PLAN OF MERGER AGREEMENT

June 29, 2005

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

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

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

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

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

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

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

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

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

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

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

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

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

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