AMENDED AND RESTATED SUBORDINATION AGREEMENT
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.
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“Laurus
Documents”
means,
collectively, the Laurus Securities Purchase Agreement, any promissory notes
executed in connection therewith and any and all guaranties and security
interests, mortgages and other liens directly or indirectly guarantying or
securing any of the Laurus Debt, and any and all other documents or instruments
executed in connection with the Laurus Securities Purchase Agreement or
otherwise evidencing or further guarantying or securing directly or indirectly
any of the Laurus Debt, whether now existing or hereafter created.
“Letter
of Intent”
means
the letter of intent dated June 29, 2005 between an affiliate of the Purchasers
and Axeda (on behalf of itself and its subsidiaries), as amended, modified
or
supplemented from time to time.
“Security
Agreement”
means
the Amended and Restated Security Agreement dated as of the date hereof by
and
among Axeda, the Guarantors and the Purchasers (including any prior version
thereof and as it may be hereafter amended, modified, substituted, extended
or
restated from time to time, including any replacement agreement
therefor).
“Senior
Debt”
means
all principal (which principal shall not exceed $600,000), interest, fees,
costs, enforcement expenses (including legal fees and disbursements), collateral
protection expenses and other reimbursement or indemnity obligations created
or
evidenced by any of the other Senior Documents (as defined below), or any prior,
concurrent or subsequent notes, instruments or agreements, or indebtedness,
liabilities or obligations of any type or form whatsoever relating thereto,
in
favor of the Senior Holders with respect to the Company in connection with
any
of the Senior Documents. Notwithstanding anything herein to the contrary, Senior
Debt shall not include any termination or break-up fees or expense reimbursement
amounts payable to the Senior Holders by the Company under either of the Letter
of Intent and/or the Asset Purchase Agreement. Senior Debt shall expressly
include any and all interest accruing or costs or expenses (including legal
fees
and expenses) incurred on or after the date of any filing by or against the
Company of any petition under the United States Bankruptcy Code or any other
bankruptcy, insolvency or reorganization act regardless of whether the Senior
Holders’ claim therefor is allowed or allowable in the case or proceeding
relating thereto.
“Senior
Documents”
means,
collectively, the Senior Purchase Agreement, the Senior Notes, the Security
Agreement, the Guaranty, any promissory notes executed in connection therewith
(subject to the aggregate principal not exceeding $600,000) and any and all
guaranties and security interests, mortgages and other liens directly or
indirectly guarantying or securing any of the Senior Debt, and any and all
other
documents or instruments otherwise evidencing or further guarantying or securing
directly or indirectly any of the Senior Debt, whether now existing or hereafter
created.
“Senior
Holders”
means
the Purchasers and any subsequent holders of the Senior Notes.
“Senior
Subordinated Creditors”
means
the Purchasers and any subsequent holders of the Senior Subordinated
Notes.
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“Senior
Subordinated Debt”
means
all principal (which principal shall not exceed $900,000), interest, fees,
costs, enforcement expenses (including legal fees and disbursements), collateral
protection expenses and other reimbursement and indemnity obligations created
or
evidenced by any of the Senior Subordinated Documents (as defined below), or
any
prior, concurrent or subsequent notes, instruments or agreements, or
indebtedness, liabilities or obligations of any type or form whatsoever relating
thereto, in favor of the Senior Subordinated Creditors with respect to the
Company in connection with any of the Senior Subordinated Documents.
Notwithstanding anything herein to the contrary, Senior Subordinated Debt shall
not include any termination or break-up fees or expense reimbursement amounts
payable to the Senior Subordinated Creditors by the Company under either of
the
Letter of Intent or the Asset Purchase Agreement. Senior Subordinated Debt
shall
expressly include any and all interest accruing or costs or expenses (including
legal fees and expenses) incurred on or after the date of any filing by or
against the Company of any petition under the United States Bankruptcy Code
or
any other bankruptcy, insolvency or reorganization act regardless of whether
the
Senior Subordinated Creditors’ claim therefor is allowed or allowable in the
case or proceeding relating thereto.
