DSL NET INC, S-1/A, 2000-02-22

DSL NET INC
S-1/A, 2000-02-22
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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As filed with the Securities and Exchange Commission on February 22, 2000

Registration No. 333-96349
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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DSL.net, Inc.
(Exact name of registrant as specified in its charter)

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Delaware 4813 06-1510312
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)

DSL.net, Inc.
545 Long Wharf Drive
New Haven, CT 06511
(203) 772-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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Stephen Zamansky, Esq.
DSL.net, Inc.
545 Long Wharf Drive
New Haven, CT 06511
(203) 772-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:
Mark H. Burnett, Esq. Ellen B. Corenswet, Esq.
Testa, Hurwitz & Thibeault, LLP Brobeck, Phleger & Harrison LLP
125 High Street 1633 Broadway, 47th Floor
Boston, Massachusetts 02110 New York, NY 10019
(617) 248-7000 (212) 581-1600

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [X]

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell these securities and it is not +
+soliciting an offer to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion, Dated February 22, 2000

[LOGO OF DSL.net APPEARS HERE]

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5,000,000 Shares
Common Stock

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This is a public offering of DSL.net, Inc. We are offering 5,000,000 shares
of our common stock.

Our common stock is traded on the Nasdaq National Market under the symbol
"DSLN." On February 18, 2000, the last reported sale price of our common
stock was $30.0625 per share.

Investing in our common stock involves risks which are described in the "Risk
Factors" section beginning on page 4 of this prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
Per
Share Total
-------- ---------
<S> <C> <C>
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds, before expenses, to DSL.net, Inc. $ $
</TABLE>

The underwriters may also purchase up to an additional 750,000 shares of our
common stock within 30 days from the date of this prospectus to cover over-
allotments.

Deutsche Banc Alex. Brown
Donaldson, Lufkin & Jenrette
Lehman Brothers
CIBC World Markets

The date of this prospectus is , 2000.
<PAGE>

[MAP TO COME]

<PAGE>

PROSPECTUS SUMMARY

This summary highlights certain important information regarding our business
and this offering. You should read this entire prospectus, including the "Risk
Factors" and the financial statements and all related notes, before deciding to
purchase our common stock. All share information reflects all stock splits
effected prior to the date of this prospectus. Except as otherwise indicated,
the information in this prospectus assumes the underwriters will not exercise
their over-allotment option.

DSL.net

Our Business

We provide high-speed data communications and Internet access services using
digital subscriber line, or DSL, technology to small and medium sized
businesses. We primarily target select second and third tier cities, generally
with populations of less than 900,000. Our networks enable data transport over
existing copper telephone lines at speeds of up to 1.5 megabits per second. Our
services, marketed under the NETgain brand name, offer customers high-speed
digital connections at prices that are attractive compared to the cost and
performance of alternative data communications services.

We offer our customers a single point of contact for a complete business
solution that includes all of the necessary equipment and services for high-
speed data communications. As of February 1, 2000, we provided service or had
installed equipment in more than 140 cities. We intend to continue our
expansion into a total of more than 300 cities by the end of 2000.

Our Strategy

Our objective is to become the leading provider of DSL-based services to
small and medium sized businesses in second and third tier cities throughout
the United States. Several DSL service providers have taken advantage of the
opportunity created by the rapidly growing data communications industry by
providing DSL-based services in large metropolitan areas. However, second and
third tier cities remain a significant underserved market. Key elements of our
strategy are to:

. be the first DSL-based service provider in select second and third tier
cities throughout the United States;

. utilize our rapid deployment model and leverage our centralized network
management to implement our rollout plan quickly and cost effectively;

. develop direct relationships with customers in order to better understand
and serve their needs;

. establish relationships in each local market with select local and
regional integrators of computer networks and systems and consultants who
can help market our services and provide us with customer referrals;

. leverage our systems and network design to capitalize on the cost
efficiencies of DSL technology; and

. develop relationships with companies that provide complementary products
and services or that can assist us in attracting our target customers.

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Recent Developments

As of February 1, 2000, we provided service or had installed equipment in
more than 140 cities.

On December 1, 1999, we acquired Tycho Networks, Inc., which provides
Internet access, web hosting and related services throughout central coastal
California. The total purchase price approximated $3.3 million, excluding
transaction costs. Our results of operations include the results of Tycho
Networks from December 1, 1999.

Our History

We were incorporated in Delaware on March 3, 1998. Our principal executive
offices are located at 545 Long Wharf Drive, New Haven, Connecticut 06511, and
our telephone number is (203) 772-1000. We maintain a corporate website at
www.dsl.net. The contents of our website are not part of this prospectus.

The Offering

<TABLE>
<C> <S>
Common stock offered................ 5,000,000 shares
Common stock to be outstanding after
the offering....................... 63,382,196 shares
Use of proceeds..................... To continue building our network and for
working capital and other general
corporate purposes. We may also use a
portion of the proceeds to acquire
complementary businesses.
Nasdaq National Market symbol....... DSLN
</TABLE>

The shares of common stock to be outstanding after the offering exclude, as
of December 31, 1999:

. 12,364,200 shares of common stock reserved for issuance under our stock
option plan, of which 5,874,302 shares with a weighted average exercise
price of $2.32 per share were subject to outstanding options;

. 300,000 shares of common stock reserved for issuance under our employee
stock purchase plan; and

. 194,556 shares of common stock issuable upon exercise of outstanding
warrants with a weighted average exercise price of $0.68 per share.

2
<PAGE>

Summary Financial Data

You should read the following summary financial data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of DSL.net and Tycho Networks, and the
related notes, and the proforma condensed combined financial information and
related notes, which are included elsewhere in this prospectus. We were
incorporated on March 3, 1998 and commenced operations on March 28, 1998.

The pro forma statement of operations data below gives effect to our
acquisition of Tycho Networks, Inc. as if the acquisition had occurred at the
beginning of the period presented.

The as adjusted balance sheet data below gives effect to the sale of
5,000,000 shares of common stock offered by us, after deducting estimated
underwriting discounts and commissions and estimated offering expenses. See
"Use of Proceeds."

<TABLE>
<CAPTION>
Actual Pro forma
----------------------------- ------------
Period from
Inception
(March 3, 1998)
through Year Ended Year Ended
December 31, December 31, December 31,
1998 1999 1999
--------------- ------------- ------------
<S> <C> <C> <C>
Statement of Operations Data:
Revenue.......................... $ 31,533 $ 1,312,546 $ 2,906,271
Operating loss................... (2,785,026) (23,871,392) (27,007,828)
Net loss......................... (2,789,637) (21,988,313) (25,328,578)
Net loss per common share........ $ (0.55) $ (2.05) $ (2.26)
Other Data:
EBITDA........................... $ (356,010) $ (17,917,617)
Capital expenditures............. 290,082 33,811,121
Cash Flow Data:
Used in operating activities..... $ (153,505) $ (6,342,720)
Used in investing activities..... (290,082) (48,660,812)
Provided by financing
activities...................... 483,066 121,142,314
</TABLE>

<TABLE>
<CAPTION>
December 31, 1999
-------------------------
Actual As Adjusted
------------ ------------
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and marketable securities..... $ 79,452,444 $221,849,319
Total assets......................................... 117,631,772 260,028,647
Long-term obligations (including current portion).... 3,055,625 3,055,625
Total stockholders' equity........................... 100,732,886 243,129,761
</TABLE>

EBITDA, shown above under "Other Data," consists of net loss excluding net
interest, taxes, depreciation of capital assets and noncash stock compensation
expense. Other companies, however, may calculate it differently from us. We
have provided EBITDA because it is a measure of financial performance commonly
used for comparing companies in the telecommunications industry in terms of
operating performance, leverage, and ability to incur and service debt. EBITDA
is not a measure determined under generally accepted accounting principles.
EBITDA should not be considered in isolation from, and you should not construe
it as a substitute for:

. operating loss as an indicator of our operating performance,

. cash flows from operating activities as a measure of liquidity,

. other consolidated statement of operations or cash flows data presented
in accordance with generally accepted accounting principles, or

. a measure of profitability or liquidity.

3
<PAGE>

RISK FACTORS

You should consider carefully the following risks, together with all other
information included in this prospectus, before you decide to buy our common
stock. Please keep these risks in mind when reading this prospectus, including
any forward-looking statements appearing in this prospectus. If any of the
following risks actually occurs, our business, financial condition or results
of operations would likely suffer materially. As a result, the trading price of
our common stock may decline, and you could lose all or part of the money you
paid to buy our common stock.

Risks relating to our business

Our limited operating history makes it difficult to evaluate our business and
prospects

We commenced operations in March 1998 and only recently began to market and
sell our services. We began offering commercial service in Stamford,
Connecticut in May 1998. Accordingly, you have limited information about our
company with which to evaluate our business, strategies and performance and an
investment in our common stock.

Because the high-speed data communications industry is new and rapidly
evolving, we cannot predict its future growth or ultimate size

The high-speed data communications industry is in the early stages of
development and is subject to rapid and significant technological change. Since
this industry is new and because the technologies available for high-speed data
communications services are rapidly evolving, we cannot accurately predict the
rate at which the market for our services will grow, if at all, or whether
emerging technologies will render our services less competitive or obsolete. If
the market for our services fails to develop or grows more slowly than
anticipated, our business, prospects, financial condition and results of
operations could be materially adversely affected. Many providers of high-speed
data communication services are testing products from numerous suppliers for
various applications, and these suppliers have not broadly adopted an industry
standard. In addition, certain industry groups are in the process of trying to
establish standards which could limit the types or speeds of the technologies
we could use. Certain critical issues concerning commercial use of DSL
technology for Internet access, including security, reliability, ease and cost
of access and quality of service, remain unresolved and may impact the growth
of these services.

We have incurred losses and have experienced negative operating cash flow to
date and expect our losses and negative operating cash flow to continue and to
increase

We have incurred significant losses and experienced negative operating cash
flow for each month since our formation. We expect to continue to incur
significant losses and negative operating cash flow for the foreseeable future.
If our revenue does not grow as expected or capital and operating expenditures
exceed our plans, our business, prospects, financial condition and results of
operations will be materially adversely affected. As of December 31, 1999, we
had an accumulated deficit of approximately $27,180,000. We cannot be certain
if or when we will be profitable or if or when we will generate positive
operating cash flow. We expect our operating expenses to increase significantly
as we expand our business. In addition, we expect to make significant
additional capital expenditures in 2000 and in subsequent years. We also expect
to substantially increase our operating expenditures, particularly network and
operations and sales and marketing expenditures, as we implement our business
plan. However, our revenue may not increase despite this increased spending.

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<PAGE>

Our business model is unproven, and may not be successful

We do not know whether our business model and strategy will be successful.
If the assumptions underlying our business model are not valid or we are unable
to implement our business plan, achieve the predicted level of market
penetration or obtain the desired level of pricing of our services for
sustained periods, our business, prospects, financial condition and results of
operations could be materially adversely affected. We have adopted a different
strategy than certain other DSL providers. We focus on selling directly to
small and medium sized businesses in second and third tier cities. In contrast,
certain other DSL providers sell services primarily to Internet service
providers and others who, in turn, resell these services to end users through
their sales forces. In addition, many other DSL providers are currently focused
primarily on offering their services in large metropolitan areas. Certain of
our target markets are within the larger metropolitan areas where other DSL
providers are focused on providing service. Our unproven business model makes
it difficult to predict the extent to which our services will achieve market
acceptance. To be successful, we must deploy our network in a significant
number of our selected markets and convince our target customers to utilize our
service. It is possible that we may never be able to deploy our network as
planned or achieve significant market acceptance, favorable operating results
or profitability.

Our failure to achieve or sustain market acceptance at desired pricing levels
could impair our ability to achieve profitability or positive cash flow

Prices for digital communication services have fallen historically, a trend
we expect will continue. Accordingly, we cannot predict to what extent we may
need to reduce our prices to remain competitive or whether we will be able to
sustain future pricing levels as our competitors introduce competing services
or similar services at lower prices. Our failure to achieve or sustain market
acceptance at desired pricing levels could impair our ability to achieve
profitability or positive cash flow, which would have a material adverse effect
on our business, prospects, financial condition and results of operations.

If we fail to recruit qualified personnel in a timely manner and retain our
employees, we will not be able to execute our business plan and our business
will be harmed

To execute our business plan, we need to hire a substantial number of
qualified personnel, particularly sales and marketing, engineering and other
technical personnel. If we are unable to recruit qualified personnel in a
timely manner or to retain our employees, we will not be able to execute our
business plan. In particular, if we are unable to recruit and retain a
sufficient number of qualified personnel, including many who must be recruited
to work locally in the new markets where we provide or intend to provide
service, we may not be able to commence service as quickly as we expect in
those new markets and, as a result, our revenue growth may be lower than we
expect and our business may be harmed. Our industry is characterized by intense
competition for, and aggressive recruiting of, skilled personnel, as well as a
high level of employee mobility. Many of our future employees must be recruited
to work locally in the new markets where we intend to establish a presence. The
combination of our local sales and marketing strategy and the competitive
nature of our industry may make it difficult to hire qualified personnel on a
timely basis and to retain our employees.

Our management team has little experience working together, and the loss of key
personnel could adversely affect our business

We depend on a small number of executive officers and other members of
senior management to work effectively as a team, to execute our business
strategy and business plan, and to manage employees located throughout the
United States. The loss of key managers or their failure to work

5
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effectively as a team could have a material adverse effect on our business and
prospects. We do not have employment agreements with any of our executive
officers, so any of these individuals may terminate employment at any time.

Our failure to establish the necessary infrastructure to support our business
and to manage our growth could strain our resources and adversely affect our
business and financial performance

Our business plan anticipates that we will provide service in a significant
number of new cities and add a significant number of new employees in
geographically-dispersed areas. This rapid growth will continue to place a
significant strain on our management, financial controls, operations, personnel
and other resources. Our failure to manage our rapid growth could have a
material adverse effect on our ability to integrate expanding operations, the
quality of our services and our ability to recruit, manage and retain key
personnel. If we do not institute adequate financial and reporting systems,
managerial controls, and procedures to manage and operate from multiple
geographically-dispersed locations, our operations will be materially and
adversely affected. We have deployed operations support systems to help manage
customer service, bill customers, process customer orders and coordinate with
vendors and contractors. The subsequent integration and enhancement of these
systems could be delayed or cause disruptions in service or billing. In
addition, we have recently implemented a new financial and reporting system
which will interact with our operations support systems. To manage our growth
effectively, we must continue to successfully implement these systems on a
timely basis, and continually expand and upgrade these systems as our
operations expand.

Disappointing quarterly revenue or operating results could cause the price of
our common stock to fall

Our quarterly revenue and operating results are difficult to predict and may
fluctuate significantly from quarter to quarter. If our quarterly revenue or
operating results fall below the expectations of investors or security
analysts, the price of our common stock could fall substantially. Our quarterly
revenue and operating results may fluctuate as a result of a variety of
factors, many of which are outside our control, including:

. the amount and timing of expenditures relating to the rollout of our
infrastructure and services;

. the ability to obtain and the timing of necessary regulatory approvals;

. the rate at which we are able to attract customers within our target
markets and our ability to retain these customers at sufficient aggregate
revenue levels;

. our ability to deploy our network on a timely basis;

. the availability of financing to continue our expansion;

. the technical difficulties or network service interruptions;

. the availability of space in traditional telephone companies' central
offices and timing of the installation of our equipment in those spaces;
and

. the introduction of new services or technologies by our competitors and
resulting pressures on the pricing of our service.

The failure of our customers to pay their bills on a timely basis could
adversely affect our cash flow

Our target customers consist of small and medium sized businesses. We
anticipate having to bill and collect numerous relatively small customer
accounts. We may experience difficulty in

6
<PAGE>

collecting amounts due on a timely basis. Our failure to collect accounts
receivable owed to us by our customers on a timely basis could have a material
adverse effect on our business, financial condition and cash flow.

Our failure to develop and maintain good relationships with marketing partners
in a local service market could adversely affect our ability to obtain and
retain customers in that market

In addition to marketing through our direct sales force, we rely on
relationships with local marketing partners, such as integrators of computer
systems and networks and consultants. These partners recommend our services to
their clients, provide us with referrals and help us build a local presence in
each market. We may not be able to identify, and maintain good relationships
with, quality marketing partners and we cannot assure you that they will
recommend our services rather than our competitors' services to their
customers. Our failure to identify and maintain good relationships with quality
marketing partners could have a material adverse effect on our ability to
obtain and retain customers in a market and, as a result, our business would
suffer.

Our success depends on negotiating and entering into interconnection agreements
with traditional telephone companies

We must enter into and renew interconnection agreements with traditional
telephone companies in each of our target markets in order to provide service
in that market. These agreements govern, among other things, the price and
other terms regarding our location of equipment in the offices of traditional
telephone companies which house telecommunications equipment and from which
local telephone service is provided, known as central offices, and our lease of
copper telephone lines that connect those central offices to our customers. To
date, we have entered into agreements with Ameritech, Bell Atlantic, BellSouth,
Cincinnati Bell, GTE, SBC Communications, Sprint and US West, which govern our
relationships in 48 states and the District of Columbia. Delays in obtaining
interconnection agreements would delay our entrance into target markets and
could have a material adverse effect on our business and prospects. Our
interconnection agreements generally have limited terms of one to two years and
we cannot assure you that new agreements will be negotiated or that existing
agreements will be extended on terms favorable to us. Interconnection
agreements must be approved by state regulators and are also subject to
oversight by the FCC and the courts. These governmental authorities may modify
the terms or prices of our interconnection agreements in ways that could
adversely affect our ability to deliver service and our business and results of
operations.

Failure to negotiate interconnection agreements with the traditional local
telephone companies could lead to costly and lengthy arbitration which may not
be resolved in our favor

Under federal law, traditional telephone companies have an obligation to
negotiate with us in good faith to enter into interconnection agreements. If no
agreement can be reached, either side may petition the applicable state
telecommunications regulators to arbitrate remaining disagreements. Arbitration
is a costly and lengthy process that could delay our entry into markets and
could harm our ability to compete. Interconnection agreements resulting from
arbitration must be approved by state regulators. We cannot assure you that a
state regulatory authority would resolve disputes in our favor.

Failure to obtain space for our DSL equipment in the local telephone companies'
central offices in our target markets could adversely affect our business

Our strategy requires us to obtain space for our DSL equipment in those
central offices of the traditional local telephone companies that already serve
a large number of our target customers.

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<PAGE>

Failure to obtain required space to locate our equipment in those central
offices, known as collocation space, on a timely basis could have a material
adverse effect on our business. In addition to negotiating and entering into
interconnection agreements with traditional telephone companies, we must obtain
collocation space in each central office in which we intend to locate
equipment. We may not be able to secure collocation space in the central
offices of our choice on a timely basis. We expect that central office space
will become increasingly scarce as demand increases. In addition, the terms of
our collocation agreements are generally one to two years and are subject to
certain renegotiation, renewal and termination provisions.

Our success depends on traditional telephone companies providing acceptable
transmission facilities and copper telephone lines

We interconnect with and use the networks of traditional telephone companies
to provide our services to our customers. We cannot assure you that these
networks will be able to meet the telecommunications needs of our customers or
maintain our service standards. We also depend on the traditional telephone
companies to provide and maintain their transmission facilities and the copper
telephone lines between our network and our customers' premises. Our dependence
on traditional telephone companies could cause delays in establishing our
network and providing our services. Any such delays could have a material
adverse effect on our business. We lease copper telephone lines running from
the central office of the traditional telephone companies to each customer's
location. In many cases, the copper telephone lines must be specially
conditioned by the telephone company to carry digital signals. We may not be
able to lease a sufficient number of acceptable telephone lines on acceptable
terms, if at all. Traditional telephone companies often rely on unionized labor
and labor-related issues have in the past, and may in the future, adversely
affect the services provided by the traditional telephone companies.

We compete with the traditional local telephone companies on whom we depend

Many of the traditional local telephone companies, including those created
by AT&T's divestiture of its local telephone service business, have begun
deploying DSL-based services. In addition, these companies also currently offer
high-speed data communications services that use other technologies.
Consequently, these companies have certain incentives to delay:

. Our entry into, and renewals of, interconnection agreements with them,

. Our access to their central offices to install our equipment and provide
our services,

. providing acceptable transmission facilities and copper telephone lines,
and

. our introduction and expansion of our services.

Any such delays would negatively impact our ability to implement our
business plan and harm our competitive position, business and prospects.

We depend on two long distance carriers to connect our network

Data is transmitted across our network via transmission facilities that we
lease from MCI WorldCom and AT&T. Failure of these carriers to provide service
or to provide quality service may interrupt the use of our services by our
customers. In August 1999, the service provided by MCI WorldCom was interrupted
for several days by a failure of their communications network. Several of our
customers were without service or had poor service during this period. As a
result, we issued approximately $21,000 in credits toward services to our
customers. We cannot be sure that the MCI WorldCom and AT&T service will not be
interrupted in the future.

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<PAGE>

Our success depends on contractors who install the equipment and wiring
necessary to utilize our service in the central offices of traditional
telephone companies and at our customers' premises

We primarily utilize contractors to install necessary equipment and wiring
in the central offices of traditional telephone companies and on our customers'
premises. These installations must be completed on a timely basis and in a
cost-efficient manner. Failure to retain experienced contractors to install the
equipment and wiring or failure to complete these installations on a timely,
cost-efficient basis could materially delay our growth or damage our
reputation, our business and prospects and results of operations. If we are
unable to retain contractors to provide these services, we will have to
complete these installations ourselves, probably at a greater cost and with
delay. We may be required to utilize numerous contractors as we expand our
operations, which may divert management attention and result in delays in
installations, cancellations, increased costs and lower quality.

Intense competition in the high-speed data communication services market may
negatively affect the number of our customers and the pricing of our services

The high-speed data communication services market is intensely competitive.
If we are unable to compete effectively, our business, prospects, financial
condition and results of operations would be adversely affected. We expect the
level of competition to intensify in the future, due, in part, to increasing
consolidation in our industry. Our competitors use various high speed
communications technologies for local access connections such as integrated
services digital network, or ISDN, frame relay, T1, DSL services and wireless,
satellite-based and cable networks. We expect significant competition from:

. Other providers of DSL-based services like us, including Covad, Network
Access Solutions, NorthPoint and Rhythms NetConnections;

. Internet service providers, such as PSINet, Concentric Network and
Flashcom, which offer high-speed access capabilities to complement their
existing products and services;

. Traditional local telephone companies, including the traditional
telephone companies created by AT&T's divestiture of its local telephone
service business, some of which have begun deploying DSL-based services
and which provide other high-speed data communications services;

. National long distance carriers, such as AT&T and MCI WorldCom, which
are beginning to offer competitive DSL-based services;

. Cable modem service providers, such as At Home, which are offering high-
speed Internet access over cable networks and have positioned themselves
to do the same for businesses; and

. Providers utilizing alternative technologies, such as wireless and
satellite-based data service providers.

Many of our current and potential competitors have longer operating
histories, greater brand name recognition, larger customer bases and
substantially greater financial, technical, marketing, management, service
support and other resources than we do. Therefore, they may be able to respond
more quickly than we can to new or changing opportunities, technologies,
standards or customer requirements. See "Business--Competition."

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We may not be able to continue to grow our business if we do not obtain
significant additional funds on acceptable terms during 2001

The actual amount and timing of our future capital requirements will depend
on the demand for our services and regulatory, technological and competitive
developments which could differ materially from our estimates. We may not be
able to raise sufficient debt or equity capital on terms that we consider
acceptable, if at all. If we are unable to obtain adequate funds on acceptable
terms, our ability to deploy and operate our network, fund our expansion or
respond to competitive pressures would be significantly impaired.

We may incur significant amounts of debt in the future to implement our
business plan and, if incurred, this indebtedness will create greater financial
and operating risk and limit our flexibility

We intend to seek additional debt financing in the future. We are not
generating sufficient revenue or operating cash flow to fund our operations or
to repay existing or expected debt. We may not be able to repay our current
debt or any future debt. In addition, the terms of any future debt would likely
contain additional restrictive covenants that would limit our ability to incur
additional indebtedness and place other operating restrictions on our business.
If we incur additional debt, we will be required to devote increased amounts of
our cash flow to service indebtedness. This could require us to modify, delay
or abandon the capital expenditures and other investments necessary to
implement our business plan.

We may be subject to risks associated with acquisitions

We acquired Tycho Networks in December 1999 and may acquire additional
businesses in the future, although we have no definitive agreements to do so at
this time. An acquisition, including the recently-completed Tycho Networks
acquisition, may not produce the revenue, earnings or business synergies that
we anticipate, and an acquired business might not perform as we expect. If we
pursue any future acquisition, our management could spend a significant amount
of time and effort in identifying and completing the acquisition and may be
distracted from the operation of our business. We will probably have to devote
a significant amount of management resources to integrating any acquired
business, including the business of Tycho Networks, with our existing
operations, and that integration may not be successful.

Our services are subject to federal, state and local regulation and changes in
laws or regulations could adversely affect the way we operate our business

The facilities we use and the services we offer are subject to varying
degrees of regulation at the federal, state and/or local levels. Changes in
applicable laws or regulations could, among other things, increase our costs,
restrict our access to the central offices of the traditional telephone
companies, or restrict our ability to provide our services. For example, the
1996 Telecommunications Act, which, among other things, requires traditional
telephone companies to unbundle network elements and to allow competitors to
locate their equipment in the telephone companies' central offices, is the
subject of ongoing proceedings at the federal and state levels, litigation in
federal and state courts, and legislation in federal and state legislatures. On
remand from a decision of the U.S. Supreme Court that invalidated certain FCC
regulations, the FCC recently re-established a list of unbundled network
elements that must be provided to competitive companies such as us; however,
this decision is still subject to petitions for reconsideration and to appeal.
Also, FCC rules governing pricing standards for access to the networks of the
traditional telephone companies are currently being challenged in federal
court. In addition, an FCC order that found that advanced services, such as
DSL, are subject to the market opening requirements of the 1996
Telecommunications Act was remanded by a federal appellate court to the FCC for
further consideration. Another recent FCC order expanding collocation rights
for DSL and other advanced service providers is also under review

10
<PAGE>

on appeal. We cannot predict the outcome of the various proceedings, litigation
and legislation or whether or to what extent these proceedings, litigation and
legislation may adversely affect our business and operations. In addition,
decisions by the FCC and state telecommunications regulators will determine
some of the terms of our relationships with traditional telecommunications
carriers, including the terms and prices of interconnection agreements, and
access fees and surcharges on gross revenue from interstate and intrastate
services. State telecommunications regulators determine whether and on what
terms we will be authorized to operate as a competitive local exchange carrier
in their state. In addition, local municipalities may require us to obtain
various permits which could increase the cost of services or delay development
of our network. Future federal, state and local regulations and legislation may
be less favorable to us than current regulations and legislation and may
adversely affect our businesses and operations. See "Business--Governmental
Regulations."

An FCC proposal to permit the traditional local telephone companies to offer
DSL services through a less-regulated subsidiary could, if adopted, adversely
affect our business plan by altering our relationship with the local telephone
companies upon whose equipment we depend for access to customers

In August 1998, the FCC proposed that the traditional local telephone
companies should be permitted to create separate affiliates to provide DSL
services that would operate under the relaxed regulatory treatment available to
competitive DSL carriers. Under the separate affiliate proposal, traditional
local telephone companies would be required to provide wholesale service to
competitor DSL carriers at the same rates, terms and conditions that it
provided to its separate affiliate. Though the outcome of this proceeding
remains uncertain, the FCC adopted a condition to the merger of two traditional
local telephone companies, SBC Communications and Ameritech, that will permit
these companies to create separate affiliates to provide DSL services. In
December 1999, the FCC accepted Bell Atlantic's commitment to create an
advanced services affiliate as a condition to the Commission's decision to
approve Bell Atlantic's application to offer interexchange long-distance
services in New York state. Any final decision in this proceeding that alters
our relationship with the traditional local telephone companies could adversely
affect our ability to provide DSL services at a competitive price.

Uncertain tax and other surcharges on our services may increase our payment
obligations to federal and state governments

Telecommunications providers are subject to a variety of federal and state
surcharges and fees on their gross revenues from interstate and intrastate
services. These surcharges and fees may be increased and other surcharges and
fees not currently applicable to our services could be imposed on us. In either
case, the cost of our services would increase and that could have a material
adverse effect on our business, prospects, financial condition and results of
operations.

A breach of our network security could result in liability to us and deter
customers from using our services

Our network may be vulnerable to unauthorized access, computer viruses and
other disruptive problems. Any of the foregoing problems could result in
liability to us and deter customers from using our service. Unauthorized access
could jeopardize the security of confidential information stored in the
computer systems of our customers. Eliminating computer viruses and alleviating
other security problems may require interruptions, delays or cessation of
service to our customers, cause us to incur significant costs to remedy the
problem, and divert management attention. We can provide no assurance that the
security measures we have implemented will not be circumvented or that any
failure of these measures will not have a material adverse effect on our
ability to obtain and retain customers. Any of these factors could have a
material adverse effect on our business and prospects.

11
<PAGE>

Our failure to adequately protect our proprietary rights may adversely affect
our business

We rely on unpatented trade secrets and know-how to maintain our competitive
position. Our inability to protect these secrets and know-how could have a
material adverse effect on our business and prospects. We protect our
proprietary information by entering into confidentiality agreements with
employees and consultants and potential business partners. These agreements may
be breached or terminated. In addition, third parties, including our
competitors, may assert infringement claims against us. Any such claims, could
result in costly litigation, divert management's attention and resources, and
require us to pay damages and/or to enter into license or similar agreements
under which we would be required to pay license fees or royalties.

We may be exposed to liability for information carried over our network or
displayed on web sites that we host

Because we provide connections to the Internet and host web sites for our
customers, we may be perceived as being associated with the content carried
over our network or displayed on web sites that we host. We do not and cannot
screen all of this content. As a result, we may face potential liability for
defamation, negligence, copyright, patent or trademark infringement and other
claims based on the content carried over our network or displayed on web sites
that we host. These types of claims have been brought against providers of
online services in the past and can be costly to defend regardless of the merit
of the lawsuit. The protection offered by recent federal legislation that
protects online services from some claims when the material is written by third
parties is limited. Further, the law in this area remains in flux and varies
from state to state. We may also suffer a loss of customers or reputational
harm based on this content or resulting from our involvement in these legal
proceedings.

Our failure and the failure of third parties to be Year 2000 compliant could
negatively impact our business

Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. The use of software and
computer systems that are not Year 2000 compliant could result in system
failures or miscalculations and may result in disruptions of operations
including, among other things, a temporary inability to process transactions,
send invoices or engage in normal business activities. We are subject to
potential Year 2000 problems affecting our services and our business systems,
the systems of the traditional local telephone companies and other vendors, and
our customers' systems. Any of these Year 2000 problems could have a material
adverse effect on our business, financial condition and results of operations.
Year 2000 errors or defects may be discovered in our internal software or other
systems and, if such errors or defects are discovered, the costs of making
those systems Year 2000 compliant may be material. Year 2000 errors or defects
in the internal systems maintained by the traditional local telephone companies
and other vendors, could require us to incur significant unanticipated expenses
to remedy any problems or, if possible, replace affected vendors. Furthermore,
Year 2000 problems of our target customers could negatively impact their
decision to buy our services. See "Management's Discussion and Analysis and
Results of Operations--Impact of Year 2000."

12
<PAGE>

Risks relating to ownership of our common stock

Our stock price could fluctuate widely in response to various factors, many of
which are beyond our control

The trading price of our common stock has been and is likely to continue to
be highly volatile. Our stock price could fluctuate widely in response to
factors such as the following:

. actual or anticipated variations in quarterly operating results;

. announcements of new products or services by us or our competitors or
new competing technologies;

. the addition or loss of customers;

. changes in financial estimates or recommendations by securities
analysts;

. conditions or trends in the telecommunications industry, including
regulatory developments;

. growth of the Internet and on-line commerce industries;

. announcements by us of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;

. additions or departures of our key personnel;

. future equity or debt offerings by us or our announcements of such
offerings; and

. general market and economic conditions.

In addition, in recent years the stock market in general, and the Nasdaq
National Market and the market for Internet and technology companies in
particular, have experienced large price and volume fluctuations. These
fluctuations have often been unrelated or disproportionate to the operating
performance of these companies. These market and industry factors may
materially and adversely affect our stock price, regardless of our operating
performance.

Our executive officers, directors and principal stockholders own a significant
percentage of our company and will be able to exercise significant influence
over our company, which could have a material and adverse effect on the market
price of our common stock.

After this offering, our executive officers, directors and principal
stockholders and their affiliates will together control approximately 54.7% of
our outstanding common stock. As a result, these stockholders, if they act
together, will be able to control all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions, and will continue to have significant influence over our affairs.
This concentration of ownership may have the effect of delaying, preventing or
deterring a change in control, could deprive our stockholders of an opportunity
to receive a premium for their common stock as part of a sale and might affect
the market price of our common stock.

Certain provisions of our charter, by-laws and Delaware law make a takeover
difficult

Our corporate documents and Delaware law contain provisions that might
enable our management to resist a takeover. These provisions include a
staggered board of directors, limitations on persons authorized to call a
special meeting of stockholders and advance notice procedures required for
stockholders to make nominations of candidates for election as directors or to
bring matters before an annual meeting of stockholders. These provisions might
discourage, delay or prevent a change of control or a change in our management.
These provisions could also discourage proxy contests and make it more
difficult for you and other stockholders to elect directors and take other
corporate actions. The existence of these provisions could limit the price that
investors might be willing to pay in the future for shares of common stock and
could deprive you of an opportunity to receive a premium for your common stock
as part of a sale.

13
<PAGE>

The market price of our common stock may drop significantly when the
restrictions on resale by our existing securityholders lapse

Following this offering, we will have approximately 63,382,196 shares of
common stock outstanding. Approximately 50,156,196 shares, or 79%, of our
outstanding common stock will be subject to restrictions on resale under U.S.
securities laws. Holders of 2,371,144 shares have agreed not to sell these
shares until April 4, 2000, and holders of 37,380,293 shares have agreed not to
sell these shares for at least 90 days following the date of this prospectus,
in each case without the consent of Deutsche Bank Securities Inc. As these
restrictions on resale end beginning in April 2000, the market price of our
common stock could drop significantly if holders of these shares sell them or
are perceived by the market as intending to sell them. These sales also may
make it difficult for us to sell equity securities in the future at a time and
price that we deem appropriate. See "Shares Eligible for Future Sale."

We will have discretion as to the use of the proceeds of this offering, which
we may not use effectively

We have not committed the net proceeds of this offering to any particular
purpose. As a result, our management will have significant flexibility in
applying the net proceeds of this offering and could apply them in ways with
which stockholders may disagree. If we do not apply the funds we receive
effectively, our accumulated deficit will increase and we may lose significant
business opportunities. See "Use of Proceeds."

Investors will experience immediate and substantial dilution in the book value
of their investment

If you purchase shares of our common stock in this offering, you will
experience immediate and substantial dilution because the price you pay will be
substantially greater than the net tangible book value per share of the shares
you acquire. This dilution is due, in large part, to the fact that certain of
our current investors paid substantially less than the public offering price
when they purchased their shares of common stock. You will experience
additional dilution upon the exercise of outstanding stock options and warrants
to purchase common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND CERTAIN OTHER INFORMATION

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business," on the inside front cover and elsewhere in this
prospectus constitute forward-looking statements. These statements relate to
future events or our future financial or business performance and are
identified by terminology such as "may," "might," "will," "should," "expect,"
"scheduled," "plan," "intend," "anticipate," "believe," "estimate,"
"potential," or "continue" or the negative of such terms or other comparable
terminology. Actual events or results may differ materially. In evaluating
these statements, you should specifically consider various factors, including
the risks outlined under "Risk Factors." These factors, among others, may cause
our actual results to differ materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.

We use market data and industry forecasts throughout this prospectus, which
we have obtained from internal surveys, market research, publicly available
information and industry publications. We believe that the surveys and market
research we or others have performed is reliable, but we have not independently
verified this information. Such information may not be accurate.

14
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of the 5,000,000 shares of common stock being
offered by us, at an assumed public offering price of $30.0625 per share based
on the last reported sales price of our common stock on the Nasdaq National
Market on February 18, 2000, less estimated underwriting discounts and
commissions and estimated offering expenses, are estimated to be approximately
$142,397,000, or $163,816,000 if the underwriters' overallotment option is
exercised in full. See "Underwriting."

