Document:

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                                                                    EXHIBIT 10.2

THIS NOTE AND THE SHARES OF COMMON STOCK OF NEON COMMUNICATIONS, INC. ISSUABLE
UPON CONVERSION OF THIS NOTE HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND
MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") SHALL HAVE BECOME EFFECTIVE WITH
RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE
SECURITIES ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS
SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND
SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE OR ANY SHARES
OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE.

THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND HOLDER HEREUNDER ARE
SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN SECTION 3 HEREOF. IN THE
EVENT OF A CONFLICT BETWEEN ANY TERMS OF THIS NOTE AND THE TERMS OF SUCH SECTION
3, THE TERMS OF SECTION 3 SHALL GOVERN.

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                            NEON COMMUNICATIONS, INC.

                   18% SUBORDINATED CONVERTIBLE NOTE DUE 2008

$15,000,000.00                                        WESTBOROUGH, MASSACHUSETTS
                                                                    JUNE__, 2001

     NEON COMMUNICATIONS, INC., a Delaware corporation (the "COMPANY"), for
value received, hereby promises to pay to the order of MODE 1 COMMUNICATIONS,
INC., a Connecticut corporation, or its designee or assignee (the "HOLDER"), on
August 15, 2008 (the "MATURITY DATE"), at the offices of the Company, the
principal sum of Fifteen Million Dollars ($15,000,000.00) or such lesser
principal amount as shall at such time be outstanding hereunder (the "PRINCIPAL
AMOUNT"). Each payment by the Company pursuant to this Note shall be made in
lawful currency of the United States of America and in immediately available
funds. Interest on this Note shall accrue monthly and compound annually on the
Principal Amount outstanding from time to time at a rate per annum computed in
accordance with Section 4 hereof.

     Accrued and unpaid interest on the Principal Amount of this Note
outstanding shall commence on the date hereof and be payable: (i) semiannually
on February 15 and August 15 of each year beginning on August 15, 2001, and (ii)
upon maturity (whether at the Maturity Date, by acceleration or otherwise). Each
of the dates referred to above is sometimes hereinafter referred to as an
"INTEREST PAYMENT DATE." All computations of interest hereunder shall be made
based on the actual number of days elapsed in a year of 360 days (including the
first day but excluding the last day during which any such Principal Amount is
outstanding). The Principal Amount of this Note together with interest accrued
and unpaid thereon shall be payable on the Maturity Date (or such

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earlier date on which such amount may become due and payable under Section 7.2
hereof) unless this Note is converted in accordance with Section 6 hereof.

     All payments by the Company hereunder shall be applied first to pay any
interest which is due, but unpaid, and then to reduce the Principal Amount.

     The Company waives presentment, demand, protest or notice of any kind in
connection with this Note.

     This Note is issued pursuant to a Convertible Note Purchase Agreement dated
the date of this Note between the Company and Mode 1 Communications, Inc. and
attached hereto as EXHIBIT A (the "PURCHASE AGREEMENT"). Notwithstanding any
provision to the contrary contained herein, this Note is subject and entitled to
those terms, conditions, covenants and agreements contained in the Purchase
Agreement which are expressly applicable to the Note.

     1. DEFINITIONS. For purposes of this Note, the following terms shall have
the meanings described below:

        1.1 "AFFILIATE" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.

        1.2 "BANKRUPTCY LAW" means 11 U.S.C.ss.101 et seq. as from time to time
hereafter amended, and any successor or similar Federal or state law for the
relief of debtors.

        1.3 "BOARD OF DIRECTORS" means the Company's Board of Directors.

        1.4 "CAPITAL STOCK" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such Person, including any preferred
stock, but excluding any debt securities convertible into such equity.

        1.5 "CHANGE OF CONTROL" means the occurrence of any of the following
events:

            (i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), except that for purposes of this clause (i) such person shall be deemed to
have "beneficial ownership" of all shares that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 35% of the total voting power of
the Voting Stock of the Company; PROVIDED, HOWEVER, that the Permitted Holders
beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, in the aggregate a lesser percentage of the total voting
power of the voting Stock of the Company than such other person and do not have
the right or ability by voting power, contract or otherwise to

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elect or designate for election a majority of the Board of Directors (for the
purposes of this clause (i), such other person shall be deemed to beneficially
own any Voting Stock of a specified corporation held by another person ("a
parent corporation"), if such other person is the beneficial owner (as described
in this clause (ii), directly or indirectly, of more than 35% of the voting
power of the Voting Stock of such parent corporation and the Permitted Holders
beneficially own (as described in this clause (i), directly or indirectly, in
the aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the board
of directors of such parent corporation);

            (ii) individuals who on the date of this Note constituted the Board
of Directors (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company
was approved by a vote of 66-2/3% of the directors of the Company then still in
office who were either directors on the date of this Note or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office;

            (iii) the adoption of a plan relating to the liquidation or
dissolution of the Company; or

            (iv) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the sale of
all or substantially all the assets of the Company to another Person (other than
a Person that is controlled by the Permitted Holders), and, in the case of any
such merger or consolidation, the securities of the Company that are outstanding
immediately prior to such transaction and which represent 100% of the aggregate
voting power of the Voting Stock of the Company are changed into or exchanged
for cash, securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving Person or transferee that represent
immediately after such transaction, at least a majority of the aggregate voting
power of the Voting Stock of the surviving Person or transferee.

        1.6 "COMMON STOCK" means the Company's common stock, par value $.01 per
share.

        1.7 "COMMON STOCK EQUIVALENT" means any Convertible Security or warrant,
option or other right to subscribe for or purchase any additional shares of
Common Stock or any Convertible Security, other than options granted to
officers, directors or employees of, or consultants to, the Company, or any of
its subsidiaries and approved by the Company's Board of Directors.

        1.8 "CONVERTIBLE SECURITY" means any evidence of indebtedness, shares of
capital stock or other securities which may be at any time convertible into or
exchanged for additional shares of Common Stock.

        1.9 "CUSTODIAN" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.

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        1.10 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

        1.11 "EXELON" means Exelon Enterprises Management, Inc., a Pennsylvania
corporation.

        1.12 "EXCLUDED SECURITIES" means any Common Stock Equivalent issued by
the Company (i) in the form of a subordinated convertible note due 2008 within
six (6) months from the date hereof, and which terms may be more fully described
therein, including a conversion price of no less than $5.00; (ii) pursuant to a
private placement of public equity, or in connection with an equity line of
credit, in either case approved by the Board of Directors of the Company; and
(iii) in the case of (i) and (ii) hereof, any Common Stock issuable upon the
conversion or exercise of any such Common Stock Equivalent.

        1.13 "INDENTURE" means the Indenture dated as of August 5, 1998, between
the Company and U.S. Bank Trust National Association.

        1.14 "MARKET PRICE" as of any valuation date, (i) means the last
reported sale price for the shares of Common Stock, as reported on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or, if
the Common Stock is listed on a stock exchange, the principal stock exchange on
which the Common Stock is listed, on the last trading day prior to the
applicable valuation date for which a closing price is available; or (ii) if the
Common Stock on any such valuation date is not reported on Nasdaq or listed on
any stock exchange, the Market Price shall be the fair market value as
reasonably determined in good faith by the Board of Directors of the Company.
The manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.

