Document:

December 12, 2001 

Alan
Norman

[Address] 

Dear
Alan: 

        This
letter sets forth the substance of the separation agreement (the "Agreement") Internap Network Services Corporation (the "Company") proposes regarding your employment transition. 

        1.    Separation. Your last day of employment with the Company shall be June 12, 2002 (the "Separation Date"). 

        2.    Transition Period. Effective immediately you will resign your position as the Company's Vice-President
Corporate Development and any positions with any affiliate of the Company other than the Japanese joint venture, and from now through the Separation Date (the "Transition Period"), you will report to
Eugene Eidenberg, the Company's Chief Executive Officer ("Mr. Eidenberg") and will be expected to assist in the transition of duties regarding the Company's Japanese joint venture project, as
requested by Mr. Eidenberg. Effective on June 12, 2002 you will automatically (without any further action required by you) be deemed to have resigned from the joint venture's Board of
Directors, provided that the Company may change such date in its sole discretion without notice to you, in which event the Separation Date will not be affected. You will perform your transition duties
from your California residence, except as required by Mr. Eidenberg. During the Transition Period you will be paid based on an annual base salary of $112,500, less applicable withholdings and
deductions, and will be entitled to continue your employee benefits, including vacation accrual. You agree that as of the date of this Agreement, your accrued vacation and paid time off balance with
the Company is at zero (0) days. 

        3.    Stock Options. Your stock options will cease vesting on the Separation Date, under the terms of your written stock option
agreement(s) and the applicable plan(s) governing those agreement(s). You may exercise your vested option shares pursuant to your written stock option agreement(s) and the applicable plan(s) governing
those agreement(s). 

        4.    Expense Reimbursements. The Company will, pursuant to its regular business practice, reimburse you for expenses approved
in advance by Mr. Eidenberg through the Separation Date, if any, that you submit within ten (10) days of the Separation Date. 

        5.    Return of Company Property. On or before the Separation Date, you must return to the Company all Company documents (and
all copies thereof) and other Company property that you have had in your possession at any time, including, but not limited to, Company files, notes, drawings, records, business plans and forecasts,
financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers), credit cards, entry cards, computer access codes, computer programs,
identification badges and keys; and any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof). 

        6.    Continuing Obligations. After the Separation Date, you will have continuing obligations to the Company, including
obligations not to use or disclose any confidential or proprietary information of the Company. A copy of the agreement you signed with respect to these obligations is attached to this letter as
Exhibit B. During the Transition Period, you may seek other employment provided that such employment shall not conflict with your obligations under Exhibit B or Sections 10 and 11 of the
Employment Agreement (defined below) except to the extent that any Company policies expressly restrict your employment by another employer. 

        7.    Release. In exchange for the Transition Period and other consideration under this Agreement, to which you acknowledge you
would otherwise not be entitled absent this Agreement, you hereby release, acquit and forever discharge the Company, its parent and subsidiaries, and its and their officers, directors, agents,
servants, employees, shareholders, attorneys, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys' fees, 

damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification you may have as a result of any third party action against you based on your employment with the Company), arising out of or in any way related to agreements, events, acts or conduct
at any time prior to and including the date you sign this Agreement, including but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with your
employment with the Company or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for
personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other equity or ownership interests in the Company, paid time off, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation; claims under that certain Employment Agreement between you and the Company dated June 21, 2001 (the "Employment Agreement");
claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act
of 1967, as amended ("ADEA"); the federal Americans with Disabilities Act of 1990; the California Fair Employment and Housing Act; the California Labor Code; the Washington Law Against Discrimination
in Employment, as amended; the Washington Family Leave Act, as amended; tort law; contract law; wrongful discharge; discrimination; fraud; defamation; and breach of the implied covenant of good faith
and fair dealing. 

        8.    ADEA Waiver. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under
the ADEA. You also acknowledge that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which you were already entitled. You
further acknowledge that you have been advised by this writing, as required
by the ADEA, that: (a) your waiver and release do not apply to any rights or claims that may arise after you sign this Agreement; (b) you have the right to consult with an attorney prior
to executing this Agreement; (c) you have twenty-one (21) days to consider this Agreement (although you may choose to voluntarily execute this Agreement earlier);
(d) you have seven (7) days following the date you sign this Agreement to revoke the Agreement; and (e) this Agreement shall not be effective until the date upon which the
revocation period has expired, which shall be the eighth (8th) day after you sign this Agreement. 