“Senior
Subordinated Documents”
means,
collectively, the Senior Subordinated Purchase Agreement, the Security Agreement
(solely to the extent relating to the loans and extension of credit under the
Senior Subordinated Purchase Agreement), the Senior Subordinated Notes, the
Guaranty (solely to the extent relating to the loans and extension of credit
under the Senior Subordinated Purchase Agreement), any promissory notes executed
in connection therewith (subject to the aggregate principal not exceeding
$900,000) and any and all guaranties and security interests, mortgages and
other
liens directly or indirectly guarantying or securing any of the Senior
Subordinated Debt, and any and all other documents or instruments otherwise
evidencing or further guarantying or securing directly or indirectly any of
the
Senior Subordinated Debt, whether now existing or hereafter created.
“Subordinated
Creditors”
means,
collectively, the Senior Subordinated Creditors and the Laurus Creditors.
“Subordinated
Debt”
means,
collectively, the Laurus Debt and the Senior Subordinated Debt.
“Subordinated
Documents”
means,
collectively, the Laurus Documents and the Senior Subordinated Documents.
“Triggering
Event”
means
the occurrence and continuation of any of the following events:
(i) the
asset
acquisition contemplated under the Asset Purchase Agreement shall not have
been
consummated by January 15, 2006;
(ii) the
Asset
Purchase Agreement shall have been amended to reduce the cash portion of the
purchase price to an amount less than the aggregate principal and accrued
interest of the Laurus Debt (which principal and accrued interest shall not
include any default interest, penalties, premiums, fees or other amounts
otherwise due and owing under the Laurus Documents) payable pursuant to the
terms of the Laurus Consent Letter upon the consummation of the asset
acquisition set forth in the Asset Purchase Agreement;
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(iii) the
asset
acquisition contemplated under the Asset Purchase Agreement shall have failed
to
receive the requisite vote for approval by Axeda’s stockholders upon the holding
of a duly convened stockholders meeting (or any properly adjourned and
reconvened meeting thereof) pursuant to Section 5.05 of the Asset Purchase
Agreement; and
(iv) the
Asset
Purchase Agreement is effectively terminated in accordance with its
terms.
2. Subordination.
Each
Subordinated Creditor, for itself, its executors, administrators, personal
representatives, heirs, devisees, legatees, successors and assigns, covenants
and agrees that the payment of the principal of and interest on all Subordinated
Debt now or hereafter outstanding is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, to the payment in full in cash
of the Senior Debt; provided,
however,
that
the Company shall be permitted to make certain payments in the form of equity
on
account of the Laurus Debt in accordance with Section 3 below.
3. No
Payment.
As long
as any of the Senior Debt is outstanding, no payment of principal of, interest
on, or premiums, fees, costs, expenses or other amounts with respect to, any
Subordinated Debt shall be made by the Company or accepted by any Subordinated
Creditor and the Company shall not set off, contra or otherwise apply all or
any
part of any obligation of any Subordinated Creditor to the Company toward
satisfaction of the Subordinated Debt, or acquire, redeem or otherwise purchase
any Subordinated Debt; provided,
however,
that
the Company shall be permitted (but not obligated) to make payments on the
Laurus Debt payable solely in the form of shares of common stock of the Company
or warrants or options to purchase shares of common stock of the Company in
accordance with the terms of the Laurus Securities Purchase Agreement so long
as
no Event of Default has occurred under the Senior Documents. Notwithstanding
anything herein to the contrary, this Agreement shall not restrict or adversely
affect the ability of, and this Section 3 shall not apply to any action
taken by, the Senior Subordinated Creditors, or any of their respective
affiliates to surrender to the Company the promissory notes evidencing the
Senior Subordinated Debt as partial payment of the purchase price under the
Asset Purchase Agreement, so long as the Asset Purchase Agreement has not been
amended in the manner set forth in clause (ii) of the definition of Triggering
Event.
4. Payments
Held in Trust.
If any
payment of principal of, interest on, or premiums, fees, costs, expenses or
other amounts with respect to, any Subordinated Debt is received by a
Subordinated Creditor before all Senior Debt shall have been paid or satisfied
in full, despite or in violation or contravention of the terms of this
Subordination Agreement, the Subordinated Creditor will hold the same in trust
for the Senior Holders and forthwith pay the same to the Senior Holders, to
be
held by the Senior Holders as additional security for the Senior Debt or applied
by the Senior Holders to payment of the Senior Debt in such manner as the Senior
Holders may choose in their sole discretion. Any such payment of principal
of,
interest on, or premiums, fees, costs, expenses or other amounts with respect
to, any Subordinated Debt paid over to the Senior Holders and held by the Senior
Holders as additional security pursuant to the immediately preceding sentence
shall, to the extent not applied to the payment of the Senior Debt, be paid
over
to the Subordinated Creditors after the Senior Debt has been finally paid in
full in cash. Until the Senior Debt has been finally paid in full in cash,
no
Subordinated Creditor shall have any right of subrogation, reimbursement,
restitution, contribution or indemnity whatsoever from any assets of the Company
or any guarantor of or provider of collateral security for the Senior Debt.
