Document:

WWW.EXFILE.COM, INC. -- 14581 -- DSL.NET, INC. -- EXHIBIT 10.01 TO FORM 8-K

     

    EXHIBIT
      10.01

    PURCHASE
      AGREEMENT

     

    PURCHASE
      AGREEMENT
      (the
“Agreement”),
      dated
      as of August 22, 2006, by and among DSL.net, Inc., a Delaware corporation (the
      “Company”),
      MegaPath Inc., a Delaware corporation (“Parent”),
      and
      MDS Acquisition, Inc., a wholly-owned subsidiary of Parent (the “Buyer”).

     

    WHEREAS:

     

    A.  The
      Company, Parent and Buyer are executing and delivering this Agreement in
      reliance upon the exemption from securities registration afforded by Section
      4(2) of the Securities Act of 1933, as amended (the “1933
      Act”),
      and
      Rule 506 of Regulation D (“Regulation D”)
      as
      promulgated by the United States Securities and Exchange Commission (the
“SEC”)
      under
      the 1933 Act.

     

    B.  The
      Buyer
      wishes to purchase, and the Company wishes to sell, upon the terms and
      conditions stated in this Agreement, Subordinated Secured Convertible Notes,
      in
      the forms attached hereto as Exhibit
      B-1,
      Exhibit
      B-2,
      Exhibit
      B-3
      and
Exhibit
      B-4
      (each, a
“Convertible
      Note”
and
      together, the “Convertible
      Notes”)
      and a
      Subordinated Secured Note, in the form attached hereto as Exhibit
      C
      (the
“Nonconvertible
      Note”),
      each
      in the principal amounts as set forth on Exhibit
      A
      hereto.
      In addition, the Company and the Buyer wish to provide for the possible future
      sale of subordinated secured notes in substantially the form as the form of
      the
      Nonconvertible Note (each a “Subsequent
      Closing Note”
and
      together with the Convertible Notes and the Nonconvertible Note, the
“Notes”).
      The
      Subsequent Closing Notes, if issued, may be used, among other purposes, to
      fund
      working capital shortfalls of the Company that may occur prior to the Merger
      (as
      defined below), including, without limitation, shortfalls that may occur as
      a
      result of the maturity of the Company’s indebtedness to Laurus Master Fund, Ltd.
      (“Laurus”).
      

     

    C.  The
      Notes
      (i) will rank senior to all outstanding and future indebtedness of the Company,
      other than as set forth in the Subordination Agreement in the form attached
      hereto as Exhibit D
      (as
      amended or modified from time to time, the “Subordination
      Agreement”),
      and
      (ii) will be secured by a perfected security interest in all of the assets
      of
      the Company, as evidenced by the Security Agreement in the form attached hereto
      as Exhibit E
      (the
“Security
      Agreement”
and
      together with the Subordination Agreement, the “Security
      Documents”).

     

    D.  Following
      the satisfaction of the conditions to the convertibility of all the Convertible
      Notes, Buyer intends to have converted all such Convertible Notes into Company
      Common Stock such that Buyer will hold more than 90% of the outstanding shares
      of Company Common Stock. At such time, Buyer, pursuant to a resolution of its
      board of directors authorized by Section 253 of the Delaware General
      Corporations Law, intends to effect a merger of the Company into Buyer, with
      the
      Buyer as the surviving corporation (the “Merger”)
      and
      pursuant to which the stockholders of the Company other than the Buyer will
      be
      entitled to receive a cash payment for their shares of Company Common
      Stock.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    NOW,
      THEREFORE,
      the
      Company, the Buyer and the Parent hereby agree as follows:

     

    1.  PURCHASE
      AND SALE OF NOTES.

     

    (a)  Purchase
      of Notes.

     

    (i)  On
      or
      prior to the Closing (as defined below), the Company shall have authorized
      (A)
      the sale and issuance to the Buyer of the Notes and (B) the issuance of the
      shares of Common Stock issuable upon conversion of the Convertible Notes in
      the
      forms attached hereto as Exhibit
      B-1,
      Exhibit
      B-2
      and
Exhibit
      B-3
      as
      provided therein and shall have authorized, conditional upon securing any
      requisite stockholder consent, the issuance of the shares of Common Stock
      issuable upon conversion of the Convertible Note in the form attached hereto
      as
Exhibit
      B-4
      as
      provided therein. The shares of Common Stock issuable upon conversion of the
      Convertible Notes are referred to herein collectively as the “Conversion
      Shares.”
The
      Convertible Notes and the Conversion Shares are collectively referred to herein
      as the “Securities.”

     

    (ii)  Subject
      to the satisfaction (or waiver) of the conditions set forth in Sections 5 and
      6
      below, the Company shall issue and sell to the Buyer, and the Buyer agrees
      to
      purchase from the Company on the Closing Date (as defined below), the Notes
      (the
“Closing”).

     

    (iii)  The
      date
      and time of the Closing (the “Closing
      Date”)
      shall
      occur after notification of satisfaction (or waiver) of the conditions to the
      Closing set forth in Sections 5 and 6 below and at the offices of Gunderson
      Dettmer Stough Villeneuve Franklin & Hachigian, LLP, 155 Constitution Drive,
      Menlo Park, California, 94025.

     

    (iv)  The
      aggregate purchase price for the Notes to be purchased by the Buyer at the
      Closing shall be $1.00 of consideration for each $1.00 of principal amount
      under
      the Convertible Notes and $1.00 of consideration for each $1.182 of principal
      amount under the Nonconvertible Note purchased by the Buyer at the Closing,
      for
      an aggregate purchase price of $13,000,000 (the “Purchase
      Price”)
      as set
      forth on Exhibit A
      hereto.

     

    (b)  Form
      of Payment.
      On the
      Closing Date, (i) the Buyer shall pay its Purchase Price to the Company for
      the
      Notes to be issued and sold to the Buyer at the Closing, by wire transfer of
      immediately available funds and (ii) the Company shall deliver to the Buyer
      the Notes the Buyer is purchasing.

     

    (c)  Subsequent
      Closing.
      Following the Closing, the Company may sell Subsequent Closing Notes subject
      to
      the terms of this Agreement to the Buyer for $1.00 of consideration for each
      $1.182 of principal amount under the Subsequent Closing Note, provided that
      such
      sale shall not take place later than one year from the Closing and
      the
      aggregate amount of consideration does not exceed $6,000,000. Each closing
      of
      the sale of Subsequent Closing Notes shall take place at such locations and
      at
      such times as shall be mutually agreed upon orally or in writing by the Company
      and the Buyer. 

     

    
      
        
        

      

      
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    2.  BUYER’S
      AND PARENT’S REPRESENTATIONS AND WARRANTIES.

     

    The
      Buyer
      and the Parent, jointly and severally, represent and warrant to the Company,
      as
      of the date hereof and as of the Closing Date, that: 

     

    (a)  No
      Public Sale or Distribution.
      The
      Buyer is (i) acquiring the Convertible Note and (ii) upon conversion of the
      Convertible Note, Buyer will acquire the Conversion Shares, for its own account
      and not with a view towards, or for resale in connection with, the public sale
      or distribution thereof, except pursuant to sales registered or exempted under
      the 1933 Act; provided,
      however,
      that by
      making the representations herein, the Buyer does not agree to hold any of
      the
      Securities for any minimum or other specific term and reserves the right to
      dispose of the Securities at any time in accordance with or pursuant to a
      registration statement or an exemption under the 1933 Act. The Buyer is
      acquiring the Securities hereunder in the ordinary course of its business.
      The
      Buyer does not presently have any agreement or understanding, directly or
      indirectly, with any Person to distribute any of the Securities. “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    (b)  Accredited
      Investor Status.
      The
      Buyer is an “accredited investor” as that term is defined in Rule 501(a) of
      Regulation D, because it is an entity whose sole equity owner is a corporation
      not formed for the specific purpose of acquiring the securities offered, with
      total assets in excess of $5,000,000. The Buyer’s principal place of business is
      at the address provided in Section 8(f) hereof.

     

    (c)  Reliance
      on Exemptions.
      The
      Buyer understands that the Securities are being offered and sold to it in
      reliance on specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying in
      part
      upon the truth and accuracy of, and the Buyer’s compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      the Buyer set forth herein to determine the availability of such exemptions
      and
      the eligibility of the Buyer to acquire the Securities.

     

    (d)  Transfer
      or Resale.
      The
      Buyer understands that: (i) the Securities have not been and are not being
      registered under the 1933 Act or any state securities laws, and may not be
      offered for sale, sold, assigned or transferred unless (A) subsequently
      registered thereunder, (B) the Buyer shall have delivered to the Company,
      if it is reasonably requested by the Company, an opinion of counsel selected
      by
      the Buyer, in a form reasonably acceptable to the Company, to the effect that
      such Securities to be sold, assigned or transferred may be sold, assigned or
      transferred pursuant to an exemption from such registration, or (C) the Buyer
      provides the Company with reasonable assurance that such Securities can be
      sold,
      assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under
      the
      1933 Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”);
      (ii)
      any sale of the Securities made in reliance on Rule 144 may be made only in
      accordance with the terms of Rule 144 and further, if Rule 144 is not
      applicable, any resale of the Securities under circumstances in which the seller
      (or the Person through whom the sale is made) may be deemed to be an underwriter
      (as that term is defined in the 1933 Act) may require compliance with some
      other
      exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
      and (iii) neither the Company nor any other Person 

     

    
      
        
        

      

      
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    is
      under
      any obligation to register the Securities under the 1933 Act or any state
      securities laws or to comply with the terms and conditions of any exemption
      thereunder.

     

    (e)  No
      Conflicts.
      The
      execution, delivery and performance of each Transaction Document by the Buyer
      and the Parent and the consummation by the Buyer and the Parent of the
      transactions contemplated thereby will not (i) result in a violation of any
      certificate of incorporation, any certificate of designations or other
      constituent documents of the Buyer or the Parent or bylaws of the Buyer or
      the
      Parent or (ii) result in a violation of any law, rule, regulation, order,
      judgment or decree (including federal and state securities laws and regulations)
      and the rules applicable to the Buyer or the Parent or by which any property
      or
      asset of the Buyer or the Parent is bound or affected. 

     

    (f)  Organization.
      The
      Buyer and the Parent are each corporations duly organized, validly existing
      and
      in good standing under the laws of the State of Delaware.

     

    (g)  Legends.
      The
      Buyer understands that the Notes and the stock certificates representing the
      Conversion Shares shall bear any legend as required by the “blue sky” laws of
      any state and a restrictive legend in substantially the following form (and
      a
      stop-transfer order may be placed against transfer of such certificates or
      other
      instruments):

     

    THE
      ISSUANCE AND SALE OF THE SECURITIES HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF REASONABLY REQUESTED
      BY
      THE COMPANY, AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
      HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
      IS
      NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
      144A UNDER SAID ACT. 

     

    (h)  Validity;
      Enforcement.
      This
      Agreement and the Security Documents to which the Buyer or the Parent is a
      party
      have been duly and validly authorized, executed and delivered on behalf of
      the
      Buyer and the Parent, as applicable, and shall constitute the legal, valid
      and
      binding obligations of the Buyer and the Parent enforceable against the Buyer
      and the Parent in accordance with their respective terms, except as such
      enforceability may be limited by general principles of equity or applicable
      bankruptcy, insolvency, reorganization, moratorium, liquidation and other
      similar laws relating to, or affecting generally, the enforcement of applicable
      creditors’ rights and remedies.

     

    3.  REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY.

     

    The
      Company hereby represents and warrants to Buyer and Parent that the statements
      contained in this Section 3 are true and correct as of the date hereof and
      as of
      the 

     

    
      
        
        

      

      
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    Closing
      Date except as set forth in the disclosure schedule delivered by the Company
      to
      Buyer and Parent concurrently with the execution of this Agreement, as may
      be
      amended or supplemented at Closing by the Company solely for the purposes of
      the
      Closing (together, the “Disclosure
      Schedule”);
      provided,
      however,
      that
      any amendments or supplements to
      the
      Disclosure Schedule after the date hereof shall only modify the Company’s
      representations and warranties as of the Closing Date.
      The
      Disclosure Schedule shall be arranged according to specific sections in this
      Section 3 and shall provide exceptions to, or otherwise qualify in reasonable
      detail, only the corresponding section in this Section 3 and
      any
      other section in this Section 3 where it is reasonably clear, upon a reading
      of
      such disclosure without any independent knowledge on the part of the reader
      regarding the matter disclosed, that the disclosure is intended to apply to
      such
      other section.

     

    (a)  Organization
      and Qualification.
      Schedule 3(a) of the Disclosure Schedule sets forth the jurisdiction of
      incorporation or organization of each of the Company and each subsidiary of
      the
      Company (each a “Subsidiary”
and
      collectively, the “Subsidiaries”).
      Each
      of the Company and the Subsidiaries is a corporation duly organized, validly
      existing and in good standing under the laws of the jurisdiction of such
      incorporation and has all requisite corporate power and authority and all
      necessary governmental approvals to own, lease and operate its properties and
      to
      carry on its business as it is now being conducted, except where the failure
      to
      have such governmental approvals have not had, and could not reasonably be
      expected to have, individually or in the aggregate, a Material Adverse Effect
      (as defined below). Each of the Company and the Subsidiaries is duly qualified
      or licensed as a foreign corporation or organization to do business, and is
      in
      good standing, in each jurisdiction where the character of the properties owned,
      leased or operated by it or the nature of its business makes such qualification
      or licensing necessary, except for such failures to be so qualified or licensed
      and in good standing that have not had, and could not reasonably be expected
      to
      have, individually or in the aggregate, a Material Adverse Effect. Schedule
      3(a)
      of the Disclosure Schedule sets forth each jurisdiction in which the Company
      or
      a Company Subsidiary is qualified or licensed to do business as a foreign
      corporation or organization. As used in this Agreement, the term “Material
      Adverse Effect”
means
      any change in or effect on the business of the Company or any Subsidiary that,
      individually or in the aggregate is, or could reasonably be expected to be,
      materially adverse to the business, condition (financial or otherwise), assets
      (tangible or intangible), liabilities (including contingent liabilities) or
      results of operations of the Company and the Subsidiaries taken as a whole.
      

     

    (b)  Authorization;
      Enforcement; Validity.
      The
      Company has the requisite power and authority to enter into and perform its
      obligations under this Agreement, the Notes, the Security Documents, and each
      of
      the other agreements entered into by the parties hereto in connection with
      the
      transactions contemplated by this Agreement (collectively, the “Transaction
      Documents”)
      and to
      issue the Securities and the Nonconvertible Note in accordance with the terms
      hereof and thereof. The execution and delivery of each Transaction Documents
      by
      the Company and the consummation by the Company of the transactions contemplated
      thereby, including, without limitation, the issuance of the Notes, the
      reservation for issuance and the issuance of the Conversion Shares, and the
      granting of a security interest in the Collateral (as defined in the Security
      Agreement), have been duly authorized by the Company’s board of directors (the
“Board
      of Directors”)
      and
      (other than the filing of appropriate UCC financing statements with the
      appropriate states and other authorities pursuant to the Security 

     

    
      
        
        

      

      
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    Agreement
      and other than majority stockholder approval of the Charter Amendment (as
      defined below) to be sought pursuant to the terms of Section 4(d) below) no
      further filing, consent, or authorization is required by the Company, its Board
      of Directors, or its stockholders. Each Transaction Document has been duly
      executed and delivered by the Company and constitutes the legal, valid and
      binding obligation of Company, enforceable against the Company in accordance
      with its terms, except as such enforceability may be limited by general
      principles of equity or applicable bankruptcy, insolvency, reorganization,
      moratorium, liquidation or similar laws relating to, or affecting generally,
      the
      enforcement of applicable creditors’ rights and remedies. 

     

    (c)  Valid
      Issuance.
      The
      issuance of the Notes are duly authorized and are free from all taxes, liens
      and
      charges with respect to the issue thereof. As of the Closing, a sufficient
      number of shares of Common Stock shall have been duly authorized and reserved
      for issuance upon conversion of the Convertible Notes in the forms attached
      hereto as Exhibit
      B-1,
      Exhibit B-2
      and
Exhibit
      B-3
      and,
      conditional upon requisite stockholder approval authorizing a sufficient number
      of shares of Common Stock for issuance upon conversion of the Convertible Note
      in the form attached hereto as Exhibit
      B-4
      and the
      filing with the Delaware Secretary of State of the Charter Amendment (as defined
      below), such number of shares of Common Stock shall have been duly reserved
      for
      issuance upon conversion of such Convertible Note. Upon issuance or conversion
      in accordance with the Convertible Notes, as the case may be, the Conversion
      Shares, will be validly issued, fully paid and nonassessable and free from
      all
      preemptive or similar rights, taxes, liens and charges with respect to the
      issue
      thereof, with the holders being entitled to all rights accorded to a holder
      of
      Common Stock. Subject in part to the truth and accuracy of the Buyer’s and
      Parent’s representations set forth in Section 2, the offer and issuance by the
      Company of the Securities is exempt from registration under the 1933
      Act.

     

    (d)  No
      Conflicts.
      The
      execution, delivery and performance of each Transaction Document by the Company
      and the consummation by the Company of the transactions contemplated thereby
      (including, without limitation, the issuance of the Notes, the granting of
      a
      security interest in the Collateral (as defined in the Security Documents)
      and
      reservation for issuance and issuance of the Conversion Shares) will not
      (i) result in a violation of any certificate of incorporation, any
      certificate of designations or other constituent documents of the Company,
      any
      capital stock of the Company or bylaws of the Company or (ii) conflict with,
      or
      constitute a default (or an event which, with notice or lapse of time, or both,
      would become a default) under, or give to others any rights of termination,
      amendment, acceleration or cancellation of, any material agreement, indenture
      or
      instrument to which the Company is a party, (iii) subject in part to the truth
      and accuracy of the Buyer’s and Parent’s representations set forth in Section 2,
      result in a violation of any law, rule or regulation (including federal and
      state securities laws and regulations) or (iv) result in the violation of any
      order, judgment or decree and the rules applicable to the Company or by which
      any property or asset of the Company is bound or affected. 

     

    (e)  Consents.
      The
      Company is not required to obtain any consent, authorization or order of, or
      make any filing (other than the filing of appropriate UCC financing statements
      with the appropriate states and other authorities pursuant to the Security
      Agreement) or registration with, any court, governmental agency or any
      regulatory or self-regulatory agency or any other Person (as defined below)
      in
      order for it to execute, deliver or perform any of its obligations under or
      contemplated by the Transaction Documents to which it is a party, in each

     

    
      
        
        

      

      
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    case
      in
      accordance with the terms thereof. All consents, authorizations, orders, filings
      and registrations which the Company is required to obtain pursuant to the
      preceding sentence will have been obtained or effected on or prior to the
      Closing Date, and the Company is unaware of any facts or circumstances which
      might prevent the Company from obtaining or effecting any of the registration,
      application or filings pursuant to the preceding sentence. 

     

    (f)  Acknowledgment
      Regarding Buyer’s Purchase of Securities.
      The
      Company acknowledges and agrees that the Buyer is acting solely in the capacity
      of an arm’s length purchaser with respect to the Transaction Documents and the
      transactions contemplated hereby and thereby and that the Buyer is not (i)
      an
      officer or director of the Company, (ii) an “affiliate” of the Company (as
      defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial
      owner” of more than 10% of the shares of Common Stock (as defined for purposes
      of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
“1934
      Act”)).
      

     

    (g)  No
      General Solicitation; Placement Agent’s Fees.
      Neither
      the Company, nor any of its Subsidiaries and affiliates, nor any Person acting
      on its or their behalf, has engaged in any form of general solicitation or
      general advertising (within the meaning of Regulation D) in connection with
      the
      offer or sale of the Securities. The Company has not engaged any placement
      agent
      or other agent in connection with the sale of the Securities.

     

    (h)  No
      Integrated Offering.
      None of
      the Company, any of its Subsidiaries and affiliates, and any Person acting
      on
      their behalf has, directly or indirectly, made any offers or sales of any
      security or solicited any offers to buy any security, under circumstances that
      would require registration of any of the Securities under the 1933 Act or cause
      this offering of the Securities to be integrated with prior offerings by the
      Company for purposes of the 1933 Act or any applicable stockholder approval
      provisions, including, without limitation, under the rules and regulations
      of
      any exchange or automated quotation system on which any of the securities of
      the
      Company are listed or designated. 

     

    (i)  Application
      of Takeover Protections; Rights Agreement.
      The
      Company and its Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under a rights agreement)
      or other similar anti-takeover provision under the Company’s certificate of
      incorporation, as amended and as in effect on the date hereof (the “Certificate
      of Incorporation”),
      or
      the laws of the jurisdiction of its formation or otherwise which is or could
      become applicable to the Buyer and the Parent as a result of the transactions
      contemplated by this Agreement, including, without limitation, the Company’s
      issuance of the Securities and the Buyer’s ownership of the Securities. The
      Company has not adopted a stockholder rights plan or similar arrangement
      relating to accumulations of beneficial ownership of Common Stock or a change
      in
      control of the Company. 

     

    (j)  SEC
      Documents; Financial Statements.

     

    (i)  During
      the three (3) years prior to the date hereof, the Company has filed all
      reports, schedules, forms, statements and other documents required to be filed
      by a company that is subject to the reporting requirements of the 1934 Act
      (all
      of the foregoing filed prior to the date hereof and all exhibits included
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    schedules
      thereto and documents incorporated by reference therein being hereinafter
      referred to as the “SEC
      Documents”).
      The
      Company has delivered or made available to the Buyer or its respective
      representatives true, correct and complete copies of the SEC Documents not
      available on the EDGAR system. As of their respective filing dates or, if
      amended, as of the date of such amendment, the SEC Documents complied in all
      material respects with the requirements of the 1934 Act and the rules and
      regulations of the SEC promulgated thereunder applicable to the SEC Documents,
      and none of the SEC Documents, at the time they were filed with the SEC or,
      if
      amended, as of the date of such amendment, contained any untrue statement of
      a
      material fact or omitted to state a material fact required to be stated therein
      or necessary in order to make the statements therein, in the light of the
      circumstances under which they were made, not misleading.

     

    (ii)  As
      of
      their respective dates, each of the consolidated financial statements (including
      in each case, any notes thereto) of the Company included in the SEC Documents
      (the “Financial
      Statements”)
      complied in all material respects with applicable accounting requirements and
      the published rules and regulations of the SEC with respect thereto. Such
      Financial Statements have been prepared in accordance with generally accepted
      accounting principles, consistently applied, during the periods involved (except
      (i) as may be otherwise indicated in such Financial Statements or the notes
      thereto, or (ii) in the case of unaudited interim statements, to the extent
      they
      may exclude footnotes or may be condensed or summary statements) and fairly
      present in all material respects the financial position of the Company and
      the
      consolidated Subsidiaries as of the dates thereof and the results of its
      operations and cash flows for the periods then ended (subject, in the case
      of
      unaudited statements, to normal year-end audit adjustments). The
      Company does not intend to correct or restate, nor, to the Company’s knowledge,
      is there any basis for any correction or restatement of, any aspect of any
      of
      the Financial Statements contained in the SEC Documents. The Company has not
      had
      any material disagreement with any of its auditors regarding accounting matters
      or policies during any of its past three full years or during the current fiscal
      year-to-date which disagreements would require disclosure to the Company’s board
      of directors. The books and records of the Company have been, and are being
      maintained, in all material respects in accordance with applicable legal and
      accounting requirements and the Financial Statements contained in the SEC
      Documents are consistent with such books and records. The
      most
      recent audited balance sheet of the Company contained in the Company SEC
      Documents as of December 31, 2005 is hereinafter referred to as the
“Reference
      Balance Sheet.”

     

    (iii)  The
      Company has heretofore furnished or made available to Buyer a complete and
      correct copy of any amendments or modifications, which have not yet been filed
      with the SEC but which are required to be filed, to agreements, documents or
      other instruments that previously had been filed by the Company with the SEC
      pursuant to the 1933 Act or the 1934 Act.

     

    (k)  Absence
      of Certain Changes or Events.
      Since
      December 31, 2005, each of the Company and the Subsidiaries has conducted its
      business only in the ordinary course and in a manner consistent with past
      practice and, since such date, there has not been any:

     

    (i)  Material
      Adverse Effect;

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (ii)  amendment
      or any other change to the Certificate of Incorporation or the Company’s bylaws,
      as amended and as in effect on the date hereof (the “Bylaws”),
      or
      equivalent organizational documents of the Company or any
      Subsidiary;

     

    (iii)  issuance,
      sale, pledge, lease, license, disposition, grant, encumbrance, or authorization
      for any issuance, sale, pledge, lease, license, disposition, grant or
      encumbrance, of (A) any shares of capital stock of any class of the Company
      or
      any Subsidiary, or any options, warrants, convertible securities or other rights
      of any kind to acquire any shares of such stock, or any other ownership interest
      (including, without limitation, any phantom interest) of the Company or any
      Subsidiary (except for (x) the issuance of shares of Common Stock pursuant
      to
      the exercise of options and in accordance with the terms of the Company’s
      various authorized stock option and employee stock purchase plans, including
      without limitation, the Company’s Amended and Restated 2001 Stock Option and
      Incentive Plan (the “Plans”)
      and
      (y) the grant in the ordinary course of business and consistent with past
      practice of options pursuant to the Plans or (B) any material assets of the
      Company or any Subsidiary, except in the ordinary course of business and in
      a
      manner consistent with past practice, including, without limitation, any Company
      IP (as defined in Section 3(u) below) of the Company or any
      Subsidiary;

     

    (iv)  authorization,
      declaration, setting aside, dividend payment or other distribution, payable
      in
      cash, stock, property or otherwise, with respect to any of the capital stock
      of
      the Company or any Subsidiary;

     

    (v)  reclassification,
      combination, split, subdivision or redemption, purchase or other acquisition,
      directly or indirectly, of any of the capital stock of the Company or any
      Subsidiary;

     

    (vi)  acquisition
      (including, without limitation, by merger, consolidation, or acquisition of
      stock or assets) of any interest in any corporation, partnership, other business
      organization or any division thereof or any assets, other than acquisitions
      of
      assets for consideration which is not, in the aggregate, in excess of
      $10,000.00; 

     

    (vii)  incurrence
      of any indebtedness for borrowed money or issuance of any debt securities or
      assumption, guarantee or endorsement of the obligations of any person, or any
      loans or advances made, except for indebtedness incurred in the ordinary course
      of business and consistent with past practice and for other indebtedness with
      a
      maturity of not more than one year in a principal amount not, in the aggregate,
      in excess of $10,000.00; 

     

    (viii)  contracts
      or agreements entered into requiring the payment of consideration in excess
      of
      $25,000.00, or the modification, amendment or termination of any such existing
      contract or agreement;

     

    (ix)  making
      of
      any capital expenditures in the aggregate in excess of $600,000 or the
      authorization of any capital expenditures not yet made in the aggregate in
      excess of $100,000;

     

    (x)  waiver
      of
      any stock repurchase rights, acceleration, amendment or change in the period
      of
      exercisability of options or restricted stock, or the repricing of options
      

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    granted
      under the Plan or authorization of cash payments in exchange for any options
      granted under any such plans;

     

    (xi)  increase
      in, or agreement to increase, the compensation payable or to become payable
      to
      its officers or employees, except for increases in accordance with past
      practices in salaries or wages of employees of the Company or any Subsidiary
      who
      are not officers of the Company, or the grant of any rights to severance or
      termination pay to, or the entering into of any employment, consulting,
      termination, indemnification or severance agreement with, any director, officer
      or other employee of the Company or any Subsidiary, or the establishment,
      adoption, entering into or amendment of any collective bargaining, bonus, profit
      sharing, thrift, compensation, stock option, restricted stock, pension,
      retirement, deferred compensation, employment, termination, severance or other
      plan, agreement, trust, fund, policy or arrangement for the benefit of any
      director, officer or employee; provided,
      however,
      that
      the foregoing provisions of this subsection shall not apply to any amendments
      to
      employee benefits plans described in Section 3(3) of the Employee Retirement
      Security Act of 1974, as amended (“ERISA”)
      that
      may be required by law;

     

    (xii)  action
      to
      make or change any material Tax (as defined in Section 3(v) below) or accounting
      election, change any annual accounting period, adopt or change any accounting
      method, file any amended Tax Return (as defined in Section 3(v) below), enter
      into any closing agreement, settle any Tax claim or assessment relating to
      the
      Company or any Subsidiary, surrender any right to claim a refund of Taxes,
      consent to any extension or waiver of the limitation period applicable to any
      Tax claim or assessment relating to the Company or any Subsidiary, or take
      any
      other action or omit to take any action that would have the effect of increasing
      the Tax liability of the Company or any Subsidiary, Buyer or
      Parent;

     

    (xiii)  action
      taken, other than as required by generally accepted accounting principles or
      by
      the SEC, with respect to accounting principles or procedures, including, without
      limitation, any revaluation of assets; 

     

    (xiv)  initiation
      or settlement of any Legal Proceeding (as defined in Section 3(q)
      below);

     

    (xv)  acceleration
      (or grant of any right to acceleration, whether or not contingent), amendment
      or
      change in the period of exercisability or the vesting schedule of restricted
      stock or options granted under any option plan, employee stock plan or
      agreements or authorization of cash payments in exchange for any options granted
      under any of such plans, except as specifically required by the terms of such
      plans or any such agreements or any related agreements in effect as of the
      date
      of this Agreement and disclosed in the Disclosure Schedule;

     

    (xvi)  action
      to
      cause, or failure to take any action to prevent, the accelerated vesting and
      exercisability of any options or Warrants;

     

    (xvii)  (A)
      sale,
      assignment, lease, termination, abandonment, transfer, authorization to encumber
      or to otherwise dispose of or grant of any security interest in and to any
      item
      of the Company IP (as defined in Section 3(u) below), in whole or in part,
      (B)
      grant of any license with respect to any Company IP, other than license of
      Company software to 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    customers
      of the Company or any Subsidiary to whom the Company or any Subsidiary licenses
      such Company software in the ordinary course of business, (C) development,
      creation or invention of any Company IP jointly with any third party, or (D)
      disclosure, or authorization for disclosure, of any confidential Company IP,
      unless such Company IP is subject to a confidentiality or non-disclosure
      covenant protecting against disclosure thereof; or

     

    (xviii)  any
      authorization, agreement or commitment by the Company or any Subsidiary to
      do
      any of the things described in this Section 3(k).

     

    (l)  No
      Undisclosed Events, Liabilities, Developments or Circumstances.
      Undisclosed
      Liabilities.
      Except
      for (i) liabilities that are fully reflected or reserved against on the
      Reference Balance Sheet and (ii) liabilities incurred in the ordinary course
      of
      business consistent with past practice that could not, individually or in the
      aggregate, reasonably be expected to have a Material Adverse Effect, since
      the
      date of the Reference Balance Sheet, neither the Company nor any Subsidiary
      has
      incurred any liability of any nature whatsoever (whether absolute, accrued,
      contingent or otherwise and whether due or to become due) that would be required
      to be reflected on, or reserved against, in a balance sheet of the Company,
      or
      in the notes thereto, prepared in accordance with the published rules and
      regulations of the SEC and generally accepted accounting principals that would
      be material to the business, results of operations or financial condition of
      the
      Company and the Subsidiaries, taken as a whole.

     

    (m)  Conduct
      of Business; Regulatory Permits.

     

    (i)  Neither
      the Company nor any Subsidiaries are in violation of any term of or in default
      under its Certificate of Incorporation and the Bylaws. Neither the Company
      nor
      any Subsidiaries are in violation of any judgment, decree or order or any
      statute, ordinance, rule or regulation applicable to the Company, except for
      possible violations which would not, individually or in the aggregate, have
      a
      Material Adverse Effect. The Company and the Subsidiaries possess all material
      franchises, grants, authorizations, licenses, permits, easements, variances,
      exceptions, consents, certificates, approvals and orders issued by the
      appropriate regulatory authorities necessary to conduct its business as it
      is
      now being conducted (the “Permits”).
      All
      Permits are in full force and effect, and the Company has not received any
      notice of proceedings relating to the pending or proposed revocation or
      modification of any such Permit. 

     

    (ii)  Neither
      the Company nor any Subsidiary is in conflict in any material respect with,
      or
      in default or violation in any material respect of, (A) any law, rule,
      regulation, order, judgment or decree (including federal and state securities
      laws and regulations) applicable to the Company or any Subsidiary or by which
      any material property or asset of the Company or any Subsidiary is bound or
      affected, (B) any material note, bond, mortgage, indenture, contract, agreement,
      lease, license, permit, franchise or other instrument or obligation to which
      the
      Company or any Subsidiary is a party or by which the Company or any Subsidiary
      or any material property or asset of the Company or any Subsidiary is bound
      or
      affected or (C) any Permits, except for such conflicts, defaults or violations
      which could not reasonably be expected to have, individually or in the
      aggregate, a Material Adverse Effect.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (n)  Sarbanes-Oxley
      Act.
      The
      Company is in compliance with any and all applicable requirements of the
      Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any
      and
      all applicable rules and regulations promulgated by the SEC thereunder that
      are
      effective as of the date hereof, except where such noncompliance would not
      have,
      individually or in the aggregate, a Material Adverse Effect.

     

    (o)  Capitalization.
      

     

    (i)  The
      authorized capital stock of the Company as of the date hereof consists of the
      following:

     

    (A)  800,000,000
      shares of Common Stock, $0.0005 par value, of which 239,020,817 are issued
      and
      outstanding, 78,505,077 shares are reserved for issuance pursuant to the Plans,
      and 16,500,142 shares are reserved for issuance pursuant to securities
      (excluding the Convertible Notes) exercisable or exchangeable for, or
      convertible into, shares of Common Stock, and a sufficient number of
      shares
      are reserved for issuance pursuant to the conversion of the Convertible
      Notes.

     

    (B)  20,000,000 shares
      of
      Preferred Stock, $0.001 par value per share, of which 20,000 shares
      are designated Series X Preferred Stock, none of which is issued and
      outstanding, 15,000 shares are designated Series Y Preferred Stock, none of
      which is issued and outstanding, and 14,000 shares are designated Series Z
      Preferred Stock, none of which is issued and outstanding. 

     

    (ii)  All
      of
      such outstanding shares have been, or upon issuance will be, duly authorized,
      validly issued, fully paid and nonassessable and issued in accordance with
      all
      applicable law. 

     

    (iii)  Schedule
      3(o)(iii) of the Disclosure Schedule accurately sets forth with respect to
      each
      option to purchase shares of the Company’s capital stock that is outstanding as
      of the date of this Agreement: (A) for those options with a per share exercise
      price of $0.05 or less, (1) the name of the holder of such option; (2) the
      number of shares of Common Stock that remain subject to such option; (3) the
      date on which such option was granted and the term of such option; (4) the
      exercise price per share of Common Stock purchasable under such option; and
      (B)
      for those options with a per share exercise price of more than $0.05, the number
      of shares of Common Stock that remain subject to such options at each per share
      exercise price of more than $0.05 per share. No option will by its terms require
      an adjustment in connection with the transactions contemplated herein. Neither
      the consummation of the transactions contemplated by this Agreement, nor any
      action taken or to be taken by Company in connection with such transactions,
      will result in (x) any acceleration of exercisability or vesting (including
      any
      right to acceleration of vesting that is contingent upon the occurrence of
      a
      subsequent event) in favor of any optionee under any option; (y) any additional
      benefits for any optionee under any option.