We intend to use the net proceeds from this offering to continue building
our network and for working capital and other general corporate purposes. We
may also use a portion of the net proceeds to acquire complementary businesses,
although we have no definitive agreements to do so at this time. The amounts
actually expended for these purposes will vary significantly depending on a
number of factors, including revenue growth, if any, and the extent and timing
of our entry into target markets and capital expenditures.

Prior to the application of the net proceeds from the offering as described
above, these proceeds will be invested in marketable, investment-grade
securities.

PRICE RANGE OF COMMON STOCK

Our common stock has been quoted on the Nasdaq National Market under the
symbol "DSLN" since October 6, 1999. The following table sets forth the high
and low sales prices per share of the common stock as reported on the Nasdaq
National Market for the periods indicated.

<TABLE>
<CAPTION>
High Low
-------- -------
<S> <C> <C>
Year Ended December 31, 1999
Fourth Quarter 1999 (from October 6, 1999)................. $ 25.625 $ 7.469

Year Ended December 31, 2000
First Quarter 2000 (through February 18, 2000)............. $32.5625 $14.000
</TABLE>

On February 18, 2000, the last reported sale price of our common stock was
$30.0625. As of January 31, 2000, there were approximately 62 stockholders of
record of our common stock.

DIVIDEND POLICY

We have never declared or paid cash dividends. We do not anticipate
declaring or paying cash dividends for the foreseeable future. Instead, for the
foreseeable future, we will retain our earnings, if any, for the future
operation and expansion of our business. In addition, our credit agreement with
our bank prohibits the payment of cash dividends.

15
<PAGE>

CAPITALIZATION

The following table shows our capitalization at December 31, 1999 on an
actual basis and an as adjusted basis.

The as adjusted information gives effect to the sale of 5,000,000 shares of
common stock offered by us at an assumed public offering price of $30.0625
(which was the last reported sales price of our common stock on the Nasdaq
National Market on February 18, 2000), after deducting estimated underwriting
discounts and commissions and estimated offering expenses. See "Use of
Proceeds."

<TABLE>
<CAPTION>
December 31, 1999
--------------------------
Actual As Adjusted
------------ ------------
<S> <C> <C>
Cash, cash equivalents and marketable securities.... $ 79,452,444 $221,849,319
============ ============
Long-term debt, including current portion........... 3,055,625 3,055,625
------------ ------------
Stockholders' equity:
Common stock, $.0005 par value; 200,000,000 shares
authorized and authorized as adjusted; 58,382,196
shares issued and outstanding and 63,382,196
shares issued and outstanding as adjusted........ 29,191 31,691
Additional paid-in capital........................ 141,245,583 283,639,958
Deferred compensation............................. (13,361,940) (13,361,940)
Accumulated deficit............................... (27,179,948) (27,179,948)
------------ ------------
Total stockholders' equity...................... $100,732,886 $243,129,761
------------ ------------
Total capitalization............................ $103,788,511 $246,185,386
============ ============
</TABLE>

DILUTION

The net tangible book value of our common stock at December 31, 1999 was
$97,228,751, or $1.67 per share.

After giving effect to the receipt by us of the net proceeds from the sale
of 5,000,000 shares of common stock in this offering (assuming an offering
price of $30.0625 per share, which was the last reported sales price of our
common stock on the Nasdaq National Market on February 18, 2000), the net
tangible book value of our common stock as of December 31, 1999 would have been
$3.78 per share of common stock. This represents an immediate increase in net
tangible book value of $2.11 per share to existing stockholders and an
immediate dilution of $26.28 per share to new investors. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per common share................ $30.06
------
Net tangible book value per share at December 31, 1999...... $1.67
Increase in pro forma net tangible book value per share
attributable to this offering.............................. 2.11
-----
Net tangible book value per share after this offering......... 3.78
------
Dilution per share to new investors........................... $26.28
======
</TABLE>

The above calculations do not take into account the exercise of outstanding
stock options or warrants as of December 31, 1999 or the exercise of the
underwriters' over-allotment option. To the extent any of these stock options
or warrants, or the underwriters' over-allotment option, are exercised, new
investors will experience further dilution.

16
<PAGE>

SELECTED FINANCIAL AND OTHER DATA

We were incorporated on March 3, 1998 and commenced operations on March 28,
1998. We present below summary financial and other data for our company. The
following historical data for the period from inception (March 3, 1998) through
December 31, 1998 and the year ended December 31, 1999, except for "Other
Data," has been derived from our financial statements audited by
PricewaterhouseCoopers LLP, independent accountants. Our balance sheet at
December 31, 1998 and 1999 and the related statements of operations, changes in
stockholders' equity and cash flows for the period from inception (March 3,
1998) to December 31, 1998 and the year ended December 31, 1999 and notes
thereto appear elsewhere in this prospectus.

You should refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the more complete financial
information included elsewhere in this prospectus.

The pro forma statement of operations data below gives effect to our
acquisition of Tycho Networks, Inc., as if the acquisition had occurred at the
beginning of the period presented.

<TABLE>
<CAPTION>
Actual Pro forma
---------------------------- ------------
Period
from Inception
(March 3, 1998)
through Year Ended Year Ended
December 31, December 31, December 31,
1998 1999 1999
--------------- ------------ ------------
<S> <C> <C> <C>
Statement of Operations Data:
Revenue............................ $ 31,533 $ 1,312,546 $ 2,906,271
Operating expenses:
Network and operations........... 127,054 9,234,278 11,144,745
General and administrative....... 230,272 4,978,510 6,976,179
Sales and marketing.............. 35,961 6,847,696 6,991,379
Stock compensation and
amortization of purchase price.. 2,423,272 4,123,454 4,801,796
Total operating expenses....... 2,816,559 25,183,938 29,914,099
Operating loss..................... (2,785,026) (23,871,392) (27,007,828)
Interest expense (income).......... 4,611 (1,889,312) (1,696,333)
Other expense ..................... -- 6,233 17,083
Net loss........................... $(2,789,637) $(21,988,313) $(25,328,578)
Net Loss per Common Share Data:
Net loss per common share.......... $ (0.55) $ (2.05) $ (2.26)
Shares used in computing net loss
per share......................... 5,118,342 16,549,535 16,549,535
Other Data:
EBITDA............................. $ (356,010) $(17,917,617)
Capital expenditures............... 290,082 33,811,121
Cash Flow Data:
Used in operating activities....... $ (153,505) $ (6,342,720)
Used in investing activities....... (290,082) (48,660,812)
Provided by financing activities... 483,066 121,142,314
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
--------- ------------
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and marketable securities....... $ 39,479 $ 79,452,444
Total assets........................................... 369,980 117,631,772
Long-term obligations (including current portion)...... 433,161 3,055,625
Total stockholders' equity (deficit)................... (315,865) 100,732,886
</TABLE>

. operating loss as an indicator of our operating performance,

. cash flows from operating activities as a measure of liquidity,

. other consolidated statement of operations or cash flows data presented
in accordance with generally accepted accounting principles, or

. as a measure of profitability or liquidity.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results
of operations should be read in conjunction with "Selected Financial and Other
Data" and the financial statements of DSL.net and Tycho Networks, and the
related notes, and the pro forma condensed combined financial information and
related notes appearing elsewhere in this prospectus.

Overview

We provide high-speed data communications services and Internet access to
small and medium sized businesses, primarily in second and third tier cities.
We began providing service in May 1998 and as of February 1, 2000 we provided
service or had installed equipment in more than 140 cities. We intend to
continue our network expansion into a total of more than 300 cities by the end
of 2000.

We have incurred operating losses and net losses for each month since our
formation. For the periods ended December 31, 1998 and 1999, we have
experienced net cash outflows for operating and investment activities. As of
December 31, 1998 and 1999, we had accumulated deficits of approximately
$2,790,000 and $27,180,000, respectively. We intend to substantially increase
our operating expenses and capital expenditures in an effort to rapidly expand
our network infrastructure and service areas. We expect to incur substantial
operating losses, net losses and net operating cash outflows during our network
build-out and during the initial penetration of each new market we enter. Our
losses and net operating cash outflows are expected to continue and to increase
as we expand our operations.

We incur network and operations expenses, sales and marketing expenses and
capital expenditures when we enter a new market. After selecting a target
market, we apply for space in the traditional telephone company's central
office from which we intend to provide service. The availability of space in
these central offices and the timing and cost of our obtaining that space
varies by location and by telephone company. Based on our experience to date,
if space is available in a desired central office, the time for us to obtain
the required local approvals and deploy our equipment in that space has
typically ranged from five to ten months. To date, our initial cost for
obtaining space in each central office and interconnection to the telephone
company's network has typically averaged less than $50,000. In addition to this
initial cost, we pay monthly fees for maintenance, utilities and continued
access to the telephone company's network, which vary by location and are
substantially lower than the initial cost for obtaining space. Once we have
deployed our network in a market, the majority of our additional capital
expenditures depend on orders to connect new end users. These additional
capital expenditures include the costs of additional DSL equipment that is
installed in the central offices and additional modems that are installed in
customers' sites. In addition to the capital expenditures required to enter a
market, we are required to fund each market's cash flow deficit as we build our
customer base.

Our financial performance will vary, and whether and when we achieve
profitability will depend on a number of factors, including:

. development of the high-speed data communications industry and our
ability to compete effectively;

. amount, timing and pricing of customer revenue;

. cost and timing of the deployment of our network, including installation
of equipment in traditional telephone companies' central offices;

19
<PAGE>

. commercial acceptance of our service and attaining expected penetration
within our target markets;

. timely recruitment of qualified personnel, particularly sales and
marketing, engineering and other technical personnel;

. upfront sales and marketing expenses;

. our ability to retain contractors to install equipment and wiring at
customer premises on a timely and cost-effective basis;

. cost and utilization of our network components which we lease from other
telecommunications providers;

. our ability to establish and maintain relationships with marketing
partners;

. successful implementation of financial, information management and
operations support systems to efficiently and cost-effectively manage our
growth; and

. outcome of federal and state regulatory proceedings and related judicial
proceedings, including proceedings relating to the 1996
Telecommunications Act.

Factors Affecting Future Operations

Revenues. We derive our revenues from installation charges and monthly fees
paid by customers for our services, which vary based on the speed of the
connection and the services ordered. The current monthly fee includes all phone
line charges, Internet access charges, the cost of the modem installed at the
customer's site and the other services we provide. During the year ended
December 31, 1999, monthly fees represented more than 80% of our revenue.
During the same period, installation charges represented less than 20% of our
revenue.

We seek to price our services competitively. The market for high-speed data
communications services and Internet access is rapidly evolving and intensely
competitive. While many of our competitors and potential competitors enjoy
competitive advantages over us, we are pursuing a significant market that, we
believe, is currently underserved. Although pricing will be an important part
of our strategy, we believe that direct relationships with our customers and
consistent, high quality service and customer support will be key to generating
customer loyalty. During the past several years, market prices for many
telecommunications services and equipment have been declining, a trend that we
believe will likely continue.

Network and Operations. Our network and operations expenses include costs
related to personnel, monthly rental for telecommunications lines between
customers, central offices and network service providers, customer line
installation, Internet access, certain depreciation and amortization expenses
and other costs. The costs of providing a customer's copper telephone line and
the related monthly leased line costs, which average approximately $20 per
month, are expensed as incurred. Our total costs for leasing lines will
increase as we lease additional lines to service additional customers. Further,
we lease high-speed fiber-optic lines and other network capacity to connect our
central office equipment with our network and the Internet and incur costs to
connect to the Internet. We expect these costs to increase as the volume of
data communications traffic generated by our customers increases.

The majority of our capital expenditures relate to building our network and
delivering service to customers. Accordingly, the majority of our depreciation
and amortization expense, excluding deferred compensation expense, is included
in our network and operations expenses. This expense includes:

20
<PAGE>

. Depreciation of network and operations equipment and DSL modems installed
at customer sites;

. Depreciation of information systems, and computer hardware and software;
and

. Amortization and depreciation of the costs of obtaining, designing and
building our collocation space and corporate facilities.

We expect depreciation and amortization expense to increase significantly as
more of our network becomes operational and as we increase capital expenditures
to expand.

General and Administrative. Our general and administrative expenses consist
primarily of costs relating to personnel, customer service, finance, billing,
administrative services, recruiting, insurance, bad debts, legal services and
depreciation expense. We have hired and expect to continue to hire additional
employees. As a result, we expect these expenses to increase as the number of
employees increases.

Sales and Marketing. Our sales and marketing expenses consist primarily of
expenses for personnel, the development of our NETgain brand name, promotional
materials, advertising and sales commissions and incentives. Sales and
marketing expenses are expected to increase significantly as we continue to
expand our business into new markets.

We have entered into strategic business relationships with Staples and
Microsoft. The Staples marketing agreement designates us as their exclusive
supplier of the types of DSL services we provide in each of our markets. The
Microsoft arrangement allows us to jointly market a co-branded version of the
Microsoft Network (MSN) service to our customers and Microsoft intends to use
its existing channels and sales force to augment our own marketing efforts.

Stock compensation. We have incurred noncash stock compensation expenses as
a result of the granting of stock and stock options to employees and others
with exercise prices per share subsequently determined to be below the fair
values per share of our common stock for financial reporting purposes at the
dates of grant. The stock compensation is being charged immediately or is being
amortized over the vesting period of the applicable options, which is generally
48 months.

Taxation. We have not generated any taxable income to date and, therefore,
have not paid any federal income taxes since inception. Use of our net
operating loss carryforwards, which will begin to expire in 2003, may be
subject to limitations. We have recorded a full valuation allowance on a
deferred tax asset, consisting primarily of net operating loss carryforwards,
because of uncertainty regarding their recoverability.

Results of Operations

Revenue. We first introduced services in May 1998. Revenue in 1998 was
approximately $32,000. Revenue increased to approximately $1,313,000 for the
year ended December 31, 1999. The increase in revenue was primarily due to the
increased number of customers subscribing for our services, resulting from our
increased sales and marketing efforts, the expansion of our network and the
Tycho acquisition. We expect revenue to increase in future periods as we expand
our network within our existing regions, deploy our network into new regions
and increase our sales and marketing efforts in all of our regions.

Network and operations. Network and operations expenses increased to
approximately $9,234,000 for the year ended December 31, 1999 from
approximately $127,000 for the period from March 3, 1998 (inception) to
December 31, 1998. The increase in these expenses between the

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<PAGE>

1998 and 1999 periods was primarily due to the increased number of customers
subscribing for our services and other increased costs resulting from the
addition of personnel, the expansion of our network and legal costs incurred in
connection with our applications for regulatory approvals in various states. We
expect network and operations costs to increase significantly in future periods
as we increase our markets and customer base.

Depreciation and amortization expense, excluding amortization of deferred
compensation, increased to approximately $1,873,000 for the year ended December
31, 1999 from $6,000 for the period from March 3, 1998 (inception) to December
31, 1998. This expense increased as more of our network became operational and
we increased capital expenditures to expand.

General and administrative. General and administrative expenses increased to
approximately $4,979,000 for the year ended December 31, 1999 from
approximately $230,000 for the period from March 3, 1998 (inception) to
December 31, 1998. The increases in general and administrative expenses were
principally the result of increases in the number of employees.

Sales and marketing. Sales and marketing expenses increased to approximately
$6,848,000 for the year ended December 31, 1999 from approximately $36,000 for
the period from March 3, 1998 (inception) to December 31, 1998. These expenses
increased primarily as a result of the increase in marketing and promotional
activities and increases in sales and marketing personnel. Sales and marketing
expenses are expected to increase significantly as we continue to expand our
business into new markets.

Stock compensation. Noncash stock compensation expenses were approximately
$4,123,000 for the year ended December 31, 1999 compared to $2,423,000 for the
period from March 3, 1998 (inception) to December 31, 1998. Expenses incurred
in 1998 consisted of current period charges related to common stock issued to
certain officers. The expenses incurred in the year ended December 31, 1999
consisted of charges and amortization related to stock options and restricted
stock granted to our employees, directors and advisors during 1999.

The unamortized balance of approximately $13,362,000 as of December 31, 1999
will be amortized over the remaining vesting period of each grant. As of
December 31, 1999, options to purchase 5,874,302 shares of common stock were
outstanding, which were exercisable at a weighted average exercise price of
$2.32 per share.

Interest expense (income), net. Net interest income was approximately
$1,889,000 for the year ended December 31, 1999 compared to interest expense of
approximately $5,000 for the period from March 3, 1998 (inception) to December
31, 1998. This increase was primarily due to an increase in our cash balances
as a result of the issuance of preferred and common stock in 1999 and, to a
lesser extent, the repayment of debt with the proceeds therefrom. Interest
expense in 1998 related primarily to a note payable which was paid in full in
January 1999.

Net loss. Net loss increased to approximately $21,988,000 for the year ended
December 31, 1999 from approximately $2,790,000 for the period from March 3,
1998(inception) to December 31, 1998.

Liquidity and Capital Resources

We have financed our capital expenditures and operations primarily with the
proceeds from stock issuances and borrowings. As of December 31, 1999, we had
cash, cash equivalents and marketable securities of approximately $79,452,000
and working capital of approximately $65,974,000.

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<PAGE>

Net cash provided by financing activities in 1998 and 1999 was approximately
$483,000 and $121,142,000, respectively. This cash primarily resulted from the
sale of preferred stock and common stock and amounts borrowed under our lease
facilities and our credit line. We have used, and intend to continue using, the
proceeds from these financings primarily to implement our business plan and for
working capital.

In August 1998, we issued a $100,000 demand note which bore interest at the
annual rate of 5.56%. As of December 31, 1998, $66,667 of principal of this
note remained outstanding. This note was repaid in full in January 1999.

In November 1998, we received $350,000 from a short-term bridge note and
warrant financing. These notes had an aggregate principal amount of $350,000
and bore interest at annual rates of 5.56% or 6%. These notes were exchanged
for shares of our Series A preferred stock in January 1999.

During 1998, we also received $50,500 from the sale of capital stock to our
founders.

In January 1999 we received net proceeds of approximately $3,302,000 from
the sale of shares of Series A preferred stock and certain warrants. In April
1999, we received net proceeds of approximately $9,940,000 from the sale of
shares of Series C preferred stock to our principal stockholders and others. In
May 1999, we received net proceeds of approximately $29,961,000 from the sale
of shares of Series D preferred stock to our principal stockholders and others.
In addition, we received approximately $1,007,000 in connection with repayment
of a note, including interest at 6.0%, from an officer in connection with the
purchase of Series D preferred stock in June 1999. In July 1999, we received
net proceeds of approximately $18,458,000 from the sale of shares of Series E
preferred stock to two strategic marketing partners. In October and November
1999, we received net proceeds of approximately $55,722,000 from the sale of
shares of common stock in our initial public offering. Upon the closing of the
initial public offering of our common stock on October 12, 1999, all
outstanding shares of our preferred stock converted automatically into shares
of common stock.

In March 1999, we entered into a 36-month lease facility to finance the
purchase of up to an aggregate of $2,000,000 of equipment. Amounts financed
under this lease facility bear an interest rate of 8% or 9%, depending on the
type of equipment, and are secured by the financed equipment. There was
approximately $1,004,000 outstanding under this lease facility at December 31,
1999. In addition, during the year ended December 31, 1999, we purchased
certain software and equipment under other capital leases, which are being
repaid over periods ranging from 24 months to 36 months. In the aggregate,
there was approximately $1,609,000 outstanding under these capital leases at
December 31, 1999.

In May 1999, we established a line of credit which allows us to borrow up to
an aggregate of $5.0 million. This line of credit expires in May 2000, at which
time amounts outstanding will convert into a term loan, which will be repayable
over 36 months. Amounts borrowed under this line of credit generally bear
interest at the sum of 1% plus the higher of the bank's prime rate of interest
and the federal funds rate plus .5%. As of December 31, 1999, amounts
outstanding under this line of credit bore interest at the annual rate of 9.25%
and are secured by a lien on certain of our equipment. Borrowings under the
line of credit are restricted based on the value of the equipment securing the
line of credit. In addition, the line of credit also contains certain
covenants, including covenants requiring us to maintain certain financial
ratios and limitations relating to, among other things, new indebtedness, the
creation of liens, types of investments, mergers, consolidations and the
transfer of all or substantially all of our assets. As of December 31, 1999,
approximately $1,447,000 was outstanding, and approximately $3,553,000 was
available, under this line of credit.

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<PAGE>

We have received commitments for a credit facility that will replace our
existing line of credit, subject to negotiation and execution of definitive
agreements. This new credit facility would provide an estimated $45,000,000
revolving line of credit to be used for general corporate purposes and for the
issuance of letters of credit. Borrowing availability and rate of interest
under the proposed line of credit would vary depending upon specified financial
ratios. This revolving line of credit would contain certain covenants,
including covenants requiring us to maintain certain financial ratios and
limitations or prohibitions relating to, among other things, new indebtedness,
the payment of dividends, the creation of certain liens, types of investments,
mergers, consolidations and the transfer of certain assets. The interest rate
would be prime or LIBOR-based.

In February 1999, we leased office space and subsequently have leased
additional space in New Haven, Connecticut. Annual minimum lease payments under
these leases are approximately $1,125,000 for each of the years 2000 through
2002, and approximately $900,000, $745,000 and $279,000 for 2003, 2004 and
2005, respectively.

On December 1, 1999, we acquired Tycho Networks, which is based in Santa
Cruz, California. Tycho Networks provides Internet access, web hosting and
related services throughout central coastal California. The approximate net
purchase price of $3.3 million, excluding transactions costs associated with
the acquisition, consisted of cash payments at closing of $1.6 million
(including notes paid at closing of approximately $0.8 million), amounts due to
the selling stockholders and others after the closing of approximately $0.8
million, net liabilities assumed of approximately $0.5 million and other costs
of approximately $0.4 million.

In 1998 and 1999, the net cash used in our operating activities was
approximately $154,000 and $6,343,000, respectively. This cash was used for a
variety of operating expenses, including salaries, consulting and legal
expenses, network operations and overhead expenses. Our net operating cash
outflows are expected to continue and to increase as we expand our operations.

Net cash used in investing activities in 1998 and 1999 was approximately
$290,000 and $48,661,000, respectively. Of this amount, approximately
$33,811,000 was used primarily for the purchase of equipment and payment of
collocation costs, approximately $13,274,000 was used for the purchase of
marketable securities and approximately $1,576,000 was used to acquire Tycho
Networks, Inc.

The development and expansion of our business requires significant capital
expenditures. The principal capital expenditures incurred to enter each market
include the procurement, design and construction of the space in traditional
telephone companies' central offices where we deploy our equipment, and the
purchase and installation of all necessary equipment. Capital expenditures were
approximately $290,000 and $33,811,000 in 1998 and 1999, respectively. We
currently anticipate spending approximately $60,000,000 for capital
expenditures for the balance of 2000. The planned capital expenditures are
primarily for the procurement, design and construction of central office spaces
and the purchase and installation of the equipment necessary for us to provide
our services, as well as for the continued development of our information and
management systems, including our operations support systems. The actual
amounts and timing of our capital expenditures will vary depending on the speed
at which we are able to expand and implement our network and could differ
materially both in amount and timing from our current plans.

We believe that the net proceeds from this offering, together with our
existing cash and short-term investments, amounts available under our equipment
lease and credit facilities, and cash generated from operations, will be
sufficient to fund our operating losses, capital expenditures, lease payments
and working capital requirements through the first half of 2001. We estimate
that the net proceeds from the sale of common stock in this offering will be
approximately $142,397,000, after deducting estimated underwriting discounts
and commissions and estimated offering expenses. We

24
<PAGE>

currently anticipate that our cash and short-term investments will exceed
$210,000,000 after completion of this offering. We intend to use these cash
resources, including the net proceeds from this offering, to continue building
our network and for working capital and other general corporate purposes. We
may also use a portion of the net proceeds to acquire complementary businesses,
although we have no definitive commitments or agreements to do so at this time.
The amounts actually expended for these purposes will vary significantly
depending on a number of factors, including revenue growth, if any, planned
capital expenditures, and the extent and timing of our entry into target
markets.

We expect our operating losses, net operating cash outflows and capital
expenditures to increase substantially as we expand our network. We expect that
additional financing will be required in the future. We may attempt to raise
financing through some combination of commercial bank borrowings, leasing,
vendor financing and the sale of equity or debt securities.

Our capital requirements may vary based upon the timing and the success of
implementation of our business plan and as a result of regulatory,
technological and competitive developments or if:

. demand for our services or our cash flow from operations is less than or
more than expected;

. our development plans or projections change or prove to be inaccurate;

. we make acquisitions; or

. we accelerate deployment of our network or otherwise alter the schedule
or targets of our business plan implementation.

We cannot assure you that we will be able to raise sufficient debt or equity
capital on terms that we consider acceptable, if at all. If we are unable to
obtain adequate funds on acceptable terms, our ability to deploy and operate
our network, fund our expansion or respond to competitive pressures would be
significantly impaired.

Qualitative Disclosures about Market Risks

We have no derivative financial instruments in our cash and cash
equivalents. We invest our cash and cash equivalents in investment-grade,
highly liquid investments, consisting of commercial paper, bank certificates of
deposit and corporate bonds. We anticipate investing our net proceeds from this
offering in similar investment-grade and highly liquid investments pending
their use as described in this prospectus.

Impact of Year 2000

Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. In order to distinguish
21st century dates from 20th century dates, the date code field needs to be
expanded to 4 digits. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with these
Year 2000 requirements. The use of software and computer systems that are not
Year 2000 compliant could result in system failures or miscalculations
resulting in disruptions of operations, including among other things, a
temporary inability to process transactions, send invoices, or engage in normal
business activities.

Since we have been recently organized, we have been able to build our
internal business systems with Year 2000 compliance in mind. Our current
service offerings are not date sensitive and do not rely on or need to process
date-related information in order to function as designed, either prior to and
after the year 2000.

We have experienced no material adverse effect on our products from the Year
2000 issue, including any problems relating to the traditional local telephone
companies, other vendors or our target customers. Nevertheless, there can be no
assurances that we will not experience problems resulting from any of the
foregoing which could have a material adverse impact on our business, operating
results and financial condition.

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<PAGE>

To date, we have not incurred significant costs in order to comply with Year
2000 requirements and we do not believe we will incur significant costs in the
future.

Recently Issued Accounting Pronouncements

In 1998, we adopted Statement of Financial Accounting Standards, or SFAS,
No. 131, Disclosures about Segments of an Enterprise and Related Information.
SFAS No. 131 supersedes SFAS 14, Financial Reporting for Segments of a Business
Enterprise, replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of our reportable segments. We operate in one segment: high-speed
data communication services. SFAS No. 131 also requires disclosures about
products and services, geographic areas, and major customers. The adoption of
SFAS No. 131 had no impact on our financial statements for the periods
presented.

In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SoP 98-1 provides guidance for
determining whether computer software is internal-use software, and on
accounting for proceeds of computer software originally developed or obtained
for internal use and then subsequently sold to the public. It also provides
guidance on capitalization of the costs incurred for computer software
developed or obtained for internal use. The Company has applied the guidance
set forth in SoP 98-1, which was effective for the Company's year ended
December 31, 1999. The impact of adoption of SoP 98-1 has not had a significant
impact on our financial statements.

In April 1998, the Accounting Standards Executive Committee issued SoP 98-5,
Reporting on the Costs of Start-Up Activities, which provides guidance on the
financial reporting of start-up costs and organizational costs. It requires
costs of start-up activities and organizational costs to be expensed as
incurred. SoP 98-5 is effective for financial statements for fiscal years
beginning after December 15, 1998. As we have not capitalized such costs to
date, the adoption of SoP 98-5 does not have an impact on our financial
statements.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. DSL.net is required to adopt SFAS No. 133,
as amended by SFAS No. 137, in fiscal 2001. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. The Company has not
entered into any derivative financial instruments or hedging activities. As a
result, management believes adoption of SFAS No. 133 will not have a material
impact on the financial statements.

In December 1999, the staff of the Securities and Exchange Commission issued
its Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition. SAB No. 101
provides guidance on the measurement and timing of revenue recognition in
financial statements of public companies. Changes in accounting policies to
apply the guidance of SAB No. 101 must be adopted by recording the cumulative
effect of the change in the fiscal quarter ending March 31, 2000. Management
has not yet determined the effect SAB No. 101 will have, if any, on its
accounting policies or the amount of the cumulative effect to be recorded from
adopting SAB No. 101.

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<PAGE>

BUSINESS

Overview

We provide high-speed data communications and Internet access services using
digital subscriber line, or DSL, technology to small and medium sized
businesses. We primarily target select second and third tier cities, which
generally have populations of less than 900,000. Our networks enable data
transport over existing copper telephone lines at speeds of up to 1.5 megabits
per second. Our services, marketed under the NETgain brand name, offer
customers high-speed digital connections at prices that are attractive compared
to the cost and performance of alternative data communications services.

Industry Background

We believe that a substantial business opportunity has been created by the
convergence of several factors:

. growth in demand for high-speed data communications;

. increased demand for Internet access by small and medium sized
businesses;

. limitations of existing telecommunications services to meet these
demands; and

. emergence of low-cost, DSL-based solutions.

Growth in High-Speed Data Communications. Data communications is the fastest
growing segment of the telecommunications industry. Forrester Research, Inc.
projects that the total market for data networking services and Internet access
will grow from $6.2 billion in 1997 to approximately $49.7 billion by 2002,
with approximately $27.9 billion to come from services to businesses. To remain
competitive, companies require high-speed connections to maintain complex
Internet sites, to access critical information and business applications, and
to communicate more efficiently with employees, customers and suppliers. In
addition, businesses are increasingly using the Internet to market and sell
their products and services.

Increased Demand for High-Speed Internet Access by Small and Medium Sized
Businesses. Small and medium sized businesses are increasingly using the
Internet to enable them to compete more effectively with larger organizations.
According to International Data Corporation/LINK, Internet access among small
businesses--those with under 100 employees--grew from 19.7% in 1996 to 38.8% in
1997. The following table illustrates the historical and estimated growth in
Internet use by these small businesses:

<TABLE>
<CAPTION>
1996 1997 1998E 1999E 2000E 2001E
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Total small businesses (000s).... 7,065 7,240 7,382 7,531 7,684 7,842
Percentage of small businesses
with Internet access............ 19.7% 38.8% 43.9% 47.8% 51.3% 54.5%
Percentage of small businesses
with home pages................. 2.1% 7.1% 9.1% 11.7% 15.0% 16.6%
</TABLE>

Source: International Data Corporation/LINK

Currently, many small and medium sized businesses use the Internet to
exchange e-mails and files with customers, suppliers and other business
partners and to disseminate and obtain industry, product and market
information. Many of these businesses also have begun to use the Internet to
market and sell their products and services, to make purchases from suppliers
and for other commerce-related activities. For example, the percentage of small
businesses with home pages more than tripled from 1996 to 1997. To take full
advantage of electronic commerce applications and

27
<PAGE>

the Internet, these businesses would benefit from high-speed, secure and
affordable digital data communications connections.

Limitations of Existing Telecommunications Network. The growing demand for
high-speed Internet access and data communications services is straining the
capacity of the existing telecommunications network, particularly the local
access portion. The long distance portion of the network typically consists of
fiber-optic cables and other equipment that enable high-speed connections
between the offices of the traditional telephone companies from which local
telephone service is provided, known as central offices. In contrast, the local
access portion of the network, also known as the last mile, typically consists
of copper telephone wire that connects end users' locations to the nearest
central office. This last mile of copper telephone wire was not originally
designed for the transmission of high-speed digital signals, but has been
historically used for the transmission of low-speed, analog voice signals. Most
data transmission solutions to the last mile problem, including dial-up modems,
frame relay, integrated services digital network (ISDN) and T1 lines, are
relatively slow, hard to obtain or expensive.

Emergence of DSL-based Solutions. As a result of technological developments
and regulatory changes, DSL technology has emerged as a commercially available,
cost-effective means of providing high-speed data transmission using existing
copper telephone lines. DSL technology enables the transmission of digital
signals over existing copper telephone wires. DSL technology enables the
transmission of packets of data over a telecommunications network, which allows
multiple users to simultaneously transmit and receive data over a single
connection. DSL equipment, when deployed at each end of a standard copper
telephone line, increases the data carrying capacity of the line to speeds to
and from the user of up to 1.5 megabits per second, depending on the distance
between the user and the central office and the quality of the copper telephone
line.

The deployment of DSL-based solutions by competitive telecommunications
companies has been facilitated by changes in the regulatory framework in recent
years. Under the 1996 Telecommunications Act, traditional telephone companies
are generally required to lease telephone lines to competitive
telecommunications companies on a wholesale basis through resale or unbundling
and to allow these competitive telecommunications companies to locate certain
of their equipment in the traditional telephone companies' central offices. By
using existing facilities and copper lines, DSL providers avoid the
considerable up-front fixed costs necessary to deploy alternative high-speed
digital communications technologies, such as cable, wireless and satellite
networks. As a result, a significant portion of the investment in a DSL network
is incurred only as customers order the service. In addition, we anticipate
that continued advances in DSL technologies and transmission speeds, as well as
advances in DSL equipment manufacturing efficiencies, will further reduce the
cost of deploying a DSL-based network.

Market Opportunity

We believe that the demand for affordable high-speed Internet access and
data communications services and the limited availability of these services
outside of large metropolitan areas have created an opportunity to provide DSL-
based services to a significant, underserved market--small and medium sized
businesses located in second and third tier cities. These businesses
increasingly require high-speed data communications capabilities to compete
effectively. Traditional telephone companies have generally offered ISDN, frame
relay or T1 lines as high-speed alternatives in these markets, but these
services are typically at a higher cost or lower speeds than DSL-based
services.

The DSL.net Solution

Our services, marketed under the NETgain brand name, provide small and
medium sized businesses, primarily in second and third tier cities, with high-
speed Internet access and data services using DSL technology. Key elements of
our solution are:

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<PAGE>

High-Speed, Symmetric Connections. We offer Internet access at speeds of up
to 1.5 megabits per second. Our network is designed to provide data
transmission at the same speed to and from the customer, known as symmetric
data transmission. We believe that symmetric data transmission is best suited
for business applications, because business users require fast connections both
to send and receive information. This compares to other DSL services which use
asymmetric data transmission, which permits users to send information at speeds
much slower than that at which they can receive information. We may offer
asymmetric services in the future to employees of our small business customers
or to home office workers.

Complete Business Solution. We offer our customers a single point of contact
for a complete solution that includes all of the necessary equipment and
services to establish and maintain digital data communications. Our primary
services include Internet access, e-mail, assisting our customers in obtaining
Internet addresses, and hosting our customers' Web sites and support networks
that connect customers' various offices and connect our customers to their
suppliers, customers and others. Through independent suppliers, we also provide
Web site design and development and applications enabling electronic commerce.
Our network is designed to enable us to individually configure each customer's
service remotely. As a result, our customers are able to upgrade to higher
speeds without adding networking equipment and without an on-site visit from
technical personnel.

Always-On Connections. With our service, customers can access the Internet
continuously without having to dial into the network for each use. These
"always-on" connections provide customers with the ability to readily access
the Internet and transfer information. Despite the always-on connection, we
charge our customers a flat fee per month rather than billing them based on
usage.

Attractive Value Proposition. Our NETgain services offer customers high-
speed digital connections at prices that are attractive compared to the cost
and performance of alternative data communications services, such as dial-up,
T1, ISDN or frame relay lines. We believe that our services also increase the
productivity of network users by decreasing the time they spend connecting to
the Internet and waiting for information downloads and transfers.

Secure Connections. Our network is designed to reduce the possibility of
unauthorized access to our customers' internal applications and information and
to allow them to safely transmit sensitive information and applications.

Customer Support. We provide customer service 24 hours a day, seven days a
week. This support is important to many of our small and medium sized business
customers because they do not typically have dedicated internal support staff.
With our remote monitoring and troubleshooting capabilities, we continuously
monitor our network and our customers' connections. This enables us to identify
and enhance network quality, service and performance and address network
problems promptly.