Notwithstanding anything to the contrary contained herein, following the payment
in full of the Senior Debt, each Senior Holder hereby agrees that in the event
such Senior Holder receives as a result of its exercise of remedies under the
Senior Documents any amount on account of the Senior Debt in excess of the
outstanding Senior Debt, such Senior Holder shall pay over such excess amount
to
the Subordinated Creditors as promptly as practicable.
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5. Sharing
of Payments and Property.
Subject
to Section 3, if a Subordinated Creditor shall (a) receive or obtain any payment
in respect of any of its Subordinated Debt or (b) receive or obtain any property
in respect of such Subordinated Debt through the exercise of any remedy or
right
(whether arising by operation of law or under any agreement) or otherwise with
respect to such Subordinated Debt, it shall (i) receive and hold such payment
or
property in trust for all Subordinated Creditors, (ii) deliver such payment
or
property (or the proceeds thereof) to all Subordinated Creditors pro-rata
in
accordance with their respective percentage of outstanding Subordinated Debt,
and (iii) make such other adjustments from time to time as shall be equitable
to
the end that all the Subordinated Creditors shall share the benefit of such
payment or property (net of any expenses which may be incurred by such
Subordinated Creditor in obtaining or preserving such benefit) pro-rata
in
accordance with their respective percentage of the outstanding Subordinated
Debt. Notwithstanding anything herein to the contrary, (a) payments
made to
the Laurus Creditors in the form of equity made in accordance with Section
3
above, and (b) payments received by any Subordinated Creditor under
Section
7(d) and/or Section 10 on account of the sale and/or transfer of their
respective Subordinated Debt, in each case, are not subject to this
Section 5. Notwithstanding anything herein to the contrary, this Agreement
shall not restrict or adversely affect the ability of, and this Section 5
shall not apply to any action taken by, the Senior Holders, the Senior
Subordinated Creditors, or any of their respective affiliates to surrender
to
the Company the promissory notes evidencing the Senior Debt or Senior
Subordinated Debt as partial payment of the purchase price under the Asset
Purchase Agreement, so long as the Asset Purchase Agreement has not been amended
in the manner set forth in clause (ii) of the definition of Triggering
Event.
6. Bankruptcy.
In the
event of any receivership, insolvency, bankruptcy, assignment for the benefit
of
creditors, reorganization (whether or not pursuant to bankruptcy laws), sale
of
all or substantially all of the assets, dissolution, liquidation, winding up
of
the business or affairs of the Company or any other marshalling of the assets
and liabilities of the Company (each a “proceeding”):
(a) each
Subordinated Creditor will prove (including filing appropriate proofs of claim),
enforce and endeavor to obtain payment of the principal of, interest on and
all
other amounts payable with respect to all Subordinated Debt and will pay over
to
the Senior Holders amounts thereof sufficient for payment of principal of and
interest on, or other payments with respect to, the Senior Debt, to pay in
full
the Senior Debt. If a Subordinated Creditor has not filed appropriate proofs
of
claim at least eight (8) business days prior to the deadline date for filing
such claims, the Senior Holders may file such claims in any such proceeding
on
such Subordinated Creditor’s behalf. In no event shall any Subordinated Creditor
waive, forgive or cancel any claim it may now or hereafter have against the
Company.
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(b) the
Senior Holders may, at their option, claim directly from the trustee or
representative of the Company’s estate in such proceeding. In the event that the
Senior Holders do so elect to claim directly against the trustee or
representative of the Company’s estate, each Subordinated Creditor shall be
obligated to do the same.
(c) each
Subordinated Creditor hereby grants to the Senior Holders an irrevocable proxy
to vote its claims in any such proceeding or at any meeting of creditors, and
agrees to execute all further documents requested by the Senior Holders to
facilitate exercise of this proxy. This Section 6(c) shall terminate in the
event all of the following conditions are satisfied: (i) the Purchase Options
(as defined in Section 10(c)) under Section 10 shall have expired unexercised,
(ii) the Company shall be subject to a proceeding and (iii) Laurus shall have
purchased from the Senior Holders at least 50% of the outstanding Senior Notes
for a cash purchase price equal to the aggregate principal and accrued interest
on such Senior Notes.
