Document:

EXHIBIT 10.3

     AGREEMENT, LIMITED WAIVER AND SEVENTH AMENDMENT, dated as of October 30,
2002 (this "Seventh Amendment"), among FIBERNET OPERATIONS, INC., a Delaware
corporation ("FiberNet"), DEVNET L.L.C., a Delaware limited liability company
("Devnet" and, together with FiberNet, the "Borrowers"), and the financial
institutions party to the Credit Agreement (as defined below) as lenders
(collectively, the "Lenders"), to the AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of February 9, 2001 (the "Credit Agreement"), among the Borrowers, the
Lenders, DEUTSCHE BANK AG NEW YORK BRANCH ("DBAG"), as administrative agent for
the Lenders (in such capacity, the "Administrative Agent"), TD SECURITIES (USA)
INC. ("TD"), as syndication agent for the Lenders (in such capacity, the
"Syndication Agent"), and WACHOVIA INVESTORS, INC., as documentation agent for
the Lenders (in such capacity, the "Documentation Agent").

                                    RECITALS
                                    --------

     WHEREAS, the Borrowers wish to make certain amendments to the Credit
Agreement, which are more particularly described herein and to waive an Event of
Default identified herein.

                                    AGREEMENT
                                    ---------

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

                                   ARTICLE I.
                                   DEFINITIONS

     Capitalized terms used but not otherwise defined herein shall have the
meanings given to such terms in the Credit Agreement.

                                   ARTICLE II.
                  REDUCTION OF COMMITMENTS AND RELATED ACTIONS

     Pursuant to Section 2.5 of the Credit Agreement, the Borrowers hereby
cancel permanently $1,000,000 of Term Loan Commitments (in respect of which no
Term Loans are currently outstanding) and $611,465 of Revolving Loan Commitments
(in respect of which no Revolving Loans or Letters of Credit are currently
outstanding), which cancellation shall be effective, without any further action
on the part of the Borrowers or any other Person, upon the Lender Common Stock
Closing. All outstanding Letters of Credit shall remain outstanding on the date
of the Lender Common Stock Closing, provided that the aggregate amount of all
outstanding Letter of Credit Obligations shall not exceed $7,140,535 In
addition, the Borrowers shall, concurrently with the Lender Common Stock
Closing, prepay Term Loans in an aggregate principal amount of $41,000,000 (to
be allocated to the Lenders in the amounts set forth on Schedule A attached
hereto) and prepay, and, pursuant to Section 2.5 of the Credit Agreement, cancel
permanently Revolving Loan Commitments in an aggregate principal amount of
$25,000,000, which prepayment shall be made by the issuance to the Lenders of
common stock and warrants pursuant to the Stock Purchase Agreement and which
cancellation of commitments

                                       1

<PAGE>

shall be effective without any further action on the part of the Borrowers, any
Lender or any other Person upon the Lender Common Stock Closing. In connection
with and at the same time as the prepayments of Term Loans and Revolving Loans
described in the preceding sentence, the Borrowers shall pay accrued interest
thereon in the amount of $3,156,579.77 (which amount represents a portion of the
$5,156,579.77 of interest on such Loans which was due and payable, but was not
paid, on any Interest Payment Date occurring prior to the date of the Seventh
Amendment) in the manner set forth in clause (i) of the proviso that is being
added to Section 2.3.C. of the Credit Agreement in accordance with Section 3.05
hereof. All other interest in respect of such Loans which accrued but was unpaid
as of the date of the Seventh Amendment shall be subject to the provisions set
forth with respect thereto in the proviso that is being added to Section 2.3.C.
of the Credit Agreement in accordance with Section 3.05 hereof. After giving
effect to the forgoing transactions, the aggregate amount of the Term Loan
Commitments on the date of the Seventh Amendment shall be $26,156,579.77 and the
aggregate amount of the Revolving Loan Commitments on the date of the Seventh
Amendment shall be $14,388,535, which amounts the parties hereto hereby
acknowledge are the total respective Term Loan and Revolving Loan principal
amounts outstanding as of the date hereof.

                                  ARTICLE III.
                                   AMENDMENTS

     Section 3.01 Definitions.