        9.    Section 1542 Waiver. You acknowledge that you have read and understand Section 1542 of the California Civil
Code which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement with the debtor." You hereby expressly waive and relinquish all rights and benefits under that
section and any law of any jurisdiction of similar effect with respect to your release of any claims you may have against the Company. 

        10.  Other Compensation or Benefits. Except as expressly provided in this Agreement, you will not receive any additional
compensation, severance, or benefits from the Company after the Separation Date. 

        11.  Separation Date Release. As further consideration for the promises set forth in this Agreement, on the Separation Date
you agree to execute, make effective and deliver to the Company the General Release and Waiver attached as Exhibit A ("the Separation Date Release"). You understand and acknowledge that failure
to provide a Separation Date Release will constitute a material breach of this Agreement. 

        12.  Entire Agreement. This Agreement, including its exhibits, constitutes the complete, final and exclusive embodiment of the
entire agreement between you and the Company with regard to the subject matter hereof. It supersedes any and all agreements entered into by and between you and the Company, including the Employment
Agreement; provided, however, that Section 10 of the Employment Agreement regarding Proprietary Rights and Inventions is expressly made a part of
and incorporated into this Agreement, and is not superseded. This Agreement is entered into without reliance on any 

promise or representation, written or oral, other than those expressly contained herein. It may not be modified except in a writing signed by a duly authorized officer of the Company. 

        13.  Successors and Assigns. This Agreement will bind the heirs, personal representatives, successors, assigns, executors and
administrators of each party, and will inure to the benefit of each party, its heirs, successors and assigns. 

        14.  Applicable Law. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance
with the laws of the State of Washington as applied to contracts made and to be performed entirely within Washington. 

        15.  Severability. If a court of competent jurisdiction determines that any term or provision of this Agreement is invalid or
unenforceable, in whole or in part, then the remaining terms and provisions hereof will be unimpaired. The court will then have the authority to modify or replace the invalid or unenforceable term or
provision with a valid and enforceable term or provision that most accurately represents the parties' intention with respect to the invalid or unenforceable term or provision. 

        If
this Agreement is acceptable to you, please sign below, and return the original to me. 

        Thank
you for your efforts in support of the Company. We look forward to working with you during the Transition Period. 

	Sincerely yours,	 	 
	
Internap Network Services Corporation	
 	

 
	

/s/  GENE EIDENBERG      
Gene Eidenberg

Chief Executive Officer	
 	

 
	
So Agreed.	
 	

 
	

/s/  ALAN NORMAN      
Alan Norman	
 	

 
	

Date:	

December 17, 2001
	
 	

 

Attachments:

Exhibit A—Separation Date Release

Exhibit B—Employee Confidentiality, Nonraiding and Noncompetition AgreementQuickLinks
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Exhibit 4.16  

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED OR AN EXEMPTION FROM REGISTRATION
UNDER SAID ACT IS AVAILABLE. 

 
 

AMENDED AND RESTATED
  CONVERTIBLE SUBORDINATED PROMISSORY NOTE    

	$6,500,000	 	November 20, 2001
	 	 	Broomfield, CO

        FOR
VALUE RECEIVED, eSoft, Inc. a Delaware corporation (the "Borrower") hereby unconditionally promises to pay to the order of
Gateway Companies, Inc. (the "Lender"), at its head office at 14303 Gateway Place, Poway, CA 92064, the principal sum of SIX MILLION FIVE HUNDRED
THOUSAND DOLLARS ($6,500,000), or so much thereof as shall be outstanding, in lawful money of the United States of America and in immediately available funds, on September 15, 2004 (the
"Maturity Date") in one lump-sum payment of $6,500,000 (or so much thereof as shall be outstanding), and from and after the date of this
Convertible Subordinated Promissory Note to pay interest on the principal amount hereof outstanding from time to time, at Borrower's election in cash or in eSoft Common Stock, par value $0.01 per
share ("Common Stock"), at the Fair Market Value (as defined in the next paragraph) at such office, at the rate per annum of seven percent (7.0%), in
arrears on a quarterly basis on the 15th day of each December, March, June and September, commencing December 15, 2001; provided,  however, that
the principal amount hereof was $12,500,000 between September 15, 2001 and November 20, 2001, and thereafter the principal
amount hereof was reduced to $6,500,000 pursuant to a prepayment of principal by the Borrower and the forgiveness of certain indebtedness by the Lender (as described in that certain Note Prepayment
and Amendment Agreement, dated as of November 20, 2001, between Borrower and Lender). 

