EXHIBIT
10.38
 
 **WAIVER
TO THE AGENCY AGREEMENT**
 
 
 Dated as
of October 7, 2004
 
 
 To:
    Deutsche
      Bank Trust Company Americas,
 as
Administrative Agent
 
 and
 
 Deutsche
Bank AG London, by DB Advisors, L.L.C., as investment advisor,
 VantagePoint
Venture Partners III (Q), L.P.,
 VantagePoint
Venture Partners III, L.P.,
 VantagePoint
Communications Partners, L.P.,
 VantagePoint
Venture Partners 1996, L.P.,
 
 each, as
an Investor under the Agency Agreement referred to below
 
 
 Ladies
and Gentlemen:
 
 We refer
to (a) the Agency, Guaranty and Security Agreement dated as of July 18, 2003 (as
amended or otherwise modified prior to the date hereof, the “ Agency
Agreement ”), among
us (the  “ Company ”),
certain of our subsidiaries party thereto as grantors (the “ Grantors ”),
Deutsche Bank Trust Company Americas, as Administrative Agent (in such capacity,
the " Agent "), and
each of you, as Investors thereunder, (b) the Subordination Agreement dated the
date hereof, among us, the Agent and Laurus Master Funds Ltd. (“ Laurus ”)
pursuant to which you have agreed to subordinate your Liens on and security
interest in our accounts receivable and other assets (as more specifically
described therein), including our deposit account with Fleet National Bank,
Account No. 9429398649 (the “ Account ”), to
those of Laurus, (c) the Deposit Account Control Agreement in respect of the
Account dated August 31, 2004 by and among, Company, Laurus and Fleet National
Bank, (d) the Deposit Account Control Agreement in respect of the Account dated
the date hereof by and among, the Company, the Agent and Fleet National Bank
(the “ Control
Agreement ”) and
(e) the Security Agreement dated August 30, 2004 between Laurus and the Company
(the “ Security
Agreement ”).
Capitalized terms not otherwise defined in this Waiver have the same meanings as
specified in the Agency Agreement.
  1. We hereby
request that the Majority Investors waive the requirements of Section 12(d) of
the Agency Agreement (and any Event of Default existing on the date hereof
pursuant to paragraph (d) of the definition of “Event of Default” in the Agency
Agreement caused by the failure to fulfill such requirements) with respect to
the requirement that our Deposit Accounts, specifically the Account, be
maintained only with the Agent or with Pledge Account Banks that have agreed, in
a record authenticated by the Company, the Agent and the Pledge Account Banks,
to comply with instructions originated by the Agent directing disposition of
funds in the Deposit Accounts without the further consent of the Company.
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  2.  Subject
to Sections 3 and 4 hereof, by executing this Waiver, the Majority Investors
hereby agree that the waiver requested in Section 1 hereof is hereby agreed to
on, and subject to, the terms and conditions of this Waiver.
  3.  In order
to induce the Majority Investors to enter into this Waiver, the Company hereby
agrees to (a) establish a segregated, non-interest bearing trust account with
the Agent titled “DSL.net, Inc. Proceeds Account” (the “ Proceeds
Account ”) into
which all of the proceeds of any borrowings under the Security Agreement (the
“ Proceeds ”) shall
be paid, (b) irrevocably instruct Laurus, in writing in a form acceptable to DB
Advisors, L.L.C., as advisor to Deutsche Bank AG London, and the Agent (the
“ Instruction ”) and
acknowledged by Laurus, to wire all of the Proceeds directly to the Proceeds
Account on the date of each such borrowing in same day funds, and (c) withdraw
funds from the Proceeds Account only with the prior consent of DB Advisors,
L.L.C., as advisor to Deutsche Bank AG London, and the Agent in such amounts and
for such purposes as DB Advisors, L.L.C., as advisor to Deutsche Bank AG London,
and the Agent shall agree. The Company hereby confirms and acknowledges that,
notwithstanding any agreement to the contrary, the Agent shall be under no
obligation to disburse funds from the Proceeds Account to it or any other
Person, except in accordance with the terms hereof. The Agent
shall have no obligation to invest and reinvest any cash held in the Proceeds
Account in the absence of timely and specific written investment direction from
the Company. If the Agent receives no such written direction, the funds in such
Proceeds Account shall be held uninvested. In no event shall the Agent be liable
for the selection of investments or for investment losses incurred thereon. The
Agent shall have no liability in respect of losses incurred as a result of the
liquidation of any investment prior to its stated maturity or the failure of the
Company to provide timely written investment direction. The Agent or its
affiliates are permitted to receive additional compensation that could be deemed
to be in the Agent's economic self-interest for (i) serving as investment
adviser, administrator, shareholder, servicing agent, custodian or sub-custodian
with respect to certain investments, (ii) using affiliates to effect
transactions in certain investments and (iii) effecting transactions in certain
investments. The Agent does not guarantee the performance of any such
investments. The
Company hereby confirms that after giving effect to the waiver contemplated by
Section 1 above, no Event of Default has occurred and is continuing.
  4.  This
Waiver shall become effective as of the date first above written when, and only
when, on or before October 7, 2004, (a) the Agent shall have received
counterparts of this Waiver executed by the Company, each of the other Grantors
and the Majority Investors or, as to any of such parties, advice satisfactory to
such Agent that such party has executed this Waiver, (b) any and all expenses
for counsel to the Agent since the date of its last invoice shall have been paid
in full, (c) the Subordination Agreement shall be in form and substance
satisfactory to the Majority Investors, (d) the Control Agreement shall be in
form and substance satisfactory to the Majority Investors, (e) the Proceeds
Account shall have been established, and (f) the Agent shall have received a
copy of the Instruction executed by the Company and acknowledged by
Laurus.
  5.  The
Agency Agreement, except to the extent of the waiver specifically provided
above, is and shall continue to be in full force and effect and is hereby in all
respects ratified and confirmed. The execution, delivery and effectiveness of
this Waiver shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any party under the Agency Agreement, nor
constitute a waiver of any provision of the Agency Agreement.
  6.  On and
after the effectiveness of this Waiver, each reference in the Agency Agreement
to “this Agreement”, “hereunder”, “hereof” or words of like import referring to
the Agency Agreement, and each reference in the Notes relating to the Agency
Agreement to “the Agency Agreement”, “thereunder”,
 
