-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qh0jAzK3DIJmZwjVIpOCMoSLyr97TgFOmPoyAup/Cra8YmOZ+THgnh5QqoCo93B+ crW+SMYzlwNAD9jlUCvQ1w== 0000947871-03-002751.txt : 20031219 0000947871-03-002751.hdr.sgml : 20031219 20031219130310 ACCESSION NUMBER: 0000947871-03-002751 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20031219 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DEUTSCHE BANK AG\ CENTRAL INDEX KEY: 0000948046 IRS NUMBER: 13294498 STATE OF INCORPORATION: I8 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: TAUNUSANLAGE 12 D-60325 CITY: FRANKFURT AM MAIN GE STATE: I8 MAIL ADDRESS: STREET 1: TAUNUSANLAGE 12 D-60325 CITY: FRANKFURT AM MAIN STATE: I8 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DSL NET INC CENTRAL INDEX KEY: 0001085866 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 061510312 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-57993 FILM NUMBER: 031064395 BUSINESS ADDRESS: STREET 1: 545 LONG WHARF DR CITY: NEW HAVEN STATE: CT ZIP: 06511 BUSINESS PHONE: 2037721000 MAIL ADDRESS: STREET 1: 545 LONG WHARF DRIVE CITY: NEW HAVEN STATE: CT ZIP: 06511 SC 13D 1 sc13d_121703.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 DSL.NET, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.0005 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 262506 10 8 - -------------------------------------------------------------------------------- (CUSIP Number) Deutsche Bank AG c/o DB Advisors, L.L.C. 280 Park Avenue, New York, New York, 10017 (212) 469-7471 Attn: General Counsel - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 9, 2003 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the Schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. The information required on this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Exchange Act") or otherwise subject to the liabilities of that section of the Exchange Act but shall be subject to all other provisions of the Exchange Act (however, see the Notes). (Continued on following pages) (Page 1 of 14 pages) SCHEDULE 13D - ------------------------ ----------------------- CUSIP No. 262506 10 8 Page 2 of 14 Pages - ------------------------ ----------------------- - ------------ ------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Deutsche Bank AG - ------------ ------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[X] (b)[ ] - ------------ ------------------------------------------------------------------- 3 SEC USE ONLY - ------------ ------------------------------------------------------------------- 4 SOURCE OF FUNDS WC (See Item 3) - ------------ ------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - ------------ ------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Deutsche Bank AG is organized under the laws of the Federal Republic of Germany. - ------------ ------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 (SEE ITEM 5) OWNED BY -------- -------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING 118,421,053 (SEE ITEM 5) PERSON WITH --------- -------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 (SEE ITEM 5) --------- -------------------------------------------- 10 SHARED DISPOSITIVE POWER 118,421,053 (SEE ITEM 5) - ------------ ------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 118,421,053 (SEE ITEM 5) - ------------ ------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ------------ ------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 55.4% (SEE ITEM 5) - ------------ ------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON BK - ------------ ------------------------------------------------------------------- - ------------------------ ------------------------ CUSIP No. 262506 10 8 Page 3 of 14 Pages - ------------------------ ------------------------ - ------------ ------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON DB Advisors, L.L.C. - ------------ ------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ] (b)[X] - ------------ ------------------------------------------------------------------- 3 SEC USE ONLY - ------------ ------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - ------------ ------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) - ------------ ------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------ ---------- -------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 (SEE ITEM 5) OWNED BY EACH REPORTING PERSON WITH ---------- -------------------------------------------- 8 SHARED VOTING POWER 118,421,053 (SEE ITEM 5) ---------- -------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 (SEE ITEM 5) ---------- -------------------------------------------- 10 SHARED DISPOSITIVE POWER 118,421,053 (SEE ITEM 5) - ------------------------ ---------- -------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 118,421,053 (SEE ITEM 5) - ------------ ------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - ------------ ------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 55.4% (SEE ITEM 5) - ------------ ------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IA - ------------ ------------------------------------------------------------------- Item 1. Security and Issuer. This statement on Schedule 13D (this "Statement") relates to warrants to purchase a certain number of shares of common stock, par value $0.0005 per share (the "Common Stock"), of DSL.net, Inc., a Delaware corporation (the "Company"). The principal executive offices of the Company are located at 545 Long Wharf Drive, 5th Floor, New Haven, Connecticut 06511. Item 2. Identity and Background. This Statement is being filed by DB Advisors, L.L.C. ("DB Advisors") and Deutsche Bank AG ("Deutsche Bank", together with DB Advisors, the "Reporting Persons" and each, a "Reporting Person"). A joint filing agreement has been filed as Exhibit 1 to this Statement pursuant to Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). DB Advisors is a limited liability company organized under the laws of Delaware, and is a wholly owned subsidiary of Deutsche Bank. Deutsche Bank is organized under the laws of the Federal Republic of Germany. The securities associated with this Statement were acquired through the London Branch of Deutsche Bank, which is licensed by the United Kingdom banking authority. The address of the principal office of DB Advisors is 280 Park Avenue, New York, New York 10017. The address of the principal place of business of Deutsche Bank is Taunusanlage 12, 60325 Frankfurt, Federal Republic of Germany. The principal business activity of DB Advisors is to act as a proprietary trading group that invests in publicly listed companies undergoing financial or operational restructuring. The principal business of Deutsche Bank is the provision of financial and related services. Deutsche Bank is the largest banking institution in the Federal Republic of Germany and is the parent company of a group consisting of banks, capital market and fund management companies, mortgage banks and property finance companies, installment financing and leasing companies, insurance companies, research and consultancy companies and other companies. In addition, in accordance with Securities Exchange Act Release No. 39538 (January 12, 1998), this Statement reflects the securities beneficially owned by the Corporate and Investment Banking business group and the Corporate Investments business group (collectively, "CIB") of Deutsche Bank and its subsidiaries and affiliates. This filing does not reflect securities, if any, beneficially owned by any other business group of Deutsche Bank. Consistent with Rule 13d-4 under the Exchange Act, this filing shall not be construed as an admission that CIB is, for purposes of Section 13(d) under the Exchange Act, the beneficial owner of any securities covered by the filing. Furthermore, CIB disclaims beneficial ownership of the securities beneficially owned by (i) any client accounts with respect to which CIB or its employees have voting or investment discretion, or both, and (ii) certain investment entities, of which CIB is the general partner, managing general partner, or other manager, to the extent interests in such entities are held by persons other than CIB. Set forth on Schedules A-1 and A-2 to this Statement, and incorporated herein by reference, are lists of the executive officers and directors of the Reporting Persons that contain the following information with respect to each such person: (i) name, (ii) business address, (iii) present principal occupation or employment and (iv) citizenship. During the last five years, none of the Reporting Persons and, to the best knowledge of the Reporting Persons, none of the persons named on Schedules A-1 and A-2 hereto has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. Pursuant to the terms of the Note and Warrant Purchase Agreement dated as of July 18, 2003 (the "Purchase Agreement") by and among the Company, Deutsche Bank and the investors listed on Schedule B thereto (the "Existing Investors", together with Deutsche Bank, the "Investors"), in consideration for $22,500,000, Deutsche Bank, acting through its London Branch and DB Advisors, acquired a senior secured promissory note in the principal amount of $22,500,000 (the "Note") and warrants to purchase 118,421,053 shares of Common Stock. On August 12, 2003, warrants to purchase 12,950,000 shares of Common Stock (the "Initial Warrants") were issued to Deutsche Bank. On December 9, 2003, warrants to purchase 105,471,053 shares of Common Stock (the "Subsequent Warrants", and together with the Initial Warrants, the "Warrants") were issued to Deutsche Bank. The Initial Warrants did not become exercisable until the issuance of the Subsequent Warrants and as of December 9, 2003 all of the Warrants were immediately exercisable. All funds used by DB Advisors to acquire the above-listed securities were provided to DB Advisors by Deutsche Bank. Deutsche Bank provided the funds out of working capital. Item 4. Purpose of Transaction. Deutsche Bank purchased the securities covered by this Statement in order to acquire an interest in the Company for investment purposes. Deutsche Bank intends to review continuously its position in the Company. Depending on further evaluations of the business prospects of the Company and upon other developments, including, but not limited to, general economic and business conditions and stock market conditions, Deutsche Bank may (i) exercise its right to purchase Common Stock pursuant to the Warrants, (ii) retain or dispose of all or a portion of the Note, the Warrants and/or Common Stock beneficially owned by it, subject to any applicable legal and contractual restrictions on its ability to do so in privately negotiated transactions, open market sales or otherwise or (iii) purchase or dispose of any other securities of the Company. Pursuant to the terms of the Amended and Restated Stockholders Agreement (the "Stockholders Agreement") by and among (i) the Company, (ii) Deutsche Bank, (iii) the Existing Investors, (iv) the holders of shares of Series X Convertible Preferred Stock, par value $0.001 per share, of the Company (the "Series X Holders"), (v) the holders of shares of Series Y Convertible Preferred Stock, par value $0.001 per share, of the Company (the "Series Y Holders") and (vi) the holders (the "Guarantee Holders", together with the Existing Investors, the Series X Holders and the Series Y Holders, the "Majority Stockholders") of the warrants exercisable for shares of Common Stock issued in connection with the guaranty of the Company's obligations under that certain Revolving Credit and Term Loan Agreement dated as of December 13, 2002 by and between the Company and Fleet National Bank, and subject to applicable laws and regulations, Deutsche Bank has the right to designate two individuals to serve on the board of directors of the Company (the "Board of Directors") subject to certain limitations. In addition, the matters set forth in Item 6 below are incorporated in this Item 4 by reference as if fully set forth herein. Except as set forth in this Item 4 (including the matters described in Item 6, which are incorporated in this Item 4 by reference), the Reporting Persons have no present plans or proposals that relate to, or that would result in, any of the actions specified in clauses (a) through (j) of Schedule 13D of the Exchange Act. Item 5. Interest in Securities of the Issuer. (a) - (b) On August 12, 2003, Deutsche Bank, acting through its London Branch and DB Advisors, acquired the Initial Warrants. On December 9, 2003, Deutsche Bank, acting through its London Branch and DB Advisors, acquired the Subsequent Warrants. Based on the 95,179,736 shares of Common Stock outstanding as of November 7, 2003 and assuming that the Warrants are fully exercised, after such exercise Deutsche Bank would beneficially own approximately 55.4% of the outstanding Common Stock. DB Advisors acts as the discretionary investment manager for Deutsche Bank with respect to the Warrants and, as such, shares the power to exercise and dispose of such Warrants and the shares of Common Stock issuable upon the exercise of the Warrants, and, upon exercise of the Warrants, would share the power to vote or direct the vote of the shares of Common Stock issuable upon such exercise. In connection with the Purchase Agreement, Deutsche Bank, acting through its London Branch and DB Advisors, entered into the Stockholders Agreement. Pursuant to the Stockholders Agreement, each of the Majority Stockholders and Deutsche Bank has agreed to vote all of its shares of voting stock of the Company in favor of certain designees of Deutsche Bank, the Series X Holders and the Series Y Holders for election to the Board of