     (a) The following defined terms are added to Section 1.1 of the Credit
Agreement in their proper alphabetical order:

     "Consolidated Revenue" means, for any period, all revenue received by any
member of the Borrower Group that would, in conformity with GAAP, be included on
the consolidated income statement of the Borrower Group as revenue for such
period.

     "Investors" means DBAG, TD, Nortel Networks, IBM Credit Corporation, Bank
One, NA and Wachovia Investors, Inc.

     "Investors' Rights Agreement" means the Investor's Rights Agreement, dated
October 30, 2002, among the Parent and the Investors.

     "Lender Common Stock and Warrants" means the common stock and warrants of
Parent issued to the Lenders pursuant to the Stock Purchase Agreement.

     "Lender Common Stock Closing" means the issuance by Parent to the Lenders
of 440,000,000 shares of Lender Common Stock and Warrants to purchase
110,000,000 shares of Parent's common stock, and the satisfaction of all
conditions precedent to closing under the Stock Purchase Agreement.

     "Lender Common Stock Conversion" means the conversion of debt to the equity
capital of the Parent by the Lenders in an aggregate amount of $66,000,000, as
more particularly described in Article II of the Seventh Amendment.

                                       2

<PAGE>

     "Lender Common Stock Conversion Documents" means the Stock Purchase
Agreement, the Investors' Rights Agreement, the Stockholders' Agreement and the
warrants issued in connection therewith, together with any other instruments and
agreements entered into by the Parent or its Subsidiaries in connection
therewith, as the same may be amended, supplemented, replaced or otherwise
modified from time to time in accordance with this Agreement.

     "LOC Revolving Loan" has the meaning assigned to that term in Section
2.2.A.

     "Required Equity" means the issuance of common stock and warrants of the
same class and series as, and otherwise identical to, the Lender Common Stock
and Warrants, yielding Net Proceeds of at least $3,300,000.

     "Seventh Amendment" means the Agreement and Seventh Amendment to the Credit
Agreement, dated October 30, 2002, among the Borrowers and the Administrative
Agent.

     "Stock Purchase Agreement" means the Common Stock and Warrant Purchase
Agreement, dated October 30, 2002, among the Parent and the Investors.

     "Stockholders' Agreement" means the Stockholders' Agreement, dated October
30, 2002, among the Parent and the Investors.

     (b) The definition of "Applicable Margin" is amended by (i) replacing the
period (".") at the end of the first proviso with a semicolon (";") and (ii)
adding the following new sentence before the words "If any financial statement
referred to in Section 5.1(ii)" in the twenty-second line thereof:

     "provided further that, notwithstanding the foregoing, until December 31,
2003, the Applicable Margin for Eurodollar Rate Loans shall be 3.75% and for
Base Rate Loans shall be 2.75%."

     (c) The definition of "Change in Control" is amended by (i) replacing the
period (".") at the end of the definition with a semicolon (";") and (ii) adding
the following immediately thereafter:

     "provided, however, that, notwithstanding the foregoing, no transaction
effected by any of the Borrowers with the consent of the Lenders in connection
with the Lender Common Stock Conversion shall be deemed a Change in Control."

     (d) The definition of "Consolidated Capitalization" is deleted in its
entirety.

     (e) The definition of "Consolidated Fixed Charge Coverage Ratio" is amended
by (i) replacing the words "two preceding Fiscal Quarters" in the third line
thereof with the words "four preceding Fiscal Quarters", (ii) deleting the words
"multiplied by two" in the third line thereof and (iii) replacing the words
"such period" in the fourth line thereof with the words "the then just ended
Fiscal Quarter".

                                       3

<PAGE>

     (f) The definition of "Consolidated Interest Coverage Ratio" is amended by
(i) replacing the words "prior two consecutive Fiscal Quarters" in the second
and third lines thereof with the words "prior four consecutive Fiscal Quarters"
and (ii) deleting the words "multiplied by two" in the third line thereof.

     (g) The definition of "Consolidated Leverage Ratio" is amended by (i)
replacing the words "two preceding Fiscal Quarters" in the third line thereof
with the words "four preceding Fiscal Quarters" and (ii) deleting the words
"multiplied by two" in the fourth line thereof.

