). In
      connection with the consummation of the transactions contemplated by the Asset
      Purchase Agreement, each Laurus Creditor shall release and terminate all claims,
      security interests, pledges, liens and other encumbrances on all of the
      Company’s assets that are to be transferred to the Purchasers or one or more of
      their affiliates as contemplated by the Asset Purchase Agreement at the closing
      of such transactions, which releases and terminations shall be effective
      concurrently with the payment in full in cash by Axeda of the outstanding
      principal and accrued and unpaid interest owed by the Company to Laurus under
      the Laurus Debt (which principal and accrued interest amount shall not include
      any default interest, penalties, premiums, fees or other amounts otherwise
      due
      or owing under the Laurus Documents) as contemplated by the Laurus Consent
      Letter. The Senior Holders may exercise, fail to exercise, waive or amend any
      of
      their rights under any instrument evidencing or securing or under any agreement
      delivered in connection with any Senior Debt, and in reference thereto may
      make
      and enter into such agreements as to them may seem proper or desirable, all
      without notice to or further assent from the Subordinated Creditors, and any
      such action shall not in any manner impair or affect this Subordination
      Agreement or any of the Senior Holders’ rights hereunder. Notwithstanding
      anything herein to the contrary, neither the Senior Documents nor the Senior
      Subordinated Documents shall be amended or modified to (x) increase the
      aggregate principal of, or increase the rates of interest, fees, other premiums
      or similar amounts payable on, either of (i) the Senior Debt from that in effect
      on July 8, 2005 or (ii) the Senior Subordinated Debt from that in effect on
      the
      date hereof, (y) cause any termination or break up fees or expense reimbursement
      amounts payable to any Purchaser (or any affiliate thereof) under the Asset
      Purchase Agreement to be secured by the security interests granted to either
      of
      the Senior Holders under the Senior Documents or the Senior Subordinated
      Creditors under the Senior Subordinated Documents, as the case may be or (z)
      restrict the Company from entering into an amendment or modification to the
      terms of the Subordinated Debt which amendment or modification is in accordance
      with the terms and conditions of Section 7(c) hereof, in each case without
      the
      consent of the Laurus Creditors representing at least a majority of the
      aggregate principal amount of the Laurus Debt then outstanding. Notwithstanding
      anything herein to the contrary, the Laurus Documents shall not be amended
      or
      modified to increase the aggregate principal of, or increase the rate of
      interest, fees, or other premiums or similar amounts payable on, the Laurus
      Debt
      from that in effect on July 8, 2005 without the consents of the Senior
      Subordinated Creditors representing at least a majority of the aggregate
      principal amount of the Senior Subordinated Debt then outstanding and the Senior
      Holders representing at least a majority of the aggregate principal amount
      of
      the Senior Notes then outstanding. Each Subordinated Creditor hereby irrevocably
      waives (i) presentment, notice and protest in connection with all negotiable
      instruments evidencing Senior Debt or Subordinated Debt, (ii) notice of the
      acceptance of this Subordination Agreement by the Senior Holders, (iii) notice
      of any extensions of credit made, extensions granted or other action taken
      in
      reliance hereon, and (iv) all demands and notices of every kind in connection
      with this Subordination Agreement. Each Subordinated Creditor hereby waives
      and
      agrees not to assert against the Senior Holders any rights which a guarantor
      or
      surety with respect to any indebtedness of the Company could exercise; but
      nothing in this Subordination Agreement shall constitute the Subordinated
      Creditor a guarantor or surety.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    10.    Purchase
      Rights of Certain Debt.
      