     

    (iv)  Other
      than as set forth in Schedules 3(o)(iv) of the Disclosure Schedule, there are
      no
      outstanding options, warrants, scrip, rights to subscribe to, calls or
      commitments of any character whatsoever relating to, or securities or rights
      convertible into, or 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    exercisable
      or exchangeable for, any preferred stock of the Company, or contracts,
      commitments, understandings or arrangements by which the Company is or may
      become bound to issue preferred stock of the Company or options, warrants,
      scrip, rights to subscribe to, calls or commitments of any character whatsoever
      relating to, or securities or rights convertible into, or exercisable or
      exchangeable for, any preferred stock of the Company. 

     

    (v)  Other
      than as set forth in Schedules 3(o)(iii), 3(o)(iv) and 3(o)(v) of the Disclosure
      Schedule, there are no outstanding options, warrants, scrip, rights to subscribe
      to, calls or commitments of any character whatsoever relating to, or securities
      or rights convertible into, or exercisable or exchangeable for, any capital
      stock or equity interests of the Company, or contracts, commitments,
      understandings or arrangements by which the Company is or may become bound
      to
      issue additional capital stock or equity interests of the Company or options,
      warrants, scrip, rights to subscribe to, calls or commitments of any character
      whatsoever relating to, or securities or rights convertible into, or exercisable
      or exchangeable for, any capital stock or equity interests of the Company.
      

     

    (vi)  No
      adjustment, including, without limitation, any adjustment of exercise or strike
      price or any adjustment of the number of shares of Company capital stock
      issuable upon exercise or conversion, of any option, warrant, scrip, right,
      call, commitment, security, contract, understanding or arrangement listed on
      Schedules 3(o)(iii), 3(o)(iv) and 3(o)(v) of the Disclosure Schedule will occur
      in connection with the authorization, issuance or conversion of the Convertible
      Notes or any of the transactions contemplated herein.

     

    (vii)  There
      are
      no agreements or arrangements under which the Company is obligated to register
      the sale of any of its securities under the 1933 Act.

     

    (viii)  There
      are
      no outstanding securities or instruments of the Company which contain any
      redemption or similar provisions, and there are no contracts, commitments,
      understandings or arrangements by which the Company is or may become bound
      to
      redeem a security of the Company. 

     

    (ix)  The
      Company does not have any stock appreciation rights or “phantom stock” plans or
      agreements or any similar plan or agreement.

     

    (x)  The
      Company has no liabilities or obligations required to be disclosed in the SEC
      Documents but not so disclosed in the SEC Documents, other than those incurred
      in the ordinary course of the Company’s business and which, individually or in
      the aggregate, do not or would not have a Material Adverse Effect. None of
      the
      Company’s capital stock is subject to preemptive rights or any other similar
      rights or any liens or encumbrances suffered or permitted by the Company, and
      there are no securities or instruments containing anti-dilution or similar
      provisions that will be triggered by the issuance of the Securities. The Company
      has furnished to the Buyer true, correct and complete copies of the Certificate
      of Incorporation and the Bylaws, and the terms of all securities convertible
      into, or exercisable or exchangeable for, shares of Common Stock and the
      material rights of the holders thereof in respect thereto.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

    

    (p)  Contracts.
      Neither
      the Company nor any Subsidiary is a party to or is bound by any:

     

    (i)  employment,
      consulting, termination or severance agreement, contract or commitment with
      any
      officer, director or higher level employee, or member of the Board of
      Directors;

     

    (ii)  agreement,
      contract or commitment containing any covenant materially limiting the right
      of
      the Company or any Subsidiary to engage in any line of business, acquire any
      property, distribute any product or provide any service (including geographic
      restrictions) or to compete with any person or granting any exclusive
      distribution rights;

     

    (iii)  agreement,
      contract or commitment (A) relating to the disposition or acquisition by the
      Company or any Subsidiary after the date of this Agreement of a material amount
      of assets not in the ordinary course of business, (B) relating to the
      acquisition by the Company of any Subsidiary of any other entity, whether by
      means of merger, consolidation, purchase of assets or otherwise, or (C) pursuant
      to which the Company or any Subsidiary has any ownership interest in any
      corporation, partnership, joint venture or other business enterprise (other
      than
      the Subsidiaries) that is material to the Company’s business as currently
      conducted;

     

    (iv)  joint
      venture, stockholder, partnership or other agreement relating to any equity
      ownership or profit interest;

     

    (v)  distributor,
      reseller or dealer agreement;

     

    (vi)  contract
      relating to any outstanding commitment for capital expenditures in excess of
      $25,000.00;

     

    (vii)  indenture,
      mortgage, promissory note, loan agreement, credit agreement, security agreement,
      guarantee of borrowed money or other agreement or instrument relating to the
      borrowing of money or extension of credit in excess of $10,000.00;

     

    (viii)  contract
      providing for an “earn-out” or other contingent payment by the Company or any
      Subsidiary involving more than $10,000.00 over the term of the
      contract;

     

    (ix)  contract
      or agreement which is terminable upon or prohibits a change of ownership or
      control of the Company or any Subsidiary; 

     

    (x)  contract
      providing for the indemnification of any officer, director, employee or agent;
      

     

    (xi)  contract
      providing for any obligation of the Company or any Subsidiary to provide funds
      to, or make any investment (in the form of a loan, capital contribution or
      otherwise) in, any Subsidiary or any other person; or 

     

    (xii)  any
      other
      agreement, contract, license or commitment that is material to the business
      of
      the Company and the Subsidiaries, taken as a whole, as currently conducted
      or
      proposed to be conducted.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Neither
      the Company nor any Subsidiary, nor to the Company’s knowledge any other party
      to a Company Contract (as defined below), is in breach or violation of or
      default under (nor does there exist any condition which with the passage of
      time
      or giving of notice or both would result in such a breach, violation or
      default), and neither the Company nor any Subsidiary has received written notice
      that it has breached, violated or defaulted under, any of the material terms
      or
      conditions of any of the agreements, contracts or commitments to which the
      Company or any Subsidiary is a party or by which it is bound that (A) are
      required to be disclosed in the Disclosure Schedule pursuant to clauses (i)
      through (xii) above, (B) are set forth in Schedule 3(u) of the Disclosure
      Schedule or (C) are required to be filed with any SEC Documents (any such
      agreement, contract or commitment, a “Company
      Contract”),
      in
      each case, in such a manner as would permit any other party to cancel or
      terminate any such Company Contract, or would permit any other party to seek
      damages or other remedies (for any or all of such breaches, violations or
      defaults, in the aggregate). Each Company Contract (x) is valid and binding
      in
      all material respects on the Company or Subsidiary and, to the knowledge of
      the
      Company, on the other parties thereto and is in full force and effect and (y)
      upon consummation of the transactions contemplated by this Agreement, shall
      continue in full force and effect without penalty or other consequence. The
      Company has delivered or made available to Buyer accurate and complete copies
      of
      all Company Contracts, including all amendments thereto.

     

    (q)  Absence
      of Litigation.
      There
      is no action, suit, proceeding, inquiry or investigation before any court,
      public board, government agency, self-regulatory organization or body (a
“Legal
      Proceeding”)
      pending or, to the knowledge of the Company, threatened against or affecting
      the
      Company or any Subsidiary, except such that if adversely determined,
      individually or in the aggregate, would not, nor be reasonably expected to,
      have
      a Material Adverse Effect or that seeks to delay or prevent the transactions
      contemplated hereunder. None of the Company, the Subsidiaries, the directors
      and
      officers of the Company and the Subsidiaries in their capacity as such, nor
      any
      material property or asset of the Company or any Subsidiary is subject to any
      continuing order of, consent decree, settlement agreement or other similar
      written agreement with, or, to the knowledge of the Company, continuing
      investigation by, any governmental entity, or any order, writ, judgment,
      injunction, decree, determination or award of any governmental entity or
      arbitrator. The Company does not have any plans to initiate any litigation,
      arbitration or other proceeding against any third party.

     

    (r)  Insurance.
      The
      Company and all the Subsidiaries are insured by insurers of recognized financial
      responsibility against such losses and risks and in such amounts as management
      of the Company believes to be prudent and customary in the business in which
      the
      Company is engaged. Neither the Company nor any Subsidiary have been refused
      any
      insurance coverage sought or applied for and the Company does not have any
      reason to believe that it will not be able to renew its existing insurance
      coverage as and when such coverage expires or to obtain similar coverage from
      similar insurers as may be necessary to continue its business at a cost that
      would not, nor would be reasonably expected to, have a Material Adverse Effect.
      There is no material claim pending under any of such policies as to which
      coverage has been questioned, denied or disputed by the underwriters of such
      policies. All premiums due and payable under all such policies have been paid
      and the Company is otherwise in compliance in all material respects with the
      terms of such policies. The Company has no knowledge of any threatened
      termination of, or material premium increase with respect to, any of such
      policies.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (s)  Employee
      Benefit Plans; Labor Matters.
      

     

    (i)  Schedule 3(s)
      of the Disclosure Schedule lists (A) all
      employee benefit plans (as defined in section 3(3) of the ERISA) and all
      bonus, stock option, stock purchase, stock appreciation right, restricted stock,
      phantom stock, incentive, deferred compensation, executive compensation,
      cafeteria benefit, dependent care, director or employee loan, fringe benefit,
      sabbatical, retiree medical or life insurance, disability, supplemental
      retirement, employment, severance, termination pay or other benefit plans,
      programs or arrangements, including (without limitation) any arrangements that
      contain change of control or vesting acceleration provisions, to which the
      Company or any Subsidiary is a party, with respect to which the Company or
      any
      Subsidiary has any obligation or which are maintained, contributed to or
      sponsored by the Company or any Subsidiary for the benefit of any current or
      former employee, officer or director of the Company or any Subsidiary,
      (B) each employee benefit plan for which the Company or any Subsidiary
      could incur liability under section 4069 of ERISA in the event such plan
      has been or were to be terminated, (C) any plan in respect of which the
      Company or any Subsidiary could incur liability under section 4212(c) of
      ERISA, and (iv) any contracts, arrangements or understandings between the
      Company or any Subsidiary and any employee or former employee of the Company
      or
      any Subsidiary including, without limitation, any contracts, arrangements or
      understandings relating to a sale of the Company (collectively, the
“Company
      Benefit Plans”).

     

    (ii)  Each
      Company Benefit Plan is in writing and the Company has furnished Buyer with
      a
      true and complete copy of each Company Benefit Plan and a true and complete
      copy
      of each material document, if any, prepared in connection with each such Company
      Benefit Plan, including, without limitation, (A) a copy of each trust or
      other funding arrangement, (B) each summary plan description and summary of
      material modifications, (C) the three most recent annual reports (Form 5500
      series and all schedules and financial statements attached thereto), if any,
      required under ERISA or the United States Internal Revenue Code of 1986, as
      amended (the “Code”)in
      connection with each Company Benefit Plan, (D) the most recently received
      IRS determination letter for each such Company Benefit Plan, (E) the
      actuarial report and financial statement in connection with each such Company
      Benefit Plan for the three most recent plan years, and (F) any
      correspondence with the IRS or the Department of Labor with respect to each
      such
      Company Benefit Plan, and (F) each form of notice of grant or stock option
      agreement used to document Company Stock Options. Neither the Company nor any
      Subsidiary has express or implied commitment, whether legally enforceable or
      not, (x) to create, incur liability with respect to, or cause to exist, any
      other employee benefit plan, program or arrangement, (y) to enter into any
      contract or agreement to provide compensation or benefits to any individual,
      or
      (z) to modify, change or terminate any Company Benefit Plan, other than
      with respect to a modification, change or termination required by ERISA or
      the
      Code.

     

    (iii)  Neither
      the Company, any Subsidiary nor any ERISA Affiliate has ever maintained or
      contributed to or had an obligation to contribute to any pension plan that
      is
      subject to Title IV of ERISA or Section 412 of the Code. 

     

    (iv)  None
      of
      the Company Benefit Plans provides for the payment of separation, severance,
      termination or similar-type benefits to any person or obligates the Company
      or
      any Subsidiary to pay separation, severance, termination or similar-type
      benefits 

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    solely
      or
      partially as a result of any transaction contemplated by this Agreement or
      as a
      result of a “change in ownership or control,” within the meaning of such term
      under section 280G of the Code. No amounts payable under the Company
      Benefit Plans solely as a result of the consummation of the transactions
      contemplated by this Agreement will fail to be deductible for federal income
      tax
      purposes by virtue of section 280G of the Code. Neither the execution and
      delivery of this Agreement nor the consummation of the transactions contemplated
      hereby, either alone or together with another event, will (A) result in any
      payment (including, without limitation, severance, unemployment compensation,
      golden parachute, forgiveness of indebtedness or otherwise) becoming due under
      any Company Benefit Plan, (B) materially increase any benefits otherwise payable
      under any Company Benefit Plan or other arrangement, (C) result in the
      acceleration of the time of payment, vesting or funding of any benefits
      including, but not limited to, the acceleration of the vesting and
      exercisability of any Company Stock Options, or (D) affect in any material
      respects any Company Benefit Plan’s current treatment under any Laws including
      any tax or social contribution law. No Company Benefit Plan provides or reflects
      or represents any liability to provide retiree health to any person for any
      reason, except as may be required by COBRA or other applicable statute, and
      neither the Company nor any Subsidiary has represented, promised or contracted
      (whether in oral or written form) to any employee (either individually or to
      employees as a group) or any other person that such employee(s) or other person
      would be provided with retiree health, except to the extent required by
      statute.

     

    (v)  Each
      Company Benefit Plan is now and always has been operated in accordance in all
      material respects with its terms and the requirements of all applicable Laws,
      regulations and rules promulgated thereunder including, without limitation,
      ERISA, COBRA, the Family Medical Leave Act of 1993, as amended (“FMLA”)
      and
      the Code. The Company and each Subsidiary has performed in all material respects
      all obligations required to be performed by it under, is not in any respect
      in
      default under or in violation of, and has no knowledge of any default or
      violation by any party to, any Company Benefit Plan. No action, claim or
      proceeding is pending or, to the knowledge of the Company, threatened with
      respect to any Company Benefit Plan (other than claims for benefits in the
      ordinary course) and no fact or event exists that could give rise to any such
      action, claim or proceeding. Neither the Company nor any person that is a member
      of the same controlled group as the Company or under common control with the
      Company within the meaning of section 414 of the Code (each, an
“ERISA
      Affiliate”)
      is
      subject to any penalty or tax with respect to any Company Benefit Plan under
      section 402(i) of ERISA or sections 4975 through 4980 of the Code. Each
      Company Benefit Plan can be amended, terminated or otherwise discontinued as
      of
      or after the Effective Time, without material liability to the Buyer, Parent,
      Company or any of its ERISA Affiliates (other than ordinary administration
      expenses).

     

    (vi)  Each
      Company Benefit Plan intended to qualify under section 401(a) or
      section 401(k) of the Code and each trust intended to qualify under section
      501(a) of the Code has either received a favorable determination, opinion,
      notification or advisory letter from the IRS with respect to each such Company
      Benefit Plan as to its qualified status under the Code, including all amendments
      to the Code effected by the Tax Reform Act of 1986 and subsequent legislation,
      and no fact or event has occurred since the date of such determination letter
      or
      letters from the IRS to adversely affect the qualified status of any such
      Company Benefit Plan or the exempt status of any such trust, or has remaining
      a
      period of time under applicable 

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    Treasury
      regulations or IRS pronouncements in which to apply for such a letter and make
      any amendments necessary to obtain a favorable determination as to the qualified
      status of each such Company Benefit Plan.

     

    (vii)  To
      the
      Company’s knowledge, all contributions, premiums or payments required to be made
      or accrued with respect to any Company Benefit Plan have been made on or before
      their due dates. All such contributions have been fully deducted for income
      tax
      purposes and no such deduction has been challenged or disallowed by any
      governmental entity and no fact or event exists which could give rise to any
      such challenge or disallowance.

     

    (viii)  Except
      as
      set forth in Schedule 3(s) of the Disclosure Schedule, (A) neither the
      Company nor any Subsidiary is a party to any collective bargaining agreement
      or
      other labor union contract applicable to persons employed by the Company or
      any
      Subsidiary or in the Company’s or any Subsidiary’s business, and currently there
      are no organizational campaigns, petitions or other unionization activities
      seeking recognition of a collective bargaining unit which could affect the
      Company or any Subsidiary; (B) there are no controversies, strikes,
      slowdowns or work stoppages pending or, to the best knowledge of the Company
      after reasonable due inquiry, threatened between the Company or any Subsidiary
      and any of its employees, and neither the Company nor any Subsidiary has
      experienced any such controversy, strike, slowdown or work stoppage within
      the
      past three years; (C) neither the Company nor any Subsidiary has breached
      or otherwise failed to comply with the provisions of any collective bargaining
      or union contract and there are no grievances outstanding against the Company
      or
      any Subsidiary under any such agreement or; (D) there are no unfair labor
      practice complaints pending against the Company or any Subsidiary before the
      National Labor Relations Board or any other governmental entity or any current
      union representation questions involving employees of the Company or any
      Subsidiary; (E) the Company and each Subsidiary is currently in compliance
      in all material respects with all applicable Laws relating to the employment
      of
      labor, including, without limitation, those related to wages, hours, worker
      classification, collective bargaining and the payment and withholding of Taxes
      and other sums as required by the appropriate governmental entity and has
      withheld and paid to the appropriate governmental entity or is holding for
      payment not yet due to such governmental entity all material amounts required
      to
      be withheld from employees of the Company or any Subsidiary and is not liable
      for any arrears of wages, Taxes, penalties or other sums for failure to comply
      in all material respects with any of the foregoing; (F) the Company and
      each Subsidiary has paid in full to all employees or adequately accrued for
      in
      accordance with generally accepted accounting principles consistently applied
      all wages, salaries, commissions, bonuses, benefits and other compensation
      due
      to or on behalf of such employees; (G) there is no claim with respect to
      payment of wages, salary or overtime pay that has been asserted or is now
      pending or threatened before any governmental entity with respect to any persons
      currently or formerly employed by the Company or any Subsidiary;
      (H) neither the Company nor any Subsidiary is a party to, or otherwise
      bound by, any consent decree with, or citation by, any governmental entity
      relating to employees or employment practices; (I) there is no charge or
      proceeding with respect to a violation of any occupational safety or health
      standards that has been asserted or is now pending or threatened with respect
      to
      the Company or any Subsidiary; and (J) there is no charge of discrimination
      in employment or employment practices, for any reason, including, without
      limitation, age, gender, race, religion or other legally protected category,
      which has been asserted or is now pending or 

     

    
      
        
        

      

      
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    threatened
      before the United States Equal Employment Opportunity Commission, or any other
      governmental entity with respect to the Company or any Subsidiary.

     

    (ix)  Schedule
      3(s) of the Disclosure Schedule accurately sets forth the name and title of
      each
      employee of the Company with the title of Vice President or higher.

     

    (t)  Title.
      The
      Company and the Subsidiaries do not own any real property and have good and
      marketable title to all personal property owned by it which is material to
      the
      business of the Company, free and clear of all liens, encumbrances and defects
      except such as do not materially affect the value of such property and do not
      interfere with the use made of such property by the Company. Any real property
      and facilities held under lease by the Company and the Subsidiaries are held
      by
      it under valid, subsisting and enforceable leases with such exceptions as are
      not material and do not interfere with the use made and proposed to be made
      of
      such property and buildings by the Company. Schedule 3(t) of the Disclosure
      Schedule lists all real property leases to which the Company or any Subsidiary
      is a party and each amendment thereto, and with respect to each such lease,
      the
      aggregate monthly rent payable thereunder and the expiration date thereof.
      All
      such current leases are in full force and effect, are valid and effective in
      accordance with their respective terms, and there is not, under any of such
      leases, any existing default or event of default (or event which with notice
      or
      lapse of time, or both, would constitute a default) that would give rise to
      a
      material claim. Neither the Company nor any of the Subsidiaries have subleased
      or otherwise granted rights of use or occupancy of any of the premises subject
      to such leases to any other persons. Other than leaseholds created under the
      real property leases identified in Schedule 3(t) of the Disclosure Schedule,
      the
      Company and the Subsidiaries have no leasehold interest in any real
      property.

     

    (u)  Intellectual
      Property Rights.
      Each of
      the Company and the Subsidiaries have sufficient title and ownership of or
      exclusive licenses to all patents, trademarks, service marks, trade names,
      domain names, copyrights, trade secrets, information, proprietary rights and
      processes necessary for their respective businesses as now conducted and as
      proposed to be conducted (collectively, the “Company
      IP”)
      without, to the knowledge of the Company and the each Subsidiary solely with
      respect to patents, any violation or infringement of, or other conflict with,
      the rights of others. The Disclosure Schedule contains a complete list of
      trademarks, service marks and domain names of, or exclusively licensed to,
      the
      Company or the Subsidiaries. There are no outstanding options, licenses,
      agreements, claims, encumbrances or shared ownership of interests of any kind
      relating to anything referred to above in this Section 3(u) that is to any
      extent owned by or exclusively licensed to the Company or the Subsidiaries,
      nor
      is the Company or any Subsidiary bound by or a party to any options, licenses
      or
      agreements of any kind with respect to the patents, trademarks, service marks,
      trade names, domain names, copyrights, trade secrets, licenses, information,
      proprietary rights and/or processes of any other person or entity, except,
      in
      either case, for standard end-user, object code, internal-use software license
      and support/maintenance agreements. Neither the Company nor the Subsidiaries
      have received any communications alleging that the Company or any Subsidiary
      has
      violated or by conducting its business as proposed, would violate any of the
      patents, trademarks, service marks, trade names, copyrights or trade secrets
      or
      other proprietary rights of any other person or entity and the Company is not
      aware of any potential basis for such an allegation or of any reason to believe
      that such an allegation may be forthcoming. The Company is not aware that any
      of
      its or the Subsidiaries’ employees is obligated under any contract (including
      licenses, covenants or 

     

    
      
        
        

      

      
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    commitments
      of any nature) or other agreement, or subject to any judgment, decree or order
      of any court or administrative agency, that would interfere with the use of
      his
      or her best efforts to promote the interests of the Company or any Subsidiary
      or
      that would conflict with the Company’s or Subsidiaries’ respective businesses as
      presently conducted or as proposed to be conducted. Neither the execution nor
      delivery of Transaction Documents, nor the carrying on of the Company’s or
      Subsidiaries’ respective businesses by the employees of the Company and the
      Subsidiaries, nor the conduct of the Company’s and Subsidiaries’ business as
      proposed, will, to the Company’s knowledge, conflict with or result in a breach
      of the terms, conditions or provisions of, or constitute a default under, any
      contract, covenant or instrument under which any of such employees is now
      obligated. Neither the Company nor any of the Subsidiaries believe (after
      reasonable investigation) it is or will be necessary to utilize any inventions
      of any of its or any Subsidiaries’ respective employees made prior to or outside
      the scope of their employment by the Company or the Subsidiary, as the case
      may
      be.

     

    (v)  Taxes.

     

    (i)  All
      Tax
      (as defined below) returns, statements, reports, declarations and other forms
      and documents (including without limitation estimated Tax returns and reports
      and material information returns and reports) required to be filed with any
      Tax
      Authority (as defined below) with respect to any Taxable (as defined below)
      period ending on or before the Closing, by or on behalf of the Company or any
      Subsidiary (collectively, “Tax
      Returns”
and
      individually, a “Tax
      Return”),
      where
      the Company has material business activity, have been or will be completed
      and
      filed when due (including any extensions of such due date). Except to the extent
      that a reserve for Taxes has been established on the Reference Balance Sheet,
      all such Returns are true, complete and correct in all material respects and
      were prepared in substantial compliance with all applicable laws. Subject to
      extensions, the Company has paid all Taxes due and owing on such Returns for
      all
      periods through December 31, 2005, or will have paid such Taxes when due, except
      to the extent reserves for Taxes have been established on the Reference Balance
      Sheet. The Financial Statements (A) fully accrue all actual and contingent
      material liabilities for Taxes (as defined below) with respect to all periods
      through December 31, 2005, and (B) properly accrues in accordance with generally
      accepted accounting principles all material liabilities for Taxes payable after
      December 31, 2005, with respect to all transactions and events occurring on
      or
      prior to such date. To the Company’s knowledge, the Company will not, as a
      result of the transactions contemplated herein, become liable for any material
      Tax not adequately reserved against on the Financial Statements. All information
      set forth in the notes to the Financial Statements relating to Tax matters
      is
      true, complete and accurate in all material respects when made for the periods
      covered. The Company has not incurred any material Tax liability since December
      31, 2005 other than in the ordinary course of business and the Company has
      made
      adequate provisions for all material Taxes since that date in accordance with
      generally accepted accounting principles on at least a quarterly
      basis.

     

    (ii)  The
      Company and the Subsidiaries have withheld and paid to the applicable financial
      institution or Tax Authority all material amounts required to be withheld.
      To
      the best knowledge of the Company, no Tax Returns filed with respect to Taxable
      years through the Taxable year ended December 31, 2005 in the case of the United
      States, have been examined and closed. The Company (or any member of any
      affiliated or combined group of which the Company has been a member) has not
      granted any extension or waiver of the 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    limitation
      period applicable to any Tax Returns that is still in effect and there is no
      material claim, audit, action, suit, proceeding, or (to the knowledge of the
      Company) investigation now pending, threatened or expected against or with
      respect to the Company in respect of any Tax or assessment. No notice of any
      material deficiency or similar document of any Tax Authority has been received
      by the Company, and, to the knowledge of the Company, there are no liabilities
      for Taxes (including liabilities for interest, additions to Tax and penalties
      thereon and related expenses) with respect to the issues that have been raised
      (and are currently pending) by any Tax Authority that could, if determined
      adversely to the Company, materially and adversely affect the liability of
      the
      Company for Taxes. No material claim has ever been made by a governmental entity
      in a jurisdiction where Company does not file Tax Returns that Company is or
      may
      be subject to material taxation by that jurisdiction. There are no liens for
      material Taxes (other than for current Taxes not yet due and payable) upon
      the
      assets of the Company. All material elections with respect to the Company’s
      Taxes made during the fiscal years ending December 31, 2003 and 2004 are
      reflected on the Company’s Tax Returns for such periods, copies of which have
      been provided or made available to Buyer. After the date of this Agreement,
      no
      material election with respect to Taxes will be made without the prior written
      consent of Buyer and Parent, which consent will not be unreasonably conditioned,
      withheld or delayed. The Company has previously provided or made available
      to
      Buyer true and correct copies of all income, franchise, and sales Tax Returns,
      and, as reasonably requested by Buyer, prior to or following the date hereof,
      presently existing information statements and reports. 

     

    (iii)  The
      Company is not, and has not been, a United States real property holding
      corporation (as defined in Section 897(c)(2) of the Code) during the applicable
      period specified in Section 897(c)(1)(A)(ii) of the Code.

     

    (iv)  There
      is
      no agreement, contract or arrangement to which the Company is a party that
      could, individually or collectively, result in the payment of any amount that
      would not be deductible by reason of Sections 280G (as determined without regard
      to Section 280G(b)(4)), 162 (other than 162(a)) or 404 of the Code. Company
      is
      not a party to any contract and/or has not granted any compensation, equity
      or
      award that could be deemed deferred compensation subject to the additional
      20%
      tax under Section 409A of the Code, and neither Company nor any of its ERISA
      Affiliates has any liability or obligation to make any payments or to issue
      any
      equity award or bonus that could be deemed deferred compensation subject to
      the
      additional 20% tax under Section 409A of the Code.

     

    (v)  The
      Company is not party to any joint venture, partnership, or other arrangement
      or
      contract which could be treated as a partnership for Federal income tax
      purposes. Company does not own any interest in any entity that is characterized
      as a partnership for federal income Tax purposes.

     

    (vi)  Schedule
      3(v)(vi) of the Disclosure Schedule sets forth a complete and accurate list
      of
      all material agreements, rulings, settlements or other Tax documents relating
      to
      Tax incentives between Company and any governmental entity.

     

    (vii)  For
      purposes of this Agreement, the following terms have the following meanings:
      “Tax”
(and,
      with correlative meaning, “Taxes”
and
      “Taxable”)
      means
      any and all taxes including, without limitation, (A) any net income, alternative
      or add-on minimum 

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    tax,
      gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
      profits, value added, net worth, license, withholding, payroll, employment,
      excise, severance, stamp, occupation, premium, property, environmental or
      windfall profit tax, custom, duty or other tax, governmental fee or other like
      assessment or charge of any kind whatsoever, together with any interest or
      any
      penalty, addition to tax or additional amount imposed by any governmental entity
      responsible for the imposition of any such tax (domestic or foreign) (a
“Tax
      Authority”),
      (B)
      any liability for the payment of any amounts of the type described in (A) as
      a
      result of being a member of an affiliated, consolidated, combined or unitary
      group for any taxable period or as the result of being a transferee or successor
      thereof and (C) any liability for the payment of any amounts of the type
      described in (A) or (B) as a result of any express or implied obligation to
      indemnify any other person. As used in this Section 3.15, the term “Company”
means
      the Company and any entity included in, or required under generally accepted
      accounting principles to be included in, any of the Audited Financial Statements
      or the Interim Financial Statements.

     

    (w)  Internal
      Accounting Controls.
      The
      Company maintains a system of internal accounting controls sufficient to provide
      reasonable assurance that (i) transactions are executed in accordance with
      management’s general or specific authorizations, (ii) transactions are recorded
      as necessary to permit preparation of Financial Statements in conformity with
      generally accepted accounting principles and to maintain asset and liability
      accountability, (iii) access to assets or incurrence of liabilities is permitted
      only in accordance with management’s general or specific authorization and (iv)
      the recorded accountability for assets and liabilities is compared with the
      existing assets and liabilities at reasonable intervals and appropriate action
      is taken with respect to any difference. Since January 1, 2005, neither the
      Company (including any employee thereof) nor, to the Company’s knowledge, the
      Company’s independent auditors, has identified or been made aware of (x) any
      significant deficiency or material weakness in the system of internal accounting
      controls utilized by the Company, (y) any fraud, whether or not material, that
      involves the Company’s management or other employees who have a role in the
      preparation of Financial Statements or the internal accounting controls utilized
      by the Company or (iii) any claim or allegation regarding any of the
      foregoing.

     

    (x)  Brokers;
      Costs.
      No
      broker, finder or investment banker is entitled to any brokerage, finder’s or
      other fee or commission in connection with the transactions contemplated herein
      based upon arrangements made by or on behalf of the Company. The Company has
      delivered to Buyer true and complete copies of all agreements under which any
      such fees or expenses are payable and all indemnification and other agreements
      related to the engagement of the persons to whom such fees are payable. The
      fees
      and expenses of any broker or financial advisor retained by the Company in
      connection with this Agreement and the transactions contemplated hereby incurred
      or to be incurred by the Company will not exceed the fees and expenses payable
      under the investment banking engagement letter set forth in Schedule 3(x) of
      the
      Disclosure Schedule, a copy of which has been provided to Buyer, and the fees
      and expenses of any accountant, legal counsel or other person retained by the
      Company (other than brokers and financial advisors) in connection with this
      Agreement and the transactions contemplated hereby incurred by the Company
      as of
      the date of this Agreement have not exceeded the fees and expenses set forth
      in
      Schedule 3(x) of the Disclosure Schedule. 

     

    (y)  Ranking
      of Notes.
      Except
      for indebtedness set forth on Schedule 3(y) (collectively, the
“Current
      Indebtedness”),
      no
      Indebtedness of the Company is senior to or 

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    ranks
      pari
      passu
      with the
      Notes in right of payment, whether with respect of payment of redemptions,
      interest, damages or upon liquidation or dissolution or otherwise. For purposes
      of this Agreement: (i) “Indebtedness”
of
      any
      Person means, without duplication (A) all indebtedness for borrowed money,
      (B)
      all obligations (other than trade payables entered into in the ordinary course
      of business) issued, undertaken or assumed as the deferred purchase price of
      property or services including, without limitation, “capital leases” in
      accordance with U.S. generally accepted accounting principals, (C) all
      reimbursement or payment obligations with respect to letters of credit, surety
      bonds and other similar instruments, (D) all obligations evidenced by notes,
      bonds, debentures or similar instruments, including obligations so evidenced
      incurred in connection with the acquisition of property, assets or businesses,
      (E) all indebtedness created or arising under any conditional sale or other
      title retention agreement, or incurred as financing, in either case with respect
      to any property or assets acquired with the proceeds of such indebtedness (even
      though the rights and remedies of the seller or bank under such agreement in
      the
      event of default are limited to repossession or sale of such property), (F)
      all
      monetary obligations under any leasing or similar arrangement which, in
      connection with generally accepted accounting principles, consistently applied
      for the periods covered thereby, is classified as a capital lease, (G) all
      indebtedness referred to in clauses (A) through (F) above secured by (or for
      which the holder of such Indebtedness has an existing right, contingent or
      otherwise, to be secured by) any mortgage, lien, pledge, charge, security
      interest or other encumbrance upon or in any property or assets (including
      accounts and contract rights) owned by any Person, even though the Person which
      owns such assets or property has not assumed or become liable for the payment
      of
      such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
      or obligations of others of the kinds referred to in clauses (A) through (G)
      above; and (ii) “Contingent
      Obligation”
means,
      as to any Person, any direct or indirect liability, contingent or otherwise,
      of
      that Person with respect to any indebtedness, lease, dividend or other
      obligation of another Person if the primary purpose or intent of the Person
      incurring such liability, or the primary effect thereof, is to provide assurance
      to the obligee of such liability that such liability will be paid or discharged,
      or that any agreements relating thereto will be complied with, or that the
      holders of such liability will be protected (in whole or in part) against loss
      with respect thereto.

     

    (z)  Disclosure.
      All
      disclosure provided to the Buyer regarding the Company, its business and the
      transactions contemplated hereby, including the Schedules to this Agreement,
      furnished by or on behalf of the Company is true and correct in all material
      respects and does not contain any untrue statement of a material fact or omit
      to
      state any material fact necessary in order to make the statements made therein,
      in the light of the circumstances under which they were made, not misleading.
      Each press release issued by the Company during the twelve (12) months preceding
      the date of this Agreement did not at the time of release contain any untrue
      statement of a material fact or omit to state a material fact required to be
      stated therein or necessary in order to make the statements therein, in the
      light of the circumstances under which they are made, not misleading. No event
      or circumstance has occurred or information exists with respect to the Company
      or its business, properties, prospects, operations or financial conditions,
      which, under applicable law, rule or regulation, requires public disclosure
      or
      announcement by the Company but which has not been so publicly announced or
      disclosed. 

     

    
      
        
        

      

      
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    4.  COVENANTS.

     

    (a)  Efforts
      to Satisfy Conditions.
      Upon
      the terms and subject to the conditions hereof, each party shall use its
      commercially reasonable efforts to (i) take, or cause to be taken, all
      appropriate action and do, or cause to be done, all things necessary, proper
      or
      advisable under applicable law or otherwise to consummate and make effective
      the
      transactions contemplated by this Agreement, (ii) obtain from any
      governmental entity or any other person all consents, licenses, permits,
      waivers, approvals, authorizations or orders required to be obtained or made
      by
      Buyer or the Company or any of their subsidiaries in connection with the
      authorization, execution and delivery of this Agreement and the consummation
      of
      the transactions contemplated by this Agreement, and (iii) make all
      necessary filings, and thereafter make any other required submission, with
      respect to this Agreement and the transactions contemplated by this Agreement
      required under applicable law. The parties hereto shall cooperate with each
      other in connection with the making of all such filings, including by providing
      copies of all such documents to the non-filing party and its advisors prior
      to
      filing and, if requested, by accepting all reasonable additions, deletions
      or
      changes suggested in connection therewith.