        1.15 "MODE 1" means Mode 1 Communications, Inc., a Connecticut
corporation.

        1.16 "PERMISSIBLE SECURITIES" means equity securities or subordinated
securities of the Company or any successor obligor of the Senior Debt or
Subordinated Debt provided for by a plan of reorganization or readjustment that
are subordinated in right of payment to all Senior Debt that may at the time be
outstanding to the same extent as, or to a greater extent than, the Subordinated
Debt is subordinate to the Senior Debt as provided in Section 3 hereof.

        1.17 "PERMITTED HOLDERS" means (i) Central Maine Power Company, a Maine
corporation, and its Affiliates and (ii) Northeast Utilities, a Massachusetts
business trust, and its Affiliates.

        1.18 "PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.

        1.19 "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement between the Company and Mode 1 dated the date hereof.

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        1.20 "SENIOR DEBT" means, collectively, (i) the 12 3/4% Senior Notes Due
2008 in the aggregate principal amount of One Hundred Eighty Million Dollars
($180,000,000.00) issued by the Company pursuant to the Indenture; (ii) all
other indebtedness incurred after the issuance of the Note which by its terms is
superior in right of payment to the Note, and (iii) all payment obligations of
the Company pursuant to any indebtedness incurred in order to finance the
acquisition of fixed or capital assets, unless by the terms of the instrument
creating or evidencing any such indebtedness it is expressly provided that such
indebtedness is not superior in right of payment to the Note, provided, however,
that in the case of each of (ii) and (iii), such indebtedness and payment
obligations shall constitute Senior Debt only to the extent that such
indebtedness and payment obligations shall have been approved in writing by the
Holder as required by Section 6.1 of the Purchase Agreement.

        1.21 "SIGNIFICANT SUBSIDIARY" shall have the meaning ascribed to it in
the Indenture.

        1.22 "SUBORDINATED DEBT" means the principal amount of the indebtedness
evidenced by this Note, together with any interest or premium due thereon or
payable with respect thereto; and the principal amount of indebtedness evidenced
by a subordinated convertible note due 2008 which may be issued by the Company
to Exelon at any time within six (6) months from the date hereof, which terms
will be more fully described therein, including a conversion price of no less
than $5.00.

        1.23 "VOTING STOCK" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustee thereof.

     2. PREPAYMENT. The Principal Amount of this Note may not be prepaid in
whole or in part prior to the second anniversary of the date of this Note
without the prior written consent of the Holder. Notwithstanding the foregoing,
the Company may prepay this Note prior to such date without the consent of the
Holder in connection with a merger of the Company or a sale of all or
substantially all of its assets, or as may be required by law.

     3. SUBORDINATION. The Company, for itself, its successors and assigns,
covenants and agrees, and the Holder and each successive holder of this Note, by
its acceptance of this Note, likewise covenants and agrees (expressly for the
benefit of the present and future holders of the Senior Debt, that the payment
of principal of, and interest on, this Note is hereby expressly subordinated in
right of payment, to the extent and in the manner set forth in this Section 3 to
the prior payment in full of the principal of, premium (if any) and interest on,
all Senior Debt of the Company, whether outstanding on the date hereof or
hereafter incurred or created.

        3.1 DEFAULT ON SENIOR DEBT. The Company shall not purchase, repurchase,
redeem, defease or otherwise acquire or retire any of the Subordinated Debt
prior to its scheduled maturity or scheduled payment (a "RESTRICTED PAYMENT") if
an event of default in respect of the Senior Debt or an event which after notice
or the passage of time or both would be such an event

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of default (a "SENIOR DEBT DEFAULT") shall have occurred and be continuing or if
such a Senior Debt Default would result from such a Restricted Payment.

        3.2 DISSOLUTION, LIQUIDATION, REORGANIZATION, ETC. Upon any payment or
distribution of the assets of the Company of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution, winding-up,
total or partial liquidation, reorganization, composition, arrangement,
adjustment or readjustment of the Company or its securities (whether voluntary
or involuntary, or in bankruptcy, insolvency, reorganization, liquidation or
receivership proceedings, or upon a general assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of the
Company, or otherwise), then and in any such event:

            (i) the holders of the Senior Debt shall be entitled to receive
payment in full in cash or cash equivalents (or to have such payment duly
provided for in a manner reasonably satisfactory to the holders of Senior Debt)
of all amounts due or to become due on or in respect of all Senior Debt, before
any payment or distribution, whether in cash, property or securities (other than
Permissible Securities), is made on account of the Subordinated Debt;

            (ii) the Subordinated Debt evidenced by this Note shall forthwith
become due and payable, and any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities (other than
Permissible Securities), to which the Holder would be entitled except for the
provisions of this Section 3, shall be paid or delivered by any debtor,
custodian, liquidating trustee, agent or other Person making such payment or
distribution, directly to the holders of the Senior Debt, or their
representative or representatives, ratably according to the aggregate amounts
remaining unpaid on account of such Senior Debt, for application to the payment
thereof, to the extent necessary to pay all such Senior Debt in full in cash or
cash equivalents after giving effect to any concurrent payment or distribution,
or provision therefor, to the holders of such Senior Debt;

            (iii) Each holder of the Subordinated Debt evidenced by this Note at
the time outstanding hereby irrevocably authorizes and empowers each holder of
the Senior Debt or such holder's representative to collect and receive such
holder's ratable share of all such payments and distributions and to receipt
therefor, and, if any holder of Subordinated Debt evidenced by this Note fails
to file a claim at least seven (7) calendar days prior to the date established
by rule of law or order of court for such filing, to file and prove (but not to
vote) such claims therefor.

Upon any payment or distribution of assets of the Company referred to in this
Section 3, the holders of the Subordinated Debt evidenced by this Note shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such bankruptcy, insolvency, reorganization, liquidation,
receivership or other proceeding is pending, or a certificate of the debtor,
custodian, liquidating trustee, agent or other Person making any such payment or
distribution to such holders, for the purpose of ascertaining the Persons
entitled to participate therein, the holders of the Senior Debt, the then
outstanding principal amount of the Senior Debt and any and all amounts payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 3.

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     4. INTEREST.

        4.1 INTEREST RATE. The outstanding Principal Amount shall bear interest
at the rate of eighteen percent (18%) per annum, which shall accrue monthly and
be compounded annually.

        4.2 PAYMENT OF INTEREST. At the option of the Company, accrued interest
may be paid on the applicable Interest Payment Date in any of the following
forms: (i) cash, (ii) additional 18% subordinated convertible notes due 2008, in
substantially the form of this Note; or (iii) such number of fully paid and
non-assessable shares of Common Stock determined by dividing the applicable
interest payment by $6.00.

     5. REDEMPTION.

        5.1 OPTIONAL REDEMPTION. Subject to the Holder's right of conversion set
forth in Section 6 hereof, at any time after the second anniversary of the date
of this Note, the Company shall have the right, at its sole option and election
made in accordance with Section 5.2 below, to redeem this Note, in whole or in
part, at a redemption price equal to the then outstanding Principal Amount
relating to that portion of the Note being redeemed, together with the related
accrued and unpaid interest (the "REDEMPTION PRICE").