     

    (a)    Upon
      the
      occurrence of a Triggering Event, for a period of ten (10) business days
      following such Triggering Event, the Purchasers shall be entitled to purchase
      the Laurus Debt from the Laurus Creditors by paying in full in immediately
      available U.S. funds by wire transfer to the Laurus Creditors the aggregate
      principal and accrued interest of the Laurus Debt (which principal and accrued
      interest shall not include any default interest, penalties, premiums, fees
      or
      other amounts otherwise due and owing under the Laurus Documents) (the “JMI
      Purchase Option”). If the Purchasers exercise their right under this Section
      10(a) to purchase the Laurus Debt and pay the purchase price therefor, the
      Laurus Creditors will assign to the Purchasers all right, title and interest
      they have to the Laurus Documents concurrently with the transfer of the
      promissory notes evidencing the Laurus Debt. Axeda hereby consents in advance
      to
      an assignment contemplated by this Section 10(a).

     

    (b)    If
      the
      Purchasers do not exercise the JMI Purchase Option in accordance with Section
      10(a), then for a period of ten (10) business days following expiration of
      the
      JMI Purchase Right, the Laurus Creditors shall be entitled to purchase all,
      but
      not less than all, of the Senior Notes and Senior Subordinated Notes
      representing the entire amount of the Senior Debt and Senior Subordinated Debt
      from the Senior Holders and the Senior Subordinated Holders by paying in full
      in
      immediately available U.S. funds by wire transfer to the Senior Holders and
      Senior Subordinated Holders the aggregate amount of all principal, interest
      and
      other amounts payable under the Senior Notes, the Senior Subordinated Notes
      and
      the Bridge Loan Documents then outstanding (the “Laurus Purchase Option”);
provided,
      however,
      that
      the Laurus Creditors shall not have the right to purchase the Senior Notes
      and
      the Senior Subordinated Notes prior to the Maturity Date (as defined in the
      Senior Purchase Agreement on the date hereof) if any Laurus Creditor is (i)
      purchasing the Senior Notes and Senior Subordinated Notes in connection with
      the
      provision by the Laurus Creditors of financing for the acquisition of the stock
      or assets of the Company or any of its subsidiaries by any person other than
      the
      Purchasers or their affiliates, or (ii) acting directly with a person other
      than
      the Purchasers and their affiliates to take any action that could reasonably
      be
      expected to prevent, interfere with, delay or postpone the acquisition of the
      stock or assets of the Company or any of its subsidiaries by the Purchasers
      or
      their affiliates. Furthermore, each Laurus Creditor agrees that, at no time
      prior to the Maturity Date (as defined in the Senior Purchase Agreement on
      the
      date hereof), shall such Laurus Creditor provide direct assistance to any person
      attempting to acquire the stock or assets of the Company or any of its
      subsidiaries other than the Purchasers or their affiliates. If the Laurus
      Creditors exercise their right under this Section 10(b) to purchase the Senior
      Notes and the Senior Subordinated Notes and pay the purchase price therefor,
      the
      Senior Holders and the Senior Subordinated Creditors will assign to the Laurus
      Creditors all right, title and interest they have to each of the Senior
      Documents and the Senior Subordinated Documents concurrently with the transfer
      of the Senior Notes and the Senior Subordinated Notes.

     

    (c)    For
      purposes of this Agreement, (i) the JMI Purchase Option and the Laurus Purchase
      Option shall collectively be referred to as the “Purchase Options” and (ii) the
      aggregate twenty (20) business day period during which the Purchase Options
      may
      be exercised in accordance with this Section 10 shall be referred to as the
      “Purchase Option Period.” During the Purchase Option Period, the provisions of
      Sections 7(a) and 7(b) of this Agreement shall apply, in addition to the
      Subordinated Creditors, to the Senior Holders with respect to the Senior
      Debt.

     

    11.    No
      Obligations of Senior Holders.
      The
      rights granted to the Senior Holders hereunder are solely for their protection
      and, except to the extent explicitly provided herein, nothing herein contained
      shall impose on the Senior Holders any duties with respect to the Subordinated
      Debt or any property of the Subordinated Creditor or the Company received
      hereunder beyond reasonable care while in the Senior Holders’ custody and
      redelivery upon expiration of this Subordination Agreement. 

     

    12.    Specific
      Performance.
      The
      Senior Holders are hereby authorized to demand specific performance of this
      Subordination Agreement, whether or not the Company shall have complied with
      the
      provisions hereof applicable to it, at any time when the Subordinated Creditor
      shall have failed to comply with any provision hereof. 