     

    (b)  Form
      D
      and Blue Sky.
      The
      Company agrees to file a Form D with respect to the Securities as required
      under
      Regulation D and to provide a copy thereof to the Buyer promptly after such
      filing. The Company shall, on or before the Closing Date, take such action
      as
      the Company shall reasonably determine is necessary in order to obtain an
      exemption for or to qualify the Securities for sale to the Buyer at the Closing
      pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
      states of the United States (or to obtain an exemption from such qualification),
      and shall provide evidence of any such action so taken to the Buyer on or prior
      to the date on which such action must be taken. The Company shall make all
      filings and reports relating to the offer and sale of the Securities required
      under applicable securities or “Blue Sky” laws of the states of the United
      States following the Closing Date.

     

    (c)  Financial
      Information.
      Unless
      the following are filed with the SEC through EDGAR and are available to the
      public through the EDGAR system, the Company agrees to send the following to
      the
      Buyer and Parent: (i) within one (1) Business Day after the filing thereof
      with
      the SEC, a copy of its Annual Reports on Form 10-K or 10-KSB, any interim
      reports or any consolidated balance sheets, income statements, stockholders’
equity statements and/or cash flow statements for any period other than annual,
      any Current Reports on Form 8-K and any registration statements (other than
      on
      Form S-8) or amendments filed pursuant to the 1933 Act, (ii) within 24 hours
      of
      the release thereof, facsimile or electronic copies of all press releases issued
      by the Company or any of its Subsidiaries, and (iii) copies of any notices
      and
      other information made available or given to the stockholders of the Company
      generally, contemporaneously with the making available or giving thereof to
      the
      stockholders.

     

    (d)  Disclosure
      of Transactions and Other Material Information.
      

     

    (i)  On
      or
      before the fourth business day following the date hereof, the Company shall
      file
      a Current Report on Form 8-K describing the terms of the transactions
      contemplated by the Transaction Documents in the form required by the 1934
      Act
      and attaching the material Transaction Documents (including, without limitation,
      this Agreement, the form of 

     

    
      
        
        

      

      
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    each
      of
      the Notes and the Security Documents) as exhibits to such filing (including
      all
      attachments, the “8-K
      Filing”).
      Subject to the foregoing, neither the Company, the Subsidiaries nor the Buyer
      shall issue any press releases or any other public statements with respect
      to
      the transactions contemplated hereby; provided,
      however,
      that
      the Company shall be entitled, without the prior approval of the Buyer and
      Parent, to make any press release or other public disclosure with respect to
      such transactions (A) in substantial conformity with the 8-K Filing and
      contemporaneously therewith and (B) as is required by applicable law and
      regulations (provided that in the case of clause (A) the Buyer and Parent shall
      be consulted by the Company in connection with and given an opportunity to
      review and comment on any such press release or other public disclosure prior
      to
      its release). Prior to the Merger, and notwithstanding the foregoing, the
      Company and each Subsidiary shall not publicly disclose the relationship of
      the
      Buyer or Parent to the Company, or include the name of the Buyer or Parent
      in
      any filing with the SEC or any regulatory agency, without the prior written
      consent of the Buyer and Parent, except (x) for disclosure thereof in the 8-K
      Filing or (y) as required by law, regulation or any order of any court or other
      governmental agency, in which case the Company shall provide the Buyer and
      Parent with prior notice of such disclosure. 

     

    (ii)  As
      promptly as practicable after the date hereof, Company shall prepare proxy
      materials (the “Proxy
      Statement”)
      relating to the approval of the Charter Amendment by the stockholders of the
      Company and, as promptly as practicable, the Company shall file with the SEC
      the
      Proxy Statement and, to the extent required, a Schedule 13E-3, each of which
      comply in form with applicable SEC requirements and shall use all reasonable
      efforts to respond to SEC comments regarding such filings and obtain SEC
      approval to mail the Proxy Statement to the stockholders of the Company. The
      Proxy Statement shall include a statement that the Board of Directors of the
      Company has declared the advisability of the Charter Amendment, provided
      that the Board of Directors may withdraw such statement regarding the
      advisability of the Charter Amendment if it determines in good faith that
      failure to do so would be inconsistent with its fiduciary obligations under
      applicable law; provided,
      further,
      however,
      that
      such withdrawal shall not affect the Company’s obligations to prepare and mail
      the Proxy Statement and to call and hold the Stockholder Meeting (as defined
      below).

     

    (iii)  Company
      shall promptly after the date hereof take all actions necessary to call a
      meeting of its stockholders to be held for the purpose of voting upon the
      Charter Amendment (the “Stockholder
      Meeting”)
      and to
      hold such Stockholder Meeting; provided,
      however,
      that,
      without the prior written consent of the Buyer, the record date for the
      Stockholder Meeting (the “Record
      Date”)
      shall
      not be set earlier than two (2) business days following nor later than five
      (5)
      business days following the date on which the conditions to the conversion
      of
      the Convertible Note in the form attached hereto as Exhibit
      B-3
      into
      Company Common Stock have been satisfied, nor shall the Record Date be set
      earlier than two (2) business days following the Company’s notice to Buyer of
      the date of the Record Date. 

     

    (e)  Conduct
      of Business.
      The
      Company agrees that, between the date of this Agreement and the Closing Date,
      except as set forth in Schedule 4(e) of the Disclosure Schedule or as
      specifically contemplated by any other provision of this Agreement, unless
      Buyer
      shall otherwise consent in writing: 

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (i)  the
      businesses of the Company and the Subsidiaries shall be conducted only in,
      and
      the Company and the Subsidiaries shall not take any action except in, the
      ordinary course of business and in a manner consistent with past practice;
      and

     

    (ii)  the
      Company shall use its reasonable best efforts to preserve substantially intact
      the business organization of the Company and the Subsidiaries, to keep available
      the services of the current officers, employees and consultants of the Company
      and the Subsidiaries and to preserve the current relationships of the Company
      and the Subsidiaries with customers, suppliers, licensors, licensees, alliance
      partners and other persons with which the Company or any Subsidiary has business
      relations. 

     

    (iii)  By
      way of
      amplification and not limitation, except as contemplated by this Agreement
      or as
      set forth in Schedule 4(e) of the Disclosure Schedule, the Company shall not,
      and shall not permit any Subsidiary to, between the date of this Agreement
      and
      the Closing Date, directly or indirectly, do, or propose to do, any of the
      following without the prior written consent of Buyer:

     

    (A)  issue,
      deliver or sell, or authorize or propose the issuance, delivery or sale of,
      any
      shares of capital stock of any class or any securities convertible into, or
      any
      right, warrants, calls, subscriptions or options to acquire, any such shares
      or
      convertible securities, or any other ownership interest other than (1) the
      issuance of shares of Common Stock upon the exercise of options outstanding
      on
      the date of this Agreement under the Plans, (2) the issuance of shares of Common
      Stock upon the exercise of warrants outstanding on the date of this Agreement
      and (3) the issuance of Common Stock upon the conversion of that certain Secured
      Convertible Minimum Borrowing Note issued to Laurus in the principal amount
      of
      $4,250,000 and that certain Secured Revolving Note issued to Laurus in the
      principal amount of $750,000;

     

    (B)  take
      any
      of the actions described in clause (i) or clauses (iii) through (xvii) of
      Section 3(k) hereof;

     

    (C)  take
      any
      action (or fail to take any action) to cause the Company’s representations and
      warranties set forth in Section 3 to be untrue in any material respect;
      or

     

    (D)  agree
      in
      writing or otherwise to take any of the actions described in Section
      4(e)(iii)(A) through (C) above.

     

    (f)  Integration.
      None of
      the Company, its affiliates and any Person acting on their behalf will take
      any
      action or steps that would require registration of any of the Securities under
      the 1933 Act or cause the offering of the Securities to be integrated with
      other
      offerings.

     

    (g)  No
      Solicitation of Transactions.

     

    (i)  The
      Company will not solicit, initiate or knowingly encourage (including by way
      of
      furnishing nonpublic information), or take any other action to facilitate,
      any
      inquiries or the making of any proposal or offer (including, without limitation,
      any proposal or offer to its stockholders) that constitutes, or may reasonably
      be expected to lead to, any 

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    Competing
      Transaction (as defined below), or enter into or maintain or continue
      discussions or negotiate with any person in furtherance of such inquiries or
      to
      obtain a Competing Transaction, or agree to or endorse any Competing
      Transaction, or authorize or permit any of the officers, directors or employees
      of the Company, or any investment banker, financial advisor, attorney,
      accountant or other representative retained by the Company, to take any such
      action; provided,
      however,
      that
      nothing contained in this Section 4(g)(i) shall prohibit the Company or its
      advisors, upon express direction of the Board of Directors, from furnishing
      information to, or entering into discussions or negotiations with, any person
      or
      entity that makes an unsolicited proposal to acquire the Company pursuant to
      a
      merger, consolidation, share exchange, business combination, purchase all or
      substantially all of the Company’s assets, tender or exchange offer or other
      similar transaction, if, the Board of Directors determines in good faith, after
      consultation with the Company’s financial advisor, that such proposal provides
      or is reasonably likely to provide greater value to and is in the better
      interests of the stakeholders of the Company than as contemplated by the
      transactions hereunder (a “Superior
      Proposal”).
      The
      Company will notify the Buyer after receipt by the Company (or any of its
      officers, directors, employees, agents, advisors or other representatives)
      of
      any proposal for, or inquiry respecting, any Competing Transaction, or any
      request for nonpublic information in connection with such proposal or inquiry
      or
      for access to the properties, books or records of the Company by any person
      that
      informs or has informed the Company that it is considering making or has made
      such a proposal or inquiry. Such notice to the Buyer shall indicate in
      reasonable detail the identity of the person making such proposal or inquiry
      and
      the terms and conditions of such proposal or inquiry. The Company immediately
      shall cease and cause to be terminated all existing discussions or negotiations
      with any parties conducted heretofore with respect to a Competing Transaction.
      The Company agrees not to release any third party from, or waive any provision
      of, any confidentiality or standstill agreement to which it is a
      party.

     

    (ii)  “Competing
      Transaction”
means
      any of the following involving the Company (other than the transactions
      contemplated by this Agreement): (A) a merger, consolidation, share
      exchange, business combination or other similar transaction; (B) any sale,
      lease, exchange, transfer or other disposition of a material portion of the
      assets or debt or equity securities of such party; and (C) a tender offer
      or exchange offer for a majority of the outstanding voting securities of such
      party.

     

    (h)  Future
      Events. Buyer
      and
      the Parent shall give prompt notice to the Company, and the Company shall give
      prompt notice to Buyer and Parent, of any failure or inability of Buyer or
      Parent on the one hand or the Company on the other hand, as the case may be,
      to
      comply with or satisfy, any covenant, condition or agreement to be complied
      with
      or satisfied by it hereunder on or before the Closing Date; provided,
      however,
      that
      the delivery of any notice pursuant to this Section 4(h) shall not limit or
      otherwise affect the remedies available hereunder to the party receiving such
      notice. The parties hereto acknowledge that reliance shall not be an element
      of
      any claim or cause of action by any party hereto for misrepresentation or breach
      of a representation, warranty or covenant under this Agreement.

     

    (i)  Threatened
      Actions. From
      the
      date of this Agreement until the earlier of the Closing or the termination
      of
      this Agreement, the Company shall promptly notify the Buyer in writing of any
      pending or, to the knowledge of the Company, threatened action, proceeding
      or
      investigation by any governmental entity or any other Person
      (i) challenging or seeking material 

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    damages
      in connection with this Agreement or the transactions contemplated hereunder
      or
      (ii) seeking to restrain or prohibit the consummation of the transactions
      contemplated hereunder.

     

    (j)  Access
      to Information.
      Except
      as required pursuant to any confidentiality agreement or similar agreement
      or
      arrangement to which the Company or any of its Subsidiaries is a party or
      pursuant to applicable Law, from the date of this Agreement to the Closing
      Date,
      the Company shall (and shall cause its Subsidiaries to): (i) provide to the
      Buyer and Parent (and their respective officers, directors, employees,
      subsidiaries, accountants, consultants, legal counsel, investment bankers,
      advisors, agents and other representatives, collectively, “Representatives”)
      access
      at reasonable times upon prior notice to the officers, employees, agents,
      properties, offices and other facilities of it and its Subsidiaries and to
      the
      books and records thereof and (ii) furnish promptly such information concerning
      the business, properties, contracts, assets, liabilities, personnel and other
      aspects of it and its Subsidiaries as the Buyer or the Parent or their
      Representatives may reasonably request.

     

    (k)  Use
      of
      Proceeds.
      The
      proceeds from the sale of the Notes will be used by the Company for general
      working capital and to repay current outstanding debt held by DunKnight Telecom
      Partners LLC and its affiliates. 

     

    (l)  Parent
      Obligations.
      The
      Parent agrees that it shall cause the Buyer to fulfill the Buyer’s obligations
      under this Agreement. 

     

    (m)  Board
      Composition.
      The
      Company covenants and agrees that beginning upon the Record Date and for so
      long
      as any of the Notes are outstanding, that the Board of Directors will neither
      fill nor nominate directors to fill either of the New Director Positions (as
      defined below in Section 6(a)(xx)), except as provided in this
      Section 4(m). Following the date that the Buyer holds more than 50% of the
      outstanding voting stock of the Company and upon the request of Buyer to the
      Company, the Board of Directors of the Company will appoint persons designated
      by Buyer to fill the New Director Positions. The Buyer covenants and agrees
      that
      should it cease to hold more than 50% of the outstanding voting stock of the
      Company that it will no longer have the right to designate persons to fill
      the
      New Director Positions and it will then use commercially reasonable efforts
      to
      cause its designees that have been appointed to the New Director Positions
      to
      resign from the Board of Directors of the Company. 

     

    5.  CONDITIONS
      TO THE COMPANY’S OBLIGATION TO SELL.

     

    (a)  The
      obligation of the Company hereunder to issue and sell the Notes to the Buyer
      at
      the Closing is subject to the satisfaction, at or before the Closing Date,
      of
      each of the following conditions, provided that these conditions are for the
      Company’s sole benefit and may be waived by the Company at any time in its sole
      discretion by providing Buyer with prior written notice thereof; provided,
      however,
      that
      other than subsection 5(a)(ii), the provisions of this Section 5 need
      not be fulfilled for any closing of sales of Subsequent Closing Notes pursuant
      to Section 1(c):

     

    (i)  The
      Buyer
      and the Parent shall have executed each of the Transaction Documents to which
      it
      is a party and delivered the same to the Company.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    (ii)  The
      Buyer
      or the Parent shall have delivered to the Company the Purchase Price for the
      Notes being purchased by the Buyer or the Parent at the Closing by wire transfer
      of immediately available funds pursuant to the wire instructions provided by
      the
      Company.

     

    (iii)  The
      representations and warranties of Buyer and Parent shall be true and correct
      in
      all material respects (except for those representations and warranties that
      are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date hereof and as of the Closing Date as
      though made at that time (except for representations and warranties that speak
      as of a specific date, which shall be true and correct as of such date), and
      the
      Buyer and Parent shall have performed, satisfied and complied in all material
      respects with the covenants, agreements and conditions required by this
      Agreement to be performed, satisfied or complied with by the Buyer and Parent
      at
      or prior to the Closing Date. The Company shall have received a certificate,
      executed by the Chief Executive Officer of the Buyer, dated as of the Closing
      Date, to the foregoing effect in a form reasonably acceptable to the
      Company.

     

    (iv)  The
      Buyer
      shall have delivered to the Company a certificate, executed by the Secretary
      of
      the Buyer and dated as of the Closing Date, as to (A) the resolutions adopted
      by
      the Board of Directors of the Buyer approving this Agreement and the
      transactions contemplated hereunder, (B) the Certificate of Incorporation and
      (C) the Bylaws, as in effect at the Closing, in a form reasonably acceptable
      to
      the Company.

     

    (v)  No
      governmental entity or court of competent jurisdiction shall have enacted,
      threatened, issued, promulgated, enforced or entered any law, rule, regulation,
      judgment, decree, injunction, executive order or award, whether temporary,
      preliminary or permanent (an “Order”),
      that
      is then in effect, pending or threatened and has, or would have, the effect
      of
      making the transactions contemplated by the Transaction Documents illegal or
      otherwise prohibiting consummation of such transactions.

     

    6.  CONDITIONS
      TO THE BUYER’S OBLIGATION TO PURCHASE AND TO RELEASE OF PURCHASE
      PRICE.
      

     

    (a)  Closing
      Date.
      The
      obligation of the Buyer hereunder to purchase the Notes at
      the
      Closing is subject to the satisfaction, at or before the Closing Date, of each
      of the following conditions, provided that these conditions are for the Buyer’s
      sole benefit and may be waived by the Buyer at any time in its sole discretion
      by providing the Company with prior written notice thereof; provided,
      however,
      that,
      other than subsection 6(a)(ii), the provisions of this Section 6 need
      not be fulfilled for any closing of sales of Subsequent Closing Notes pursuant
      to Section 1(c):

     

    (i)  The
      Company shall have executed and delivered to the Buyer and the Parent each
      of
      the Transaction Documents to which it is a party.

     

    (ii)  The
      Company shall have executed and delivered to the Buyer the Notes being purchased
      by the Buyer at the Closing pursuant to this Agreement.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    (iii)  The
      Buyer
      and Parent shall have received the opinion of Edwards Angell Palmer & Dodge
      LLP, the Company’s outside counsel, dated as of the Closing Date, in
      substantially the form of Exhibit F
      attached
      hereto.

     

    (iv)  The
      Company shall have delivered to Buyer and Parent (A) a certificate evidencing
      the formation and good standing of the Company and each Subsidiary in such
      entity’s jurisdiction of formation issued by the Secretary of State (or
      comparable office) of such jurisdiction, as of a date within five (5) days
      of
      the Closing Date and (B) a facsimile or other acceptable method of confirmation
      from such Secretary of State (or comparable office) as of the Closing Date
      as to
      the continued good standing of such entity.

     

    (v)  The
      Company shall have delivered to Buyer and Parent a certificate evidencing the
      Company’s and each Subsidiary’s qualification as a foreign corporation and good
      standing issued by the Secretary of State (or comparable office) in each of
      California, Connecticut, Illinois, Maryland, New Jersey, New York, Pennsylvania,
      the Commonwealth of Massachusetts, the Commonwealth of Virginia and the District
      of Columbia, in each case as applicable, as of a date within five (5) days
      of
      the Closing Date. 

     

    (vi)  The
      Company shall have delivered to the Buyer and Parent a certified copy of its
      Certificate of Incorporation, as certified by the Secretary of State of Delaware
      within five (5) days of the Closing Date. 

     

    (vii)  The
      Company shall have delivered to the Buyer and Parent a certificate, executed
      by
      the Secretary of the Company and dated as of the Closing Date, as to (A) the
      resolutions adopted by the Board of Directors approving this Agreement and
      the
      transactions contemplated hereunder in a form reasonably acceptable to the
      Buyer, (B) the Certificate of Incorporation and (C) the Bylaws, as in effect
      at
      the Closing, in a form reasonably acceptable to the Buyer.

     

    (viii)  The
      representations and warranties of the Company shall be true and correct in
      all
      material respects (except for those representations and warranties that are
      qualified by materiality or Material Adverse Effect, which shall be true and
      correct in all respects) as of the date hereof and as of the Closing Date as
      though made at that time (except for representations and warranties that speak
      as of a specific date, which shall be true and correct as of such date), and
      the
      Company shall have performed, satisfied and complied in all material respects
      with the covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by the Company at or
      prior
      to the Closing Date; provided,
      however,
      the
      Company shall have performed, satisfied and complied in all respects with the
      covenants set forth in subsection 4(e)(iii)(A) and subsections (b), (c),
      (d), (e), (k), (l) and (m) of Section 4 of the Security Agreement. The Buyer
      and
      Parent shall have received a certificate, executed by the Chief Executive
      Officer of the Company, dated as of the Closing Date, to the foregoing effect
      and as to such other matters as may be reasonably requested by the Buyer or
      Parent in a form reasonably acceptable to the Buyer.

     

    (ix)  No
      Material Adverse Effect shall have occurred since the date of this
      Agreement.

     

    
      
        
        

      

      
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    (x)  The
      Company shall have delivered to the Buyer and Parent a letter from the Company’s
      Common Stock transfer agent certifying the number of shares of Common Stock
      outstanding as of a date within five days of the Closing Date.

     

    (xi)  The
      Company shall have delivered to the Buyer and Parent the following agreements
      executed by Laurus: (A) an agreement, in a form acceptable to Buyer, in which
      Laurus (1) consents to the transactions contemplated by this Agreement;
      (2) waives any anti-dilution adjustments arising from such transactions,
      and (3) agrees not to exercise any registration rights for so long as any
      of the Notes are outstanding; and (B)  a Voting Agreement in the form
      attached hereto as Exhibit
      G
      (the
“Voting Agreement”)
      pursuant to which Laurus agrees to vote all shares of the Company’s capital
      stock held by it in favor of the Charter Amendment.

     

    (xii)  The
      Company shall have delivered to the Buyer and Parent the following agreements
      executed by each of DunKnight Telecom Partners, LLC and Knight Vision Foundation
      (collectively, the “DunKnight
      Parties”):
      (A)
      an agreement, in a form acceptable to Buyer, in which the DunKnight Parties
      (1) agree to the pay-off of the Company’s indebtedness to them and consent
      to the transactions contemplated by this Agreement; and (2) agree not to
      exercise any registration rights for so long as any of the Notes are
      outstanding; and (B)  a Voting Agreement pursuant to which the DunKnight
      Parties agree to vote all shares of the Company’s capital stock held by them in
      favor of the Charter Amendment.

     

    (xiii)  Within
      six (6) Business Days prior to the Closing, the Company shall have delivered
      or
      caused to be delivered to Buyer and Parent certified copies of UCC financing
      statement search results listing any and all effective financing statements
      filed within five (5) years prior to such date in Delaware that name the Company
      as a debtor to perfect an interest in any of the assets thereof, together with
      copies of such financing statements, none of which financing statements, except
      for any financing statements filed with respect to the Senior Indebtedness
      and
      as otherwise agreed to in writing by the Buyer, shall cover any of the
“Collateral”
(as
      defined in the Security Agreement), and the results of searches for any
      effective tax liens and judgment liens filed against any such Person or its
      property in each of California, Connecticut, Illinois, Maryland, New Jersey,
      New
      York, Pennsylvania, the Commonwealth of Massachusetts, the Commonwealth of
      Virginia and the District of Columbia, which results, except as otherwise agreed
      to in writing by the Buyer, shall not show any such effective tax liens and
      judgment liens.

     

    (xiv)  The
      Certificate of Amendment of the Company’s Certificate of Incorporation (the
“Charter
      Amendment”),
      in
      the form reasonably acceptable to Buyer and Parent, increasing the number of
      authorized shares of the Company’s Common Stock and decreasing the par value of
      the Common Stock to $0.0001 in order to permit the conversion of the Convertible
      Note in the form attached hereto as Exhibit
      B-4,
      shall
      have been approved by the Board of Directors and declared advisable to the
      stockholders of the Company.

     

    (xv)  The
      Company shall have delivered to the Buyer, to be held until the receipt of
      the
      requisite stockholder approval, an undated Charter Amendment duly executed
      by
      the Company’s Chief Executive Officer that provides for an increase in the
      authorized 

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    number
      of
      shares of Common Stock to a number of
      shares
      sufficient for the issuance of Common Stock issuable upon the conversion of
      all
      of the Convertible Notes. 

     

    (xvi)  No
      governmental entity or court of competent jurisdiction shall have enacted,
      threatened, issued, promulgated, enforced or entered any Order that is then
      in
      effect, pending or threatened and has, or would have, the effect of making
      the
      transactions contemplated by the Transaction Documents illegal or otherwise
      prohibiting consummation of such transactions.

     

    (xvii)  Actions
      shall have been taken so that, effective at Closing, the Board of Directors
      shall consist of the following five (5) persons: David F. Struwas, two (2)
      individuals designated by the Buyer, Robert B. Hartnett, Jr. and Paul J.
      Keeler.

     

    (xviii)  Each
      individual set forth on Schedule 6(a)(xviii) shall (A) remain employed by the
      Company and (B) shall have entered into an employment agreement with the Company
      providing for supplemental retention compensation and severance protection,
      each
      in a form acceptable to the Buyer and which agreement shall remain in full
      force
      and effect and shall not have been anticipatorily breached or repudiated by
      such
      individual.

     

    (xix)  The
      Company shall have delivered to Buyer a duly executed and properly completed
      Perfection Certificate in substantially the form attached hereto as Exhibit
      H.

     

    (xx)  The
      Board
      of Directors of the Company shall have taken appropriate action so that the
      authorized size of the Board of Directors, which as of the Closing shall be
      five (5) members, shall be increased to seven (7) members upon the
      Record Date. The two (2) director positions created on the Board of
      Directors by such increase as of the Record Date are referred to herein as
      the
“New
      Director Positions”.

     

    7.  TERMINATION.

     

    (a)  Termination.
      This
      Agreement may be terminated and the transactions contemplated by this Agreement
      may be abandoned at any time prior to the Closing Date, as follows:

     

    (i)  by
      mutual
      written consent duly authorized by the Boards of Directors of each of Buyer,
      Parent and the Company;

     

    (ii)  by
      Buyer
      if (A) the Board of Directors withholds, withdraws, amends, modifies or changes
      its unanimous recommendation of the adoption of the Transaction Documents or
      the
      approval of the transactions contemplated hereunder in a manner adverse to
      Buyer
      or shall have resolved to do so, (B) the Board of Directors shall have
      recommended to the stockholders of the Company a Competing Transaction or shall
      have resolved to do so or shall have entered into any letter of intent or
      similar document or any agreement, contract or commitment accepting any
      Competing Transaction, (C) the Board of Directors fails to reject a Competing
      Transaction within 10 days following receipt by the Company of the proposal
      for
      such Competing Transaction, or (D) the Company shall have breached its
      obligations under Section 4(g);

     

    
      
        
        

      

      
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    (iii)  by
      the
      Company, by action of its Board of Directors, if pursuant to and in compliance
      with Section 4(g) the Board of Directors has determined that it has
      received a Superior Proposal, provided that such termination by the Company
      shall not become effective until the Company has paid the Termination Fee in
      accordance with Section 7(c)(i);

     

    (iv)  by
      Buyer
      upon a material breach of any representation, warranty, covenant or agreement
      on
      the part of the Company set forth in this Agreement such that the conditions
      set
      forth in Section 6(a)(vii) would not be satisfied (“Terminating
      Company Breach”);
      provided,
      however,
      that if
      such Terminating Company Breach is curable by the Company within 15 days of
      the
      occurrence of such Terminating Company Breach through the exercise of its best
      efforts and for as long as the Company continues to exercise such best efforts,
      Buyer may not terminate this Agreement under this Section 7(a)(iv) until the
      expiration of such 15-day period;

     

    (v)  by
      the
      Company upon a material breach of any representation, warranty, covenant or
      agreement on the part of Buyer set forth in this Agreement such that the
      conditions set forth in Section 5(a)(iii) would not be satisfied (“Terminating
      Buyer Breach”);
      provided,
      however,
      that if
      such Terminating Buyer Breach is curable by Buyer and within 15 days of the
      occurrence of such Terminating Buyer Breach through the exercise of their
      respective best efforts and for as long as Buyer continue to exercise such
      best
      efforts, the Company may not terminate this Agreement under this Section 7(a)(v)
      until the expiration of such 15-day period; 

     

    (vi)  by
      either
      the Buyer or Company in the event that the Closing shall not have occurred
      on or
      before October 31, 2006; provided,
      however,
      that
      the right to terminate this Agreement under this Section 7(a)(vi) shall not
      be available to any party whose failure to fulfill any obligation under this
      Agreement has been the cause of, or resulted in, the failure of the Closing
      to
      occur on or before October 31,
      2006;
      or

     

    (vii)  by
      Buyer
      if there shall be any Order which is final and nonappealable preventing the
      consummation of any of the transactions contemplated hereunder.

     

    (b)  Effect
      of Termination.
      In the
      event of termination of this Agreement pursuant to Section 7(a), this
      Agreement shall forthwith become void, there shall be no liability under this
      Agreement on the part of the Buyer, the Parent or the Company or any of their
      respective officers or directors, and all rights and obligations of each party
      hereto shall cease; provided,
      however,
      that
      (i) this Section 7(b) shall remain in full force and effect and survive any
      termination of this Agreement and (ii) nothing herein shall relieve any
      party from liability for the willful breach of any of its representations or
      warranties or the breach of any of its covenants or agreements set forth in
      this
      Agreement.

     

    (c)  Termination
      Fee.
      

     

    (i)  The
      Company agrees that the Company shall pay to Buyer an amount equal to the sum
      of
      $500,000.00 (the “Termination
      Fee”)
      and
      all of Buyer’s Expenses (as defined below) up to $250,000.00: 

     

    (A)  if
      Buyer
      shall terminate this Agreement pursuant to Section 7(a)(ii);
      or

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    (B)  if
      the
      Company shall terminate this Agreement pursuant to
      Section 7(a)(iii).

     

    (ii)  The
      Company agrees that the Company shall pay to Buyer all of Buyer’s Expenses (as
      defined below) up to $250,000.00 if Buyer shall terminate this Agreement
      pursuant to Section 7(a)(iv) hereof.

     

    (d)  Except
      as
      otherwise required by Section 7, any payment required to be made pursuant to
      Section 7(c) shall be made to Buyer not later than two business days after
      delivery to the Company of notice of demand for payment and an itemization
      setting forth in reasonable detail all Expenses (as defined below) of Buyer
      (which itemization may be supplemented and updated from time to time by Buyer
      until the 60th day after Buyer delivers such notice of demand for payment),
      and
      shall be made by wire transfer of immediately available funds to an account
      designated by Buyer. Payment of the Termination Fee and Expenses described
      in
      Section 7(c) shall not be in lieu of damages incurred in the event of willful
      breach of the representations and warranties set forth in this Agreement or
      the
      willful breach of any of the covenants or agreements set forth in this
      Agreement. “Expenses”
as
      used
      in this Agreement shall include all reasonable out of pocket expenses
      (including, without limitation, all fees and expenses of counsel, accountants,
      investment bankers, experts and consultants to a party hereto and its
      affiliates) incurred by a party or on its behalf in connection with or related
      to the authorization, preparation, negotiation, execution and performance of
      this Agreement and all other matters related to the closing of the transactions
      contemplated hereunder. In the event that the Company shall fail to pay the
      Termination Fee or the Expenses when due, the term “Expenses” shall be deemed to
      include the costs and expenses actually incurred or accrued by Buyer (including,
      without limitation, fees and expenses of counsel) in connection with the
      collection under and enforcement of this Section 7(d), together with interest
      on
      such Termination Fee and unpaid Expenses, commencing on the date that such
      Termination Fee and Expenses became due, at a rate equal to the rate of interest
      publicly announced by Citibank, N.A., from time to time, in The City of New
      York, as such bank’s Prime Rate plus 1.00%.

     

    8.  MISCELLANEOUS.

     

    (a)  Governing
      Law; Jurisdiction; Jury Trial.
      This
      Agreement (and any claim or controversy arising out of or relating to this
      Agreement) shall be governed by, and construed in accordance with, the laws
      of
      the State of Delaware applicable to contracts executed in and to be performed
      in
      that state and without regard to any applicable conflicts of law. In any action
      between the parties hereto arising out of or relating to this Agreement or
      any
      of the transactions contemplated by this Agreement: (i) each of the parties
      irrevocably and unconditionally consents and submits to the exclusive
      jurisdiction and venue of the Delaware Court of Chancery; and (ii) each of
      the
      parties irrevocably consents to service of process by first class certified
      mail, return receipt requested, postage prepaid. 

     

    (b)  Counterparts.
      This
      Agreement may be executed in two or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon 

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    the
      signatory thereto with the same force and effect as if the signature were an
      original, not a facsimile signature.

     

    (c)  Headings.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    (d)  Severability.
      If any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction.

     

    (e)  Entire
      Agreement; Amendments.
      This
      Agreement supersedes all other prior oral or written agreements between Buyer,
      Parent, the Company, their respective affiliates and Persons acting on their
      behalf with respect to the matters discussed herein, and this Agreement and
      the
      instruments referenced herein contain the entire understanding of the parties
      with respect to the matters covered herein and therein and, except as
      specifically set forth herein or therein, neither the Company nor the Buyer
      nor
      the Parent makes any representation, warranty, covenant or undertaking with
      respect to such matters. No provision of this Agreement may be amended other
      than by an instrument in writing signed by the Company, the Parent and Buyer.
      No
      provision hereof may be waived other than by an instrument in writing signed
      by
      the party against whom enforcement is sought. 

     

    (f)  Notices.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with an overnight courier service,
      in
      each case properly addressed to the party to receive the same. The addresses
      and
      facsimile numbers for such communications shall be:

     

    If
      to the
      Company:

     

    DSL.net,
      Inc.

    50
      Barnes
      Park North, Suite # 104

    Wallingford,
      CT 06492

    Telephone:
      203-284-6100

    Facsimile: 203-284-6102

    Attention: Chief
      Executive Officer

     

    with
      a
      copy (for informational purposes only) to:

     

    Edwards
      Angell Palmer & Dodge LLP

    111
      Huntington Avenue at Prudential Center

    Boston,
      MA 02199

    Telephone: 617-239-0303

    Facsimile: 617-227-4420

    Attention: Matthew
      C. Dallett, Esq.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    If
      to the
      Buyer:

     

    MDS
      Acquisition, Inc.

    555
      Anton
      Blvd., Suite 200

    Costa
      Mesa, CA 92626

    Telephone: (714)
      327-2075

    Facsimile: (714)
      438-1074

    Attention: Chief
      Executive Officer

     

    with
      a
      copy (for informational purposes only) to:

     

    Gunderson
      Dettmer Stough Villeneuve Franklin & Hachigian, LLP 

    155
      Constitution Drive

    Menlo
      Park, CA 94025

    Telephone: (650)
      321-2400

    Facsimile: (650)
      321-2800

    Attention: David
      T.
      Young, Esq.

     

    If
      to the
      Parent:

     

    MegaPath
      Inc.

    555
      Anton
      Blvd., Suite 200

    Costa
      Mesa, CA 92626

    Telephone: (714)
      327-2075

    Facsimile: (714)
      438-1074

    Attention: General
      Counsel

     

    with
      a
      copy (for informational purposes only) to:

     

    Gunderson
      Dettmer Stough Villeneuve Franklin & Hachigian, LLP 

    155
      Constitution Drive

    Menlo
      Park, CA 94025

    Telephone: (650)
      321-2400

    Facsimile: (650)
      321-2800

    Attention: David
      T.
      Young, Esq.