        Capitalized
terms not otherwise defined herein shall have the respective meanings assigned to them in the Stock and Warrant Purchase and Investor Rights Agreement dated April 26,
2000 between the Borrower and the Lender, as amended on September 15, 2000 (the "Purchase Agreement"). For purposes of this Convertible
Subordinated Promissory Note, "Fair Market Value" of the Common Stock shall be determined by the average of the closing prices of the Common Stock on
the principal securities exchange or market on which it is then being listed for the ten (10) trading days preceding the date of determination of the Fair Market Value. 

        Unless
all or part of the principal amount of this Convertible Subordinated Promissory Note is converted to the Borrower's Common Stock by the Lender on or before the Maturity Date as
provided for herein, all outstanding principal and accrued interest hereunder shall be due and payable on the Maturity Date. The Borrower may not prepay all or any part of the principal amount of this
Convertible Subordinated Promissory Note before maturity. The loan represented by this Convertible Subordinated Promissory Note shall be subordinated to all other debt of the Borrower outstanding at
any time. 

        A.    Payments:    All payments of principal, interest and other amounts to be made by the Borrower under this
Convertible Subordinated Promissory Note shall be made, (i) if in cash in immediately available funds to the Lender no later than 1:00 p.m. local time in Broomfield, Colorado, on the
date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding business day), and (ii) if in stock to
the Lender no later than 1:00 p.m. local time in Broomfield, Colorado, five (5) business days following the date on which such payment shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next succeeding business day). If an Event of Default (as defined below) has occurred and is continuing, the Lender may apply any
such payment as it may elect in its discretion. If the due date of any payment under this Agreement or the Note would otherwise fall on a day that is not a business day, such date shall be extended to
the next succeeding business day and 

 

interest shall be payable for any principal so extended for the period of such extension. Interest shall be computed on the basis of the actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable, relative to a year of 365 or 366 days, as the case may be. 

        B.    Conversion:    The aggregate amount of outstanding principal of this Convertible Subordinated Promissory Note
plus accrued and unpaid interest is convertible, in whole or in part, at the option of the Lender, at any time commencing on the date of issuance of this Convertible Subordinated Promissory Note and
ending on the Maturity Date, as follows: 

        1.    Mechanics of Conversion.    The Lender shall notify the Borrower in writing (the
"Conversion Notice"), in the manner prescribed in Section 11(e) of the Purchase Agreement, of its desire to convert all or part of the
aggregate amount of principal of this Convertible Subordinated Promissory Note plus interest, if any, that has accrued but remains unpaid thereon. The Conversion Notice shall be accompanied by the
original of this Convertible Subordinated Promissory Note (or reasonable written assurance of the loss or destruction of the original of this Convertible Subordinated Promissory Note). The Conversion
Notice shall specify (i) the aggregate amount of principal of this Convertible Subordinated Promissory Note plus interest, if any, that has accrued but remains unpaid thereon to be converted
(the "Conversion Amount"), (ii) the date of the desired conversion (the "Conversion Date") and
(iii) the name(s) which should appear on the stock certificate(s) to be issued by the Borrower which represent the Common Stock acquired by the Lender upon conversion. If reasonably required by
the Borrower, certificates surrendered for conversion shall be accompanied by a written instrument or instruments of transfer in form reasonably satisfactory to the Borrower. The Borrower shall not be
required to pay any tax that may be payable in respect of any transfer involving the issuance and delivery of such certificates upon conversion in a name other than that of the Lender, and the
Borrower shall not be required to issue or deliver such certificates unless or until the persons requesting the issuance thereof shall have established to the Borrower's reasonable satisfaction that
any such taxes have been paid or will be paid by parties other than the Borrower. 