     (h) The definition of "Fee Letters" is amended by (i) replacing the word
"and" in the fifth line thereof with a comma (",") and (ii) adding the following
new clause after the words "and IBM Credit Corporation" in the sixth line
thereof:

          "and (v) the Fee Letter, dated October 30, 2002, among the Borrowers,
     DBAG, Wachovia Securities, Inc., TD, Bank One, NA, Nortel Networks and IBM
     Credit Corporation."

     (i) The definition of "Net Revenue" is deleted in its entirety.

     (j) The definition of "NPPE" is deleted in its entirety.

     (k) The definition of "Restricted Payment" is amended by (i) replacing the
period (".") at the end of the definition with a semicolon (";") and (ii) adding
the following immediately thereafter:

     "provided, however, that, notwithstanding the foregoing, no transaction
effected by any of the Borrowers with the consent of the Lenders in connection
with the Lender Common Stock Closing shall be deemed a Restricted Payment."

     Section 3.02 Term Loans.

     (a) Section 2.1.A.(i) of the Credit Agreement is amended by (i) replacing
the words "each Term Lender's Commitment as of the Closing Date" in the sixth
line thereof with the words "each Term Lender's Commitment as of the date of the
Seventh Amendment" and (ii) replacing the words "the Term Loan Commitments is
$65,000,000" in the eighth line thereof with the words "the Term Loan
Commitments is $26,156,579.77".

     (b) Schedule 2.1.A of the Credit Agreement is amended by deleting it in its
entirety and replacing it with the revised Schedule 2.1.A set forth on Annex I
hereto.

     Section 3.03 Revolving Loans.

     (a) Section 2.1.A.(ii) of the Credit Agreement is amended by deleting it in
its entirety and replacing it with the following:

     "(ii) Revolving Loans. Each Revolving Lender severally agrees to make
revolving loans ("Revolving Loans") to the Borrowers from the Closing Date until
the

                                       4

<PAGE>

Revolving Loan Commitment Termination Date in an aggregate amount not exceeding
its Pro Rata Share of the aggregate amount of the Revolving Loan Commitments.
Each Borrower shall use the proceeds of any such Revolving Loans solely for the
purposes identified in Section 5.12. The amount of each Revolving Lender's
Commitment as of the date of the Seventh Amendment is set forth opposite its
name on Schedule 2.1.A annexed hereto and the aggregate amount of the Revolving
Loan Commitments is $14,388,535; provided that the Revolving Loan Commitments of
the applicable Revolving Lenders shall be adjusted to give effect to any
assignments of such Revolving Lender's respective Revolving Loan Commitments
pursuant to Section 9.1.; and provided further that the amount of the Revolving
Loan Commitments shall be reduced from time to time by the amount of any
reductions thereto made pursuant to Section 2.5. Notwithstanding anything to the
contrary herein, the outstanding principal amount of Revolving Loans made
pursuant to this Section 2.1.A(ii) shall not at any time exceed $7,248,000. Each
Revolving Lender's Revolving Loan Commitments shall expire immediately and
without further action on the Revolving Loan Commitment Termination Date and no
Revolving Loans shall be made after such date. Amounts borrowed under this
Section 2.1.A.(ii) and subsequently repaid or prepaid may be reborrowed;
provided, however, that (i) the aggregate principal amount of Revolving Loans
outstanding that were made pursuant to this Section 2.1.A(ii) shall not at any
time exceed $7,248,000 and (ii) the aggregate principal amount of the Revolving
Loans (including LOC Revolving Loans) outstanding at any time, when taken
together with the outstanding Letter of Credit Obligations, may not exceed the
aggregate amount of the Revolving Loan Commitments."

     Section 3.04 Letters of Credit.