Directors. As a result of the voting and other agreements set forth in the Shareholders Agreement, the Reporting Persons may be deemed to beneficially own the shares of stock or similar securities of the Company or any securities convertible or exchangeable into or for any such stock or similar securities, or any securities carrying any warrant or right to subscribe to or purchase any such stock or similar securities, or any such warrant or right (the "Equity Securities") held by the Majority Stockholders. Each Reporting Person disclaims beneficial ownership of those Equity Securities held by the Majority Stockholders. (c) Except for the transactions described herein, there were no transactions effected in the past sixty days in this class of securities by either Deutsche Bank or DB Advisors. (d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understanding or Relationships with respect to Securities of the Issuer. The response to Item 4 of this Statement is incorporated herein by reference. Purchase Agreement - ------------------ On July 18, 2003, Deutsche Bank, acting through its London Branch and DB Advisors, entered into the Purchase Agreement relating to the sale and purchase of (i) $30,000,000 in aggregate principal amount of senior secured promissory notes and (ii) three-year warrants to purchase an aggregate of 157,894,737 shares of Common Stock at an exercise price of $0.38 per share. Pursuant to the terms of the Purchase Agreement, Deutsche Bank, acting through its London Branch and DB Advisors, agreed to purchase from the Company the $22,500,000 Note and the Warrants. This description of the Purchase Agreement is qualified in its entirety by reference to the Purchase Agreement, a copy of which has been filed as Exhibit 2 to this Statement and is incorporated herein by reference. Stockholders Agreement - ---------------------- On July 18, 2003, Deutsche Bank, acting through its London Branch and DB Advisors, entered into the Stockholders Agreement. Pursuant to the terms of the Stockholders Agreement and subject to applicable laws and regulations, Deutsche Bank has the right to designate one or two individuals, as applicable, to serve on the Board of Directors. For so long as Deutsche Bank beneficially owns (x) an outstanding Note with an aggregate principal amount of at least $10,000,000 or (y) at least 52,631,579 shares of Common Stock issued or issuable upon exercise of the Warrants, Deutsche Bank has the right to designate two people to serve on the Board of Directors and each of the Majority Stockholders has agreed to vote all of its shares of voting stock of the Company in favor of the election to the Board of Directors of such two designees of Deutsche Bank. If Deutsche Bank is no longer entitled to designate two directors pursuant to the preceding sentence, for so long as Deutsche Bank beneficially owns (x) an outstanding Note with an aggregate principal amount of at least $5,000,000 or (y) at least 26,315,790 shares of Common Stock issued or issuable upon exercise of the Warrants, Deutsche Bank has the right to designate one person to serve on the Board of Directors and each of the Majority Stockholders has agreed to vote all of its shares of voting stock of the Company in favor of the election to the Board of Directors of such designee of Deutsche Bank. In addition, pursuant to the Stockholders Agreement, Deutsche Bank received certain registration rights, whereby it may notify the Company that it intends to offer or cause to be offered for public sale the shares of Common Stock issuable upon exercise of the Warrants held by it and, if applicable, that Deutsche Bank intends to distribute the Common Stock by means of an underwriting (the "Notice"). Upon receipt of such Notice, the Company is obligated to file with the SEC and use best efforts to have declared effective, a shelf registration statement on Form S-3 or, if Form S-3 is not available, on such other form that is available for use by the Company under the Securities Act of 1933, as amended (the "Act"), as expeditiously as possible, with respect to the Common Stock issuable upon exercise of the Warrants. The registration rights set forth in the Stockholders Agreement expire and terminate on July 1, 2008. The Company has the customary "black out" rights to delay the filing or effectiveness of any registration statement under the Stockholders Agreement. If the Company proposes to register any of its securities under the Act for sale to the public, whether for its own account or for the account of security holders other than Deutsche Bank, it must give written notice to Deutsche Bank of its intention to do so before the initial filing with the SEC of such registration statement. Deutsche Bank may request that the Company include its shares of Common Stock in such offering, and the Company shall use its best efforts to cause such Common Stock to be included in the securities to be covered by the registration statement proposed to be filed by the Company. The Stockholders Agreement contains customary indemnification provisions for the registration rights. This description of the Stockholders Agreement is qualified in its entirety by reference to the Stockholders Agreement, a copy of which has been filed as Exhibit 3 to this Statement and is incorporated herein by reference. Warrants - -------- As of December 9, 2003, Deutsche Bank held the Warrants to purchase 118,421,053 shares of Common Stock. The Warrants will expire July 18, 2006, have an exercise price of $0.38 per share and provide for customary adjustments upon the occurrence of mergers and consolidations, stock splits, stock dividends and other pro rata events. The Warrants also contain a net exercise provision. This description of the Warrants is qualified in its entirety by reference to the Initial Warrants, a copy of which has been filed as Exhibit 4 to this Statement and is incorporated herein by reference, and the Subsequent Warrants, a copy of which has been filed as Exhibit 5 to this Statement and is incorporated herein by reference. Note - ---- Subject to the terms and conditions of the Purchase Agreement, the Company issued the $22,500,000 Note to Deutsche Bank on July 18, 2003. Principal on the Note is payable in a single payment on July 18, 2006. The Note provides for an annual interest rate of 1.23% payable in cash quarterly in arrears commencing on October 18, 2003 unless the Company elects to defer payment of such interest and pay it together with the principal amount of the Note at maturity on July 18, 2006. Pursuant to the terms of the Security Agreement (discussed above), the Company's obligations under the Note are secured by a security interest in a majority of all of the personal property and assets of the Company and certain of its subsidiaries. This description of the Note is qualified in its entirety by reference to the form of Note, a copy of which has been filed as Exhibit 6 to this Statement and is incorporated herein by reference. Security Agreement - ------------------ On July 18, 2003, the Company entered into the Agency, Guaranty and Security Agreement with the subsidiaries of the Company listed on a schedule thereto, the Investors and Deutsche Bank Trust Company Americas, as Administrative Agent for the Investors, pursuant to which the Company's obligations under the Notes are secured by a security interest in a majority of the personal property and assets of the Company and certain of its subsidiaries. This description of the Security Agreement is qualified in its entirety by reference to the Security Agreement, a copy of which has been filed as Exhibit 7 to this Statement and is incorporated herein by reference. Item 7. Material to be filed as Exhibits. Exhibit 1: Joint Filing Statement Exhibit 2: Note and Warrant Purchase Agreement dated as of July 18, 2003 by and among DSL.net, Inc., the investors listed on Schedule A thereto and the investors listed on Schedule B thereto.* Exhibit 3: The Amended and Restated Stockholders Agreement dated as of July 18, 2003 by and among (i) DSL.net, Inc., (ii) the investors listed on Schedule A and Schedule B to ___________________ * Previously filed as an exhibit to Form 8-K filed by the Company on August 4, 2003 and incorporated by reference in this Statement. the Note and Warrant Purchase Agreement dated as of July 18, 2003, (iii) the holders of shares of Series X Convertible Preferred Stock, par value $0.001 per share of the Company, (iv) the holders of shares of Series Y Convertible Preferred Stock, par value $0.001 per share of the Company, (v) the holders of the warrants exercisable for shares of Common Stock of the Company issued in connection with the guaranty of the Company's obligations under that certain Revolving Credit and Term Loan Agreement dated as of December 13, 2002 by and between the Company and Fleet National Bank.* Exhibit 4: Warrant granted to Deutsche Bank AG London on August 12, 2003 to purchase 12,950,000 shares of common stock, par value $0.0005 per share, of DSL.net, Inc. Exhibit 5: Warrant granted to Deutsche Bank AG London on December 9, 2003 to purchase 105,471,953 shares of common stock, par value $0.0005 per share, of DSL.net, Inc. Exhibit 6: Senior secured promissory note, dated as of July 18, 2003, by and among the Company and the holder of the Note. Exhibit 7: The Agency, Guaranty and Security Agreement, dated as of July 18, 2003, by and among DSL.net, Inc., the subsidiaries of the Company listed on Schedule 1 thereto, the investors listed on Schedule 2 thereto, and Deutsche Bank Trust Company Americas, as administrative agent for the investors.* SIGNATURE After reasonable inquiry and to the best of our knowledge and belief, we certify that the information set forth in this Statement is true, complete and correct. Dated: December 19, 2003 DEUTSCHE BANK AG By: /s/ Jeffrey A. Ruiz --------------------------------- Name: Jeffrey A. Ruiz Title: Vice President DB ADVISORS, L.L.C. By: /s/ Jeffrey A. Ruiz --------------------------------- Name: Jeffrey A. Ruiz Title: Vice President SCHEDULE A-1 EXECUTIVE OFFICERS AND DIRECTORS OF DB ADVISORS, L.L.C. The following sets forth the name, business address, title and citizenship of the directors and principal executive officer of DB Advisors, L.L.C. The business address of DB Advisors, L.L.C. is 280 Park Avenue, New York, New York 10017.
NAME BUSINESS ADDRESS TITLE CITIZENSHIP - ---- ---------------- ----- ----------- Kevin Parker 60 Wall Street Chief Executive Officer United States New York, New York Roger Ehrenberg 280 Park Avenue President United States New York, New York Shengbei Guo 280 Park Avenue Executive Vice President China New York, New York Paul G. Bigler II 280 Park Avenue Managing Director United States New York, New York Mark Cullen 60 Wall Street Managing Director Australia New York, New York Steven Morris 60 Wall Street Managing Director, Chief Financial New Zealand New York, New York Officer and Treasurer Glen MacMullin 280 Park Avenue Director Canada New York, New York Tracy C. Wills-Zapata 280 Park Avenue Director United States New York, New York
SCHEDULE A-2 MANAGING DIRECTORS OF DEUTSCHE BANK AG The following sets forth the name, business address, title and citizenship of the managing directors of Deutsche Bank AG. The business address of Deutsche Bank AG is Taunusanlage 12, 60325 Frankfurt, Federal Republic of Germany.
NAME BUSINESS ADDRESS TITLE CITIZENSHIP - ---- ---------------- ----- ----------- Dr. Josef Ackermann Deutsche Bank AG Chairman of the Group Executive Member of Swiss Taunusanlage 12 the Board of Managing Directors, Deutsche 60325 Frankfurt Bank AG The Federal Republic of Germany Dr. Tessen von Heydebreck Deutsche Bank AG Member of the Board of Managing German Taunusanlage 12 Directors, Deutsche Bank AG 60325 Frankfurt The Federal Republic of Germany Dr. Hermann-Josef Lamberti Deutsche Bank AG Member of the Board of Managing German Taunusanlage 12 Directors, Deutsche Bank AG 60325 Frankfurt The Federal Republic of Germany Dr. Clemens Borsig Deutsche Bank AG Member of the Board of Managing German Taunusanlage 12 Directors, Deutsche Bank AG 60325 Frankfurt The Federal Republic of Germany
