SECURITY AGREEMENT
This
Security Agreement, dated as of July 8, 2005 (the “Security
Agreement”),
by
and among Axeda Systems, Inc., a Delaware corporation (the “Company”),
Axeda
Systems Operating Company, Inc., a Massachusetts corporation (the “Guarantor”
and
together with the Company, the “Obligors”),
and
the purchasers named in Schedule
1
hereto
(the “Purchasers”).
WITNESSETH:
WHEREAS,
the Obligors and the Purchasers have entered into the Senior Secured Bridge
Note
Purchase Agreement, dated as of July 8, 2005 (as may be hereafter amended,
modified, substituted, extended or restated from time to time, including
any
replacement agreement therefore, the “Purchase
Agreement”),
pursuant to which the Company will issue to the Purchasers its 7% Senior
Secured
Bridge Notes with an aggregate principal amount of $600,000 (the “Notes”);
and
WHEREAS,
the Obligors, as an inducement to the Purchasers to purchase the Notes pursuant
to the Purchase Agreement, desire to give the Purchasers a first priority
security interest in the Collateral (as defined below);
NOW,
THEREFORE, in consideration of the premises and the mutual covenants hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Obligors, the Obligors
hereby agree with the Purchasers as follows:
1. Certain
Definitions.
The
following terms used herein shall have the meanings ascribed to them under
the
Uniform Commercial Code in effect in the Commonwealth of Massachusetts on
the
date hereof: Accounts, Chattel Paper, Documents, Equipment, Fixtures, General
Intangibles, Goods, Instruments, Inventory, Investment Property and Proceeds.
Terms not otherwise defined herein shall have the meaning assigned such terms
in
the Purchase Agreement.
2. Security
Agreement.
Each
Obligor hereby grants to the Purchasers a first priority security interest
in
all of the following property now owned or at any time hereafter acquired
by the
Obligor or in which the Obligor now has or at any time in the future may
acquire
any right, title or interest: (i) Accounts; (ii) Chattel Paper;
(iii) Deposit Accounts; (iv) Documents; (v) Equipment; (vi)
Fixtures;
(vii) General Intangibles (including without limitation patents, letters
patent,
patent applications, trademarks, service marks, trade names and copyrights
and
any applications therefor or registrations, recordings, divisions,
continuations, continuations-in-part, renewals, reissues or extensions thereof);
(viii) Investment Property; (ix) Goods; (x) Instruments;
(xi) Inventory; (xii) insurance claims and proceeds; (xiii) books
and records, computer programs, databases and other computer materials of
the
Obligor pertaining to any and all of the foregoing; and (xiv) to the
extent
not otherwise included, Proceeds and products of any and all of the foregoing
(all such property described above being referred to hereinafter collectively
as
the “Collateral”).
3. Obligations
Secured.
The
security interest granted hereby secures payment of all amounts owed pursuant
to
the Notes issued pursuant to the Purchase Agreement and all other obligations
of
the Obligors to the Purchasers under the Bridge Loan Documents.
4. Obligors’
Representations, Warranties and Covenants.
The
Obligors represent, warrant and covenant that:
(a) Each
of
the Obligors’ principal place of business is 00 Xxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000 and the Obligors keep their records concerning accounts,
contract rights and other property at that location. The Obligors will promptly
notify the Purchasers in writing of the establishment of any new place of
business where any of their Inventory or records, or any of the Collateral,
are
kept.
(b) The
Obligors will at all times keep in a manner reasonably satisfactory to the
Purchasers accurate and complete records of the Obligors’ Inventory and Accounts
and will keep such Inventory insured. The Purchasers shall be entitled, at
reasonable times and intervals after reasonable notice to the Company, and
without undue disruption to the Company’s business to enter any of the Obligors’
premises for purposes of inspecting the Collateral and the Obligors’ books and
records relating thereto.
(c) The
Obligors will not create, incur, assume or suffer to exist, or permit any
subsidiary to create, incur, assume or suffer to exist, any mortgage, deed
of
trust, pledge, lien, security interest or other charge or encumbrance (including
the lien or retained security title of a conditional vendor) of any nature,
upon
or with respect to any of their properties, now owned or hereinafter acquired,
or assign or otherwise convey any right to receive income, except that the
foregoing restrictions shall not apply to liens, security interests or other
charges or encumbrances (i) for taxes, assessments or governmental charges
or
levies on property of the Obligors or any subsidiary if the same shall not
at
the time be delinquent or thereafter can be paid without penalty, or are
being
contested in good faith and by appropriate proceedings, (ii) imposed by law,
such as carriers’, warehousemen’s and mechanics’ liens and other similar liens
arising in the ordinary course of business or (iii) granted prior to the
date
hereof to Laurus Master Fund, Ltd. pursuant to that certain Master Security
Agreement, dated as of October 4, 2004, and those other security and pledge
agreements related to the Laurus Debt (as defined in the Purchase Agreement).
(d) The
Obligors shall not use the Collateral in violation of any applicable statute,
ordinance, law or regulation or in violation of any insurance policy maintained
by the Obligors with respect to the Collateral.
5. Financing
Statements.