        2.    Common Stock Issuable upon Conversion.    Within three (3) business days of receipt of a
Conversion Notice, the Borrower shall issue to the Lender that number of shares of Common Stock determined by dividing the Conversion Amount by the Fair Market Value of the Common Stock as of the
Conversion Date (the "Conversion Price"). If the calculation of the Conversion Price set forth in the preceding sentence would result in a Conversion
Price of less than $11.00 (as adjusted for stock splits, stock dividends, recapitalizations and the like), then the Conversion Price shall instead be $11.00 (as adjusted for stock splits, stock
dividends, recapitalizations and the like). If the calculation of the Conversion Price set forth in the second preceding sentence would result in a Conversion Price of greater than $19.507 (as
adjusted for stock splits, stock dividends, recapitalizations and the like), then the Conversion Price shall instead be $19.507 (as adjusted for stock splits, stock dividends, recapitalizations and
the like). The Conversion Price shall be subject to adjustment as set forth below. If less than the entire outstanding principal amount of this Convertible Subordinated Promissory Note is being
converted, a new Convertible Subordinated Promissory Note shall promptly be delivered to the Lender for the unconverted principal balance and shall be of like tenor as to all terms as the Convertible
Subordinated Promissory Note surrendered. 

        a.    Adjustment for Dividends and Distributions.    If the Borrower at any time or from time to time after the
issuance of this Convertible Subordinated Promissory Note makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable
in securities of the Borrower other than shares of Common Stock, in each such event provision shall be made so that the holder of this Convertible Subordinated Promissory Note shall receive upon
conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of other securities of the Borrower which it would have received had this Convertible
Subordinated Promissory Note been converted into Common Stock on the date of such event and had the holder thereafter, during the period from the date of such event to 

3

 

and including the conversion date, retained such securities receivable by it as aforesaid during such period, subject to all other adjustments called for during such period under this
Section 2 with respect
to the rights of the holder of this Convertible Subordinated Promissory Note or with respect to such other securities by their terms. 

        b.    Adjustment for Reclassification, Exchange and Substitution.    If at any time or from time to time after the
issuance of this Convertible Subordinated Promissory Note, the Common Stock issuable upon the conversion of this Convertible Subordinated Promissory Note is changed into the same or a different number
of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a reorganization, merger, consolidation or sale of assets provided for elsewhere in
this Section 2), in any such event the holder of this Convertible Subordinated Promissory Note shall have the right thereafter to convert this Convertible Subordinated Promissory Note into the
kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which
this Convertible Subordinated Promissory Note could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or
with respect to such other securities or property by the terms thereof. 

        c.    Reorganizations, Mergers, Consolidations or Sales of Assets.    If at any time or from time to time after the
issuance of this Convertible Subordinated Promissory Note, there is a capital reorganization of the Common Stock (other than a recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 2), as a part of such capital reorganization, provision shall be made so that the holder of this Convertible Subordinated
Promissory Note shall thereafter be entitled to receive upon conversion of this Convertible Subordinated Promissory Note the number of shares of stock or other securities or property of the Borrower
to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or
securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 2 with respect to the rights of the holder of this
Convertible Subordinated Promissory Note after the capital reorganization to the end that the provisions of this Section 2 (including adjustment of the Conversion Price then in effect and the
number of shares issuable upon conversion of this Convertible Subordinated Promissory Note) shall be applicable after that event and be as nearly equivalent as practicable. 

        d.    Certificate of Adjustment.    In each case of an adjustment or readjustment of the Conversion Price for the
number of shares of Common Stock or other securities issuable upon conversion of this Convertible Subordinated Promissory Note, the Borrower, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate pursuant to the notice provisions of
Section 11(e) of the Purchase Agreement. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based,
including the type and amount, if any, of other property which at the time would be received upon conversion of this Convertible Subordinated Promissory Note. 

        e.    Notices of Record Date.    Upon (i) any taking by the Borrower of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any consolidation or merger of the Borrower with or into
any other corporation or other entity or other capital reorganization of the Borrower, any reclassification or
recapitalization of the capital stock of the Borrower, any merger or consolidation of the Borrower with or into any other corporation, or any sale, lease or other disposition of all or substantially
all of the assets of the Borrower or any voluntary or involuntary dissolution, liquidation or winding up of the Borrower, the Borrower shall deliver notice to the holder of this 

4

 