Exhibit 1: Joint Filing Statement Exhibit 2: Note and Warrant Purchase Agreement dated as of July 18, 2003 by and among DSL.net, Inc., the investors listed on Schedule A thereto and the investors listed on Schedule B thereto.* Exhibit 3: The Amended and Restated Stockholders Agreement dated as of July 18, 2003 by and among (i) DSL.net, Inc., (ii) the investors listed on Schedule A and Schedule B to the Note and Warrant Purchase Agreement dated as of July 18, 2003, (iii) the holders of shares of Series X Convertible Preferred Stock, par value $0.001 per share of the Company, (iv) the holders of shares of Series Y Convertible Preferred Stock, par value $0.001 per share of the Company, (v) the holders of the warrants exercisable for shares of Common Stock of the Company issued in connection with the guaranty of the Company's obligations under that certain Revolving Credit and Term Loan Agreement dated as of December 13, 2002 by and between the Company and Fleet National Bank.* Exhibit 4: Warrant granted to Deutsche Bank AG London on August 12, 2003 to purchase 12,950,000 shares of common stock, par value $0.0005 per share, of DSL.net, Inc. Exhibit 5: Warrant granted to Deutsche Bank AG London on December 9, 2003 to purchase 105,471,953 shares of common stock, par value $0.0005 per share, of DSL.net, Inc. Exhibit 6: Senior secured promissory note, dated as of July 18, 2003, by and among the Company and the holder of the Note. Exhibit 7: The Agency, Guaranty and Security Agreement, dated as of July 18, 2003, by and among DSL.net, Inc., the subsidiaries of the Company listed on Schedule 1 thereto, the investors listed on Schedule 2 thereto, and Deutsche Bank Trust Company Americas, as administrative agent for the investors.* - -------- * Previously filed as an exhibit to Form 8-K filed by the Company on August 4, 2003 and incorporated by reference in this Statement. EX-1 3 ex-1_121703.txt JOINT FILING AGREEMENT EXHIBIT 1 JOINT FILING AGREEMENT The undersigned hereby agree that the statement on Schedule 13D, dated December 19, 2003, with respect to the common stock, par value $0.0005 per share, of DSL.net, Inc. is, and any amendments thereto executed by each of us shall be, filed on behalf of each of us pursuant to and in accordance with the provisions of Rule 13d-1(k)(1) under the Securities and Exchange Act of 1934, as amended, and that this Agreement shall be included as an Exhibit to the Schedule 13D and each such amendment. Each of the undersigned agrees to be responsible for the timely filing of the Schedule 13D and any amendments thereto, and for the completeness and accuracy of the information concerning itself contained therein. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the 19th day of December, 2003. DEUTSCHE BANK AG By: /s/ Jeffrey A. Ruiz ------------------------------- Name: Jeffrey A. Ruiz Title: Vice President DB ADVISORS, L.L.C. By: /s/ Jeffrey A. Ruiz ------------------------------- Name: Jeffrey A. Ruiz Title: Vice President EX-4 4 ex-4_121703.txt WARRANT GRANTED ON AUGUST 12, 2003 EXHIBIT 4 THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF (THESE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION UNDER SUCH LAWS, TOGETHER WITH, IN CERTAIN CASES, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING AGREEMENTS AS SET FORTH IN A STOCKHOLDERS AGREEMENT, AS AMENDED FROM TIME TO TIME, BY AND AMONG THE REGISTERED OWNER OF THIS CERTIFICATE, THE COMPANY AND CERTAIN OTHER HOLDERS OF SECURITIES OF THE COMPANY, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE SECRETARY OF THE COMPANY. DSL.NET, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK Date of Issuance: August 12, 2003 Certificate No. W-1 THIS CERTIFIES THAT, for value received, Deutsche Bank AG London and its assigns are entitled to subscribe for and purchase 12,950,000 shares of duly authorized, validly issued, fully paid and nonassessable Common Stock (as adjusted pursuant to Section 4 hereof, the "Shares") of DSL.NET, INC., a Delaware corporation (the "Company"), at the price of $0.38 per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein the term "Date of Grant" shall mean August 12, 2003. The term "Warrant" as used herein shall be deemed to include any warrants issued upon transfer or partial exercise of this Warrant unless the context clearly requires otherwise. Capitalized terms used but not otherwise defined herein shall have the respective meaning ascribed to them in the Note and Warrant Purchase Agreement dated as of July 18, 2003 by and among the Company and the Investors listed on Schedule A and Schedule B thereto (the "Purchase Agreement"). 1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through the date three (3) years after the Initial Closing Date. The holder of this Warrant shall not (a) exercise this Warrant or (b) transfer or otherwise dispose of this Warrant to a third party, unless such third party has agreed to be bound by the terms of Sections 3.8 and 3.9 of the Purchase Agreement, in each case until the date that is the earlier of: (x) the failure by the Company to pay the Termination Amount on or before the second business day after receipt by the Company of the Termination Notice in accordance with Section 1.5 of the Purchase Agreement; and (y) the Second Closing Date. If the Purchase Agreement is terminated and the Termination Amount is paid on or before the second business day after receipt by the Company of the Termination Notice in accordance with Section 1.5 of the Purchase Agreement, this Warrant shall be null and void in its entirety and of no further force and effect. 2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, at the election of the holder hereof, by (a) the surrender of this Warrant (with the notice of exercise substantially in the form attached hereto as Exhibit A-1 duly completed and executed) at the principal office of the Company and the payment to the Company, by certified or bank check, or by wire transfer to an account designated by the Company (a "Wire Transfer") of an amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased, or (b) if in connection with a registered public offering of the Company's securities, the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly completed and executed) at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company either by certified or bank check or by Wire Transfer from the proceeds of the sale of shares to be sold by the holder in such public offering of an amount equal to the then applicable Warrant Price per share multiplied by the number of Shares then being purchased, or (c) exercise of the "net issuance" right provided for in Section 10.2 hereof, or (d) the tender of all or a portion of a Senior Secured Promissory Note issued by the Company pursuant to the Purchase Agreement in a principal amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased. The person or persons in whose name(s) any certificate(s) representing the Shares shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as practicable and, if requested by the holder of this Warrant, the Company shall cause its transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant to a broker or other person (as directed by the holder exercising this Warrant) within the time period required to settle any trade made by the holder after exercise of this Warrant. 3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: 2 (a) Reclassification or Merger. In case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), the Company, or such surviving corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (which, if not in substantially the form of this Warrant, shall be in form and substance satisfactory to the holder of this Warrant), or the Company shall make appropriate provision without the issuance of a new Warrant, so that the holder of this Warrant shall have the right to receive upon exercise of this Warrant, at a total purchase price not to exceed that payable upon the exercise of the then unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change or merger by a holder of the number of shares of Common Stock purchasable under this Warrant immediately preceding the consummation of such reclassification or merger. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes and mergers. (b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Common Stock, the Warrant Price shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Warrant Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination. (c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to its Common Stock payable in Common Stock, then the Warrant Price shall be adjusted, from and after the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution; or (ii) make any other distribution with respect to Common Stock (except any distribution specifically provided for in Sections 4(a) and 4(b)), then, in each such case, provision shall be made by the Company such that the holder of this Warrant shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were the holder of the Shares as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution. (d) Adjustment for Issuance of Shares of Common Stock Below Warrant Price. If the Company shall issue, or be deemed to issue (as provided below), any additional shares of Common Stock other than Excluded Stock, as defined below ("Additional Shares of Common Stock") for a consideration per share less than the Warrant Price in effect immediately prior to the issuance of 3 such Additional Shares of Common Stock (excluding stock splits, stock dividends, combinations, reclassifications and capital reorganizations which are covered in Sections 4(a), 4(b) and 4(c) above), the Warrant Price shall be reduced concurrent with each such issuance to a price calculated as follows: Adjusted Warrant Price = (Outstanding Stock x Warrant Price) + Additional Stock Consideration Outstanding Stock + No. of Additional Shares of Common Stock As used herein: "Additional Stock Consideration" means the consideration received by the Company upon the issuance of the Additional Shares of Common Stock. "Convertible Securities" means any evidence of indebtedness, shares or securities, in each case convertible into or exchange for Additional Shares of Common Stock. "Excluded Stock" means; (a) securities issued, or deemed issued (as provided below), to directors, officers, employees or consultants of the Company or a subsidiary of the Company in connection with their service as directors of the Company or a subsidiary of the Company, their employment by the Company or a subsidiary of the Company or their retention as consultants by the Company or a subsidiary of the Company under the Company's Amended and Restated 1999 Stock Plan, the Vector Internet Services Inc. 1997 Stock Option Plan, the Vector Internet Services Inc. 1999 Stock Option Plan, the Company's 1999 Employee Stock Purchase Plan or the Company's Amended and Restated 2001 Stock Option and Incentive Plan (the "Plans"), plus such additional number of shares issued or issuable to directors, officers, employees or consultants of the Company or a subsidiary of the Company under any amendment of the Plans, or under other plans, adopted or assumed by the Company with the approval of the Board of Directors of the Company, plus such number of shares of Common Stock which are repurchased by the Company from such persons pursuant to contractual rights held by the Company and at repurchase prices not exceeding the respective original purchase prices paid by such persons to the Company therefor; (b) shares of Common Stock issuable upon exercise of warrants outstanding as of the date hereof; (c) shares of Common Stock issued, or deemed issued (as provided below), pursuant to a merger, consolidation or stock or asset acquisition approved by the Company's Board of Directors; (d) shares of Common Stock issuable upon the conversion of the Series X Preferred Stock or the Series Y Preferred Stock; (e) shares of Common Stock issued as payment of interest in accordance with the terms of the Notes issued pursuant to the Purchase Agreement; and (f) the issuance, or deemed issuance, of securities of the Company for any purpose and in any amount as approved by the Company's Board of Directors, including the approval of (i) a majority of the Series X Directors, (ii) the Series Y Director (as defined in the Amended and Restated Stockholders Agreement dated, as of July 18, 2003 among the Company and the Investors named therein (the "Stockholders Agreement")), if any, and (iii) the Warrant Investor Directors (as defined in the Stockholders Agreement), if any. "No. of Additional Shares of Common Stock" means the number of units of Additional Shares of Common Stock issued in connection with the issuance of the same. 4 "Options" means rights, options or warrants to subscribe for, purchase or otherwise acquire shares of Common Stock or Convertible Securities. "Outstanding Stock" means the total number of shares of Common Stock outstanding plus the total number of shares of Common Stock issuable upon conversion or exercise of outstanding Convertible Securities (including this Warrant and all other warrants) immediately prior to the issuance of the Additional Shares of Common Stock; provided that the number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company. No adjustment in the Warrant Price need be made if such adjustment would result in a change in the Warrant Price of less than $0.01. Any such adjustment which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Warrant Price. No adjustment in the Warrant Price of this Warrant shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share for such Additional Shares of Common Stock issued or deemed to be issued (as provided below) by the Company is less than the Warrant Price then in effect on the date of, and immediately prior to, such issue, for this Warrant. For purposes of making any adjustment required under this Section 4(d), the consideration received by the Company for any issue or sale of securities shall (a) to the extent that it consists of cash be computed as the amount of cash received by the Company without deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale, (b) to the extent that it consists of property other than cash, be computed at the fair market value of that property as determined in good faith by the Board of Directors, and (c) if Additional Shares of Common Stock, Convertible Securities or right or Options are issued or sold together with other securities or other assets of the Company for a consideration which covers both, be computed (as provided in clauses (a) and (b) above) as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or Options. If the holders of a majority-in-interest of the warrants issued pursuant to the Purchase Agreement shall, in good faith, disagree with any determination made by the Board of Directors of the Company of the fair market value of any property (including without limitation any securities other than shares of Common Stock) pursuant to the warrants issued pursuant to the Purchase Agreement (such holders hereinafter referred to as the "Requesting Holders"), and such disagreement is in respect of property valued by the Board of Directors of the Company at more than $500,000, then the Requesting Holders may by written notice to the Company (an "Appraisal Notice"), given within 15 days after notice to the holders of the warrants issued pursuant to the Purchase Agreement following such determination, elect to contest such determination; provided, however, that the holders of the warrants issued pursuant to the Purchase Agreement may not seek appraisal or any determination of fair market value to the extent that the Company has received a fairness opinion or other appraisal from an independent appraiser selected by the Board of Directors of the Company (including the Warrant Investor Directors, if any) in connection with the transaction giving rise to such determination. Within 15 days after an Appraisal Notice, the Company shall engage an Appraiser to make an independent determination of such fair market value (the "Appraiser's Determination"), and 5 to deliver to the Company and the holder of this Warrant a report describing its methodology and results in reasonable detail within 15 days of such engagement. The Company and the holder of this Warrant shall be afforded reasonable opportunities to discuss the appraisal with the Appraiser. The Appraiser's Determination shall be final and binding on the Company and the holder of this Warrant, absent manifest error. The costs of conducting an appraisal, including all fees and expenses of the Appraiser, shall be borne one half by the Requesting Holders (among the Requesting Holders, pro rata according to the number of shares issuable upon exercise of outstanding warrants issued under the Purchase Agreement that are held by the Requesting Holders) and one half by the Company. "Appraiser" means an independent appraiser chosen by the Board of Directors of the Company with the consent of the Requesting Holder with the greatest number of Warrant Shares issuable upon exercise of the warrants issued pursuant to the Purchase Agreement, which consent shall not be unreasonably withheld or delayed. For purposes of the adjustment required under this Section 4(d), if at any time or from time to time after the Date of Grant, the Company issues or sells any Options or Convertible Securities, then in each case the Company shall be deemed to have issued at the time of the issuance of such Options or Convertible Securities the maximum number of Additional Shares of Common Stock (as set forth in the instruments relating thereto, giving effect to any provision contained therein for a subsequent upward adjustment of such number) issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares of Common Stock an amount equal to the total amount of consideration, if any, received by the Company for the issuance of such Options or Convertible Securities plus, in the case of such Options, the minimum amounts of consideration, if any (as set forth in the instruments relating thereto, giving effect to any provision contained therein for a subsequent downward adjustment of such consideration), payable to the Company upon the exercise of such Options and, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the subsequent conversion of any such Convertible Security (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities). No further adjustment of the Warrant Price, adjusted upon the issuance of such Options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such Options or the conversion of any such Convertible Securities. If any such Options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Warrant Price adjusted upon the issuance of such Options or Convertible Securities shall be readjusted to the Warrant Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold for the consideration received by the Company for the granting of all such Options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities. Upon the happening of any of the following events, namely, if the purchase price provided for in any Option, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or the rate at which Convertible Securities are convertible into or exchangeable for Common Stock shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Warrant Price in effect at the time of such event shall forthwith be readjusted to the Warrant Price which would have been in effect at such time had such Options or Convertible Securities still 6 outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment the Warrant Price then in effect hereunder is thereby reduced; and on the termination of any such Option or any such right to convert or exchange such Convertible Securities, the Warrant Price then in effect hereunder shall forthwith be increased to the Warrant Price which would have been in effect at the time of such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued. (e) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter. In no event shall any further adjustment to the Warrant Price or number of shares issuable upon exercise of this Warrant be made pursuant to this Section 4(e) in connection with an event resulting in an adjustment in the Warrant Price and/or the number of Shares issuable upon exercise of this Warrant pursuant to Sections 4(a), (b),(c) or (d) of this Warrant. 5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant at such holder's last known address. 6. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise as reasonably determined in good faith by the Company's Board of Directors. 7. Compliance with Securities Act; Disposition of Warrant or Shares of Common Stock. (a) Compliance with Securities Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the Shares to be issued upon exercise hereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant, or any Shares except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"), or any applicable state securities laws. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act and any applicable state securities laws or an exemption from such registration is available, the holder hereof shall confirm in writing that the Shares so purchased are being acquired for investment and not with a view toward distribution or resale in violation of the Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all Shares issued upon exercise of this Warrant (unless registered under the Act and any applicable state securities laws) shall be stamped or imprinted with a legend in substantially the following form: 7 These securities have not been registered under the Securities Act of 1933, as amended, or any state securities laws. They may not be sold, offered for sale, pledged or hypothecated in the absence of a registration statement in effect with respect to the securities under such Act and any applicable state securities laws or pursuant to an exemption under such laws, together with, in certain cases, an opinion of counsel reasonably satisfactory to the Company that such registration is not required. Said legend shall be removed by the Company, upon the request of a holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows: (1) The holder is aware of the Company's business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant, and will acquire the Shares issuable upon exercise of this Warrant, for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof in violation of the Act; provided, however, that, subject to compliance with the terms of the Purchase Agreement, the Stockholders Agreement and applicable law, the disposition of such holder's property shall at all times be within its control. (2) The holder understands that neither this Warrant nor the Shares issuable upon exercise of this Warrant have been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder's investment intent as expressed herein. (3) The holder further understands that this Warrant and the Shares issuable upon exercise of this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The holder is aware of the provisions of Rule 144, promulgated under the Act and that the Company has no obligation to register this Warrant under the Act or to qualify this Warrant under any applicable state securities laws. (4) The holder is an "accredited investor" as such term is defined in Rule 501 of Regulation D promulgated under the Act. (b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, or other evidence reasonably satisfactory to the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or 8 otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 7(b) that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such Shares may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 have been satisfied. Each certificate representing this Warrant or the Shares thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. (c) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 7(b) above shall apply to any transfer of, or grant of a security interest in, this Warrant (or the Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the holder if the holder is a partnership or to a member of the holder if the holder is a limited liability company, (ii) to a partnership of which the holder is a partner or a limited liability company of which the holder is a member, or (iii) to any affiliate of the holder if the holder is a corporation; provided, however, in any such transfer, if applicable, the transferee shall on the Company's request agree in writing to be bound by the terms of this Warrant as if an original holder hereof. 8. Rights as Shareholders; Information. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company for which this warrant is then exercisable concurrently with the distribution thereof to the shareholders. 9. Registration Rights. The Company has granted registration rights to the holder of this Warrant for the resale of the Common Stock of the Company obtained upon exercise hereof, pursuant to the Stockholders Agreement. 9 10. Additional Rights. 10.1 Notice of Corporate Action. In the event the Company proposes to: (i) pay, distribute, or take a record of the holders of its Common Stock for the purpose of determining the holders thereof who are entitled to receive, any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of capital stock or any other securities or property, or (ii) consummate any capital reorganization, reclassification, recapitalization, consolidation, merger, transfer of all or substantially all of the Company's assets, dissolution, liquidation or winding-up, or any similar transaction, then, at least 10 days prior to the earlier of any applicable record date or such event, as the case may be, the Company shall mail to the holder of this Warrant a notice specifying: (a) the date or expected date on which any such payment or distribution is to be made or record is to be taken and the amount and character of any such dividend, distribution or right; (b) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation, winding-up or similar transaction is to take effect and any record date therefor; (c) the time as of which any holders of record of shares of Common Stock and/or any other class of securities shall be entitled to exchange their shares of Common Stock and/or other securities for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation, winding-up or similar transaction and a description in reasonable detail of such transaction; and (d) in each case, the expected effect on the Warrant Price of each such transaction or event. The Company shall update any such notice to reflect any change in the foregoing information. 10.2 Right to Convert Warrant into Stock: Net Issuance. (a) Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the "Conversion Right") into shares of Common Stock as provided in this Section 10.2 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of Shares subject to this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) that number of shares of fully paid and nonassessable Common Stock as is determined according to the following formula: X = B - A ----- Y Where: X = the number of shares of Common Stock to be issued to the holder upon such exercise Y = the fair market value of one share of Common Stock A = the aggregate Warrant Price of the specified number of Converted Warrant Shares immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Warrant Price) 10 B = the aggregate fair market value of the specified number of Converted Warrant Shares (i.e., the number of Converted Warrant Shares multiplied by the fair market value of one Converted Warrant Share) No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the fair market value of the resulting fractional share on the Conversion Date (as hereinafter defined). For purposes of Section 9 of this Warrant, shares issued pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of this Warrant. (b) Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement (which may be in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in Section 10.2(a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the "Conversion Date"), and, at the election of the holder hereof, may be made contingent upon the closing of the sale of the Company's Common Stock to the public in a public offering pursuant to a Registration Statement under the Act (a "Public Offering"). Certificates for the Shares issuable upon exercise of the Conversion Right and, if applicable, a new Warrant evidencing the balance of the Shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date. (c) Determination of Fair Market Value. For purposes of this Section 10.2, "fair market value" of a share of Common Stock as of a particular date (the "Determination Date") shall mean: (i) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Company's Registration Statement relating to such Public Offering ("Registration Statement") has been declared effective by