The DSL.net Strategy

Our objective is to become the leading provider of DSL-based services to
small and medium sized businesses in second and third tier cities throughout
the United States. To achieve this objective, we plan to:

Establish Service in Select Markets Throughout the United States. We seek to
be the first DSL-based service provider in select second and third tier cities
throughout the United States. As of February 1, 2000, we provided service or
had installed equipment in more than 140 cities. We intend to continue our
expansion into more than 300 cities by the end of 2000. Before entering a
market,

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<PAGE>

we carefully analyze the competitive environment, the composition of the small
and medium sized businesses located in the market, the location, cost and
availability of collocation space in the local telephone company's central
offices, and the proximity of our target customers to those central offices.
Our goal is to locate our equipment in central offices with a high density of
small and medium sized businesses that we believe will use our services. We are
currently authorized to operate as a competitive local exchange carrier, which
is an entity authorized to provide local and long-distance telecommunications
services and is subject to federal and state regulation, in 47 states and the
District of Columbia, and we are seeking to have regulatory approval in the
remaining three states by the end of the first quarter of 2000. We have entered
into interconnection agreements with the major traditional local telephone
companies.

Utilize Our Rapid Deployment Model. Once we have selected a market to enter,
we deploy our network using an operating and strategic model that we believe is
replicable across the country and leverages our centralized network management
capabilities. We deploy a standard package of pre-configured equipment at each
central office. We utilize third-party field service organizations, who have
the required authorizations from traditional telephone companies, as well as
our own internal personnel to install this equipment in central offices.
Through centralized network management, standardized configuration of our
equipment, the assistance of third-party service providers and on-site
inspection of central office installations, we believe we can implement our
rollout plan quickly and cost effectively.

Develop Relationships Directly with Customers. Our strategy emphasizes
direct relationships with our customers. These relationships enable us to learn
about our customers' needs and preferences, help us expand our service
offerings to include additional value-added services based on customer demand
and market higher-speed Internet connections and other services to our
customers. We believe that these relationships increase customer loyalty and
reduce customer turnover. In addition, our existing customers have provided
customer referrals and we believe strong customer relationships will result in
customer referrals in the future.

Establish Local Referral Networks. We seek to establish relationships in
each local market with select local and regional technology-related
professionals, such as integrators of computer networks and systems and
consultants, who market our services and provide customer referrals. These
local marketing partners typically understand their clients' technology
requirements and capabilities and can provide valuable insights into customers'
needs. We also work with other local organizations which serve the business
community and refer customers to us. We use these relationships to leverage our
general advertising, direct mail and telesales efforts, which are directed at
decision makers in local businesses.

Leverage our Systems and Network. Our network and operations support systems
have been designed to leverage the economies of DSL technology and to grow with
our business. Because DSL technology uses existing copper telephone lines,
implementing a DSL-based network generally requires a lower initial capital
investment than that needed for alternative technologies. Once we install our
pre-configured equipment in a central office, our subsequent capital
investments to expand service from that location are directly related to the
number of customers who order our service, thereby reducing our overall capital
expenditures until additional paying customers have ordered our service. In
addition, the design of our network and our operations support systems is
intended to allow us to expand capacity as it is needed to support additional
customers and markets.

Our NETgain Services

We utilize DSL technology to provide reliable and cost-effective service to
our customers under the NETgain brand. As part of our service offerings, we
function as our customer's Internet service provider and deliver a broad range
of Internet-based, value-added solutions. As of February 1, 2000, we provided
service or had installed equipment in more than 140 cities.

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<PAGE>

Our goal is to deliver services which:

. provide reliable, always-on, secure, high-speed Internet connections with
transmission speeds up to 1.5 megabits per second;

. are easily upgradable to higher speeds with simple software changes that
can be affected remotely from our offices;

. are more reliable and enable greater productivity than dial-up modems;
and

. are easier to provide, install and support than existing high-speed data
communications alternatives.

Our NETgain services currently include all necessary equipment, software and
lines required to establish and maintain a digital Internet connection. Our
primary services include Internet access, e-mail, assisting our customers in
obtaining Internet addresses and hosting our customers' Web sites. We also
support networks that connect customers' various offices and connect our
customers to their suppliers, customers and others. In addition, through
independent suppliers, we offer Web site design and development, as well as
applications enabling electronic commerce.

The following table lists our primary Internet access service offerings:

<TABLE>
<CAPTION>
Maximum Speed*
----------------- Maximum
To From Distance from
Customer Customer Central Office
-------- -------- --------------
<S> <C> <C> <C>
Services
NETgain 200.................................. 208 kb/s 208 kb/s 22,000 feet
NETgain 400.................................. 416 kb/s 416 kb/s 18,000 feet
NETgain 800.................................. 784 kb/s 784 kb/s 14,000 feet
NETgain 1200................................. 1.2 mb/s 1.2 mb/s 12,000 feet
NETgain 1500................................. 1.5 mb/s 1.5 mb/s 9,000 feet
</TABLE>
- --------
* The speed and effectiveness of the DSL connection varies based on a number of
factors, including the distance of the customer from the central office and
the condition of the copper line that connects the customer to the central
office. Speed is measured in kilobits per second, or kb/s, or megabits per
second, or mb/s.

Currently, customers typically pay an installation charge and a monthly fee
for the NETgain service. The monthly fee does not vary by number of users or
usage, although it does vary based on the speed of the connection. The fee
includes the cost of the modem installed at the customer's site, all phone line
charges, and general Internet access services, including e-mail, assistance in
obtaining Internet addresses and services related to the registration of these
addresses with various administrative bodies. Generally, customers subscribe to
our NETgain services for at least one year and are billed for our services on a
monthly basis. We also offer customers the ability to have their monthly
service fees charged directly to their credit cards.

We plan to continue expanding our network features and applications to meet
customer demand by working closely with leading hardware, software and
networking companies. We expect to focus on many applications, including
combining voice and data communications, increasing our directory and security
capabilities, and providing businesses with the ability to access their
important applications from remote locations. Using these network-enabled
features and applications, we are able to provide a complete solution to meet
our business customers' needs.

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<PAGE>

Customers

Our target customers are small and medium sized businesses in cities in
which we offer our services. In particular, we believe the following are
especially attractive customers:

. businesses currently using other high-speed data communications services,
such as T1, ISDN and frame relay services, or low-speed dial-up Internet
access;

. professional or service-based firms that have multiple Internet service
provider accounts and phone lines;

. branch offices located in second and third tier cities that require
transmission of large files between locations; and

. businesses that use data-intensive applications, such as financial
services, technology, and publishing.

None of our customers accounted for more than 5% of our total revenues
during period from inception (March 3, 1998) through December 31, 1998 or the
year ended December 31, 1999.

Sales and Marketing

Our marketing professionals have developed a methodology to identify the
businesses that would benefit from our services. Once we identify businesses in
a target market, we employ a targeted local marketing strategy utilizing a
variety of mediums, including direct mail, print and radio. In addition, we
sponsor local promotional events, such as information technology or
telecommunications seminars, to assist our local sales professionals.

Direct Sales Channels. Our direct sales efforts are centered around
telesales personnel and outside account managers, who are assigned to one or
more local areas. Our telesales personnel follow up on our direct mail
marketing campaigns. Unlike large corporations, decision-makers in small and
medium sized businesses generally decide over the phone and in a relatively
short time whether to initiate data communications service with us. We believe
our telesales personnel are effective in following up with those businesses
that have received direct mailings from us.

The outside account managers are responsible for selling our NETgain
services, assessing business opportunities and identifying marketing partners
to assist us in the sale of our NETgain services. In addition, outside account
managers work with local business associations to identify potential customers
and build brand awareness.

Marketing Partners. Our outside account managers also identify local
information technology professionals, such as integrators of computer networks
and systems and consultants, to assist in the sale of our NETgain services. We
select marketing partners based on several factors, including brand name, local
market presence, complementary technology or product lines, and a strong
distribution channel. Our local marketing partners understand the technology
needs and capabilities of their clients and are in position to recommend us to
their clients and provide us with referrals. We compensate our marketing
partners for each referral of a customer who purchases our services. We believe
that relationships with marketing partners are important in establishing a
long-term presence in the local community and leveraging our direct sales
force.

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<PAGE>

Strategic Relationships

We entered into strategic relationships that we believe are valuable because
they provide additional marketing capabilities and distribution channels, in
addition to capital investment. We anticipate that we will enter into
additional strategic relationships with others in the future.

Our current strategic relationships include:

Staples. In July 1999, we entered into a strategic relationship with Staples
pursuant to which, among other things:

. Staples Investment. Staples invested $3,500,000 in return for shares of
our Series E preferred stock which converted into 473,655 shares of our
common stock upon the closing of our initial public offering on October
12, 1999. In addition, Staples purchased 360,000 shares of our common
stock in connection with our initial public offering.

. Marketing Services through Staples. Staples has agreed to market our
services to their small and medium sized business customers. Staples
refers potential customers to us through their retail stores, catalog and
web site. We have agreed to compensate Staples for each sale of our
services generated through these channels. We intend to offer our
customers the ability to connect over the Internet directly to Staples
for their business supply purchases.

. Mutual Exclusivity. During the term of our agreement, which is initially
for one year with the potential for annual renewals, we have agreed not
to offer our services through another national office supply company. In
turn, Staples has agreed to offer our services exclusively to its
customers in all of the markets we serve.

Microsoft. In July 1999, we entered into a strategic relationship with
Microsoft pursuant to which, among other things:

. Microsoft Investment. Microsoft invested $15,000,000 in return for shares
of our Series E preferred stock which converted into 2,029,949 shares of
common stock upon the closing of our initial public offering on October
12, 1999.

. Co-branding for Our Customers. During the term of our agreement, which is
initially for two years with the potential for annual renewals, Microsoft
has agreed to jointly market with us a co-branded version of the
Microsoft Network service (MSN). We have agreed to provide and market the
co-branded MSN service to our new and existing customers. We will receive
a portion of any advertising revenue generated through the co-branded MSN
service.

. Joint Marketing of Our Services. We have agreed to cooperate in joint
marketing activities utilizing our respective sales forces to promote and
sell the combined DSL.net services with the co-branded MSN services.

Customer Support and Operations

Our customer support professionals work to minimize the complexity and
inconvenience of data communications and Internet access for our customers.
They provide our customers with a single point of contact for implementation,
maintenance and operations support.

Implementation. We manage the implementation of our service for each
customer. We lease the copper telephone lines from the local telephone company.
These lines run from our equipment located in the telephone company's central
office to our customer. We test these lines to determine whether they meet our
specifications and work with the local telephone company to correct any

33
<PAGE>

problems identified by our testing. Field service technicians, typically
outside contractors, install the modem and any necessary wiring inside our
customers' offices and test the modem and connection over our network.

Maintenance. Our network operations center provides network surveillance for
all equipment in our network. We are able to detect and correct many of our
customers' maintenance problems remotely, often before our customer is aware of
the problem. Customer-initiated maintenance and repair requests are managed and
resolved primarily through our help desk. Our information management system,
which generates reports for tracking maintenance problems, allows us to
communicate maintenance problems from the customer service center to our
network operations center 24 hours a day, seven days a week.

Operations Support Systems. Our operations support systems are intended to
improve many of our business processes, including customer billing, service
activation, inventory control, customer care reports and maintenance reports.
They have been designed to provide us with accurate, up-to-date information in
these areas. Additional enhancements and integration of these systems will be
implemented during 2000. We believe that our operations support systems will
provide us with the flexibility to add additional services for our customers as
well as to meet our expansion goals.

Our Network

Our network delivers high-speed Internet access and data communication
services. It offers scaleability, reliability, security and high performance.

Network Design. The key design principles of our network are:

. Intelligent End-to-End Network Management. Our network is designed to
allow us to monitor network components and customer traffic from a
central location. Because we control the lines to the customer, we can
perform network diagnostics and equipment surveillance continuously. From
our network operations center, we have visibility across our entire
network, allowing us to identify and address network problems quickly and
to provide quality service and performance.

. Consistent Performance with the Ability to Expand. We believe that
networks that use technology that transmits packets of information, such
as ours, will eventually replace networks that use conventional telephone
transmission technology. We have designed our network to leverage the
economics of DSL technology, to grow with our business and to provide
consistent performance. We also use asynchronous transfer mode equipment
in our network, which implements high-speed, high volume transmission of
data.

. Security. Our network is designed to reduce the possibility of
unauthorized access and to allow our customers to safely transmit and
receive sensitive information and applications. The modems we install on
our customers' premises are designed with enhanced security features and
work in conjunction with installed security systems and network servers
in an effort to provide safe connections to the Internet and a secure
operating environment.

Network Components. The primary components of our network are:

. DSL Modems and On-Site Connections. We purchase DSL modems and provide
them to our customers as part of the service contract. We configure the
DSL modem and arrange for the installation of the modem and on-site
wiring needed to connect the modem to the copper telephone line that we
lease. We contract with independent field service organizations to
perform these services, in addition to using a small internal staff.

. Copper Telephone Lines. We lease a copper telephone line running to each
customer from our equipment in the local telephone company's central
office under terms specified in our

34
<PAGE>

interconnection agreements with these companies. Each copper line must be
specifically conditioned by the local telephone company to carry digital
signals, typically for an additional charge. If we are unable to lease, or
experience delays in leasing, a sufficient number of acceptable telephone
lines on acceptable terms, our business will be harmed.

. Central Office Collocation. Through our interconnection agreements, we
seek to secure space to locate our equipment in the central offices of
traditional local telephone companies and offer our services from these
locations. These collocation spaces are designed to offer the same high
reliability and availability standards as the telephone companies' other
central office spaces. We install the equipment necessary to provide
high-speed DSL signals to our customers in these spaces. We have
continuous access to these spaces to install and maintain our equipment.
We expect that space in central offices will become increasingly scarce
as competitive telecommunications companies vie for this space. We may
not be able to secure space to install our equipment on a timely basis,
which could delay our roll-out plan and adversely affect our business and
prospects.

. Connection to the Internet. Network traffic gathered at each central
office is routed to one of our regional hubs and then to the Internet. In
certain areas where we offer service from more than one central office,
network traffic is routed from each central office in that area to a
local hub which aggregates its traffic and the traffic from the other
central offices located in that area and routes this traffic to a
regional hub. Our hubs contain extra equipment and backup power to
provide backup facilities in the event of an equipment failure and are
actively monitored from our network operations center. We lease space for
our hubs in facilities designed to host network equipment. Our hubs are
connected to one another via fiber-optic cables and other high speed data
communications technologies. Until recently, this service was provided
solely by MCI WorldCom. In August 1999, the service provided by MCI
WorldCom was interrupted for several days by a failure of their network.
As a result, we issued approximately $21,000 in credits toward services
to our customers. We now have agreements with MCI WorldCom and AT&T to
provide this service, which enables us to have duplicate independent
connections for our network links. Our network connects to the Internet
through multiple Internet access providers.

. Network Operations Center. Our network is managed from our network
operations center located in New Haven, Connecticut. We provide end-to-
end network management 24 hours a day, seven days a week. This enhances
our ability to address performance and service issues before they affect
the customer. From the network operations center, we can monitor
individual customer lines and the equipment and circuits in each regional
network and central office.

. Private Regional Network. We anticipate that, at some point in the
future, we will operate our own private regional networks in certain
geographic areas. We believe our regional networks will consist of high-
speed telecommunications equipment that will connect our hubs to our
equipment in individual central offices. Private networks of this type
typically operate at speeds of 45 to 155 megabits per second.

Competition

We face competition from many companies with significantly greater financial
resources, well-established brand names and large installed customer bases.
Although we believe competition in many second and third tier cities is less
intense than competition in larger cities, we expect the level of competition
in our markets to intensify in the future. We expect significant competition
from:

Other DSL Providers. Certain competitive carriers, including Covad, Network
Access Solutions, NorthPoint and Rhythms NetConnections, offer DSL-based
services. The 1996 Telecommunications

35
<PAGE>

Act specifically grants competitive telecommunications companies, including
other DSL providers, the right to negotiate interconnection agreements with
traditional telephone companies, including interconnection agreements which may
be identical in all respects to, or more favorable than, our agreements.
Several of the large telecommunications companies and computer companies, such
as Microsoft and Qwest, have made investments in DSL service providers.

Internet Service Providers. Several national and regional Internet service
providers, including America Online, Concentric Network, Flashcom, PSINet and
Verio, offer high-speed access capabilities to complement their existing
products and services. These companies generally provide Internet access to
residential and business customers over the traditional telephone companies'
networks. However, some Internet service providers offer DSL-based access using
another carrier's DSL service or, in some cases, building their own DSL
networks. Some Internet service providers combine their significant and even
nationwide marketing presence with strategic or commercial alliances with DSL-
based competitive telecommunications companies and traditional local telephone
companies.

Traditional Local Telephone Companies. Many of the traditional local
telephone companies, including Bell Atlantic, BellSouth, SBC Communications,
and U S West have begun deploying DSL-based services. These companies have
established brand names and reputations for high quality in their service
areas, possess sufficient capital to deploy DSL equipment rapidly, have their
own copper telephone lines and can bundle digital data services with their
existing voice services to achieve a competitive advantage in serving
customers. We believe that the traditional telephone companies have the
potential to quickly deploy DSL services. In addition, these companies also
offer high-speed data communications services that use other technologies. We
depend on these traditional local telephone companies to enter into agreements
for interconnection and to provide us access to individual elements of their
networks. Although the traditional local telephone companies are required to
negotiate in good faith in connection with these agreements, future
interconnection agreements may contain less favorable terms and result in a
competitive advantage to the traditional local telephone companies.

National Long Distance Carriers. National long distance carriers, such as
AT&T, MCI WorldCom, Nextlink, Qwest, Sprint and Williams have deployed large-
scale data networks, sell connectivity to businesses and residential customers,
and have high brand recognition. They also have interconnection agreements with
many of the traditional telephone companies, and many offer competitive DSL
services.

Other Fiber-Based Carriers. Companies such as Allegiance, Choice One,
e.spire and Intermedia have extensive fiber networks in many metropolitan
areas, primarily providing high-speed data and voice circuits to small and
large corporations. They also have interconnection agreements with the
traditional telephone companies under which they have acquired collocation
space in many large markets, which could position them to offer DSL service in
those markets.

Cable Modem Service Providers. Cable modem service providers, such as At
Home and its cable partners, RoadRunner and High Speed Access, offer high-speed
Internet access over cable networks to consumers. @Work, a division of At Home,
has positioned itself to do the same for businesses. Where deployed, these
networks provide high-speed local access services, in some cases at speeds
higher than DSL service. They typically offer these services at lower prices
than our services, in part by sharing the capacity available on their cable
networks among multiple end users.

Wireless and Satellite Data Service Providers. Several new companies,
including Teligent and WinStar Communications, are emerging as wireless data
service providers. In addition, other companies, including Motorola Satellite
Systems and Hughes Communications, are emerging as

36
<PAGE>

satellite-based data service providers. These companies use a variety of new
and emerging technologies to provide high-speed data services.

We may be unable to compete successfully against these competitors. The most
significant competitive factors include: transmission speed, service
reliability, breadth of product offerings, price/performance, network security,
ease of access and use, content bundling, customer support, brand recognition,
operating experience, capital availability and exclusive contracts with
customers, including Internet service providers and businesses with multiple
offices. We believe our services compete favorably within our service markets
with respect to transmission speed, price/performance, ease of access and use
and customer support. Many of our competitors enjoy competitive advantages over
us based on their brand recognition, breadth of product offerings, operating
experience and exclusive contracts with customers.

Interconnection Agreements with Traditional Local Telephone Companies

We are required to enter into and implement interconnection agreements
covering each of our target markets with the traditional local telephone
company in that market in order to provide service. These agreements govern,
among other things:

. the price and other terms under which we locate our equipment in the
telephone company's central offices,

. the price we pay to lease copper telephone lines,

. the special conditioning of these copper lines that the traditional
telephone company provides to enable the transmission of DSL signals,

. the price we pay to access the telephone company's transmission
facilities, and

. certain other terms and conditions of our relationship with the telephone
company.

Under the 1996 Telecommunications Act, the traditional local telephone
companies have a statutory duty to negotiate in good faith with us for
agreements for interconnection and access to certain individual elements of
their networks. This interconnection process is subject to review and approval
by the state regulatory commissions. We have signed interconnection agreements
with Ameritech, Bell Atlantic, BellSouth, Cincinnati Bell, GTE, SBC
Communications, Sprint and U S West, which govern our relationships in 48
states and the District of Columbia. Certain of our interconnection agreements
govern our relationship with the traditional telephone company throughout its
service areas and others relate only to individual states. In addition, we are
currently negotiating additional agreements with additional carriers as well as
amendments and replacements of existing agreements. Future interconnection
agreements may contain terms and conditions less favorable to us than those in
our current agreements and could increase our costs of operations.

During these interconnection negotiations, either the telephone company or
we may submit disputes to the state regulatory commissions for mediation and,
after the expiration of the statutory negotiation period set forth in the 1996
Telecommunications Act, we may submit outstanding disputes to the states for
arbitration, as well as ask the state regulatory commissions to arbitrate a new
agreement or particulars thereof.

Under the 1996 Telecommunications Act, states have begun and, in a number of
cases, completed regulatory proceedings to determine the pricing of individual
elements of their networks and services, and the results of these proceedings
will determine the price we pay for, and whether it is economically attractive
for us to use, these elements and services.

Our interconnection agreements generally have terms of one or two years.
Therefore, we will have to renegotiate our existing agreements when they
expire. Although we expect to renew our

37
<PAGE>

interconnection agreements and believe the 1996 Telecommunications Act limits
the ability of traditional telephone companies not to renew these agreements,
we may not succeed in extending or renegotiating our interconnection agreements
on favorable terms. Additionally, disputes have arisen and will likely arise in
the future as a result of differences in interpretations of the interconnection
agreements. These disputes have delayed our deployment of our networks. They
have also adversely affected our service to our customers and our ability to
enter into additional interconnection agreements with the traditional telephone
companies in other states. Finally, the interconnection agreements are subject
to state regulatory commission, FCC and judicial oversight. These government
authorities may modify the terms of the interconnection agreements in a way
that hurts our business.

Government Regulations

A significant portion of the services that we offer will be subject to
regulation at the federal and/or state levels. The Federal Communications
Commission, or FCC, and state public utility commissions regulate
telecommunications common carriers, which are companies that offer
telecommunications services to the public or to all prospective users on
standardized rates and terms. Our data transport services are common carrier
services.

The FCC exercises jurisdiction over common carriers, and their facilities
and services, to the extent they are providing interstate or international
communications. The various state utility commissions retain jurisdiction over
telecommunications carriers, and their facilities and services, to the extent
they are used to provide communications that originate and terminate within the
same state. The degree of regulation varies from state to state.

In recent years, the regulation of the telecommunications industry has been
in a state of flux as the United States Congress and various state legislatures
have passed laws seeking to foster greater competition in telecommunications
markets. The FCC and state commissions have adopted many new rules to implement
those new laws and to encourage competition. These changes, which are still
incomplete, have created new opportunities and challenges for us and our
competitors. Certain of these and other existing federal and state regulations
are currently the subject of judicial proceedings, legislative hearings and
administrative proposals which could change, in varying degrees, the manner in
which this industry operates. Neither the outcome of these proceedings nor
their impact upon the telecommunications industry or us can be predicted at
this time. Indeed, future federal or state regulations and legislation may be
less favorable to us than current regulations and legislation and therefore
have a material and adverse impact on our business and financial prospects by
undermining our ability to provide DSL services at competitive prices. In
addition, we may expend significant financial and managerial resources to
participate in proceedings setting rules at either the federal or state level,
without achieving a favorable result.

Federal Regulation and Legislation

We must comply with the requirements of a common carrier under the
Communications Act of 1934, as amended, to the extent we provide regulated
interstate services. These requirements include an obligation that our charges,
terms and conditions for communications services must be "just and reasonable"
and that we may not make any "unjust or unreasonable discrimination" in our
charges or terms and conditions. The FCC also has jurisdiction to act upon
complaints against common carriers for failure to comply with their statutory
obligations. We are not currently subject to price cap or rate of return
regulation at the federal level and are not currently required to obtain FCC
authorization for the installation, acquisition or operation of our facilities.

The FCC has established different levels of regulation for dominant and non-
dominant carriers. Of domestic carriers, only the traditional local telephone
companies are classified as dominant

38
<PAGE>

carriers and all other providers of domestic common carrier service, including
us, are classified as non-dominant carriers. As a non-dominant carrier, we are
subject to less FCC regulation than are dominant carriers.

In October 1998, the FCC ruled that DSL and other advanced data services
provided as dedicated access services in connection with interstate services
such as Internet access are interstate services subject to the FCC's
jurisdiction. Accordingly, we could offer DSL services without state regulatory
authority, so long as we do not also provide local or intrastate
telecommunications services via our network. This decision allows us to provide
our DSL services in a manner that potentially reduces state regulatory
obligations. This decision is currently subject to reconsideration and appeal.

Comprehensive changes to the Communications Act were made by the 1996
Telecommunications Act, enacted on February 8, 1996. It represents a
significant milestone in telecommunications policy by establishing competition
in local telephone service markets as a national policy. The 1996
Telecommunications Act removes many state regulatory barriers to competition
and forecloses state and local governments from creating laws preempting or
effectively preempting competition in the local telephone service market.

The 1996 Telecommunications Act places substantial interconnection
requirements on the traditional local telephone companies.

. Traditional local telephone companies are required to provide physical
collocation, which allows companies such as us and other interconnectors
to install and maintain their own network termination equipment in the
central offices of traditional local telephone companies, and virtual
collocation only if requested or if physical collocation is demonstrated
to be technically infeasible. This requirement is intended to enable us
and other competitive carriers to deploy our equipment on a relatively
convenient and economical basis.

. Traditional local telephone companies are required to unbundle components
of their local service networks so that other providers of local service
can compete for a wide range of local service customers. This requirement
is designed to provide us flexibility to purchase only the equipment we
require to deliver our services.

. Traditional local telephone companies are required to establish
"wholesale" rates for their services to promote resale by competitive
local exchange carriers and other competitors.

. Traditional local telephone companies are required to establish number
portability, which allows a customer to retain its existing phone number
if it switches from the traditional local telephone companies to a
competitive local service provider.

. Traditional local telephone companies are required to establish dialing
parity, which ensures that customers will not detect a quality difference
in dialing telephone numbers or accessing operators or emergency services
of local competitive service providers.

. Traditional local telephone companies are required to provide
nondiscriminatory access to telephone poles, ducts, conduits and rights-
of-way. In addition, the 1996 Telecommunications Act requires traditional
local telephone companies to compensate competitive carriers for traffic
originated by them and terminated on the competitive carrier's network.

The 1996 Telecommunications Act in some sections is self-executing. The FCC
issues regulations interpreting the 1996 Telecommunications Act that impose
specific requirements upon which we and our competitors rely. The outcome of
various ongoing FCC rulemaking proceedings or judicial appeals of such
proceedings could materially affect our business and financial prospects by
increasing the cost or decreasing our flexibility in providing DSL services.

39
<PAGE>

The FCC prescribes rules applicable to interstate communications, including
rules implementing the 1996 Telecommunications Act, a responsibility it shares
in certain respects with the state regulatory commissions. As part of its
effort to implement the 1996 Telecommunications Act, the FCC issued an order
governing interconnection in August 1996. A federal appeals court for the
Eighth Circuit, however, reviewed the initial rules and overruled some of their
provisions, including some rules on pricing and nondiscrimination. In January
1999, the United States Supreme Court reversed elements of the Eighth Circuit's
ruling, finding that the FCC has broad authority to interpret the 1996
Telecommunications Act and issue rules for its implementation, specifically
including authority over pricing methodology. The Supreme Court upheld the
FCC's directive to the traditional local telephone companies to combine
individual elements for competitors, and to allow competitors to pick and
choose among provisions in existing interconnection agreements. The Supreme
Court also found that the FCC's interpretation of the rules for establishing
individual elements of a network system was not consistent with standards
prescribed in the 1996 Telecommunications Act, and required the FCC to
reconsider and better justify its delineation of individual elements. The pick
and choose rule permits a competitive carrier to select individual provisions
of existing interconnection agreements yet still tailor its interconnection
agreement to its individual needs by negotiating the remaining provisions. In
November, 1999, the FCC issued a modified list of the network elements that
must be offered on an unbundled basis by traditional local telephone companies,
including the local copper telephone lines leased by DSL.net. This decision is
still subject to petitions for reconsideration and to appeal.

In March 1998, several traditional local telephone companies petitioned the
FCC for relief from certain regulations applicable to the DSL and other
advanced data services that they provide, including their obligations to
provide copper telephone lines and resold DSL services to competitive carriers.
In August 1998, the FCC concluded that DSL services are telecommunications
services and, therefore, the traditional local telephone companies are required
to allow interconnection of their facilities and equipment used to provide data
transport functionality, unbundle local telecommunications lines and offer for
resale DSL services. After some of the traditional local telephone companies
appealed this decision, the U.S. Court of Appeals for the District of Columbia
remanded the proceeding to the FCC for further consideration. In December 1999,
the FCC reaffirmed its conclusion on remand that traditional telephone
companies are required to offer to competitive data transmission companies the
ability to interconnect and the necessary unbundled network elements to provide
advanced data transmission services. This remand order is now pending on appeal
before the U.S. Court of Appeals. Any change in the August 1998 and December
1999 orders that would affect our ability to interconnect with and obtain
facilities from the traditional local telephone companies could affect our
ability to provide DSL services to the public.

In the same August 1998 order, the FCC issued a notice of proposed
rulemaking seeking comments on its tentative conclusion that traditional local
telephone companies should be permitted to create separate affiliates to
provide DSL services. Under the separate affiliate proposal, traditional local
telephone companies would be required to provide wholesale service to other DSL
carriers at the same rates, terms and conditions that it provided to its
separate affiliate. The outcome of this proceeding remains uncertain. However,
in October 1999 the FCC adopted a condition to the merger of two traditional
local telephone companies, SBC Communications and Ameritech, that will permit
the subsidiaries of these companies to create separate affiliates to provide
DSL services consistent with the regulations established in a final order. In
December 1999, the FCC listed Bell Atlantic's commitment to create an advanced
services affiliate as support for the Commission's decision to approve Bell
Atlantic's application to offer interexchange long-distance services in New
York state. Any final decision in this proceeding that alters our relationship
with the traditional local telephone companies could adversely affect our
ability to provide DSL services at a competitive price.

In March 1999, the FCC strengthened its regulations that require the
traditional local telephone companies to permit other carriers to collocate all
equipment necessary for interconnection. This

40
<PAGE>

requirement includes equipment that we use to provide DSL data services. The
FCC adopted limits on the construction standards and other conditions for
collocation that may be imposed by traditional local telephone companies. These
new rules should reduce our collocation costs and expedite our ability to
provide service to new areas. There is no guarantee that these new rules will
be implemented fully by the traditional local telephone companies. Therefore,
the benefits of these rules may be delayed pending interpretation and
enforcement by state and federal regulators. These rules are currently subject
to appeal by several traditional local telephone companies.

In November 1999, the FCC issued an order reaffirming its prior conclusion
that DSL services must be offered for resale at a discount by traditional local
telephone companies to the extent such services are offered at retail to
residential and business customers. The FCC clarified, however, that advanced
services provided to Internet service providers would not be subject to resale
at a discount. Accordingly, traditional telephone companies may enter into
volume and term discounts for the provisioning of DSL services with internet
service providers without having to make such arrangements available to other
requesting CLECs at discounted rates.

In December 1999, the FCC issued an order that requires the traditional
local telephone companies to provide "line sharing" of unbundled copper
telephone lines to DSL companies. Line sharing allows a DSL company to lease
the high frequency portion of a loop over which some types of DSL data traffic
is transmitted without having to lease the low frequency portion of the loop
which carries voice traffic. Line sharing is not currently available using
symmetric DSL technology, which transmits data at the same speed to and from
the customer and is the same technology that we principally use in providing
our service. We have requested each of the traditional local telephone
companies to offer amendments to our interconnection agreements that would
establish rates and terms for line sharing and are participating in several
line sharing pilot programs. If the traditional local telephone companies do
not offer acceptable rates and/or terms, we may request state arbitration of
these issues. If we require arbitration in some states, we would not be able to
implement line sharing arrangements in those states until at least the second
half of 2000. While the rates for line sharing have not been determined, it is
expected that by late 2000 DSL carriers will be able to obtain copper telephone
lines for at least some types of DSL services at lower costs than are available
today. However, the traditional local telephone companies may seek judicial
review of this decision. There is no guarantee that we will be able to benefit
from the FCC's line sharing decision.

Also in December 1999, the FCC granted Bell Atlantic authority to provide
long distance interexchange service in New York, a service it and other
traditional local telephone companies that had been part of Bell Telephone
prior to the break-up of AT&T had previously been barred from offering. In
January 2000, Southwestern Bell filed an application for authority to provide
long distance interexchange service in Texas, and additional applications are
expected over the next one to two years. While we do not presently provide long
distance interexchange service, this ruling and any future similar rulings
could negatively impact our business. First, Bell Atlantic will now be able to
offer potentially attractive packages of local, long distance and data
services. Second, the prospect of long distance authority has served as a
powerful incentive for the traditional Bell telephone companies to comply with
their obligations under the 1996 Telecommunications Act, including the
provision of unbundled network elements and collocation services to competitors
such as us. There is no guarantee that the traditional Bell telephone companies
will extend to us the same level of cooperation once they receive approval to
provide long distance interexchange service.

The 1996 Telecommunications Act also directs the FCC, in cooperation with
state regulators, to establish a universal service fund that will provide
subsidies to carriers that provide service to individuals that live in rural,
insular, and high-cost areas. A portion of carriers' contributions to the
universal service fund also will be used to provide telecommunications related
facilities for schools, libraries and certain rural health care providers. The
FCC released its initial order in this context in June 1997, which requires all
telecommunications carriers to contribute to the universal service

41
<PAGE>

fund. The FCC's implementation of universal service requirements remains
subject to judicial and additional FCC review. Additional changes to the
universal service regime, which could increase our costs, could have an adverse
affect on us.

Although not required for our existing DSL data service offering, on August
6, 1999 we obtained authority from the FCC to provide international
telecommunications services originating from the United States.

State Regulation

In October 1998, the FCC deemed data transmission to the Internet as
interstate services subject only to federal jurisdiction. However, this
decision is currently subject to reconsideration and appeal. Also, some of our
services that are not limited to interstate access potentially may be
classified as intrastate services subject to state regulation. All of the
states where we operate, or intend to operate, require some degree of state
regulatory commission approval to provide certain intrastate services and
maintain ongoing regulatory supervision. In most states, intrastate tariffs are
also required for various intrastate services, although our services are not
subject to price or rate of return regulation. Actions by state public utility
commissions could cause us to incur substantial legal and administrative
expenses and adversely affect our business.

To date, we have been able to obtain authorizations to operate as a
competitive local exchange carrier in 47 states and the District of Columbia,
and we have filed for competitive local exchange carrier status in the
remaining states. Although we expect to obtain certifications in all states,
there is no guarantee that these certifications will be granted or obtained in
a timely manner.

Local Government Regulation

In certain instances, we may be required to obtain various permits and
authorizations from municipalities, such as for use of rights-of-way, in which
we operate our own local distribution facilities. Whether various actions of
local governments over the activities of telecommunications carriers such as
ours, including requiring payment of franchise fees or other surcharges, pose
barriers to entry for competitive local exchange carriers which violate the
1996 Telecommunications Act or may be preempted by the FCC is the subject of
litigation. While we are not a party to this litigation, we may be affected by
the outcome. If municipal governments impose conditions on granting permits or
other authorizations or if they fail to act in granting such permits or other
authorizations, the cost of providing DSL services may increase or it may
negatively impact our ability to expand our network on a timely basis and
adversely affect our business.

Intellectual Property

We regard our products, services and technology as proprietary and attempt
to protect them with copyrights, trademarks, trade secret laws, restrictions on
disclosure and other methods. For example, we own a federal supplemental
registration and claim rights in the name DSL.net. There can be no assurance
these methods will be sufficient to protect our technology and intellectual
property. We also generally enter into confidentiality agreements with our
employees and consultants, and generally control access to and distribution of
our documentation and other proprietary information. Despite these precautions,
it may be possible for a third party to copy or otherwise obtain and use our
products, services or technology without authorization, or to develop similar
technology independently. Effective patent, copyright, trademark and trade
secret protection may be unavailable or limited in certain foreign countries,
and the global nature of the Internet makes it virtually impossible to control
the ultimate destination of our proprietary information. There can be no
assurance that the steps we have taken will prevent misappropriation or
infringement of our technology. In addition, litigation may be necessary in the
future to enforce our intellectual

42
<PAGE>

property rights, to protect our trade secrets or to determine the validity and
scope of the proprietary rights of others. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business, operating results and financial condition. In addition,
some of our information, including our competitive carrier status in individual
states and our interconnection agreements, is a matter of public record and can
be readily obtained by our competitors and potential competitors, possibly to
our detriment.