7. Certain
Prohibited Actions.
Until
the payment or satisfaction in full of the Senior Debt, without the prior
written consent of the Senior Holders (subject to the last sentence of this
Section 7):
(a) no
Subordinated Creditor shall from and after the date hereof, request, demand
or
seek to obtain from the Company, and the Company shall not grant or deliver
to
the Subordinated Creditor, any collateral or other security for the Subordinated
Debt (the parties hereto acknowledge that this clause (a) does not require
the
Subordinated Creditors to terminate the liens granted prior to this date under
the Subordinated Documents);
(b) no
Subordinated Creditor shall, (i) accelerate the maturity of any Subordinated
Debt, (ii) demand payment of any Subordinated Debt or (iii) exercise any right
or remedy, or take any action, against the Company or any of the assets or
property of the Company to enforce its rights with respect to any Subordinated
Debt;
(c) no
Subordinated Creditor shall, amend or modify any of the terms of any of the
Subordinated Debt or any of the Subordinated Documents in a manner that is
materially adverse to the interests of the Senior Holders (including those
interests relating to the Senior Documents and the transactions contemplated
by
the Letter of Intent); provided,
however,
that
the Subordinated Creditors shall provide the Senior Holders at least five
business days’ prior notice of any proposed amendment or modification to afford
the Senior Holders an opportunity to object to such proposed amendment or
modification as being materially adverse to their interests; and
(d) no
Subordinated Creditor shall sell, assign or otherwise transfer or further
encumber any Subordinated Debt or interest therein without first procuring
and
delivering to the Senior Holders and the other Subordinated Creditors evidence
in writing of the consent and agreement of the purchaser, pledgee, assignee
or
transferee of such Subordinated Debt or interest therein to comply with all
terms, conditions and provisions of this Subordination Agreement. The rights
of
the Senior Holders under this Section 7 shall inure to the benefit of
their
successors and assigns.
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Upon
expiration of the Purchase Option Period (defined in Section 10(c)) during
which
period no party has exercised its respective Purchase Option under Section
10,
then in such event Sections 7(a), (b) and (c) above shall cease to be effective
and binding upon the Subordinated Creditors.
8. Subordinated
Creditors’ Security.
(a) Each
Subordinated Creditor hereby confirms that, regardless of the relative times
and
method of attachment or perfection thereof (or any failure to perfect) or the
order of filing of financing statements, mortgages or other security agreements
or documents, or anything in the Subordinated Documents or this Subordination
Agreement to the contrary, the security interests and liens granted or to be
granted from time to time to secure the Senior Debt, shall in all respects
be
first and senior security interests and liens, superior to any security
interests and liens granted or to be granted to Subordinated Creditor in assets
of, or ownership interests in, the Company or any other person pursuant to
the
Subordinated Documents or otherwise, it being the express intention of the
parties that, notwithstanding anything in this Subordination Agreement to the
contrary, all liens and security interests granted to Senior Holders from time
to time shall be prior and superior to any liens or security interests granted
to Subordinated Creditor. In foreclosing on Senior Holders’ security interests
and liens in the collateral described in or purportedly covered by the Security
Agreement and any other documents and/or instruments securing the Senior Debt
(as defined in the Senior Purchase Agreement) (the “Collateral”),
the
Senior Holders may proceed to foreclose on their security interests and liens
in
any manner which the Senior Holders, in their sole discretion, choose, even
though a higher price might have been realized if Senior Holders had proceeded
to foreclose on their security interests and liens in another
manner.
(b) Except
as
set forth in the last sentence of Section 4 and the last sentence of Section
8(c), each Subordinated Creditor hereby consents and agrees that the Senior
Holders shall be under no obligation with respect to marshaling collateral
security for the Senior Debt in favor of Subordinated Creditors or in payment
of
indebtedness of the Company to the Subordinated Creditors.