    

    or
      to
      such other address and/or facsimile number and/or to the attention of such
      other
      Person as the recipient party has specified by written notice given to each
      other party five (5) days prior to the effectiveness of such change. Written
      confirmation of receipt (A) given by the recipient of such notice, consent,
      waiver or other communication, (B) mechanically or electronically generated
      by
      the sender’s facsimile machine containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by an
      overnight courier service shall be rebuttable evidence of personal service,
      receipt by facsimile or receipt from an overnight courier service in accordance
      with clause (i), (ii) or (iii) above, respectively; provided,
      however
      that the
      foregoing clause (B) shall only be valid if such communication contained in
      the
      facsimile is delivered by an overnight courier service within 24 hours of the
      transmission of facsimile.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    (g)  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any purchasers of the Notes.
      The Company shall not assign this Agreement or any rights or obligations
      hereunder without the prior written consent of Buyer and Parent. Subject to
      Sections 2(d) and 2(g), the Buyer may assign some or all of its rights hereunder
      without the consent of the Company.

     

    (h)  No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    (i)  Survival
      of Representations, Warranties and Agreements.
      The
      representations, warranties and agreements in this Agreement and in any
      certificate delivered pursuant hereto shall terminate on the date that all
      Notes
      have been cancelled and are no longer outstanding or upon the termination of
      this Agreement pursuant to Section 7, as the case may be, except that the
      agreements set forth in Section 1, Section 4(k), Section 4(m) and this Section
      8
      shall survive the Closing Date and those set forth in Sections 7(b), 7(c) and
      7(d) and this Section 8 shall survive termination of this
      Agreement.

     

    (j)  Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request to carry out the intent and accomplish the purposes of this Agreement
      and the consummation of the transactions contemplated hereby.

     

    (k)  No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    (l)  Remedies.
      The
      Buyer, Parent and each holder of the Securities shall have all rights and
      remedies set forth in the Transaction Documents and all rights and remedies
      which such holders have been granted at any time under any other agreement
      or
      contract and all of the rights which such holders have under any law. Any Person
      having any rights under any provision of this Agreement shall be entitled to
      enforce such rights specifically (without posting a bond or other security),
      to
      recover damages by reason of any breach of any provision of this Agreement
      and
      to exercise all other rights granted by law. Furthermore, the Company recognizes
      that in the event that it fails to perform, observe, or discharge any or all
      of
      its obligations under the Transaction Documents, any remedy at law may prove
      to
      be inadequate relief to the Buyer or Parent. The Company therefore agrees that
      the Buyer or Parent shall be entitled to seek temporary and permanent injunctive
      relief in any such case without the necessity of proving actual damages and
      without posting a bond or other security.

     

    (m)  Each
      of
      the Company, the Buyer and the Parent shall pay the fees and disbursements
      of
      its own counsel in connection with the preparation of this Agreement and the
      other documents contemplated hereby and the closing of the transactions
      contemplated hereby.

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      Buyer,
      Parent and the Company have caused their respective signature page to this
      Purchase Agreement to be duly executed as of the date first written
      above.

     

    
      	 	 	 
	 	
              COMPANY: 

            
	 	 
	 	DSL.NET,
              INC.
	 
 	 
 	 
 
	 	By:  	/s/ David
              F. Struwas
	 	
              
Name:
David
              F. Struwas 
	 	Title:
              President
              & Chief Executive Officer 

       

      
        	 	 	 
	 	
                BUYER: 

              
	 	 
	 	MDS
                ACQUISITION, INC.
	 
 	 
 	 
 
	 	By:  	/s/ D.
                Craig Young 
	 	
                

                Name:
                  D.
                  Craig Young 

              
	 	Title:
                Chief
                Executive Officer 

         

        
          	 	 	 
	 	
                  
                    PARENT:

                  

                
	 	 
	 	MEGAPATH
                  INC.
	 
 	 
 	 
 
	 	By:  	/s/ D.
                  Craig Young 
	 	
                  

                  Name:
                    D.
                    Craig Young 

                
	 	Title:
                  Chairman
                  & Chief Executive Officer 

    SIGNATURE
      PAGE TO PUCHASE AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBITS

     

    
      	
            	Exhibit
              A	
              Schedule
                of Consideration for and Principal Amounts of
                Notes

            

    

    
      	
            	Exhibit
              B-1	
              Form
                of Convertible Note 

            

    

    
      	
            	Exhibit
              B-2	
              Form
                of Convertible Note

            

    

    
      	
            	Exhibit
              B-3	
              Form
                of Convertible Note

            

    

    
      	
            	Exhibit
              B-4	
              Form
                of Convertible Note

            

    

    
      	
            	Exhibit
              C	
              Form
                of Nonconvertible Note

            

    

    
      	
            	Exhibit
              D	
              Form
                of Subordination Agreement

            

    

    
      	
            	Exhibit
              E	
              Form
                of Security Agreement

            

    

    
      	
            	Exhibit
              F	
              Form
                of Legal Opinion

            

    

    
      	
            	Exhibit
              G	
              Form
                of Voting Agreement

            

    

    
      	
            	Exhibit
              H	
              Form
                of Perfection Certificate

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      A

     

    Schedule
      of Consideration for and Principal Amounts of Notes

     

    Closing
      Date: August __, 2006

     

    
      	 	 	
              Consideration

            	 	
              Principal
                Amount

            	 
	
              Convertible
                Notes

            	 	 	 	 	 
	
              Exhibit
                B-1

            	 	 	
              30,000

            	 	 	
              30,000

            	 
	
              Exhibit
                B-2

            	 	 	
              300,000

            	 	 	
              300,000

            	 
	
              Exhibit
                B-3

            	 	 	
              150,000

            	 	 	
              150,000

            	 
	
              Exhibit
                B-4

            	 	 	
              1,520,000

            	 	 	
              1,520,000

            	 
	
              SUB-TOTAL

            	 	
              $

            	
              2,000,000

            	 	
              $

            	
              2,000,000

            	 
	 	 	 	 	 	 	 	 
	
              Nonconvertible
                Note

            	 	
              $

            	
              11,000,000

            	 	
              $

            	
              13,002,000

            	 
	
              TOTAL

            	 	
              $

            	
              13,000,000

            	 	
              $

            	
              15,002,000

            	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      B-1

     

    Form
      of Convertible Note

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

       

      THE
        ISSUANCE AND SALE OF THE SECURITIES AND THE SECURITIES INTO WHICH THIS
        INSTRUMENT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF REASONABLY REQUESTED
        BY
        THE COMPANY, AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
        HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
        IS
        NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
        144A UNDER SAID ACT.

      

      SUBORDINATED
        SECURED
        CONVERTIBLE PROMISSORY NOTE

      [First
        Convertible Note]

      
        	$30,000 	
                August
                  __,
                  2006 

              

      

       

      FOR
        VALUE
        RECEIVED, the undersigned, DSL.net, Inc., a Delaware corporation ("Borrower"),
        hereby promises to pay to MDS Acquisition, Inc., a Delaware corporation
        ("Lender"),
        or
        order, the principal sum of Thirty Thousand Dollars ($30,000), together with
        accrued interest as provided herein. This Note is being issued pursuant to
        the
        Purchase Agreement, dated as of the date hereof, between Borrower, Lender
        and
        Lender’s parent company, MegaPath Inc. (the “Purchase
        Agreement”).

      

      A.  Interest.
        Interest shall accrue with respect to the principal sum hereunder at eight
        percent (8%) per annum. However, if an Event of Default, as defined herein,
        occurs and is continuing, then interest shall accrue at ten percent (10%)
        per
        annum. Interest payable hereunder shall be calculated on the basis of a three
        hundred sixty (360) day year for actual days elapsed. 

      

      B.  Payment.

      

      1.  Scheduled
        Payment.
        The
        principal indebtedness, together with all accrued interest, shall be payable
        in
        full on December 31, 2007 (the “Maturity
        Date”).

      

      2.  Prepayment.
        Borrower shall not have the right to prepay, in whole or in part, the principal
        of this Note without the prior written consent of Lender, given in its sole
        discretion.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      3.  Form
        of Payment.
        Principal and interest and all other amounts due hereunder are to be paid
        in
        lawful money of the United States of America in federal or other immediately
        available funds.

      

      C.  Security
        Interest and Subordination.

      

      1.  Security
        Interest.
        Borrower’s obligations hereunder are secured by Borrower’s grant of a security
        interest to Lender in all of Borrower’s personal property (the “Collateral”)
        pursuant to the Security Agreement, dated as of the date hereof, between
        Borrower and Lender (the “Security
        Agreement”).

      

      2.  Subordination.
        Lender’s Lien against the Collateral is subordinated to prior existing Liens
        granted to other lenders to Borrower, to the extent provided in the
        Subordination Agreement, dated as of the date hereof, by and among Borrower,
        Lender and Laurus Master Fund, Ltd. (the “Subordination
        Agreement”).

       

      D.  Events
        of Default.
        During
        the continuance of an Event of Default, as defined in the Security Agreement,
        Lender shall have the right to exercise its rights and remedies with respect
        to
        Borrower and the Collateral as provided in the Security Agreement.

      

      E.  Conversion
        Right.

      

      1.  Conversion
        Right.Lender
        shall have the right (the "Conversion
        Right"),
        in
        its sole discretion, at any time to elect to convert the outstanding principal
        hereunder into such number of fully paid and nonassessable shares of Common
        Stock (such shares the "Conversion
        Shares")
        as
        determined by dividing the outstanding principal hereunder by the Conversion
        Price (as defined below); provided,
        however,
        that
        Lender may convert the outstanding principal hereunder into Common Stock
        only to
        the extent that the Conversion Shares, when aggregated with the Common Stock
        owned by Lender immediately prior to the conversion, would equal 9.9% of
        the
        Common Stock Outstanding, accounting for all antidilution adjustments to
        then
        outstanding Convertible Securities and Options that would result from such
        issuance of the Conversion Shares. The “Conversion
        Price”
shall
        be the amount determined by dividing the outstanding principal hereunder
        by the
        number of shares of Common Stock that Lender needs to acquire in order to
        own
        9.9% of the Common Stock Outstanding, accounting for all antidilution
        adjustments to then outstanding Convertible Securities and Options that would
        result from such issuance of the Conversion Shares.

      

      2.  Exercise
        of Conversion Right.
        To
        convert the outstanding principal hereunder into shares of Common Stock,
        Lender
        shall deliver to Borrower a written notice of election to exercise the
        Conversion Right (the "Conversion
        Notice").
        Borrower shall, as soon as practicable thereafter, issue and deliver to Lender
        a
        certificate or certificates, registered in Lender's name, for the number
        of
        Conversion Shares to which Lender shall be entitled by virtue of such exercise.
        The conversion 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      of
        the
        outstanding principal shall be deemed to have been made on the date that
        Borrower receives the Conversion Notice (the "Conversion
        Date")
        and
        Lender shall be treated for all purposes as the record holder of the Conversion
        Shares as of such date. 

      

      3.  Acquisition.
        Borrower shall give Lender written notice of an Acquisition no later than
        the
        date that notice of such event is given to Borrower’s stockholders. Lender may
        deliver a Conversion Notice that provides that the exercise of the Conversion
        Right is contingent upon, and shall occur concurrent with, the closing of
        the
        Acquisition. 

       

      4.  Fractional
        Shares.
        Borrower shall not issue fractional shares of Common Stock or scrip representing
        fractional shares of Common Stock upon exercise of the Conversion Right.
        As to
        any fractional share of Common Stock which Lender would otherwise be entitled
        to
        purchase from Borrower upon such exercise, Borrower shall purchase from Lender
        such fractional share at a price equal to an amount calculated by multiplying
        such fractional share (calculated to the nearest 1/100th of a share) by the
        fair
        market value of a share of Common Stock on the Conversion Date, as determined
        in
        good faith by Borrower's Board of Directors. Payment of such amount shall
        be
        made in cash or by check payable to the order of Lender at the time of delivery
        of any certificate or certificates arising upon such exercise.

       

      5.  Dilutive
        Events.
        If any
        event occurs as to which the other provisions of this Section E are not strictly
        applicable but the failure to make any adjustment would not fairly protect
        the
        Conversion Right in accordance with the essential intent and principles hereof,
        then, in each such case, Borrower shall appoint a firm of independent public
        accountants of recognized national standing (which may be Borrower's regular
        auditors) which shall give their opinion upon the adjustment, if any, on
        a basis
        consistent with the essential intent and principles established in this Section
        E, necessary to preserve, without dilution, the Conversion Right. Upon receipt
        of such opinion, Borrower shall promptly mail a copy thereof to Lender and
        shall
        make the adjustments described therein.

      

      F.  Other
        Provisions.
        

       

      1.  Definitions.
        As used
        herein, the following terms shall have the following meanings:

      

      “Acquisition”
means
        (i) the Borrower’s merger, consolidation, or reorganization with one or more
        entities, corporate or otherwise, as a result of which the Borrower’s
        stockholders immediately prior to such merger, consolidation or reorganization
        do not hold at least a majority of the stock of the surviving entity that
        is
        entitled to vote for the election of directors, or (ii) the Borrower sells
        all
        or substantially all of its assets.

      

      "Common
        Stock Outstanding"
        means
        as of any date (i) all shares of Common Stock that are outstanding as of
        such
        date, plus
        (ii) all
        shares of Common Stock issuable upon conversion of Convertible Securities
        outstanding as of such date, whether or not convertible as of such
        date.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      "Convertible
        Securities"
        means
        shares of stock or other securities (other than Options and evidences of
        indebtedness) which are convertible into or exchangeable for, with or without
        payment of additional consideration, shares of Common Stock, either immediately
        or upon the arrival of a specified date or the happening of a specified event
        or
        both.

      

      "Option"
        means
        any right, warrant or option to subscribe or purchase shares of Common Stock
        or
        Convertible Securities.

       

      Capitalized
        terms used herein without definition shall have the meanings assigned to
        them in
        the Security Agreement.

      

      2.  Governing
        Law; Venue.
        This
        Note shall be governed by the laws of the State of Delaware, without giving
        effect to conflicts of law principles. All actions or proceedings arising
        in
        connection with this Note shall be conducted in accordance with Section 8(a)
        of
        the Purchase Agreement.

      

      3.  Notices.
        Any
        notice or communication required or desired to be served, given or delivered
        hereunder shall be in the form and manner specified below, and shall be
        addressed to the party to be notified as provided in Section 8(f) of the
        Purchase Agreement.

      

      4.  Lender's
        Rights; Borrower Waivers.
        Lender's acceptance of partial or delinquent payment from Borrower hereunder,
        or
        Lender's failure to exercise any right hereunder, shall not constitute a
        waiver
        of any obligation of Borrower hereunder, or any right of Lender hereunder,
        and
        shall not affect in any way the right to require full performance at any
        time
        thereafter. Borrower waives presentment, diligence, demand of payment, notice,
        protest and all other demands and notices in connection with the delivery,
        acceptance, performance, default or enforcement of this Note. In any action
        on
        this Note, Lender need not produce or file the original of this Note, but
        need
        only file a photocopy of this Note certified by Lender be a true and correct
        copy of this Note in all material respects.

       

      5.  Enforcement
        Costs.
        Borrower shall pay all costs and expenses, including reasonable attorneys'
        fees
        and expenses Lender expends or incurs in connection with the enforcement
        of this
        Note, the collection of any sums due hereunder, any actions for declaratory
        relief in any way related to this Note, or the protection or preservation
        of any
        rights of the holder hereunder.

      

      6.  Severability.
        Whenever possible each provision of this Note shall be interpreted in such
        manner as to be effective and valid under applicable law, but if any provision
        is prohibited by or invalid under applicable law, it shall be ineffective
        to the
        extent of such prohibition or invalidity, without invalidating the remainder
        of
        the provision or the remaining provisions of this Note.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      7.  Amendment
        Provisions.
        This
        Note may not be amended or modified, nor may any of its terms be waived,
        except
        by written instruments signed by Borrower and Lender.

      

      8.  Binding
        Effect.
        This
        Note shall be binding upon, and shall inure to the benefit of, Borrower and
        Lender and their respective successors and assigns; provided,
        however,
        that
        (i) Borrower's rights and obligations shall not be assigned or delegated
        without
        Lender's prior written consent, given in its sole discretion, and any purported
        assignment or delegation without such consent shall be void ab initio,
        and
        (ii) Lender may not assign, transfer or otherwise convey this Note to any
        Person
        that is not an Affiliate of Lender.

      

      9.  Time
        of Essence.
        Time is
        of the essence of each and every provision of this Note.

      

      10.  Headings.
        Section
        headings used in this Note have been set forth herein for convenience of
        reference only. Unless the contrary is compelled by the context, everything
        contained in each section hereof applies equally to this entire
        Note.

      
         

        
          
            	 	
                    DSL.net,
                      Inc.

                     

                    By:         

                    Name:______________________________

                    Title:                          

                  

          

        

        

 

      

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    Exhibit
      B-2

     

    Form
      of Convertible Note

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      

      THE
        ISSUANCE AND SALE OF THE SECURITIES AND THE SECURITIES INTO WHICH THIS
        INSTRUMENT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF REASONABLY REQUESTED
        BY
        THE COMPANY, AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
        HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
        IS
        NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
        144A UNDER SAID ACT.

      

      SUBORDINATED
        SECURED
        CONVERTIBLE PROMISSORY NOTE

      [Second
        Convertible Note]

      

      
        	$300,000 	
                August
                  __,
                  2006 

              

      

       

      FOR
        VALUE
        RECEIVED, the undersigned, DSL.net, Inc., a Delaware corporation ("Borrower"),
        hereby promises to pay to MDS Acquisition, Inc., a Delaware corporation
        ("Lender"),
        or
        order, the principal sum of Three Hundred Thousand Dollars ($300,000), together
        with accrued interest as provided herein. This Note is being issued pursuant
        to
        the Purchase Agreement, dated as of the date hereof, between Borrower, Lender
        and Lender’s parent company, MegaPath Inc. (the “Purchase
        Agreement”).

      

      A.  Interest.
        Interest shall accrue with respect to the principal sum hereunder at eight
        percent (8%) per annum. However, if an Event of Default, as defined herein,
        occurs and is continuing, then interest shall accrue at ten percent (10%)
        per
        annum. Interest payable hereunder shall be calculated on the basis of a three
        hundred sixty (360) day year for actual days elapsed. 

      

      B.  Payment.

      

      1.  Scheduled
        Payment.
        The
        principal indebtedness, together with all accrued interest, shall be payable
        in
        full on the later of (i) December 31, 2007, and (ii) the earlier of (A) December
        31, 2008, and (B) the date that is thirty (30) days following the date on
        which
        the condition for exercise of the Conversion Right specified in clause (i)
        of
        the first sentence of Section E.1 is satisfied (the “Maturity
        Date”).

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      2.  Prepayment.
        Borrower shall not have the right to prepay, in whole or in part, the principal
        of this Note without the prior written consent of Lender, given in its sole
        discretion.

      

      3.  Form
        of Payment.
        Principal and interest and all other amounts due hereunder are to be paid
        in
        lawful money of the United States of America in federal or other immediately
        available funds.

      

      C.  Security
        Interest and Subordination.

      

      1.  Security
        Interest.
        Borrower’s obligations hereunder are secured by Borrower’s grant of a security
        interest to Lender in all of Borrower’s personal property (the “Collateral”)
        pursuant to the Security Agreement, dated as of the date hereof, between
        Borrower and Lender (the “Security
        Agreement”).

      

      2.  Subordination.
        Lender’s Lien against the Collateral is subordinated to prior existing Liens
        granted to other lenders to Borrower, to the extent provided in the
        Subordination Agreement, dated as of the date hereof, by and among Borrower,
        Lender and Laurus Master Fund, Ltd. (the “Subordination
        Agreement”).

       

      D.  Events
        of Default.
        During
        the continuance of an Event of Default, as defined in the Security Agreement,
        Lender shall have the right to exercise its rights and remedies with respect
        to
        Borrower and the Collateral as provided in the Security Agreement.

      

      E.  Conversion
        Right.

      

      1.  Conversion
        Right.Subject
        to (i) Borrower
        having obtained any required
        regulatory
        approvals, the failure of which to obtain prior to Lender owning 49.9% of
        the
        Common Stock Outstanding would constitute a Material Adverse Effect (as defined
        in the Purchase Agreement),
        and (ii)
        Lender having exercised the conversion right with respect to the First
        Convertible Note,
        Lender
        shall have the right (the "Conversion
        Right"),
        in
        its sole discretion, at any time to elect to convert the outstanding principal
        hereunder into such number of fully paid and nonassessable shares of Common
        Stock (such shares the "Conversion
        Shares")
        as
        determined by dividing the outstanding principal hereunder by the Conversion
        Price (as defined below); provided,
        however,
        that
        Lender may convert the outstanding principal into Common Stock only to the
        extent that the Conversion Shares, when aggregated with the Common Stock
        owned
        by Lender immediately prior to the conversion, would equal 49.9% of the Common
        Stock Outstanding, accounting for all antidilution adjustments to then
        outstanding Convertible Securities and Options that would result from such
        issuance of the Conversion Shares. The
        “Conversion
        Price”
shall
        be the amount determined by dividing the outstanding principal hereunder
        by the
        number of shares of Common Stock that Lender needs to acquire in order to
        own
        49.9% of the Common Stock Outstanding, accounting for all antidilution
        adjustments to then outstanding Convertible Securities and Options that would
        result from such issuance of the Conversion Shares.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      2.  Exercise
        of Conversion Right.
        To
        convert any of the outstanding principal hereunder into shares of Common
        Stock,
        Lender shall deliver to Borrower a written notice of election to exercise
        the
        Conversion Right (the "Conversion
        Notice").
        Borrower shall, as soon as practicable thereafter, issue and deliver to Lender
        a
        certificate or certificates, registered in Lender's name, for the number
        of
        Conversion Shares to which Lender shall be entitled by virtue of such exercise.
        The conversion of the outstanding principal shall be deemed to have been
        made on
        the date that Borrower receives the Conversion Notice (the "Conversion
        Date")
        and
        Lender shall be treated for all purposes as the record holder of the Conversion
        Shares as of such date. 

      

      3.  Acquisition.
        Borrower shall give Lender written notice of an Acquisition no later than
        the
        date that notice of such event is given to Borrower’s stockholders. Lender may
        deliver a Conversion Notice that provides that the exercise of the Conversion
        Right is contingent upon, and shall occur concurrent with, the closing of
        the
        Acquisition. 

       

      4.  Fractional
        Shares.
        Borrower shall not issue fractional shares of Common Stock or scrip representing
        fractional shares of Common Stock upon exercise of the Conversion Right.
        As to
        any fractional share of Common Stock which Lender would otherwise be entitled
        to
        purchase from Borrower upon such exercise, Borrower shall purchase from Lender
        such fractional share at a price equal to an amount calculated by multiplying
        such fractional share (calculated to the nearest 1/100th of a share) by the
        fair
        market value of a share of Common Stock on the Conversion Date, as determined
        in
        good faith by Borrower's Board of Directors. Payment of such amount shall
        be
        made in cash or by check payable to the order of Lender at the time of delivery
        of any certificate or certificates arising upon such exercise.

       

      5.  Other
        Dilutive Events.
        If any
        event occurs as to which the other provisions of this Section E are not strictly
        applicable but the failure to make any adjustment would not fairly protect
        the
        Conversion Right in accordance with the essential intent and principles hereof,
        then, in each such case, Borrower shall appoint a firm of independent public
        accountants of recognized national standing (which may be Borrower's regular
        auditors) which shall give their opinion upon the adjustment, if any, on
        a basis
        consistent with the essential intent and principles established in this Section
        E, necessary to preserve, without dilution, the Conversion Right. Upon receipt
        of such opinion, Borrower shall promptly mail a copy thereof to Lender and
        shall
        make the adjustments described therein.

      

      F.  Other
        Provisions.
        

       

      1.  Definitions.
        As used
        herein, the following terms shall have the following meanings:

      

      “Acquisition”
means
        (i) the Borrower’s merger, consolidation, or reorganization with one or more
        entities, corporate or otherwise, as a result of which the Borrower’s
        stockholders immediately prior to such merger, consolidation or reorganization
        do not hold at least a majority of the stock of 

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      the
        surviving entity that is entitled to vote for the election of directors,
        or (ii)
        the Borrower sells all or substantially all of its assets.

      

      "Common
        Stock Outstanding"
        means
        as of any date (i) all shares of Common Stock that are outstanding as of
        such
        date, plus
        (ii) all
        shares of Common Stock issuable upon conversion of Convertible Securities
        outstanding as of such date, whether or not convertible as of such
        date.

      

      "Convertible
        Securities"
        means
        evidence of indebtedness, shares of stock or other securities (other than
        Options and evidences
        of indebtedness)
        which
        are convertible into or exchangeable for, with or without payment of additional
        consideration, shares of Common Stock, either immediately or upon the arrival
        of
        a specified date or the happening of a specified event or both.

      

      "Option"
        means
        any right, warrant or option to subscribe or purchase shares of Common Stock
        or
        Convertible Securities.

       

      Capitalized
        terms used herein without definition shall have the meanings assigned to
        them in
        the Security Agreement.

      

      2.  Governing
        Law; Venue.
        This
        Note shall be governed by the laws of the State of Delaware, without giving
        effect to conflicts of law principles. All actions or proceedings arising
        in
        connection with this Note shall be conducted in accordance with Section 8(a)
        of
        the Purchase Agreement.

      

      3.  Notices.
        Any
        notice or communication required or desired to be served, given or delivered
        hereunder shall be in the form and manner specified below, and shall be
        addressed to the party to be notified as provided in Section 8(f) of the
        Purchase Agreement.

      

      4.  Lender's
        Rights; Borrower Waivers.
        Lender's acceptance of partial or delinquent payment from Borrower hereunder,
        or
        Lender's failure to exercise any right hereunder, shall not constitute a
        waiver
        of any obligation of Borrower hereunder, or any right of Lender hereunder,
        and
        shall not affect in any way the right to require full performance at any
        time
        thereafter. Borrower waives presentment, diligence, demand of payment, notice,
        protest and all other demands and notices in connection with the delivery,
        acceptance, performance, default or enforcement of this Note. In any action
        on
        this Note, Lender need not produce or file the original of this Note, but
        need
        only file a photocopy of this Note certified by Lender be a true and correct
        copy of this Note in all material respects.

       

      5.  Enforcement
        Costs.
        Borrower shall pay all costs and expenses, including reasonable attorneys'
        fees
        and expenses Lender expends or incurs in connection with the enforcement
        of this
        Note, the collection of any sums due hereunder, any actions for declaratory
        relief in any way related to this Note, or the protection or preservation
        of any
        rights of the holder hereunder.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

      6.  Severability.
        Whenever possible each provision of this Note shall be interpreted in such
        manner as to be effective and valid under applicable law, but if any provision
        is prohibited by or invalid under applicable law, it shall be ineffective
        to the
        extent of such prohibition or invalidity, without invalidating the remainder
        of
        the provision or the remaining provisions of this Note.

       

      7.  Amendment
        Provisions.
        This
        Note may not be amended or modified, nor may any of its terms be waived,
        except
        by written instruments signed by Borrower and Lender.

      

      8.  Binding
        Effect.
        This
        Note shall be binding upon, and shall inure to the benefit of, Borrower and
        Lender and their respective successors and assigns; provided,
        however,
        that
        (i) Borrower's rights and obligations shall not be assigned or delegated
        without
        Lender's prior written consent, given in its sole discretion, and any purported
        assignment or delegation without such consent shall be void ab initio,
        and
        (ii) Lender may not assign, transfer or otherwise convey this Note to any
        Person
        that is not an Affiliate of Lender.

      

      9.  Time
        of Essence.
        Time is
        of the essence of each and every provision of this Note.

      

      10.  Headings.
        Section
        headings used in this Note have been set forth herein for convenience of
        reference only. Unless the contrary is compelled by the context, everything
        contained in each section hereof applies equally to this entire
        Note.

       

      
        
           

          
            
              	 	
                      DSL.net,
                        Inc.

                       

                      By:         

                      Name:______________________________

                      Title:                          

                    

            

          

          
 

        

        
           

        

        
 

      

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Exhibit
      B-3

     

    Form
      of Convertible Note

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

       

      THE
        ISSUANCE AND SALE OF THE SECURITIES AND THE SECURITIES INTO WHICH THIS
        INSTRUMENT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF REASONABLY REQUESTED
        BY
        THE COMPANY, AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
        HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
        IS
        NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
        144A UNDER SAID ACT.

      

      SUBORDINATED
        SECURED
        CONVERTIBLE PROMISSORY NOTE

      [Third
        Convertible Note]

      

      
        	$150,000 	
                August
                  __, 2006

              

      

       

      FOR
        VALUE
        RECEIVED, the undersigned, DSL.net, Inc., a Delaware corporation ("Borrower"),
        hereby promises to pay to MDS Acquisition, Inc., a Delaware corporation
        ("Lender"),
        or
        order, the principal sum of One Hundred Fifty Thousand Dollars ($150,000),
        together with accrued interest as provided herein. This Note is being issued
        pursuant to the Purchase Agreement, dated as of the date hereof, between
        Borrower, Lender and Lender’s parent company, MegaPath Inc. (the “Purchase
        Agreement”).

      

      A.  Interest.
        Interest shall accrue with respect to the principal sum hereunder at eight
        percent (8%) per annum. However, if an Event of Default, as defined herein,
        occurs and is continuing, then interest shall accrue at ten percent (10%)
        per
        annum. Interest payable hereunder shall be calculated on the basis of a three
        hundred sixty (360) day year for actual days elapsed. 

      

      B.  Payment.

      

      1.  Scheduled
        Payment.
        The
        principal indebtedness, together with all accrued interest, shall be payable
        in
        full on the later of (i) December 31, 2007, and (ii) the earlier of (A) December
        31, 2008, and (B) the date that is thirty (30) days following the date on
        which
        the condition for exercise of the Conversion Right specified in clause (i)
        of
        the first sentence of Section E.1 is satisfied (the “Maturity
        Date”).

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      2.  Prepayment.
        Borrower shall not have the right to prepay, in whole or in part, the principal
        of this Note without the prior written consent of Lender, given in its sole
        discretion.

      

      3.  Form
        of Payment.
        Principal and interest and all other amounts due hereunder are to be paid
        in
        lawful money of the United States of America in federal or other immediately
        available funds.

      

      C.  Security
        Interest and Subordination.

      

      1.  Security
        Interest.
        Borrower’s obligations hereunder are secured by Borrower’s grant of a security
        interest to Lender in all of Borrower’s personal property (the “Collateral”)
        pursuant to the Security Agreement, dated as of the date hereof, between
        Borrower and Lender (the “Security
        Agreement”).

      

      2.  Subordination.
        Lender’s Lien against the Collateral is subordinated to prior existing Liens
        granted to other lenders to Borrower, to the extent provided in the
        Subordination Agreement, dated as of the date hereof, by and among Borrower,
        Lender and Laurus Master Fund, Ltd. (the “Subordination
        Agreement”).

       

      D.  Events
        of Default.
        During
        the continuance of an Event of Default, as defined in the Security Agreement,
        Lender shall have the right to exercise its rights and remedies with respect
        to
        Borrower and the Collateral as provided in the Security Agreement.

      

      E.  Conversion
        Right.

      

      1.  Conversion
        Right.Subject
        to (i) Borrower
        having obtained any required
        regulatory
        approvals, the failure of which to obtain prior to Lender owning 51% of the
        Common Stock Outstanding would constitute a Material Adverse Effect (as defined
        in the Purchase Agreement),
        and (ii)
        Lender having exercised the conversion right with respect to (A) the First
        Convertible Note and (B) the Second Convertible Note,
        Lender
        shall have the right (the "Conversion
        Right"),
        in
        its sole discretion, at any time to elect to convert the outstanding principal
        hereunder into such number of fully paid and nonassessable shares of Common
        Stock (such shares the "Conversion
        Shares")
        as
        determined by dividing the outstanding principal by the Conversion Price
        (as
        defined below); provided,
        however,
        that
        Lender may convert the outstanding principal hereunder into Common Stock
        only to
        the extent that the Conversion Shares, when aggregated with the Common Stock
        owned by Lender immediately prior to the conversion, would equal fifty-one
        percent (51%) of the Common Stock Outstanding, accounting for all antidilution
        adjustments to then outstanding Convertible Securities and Options that would
        result from such issuance of the Conversion Shares. The
        “Conversion
        Price”
shall
        be the amount determined by dividing the outstanding principal hereunder
        by the
        number of shares of Common Stock that Lender needs to acquire in order to
        own
        51% of the Common Stock Outstanding, accounting for all antidilution

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      adjustments
        to then outstanding Convertible Securities and Options that would result
        from
        such issuance of the Conversion Shares.

      

      2.  Exercise
        of Conversion Right.
        To
        convert any of the outstanding principal hereunder into shares of Common
        Stock,
        Lender shall deliver to Borrower a written notice of election to exercise
        the
        Conversion Right (the "Conversion
        Notice").
        Borrower shall, as soon as practicable thereafter, issue and deliver to Lender
        a
        certificate or certificates, registered in Lender's name, for the number
        of
        Conversion Shares to which Lender shall be entitled by virtue of such exercise.
        The conversion of the outstanding principal shall be deemed to have been
        made on
        the date that Borrower receives the Conversion Notice (the "Conversion
        Date")
        and
        Lender shall be treated for all purposes as the record holder of the Conversion
        Shares as of such date. 

      

      3.  Acquisition.
        Borrower shall give Lender written notice of an Acquisition no later than
        the
        date that notice of such event is given to Borrower’s stockholders. Lender may
        deliver a Conversion Notice that provides that the exercise of the Conversion
        Right is contingent upon, and shall occur concurrent with, the closing of
        the
        Acquisition. 

       

      4.  Fractional
        Shares.
        Borrower shall not issue fractional shares of Common Stock or scrip representing
        fractional shares of Common Stock upon exercise of the Conversion Right.
        As to
        any fractional share of Common Stock which Lender would otherwise be entitled
        to
        purchase from Borrower upon such exercise, Borrower shall purchase from Lender
        such fractional share at a price equal to an amount calculated by multiplying
        such fractional share (calculated to the nearest 1/100th of a share) by the
        fair
        market value of a share of Common Stock on the Conversion Date, as determined
        in
        good faith by Borrower's Board of Directors. Payment of such amount shall
        be
        made in cash or by check payable to the order of Lender at the time of delivery
        of any certificate or certificates arising upon such exercise.

       

      5.  Other
        Dilutive Events.
        If any
        event occurs as to which the other provisions of this Section E are not strictly
        applicable but the failure to make any adjustment would not fairly protect
        the
        Conversion Right in accordance with the essential intent and principles hereof,
        then, in each such case, Borrower shall appoint a firm of independent public
        accountants of recognized national standing (which may be Borrower's regular
        auditors) which shall give their opinion upon the adjustment, if any, on
        a basis
        consistent with the essential intent and principles established in this Section
        E, necessary to preserve, without dilution, the Conversion Right. Upon receipt
        of such opinion, Borrower shall promptly mail a copy thereof to Lender and
        shall
        make the adjustments described therein.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      F.  Other
        Provisions.
        

       

      1.  Definitions.
        As used
        herein, the following terms shall have the following meanings:

      

      “Acquisition”
means
        (i) the Borrower’s merger, consolidation, or reorganization with one or more
        entities, corporate or otherwise, as a result of which the Borrower’s
        stockholders immediately prior to such merger, consolidation or reorganization
        do not hold at least a majority of the stock of the surviving entity that
        is
        entitled to vote for the election of directors, or (ii) the Borrower sells
        all
        or substantially all of its assets.