Convertible Subordinated Promissory Note (pursuant to the provisions of Section 11(e) of the Purchase Agreement) at least twenty (20) days prior to the record date specified
therein a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution,
(B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, sale, lease, dissolution, liquidation, winding up or other disposition is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, sale, lease, dissolution, liquidation, winding up or other
disposition. 

        f.    Fractional Shares.    No fractional shares of Common Stock shall be issued upon conversion of this Convertible
Subordinated Promissory Note. If, in the aggregate, any conversion would result in the issuance of any fractional share, the Borrower shall, in lieu of issuing the fractional share, pay cash equal to
the product of such fraction multiplied by the Common Stock's Fair Market Value. 

        g.    Reservation of Stock Issuable Upon Conversion.    The Borrower shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of this Convertible Subordinated Promissory Note, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding principal and accrued but unpaid interest on this Convertible Subordinated Promissory Note. If at any
time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all outstanding principal and accrued but unpaid interest on this Convertible
Subordinated Promissory Note, the Borrower will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose. 

        h.    No Dilution or Impairment.    Without the consent of the holder of this Convertible Subordinated Promissory
Note, the Borrower shall not amend its certificate of incorporation or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or take
any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder but shall at all times in good faith
assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the holder of this Convertible Subordinated Promissory Note against
dilution or other impairment. 

        C.    Events of Default:    Upon the occurrence of an Event of Default (as set forth below), the principal hereof and
accrued interest hereon shall become, or may be declared to be, forthwith due and payable
in the manner, upon the conditions and with the effect provided below. An "Event of Default" shall exist if one or more of the following events or
conditions shall occur and be continuing: 

        1.    The
Borrower shall default in the payment when due of any principal of or interest on the Loan, any other amount payable by it under this Convertible Subordinated
Promissory Note, or any amount of securities and/or cash payable upon conversion of this Convertible Subordinated Promissory Note; 

        2.    There
shall have occurred with respect to any issue or issues of debt of the Borrower having an outstanding principal amount of $1,000,000 or more in the aggregate for
all such issues, whether such debt now exists or shall hereafter be created, an event of default which has caused the holder thereof to declare such debt to be due and payable prior to its stated
maturity; 

5

 

        3.    A
judgment or order (not covered by insurance) for the payment of money shall be rendered against the Borrower in excess of $1,000,000 in the aggregate for all such
judgments or orders (treating any deductibles, self insurance or retention as not so covered) that shall not be discharged, and all such judgments and orders remain outstanding and there shall be any
period of sixty (60) consecutive days following entry of the judgment or order in excess of $1,000,000 or the judgment or order which causes the aggregate amount described above to exceed
$1,000,000 during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; 

        4.    The
Borrower shall (i) apply for or consent to the appointment of a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its
property; (ii) make a general assignment for the benefit of its creditors; (iii) commence a voluntary case under 11 U.S.C. Section 101 et
seq., as now or hereafter in effect) (the "Bankruptcy Code"); (iv) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts; (v) fail to controvert in a timely manner, or acquiesce in
writing to, any petition filed against it in any involuntary case under the Bankruptcy Code; or (vi) take any action for the purpose of effecting any of the foregoing; 

        5.    A
proceeding or case shall be commenced, without the application or consent of the Borrower in any court of competent jurisdiction, seeking (i) liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of debts of the Borrower; (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower or of all or any substantial part of any of the Borrower's assets; or (iii) similar relief in respect of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed or unstayed for a period of 60 days, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered or an order for relief against the Borrower shall be entered in an involuntary case under the Bankruptcy Code, which order,
judgment or decree shall remain undismissed or unstayed for a period of 60 days; 

THEREUPON
(i) in the case of an Event of Default, other than one referred to in clause (4) or (5) above, the Lender may, by notice to the Borrower, declare the principal
amount then outstanding of, and the accrued interest on all amounts payable by the Borrower under this Convertible Subordinated Promissory Note and all other amounts payable by the Borrower hereunder
to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby waived by
the Borrower, and (ii) in the case of the occurrence of an Event of Default referred to in clause (4) or (5) above, the principal amount then outstanding of, and the
accrued interest on all amounts payable by the Borrower under this Convertible Subordinated Promissory Note and all other amounts payable by the Borrower hereunder shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of which are hereby waived by the Borrower. 