Employees

As of December 31, 1999, we had 267 employees. We believe that our future
success will depend in part on our continued ability to attract, hire and
retain qualified personnel. Competition for such personnel is intense, and we
may be unable to identify, attract and retain such personnel in the future.
None of our employees are represented by a labor union or are the subject of a
collective bargaining agreement. We have never experienced a work stoppage and
believe that our employee relations are good.

Properties

Our headquarters consists of approximately 55,700 square feet in an office
building complex in New Haven, Connecticut. We also lease offices in Santa
Cruz, California. These spaces are occupied under various leases. In addition,
we lease office space for local sales personnel and space for network equipment
installations in a number of other locations. With respect to our arrangements
to use space in traditional telephone companies' central offices, please see
"Interconnection Agreements with Traditional Local Telephone Companies."

Legal Proceedings

A lawsuit for wrongful termination of employment was filed against us in the
Superior Court in New Haven, Connecticut on July 29, 1999 by Frank W. Pereira,
a former officer who was employed by us for less than two months. Plaintiff's
claims are based chiefly on his allegation that we terminated his employment
because he allegedly voiced concerns to senior management about the feasibility
of our second and third tier city business strategy. He further alleges that
our senior management knew of these alleged flaws in the strategy. The
plaintiff is principally seeking compensatory damages for wages and unvested
stock options. We deny these allegations and believe that the plaintiff's
claims are without merit. We plan to defend the case vigorously.

We are also a party to legal proceedings related to regulatory approvals. We
are subject to state commission, FCC and court decisions as they relate to the
interpretation and implementation of the 1996 Telecommunications Act, the
interpretation of competitive carrier interconnection agreements in general and
our interconnection agreements in particular. In some cases, we may be deemed
to be bound by the results of ongoing proceedings of these bodies. We therefore
may participate in proceedings before these regulatory agencies or judicial
bodies that affect, and allow us to advance, our business plans.

From time to time, we may be involved in other litigation concerning claims
arising in the ordinary course of our business. We do not believe any of the
legal claims or proceedings will result in a material adverse effect on our
business, financial position, results of operations or cash flows.

43
<PAGE>

MANAGEMENT

Directors and Executive Officers

The directors and executive officers of DSL.net are as follows:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Paul K. Sun............. 40 Chairman of the Board and Chief Technology Officer
David F. Struwas........ 51 President, Chief Executive Officer and Director
Raymond C. Allieri...... 39 Senior Vice President, Sales and Marketing
Robert Q. Berlin........ 34 Chief Financial Officer and Vice President, Strategic Planning
Alan A. Bolduc.......... 45 Vice President, Operations
John M. Jaser........... 40 Vice President, Technology
Stephen Zamansky........ 29 Vice President and General Counsel
Robert
Gilbertson(1)(2)....... 58 Director
William J. Marshall(1).. 44 Director
James D. Marver......... 49 Director
William Seifert(1)(2)... 50 Director
</TABLE>
- --------
(1) Member of the audit committee
(2) Member of the compensation committee

Our directors were initially elected in accordance with an amended and
restated voting agreement that terminated upon the closing of our initial
public offering on October 12, 1999. Each of these directors will hold office
until the next annual meeting of our stockholders. Commencing at the next
annual meeting of our stockholders, our board of directors will be divided into
three classes. The members of each class will be determined by the board of
directors prior to that meeting. At that meeting, our stockholders will elect
one class of directors for a term expiring in one year, a second class of
directors for a term expiring in two years, and a third class of directors for
a term expiring in three years. Thereafter, each director will be elected for a
three-year term, with one class of directors being elected at each annual
meeting. Each director holds office until that director's successor is elected
and qualified.

Paul K. Sun has served as a director since January 1999 and Chairman of the
board of directors since February 1999. In addition, he has also served as
Chief Technology Officer since December 1998. From February 1997 to December
1998, Mr. Sun was a Director at PairGain Technologies, Inc. From December 1995
to February 1997, he was President and Chief Executive Officer of Avidia
Systems, Inc., an ATM switch vendor, which was acquired by PairGain
Technologies, Inc. in February 1997. From 1989 to 1995, Mr. Sun held various
positions at TranSwitch Corporation, a now-public telecommunications-oriented
semiconductor company, most recently as Manager of ATM Development.

David F. Struwas joined DSL.net in August 1998 and has served as our
President and Chief Executive Officer since November 1998 and as a director
since January 1999. From January 1997 to August 1998, Mr. Struwas was a General
Manager for Brooks Fiber-Worldcom. From May 1980 to January 1997, Mr. Struwas
held various positions at Southern New England Telephone, most recently as
Director of Marketing.

Raymond C. Allieri has served as Senior Vice President, Sales and Marketing
since June 1999. From 1988 to 1999, Mr. Allieri held various positions at MCI
WorldCom Communications Corporation, most recently as Senior Vice President,
Local Market Strategy and Development.

Robert Q. Berlin has served as Chief Financial Officer and Vice President,
Strategic Planning since July 1999, as Vice President, Strategic Planning since
May 1999 and as Executive Director,

44
<PAGE>

Strategic Planning from January 1999 to May 1999. From December 1997 to January
1999, Mr. Berlin was Managing Director of Rice Sangalis Toole & Wilson, a
private investment firm. From August 1994 to December 1997, he held various
positions, including Managing Director, at GE Capital Corporation.

Alan A. Bolduc has served as Vice President, Operations since November 1998.
From June 1998 to November 1998, Mr. Bolduc was Managing Director of
Cablevision Lightpath of CT, Inc., a competitive carrier subsidiary of
Cablevision. From January 1995 to May 1998, he was a General Manager at Brooks
Fiber Communications of CT, Inc.

John M. Jaser has served as Vice President, Technology since May 1999. Mr.
Jaser served as our President from March 1998 to November 1998 and was
responsible for business development from November 1998 to May 1999. From
January 1992 to March 1998, Mr. Jaser was the President and Chief Executive
Officer of FutureComm, Inc., a consulting firm specializing in network
planning, architecture and design.

Stephen Zamansky has served as Vice President and General Counsel since May
1999. From August 1997 to May 1999, Mr. Zamansky was an associate at Day, Berry
& Howard LLP. From October 1995 to August 1997, he was an associate at Sullivan
& Cromwell. From August 1994 to August 1995, Mr. Zamansky was a legal clerk for
a justice at the Supreme Judicial Court of Massachusetts.

Robert Gilbertson has served as a director since January 1999. Mr.
Gilbertson has been at Network Computing Devices, Inc. since May 1997, serving
as Chairman of the Board of Directors since August 31, 1999 and as President
and Chief Executive Officer from May 1997 to August 30, 1999. From April 1996
to April 1997, Mr. Gilbertson served as Chairman of Avidia Systems Inc. From
January 1992 to May 1996, Mr. Gilbertson served as President and a director of
CMX Systems, Inc., a manufacturer of precision measurement and positioning
products.

William J. Marshall has served as a director since January 1999. Mr.
Marshall has been a Managing Partner at VantagePoint Venture Partners since
1998 and served as Senior Advisor from 1996 to 1998. From 1985 to 1996, Mr.
Marshall was the Senior Managing Director and Chief Technology Officer of the
Communications Technologies Group at Bear Stearns & Co. Inc. Mr. Marshall is a
Co-Founder of the ATM Forum and was also a Board member of the Securities
Industry Association Technology Committee.

James D. Marver has served as a director since April 1999. Mr. Marver has
been a Managing Partner at VantagePoint Venture Partners since co-founding the
firm in 1996. From 1988 to 1996, Mr. Marver was Senior Managing Director and
Head of the Global Technology Group at Bear Stearns & Co. Inc., as well as Head
of the San Francisco Investment Banking office.

William Seifert has served as a director since April 1999. Mr. Seifert has
been a General Partner of Prism Ventures Partners II, L.P. since October 1998.
From November 1997 to October 1998, Mr. Seifert was a consultant and private
investor. Mr. Seifert founded Agile Networks, Inc. in November 1991 and served
as its Chief Executive Officer until November 1997. Mr. Seifert is a director
of Digital Lightwave, Inc.

Committees of the Board of Directors

Our compensation committee was appointed in September 1999 and consists of
Messrs. Gilbertson and Seifert. The compensation committee reviews and
evaluates the salaries and

45
<PAGE>

incentive compensation of our management and key employees and administers our
1999 stock plan and 1999 employee stock purchase plan. All decisions of the
compensation committee are currently subject to the review and approval of our
board of directors.

Our audit committee consists of Messrs. Gilbertson, Marshall and Seifert. It
is responsible for reviewing the scope of annual audits, considering specific
problems and questions that arise during the course of audits, monitoring the
adequacy of accounting and audit controls, and such other functions as the
board of directors may from time to time delegate to it. Our audit committee
must report to the board of directors when asked to do so.

Director Compensation

We currently do not provide cash compensation, other than reimbursement of
expenses, to any member of our board of directors. In February 1999, our board
of directors approved the grant of non-qualified stock options to purchase
333,250 shares of our common stock to each of Mr. Gilbertson and Mr. Marshall
for their services as directors and 79,980 shares to Mr. Marver for his service
as our advisor, in each case at an exercise price of $0.0375 per share. In July
1999, our board approved additional grants of non-qualified stock options to
purchase 53,320 and 133,300 shares of our common stock to Messrs. Marver and
Seifert, respectively, for their service as directors at an exercise price of
$7.3893 per share. Mr. Seifert has executed an agreement whereby the proceeds
of a sale of shares of common stock issued to him upon exercise of these
options will be transferred to Prism Venture Partners II, L.P. and he therefore
disclaims beneficial ownership of such shares. Each of the options granted to
our directors provides that all shares subject to the option are immediately
exercisable subject to our right to repurchase all of the shares up until one
year following the date of grant, at which time our right to repurchase
terminates with respect to 25% of the shares originally granted. Thereafter,
our right to repurchase terminates monthly over the next 36 months with respect
to 2.08% of the shares originally granted under the option. The board of
directors has also provided that our right to repurchase shares relating to an
option granted under the 1999 stock plan to a member of our board of directors
or certain of our advisors will terminate immediately upon a change of control.
In addition, the option granted to Mr. Gilbertson provides that the Company's
right to repurchase shares issued upon exercise of his option will terminate in
full in the event he is removed as a director for any reason other than in
connection with a change of control of DSL.net. See "Management--Stock Plans."

46
<PAGE>

Executive Compensation

The following summary compensation table sets forth the total compensation
paid or accrued for the 1998 for our Chief Executive Officer and for the 1999
fiscal year for our named executive officers, including our Chief Executive
Officer and the three most highly compensated executive officers who were
serving as of December 31, 1999. No other executive officer had compensation in
excess of $100,000 during the years ended December 31, 1998 or 1999.

Summary Compensation Table

Annual Compensation

<TABLE>
<CAPTION>
Long Term Compensation
-----------------------
Securities
Restricted Under- All Other
Name and Principal Salary Bonus Stock lying Compensation
Position Year ($) ($) Award(s) Options ($)
- ------------------ ---- -------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
David F. Struwas........ 1999 $123,244 -- -- -- $44,585(1)
President and Chief 1998 $ 29,867 $35,000 -- -- $ 6,682(2)
Executive Officer
Raymond C. Allieri...... 1999 $ 89,450 $45,000 -- 933,100 --
Senior Vice President,
Sales and Marketing
Robert Q. Berlin........ 1999 $102,559 -- -- 679,880 --
Chief Financial Officer
and Vice President,
Strategic Planning
Alan A. Bolduc.......... 1999 $116,042 -- -- 506,540 --
Vice President,
Operations
</TABLE>
- --------

(1) Consists of an amount equal to the fair market value of common stock, as
determined by our board of directors, awarded in March, 1999. Based upon
subsequent events such as the issuance of our Series C preferred stock we
have recorded noncash stock compensation expense of $602,369 relating to
these shares of common stock. See "Certain Transactions."

(2) Consists of an amount equal to the fair market value of common stock, as
determined by our board of directors, purchased in December 1998 in
exchange for a promissory note. The note was subsequently cancelled in full
satisfaction of our obligation to pay additional compensation under an
agreement entered into in December 1998. Based on subsequent events, we
have recorded noncash stock compensation expenses of $895,363 relating to
these shares of common stock. See "Certain Transactions."

47
<PAGE>

Option Grants

The following table provides information concerning grants of options to
purchase common stock made during the period January 1, 1999 through December
31, 1999 to the named executive officers.

Individual Grants

<TABLE>
<CAPTION>
Potential
Number of Net
Securities Options Exercise Realizable
Underlying Granted to Price or Value (2)
Options Employees in Base Expiration ---------------------
Name Granted (1) Fiscal Year Price ($) Date 5% 10%
- ---- ----------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David F. Struwas........ -- -- -- -- -- --
Raymond C. Allieri...... 933,100 19.95% $0.5251 6/01/09 $ 308,140 $ 780,887
Robert Q. Berlin........ 319,920 6.8% 0.0675 3/30/09 $ 13,581 $ 34,416
Robert Q. Berlin........ 159,960 3.4% 0.3938 4/29/09 $ 39,615 $ 100,393
Robert Q. Berlin........ 200,000 4.3% 8.3750 10/12/09 $1,053,399 $2,669,519
Alan A. Bolduc.......... 346,580 7.4% 0.0375 2/19/09 $ 8,174 $ 20,713
Alan A. Bolduc.......... 159,960 3.4% 0.3938 4/29/09 $ 39,615 $ 100,393
</TABLE>
- --------
(1) Except with respect to options to purchase 687,956 and 47,760 shares of our
common stock granted to Mr. Allieri and Mr. Berlin, respectively, these
options are currently exercisable subject to our right to repurchase 100%
of the shares until one year following either the date of grant or the one
year employment anniversary of the person, at which time our right to
repurchase terminates with respect to 25% of the shares originally granted.
Thereafter, our right to repurchase terminates monthly over each of the
next thirty-six months with respect to approximately 2.08% of the shares
originally granted under the option. Options to purchase 687,956 and 47,760
shares of our common stock granted to Mr. Allieri and Mr. Berlin,
respectively, become exercisable at various times over a four-period.

(2) We recommend caution in interpreting the financial significance of the
figures representing the potential realizable value of the stock options.
Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on our common stock over the term of the options. These numbers are
calculated based on rules promulgated by the SEC and do no reflect our
estimate of future stock price growth. Actual gains, if any, on stock
option exercises and common stock holdings are dependent on the timing of
such exercise and the future performance of our common stock. There can be
no guarantee that the market value of the common stock will reflect the
rates of appreciation assumed in this table at the time that the options
are exercisable and no longer subject to our right to repurchase.

Aggregate Options Exercised in Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth information regarding option exercises, and
the fiscal year end values of stock options held by each of the named executive
officers during the fiscal year ended December 31, 1999 and exercisable and
unexercisable options held as of December 31, 1999:

<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Underlying Unexercised Options at In-the-Money Options at
Shares December 31, 1999 December 31, 1999(1)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David F. Struwas........ -- -- -- -- -- --
Raymond C. Allieri...... -- -- 245,144 687,956 $3,410,664 $9,571,463
Robert Q. Berlin........ -- -- 632,120 47,760 $7,766,951 $ 289,569
Alan A. Bolduc.......... -- -- 506,540 -- $7,237,435 --
</TABLE>
- --------
(1) Value is based on the difference between the option exercise price and
$14.438, the fair market value of our common stock on December 31, 1999,
the last trading day for the fiscal year ended 1999, multiplied by the
number of shares of common stock underlying the options.

48
<PAGE>

Stock Plans

1999 Stock Plan. Our stock plan was adopted by the board of directors in
February 1999 and approved by the stockholders in March 1999. A total of
12,364,200 shares of common stock have been authorized and reserved for
issuance under the stock plan. As of December 31, 1999, there were outstanding
options for the purchase of a total of 5,874,302 shares of common stock at a
weighted average exercise price of $2.32. As of December 31, 1999, 116,635
shares of common stock had been issued pursuant to the exercise of options.
Under the terms of the stock plan, we are authorized to grant incentive stock
options as defined under the Internal Revenue Code, non-qualified options,
stock appreciation rights, stock awards or opportunities to make direct
purchases of common stock to officers, directors, consultants and other
employees of ours and our subsidiaries.

The stock plan is currently administered by our compensation committee
subject to the approval of our board of directors. Prior to September 1999, the
stock plan was administered by our board of directors. The compensation
committee selects the individuals to whom options or other awards will be
granted and determines the option exercise price and other terms of each award,
subject to the provisions of the stock plan. The President and Chief Executive
Officer may approve options to non-officers in accordance with guidelines
approved by our board of directors. Options generally provide that 25% of the
shares exercisable under each option will vest one year following either the
date of grant or the optionee's date of employment and thereafter vest in equal
monthly installments over the next 36 months. However, certain options granted
under our stock plan to directors, members of our advisory board, and certain
officers and consultants are immediately exercisable subject to our right to
repurchase 100% of the shares until one year following the date of grant or the
one year employment anniversary of the person, at which time our right to
repurchase terminates with respect to 25% of the shares originally granted.
Thereafter, our right to repurchase terminates monthly over each of the next
thirty-six months with respect to approximately 2.08% of the shares originally
granted under the option. In addition, upon termination of employment without
cause of certain officers, our right to repurchase shares granted under an
option to that person will terminate with respect to all shares for which our
right to repurchase would have terminated within one year following the date of
termination. The option exercise price may be paid in cash or in shares of
common stock valued at fair market value on the exercise date. We may also
allow the option to be exercised through a same-day sale program without any
cash outlay by the optionee. The stock plan also provides that, if at any time
following a change in control we terminate an optionee's business relationship
with DSL.net or any of our subsidiaries without cause or the optionee
terminates his or her business relationship with us for good reason, all
options and other awards held by that optionee will immediately vest and become
exercisable. In addition, the board of directors has provided that our right to
repurchase certain shares subject to an option granted under the stock plan to
any person serving as president, chief executive officer, senior vice
president, chief financial officer, chief technology officer, chairman of our
board of directors, a member of our board of directors, a member of our
advisory board and certain vice presidents and consultants will terminate
immediately upon a change in control. In addition, options to purchase certain
shares granted under the stock plan to certain vice presidents shall accelerate
upon a change of control. An option is not transferable by the recipient except
by will or by the laws of descent and distribution, or, in the case of non-
qualified stock options, is only transferable to the extent set forth in the
agreement relating to the non-qualified stock option or pursuant to a valid
domestic relations order. The term of the stock plan is ten years, unless
sooner terminated by vote of our board of directors.

1999 Employee Stock Purchase Plan. The purchase plan was adopted by the
board of directors and received stockholder approval in September 1999. The
purchase plan provides for the issuance of up to an aggregate of 300,000 shares
of common stock to participating employees.

49
<PAGE>

The purchase plan is currently administered by our compensation committee
subject to the approval of our board of directors. Generally, all employees who
have completed three months of employment and whose customary employment is
more than 20 hours per week and for more than five months in any calendar year
are eligible to participate in the purchase plan. The right to purchase common
stock under the purchase plan will be made available through a series of
offerings. On the first day of an offering period, we will grant to each
eligible employee who has elected in writing to participate in the purchase
plan an option to purchase shares of common stock. The employee will be
required to authorize an amount, between 1% and 10% of the employee's
compensation, to be deducted from the employee's pay during the offering
period. On the last day of the offering period, the employee will be deemed to
have exercised the option, at the option exercise price, to the extent of
accumulated payroll deductions. Under the terms of the purchase plan, the
option exercise price is an amount equal to 85% of the fair market value of one
share of common stock on either the first or last day of the offering period,
whichever is lower. No employee may be granted an option that would permit the
employee's rights to purchase common stock to accrue in excess of $25,000 in
any calendar year. The first offering period under the purchase plan commenced
on October 12, 1999 and continues through February 2000. Thereafter, the
offering periods will begin on each March 1 and September 1. Options granted
under the purchase plan terminate upon an employee's voluntary withdrawal from
the plan at any time or upon termination of employment.

Compensation Committee Interlocks and Insider Participation

Our board of directors reviewed salaries and incentive compensation for our
employees and consultants during 1999 until our compensation committee was
formed in September 1999. Each of John Jaser, a founder and our Vice President,
Technology, Paul Sun, our Chairman and Chief Technology Officer and Mr.
Struwas, our President and Chief Executive Officer, participated in
deliberations of our board of directors concerning executive compensation in
1999. Other than Mr. Jaser, none of our executive officers has served as a
director or member of the compensation committee, or other committee serving an
equivalent function, of any other entity, whose executive officers served as a
director or member of our compensation committee. Mr. Jaser was our sole
director and president for a portion of 1998 and a director for a portion of
1999 and also a director and executive officer of FutureComm, Inc.

In September 1999, we formed a compensation committee consisting of Messrs.
Gilbertson and Seifert. All decisions of the compensation committee are
currently subject to the review and approval of our board of directors.

We are party to an agreement, dated as of April 1, 1999, with DMW Worldwide,
Inc. under which we license software for use in connection with our operations
support systems. In addition, DMW will install and modify the software, and
provide training, maintenance and support services in connection with the
software. We have made payments of approximately $563,000 in connection with
this agreement. We are currently renegotiating the terms of this agreement and
future payments, if any, will be subject to the results of our negotiations.
Two of our stockholders, VantagePoint Venture Partners 1996, L.P. and
VantagePoint Communications Partners, L.P., in the aggregate, own in excess of
5% of the capital stock of DMW. Messrs. Marshall and Marver, affiliates of
VantagePoint Venture Partners 1996, L.P. and VantagePoint Communications
Partners, L.P., are also members of our board of directors. In addition, Mr.
Marver is a director of DMW. For certain other information regarding
transactions we have entered into with members of our board of directors and
their affiliates, see "Certain Transactions."

50
<PAGE>

CERTAIN TRANSACTIONS

Organization of DSL.net

In connection with our formation in 1998, we issued and sold 2,544,817
shares of common stock for a purchase price of $250 to John Jaser, a founder
and currently our Vice President, Technology. In addition, we issued and sold
2,544,817 shares of common stock for a purchase price of $250 to Felix Tang, a
founder and currently our Director of Network Engineering.

In addition, we issued 20,000 shares of a prior series A preferred stock for
an aggregate of $50,000 to another founder, Paul Sun, who currently is the
Chairman of the board of directors and Chief Technology Officer.

In anticipation of the Series A preferred financing, in December 1998 Mr.
Sun exchanged 20,000 shares of a prior series A preferred stock for 7,634,451
shares of our common stock, 5,598,597 shares more than he was entitled to under
the terms of the prior series A preferred stock. As a result, we incurred a
compensation charge equal to $1,400,000. In January 1999, Mr. Tang purchased 8
shares of common stock for an aggregate purchase price of $0.02.

Issuance of Notes and Warrants

In November 1998, we issued a convertible promissory note in the aggregate
principal amount of $41,667 and a warrant to purchase 10,416 shares of Series A
preferred stock at an exercise price of $1.00 per share to VantagePoint Venture
Partners, 1996, L.P. In addition, we issued a convertible promissory note in
the aggregate principal amount of $83,333 and a warrant to purchase 20,834
shares of Series A preferred stock at an exercise price of $1.00 per share to
VantagePoint Communications Partners, L.P., an affiliate of VantagePoint
Venture Partners. Messrs. Marver and Marshall, two of our directors, are
members of the general partners of each of these VantagePoint entities.

Each of the notes issued to the VantagePoint entities provided for interest
at 6.0% and was repayable on demand beginning on January 8, 1999. Each of these
notes was cancelled in January 1999 in connection with the Series A preferred
stock financing described below.

Upon completion of our initial public offering on October 12, 1999, the
warrants became exercisable in whole or in part, at any time or from time to
time, until November 18, 2003, for an aggregate of 83,314 shares of common
stock at an exercise price of $0.375 per share.

Issuance of Notes and Rights to Warrants

Concurrently with the issuance of the convertible promissory notes and
warrants to the VantagePoint entities, we issued three convertible promissory
notes in the aggregate principal amount of $225,000 and contractual rights to
warrants to purchase an aggregate of 56,250 shares of Series A preferred stock
at an exercise price for $1.00 per share. Of that amount, one convertible
demand promissory note in the principal amount of $100,000 and a contractual
right to a warrant to purchase 25,000 shares of Series A preferred stock was
issued to Robert Gilbertson, one of our directors.

In January 1999, convertible promissory notes issued in November 1998 were
automatically converted into an aggregate of 225,000 shares of Series A
preferred stock in January 1999, of which Mr. Gilbertson, one of our directors,
was issued 100,000 shares. Upon completion of our initial public offering on
October 12, 1999, the 225,000 shares of Series A preferred stock converted into
599,850 shares of common stock.

51
<PAGE>

In addition, as a result of the exercise of the contractual rights we
granted in November 1998, we issued warrants to purchase an aggregate of 56,250
shares of Series A preferred stock at an exercise price of $1.00 per share were
issued. Of this amount, a warrant to purchase 25,000 shares of Series A
preferred stock at an exercise price of $1.00 per share was issued to Mr.
Gilbertson. The warrant issued to Mr. Gilbertson has been exercised.

Issuance of Stock

In December 1998, we issued 508,963 shares of common stock to Mr. Jaser in
exchange for his promissory note dated December 29, 1998 in the principal
amount of $955, and 3,562,744 shares of common stock to David Struwas in
exchange for his promissory note dated December 29, 1998 in the principal
amount of $6,682. Each promissory note bore interest at 5.56% per annum. We
incurred compensation expense in an aggregate amount of $1,015,635, the deemed
fair market value of the stock issued to Messrs. Jaser and Struwas less the
aggregate principal amount(s) of the notes. Simultaneously with the issuance of
this common stock, we entered into agreements with each of Mr. Jaser and Mr.
Struwas that provided for additional compensation, after taxes, in the amount
of $955 and $6,682, respectively, plus interest of 5.56% per annum from the
date of the agreement until the date of payment. The promissory notes of each
of Mr. Jaser and Mr. Struwas were cancelled in January 1999 in full
satisfaction of our obligations for additional compensation and the related
interest under each of these agreements. We incurred compensation expense in an
aggregate amount of $7,637 at the time these promissory notes were forgiven.

In January 1999, we issued 1,166,667 shares of Series A preferred stock and
a warrant to purchase 1,166,667 shares of a prior series B preferred stock to
VantagePoint Venture Partners 1996, L.P. for aggregate consideration of
$1,166,667. These shares and warrants were subsequently exchanged in April
1999, for 2,166,667 shares of Series B preferred stock. In addition, we issued
2,333,333 shares of Series A preferred stock and a warrant to purchase
2,333,333 shares of a prior series B preferred stock to VantagePoint
Communications Partners, L.P. for aggregate consideration of $2,333,333. These
shares and warrants were subsequently exchanged in April 1999 for 4,333,333
shares of Series B preferred stock. A portion of the aggregate consideration
paid by VantagePoint Venture Partners 1996, L.P. and VantagePoint
Communications Partners, L.P. was in the form of the cancellation of each of
the convertible promissory notes issued by DSL.net in November 1998. At the
time of the exchange, the exchange rate was below the deemed fair market value
of the stock. In addition, in January 1999, certain shares of common stock
owned by Messrs. Jaser, Struwas, Tang and Sun were made subject to vesting
based on tenure and certain performance criteria under a stockholders'
agreement described below.

In March 1999, we issued 436,256 shares of common stock to Mr. Struwas
having a fair market value as determined by our board of directors at the time
of issuance of approximately $44,585. Based on subsequent events, we recorded
compensation expense of $602,369 related to this issuance.

In April 1999, in connection with a recapitalization to adjust the share
ownership of each stockholder and the removal of certain vesting restrictions
based on performance criteria contained in the stockholders' agreement
described below, Mr. Jaser surrendered 867,660 shares of common stock, Mr. Tang
surrendered 731,945 shares of common stock and Mr. Sun surrendered 1,502,651
shares of common stock to DSL.net.

In April 1999, we issued an aggregate of 2,785,516 shares of Series C
preferred stock at a price of $3.59 per share, for aggregate consideration of
$10,000,002. Of that amount, we issued 185,701 shares to VantagePoint Venture
Partners 1996, L.P., 371,402 shares to VantagePoint Communications Partners,
L.P. and 1,392,758 shares to Prism Venture Partners II, L.P. Mr. Seifert, one
of our directors, is a managing director of the general partner of Prism
Venture Partners II, L.P.

52
<PAGE>

We also issued 819,778 shares to Oak Investment Partners VIII, L.P. and 15,877
shares to Oak VIII Affiliates Fund L.P.

In May 1999, we issued an aggregate of 2,868,069 shares of Series D
preferred stock at a purchase price of $10.46 per share, for aggregate
consideration of $30,000,002, including a secured promissory note of
VantagePoint Venture Partners III(Q), L.P., an affiliate of VantagePoint
Venture Partners 1996, L.P. and VantagePoint Communications Partners, L.P., in
an aggregate principal amount of $5,999,429. Messrs. Marver and Marshall are
members of the general partner of this VantagePoint entity. Of that amount, we
issued 191,204 shares to VantagePoint Venture Partners, 1996, L.P., 382,410
shares to VantagePoint Communications Partners, L.P., 573,614 shares to
VantagePoint Venture Partners III(Q), L.P. and 95,602 shares to Prism Venture
Partners II, L.P. We also issued 515,823 shares of Series D preferred stock to
Oak Investment Partners VIII, L.P. and 9,990 shares of Series D preferred stock
to Oak VIII Affiliates Fund, L.P. VantagePoint Venture Partners III(Q), L.P.
paid the secured promissory note in full on May 28, 1999.

In June 1999, we issued an aggregate of 95,603 shares of Series D preferred
stock to Raymond C. Allieri, our Senior Vice President, Sales and Marketing, at
a purchase price of $10.46 per share, for aggregate consideration of
$1,000,007, including a secured promissory note in an aggregate principal
amount of $999,911. The promissory note provided for interest at 6.00% per
annum and was paid in full on July 16, 1999.

Upon the completion of our initial public offering on October 12, 1999, our
outstanding convertible preferred stock automatically converted into 35,909,761
shares of common stock.

In January 1999, Messrs. Jaser, Tang, Sun and Struwas entered into a
shareholders' agreement which subjected 1,266,350, 1,055,291, 3,060,347 and
1,477,410 shares, respectively, to vesting pro-rata over 38 months. In
addition, 1,454,181, 1,211,825, 3,635,451 and 1,696,544 shares of common stock,
respectively, became subject to vesting over 84 months, or earlier if certain
gross revenue and EBITDA targets were achieved. In April 1999, the vesting
provisions relating to the shares vesting over 84 months were removed in
connection with an amended and restated shareholders' agreement and the
recapitalization discussed above. In addition, the shareholders' agreement
provides that all unvested shares will vest and the right to repurchase will
terminate upon a change in control.

In connection with the preferred stock financings, we entered into an
investors' rights agreement in which we granted registration rights to certain
holders of preferred stock and common stock and which contained certain other
covenants which terminated upon the completion of our initial public offering
on October 12, 1999. See "Description of Capital Stock--Registration Rights."

We also entered into a voting agreement under which the parties agreed to
elect nominees of certain holders to the board of directors. In addition, we
entered into a right of first refusal and co-sale agreement which gave us and
certain stockholders a right of first refusal and a right to sell shares in
connection with any sale of shares held by Messrs. Jaser, Struwas, Sun and
Tang. Each of these agreements terminated upon the completion of our initial
public offering on October 12, 1999.

Other

In January 1999, we entered into an agreement with FutureComm, Inc., a
Connecticut corporation, under which FutureComm, Inc. transferred and assigned
all of its interest in certain equipment, agreements, licenses and intellectual
property in return for payment of approximately $28,000. Mr. Jaser is the sole
stockholder and director of FutureComm, Inc. and Mr. Jaser and Mr. Tang are
officers of FutureComm, Inc.

53
<PAGE>

We are party to an agreement, dated as of April 1, 1999, with DMW Worldwide,
Inc. under which we license software for use in connection with our operations
support systems. In addition, DMW will install and modify the software, and
provide training, maintenance and support services in connection with the
software. We have made payments of approximately $563,000 in connection with
this agreement. We are currently renegotiating the terms of this agreement and
future payments, if any, will be subject to the results of our negotiations.
Two of our stockholders, VantagePoint Venture Partners 1996, L.P. and
VantagePoint Communications Partners, L.P., in the aggregate, own in excess of
5% of the capital stock of DMW. Mr. Marshall and Mr. Marver, affiliates of
VantagePoint Venture Partners 1996, L.P. and VantagePoint Communications
Partners, L.P., are also members of our board of directors. In addition, Mr.
Marver is a director of DMW.

We have adopted a policy whereby all future transactions between us and our
officers, directors and affiliates will be on terms no less favorable to us
than could be obtained from unaffiliated third parties and will be approved by
a majority of the disinterested members of our board of directors.

54
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of our common stock as of December 31, 1999, and as adjusted to
reflect the sale of the shares of common stock offered hereby, by:

. each person known by us to be the beneficial owner of more than 5% of
our common stock;

. each named executive officer;

. each of our directors; and

. all executive officers and directors as a group.

Unless otherwise noted below, the address of each person listed on the table
is c/o DSL.net, Inc., 545 Long Wharf Drive, New Haven, CT 06511, and each
person has sole voting and investment power over the shares shown as
beneficially owned except to the extent authority is shared by spouses under
applicable law.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Shares of common stock issuable by us to a
person pursuant to options or warrants which may be exercised within 60 days
after December 31, 1999 are deemed to be beneficially owned and outstanding for
purposes of calculating the number of shares and the percentage beneficially
owned by that person. However, these shares are not deemed to be beneficially
owned and outstanding for purposes of computing the percentage beneficially
owned by any other person.

For purposes of calculating the percentage beneficially owned by any person,
the number of shares deemed outstanding before the offering includes:

. shares of common stock outstanding as of December 31, 1999; and

. shares of common stock issuable upon the exercise of options and warrants
which may be exercised by that person within 60 days of December 31,
1999.

For purposes of calculating the percentage beneficially owned by any person,
the number of shares deemed outstanding after the offering includes:

. all shares deemed to be outstanding before the offering; and

. shares being sold in this offering, assuming no exercise of the
underwriters' over-allotment option.

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<PAGE>

<TABLE>
<CAPTION>
Percent of Common
Stock Outstanding
Shares -----------------
Beneficially Before After
Owned Offering Offering
------------ -------- --------
<S> <C> <C> <C>
David F. Struwas............................... 3,999,000 6.85% 6.31%
Raymond C. Allieri(1).......................... 690,461 1.17 1.08
Robert Q. Berlin(2)............................ 644,060 1.09 1.01
Alan A. Bolduc(3).............................. 506,540 * *
Robert Gilbertson(4)........................... 666,500 1.14 1.05
James D. Marver(5)............................. 22,089,363 37.75 34.78
William J. Marshall(6)......................... 22,289,313 37.96 34.98
William Seifert(7)............................. 4,101,268 7.01 6.46
Paul K. Sun.................................... 3,097,892 5.31 4.89
The VantagePoint Entities(8)................... 21,956,063 37.55 34.60
1001 Bayhill Drive
Suite 1001
San Bruno, CA 94066
Prism Venture Partners II, L.P.(9)............. 4,101,268 7.01 6.46
100 Lowder Brook Drive
Suite 2500
Westwood, MA 02090
The Oak Entities(10)........................... 3,629,677 6.22 5.73
One Gorham Island
Westport, CT 06830
Stephen K. Gellman(11)(12)..................... 3,178,352 5.44 5.01
Shipman & Goodwin L.L.P.
One American Row
Hartford, CT 06103
Cecilia S. Wu (11)............................. 3,033,908 5.20 4.79
All executive officers and directors as a group
(11 persons)(13).............................. 38,374,150 62.7% 57.98%
</TABLE>
- --------
* Indicates less than 1%.
(1) Includes 435,583 shares held by Mr. Allieri issuable in connection with
options that are exercisable within 60 days after December 31, 1999.
(2) Includes 644,060 shares held by Mr. Berlin issuable in connection with
options that are exercisable within 60 days after December 31, 1999.
(3) Includes 506,540 shares held by Mr. Bolduc issuable in connection with
options that are exercisable within 60 days after December 31, 1999.
(4) Includes 333,250 shares held by Mr. Gilbertson issuable in connection with
options that are exercisable within 60 days after December 31, 1999.
(5) Includes 133,300 shares issuable to Mr. Marver in connection with options
that are exercisable within 60 days after December 31, 1999. Also includes
shares beneficially owned by the VantagePoint entities as set forth in
footnote 8. Mr. Marver is a member of the general partner of each of the
VantagePoint entities. Mr. Marver may be deemed to share voting and
investment power with respect to such shares and disclaims beneficial
ownership of such shares.