      

      "Common
        Stock Outstanding"
        means
        as of any date (i) all shares of Common Stock that are outstanding as of
        such
        date, plus
        (ii) all
        shares of Common Stock issuable upon conversion of Convertible Securities
        outstanding as of such date, whether or not convertible as of such date,
        plus
        (iii)
        all shares of Common Stock issuable upon exercise of Options outstanding
        as of
        such date, whether or not such Options are exercisable as of such date (assuming
        for this purpose that Convertible Securities acquirable upon exercise of
        any
        such Options are converted into Common Stock as of such date).

      

      "Convertible
        Securities"
        means
        evidence of indebtedness (other than this Note, the First Convertible Note,
        the
        Second Convertible Note and the Fourth Convertible Note), shares of stock
        or
        other securities (other than Options) which are convertible into or exchangeable
        for, with or without payment of additional consideration, shares of Common
        Stock, either immediately or upon the arrival of a specified date or the
        happening of a specified event or both.

      

      "Option"
        means
        any right, warrant or option to subscribe or purchase shares of Common Stock
        or
        Convertible Securities.

       

      Capitalized
        terms used herein without definition shall have the meanings assigned to
        them in
        the Security Agreement.

      

      2.  Governing
        Law; Venue.
        This
        Note shall be governed by the laws of the State of Delaware, without giving
        effect to conflicts of law principles. All actions or proceedings arising
        in
        connection with this Note shall be conducted in accordance with Section 8(a)
        of
        the Purchase Agreement.

      

      3.  Notices.
        Any
        notice or communication required or desired to be served, given or delivered
        hereunder shall be in the form and manner specified below, and shall be
        addressed to the party to be notified as provided in Section 8(f) of the
        Purchase Agreement.

      

      4.  Lender's
        Rights; Borrower Waivers.
        Lender's acceptance of partial or delinquent payment from Borrower hereunder,
        or
        Lender's failure to exercise any right hereunder, shall not 

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      constitute
        a waiver of any obligation of Borrower hereunder, or any right of Lender
        hereunder, and shall not affect in any way the right to require full performance
        at any time thereafter. Borrower waives presentment, diligence, demand of
        payment, notice, protest and all other demands and notices in connection
        with
        the delivery, acceptance, performance, default or enforcement of this Note.
        In
        any action on this Note, Lender need not produce or file the original of
        this
        Note, but need only file a photocopy of this Note certified by Lender be
        a true
        and correct copy of this Note in all material respects.

       

      5.  Enforcement
        Costs.
        Borrower shall pay all costs and expenses, including reasonable and documented
        attorneys' fees and expenses Lender expends or incurs in connection with
        the
        enforcement of this Note, the collection of any sums due hereunder, any actions
        for declaratory relief in any way related to this Note, or the protection
        or
        preservation of any rights of the holder hereunder.

      

      6.  Severability.
        Whenever possible each provision of this Note shall be interpreted in such
        manner as to be effective and valid under applicable law, but if any provision
        is prohibited by or invalid under applicable law, it shall be ineffective
        to the
        extent of such prohibition or invalidity, without invalidating the remainder
        of
        the provision or the remaining provisions of this Note.

       

      7.  Amendment
        Provisions.
        This
        Note may not be amended or modified, nor may any of its terms be waived,
        except
        by written instruments signed by Borrower and Lender.

      

      8.  Binding
        Effect.
        This
        Note shall be binding upon, and shall inure to the benefit of, Borrower and
        Lender and their respective successors and assigns; provided,
        however,
        that
        (i) Borrower's rights and obligations shall not be assigned or delegated
        without
        Lender's prior written consent, given in its sole discretion, and any purported
        assignment or delegation without such consent shall be void ab initio,
        and
        (ii)
        Lender may not assign, transfer or otherwise convey this Note to any Person
        that
        is not an Affiliate of Lender.

      

      9.  Time
        of Essence.
        Time is
        of the essence of each and every provision of this Note.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

      10.  Headings.
        Section
        headings used in this Note have been set forth herein for convenience of
        reference only. Unless the contrary is compelled by the context, everything
        contained in each section hereof applies equally to this entire
        Note.

       

      
        
           

          
            
              	 	
                      DSL.net,
                        Inc.

                       

                      By:         

                      Name:______________________________

                      Title:                          

                    

            

          

          
 

        

        
          

 

        

      

       

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Exhibit
      B-4

     

    Form
      of Convertible Note

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

       

      THE
        ISSUANCE AND SALE OF THE SECURITIES AND THE SECURITIES INTO WHICH THIS
        INSTRUMENT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF REASONABLY REQUESTED
        BY
        THE COMPANY, AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
        HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
        IS
        NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
        144A UNDER SAID ACT.

      

      SUBORDINATED
        SECURED
        CONVERTIBLE PROMISSORY NOTE

      [Fourth
        Convertible Note]

      

      
        	$1,520,000 	
                August
                  __,
                  2006 

              

      

       

      FOR
        VALUE
        RECEIVED, the undersigned, DSL.net, Inc., a Delaware corporation ("Borrower"),
        hereby promises to pay to MDS Acquisition, Inc., a Delaware corporation
        ("Lender"),
        or
        order, the principal sum of One Million Five Hundred Twenty Thousand Dollars
        ($1,520,000), together with accrued interest as provided herein. This Note
        is
        being issued pursuant to the Purchase Agreement, dated as of the date hereof,
        between Borrower, Lender and Lender’s parent company, MegaPath Inc. (the
“Purchase
        Agreement”).

      

      A.  Interest.
        Interest shall accrue with respect to the principal sum hereunder at eight
        percent (8%) per annum. However, if an Event of Default, as defined herein,
        occurs and is continuing, then interest shall accrue at ten percent (10%)
        per
        annum. Interest payable hereunder shall be calculated on the basis of a three
        hundred sixty (360) day year for actual days elapsed. 

      

      B.  Payment.

      

      1.  Scheduled
        Payment.
        The
        principal indebtedness, together with all accrued interest, shall be payable
        in
        full on the later of (i) December 31, 2007, and (ii) earlier of (A) December
        31,
        2008, and (B) the date that is thirty (30) days following the date on which
        the
        condition for exercise of the Conversion Right specified in clause (i) of
        the
        first sentence of Section E.1 is satisfied (the “Maturity
        Date”).

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      2.  Prepayment.
        Borrower shall not have the right to prepay, in whole or in part, the principal
        of this Note without the prior written consent of Lender, given in its sole
        discretion.

      

      3.  Form
        of Payment.
        Principal and interest and all other amounts due hereunder are to be paid
        in
        lawful money of the United States of America in federal or other immediately
        available funds.

      

      C.  Security
        Interest and Subordination.

      

      1.  Security
        Interest.
        Borrower’s obligations hereunder are secured by Borrower’s grant of a security
        interest to Lender in all of Borrower’s personal property (the “Collateral”)
        pursuant to the Security Agreement, dated as of the date hereof, between
        Borrower and Lender (the “Security
        Agreement”).

      

      2.  Subordination.
        Lender’s Lien against the Collateral is subordinated to prior existing Liens
        granted to other lenders to Borrower, to the extent provided in the
        Subordination Agreement, dated as of the date hereof, by and among Borrower,
        Lender and Laurus Master Fund, Ltd. (the “Subordination
        Agreement”).

       

      D.  Events
        of Default.
        During
        the continuance of an Event of Default, as defined in the Security Agreement,
        Lender shall have the right to exercise its rights and remedies with respect
        to
        Borrower and the Collateral as provided in the Security Agreement.

      

      E.  Conversion
        Right.

      

      1.  Conversion
        Right.Subject
        to (i) the filing with the Secretary of State of the State of Delaware (after
        approval of Borrower’s stockholders) of an amendment to Borrower’s Amended and
        Restated Certificate of Incorporation authorizing a sufficient number of
        shares
        of Common Stock, and (ii) Lender having exercised the conversion right with
        respect to (A) the First Convertible Note, (B) the Second Convertible Note,
        and
        (C) the Third Convertible Note,
        Lender
        shall have the right (the "Conversion
        Right"),
        in
        its sole discretion, at any time to elect to convert the outstanding principal
        hereunder into such number of fully paid and nonassessable shares of Common
        Stock (such shares the "Conversion
        Shares")
        as
        determined by dividing the outstanding principal by the Conversion Price
        (as
        defined below); provided,
        however,
        that
        Lender may convert the outstanding principal hereunder into Common Stock
        only to
        the extent that the Conversion Shares, when aggregated with the Common Stock
        owned by Lender immediately prior to the conversion, would equal ninety-one
        percent (91%) of the Common Stock Outstanding, accounting for all antidilution
        adjustments to then outstanding Convertible Securities and Options that would
        result from such issuance of the Conversion Shares. The
        “Conversion
        Price”
shall
        be the amount determined by dividing the outstanding principal hereunder
        by the
        number of shares of Common Stock that Lender needs to acquire in order to
        own
        91% of the Common Stock Outstanding, 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      accounting
        for all antidilution adjustments to then outstanding Convertible Securities
        and
        Options that would result from such issuance of the Conversion
        Shares.

      

      2.  Exercise
        of Conversion Right.
        To
        convert any of the outstanding principal hereunder into shares of Common
        Stock,
        Lender shall deliver to Borrower a written notice of election to exercise
        the
        Conversion Right (the "Conversion
        Notice").
        Borrower shall, as soon as practicable thereafter, issue and deliver to Lender
        a
        certificate or certificates, registered in Lender's name, for the number
        of
        Conversion Shares to which Lender shall be entitled by virtue of such exercise.
        The conversion of the outstanding principal shall be deemed to have been
        made on
        the date that Borrower receives the Conversion Notice (the "Conversion
        Date")
        and
        Lender shall be treated for all purposes as the record holder of the Conversion
        Shares as of such date. 

      

      3.  Acquisition.
        Borrower shall give Lender written notice of an Acquisition no later than
        the
        date that notice of such event is given to Borrower’s stockholders. Lender may
        deliver a Conversion Notice that provides that the exercise of the Conversion
        Right is contingent upon, and shall occur concurrent with, the closing of
        the
        Acquisition. 

      

      4.  Fractional
        Shares.
        Borrower shall not issue fractional shares of Common Stock or scrip representing
        fractional shares of Common Stock upon exercise of the Conversion Right.
        As to
        any fractional share of Common Stock which Lender would otherwise be entitled
        to
        purchase from Borrower upon such exercise, Borrower shall purchase from Lender
        such fractional share at a price equal to an amount calculated by multiplying
        such fractional share (calculated to the nearest 1/100th of a share) by the
        fair
        market value of a share of Common Stock on the Conversion Date, as determined
        in
        good faith by Borrower's Board of Directors. Payment of such amount shall
        be
        made in cash or by check payable to the order of Lender at the time of delivery
        of any certificate or certificates arising upon such exercise.

       

      5.  Other
        Dilutive Events.
        If any
        event occurs as to which the other provisions of this Section E are not strictly
        applicable but the failure to make any adjustment would not fairly protect
        the
        Conversion Right in accordance with the essential intent and principles hereof,
        then, in each such case, Borrower shall appoint a firm of independent public
        accountants of recognized national standing (which may be Borrower's regular
        auditors) which shall give their opinion upon the adjustment, if any, on
        a basis
        consistent with the essential intent and principles established in this Section
        E, necessary to preserve, without dilution, the Conversion Right. Upon receipt
        of such opinion, Borrower shall promptly mail a copy thereof to Lender and
        shall
        make the adjustments described therein.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      

      F.  Other
        Provisions.
        

       

      1.  Definitions.
        As used
        herein, the following terms shall have the following meanings:

      

      “Acquisition”
means
        (i) the Borrower’s merger, consolidation, or reorganization with one or more
        entities, corporate or otherwise, as a result of which the Borrower’s
        stockholders immediately prior to such merger, consolidation or reorganization
        do not hold at least a majority of the stock of the surviving entity that
        is
        entitled to vote for the election of directors, or (ii) the Borrower sells
        all
        or substantially all of its assets.

      

      "Common
        Stock Outstanding"
        means
        as of any date (i) all shares of Common Stock that are outstanding as of
        such
        date, plus
        (ii) all
        shares of Common Stock issuable upon conversion of Convertible Securities
        outstanding as of such date, whether or not convertible as of such date,
        plus
        (iii)
        all shares of Common Stock issuable upon exercise of Options outstanding
        as of
        such date, whether or not such Options are exercisable as of such date (assuming
        for this purpose that Convertible Securities acquirable upon exercise of
        any
        such Options are converted into Common Stock as of such date).

      

      "Convertible
        Securities"
        means
        evidence of indebtedness (other than this Note, the First Convertible Note,
        the
        Second Convertible Note and the Third Convertible Note), shares of stock
        or
        other securities (other than Options) which are convertible into or exchangeable
        for, with or without payment of additional consideration, shares of Common
        Stock, either immediately or upon the arrival of a specified date or the
        happening of a specified event or both.

      

      "Option"
        means
        any right, warrant or option to subscribe or purchase shares of Common Stock
        or
        Convertible Securities.

       

      Capitalized
        terms used herein without definition shall have the meanings assigned to
        them in
        the Security Agreement.

      

      2.  Governing
        Law; Venue.
        This
        Note shall be governed by the laws of the State of Delaware, without giving
        effect to conflicts of law principles. All actions or proceedings arising
        in
        connection with this Note shall be conducted in accordance with Section 8(a)
        of
        the Purchase Agreement.

      

      3.  Notices.
        Any
        notice or communication required or desired to be served, given or delivered
        hereunder shall be in the form and manner specified below, and shall be
        addressed to the party to be notified as provided in Section 8(f) of the
        Purchase Agreement.

      

      4.  Lender's
        Rights; Borrower Waivers.
        Lender's acceptance of partial or delinquent payment from Borrower hereunder,
        or
        Lender's failure to exercise any right hereunder, shall not 

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      constitute
        a waiver of any obligation of Borrower hereunder, or any right of Lender
        hereunder, and shall not affect in any way the right to require full performance
        at any time thereafter. Borrower waives presentment, diligence, demand of
        payment, notice, protest and all other demands and notices in connection
        with
        the delivery, acceptance, performance, default or enforcement of this Note.
        In
        any action on this Note, Lender need not produce or file the original of
        this
        Note, but need only file a photocopy of this Note certified by Lender be
        a true
        and correct copy of this Note in all material respects.

       

      5.  Enforcement
        Costs.
        Borrower shall pay all costs and expenses, including reasonable and documented
        attorneys' fees and expenses Lender expends or incurs in connection with
        the
        enforcement of this Note, the collection of any sums due hereunder, any actions
        for declaratory relief in any way related to this Note, or the protection
        or
        preservation of any rights of the holder hereunder.

      

      6.  Severability.
        Whenever possible each provision of this Note shall be interpreted in such
        manner as to be effective and valid under applicable law, but if any provision
        is prohibited by or invalid under applicable law, it shall be ineffective
        to the
        extent of such prohibition or invalidity, without invalidating the remainder
        of
        the provision or the remaining provisions of this Note.

       

      7.  Amendment
        Provisions.
        This
        Note may not be amended or modified, nor may any of its terms be waived,
        except
        by written instruments signed by Borrower and Lender.

      

      8.  Binding
        Effect.
        This
        Note shall be binding upon, and shall inure to the benefit of, Borrower and
        Lender and their respective successors and assigns; provided,
        however,
        that
        (i) Borrower's rights and obligations shall not be assigned or delegated
        without
        Lender's prior written consent, given in its sole discretion, and any purported
        assignment or delegation without such consent shall be void ab initio,
        and
        (ii) Lender may not assign, transfer or otherwise convey this Note to any
        Person
        that is not an Affiliate of Lender.

      

      9.  Time
        of Essence.
        Time is
        of the essence of each and every provision of this Note.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

      10.  Headings.
        Section
        headings used in this Note have been set forth herein for convenience of
        reference only. Unless the contrary is compelled by the context, everything
        contained in each section hereof applies equally to this entire
        Note.

       

      
        
           

          
            
              	 	
                      DSL.net,
                        Inc.

                       

                      By:         

                      Name:______________________________

                      Title:                          

                    

            

          

          
 

        

        
          
 

        

         

         

         

         

         

         

         

        
 

      

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Exhibit
      C

     

    Form
      of Nonconvertible Note

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      

      THE
        ISSUANCE AND SALE OF THE SECURITIES HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF REASONABLY REQUESTED
        BY
        THE COMPANY, AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
        HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
        IS
        NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
        144A UNDER SAID ACT.

      

      

      SUBORDINATED
        SECURED
        PROMISSORY NOTE

       

      
        	$13,002,000 	
                August
                  __,
                  2006 

              

      

       

      FOR
        VALUE
        RECEIVED, the undersigned, DSL.net, Inc., a Delaware corporation ("Borrower"),
        hereby promises to pay to MDS Acquisition, Inc., a Delaware corporation
        ("Lender"),
        or
        order, the principal sum of Thirteen Million Two Thousand Dollars ($13,002,000),
        together with accrued interest as provided herein. This Note is being issued
        pursuant to the Purchase Agreement, dated as of the date hereof, between
        Borrower, Lender and Lender’s parent company, MegaPath Inc. (the “Purchase
        Agreement”).

      

      A.  Interest.
        Interest shall accrue with respect to the principal sum hereunder at eight
        percent (8%) per annum. However, if an Event of Default, as defined herein,
        occurs and is continuing, then interest shall accrue at ten percent (10%)
        per
        annum. Interest payable hereunder shall be calculated on the basis of a three
        hundred sixty (360) day year for actual days elapsed. 

      

      B.  Payment.

      

      1.  Scheduled
        Payment.
        The
        principal indebtedness, together with all accrued interest, shall be payable
        in
        full on December 31, 2007 (the “Maturity
        Date”).

      

      2.  Prepayment.
        Borrower shall not have the right to prepay, in whole or in part, the principal
        of this Note without the prior written consent of Lender, given in its sole
        discretion.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      3.  Form
        of Payment.
        Principal and interest and all other amounts due hereunder are to be paid
        in
        lawful money of the United States of America in federal or other immediately
        available funds.

      

      C.  Security
        Interest and Subordination.

      

      1.  Security
        Interest.
        Borrower’s obligations hereunder are secured by Borrower’s grant of a security
        interest to Lender in all of Borrower’s personal property (the “Collateral”)
        pursuant to the Security Agreement, dated as of the date hereof, between
        Borrower and Lender (the “Security
        Agreement”).

      

      2.  Subordination.
        Lender’s Lien against the Collateral is subordinated to prior existing Liens
        granted to other lenders to Borrower, to the extent provided in the
        Subordination Agreement, dated as of the date hereof, by and among Borrower,
        Lender and Laurus Master Fund, Ltd. (the “Subordination
        Agreement”).

       

      D.  Events
        of Default.
        During
        the continuance of an Event of Default, as defined in the Security Agreement,
        Lender shall have the right to exercise its rights and remedies with respect
        to
        Borrower and the Collateral as provided in the Security Agreement.

      

      E.  Other
        Provisions.
        

       

      1.  Definitions.
        Capitalized terms used herein without definition shall have the meanings
        assigned to them in the Security Agreement.

      

      2.  Governing
        Law; Venue.
        This
        Note shall be governed by the laws of the State of Delaware, without giving
        effect to conflicts of law principles. All actions or proceedings arising
        in
        connection with this Note shall be conducted in accordance with Section 8(a)
        of
        the Purchase Agreement.

      

      3.  Notices.
        Any
        notice or communication required or desired to be served, given or delivered
        hereunder shall be in the form and manner specified below, and shall be
        addressed to the party to be notified as provided in Section 8(f) of the
        Purchase Agreement.

      

      4.  Lender's
        Rights; Borrower Waivers.
        Lender's acceptance of partial or delinquent payment from Borrower hereunder,
        or
        Lender's failure to exercise any right hereunder, shall not constitute a waiver
        of any obligation of Borrower hereunder, or any right of Lender hereunder,
        and
        shall not affect in any way the right to require full performance at any
        time
        thereafter. Borrower waives presentment, diligence, demand of payment, notice,
        protest and all other demands and notices in connection with the delivery,
        acceptance, performance, default or enforcement of this Note. In any action
        on
        this Note, Lender need not produce or file the original 

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      of
        this
        Note, but need only file a photocopy of this Note certified by Lender be
        a true
        and correct copy of this Note in all material respects.

       

      5.  Enforcement
        Costs.
        Borrower shall pay all costs and expenses, including reasonable and documented
        attorneys' fees and expenses Lender expends or incurs in connection with
        the
        enforcement of this Note, the collection of any sums due hereunder, any actions
        for declaratory relief in any way related to this Note, or the protection
        or
        preservation of any rights of the holder hereunder.

      

      6.  Severability.
        Whenever possible each provision of this Note shall be interpreted in such
        manner as to be effective and valid under applicable law, but if any provision
        is prohibited by or invalid under applicable law, it shall be ineffective
        to the
        extent of such prohibition or invalidity, without invalidating the remainder
        of
        the provision or the remaining provisions of this Note.

       

      7.  Amendment
        Provisions.
        This
        Note may not be amended or modified, nor may any of its terms be waived,
        except
        by written instruments signed by Borrower and Lender.

      

      8.  Binding
        Effect.
        This
        Note shall be binding upon, and shall inure to the benefit of, Borrower and
        Lender and their respective successors and assigns; provided,
        however,
        that
        (i) Borrower's rights and obligations shall not be assigned or delegated
        without
        Lender's prior written consent, given in its sole discretion, and any purported
        assignment or delegation without such consent shall be void ab initio,
        and
        (ii) Lender may not assign, transfer or otherwise convey this Note to any
        Person
        that is not an Affiliate of Lender.

      

      9.  Time
        of Essence.
        Time is
        of the essence of each and every provision of this Note.

      

      10.  Headings.
        Section
        headings used in this Note have been set forth herein for convenience of
        reference only. Unless the contrary is compelled by the context, everything
        contained in each section hereof applies equally to this entire
        Note.

       

      
         

        
          
            	 	
                    DSL.net,
                      Inc.

                     

                    By:         

                    Name:______________________________

                    Title:                          

                  

          

        

        

      

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Exhibit
      D

     

    Form
      of Subordination Agreement

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      SUBORDINATION
        AGREEMENT

       

      This
        SUBORDINATION AGREEMENT, dated as of August __, 2006 (this “Agreement”),
        is
        entered into among Laurus Master Fund, Ltd. (“Laurus”),
        as
        First Lien Collateral Agent and as First Lien Lender (each, as defined below),
        MDS Acquisition, Inc., (“MDS”)
        as
        Second Lien Lender (as defined below), and DSL.net, Inc., a Delaware corporation
        (the “Borrower”),
        for
        itself and on behalf of its Subsidiaries (as defined in the Laurus Security
        Agreement referred to below).

       

      W  I
        T N E S S E T H:

       

      Whereas,
        Laurus
        (individually, a “First
        Lien Lender”
and,
        together with its successors and assigns, the “First
        Lien Lenders”)
        and
        Borrower have entered into a Security Agreement, dated as of August 31, 2004
        (as
        such agreement may be amended, amended and restated, supplemented or otherwise
        modified, from time to time by the parties thereto, the “Laurus
        Security Agreement”),
        pursuant to which the First Lien Lender has made loans and extended other
        financial accommodations to the Borrower on a secured basis; and

       

      Whereas,
        MDS
        (the “Second
        Lien Lender”
and
        together within its successors and assigns, the “Second
        Lien Lenders”),
        Borrower and MDS’s parent, MegaPath, Inc., have entered into a Purchase
        Agreement, dated as of the date hereof (as such agreement may be amended,
        amended and restated, supplemented or otherwise modified from time to time
        by
        the parties thereto, the “Purchase
        Agreement”),
        pursuant to which MDS has agreed to make loans to the Borrower on a secured
        basis in accordance with the Notes described in the Purchase Agreement (the
        “MDS
        Notes);

       

      The
        Borrower and MDS are parties to a Security Agreement, dated as of the date
        hereof (as amended, amended and restated, supplemented or otherwise modified
        from time to time by the parties thereto, the “MDS Security
        Agreement”),
        securing the obligations of the Borrower owing to the Second Lien Lenders
        under
        and in respect of the MDS Notes;

       

      Whereas,
        it is a
        condition to the effectiveness of the Purchase Agreement and the continued
        extension by Laurus of loans and other financing accommodations to the Borrower
        pursuant to the terms of the Laurus Security Agreement that this Agreement
        be
        executed and delivered by the parties hereto to set forth the terms of the
        respective rights of the First Lien Claimholders (as defined below), on the
        one
        hand, and the Second Lien Claimholders (as defined below), on the other hand,
        and the application of any proceeds and certain other matters; and

       

      Now,
        Therefore,
        in
        consideration of the foregoing, the mutual covenants and obligations herein
        set
        forth and for other good and valuable consideration, the adequacy and receipt
        of
        which are hereby acknowledged, and in reliance upon the representations,
        warranties and covenants herein contained, the parties hereto, intending
        to be
        legally bound, hereby agree as follows:

       

      Section
        1.  Definitions

       

      Unless
        otherwise defined herein, terms defined in the Laurus Security Agreement
        and
        used herein shall have the meanings specified in the Laurus Security Agreement.
        In addition, as used in this Agreement, the following terms shall have the
        following meanings (such meanings to be equally applicable to both the singular
        and the plural form of the terms indicated):

       

      “Adequate
        Protection”
means
        “adequate protection” under Section 361, 362, 363 or 364 of the Bankruptcy
        Code.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Agreement”
has
        the
        meaning set forth in the recitals hereto.

       

      “Bankruptcy
        Code”
means
        11 U.S.C. §§ 101 et seq.

       

      “Borrower”
has
        the
        meaning set forth in the recitals hereto, and shall include any successor
        in
        interest thereto.

       

      “Claimholders”
means,
        collectively, the First Lien Claimholders and the Second Lien
        Claimholders.

       

      “Collateral
        Document”
means
        any First Lien Collateral Document or Second Lien Collateral Document, as
        the
        context may require.

       

      “Common
        Collateral”
means
        (a) all trade accounts receivable, and other book debts and other forms of
        obligations associated with all trade accounts receivable (other than forms
        of
        obligations evidenced by Chattel Paper (as defined in the UCC) or Instruments
        (as defined in the UCC) relating thereto)(including any right to receive
        payment
        for the sale of a product owned by the Borrower or the provision of services
        by
        the Borrower), now or hereafter owned by the Borrower; (b) all collateral
        security of any kind given by the Borrower or any other Person with respect
        to
        the foregoing; (c) all supporting obligations (as defined in the UCC); (d)
        the
        Deposit Account, no. 9429398649, maintained at Fleet National Bank, a national
        banking association organized under the laws of the United States and having
        its
        principal place of business at 100 Federal Street, Boston, Massachusetts
        and any
        funds on deposit therein; (e) all Books and Records relating to each of the
        foregoing; (f) all proceeds of all or any of the foregoing and (g) any tort
        claims or other claims and other rights to payment, including insurance claims
        against third parties, relating to each of the foregoing

       

      “Debtor
        Relief Laws”
means
        the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy,
        general assignment for the benefit of creditors, moratorium, rearrangement,
        receivership, insolvency, reorganization, or similar debtor relief Laws of
        the
        United States or other applicable jurisdictions from time to time in effect
        and
        affecting the rights of creditors generally.

       

      “Disposition”
or
        “Dispose”
means
        the sale, transfer, license, lease or other disposition (including any sale
        and
        leaseback transaction) of any property by any Person, including any sale,
        assignment, transfer or other disposal, with or without recourse, of any
        notes
        or accounts receivable or any rights and claims associated
        therewith.

       

      “First
        Lien Claimholders”
means,
        at any relevant time, the holders of the First Lien Obligations outstanding
        at
        such time.

       

      “First
        Lien Collateral Agent”
means
        the First Lien Collateral Agent referred to herein and any successor agent
        thereto, or if there is no acting First Lien Collateral Agent under the Laurus
        Security Agreement and the Ancillary Agreements, First Lien Lenders holding
        more
        than 80% of the sum of the aggregate unpaid principal amount of the Notes
        outstanding.

       

      “First
        Lien Collateral Documents”
means
        the Laurus Security Agreement and any Ancillary Documents executed in favor
        of
        the First Lien Collateral Agent and creating or purporting to create a Lien
        in
        respect of the First Lien Obligations on the Common Collateral.

       

      “First
        Lien Lenders”
has
        the
        meaning set forth in the recitals hereto.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “First
        Lien Obligations”
means
        all of Obligations owing to the First Lien Lenders under the Laurus Security
        Agreement and the Ancillary Agreements.

       

      “Governmental
        Authority”
means
        any nation or government, any state, province, city, municipal entity or
        other
        political subdivision thereof, and any governmental, executive, legislative,
        judicial, administrative or regulatory agency, department, authority,
        instrumentality, commission, board or similar body, whether federal, state,
        territorial, local or foreign.

       

      “Insolvency
        or Liquidation Proceeding”
means
        (a) any voluntary or involuntary case or proceeding under any Debtor Relief
        Laws
        with respect to the Borrower or any of its Subsidiaries, (b) any other voluntary
        or involuntary insolvency, reorganization or bankruptcy case or proceeding,
        or
        any receivership or other similar case or proceeding with respect to the
        Borrower or any of its Subsidiaries or with respect to any of their respective
        assets, (c) any liquidation, dissolution, reorganization or winding up of
        the
        Borrower or any of its Subsidiaries, whether voluntary or involuntary and
        whether or not involving insolvency or bankruptcy or (d) any general assignment
        for the benefit of creditors or any other marshaling of assets and liabilities
        of the Borrower or any of its Subsidiaries.

       

      “Laurus”
has
        the
        meaning set forth in the recitals hereto.

       

      “Laurus
        Security Agreement”
has
        the
        meaning set forth in the recitals hereto.

       

      “Laws”
means,
        collectively, all applicable international, foreign, Federal, state and local
        statutes, treaties, rules, guidelines, regulations, ordinances, codes and
        administrative or judicial precedents or authorities, including the
        interpretation or administration thereof by any Governmental Authority charged
        with the enforcement, interpretation or administration thereof, and all
        applicable administrative orders, directed duties, licenses, authorizations
        and
        permits of, and settlement agreements with, any Governmental Authority, in
        each
        case whether or not having the force of law.

       

      “Lien”
means
        any mortgage, pledge, hypothecation, assignment, deposit arrangement,
        encumbrance, lien (statutory or other), charge, or preference, priority or
        other
        security interest or preferential arrangement in the nature of a security
        interest of any kind or nature whatsoever (including any conditional sale
        or
        other title retention agreement, any easement, right of way or other encumbrance
        on title to real property, and any financing lease having substantially the
        same
        economic effect as any of the foregoing).

       

      “MDS”
has
        the
        meaning set forth in the recitals hereto.

       

      “MDS
        Notes”
has
        the
        meaning set forth in the recitals hereto.

       

      “MDS
        Security Agreement”
has
        the
        meaning set forth in the recitals hereto.

       

      “Non-Common
        Collateral”
means
        the Collateral (as defined in the MDS Security Agreement) excluding the Common
        Collateral

       

      “paid
        in full”
and
        “payment
        in full”
means,
        with respect to any and all First Lien Obligations, (a) payment in full
        thereof in cash (or otherwise to the written satisfaction of the First Lien
        Claimholders with respect to such First Lien Obligations), and (b) termination
        of the Loans and all other First Lien Obligations of the First Lien Claimholders
        under the Laurus Security Agreement and the Ancillary Agreements. 

       

      “Purchase
        Agreement”
has
        the
        meaning set forth in the recitals hereto.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Recovery”
has
        the
        meaning set forth in Section
        6.3
        hereof.

       

      “Required
        First Lien Lenders”
means,
        at any time, First Lien Lenders holding at least 51% of the sum of the
        aggregate unpaid principal amount owing under the Notes
        outstanding.

       

      “Required
        Second Lien Lenders”
means,
        at any time, Second Lien Lenders holding at least 51% of the sum of the
        aggregate unpaid principal amount owing under the MDS Notes
        outstanding.

       

      “Second
        Lien Claimholders”
means,
        at any relevant time, the holders of the obligations owing to the Second
        Lien
        Lenders under the MDS Security Agreement and the MDS Notes outstanding at
        such
        time.

       

      “Second
        Lien Collateral Agent”
means
        the Second Lien Lender, if any, designated by the Second Lien Lenders to
        serve
        as collateral agent under the MDS Security Agreement and the MDS Notes, or
        if
        there is no acting Second Lien Collateral Agent under the MDS Security Agreement
        and the MDS Notes, the Second Lien Lenders holding more than 80% of the sum
        of
        the aggregate unpaid principal amount of MDS Notes outstanding.

       

      “Second
        Lien Collateral Documents”
means
        each security agreement, mortgage, cash collateral deposit letter, collateral
        assignment, pledge agreement and other similar agreement, instrument or document
        executed in favor of the Second Lien Lenders and creating or purporting to
        a
        create a Lien in respect of the Second Lien Obligations.

       

      “Second
        Lien Lenders”
has
        the
        meaning set forth in the recitals hereto.

       

      “Second
        Lien Obligations”
means
        all of obligations owing to the Second Lien Lenders under the Purchase Agreement
        and the MDS Notes and all related instruments and agreements.

       

      “Uniform
        Commercial Code”
or
        “UCC”
means
        the Uniform Commercial Code of the State of New York, as amended.

       

      Section
        2.  Lien
        Priorities

       

      2.1  Relative
        Priorities

       

      Notwithstanding
        the date, manner or order of grant, attachment or perfection of any Lien
        granted
        to the First Lien Collateral Agent or the First Lien Claimholders on the
        Common
        Collateral or of any Lien granted to the Second Lien Collateral Agent or
        the
        Second Lien Claimholders on the Common Collateral and notwithstanding any
        provision of the UCC, or any applicable Laws or decision or the MDS Notes,
        the
        Purchase Agreement, the MDS Security Agreement, the Laurus Security Agreement
        or
        any Ancillary Agreement or any other circumstance whatsoever (including,
        without
        limitation, any non-perfection of any Lien securing or purporting to secure
        the
        First Lien Obligations or the Second Lien Obligations), the Second Lien
        Collateral Agent and each Second Lien Claimholder and the First Lien Collateral
        Agent and each First Lien Claimholder agree that: (a) any Lien on the Common
        Collateral securing the First Lien Obligations now or hereafter held by or
        for
        the benefit of the First Lien Claimholders, regardless of how acquired, whether
        by grant, statute, operation of law, subrogation or otherwise, shall be senior
        in all respects and prior to any Lien on the Common Collateral securing the
        Second Lien Obligations; (b) any Lien on the Common Collateral securing the
        Second Lien Obligations now or hereafter held by or for the benefit of the
        Second Lien Claimholders, regardless of how acquired, whether by grant, statute,
        operation of law, subrogation or otherwise, shall be junior and subordinate
        in
        all respects to all Liens on the Common Collateral securing the First Lien
        Obligations, and (c) any Lien on 

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      the
        Non-Common Collateral securing the Second Lien Obligations now or hereafter
        held
        by or for the benefit of the Second Lien Claimholders, regardless of how
        acquired, whether by grant, statute, operation of law, subrogation or otherwise,
        shall be senior in all respects to all Liens, if any, on the Non-Common
        Collateral securing the First Lien Obligations. All Liens on the Common
        Collateral securing the First Lien Obligations shall be and remain senior
        to all
        Liens on the Common Collateral securing the Second Lien Obligations for all
        purposes, whether or not such Liens securing the First Lien Obligations are
        subordinated to any Lien securing any other obligation of the Borrower. All
        Liens on the Non-Common Collateral securing the Second Lien Obligations shall
        be
        and remain senior to all Liens, if any, on the Non-Common Collateral securing
        the First Lien Obligations for all purposes, whether or not such Liens securing
        the First Lien Obligations are subordinated to any Lien securing any other
        obligation of the Borrower.