the Securities and Exchange Commission, then the initial "Price to Public" specified in the final prospectus with respect to such offering. (ii) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering, then as follows: (A) If traded on a securities exchange or the Nasdaq National Market, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange or market over the five trading days immediately prior to the Determination Date; (B) If traded on the Nasdaq Stock Market (other than the Nasdaq National Market) or other over-the-counter system, the fair market value of the Common Stock shall be deemed 11 to be the average of the closing bid prices of the Common Stock over the five trading days immediately prior to the Determination Date; and (C) If there is no public market for the Common Stock, then fair market value shall be determined by (i) mutual agreement of the holders of a majority-in-interest of the warrants issued pursuant to the Purchase Agreement who are then seeking to exercise their Conversion Rights (the "Converting Holders") and the Company or (ii) if no such mutual agreement can be reached within 15 days, then the higher of (a) the book value of a share of the Common Stock as determined by a firm of independent public accountants selected (within 10 days after the failure of the Company and the Converting Holders to reach mutual agreement) by the Board of Directors of the Company with the consent of the holders of the majority-in-interest of the warrants issued pursuant to the Purchase Agreement that are beneficially owned by Converting Holders, which consent shall not be unreasonably withheld or delayed, as at the last day of any month ending within 60 days preceding the date as of which the determination is to be made (such determination of the independent public accountant to be completed within 30 days after such independent public accountant is chosen by the Company and the Converting Holders) or (b) the fair value thereof determined in good faith by an independent appraiser (chosen within 10 days after the failure of the Company and the Converting Holders to reach mutual agreement by the Board of Directors of the Company with the consent of the Converting Holder exercising the Conversion Right with respect to the greatest number of shares, which consent shall not be unreasonably withheld or delayed) as of a date which is within 15 days of the date as of which the determination is to be made (such determination of the independent appraiser to be completed within 30 days after such independent appraiser is chosen by the Company and the Converting Holders). The fees and expenses of any such independent public accountant or independent appraiser shall be borne one half by the Converting Holders (among the Converting Holders, pro rata according to the number of shares for which Conversion Rights are being exercised) and one half by the Company. If closing prices or closing bid prices are no longer reported by a securities exchange or other trading system, the closing price or closing bid price shall be that which is reported by such securities exchange or other trading system at 4:00 p.m. New York City time on the applicable trading day. 10.3 Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all of the Shares subject hereto, and if the fair market value of one share of the Common Stock is greater than the Warrant Price then in effect, this Warrant shall be deemed automatically exercised pursuant to Section 10.2 above (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of Common Stock upon such expiration shall be determined pursuant to Section 10.2(c). To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 10.3, the Company agrees to promptly notify the holder hereof of the number of Shares, if any, the holder hereof is to receive by reason of such automatic exercise. 11. Representations and Warranties. The Company represents and warrants to the holder of this Warrant as follows: 12 (a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws relating to bankruptcy, insolvency, the relief of debtors or creditors' rights generally and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies; (b) The Shares have been duly authorized and reserved for issuance by the Company as of the Date of Grant and, when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable; (c) The execution and delivery of this Warrant as of the Date of Grant, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof (i) are not and will not be, inconsistent with the Company's certificate of incorporation or by-laws, (ii) assuming the holder's representations to the Company set forth in Section 7(a) are true and complete, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, (iii) do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound, and (iv) assuming the holder's representations to the Company set forth in Section 7(a) are true and complete, do not and will not require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby; and (d) As of the Date of Grant, there are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, will have a material adverse effect on the ability of the Company to perform its obligations under this Warrant. 12. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. 13. Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant with a copy to the General Counsel at the same address and with another copy to Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, MA 02111, Attention: Mark H. Burnett, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. 14. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger or consolidation and all of the obligations of the Company relating to the Shares issuable upon the exercise or conversion of this Warrant shall survive the 13 exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof. 15. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. 16. Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant. 17. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York. 18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative. 19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant. 20. No Impairment of Rights. The Company will not, by amendment of its certificate of incorporation or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. 21. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect. 22. Recovery of Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Warrant, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 14 23. Entire Agreement; Modification. This Warrant and the Purchase Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -------------------------------------------- 15 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in its corporate name by its duly authorized officer and to be dated as of the Date of Grant set forth on the first page to this Warrant. DSL.NET, INC. By: /s/ Robert J. DeSantis ------------------------ Name: Robert J. DeSantis Title: Chief Financial Officer Address: 545 Long Wharf Drive, 5th Floor New Haven, CT 06511 EXHIBIT A-1 NOTICE OF EXERCISE To: DSL.NET, INC. (the "Company") 1. The undersigned hereby: |_| elects to purchase __ shares of Common Stock of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full, or |_| *elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to __ shares of Common Stock. 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below: _________________________________________ (Name) _________________________________________ _________________________________________ (Address) 3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws. _________________________________________ (Signature) ___________________________ (Date) A-2 EXHIBIT A-2 NOTICE OF EXERCISE To: DSL.NET, INC. (the "Company") 1. Contingent upon and effective immediately prior to the closing (the "Closing") of the Company's public offering contemplated by the Registration Statement on Form S, (File No. ______________) which was filed with the Securities and Exchange Commission on ____________, 20__, the undersigned hereby: |_| elects to purchase __ shares of Common Stock of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant, or |_| elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to __ Shares of Common Stock. 2. Please deliver to the custodian for the selling shareholders a stock certificate representing such __ shares. 3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $__ or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing. _________________________________________ (Name) _________________________________________ _________________________________________ (Address) ___________________________ (Date) A-3 EX-5 5 ex-5_121703.txt WARRANT GRANTED ON DECEMBER 9, 2003 EXHIBIT 5 THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF (THESE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION UNDER SUCH LAWS, TOGETHER WITH, IN CERTAIN CASES, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING AGREEMENTS AS SET FORTH IN A STOCKHOLDERS AGREEMENT, AS AMENDED FROM TIME TO TIME, BY AND AMONG THE REGISTERED OWNER OF THIS CERTIFICATE, THE COMPANY AND CERTAIN OTHER HOLDERS OF SECURITIES OF THE COMPANY, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE SECRETARY OF THE COMPANY. DSL.NET, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK Date of Issuance: December 9, 2003 Certificate No. W-2 THIS CERTIFIES THAT, for value received, Deutsche Bank AG London and its assigns are entitled to subscribe for and purchase 105,471,053 shares of duly authorized, validly issued, fully paid and nonassessable Common Stock (as adjusted pursuant to Section 4 hereof, the "Shares") of DSL.NET, INC., a Delaware corporation (the "Company"), at the price of $0.38 per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein the term "Date of Grant" shall mean the December 9, 2003. The term "Warrant" as used herein shall be deemed to include any warrants issued upon transfer or partial exercise of this Warrant unless the context clearly requires otherwise. Capitalized terms used but not otherwise defined herein shall have the respective meaning ascribed to them in the Note and Warrant Purchase Agreement dated as of July 18, 2003 by and among the Company and the Investors listed on Schedule A and Schedule B thereto (the "Purchase Agreement"). 1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through the date three (3) years after the Initial Closing Date. 2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, at the election of the holder hereof, by (a) the surrender of this Warrant (with the notice of exercise substantially in the form attached hereto as Exhibit A-1 duly completed and executed) at the principal office of the Company and the payment to the Company, by certified or bank check, or by wire transfer to an account designated by the Company (a "Wire Transfer") of an amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased, or (b) if in connection with a registered public offering of the Company's securities, the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly completed and executed) at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company either by certified or bank check or by Wire Transfer from the proceeds of the sale of shares to be sold by the holder in such public offering of an amount equal to the then applicable Warrant Price per share multiplied by the number of Shares then being purchased, or (c) exercise of the "net issuance" right provided for in Section 10.2 hereof, or (d) the tender of all or a portion of a Senior Secured Promissory Note issued by the Company pursuant to the Purchase Agreement in a principal amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased. The person or persons in whose name(s) any certificate(s) representing the Shares shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as practicable and, if requested by the holder of this Warrant, the Company shall cause its transfer agent to deliver the certificate representing Shares issued upon exercise of this Warrant to a broker or other person (as directed by the holder exercising this Warrant) within the time period required to settle any trade made by the holder after exercise of this Warrant. 3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Reclassification or Merger. In case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), the Company, or such surviving corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (which, if not in substantially the form of this Warrant, shall be in form and substance satisfactory to the holder of this Warrant), or the 2 Company shall make appropriate provision without the issuance of a new Warrant, so that the holder of this Warrant shall have the right to receive upon exercise of this Warrant, at a total purchase price not to exceed that payable upon the exercise of the then unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change or merger by a holder of the number of shares of Common Stock purchasable under this Warrant immediately preceding the consummation of such reclassification or merger. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes and mergers. (b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Common Stock, the Warrant Price shall be proportionately decreased and the number of Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Warrant Price shall be proportionately increased and the number of Shares issuable hereunder shall be proportionately decreased in the case of a combination. (c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to its Common Stock payable in Common Stock, then the Warrant Price shall be adjusted, from and after the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution; or (ii) make any other distribution with respect to Common Stock (except any distribution specifically provided for in Sections 4(a) and 4(b)), then, in each such case, provision shall be made by the Company such that the holder of this Warrant shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were the holder of the Shares as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution. (d) Adjustment for Issuance of Shares of Common Stock Below Warrant Price. If the Company shall issue, or be deemed to issue (as provided below), any additional shares of Common Stock other than Excluded Stock, as defined below ("Additional Shares of Common Stock") for a consideration per share less than the Warrant Price in effect immediately prior to the issuance of such Additional Shares of Common Stock (excluding stock splits, stock dividends, combinations, reclassifications and capital reorganizations which are covered in Sections 4(a), 4(b) and 4(c) above), the Warrant Price shall be reduced concurrent with each such issuance to a price calculated as follows: Adjusted Warrant Price = (Outstanding Stock x Warrant Price) + Additional Stock Consideration Outstanding Stock + No. of Additional Shares of Common Stock As used herein: 3 "Additional Stock Consideration" means the consideration received by the Company upon the issuance of the Additional Shares of Common Stock. "Convertible Securities" means any evidence of indebtedness, shares or securities, in each case convertible into or exchange for Additional Shares of Common Stock. "Excluded Stock" means; (a) securities issued, or deemed issued (as provided below), to directors, officers, employees or consultants of the Company or a subsidiary of the Company in connection with their service as directors of the Company or a subsidiary of the Company, their employment by the Company or a subsidiary of the Company or their retention as consultants by the Company or a subsidiary of the Company under the Company's Amended and Restated 1999 Stock Plan, the Vector Internet Services Inc. 1997 Stock Option Plan, the Vector Internet Services Inc. 1999 Stock Option Plan, the Company's 1999 Employee Stock Purchase Plan or the Company's Amended and Restated 2001 Stock Option and Incentive Plan (the "Plans"), plus such additional number of shares issued or issuable to directors, officers, employees or consultants of the Company or a subsidiary of the Company under any amendment of the Plans, or under other plans, adopted or assumed by the Company with the approval of the Board of Directors of the Company, plus such number of shares of Common Stock which are repurchased by the Company from such persons pursuant to contractual rights held by the Company and at repurchase prices not exceeding the respective original purchase prices paid by such persons to the Company therefor; (b) shares of Common Stock issuable upon exercise of warrants outstanding as of the date hereof; (c) shares of Common Stock issued, or deemed issued (as provided below), pursuant to a merger, consolidation or stock or asset acquisition approved by the Company's Board of Directors; (d) shares of Common Stock issuable upon the conversion of the Series X Preferred Stock or the Series Y Preferred Stock; (e) shares of Common Stock issued as payment of interest in accordance with the terms of the Notes issued pursuant to the Purchase Agreement; and (f) the issuance, or deemed issuance, of securities of the Company for any purpose and in any amount as approved by the Company's Board of Directors, including the approval of (i) a majority of the Series X Directors, (ii) the Series Y Director (as defined in the Amended and Restated Stockholders Agreement dated, as of July 18, 2003 among the Company and the Investors named therein (the "Stockholders Agreement")), if any, and (iii) the Warrant Investor Directors (as defined in the Stockholders Agreement), if any. "No. of Additional Shares of Common Stock" means the number of units of Additional Shares of Common Stock issued in connection with the issuance of the same. "Options" means rights, options or warrants to subscribe for, purchase or otherwise acquire shares of Common Stock or Convertible Securities. "Outstanding Stock" means the total number of shares of Common Stock outstanding plus the total number of shares of Common Stock issuable upon conversion or exercise of outstanding Convertible Securities (including this Warrant and all other warrants) immediately prior to the issuance of the Additional Shares of Common Stock; provided that the number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company. 4 No adjustment in the Warrant Price need be made if such adjustment would result in a change in the Warrant Price of less than $0.01. Any such adjustment which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Warrant Price. No adjustment in the Warrant Price of this Warrant shall be made in respect of the issuance of Additional Shares of Common Stock unless the consideration per share for such Additional Shares of Common Stock issued or deemed to be issued (as provided below) by the Company is less than the Warrant Price then in effect on the date of, and immediately prior to, such issue, for this Warrant. For purposes of making any adjustment required under this Section 4(d), the consideration received by the Company for any issue or sale of securities shall (a) to the extent that it consists of cash be computed as the amount of cash received by the Company without deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale, (b) to the extent that it consists of property other than cash, be computed at the fair market value of that property as determined in good faith by the Board of Directors, and (c) if Additional Shares of Common Stock, Convertible Securities or right or Options are issued or sold together with other securities or other assets of the Company for a consideration which covers both, be computed (as provided in clauses (a) and (b) above) as the portion of the consideration so received that may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or Options. If the holders of a majority-in-interest of the warrants issued pursuant to the Purchase Agreement shall, in good faith, disagree with any determination made by the Board of Directors of the Company of the fair market value of any property (including without limitation any securities other than shares of Common Stock) pursuant to the warrants issued pursuant to the Purchase Agreement (such holders hereinafter referred to as the "Requesting Holders"), and such disagreement is in respect of property valued by the Board of Directors of the Company at more than $500,000, then the Requesting Holders may by written notice to the Company (an "Appraisal Notice"), given within 15 days after notice to the holders of the warrants issued pursuant to the Purchase Agreement following such determination, elect to contest such determination; provided, however, that the holders of the warrants issued pursuant to the Purchase Agreement may not seek appraisal or any determination of fair market value to the extent that the Company has received a fairness opinion or other appraisal from an independent appraiser selected by the Board of Directors of the Company (including the Warrant Investor Directors, if any) in connection with the transaction giving rise to such determination. Within 15 days after an Appraisal Notice, the Company shall engage an Appraiser to make an independent determination of such fair market value (the "Appraiser's Determination"), and to deliver to the Company and the holder of this Warrant a report describing its methodology and results in reasonable detail within 15 days of such engagement. The Company and the holder of this Warrant shall be afforded reasonable opportunities to discuss the appraisal with the Appraiser. The Appraiser's Determination shall be final and binding on the Company and the holder of this Warrant, absent manifest error. The costs of conducting an appraisal, including all fees and expenses of the Appraiser, shall be borne one half by the Requesting Holders (among the Requesting Holders, pro rata according to the number of shares issuable upon exercise of outstanding warrants issued under the Purchase Agreement that are held by the Requesting Holders) and one half by the Company. "Appraiser" means an independent appraiser chosen by the Board of Directors of the Company with the consent of the Requesting Holder with the greatest number of Warrant Shares issuable upon 5 exercise of the warrants issued pursuant to the Purchase Agreement, which consent shall not be unreasonably withheld or delayed. For purposes of the adjustment required under this Section 4(d), if at any time or from time to time after the Date of Grant, the Company issues or sells any Options or Convertible Securities, then in each case the Company shall be deemed to have issued at the time of the issuance of such Options or Convertible Securities the maximum number of Additional Shares of Common Stock (as set forth in the instruments relating thereto, giving effect to any provision contained therein for a subsequent upward adjustment of such number) issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares of Common Stock an amount equal to the total amount of consideration, if any, received by the Company for the issuance of such Options or Convertible Securities plus, in the case of such Options, the minimum amounts of consideration, if any (as set forth in the instruments relating thereto, giving effect to any provision contained therein for a subsequent downward adjustment of such consideration), payable to the Company upon the exercise of such Options and, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the subsequent conversion of any such Convertible Security (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities). No further adjustment of the Warrant Price, adjusted upon the issuance of such Options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such Options or the conversion of any such Convertible Securities. If any such Options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Warrant Price adjusted upon the issuance of such Options or Convertible Securities shall be readjusted to the Warrant Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold for the consideration received by the Company for the granting of all such Options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities. Upon the happening of any of the following events, namely, if the purchase price provided for in any Option, the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or the rate at which Convertible Securities are convertible into or exchangeable for Common Stock shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Warrant Price in effect at the time of such event shall forthwith be readjusted to the Warrant Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment the Warrant Price then in effect hereunder is thereby reduced; and on the termination of any such Option or any such right to convert or exchange such Convertible Securities, the Warrant Price then in effect hereunder shall forthwith be increased to the Warrant Price which would have been in effect at the time of such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued. (e) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares purchasable hereunder shall be adjusted, to the nearest whole share, to the 6 product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter. In no event shall any further adjustment to the Warrant Price or number of shares issuable upon exercise of this Warrant be made pursuant to this Section 4(e) in connection with an event resulting in an adjustment in the Warrant Price and/or the number of Shares issuable upon exercise of this Warrant pursuant to Sections 4(a), (b),(c) or (d) of this Warrant. 5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant at such holder's last known address. 6. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise as reasonably determined in good faith by the Company's Board of Directors. 7. Compliance with Securities Act; Disposition of Warrant or Shares of Common Stock. (a) Compliance with Securities Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the Shares to be issued upon exercise hereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant, or any Shares except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"), or any applicable state securities laws. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act and any applicable state securities laws or an exemption from such registration is available, the holder hereof shall confirm in writing that the Shares so purchased are being acquired for investment and not with a view toward distribution or resale in violation of the Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all Shares issued upon exercise of this Warrant (unless registered under the Act and any applicable state securities laws) shall be stamped or imprinted with a legend in substantially the following form: These securities have not been registered under the Securities Act of 1933, as amended, or any state securities laws. They may not be sold, offered for sale, pledged or hypothecated in the absence of a registration statement in effect with respect to the securities under such Act and any applicable state securities laws or pursuant to an exemption under such laws, together with, in certain cases, an opinion of counsel reasonably satisfactory to the Company that such registration is not required. 