        5.2 REDEMPTION PROCEDURES. Notice of any redemption of this Note
pursuant to Section 5.1 shall be mailed to the Holder at least 10 days but not
more than 60 days prior to the date fixed for redemption (the "REDEMPTION
DATE"). On or before the Redemption Date, the Holder shall surrender this Note
or the portion thereof being redeemed, duly endorsed, at the principal office of
the Company. On the Redemption Date, the Company shall wire transfer to the
Holder the Redemption Price in immediately available funds for the Notes being
so redeemed.

     6. CONVERSION.

        6.1 OPTIONAL CONVERSION. At the option of the Holder, any portion (in
increments of $1,000,000) or all of the outstanding Principal Amount of this
Note together with all accrued and unpaid interest thereon, shall be convertible
at any time and from time to time up to and including the Maturity Date, into
such number of fully paid and non-assessable shares of Common Stock as shall be
determined by Section 6.3 below.

        6.2 MANDATORY CONVERSION. At the option of the Company, at any time
during the thirty (30) day period after the Common Stock has a Market Price
equal to or greater than twenty dollars ($20.00) for twenty (20) or more
consecutive trading days, the Company may deliver a notice (the "MANDATORY
CONVERSION NOTICE") to the Holder, providing that the Note shall automatically
be converted into such number of fully paid and non-assessable shares of Common
Stock as shall be determined by Section 6.3 below. Notwithstanding the
foregoing, the Company shall not be entitled to effect a mandatory conversion
pursuant to this Section 6.2 unless the Company has filed a registration
statement registering the Conversion Shares (as defined below) with the
Securities and Exchange Commission (the "Commission") under the

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Securities Act of 1933, as amended, and such registration statement has been
declared effective by the Commission.

        6.3 CONVERSION PRICE. The number of shares of Common Stock to be
received by the Holder upon conversion of this Note in accordance with Section
6.1 or 6.2 (the "CONVERSION SHARES") shall be determined by dividing the then
outstanding Principal Amount of the Note together with all accrued and unpaid
interest being converted by the Holder by the Conversion Price in effect at the
time of conversion (the "CONVERSION PRICE"). The Conversion Price at which the
Conversion Shares shall be deliverable upon conversion of this Note without the
payment of additional consideration by the Holder shall initially be $6.00 per
share of Common Stock. Such initial Conversion Price shall be subject to
adjustment as provided in Section 6.4 below.

        6.4 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price in effect at
any time and the number and kind of securities issuable upon conversion of the
Notes shall be subject to adjustment from time to time upon the happening of
certain events as follows:

            (i) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company at
any time or from time to time after the date of this Note effects a subdivision
of shares of its Common Stock, the number of Conversion Shares issuable to the
Holder immediately before that subdivision shall be proportionately increased
(as at the effective date of such subdivision, or if the Company shall take a
record of holders of its Common Stock for the purpose of so subdividing, as at
the applicable record date, whichever is earlier) to reflect the increase in the
total number of shares of Common Stock outstanding as a result of such
subdivision, and conversely, if the Company at any time or from time to time
after the date of this Note combines shares of the Common Stock into a smaller
number of shares, the number of shares of Conversion Stock issuable to the
Holder immediately before the combination shall be proportionately decreased (as
at the effective date of such combination, or if the Company shall take a record
of holders of its Common Stock for the purpose of so combining, as at the
applicable record date, whichever is earlier) to reflect the reduction in the
total number of shares of Common Stock outstanding as a result of such
combination. Any adjustment under this clause (i) shall become effective at the
close of business on the date the subdivision or combination becomes effective.

            (ii) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the date of this Note makes, or
fixes a record date for the determination of holders of shares of the Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of the Common Stock, then and in each such event, the number of
Conversion Shares issuable to the Holder shall be increased as of the time of
such issuance, or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying the number of Conversion Shares
issuable to the Holder by a fraction (A) the numerator of which shall be the
total number of shares of the Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
PLUS the number of shares of the Common Stock issuable in payment of such
dividend or distribution and (B) the denominator of which is the total number of
shares of the

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Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date.

            (iii) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time or from time to time after the date of this Note
makes, or fixes a record date for the determination of holders of shares of the
Common Stock entitled to receive a dividend or other distribution payable in
securities of the Company other than the shares of the Common Stock, including
but not limited to indebtedness, or in securities of any wholly-owned subsidiary
of the Company then and in each such event, provision shall be made so that the
Holder, upon conversion of this Note, shall receive upon conversion thereof, in
addition to the number of Conversion Shares receivable thereupon, the amount of
securities of the Company or of the applicable subsidiary which the Holder would
have received had Holder been a holder of Common Stock on the date of such event
and had thereafter, during the period from the date of such event to and
including the date of conversion, retained such securities receivable as
aforesaid during such period, subject to all other adjustments called for during
such period under this Section 6.4 with respect to the rights of the Holder.

            (iv) ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER. In the
event of any reorganization of the Company (or any other corporation, the stock
or other securities of which are at the time receivable upon the conversion of
this Note) after the date hereof, or if, after such date, the Company (or any
such other corporation) shall consolidate with or merge into another corporation
or convey all or substantially all its assets to another corporation, then and
in each such case the Holder, upon the conversion hereof as provided in Section
6.1 or 6.2, at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the stock receivable upon the conversion of this Note prior to such
consummation, the stock or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had converted
this Note immediately prior thereto.

            (v) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. In
the event that at any time or from time to time after the date of this Note, the
shares of the Common Stock are changed into the same or a different number of
shares of any class of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets, provided for
elsewhere in this Section 6.4), then and in any such event the kind and amount
of stock and other securities and property receivable upon such
recapitalization, reclassification or other change shall be used for calculation
of the number of Conversion Shares issuable to the Holder, all subject to
further adjustment as provided in this Note.

            (vi) ADJUSTMENT FOR ISSUANCE OF RIGHTS OR WARRANTS. In the event
that at any time or from time to time after the date of this Note, the Company
issues warrants or other rights to purchase Common Stock to all holders of its
Common Stock entitling them to purchase shares of Common Stock at a price below
the then-current Market Price, and such purchase price is below the Conversion
Price, the Conversion Price shall thereafter be decreased to such purchase
price.

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            (vii) ADJUSTMENT FOR ISSUANCE OF COMMON STOCK EQUIVALENTS. In the
event that the Company at any time prior to December __, 2001 issues any Common
Stock Equivalent, other than Excluded Securities, and the price per share for
which additional shares of Common Stock may be issuable thereafter pursuant to
such Common Stock Equivalent shall be less than the Conversion Price then in
effect, then the Conversion Price shall thereafter be decreased to such purchase
price. Upon the expiration or termination of the right to convert, exchange or
exercise any Common Stock Equivalent the issuance of which affected an
adjustment pursuant to this paragraph (vii), to the extent such Common Stock
Equivalent shall not have been converted, exercised or exchanged in its
entirety, then the Conversion Price shall forthwith be readjusted and thereafter
be the price which it would have been (but reflecting any other adjustments in
the Conversion Price made pursuant to the provisions of this Section 6.4 after
the issuance of such Common Stock Equivalent) prior to the issuance of such
Common Stock Equivalent.

            (viii) CERTIFICATE OF CHIEF FINANCIAL OFFICER AS TO ADJUSTMENT. In
each case of an adjustment of the Common Stock, upon the request of the Holder,
the Company shall compute such adjustment in accordance with the provisions of
this Note and prepare a certificate setting forth such adjustment, and showing
in detail the facts upon which such adjustment is based.