        D.    Subordination:    The Borrower covenants and agrees, and each holder of this Convertible Subordinated Promissory
Note, by his or its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Section D: 

        1.    The
payment of the principal of (and premium, if any) and interest on this Convertible Subordinated Promissory Note are hereby expressly made subordinate and subject in
right of payment to the prior payment in full of all existing or future indebtedness of the Borrower, including principal and interest and premium (if any) and all other amounts outstanding on such
debt (and any extensions or refinancings thereof) and including, but not limited to, up to $8,000,000 in principal amount of the Company's 5% Convertible Debentures due 2002
("Senior Indebtedness"). 

        2.    No
payment or distribution of cash, property or securities (other than Common Stock of the Borrower or other securities of the Borrower that are subordinated to Senior
Indebtedness to at least the same extent as this Convertible Subordinated Promissory Note) of the Borrower shall be made by 

6

 

the Borrower with respect to the principal of or interest on this Convertible Subordinated Promissory Note, or to defease or acquire any of this Convertible Subordinated Promissory Note, and no
action shall be taken (judicial or otherwise) to collect any such payment or distribution (a) upon the maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise, unless
and until all Senior Indebtedness shall first be paid in full in cash, or such payment duly made in a manner satisfactory to the holders of such Senior Indebtedness or (b) in the event that the
Borrower defaults in the payment of any principal of, premium, if any, or interest on or any other amounts payable on or due in connection with any Senior Indebtedness when it becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or otherwise, unless and until such default has been waived in writing by the holders of the Senior Indebtedness. 

        3.    If
any default other than a default contemplated by Section 2(b) above shall have occurred and be continuing that would permit the holders of the Senior
Indebtedness to accelerate the maturity of Senior Indebtedness, upon written notice (a "Payment Blockage Notice") of the default given to the Borrower
and the holders of this Convertible Subordinated Promissory Note (the "Holders") by the
holders of, or an agent, trustee or other representative for, such Senior Indebtedness, then, unless and until such default has been waived in writing, no payment or distribution of cash or property
(other than Common Stock of the Borrower or other securities of the Borrower that are subordinated to Senior Indebtedness to at least the same extent as this Convertible Subordinated Promissory Note)
of the Borrower shall be made by the Borrower with respect to the principal of or interest on this Convertible Subordinated Promissory Note, or to acquire or repurchase any of this Convertible
Subordinated Promissory Note for cash or property other than Common Stock of the Borrower, and no action shall be taken judicial or otherwise) to collect any such payment or distribution. If such
Senior Indebtedness is not declared due and payable within one hundred eighty (180) days after written notice of the event of default is given, promptly after the end of the 180-day
period, the Borrower shall pay all sums due in respect of this Convertible Subordinated Promissory Note and not paid during the 180-day period. Payments on this Convertible Subordinated
Promissory Note may and shall be resumed in the case of a payment default only upon the date on which such default is waived in writing by the holders of the Senior Indebtedness or their agent. 

        4.    If
any payment or distribution of assets of the Borrower is received by any Holder in respect of this Convertible Subordinated Promissory Note at a time when that payment
or distribution should not have been made because of Sections 2 or 3, and provided that prior to the Borrower's disbursement of such payment or distribution, the Holders shall have received a written
notice from the Borrower or from an agent or representative for one or more holders of Senior Indebtedness, such payment or distribution shall be received and held and shall be paid over to the
holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness held by them) until all such Senior Indebtedness has been paid in
full, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness. 

        5.    Upon
any distribution of assets of the Borrower upon any dissolution, winding up, liquidation or reorganization of the Borrower (whether in bankruptcy, insolvency,
receivership or similar proceedings relating to the Borrower or its property or upon an assignment for the benefit of creditors or any marshalling of the Borrower's assets or liabilities or
otherwise): 

        a.    the
holders of all Senior Indebtedness will first be entitled to receive payment in full of the principal of and interest due on Senior Indebtedness (including interest
accruing after the commencement of a bankruptcy or insolvency at the rate specified in the applicable Senior Indebtedness documents and including, without limitation, in respect of premiums,
indemnities or otherwise, before the Holders are entitled to receive any payment or distribution on account of the principal of or interest on this Convertible Subordinated Promissory Note; 