7 Said legend shall be removed by the Company, upon the request of a holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows: (1) The holder is aware of the Company's business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant, and will acquire the Shares issuable upon exercise of this Warrant, for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof in violation of the Act; provided, however, that, subject to compliance with the terms of the Purchase Agreement, the Stockholders Agreement and applicable law, the disposition of such holder's property shall at all times be within its control. (2) The holder understands that neither this Warrant nor the Shares issuable upon exercise of this Warrant have been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder's investment intent as expressed herein. (3) The holder further understands that this Warrant and the Shares issuable upon exercise of this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The holder is aware of the provisions of Rule 144, promulgated under the Act and that the Company has no obligation to register this Warrant under the Act or to qualify this Warrant under any applicable state securities laws. (4) The holder is an "accredited investor" as such term is defined in Rule 501 of Regulation D promulgated under the Act. (b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, or other evidence reasonably satisfactory to the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 7(b) that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such Shares may, as to such federal 8 laws, be offered, sold or otherwise disposed of in accordance with Rule 144 under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 have been satisfied. Each certificate representing this Warrant or the Shares thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. (c) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 7(b) above shall apply to any transfer of, or grant of a security interest in, this Warrant (or the Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the holder if the holder is a partnership or to a member of the holder if the holder is a limited liability company, (ii) to a partnership of which the holder is a partner or a limited liability company of which the holder is a member, or (iii) to any affiliate of the holder if the holder is a corporation; provided, however, in any such transfer, if applicable, the transferee shall on the Company's request agree in writing to be bound by the terms of this Warrant as if an original holder hereof. 8. Rights as Shareholders; Information. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company for which this warrant is then exercisable concurrently with the distribution thereof to the shareholders. 9. Registration Rights. The Company has granted registration rights to the holder of this Warrant for the resale of the Common Stock of the Company obtained upon exercise hereof, pursuant to the Stockholders Agreement. 9 10. Additional Rights. 10.1 Notice of Corporate Action. In the event the Company proposes to: (i) pay, distribute, or take a record of the holders of its Common Stock for the purpose of determining the holders thereof who are entitled to receive, any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of capital stock or any other securities or property, or (ii) consummate any capital reorganization, reclassification, recapitalization, consolidation, merger, transfer of all or substantially all of the Company's assets, dissolution, liquidation or winding-up, or any similar transaction, then, at least 10 days prior to the earlier of any applicable record date or such event, as the case may be, the Company shall mail to the holder of this Warrant a notice specifying: (a) the date or expected date on which any such payment or distribution is to be made or record is to be taken and the amount and character of any such dividend, distribution or right; (b) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation, winding-up or similar transaction is to take effect and any record date therefor; (c) the time as of which any holders of record of shares of Common Stock and/or any other class of securities shall be entitled to exchange their shares of Common Stock and/or other securities for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation, winding-up or similar transaction and a description in reasonable detail of such transaction; and (d) in each case, the expected effect on the Warrant Price of each such transaction or event. The Company shall update any such notice to reflect any change in the foregoing information. 10.2 Right to Convert Warrant into Stock: Net Issuance. (a) Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the "Conversion Right") into shares of Common Stock as provided in this Section 10.2 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of Shares subject to this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) that number of shares of fully paid and nonassessable Common Stock as is determined according to the following formula: X = B - A ----- Y Where: X = the number of shares of Common Stock to be issued to the holder upon such exercise Y = the fair market value of one share of Common Stock A = the aggregate Warrant Price of the specified number of Converted Warrant Shares immediately prior to the exercise of the Conversion Right (i.e., the number of Converted Warrant Shares multiplied by the Warrant Price) 10 B = the aggregate fair market value of the specified number of Converted Warrant Shares (i.e., the number of Converted Warrant Shares multiplied by the fair market value of one Converted Warrant Share) No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the fair market value of the resulting fractional share on the Conversion Date (as hereinafter defined). For purposes of Section 9 of this Warrant, shares issued pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of this Warrant. (b) Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement (which may be in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in Section 10.2(a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the "Conversion Date"), and, at the election of the holder hereof, may be made contingent upon the closing of the sale of the Company's Common Stock to the public in a public offering pursuant to a Registration Statement under the Act (a "Public Offering"). Certificates for the Shares issuable upon exercise of the Conversion Right and, if applicable, a new Warrant evidencing the balance of the Shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date. (c) Determination of Fair Market Value. For purposes of this Section 10.2, "fair market value" of a share of Common Stock as of a particular date (the "Determination Date") shall mean: (i) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Company's Registration Statement relating to such Public Offering ("Registration Statement") has been declared effective by the Securities and Exchange Commission, then the initial "Price to Public" specified in the final prospectus with respect to such offering. (ii) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering, then as follows: (A) If traded on a securities exchange or the Nasdaq National Market, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange or market over the five trading days immediately prior to the Determination Date; (B) If traded on the Nasdaq Stock Market (other than the Nasdaq National Market) or other over-the-counter system, the fair market value of the Common Stock shall be deemed 11 to be the average of the closing bid prices of the Common Stock over the five trading days immediately prior to the Determination Date; and (C) If there is no public market for the Common Stock, then fair market value shall be determined by (i) mutual agreement of the holders of a majority-in-interest of the warrants issued pursuant to the Purchase Agreement who are then seeking to exercise their Conversion Rights (the "Converting Holders") and the Company or (ii) if no such mutual agreement can be reached within 15 days, then the higher of (a) the book value of a share of the Common Stock as determined by a firm of independent public accountants selected (within 10 days after the failure of the Company and the Converting Holders to reach mutual agreement) by the Board of Directors of the Company with the consent of the holders of the majority-in-interest of the warrants issued pursuant to the Purchase Agreement that are beneficially owned by Converting Holders, which consent shall not be unreasonably withheld or delayed, as at the last day of any month ending within 60 days preceding the date as of which the determination is to be made (such determination of the independent public accountant to be completed within 30 days after such independent public accountant is chosen by the Company and the Converting Holders) or (b) the fair value thereof determined in good faith by an independent appraiser (chosen within 10 days after the failure of the Company and the Converting Holders to reach mutual agreement by the Board of Directors of the Company with the consent of the Converting Holder exercising the Conversion Right with respect to the greatest number of shares, which consent shall not be unreasonably withheld or delayed) as of a date which is within 15 days of the date as of which the determination is to be made (such determination of the independent appraiser to be completed within 30 days after such independent appraiser is chosen by the Company and the Converting Holders). The fees and expenses of any such independent public accountant or independent appraiser shall be borne one half by the Converting Holders (among the Converting Holders, pro rata according to the number of shares for which Conversion Rights are being exercised) and one half by the Company. If closing prices or closing bid prices are no longer reported by a securities exchange or other trading system, the closing price or closing bid price shall be that which is reported by such securities exchange or other trading system at 4:00 p.m. New York City time on the applicable trading day. 10.3 Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all of the Shares subject hereto, and if the fair market value of one share of the Common Stock is greater than the Warrant Price then in effect, this Warrant shall be deemed automatically exercised pursuant to Section 10.2 above (even if not surrendered) immediately before its expiration. For purposes of such automatic exercise, the fair market value of one share of Common Stock upon such expiration shall be determined pursuant to Section 10.2(c). To the extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this Section 10.3, the Company agrees to promptly notify the holder hereof of the number of Shares, if any, the holder hereof is to receive by reason of such automatic exercise. 11. Representations and Warranties. The Company represents and warrants to the holder of this Warrant as follows: 12 (a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws relating to bankruptcy, insolvency, the relief of debtors or creditors' rights generally and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies; (b) The Shares have been duly authorized and reserved for issuance by the Company as of the Date of Grant and, when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable; (c) The execution and delivery of this Warrant as of the Date of Grant, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof (i) are not and will not be, inconsistent with the Company's certificate of incorporation or by-laws, (ii) assuming the holder's representations to the Company set forth in Section 7(a) are true and complete, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, (iii) do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound, and (iv) assuming the holder's representations to the Company set forth in Section 7(a) are true and complete, do not and will not require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby; and (d) As of the Date of Grant, there are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, will have a material adverse effect on the ability of the Company to perform its obligations under this Warrant. 12. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. 13. Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant with a copy to the General Counsel at the same address and with another copy to Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, MA 02110, Attention: Mark H. Burnett, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. 14. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger or consolidation and all of the obligations of the Company relating to the Shares issuable upon the exercise or conversion of this Warrant shall survive the 13 exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof. 15. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. 16. Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant. 17. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York. 18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative. 19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant. 20. No Impairment of Rights. The Company will not, by amendment of its certificate of incorporation or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. 21. Severability. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect. 22. Recovery of Litigation Costs. If any legal action or other proceeding is brought for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Warrant, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 14 23. Entire Agreement; Modification. This Warrant and the Purchase Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -------------------------------------------- 15 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in its corporate name by its duly authorized officer and to be dated as of the Date of Grant set forth on the first page to this Warrant. DSL.NET, INC. By:/s/ Robert J. DeSantis ---------------------- Name: Robert J. DeSantis Title: Chief Financial Officer Address: 545 Long Wharf Drive, 5th Floor New Haven, CT 06511 EXHIBIT A-1 NOTICE OF EXERCISE To: DSL.NET, INC. (the "Company") 1. The undersigned hereby: |_| elects to purchase __ shares of Common Stock of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full, or |_| *elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to __ shares of Common Stock. 