(c) Without
limiting any of the rights (including any of the foreclosure rights) of Senior
Holders under the Senior Purchase Agreement, the Security Agreement, the
Guaranty or any documents delivered to secure the obligations of the Company
to
the Senior Holders in connection therewith or under the provisions of any
applicable law, and without placing any obligation on the part of the Senior
Holders to follow any of the following provisions in order to retain their
priority status hereunder, in the event that the Senior Holders release or
discharge their security interests in, or liens upon, any Collateral which
is
subject to a lien or security interest in favor of any Subordinated Creditor,
in
each case in connection with exercising the Senior Holders’ rights under the
Security Agreement, such Collateral shall thereupon be deemed to have been
released from all such liens and security interests. Each Subordinated Creditor
agrees that within two Business Days’ following Senior Holder’s written request
therefor, it will execute, deliver and file any and all such termination
statements, lien releases and other agreements and instruments as Senior Holders
reasonably deem necessary or appropriate in order to give effect to the
preceding sentence. Each Subordinated Creditor hereby irrevocably appoints
the
Senior Holders the true and lawful attorney of such Subordinated Creditor for
the purpose of effecting any such executions, deliveries and filings. Without
limiting the foregoing, and without implying that any Senior Holder is obligated
to undertake any special investigation with respect to its good faith belief
as
to the fair value of any property, the parties hereto agree to be bound as
to
the fair value of any property as determined by any independent appraisal of
such property that may be conducted at the Senior Holders’ request. The cost of
any such appraisal shall be borne by the Company and, if funded by the Senior
Holders, shall constitute Senior Debt. Each Senior Holder agrees that if, as
a
result of a release of its liens on Collateral which is subject to a lien or
security interest in favor of any Subordinated Creditor, such Senior Holder
receives any amount on account of the Senior Debt in excess of the outstanding
Senior Debt, such Senior Holder shall in accordance with the last sentence
of
Section 4 above pay over such excess amount to the Subordinated Creditors as
promptly as practicable following payment in full of the Senior Debt.
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9. Consents
and Waivers.
Each
Laurus Creditor hereby irrevocably (subject to the last parenthetical clause
set
forth in the clause (g) of this Section 9 below) consents to (a) the Company
entering into the Senior Purchase Agreement and the other Senior Documents,
the
Company’s incurrence of the Senior Debt and the Company’s performance of its
obligations thereunder and irrevocably waives any rights it may have to
participate in, receive notice of or otherwise prohibit the issuance of the
Senior Debt, (b) the Company entering into the Senior Subordinated Purchase
Agreement and the other Senior Subordinated Documents, the Company’s incurrence
of the Senior Subordinated Debt and the Company’s performance of its obligations
thereunder and irrevocably waives any rights it may have to participate in,
receive notice of or otherwise prohibit the issuance of the Senior Subordinated
Debt, (c) any waiver of the terms of the Senior Debt, the Senior Documents,
the
Senior Subordinated Debt or the Senior Subordinated Documents, (d) any renewal,
extension or postponement of the time of payment of the Senior Debt or the
Senior Subordinated Debt or any other indulgence with respect to the Senior
Debt
or the Senior Subordinated Debt, (e) any substitution, exchange or release
of
collateral for the Senior Debt or the Senior Subordinated Debt, (f) the addition
or release of any person primarily or secondarily liable on the Senior Debt
or
the Senior Subordinated Debt made or effected by the Senior Holders or the
Senior Subordinated Creditors, and (g) the execution, delivery and performance
by the Company (including Axeda, ASOC and AIP) of the Asset Purchase Agreement
and the consummation of the transactions contemplated thereby, including the
transfer of the Business and the Purchased Assets (as each such term is defined
in the Asset Purchase Agreement) to the Purchasers or one or more of their
affiliates (consent to such performance and consummation being subject to the
payment to Laurus of the outstanding principal and accrued interest under the
Laurus Dept in accordance with the immediately succeeding sentence). In
connection with the consummation of the transactions contemplated by the Asset
Purchase Agreement, each Laurus Creditor shall release and terminate all claims,
security interests, pledges, liens and other encumbrances on all of the