       

      2.2  Prohibition
        on Contesting Liens

       

      Each
        of
        (a) the Second Lien Collateral Agent and each Second Lien Claimholder agrees
        that it shall not, and hereby waives any right to, contest, or support any
        other
        Person in contesting, in any proceeding (including, without limitation, any
        Insolvency or Liquidation Proceeding), the priority, validity or enforceability
        of any Lien held by the First Lien Collateral Agent or First Lien Claimholders
        in the Common Collateral, and (b) the First Lien Collateral Agent and each
        First
        Lien Claimholder agrees that it shall not, and hereby waives any right to,
        contest, or support any other Person in contesting, in any proceeding
        (including, without limitation, any Insolvency or Liquidation Proceeding),
        the
        priority, validity or enforceability of any Lien held by the Second Lien
        Collateral Agent or Second Lien Claimholders in the Non-Common Collateral.
        Each
        of the First Lien Collateral Agent and each First Lien Claimholder (by its
        acceptance of the benefits of the Laurus Security Agreement and the Ancillary
        Agreements) agrees that it shall not, and hereby waives any right to, contest,
        or support any other Person in contesting, in any proceeding (including,
        without
        limitation, any Insolvency or Liquidation Proceeding), the priority, validity
        or
        enforceability of any Lien held by the Second Lien Collateral Agent and/or
        the
        Second Lien Claimholders in the Common Collateral; provided
        that
        this Section
        2.2
        shall
        not be construed to prevent or impair the rights of the First Lien Collateral
        Agent or First Lien Claimholders to enforce this Agreement, including without
        limitation, the priority of Liens in Section
        2.1
        and the
        exercise of remedies in Section
        3.1

       

      Section
        3.  Enforcement;
        Application of Proceeds of Collateral and Other
        Payments

       

      3.1  Exercise
        of Remedies

       

      The
        Second Lien Collateral Agent and each Second Lien Claimholder agrees that
        it
        shall not, with respect to the Second Lien Obligations, take or receive from
        or
        on behalf of the Borrower, directly or indirectly, in cash or other property
        or
        by setoff, counterclaim or in any other manner (whether pursuant to any
        enforcement, collection, execution, levy, foreclosure action or other proceeding
        or otherwise) any Common Collateral or any proceeds of Common Collateral,
        unless
        and until all First Lien Obligations have been paid in full in accordance
        with
Section
        3.2
        hereof.
        Without limiting the generality of the foregoing, unless and until the First
        Lien Obligations have been paid in full, except as expressly provided herein
        or
        in the Laurus Security Agreement, the sole right of the Second Lien Collateral
        Agent and the Second Lien Claimholders with respect to the Common Collateral
        is
        to hold a Lien on the Common Collateral pursuant to the MDS Security Agreement
        and the MDS Notes for the period and to the extent granted therein and to
        receive a share of the proceeds thereof, if any, after payment in full of
        the
        First Lien Obligations; provided
        however,
        that
        nothing in this paragraph shall be construed to impair the right of the Second
        Lien Claimholders to receive payments of principal, interest, fees and other
        amounts in respect of the Second Lien Obligations as provided for in the
        MDS
        Security Agreement and 

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      the
        MDS
        Notes, and to enforce the making of such payments by bringing suit at law
        with
        respect to any unpaid amounts of such payments. Each of the Second Lien
        Collateral Agent and the Second Lien Claimholders (i) further agrees that
        the
        Second Lien Collateral Agent and the other Second Lien Claimholders will
        not
        take any action that would hinder, delay, limit, impede or prohibit any exercise
        of remedies by the First Lien Collateral Agent to the extent related to
        satisfying the First Lien Obligations, including any collection, sale, lease,
        exchange, transfer or other Disposition of the Common Collateral, whether
        by
        foreclosure or otherwise, or that would limit, invalidate, avoid or set aside
        any Lien or Collateral Document securing or purporting to secure the First
        Lien
        Obligations or subordinate the priority of the First Lien Obligations to
        the
        Second Lien Obligations with respect to the Common Collateral or grant the
        Liens
        securing the Second Lien Obligations with respect to the Common Collateral
        equal
        in ranking to the Liens securing the First Lien Obligations and (ii) hereby
        waives any and all rights it may have (other than as specified herein) as
        a
        junior lien creditor or otherwise (whether arising under the UCC or under
        any
        other Law) to object to the manner in which the First Lien Collateral Agent
        or
        the First Lien Claimholders seek to enforce or collect the First Lien
        Obligations or the Liens now or hereafter granted in any Common Collateral
        to
        secure the First Lien Obligations, regardless of whether any action or failure
        to act by or on behalf of the First Lien Collateral Agent or the First Lien
        Claimholders is adverse to the interest of the Second Lien Claimholders.
        Notwithstanding the foregoing or anything else contained herein, (i) the
        Second
        Lien Collateral Agent and the other Second Lien Claimholders may sue upon
        any
        claim they may have with respect to the Non-Common Collateral (whether pursuant
        to an Insolvency or Liquidation Proceeding or otherwise) or take any action
        with
        respect to the Non-Common Collateral (including, without limitation, a
        Disposition of the Non-Common Collateral), the Borrower or any of its
        Subsidiaries or enforce their Lien in the Non-Common Collateral, without
        consent, notice or consultation with the First Lien Collateral Agent or any
        other First Lien Claimholder and (ii) the Second Lien Collateral Agent and
        the
        other Second Lien Claimholders may sue upon any claim they may have with
        respect
        to the Common Collateral (whether pursuant to an Insolvency or Liquidation
        Proceeding or otherwise) or take any action with respect to the Common
        Collateral (including, without limitation, a Disposition of the Common
        Collateral), the Borrower or any of its Subsidiaries or enforce their Lien
        in
        the Common Collateral, without consent, notice or consultation with the First
        Lien Collateral Agent or any other First Lien Claimholder if the First Lien
        Collateral Agent or any other First Lien Claimholders has not taken any of
        the
        actions specified in this clause (ii) with respect to the Common Collateral
        within 120 days after any First Lien Claimholder has knowledge of the occurrence
        of an Event of Default under the Laurus Security Agreement and such Event
        of
        Default shall not have been cured and/or waived within the 120-day period
        following the date on which such First Lien Claimholder has knowledge of
        the
        occurrence of such Event of Default; it being understood and agreed that
        for
        purposes of this Section
        3.1,
        the
        First Lien Claimholders will be deemed to have knowledge of the occurrence
        of an
        Event of Default if any Second Lien Claimholder notifies a First Lien
        Claimholder of such occurrence.
        Any
        proceeds of Common Collateral recovered pursuant to the actions of the Second
        Lien Collateral Agent or the other Second Lien Claimholders pursuant to the
        foregoing clause (ii) shall be applied in the manner specified in Section
        3.2
        and
        shall be subject to the provisions of Section
        4.1.
        

       

      3.2  Application
        of Proceeds of Common Collateral

       

      All
        proceeds of Common Collateral received by the First Lien Collateral Agent
        (including, without limitation, any interest earned thereon) resulting from
        the
        sale, collection or other Disposition of Common Collateral in connection
        with
        any demand for payment or acceleration thereof, the exercise of any rights
        or
        remedies with respect to any Common Collateral securing the First Lien
        Obligations and the Second Lien Obligations or the commencement or prosecution
        of enforcement of any of the rights and remedies under, as applicable, the
        Laurus Security Agreement, the Ancillary Agreements, the MDS Security Agreement
        or the MDS Notes, or applicable Law, including without limitation the exercise
        of any rights of set-off or recoupment, and the exercise of any rights or
        remedies of 

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      a
        secured
        creditor under the UCC of any applicable jurisdiction or under the Bankruptcy
        Code shall be applied to the First Lien Obligations and Second Lien Obligations
        as follows:

       

      First,
        to
        payment of that portion of the First Lien Obligations constituting fees,
        indemnities, expenses and other amounts (including the reasonable fees and
        expenses of counsel) payable to the First Lien Collateral Agent in its capacity
        as such;

       

      Second,
        to
        payment of that portion of the First Lien Obligations constituting fees payable
        to the First Lien Lenders, ratably among them in proportion to the amounts
        described in this clause Second
        payable
        to them;

       

      Third,
        to
        payment of that portion of the First Lien Obligations constituting indemnities
        and other amounts (other than fees, principal and interest) payable to the
        First
        Lien Lenders (including the reasonable fees and expenses of counsel), ratably
        among them in proportion to the amounts described in this clause Third
        payable
        to them;

       

      Fourth,
        to
        payment of that portion of the First Lien Obligations constituting accrued
        and
        unpaid interest on the Loans, ratably among the First Lien Lenders in proportion
        to the respective amounts described in this clause Fourth
        payable
        to them;

       

      Fifth,
        to
        payment of that portion of the First Lien Obligations constituting unpaid
        principal of the Loans, ratably under this clause Fifth
        among
        the First Lien Lenders in proportion to the aggregate amounts of such Loans
        owing to First Lien Lenders then due and payable;

       

      Sixth,
        to
        payment of that portion of the Second Lien Obligations constituting fees,
        indemnities, expenses and other amounts (including the reasonable fees and
        expenses of counsel) payable to the Second Lien Collateral Agent in its capacity
        as such;

       

      Seventh,
        to
        payment of all other Second Lien Obligations of the Borrower and its
        Subsidiaries owing under or in respect of the MDS Security Agreement and
        the MDS
        Notes, including, without limitation, fees, unpaid principal, accrued and
        unpaid
        interest, indemnities and other amounts (including the reasonable fees and
        expenses of counsel) that are due and payable to the Second Lien Collateral
        Agent and the Second Lien Lenders, ratably based upon the respective aggregate
        amounts of all such Second Lien Obligations owing to the Second Lien Lenders
        on
        such date; and

       

      Last,
        the
        balance, if any, after all of the First Lien Obligations and Second Lien
        Obligations have been paid in full, to the Borrower or as otherwise required
        by
        Law.

       

      Section
        4.  Payments

       

      4.1  Payments
        Over

       

      Unless
        and until all First Lien Obligations shall have been paid in full, any Common
        Collateral or proceeds thereof or any payment received by the Second Lien
        Collateral Agent or any Second Lien Claimholder from proceeds of the Common
        Collateral shall be segregated and held in trust and forthwith paid over
        to the
        First Lien Collateral Agent for application to the First Lien Obligations
        and
        Second Lien Obligations in the priority set forth in Section
        3.2
        in the
        same form as received, with any necessary endorsements or as a court of
        competent jurisdiction may otherwise direct. The First Lien Collateral Agent
        is
        hereby authorized to make any such endorsements as agent for the Second Lien
        

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      Collateral
        Agent or any such Second Lien Claimholder. This authorization is coupled
        with an
        interest and is irrevocable.

       

      4.2  Permitted
        Payments and Prepayments of Second Lien Obligations

       

      (a)  Notwithstanding
        anything to the contrary in this Agreement, the Borrower shall be entitled
        to
        make the required payments of interest and principal and other amounts due
        in
        respect of the Second Lien Obligations in accordance with, and shall otherwise
        be bound in all respects by, the terms of the MDS Security Agreement and
        the MDS
        Notes.

       

      (b)  Notwithstanding
        the foregoing provisions of Section
        3.2
        and
Section
        4.1,
        optional prepayments made pursuant to the terms of the MDS Notes may be made
        and
        applied to the Second Lien Obligations as specified therein.

       

      Section
        5.  Other
        Agreements

       

      5.1  Amendments
        to Second Lien Collateral Documents

       

      Without
        the prior written consent of the First Lien Collateral Agent, no provision
        of
        any Second Lien Collateral Document relating to the Common Collateral may
        be
        amended, supplemented or otherwise modified or entered into to the extent
        such
        amendment, supplement or modification, or the terms of any new Second Lien
        Collateral Document, would contravene the provisions of this Agreement.

       

      5.2  Rights
        As Unsecured Creditors

       

      Except
        as
        otherwise set forth in Section
        3.1
        of this
        Agreement but subject to the penultimate sentence of Section
        3.1,
        the
        Second Lien Collateral Agent and the Second Lien Claimholders may exercise
        rights and remedies as secured creditors as to the Non-Common Collateral
        and as
        unsecured creditors against the Borrower in accordance with the terms of
        the MDS
        Security Agreement, the MDS Notes and applicable Law. Except as otherwise
        set
        forth in Section
        3.1
        of this
        Agreement, the First Lien Collateral Agent and the First Lien Claimholders
        may
        exercise rights and remedies as secured creditors as to the Common Collateral
        and as unsecured creditors against the Borrower in accordance with the terms
        of
        the Laurus Security Agreement, the Ancillary Agreements referred to therein
        and
        applicable Law. Except as otherwise set forth in Section 3.1 of this Agreement,
        nothing in this Agreement shall prohibit the receipt by the Second Lien
        Collateral Agent or any Second Lien Claimholder of the required payments
        of
        interest and principal and other amounts due in respect of the Second Lien
        Obligations so long as such receipt is not the direct or indirect result
        of the
        exercise by the Second Lien Collateral Agent or any Second Lien Claimholders
        of
        rights or remedies as a secured creditor against the Common Collateral or
        enforcement in contravention of this Agreement, the MDS Security Agreement
        or
        the MDS Notes of any Lien held by any of them in the Common Collateral. Except
        as otherwise set forth in Section
        3.1 of
        this
        Agreement, nothing in this Agreement shall prohibit the receipt by the First
        Lien Collateral Agent or any First Lien Claimholder of the required payments
        of
        interest and principal and other amounts due in respect of the First Lien
        Obligations so long as such receipt is not the direct or indirect result
        of the
        exercise by the First Lien Collateral Agent or any First Lien Claimholders
        of
        rights or remedies as a secured creditor against the Non-Common Collateral
        or
        enforcement in contravention of this Agreement, the Laurus Security Agreement
        or
        the Ancillary Agreements referred to therein of any Lien held by any of them
        in
        the Non-Common Collateral.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      5.3  First
        Lien Collateral Agent as Bailee; Representative; Relationship

       

      (a)  The
        First
        Lien Collateral Agent agrees to hold the Common Collateral that is in its
        possession or “control” (as defined in the UCC) (or in the possession or
“control” of its agents or bailees) as bailee or as agent, as the case may be,
        for the Second Lien Collateral Agent and any assignee solely for the purpose
        of
        perfecting the security interest granted in such Collateral to the Second
        Lien
        Collateral Agent pursuant to other applicable Collateral Documents, subject
        to
        the terms and conditions of this Section
        5.3.
        For the
        avoidance of doubt, solely for purposes of perfecting the Liens in favor
        of the
        Second Lien Collateral Agent, the First Lien Collateral Agent agrees that
        it
        shall be the agent of the Second Lien Collateral Agent with respect to any
        Deposit Accounts or other documents or instruments included in the Common
        Collateral that are controlled or held by the First Lien Collateral
        Agent.

       

      (b)  Except
        as
        otherwise expressly provided for herein, until the First Lien Obligations
        are
        paid in full, the First Lien Collateral Agent shall be entitled to deal with
        the
        Common Collateral in accordance with the terms of this Agreement, the Laurus
        Security Agreement and the Ancillary Agreements as if the Liens of the Second
        Lien Claimholders under the MDS Security Agreement and the MDS Notes did
        not
        exist. The rights of the Second Lien Collateral Agent and the Second Lien
        Claimholders with respect to the Common Collateral shall at all times be
        subject
        to the terms of this Agreement.

       

      (c)  The
        First
        Lien Collateral Agent shall have no obligation whatsoever to the Second Lien
        Collateral Agent or any Second Lien Claimholder to assure that the Common
        Collateral is genuine or owned by the Borrower or to preserve the rights
        or
        benefits of any Person.

       

      (d)  Neither
        the First Lien Collateral Agent nor any First Lien Claimholder shall have
        by
        reason of the Laurus Security Agreement, the Ancillary Agreements, this
        Agreement or any other document a fiduciary relationship in respect of the
        Second Lien Collateral Agent or any Second Lien Claimholder (each of the
        First
        Lien Claimholders so agreeing by its acceptance of the benefits of the Laurus
        Security Agreement and the Ancillary Agreements). Neither the Second Lien
        Collateral Agent nor any Second Lien Claimholder shall have by reason of
        the MDS
        Security Agreement and the MDS Notes, this Agreement or any other document
        a
        fiduciary relationship in respect of the First Lien Collateral Agent or any
        First Lien Claimholder.

       

      (e)  Each
        First Lien Claimholder (by its acceptance of the benefits of the Laurus Security
        Agreement and the Ancillary Agreements) hereby authorizes the First Lien
        Collateral Agent, upon the payment in full of the First Lien Obligations,
        to
        deliver to the Second Lien Collateral Agent the Common Collateral held or
        received by it, together with any necessary endorsement and any other proceeds
        of Common Collateral held by it.

       

      (f)  The
        First
        Lien Collateral Agent and the Second Lien Collateral Agent shall each be
        entitled to rely upon any certificate, notice, consent or other instrument
        in
        writing (including any facsimile transmission) believed by such Agent to
        be
        genuine and correct and to have been signed or sent or made by or on behalf
        of a
        proper Person.

       

      5.4  Required
        Second Lien Lenders Consent to Certain Transactions

       

      (a)  Notwithstanding
        anything in the Laurus Security Agreement to the contrary, the Borrower agrees
        that, prior to the payment in full of the First Lien Obligations, no amendment
        of the Laurus Security Agreement or waiver of the terms of the Laurus Security
        Agreement shall be effective without the Borrower obtaining the consent to
        such
        amendment or waiver by the Required Second Lien 

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      Lenders
        if such amendment or waiver seeks the consent of any of the Lenders to increase
        the Capital Availability Amount to an aggregate amount in excess of
        $5,000,000.

       

      (b)  The
        First
        Lien Collateral Agent agrees not to subordinate any Lien on the Common
        Collateral to the Lien of any other creditor of the Borrower without the
        consent
        of the Required Second Lien Lenders.

       

      5.5  Actions
        in Connection with Certain Refinancings 

       

      If,
        at
        any time concurrently with or after the First Lien Obligations are deemed
        for
        purposes of this Agreement “paid in full”, the Borrower enters into a
        Refinancing (as defined below) of any First Lien Obligation, then the
        obligations under such Refinancing shall automatically and immediately be
        treated as First Lien Obligations for all purposes of this Agreement, including
        for purposes of the Lien priorities and rights in respect of Common Collateral
        set forth herein, and the first lien collateral agent under the documents
        and
        other instruments evidencing such Refinancing (the “New
        First Lien Agent”)
        shall
        be deemed to be the First Lien Collateral Agent. Upon receipt of a notice
        stating that the Borrower has entered into a new loan document in connection
        with a Refinancing (which notice shall include the identity of the New First
        Lien Agent), the Second Lien Collateral Agent shall promptly enter into such
        documents and agreements (including amendments or supplements to this Agreement)
        as the Borrower or such New First Lien Agent may reasonably request in order
        to
        provide to the New First Lien Agent the rights contemplated hereby, in each
        case
        consistent in all material respects with the terms of this Agreement. As
        used in
        this Section
        5.5,
        the
        term “Refinancing”
means
        any modification, refinancing, refunding, renewal or extension of any First
        Lien
        Obligation, subject to the limitation in Section
        5.4(a)
        hereof. 

       

      Section
        6.  Insolvency
        or Liquidation Proceedings

       

      6.1  Relief
        From the Automatic Stay

       

      Subject
        to the penultimate sentence of Section 3.1, the Second Lien Collateral Agent
        and
        each Second Lien Claimholder agrees that it will not seek relief from the
        automatic stay or any other stay in any Insolvency or Liquidation Proceeding
        in
        respect of the Common Collateral, without the prior written consent of the
        First
        Lien Collateral Agent and the Required First Lien Lenders.

       

      6.2  No
        Waiver

       

      Nothing
        contained herein shall prohibit or in any way limit the First Lien Collateral
        Agent or any First Lien Claimholder from objecting in any Insolvency or
        Liquidation Proceeding or otherwise to any action taken by the Second Lien
        Collateral Agent or any Second Lien Claimholder, including, without limitation,
        the seeking by the Second Lien Collateral Agent or any Second Lien Claimholder
        of Adequate Protection or the asserting by any Second Lien Claimholder of
        any of
        its rights and remedies under the MDS Security Agreement or the MDS Notes
        or
        otherwise. 

       

      6.3  Preference
        Issues

       

      If
        any
        Claimholder is required in any Insolvency or Liquidation Proceeding or otherwise
        to turn over or otherwise pay to the estate of the Borrower any amount received
        in connection with the Common Collateral (a “Recovery”),
        then
        the First Lien Obligations or Second Lien Obligations, as the case may be,
        of
        such Claimholder shall be reinstated to the extent of such Recovery and such
        Claimholder shall be entitled to receive payment in full of all such recovered
        amounts. If this Agreement shall have been terminated prior to such Recovery,
        this Agreement shall be reinstated in full force and effect, and 

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      such
        prior termination shall not diminish, release, discharge, impair or otherwise
        affect the obligations of the parties hereto.

       

      Section
        7.  Waivers;
        etc.

       

      7.1  No
        Waiver of Provisions

       

      (a)  No
        right
        of any of the First Lien Claimholders to enforce any provision of this Agreement
        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 any of its Subsidiaries or by any act
        or
        failure to act by any First Lien Claimholder or the First Lien Collateral
        Agent
        (subject, however, to the penultimate sentence of Section
        3.1),
        or by
        any noncompliance by any Person with the terms, provisions and covenants
        of this
        Agreement, the Laurus Security Agreement, the Ancillary Agreements, the MDS
        Security Agreement or the MDS Notes, regardless of any knowledge thereof
        which
        the First Lien Collateral Agent or the First Lien Claimholders, or any of
        them,
        may have or be otherwise charged with.

       

      (b)  Each
        of
        the Second Lien Collateral Agent and each Second Lien Claimholder also agrees
        that the First Lien Claimholders and the First Lien Collateral Agent shall
        have
        no liability to the Second Lien Collateral Agent or any Second Lien
        Claimholders, and the Second Lien Collateral Agent and each Second Lien
        Claimholder hereby waives any claim against any First Lien Claimholder or
        the
        First Lien Collateral Agent arising out of any and all actions which any
        of the
        First Lien Claimholders or the First Lien Collateral Agent may take or permit
        or
        omit to take with respect to (i) the Laurus Security Agreement or the Ancillary
        Agreements, (ii) the collection of the First Lien Obligations or (iii) the
        foreclosure upon, or sale, liquidation or other Disposition of, the Common
        Collateral (except only, in the case of Common Collateral, to the extent
        such
        foreclosure, sale, liquidation or other disposition is not made in a
        commercially reasonable manner in accordance with the UCC or contrary to
        this
        Agreement or the Laurus Security Agreement, the Ancillary Agreements, the
        MDS
        Security Agreement or the MDS Notes). The Second Lien Collateral Agent and
        each
        Second Lien Claimholder agrees that the First Lien Collateral Agent and the
        First Lien Claimholders have no duty to them in respect of the maintenance
        or
        preservation of the Common Collateral.

       

      (c)  Unless
        and until the First Lien Obligations are paid in full, the Second Lien
        Collateral Agent and each Second Lien Claimholder agrees not to assert and
        hereby waives, to the fullest extent permitted by law, any right to demand,
        request, plead or otherwise assert or otherwise claim the benefit of, any
        marshaling, appraisal, valuation or other similar right that may otherwise
        be
        available under applicable law or any other similar rights a secured creditor
        may have under applicable law with respect to the Common
        Collateral.

       

      7.2  Obligations
        Unconditional

       

      All
        rights, interests, agreements and obligations of the First Lien Collateral
        Agent
        and the First Lien Claimholders and the Second Lien Collateral Agent and
        the
        Second Lien Claimholders, respectively, hereunder shall remain in full force
        and
        effect irrespective of:

       

      (a)  any
        lack
        of validity or enforceability of the Laurus Security Agreement, the Ancillary
        Agreements, the MDS Security Agreement or the MDS Notes;

       

      (b)  any
        change in the time, manner or place of payment of, or in any other terms
        of, all
        or any of the First Lien Obligations or Second Lien Obligations, or any
        amendment or waiver or other modification, including, without limitation,
        any
        increase in the amount of Second Lien Obligations, whether by course of conduct
        or otherwise, of the terms of the Laurus Security Agreement or of the terms
        

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      of
        the
        Ancillary Agreements, the MDS Security Agreement or the MDS Notes made in
        accordance with their terms;

       

      (c)  any
        exchange, release or nonperfection of any security interest in any Common
        Collateral or any other collateral, or any release, amendment, waiver or
        other
        modification, whether in writing or by course of conduct or otherwise, of
        all or
        any of the First Lien Obligations or Second Lien Obligations or any guarantee
        thereof;

       

      (d)  the
        commencement of any Insolvency or Liquidation Proceeding; or

       

      (e)  any
        other
        circumstances which otherwise might constitute a defense available to, or
        a
        discharge of, the Borrower in respect of the First Lien Obligations or of
        any
        Second Lien Claimholder in respect of this Agreement.

       

      Section
        8.  Miscellaneous

       

      8.1  Second
        Lien Lenders’ Representation

       

      The
        Second Lien Lenders hereby represent and warrant that all Second Lien Lenders
        party to the MDS Security Agreement and MDS Notes are signatories hereto.
        

       

      8.2  Consent
        to Control Agreement

       

      The
        Second Lien Lenders hereby consent to the terms of the Deposit Account Control
        Agreement between the Second Lien Collateral Agent and Fleet National Bank
        with
        respect to the Borrower’s deposit account with Fleet National Bank, Account No.
        9429398649, and authorize the Second Lien Collateral Agent to execute such
        Deposit Account Control Agreement on our behalf.

       

      8.3  Notice
        from First Lien Collateral Agent

       

      The
        First
        Lien Collateral Agent hereby agrees to give prior written notice to the Second
        Lien Collateral Agent, the Second Lien Lenders and Fleet National Bank of
        the
        date of termination of the Laurus Security Agreement.

       

      8.4  Conflicts

       

      Except
        as
        expressly provided herein, in the event of any conflict between the provisions
        of this Agreement and the provisions of the Laurus Security Agreement, the
        Ancillary Agreements, the MDS Security Agreement or the MDS Notes with respect
        to the Common Collateral or the enforcement of the Claimholders’ Liens, rights
        or remedies with respect thereto, the provisions of this Agreement shall
        govern.
        It is further expressly understood that the Lien priorities and other terms
        referred to herein shall not in any way modify or relieve the Borrower or
        any of
        its Subsidiaries of or from any liability or obligation that the Borrower
        or any
        of its Subsidiaries may have to the Claimholders under the Laurus Security
        Agreement, the Ancillary Agreements, the MDS Security Agreement or the MDS
        Notes.

       

      8.5  Continuing
        Nature of this Agreement

       

      This
        Agreement (other than the provisions in Section
        3.2)
        shall
        continue to be effective until all First Lien Obligations shall have been
        paid
        in full, and the provisions of Section
        3.2
        shall
        continue to be effective until all First Lien Obligations and Second Lien
        Obligations have been paid in full. This is a continuing agreement of lien
        subordination and the First Lien Claimholders may continue, 

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      at
        any
        time and without notice to the Second Lien Collateral Agent or any Second
        Lien
        Claimholder, to extend credit and other financial accommodations and lend
        monies
        to or for the benefit of the Borrower or any Subsidiary on the faith hereof.
        Except as expressly provided herein, the Second Lien Collateral Agent and
        each
        Second Lien Claimholder hereby waives any right it may have under applicable
        law
        to revoke this Agreement or any of the provisions of this Agreement. The
        terms
        of this Agreement shall survive, and shall continue in full force and effect,
        in
        any Insolvency or Liquidation Proceeding.

       

      8.6  Amendments;
        Waivers

       

      No
        amendment, modification or waiver of any of the provisions of this Agreement
        by
        the Second Lien Collateral Agent, the Required Second Lien Lenders, the First
        Lien Collateral Agent, the Required First Lien Lenders or the Borrower shall
        be
        deemed to be made unless the same is made in writing and in accordance with
        Section
        5.4
        of this
        Agreement; provided,
        however,
        that no
        amendment, modification or waiver of any of the provisions of this Agreement
        shall be effective unless approved by the Required First Lien Lenders and
        the
        Required Second Lien Lenders.

       

      8.7  Notices

       

      Unless
        otherwise specifically provided herein, any notice or other communication
        herein
        required or permitted to be given shall be made in accordance with Section
        27
        of the
        Laurus Security Agreement in the case of the First Lien Collateral Agent
        or any
        First Lien Lender or in accordance with Section 6(f)
        of the
        MDS Security Agreement in the case of the Second Lien Collateral Agent or
        any
        Second Lien Lender.

       

      8.8  Further
        Assurances

       

      The
        Second Lien Collateral Agent and each Second Lien Claimholder agrees that
        each
        of them shall, at the Borrower’s expense, take such further action and shall
        execute and deliver to the First Lien Collateral Agent and the First Lien
        Claimholders such additional documents and instruments (in recordable form,
        if
        requested) as the First Lien Collateral Agent or the other First Lien
        Claimholders may reasonably request to effectuate the terms of and the Lien
        subordination contemplated by this Agreement.

       

      8.9  Governing
        Law

       

      This
        Agreement shall be governed by, and construed in accordance with, the law
        of the
        State of New York.

       

      8.10  Specific
        Performance

       

      Each
        of
        the First Lien Collateral Agent, the Second Lien Collateral Agent and the
        Claimholders may demand specific performance of this Agreement. Each of the
        First Lien Collateral Agent and each First Lien Claimholder (by its acceptance
        of the benefits of the Laurus Security Agreement and the Ancillary Agreements),
        the Second Lien Collateral Agent, and each Second Lien Claimholder, as the
        case
        may be, hereby irrevocably waives any defense based on the adequacy of a
        remedy
        at law and any other defense which might be asserted to bar the remedy of
        specific performance in any action which may be brought by the other
        Person. 

       

      8.11  Section
        Titles; Time Periods

       

      The
        section titles contained in this Agreement are and shall be without substantive
        meaning or content of any kind whatsoever and are not a part of this Agreement,
        except when used to 

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      reference
        such sections. In the computation of time periods, unless otherwise specified,
        the word “from”
means
        “from
        and including”
and
        each of the words “to”
and
        “until”
means
        “to
        but excluding”
and
        the
        word “through”
means
        “to
        and including”.
        The
        term “including”
when
        used in this Agreement means “including without limitation”, except when used in
        the computation of time periods.

       

      8.12  Counterparts

       

      This
        Agreement may be executed in one or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        instrument. Delivery by telecopier of an executed counterpart of a signature
        page to this Agreement shall be effective as delivery of an original executed
        counterpart of this Agreement. The First Lien Collateral Agent and the Second
        Lien Collateral Agent may also require that any such documents and signatures
        delivered by telecopier be confirmed by a manually-signed original thereof;
        provided
        that the
        failure to request or deliver the same shall not limit the effectiveness
        of any
        document or signature delivered by telecopier.

       

      8.13  Effectiveness

       

      This
        Agreement shall become effective when executed and delivered by the parties
        hereto. This Agreement shall be effective both before and after the commencement
        of any Insolvency or Liquidation Proceeding. All references to the Borrower
        or
        any of its Subsidiaries shall include the Borrower or any of its Subsidiaries
        as
        debtor and debtor-in-possession and any receiver or trustee for the Borrower
        or
        any of its Subsidiaries (as the case may be) in any Insolvency or Liquidation
        Proceeding. 

       

      [SIGNATURE
        PAGES
        FOLLOW]

       

      

      
        
          
          

        

        
          14

          
            

          

        

         

      

      IN
        WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
        date
        first written above.

       

      
        	 	
                LAURUS
                  MASTER FUND, LTD,
                  as
                  First Lien Collateral 

                Agent
                  and as First Lien Lender

                 

                By:
                  
                  

                

                 

                Name:

                Title:

              

      

      

      
        	 	
                MDS
                  ACQUISITION, INC.,
                  as
                  Second Lien Lender

                 

                By:
                  
                  

                

                 

                Name:

                Title:

              

      

      

      
        	 	
                DSL.NET,
                  INC.,
                  as
                  Borrower

                 

                By:
                  
                  

                

                 

                Name:

                Title:

              

      

      

      

      

    

    
 

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    Exhibit
      E

     

    Form
      of Security Agreement

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
       

      SECURITY
        AGREEMENT

       

      This
        Security Agreement (this
        “Agreement”)
        is
        entered into as of August __, 2006, between DSL.net., Inc., a Delaware
        corporation (“Borrower”),
        and
        MDS Acquisition, Inc., a Delaware corporation (“Lender”).
        

       

      RECITALS

       

      WHEREAS,
        Borrower has issued to Lender (i) four (4) subordinated secured convertible
        promissory notes in the original aggregate principal amount of Two Million
        Dollars ($2,000,000)(the “Convertible
        Notes”),
        and
        (ii) a subordinated secured promissory note in the principal amount of Thirteen
        Million Two Thousand Dollars ($13,002,000)(the “Nonconvertible
        Note”,
        and
        together with the Convertible Notes the “Notes”),
        pursuant to the Purchase Agreement, dated as of the date hereof, between
        Borrower, Lender and Lender’s parent company, MegaPath Inc. (the “Purchase
        Agreement”).
        The
        parties wish to enter into this Agreement to secure Borrower’s obligations under
        the Notes.

       

      NOW,
        THEREFORE, IT IS AGREED THAT:

       

      1.  
Definitions.
        Where
        applicable and except as otherwise defined herein, terms used in this Agreement
        shall have the meanings assigned to them in the UCC. For purposes of this
        Agreement, the following terms shall have the following meanings:

       

      (a)  “Affiliate”
means,
        with respect to any Person, any Person that owns or controls directly or
        indirectly such Person, any Person that controls or is controlled by or is
        under
        common control with such Person, and each of such Person’s senior executive
        officers, directors, and partners.

       

      (b)  “Borrower’s
        Books”
means
        all of Borrower’s books and records including: ledgers; records concerning
        Borrower’s assets or liabilities, the Collateral, business operations or
        financial condition; and all computer programs, or tape files, and the
        equipment, containing such information.

       

      (c)  “Collateral”
means
        the personal property described in Exhibit A.