        6.5 FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of this Note. The determination of fractional shares
shall be made on the basis of the converted amount of Principal Amount of this
Note plus accrued and unpaid interest at the time of conversion divided by the
Conversion Price. In lieu of any fractional shares to which the Holder would
otherwise be entitled, the Company shall pay cash equal to such fraction
multiplied by the Conversion Price, immediately in effect prior to the event
which would result in the issuance of a fractional share of Common Stock.

        6.6 MECHANICS OF CONVERSION. Upon election of the Holder to convert this
Note into Conversion Shares pursuant to Section 6.1, or upon mandatory
conversion at the option of the Company pursuant to Section 6.2, the Holder
shall surrender this Note or portion thereof, duly endorsed, at the office of
the Company, and shall give written notice to the Company at its principal
corporate office, of the election to convert the same (if applicable) and shall
state therein the name or names in which the certificate or certificates for the
Conversion Shares are to be issued. The Company shall, as soon as practicable
thereafter, issue and deliver to the Holder, or to the nominee or nominees of
the Holder, a certificate or certificates for the number of Conversion Shares to
which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of this Note to be converted, and the person or persons
entitled to receive the Conversion Shares issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. In the event that only a portion of this Note is
converted into Conversion Shares, the Company shall issue a new Note to the
Holder evidencing the reduced Principal Amount after the partial conversion.

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     7. EVENTS OF DEFAULT.

        7.1 EVENTS CONSTITUTING AN EVENT OF DEFAULT. Each of the following
described events shall constitute an "Event of Default" under this Note:

            (i) INTEREST PAYMENT DEFAULT. The Company defaults in any payment of
interest on this Note when the same becomes due and payable and such default
continues for a period of thirty (30) days;

            (ii) PRINCIPAL PAYMENT DEFAULT. The Company defaults in the payment
of the Principal Amount when the same becomes due and payable on the Maturity
Date, upon required repurchase or otherwise.

            (iii) COVENANT DEFAULT. The Company fails to perform or observe any
of the provisions contained in this Note, the Purchase Agreement or in the
Registration Rights Agreement and such failure shall continue for more than
sixty (60) days after the Holder has given written notice to the Company; or

            (iv) DEFAULT ON OTHER INDEBTEDNESS. The Company or any Significant
Subsidiary shall fail to pay any indebtedness of the Company or such Subsidiary
(including without limitation the Senior Debt) within any applicable grace
period after final maturity or such indebtedness is accelerated by the holders
thereof because of a default and the total amount of such indebtedness unpaid or
accelerated exceeds $5,000,000 or its foreign currency equivalent at the time;

            (v) JUDGMENTS. Any judgment or decree for the payment of money in
excess of $5,000,000 or its foreign currency equivalent at the time it is
entered against the Company or any Significant Subsidiary, remains outstanding
for a period of 60 days following the entry of such judgment or decree and is
not discharged, waived or the execution thereof stayed within 10 days after the
Holder has given written notice to the Company;

            (vi) CONSENT TO BANKRUPTCY. The Company or any Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

                 (A) commences a voluntary case;

                 (B) consents to the entry of an order for relief against it in
an involuntary case;

                 (C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or

                 (D) makes a general assignment for the benefit of its
creditors; or

                 (E) takes any comparable action under any foreign laws relating
to insolvency; and

                                       11

<PAGE>

            (vii) BANKRUPTCY ORDER. A court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:

                 (A) is for relief of the Company or any Significant Subsidiary
in an involuntary case;

                 (B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property;

                 (C) orders the winding up or liquidation of the Company or any
Significant Subsidiary; or

                 (D) any similar relief is granted under any foreign laws and in
each of (A), (B), and (C) above, the order or decree remains unstayed and in
effect for sixty (60) days.

The foregoing will constitute Events of Default whatever the reason for any such
Event of Default and whether it is voluntary or involuntary or is effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.

        7.2 CONSEQUENCES OF AN EVENT OF DEFAULT. If an Event of Default (other
than an Event of Default specified in Section 7.1(vi) or Section 7.1(vii) hereof
with respect to the Company) occurs and is continuing, the Holder by notice to
the Company, may declare the Principal Amount and accrued but unpaid interest on
this Note to be due and payable. If an Event of Default specified in Section
7.1(vi) or Section 7.1(vii) hereof with respect to the Company occurs, the
Principal Amount and accrued but unpaid interest on the Note shall IPSO FACTO
become and be immediately due and payable without any declaration or other act
on part of the Holder. The Holder may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of Principal Amount or interest that has become due solely because of
acceleration. No such rescission shall affect any subsequent Event of Default or
impair any right consequent thereto.

     8. CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the
Holder shall have the right to require that the Company repurchase this Note at
a purchase price in cash equal to 101% of the Principal Amount outstanding on
the date of purchase plus accrued and unpaid interest, if any, to the date of
purchase, in accordance with the terms contemplated in section 8(b). For the
avoidance of doubt, the additional 1% included in the purchase price of the Note
upon a Change of Control shall not be considered a premium when determining the
Principal Amount of the Note for use in the computation of such purchase price.

            (a) Within 30 days following any Change of Control, the Company
shall mail a notice to the Holder stating:

               (1) that a Change of Control has occurred and that the Holder has
          the right to require the Company to purchase the Note at a purchase
          price in cash

                                       12

<PAGE>

          equal to 101% of the Principal Amount on the date of purchase plus
          accrued and unpaid interest, if any, to the date of purchase;

               (2) the circumstances and relevant facts regarding such Change of
          Control (including information with respect to pro forma historical
          income, cash flow and capitalization, each after giving effect to such
          Change of Control);

               (3) the repurchase date (which shall be no earlier than 30 days
          nor later than 60 days from the date such notice is mailed); and

               (4) the instructions determined by the Company, consistent with
          this Section 8, that the Holder must follow in order to have the Note
          purchased.

            (b) If the Holder elects to have the Note purchased, it will be
required to surrender the Note, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three business days
prior to the purchase date. The Holder will be entitled to withdraw its election
if the Company receives not later than one business day prior to the purchase
date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the Principal Amount which was delivered for purchase by the
Holder and a statement that such Holder is withdrawing his election to have the
Note purchased.

            (c) On the purchase date, the Company shall pay the purchase price
plus accrued and unpaid interest, if any, to the Holder.

     9. RESTRICTIONS ON TRANSFER.

        9.1 GENERALLY. The Holder acknowledges that this Note and the Conversion
Shares issuable upon its conversion have not been registered or qualified under
federal or state securities laws. This Note shall not be transferable by the
Holder except in accordance with the terms and conditions set forth in the
Purchase Agreement, this Note and the Securities Act of 1933, as amended.

        9.2 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. This Note does not by
itself entitle the Holder to any voting rights or other rights as a stockholder
of the Company. In the absence of conversion of this Note, no provision of this
Note, and no enumeration in this Note of the rights or privileges of the Holder
shall cause such Holder to be a stockholder of the Company for any purpose.

        9.3 ASSIGNMENT. This Note may be assigned by the Holder only with the
Company's prior written consent, and only if the assignee of this Note
acknowledges in writing to the Company that it is bound by all the terms and
conditions of this Note.