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        b.    any
payment or distribution of assets of the Borrower of any kind or character, whether in cash, property or securities (except that the Holders may receive securities
that are subordinated at least to the same extent as this Convertible Subordinated Promissory Note to Senior Indebtedness and any securities issued in exchange for Senior Indebtedness), to which the
Holders would be entitled except for the provisions of this Section 5 will be paid by the liquidating trustee or agent or other persons who
make such a payment or distribution directly to the holders of Senior Indebtedness (pro rata as to each of such holders on the basis of the respective amounts of Senior Indebtedness held by such
holders) or their representatives to the extent necessary to make or provide for payment in full in cash of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness or provision for that payment or distribution; and 

        c.    if,
notwithstanding the foregoing, any payment or distribution of assets of the Borrower of any kind or character, whether in cash, property or securities (except that
the Holders may receive securities that are subordinated at least to the same extent as this Convertible Subordinated Promissory Note to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness) is received by the Holders on account of the principal of or interest on this Convertible Subordinated Promissory Note before all Senior Indebtedness is paid in full, such payment
or distribution will be received and held in trust for and will be forthwith paid over to the holders of the Senior Indebtedness remaining unpaid or unprovided for or their representatives for
application (in the case of cash) to, or as collateral (in the case of non-cash property or securities) for, the payment of such Senior Indebtedness until all such Senior Indebtedness has
been paid in full, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Indebtedness. 

        6.    Subject
to the payment in full of all Senior Indebtedness, the Holders shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Borrower applicable to the Senior Indebtedness until all amounts owing on this Convertible Subordinated Promissory Note shall be paid in full, and,
for the purposes of such subrogation: 

        a.    no
payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders would be entitled except for the
provisions of this Section D and no payment pursuant to the provisions of this Section D to the holders of Senior Indebtedness by the Holders shall, as between the Borrower, its
creditors (other than holders of Senior Indebtedness) and the Holders, be deemed to be a payment by the Borrower to or on account of the Senior Indebtedness; and 

        b.    no
payment or distributions of cash, property or securities to or for the benefit of the Holders pursuant to the subrogation provision of this Section D, which
would otherwise have been paid to the holders of Senior Indebtedness, shall be deemed to be a payment by the Borrower to or for the account of the Holders of this Convertible Subordinated Promissory
Note. 

        7.    The
provisions of this Section D are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand and the holders of
Senior Indebtedness on the other hand. Nothing contained in this Section D or elsewhere in this Convertible Subordinated Promissory Note is intended to or shall (a) impair, as among the
Borrower, its creditors other than holders of Senior Indebtedness and the Holders of this Convertible Subordinated Promissory Note, the obligation of the Borrower, which is absolute and unconditional
to pay to the Holders of this Convertible Subordinated Promissory Note the principal of (any premium, if any) and interest on this Convertible Subordinated Promissory Note as and when the same shall
become due and payable in accordance with their terms,
(b) affect the relative rights against the Borrower of the Holders of this Convertible Subordinated Promissory Note and creditors of the Borrower other than the holders of Senior 

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Indebtedness or (c) prevent the holder of this Convertible Subordinated Promissory Note from exercising all remedies otherwise permitted by applicable law upon default under this Convertible
Promissory Note, subject to the rights, if any, under this Section D of the holders of Senior Indebtedness to receive cash, property or securities otherwise payable or deliverable to the Holder
upon the exercise of any such remedy. 

        8.    In
the event of any dissolution, winding up, liquidation or reorganization of the Borrower (whether in bankruptcy, insolvency, receivership or similar proceedings
relating to the Borrower or its property or upon any assignment for the benefit of creditors or any marshalling of the Borrower's assets or liabilities or otherwise) tending towards liquidation of the
business and assets of the Borrower, with respect to the filing of a claim for the unpaid balance of any portion of this Convertible Subordinated Promissory Note in the form required in those
proceedings, if the Holder does not file a proper claim or proof of debt in the form required in such proceeding at least thirty (30) days before the expiration of the time to file such
claim or claims, then the holders of Senior Indebtedness and their agents, trustees, or other representatives are hereby authorized to have the right to file, and are hereby authorized to file an
appropriate claim for and on behalf of each such Holder. 