       

      (d)  “Change
        of Control”
means
        (a)
        any
        merger or consolidation of Borrower with or into any other corporation or
        other
        entity, or any other reorganization of Borrower, in which the holders of
        Borrower’s outstanding capital stock immediately prior to such transaction do
        not, immediately after such transaction, retain a majority of the voting
        power
        of the surviving entity or its parent, other than a transaction which results
        in
        Lender or an Affiliate of Lender holding such majority voting power, (b)
        any
        Person or any Persons (other than Lender and/or Affiliate(s) of Lender) acting
        together that would constitute a “group” for purposes of Section 13(d) under the
        Securities Exchange Act of 1934, or any successor provision thereto, shall
        acquire beneficial ownership (within the meaning of Rule 13d-3 under the
        Securities Exchange Act, or any successor provision thereto) in a single
        transaction or a series of related transactions, of more than 50% of the
        aggregate voting power of Borrower’s equity securities; or (c) any sale of all
        or substantially all of Borrower’s assets, other than a sale to Lender or an
        Affiliate of Lender.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (e)  “Contingent
        Obligation”
means,
        as applied to any Person, any direct or indirect liability, contingent or
        otherwise, of that Person with respect to (i) any indebtedness, lease,
        dividend, letter of credit or other obligation of another, including any
        such
        obligation directly or indirectly guaranteed, endorsed, co-made or discounted
        or
        sold with recourse by that Person, or in respect of which that Person is
        otherwise directly or indirectly liable; (ii) any obligations with respect
        to undrawn letters of credit, corporate credit cards, or merchant services
        issued or provided for the account of that Person; and (iii) all
        obligations arising under any interest rate, currency or commodity swap
        agreement, interest rate cap agreement, interest rate collar agreement, or
        other
        agreement or arrangement designed to protect such Person against fluctuation
        in
        interest rates, currency exchange rates or commodity prices; provided, however,
        that the term “Contingent Obligation” shall not include endorsements for
        collection or deposit in the ordinary course of business. The amount of any
        Contingent Obligation shall be deemed to be an amount equal to the stated
        or
        determined amount of the primary obligation in respect of which such Contingent
        Obligation is made or, if not stated or determinable, the maximum reasonably
        anticipated liability in respect thereof as determined by such Person in
        good
        faith; provided, however, that such amount shall not in any event exceed
        the
        maximum amount of the obligations under the guarantee or other support
        arrangement.

       

      (f)  “Copyrights”
means
        any and all copyright rights, copyright applications, copyright registrations
        and like protections in each work or authorship and derivative work thereof,
        whether published or unpublished and whether or not the same also constitutes
        a
        trade secret, now or hereafter existing, created, acquired or held.

       

      (g)  “Equipment”
means
        all present and future machinery, equipment, tenant improvements, furniture,
        fixtures, vehicles, tools, parts and attachments in which Borrower has any
        interest.

       

      (h)  “ERISA”
means
        the Employee Retirement Income Security Act of 1974, as amended, and the
        regulations thereunder.

       

      (i)  “GAAP”
means
        generally accepted accounting principles as from time to time set forth in
        the
        opinions of the Accounting Principles Board of the American Institute of
        Certified Public Accountants and in statements by the Financial Accounting
        Standards Board or in such opinions and statements of such other entities
        as
        shall be approved by a significant segment of the accounting profession in
        the
        United States.

       

      (j)  “Indebtedness”
means
        (a) all indebtedness for borrowed money or the deferred purchase price of
        property or services, including reimbursement and other obligations with
        respect
        to surety bonds and letters of credit, (b) all obligations evidenced by
        notes, bonds, debentures or similar instruments, (c) all capital lease
        obligations and (d) all Contingent Obligations.

       

      (k)  “Intellectual
        Property Collateral”
means
        all of Borrower’s right, title, and interest in and to the
        following:

       

      
        	i.  	
                Copyrights,
                  Trademarks and Patents;

              

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
        	ii.  	
                All
                  trade secrets, and all intellectual property rights in computer
                  software
                  and computer software products now or hereafter existing, created,
                  acquired or held;

              

      

       

      
        	iii.  	
                All
                  design rights which may be available to Borrower now or hereafter
                  existing, created, acquired or
                  held;

              

      

       

      
        	iv.  	
                All
                  claims for damages by way of past, present and future infringement
                  of any
                  of the rights included above, with the right, but not the obligation,
                  to
                  sue for and collect such damages for said use or infringement of
                  the
                  intellectual property rights identified
                  above;

              

      

       

      
        	v.  	
                All
                  licenses or other rights to use any of the Copyrights, Patents
                  or
                  Trademarks, and all license fees and royalties arising from such
                  use to
                  the extent permitted by such license or rights;

              

      

       

      
        	vi.  	
                All
                  amendments, renewals and extensions of any of the Copyrights, Trademarks
                  or Patents; and

              

      

       

      
        	vii.  	
                All
                  proceeds and products of the foregoing, including all payments
                  under
                  insurance or any indemnity or warranty payable in respect of any
                  of the
                  foregoing.

              

      

       

      (l)  “Inventory”
means
        all present and future inventory in which Borrower has any interest, including
        merchandise, raw materials, parts, supplies, packing and shipping materials,
        work in process and finished products intended for sale or lease or to be
        furnished under a contract of service, of every kind and description now
        or at
        any time hereafter owned by or in the custody or possession, actual or
        constructive, of Borrower, including such inventory as is temporarily out
        of its
        custody or possession or in transit and including any returns upon any accounts
        or other proceeds, including insurance proceeds, resulting from the sale
        or
        disposition of any of the foregoing and any documents of title representing
        any
        of the above, and Borrower’s Books relating to any of the
        foregoing.

       

      (m)  “Investment”
means
        any beneficial ownership of (including stock, partnership interest or other
        securities) any Person, or any loan, advance or capital contribution to any
        Person.

       

      (n)  “Lien”
means
        any lien, pledge, mortgage, or security interest.

       

      (o)  “Material
        Adverse Effect”
means
        a
        material adverse effect on (i) the business operations or condition (financial
        or otherwise) of the Borrower and its Subsidiaries taken as a whole or (ii)
        the
        ability of the Borrower to repay the Obligations or otherwise perform its
        obligations under the Notes or (iii) the priority of Lender’s security interests
        in the Collateral.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      (p)  “Patents”
means
        all patents, patent applications and like protections including improvements,
        divisions, continuations, renewals, reissues, extensions and
        continuations-in-part of the same.

       

      (q)  “Permitted
        Investments”
        means:

       

      
        	i.  	
                Investments
                  existing on the date stated above;
                  and

              

      

       

      
        	ii.  	
                (i)
                  marketable direct obligations issued or unconditionally guaranteed
                  by the
                  United States of America or any agency or any State thereof maturing
                  within one (1) year from the date of acquisition thereof and (ii)
                  commercial paper maturing no more than one (1) year from the date
                  of
                  creation thereof and currently having rating of at least A-2 or
                  P-2 from
                  either Standard & Poor’s Corporation or Moody’s Investors Service.
                  

              

      

       

      (r)  “Permitted
        Liens”
means:
        (i) Liens in favor of Lender, (ii) Liens in favor of prior secured creditors
        described in Exhibit B; (iii) Liens for taxes, assessments or other governmental
        charges which are not yet due and payable or which are being contested in
        good
        faith with a reserve or other appropriate provision having been made therefore;
        (iv) Liens of landlords (including security deposits under leases), carriers,
        warehousemen, mechanics, materialmen and other similar liens imposed by law,
        which are incurred in the ordinary course of business for sums not more than
        ninety (90) days delinquent or which are being contested in good faith;
provided
        that a
        reserve or other appropriate provision shall have been made therefor; (v)
        Liens
        incurred or deposits made in the ordinary course of business in connection
        with
        workers’ compensation, unemployment insurance and other types of social
        security, or to secure the performance of tenders, statutory obligations,
        surety, stay, customs and appeal bonds, regulatory bonds, bids, leases,
        government contracts, trade contracts, performance and return of money bonds
        and
        other similar obligations (exclusive of obligations for the payment of borrowed
        money); (vi) Liens securing contingent reimbursement obligations under letters
        of credit; (vii) Liens on equipment and related software to secure (1) the
        purchase price and related soft costs of such equipment and related software,
        as
        applicable, or (2) lease obligations or indebtedness incurred solely for
        the purpose of financing the acquisition of such equipment and related software;
        provided that
        such
        Liens are confined solely to the equipment and related software so acquired,
        and
        the proceeds thereof, and the amount secured does not exceed the acquisition
        price thereof; (viii) liens on equipment and related software when acquired;
        (ix) licenses or sublicenses and any interest or title of a licensor or licensee
        under any license or sublicense; (x) Liens on earnest money deposits required
        under a letter of intent or purchase agreement; (xi) Liens on escrowed cash,
        representing a portion of the proceeds of sales or other transactions,
        established to satisfy contingent post closing obligations (including earn-outs,
        indemnities and working capital adjustments); (xii) leases or subleases granted
        in the ordinary course of business; (xiii) Liens in favor of customs and
        revenue
        authorities which secure payment of customs duties in connection with the
        importation of goods; (xiv) easements, rights-of-way, restrictions and other
        similar encumbrances incurred in the ordinary course of business and
        encumbrances consisting of zoning restrictions, easements, licenses,
        restrictions on the use of real property or minor imperfections in title
        thereto
        which, in the aggregate, are not material in amount, and which do not, in
        the
        aggregate, materially detract from the value of the real property of

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      Borrower;
        (xv) Liens consisting of bankers’ liens and rights of setoff, in each case,
        arising by operation of law, and Liens on documents presented in letter of
        credit drawings; (xvi) assignments of uncollectible accounts receivable to
        collection agencies in the ordinary course of business; and (xvii) any zoning
        or
        similar law or right reserved to or vested in any governmental authority
        to
        control or regulate the use of any real property.

       

      (s)  “Permitted
        Indebtedness”
        means:

       

      (i)  Indebtedness
        existing on the date hereof and disclosed in the Schedule hereto;

       

      (ii)  Indebtedness
        secured by a Lien described in clause (vii) of the defined term “Permitted
        Liens”; 

       

      (iii)  Subordinated
        Debt; and

       

      (iv)  Indebtedness
        incurred to refinance any Indebtedness permitted under the foregoing clauses,
        provided that (1) the principal amount of such Indebtedness does not exceed
        the principal amount of the Indebtedness being refinanced, (2) such
        Indebtedness has a Weighted Average Life to Maturity equal to or greater
        than
        the Weighted Average Life to Maturity of the Indebtedness being refinanced,
        and
        (3) the interest rate with respect to such Indebtedness is less than or
        equal to that of the Indebtedness being refinanced. “Weighted Average Life to
        Maturity” means, when applied to any Indebtedness at any date, the number of
        years obtained by dividing (a) the sum of the products obtained by
        multiplying (x) the amount of each then remaining installment, sinking
        fund, serial maturity or other required payments of principal, including
        payment
        at final maturity, in respect thereof, by (y) the number of years
        (calculated to the nearest one-twelfth) that will elapse between such date
        and
        the making of such payment, by (b) the then outstanding principal amount of
        such Indebtedness.

       

      (t)  “Person”
means
        any individual, sole proprietorship, partnership, limited liability company,
        joint venture, trust, unincorporated organization, association, corporation,
        institution, public benefit corporation, firm, joint stock company, estate,
        entity or governmental agency.

       

      (u)  “Regulated
        Entity”
means
        DSLnet Communications, LLC and DSLnet Communications VA, Inc.

       

      (v)  “Subordinated
        Debt”
means
        any indebtedness incurred by Borrower that is subordinated to the debt owing
        by
        Borrower to Lender on terms acceptable to Lender (and identified as being
        such
        by Borrower and Lender).

       

      (w)  “Subsidiary”
means
        any corporation, company or partnership in which (i) any general partnership
        interest or (ii) more than 50% of the stock or other units of ownership which
        by
        the terms thereof has the ordinary voting power to elect the board of directors,
        managers or trustees of the entity, at the time as of which any determination
        is
        being made, is owned by Borrower, either directly or through an Affiliate
        of
        Borrower.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      (x)  “Trademarks”
means
        any trademark and servicemark rights, whether registered or not, applications
        to
        register and registrations of the same and like protections, and the entire
        goodwill of the business of Borrower connected with and symbolized by such
        trademarks.

       

      (y)  “UCC”
means
        the Uniform Commercial Code as in effect in the State of Delaware from time
        to
        time.

       

      Capitalized
        terms used in this Agreement and not otherwise defined herein shall have
        the
        meanings set forth in the Purchase Agreement.

       

      2.  
Grant
        of Security Interest.

       

      (a)  Security
        Interest.
        As
        security for the payment and performance of the Obligations (as defined below),
        Borrower hereby grants to Lender a continuing security interest in all of
        Borrower’s right, title and interest in and to in the Collateral. 

       

      (b)  Obligations
        Secured.
        The
        security interest granted hereunder secures payment and performance of all
        obligations of Borrower to Lender under this Agreement and all obligations
        of
        Borrower to Lender under the Notes, including all unpaid principal of the
        Notes,
        all interest accrued thereon, and all other amounts payable by Borrower to
        Lender under the Notes, whether due or to become due, absolute or contingent,
        liquidated or unliquidated, determined or undetermined, including any interest
        that accrues after the commencement of an Insolvency Proceeding (collectively,
        the “Obligations”).

       

      (c)  Authorization
        to File Financing Statement.
        Borrower authorizes Lender to file one or more financing statements describing
        the Collateral with the Secretary of State of the State of Delaware. Lender
        shall promptly provide Borrower with copies of all such financing statements
        filed. 

       

      3.  
Affirmative
        Covenants.
        So long
        as the Obligations remain outstanding (other than contingent indemnification
        obligations), Borrower covenants to Lender that it will do all of the
        following:

       

      (a)  Good
        Standing.
        Borrower
        shall maintain its and each of its Subsidiaries’ corporate existence and good
        standing in its jurisdiction of incorporation and maintain qualification
        as a
        foreign corporation in each jurisdiction in which it is required under
        applicable law, except for those jurisdictions where Borrower determines
        to
        relinquish its CLEC permit or to otherwise cease providing services. Borrower
        shall maintain, and shall cause each of its Subsidiaries to maintain, in
        force
        all licenses, approvals and agreements, the loss of which could have a Material
        Adverse Effect.

       

      (b)  Government
        Compliance.
        Borrower shall meet, and shall cause each Subsidiary to meet, the minimum
        funding requirements of ERISA with respect to any employee benefit plans
        subject
        to ERISA. Borrower shall comply, and shall cause each Subsidiary to comply,
        with
        all statutes, laws, ordinances and government rules and regulations to which
        it
        is subject, noncompliance with which could have a Material Adverse
        Effect.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      (c)  Protection
        of Collateral.
        Borrower shall keep the Collateral in good condition and repair, maintain,
        preserve, defend and protect the Collateral from loss, damage or deterioration
        (ordinary wear and tear excepted), except to the extent Borrower has determined,
        in its reasonable business judgment, that such Collateral is no longer useful
        in
        the operation of its business.

       

      (d)  Notice
        of Certain Actions; Location of Collateral.
        Borrower shall give prompt written notice to Lender of: (i) any change in
        the
        location of its chief executive office; (ii) any change in its corporate
        name;
        (iii) any change its jurisdiction of organization; and (iv) any change in
        its
        executive officers.

       

      (e)  Inspection.
        Upon
        reasonable prior written notice, Borrower shall provide a representative
        of
        Lender with access to the Collateral and all books and records relating thereto
        for the purpose of conducting an inspection and audit of the Collateral,
        at
        Lender’ sole cost and expense, at reasonable times during regular business
        hours.

       

      (f)  Insurance.
        Borrower shall carry and maintain in full force and effect, at its own expense
        and with financially sound and reputable insurance companies, insurance with
        respect to the Collateral in such amounts, with such deductibles and covering
        such risks as is customarily carried by companies engaged in the same or
        similar
        businesses of similar size and owning similar properties in the localities
        where
        it operates or as reasonably determined by its Board of Directors or executive
        officers.

       

      (g)  Taxes.
        Borrower shall make, and shall cause each of its Subsidiaries to make, due
        and
        timely payment or deposit of all material federal, state, and local taxes,
        assessments, or contributions required of it by law, and will execute and
        deliver to Lender, on demand, appropriate certificates attesting to the payment
        or deposit thereof; and Borrower will make, and will cause each of its
        Subsidiaries to make, timely payment or deposit of all material tax payments
        and
        withholding taxes required of it by applicable laws, including, but not limited
        to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
        state, and federal income taxes, and will, upon request, furnish Lender with
        proof satisfactory to Lender indicating that Borrower or such Subsidiary
        has
        made such payments or deposits; provided that Borrower or a Subsidiary need
        not
        make any payment if the amount or validity of such payment is being contested
        in
        good faith by appropriate proceedings and is reserved against (to the extent
        required by GAAP) by Borrower or such Subsidiary.

       

      (h)  Intellectual
        Property Rights.
        

       

      i.  Within
        forty-five (45) days after the end of each fiscal quarter, Borrower shall
        give
        Lender written notice of any applications or registrations of intellectual
        property rights filed with the United States Patent and Trademark Office
        during
        such fiscal quarter, including the date of such filing and the registration
        or
        application numbers, if any. Borrower (i)shall give Lender not less than
        30 days
        prior written notice of the filing of any applications or registrations with
        the
        United States Copyright Office, including the title of such intellectual
        property rights to be registered, as such title will appear on such applications
        or registrations, and the date such applications or registrations will be
        filed,
        and (ii) prior to the filing of any such applications or registrations, shall
        execute such documents as Lender may reasonably request for Lender to maintain
        

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      its
        perfection in such intellectual property rights to be registered by Borrower,
        and upon the request of Lender, shall file such documents simultaneously
        with
        the filing of any such applications or registrations. Upon filing any such
        applications or registrations with the United States Copyright Office, Borrower
        shall promptly provide Lender with (i) a copy of such applications or
        registrations, without the exhibits, if any, thereto, (ii) evidence of the
        filing of any documents requested by Lender to be filed for Lender to maintain
        the perfection and priority of its security interest in such intellectual
        property rights, and (iii) the date of such filing.

       

      ii.  Borrower
        shall execute and deliver such additional instruments and documents from
        time to
        time as Lender shall reasonably request to perfect and maintain the priority
        of
        Lender's security interest in the Intellectual Property Collateral. Borrower
        shall (i) protect, defend and maintain the validity and enforceability of
        the
        trade secrets, Trademarks, Patents and Copyrights to the extent that the
        failure
        to do so could be reasonably expected to have a Material Adverse Effect,
        (ii)
        use commercially reasonable efforts to detect infringements of the Trademarks,
        Patents and Copyrights and promptly advise Lender in writing of material
        infringements detected and (iii) not allow any material Trademarks, Patents or
        Copyrights to be abandoned, forfeited or dedicated to the public without
        the
        written consent of Lender, which shall not be unreasonably
        withheld.

       

      iii.  Lender
        shall have the right, but not the obligation, to take, at Borrower’s sole
        expense, any actions that Borrower is required under this section to take
        but
        which Borrower fails to take, after 15 days' notice to Borrower. Borrower
        agrees
        to reimburse and indemnify Lender for all reasonable and documented costs
        and
        reasonable expenses incurred in the reasonable exercise of its rights under
        this
        section.

       

      (i)  Further
        Assurances.
        From
        time to time, Borrower shall execute, deliver, file and record such further
        instruments, endorsements and other documents, and take such further action
        as
        Lender may reasonably request to perfect and continue the perfection, maintain
        the priority of, or provide notice of, Lenders’ security interest in the
        Collateral. 

       

      4.  
Negative
        Covenants.
        So long
        as the Obligations remain outstanding (other than contingent indemnification
        obligations), Borrower covenants to Lender that it will not do any of the
        following:

       

      (a)  Clear
        Title.
        Grant
        or suffer to exist any Lien against any of the Collateral, other than Permitted
        Liens. 

       

      (b)  Dispositions.
        Convey,
        sell, lease, transfer or otherwise dispose of (collectively, a “Transfer”),
        or
        permit any of its Subsidiaries to Transfer, all or any part of its material
        business properties or assets, other than: (i) Transfers of Inventory in
        the
        ordinary course of business; (ii) Transfers of non-exclusive licenses and
        similar arrangements for the use of the property of Borrower or its Subsidiaries
        in the ordinary course of business; or (iii) Transfers of worn-out, obsolete,
        excess or retired (i.e.,
        no
        longer actively deployed) Equipment.

       

      (c)  Indebtedness.
        Create,
        incur, assume or be or remain liable with respect to any indebtedness, or
        permit
        any Subsidiary so to do, other than Permitted Indebtedness.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      (d)  Distributions;
        Splits; Reclassifications; Etc.
        Declare, set aside, make or pay any dividends or other distribution, payable
        in
        cash, stock, property or otherwise, with respect to any of its capital stock,
        or
        split, combine, subdivide, redeem or reclassify any of its capital stock
        or
        issue or authorize the issuance of any other securities in respect of, in
        lieu
        of or in substitution for shares of its capital stock, or purchase or otherwise
        acquire, directly or indirectly, any shares of its capital stock, or permit
        any
        Subsidiary to take any of the foregoing described actions.

       

      (e)  Investments.
        Directly or indirectly acquire or own, or make any Investment in or to any
        Person, or permit any of its Subsidiaries so to do, other than Permitted
        Investments; or maintain or invest any of its property with a Person other
        than
        Lender or permit any of its Subsidiaries to do so unless such Person has
        entered
        into an account control agreement with Lender in form and substance satisfactory
        to Lender; or suffer or permit any Subsidiary to be a party to, or be bound
        by,
        an agreement that restricts such Subsidiary from paying dividends or otherwise
        distributing property to Borrower.

       

      (f)  Transactions
        with Affiliates.
        Directly or indirectly enter into or permit to exist any material transaction
        with any Affiliate of Borrower except for transactions that are in the ordinary
        course of Borrower’s business, upon fair and reasonable terms that are no less
        favorable to Borrower than would be obtained in an arm’s length transaction with
        a non-affiliated Person.

       

      (g)  Subordinated
        Debt.
        Make
        any payment in respect of any Subordinated Debt, or permit any of its
        Subsidiaries to make any such payment, except in compliance with the terms
        of
        such Subordinated Debt, or amend any provision contained in any documentation
        relating to the Subordinated Debt without Lender’s prior written
        consent.

       

      (h)  [Intentionally
        Omitted].

       

      (i)  Compliance.
        Become
        an “investment company” or be controlled by an “investment company,” within the
        meaning of the Investment Company Act of 1940, or become principally engaged
        in,
        or undertake as one of its important activities, the business of extending
        credit for the purpose of purchasing or carrying margin stock, or use the
        proceeds of any loan secured hereby for such purpose; fail to meet the minimum
        funding requirements of ERISA, permit a Reportable Event or Prohibited
        Transaction, as defined in ERISA, to occur; fail to comply with the Federal
        Fair
        Labor Standards Act or violate any law or regulation, which violation could
        reasonably be expected to have a Material Adverse Effect, or a material adverse
        effect on the Collateral or the priority of Lender’s Lien on the Collateral, or
        permit any of its Subsidiaries to do any of the foregoing.

       

      (j)  Negative
        Pledge Agreements.
        Permit
        the inclusion in any contract to which Borrower becomes a party (other than
        the
        documents evidencing and relating to the loans extended by Laurus Master
        Fund,
        Ltd.) of any provisions that could restrict or invalidate the creation or
        enforcement of a security interest in any of Borrower’s property.

       

      (k)  Capital
        Stock.
        Issue,
        sell, pledge, dispose of, grant, encumber, authorize or propose the issuance,
        sale, pledge, disposition, grant or encumbrance of any shares of its capital
        

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      stock
        of
        any class, or any options, warrants, convertible securities or other rights
        of
        any kind to acquire any shares of such capital stock or any other ownership
        interest (including, without limitation, any phantom interest, but excluding
        any
        shares of common stock issued upon conversion of the Convertible Notes),
        of
        Borrower or any of the Subsidiaries, other than issuances of shares of common
        stock pursuant to the Plans or upon exercise of options, warrants or other
        convertible securities outstanding as of the date hereof. 

       

      (l)  Corporate
        Governance Matters.
        Amend
        or waive any provisions of its Certificate of Incorporation or Bylaws, or
        change
        the number of directors on Borrower’s Board of Directors, other than as
        contemplated by the Purchase Agreement. 

       

      (m)  Mergers
        or Acquisitions.
        Merge
        or consolidate, or permit any of its Subsidiaries to merge or consolidate,
        with
        or into any other non-Affiliate business organization, other than Lender
        or its
        Affiliates, or acquire, or permit any of its Subsidiaries to acquire, all
        or
        substantially all of the capital stock or property of another
        Person.

       

      5.  
Events
        of Default; Remedies.
        

       

      (a)  The
        occurrence of any one or more of the following events shall constitute an
        "Event
        of Default"
        hereunder:

       

      (i)  Borrower’s
        failure to pay any amount payable under either of the Notes in accordance
        with
        the terms thereof; provided,
        however,
        that
        Borrower shall have three (3) business days in which to cure any failure
        to pay
        interest due under any of the Notes;

       

      (ii)  Borrower’s
        failure to issue any Common Stock issuable under any of the Convertible Notes
        in
        accordance with the terms thereof upon Lender’s exercise of the Conversion
        Right, as defined in such Convertible Note; 

       

      (iii)  Borrower’s
        breach of any representation and warranty made to Lender in any of the
        Transaction Documents or Borrower’s breach of any covenant under any of the
        Transaction Documents which is not cured within ten (10) business days of
        the
        earlier of Borrower learning of such breach or of notice thereof from Lender;
        provided,
        however,
        that if
        the cure will take more than ten (10) business days and Borrower is diligently
        pursuing such cure during such ten (10) business day period, then an Event
        of
        Default shall not occur with respect to such breach if it is cured within
        twenty
        (20) business days of the earlier of an officer of Borrower learning of such
        breach or receipt by Borrower of notice thereof from Lender; 

       

      (iv)  Borrower
        (A) has an order for relief entered against it under the federal Bankruptcy
        Code, (B) makes an assignment for the benefit of creditors, (C) applies for
        or
        seeks the appointment of a receiver, liquidator, assignee, trustee or other
        similar official for it or of any substantial part of its property or any
        such
        official is appointed, other than upon Borrower’s request, and such unrequested
        appointment continues for sixty (60) days, (D) institutes proceedings seeking
        an
        order for relief under the federal Bankruptcy Code or seeking to adjudicate
        it a
        bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
        reorganization, arrangement, adjustment or composition of it or any of its
        debts
        under other applicable federal or state law relating to creditor

       

      
        
          
          

        

        
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      rights
        and remedies, or any such proceeding is filed against it, other than upon
        Borrower’s request, and such unrequested proceeding continues undismissed or
        unstayed for thirty (30) days, or (E) takes corporate action in furtherance
        of
        any of the foregoing actions;

       

      (v)  the
        occurrence and continuance of any default under any lease or agreement for
        borrowed money having an outstanding principal amount in excess of $100,000
        that
        gives the lessor or the creditor of such indebtedness, as applicable, the
        right
        to accelerate the lease payments or the indebtedness, as applicable, or the
        right to exercise any rights or remedies with respect to any of the Collateral;
        

       

      (vi)  the
        entry
        of any judgment or order against Borrower which remains unsatisfied or
        undischarged and in effect for forty-five (45) days after such entry without
        a
        stay of enforcement or execution; 

       

      (vii)  the
        occurrence of a Change of Control; or

       

      (viii)  any
        material portion of Borrower’s assets is attached, seized, subjected to a writ
        or distress warrant, or is levied upon, or comes into the possession of any
        trustee, receiver or person acting in a similar capacity and such attachment,
        seizure, writ or distress warrant or levy has not been removed, discharged
        or
        rescinded within ten (10) business days, or Borrower is enjoined, restrained,
        or
        in any way prevented by court order from continuing to conduct all or any
        material part of its business affairs.

       

      (b)  Upon
        the
        occurrence and during the continuance of any Event of Default, Lender, may
        at
        any time, do any of the following: 

       

      (i)  accelerate
        the payment of the amounts owing under the Notes; 

       

      (ii)  enforce
        the Notes by exercise of the rights and remedies under this Agreement or
        granted
        to Lender by applicable law; and

       

      (iii)  exercise,
        in addition to all other rights and remedies granted in this Agreement, all
        rights and remedies of a secured party under the UCC and other applicable
        laws.

       

      (c)  Without
        limiting the generality of the foregoing provisions in Section 5(b), Lender
        shall have the right to sell or otherwise dispose of all or any part of the
        Collateral, either at public or private sale, in lots or in bulk, for cash
        or
        for credit, with or without warranties or representations, and upon such
        terms
        and conditions, all as Lender, in its sole discretion, may deem advisable,
        and
        it shall have the right to purchase at any such sale. Borrower agrees that
        a
        notice sent at least fifteen (15) days before the time of any intended public
        sale or of the time after which any private sale or other disposition of
        the
        Collateral is to be made shall be reasonable notice of such sale or other
        disposition. The proceeds of any such sale or other Collateral disposition
        shall
        be applied, first to the expenses of retaking, holding, storing, processing
        and
        preparing for sale, selling, and the like, and to Lender's reasonable and
        documented attorneys’ fees and legal expenses, and then to the Obligations and
        to the payment of any other amounts required by applicable law, after which
        Lender shall account to Borrower for any surplus proceeds. If, upon the sale
        or
        other disposition of the

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      Collateral,
        the proceeds thereof are insufficient to pay all amounts to which Lender
        is
        legally entitled, Borrower shall be liable for the deficiency, together with
        interest thereon at the default rate specified in the Notes, and the reasonable
        and documented fees of any attorneys Lender employs to collect such deficiency;
        provided,
        however,
        that
        the foregoing shall not be deemed to require Lender to resort to or initiate
        proceedings against the Collateral prior to the collection of any such
        deficiency from Borrower. To the extent permitted by applicable law, Borrower
        waives all claims, damages and demands against Lender arising out of the
        retention or sale or lease of the Collateral or other exercise of Lender's
        rights and remedies with respect thereto.

       

      (d)  To
        the
        extent permitted by law, Borrower covenants that it will not at any time
        insist
        upon or plead, or in any manner whatever claim or take any benefit or advantage
        of, any stay or extension law now or at any time hereafter in force, nor
        claim,
        take or insist upon any benefit or advantage of or from any law now or hereafter
        in force providing for the valuation or appraisal of the Collateral or any
        part
        thereof, prior to any sale or sales thereof to be made pursuant to any provision
        herein contained, or the decree, judgment or order of any court of competent
        jurisdiction; or, after such sale or sales, claim or exercise any right under
        any statute now or hereafter made or enacted by any state or otherwise to
        redeem
        the property so sold or any part thereof, and, to the full extent legally
        permitted, hereby expressly waives all benefit and advantage of any such
        law or
        laws, and covenants that it will not invoke or utilize any such law or laws
        or
        otherwise hinder, delay or impede the execution of any power herein granted
        and
        delegated to Lender, but will suffer and permit the execution of every such
        power as though no such power, law or laws had been made or
        enacted.

       

      (e)  Any
        sale,
        whether under any power of sale hereby given or by virtue of judicial
        proceedings, shall operate to divest all Borrower's right, title, interest,
        claim and demand whatsoever, either at law or in equity, in and to the
        Collateral sold, and shall be a perpetual bar, both at law and in equity,
        against Borrower, its successors and assigns, and against all persons and
        entities claiming the Collateral sold or any part thereof under, by or through
        Borrower, its successors or assigns.

       

      (f)  Borrower
        appoints Lender, and any officer, employee or agent of Lender, with full
        power
        of substitution, as Borrower's true and lawful attorney-in-fact, effective
        as of
        the date hereof, with power, in its own name or in the name of Borrower,
        during
        the continuance of an Event of Default, to endorse any notes, checks, drafts,
        money orders, or other instruments of payment in respect of the Collateral
        that
        may come into Lender's possession, to sign and endorse any drafts against
        debtors, assignments, verifications and notices in connection with accounts,
        and
        other documents relating to Collateral; to pay or discharge taxes or Liens
        at
        any time levied or placed on or threatened against the Collateral; to demand,
        collect, issue receipt for, compromise, settle and sue for monies due in
        respect
        of the Collateral; to notify parties obligated with respect to the Collateral
        to
        make payments directly to Lender; and, generally, to do, at Lender's option
        and
        at Borrower's expense, at any time, or from time to time, all acts and things
        which Lender deems necessary to protect, preserve and realize upon the
        Collateral and Lender's security interest therein to effect the intent of
        this
        Agreement, all as fully and effectually as Borrower might or could do; provided
        that Lender provides Borrower with prompt notice of such actions having been
        taken and Borrower hereby ratifies all that said attorney shall lawfully
        do or
        cause to be done by virtue hereof. This power of attorney shall be irrevocable
        as long as any of the Obligations are outstanding.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      (g)  All
        of
        Lender's rights and remedies with respect to the Collateral, whether established
        hereby or by any other agreements, instruments or documents or by law shall
        be
        cumulative and may be exercised singly or concurrently.

       

      6.  
Term.
        The
        term of this Agreement shall begin on the date stated above and shall continue
        and be binding upon Borrower until all Obligations have been fully paid (other
        than contingent indemnification obligations). 

       

      7.  
Miscellaneous.

       

      (a)  Indemnity.
        Borrower shall defend, indemnify and hold harmless Lender and its stockholders,
        directors, officers, employees, and agents against: (a) all obligations,
        demands, claims, and liabilities claimed or asserted by any other party in
        connection with the transactions contemplated by this Agreement and the Notes;
        and (b) all losses and expenses in any way suffered, incurred, or paid by
        Lender as a result of or in any way arising out of, following, or consequential
        to transactions between Lender and Borrower whether under this Agreement
        or the
        Notes, or otherwise (including reasonable and documented attorneys’ fees and
        expenses), except for losses caused by Lender’s gross negligence or willful
        misconduct. The
        indemnity under this Section 7(a) shall survive payment, performance and
        discharge of the Obligations and the
        termination of this Agreement until applicable statutes of limitations for
        actions that may be brought against Lender have run.

       

      (b)  Limitation
        on Lender’ Duty in Respect of Collateral.
        Lender
        shall not have any obligation or liability under any contract or license
        by
        reason of or arising out of this Agreement or the granting of a security
        interest therein or the receipt of any payment relating to any contract or
        license pursuant hereto, nor shall Lender be required or obligated in any
        manner
        to perform or fulfill any of Borrower’s obligations under or pursuant to any
        contract or license, or to make any payment, or to make any inquiry as to
        the
        nature or the sufficiency of any payment received by it or the sufficiency
        of
        any performance by any party under any contract or license, or to present
        or
        file any claim, or to take any action to collect or enforce any performance
        or
        the payment of any amounts which may have been assigned to it or to which
        it may
        be entitled at any time or times. Lender shall be deemed to have acted
        reasonably in the custody, preservation and disposition of any of the Collateral
        if it takes such action as Borrower requests in writing, but Lender’s failure to
        comply with any such request shall not in itself be deemed a failure to act
        reasonably, and no failure of Lender to do any act not so requested shall
        be
        deemed a failure to act reasonably.

       

      (c)  Governing
        Law.
        This
        Agreement is governed by and shall be construed in accordance with the laws
        of
        the State of Delaware, without reference to the conflicts of law provisions
        thereof
        except
        as required by mandatory provisions of law and to the extent the validity
        or
        perfection of the security interests hereunder, or the remedies hereunder,
        in
        respect of any Collateral are governed by the law of a jurisdiction other
        than
        Delaware.

       

      (d)  Severability
        of Provisions. If
        any
        one or more of the provisions contained in this Agreement shall for any reason
        be held to be invalid, illegal or unenforceable in any respect, such invalidity,
        illegality or unenforceability shall not affect any other provision hereof,
        and
        this 

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      Agreement
        shall be construed as if such invalid, illegal or unenforceable provision
        had
        never been contained herein.

       

      (e)  Time
        of the Essence.
        Time is
        of the very essence of this Agreement.

       

      (f)  Notices.
        All
        notices required or permitted hereunder shall be in writing and shall be
        given,
        and be deemed effective, in accordance with Section 8(f) of the Purchase
        Agreement.