     (a) Section 2.2.A. of the Credit Agreement is amended by deleting it in its
entirety and replacing it with the following:

     "A. Issuance of Letters of Credit. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set forth herein,
the Issuing Bank agrees to issue, and each Revolving Loan Lender severally
agrees to participate in the issuance by the Issuing Bank of, Letters of Credit
in Dollars from time to time from the Closing Date until the Revolving Loan
Commitment Termination Date as any Borrower may request, in a form acceptable to
the Issuing Bank; provided, however, that (i) the sum of the outstanding Letter
of Credit Obligations and any outstanding Revolving Loans made under Section
2.2.E. (each such Revolving Loan an "LOC Revolving Loan") shall not at any time
exceed $7,140,535 (the "LOC Committed Amount") and (ii) the sum of the aggregate
outstanding principal amount of Revolving Loans (including LOC Revolving Loans)
plus outstanding Letter of Credit Obligations shall not at any time exceed the
aggregate amount of the Revolving Loan Commitments. No Letter of Credit shall
(a) have an original expiry date more than one year from the date of issuance
(provided that any such Letter of Credit may contain customary "evergreen"
provisions pursuant to which the expiry date is automatically extended by a
specific time period unless the Issuing Bank gives notice of expiration or
termination to the beneficiary of such Letter of Credit at least a specified
time period prior to the expiry date then in effect) or (b) as originally issued
or as extended, have an expiry date extending beyond the date which is 30 days
prior to the Maturity Date. Each Letter of Credit shall comply with the terms
and conditions of the related LOC Documents. The issuance and expiry dates of
each Letter of Credit shall be a Business Day."

                                       5

<PAGE>

     Section 3.05 Interest on the Loans.

     (a) Section 2.3.C. of the Credit Agreement is amended by adding the
following proviso after the words "maturity (including final maturity)" in the
fourth line thereof:

     "provided, however, that, notwithstanding the foregoing, (i) accrued but
unpaid interest on the Loans being prepaid on the date of the Seventh Amendment
as set forth in Article II thereof in the amount of $3,156,579.77 shall, on such
date, be capitalized and added to the outstanding principal amount of the Term
Loans, (ii) if, on or prior to November 8, 2002, accrued but unpaid interest on
the Loans being prepaid on the date of the Seventh Amendment as set forth in
Article II thereof in the amount of $2,000,000 has not been paid to the Lenders
on terms and conditions satisfactory to the Administrative Agent, then an Event
of Default shall occur at such time and the provisions of Section 2.3.E. shall
apply thereto, (iii) all accrued but unpaid interest on the Loans being prepaid
on the date of the Seventh Amendment as set forth in Article II thereof (other
than the accrued but unpaid interest that is referred to in clause (i) or clause
(ii) of this proviso) shall be capitalized and added to the outstanding
principal amount of the Term Loans on the next Interest Payment Date on which
such interest otherwise would have been due and payable and (iv) all interest on
any Loan that accrues during the period beginning on the date of the Seventh
Amendment and ending on June 30, 2003 shall, on the earlier to occur of the next
Interest Payment Date on which such interest otherwise would be due and payable
and June 30, 2003, be capitalized and added to the outstanding principal amount
of the Term Loans, and, in the case of each of clauses (i), (iii) and (iv)
above, all interest on such Term Loans shall, thereafter, subject to the
provisions of Section 2.3.E, be payable in arrears on and to each Interest
Payment Date applicable to the Term Loans, upon any prepayment of that Loan (to
the extent accrued on the amount being prepaid) and at maturity (including final
maturity)"

     Section 3.06 Prepayments Due to Issuance of Debt or Equity.

     (a) Section 2.5.B.(iii)(a) of the Credit Agreement is amended by deleting
it in its entirety and replacing it with the following:

     "(a) Automatic Reductions of Commitments. The Revolving Loan Commitments
and the Term Loan Commitments in effect from time to time shall be permanently
reduced on the dates and by the amounts (calculated from the amount of the
Revolving Loan Commitments and the Term Loan Commitments, as the case may be,
outstanding as of the date of the Seventh Amendment) set forth below:

                  --------------------------------------------
                                         Aggregate Reduction
                                           (Expressed as a
                    Date of Reduction        Percentage)
                  --------------------------------------------
                       03/31/2004              3.00%
                  --------------------------------------------
                       06/30/2004              3.00%
                  --------------------------------------------
                       09/30/2004              6.50%
                  --------------------------------------------
                       12/31/2004              6.50%
                  --------------------------------------------
                       03/31/2005              9.00%
                  --------------------------------------------