56
<PAGE>

(6) Includes 333,250 shares issuable to Mr. Marshall in connection with options
that are exercisable within 60 days after December 31, 1999. Also includes
shares beneficially owned by the VantagePoint entities as set forth in
footnote 8. Mr. Marshall is a member of the general partner of each of the
VantagePoint entities. Mr. Marshall may be deemed to share voting and
investment power with respect to such shares and disclaims beneficial
ownership of such shares.
(7) Includes 133,300 shares issuable to Mr. Seifert in connection with options
that are exercisable within 60 days after December 31, 1999. Mr. Seifert
has executed an agreement whereby the proceeds of a sale of shares of
common stock issued to him upon exercise of these options will be
transferred to Prism Venture Partners II, L.P. and he therefore disclaims
beneficial ownership of such shares. Includes 3,967,968 shares held by
Prism Venture Partners II, L.P., of which Prism Investment Partners II,
L.P. is the general partner, of which Prism Venture Partners II, L.L.C. is
the general partner. Mr. Seifert is a managing director of Prism Venture
Partners II, L.L.C. Mr. Seifert may be deemed to share voting and
investment power with respect to such shares and disclaims beneficial
ownership of such shares.
(8) Includes 6,781,164 shares and warrants to purchase 27,770 shares held by
VantagePoint Venture Partners 1996, L.P., of which VantagePoint Associates,
L.L.C. is the general partner. Also includes 13,562,330 shares and warrants
to purchase 55,544 shares held by VantagePoint Communications Partners,
L.P., of which VantagePoint Communications Associates, LLC is the general
partner, and 1,529,255 shares held by VantagePoint Venture Partners III(Q),
L.P., of which VantagePoint Venture Associates III, L.L.C. is the general
partner.
(9) Includes 133,000 shares issuable to Mr. Seifert in connection with options
that are exercisable within 60 days after December 31, 1999. Mr. Seifert
has executed an agreement whereby the proceeds of all options to purchase
shares of common stock held by him will be transferred to Prism Venture
Partners II, L.P. and he therefore disclaims beneficial ownership of such
shares.
(10) Includes 3,560,713 shares held by Oak Investment Partners VIII, L.P., of
which Oak Associates VIII, LLC is the general partner. Also includes
68,962 shares held by Oak VIII Affiliates Fund, L.P., of which Oak VIII
Affiliates Fund, LLC is the general partner.
(11) Includes an aggregate of 101,308 shares held in trust for Paul Sun's
children, of which Mr. Gellman and Ms. Wu are co-trustees, and 2,932,600
shares held in trust for Mr. Sun, of which Mr. Gellman and Ms. Wu are co-
trustees. Each of Mr. Gellman and Ms. Wu may be deemed to share voting and
investment power with respect to such shares and each disclaims beneficial
ownership of such shares.

(12) Includes an aggregate of 144,444 shares held in trust for John Jaser's
children, of which Mr. Gellman is the sole trustee. Mr. Gellman may be
deemed to share voting and investment power with respect to such shares
and disclaims beneficial ownership of such shares.
(13) See Notes 1 through 7. Also includes shares owned by executive officers
and shares issuable to executive officers in connection with options which
are exercisable within 60 days after December 31, 1999.

57
<PAGE>

DESCRIPTION OF CAPITAL STOCK

General

Our authorized capital stock consists of 200,000,000 shares of common stock,
with a par value of $.0005 per share, and 20,000,000 shares of preferred stock,
with a par value of $.001 per share.

Common Stock

As of December 31, 1999, there were 58,382,196 shares of common stock
outstanding and held of record by 62 stockholders.

Based upon the number of shares outstanding as of December 31, 1999 and
giving effect to the issuance of the shares of common stock offered by us
hereby, there will be 63,382,196 shares of common stock outstanding upon the
closing of this offering. In addition, as of December 31, 1999, there were
outstanding stock options for the purchase of a total of 5,874,302 shares of
common stock at a weighted average exercise price of $2.32, and outstanding
warrants for the purchase of a total of 194,556 shares of common stock at a
weighted average exercise price of $0.68.

Holders of common stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of stockholders. The holders
of common stock are entitled to receive ratably such lawful dividends as may be
declared by our board of directors. However, these dividends are subject to
preferences that may be applicable to the holders of any outstanding shares of
preferred stock. In the event of a liquidation, dissolution or winding up of
the affairs of DSL.net, whether voluntary or involuntary, the holders of common
stock will be entitled to receive pro rata all of our remaining assets
available for distribution to our stockholders. Any such pro rata distribution
would be subject to the rights of the holders of any outstanding shares of
preferred stock. The common stock has no preemptive, redemption, conversion or
subscription rights. The rights, powers, preferences and privileges of holders
of common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock which we may designate
and issue in the future.

Preferred Stock

As of December 31, 1999, there were no shares of preferred stock
outstanding.

Our board of directors is authorized, subject to any limitations prescribed
by Delaware law, without further stockholder approval, to issue from time to
time up to 20,000,000 shares of preferred stock, in one or more series. Our
board of directors is also authorized, subject to the limitations prescribed by
Delaware law, to establish the number of shares to be included in each series
and to fix the voting powers, preferences, qualifications and special or
relative rights or privileges of each series. Our board of directors is
authorized to issue preferred stock with voting, conversion and other rights
and preferences that could adversely affect the voting power or other rights of
the holders of common stock.

We have no current plans to issue any preferred stock following this
offering. However, the issuance of preferred stock or of rights to purchase
preferred stock could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
a majority of our outstanding voting stock.

Warrants

As of December 31, 1999, we had outstanding three warrants to purchase an
aggregate of 194,556 shares of common stock:

58
<PAGE>

. Two warrants provide for the purchase of an aggregate of 83,314 shares of
common stock at an exercise price of $0.375 per share, and are
exercisable, in whole or in part, at any time or from time to time, until
November 18, 2003.

. The third warrant is to purchase an aggregate of 111,242 shares of common
stock at an exercise price of $0.90 per share and is exercisable, in
whole or in part, at any time or from time to time until October 12,
2002.

All of the outstanding warrants contain certain protections against dilution
resulting from stock splits, stock dividends and our consolidation or merger
with or into another person or sale of all or substantially all of our assets.

Registration Rights

Under the terms of the amended and restated investors' rights agreement
dated as of July 16, 1999, holders of an aggregate of 49,289,748 shares of
common stock are entitled to certain rights with respect to the registration of
these shares under the Securities Act.

If we propose to register any of our securities under the Securities Act,
either for our own account or for the account of other security holders, the
holders of registration rights are entitled to notice of such registration.
These holders are also entitled to include their shares of common stock in such
registration. However, in the event of a registration pursuant to an
underwritten public offering of common stock, the underwriters have the right,
subject to certain conditions, to limit the number of shares included in such
registration.

The holders of at least 40% of the then-outstanding shares of common stock
that were issued upon the conversion of Series B, C, D and E preferred stock
are entitled, at any time following April 3, 1999, to request that we file a
registration statement under the Securities Act covering the sale of the shares
held by the requesting holders of registration rights. Upon the receipt of such
a request, we must use best efforts to effect such registration. We are not
required to effect more than two such demand registrations.

Once we have qualified to use Form S-3 to register securities under the
Securities Act, the holders of the then-outstanding shares of common stock
issued upon the conversion of Series B, C, D and E preferred stock will have
the right to request that we file a registration statement on Form S-3 or any
successor thereto for a public offering of all or any portion of their shares,
provided that the reasonably anticipated aggregate price to the public of such
offering would not be less than $1,000,000. We are not required to effect a
registration in this manner more than once in any six-month period.

In general, all fees, costs and expenses of such registrations will be borne
by us. We have agreed to indemnify the holders of registration rights against,
and provide contribution with respect to, certain liabilities relating to any
registration in which any shares of these holders are sold under the Securities
Act.

Anti-Takeover Effects of Provisions of our Certificate of Incorporation and By-
Laws and Delaware General Corporation Law

Our certificate of incorporation and by-laws and the Delaware General
Corporation Law contain certain provisions that could be deemed to have anti-
takeover effects. These provisions could discourage, delay or prevent a change
in control of DSL.net or an acquisition of DSL.net at a price which many
stockholders may find attractive. The existence of these provisions could limit
the price that investors might be willing to pay in the future for shares of
our common stock.

59
<PAGE>

Certificate of Incorporation and By-Laws

Our certificate of incorporation provides that beginning on the date of the
next annual meeting of stockholders, the board will be divided into three
classes as nearly equal in size as possible with staggered three year terms. In
addition, our certificate of incorporation provides that at any time prior to
the date on which we have a classified board of directors, any director may be
removed without cause only by the vote of at least 75% of the shares entitled
to vote for the election of directors or with cause by the vote of at least a
majority of such shares. On or after the date on which we have a classified
board, our certificate of incorporation will provide that any director may be
removed, but only for cause, by the vote of at least 75% of the shares entitled
to vote for the election of directors. These provisions could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, control of DSL.net.

Our by-laws provide that, except as otherwise provided by law or our
certificate of incorporation, newly created directorships resulting from an
increase in the authorized number of directors or vacancies on our board of
directors may be filled only by:

. a majority of the directors then in office, even if less than a quorum is
then in office; or

. the sole remaining director.

These provisions prevent a stockholder from enlarging our board of directors
and filling the new directorships with such stockholder's own nominees without
the board of directors' approval.

These provisions of our certificate of incorporation and by-laws may have
the effect of discouraging a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of DSL.net, or of
attempting to change the composition or policies of the Board, even though such
attempts might be beneficial to DSL.net or its stockholders.

Our by-laws provide that, unless otherwise prescribed by law or the
certificate of incorporation, only a majority of our board of directors, the
Chairman of the board of directors or the President is able to call a special
meeting of stockholders. Our certificate of incorporation and by-laws also
provide that, unless otherwise prescribed by law or our certificate of
incorporation, stockholder action may be taken only at a duly called and
convened annual or special meeting of stockholders and may not be taken by
written consent. These provisions, taken together, prevent stockholders from
forcing consideration by the stockholders of stockholder proposals over the
opposition of our board of directors, except at an annual meeting.

Our by-laws also establish an advance notice procedure for stockholders to
make nominations of candidates for election as director, or to bring other
business before an annual meeting of our stockholders. Under the notice
procedure, notice of stockholder nominations or proposals to be made at an
annual meeting or a special meeting in lieu of an annual meeting generally must
be received by us not less than 120 days nor more than 150 days prior to the
first anniversary of the date of the proxy statement delivered to the
stockholders in connection with the preceding year's annual meeting. However,
if the number of directors to be elected to our board of directors is increased
and there is no public announcement by us naming all of the nominees for
director or specifying the size of the increased board of directors at least
120 days prior to the first anniversary of the preceding year's annual meeting,
then notice must be received not later than the 10th day following the day such
public disclosure was made. The notice will be timely only with respect to any
director nominees for any position caused by the increase in our board of
directors. Notice of stockholder nominations or proposals to be made at a
special meeting called by our board of directors for the purpose of electing
one or more directors (other than a special meeting in lieu of an annual
meeting), must be received not earlier than the 90th day prior to such special
meeting nor later than the close of business on the 60th day prior to such
special meeting or, if later, the 10th day following the day such public
disclosure was made. These notices must contain certain prescribed information.

60
<PAGE>

The notice procedure affords our board of directors an opportunity to
consider the qualifications of proposed director nominees or the merit of
stockholder proposals, and, to the extent deemed appropriate by our board of
directors, to inform stockholders about such matters. The notice procedure also
provides a more orderly procedure for conducting annual meetings of
stockholders. Our by-laws do not give our board of directors any power to
approve or disapprove stockholder nominations for the election of directors or
proposals for action. However, the notice procedure may prevent a contest for
the election of directors or the consideration of stockholder proposals. This
could deter a third party from soliciting proxies to elect its own slate of
directors or to approve its own proposal if the proper advance notice
procedures are not followed, without regard to whether consideration of such
nominees or proposals might be harmful or beneficial to DSL.net and its
stockholders.

Delaware General Corporation Law

As provided in Section 203 of the Delaware General Corporation Law, our
certificate of incorporation authorizes the board of directors, when
considering a tender offer or merger or acquisition proposal, to take into
account factors in addition to potential economic benefits to stockholders.
Such factors may include:

. the interests of our stockholders, including the possibility that these
interests might be best served by the continued independence of DSL.net;

. whether the proposed transaction might violate Federal or state laws;

. the consideration being offered in the proposed transaction in relation
to the then current market price for our outstanding capital stock, as
well as in relation to the market price for our capital stock over a
period of years, the estimated price that might be achieved in a
negotiated sale of DSL.net as a whole or in part or through orderly
liquidation, the premiums over a market price for the securities of other
corporations in similar transactions, current political, economic and
other factors bearing on securities prices and our financial condition
and future prospects; and

. the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with
DSL.net, upon the communities in which we conduct our business and upon
the economy of the state, region and nation.

The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party acquiring,
control of DSL.net. We are subject to Section 203 of the Delaware General
Corporation Law which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such
stockholder became an interested stockholder.

Section 203 does not apply if:

. prior to such time, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;

. upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or

61
<PAGE>

. at or subsequent to such time, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock which is not owned by
the interested stockholder.

The application of Section 203 may limit the ability of stockholders to
approve a transaction that they may deem to be in their best interests.

Section 203 defines "business combination" to include:

. any merger or consolidation involving the corporation and the interested
stockholder;

. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation to or with the interested stockholder;

. subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;

. any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or

. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.

In general, Section 203 defines an "interested stockholder" as any entity or
person who beneficially owns 15% or more of the outstanding voting stock of the
corporation or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the past three years, and any entity or person associated with,
affiliated with or controlling or controlled by such entity or person.

Limitation of Liability

Our certificate of incorporation provides that no director or officer of
DSL.net shall be personally liable to us or to our stockholders for monetary
damages for breach of fiduciary duty as a director or officer, except for
liability:

. for any breach of the director's duty of loyalty to us or our
stockholders;

. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. under Section 174 of the Delaware General Corporation Law, relating to
unlawful payment of dividends or unlawful stock purchase or redemption of
stock; or

. for any transaction from which the director derives an improper personal
benefit.

Our certificate of incorporation further provides for the indemnification
of, and advancement of expenses to, our directors and officers to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law,
including circumstances in which indemnification is otherwise discretionary. A
principal effect of these provisions is to limit or eliminate the potential
liability of our directors and officers for monetary damages arising from
breaches of their duty of care, subject to certain exceptions. These provisions
may also shield directors and officers from liability under federal and state
securities laws.

Stock Transfer Agent

The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company, Inc.

62
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have outstanding 63,382,196 shares
of common stock, including the 5,000,000 shares sold by us in this offering
(assuming no exercise of the underwriters' over-allotment option). A total of
13,226,000 of the shares will be freely tradeable without restriction under the
Securities Act unless purchased by our "affiliates," which generally includes
officers, directors or 10% stockholders as that term is defined in Rule 144
under the Securities Act.

The remaining 50,156,196 shares outstanding are "restricted securities"
within the meaning of Rule 144 under the Securities Act. These shares may be
sold in the public market only if registered or if they qualify for an
exemption from registration under Securities Act, including under Rules 144,
144(k) or 701 promulgated under the Securities Act which are summarized below.
Sales of restricted shares in the public market, or the availability of these
shares for sale, could adversely affect the market price of our common stock.

In connection with our initial public offering, all of our directors and
officers and certain of our stockholders entered into lock-up agreements
providing that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of our common stock or any securities
exercisable for or convertible into our common stock owned by them until April
4, 2000, without the prior written consent of Deutsche Bank Securities Inc.

In connection with this offering, all of our directors and officers and
certain of our stockholders have entered into lock-up agreements generally
providing that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of our common stock or any securities
exercisable for or convertible into our common stock owned by them for a period
of 90 days after the date of this prospectus without the prior written consent
of Deutsche Bank Securities Inc. This consent may be given at any time without
public notice. We have entered into a similar lock-up agreement with Deutsche
Bank Securities Inc. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701, shares subject to lock-up agreements will not be
salable until these agreements expire or are waived by Deutsche Bank Securities
Inc. Taking into account the lock-up agreements, and assuming Deutsche Bank
Securities Inc. does not release stockholders from these agreements, the
following shares will be eligible for sale in the public market at the
following times:

. After the date of this prospectus, a total of 13,226,000 of the shares
will be freely tradeable without restriction under the Securities Act,
unless purchased by our "affiliates," which generally includes officers,
directors or 10% stockholders as that term is defined in Rule 144 under
the Securities Act.

. Beginning on April 4, 2000, approximately 2,371,144 additional shares
will become eligible for sale pursuant to Rules 144, 144(k) and 701.

. Beginning 90 days after the date of this prospectus, approximately
37,380,293 additional shares will become eligible for sale pursuant to
Rules 144, 144(k) and 701.

. An additional 10,404,759 shares will become eligible for sale pursuant
to Rule 144 at various times after 90 days from the date of this
prospectus. Shares eligible to be sold pursuant to Rule 144 are subject
to volume restrictions as described below.

63
<PAGE>

In general, under Rule 144 as currently in effect, and beginning after the
expiration of the applicable lock-up agreements, a person, or persons whose
shares are aggregated, who has beneficially owned restricted securities for at
least one year would be entitled to sell within any three-month period a number
of shares that does not exceed the greater of:

. one percent of the number of shares of common stock then outstanding,
which will equal approximately 633,821 shares immediately after this
offering; or

. the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about
DSL.net. Under Rule 144(k), a person who is not deemed to have been an
affiliate of DSL.net at any time during the three months preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell those share without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.

As of December 31, 1999, there were outstanding warrants to purchase an
aggregate of 194,556 shares of common stock at a weighted average exercise
price of $0.68, all of which are presently exercisable. In addition, as of
December 31, 1999, there were outstanding stock options to purchase an
aggregate of 5,874,302 shares of common stock at a weighted average exercise
price of $2.32.

On October 6, 1999, we filed a registration statement under the Securities
Act to register 300,000 shares of common stock issuable in connection with our
employee stock purchase plan and 12,364,200 shares of common stock issued upon
the exercise of stock options or reserved for issuance under the stock plan.
Accordingly, shares registered under such registration statement will, subject
to Rule 144 provisions applicable to affiliates, be available for sale in the
open market, except to the extent that such shares are subject to vesting
restrictions or the contractual restrictions described above. See "Management--
Stock Plans."

64
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, Deutsche Bank
Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Lehman
Brothers Inc. and CIBC World Markets Corp., have severally agreed to purchase
from us the following respective number of shares of common stock at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus:

<TABLE>
<CAPTION>
Number
Underwriter of Shares
- ----------- ---------
<S> <C>
Deutsche Bank Securities Inc.......................................... --
Donaldson, Lufkin & Jenrette Securities Corporation................... --
Lehman Brothers Inc................................................... --
CIBC World Markets Corp............................................... --
---------
Total............................................................... 5,000,000
=========
</TABLE>

In the underwriting agreement, the several underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the shares of
common stock being sold pursuant to the underwriting agreement if any of the
shares of common stock being sold pursuant to the underwriting agreement are
purchased. In the event of a default by an underwriter, the underwriting
agreement provides that, in certain circumstances, the commitments of non-
defaulting underwriters may be increased or the underwriting agreement may be
terminated.

We have been advised by the representatives of the underwriters that the
underwriters propose to offer the shares of common stock to the public at the
public offering price set forth on the cover page of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession not in excess of $ per share to other dealers.

The expenses of this offering, all of which are being paid by us, are
estimated to be approximately $400,000.

We have granted to the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to 750,000 additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. To the extent that
the underwriters exercise the option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the same percentage
of additional shares of common stock as the number of shares of common stock to
be purchased by it in the above table bears to 5,000,000. We will be obligated,
pursuant to the option, to sell these shares to the underwriters to the extent
the option is exercised. If any additional shares of common stock are
purchased, the underwriters will offer additional shares on the same terms as
those on which the 5,000,000 shares are being offered.

We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act.

65
<PAGE>

Our officers, directors and certain of our stockholders have agreed not to
offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result in the
disposition of any portion of, any common stock for a period of 90 days after
the date of this prospectus without the prior written consent of Deutsche Bank
Securities Inc. This consent may be given at any time without public notice. We
have entered into a similar agreement with Deutsche Bank Securities Inc.

Deutsche Bank Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Lehman Brothers Inc., each a representative, and certain of
their affiliates acted as representatives of the underwriters in connection
with our initial public offering.

In connection with this offering, certain underwriters may engage in passive
market making transactions in the common stock on the Nasdaq National Market
immediately prior to the commencement of sales in this offering in accordance
with Rule 103 of Regulation M. Passive market making consists of displaying
bids on the Nasdaq National Market limited by the bid prices of independent
market makers and making purchases limited by such prices and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited to a specified percentage of the passive market maker's average daily
trading volume in the common stock during a specified period and must be
discontinued when such limit is reached. Passive market making may stabilize
the market price of the common stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the common stock. Specifically, the underwriters may over-allot
shares of the common stock in connection with this offering, thus creating a
short position in the common stock for their own account. Additionally, to
cover these over-allotments or to stabilize the market price of the common
stock, the underwriters may bid for, and purchase, shares of the common stock
in the open market. Finally, the representatives, on behalf of the
underwriters, also may reclaim selling concessions allowed to an underwriter or
dealer if the underwriting syndicate repurchases shares distributed by that
underwriter or dealer. Any of these activities may maintain the market price of
the common stock at a level above that which might otherwise prevail in the
open market. The underwriters are not required to engage in these activities
and, if commenced, may end any of these activities at any time.

The underwriters and their respective affiliates may be lenders to, engage
in transactions with, and perform services for us in the ordinary course of
business.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for us by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Certain
legal matters will be passed upon for the underwriters by Brobeck, Phleger &
Harrison LLP.

66
<PAGE>

EXPERTS

The financial statements of DSL.net, Inc. as of December 31, 1998 and 1999
and for the period from inception (March 3, 1998) through December 31, 1998 and
the year ended December 31, 1999 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

The consolidated financial statements of Tycho Networks, Inc. as of December
31, 1998 and for the year then ended included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein (which report expresses an unqualified opinion and
includes an explanatory paragraph referring to the Company's ability to
continue as a going concern), and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.

ADDITIONAL INFORMATION

We have filed with the SEC a registration statement, including exhibits,
schedules and amendments. This prospectus is a part of the registration
statement and includes all of the information which we believe is material to
an investor considering whether to make an investment in our common stock. We
refer you to the registration statement for additional information about us,
our common stock and this offering, including the full texts of the exhibits,
some of which have been summarized in this prospectus. We are subject to the
informational requirements of the Securities Exchange Act. We will be required
to file annual and quarterly reports, proxy statements and other information
with the SEC.

You can inspect and copy our registration statement, reports and other
information at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information about the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the
SEC maintains an Internet site that contains our registration statement,
reports and other information. The address of the SEC's Internet site is
"http://www.sec.gov."

We intend to furnish our stockholders annual reports containing financial
statements audited by our independent accountants.

67
<PAGE>

INDEX TO FINANCIAL STATEMENTS

DSL.net, Inc.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-3
Consolidated Statements of Operations for the period from inception
(March 3, 1998) through December 31, 1998 and for the year ended
December 31, 1999....................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for
the period from inception (March 3, 1998) through December 31, 1998 and
for the year ended December 31, 1999.................................... F-5
Consolidated Statements of Cash Flows for the period from inception
(March 3, 1998) through December 31, 1998 and for the year ended
December 31, 1999....................................................... F-6
Notes to Consolidated Financial Statements............................... F-7

Tycho Networks, Inc.

Independent Auditors' Report............................................. F-20
Consolidated Balance Sheet as of December 31, 1998....................... F-21
Consolidated Statement of Operations for the year ended December 31, 1998
........................................................................ F-22
Consolidated Statement of Stockholders' Equity for the year ended
December 31, 1998....................................................... F-23
Consolidated Statement of Cash Flows for the year ended December 31,
1998.................................................................... F-24
Notes to Consolidated Financial Statements............................... F-25

Tycho Networks, Inc.--unaudited

Condensed Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998....................................................... F-31
Condensed Consolidated Statements of Operations for the nine months ended
September 30, 1999 and 1998............................................. F-32
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998............................................. F-33
Notes to Unaudited Condensed Consolidated Financial Statements........... F-34

Unaudited Pro Forma Condensed Combined Financial Information

Basis of Presentation.................................................... F-36
Unaudited Pro Forma Condensed Combined Statement of Operations for the
year ended December 31, 1999............................................ F-37
Notes to Unaudited Pro Forma Condensed Combined Statement of Operations.. F-38
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of

DSL.net, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of DSL.net, Inc. and its subsidiaries at December 31, 1999
and 1998 and the results of their operations and their cash flows for the year
ended December 31, 1999 and for the period from inception (March 3, 1998)
through December 31, 1998, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP

Hartford, Connecticut

February 1, 2000

F-2
<PAGE>

DSL.net, Inc.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 39,479 $ 66,178,261
Marketable securities.............................. -- 13,274,183
Accounts receivable (net of allowance of $63,000 at
December 31, 1999)................................ 30,597 318,516
Prepaid expenses and other current assets.......... -- 1,043,935
----------- ------------
Total current assets.............................. 70,076 80,814,895
Fixed assets, net (Note 3).......................... 284,338 32,664,924
Goodwill and other intangible assets (Note 2)....... -- 3,420,135
Other assets........................................ 15,566 731,818
----------- ------------
Total assets...................................... $ 369,980 $117,631,772
=========== ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................... $ 231,073 $ 9,587,186
Accrued salaries................................... -- 848,841
Accrued liabilities................................ 16,219 3,173,173
Deferred revenue................................... 5,392 234,061
Current portion of capital lease payable (Note 6).. 16,494 715,953
Current portion of notes payable (Note 5).......... 66,667 281,316
----------- ------------
Total current liabilities......................... 335,845 14,840,530
Capital lease payable (Note 6)...................... -- 892,906
Notes payable (Note 5).............................. 350,000 1,165,450
----------- ------------
Commitments and contingencies (Note 6) -- --
Total liabilities................................. 685,845 16,898,886
----------- ------------
Stockholders' equity (deficit) (Note 8):
Common stock, $0.0005 par value; 508,963,394 and
200,000,000 shares authorized; 16,795,800, and
58,382,196 shares issued and outstanding.......... 8,398 29,191
Additional paid-in capital......................... 2,465,374 141,245,583
Deferred compensation.............................. -- (13,361,940)
Accumulated deficit................................ (2,789,637) (27,179,948)
----------- ------------
Total stockholders' (deficit) equity.............. (315,865) 100,732,886
----------- ------------
Total liabilities and stockholders' equity........ $ 369,980 $117,631,772
=========== ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>

DSL.net, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Period
From Inception
(March 3, 1998)
through Year Ended
December 31, December 31,
1998 1999
--------------- ------------
<S> <C> <C>
Revenue.......................................... $ 31,533 $ 1,312,546
----------- ------------
Operating expenses:
Network and operations (excluding $0 and
$369,922 of stock compensation,
respectively)................................. 127,054 9,234,278
General and administrative (excluding
$2,423,272 and $3,058,037 of stock
compensation, respectively)................... 230,272 4,978,510
Sales and marketing (excluding $0 and $695,495
of stock compensation, respectively).......... 35,961 6,847,696
Stock compensation............................. 2,423,272 4,123,454
----------- ------------
Total operating expenses..................... $ 2,816,559 $ 25,183,938
----------- ------------
Operating loss................................... $(2,785,026) $(23,871,392)
----------- ------------
Interest expense (income), net................... 4,611 (1,889,312)
Other expense, net............................... -- 6,233
----------- ------------
Net loss..................................... $(2,789,637) $(21,988,313)
=========== ============
Exchange of preferred stock (Note 8)............. -- 11,998,000
----------- ------------
Loss applicable to common stock.................. $(2,789,637) $(33,986,313)
=========== ============
Net loss per share-basic and diluted............. $ (0.55) $ (2.05)
=========== ============
Shares used in computing net loss per share...... 5,118,342 16,549,535
=========== ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

DSL.net, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
Notes
Preferred Stock Common Stock Additional Receivable
----------------- -------------------- Paid-in from Deferred Accumulated
Shares Amount Shares Amount Capital Officers Compensation Deficit Total
------- -------- ----------- ------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial
capitalization,
including
retroactive
effect of stock
splits.......... 20,000 $ 50,000 5,089,634 $ 500 $ -- $ (500) $ -- $ -- $ 50,000
Exchange of
preferred stock
for common
stock........... (20,000) (50,000) 7,634,451 5,862 1,444,138 -- -- -- 1,400,000
Issuance of
common stock.... -- -- 4,071,715 2,036 1,021,236 -- -- -- 1,023,272
Repayment of
notes receivable
from officers... -- -- -- -- -- 500 -- -- 500
Net loss........ -- -- -- -- -- -- -- (2,789,637) (2,789,637)
------- -------- ----------- ------- ------------ --------- ------------ ------------ ------------
Balance at
December 31,
1998............ -- $ -- 16,795,800 $ 8,398 $ 2,465,374 $ -- $ -- $ (2,789,637) $ (315,865)
Issuance of
warrants........ -- -- -- -- 1,155,000 -- -- -- 1,155,000
Deferred
compensation--
restricted
stock........... -- -- -- -- 3,733,854 -- (3,733,854) -- --
Stock
compensation.... -- -- 436,256 218 602,369 -- -- -- 602,587
Deferred
compensation--
stock options... -- -- -- -- 13,928,591 -- (13,928,591) -- --
Amortization of
deferred
compensation.... -- -- -- -- -- -- 2,350,325 -- 2,350,325
Issuance of
warrants........ -- -- -- -- 112,000 -- -- -- 112,000
Surrender of
common stock.... -- -- (3,102,256) (1,551) (778,087) -- 779,638 -- --
Acceleration
associated with
surrender....... -- -- -- -- -- -- 1,170,542 -- 1,170,542
Exchange of
redeemable
preferred
stock........... -- -- -- -- (10,750,757) -- -- (2,401,998) (13,152,755)
Note receivable
from officer.... -- -- -- -- -- (999,911) -- -- (999,991)
Repayment of
note receivable
from officer.... -- -- -- -- -- 999,911 -- -- 999,991
Issuance of
common stock--
stock options... -- -- 116,635 58 4,315 -- -- -- 4,373
Issuance of
common stock,
net of issuance
costs........... -- -- 8,226,000 4,113 55,718,285 -- -- -- 55,722,398
Issuance of and
conversion of
redeemable
preferred stock
into common
stock........... -- -- 35,909,761 17,955 75,054,639 -- -- -- 75,072,594
Net loss........ -- -- -- -- -- -- -- (21,988,313) (21,988,313)
------- -------- ----------- ------- ------------ --------- ------------ ------------ ------------
Balance at
December 31,
1999............ -- $ -- 58,382,196 $29,191 $141,245,583 $ -- $(13,361,940) $(27,179,948) $100,732,886
======= ======== =========== ======= ============ ========= ============ ============ ============

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

DSL.net, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the Period
From Inception
(March 3, 1998)
through
December 31, Year Ended
1998 December 31, 1999
--------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................... $(2,789,637) $(21,988,313)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............. 5,744 1,831,331
Amortization of deferred debt issuance
costs.................................... -- 41,978
Stock compensation expense................ 2,423,272 4,123,454
Changes in operating assets and
liabilities:
Increase in accounts receivable.......... (30,597) (257,330)
Increase in prepaid expenses and other
current assets.......................... -- (943,888)
Increase in other assets................. (15,566) (578,145)
Increase in accounts payable............. 231,073 8,624,119
Increase in accrued salaries............. -- 848,841
Increase in accrued liabilities.......... 16,814 1,831,119
Increase in deferred revenue............. 5,392 124,114
----------- ------------
Net cash used in operating activities... (153,505) (6,342,720)
----------- ------------
Cash flows from investing activities:
Purchases of fixed assets................ (290,082) (33,811,121)
Purchases of marketable securities....... -- (13,274,183)
Acquisition of subsidiary, net of cash
acquired................................ -- (1,575,508)
----------- ------------
Net cash used in investing activities... (290,082) (48,660,812)
----------- ------------
Cash flows from financing activities:
Initial capitalization................... 50,500 --
Proceeds from bridge financing........... 350,000 --
Proceeds from equipment credit facility.. -- 1,355,036
Proceeds from common stock issuance...... -- 55,726,681
Proceeds from equipment notes payable.... 124,000 1,762,754
Proceeds from preferred stock issuance... -- 62,724,823
Payments on equipment notes payable...... (41,434) (66,667)
Principal payments under capital lease
obligation.............................. -- (360,313)
----------- ------------
Net cash provided by financing
activities............................. 483,066 121,142,314
----------- ------------
Net increase in cash and cash equivalents... 39,479 66,138,782
Cash and cash equivalents at beginning of
period..................................... -- 39,479
----------- ------------
Cash and cash equivalents at end of period.. $ 39,479 $ 66,178,261
=========== ============
Supplemental disclosure:
Cash paid:
Interest................................. $ 2,524 $ 172,380
=========== ============
Fixed assets financed under capital
leases................................... $ 22,699 $ 1,561,289
=========== ============
Fixed asset purchases included in accounts
payable.................................. $ -- $ 7,179,912
=========== ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Formation and Operations of the Company

DSL.net, Inc. (the "Company") was incorporated in Delaware on March 3, 1998
and operations commenced March 28, 1998. The Company provides dedicated high-
speed digital communications and Internet access services using digital
subscriber line (DSL) technology. During the period ended December 31, 1998,
the Company was considered a development stage company in accordance with
Statement of Financial Accounting Standard No. 7. As of June 30, 1999, the
Company was no longer considered a development stage enterprise.

2. Summary of Significant Accounting Policies

Significant accounting policies followed in the preparation of these
financial statements are as follows:

Principles of consolidation

The accompanying consolidated financial statements include the transactions
and balances of DSL.net, Inc. and its wholly owned subsidiaries, including
DSLnet Communications Delaware, Inc., DSLnet Communications LLC, DSLnet
Communications Puerto Rico, Inc., DSLnet Communications Virginia, Inc., and
Tycho Networks, Inc. All material intercompany transactions and balances have
been eliminated.

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The markets
for the Company's services are characterized by intense competition, rapid
technological development, regulatory changes, and frequent new product
introductions, all of which could impact the future value of the Company's
assets.

Cash equivalents and marketable securities

The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents. The carrying
value of cash equivalents at December 31, 1999 was approximately $38,354,000.
The Company did not have any cash equivalents as of December 31, 1998.

The Company considers its investment portfolio to be available-for-sale
securities as defined in Statement of Financial Accounting Standards ("SFAS")
No. 115. Marketable securities as of December 31, 1999 consist of debt
securities and certificates of deposit with maturities of greater than three
months and no more than a year. Securities are available-for-sale and are
carried at fair value. The unrealized losses earned on the securities as of
December 31, 1999 were de minimus.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash, cash equivalents, marketable
securities and accounts receivable. The Company's cash and investment policies
limit investments to short-term, investment grade instruments. Concentrations
of credit risk with respect to accounts receivable are limited due to the large
number of customers comprising the Company's customer base.

F-7
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Fixed assets

Fixed assets are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, which are between 3 and 5
years. Leasehold improvements are amortized over the shorter of the term of the
related lease or the useful life of the asset. Maintenance and repairs are
charged to expense as incurred. Collocation space improvements represent
payments to carriers for infrastructure improvements within their central
offices to allow the Company to install its equipment, which allows the Company
to interconnect with the carrier's network. These payments are being amortized
over their estimated useful lives of five years.

In 1999, the Company adopted Statement of Position 98-1 ("SoP 98-1"),
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use. This statement requires capitalization of certain costs incurred
in the development of internal use software. The Company has applied the
guidance outlined in SoP 98-1 and the impact of adoption has not been
significant.