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    13.    Amendment.
      This
      Subordination Agreement may not be amended or waived except by an instrument
      in
      writing signed by (i) Axeda, (ii) the Laurus Creditors representing at least
      a
      majority of the aggregate principal amount of the Laurus Debt then outstanding,
      (iii) the Senior Subordinated Creditors representing at least a majority of
      the
      aggregate principal amount of the Senior Subordinated Debt then outstanding
      and
      (iv) the Senior Holders representing at least a majority of the aggregate
      principal amount of the Senior Notes then outstanding; provided,
      however,
      that
      Sections 9 and 10 of this Subordination Agreement may not be amended or waived
      without the written consent of the Purchasers, regardless of whether the
      Purchasers continue to hold any Senior Debt or Senior Subordinated
      Debt.

     

    14.    Notices.
      All
      notices, requests, demands and other communications provided for hereunder
      shall
      be in writing (including telecopy communication) and telecopied or delivered:
      (i) if to a Senior Holder or the Senior Subordinated Creditor, c/o JMI
      Management, Inc., 1119
      St.
      Paul Street, Baltimore, MD 21202, Attn: Bradford D. Woloson or at such other
      address as to which such Senior Holder or Senior Subordinated Creditor, as
      the
      case may be, may inform the other parties in writing in compliance with the
      terms of this Section 13, with a copy to Goodwin Procter LLP, Exchange
      Place, 53 State Street, Boston, MA 02109, Attn: Mark H. Burnett, Esq., Fax.
      No.:
      (617) 523-1231; (ii) if to the Company, at 21 Oxford Road, Mansfield,
      Massachusetts 02048, or at such other address as shall be designated by the
      Company in a written notice to the other parties complying as to delivery with
      the terms of this Section 13, with a copy to Arent Fox PLLC, 1675 Broadway,
      New York, New York 10019-5820, Attn: Steven D. Dreyer, Fax No. (212) 484-3990;
      and (iii) if to the Laurus Creditor, at c/o Laurus Capital Management LLC,
      825
      Third Avenue, 14th
      Floor,
      New York, New York 10022, Attn: Jason Ban, Esq., Fax No.: (212) 541-4434 or
      at
      such other address as shall be designated by the Laurus Creditor in a written
      notice to the other parties complying as to delivery with the terms of this
      Section 13.

     

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

     

    15.    Waiver.
      No
      delay on the part of the Senior Holders or Subordinated Creditors in exercising
      any right, power or privilege hereunder shall operate as a waiver thereof,
      nor
      shall any partial exercise or waiver of any privilege or right hereunder
      preclude any further exercise of such privilege or right or the exercise of
      any
      other right, power or privilege. The rights and remedies expressed in this
      Subordination Agreement are cumulative and not exclusive of any right or remedy
      which the Senior Holders or Subordinated Creditors may otherwise
      have.

     

    16.    Further
      Assurances.
      The
      Subordinated Creditors and the Company shall execute and deliver to the Senior
      Holders such further instruments and documents and shall take such further
      action as the Senior Holders may at any time or times reasonably request in
      order to carry out the provisions and intent of this Subordination Agreement.
      

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    17.    Prior
      Agreements.
      This
      Subordination Agreement constitutes the entire agreement between the parties
      and
      supercedes any other prior understandings or agreements, including, without
      limitation, the Original Subordination Agreement concerning the subject matter
      hereof. 

     

    18.    Governing
      Law.
      This
      Subordination Agreement shall be governed by, and construed in accordance with
      the laws of the Commonwealth of Massachusetts, without giving effect to the
      principles of conflicts of laws thereof. The Company and the Subordinated
      Creditors hereby consent to the jurisdiction of any federal or state court
      in
      the Commonwealth of Massachusetts located in the counties of Suffolk, Middlesex
      or Norfolk.