     10. AMENDMENT AND WAIVER.

        10.1 AMENDMENT. The provisions of this Note may not be amended,
modified, waived, changed or terminated other than by an agreement in writing
signed by the Company and the Holder.

                                       13

<PAGE>

        10.2 WAIVER. No failure or delay on the part of any party hereto in
exercising any power or right under this Note shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Company in any case shall entitle it to any notice
or demand in similar or other circumstances. No waiver or approval by the Holder
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval by the Holder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.

     11. MISCELLANEOUS.

        11.1 REGISTERED HOLDER. The Company may consider and treat the person in
whose name this Note shall be registered as the absolute owner thereof for all
purposes whatsoever (whether or not this Note shall be overdue) and the Company
shall not be affected by any notice to the contrary. In case of transfer of this
Note by operation of law, the transferee agrees to notify the Company of such
transfer and of its address, and to submit appropriate evidence regarding such
transfer so that this Note may be registered in the name of the transferee. This
Note is transferable only on the books of the Company by the holder hereof, in
person or by attorney, on the surrender hereof, duly endorsed. Communications
sent to any registered owner shall be effective as against all holders or
transferees of the Note not registered at the time of sending the communication.

        11.2 COSTS OF ENFORCEMENT. The Company shall reimburse the Holder for
all reasonable documented costs and expenses, including reasonable attorneys'
fees, incurred by the Holder to enforce the provisions hereof and collect the
Company's obligations hereunder.

        11.3 GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to conflict
of laws principles applied in the State of New York.

        11.4 NOTICES. The notice provisions under Section 7.9 of the Purchase
Agreement are applicable to this Note.

        11.5 USURY LIMITATION. In no event shall the amount paid or agreed to be
paid to the Holder for the use or forbearance of money to be advanced hereunder
exceed the highest lawful rate permissible under the then applicable usury laws.
If it is hereafter determined by a court of competent jurisdiction that the
interest payable hereunder is in excess of the amount which the Holder may
legally collect under the then applicable usury laws, such amount which would be
excessive interest shall be applied to the payment of the unpaid principal
balance due hereunder and not to the payment of interest or, if all principal
shall previously have been paid, promptly repaid by the Holder to the Company.

        11.6 SEVERABILITY. Every provision of this Note is intended to be
severable. If any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid, such illegal or invalid term or provision
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.

                                       14

<PAGE>

        11.7 TERMS BINDING. By acceptance of this Note, the Holder of this Note
(and each subsequent Holder of this Note) accepts and agrees to be bound by all
the terms and conditions of this Note and the Purchase Agreement.

        11.8 WAIVER OF JURY TRIAL. THE HOLDER AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE HOLDER OR THE COMPANY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER'S PURCHASING THIS NOTE.

                                       15

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer.

                                            NEON COMMUNICATIONS, INC.

                                            By:
                                                --------------------------------
                                                 Name:   Stephen E. Courter
                                                 Title:  Chief Executive Officer<PAGE>

                                                                    EXHIBIT 10.3

                          REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of June 15,
2001, among NEON COMMUNICATIONS, INC., a Delaware corporation ("Neon") and MODE
1 COMMUNICATIONS, INC., a Connecticut corporation ("Mode 1").

                              B A C K G R O U N D:

     Pursuant to a certain Subordinated Convertible Note Purchase Agreement
dated as of the date hereof by and between Neon and Mode 1 (the "Mode 1 Purchase
Agreement"), Mode 1 is purchasing and Neon is selling an 18% Subordinated
Convertible Note (the "Mode 1 Note"), all as more fully described in the Mode 1
Purchase Agreement.

     NOW THEREFORE, in consideration of the foregoing and of the mutual promises
and covenants set forth herein, the parties hereto, intending to be legally
bound, agree as follows:

     1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:

        (a) "APPLICABLE PERIOD" shall mean the time between the date on which a
Registration Statement covering the Registrable Securities has been declared
effective by the Commission and the earlier of (i) the date on which each Seller
has completed the distribution of the Registrable Securities described in the
Registration Statement or (ii) the date on which all of the Registrable
Securities held by the Sellers shall be eligible to be sold pursuant to Rule
144(h) (or any similar successor provision).

        (b) "BUSINESS DAY" shall mean a day that is not a Saturday, a Sunday, or
a day on which banking institutions in New York, New York are required to be
closed.

        (c) "CLOSING" shall mean the closing of the transactions contemplated by
the Mode 1 Purchase Agreement.

        (d) "CLOSING DOCUMENTS" shall mean this Agreement, the Mode 1 Purchase
Agreement and each of the other agreements and documents delivered by Neon at
Closing.

        (e) "COMMISSION" shall mean the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.

        (f) "COMMON STOCK" shall mean the common stock, par value $.01 per
share, of Neon.

        (g) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, all as the same shall be in
effect from time to time.

<PAGE>

        (h) "MODE 1 SHARES" shall mean the shares of Common Stock issuable upon
conversion of the Mode 1 Note.

        (i) "NASDAQ" shall mean The Nasdaq Stock Market or any market successor
thereto.

        (j) "PERMITTED TRANSFER" shall mean (i) a sale, assignment, pledge or
transfer of the interest of Mode 1 in all or any part of the Registrable
Securities to any third party, (ii) a Transfer by Mode 1 to a subsidiary,
limited partnership or limited liability company, which subsidiary, limited
partnership or limited liability company is controlled by Mode 1; PROVIDED,
HOWEVER, that each Transferee shall, prior to the Transfer of Registrable
Securities to such Transferee, execute and deliver to Neon a valid and binding
agreement in the form attached hereto as EXHIBIT A.

        (k) "PERMITTED TRANSFEREE" shall mean a transferee in a transaction
constituting a Permitted Transfer.

        (l) "PERSON" means an individual, partnership, limited liability
company, corporation, trust or unincorporated organization or government or
agency or political subdivision thereof.

        (m) "PROSPECTUS" shall mean (i) each preliminary prospectus included in
the Registration Statement filed prior to the time it becomes effective; (ii)
the form of prospectus first filed with the Commission pursuant to Rule 424(b);
(iii) all supplements thereto; and (iv) amendments thereto which shall have been
declared effective by the Commission.

        (n) "REGISTRABLE SECURITIES" shall mean (i) the Mode 1 Shares and (ii)
any Common Stock and any other security issued as an interest payment or other
distribution with respect to or in exchange for or in replacement of the Mode 1
Shares, PROVIDED, HOWEVER, that Registrable Securities shall not include any
shares of Common Stock which have been sold to the public either pursuant to the
Registration Statement or pursuant to Rule 144, which are eligible for resale
pursuant to Rule 144(k) under the Securities Act, or which have been sold in any
other transaction in which the transferor's rights under this Agreement are not
assigned.

        (o) The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to
a registration effected by preparing and filing with the Commission a
registration statement in compliance with the Securities Act and applicable
rules and regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement by the Commission.

        (p) "REGISTRATION EXPENSES" shall mean all expenses incurred by Neon in
effecting any registration pursuant to this Agreement, including all
registration, qualification and filing fees, reproduction and printing expenses,
expenses incurred by Neon in the preparation of any registration statement, fees
and disbursements of counsel for Neon and those of Neon's other independent
professional advisors and experts, listing fees and other costs incurred in
listing Registrable Securities for trading on Nasdaq or on any stock exchange,
blue sky fees and expenses (if any), expenses of any regular or special
accounting services provided to Neon or required by any such registration, and
the reasonable fees and disbursements of one counsel selected by Mode 1, but
shall not include Selling Expenses.