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below: _________________________________________ (Name) _________________________________________ _________________________________________ (Address) 3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws. _________________________________________ (Signature) ___________________________ (Date) A-2 EXHIBIT A-2 NOTICE OF EXERCISE To: DSL.NET, INC. (the "Company") 1. Contingent upon and effective immediately prior to the closing (the "Closing") of the Company's public offering contemplated by the Registration Statement on Form S, (File No. ______________) which was filed with the Securities and Exchange Commission on ____________, 20__, the undersigned hereby: |_| elects to purchase __ shares of Common Stock of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant, or |_| elects to exercise its net issuance rights pursuant to Section 10.2 of the attached Warrant with respect to __ Shares of Common Stock. 2. Please deliver to the custodian for the selling shareholders a stock certificate representing __ such shares. 3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $__ or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing. _________________________________________ (Name) _________________________________________ _________________________________________ (Address) ___________________________ (Date) A-3 EX-6 6 ex-6_121703.txt SENIOR SECURED NOTE EXHIBIT 6 SENIOR SECURED PROMISSORY NOTE $22,500,000 July 18, 2003 For value received, the undersigned, DSL.net, Inc., a Delaware corporation (the "Company"), hereby PROMISES TO PAY to the order of DEUTSCHE BANK AG LONDON, acting through DB ADVISORS LLC as INVESTMENT ADVISOR, a UK company (the "Investor"), the principal sum of $22,500,000 together with interest in arrears from and including the date hereof on the unpaid principal balance until such principal balance is paid in full. The Company agrees to make all payments under this Senior Secured Promissory Note to the order of the Investor, in lawful money of the United States of America and in immediately available funds, to such account or place as the Investor may request in writing ten (10) Business Days (as defined herein) prior to any such payment. The Company agrees to pay interest on the unpaid principal amount of this Senior Secured Promissory Note until such principal amount shall be paid in full, computed daily, at a rate per annum equal to 1.23%. Interest shall be payable quarterly in arrears as set forth in the relevant provision below and shall be calculated on the basis of actual number of days elapsed and a year of 360 days. Notwithstanding any other provision of this Senior Secured Promissory Note, the Investor does not intend to charge and the Company shall not be required to pay any interest or other fees or charges in excess of the maximum permitted by applicable law; any payments in excess of such maximum shall be credited to reduce principal hereunder. All payments received by the Investor hereunder will be applied first to costs of collection, if any, then to interest and the balance to principal. The Company shall pay interest on the amount of any principal, interest or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to two percent (2%) per annum above the rate per annum of interest set forth in the immediately preceding paragraph (the "Default Rate"). Principal hereunder shall be payable in a single payment by 11:00 A.M. (New York City time) on July 18, 2006 (the "Principal Payment Date"). Interest hereunder shall be payable quarterly in arrears commencing on October 31, 2003 and continuing on the same day of each successive quarter thereafter (each such quarterly date upon which interest is due and payable, being an "Interest Payment Date") with a final payment of all unpaid interest on the date principal is paid in full hereunder. The Company shall have the option to pay such interest in cash or to cause such interest to be capitalized on any such Interest Payment Date and added to the principal amount of this Senior Secured Promissory Note, which additional amount shall bear interest and otherwise be payable in accordance with the terms and conditions of this Senior Secured Promissory Note. The Investor shall have the right at any time to request that any or all capitalized interest added to the principal amount of this Senior Secured Promissory Note be evidenced by a separate promissory note or notes in substantially the form of this Senior Secured Promissory Note. If any day on which a payment is due pursuant to the terms of this Senior Secured Promissory Note is not a day on which banks in the State of New York are generally open (a "Business Day"), such payment shall be due on the next Business Day following and interest shall be payable for such extension of time; provided, that any such interest accruing for such extension of time shall be due and payable on the immediately succeeding Interest Payment Date. This Senior Secured Promissory Note may be prepaid at any time, without premium or penalty, in whole or in part, together with accrued interest to the date of such prepayment on the portion prepaid. All prepayments made shall be recorded by the Investor and, prior to any transfer hereof, indorsed on the grid attached as Annex I hereto, which is part of this Senior Secured Promissory Note; provided, that the failure of the Investor to make any such recordation shall not affect the obligations of the Company under this Senior Secured Promissory Note. This Senior Secured Promissory Note is entitled to the benefits of and is secured by the pledge, liens, security, title, rights and security interests granted under the Agency, Guaranty and Security Agreement among the Company, the Investors and the other entities listed on the signature pages thereto dated as of July 18, 2003 (the "Agency and Security Agreement"), as the same may be amended, supplemented or renewed, from time to time. If any Event of Default occurs, and is not cured within the applicable cure period, if any, (i) the Investor may by notice to the Company, declare this Senior Secured Promissory Note, all interest thereon and all other amounts payable hereunder to be forthwith due and payable, whereupon this Senior Secured Promissory Note, all such interest and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company and (ii) the Investor may pursue its remedies against the Company and the personal and real property that secures the Company's obligations, from time to time and in such order as the Investor shall determine. For purposes of this Senior Secured Promissory Note, Event of Default shall mean Event of Default as defined in the Agency and Security Agreement. The Company agrees that, upon the occurrence of an Event of Default that is not cured within the applicable cure period, the Company shall pay to the Investor, in addition to principal and accrued interest thereon, all costs of collection of the principal and accrued interest, including, but not limited to, all reasonable attorneys' fees, court costs, and other reasonable costs and expenses of the Investor related to the enforcement of payment of this Senior Secured Promissory Note. Such amounts shall be added to the principal of this Senior Secured Promissory Note and will bear interest at the Default Rate. All notices and other communications provided for under this Senior Secured Promissory Note shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, if to the Company, at its address at 545 Long Wharf Drive, Fifth Floor, New Haven, CT 06511, Attention: Chief Financial Officer, with a copy to the General Counsel; if to the Investor, at its address at 16th Floor 31 West 52nd Street New York, NY 10019, Attention: DSL.net; and if to the Agent, at its address at 1761 East St. Andrew Place Santa Ana, CA 92705, Attention: DSL.net. No amendment, waiver, modification or supplement of any provision of this Senior Secured Promissory Note, nor consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and otherwise in accordance with Section 24 of the Agency and Security Agreement and then such amendment, waiver, modification, supplement or consent shall be effective only in the specific instance and for the specific purpose for which given. This Senior Secured Promissory Note is governed by and construed in accordance with, the laws of the State of New York. This Senior Secured Promissory Note may not be assigned, in whole or in part, from time to time, by the Investor, except with the prior written consent of the Company, which consent shall not be unreasonably withheld; provided, however, that this Senior Secured Promissory Note may be assigned, in whole or in part, from time to time, by the Investor, without the prior written consent of the Company, to an Affiliate (as defined in the Agency and Security Agreement) or to an approved transferee listed on Schedule C to the Note and Warrant Purchase Agreement among the Company and the Investors listed on Schedule A and Schedule B thereto dated as of July 18, 2003, as the same may be amended or supplemented from time to time. This Senior Secured Promissory Note and the rights and obligations under this Senior Secured Promissory Note are not assignable or delegable, directly or indirectly, in whole or in part, by the Company, without the prior written consent of the Investor; provided, however, that the Company may transfer this Senior Secured Promissory Note and the rights and obligations under this Senior Secured Promissory Note to any third party that has acquired all or substantially all of the capital stock or ownership interest in and to the Company (including by way of merger or consolidation) or to any third party that has acquired all or substantially all of the assets of the Company; provided that the Collateral (as defined in the Agency and Security Agreement) is included in any such sale. This Senior Secured Promissory Note shall be binding upon the Company, its successors and its assigns, and, in addition, shall inure to the benefit of and be enforceable by the Investor and its successors and assigns. Whenever possible this Senior Secured Promissory Note and each provision hereof shall be interpreted in such manner as to be effective, valid and enforceable under applicable law. If and to the extent that any such provision of this Senior Secured Promissory Note shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provisions hereof, and any determination that the application of any provision hereof to any person or under any circumstance is illegal and unenforceable shall not affect the legality, validity and enforceability of such provision as it may be applied to any other person or in any other circumstance. All rights and remedies provided in this Senior Secured Promissory Note, the Agency and Security Agreement or any law shall be available to the Investor and shall be cumulative. The Investor hereby expressly waives presentment, demand, and protest, notice of demand, dishonor and nonpayment of this Senior Secured Promissory Note, and all other notices or demands of any kind in connection with the delivery, acceptance, performance, default or enforcement hereof, and hereby consents to any delays, extensions of time, renewals, waivers or modifications that may be granted or consented to by the holder hereof with respect to the time of payment or any other provision hereof or of the Agency and Security Agreement. No course of dealing between the Company and the Investor and no delay or failure in exercising any rights hereunder in respect thereof shall operate as a waiver of any rights of the Investor. This Senior Secured Promissory Note and the indebtedness of the Company to the Investor evidenced hereby, shall not be subject to any set-off, recoupment or counterclaim, lack of which is hereby expressly waived by the Company. The Company hereby irrevocably submits to the non-exclusive jurisdiction of any United States Federal or New York State court sitting in New York City in any action or proceeding arising out of or relating to this Senior Secured Promissory Note and hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in any such court and irrevocably waives any objection it may now or hereafter have as to the venue of any such suit, action or proceeding brought in such a court or that such court is an inconvenient forum. Nothing herein shall limit the right of the Investor to bring proceedings against the Company in the courts of any other jurisdiction. COMPANY: DSL.NET, INC. By: /s/ Robert J. DeSantis ---------------------- Name: Robert J. DeSantis ------------------ Title: Chief Financial Officer ----------------------- Annex I ------- PREPAYMENTS ============= ====================== ====================== ==================== Date Amount Prepaid Unpaid Balance Notation Made By ============= ====================== ====================== ==================== - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- - ------------- ---------------------- ---------------------- -------------------- ============= ====================== ====================== ==================== -----END PRIVACY-ENHANCED MESSAGE-----