Goodwill and other intangible assets

Goodwill and other intangible assets are amortized on a straight-line basis
over the estimated future periods to be benefited, ranging from three to five
years. In addition, goodwill and other intangible assets are reviewed for
impairment quarterly, or whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount
of the assets to future undiscounted cash flows of the business acquired. If
the assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. To date, no impairment has occurred. Accumulated
amortization of goodwill and other intangible assets was $0 and $63,306 at
December 31, 1998 and 1999, respectively.

Other assets

As of December 31, 1999 other assets included amounts held in certificates
of deposit of approximately $521,000. Such amounts collateralize a letter of
credit required under certain facilities leases. Balances restricted under this
letter of credit decline annually, with a final expiration of May, 2003.

Income taxes

The Company uses the liability method of accounting for income taxes, as set
forth in Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities and
net operating loss carryforwards, all calculated using presently enacted tax
rates.

Revenue recognition

Revenue is recognized pursuant to the terms of each contract on a monthly
service fee basis. Deferred revenue represents payments received in advance of
the services provided. Revenue related to installation fees are recognized to
the extent of direct costs incurred. Any excess installation fees over direct
costs are deferred and amortized to revenue over the service contract. Such
revenue is not expected to significantly exceed the direct costs. In certain
situations, the Company will waive non-recurring installation fees in order to
obtain a sale. The Company will expense the related direct costs as incurred.

F-8
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Long-lived assets

Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,
requires that long-lived assets and certain intangible assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If undiscounted expected future cash
flows are less than the carrying value of the assets, an impairment loss is to
be recognized based on the fair value of the assets. No impairment losses have
been recognized to date.

Segment information

In 1998, the Company adopted Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related Information (SFAS
No. 131). SFAS No. 131 supersedes SFAS No. 14, Financial Reporting for Segments
of a Business Enterprise, replacing the "industry segment" approach with the
"management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. The
Company operates in one segment: high-speed Internet access and data
communications services. SFAS No. 131 also requires disclosures about products
and services, geographic areas, and major customers. The adoption of SFAS No.
131 had no impact on the Company's financial statements for the periods
presented.

Stock compensation

The Company applies Accounting Principles Board Opinion No. 25 (APB 25) and
related interpretations in accounting for its stock option plan and stock
awards with the disclosure provisions of Statement of Financial Accounting
Standards No. 123 (SFAS 123). Under APB 25, compensation expense is computed to
the extent that the fair market value of the underlying stock on the date of
grant exceeds the exercise price of the employee stock option or stock award.
Compensation so computed is then recognized over the vesting period. The
Company accounts for equity instruments issued to nonemployees in accordance
with SFAS 123 and Emerging Issues Task Force ("EITF") 96-18.

Stock compensation expense includes amortization of deferred compensation
and charges related to stock grants which are not subject to vesting
requirements. Stock compensation expense for the period from inception (March
3, 1998) to December 31, 1998 and for the year ended December 31, 1999 totaled
approximately $2,423,000 and $4,123,000, respectively.

Earnings (loss) per share

The Company computes net loss per share pursuant to Statement of Financial
Accounting Standards No. 128, Earnings Per Share. Basic net loss per share is
computed by dividing income or loss applicable to common stockholders by the
weighted average number of shares of the Company's common stock outstanding
during the period. Diluted net loss per share is determined in the same manner
as basic net loss per share except that the number of shares is increased
assuming exercise of dilutive stock options and warrants using the treasury
stock method and dilutive conversion of the Company's preferred stock.

F-9
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

As of December 31, 1998 and 1999, options to purchase no shares and
5,874,302 shares of common stock, respectively, and warrants to purchase
preferred stock convertible into 233,277 shares of common stock, and warrants
to purchase 194,556 shares of common stock, respectively, were excluded from
the calculation of earnings per share since their inclusion would be
antidilutive for all periods presented.

Comprehensive income

The Company has adopted the accounting treatment prescribed by Statement of
Financial Accounting Standards No. 130, Comprehensive Income. The adoption of
this statement had no material impact on the Company's financial statements for
the periods presented.

Recently issued accounting pronouncements

In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. DSL.net is required to adopt SFAS No. 133,
as amended by SFAS No. 137, in fiscal 2001. SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. The Company has not
entered into any derivative financial instruments or hedging activities. As a
result, the Company believes adoption of SFAS No. 133 will not have a material
impact on the financial statements.

3. Fixed Assets
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1999
-------- -----------
<S> <C> <C>
Network equipment....................................... $161,814 $19,866,200
Furniture, fixtures, office equipment and software...... 61,535 5,827,493
Vehicles................................................ -- 99,189
Collocation costs....................................... 66,733 8,659,789
-------- -----------
290,082 34,452,671
Less--accumulated depreciation and amortization........ 5,744 1,787,747
-------- -----------
$284,338 $32,664,924
======== ===========
</TABLE>

As of December 31, 1998 and December 31, 1999, the recorded cost of the
equipment under capital lease was $22,699 and $1,862,466, respectively.
Accumulated amortization for this equipment under capital lease was $1,265 and
$222,495 as of December 31, 1998 and 1999, respectively.

During 1999, the Company capitalized computer software costs of $5,046,545
and has recorded amortization expenses related to these costs of $217,644.
Approximately $796,000 of total costs capitalized related to software that was
not in service as of December 31, 1999. As such, no amortization expense has
been recorded with regard to these costs.

Depreciation and amortization expense related to fixed assets was $5,744 and
$1,782,003 for the period from inception March 3, 1998 to December 31, 1998 and
for the year ended December 31, 1999, respectively.

F-10
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Acquisition

On December 1, 1999, the Company acquired Tycho Networks, Inc., a Santa
Cruz, California based provider of Internet access, web hosting and related
services throughout central coastal California. The acquisition was accounted
for under the purchase method of accounting and, accordingly, the purchase
price has been allocated to the assets acquired and liabilities assumed based
on their estimated fair values at the date of acquisition. The approximate net
purchase price of $3,267,000, excluding transaction costs, consisted of cash
payments at closing of approximately $1,576,000 (including notes paid at
closing of approximately $793,000); amounts due to selling stockholders and
others after the closing of approximately $802,000; net liabilities assumed of
approximately $530,000 and other costs of approximately $359,000. In addition,
the Company incurred transaction costs associated with the acquisition of
approximately $125,000. Immediately prior to the acquisition, Tycho Networks
sold fixed assets with a net book value of approximately $90,000 to a related
party and received notes that were convertible into the preferred stock of the
buyer. These notes were assigned an estimated fair value of $90,000. The excess
of purchase price over the fair value of net assets received, including
transaction costs, of approximately $3,392,000, has been recorded as goodwill
and is being amortized over its estimated useful life of five years.

The results of Tycho Networks, Inc.'s operations have been included in the
consolidated results of the Company from the date of acquisition. The following
table sets forth the unaudited pro forma consolidated financial information of
the Company, giving effect to the acquisition of Tycho Networks, Inc. as if it
had occurred at the beginning of the periods presented:

<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1999
----------- ------------
<S> <C> <C>
Pro forma revenue............................... $ 380,060 $ 2,906,271
Pro forma operating loss........................ $(4,198,261) $(27,007,828)
Pro forma net loss.............................. $(4,471,839) $(25,328,578)
Pro forma net loss per share, basic and
diluted........................................ $ (0.87) $ (2.26)
Shares used in computing pro forma net loss per
share.......................................... 5,118,342 16,549,535
</TABLE>

The pro forma results are not necessarily indicative of the actual results
of operations that would have been obtained had the acquisition taken place at
the beginning of the respective periods or the results that may occur in the
future.

5. Debt

Notes payable

In August 1998, the Company issued a $100,000 demand note payable for
funding capital expenditures and operating expenses. The note was originally
payable October 1, 1998, and bore interest at 5.56% per annum. At December 31,
1998, $66,667 remained unpaid. The amount was paid in January 1999.

In November 1998, the Company entered into a series of Note and Warrant
Purchase Agreements pursuant to which the Company received $350,000 and issued
$350,000 principal amount of secured convertible promissory notes (the "Bridge
Notes") and warrants (the "Bridge Warrants") to acquire 87,500 shares of Series
A Preferred Stock. The Notes, which originally expired in January 1999 or
September 2000, bore interest at 5.56% or 6.0% per annum, depending upon the
holder, and were convertible into preferred shares at a rate equal to the
Company's next

F-11
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

qualified equity financing. A total of $225,000 of the Bridge Notes converted
into 225,000 shares of Series A Preferred Stock in January 1999. The remaining
$125,000 was deducted from proceeds received by the Company in the January 1999
issuance of Series A Preferred Stock. The Bridge Warrants valued at
approximately $18,000, are exercisable at $0.375 per share of common stock
($1.00 per share on a pre-split basis) for a period of five years or, in the
case of certain of the warrants, until the initial public offering of the
Company's common stock. Such warrants were exercised immediately prior to their
expiration upon the initial public offering of the Company's common stock on
October 6, 1999.

Credit Facility

In May 1999, the Company entered into a secured credit facility (the "Credit
Facility") with a bank which will provide up to $5.0 million for the purchase
of telecommunications and office equipment and vehicles. The Credit Facility
expires in May 2000, at which time amounts outstanding will convert to a term
loan payable over 36 months. The Credit Facility bears interest on outstanding
borrowings at 1% over the higher of the bank's prime rate or the federal funds
rate plus 0.5%. As of December 31, 1999, amounts outstanding under this line of
credit bore interest at the annual rate of 9.25%. The Credit Facility is
secured by a lien on certain equipment and vehicles owned by the Company
located at its principal office, and imposes certain financial and other
covenants requiring us to maintain certain financial ratios and limits new
indebtedness, the creation of liens, types of investments, mergers,
consolidations and the transfer of all or substantially all of our assets. As
of December 31, 1999, there was $1,446,766 outstanding and $3,553,234 available
under this line of credit. Financing costs associated with the Credit Facility
of $83,868 were deferred over the four year life of the facility and term loan
payable. Amortization expense related to the deferred costs was $13,978 for the
year ended December 31, 1999.

6. Commitment and Contingencies

Leases

Rent expense under operating leases was approximately $14,275 and $720,691
for the period from inception (March 3, 1998) through December 31, 1998 and for
the year ended December 31, 1999, respectively.

The Company is obligated under various capital equipment leases expiring at
different times until March, 2003.

The future minimum annual lease payments under the terms of such
noncancelable leases as of December 31, 1999 are as follows:

<TABLE>
<CAPTION>
Operating Capital
Leases Leases
---------- ----------
<S> <C> <C>
2000.................................................. $1,258,878 $ 877,490
2001.................................................. 1,261,887 680,849
2002.................................................. 1,261,887 303,052
2003.................................................. 1,039,587 23,568
2004.................................................. 882,630 --
Thereafter............................................ 279,484 --
---------- ----------
Total............................................... $5,984,353 1,884,959
==========
Less--Amount representing interest.................... 276,100
----------
Present value of future minimum lease payments........ $1,608,859
==========
</TABLE>

F-12
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In September 1998, the Company entered into an operating lease agreement for
office space in Norwalk, Connecticut. In February 1999, the Company cancelled
the Norwalk lease and entered into an operating lease for office space in New
Haven, Connecticut. Costs related to exiting the Norwalk lease were $42,900 and
were expensed as incurred. Subsequently, the Company entered into amendments to
the New Haven lease and various leases and subleases for additional office
space. In addition, the Company leases office space in Santa Cruz, California
related to its acquisition of Tycho Networks, Inc. (Note 4).

In March 1999, the Company entered into a master lease agreement to provide
up to $2,000,000 for capital equipment purchases over an initial twelve month
period, subject to renewal options. Individual capital leases are amortized
over 30 or 36 month terms and bear interest at 8% to 9% per annum. The
outstanding balance under this agreement at December 31, 1999 was $921,956.

Litigation

The Company is involved in litigation with a former officer who claims
wrongful termination of employment. The plaintiff is principally seeking
compensatory damages for wages and unvested stock options. The Company believes
that the plaintiff's claims are without merit, and plans to defend the case
vigorously.

From time to time, the Company may be involved in other litigation
concerning claims arising in the ordinary course of its business. The Company
does not believe any of the legal claims or proceedings will result in a
material adverse effect on its business, financial position, results of
operations or cash flows.

Other Matters

As part of the master lease agreement, the Company issued 41,726 warrants
(the "Lease Warrants") to the lessor to purchase Series A Preferred Stock at a
formula-based price equal to approximately $2.40 per share. The warrants are
exercisable until October 2002. In conjunction with the Company's initial
public offering on October 6, 1999, and the conversion of all preferred stock
into common stock, these warrants became exercisable for 111,242 shares of
common stock at an exercise price of approximately $0.90 per share. The value
of these warrants is approximately $112,000 and is being amortized to interest
expense over the life of the capital lease obligation. Interest expense related
to the warrants was approximately $28,000 for the year ended December 31, 1999.

The Company has entered into interconnection agreements. The agreements have
terms of one to two years and are subject to certain renewal and termination
provisions by either party generally upon 30 day notification. The Company
anticipates that it will renew such agreements beyond their initial terms.

7. Related Party Transactions

In January 1999, the Company entered into an Asset Transfer Agreement with
FutureComm, Inc., whose sole shareholder is an officer and founder of the
Company. The amount paid by the Company in exchange for certain equipment,
agreements, licenses and intellectual property was approximately $28,000.

F-13
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In May 1999, the Company entered into an agreement to license and implement
components of an operations support system from a software vendor. Two
stockholders of the Company, in the aggregate, own 16% of the outstanding
capital stock of the software vendor.

8. Stockholders' Equity

Common stock transactions

In March 1998, the Company's founding stockholders were issued 5,089,634
shares of common stock and 20,000 shares of a prior series A preferred stock
for $50,500.

In December 1998, the Company's Board of Directors declared a 50:1 reverse
stock split. The accompanying financial statements have been restated to
reflect this stock split. Concurrently, the preferred shareholder exchanged all
the then outstanding series A Preferred Stock for 7,634,451 shares of common
stock, adjusted for stock splits. The value attributed to this exchange, which
provided 3.75 shares of common stock for every split-effected share of
preferred stock, was approximately $1.4 million which has been charged to
compensation expense.

In December 1998, the Company issued 4,071,715 shares of common stock to two
officers in exchange for promissory notes totaling $7,637. Such notes were
subsequently forgiven by the Company. Compensation expense of $1,023,272, or
$0.25 per share, has been recognized related to this issuance.

In January 1999, the Company's Board of Directors declared a stock split of
1,909.09 shares for every outstanding common share. The accompanying financial
statements have been restated to reflect this stock split. In conjunction with
this split and the sale of Series A Preferred Stock described below, certain
employment tenure and performance criteria were required of management in order
to fully vest in a portion of their founders' shares. The value attributed to
these 14,857,397 nonvested shares is reflected in deferred compensation of
approximately $3,734,000, or $0.25 per share, and is being amortized over the
related vesting term.

In March 1999, the Company issued 436,256 shares of common stock to an
executive officer of the Company, adjusted for stock splits. Compensation
expense of $602,587 has been recognized related to this issuance.

In April 1999, the Company's founding shareholders surrendered 3,102,256
shares of common stock. Such stock was previously made subject to certain
employment tenure and performance vesting criteria. In exchange, the vesting
criteria on other restricted common stock owned by the founders was removed.
This share surrender and acceleration of vesting resulted in a compensation
charge of approximately $1.2 million in the second quarter of 1999 and
eliminated approximately $780,000, or $0.25 per share, from deferred
compensation.

In May 1999, the Company declared a 2:1 stock split of its common stock. The
accompanying financial statements have been restated to reflect this stock
split.

In July 1999, the Company declared a 0.333:1 stock dividend on its common
stock. The accompany financial statements have been restated to reflect this
stock dividend.

During 1999, 116,635 shares of common stock were issued in exchange for
aggregate proceeds of approximately $4,400 pursuant to the exercise of options
granted under the 1999 Stock Plan (Note 10).

F-14
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

On October 12, 1999, the Company completed its initial public offering of
7,200,000 shares of common stock resulting in net proceeds to the Company of
approximately $48.5 million. In addition, the underwriters exercised their
over-allotment option for 1,026,000 shares, resulting in net proceeds to the
Company of approximately $7.2 million on November 8, 1999.

In conjunction with the closing of the Company's initial public offering on
October 12, 1999, all outstanding preferred stock was converted into 35,909,761
shares of common stock.

Common stock reserved

The Company has reserved shares of common stock as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1999
--------- ----------
<S> <C> <C>
1999 Stock Plan......................................... -- 12,364,200
1999 Employee Stock Purchase Plan....................... -- 300,000
Conversion of promissory notes.......................... 933,100 --
Stock warrants.......................................... 233,277 194,556
--------- ----------
1,166,377 12,858,756
========= ==========
</TABLE>

Stock warrants

At December 31, 1998 the Company had outstanding stock purchase warrants to
purchase shares of preferred stock which were convertible into 233,277 shares
of common stock. At December 31, 1999 the Company had outstanding stock
purchase warrants to purchase 194,556 shares of common stock.

<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------- -------
<S> <C> <C>
Lease Warrants............................................... -- 111,242
Bridge Warrants.............................................. 233,277 83,314
------- -------
233,277 194,556
======= =======
</TABLE>

On October 6, 1999, warrants for 56,250 shares of Series A preferred stock
were exercised, for aggregate net proceeds of $56,250.

Redeemable Convertible Preferred Stock

In January 1999, the Company issued 3,500,000 shares of convertible voting
preferred stock designated as Series A Preferred Stock, together with warrants
to purchase 3,500,000 shares of a prior Series B Preferred Stock (the
"Warrants"), at an exercise price of $1.00 per share, for an aggregate of
$3,500,000. A total of $1,155,000 of the related proceeds has been allocated to
the Warrants.

The Warrants, which were exercisable for a period of 5 years, were subject
to a repurchase right by the Company contingent upon a specified rate of return
upon an initial public offering or acquisition of the Company. If the Company
had exercised its repurchase right, it would have been obligated to pay the
holder the original exercise price plus interest from the date of exercise at
8% per annum.

F-15
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In January 1999, the holders of $225,000 of Bridge Notes (Note 5) converted
$225,000 of the Bridge Notes into 225,000 shares of Series A Preferred Stock.
The remaining $125,000 of Bridge Notes reduced the proceeds paid to the Company
for the Series A Preferred Stock.

In April 1999, certain holders of the Series A Preferred Stock exchanged
3,500,000 shares of Series A Preferred Stock and the Warrants for 6,500,000
shares of Series B Preferred Stock. Cashless warrant exercises accounted for
2,525,070 of these 6,500,000 shares of Series B Preferred Stock. The exchange
into the remaining 3,974,930 shares of Series B Preferred Stock, which was not
contemplated in the original Series A Preferred Stock purchase agreement,
afforded the holders an exchange rate of $0.57 per share which was lower than
the deemed fair market value of the preferred stock at the time of exchange of
$3.59 per share and therefore has been treated as a beneficial nonmonetary
exchange under APB Opinion No. 29, "Accounting for Nonmonetary Transactions."
The difference between the carrying value of the Series A Preferred Stock,
$2,272,000, and the deemed fair market value of the Series B Preferred Stock,
$14,270,000, has been included in the calculation of net loss per common share,
although no assets of the Company were expended. The exchange reduces
additional paid-in capital and increases the carrying value of the Series B
Preferred Stock by approximately $11,998,000 for the year ended December 31,
1999. The exchange has been given no other accounting treatment in the 1999
financial statements of the Company.

In April 1999, the Company issued 2,785,516 shares of convertible voting
preferred stock designated as Series C Preferred Stock at $3.59 per share for
net proceeds of $9,940,000. These shares were subsequently converted into
7,426,186 shares of common stock, representing a per share price of $1.35.

In May and June 1999, the Company issued 2,963,672 shares of convertible
voting preferred stock designated as Series D Preferred Stock at $10.46 per
share for net proceeds of $29,961,000. In July 1999, we received approximately
$1,007,000 in connection with repayment of a note, including interest at 6.0%,
from an officer in connection with the purchase of Series D preferred stock in
June 1999. These shares were subsequently converted into 7,901,150 shares of
common stock, representing a per share price of $3.92.

In July 1999, the Company issued 939,086 shares of convertible voting
preferred stock designated as Series E Preferred Stock at $19.70 per share for
net proceeds of approximately $18,468,000. These shares were subsequently
converted into 2,503,603 shares of common stock, representing a per share price
of $7.39.

The preferred stock automatically converted into shares of common stock upon
the Company's initial public offering. While such shares of preferred stock
were outstanding, the Series A, Series B, Series C, Series D and Series E
Preferred stockholders were entitled to receive noncumulative cash dividends of
approximately $0.08 per share, $0.04 per share, $0.29 per share, $0.84 per
share and $1.58 per share, respectively, per annum when and as declared by the
Board of Directors. In the event of any voluntary or involuntary liquidation of
the Company, the Preferred stockholders were entitled to the original per share
issuance price, plus any declared but unpaid dividends. Remaining assets would
be distributed to the Preferred and Common stockholders on a pro rata basis
assuming full conversion of all such Preferred Stock. Any acquisition, merger
or consolidation which would result in a majority ownership change would have
been deemed to be a liquidation of the Company, resulting in the redemption of
the remaining preferred shareholder interest.

F-16
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The shares were converted into common stock at the rate of 2.666 shares of
common stock for one share of Preferred Stock, which had been adjusted for
certain subsequent dilutive issuances and stock splits. The Preferred Stock
automatically converted into shares of common stock upon the sale of the
Company's Common Stock in an initial public offering on October 12, 1999.

The Series A, Series B, Series C, Series D and Series E Preferred
stockholders had voting rights similar to common stockholders and other rights
(on an as-converted basis), including the power to elect directors to a seven
member board as follows: Series A and B (as a class) elected two directors,
Series C elected one director, and Series A, B, C, D and E together with common
stockholders elected two directors. In addition, the holders of common stock
elected two directors.

9. Income Taxes

The Company's gross deferred tax assets and liabilities were comprised of
the following:

<TABLE>
<CAPTION>
December 31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Gross deferred tax asset:
Net operating loss carryforwards................. $ 1,076,382 $ 7,462,759
Other............................................ 53,599 554,756
----------- -----------
1,129,981 8,017,515
Gross deferred tax liability:
Depreciation..................................... 8,054 656,033
----------- -----------
1,121,927 7,361,482
Valuation allowance............................... (1,121,927) (7,361,482)
----------- -----------
Net deferred taxes................................ $ -- $ --
=========== ===========
</TABLE>

The Company has provided a valuation allowance for the full amount of the
net deferred tax asset, since management has not determined that these future
benefits will more likely than not be realized as of December 31, 1999.

At December 31, 1999 the Company had approximately $18.5 million of federal
and state net operating loss carryforwards that begin to expire in 2018 and
2003, respectively.

The amount of the net operating carryforwards that may be utilized annually
to offset future taxable income and tax liability will be limited as a result
of certain ownership changes pursuant to Section 382 of the Internal Revenue
Code.

The provision for (benefit from) income taxes reconciles to the statutory
federal tax rate as follows:

<TABLE>
<CAPTION>
December 31,
---------------
1998 1999
------ ------
<S> <C> <C>
Statutory federal tax rate................................. (34.00)% (34.00)%
State income tax, net of federal benefit................... (6.27) (6.27)
Permanent differences...................................... 0.05 7.29
Other...................................................... -- 4.46
Deferred tax asset valuation allowance..................... 40.22 28.52
------ ------
-- % -- %
====== ======
</TABLE>

F-17
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10. Incentive Stock Award Plans

Employee Stock Option Plan

In February 1999, the Company's Board of Directors adopted the 1999 Stock
Plan (the "Stock Plan") under which employees, directors, advisors and
consultants can be granted any or all of the following: incentive stock options
and non-qualified stock options, stock appreciation rights, and stock awards. A
total of 12,364,200 shares of common stock have been authorized under the Stock
Plan.

Options generally vest 25% after one year, then ratably over the next
thirty-six months and are exercisable once vested for ten years from the date
of grant.

A summary of activity under the Plan as of December 31, 1999 is as follows:

<TABLE>
<CAPTION>
Weighted
Average
--------------
Number of Fair Exercise
Shares Value Price
---------- ----- --------
<S> <C> <C> <C>
Outstanding at Inception.......................... -- $ -- $ --
Granted........................................... 7,692,879 3.59 2.01
Exercised......................................... (116,635) 0.25 0.04
Canceled.......................................... (1,701,942) 2.71 1.09
----------
Outstanding at December 31, 1999.................. 5,874,302
==========
</TABLE>

The following summarizes the outstanding and exercisable options under the
Plan as of December 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------- --------------------------
Weighted Avg
Exercise Number Remaining Life Weighted Avg Number Weighted Avg
Price Outstanding (in years) Exercise Price Exercisable Exercise Price
-------- ----------- -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.04-
0.07 2,383,741 9.17 $ 0.05 96,086 $0.04
$0.39-
0.53 2,127,484 9.38 $ 0.47 -- --
$5.00-
9.85 1,166,077 9.69 $ 7.73 -- --
$16.50-
18.75 197,000 9.90 $17.81 -- --
</TABLE>

If compensation expenses had been recognized based on the fair value of the
options at their grant date, in accordance with Financial Accounting Standard
No. 123 ("FAS 123"), the results of operations for the year ended December 31,
1999 would have been as follows:

<TABLE>
<S> <C>
Net loss:
As reported................................................. $(21,988,313)
Pro forma under FAS 123..................................... $(22,426,281)
Basic and diluted net loss per common share:
As reported................................................. $ (2.05)
Pro forma under FAS 123..................................... $ (2.08)
</TABLE>

F-18
<PAGE>

DSL.net, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The estimated fair value at date of grant for options granted for the year
ended December 31, 1999 ranged from $0.23 to $16.27 per share. The minimum
value of each option grant is estimated on the date of grant using the Black-
Scholes option pricing model with the following weighted average assumptions:

<TABLE>
<S> <C>
Risk free interest rate........................................ 4.88%-6.09%
Expected dividend yield........................................ None
Expected life of option........................................ 10 years
Expected volatility............................................ .0001%-84.52%
</TABLE>

As additional options are expected to be granted in future years and the
options vest over several years, the above pro forma results are not
necessarily indicative of future pro forma results.

Deferred compensation of approximately $13,929,000 has been attributed to
those common stock options granted during the year ended December 31, 1999,
with an exercise price below estimated fair value. Stock compensation expense
is recognized over the four year vesting period and totaled approximately
$4,123,000 for the year ended December 31, 1999.

Employee Stock Purchase Plan

The Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in September 1999. The Purchase Plan
authorized the issuance of up to a total of 300,000 shares of Common Stock to
participating employees.

All employees of the Company and all employees of any participating
subsidiaries whose customary employment is more than 20 hours per week and more
than three months in any calendar year are eligible to participate in the
Purchase Plan. Under the terms of the Purchase Plan, the price per share paid
by each participant on the last day of the Offering Period (as defined therein)
is an amount equal to 85% of the fair market value of the Common Stock on
either the first day or the last day of the Offering Period, whichever is
lower. The Purchase Plan terminates on December 31, 2009 or such earlier date
as the Board of Directors determines. The Purchase Plan will terminate in any
case when all or substantially all of the unissued shares of stock reserved for
the purposes of the Purchase Plan have been purchased. Upon termination of the
Purchase Plan all amounts in the accounts of participating employees will be
promptly refunded.

The first payment period of the Purchase Plan began on October 6, 1999 and
ends on February 29, 2000. An option to purchase up to 500 shares of the
Company's common stock was granted to each participant in the plan at the
beginning of the payment period.

11. Subsequent Events (unaudited)

Effective as of April 1, 2000, the Company adopted the DSL.net 401(k) Profit
Sharing Plan. Employees meeting certain age and service requirements are
eligible to participate in this plan. The Company may elect to make matching
distributions at its discretion.

F-19
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Tycho Networks, Inc.:

We have audited the accompanying consolidated balance sheet of Tycho
Networks, Inc. and subsidiary (the "Company") as of December 31, 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1998, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's losses from operations raise substantial
doubt about its ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

/s/ DELOITTE & TOUCHE LLP
San Jose, California
May 21, 1999
(October 13, 1999 as to the last
three paragraphs of Note 9)

F-20
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
December 31, 1998

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 216,105
Accounts receivable (net of allowance of $5,800).............. 48,752
Prepaids and other current assets............................. 2,645
----------
Total current assets........................................ 267,502
PROPERTY AND EQUIPMENT, Net..................................... 126,044
OTHER ASSETS.................................................... 118,527
INTANGIBLE ASSETS............................................... 377,160
----------
TOTAL........................................................... $ 889,233
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................. $ 193,637
Accrued liabilities........................................... 36,100
----------
Total current liabilities................................... 229,737
----------
SUBORDINATED CONVERTIBLE NOTES PAYABLE.......................... 290,543
COMMITMENTS (Note 7)
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, $0.001 par value;
authorized--4,050,000 shares; issued and outstanding--
3,744,128 shares; liquidation preference: $1,170,040......... 1,153,510
Common stock, $0.001 par value; authorized--10,000,000 shares;
outstanding--2,450,000 shares................................ 2,450
Accumulated deficit........................................... (787,007)
----------
Total stockholders' equity.................................. 368,953
----------
TOTAL........................................................... $ 889,233
==========
</TABLE>

See notes to consolidated financial statements.

F-21
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 1998

<TABLE>
<S> <C>
NET REVENUES.................................................... $ 348,527
----------
COSTS AND EXPENSES:
Cost of revenues.............................................. 436,815
Selling, general and administrative........................... 613,148
Research and development...................................... 89,615
----------
Total costs and expenses.................................... 1,139,578
----------
LOSS FROM OPERATIONS............................................ (791,051)
OTHER INCOME (EXPENSE):
Interest income............................................... 4,181
Interest expense.............................................. (12,762)
Other......................................................... 12,625
----------
Total other income.......................................... 4,044
----------
NET LOSS........................................................ $ (787,007)
==========
</TABLE>

See notes to consolidated financial statements.

F-22
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

Year Ended December 31, 1998

<TABLE>
<CAPTION>
Series A
Convertible
Preferred Stock Common Stock
-------------------- ---------------- Accumulated
Shares Amount Shares Amount Deficit Total
--------- ---------- --------- ------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, January 1,
1998................... -- $ -- 2,450,000 $2,450 $ -- $ 2,450
Issuance of Series A
preferred stock (net of
issuance costs of
$16,350)............... 3,744,128 1,153,510 -- -- -- 1,153,510
Net loss................ -- -- -- -- (787,007) (787,007)
--------- ---------- --------- ------ --------- ----------
BALANCES, December 31,
1998................... 3,744,128 $1,153,510 2,450,000 $2,450 $(787,007) $ 368,953
========= ========== ========= ====== ========= ==========
</TABLE>

See notes to consolidated financial statements.

F-23
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended December 31, 1998

<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net loss.......................................................... $ (787,007)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................... 48,819
Gain on disposal of property.................................... (12,625)
Changes in operating assets and liabilities, net of effects of
acquisition:
Accounts receivable........................................... 73,676
Prepaids and other current assets............................. 67,205
Accounts payable.............................................. 268,938
Accrued liabilities........................................... (29,619)
----------
Net cash used in operating activities....................... (370,613)
----------
INVESTING ACTIVITIES:
Purchases of property and equipment............................. (267,442)
Proceeds from sale of property.................................. 112,599
Other assets.................................................... (118,527)
Acquisition of business......................................... (582,874)
----------
Net cash used in investing activities....................... (856,244)
----------
FINANCING ACTIVITIES:
Sale of convertible preferred stock............................. 793,469
Proceeds from convertible notes payable......................... 655,000
Repayment of convertible notes payable.......................... (9,457)
----------
Net cash provided by financing activities................... 1,439,012
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS......................... 212,055
CASH AND CASH EQUIVALENTS:
Beginning of period............................................. 3,950
----------
End of period................................................... $ 216,105
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION--Cash paid during
the period for interest.......................................... $ 12,762
==========
NONCASH FINANCING ACTIVITY--Conversion of convertible notes
payable and accrued interest into preferred stock................ $ 360,041
==========
</TABLE>

See notes to consolidated financial statements.

F-24
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 1998

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Organization--Tycho Networks, Inc. (the "Company") develops and implements a
new family of innovative data services, including high-speed internet access,
virtual private networks, and remote network access for small- and medium-sized
businesses throughout California. The Company was incorporated in Delaware on
December 22, 1997 ("inception"). With the exception of the issuance of common
stock to founders for $2,450 and convertible notes payable of $1,500 on
December 24, 1997, the Company had no activities prior to January 1, 1998
("commencement of operations").

Basis of Presentation--The consolidated financial statements have been
prepared on a going concern basis which contemplates the realization of assets
and satisfaction of liabilities in the ordinary course of business. As shown in
the consolidated financial statements, the Company incurred a net loss of
approximately $787,000 for the year ended December 31, 1998 and management
expects substantial future losses. This factor, among others, raises
substantial doubt about the Company's ability to continue as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flows to meet it obligations on a timely basis, to
obtain additional financing as may be required and, ultimately, to attain
successful operations. Management intends to increase marketing and sales
efforts to sell the Company's services. However, due to current development
activities, management believes that additional equity or debt financing will
be necessary for the Company to implement its plans and sustain operations
through fiscal 1999. While management believes that the Company will be able to
obtain such financing, failure to do so would significantly impact the
Company's ability to sustain its operations. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

Principles of Consolidation--The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary. The subsidiary had
no operations for the year ended December 31, 1998.

Certain Significant Risks and Uncertainties--The Company operates in a
dynamic industry, and accordingly, can be affected by a variety of factors. For
example, management of the Company believes that changes in any of the
following areas could have a significant negative effect on the Company in
terms of its future financial position, results of operations and/or cash
flows: ability to obtain additional financing; regulatory changes; fundamental
changes in the technology underlying the Company's products or services; market
acceptance of the Company's products or services under development; litigation
or other claims against the Company; the hiring, training and retention of key
employees; successful and timely completion of product development efforts; and
new product introductions by competitors.

Cash Equivalents--The Company considers all highly liquid instruments
purchased with an original maturity of three months or less to be cash
equivalents.

Property and Equipment are stated at cost. Depreciation and amortization are
computed using the straight-line method over estimated useful lives of three to
four years. Leasehold improvements are amortized over the shorter of the lease
term or their useful life.

F-25
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Intangible Assets--Intangible assets of $377,160 (net of accumulated
amortization of $20,196) at December 31, 1998, consist of acquired trademarks,
copyrights and customer relationships (see Note 3). These intangible assets are
being amortized on a straight-line basis over a period of three to five years.

Long-Lived Assets--The Company evaluates its long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets or intangibles may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future undiscounted net cash flows expected to
be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.

Revenue Recognition--The Company recognizes on-line service revenue during
the period services are provided.

Concentration of Credit Risk--Financial instruments that potentially expose
the Company to concentrations of credit risk consists primarily of accounts
receivable. The Company does not require collateral or other security to
support accounts receivable. To reduce credit risk, management performs ongoing
credit evaluations of its customers' financial condition. The Company maintains
allowances for potential credit losses. Two customers accounted for 14% and
11%, respectively, of the Company's total accounts receivable at December 31,
1998.

Significant Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Actual results could differ from these
estimates.

Stock Compensation--The Company accounts for stock-based awards to employees
using the intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees."

Comprehensive Loss--The Company has adopted Statement of Financial
Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income," which
requires an enterprise to report, by major components and as a single total the
change in its net assets during the period from nonowner sources. For the year
ended December 31, 1998, net loss equaled comprehensive loss.

Recently Issued Accounting Standard--In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement requires companies to record derivatives on
the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. SFAS No. 133 will be effective for the Company's fiscal
year ending December 31, 2001. Management believes that adoption of this
statement will not have a significant impact on the Company's financial
position, results of operations or cash flows.

F-26
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

2. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1998 consists of:

<TABLE>
<S> <C>
Equipment and purchased software................................... $121,598
Furniture and fixtures............................................. 11,406
Leasehold improvements............................................. 9,038
--------
142,042
Accumulated depreciation and amortization.......................... (15,998)
--------
$126,044
========
</TABLE>

In November 1998, the Company sold and leased back certain equipment under
an operating lease with an initial term of eighteen months, resulting in a gain
of $12,625.

3. ACQUISITION

On September 15, 1998, the Company acquired certain assets from and assumed
certain liabilities of Scruz-Net, Inc. for a cash purchase price of $557,428
and incurred $25,446 in transaction costs. Scruz-Net was a full-service
Internet service provider, providing connectivity to the Internet from network
hubs in California's central coast region. The acquisition was accounted for as
a purchase and, accordingly, the results of operations of Scruz-Net have been
included in the Company's financial statements from the date of acquisition. In
connection with the acquisition, intangible assets of $397,356 were acquired,
consisting of trademarks, copyrights and customer relationships, which are
being amortized over their useful lives of three to five years.