                                       2

<PAGE>

        (q) "REGISTRATION STATEMENT" shall mean any registration statement to be
filed or filed by Neon with the Commission pursuant to Section 2, below
(including (a) all amendments and supplements thereto, (b) each Prospectus
contained therein, and (c) all exhibits thereto or incorporated by reference
therein).

        (r) "RULE 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the commission.

        (s) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and regulations thereunder, all as the same shall be in effect from time to
time.

        (t) "SELLER" shall mean Mode 1, each Permitted Transferee thereof, and
any other holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with Section
11(a) hereof, in each case who are offering for resale Registrable Securities on
a Registration Statement.

        (u) "SELLING EXPENSES" shall mean all brokerage fees, selling
commissions and underwriting discounts (if any), and stock transfer taxes
applicable to the sale of Registrable Securities and fees and disbursements of
counsel for any Seller (other than the fees and disbursements of such counsel
included in Registration Expenses).

        (v) "TRANSFER" shall mean any sale, transfer, encumbrance, gift,
donation, assignment, pledge, hypothecation or other disposition of any Common
Stock or any interest therein, whether voluntary or involuntary, including, but
not limited to, any disposition by operation of law, by court order, by judicial
process or by foreclosure, levy or attachment.

     2. REGISTRATION.

        (a) INITIAL REGISTRATION. As soon as practicable after the Closing, Neon
shall use its best efforts to effect the registration for offer and sale under
the Securities Act of all of the Mode 1 Shares. In furtherance thereof, Neon
shall file with the Commission within one hundred and eighty (180) days of
Closing a registration statement on an appropriate form (which form shall comply
as to form in all material respects with the requirements of the applicable
form) under the Securities Act covering the Mode 1 Shares and that number of
additional shares of Common Stock which represent interest payments that would
become due on the Mode 1 Note through August 15, 2004 if such interest payments
were to be paid in the form of additional shares of Common Stock or additional
convertible notes in accordance with the terms of the Mode 1 Note.

        (b) ADDITIONAL REGISTRATION. Neon shall file an additional registration
statement no later than January 15, 2005, to the extent necessary to register
the offer and sale under the Securities Act of that number of additional shares
of Common Stock which represent interest payments that would become due under
the Mode 1 Note through its maturity date if such interest payments were to be
paid in the form of additional shares of Common Stock or additional convertible
notes in accordance with the terms of the Mode 1 Note.

     3. REGISTRATION EXPENSES. All Registration Expenses shall be borne by Neon.

                                       3

<PAGE>

     4. REGISTRATION  PROCEDURES. If and whenever Neon is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any Registrable Securities under the Securities Act, Neon shall, at Neon's
expense:

        (a) notify each Seller as to: (i) the initial filing of the Registration
Statement; (ii) the receipt of any comments thereon from the Commission; (iii)
any request from the Commission or any state regulatory authority for amendment
of the Registration Statement or for supplement to any Prospectus or for any
additional information in connection therewith; (iv) the filing of each
amendment thereto, including any post-effective amendment; (v) the effectiveness
of the Registration Statement or any post-effective amendment thereto; and (vi)
the issuance by the Commission or any state regulatory authority of any stop
order suspending the effectiveness of the Registration Statement or the use of
any Prospectus or the institution of any proceedings for that purpose;

        (b) use its best efforts to prevent the issuance of any stop order
preventing or suspending the use of any Prospectus and to obtain as soon as
possible the lifting or withdrawal thereof, if issued;

        (c) keep the Registration Statement effective from the effective date
thereof to and including the first to occur: (i) ninety-six (96) months from the
Closing Date; (ii) the date on which all Sellers have completed the distribution
of Registrable Securities described in the Registration Statement; or (iii) the
date on which all of the Registrable Securities held by the Sellers shall be
eligible to be sold pursuant to Rule 144(k) (or any similar successor
provision);

        (d) promptly prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as shall be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement and thereafter use its
reasonable best efforts to cause any such post-effective amendment to be
declared effective by the Commission as promptly as permitted by the Commission;

        (e) furnish to each Seller: (i) such number of Prospectuses and other
documents incident thereto, including any amendment of or supplement to the
Prospectus, as such Seller may reasonably request (for dissemination or
otherwise) from time to time; (ii) two signed copies of the Registration
Statement and all amendments thereto, including all exhibits filed therewith;
and (iii) such number of conformed copies of the Registration Statement
(including such number of copies of the exhibits filed therewith as may
reasonably be requested), including documents incorporated by reference therein,
as such Seller may reasonably request from time to time;

        (f) notify each Seller of Registrable Securities covered by the
Registration Statement at any time

            (i) when a Prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event or the failure of any
event to occur or the discovery of any facts as a result of which the Prospectus
included in the Registration Statement, as then in effect, includes any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or

                                       4

<PAGE>

incomplete in the light of the circumstances then existing, and at the request
of a Seller, prepare and furnish to such Seller, a reasonable number of copies
of a supplement to or an amendment of such Prospectus as may be necessary so
that, as thereafter delivered to the purchaser(s) of such shares, such
Prospectus shall not include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing;

            (ii) if, during the Applicable Period, the representations and
warranties of Neon contained in this Agreement or in the Mode 1 Purchase
Agreement, as the case may be, cease to be true and correct in any material
respect;

            (iii) if Neon receives any notification of the issuance of a stop
order or the suspension of the registration or qualification of the Registrable
Securities in any jurisdiction or the initiation of any proceeding for such
purpose; and

            (iv) that, in Neon's reasonable determination, a post-effective
amendment to the Registration Statement would be appropriate;

        (g) use its best efforts to register or qualify the Registrable
Securities covered by the Registration Statement under the securities or Blue
Sky laws of such states as the Seller shall reasonably request, and do any and
all other acts and things that may be necessary or desirable to enable the
Seller to consummate the public sale or other disposition in such states of the
Registrable Securities owned by such Seller; PROVIDED, HOWEVER that Neon shall
not be required in connection with this paragraph (g) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;

        (h) use its best efforts to list the Registrable Securities registered
pursuant to this Agreement on Nasdaq and any securities exchange on which shares
of the Common Stock are then listed;

        (i) make generally available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve (12) months, but not more than eighteen (18) months, beginning with the
first month after the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated under
the Securities Act); and

        (j) Neon shall provide one copy of each notice or document given or
furnished to each Seller pursuant to Section 4(a) (e) and (f) above,
concurrently with the provision thereof to each Seller and/or as promptly
thereafter as possible, to legal counsel designated by each Seller in a written
notice given to Neon.

                                       5

<PAGE>

     5. INFORMATION BY EACH SELLER.

        (a) Each Seller shall furnish to Neon such information regarding such
Seller, the Registrable Securities held by such Seller and the sale or other
Transfer thereof proposed by such Seller as Neon may request in writing and as
shall be reasonably required in connection with the Registration.

        (b) Each Seller shall furnish to Neon such certificates and documents
confirming as of the effective date of the Registration Statement the
representations and warranties and performance of the covenants made herein by
such Seller.