        9.    No
right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Borrower or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Borrower with the terms, provisions and
covenants of this Convertible Subordinated Promissory Note, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Holders of this Convertible Subordinated Promissory Note,
without incurring responsibility to the Holders of this Convertible Subordinated Promissory Note and without impairing or releasing the subordination provided in this Section D or the
obligations hereunder of the Holders of this Convertible Subordinated Promissory Note to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or
terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or
any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness;
(iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Borrower and any other
Person. 

        10.  The
Borrower shall give prompt written notice to the Holders of any fact known to the Borrower which would prohibit the making of any payment to or by the Holders in
respect of this Convertible Subordinated Promissory Note. Notwithstanding the provisions of this Section D or any other provision of this Convertible Subordinated Promissory Note, the Holders
shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to the Holders in respect of this Convertible Subordinated Promissory Note, unless and
until the Holders shall have received written notice thereof from the Borrower or a holder of Senior Indebtedness; and, prior to the receipt of any
such written notice, the Holders shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Holders shall not have received the notice provided for in this
Section 10 at least two (2) business days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment
of the principal of, and premium, if any, or interest on this Convertible Subordinated Promissory Note), then, anything herein contained to the contrary notwithstanding, the Holders shall have full
power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it
within two (2) business days prior to such date. 

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        The
Holders shall be entitled to rely on the delivery to them of a written notice by a person representing himself to be a holder of Senior Indebtedness (or a representative thereof) to
establish that such notice has been given by a holder of Senior Indebtedness (or representative thereof). In the event that the Holders determine in good faith that further evidence is required with
respect to the right of any person as a holder of Senior Indebtedness (or a representative thereof) to participate in any payment or distribution pursuant to this Section D, the Holders may
request such person to furnish evidence to the reasonable satisfaction of the Holders as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the rights of such person under this Section D, and if such evidence is not furnished, the Holders may defer any
payment or distribution to such person pending judicial determination as to the right of such person to receive such payment or distribution. 

        11.  Upon
the payment or distribution of assets of the Borrower referred to in this Section D, the Holders of this Convertible Subordinated Promissory Note shall be
entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of the creditors, agent or other person making such payment or distribution, delivered to the holders of this Convertible Subordinated Promissory Note, for
the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Borrower, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section D. 

        The
transfer of this Convertible Subordinated Promissory Note in accordance with applicable federal and state blue sky laws may be registered on the books maintained for that purpose by
or on behalf of the Borrower. The Borrower may request an opinion of counsel reasonably acceptable to the Borrower as a condition of registering such transfer. 

        None
of the terms or provisions of this Convertible Subordinated Promissory Note may be amended, modified or waived except by a written agreement duly executed on behalf of the Lender
and the Borrower and specifically setting forth the provision so amended, modified or waived. No failure on the part of the Lender to exercise and no delay in exercising, and no course of dealing with
respect to any right, power or privilege under this Convertible Subordinated Promissory Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or
privilege under this Convertible
Subordinated Promissory Note preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 

        Except
as set forth in the Purchase Agreement, this Convertible Subordinated Promissory Note shall not entitle the Holder to any rights as a stockholder of the Borrower, including
without limitation, the right to vote, to receive dividends and other distributions, or to receive notice of, or to attend, meetings of stockholders or any other proceedings of the Borrower, unless
and to the extent converted into shares of Common Stock in accordance with terms hereof. 

        The
Borrower hereby waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Convertible Subordinated Promissory Note, and shall pay all
reasonable costs of collection within five (5) business days following demand by the Lender, including, without limitation, reasonable attorneys' fees, costs and other expenses. 

        If
any terms or provisions of this Convertible Subordinated Promissory Note or application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Convertible Subordinated Promissory Note, or the application of such terms or provisions to persons or circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Convertible Subordinated Promissory Note shall be valid and enforceable to the fullest extent permitted by law. 

10

 

        THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE. 

*
* * * * * * 

[signature
page follows] 

11

 

	 	 	eSoft, Inc.
	

 	
 	

By:	
 	

/s/  JEFFREY FINN      
 Jeffrey Finn
 President and Chief Executive Officer

12

QuickLinks

AMENDED AND RESTATED CONVERTIBLE SUBORDINATED PROMISSORY NOTE

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