In connection with the acquisition, net assets acquired were as follows (in
thousands):

<TABLE>
<S> <C>
Current assets..................................................... $192,278
Property and equipment, net........................................ 62,500
Intangible assets.................................................. 397,356
Current liabilities assumed........................................ (69,260)
--------
Net assets acquired................................................ $582,874
========
</TABLE>

4. NOTES PAYABLE

In December 1997 through August 1998, the Company issued convertible notes
payable to various investors for a total of $656,500 for working capital
purposes. In June 1998, notes payable of $206,500 and accrued interest of
$3,541 were converted into 672,131 shares of Series A preferred stock at a
conversion price of $0.3125 per share.

In October 1998, notes payable of $150,000 were converted into 480,000
shares of Series A preferred stock at a conversion price of $0.3125 per share.
The remaining principal of $300,000 was amended into a subordinated convertible
note agreement. The note accrues interest at an annual rate of 6% with the
principal and accrued interest due and payable in October 2003 if and to the
extent that the notes are not previously converted. The notes and related
accrued interest are convertible at the option of the noteholder into shares of
preferred Series A stock to the

F-27
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

extent that the additional shares of Series A preferred stock have been
authorized by the Company's stockholders. The notes are convertible at a
$0.3125 per share (subject to adjustment for events of dilution).

5. STOCKHOLDERS' EQUITY

Convertible Preferred Stock

The significant terms of the Series A convertible preferred stock are as
follows:

. Each share of Series A preferred stock is convertible into one share of
common stock (subject to adjustment for events of dilution). Each share
will automatically convert upon an underwritten public offering of common
stock, in which the pre-public market capitalization of the Company is at
least $50,000,000 and the aggregate cash proceeds to the Company are at
least $7,500,000 (net of underwriting discounts and commissions).

. When and if declared by the Board of Directors, the holders of Series A
convertible preferred stock are entitled to receive noncumulative
dividends of $0.03125 per share per annum, respectively, prior to the
payment of any dividends on common stock.

. Holders of Series A convertible preferred stock have a liquidation
preference of $0.3125 per share, plus any declared but unpaid dividends.
A sale of substantially all of the Company's assets or a change in
control is treated as a deemed liquidation.

Common Stock

The Company issued 2,450,000 shares of common stock subject to repurchase
agreements whereby the Company has the option to repurchase the unvested shares
upon termination of employment at the original issue price. The number of
shares subject to repurchase is reduced at the rate of 10% upon issuance and
1/48 per month thereafter. At December 31, 1998, 1,653,750 shares were subject
to repurchase by the Company.

At December 31, 1998, the Company has reserved shares of common stock for
issuance as follows:

<TABLE>
<S> <C>
Conversion of notes payable and related preferred stock............ 929,737
Conversion of preferred stock...................................... 3,744,128
Issuances under the 1997 Stock Plan................................ 1,600,000
---------
6,273,865
=========
</TABLE>

Stock Option Plan

Under the 1997 Stock Plan (the "Plan"), the Company may grant options to
purchase up to 1,600,000 shares of common stock to employees, officers,
directors, and consultants at prices not less than the fair market value at the
date of grant for incentive and nonstatutory stock options. These options
generally expire ten years from the date of grant and vest at rate of 25% on
the first anniversary of the grant date and 1/48 per month thereafter. At
December 31, 1998, 1,425,000 were available for future grant under the Plan.

F-28
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Additional information with respect to options under the Plan is as follows:

<TABLE>
<CAPTION>
Outstanding Stock
Options
----------------------
Weighted
Average
Number of Option Price
Options Per Share
--------- ------------
<S> <C> <C>
Granted beginning in November 1998 (weighted
average fair value of $0.01)...................... 175,000 $0.05
-------
Outstanding, December 31, 1998..................... 175,000 $0.05
=======
</TABLE>

As of December 31, 1998, no options were exercisable and outstanding options
had a weighted-average remaining contractual life of 9.8 years.

SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
disclosure of pro forma net loss as if the Company had adopted the fair value
method. Under SFAS 123, the fair value of stock-based awards to employees is
calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradeable, fully
transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require subjective
assumptions, including expected time to exercise, which greatly affect the
calculated values. The Company's calculations were made using the minimum value
method model with the following weighted average assumptions: expected life, 24
months following vesting; risk free interest rate, 5.9% in 1998; and no
dividends during the expected term. The Company's calculations are based on a
multiple option valuation approach and forfeitures are recognized as they
occur. If the computed minimum values of the awards had been amortized to
expense over the vesting period of the awards, pro forma net loss would not
have been materially different from net loss.

6. Income Taxes

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1998,
the Company's deferred income tax assets totaled approximately $342,000 and
consisted primarily of net operating loss (NOL) carryforwards and temporary
differences related to accruals and reserves not currently deductible. The
deferred tax assets have been fully reserved due to the uncertainty surrounding
the realization of such benefits.

At December 31, 1998, the Company has NOL carryforwards of approximately
$726,000 for federal and state income tax purposes, respectively. The federal
NOL carryforwards expire in 2018, while the state NOL carryforwards expire in
2006.

The extent to which the NOL carryforwards can be used to offset future
taxable income and tax liabilities, respectively, may be limited, depending on
the extent of ownership changes within any three-year period.

7. Lease Commitments

The Company leases its facilities and certain equipment under noncancelable
operating leases expiring through December 2004. Rent expense was approximately
$153,000 in 1998. Future

F-29
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

minimum rent payments are approximately $454,000, $398,000, $192,000, $160,000,
$160,000 and $160,000 in 1999, 2000, 2001, 2002, 2003 and thereafter,
respectively.

8. Employee Benefit Plan

In January 1998, the Company established a 401(k) tax-deferred savings plan,
whereby eligible employees may contribute up to 15% of their eligible
compensation. Company contributions are discretionary. No employer
contributions were made in 1998.

9. Subsequent Events

On March 1, 1999, the Board of Directors increased the authorized shares of
Series A convertible preferred stock to 6,450,000 shares and authorized shares
of common stock to 13,550,000 shares. In March 1999 through April 1999, the
Company issued 2,281,600 shares of Series A convertible preferred stock for
total gross proceeds of approximately $713,000.

In July and August 1999, the Company issued notes payable totaling $500,000
for working capital purposes. Borrowings bear interest at 12% per annum and are
payable in thirty-six monthly installments.

In addition, in July 1999, the Company entered into lease agreements for
equipment purchases. Under the agreements, the Company may borrow up to
$500,000 immediately and an additional $2,250,000 upon the closing of a
qualified Series B preferred stock financing with proceeds of at least
$10,000,000. In addition, the Company agreed to issue warrants to purchase
Series B preferred stock upon such closing. The number and per share price
thereof are to be determined by the per share closing price of the Series B
preferred stock financing.

In October 1999, the Company issued a note payable for $75,000 for working
capital purposes. Borrowings bear interest at 6% per annum. The entire
principal balance will automatically convert to shares of Series B preferred
stock upon completion of a Series B preferred stock financing with proceeds of
at least $5,000,000 consummated on or before January 31, 2000; otherwise, the
balance will become due on demand. The Company has the option to convert
accrued interest into shares of Series B preferred stock or pay the outstanding
balance.

F-30
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 20,585 $ 216,105
Accounts receivable, net.......................... 33,855 48,752
Prepaids and other current assets................. 20,095 2,645
----------- ----------
Total current assets............................ 74,535 267,502
PROPERTY AND EQUIPMENT, Net......................... 430,179 126,044
OTHER ASSETS........................................ 150,528 118,527
INTANGIBLE ASSETS................................... 274,553 377,160
----------- ----------
TOTAL............................................... $ 929,795 $ 889,233
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................. $ 779,721 $ 193,637
Accrued liabilities............................... 97,445 36,100
Unearned revenue.................................. 12,508 --
Current portion of capital lease payable.......... 66,279 --
Current portion of notes payable.................. 148,409 --
----------- ----------
Total current liabilities....................... 1,104,362 229,737
----------- ----------
Long-term portion of capital lease payable.......... 200,572 --
Notes Payable....................................... 339,964 --
Subordinated Convertible Notes Payable.............. 303,618 290,543
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, $0.001 par
value; authorized--
6,450,000 and 4,050,000 shares, respectively; issued
and outstanding--
6,025,728 and 3,744,128 shares, respectively........ 1,851,337 1,153,510
Common stock, $0.001 par value; authorized--
13,550,000 and 10,000,000 shares, respectively;
outstanding--2,450,000 shares...................... 2,450 2,450
Accumulated deficit................................. (2,872,508) (787,007)
----------- ----------
Total stockholders' equity...................... (1,018,721) 368,953
----------- ----------
TOTAL............................................... $ 929,795 $ 889,233
=========== ==========
</TABLE>

See notes to condensed consolidated financial statements.

F-31
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

<TABLE>
<CAPTION>
Nine months ended
September 30
----------------------
1999 1998
----------- ---------
<S> <C> <C>
NET REVENUES........................................... $ 1,269,462 $ 60,000
----------- ---------
COSTS AND EXPENSES:
Cost of revenues..................................... 1,235,420 104,028
Selling, general and administrative.................. 2,012,650 415,300
Research and development............................. 92,822 54,593
----------- ---------
Total costs and expenses........................... 3,340,892 573,921
----------- ---------
LOSS FROM OPERATIONS................................... (2,071,430) (513,921)
Interest expense, net................................ (14,071) (6,014)
----------- ---------
NET LOSS............................................... $(2,085,501) $(519,935)
=========== =========
</TABLE>

See notes to condensed consolidated financial statements.

F-32
<PAGE>

TYCHO NETWORKS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------------
1999 1998
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.............................................. $(2,085,501) $ (519,935)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization....................... 141,996 (1,885)
Changes in operating assets and liabilities, net of
effects of acquisition:
Accounts receivable............................... 14,897 78,228
Prepaids and other current assets................. (17,450) (4,700)
Accounts payable.................................. 586,084 213,664
Accrued liabilities & other current liabilities... 74,420 14,774
Unearned revenue.................................. 12,508 --
----------- ----------
Net cash used in operating activities........... (1,273,046) (219,854)
----------- ----------
INVESTING ACTIVITIES:
Purchases of property and equipment................. (76,673) (264,945)
Other assets........................................ (32,001) (8,521)
Acquisition of business............................. -- (582,874)
----------- ----------
Net cash used in investing activities........... (108,674) (856,340)
----------- ----------
FINANCING ACTIVITIES:
Sale of convertible preferred stock................. 697,827 487,135
Proceeds from convertible notes payable............. 500,000 655,000
Repayment of notes payable.......................... (11,627) (8,675)
----------- ----------
Net cash provided by financing activities....... 1,186,200 1,133,460
----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS............. (195,520) 57,266
CASH AND CASH EQUIVALENTS:
Beginning of period................................. 216,105 3,950
----------- ----------
End of period....................................... 20,585 61,216
=========== ==========
NONCASH FINANCING ACTIVITY--Equipment acquired under
capital lease........................................ $ 266,851 --
=========== ==========
</TABLE>

See notes to condensed consolidated financial statements

F-33
<PAGE>

TYCHO NETWORKS, INC. & SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The financial statements at September 30, 1999 and for the nine months ended
September 30, 1999 and 1998 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments) that the Company considers
necessary for a fair presentation of financial position and operating results.
Operating results for the nine month periods ended September 30, 1999 and 1998
are not necessarily indicative of results that may be expected for any future
periods.

The accompanying unaudited interim financial statements have been prepared
with the assumption that users of the interim financial information have read
Tycho Networks, Inc. & Subsidiary's ("Tycho") audited financial statements for
the year ended December 31, 1998. Accordingly, footnote disclosures which would
substantially duplicate the disclosures contained in these audited financial
statements have been omitted from these unaudited interim financial statements.
While management believes the disclosures presented are adequate to make these
financial statements not misleading, these financial statements should be read
in conjunction with Tycho's audited financial statements and related notes.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements.
Actual results may differ from those estimates.

2. Stockholders' Equity

3. Notes Payable and Capital Leases

In July and August 1999, the Company issued notes payable totaling $500,000
for working capital purposes. Borrowings bear interest at 12% per annum and are
payable in thirty-six monthly installments.

F-34
<PAGE>

4. Sale to DSL.net

On December 1, 1999, Tycho Networks, Inc. entered into an Agreement and Plan
of Merger with DSL.net, Inc. and a wholly owned subsidiary of DSL.net, Inc. The
transaction included cash consideration of approximately $1.6 million
(including amounts used to pay off existing notes of approximately $0.8
million), amounts due to selling stockholders and others after the closing of
approximately $0.8 million, net liabilities assumed of approximately $0.5
million and other costs of approximately $0.4 million. Immediately prior to the
acquisition, Tycho sold fixed assets with a net book value of approximately
$0.1 million to a related party and received notes that were convertible into
preferred stock of the buyer.

F-35
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Basis of Presentation

The following unaudited pro forma condensed combined statement of operations
for DSL.net, Inc. ("DSL" or the "Company") gives effect to the acquisition of
Tycho Networks, Inc. and subsidiary ("Tycho") under the purchase method of
accounting as if such acquisition had been consummated as of the beginning of
the period presented. The Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1999 combines the results of the
Company for such period and Tycho for the eleven months ended November 30,
1999. The historical financial information set forth below has been derived
from, and is qualified by reference to, the financial statements of the Company
and Tycho and should be read in conjunction with those financial statements and
the notes thereto included elsewhere herein.

The pro forma data is based on the combined historical results of the
Company and Tycho after giving effect to the Tycho acquisition under the
purchase method of accounting, and to the assumptions and adjustments (which
the Company believes to be reasonable) described in the accompanying Notes to
Unaudited Pro Forma Condensed Combined Statement of Operations. Under the
purchase method of accounting, assets acquired and liabilities assumed will be
recorded at their estimated fair value at the date of acquisition. The pro
forma adjustments set forth in the following unaudited pro forma combined
financial information are estimated and may differ from the actual adjustments
when they become known; however, no material differences are anticipated by the
Company.

The unaudited pro forma condensed combined Statement of Operations set forth
below does not purport to represent what the combined results of operations of
the Company would actually have been if the Tycho acquisition had in fact
occurred as of the beginning of the period presented nor should it be utilized
to project the future combined results of operations of the Company.

F-36
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
Pro Forma Pro Forma
DSL.net(a) Tycho(b) Adjustments Combined
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue................. $ 1,312,546 $ 1,593,725 $ -- $ 2,906,271
------------ ----------- --------- ------------
Operating expenses:
Network and
operations........... 9,234,278 1,910,467 -- 11,144,745
General and
administrative....... 4,978,510 2,114,929 (117,260)(1) 6,976,179
Sales and marketing... 6,847,696 143,683 -- 6,991,379
Stock compensation and
amortization of
excess purchase
price................ 4,123,454 -- 678,342 (1) 4,801,796
------------ ----------- --------- ------------
Total operating
expenses........... 25,183,938 4,169,079 561,082 29,914,099
------------ ----------- --------- ------------
Operating loss.......... (23,871,392) (2,575,354) (561,082) (27,007,828)
------------ ----------- --------- ------------
Interest expense
(income), net.......... (1,889,312) 40,352 152,627 (2) (1,696,333)
Other expense, net...... 6,233 10,850 -- 17,083
------------ ----------- --------- ------------
Net loss.............. $(21,988,313) $(2,626,556) $(713,709) $(25,328,578)
============ =========== ========= ============
Exchange of preferred
stock.................. 11,998,000 -- -- 11,998,000
------------ ----------- --------- ------------
Loss applicable to
common stock........... $(33,986,313) $(2,626,556) $(713,709) $(37,326,578)
============ =========== ========= ============
Net loss per share-basic
and diluted............ $ (2.05) $ (2.26)
============ ============
Shares used in computing
net loss per share..... 16,549,535 16,549,535
============ ============
</TABLE>
- --------

Periods include:

(a)Twelve months ended December 31, 1999, including Tycho since December 1,
1999.

(b)Eleven months ended November 30, 1999

See accompanying notes.

F-37
<PAGE>

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED STATEMENT OF OPERATIONS

Pro Forma adjustments are as follows:

1) Adjustment to record amortization of the excess of purchase price over the
fair value of the net assets acquired of approximately $3.4 million,
including transaction costs, as though the acquisition occurred on the first
day of the period presented and assuming a five year life of such asset.

2) Adjustment to record a decrease in interest income to reflect cash used for
the acquisition of Tycho, assuming an interest rate of 4.5% per annum.

F-38
<PAGE>

You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of common
stock means that information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy these shares of common stock in any
circumstances under which the offer or solicitation is unlawful.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 5
Special Note Regarding Forward-looking Statements and Certain Other
Information............................................................. 15
Use of Proceeds.......................................................... 16
Price Range of Common Stock.............................................. 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Financial and Other Data ....................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 29
Management............................................................... 46
Certain Transactions..................................................... 53
Principal Stockholders................................................... 57
Description of Capital Stock............................................. 60
Shares Eligible for Future Sale.......................................... 65
Underwriting............................................................. 67
Legal Matters............................................................ 68
Experts.................................................................. 69
Additional Information................................................... 69
Index to Financial Statements............................................ F-1
</TABLE>

[LOGO OF DSL.net APPEARS HERE]

5,000,000 Shares

Common Stock

Deutsche Banc Alex. Brown

Donaldson, Lufkin & Jenrette

Lehman Brothers

CIBC World Markets

Prospectus

, 2000

- -------------------------------------------------------------------------------

<PAGE>

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the common stock offered hereby are as
follows:

<TABLE>
<S> <C>
SEC registration fee............................................... $ 30,930
NASD filing fee.................................................... 12,216
Printing and engraving expenses.................................... 90,000
Legal fees and expenses............................................ 125,000
Accounting fees and expenses....................................... 100,000
Transfer agent and registrar fees and expenses..................... 5,000
Miscellaneous...................................................... 36,854
--------
Total............................................................ $400,000
========
</TABLE>

DSL.net will bear all expenses shown above.

Item 14. Indemnification of Directors and Officers.

The Delaware General Corporation Law and the certificate of incorporation
and by-laws of DSL.net provide for indemnification of our directors and
officers for liabilities and expenses that they may incur in such capacities.
In general, directors and officers are indemnified with respect to actions
taken in good faith in a manner reasonably believed to be in, or not opposed
to, the best interests of DSL.net and, with respect to any criminal action or
proceeding, actions that the indemnitee had no reasonable cause to believe were
unlawful. Reference is made to our Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws filed as Exhibits 3.01 and 3.02
hereto, respectively.

The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of DSL.net against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Reference is made to
the form of Underwriting Agreement filed as Exhibit 1.01 hereto.

In addition, we have an existing directors and officers liability insurance
policy.

Item 15. Recent Sales of Unregistered Securities.

In the three years preceding the filing of this registration statement, the
Company has issued the following securities that were not registered under the
Securities Act:

(a) Issuances of Capital Stock, Notes and Warrants

In March 1998, DSL.net issued and sold an aggregate of (i) 5,089,634 shares
of common stock for an aggregate of $500 and (ii) 20,000 shares of a prior
Series A preferred stock for an aggregate of $50,000.

In August 1998, DSL.net issued a promissory note in the aggregate principal
amount of $100,000.

II-1
<PAGE>

In November 1998, DSL.net issued five convertible promissory notes in the
aggregate principal amount of $350,000, two warrants to purchase an aggregate
31,250 shares of Series A preferred stock at a price of $1.00 per share and
rights to warrants to purchase 56,250 shares of Series A preferred stock at a
price of $1.00 per share.

In December 1998, DSL.net issued and sold an aggregate of (i) 7,634,451
shares of common stock in exchange for 20,000 shares of a prior series A
preferred stock and (ii) 4,071,707 shares of common stock in exchange for
promissory notes in an aggregate principal amount of $7,637.

In January 1999, DSL.net issued and sold 3,500,000 shares of Series A
preferred stock and warrants to purchase 3,500,000 shares of a prior series B
preferred stock for an aggregate of $3,500,000, a portion of which was paid by
the cancellation of two convertible promissory notes in the aggregate principal
amount of $125,000. In addition, DSL.net issued three warrants to purchase
56,250 shares of Series A preferred stock at a price of $1.00 per share in
exchange for the rights to warrants to purchase 56,250 warrants of Series A
preferred stock. DSL.net also issued an aggregate of 225,000 shares of Series A
preferred stock in conversion of three convertible promissory notes in the
aggregate principal amount of $225,000. Each outstanding share of Series A
preferred stock converted into 2.666 shares of common stock upon the closing of
our initial public offering on October 12, 1999. Finally, DSL.net issued 8
shares of common stock for aggregate consideration of $0.02.

In March 1999, DSL.net issued and sold an aggregate of 436,256 shares of
common stock for services valued at $44,585. Based on subsequent events,
DSL.net recognized compensation expense of $587,457 in connection with the
issuance of these shares. In addition, DSL.net issued one warrant to purchase
41,726 shares of Series A preferred stock at an exercise price of $2.40 per
share.

In April 1999, DSL.net issued and sold an aggregate of 6,500,000 shares of
Series B preferred stock in exchange for 3,500,000 shares of Series A preferred
stock and the cancellation of warrants to purchase 3,500,000 shares of a prior
Series B preferred stock. In addition, in April 1999, DSL.net issued and sold
an aggregate of 2,785,516 shares of Series C preferred stock for aggregate
consideration of $10,000,002. Each outstanding share of preferred stock
converted into 2.666 shares of common stock upon the closing of our initial
public offering on October 12, 1999.

In May 1999, DSL.net issued and sold an aggregate of 2,868,069 shares of
Series D preferred stock for aggregate consideration of $30,000,001, including
a secured promissory note in an aggregate principal amount of $5,999,429, which
note has since been paid in full. Each outstanding share of Series D preferred
stock converted into 2.666 shares of common stock upon the closing of our
initial public offering on October 12, 1999.

In June 1999, DSL.net issued an aggregate of 95,603 shares of Series D
preferred stock for aggregate consideration of $1,000,007, including a secured
promissory note in an aggregate principal amount of $999,912. The note, which
contained an interest rate of 6.00%, was paid in full on July 16, 1999. In
addition, in July 1999, DSL.net issued an aggregate of 939,086 shares of Series
E preferred stock for aggregate consideration of $18,499,994. Each outstanding
share of Series D and E preferred stock converted into 2.666 shares of common
stock upon the closing of our initial public offering on October 12, 1999.

(b) Grants and Exercises of Stock Options

From February 19, 1999 through October 5, 1999, DSL.net had granted options
to purchase an aggregate of 7,092,880 shares of common stock under the 1999
stock plan at exercise prices ranging from $.04 to $9.00 for an aggregate
purchase price of approximately $8,607,820, and 93,310 shares of common stock
had been issued in connection with the exercise of options.

II-2
<PAGE>

On October 6, 1999, DSL.net issued 56,250 shares of Series A preferred stock
to three stockholders in connection with the exercise of their warrants. These
shares converted into 149,963 shares of common stock up on the closing of our
initial public offering or October 12, 1999.

No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of certain options to purchase common stock and
employee stock grants, Rule 701 under the Securities Act. All of the foregoing
securities are deemed restricted securities for purposes of the Securities Act.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits:

<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<C> <S>
1.01* Form of Underwriting Agreement.

2.01 Agreement and Plan of Merger, dated as of November 30, 1999, by and
among DSL.net, Long Wharf Mergeco, Inc. and Tycho Networks, Inc.
(incorporated by reference to Exhibit 2 filed with our Form 8-K dated
as of December 1, 1999).

3.01 Amended and Restated Certificate of Incorporation of DSL.net, as
amended (incorporated by reference to Exhibit 3.02 filed with our
registration statement on Form S-1 (No. 333-80141)).

3.02 Amended and Restated By-laws of DSL.net (incorporated by reference to
Exhibit 3.03 filed with our registration statement on Form S-1 (No.
333-80141)).

4.01 Specimen Certificate for shares of DSL.net's Common Stock
(incorporated by reference to the exhibit of corresponding number
filed with our registration statement on Form S-1 (No. 333-80141)).

4.02 Description of Capital Stock (contained in the Certificate of
Incorporation filed as Exhibit 3.02 with our registration statement on
Form S-1 (No. 333-80141)).

4.03++ Form of Stock Purchase Warrant dated as of October 12, 1999 between
DSL.net and certain investors.

4.04++ Form of Stock Subscription Warrant dated as of October 12, 1999 by and
between DSL.net and Comdisco, Inc.

5.01* Legal Opinion of Testa, Hurwitz & Thibeault, LLP.

10.01+ Amended and Restated 1999 Stock Plan (incorporated by reference to the
exhibit of corresponding number filed with our registration statement
on Form S-1 (No. 333-80141)).

10.02+ 1999 Employee Stock Purchase Plan (incorporated by reference to the
exhibit of corresponding number filed with our registration statement
on Form S-1 (No. 333-80141)).

10.03 Amended and Restated Investors' Rights Agreement dated as of July 16,
1999 between DSL.net and the purchasers named therein (incorporated by
reference to the exhibit of corresponding number filed with our
registration statement on Form S-1 (No.333-80141)).

10.04 Master Lease Agreement dated as of March 4, 1999 between Comdisco,
Inc. and DSL.net, as modified by the Addendum thereto (incorporated by
reference to the exhibit of corresponding number filed with our
registration statement on Form S-1 (No.333-80141)).
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<C> <S>
10.05 Credit Agreement dated as of May 12, 1999 by and between DSL.net and
Fleet National Bank (incorporated by reference to the exhibit of
corresponding number filed with our registration statement on Form S-1
(No. 333-80141)).

10.06 Security Agreement dated as of May 12, 1999 by and between DSL.net and
Fleet National Bank (incorporated by reference to the exhibit of
corresponding number filed with our registration statement on Form S-1
(No. 333-80141)).

10.07++ Lease Agreement dated February 5, 1999 by and between DSL.net and Long
Wharf Drive, LLC, as amended.

10.08++ Amendment No. 1 dated June 9, 1999 to Lease Agreement by and between
DSL.net and Long Wharf Drive, LLC.

10.09++ Amendment No. 2 dated November 9, 1999 to Lease Agreement by and
between DSL.net and Long Wharf Drive, LLC.

10.10++ Amendment No. 3 dated January 20, 2000 to Lease Agreement by and
between DSL.net and Long Wharf Drive, LLC.

10.11 Amended and Restated Shareholders' Agreement, as amended, by and among
DSL.net and certain investors (incorporated by reference to Exhibit
10.08 filed with our registration statement on Form S-1 (No. 333-
80141)).

10.12 Form of Subscription Agreement dated as of October 28, 1998 by and
among DSL.net and certain stockholders (incorporated by reference to
Exhibit 10.10 filed with our registration statement on Form S-1 (No.
333-80141)).

10.13 Series A Preferred Stock and Warrant Purchase Agreement dated January
8, 1999 by and among DSL.net and the investors named therein
(incorporated by reference to Exhibit 10.11 filed with our
registration statement on Form S-1 (No. 333-80141)).

10.14 Securities Exchange and Subscription Agreement dated April 15, 1999 by
and between DSL.net, VantagePoint Venture Partners 1996, L.P. and
VantagePoint Communications Partners, L.P. (incorporated by reference
to Exhibit 10.12 filed with our registration statement on Form S-1
(No. 333-80141)).

10.15 Series C Preferred Stock Purchase Agreement dated March 31, 1999 by
and among DSL.net and the investors named therein (incorporated by
reference to Exhibit 10.13 filed with our registration statement on
Form S-1 (No. 333-80141)).

10.16 Series D Preferred Stock Purchase Agreement dated May 12, 1999 by and
among DSL.net and the investors named therein (incorporated by
reference to Exhibit 10.14 filed with our registration statement on
Form S-1 (No. 333-80141)).

10.17 Preferred Stock Purchase Agreement dated June 2, 1999 by and between
DSL.net and Raymond C. Allieri (incorporated by reference to Exhibit
10.15 filed with our registration statement on Form S-1 (No. 333-
80141)).

10.18 Series E Preferred Stock Purchase Agreement dated July 6, 1999 by and
between DSL.net and Microsoft Corporation (incorporated by reference
to Exhibit 10.16 filed with our registration statement on Form S-1
(No. 333-80141)).

10.19 Series E Preferred Stock Purchase Agreement dated July 16, 1999 by and
between DSL.net and Staples, Inc. (incorporated by reference to
Exhibit 10.17 filed with our registration statement on Form S-1 (No.
333-80141)).

10.20+ Additional Compensation Agreement dated as of December 29, 1998
between DSL.net and David Struwas (incorporated by reference to
Exhibit 10.18 of corresponding number filed with our registration
statement on Form S-1 (No. 333-80141)).

10.21+ Additional Compensation Agreement dated as of December 29, 1998
between DSL.net and John Jaser (incorporated by reference to Exhibit
10.19 filed with our registration statement on Form S-1 (No. 333-
80141)).
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<C> <S>
10.22++ On-Net Service Agreement dated February 2, 1999 by and between DSL.net
and MCI Worldcom Technologies, Inc., as amended.

10.23 Amendment No. 1 to Amended and Restated Investors' Rights Agreement
(incorporated by reference to Exhibit 10.21 filed with our
registration statement on Form S-1 (No. 333-80141)).

23.01* Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit
5.01).

23.02* Consent of PricewaterhouseCoopers LLP.

23.03* Consent of Deloitte & Touche LLP.

24.01++ Power of Attorney.
</TABLE>
- --------
* Filed herewith.
+ Indicates a management contract or any compensatory plan, contract or
arrangement.

++ Previously filed.

(b) Financial Statement Schedules

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective; and (3) that for the purpose of determining
any liability under the Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New Haven, State of Connecticut on February 22, 2000.

DSL.NET, INC.

By: /s/ Stephen Zamansky
----------------------------------

Stephen Zamansky

Vice President and General
Counsel

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----

<S> <C> <C>
* President, Chief Executive February 22, 2000
______________________________________ Officer and Director
David F. Struwas (Principal Executive
Officer)

* Chief Financial Officer February 22, 2000
______________________________________ and Vice President,
Robert Q. Berlin Strategic Planning
(Principal Financial and
Accounting Officer)

* Director February 22, 2000
______________________________________
Robert Gilbertson

* Director February 22, 2000
______________________________________
William J. Marshall

* Director February 22, 2000
______________________________________
William Seifert

* Director February 22, 2000
______________________________________
James D. Marver

* Director February 22, 2000
______________________________________
</TABLE> Paul K. Sun

*By: /s/ Stephen Zamansky

---------------------------------

Stephen Zamansky

as Attorney-in-Fact

II-6
<PAGE>

Exhibit Index

<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<C> <S>
1.01* Form of Underwriting Agreement.

2.01 Agreement and Plan of Merger, dated as of November 30, 1999, by
and among DSL.net, Long Wharf Mergeco, Inc. and Tycho Network,
Inc. (incorporated by reference to Exhibit 2 filed with our Form
8-K dated as of December 1, 1999).

3.01 Amended and Restated Certificate of Incorporation of DSL.net, as
amended (incorporated by reference to Exhibit 3.02 filed with our
registration statement on Form S-1 (No. 333-80141)).

3.02 Amended and Restated By-laws of DSL.net (incorporated by reference
to Exhibit 3.03 filed with our registration statement on Form S-1
(No. 333-80141)).

4.01 Specimen Certificate for shares of DSL.net's Common Stock
(incorporated by reference to exhibit of corresponding number
filed with our registration statement on Form S-1 (No. 333-
80141)).

4.02 Description of Capital Stock (contained in the Certificate of
Incorporation filed as Exhibit 3.02 with our registration
statement on Form S-1 (No. 333-80141)).

4.03++ Form of Stock Purchase Warrant dated as of October 12, 1999
between DSL.net and certain investors.

4.04++ Form of Stock Subscription Warrant dated as of October 12, 1999 by
and between DSL.net and Comdisco, Inc.

5.01* Legal Opinion of Testa, Hurwitz & Thibeault, LLP.

10.01+ Amended and Restated 1999 Stock Plan (incorporated by reference to
the exhibit of corresponding number filed with our registration
statement on Form S-1
(No. 333-80141)).

10.02+ 1999 Employee Stock Purchase Plan (incorporated by reference to
the exhibit of corresponding number filed with our registration
statement on Form S-1
(No. 333-80141)).

10.03 Amended and Restated Investors' Rights Agreement dated as of July
16, 1999 between DSL.net and the purchasers named therein
(incorporated by reference to the exhibit of corresponding number
filed with our registration statement on Form S-1
(No. 333-80141)).

10.04 Master Lease Agreement dated as of March 4, 1999 between Comdisco,
Inc. and DSL.net, as modified by the Addendum thereto
(incorporated by reference to the exhibit of corresponding number
filed with our registration statement on Form S-1 (No.333-80141)).

10.05 Credit Agreement dated as of May 12, 1999 by and between DSL.net
and Fleet National Bank (incorporated by reference to the exhibit
of corresponding number filed with our registration statement on
Form S-1 (No. 333-80141)).

10.06 Security Agreement dated as of May 12, 1999 by and between DSL.net
and Fleet National Bank (incorporated by reference to the exhibit
of corresponding number filed with our registration statement on
Form S-1 (No. 333-80141)).

10.07++ Lease Agreement dated February 5, 1999 by and between DSL.net and
Long Wharf Drive, LLC, as amended.

10.08++ Amendment No. 1 dated June 9, 1999 to Lease Agreement by and
between DSL.net and Long Wharf Drive, LLC.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<C> <S>
10.09++ Amendment No. 2 dated November 9, 1999 to Lease Agreement by and
between DSL.net and Long Wharf Drive, LLC.

10.10++ Amendment No. 3 dated January 20, 2000 to Lease Agreement by and
between DSL.net and Long Wharf Drive, LLC.

10.11 Amended and Restated Shareholders' Agreement, as amended, by and
among DSL.net and certain investors, as amended (incorporated by
reference to exhibit of corresponding number filed with our
registration statement on Form S-1 (No. 333-80141)).

10.12 Form of Subscription Agreement dated as of October 28, 1998 by and
among DSL.net certain investors (incorporated by reference to
Exhibit 10.10 filed with our registration statement on Form S-1
(No. 333-80141)).

10.13 Series A Preferred Stock and Warrant Purchase Agreement dated
January 8, 1999 by and among DSL.net and the investors named
therein (incorporated by reference to Exhibit 10.11 filed with our
registration statement on Form S-1 (No. 333-80141)).

10.14 Securities Exchange and Subscription Agreement dated April 15, 1999
by and between DSL.net, VantagePoint Venture Partners 1996, L.P.
and VantagePoint Communications Partners, L.P. (incorporated by
reference to Exhibit 10.12 filed with our registration statement on
Form S-1 (No. 333-80141)).

10.16 Series D Preferred Stock Purchase Agreement dated May 12, 1999 by
and among DSL.net and the investors named therein (incorporated by
reference to Exhibit 10.14 filed with our registration statement on
Form S-1 (No. 333-80141)).

10.17 Preferred Stock Purchase Agreement dated June 2, 1999 by and
between DSL.net and Raymond C. Allieri (incorporated by reference
to Exhibit 10.15 filed with our registration statement on Form S-1
(No. 333-80141)).

10.18 Series E Preferred Stock Purchase Agreement dated July 6, 1999 by
and between DSL.net and Microsoft Corporation (incorporated by
reference to Exhibit 10.16 filed with our registration statement on
Form S-1 (No. 333-80141)).

10.19 Series E Preferred Stock Purchase Agreement dated July 16, 1999 by
and between DSL.net and Staples, Inc. (incorporated by reference to
Exhibit 10.17 filed with our registration statement on Form S-1
(No. 333-80141)).

10.20+ Additional Compensation Agreement dated as of December 29, 1998
between DSL.net and David Struwas (incorporated by reference to
Exhibit 10.18 filed with our registration statement on Form S-1
(No. 333-80141).

10.21+ Additional Compensation Agreement dated as of December 29, 1998
between DSL.net and John Jaser (incorporated by reference to
Exhibit 10.19 filed with our registration statement on Form S-1
(No. 333-80141).

10.22++ On-Net Service Agreement dated February 2, 1999 by and between
DSL.net and MCI Worldcom Technologies, Inc. as amended.