     6. REPRESENTATION AND WARRANTIES OF NEON. Neon represents and warrants
to each Seller as of the date hereof follows:

        (a) Neon complies with the conditions for the use of Form S-3 under the
Securities Act in connection with the resale of securities on behalf of a
selling stockholder.

        (b) The Registration Statement will contain, 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
Securities Act. The documents incorporated by reference in the Prospectus, at
the time filed with the Commission, conformed in all material respects to the
then applicable requirements of the Exchange Act or the Securities Act. The
Registration Statement will not contain any untrue statement of a material fact
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 will not contain as of the date of such
Prospectus, any untrue statement of material fact; and will not omit as of the
date of such Prospectus, 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 Neon makes no representations or warranties as to information contained in
or omitted from the Registration Statement or the Prospectus, in reliance upon,
and in conformity with, written information furnished to Neon by or on behalf of
Mode 1 or any predecessor of Mode 1 or any other Seller, specifically for use in
the preparation thereof or in any report or other document incorporated therein
by reference, including, without limitation, any Current Report on Form 8-K
under the Exchange Act which Neon may file in connection with the transactions
contemplated by the Note Purchase Agreement.

        (c) The consolidated financial statements of Neon and its subsidiaries,
together with related notes and schedules as set forth or incorporated by
reference in the Registration Statement, present fairly the financial position
and the results of operations and cash flows of Neon 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, and all adjustments necessary for a fair presentation of
results for such periods have been made.

        (d) No approval, consent, order, authorization, designation, or filing
by or with any regulatory, administrative or other governmental body is
necessary to be made by or on

                                       6

<PAGE>

behalf of Neon in connection with the execution and delivery by Neon of this
Agreement and the consummation of the transactions herein contemplated except
(i) as required under the Securities Act or the Exchange Act; (ii) in connection
with the listing of the Registrable Securities on Nasdaq; or (iii) as may be
necessary to qualify the Registrable Securities for public offering under state
securities or Blue Sky laws.

     7. REPRESENTATION AND WARRANTIES OF EACH SELLER. Each Seller, severally
and not jointly, represents and warrants, with respect to itself only, the
following:

        (a) Seller has, and will have, upon the effectiveness of the
Registration Statement and at the time of any sale or other Transfer thereunder,
good and marketable title to the Registrable Securities held by it which it
seeks to sell pursuant to the Registration Statement, free and clear of any
liens, encumbrances and claims, at law or in equity, and full right, power and
authority to effect the sale and delivery of such Registrable Securities.

        (b) Seller has not taken, directly or indirectly, any action designed
to, or which has constituted, or which might reasonably be expected to cause or
result in the manipulation or stabilization of the price of the Common Stock
and, other than as permitted by the Securities Act, Seller will not distribute
any Prospectus (as defined in the Securities Act) or other offering material in
connection with the offering of the Registrable Securities.

     8. COVENANTS OF EACH SELLER. Each Seller, severally and not jointly
covenants and agrees, with respect to itself only, as follows:

        (a) Seller shall not make or effect any Transfer, directly or,
indirectly, of any Registrable Securities, owned of record or beneficially by
it, (i) prior to the effectiveness of the Registration Statement, or (ii)
thereafter, except as permitted by and in accordance with the respective terms
and conditions of this Agreement (including Section 6 (b), below) and the other
Closing Documents.

        (b) Subsequent to the effectiveness of the Registration Statement,
Seller shall not make or effect any Transfer of Registrable Securities except:
(i) Permitted Transfers; (ii) Transfers pursuant to the Prospectus and as
provided under the caption "Plan of Distribution" therein; and (iii) Transfers
in accordance with Rule 144(k); PROVIDED, HOWEVER, that if, for any reason, the
Registration Statement shall not have become effective prior to the first
anniversary of Closing, Transfers of Registrable Securities may be effected in
accordance with Rule 144; and PROVIDED, FURTHER, HOWEVER, that if the
Registration Statement shall become effective but the Prospectus shall
thereafter become unusable to effect sales of Registrable Securities during the
Applicable Period due to the entry of a stop order, the filing of a
post-effective amendment which has not been declared effective or for any other
reason, then Transfers of Registrable Securities may be effected pursuant to the
provisions of Rule 144.

        (c) Seller shall promptly notify Neon of each Transfer (other than
Transfers effected pursuant to the Prospectus or Rule 144) of Registrable
Securities made or effected by it, but in no event later than five (5) Business
Days after such Transfer. Each such Seller shall specify the name, address and
tax identification number of each transferee, together with the amount of
Registrable Securities transferred to such transferee.

                                       7

<PAGE>

        (d) Seller shall promptly notify Neon if it shall have become an
"affiliate" of Neon within the meaning of Rule 144(a).

        (e) Seller shall not take, directly or indirectly, any action designed
to cause or result in, or which might reasonably be expected to constitute, the
manipulation or stabilization of the price of Common Stock or of any other
securities of Neon. Seller will use its best efforts to maintain an orderly
market when distributing the Registrable Securities.

        (f) The information pertaining to Seller provided or which will be
provided to Neon by or on behalf of each such Seller for inclusion under the
caption "Selling Stockholders" in each Prospectus will be complete and accurate
in all material respects as to such Seller as of the date of such Prospectus.

     9. INDEMNIFICATION WITH RESPECT TO SECURITIES MATTERS.

        (a) Neon will indemnify each Seller, each of their respective officers,
directors and partners, agents, representatives, legal counsel, and accountants
and each Person controlling each such Seller within the meaning of Section 15 of
the Securities Act with respect to which Registration has been effected pursuant
to this Section 9 against all expenses, claims, losses, damages, and liabilities
(or actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any Prospectus, offering circular, or other document (including any
related Registration Statement) incident to any such Registration, or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statement therein not misleading, or
any violation by Neon of the Securities Act or any rule or regulation thereunder
applicable to Neon and relating to action or inaction required of Neon in
connection with any such Registration, and will reimburse any such Seller, its
respective officers, directors, partners, agents, representatives, legal
counsel, and accountants and each person controlling such Seller for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action;
PROVIDED, HOWEVER, that Neon will not be liable in any such case to the extent
that any such claim, loss, damage, liability, or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to Neon by any Seller and stated to be specifically for use therein;
PROVIDED, FURTHER, THAT Neon will not be liable in any case to the extent such
claim, loss, damage, liability or action arises out of the Indemnified Party's
(as defined below) failure to send or give a copy of the final Prospectus, as
the same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final Prospectus so
long as such final Prospectus, and any amendments or supplements thereto, have
been furnished to such Indemnified Party. It is agreed that the indemnity
agreement contained in this Section 9 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of Neon (which consent shall not be
unreasonably withheld).

        (b) Each Seller will indemnify Neon, each of its directors, officers,
partners, agents, representatives, legal counsel, and accountants and each
Person who controls Neon within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and

                                       8

<PAGE>

liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement, Prospectus, offering circular, or other document, or
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse Neon, directors, officers, partners, agents, representatives,
legal counsel, and accountants and control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such Registration Statement,
Prospectus, offering circular, or the document in reliance upon and in
conformity with written information furnished to Neon by such Seller or
authorized by such Seller to be furnished to Neon on behalf of such Seller, and
stated to be specifically for use therein; provided, however, that the
obligations of each Seller hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Seller (which consent shall not be unreasonably withheld). The maximum liability
of any Seller for indemnity pursuant to this Section 9(b) shall not exceed the
net proceeds that such Seller realized from the sale of its Registrable
Securities pursuant to the Prospectus or, if such Seller has not yet sold any
Registrable Securities pursuant to the Prospectus at the time that
indemnification is required pursuant to this Agreement then such Seller's
maximum liability hereunder shall be the value of the Common Stock beneficially
held by such Seller covered by the Prospectus measured by the closing price of
such Common Stock on Nasdaq or other market or exchange on which the Common
Stock are traded, or, if not so traded, by a fair market value standard
reasonably approved by Neon's then current Board of Directors.