       

      (g)  Waiver;
        Amendment.
        No
        failure or delay on Lender’s part in the exercise of any right or remedy, power
        or privilege shall operate as a waiver thereof. No single or partial exercise
        of
        a right or remedy, power or privilege shall preclude other or further exercise
        thereof. No waiver of any right hereunder shall be effective unless in a
        writing
        executed by Lender and Borrower. Any
        such
        waiver shall be effective only for the specific purpose for which it is given.
        The rights and remedies under this Agreement are cumulative and not exclusive
        of
        any other rights, remedies, powers or privileges that may otherwise the
        available to Lender. No
        provision of this Agreement may be amended, waived or modified or rights
        modified or released, other than by a document signed by Borrower and Lender.
        This Agreement may be amended, waived or modified upon the written consent
        of
        Borrower and Lender.

       

      (h)  Binding
        Effect.
        This
        Agreement shall be binding upon, and shall inure to the benefit of, Borrower
        and
        Lender and their respective successors and assigns; provided,
        however,
        that
        (i) Borrower's rights and obligations shall not be assigned or delegated
        without
        Lender's prior written consent, given in its sole discretion, and any purported
        assignment or delegation without such consent shall be void ab initio,
        and
        (ii) Lender may not assign any of the Obligations, or its rights and obligations
        hereunder, to any Person that is not an Affiliate of Lender.

       

      (i)  Counterparts.
        This
        Agreement may be executed by facsimile and 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 but one and the same agreement.

       

      [Signature
        Page Follows]

      

      

      
 

       

       

       

       

       

      

 

      
        
          
          

        

        
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      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
        executed and delivered as of the date first above written.

       

       

       

      
        	
                DSL.NET, INC.

                 

                 

              	 	 	MDS ACQUISITION,
                INC.
	By:	 	 	 	By:	 
	
                 

                
                  Name:

                

              	
                

              	 	 	
                 

                Name:

              	
                

              
	
                 

                Title:

              	
                
 	 	 	
                 

                
                  Title:

                

              	
                
 
	 	
                
                  
  

                 

              	 	 	 	
                

              

      

       

       

      
 

      

      
 

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      Signature
        Page to Security Agreement

      

 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
        A

      

      COLLATERAL
        DESCRIPTION

      

      All
        personal property of DSL.net, Inc. (herein referred to as “Borrower”)
        whether presently existing or hereafter created or acquired, and wherever
        located, including, but not limited to:

       

      (a)
         all
        accounts (including health-care-insurance receivables), chattel paper (including
        tangible and electronic chattel paper), deposit accounts, documents (including
        negotiable documents), equipment (including all accessions and additions
        thereto), general intangibles (including payment intangibles and software),
        goods (including fixtures), instruments (including promissory notes), inventory
        (including all goods held for sale or lease or to be furnished under a contract
        of service, and including returns and repossessions), investment property
        (including securities and securities entitlements), letter of credit rights,
        money, and all of Borrower’s books and records with respect to any of the
        foregoing, and the computers and equipment containing said books and records;
        

       

      (b)
         all
        common law and statutory copyrights and copyright registrations, applications
        for registration, now existing or hereafter arising, in the United States
        of
        America or in any foreign jurisdiction, obtained or to be obtained on or
        in
        connection with any of the forgoing, or any parts thereof or any underlying
        or
        component elements of any of the forgoing, together with the right to copyright
        and all rights to renew or extend such copyrights and the right (but not
        the
        obligation) of Lender to sue in its own name and/or in the name of Borrower
        for
        past, present and future infringements of copyright; 

       

      (c)
         all
        trademarks, service marks, trade names and service names and the goodwill
        associated therewith, together with the right to trademark and all rights
        to
        renew or extend such trademarks and the right (but not the obligation) of
        Lender
        to sue in its own name and/or in the name of Borrower for past, present and
        future infringements of trademark provided that the Collateral shall not
        include
        any intent to use filings; 

       

      (d)
         all
        (i)
        patents and patent applications filed in the United States Patent and Trademark
        Office or any similar office of any foreign jurisdiction, and interests under
        patent license agreements, including the inventions and improvements described
        and claimed therein, (ii) licenses pertaining to any patent whether Borrower
        is
        licensor or licensee, (iii) income, royalties, damages, payments, accounts
        and
        accounts receivable now or hereafter due and/or payable under and with respect
        thereto, including damages and payments for past, present or future
        infringements thereof, (iv) right (but not the obligation) to sue in the
        name of
        Borrower and/or in the name of Lender for past, present and future infringements
        thereof, (v) rights corresponding thereto throughout the world in all
        jurisdictions in which such patents have been issued or applied for, and
        (vi) reissues, divisions, continuations, renewals, extensions and
        continuations-in-part with respect to any of the foregoing; and 

       

      (e)
         any
        and
        all cash proceeds and/or noncash proceeds of any of the foregoing, including
        insurance proceeds, and all supporting obligations and the security therefor
        or
        for any right to payment. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      All
        terms
        above have the meanings given to them in the Delaware Uniform Commercial
        Code,
        as amended or supplemented from time to time.

       

      The
        Collateral shall not include (i) any equity interests in Regulated Entities,
        or
        (ii) any lease, license, contract, property right or agreement to which Borrower
        is a party or any of its rights or interests thereunder if and only for so
        long
        as the grant of a security interest hereunder shall constitute or result
        in a
        breach, termination or default under any such lease, license, contract, property
        right or agreement (other than to the extent that any such term would be
        rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of
        the
        Uniform Commercial Code of any relevant jurisdiction or any other applicable
        law
        or principles of equity); provided,
        however,
        that
        such security interest shall attach immediately to any portion of such lease,
        license, contract, property rights or agreement that does not result in any
        of
        the consequences specified above. 

       

      

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      EXHIBIT
        B

      

      EXISTING
        SECURED CREDITORS

      

      
        	1. 
                  	
                Liens
                  securing that certain Amended and Restated Secured Convertible
                  Minimum
                  Borrowing Note, dated June 2, 2006, in the principal amount of
                  $4,250,000,
                  payable to Laurus Master Fund, Ltd. and all amounts owing in respect
                  of
                  the agreements related thereto.

              

      

       

      
        	2.  
                 	
                Liens
                  securing that certain Amended and Restated Secured Revolving Note,
                  dated
                  June 2, 2006, in the principal amount of $750,000, payable to Laurus
                  Master Fund, Ltd. and all amounts owing in respect of the agreements
                  related thereto.

              

      

       

      

       

      
 

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      SCHEDULE

       

      Existing
        Indebtedness

       

      The
        Indebtedness secured by the Liens described in Exhibit B.

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

         

      

 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      F

     

    Form
      of Legal Opinion

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      EXHIBIT
        F

       

      Opinion
        Points for Legal Opinion of Company Counsel

       

      1.  The
        Company is validly existing as a corporation and in good standing under Delaware
        law. The Company has the corporate power and authority to own, operate and
        lease
        its properties and to carry on any lawful business activity for which a
        corporation may be organized under Delaware law. 

       

      2.  Each
        of
        Atlantic and Communications is validly existing as a limited liability company
        and in good standing under Delaware law. Each has the power and authority
        to
        own, operate and lease its properties and to carry on any lawful business
        activity for which a limited liability company may be organized under Delaware
        law.

       

      3.  The
        Company has the corporate power and authority to execute, deliver and perform
        its obligations under the Investment Documents and to consummate the
        transactions contemplated thereby. The execution, delivery and performance
        of
        the Investment Documents by the Company and the consummation by the Company
        of
        the transactions contemplated thereby have been duly and validly approved
        and
        authorized by the Board of Directors of the Company, and no other corporate
        proceeding or action on the part of the Board of Directors of the Company
        is
        necessary for the execution and delivery by the Company of the Investment
        Documents and the performance by the Company of its obligations
        thereunder.

       

      4.  The
        Investment Documents have been duly and validly executed and delivered by
        the
        Company and subject, with respect to the convertibility into the Company’s
        Common Stock of the Convertible Note attached as Exhibit B-4 to the Purchase
        Agreement, to the approval of the Charter Amendment by the Company’s
        stockholders and the filing thereof with the Secretary of State of Delaware,
        constitute valid and binding obligations of the Company, enforceable against
        the
        Company in accordance with their terms.1

       

      5.  Neither
        the execution and delivery of the Investment Documents by the Company nor
        the
        performance by the Company its obligations thereunder will violate (a) the
        Company’s Certificate of Incorporation or Bylaws, (b) any order, writ,
        injunction or decree known to us of any federal, Connecticut or Delaware
        court
        that is applicable to the Company, or (c)  federal law or the DGCL.

       

      We
        are
        not representing the Company or any Subsidiary in any Legal Proceeding that
        is
        pending or threatened in writing against (a) the Company or any Subsidiary,
        (b) any officer, director, employee or agent of the Company or a Subsidiary
        in
        his, her or its capacity as such or relating to his, her or its employment,
        services or relationship with the Company or Subsidiary, or (c) any asset
        or
        property owned or used by the Company or a Subsidiary, in each case before
        any
        governmental entity, court or arbitrator. To our knowledge, there is no
        judgment, decree, injunction, rule or order of any federal, Connecticut or
        Delaware governmental entity, court or arbitrator outstanding against the
        Company that seeks to prohibit, restrain or enjoin the Company’s performance of
        the Investment Documents or the transactions contemplated thereby.

       

      

        

        
          1
            Please
            note that the opinion letter will assume for purposes of the opinion
            on
            enforceability of the conversion provisions of the Notes that the conversion
            occurs immediately after the Closing.

        

      

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      G

     

    Form
      of Voting Agreement

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      EXHIBIT
        G

      

      FORM
        OF VOTING AGREEMENT

       

      VOTING
        AGREEMENT,
        dated
        as of August __, 2006 (this “Agreement”),
        between MegaPath Inc., a Delaware corporation
        (“Parent”),
        and
[______________]
        (“Stockholder”).
        

       

      W
        I T N E S S E T H:

       

      WHEREAS,
        Parent
        has entered into that certain Purchase Agreement, dated as of August __,
        2006,
        by and among Parent, MDS Acquisition, Inc., a Delaware corporation and wholly
        owned subsidiary of Parent (“Buyer”),
        and
        DSL.net, Inc., a Delaware corporation (the “Company”)
        (as
        the same may be amended from time to time, the “Purchase
        Agreement”;
        capitalized terms used but not defined in this Agreement shall have the meanings
        ascribed to them in the Purchase Agreement), which provides, upon the terms
        and
        subject to the conditions thereof, for the purchase by Buyer of certain Notes
        issued by Company;

       

      WHEREAS,
        as of
        the date hereof, Stockholder owns shares of common stock, par value $0.0005
        per
        share, of the Company (the “Company
        Common Stock”);
        

       

      WHEREAS,
        as a
        condition to the willingness of Parent and Buyer to purchase Notes under
        the
        terms of the Purchase Agreement, Parent has requested that Stockholder enter
        into this Agreement.

       

      NOW,
        THEREFORE,
        in
        consideration of the promises and of the mutual agreements and covenants
        set
        forth herein and in the Purchase Agreement and for other good and valuable
        consideration, the receipt and adequacy of which are hereby acknowledged,
        and
        intending to be legally bound hereby, the parties hereto agree as
        follows:

       

      ARTICLE
        I

       

      VOTING
        OF SHARES

       

      SECTION
        1.01   Vote
        in Favor of the Charter Amendment.
        Stockholder, solely in Stockholder’s capacity as a stockholder of the Company,
        agrees to vote (or cause to be voted) all Shares (as defined below) at any
        meeting of the stockholders of the Company or any adjournment thereof, and
        in
        any action by written consent of the stockholders of the Company, (i) in
        favor of the Charter Amendment, and (ii) against any other action that
        could reasonably be expected to delay or not to facilitate approval of the
        Charter Amendment. “Shares”
shall
        mean any securities of the Company that Stockholder now and hereafter owns
        beneficially or of record or to which Stockholder otherwise has the power
        to
        vote, or directs the vote.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SECTION
        1.02   Grant
        of Irrevocable Proxy.
        Concurrently with the execution of this Agreement, Stockholder agrees to
        deliver
        to Parent a proxy with respect to the Shares in the form attached hereto
        as
Exhibit A,
        which
        shall be coupled with an interest and irrevocable to the fullest extent
        permissible by law.

       

      ARTICLE
        II

       

      REPRESENTATIONS,
        WARRANTIES AND COVENANTS 

      OF
        STOCKHOLDER

       

      SECTION
        2.01   Stockholder
        hereby represents and warrants to Parent as follows:

       

      (a)  Authorization;
        Binding Agreement.
        Stockholder has all legal right, power, authority and capacity to execute
        and
        deliver this Agreement and to perform Stockholder’s obligations hereunder, and
        to consummate the transactions contemplated hereby. This Agreement has been
        duly
        and validly executed and delivered by or on behalf of Stockholder and, assuming
        its due authorization, execution and delivery by or on behalf of Parent,
        constitutes a legal, valid and binding obligation of Stockholder, enforceable
        against Stockholder in accordance with its terms, subject to (i) the effect
        of any applicable bankruptcy, insolvency, moratorium or similar law affecting
        creditors’ rights generally and (ii) rules of law governing specific
        performance, injunctive relief and other equitable remedies.

       

      (b)  No
        Conflict; Required Filings and Consents.
        

       

      (i)  The
        execution and delivery of this Agreement to Parent by Stockholder does not,
        and
        the performance of this Agreement by Parent and Stockholder will not,
        (A) conflict with or violate, in a manner that would or would be reasonably
        expected to prevent or materially delay the performance by Stockholder of
        Stockholder’s obligations under this Agreement, any statute, law, rule,
        regulation, order, judgment or decree applicable to Stockholder or by which
        Stockholder or the Shares are bound or affected, (B) violate or conflict
        with the Certificate of Incorporation, Bylaws or other equivalent organizational
        documents of Stockholder (if any), or (C) result in or constitute (with or
        without notice or lapse of time or both) any material breach of or default
        under, or give to another party any right of termination, amendment,
        acceleration or cancellation of, or result in the creation of any lien or
        encumbrance or restriction on the Shares pursuant to, any note, bond, mortgage,
        indenture, contract, agreement, lease, license, permit, franchise or other
        instrument or obligation to which Stockholder is a party or by which Stockholder
        or the Shares are bound or affected, such that Stockholder would not, or
        would
        not be reasonably expected to, be able to perform, or would be materially
        delayed in performing, its obligations under this Agreement. There is no
        beneficiary or holder of a voting trust certificate or other interest of
        any
        trust of which Stockholder is a trustee whose consent is required for the
        execution and delivery of this Agreement or the consummation by Stockholder
        of
        the transactions contemplated by this Agreement.

      

      (ii)  The
        execution and delivery of this Agreement to Parent by Stockholder does not,
        and
        the performance of this Agreement by Parent and Stockholder will not, require
        any consent, approval, authorization or permit of, or filing with or
        notification to, any third party or any governmental or regulatory authority,
        domestic or foreign, except where 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      the
        failure to obtain such consents, approvals, authorizations or permits, or
        to
        make such filings or notifications, would not and would not reasonably be
        expected to prevent or materially delay the performance by Stockholder of
        Stockholder’s obligations under this Agreement. Stockholder does not have any
        understanding in effect with respect to the voting or transfer of any
        Shares.

      

      SECTION
        2.02   Further
        Assurances.
        From
        time to time and without additional consideration, Stockholder shall execute
        and
        deliver, or cause to be executed and delivered, such additional transfers,
        assignments, endorsements, proxies, consents and other instruments, and shall
        take such further actions, as Parent may reasonably request for the purpose
        of
        carrying out and furthering the intent of this Agreement.

      

      ARTICLE
        III

       

      GENERAL
        PROVISIONS

       

      SECTION
        3.01   Entire
        Agreement; Amendments.
        This
        Agreement constitutes the entire agreement of the parties, and supersedes
        all
        prior agreements and undertakings, both written and oral, between the parties,
        with respect to the subject matter hereof. This Agreement may not be amended
        or
        modified except in an instrument in writing signed by, or on behalf of, the
        parties hereto.

      

      SECTION
        3.02   Assignment.
        The
        provisions of this Agreement shall be binding upon and inure to the benefit
        of
        the parties hereto and their respective successors and permitted assigns;
        provided that
        any
        assignment, delegation or attempted transfer of any rights, interests or
        obligations under this Agreement by Stockholder without the prior written
        consent of Parent shall be void.

      

      SECTION
        3.03   Severability.
        If any
        term or other provision of this Agreement is invalid, illegal or incapable
        of
        being enforced by any rule of law or public policy, all other conditions
        and
        provisions of this Agreement shall nevertheless remain in full force and
        effect
        so long as the economic or legal substance of the transactions contemplated
        hereby is not affected in any manner materially adverse to any party. Upon
        such
        determination that any term or other provision is invalid, illegal or incapable
        of being enforced, the parties hereto shall negotiate in good faith to modify
        this Agreement so as to effect the original intent of the parties as closely
        as
        possible to the fullest extent permitted by applicable law in an acceptable
        manner. 

       

      SECTION
        3.04   Specific
        Performance.
        The
        parties agree that irreparable damage would occur in the event that any of
        the
        provisions of this Agreement is not performed in accordance with its specific
        terms or is otherwise breached. Stockholder agrees that, in the event of
        any
        breach or threatened breach by Stockholder of any covenant or obligation
        contained in this Agreement, Parent may (in addition to any other remedy
        that
        may be available to it, including monetary damages) seek and obtain (a) a
        decree or order of specific performance to enforce the observance and
        performance of such covenant or obligation, and (b) an injunction
        restraining such breach or threatened breach. Stockholder further agrees
        that
        Parent shall not be required to obtain, furnish or post any bond or similar
        instrument in connection with or as a condition to obtaining any remedy referred
        to in this Section 3.04, and Stockholder irrevocably waives any 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      right
        he,
        she or it may have to require the obtaining, furnishing or posting of any
        such
        bond or similar instrument.

       

      SECTION
        3.05   Governing
        Law; Forum.
        This
        Agreement shall be governed by, and construed in accordance with, the laws
        of
        the State of Delaware applicable to contracts executed in and to be performed
        in
        that state and without regard to any applicable conflicts of law. 

       

      SECTION
        3.06   No
        Waiver.
        No
        failure or delay by any party in exercising any right, power or privilege
        hereunder shall operate as a waiver thereof, nor shall any single or partial
        exercise thereof preclude any other or further exercise thereof or the exercise
        of any other right, power or privilege. Neither Parent nor Stockholder shall
        be
        deemed to have waived any claim available to it arising out of this Agreement,
        or any right, power or privilege hereunder, unless the waiver is expressly
        set
        forth in writing duly executed and delivered on behalf of Parent or such
        Stockholder, as applicable. The rights and remedies herein provided shall
        be
        cumulative and not exclusive of any rights or remedies provided by
        law.

       

      SECTION
        3.07   Counterparts.
        This
        Agreement may be executed in two or more counterparts, and by the different
        parties hereto in separate counterparts, each of which when executed shall
        be
        deemed to be an original but all of which taken together shall constitute
        one
        and the same agreement.

       

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF,
        each of
        Parent and Stockholder has executed or has caused this Voting Agreement to
        be
        executed by their respective duly authorized officers as of the date first
        written above.

       

      
        	 	 	 
	 	MEGAPATH
                INC.
	 
 	 
 	 
 
	 	  	 
	 	
                

                Name:

                Title:

              
	 	 

      
        	 	 	 
	 	
                [STOCKHOLDER]

              
	 
 	 
 	 
 
	 	 	 
	 	
                

                [Name:]

                [Title:]

              
	 	Title 

      

       

       

       

       

       

       

       

       

      
 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      EXHIBIT
        A

      

      IRREVOCABLE
        PROXY

      

      The
        undersigned stockholder of DSL.net, Inc., a Delaware corporation (the
“Company”), hereby irrevocably (to the fullest extent permitted by law)
        appoints the directors on the Board of Directors of MegaPath Inc., a Delaware
        corporation (“Parent”), and each of them, as the sole and exclusive
        lawful attorneys-in-fact and proxies of the undersigned, with full power
        of
        substitution and resubstitution, to vote and exercise all voting and related
        rights (to the full extent that the undersigned is entitled to do so) with
        respect to all of the Shares (as defined in that certain Voting Agreement,
        dated
        as of even date herewith, by and between Parent and the undersigned (the
        “Voting Agreement”)) in accordance with the terms of this Proxy. This
        Proxy is irrevocable (to the fullest extent permitted by law), is coupled
        with
        an interest and is granted pursuant to the Voting Agreement, and is granted
        in
        consideration of Parent’s purchase of Notes pursuant to that certain Purchase
        Agreement (the “Purchase Agreement”), dated as of August __, 2006, by and
        among Parent, MDS Acquisition, Inc., a Delaware corporation and wholly owned
        subsidiary of Parent, and the Company. 

       

      The
        attorneys-in-fact and proxies named above, and each of them, are hereby
        authorized and empowered by the undersigned to act as the undersigned’s true and
        lawful attorneys-in-fact and proxies to vote the Shares, and to exercise
        all
        voting, consent and similar rights of the undersigned with respect to the
        Shares
        (including, without limitation, the power to execute and deliver in the
        undersigned’s name any consent, certificate or other document that may be
        required by law) at every annual, special or adjourned meeting of stockholders
        of the Company and in every written consent in lieu of such meeting in favor
        of
        adoption of the Charter Amendment (as defined in the Purchase
        Agreement).

       

      The
        attorneys-in-fact and proxies named above may not exercise this Proxy on
        any
        other matter except as provided above. The undersigned may vote the Shares
        on
        all other matters. Any obligation of the undersigned hereunder shall be binding
        upon the successors and assigns of the undersigned. This Proxy is irrevocable
        (to the fullest extent permitted by law). 

       

      

       

      
        	Dated: August __, 2006 	
                Signature
                  of Stockholder:

                
                  

                

              
	 	 
	 	
                Print Name of Stockholder: 

                
                  

                

              

      

               

      

       

      

      

      

    

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      H

     

    Form
      of Perfection Certificate

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    PERFECTION
      CERTIFICATE

     

    TO: MDS
      ACQUISITION, INC.

    

    The
      undersigned, the  
      of
      DSL.net, Inc. (the “Company”),
      hereby represents and warrants to you on behalf of the Company as
      follows:

     

    
      	 	
              1.

            	
              NAMES
                OF THE COMPANY

            

    

     

    a.    The
      name
      of the Company as it appears in its current Articles or Certificate of
      Incorporation is: DSL.net,
      Inc.

     

    b.    The
      federal employer identification number of the Company is:  

     

    c.    The
      Company is formed under
      the
      laws of the State of Delaware. 

     

    d.    The
      organizational identification number of the Company is:  

     

    e.    The
      Company transacts business in the following jurisdictions (list jurisdictions
      other than jurisdiction of formation):   

     

    f.    The
      Company is duly qualified to transact business as a foreign entity in the
      following jurisdictions (list jurisdictions other than jurisdiction of
      formation):   

     

    g.    The
      following is a list of all other names (including fictitious names, d/b/a’s,
      trade names or similar names) currently used by the Company or used within
      the
      past five years:

     

    
      	
               

              Name

               

            	
               

              Period
                of Use

               

            
	
               

               

            	
               

               

            
	
               

               

            	
               

               

            
	
               

               

            	
               

               

            

    

    

    h.    The
      following are the names of all entities which have been merged into the Company
      during the past five years: 

     

    
      	
               

              Name
                of Merged Entity

               

            	
               

              Year
                of Merger

               

            
	
               

               

            	
               

               

            
	
               

               

            	
               

               

            
	
               

               

            	
               

               

            

    

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

     

    
      
        	
                To:
                  MDS Acquisition, Inc. 

              	
                Perfection
                  Certificate

              

      

       

    

    i.    The
      following are the names and addresses of all entities from whom the Company
      has
      acquired any personal property in a transaction not in the ordinary course
      of
      business during the past five years, together with the date of such acquisition
      and the type of personal property acquired (e.g., equipment, inventory, etc.):
      

     

    
      	
               

              Name

               

            	
               

              Address

               

            	
               

              Date
                of Acquisition

               

            	
               

              Type
                of Property

               

            
	
               

               

            	
               

               

            	
               

               

            	
               

               

            
	
               

               

            	
               

               

            	
               

               

            	
               

               

            
	
               

            	
               

               

            	
               

               

            	
               

               

            

    

    

    
      	
            	2.	
              LOCATIONS
                OF COMPANY
                AND ITS SUBSIDIARIES

            

    

    

    a.    The
      Company’s chief executive offices are presently located at the following
      addresses: 

     

    
      	
               

              Complete
                Street and Mailing Address, including County and Zip Code

               

            
	
               

               

            

    

    

    b.    The
      Company’s books and records are located at the following additional addresses
      (if different from the above): 

     

    
      	
               

              Complete
                Street and Mailing Address, including County and Zip Code

               

            
	
               

               

            

    

    

    c.    The
      following are all the locations where the Company owns, leases, or occupies
      any
      real property: 

     

    
      	
               

              Complete
                Street and Mailing Address, including County and Zip Code

               

            
	
               

               

            

    

    

    d.    The
      following are all of the locations where the Company maintains any inventory,
      equipment, or other property: 

     

    
      	
               

              Complete
                Address

               

            
	
               

               

            
	
               

               

            
	
               

               

            
	
               

               

            

    

     

    
 

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    
       

      
        	
                To:
                  MDS Acquisition, Inc. 

              	
                Perfection
                  Certificate

              

      

       

      e.    The
        following are the names and addresses of all warehousemen, bailees, or other
        third parties who have possession of any of the Company’s inventory:

    

     

    
      	
               

              Name

               

            	
               

              Complete
                Street and Mailing Address, including County and Zip Code

               

            
	
               

               

            	
               

               

            
	
               

               

            	
               

               

            
	
               

               

            	
               

               

            
	
               

               

            	
               

               

            

    

    

    
      	 	
              3.

            	
              SPECIAL
                TYPES OF COLLATERAL

            

    

     

    a.    The
      Company owns the following kinds of assets. (If the answer is “Yes” to any of
      the following questions) 

     

    
      	
               

              Copyrights
                or copyright applications registered with the U.S. Copyright
                Office

               

            	
               

              Yes    No
                

               

            
	
               

              Software
                registered with the U.S. Copyright Office

               

            	
               

              Yes    No
                

               

            
	
               

              Software
                not
                registered with the U.S. Copyright Office

               

            	
               

              Yes    No
                

               

            
	
               

              Patents
                and patent applications

               

            	
               

              Yes    No
                

               

            
	
               

              Trademarks
                or trademark applications (including any service marks, collective
                marks
                and certification marks)

               

            	
               

              Yes    No
                

               

            
	
               

              Licenses
                to use trademarks, patents and copyrights of others

               

            	
               

              Yes    No
                

               

            
	
               

              Licenses,
                permits (including environmental), authorizations, or certifications
                issued by federal, state, or local governments issued to the Company
                

               

            	
               

              Yes    No
                

               

            
	
               

              Stocks,
                bonds or other securities

               

            	
               

              Yes    No
                

               

            
	
               

              Promissory
                notes, or other instruments or evidence of indebtedness

               

            	
               

              Yes    No
                

               

            
	
               

              Leases
                of equipment, security agreements naming such person as secured party
                or
                other chattel paper

               

            	
               

              Yes    No
                

               

            
	
               

              Aircraft

               

            	
               

              Yes    No
                

               

            
	
               

              Vessels,
                Boats or Ships

               

            	
               

              Yes    No
                

               

            
	
               

              Motor
                Vehicles

               

            	
               

              Yes    No
                

               

            

    

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    
       

      
        	
                To:
                  MDS Acquisition, Inc. 

              	
                Perfection
                  Certificate

              

      

       

    

    b.    The
      following is a list of material contracts to which the Company is a party
      (include any equipment leases) or in which the Company has an interest
      (including whether such contract has a nonassignability provision which would
      require the other party’s or another person’s consent to the granting of a
      security interest in such contract):

     

    
      	 	 	
              Nonassignability
                Clause

               

            
	
               

              Other
                Party to Contract

               

            	
               

              Title/Date
                of Contract

               

            	
               

              Asset
                Sale (Y/N)

               

            	
               

              Security
                Interest (Y/N)

               

            	
              Consent
                Obtained 

              (Y/N)

               

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

    

    

    c.    The
      following are all banks or savings institutions at which the Company maintains
      deposit accounts: 

     

    
      	
               

              Bank
                Name

               

            	
               

              Account
                Number

               

            	
               

              Branch
                Address

               

            
	
               

               

            	
               

               

            	
               

               

            
	
               

               

            	
               

               

            	
               

               

            
	
               

               

            	
               

               

            	
               

               

            
	
               

               

            	
               

               

            	
               

               

            

    

    

    d.    Does
      or
      is it contemplated that the Company will regularly receive letters of credit
      from customers or other third parties to secure payments of sums owed to the
      Company? The following is a list of letters of credit naming the Company as
      “beneficiary” thereunder:

    

    
      	
              LC
                Number

            	
              Name
                of LC Issuer

            	
              LC
                Applicant

               

            
	 	 	 
	 	 	 
	 	 	 

    

    

    
      	 	
              4.

            	
              ENCUMBRANCES

            

    

     

    The
      Company’s property is subject to the following liens or encumbrances:

     

    
      	
              Name
                of Holder of 

              Lien/Encumbrance

               

            	
              Description
                of Property Encumbered

               

            
	 	 
	 	 
	 	 

    

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    
       

      
        	
                To:
                  MDS Acquisition, Inc. 

              	
                Perfection
                  Certificate

              

      

      
 

    

    
      	
            	5.	
              TAXES

            

    

     

    The
      following tax assessments are currently outstanding and unpaid:

     

    
      	
              Assessing
                Authority

               

            	
              Amount
                and Description

               

            
	 	 
	 	 
	 	 

    

    

    
      	 	
              6.

            	
              INSURANCE
                BROKER

            

    

     

    The
      following broker handles the Company’s property insurance: 

     

    
      	
               

              Broker

               

            	
               

              Contact

               

            	
               

              Telephone

               

            	
               

              Fax

               

            	
               

              Email

               

            
	
               

               

               

            	
               

               

               

            	
               

               

               

            	
               

               

               

            	
               

               

               

            

    

     

    The
      Company agrees to advise you of any change or modification to any of the
      foregoing information or any supplemental information provided on any
      continuation pages attached hereto, and, until such notice is received by you,
      you shall be entitled to rely upon such information and presume it is correct.
      The Company acknowledges that your acceptance of this Perfection Certificate
      and
      any continuation pages does not imply any commitment on your part to enter
      into
      a loan transaction with the Company, and that any such commitment may only
      be
      made by an express written loan commitment, signed by one of your authorized
      officers.

     

    
      	 	 	 
	 	DSL.net,
              Inc.
	 
 	 
 	 
 
	Date:
              August __, 2006	By:  	 
	 	
              

              Its:
	 	
              

            

    

        

     

    
      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

    

     

    
      	
              To:
                MDS Acquisition, Inc. 

            	
              Perfection
                Certificate

            

    

    

    Continuation
      Page—Additional Information

    

     

     

    

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        -6-EXHIBIT
10.1

Audit Committee

Grant Date

Grantee

Address

City, State Zip

Re:                               Grant
of Restricted Units

Dear:

I am
pleased to inform you that your existing grant (the “Prior Grant”) of
Restricted Units under the Company’s 1998 Long-Term Incentive Plan (the “Plan”)
is hereby supplemented with an additional grant of 5,000 Restricted Units
(10,000 total).  The terms and conditions
of this grant are as set forth below.

1.                     Subject to
the further provisions of this Agreement, the Restricted Units granted by this
letter shall vest (become payable in the form of one Common Unit of Plains All
American Pipeline, L.P. for each Restricted Unit) as follows: 1,250 Restricted
Units will vest on August 31, 2006; thereafter, 1,250 units (in addition to
units vesting under the Prior Grant) will vest annually on the August
Distribution Date.

2.                     As of each
vesting date, for so long as your service on the Board of Directors is not
terminated, you shall automatically receive a grant, evidenced hereby, of an
additional 1,250 Restricted Units, such that the total outstanding Restricted
Units granted by this letter shall remain 5,000 (in addition to the Prior
Grant).

3.                     In the event
that (i) you voluntarily terminate your service on the Board of Directors
(other than for Retirement) or (ii) your service on the Board of Directors is
terminated by the Members for Good Cause, all unvested Restricted Units shall
be forfeited as of the date service terminates. 
All unvested Restricted Units shall also be forfeited upon any intentional
change in status that compromises your classification as an “independent
director” as such phrase is used in applicable NYSE listing requirements and
the Partnership Agreement (as defined below). 
Examples of intentional change in status would include accepting a
position as an officer of a company with which the Partnership conducts
business in amounts that exceed NYSE tests for independence or purchasing an
interest in the Partnership’s general partner. 
Examples that would not involve an intentional change in status would
include a change in the applicable rules that results in a change of status.

4.                     In the event
your service on the Board of Directors is terminated for any reason other than
as described in paragraph 3 above, including without limitation because of your
death, disability (as determined in good faith by the Board) or Retirement, all
unvested Restricted Units shall immediately become nonforfeitable, and shall
vest in full as of the next vesting date.

5.                     In the event
of a vesting under paragraph 4 above, the provisions of paragraph 2 above shall
no longer be operative.

For the purposes
of this Agreement, the Members shall have “Good Cause” to remove or fail to
reelect you as a Director only upon (i) your willful engaging in gross
misconduct, including without limitation any 

 

willful breach of
your fiduciary duties, (ii) your violation of the Company’s Code of Business
Conduct (unless waived in accordance with the terms thereof), or (iii) your
nonappealable conviction of a felony involving moral turpitude.  For purposes of this paragraph, no act, or
failure to act, on your part shall be considered “willful” unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your act or omission was in the best interest of the Company or the Partnership
or otherwise likely to result in no material injury thereto.  Notwithstanding the foregoing, any removal of
or failure to reelect you shall not be deemed to have been for Good Cause
unless and until you receive a copy of a resolution, duly adopted by the
affirmative vote of the Board of Directors at a meeting duly called and held
for that purpose, finding that in the good faith opinion of the Board of
Directors, “Good Cause” exists as described above in clause (i), (ii) or (iii)
and specifying the particulars thereof in detail.

As
used herein, the phrase “Distribution Date” means the date, in any given month
and year, on which the Partnership pays a quarterly distribution.  The “Company” refers to Plains All American
GP LLC.  The “Partnership” refers to
Plains All American Pipeline, L.P.  The
term “Retirement” means you no longer serve as an officer or director of any
public company and have retired from full-time employment.  The term “Members” means the owners of the Company
in their capacity as members thereof.

Terms used herein that are not
defined herein shall have the meanings set forth in the Plan or, if not defined
in the Plan, in the Third Amended and Restated Agreement of Limited Partnership
of Plains All American Pipeline, L.P., as amended (the “Partnership Agreement”).
By signing below, you agree that the Restricted Units granted hereunder are
governed by the terms of the Plan.  
Copies of the Plan and the Partnership Agreement are available upon
request.  Please execute and return this
Agreement to me.  The attached copy of
this Agreement is for your records.

	
  

  	
  PLAINS ALL AMERICAN PIPELINE, L.P.

  
	
   

  	
  By:

  	
  PLAINS AAP, L.P.

  
	
   

  	
  By:

  	
  PLAINS ALL AMERICAN GP
  LLC

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Tim Moore

  
	
   

  	
  Title:

  	
  Vice President & General Counsel

  
	
   

  	
   

  	
   

  
	
  First Name Last
  Name

  	
   

  	
   

  
	
  SSN:

  	
       SSN

  	
   

  
	
  Dated:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]