     

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

     

    20.    Counterparts.
      This
      Subordination Agreement may be signed in any number of counterparts, which
      together will be one and the same instrument. This Subordination Agreement
      shall
      become effective whenever each party shall have signed at least one such
      counterpart. This Subordination Agreement shall be binding upon each party
      hereto and its executors, administrators, personal representatives, heirs,
      devisees, legatees, successors and assigns, and shall inure to the benefit
      of
      the Senior Holders and the Subordinated Creditors and each of their respective
      successors and assigns.

     

    21.    Assignment
      by Senior Holders.
      No
      Senior Holder shall sell, assign or otherwise transfer or further encumber
      any
      Senior Debt or interest therein without first procuring and delivering to the
      Subordinated Creditors evidence in writing of the consent and agreement of
      the
      purchaser, pledgee, assignee or transferee of such Senior Debt or interest
      therein to comply with all terms, conditions and provisions of, and be bound
      by,
      this Subordination Agreement. 

     

    22.    Party’s
      Status.
      Each
      party to this Agreement may be a party to this Agreement (i) as a Senior Holder
      with respect to the Senior Debt and the Senior Documents and shall be deemed
      to
      be, and shall have the rights and obligations of, a Senior Holder for purposes
      of this Subordination Agreement with respect to the Senior Debt and the Senior
      Documents, (ii) as a Senior Subordinated Creditor with respect to other the
      Senior Subordinated Debt and the Senior Subordinated Documents and shall be
      deemed to be, and shall have the rights and obligations of, a Senior
      Subordinated Creditor for purposes of this Subordination Agreement with respect
      to the Senior Subordinated Debt and the Senior Subordinated Documents, and
      (iii)
      as a Purchaser and shall be deemed to be, and shall have the rights and
      obligations of, a Purchaser for purposes of this Subordination Agreement. The
      fact that a party to this Subordination Agreement is a Senior Holder, a Senior
      Subordinated Creditor and a Purchaser under this Subordination Agreement shall
      not preclude them from being treated differently under this Agreement with
      respect to different indebtedness or rights held. For the avoidance of doubt,
      each of JMI Equity Fund V, L.P. and JMI Equity Fund V (AI), L.P. is (i) a Senior
      Holder with respect to the Senior Debt and the Senior Documents and shall be
      deemed to be, and shall have the rights and obligations of, a Senior Holder
      for
      purposes of this Subordination Agreement with respect to the Senior Debt and
      the
      Senior Documents, (ii) a Senior Subordinated Creditor with respect to other
      the
      Senior Subordinated Debt and the Senior Subordinated Documents and shall be
      deemed to be, and shall have the rights and obligations of, a Senior
      Subordinated Creditor for purposes of this Subordination Agreement with respect
      to the Senior Subordinated Debt and the Senior Subordinated Documents, and
      (iii)
      a Purchaser and shall be deemed to be, and shall have the rights and obligations
      of, a Purchaser for purposes of this Subordination Agreement. 

     

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      OF PAGE INTENTIONALLY LEFT BLANK]

    

    

    

    

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, each party hereto has cause this Subordination Agreement to
      be
      executed by its duly authorized officer as of the date first above
      written.

     

    AXEDA
      SYSTEMS INC.

     

    By:  
      /s/
      Robert M. Russell, Jr.

      
        

      

    

    Name:
      Robert M. Russell Jr.

    Title:
      Chief Executive Officer

     

     

    JMI
      EQUITY FUND V, L.P.

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

    its
      General Partner

     

    By:  
      /s/
      Bradford D. Woloson

      
        

      

    

    Name:
      Bradford D. Woloson

    Title:
      Managing Member

     

     

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

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

    its
      General Partner

     

    By:  
      /s/
      Bradford D. Woloson

      
        

      

    

    Name:
      Bradford D. Woloson

    Title:
      Managing Member

     

     

    LAURUS
      MASTER FUND, LTD.

     

    By:  
      /s/
      David
      Grin

      
        

      

    

    Title:
      Director

    
 

    
      
         

      

        -13-

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