The
Obligors shall execute any financing statements, or other notices appropriate
under applicable law (including without limitation the filing of notices
with
the Patent and Trademark Office), in respect of any security interest created
pursuant to this Security Agreement which may at any time be required or
which,
in the reasonable opinion of the Purchasers, may at any time be desirable.
In
the event that any recording or filing thereof (or the filing of any statements
of continuation or assignment of any financing statement) is required to
protect
and preserve such lien or security interest, the Obligors shall execute the
same
at the time and in the manner requested by the Purchasers.
6. Obligors’
Rights Until Default.
In the
absence of any Event of Default (as defined in the Purchase Agreement), the
Obligors shall have the right to possess the Collateral, manage their property
and sell their inventory in the ordinary course of business.
7. Purchasers’
Rights Upon Default.
Upon an
Event of Default and at any time thereafter, the Purchasers of at least a
majority of the aggregate principal amount of the Notes then outstanding
may
exercise any of the remedies available to them, including without limitation,
those available to a secured party under the Uniform Commercial Code as from
time to time in effect in the Commonwealth of Massachusetts. The Obligors
shall
pay to the Purchasers of at least a majority of the aggregate principal amount
of the Notes then outstanding on demand any and all reasonable counsel fees
and
other expenses incurred by the Purchasers in exercising their available remedies
upon an Event of Default hereunder.
8. Amendment.
Any
provision in this Security Agreement or the Purchase Agreement to the contrary
notwithstanding, amendments to this Security Agreement may be made, and
compliance with any covenant or provision set forth herein may be omitted
or
waived, only with the prior written consent thereto of the Purchasers of
at
least a majority of the aggregate principal amount of all Notes then outstanding
and, in the case of amendments only, the Company. Any waiver or consent may
be
given subject to satisfaction of conditions stated therein and any waiver
or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No failure or delay on the part of any of the
Purchasers, or any other holder of any Note, in exercising any right, power
or
remedy hereunder shall operate as a waiver thereof, nor shall any single
or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. Written notice of any waiver or consent effected under this Section
8
shall promptly be delivered by the Company to any Purchasers who did not
execute
the same.
9. Notices.
All
notices and other communications required or permitted hereunder shall be
in
writing and shall be given as provided in Section 15 of the Purchase
Agreement.
10. Cumulation
of Remedies.
The
rights and remedies under this Security Agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges that may otherwise
be
available to the Purchasers.
11. Binding
Effect.
This
Security Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto, including without limitation,
all
future holders of the Notes. This Security Agreement constitutes the entire
agreement with respect to the matter set forth herein and supersedes any
prior
agreements or understandings with respect thereto.
Security
Agreement - Page 4
12. Governing
Law.
This
Security Agreement shall be governed by, and construed in accordance with
the
laws of the Commonwealth of Massachusetts, without giving effect to the
principles of conflict of laws thereof.
13. Counterparts.
This
Security Agreement may be executed and delivered (including by facsimile
transmission) in more than one counterpart, each of which shall be deemed
to be
an original and which, together, shall constitute one and the same
instrument.
14. Severability.
If any
provision of this Security Agreement shall be held to be illegal, invalid
or
unenforceable, such illegality, invalidity or unenforceability shall attach
only
to such provision and shall not in any manner affect or render illegal, invalid
or unenforceable any other provision of this Security Agreement, and this
Security Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
[REMAINDER
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Security
Agreement - Signature Page
IN
WITNESS WHEREOF, this Security Agreement has been executed by the parties
hereto
as of the date first above written.
| THE COMPANY: | ||
| AXEDA SYSTEMS, INC. | ||
| |
|
|
| By: | /s/ Xxxxx X. Xxxxxxxxxx | |
|
Name: Xxxxx X. Xxxxxxxxxx |
||
| Title: Chief Financial Officer | ||
| THE GUARANTOR: | ||
| AXEDA SYSTEMS OPERATING COMPANY, INC. | ||
| |
|
|
| By: | /s/ Xxxxx X. Xxxxxxxxxx | |
|
Name: Xxxxx X. Xxxxxxxxxx |
||
| Title: Chief Financial Officer | ||
| THE PURCHASERS: | ||
|
JMI
EQUITY
FUND V, L.P.
By:
JMI Associates V, L.L.C.
its
General Partner
|
||
| |
|
|
| By: | /s/ Xxxxxxxx X. Xxxxxxx | |
|
Xxxxxxxx X. Xxxxxxx |
||
| Managing Member | ||
|
JMI
EQUITY
FUND V (AI), L.P.
By:
JMI Associates V, L.L.C.
its
General Partner
|
||
| |
|
|
| By: | /s/ Xxxxxxxx X. Xxxxxxx | |
|
Xxxxxxxx X. Xxxxxxx |
||
|
Managing
Member
|
||
Security
Agreement - Schedule I
Schedule
1
PURCHASERS:
|
JMI
EQUITY
FUND V, L.P.
0000
Xx.
Xxxx Xxxxxx
Xxxxxxxxx,
XX 00000
|
|
JMI
EQUITY
FUND V (AI), L.P.
0000
Xx.
Xxxx Xxxxxx
Xxxxxxxxx,
XX 00000
|