10.23 Amendment No. 1 to Amended and Restated Investor's Rights Agreement
(incorporated by reference to Exhibit 10.21 filed with registration
statement on Form S-1 (No. 333-80141)).

23.01* Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit
5.01).
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------

<C> <S>
23.02* Consent of PricewaterhouseCoopers LLP.

23.03* Consent of Deloitte & Touche LLP.

24.01++ Power of Attorney.
</TABLE>
- --------
* Filed herewith.
+ Indicates a management contract or any compensatory plan, contract or
arrangement.

++ Previously filed.

<PAGE>

EXHIBIT 1.01

5,000,000 Shares

DSL.net, Inc.

Common Stock

($.0005 Par Value)

EQUITY UNDERWRITING AGREEMENT

February __, 2000

Deutsche Bank Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers Inc
CIBC World Markets Corp.
As Representatives of the
Several Underwriters
c/o Deutsche Bank Securities Inc.
One South Street
Baltimore, Maryland 21202

Ladies and Gentlemen:

DSL.net, Inc., a Delaware corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as representatives (the "Representatives") an aggregate
of 5,000,000 shares of the Company's Common Stock, $.0005 par value (the "Firm
Shares"). The respective amounts of the Firm Shares to be so purchased by the
several Underwriters are set forth opposite their names in Schedule I hereto.
The Company [and certain shareholders of the Company (the "Selling Shareholders]
also propose[s] to sell at the Underwriters' option an aggregate of up to
750,000 additional shares of the Company's Common Stock (the "Option Shares") as
set forth below.

As the Representatives, you have advised the Company [and the Selling
Shareholders] (a) that you are authorized to enter into this Agreement on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm
Shares set forth opposite their respective names in Schedule I, plus their pro
rata portion of the Option Shares if you elect to exercise the over-allotment
option in whole or in part for the accounts of the several Underwriters. The
Firm Shares and the Option Shares (to the extent the aforementioned option is
exercised) are herein collectively called the "Shares."

In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
<PAGE>

1. Representations and Warranties of the Company [and the Selling
Shareholders].

(a) The Company represents and warrants to each of the
Underwriters as follows:

(i) A registration statement on Form S-1 (File No. 333-
96349) with respect to the Shares has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462 (b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means the form of prospectus first filed
with the Commission pursuant to Rule 424(b). Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus

(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. Each of the
subsidiaries of the Company as listed in Exhibit A hereto (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a corporation
or limited liability company, as applicable, in good standing under the laws of
the jurisdiction of its incorporation or formation, with corporate power or
limited liability company power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. The
Subsidiaries are the only subsidiaries, direct or indirect, of the Company. The
Company and each of the Subsidiaries are duly qualified to transact business in
all jurisdictions in which the conduct of their business requires such
qualification. The outstanding shares of capital stock or limited liability
company interests, as applicable, of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and are owned
by the Company or another Subsidiary free and clear of all liens, encumbrances
and equities and claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.

(iii) The outstanding shares of Common Stock of the
Company[, including all shares to be sold by the Selling Shareholders,] have
been duly authorized and validly issued and are fully paid and non-assessable;
the Shares to be issued and sold by the Company have been duly authorized and
when issued and paid for as contemplated herein will be validly issued, fully
paid and non-assessable. Neither the filing of the Registration Statement nor
the offering or sale of the Shares as contemplated by this Agreement gives rise
to

2
<PAGE>

any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock.

(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the Shares
conform to the description thereof contained in the Registration Statement. The
form of certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.

(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and will
conform, to the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendments
and supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representatives or by or on behalf of
any Selling Shareholder, specifically for use in the preparation thereof.

(vi) The consolidated financial statements of the Company
and the Subsidiaries, together with related notes and schedules as set forth in
the Registration Statement, present fairly the financial position and the
results of operations and cash flows of the Company and the consolidated
Subsidiaries, at the indicated dates and for the indicated periods. Such
financial statements and related schedules have been prepared in accordance with
generally accepted principles of accounting, consistently applied throughout the
periods involved, except as disclosed therein, and all adjustments necessary for
a fair presentation of results for such periods have been made. The summary
financial and statistical data included in the Registration Statement presents
fairly the information shown therein and such data has been compiled on a basis
consistent with the financial statements presented therein and the books and
records of the company. The pro forma financial statements and other pro forma
financial information included in the Registration Statement and the Prospectus
present fairly the information shown therein, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma bases described
therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.

(vii) PricewaterhouseCoopers LLP, who have certified certain
of the financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required by the
Act and the Rules and Regulations.

3
<PAGE>

(viii) There is no action, suit, claim or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
the Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and of the Subsidiaries taken as a whole or to prevent the
consummation of the transactions contemplated hereby, except as set forth in the
Registration Statement.

(ix) Neither the Company nor any of the Subsidiaries owns
any real property. The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described, subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and the Subsidiaries
occupy their leased properties under valid and binding leases conforming in all
material respects to the description thereof set forth in the Registration
Statement.

(x) The Company and the Subsidiaries have filed all
Federal, State, local and foreign tax returns which have been required to be
filed and have paid all taxes indicated by said returns and all assessments
received by them or any of them to the extent that such taxes have become due
and are not being contested in good faith and for which an adequate reserve for
accrual has been established in accordance with generally accepted accounting
principles. All tax liabilities have been adequately provided for in the
financial statements of the Company, and the Company does not know of any actual
or proposed additional material tax assessments.

(xi) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries taken as a whole,
whether or not occurring in the ordinary course of business, and there has not
been any material transaction entered into or any material transaction that is
probable of being entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and the Subsidiaries have no material contingent obligations which
are not disclosed in the Company's financial statements which are included in
the Registration Statement.

(xii) Neither the Company nor any of the Subsidiaries is or
with the giving of notice or lapse of time or both, will be, in violation of or
in default under its certificate of incorporation or limited liability company
agreement, as applicable, or By-Laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the Company
and its Subsidiaries taken as a whole or the business, management, properties,
assets, rights, operations,

4
<PAGE>

condition (financial or otherwise) or prospects of the Company and the
Subsidiaries taken as a whole. The execution and delivery of this Agreement and
the consummation of the transactions herein contemplated and the fulfillment of
the terms hereof will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or any
Subsidiary is a party, or of the certificate of incorporation or limited
liability company agreement, as applicable, or By-Laws of the Company or any
Subsidiary or any order, rule or regulation applicable to the Company or any
Subsidiary of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.

(xiii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.

(xiv) The Company and each of its Subsidiaries owns, or
possesses valid and enforceable licenses to or rights to use, all patents,
patent rights, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names ("Intellectual
Property") currently employed by the Company and its Subsidiaries in connection
with the business now operated by them, except where the failure to own or
possess licenses for or rights to use such Intellectual Property would not,
singly or in the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operation of the Company and its
Subsidiaries, taken as a whole. Neither the Company nor its Subsidiaries has
received any written notice, nor are they aware of facts which would form a
reasonable basis for any such claim, that: (i) challenges the Company's or its
Subsidiaries' rights in or to any Intellectual Property; (ii) challenges the
validity or scope of any Intellectual Property; (iii) any third party has or
will be able to establish any rights in the Intellectual Property, except for
the ownership rights of the owners of the Intellectual Property which is
licensed to the Company or the rights of parties to whom the Company has granted
licenses of such Intellectual Property; (iv) the Intellectual Property infringes
or otherwise violates any patent, copyright, trade secret, trademark or other
proprietary right of any third party; or (v) there is infringement of the
Intellectual Property by any third party, which , in the case of any such claim
specified in clauses (i), (ii), (iii), (iv) or (v) above, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a material adverse effect on the business, prospects, financial condition
or results of operations of the Company and its subsidiaries, taken as a whole,
except that the Company has received notice from the United States Patent and
Trademark Office that its registration of the trademark "DSL.net" may be removed
from the list of supplemental registrations under certain circumstances.

(xv) The Company and each of its Subsidiaries holds all
material licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses.

5
<PAGE>

(xvi) Neither the Company, nor to the Company's knowledge,
any of its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares. The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on The Nasdaq Stock Market in
accordance with Rule 10b-6A under the Exchange Act.

(xvii) Neither the Company nor any Subsidiary is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940, (as amended, the "1940 Act") and the rules and regulations
of the Commission thereunder.

(xviii) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

(xix) The Company and each of its Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks as is adequate
for the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.

(xx) The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.

(xxi) To the Company's knowledge, there are no
affiliations or associations between any member of the NASD and any of the
Company's officers, directors or 5% or greater securityholders, except as set
forth in the Registration Statement.

(xxii) Neither the Company nor any of its Subsidiaries has
violated any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"). There
are no costs or liabilities associated with

6
<PAGE>

Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole.

(b) [Each of the Selling Shareholders severally represents and
warrants as follows:

(i) Such Selling Shareholder now has and at the Option
Closing Date will have good and marketable title to the Option Shares to be sold
by such Selling Shareholder, free and clear of any liens, encumbrances, equities
and claims, and full right, power and authority to effect the sale and delivery
of such Option Shares; and upon the delivery of, against payment for, such
Option Shares pursuant to this Agreement, the Underwriters will acquire good and
marketable title thereto, free and clear of any liens, encumbrances, equities
and claims.

(ii) Such Selling Shareholder has full right, power and
authority to execute and deliver this Agreement, the Power of Attorney, and the
Custodian Agreement referred to below and to perform its obligations under such
Agreements. The execution and delivery of this Agreement and the consummation by
such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not require any
consent, approval, authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be required
under the Act, state securities laws or Blue Sky laws) and will not result in a
breach of any of the terms and provisions of, or constitute a default under,
organizational documents of such Selling Shareholder, if not an individual, or
any indenture, mortgage, deed of trust or other agreement or instrument to which
such Selling Shareholder is a party, or of any order, rule or regulation
applicable to such Selling Shareholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.

(iii) Such Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to, or which has constituted,
or which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Shareholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.

(iv) Without having undertaken to determine independently
the accuracy or completeness of either the representations and warranties of the
Company contained herein or the information contained in the Registration
Statement, such Selling Shareholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1 are
not true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in the
Registration Statement which has adversely affected or may adversely affect the
business of the Company or any of the Subsidiaries; and the sale of the Option
Shares by such Selling Shareholder pursuant

7
<PAGE>

hereto is not prompted by any information concerning the Company or any of the
Subsidiaries which is not set forth in the Registration Statement. The
information pertaining to such Selling Shareholder under the caption "Selling
Shareholders" in the Prospectus is complete and accurate in all material
respects.]

2. Purchase, Sale And Delivery Of The Firm Shares.
----------------------------------------------

(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.

(b) Payment for the Firm Shares to be sold hereunder is to be
made in New York Clearing House funds by Federal (same day) against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made through the facilities of
the Depository Trust Company, New York, New York at 10:00 a.m., New York time,
on the third business day after the date of this Agreement or at such other time
and date not later than five business days thereafter as you and the Company
shall agree upon, such time and date being herein referred to as the "Closing
Date." (As used herein, "business day" means a day on which the New York Stock
Exchange is open for trading and on which banks in New York are open for
business and are not permitted by law or executive order to be closed.)

(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company [and the Selling Shareholders listed on Schedule III hereto]
hereby grant[s] an option to the several Underwriters to purchase the Option
Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is three or
more days before the Closing Date, the notice of exercise shall set the Closing
Date as the Option Closing Date. The number of Option Shares to be purchased by
each Underwriter shall be in the same proportion to the total number of Option
Shares being purchased as the number of Firm Shares being purchased by such
Underwriter bears to the total number of Firm Shares, adjusted by you in such
manner as to avoid fractional shares. The option with respect to the Option
Shares granted hereunder may be exercised only to cover over-allotments in the
sale of the Firm Shares by the Underwriters. You, as Representatives of the
several Underwriters, may cancel such option at any time prior to its expiration
by giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Shares shall

8
<PAGE>

be made on the Option Closing Date in Federal (same day funds) through the
facilities of the Depository Trust Company in New York, New York drawn to the
order of the Company.

3. Offering By The Underwriters.
----------------------------

It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.

It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.

4. Covenants Of The Company [And The Selling Shareholders].
-------------------------------------------------------

(a) The Company covenants and agrees with the several
Underwriters that:

(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations and (C) file on a timely basis all
reports and any definitive proxy or information statements required to be filed
by the Company with the Commission subsequent to the date of the Prospectus and
prior to the termination of the offering of the Shares by the Underwriters.

(ii) The Company will advise the Representatives promptly
(A) when the Registration Statement or any post-effective amendment thereto
shall have become effective, (B) of receipt of any comments from the Commission,
(C) of any request of the Commission for amendment of the Registration Statement
or for supplement to the Prospectus or for any additional information, and (D)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of the institution
of any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.

(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file

9
<PAGE>

such documents, and furnish such information as may be reasonably required for
that purpose, provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a
consent. The Company will, from time to time, prepare and file such statements,
reports, and other documents, as are or may be required to continue such
qualifications in effect for so long a period as the Representatives may
reasonably request for distribution of the Shares.

(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or
before the Closing Date, four signed copies of the Registration Statement and
all amendments thereto including all exhibits filed therewith, and will deliver
to the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representatives
may reasonably request.

(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so as to
permit the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will either (i) prepare
and file with the Commission an appropriate amendment to the Registration
Statement or supplement to the Prospectus or (ii) prepare and file with the
Commission an appropriate filing under the Securities Exchange Act of 1934 which
shall be incorporated by reference in the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with the
law.

(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.

(vii) Prior to the Closing Date, the Company will furnish to
the Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of

10
<PAGE>

any unaudited interim financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Registration Statement and the Prospectus.

(viii) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of Common
Stock (or agreement for such) will be made for a period of 90 days after the
date of this Agreement, directly or indirectly, by the Company otherwise than
hereunder or with the prior written consent of Deutsche Bank Securities Inc.
Notwithstanding the foregoing, during such period (i) the Company may grant
stock options pursuant to the Company's existing stock option plan and employee
stock purchase plan, (ii) the Company may issue shares of Common Stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof or granted or issued under the Company's existing stock option
plan or employee stock purchase plan, and (iii) the Company may issue shares of
Common Stock and other securities convertible into or exercisable or
exchangeable for shares of Common Stock in connection with acquisitions
(including asset acquisitions) and strategic partner relationships, provided
that each holder of such Common Stock or other such securities shall, prior to
or concurrently with the issuance of such Common Stock or other securities,
agree in writing to be bound by the restrictions set forth in the agreements
described in Section 4(a)(x) below. The Company also agrees not to file any
registration statement (other than a registration statement on Form S-8
registering Common Stock issuable under the Company's existing stock option plan
and employee stock purchase plan) with respect to any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
for a period of 90 days after the date of the Prospectus without the prior
written consent of Deutsche Bank Securities Inc.

(ix) The Company will use its best efforts to list, subject
to notice of issuance, the Shares on The Nasdaq Stock Market.

(x) The Company has caused each officer, director and
specific shareholders, as set forth on Exhibit B hereto, of the Company to
furnish to you, on or prior to the date of this agreement, a letter or letters,
in form and substance satisfactory to the Underwriters, pursuant to which each
such person shall agree not to offer, sell, sell short or otherwise dispose of
any shares of Common Stock of the Company or other capital stock of the Company,
or any other securities convertible, exchangeable or exercisable for Common
Shares or derivative of Common Shares owned by such person or request the
registration for the offer or sale of any of the foregoing (or as to which such
person has the right to direct the disposition of) for a period of 90 days after
the date of this Agreement, directly or indirectly, except with the prior
written consent of Deutsche Bank Securities Inc. ("Lockup Agreements").

(xi) The Company shall apply the net proceeds of its sale of
the Shares as set forth in the Prospectus.

(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the 1940 Act.

11
<PAGE>

(xiii) The Company will maintain a transfer agent and,
if necessary under the jurisdiction of incorporation of the Company, a registrar
for the Common Stock.

(xiv) The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.

(b) [Each of the Selling Shareholders covenants and agrees
with the several Underwriters that:

(i) No offering, sale, short sale or other
disposition of any shares of Common Stock of the Company or other capital stock
of the Company or other securities convertible, exchangeable or exercisable for
Common Stock or derivative of Common Stock owned by the Selling Shareholder or
request the registration for the offer or sale of any of the foregoing (or as to
which the Selling Shareholder has the right to direct the disposition of) will
be made for a period of 90 days after the date of this Agreement, directly or
indirectly, by such Selling Shareholder otherwise than hereunder or with the
prior written consent of Deutsche Bank Securities Inc.

(ii) In order to document the Underwriters'
compliance with the reporting and withholding provisions of the Tax Equity and
Fiscal Responsibility Act of 1982 and the Interest and Dividend Tax Compliance
Act of 1983 with respect to the transactions herein contemplated, each of the
Selling Shareholders agrees to deliver to you prior to or at the Closing Date a
properly completed and executed United States Treasury Department Form W-8 or W-
9 (or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).

(iii) Such Selling Shareholder will not take, directly
or indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.]

5. Costs And Expenses.
------------------

The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company [and the Selling Shareholders]
under this Agreement, including, without limiting the generality of the
foregoing, the following: accounting fees of the Company; the fees and
disbursements of counsel for the Company [and the Selling Shareholders]; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Selling Memorandum, the Underwriters' Invitation
Letter, the Listing Application, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the filing fees and
expenses (including reasonable legal fees and disbursements) incident to
securing any required review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Shares; the Listing Fee of the
Nasdaq Stock Market; and the expenses, including the fees and disbursements of
counsel for the Underwriters, incurred in connection

12
<PAGE>

with the qualification of the Shares under State securities or Blue Sky laws,
which shall not exceed $10,000. [The Selling Shareholders have agreed with the
Company to reimburse the Company for a portion of such expenses. To the extent,
if at all, that any of the Selling Shareholders engage special legal counsel to
represent them in connection with this offering, the fees and expenses of such
counsel shall be borne by such Selling Shareholder. Any transfer taxes imposed
on the sale of the Shares to the several Underwriters will be paid by the
Sellers pro rata.] The Company agrees to pay all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the
Underwriters, incident to the offer and sale of directed shares of the Common
Stock by the Underwriters to employees and persons having business relationships
with the Company and its Subsidiaries. The Company [and the Selling
Shareholders] shall not, however, be required to pay for any of the Underwriters
expenses (other than those related to qualification under NASD regulation and
State securities or Blue Sky laws) except that, if this Agreement shall not be
consummated because the conditions in Section 6 hereof are not satisfied, or
because this Agreement is terminated by the Representatives pursuant to Section
11 hereof, or by reason of any failure, refusal or inability on the part of the
Company [or the Selling Shareholders] to perform any undertaking or satisfy any
condition of this Agreement or to comply with any of the terms hereof on [its]
[their] part to be performed, unless such failure to satisfy said condition or
to comply with said terms be due to the default or omission of any Underwriter,
then the Company shall reimburse the several Underwriters for reasonable out-of-
pocket expenses, including fees and disbursements of counsel, reasonably
incurred in connection with investigating, marketing and proposing to market the
Shares or in contemplation of performing their obligations hereunder; but the
Company [and the Selling Shareholders] shall not in any event be liable to any
of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Shares.

6. Conditions Of Obligations Of The Underwriters.
---------------------------------------------

The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option Closing
Date are subject to the accuracy, as of the Closing Date or the Option Closing
Date, as the case may be, of the representations and warranties of the Company
[and the Selling Shareholders] contained herein, and to the performance by the
Company [and the Selling Shareholders] of [its] [their] covenants and
obligations hereunder and to the following additional conditions:

(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and, to the Company's knowledge, no proceedings for that
purpose shall have been taken or, to the knowledge of the Company [or the
Selling Shareholders], shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Shares.

13
<PAGE>

(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Testa, Hurwitz &
Thibeault, LLP, counsel for the Company [and the Selling Shareholders], dated
the Closing Date or the Option Closing Date, as the case may be, addressed to
the Underwriters (and stating that it may be relied upon by counsel to the
Underwriters) to the effect that:

(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement.

(ii) The Company has authorized and outstanding capital stock
as set forth under the caption "Description of Capital Stock" in the Prospectus;
all of the Shares conform to the description thereof contained in the
Prospectus; the certificates for the Shares, assuming they are in the form filed
with the Commission, are in due and proper form; the shares of Common Stock,
including the Option Shares, if any, to be sold by the Company pursuant to this
Agreement have been duly authorized and will be validly issued, fully paid and
non-assessable when issued and paid for as contemplated by this Agreement; and
no preemptive rights, rights of first refusal or first offer, or similar rights
arising under the Delaware General Corporation Law, the Company's certificate of
incorporation or any agreement filed as an exhibit to the Registration
Statement, of stockholders exist with respect to any of the Shares or the issue
or sale thereof.

(iii) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Shares or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.

(iv) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.

(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and related schedules therein).

14
<PAGE>

(vi) The statements under the captions "Description of
Capital Stock" and "Underwriting" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters of law, fairly
summarize in all material respects the information called for with respect to
such documents and matters.

(vii) Such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are no so filed
or described as required, and such contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly summarized in all
material respects.

(viii) Such counsel knows of no material legal or
governmental proceedings pending or threatened against the Company or any of the
Subsidiaries except as set forth in the Prospectus.

(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Charter or By-Laws of the Company, or any
agreement that is filed as an exhibit to the Registration Statement or
instrument known to such counsel to which the Company or any of the Subsidiaries
is a party or by which the Company or any of the Subsidiaries may be bound.

(x) This Agreement has been duly authorized, executed and
delivered by the Company.

(xi) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by State
securities and Blue Sky laws as to which such counsel need express no opinion)
except such as have been obtained or made, specifying the same.

(xii) The Company is not, and will not become, as a result
of the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.

(xiii) [This Agreement has been duly authorized, executed
and delivered on behalf of the Selling Shareholders.

(xiv) Each Selling Shareholder has full legal right, power
and authority, and any approval required by law (other than as required by State
securities and Blue Sky laws as to which such counsel need express no opinion),
to sell, assign, transfer and deliver the portion of the Shares to be sold by
such Selling Shareholder.

(xv) The Custodian Agreement and the Power of Attorney
executed and delivered by each Selling Shareholder is valid and binding.

15
<PAGE>

(xvi) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have acquired good
and marketable title to the Shares being sold by each Selling Shareholder on the
Closing Date, and the Option Closing Date, as the case may be, free and clear of
all liens, encumbrances, equities and claims.]

In rendering such opinion, Testa, Hurwitz & Thibeault, LLP may rely as
to matters governed by the laws of states other than Delaware corporate law or
Massachusetts or Federal laws on local counsel in such jurisdictions [and as to
the matters set forth in subparagraphs (xiii), (xiv) and (xv) on opinions of
other counsel representing the respective Selling Shareholders], provided that
in each case Testa, Hurwitz & Thibeault, LLP shall state that they believe that
they and the Underwriters are justified in relying on such other counsel. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to
such statement, Testa, Hurwitz & Thibeault, LLP may state that their belief is
based upon the procedures set forth therein, but is without independent check
and verification.

(c) The Representatives shall have received on the Closing Date
or the Option Closing Date, as the case may be, an opinion (satisfactory to
counsel for the underwriters), dated the Closing Date or the Option Closing
Date, as the case may be, of Day, Berry & Howard, counsel for the Company, to
the effect that:

(i) all of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable and not subject to any preemptive rights, rights of first refusal
or first offer, or similar rights arising under the Delaware General Corporation
Law, the Company's certificate of incorporation or any agreement filed as an
exhibit to the Registration Statement;

(ii) all of the outstanding shares of capital stock or
limited liability company interests of each of the Subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable, and are
owned by the Company, directly or indirectly through one or more subsidiaries,
free and clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature;

(iii) each of the Company and the Subsidiaries is duly
qualified and is in good standing as a foreign corporation or limited liability
company, as the case may be, authorized to do business in each jurisdiction in
which the nature of its business or its ownership

16
<PAGE>

or leasing of property requires such qualification, except where the failure to
be so qualified would not have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole; and

(iv) the statements under the caption "Business-Legal
Proceedings" in the Prospectus, insofar as such statements purport to summarize
legal matters, present fair summaries of such legal matters, in all material
respects.

(d) The Representatives shall have received on the Closing Date
or Option Closing Date, as the case may be, an opinion, dated the Closing Date
or Option Closing Date, as the case may be, of Swidler Berlin Sherreff Friedman,
LLP, regulatory counsel for the Company, which opinion shall be to the
Representatives reasonable satisfaction.

(e) The Representatives shall have received from Brobeck,
Phleger & Harrison LLP, counsel for the Underwriters, an opinion dated the
Closing Date or the Option Closing Date, as the case may be, substantially to
the effect specified in subparagraphs (ii), (iv) and (v) of Paragraph (b) of
this Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion
Brobeck, Phleger & Harrison LLP may rely as to all matters governed other than
by the laws of the State of Delaware or Federal laws on the opinion of counsel
referred to in Paragraph (b) of this Section 6. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that (i) the Registration Statement, or any amendment thereto, as of the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) as of the Closing Date
or the Option Closing Date, as the case may be, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact, necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Brobeck,
Phleger & Harrison LLP may state that their belief is based upon the procedures
set forth therein, but is without independent check and verification.

(f) The Representatives shall have received at or prior to the
Closing Date from Brobeck, Phleger & Harrison LLP a memorandum or summary, in
form and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
State securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.

(g) You shall have received, on each of the dates hereof, the
Closing Date and the Option Closing Date, as the case may be, a letter dated the
date hereof, the Closing Date or the Option Closing Date, as the case may be, in
form and substance satisfactory to you, of PricewaterhouseCoopers LLP confirming
that they are independent public accountants within the meaning of the Act and
the applicable published Rules and Regulations thereunder and

17
<PAGE>

stating that in their opinion the financial statements and schedules examined by
them and included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the related
published Rules and Regulations; and containing such other statements and
information as is ordinarily included in accountants' "comfort letters" to
Underwriters with respect to the financial statements and certain financial and
statistical information contained in the Registration Statement and Prospectus.

(h) The Representatives shall have received on the Closing Date
or the Option Closing Date, as the case may be, a certificate or certificates of
the President and Chief Executive Officer and the Chief Financial Officer of the
Company to the effect that, as of the Closing Date or the Option Closing Date,
as the case may be, each of them severally represents as follows:

(i) To their knowledge, the Registration Statement has
become effective under the Act and no stop order suspending the effectiveness of
the Registrations Statement has been issued, and no proceedings for such purpose
have been taken or are, to his knowledge, contemplated by the Commission;

(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;

(iii) All filings required to have been made pursuant to
Rules 424 or 430A under the Act have been made;

(iv) Such officers have carefully examined the Registration
Statement and the Prospectus and, in their opinion, as of the effective date of
the Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and Prospectus
did not omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, and since the effective
date of the Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment; and

(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business.

(i) The Company [and the Selling Shareholders] shall have
furnished to the Representatives such further certificates and documents
confirming the representations and warranties, covenants and conditions
contained herein and related matters as the Representatives may reasonably have
requested.

18
<PAGE>

(j) The Firm Shares and Option Shares, if any, have been
approved for designation upon notice of issuance on the Nasdaq Stock Market.

(k) The Lockup Agreements described in Section 4(a)(x) are in
full force and effect.

The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Brobeck, Phleger &
Harrison LLP, counsel for the Underwriters.

If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company [and the Selling Shareholders] of
such termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be.

In such event, [the Selling Shareholders,] the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).

7. Conditions Of The Obligations Of The Company [and Selling
---------------------------------------------------------
Shareholders].
- -------------

The obligations of the Company [and Selling Shareholders] to sell and
deliver the portion of the Shares required to be delivered as and when specified
in this Agreement are subject to the conditions that at the Closing Date or the
Option Closing Date, as the case may be, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and in effect
or proceedings therefor initiated or threatened.

8. Indemnification.
---------------

(a) The Company agrees:

(1) to indemnify and hold harmless each Underwriter [and
each Selling Shareholder] and each person, if any, who controls any Underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities to which such Underwriter or any such controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading any act or failure to
act, or (iii) any alleged act or failure to act by any Underwriter in connection
with, or relating in any manner to, the Shares or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon matters covered by
clause (i) or (ii) above (provided, that the Company shall not be liable under
this clause (iii) to the extent that it is determined in a final judgment by a
court of competent

19
<PAGE>

jurisdiction that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its gross negligence or willful misconduct);
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof.

(2) to reimburse each Underwriter and each such controlling
person upon demand for any legal or other out-of-pocket expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to the
offering of the Shares, whether or not such Underwriter or controlling person is
a party to any action or proceeding. In the event that it is finally judicially
determined that the Underwriters were not entitled to receive payments for legal
and other expenses pursuant to this subparagraph, the Underwriters will promptly
return all sums that had been advanced pursuant hereto.

(b) The Selling Shareholders agree to indemnify the Underwriters
and the Company and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities to which
such Underwriter or controlling person may become subject under the Act or
otherwise to the same extent as indemnity is provided by the Company pursuant to
Section 8(a) above. In no event, however, shall the liability of any Selling
Shareholder for indemnification under this Section 8(a) exceed the proceeds
received by such Selling Shareholder from the Underwriters in the offering. This
indemnity obligation will be in addition to any liability which the Company may
otherwise have.

(c) Each Underwriter severally and not jointly will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement[, the Selling Shareholders,] and each
person, if any, who controls the Company [or the Selling Shareholders] within
the meaning of the Act, against any losses, claims, damages or liabilities to
which the Company or any such director, officer, [Selling Shareholder] or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, [Selling Shareholder] or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the

20
<PAGE>

Representative[s] specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.

(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a), (b) or (c) shall be available to
any party who shall fail to give notice as provided in this Section 8(d) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a), (b) or (c). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) or (b) and by the Company [and the Selling Shareholders] in the
case of parties indemnified pursuant to Section 8(c). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
of which indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action
or proceeding.

(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof)

21
<PAGE>

referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company [and the Selling Shareholders] on the one hand and the Underwriters on
the other from the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law then
each indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company [and the Selling
Shareholders] on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, (or actions or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company [and the Selling Shareholders] on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company [and the
Selling Shareholders] bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company [or the Selling Shareholders] on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The Company, [the Selling Shareholders] and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 8(e) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 8(e). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to above in this Section 8(e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (e), (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter, (ii) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation, and (iii)
no Selling Shareholder shall be required to contribute any amount in excess of
the proceeds received by such Selling Shareholder from the Underwriters in the
offering. The Underwriters' obligations in this Section 8(e) to contribute are
several in proportion to their respective underwriting obligations and not
joint.

(f) In any proceeding relating to the Registration Statement,
any Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this Section 8
hereby consents to the jurisdiction of any court having jurisdiction over any
other contributing party, agrees that process issuing from such court may be
served upon him or it by any other contributing party and consents to the
service of such process and agrees that any other contributing party may join
him or it as an additional defendant in any such proceeding in which such other
contributing party is a party.

22
<PAGE>

(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.

9. Default By Underwriters.
-----------------------

If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company [or a
Selling Shareholder]), you, as Representatives of the Underwriters, shall use
your reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company [and the Selling
Shareholders] such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company [and
the Selling Shareholders] or you as the Representatives of the Underwriters will
have the right, by written notice given within the next 36-hour period to the
parties to this Agreement, to terminate this Agreement without liability on the
part of the non-defaulting Underwriters or of the Company [or of the Selling
Shareholders] except to the extent provided in Section 8 hereof. In the event
of a default by any Underwriter or Underwriters, as set forth in this Section 9,
the Closing Date or Option Closing Date, as the case may be, may be postponed
for such period, not exceeding seven days, as you, as Representatives, may
determine in order that the required changes in the Registration Statement or in
the Prospectus or in any other documents or arrangements may be effected. The
term "Underwriter" includes any person substituted for a defaulting Underwriter.
Any action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.

23
<PAGE>

10. Notices.
-------

All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to Deutsche Bank Securities
Inc., One South Street, Baltimore, Maryland 21202, Attention: General Counsel;
with a copy to Deutsche Bank Securities Inc., One Bankers Trust Plaza, 130
Liberty Street, New York, New York 10006, Attention: General Counsel; if to the
Company [or the Selling Shareholders], to DSL.net, Inc., 545 Long Wharf Drive,
New Haven, Connecticut 06511, Attention: General Counsel.

11. Termination.
-----------

(a) This Agreement may be terminated by you by notice to the
Company [and the Selling Shareholders] at any time prior to the Closing Date if
any of the following has occurred: (i) any outbreak or escalation of hostilities
or declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in your reasonable
judgment, make it impracticable or inadvisable to market the Shares or to
enforce contracts for the sale of the Shares, (ii) suspension of trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on either such Exchange, (iii) the enactment,
publication, decree or other promulgation of any statute, regulation, rule or
order of any court or other governmental authority which in your opinion
materially and adversely affects or may materially and adversely affect the
business or operations of the Company, (iv) declaration of a banking moratorium
by United States or New York State authorities, (v) the suspension of trading of
the Company's common stock by the Nasdaq Stock Market, the Commission, or any
other governmental authority, or (vi) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States; or

(b) as provided in Sections 6 and 9 of this Agreement.

12. Successors.
----------

This Agreement has been and is made solely for the benefit of the
Underwriters, the Company [and the Selling Shareholders] and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.

13. Information Provided By Underwriters.
------------------------------------

The Company, the Selling Shareholders and the Underwriters acknowledge
and agree that the only information furnished or to be furnished by any
Underwriter to the Company

24
<PAGE>

for inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.

14. Miscellaneous.
-------------

The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of
any Underwriter or controlling person thereof, or by or on behalf of the Company
or its directors or officers and (c) delivery of and payment for the Shares
under this Agreement.

This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.

If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among [the Selling Shareholders,]
the Company and the several Underwriters in accordance with its terms.

Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.

Very truly yours,

DSL.NET, INC.

By__________________________________________
David Struwas

[Selling Shareholders listed on Schedule II

By__________________________________________
Attorney-in-Fact]

25
<PAGE>

The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.

DEUTSCHE BANK SECURITIES INC.

_______________________________________

As Representatives of the several
Underwriters listed on Schedule I

By: Deutsche Bank Securities Inc.

By: ____________________________________
Authorized Officer

26
<PAGE>

SCHEDULE I

Schedule Of Underwriters

Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------

Deutsche Bank Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers Inc
CIBC World Markets Corp.

__________
Total __________

27
<PAGE>

SCHEDULE II

Schedule Of Selling Shareholders

Number of Firm Shares
Selling Shareholder to be Sold
------------------- ---------------------

__________
Total __________

28
<PAGE>

SCHEDULE III

Schedule Of Option Shares

Maximum Number Percentage of
of Option Shares Total Number of
Name of Seller to be Sold Option Shares
--------------- ---------------- ---------------

______ ___
Total 100%
______ ---

<PAGE>

Exhibit 5.01
------------

February 22, 2000

DSL.net, Inc.
545 Long Wharf Drive
New Haven, CT 06511

RE: REGISTRATION STATEMENT ON FORM S-1 (NO. 333-96349)
---------------------------------------------------

Ladies and Gentlemen:

We are acting as counsel for DSL.net, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale by the Company of up to
5,750,000 shares (the "Shares") of Common Stock, par value $.0005 per share, of
the Company pursuant to the Company's Registration Statement on Form S-1 (No.
333-96349) which has been filed with the Securities and Exchange Commission (the
"Registration Statement").

We have examined such documents, records and matters of law as we have
deemed necessary for the purposes of this opinion, and based thereupon we are of
the opinion that the Shares, when issued and paid for in accordance with the
terms described in the Registration Statement, will be validly issued, fully
paid and nonassessable.

We hereby consent to the filing of this opinion as Exhibit 5.01 to the
Registration Statement and to the reference to our firm in the Prospects under
the caption "Legal Matters."

Very truly yours,

/s/ TESTA, HURWITZ & THIBEAULT, LLP

<PAGE>

Exhibit 23.02

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 1, 2000,
relating to the financial statements of DSL.net, Inc., which appear in such
Prospectus. We also consent to the references to us under the headings
"Experts" and "Selected Financial Data" in such Prospectus.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

February 22, 2000

<PAGE>

Exhibit 23.03

CONSENT OF DELOITTE & TOUCHE LLP

We consent to the use in Amendment No. 1 to this Registration Statement No
333-96349 of DSL.net, Inc. on Form S-1 of our report with respect to Tycho
Networks, Inc. (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to the Company's ability to continue as as
going concern) dated May 21, 1999 (October 13, 1999 as to the last three
paragraphs of Note 9), appearing in the Prospectus, which is part of this
Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

San Jose, California

February 21, 2000