                                       6

<PAGE>

                  --------------------------------------------
                       06/30/2005              9.00%
                  --------------------------------------------
                       09/30/2005              9.00%
                  --------------------------------------------
                       12/31/2005              9.00%
                  --------------------------------------------
                       03/31/2006              9.00%
                  --------------------------------------------
                       06/30/2006              9.00%
                  --------------------------------------------
                       09/30/2006              9.00%
                  --------------------------------------------
                       12/31/2006              9.00%
                  --------------------------------------------
                        Maturity               9.00%
                  --------------------------------------------

     All such reductions shall reduce (1) the Revolving Loan Commitment of each
Revolving Loan Lender proportionately to its Pro Rata Share of the Revolving
Loan Commitments and (2) the Term Loan Commitment of each Term Loan Lender
proportionately to its Pro Rata share of the Term Loan Commitments. In
connection with any such reduction, the Borrowers shall prepay the Revolving
Loans and the Term Loans, as the case may be, in accordance with Section
2.5.B(v)."

     (b) Section 2.5.B.(iii)(d) of the Credit Agreement is amended by (i)
deleting clause (v) in its entirety and (ii) adding the following clauses (v, vi
and vii) immediately prior to the words "in each case to prepay the Loans or
permanently" in the twenty-third line thereof:

     "(v) such Net Proceeds received in connection with the Lender Common Stock
Conversion, (vi) such Net Proceeds received in connection with the issuance, on
or before December 31, 2002, of equity (other than the Required Equity) at a
price equal to or greater than $0.15 per share and in an amount not to exceed
$2,000,000 and (vii) such Net Proceeds received in connection with the Required
Equity,"

     Section 3.07 Compensation For Breakage Costs

     (a) Section 2.6.D. of the Credit Agreement is amended by (i) deleting the
word "or" in the fourteenth line thereof and (ii) adding the following new
clause after the words "by the terms of this Agreement" in the sixteenth line
thereof:

     "or (v) as a consequence of the consummation of the transactions
contemplated by the Lender Common Stock Conversion Documents."

     Section 3.08 Interest Rate Protection.

     (a) Section 5.15 of the Credit Agreement is amended by replacing the words
"On or before June 30, 2002" in the first line thereof with the words "On or
before June 30, 2003".

                                       7

<PAGE>

     Section 3.09 Additional Equity Contribution.

     (a) Section 5.16. of the Credit Agreement is amended by deleting it in its
entirety and replacing it with the following:

     "SECTION 5.16. [Intentionally omitted]"

     Section 3.10 Indebtedness.

     (a) Section 6.1(viii) of the Credit Agreement is amended by replacing the
words "aggregate annual payments not to exceed $1,000,000" in the second line
thereof with the words "aggregate annual payments not to exceed $500,000".

     Section 3.11 Financial Covenants.

     (a) Section 6.6. of the Credit Agreement is amended by deleting it in its
entirety and replacing it with the following:

     "SECTION 6.6. Financial Covenants.

     A. Minimum Consolidated Revenue. At the end of each Fiscal Quarter of the
Borrower Group, no Borrower shall permit the Consolidated Revenue for the
immediately preceding four Fiscal Quarters ending on any date set forth below to
be less than the amount set forth below opposite such date:

               ==================================================
                       Date             Minimum Consolidated
                                               Revenue
                                            (in Dollars)
               --------------------------------------------------
               September 30, 2002            27,095,700
               --------------------------------------------------
               December 31, 2002             24,818,600
               --------------------------------------------------
               March 31, 2003                23,211,600
               --------------------------------------------------
               June 30, 2003                 22,695,200
               --------------------------------------------------
               September 30, 2003            24,538,700
               --------------------------------------------------
               December 31, 2003             27,011,000
               --------------------------------------------------
               March 31, 2004                29,708,600
               --------------------------------------------------
               June 30, 2004                 32,527,400
               --------------------------------------------------
               September 30, 2004            35,134,100
               --------------------------------------------------