 
 2
 
 “thereof”
or words of like import referring to the Agency Agreement, shall mean and be a
reference to such Agency Agreement, as amended by this Waiver.
  7.  If you
agree to the terms and provisions of this Waiver, please evidence such agreement
by executing and returning at least two counterparts of this Waiver to Nicole
Jerabek at Shearman & Sterling LLP, 599 Lexington Avenue, New York, NY 10022
(Telecopier: (646) 848-7458; Telephone: (212) 848-7458).
  8.  This
Waiver may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Waiver by telecopier shall be effective as delivery of a manually executed
counterpart of this Waiver.
  9.  This
Waiver shall be governed by, and construed in accordance with, the laws of the
State of New York.
 
 *********
 
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 DSL.NET,
INC.
 By /s/
Robert J. DeSantis
 _____________________________________
 Name:
Robert J. DeSantis
 Title:
Chief Financial Officer
 
 Consented and agreed to:
 
 
 DSLNET
COMMUNICATIONS PUERTO RICO, INC.
 
 By /s/
Marc R. Esterman
 _____________________________________
 Name:
Marc R. Esterman
 Title:
Vice President
 
 
 DSLNET
COMMUNICATIONS VA., INC.
 
 By /s/
Marc R. Esterman
 _____________________________________
 Name:
Marc R. Esterman
 Title:
Vice President
 
 
 TYCO
NETWORKS, INC.
 
 By /s/
Marc R. Esterman
 _____________________________________
 Name:
Marc R. Esterman
 Title:
Vice President
 
 
 VECTOR
INTERNET SERVICES, INC.
 
 By /s/
Marc R. Esterman
 _____________________________________
 Name:
Marc R. Esterman
 Title:
Vice President
 
 DSLNET
ATLANTIC LLC
 
 By /s/
Marc R. Esterman
 _____________________________________
 Name:
Marc R. Esterman
 Title:
Vice President
 
  
  
 Agreed as
of the date first above written
 
 DEUTSCHE
BANK TRUST COMPANY AMERICAS,
 as
Agent
 
 
 By /s/
Steven T. Hessler
 _____________________________________
 Name:
Steven T. Hessler
 Title:
Vice President
 
 
 DEUTSCHE
BANK AG LONDON,
 By DB
ADVISORS LLC AS INVESTMENT ADVISOR
 
 
 By /s/
Jon Hitchon
 _____________________________________
 Name: Jon
Hitchon
 Title:
Chief Operating Officer
 
 By /s/
Pam Kiernan
_____________________________________
Name: Pam
Kiernan
Title:
Managing Director
 VANTAGEPOINT
VENTURE PARTNERS III (Q), L.P.,
 by
VANTAGEPOINT VENTURE ASSOCIATES
 III, L.L.C.,
its general partner
 
 
 By /s/
James D. Marver
 _____________________________________
 Name:
James D. Marver
 Managing
Member
 
 VANTAGEPOINT
VENTURE PARTNERS III, L.P.,
 by
VANTAGEPOINT VENTURE ASSOCIATES
 III, L.L.C.,
its general partner
 
 
 By /s/
James D. Marver
 _____________________________________
 Name:
James D. Marver
 Managing
Member
 
 VANTAGEPOINT
COMMUNICATIONS PARTNERS, L.P.,
 by
VANTAGEPOINT COMMUNICATIONS ASSOCIATES,
 L.L.C., its
general partner
 
 
 By /s/
James D. Marver
 _____________________________________
 Name:
James D. Marver
 Managing
Member
 
 VANTAGEPOINT
VENTURE PARTNERS 1996, L.P.,
 by
VANTAGEPOINT ASSOCIATES, L.L.C.,
 its general
partner
 
 By 
/s/ James D. Marver
 _____________________________________
 Name:
James D. Marver
 Managing
Member