        (c) Each Person entitled to indemnification under this Section 9 (the
"INDEMNIFIED PARTY") shall give notice to the Person required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement to the
extent such failure is not prejudicial. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any, judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.

        (d) If the indemnification provided for in this Section 9 is unavailable
to or insufficient to hold harmless an Indemnified Party with respect to any
loss, liability, claim, damage, or expense, (or actions or proceedings in
respect thereof) referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute

                                       9

<PAGE>

to the amount paid or payable by such Indemnified Party as a result of such
loss, liability, claim, damage, or expense (or actions or proceedings in respect
thereof) in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party, on the one hand, and of the Indemnified Party on the
other, in connection with the statement or omissions that resulted in such loss,
liability, claim, damage, or expense (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations; provided,
however, that no Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contributions from any Person that was not guilty of such fraudulent
misrepresentation. The relative fault of the Indemnifying Party and of the
Indemnified Party 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 Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.

     The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 9(d) were determined by pro rata
allocation or by any other method, of allocation which does not take account of
the equitable considerations referred to above in this Section 9 (d). The amount
paid or payable by an Indemnified Party as a result of any loss, liability,
claim, damage, or expense (or actions or proceedings in respect thereof)
referred to above in this Section 9(d) 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.

        (e) The obligations of each Seller to indemnify and hold harmless Neon
and each other person entitled to indemnity as an Indemnified Party under
Section 9(b), above, is independent of any provision of the Mode 1 Purchase
Agreement and the right of Neon and each such other Person to be indemnified
under Section 9(b) shall not be limited by or otherwise subject to any provision
of the Mode 1 Purchase Agreement. Specifically, by way of example, and not by
way of limitation, such claims shall not be subject to any minimum amount and
such claims may not be asserted against or offset by any portion of the Mode 1
Note.

     10. REPORTING REQUIREMENTS.  Neon agrees that:

        (a) during the Applicable Period, for so long as Neon is subject to the
reporting requirements of Section 13 or 15 of the Exchange Act, Neon will file
the reports required to be filed by it under the Securities Act and Section
13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the
Commission thereunder;

        (b) if Neon shall cease to be so required to file such reports, it will,
upon the request of any Seller with Registrable Securities covered under a
Registration Statement, take such further action that is reasonable in the
circumstances, including, without limitation, the provision of current public
information as required by Rule 144(c) (or any similar successor provision), to
enable such Seller to sell its Registrable Securities pursuant to Rule 144; and

        (c) periodically furnish to each Seller with Registrable Securities
covered under a Registration Statement forthwith upon written request a written
statement by Neon as to its

                                       10

<PAGE>

compliance with the reporting requirements of the Securities Act, the Exchange
Act and/or Rule 144, as appropriate.

     11. MISCELLANEOUS.

        (a) BENEFITS NON-TRANSFERABLE. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Closing Document, the
obligation of Neon to effect the Registration and, thereafter, to maintain the
effectiveness of the Registration Statement is solely for the benefit of Mode 1
and, subject to Section 1(g), its Permitted Transferees.

        (b) GOVERNING LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of Delaware as applied to
contracts made and fully performed therein.

        (c) SECTION HEADINGS. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.

        (d) INTERPRETATION. The masculine (or neuter) pronoun and the singular
number shall include the masculine, feminine and neuter genders and the singular
and plural numbers. All references in the singular or plural shall be deemed to
have been made, respectively, in the plural or singular number as well, as the
context may require.

        (e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, including, without limitation, execution by facsimile, each of
which shall be deemed an original, and all of which when taken together shall be
deemed to be one and the same instrument. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for any
of the other counterparts.

        (f) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
provisions of this Section 9(f), may not be amended, modified or supplemented,
otherwise than with the prior written consent of Neon and Mode 1.

        (g) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered first
class mail, telex, telecopier, or any courier guaranteeing overnight delivery:
(i) if to Mode 1 addressed as follows: 107 Selden Street, Berlin, Connecticut
06037 and (ii) if to Neon, addressed to Neon's address as set forth in the Mode
1 Purchase Agreement, and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 9(g).

     All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and on the next
Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.

        (h) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of the parties
hereto, subject to Section 9(a), above, provided, however, that nothing herein
shall be deemed to permit any assignment,

                                       11

<PAGE>

transfer or other disposition of Registrable Securities in violation of the
terms of this Agreement, the Note Purchase Agreement or applicable law. If any
transferee of any Seller shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities, such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

                                       12

<PAGE>

         IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Registration Rights Agreement on the date first
above written.

Attest:                                  NEON COMMUNICATIONS, INC.

/s/ Barbara Johnson                      By:  /s/ Stephen E. Courter
---------------------------------            ---------------------------------
Name: Barbara Johnson                         Name:  Stephen E. Courter
Admin Assistant and                           Title: Chief Executive Officer
Assistant Secretary

Attest:                                  MODE 1 COMMUNICATIONS, INC.

/s/ Leonard Rodriguez                    By:  /s/ John H. Forsgren
---------------------------------            ---------------------------------
Name: Leonard Rodriguez                       Name:  John H. Forsgren
in house Counsel                              Title: Exec VP and CFO of NU
                                                     as Agent for Mode 1

                         REGISTRATION RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                                                       EXHIBIT A

                               ADOPTION AGREEMENT

        This Adoption Agreement ("ADOPTION AGREEMENT") is executed by the
undersigned (the "TRANSFEREE") pursuant to the terms of that certain
Registration Rights Agreement dated as of June 15, 2001 (the "AGREEMENT") by and
among Neon Communications, Inc. and the other parties thereto. Capitalized terms
used but not defined herein shall have the respective meanings ascribed to such
terms in the Agreement. By the execution of this Adoption Agreement, the
Transferee agrees as follows:

        1. ACKNOWLEDGMENT. Transferee acknowledges that Transferee is acquiring
certain securities of the Company (the "Securities"), subject to the terms and
conditions of the Agreement.

        2. AGREEMENT. Transferee (i) agrees that the Securities acquired by
Transferee shall be bound by and subject to the terms of the Agreement, and (ii)
hereby adopts the Agreement with the same force and effect as if Transferee were
originally a party thereto, with the effect that Transferee shall hereafter be
deemed a "Seller" for the purposes of the Agreement.

        3. NOTICE. Any notice required or permitted by the Agreement shall be
given to Transferee at the address listed beside Transferee's signature below.

        EXECUTED AND DATED as of this ____ day of __________________.

                             [NAME OF TRANSFEREE]

                             By:________________________________________________
                             Name:______________________________________________
                             Title:_____________________________________________

                             Social Security Number or Tax ID Number:___________
                             Address:___________________________________________
                             Fax:_______________________________________________

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