                                       8

<PAGE>

               --------------------------------------------------
               December 31, 2004             37,689,200
               --------------------------------------------------
               March 31, 2005                40,347,200
               --------------------------------------------------
               June 30, 2005                 42,809,100
               --------------------------------------------------
               September 30, 2005            45,023,700
               --------------------------------------------------
               December 31, 2005             46,969,700
               --------------------------------------------------
               March 31, 2006                48,605,500
               --------------------------------------------------
               June 30, 2006                 50,162,100
               --------------------------------------------------
               September 30, 2006            51,558,800
               --------------------------------------------------
               December 31, 2006             52,777,800
               --------------------------------------------------

     B. Minimum Consolidated EBITDA. At the end of each Fiscal Quarter of the
Borrower Group, no Borrower shall permit the Consolidated EBITDA for the
immediately preceding four Fiscal Quarters ending on any date set forth below to
be less than the amount set forth below opposite such date:

                ===================================================
                         Date             Minimum Consolidated
                                                 EBITDA
                                              (in Dollars)
                ---------------------------------------------------
                September 30, 2002              1,359,100
                ---------------------------------------------------
                December 31, 2002               1,805,000
                ---------------------------------------------------
                March 31, 2003                  1,174,800
                ---------------------------------------------------
                June 30, 2003                    31,600
                ---------------------------------------------------
                September 30, 2003              1,474,500
                ---------------------------------------------------
                December 31, 2003               3,459,400
                ---------------------------------------------------
                March 31, 2004                  5,799,700
                ---------------------------------------------------
                June 30, 2004                   8,242,500
                ---------------------------------------------------
                September 30, 2004             10,438,700
                ---------------------------------------------------

                                       9

<PAGE>

                ---------------------------------------------------
                December 31, 2004              12,570,900
                ---------------------------------------------------
                March 31, 2005                 14,714,100
                ---------------------------------------------------
                June 30, 2005                  16,666,700
                ---------------------------------------------------
                September 30, 2005             18,382,100
                ---------------------------------------------------
                December 31, 2005              19,824,700
                ---------------------------------------------------
                March 31, 2006                 26,561,700
                ---------------------------------------------------
                June 30, 2006                  33,281,700
                ---------------------------------------------------
                September 30, 2006             39,914,800
                ---------------------------------------------------
                December 31, 2006              46,442,100
                ===================================================

     C. Maximum Cumulative Capital Expenditures. At the end of each Fiscal
Quarter of the Borrower Group, no Borrower shall permit Consolidated Capital
Expenditures for the period commencing on September 30, 2002 and ending on the
dates set forth below to be greater than the amounts set forth below:

                ===================================================
                         Date              Maximum Cumulative
                                          Consolidated Capital
                                              Expenditures
                                         From September 30, 2002
                                              (In Dollars)
                ---------------------------------------------------
                September 30, 2002               550,000
                ---------------------------------------------------
                December 31, 2002               1,650,000
                ---------------------------------------------------
                March 31, 2003                  3,186,700
                ---------------------------------------------------
                June 30, 2003                   4,262,500
                ---------------------------------------------------
                September 30, 2003              5,404,300
                ---------------------------------------------------
                December 31, 2003               6,679,200
                ---------------------------------------------------
                March 31, 2004                  8,284,100
                ---------------------------------------------------
                June 30, 2004                   9,758,100
                ---------------------------------------------------

                                       10

<PAGE>

                ---------------------------------------------------
                September 30, 2004             10,968,100
                ---------------------------------------------------
                December 31, 2004              12,707,200
                ---------------------------------------------------
                March 31, 2005                 13,852,300
                ---------------------------------------------------
                June 30, 2005                  15,130,500
                ---------------------------------------------------
                September 30, 2005             16,408,700
                ---------------------------------------------------
                December 31, 2005              17,754,000
                ---------------------------------------------------
                March 31, 2006                 19,001,400
                ---------------------------------------------------
                June 30, 2006                  20,279,600
                ---------------------------------------------------
                September 30, 2006             21,584,200
                ---------------------------------------------------
                December 31, 2006              22,914,100
                ===================================================

     D. Consolidated Leverage Ratio. At the end of each Fiscal Quarter of the
Borrower Group set forth below (after giving effect to any incurrence of
Indebtedness and any payment of principal of Indebtedness on such day), no
Borrower shall permit the Consolidated Leverage Ratio to be greater than the
ratios set forth below:

               ==================================================
                       Date             Consolidated Leverage
                                                Ratio
               --------------------------------------------------
               December 31, 2003             10.0 to 1.0
               --------------------------------------------------
               March 31, 2004                5.9 to 1.0
               --------------------------------------------------
               June 30, 2004                 4.0 to 1.0
               --------------------------------------------------
               September 30, 2004            3.0 to 1.0
               --------------------------------------------------
               December 31, 2004             2.25 to 1.0
               --------------------------------------------------
               March 31, 2005                2.0 to 1.0
               --------------------------------------------------
               June 30, 2005                 2.0 to 1.0
               --------------------------------------------------
               September 30, 2005            2.0 to 1.0
               --------------------------------------------------

                                       11

<PAGE>

               --------------------------------------------------
               December 31, 2005             2.0 to 1.0
               --------------------------------------------------
               March 31, 2006                2.0 to 1.0
               --------------------------------------------------
               June 30, 2006                 2.0 to 1.0
               --------------------------------------------------
               September 30, 2006            2.0 to 1.0
               --------------------------------------------------
               December 31, 2006             2.0 to 1.0
               --------------------------------------------------

     E. Consolidated Interest Coverage Ratio. At the end of each Fiscal Quarter
of the Borrower Group, no Borrower shall permit the Consolidated Interest
Coverage Ratio to be less than the ratios set forth below:

               ==================================================
                       Date             Consolidated Interest
                                           Coverage Ratio
               --------------------------------------------------
               December 31, 2003             1.6 to 1.0
               --------------------------------------------------
               March 31, 2004                2.75 to 1.0
               --------------------------------------------------
               June 30, 2004                 3.0 to 1.0
               --------------------------------------------------
               September 30, 2004            3.0 to 1.0
               --------------------------------------------------
               December 31, 2004             3.0 to 1.0
               --------------------------------------------------
               March 31, 2005                3.0 to 1.0
               --------------------------------------------------
               June 30, 2005                 3.0 to 1.0
               --------------------------------------------------
               September 30, 2005            3.0 to 1.0
               --------------------------------------------------
               December 31, 2005             3.0 to 1.0
               --------------------------------------------------
               March 31, 2006                3.0 to 1.0
               --------------------------------------------------
               June 30, 2006                 3.0 to 1.0
               --------------------------------------------------
               September 30, 2006            3.0 to 1.0
               --------------------------------------------------
               December 31, 2006             3.0 to 1.0
               --------------------------------------------------

                                       12

<PAGE>

     F. Consolidated Fixed Charge Coverage Ratio. At the end of each Fiscal
Quarter of the Borrower Group, no Borrower shall permit the Consolidated Fixed
Charge Coverage Ratio to be less than the ratios set forth below:

               ==================================================
                       Date           Consolidated Fixed Charge
                                           Coverage Ratio
               --------------------------------------------------
               December 31, 2003             1.2 to 1.0
               --------------------------------------------------
               March 31, 2004                1.25 to 1.0
               --------------------------------------------------
               June 30, 2004                 1.3 to 1.0
               --------------------------------------------------
               September 30, 2004            1.3 to 1.0
               --------------------------------------------------
               December 31, 2004             1.3 to 1.0
               --------------------------------------------------
               March 31, 2005                1.3 to 1.0
               --------------------------------------------------
               June 30, 2005                 1.3 to 1.0
               --------------------------------------------------
               September 30, 2005            1.3 to 1.0
               --------------------------------------------------
               December 31, 2005             1.3 to 1.0
               --------------------------------------------------
               March 31, 2006                1.75 to 1.0
               --------------------------------------------------
               June 30, 2006                 1.75 to 1.0
               --------------------------------------------------
               September 30, 2006            1.75 to 1.0
               --------------------------------------------------
               December 31, 2006             1.75 to 1.0
               --------------------------------------------------

     Section 3.12 Sale or Discount of Receivables.