Company’s assets that are to be transferred to the Purchasers or one or more of
their affiliates as contemplated by the Asset Purchase Agreement at the closing
of such transactions, which releases and terminations shall be effective
concurrently with the payment in full in cash by Axeda of the outstanding
principal and accrued and unpaid interest owed by the Company to Laurus under
the Laurus Debt (which principal and accrued interest amount shall not include
any default interest, penalties, premiums, fees or other amounts otherwise
due
or owing under the Laurus Documents) as contemplated by the Laurus Consent
Letter. The Senior Holders may exercise, fail to exercise, waive or amend any
of
their rights under any instrument evidencing or securing or under any agreement
delivered in connection with any Senior Debt, and in reference thereto may
make
and enter into such agreements as to them may seem proper or desirable, all
without notice to or further assent from the Subordinated Creditors, and any
such action shall not in any manner impair or affect this Subordination
Agreement or any of the Senior Holders’ rights hereunder. Notwithstanding
anything herein to the contrary, neither the Senior Documents nor the Senior
Subordinated Documents shall be amended or modified to (x) increase the
aggregate principal of, or increase the rates of interest, fees, other premiums
or similar amounts payable on, either of (i) the Senior Debt from that in effect
on July 8, 2005 or (ii) the Senior Subordinated Debt from that in effect on
the
date hereof, (y) cause any termination or break up fees or expense reimbursement
amounts payable to any Purchaser (or any affiliate thereof) under the Asset
Purchase Agreement to be secured by the security interests granted to either
of
the Senior Holders under the Senior Documents or the Senior Subordinated
Creditors under the Senior Subordinated Documents, as the case may be or (z)
restrict the Company from entering into an amendment or modification to the
terms of the Subordinated Debt which amendment or modification is in accordance
with the terms and conditions of Section 7(c) hereof, in each case without
the
consent of the Laurus Creditors representing at least a majority of the
aggregate principal amount of the Laurus Debt then outstanding. Notwithstanding
anything herein to the contrary, the Laurus Documents shall not be amended
or
modified to increase the aggregate principal of, or increase the rate of
interest, fees, or other premiums or similar amounts payable on, the Laurus
Debt
from that in effect on July 8, 2005 without the consents of the Senior
Subordinated Creditors representing at least a majority of the aggregate
principal amount of the Senior Subordinated Debt then outstanding and the Senior
Holders representing at least a majority of the aggregate principal amount
of
the Senior Notes then outstanding. Each Subordinated Creditor hereby irrevocably
waives (i) presentment, notice and protest in connection with all negotiable
instruments evidencing Senior Debt or Subordinated Debt, (ii) notice of the
acceptance of this Subordination Agreement by the Senior Holders, (iii) notice
of any extensions of credit made, extensions granted or other action taken
in
reliance hereon, and (iv) all demands and notices of every kind in connection
with this Subordination Agreement. Each Subordinated Creditor hereby waives
and
agrees not to assert against the Senior Holders any rights which a guarantor
or
surety with respect to any indebtedness of the Company could exercise; but
nothing in this Subordination Agreement shall constitute the Subordinated
Creditor a guarantor or surety.
-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., 0000
Xx.
Xxxx Xxxxxx, Xxxxxxxxx, XX 00000, Attn: Xxxxxxxx X. Xxxxxxx 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 Xxxxxxx Procter LLP, Exchange
Place, 00 Xxxxx Xxxxxx, Xxxxxx, XX 00000, Attn: Xxxx X. Xxxxxxx, Esq., Fax.
No.:
(000) 000-0000; (ii) if to the Company, at 00 Xxxxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000, 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, 0000 Xxxxxxxx,
Xxx Xxxx, Xxx Xxxx 00000-0000, Attn: Xxxxxx X. Xxxxxx, Fax No. (000) 000-0000;
and (iii) if to the Laurus Creditor, at c/o Laurus Capital Management LLC,
000
Xxxxx Xxxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxx Ban, Esq., Fax No.: (000) 000-0000 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.
[REMAINDER
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.
By:
/s/
Xxxxxx X. Xxxxxxx, Xx.
Name:
Xxxxxx X. Xxxxxxx Xx.
Title:
Chief Executive Officer
JMI
EQUITY FUND V, L.P.
By:
JMI Associates V, L.L.C.
its
General Partner
By:
/s/
Xxxxxxxx X. Xxxxxxx
Name:
Xxxxxxxx X. Xxxxxxx
Title:
Managing Member
JMI
EQUITY FUND V (AI), L.P.
By:
JMI Associates V, L.L.C.
its
General Partner
By:
/s/
Xxxxxxxx X. Xxxxxxx
Name:
Xxxxxxxx X. Xxxxxxx
Title:
Managing Member
LAURUS
MASTER FUND, LTD.
By:
/s/
Xxxxx
Grin
Title:
Director
-13-