     (a) Section 6.9 of the Credit Agreement is amended by adding the following
after the words "any of its notes or accounts receivable" in the third line
thereof:

     "provided, however, that the Borrowers shall be permitted to engage a
collection agency for the collection of accounts receivable that have been fully
reserved for by the Borrowers and that do not, in the aggregate, exceed
$500,000, and to pay such firm reasonable and customary fees which may be based
on the amounts recovered by such firm."

                                       13

<PAGE>

     Section 3.13 Transactions with Shareholders and Affiliates.

     (a) Section 6.10 of the Credit Agreement is amended by adding the following
new sentence after Section 6.10(v):

     "Notwithstanding anything to the contrary in this Section 6.10 and for the
avoidance of doubt, the Borrowers are hereby expressly permitted to make all
payments required or permitted to made to the Lenders under this Agreement and
the Lender Common Stock Conversion Documents."

     Section 3.14 Events of Default.

     (a) The following Event of Default shall be added to Article VII of the
Credit Agreement:

     "SECTION 7.20. KEY OFFICER.

     Michael Liss shall have failed for a period of 30 days to participate in
the affairs of the Parent as the Chief Executive Officer thereof, or shall,
despite continuing to hold the title of Chief Executive Officer of the Parent,
no longer have the responsibilities and authority related to such executive
management position as of the date of the Seventh Amendment, in each case, for
any reason other than the death or disability of Michael Liss."

     Section 3.15 Assignments.

     (a) Section 9.1.B. of the Credit Agreement is amended by replacing the
words "in an aggregate amount of not less than $5,000,000" in the fifth line
thereof with the words "in an aggregate amount of not less than $1,000,000".

                                   ARTICLE IV.
                                 LIMITED WAIVER

     Subject to the conditions and upon the terms set forth in this Seventh
Amendment and in reliance on the representations and warranties of the Borrowers
set forth in Section 5.02 of this Seventh Amendment, the Lenders hereby waive
any right or remedy arising in favor of the Lenders under the Credit Agreement
by reason of the failure of the Borrowers to comply on June 30, 2002 with the
provisions of Section 5.15 of the Credit Agreement as in effect immediately
prior to the amendment set forth in Section 3.08 of this Seventh Amendment.

                                   ARTICLE V.
                                     CONSENT

     The Lenders hereby consent to the execution and delivery and performance by
Parent and/or the Borrowers (as applicable) of (i) the Stock Purchase Agreement,
(ii) the Common Stock Purchase Agreement, dated as of October 30, 2002, by and
between Parent and the purchasers listed on Schedule I thereto providing for the
purchase and sale of the Required

                                       14

<PAGE>

Equity and (iii) each of the agreements referred to in the agreement described
in clause (i) or (ii) of this sentence.

                                   ARTICLE VI.
                                  MISCELLANEOUS

     Section 6.01 Execution of this Seventh Amendment; Effectiveness.

     This Seventh Amendment is executed and shall be construed as an amendment
to the Credit Agreement, and, as provided in the Credit Agreement, this Seventh
Amendment forms a part thereof. This Seventh Amendment shall be effective upon
the satisfaction of the following condition:

     (a) The transactions contemplated by Article II above and the Lender Common
Stock Conversion Documents shall have been consummated on the terms set forth in
the Lender Common Stock Conversion Documents and upon satisfaction of the
conditions therein set forth.

     Section 6.02 Representations and Warranties.

     The Borrowers hereby represent and warrant to the Administrative Agent and
the Lenders that (a) all consents, approvals and authorizations necessary for
the Borrowers' execution, delivery and performance of this Seventh Amendment
have been obtained or made and (b) this Seventh Amendment has been duly executed
and delivered by the Borrowers and constitutes a legal, valid and binding
obligation of each Borrower, enforceable against such Borrower in accordance
with its terms.

     Section 6.03 Waiver.

     This Seventh Amendment is made in amendment and modification of, but not
extinguishment of, the obligations set forth in the Credit Agreement and the
other Loan Documents and, except as specifically modified pursuant to the terms
of this Seventh Amendment, the terms and conditions of the Credit Agreement and
the other Loan Documents remain in full force and effect. Nothing herein shall
limit in any way the rights and remedies of the Administrative Agent and the
Lenders under the Credit Agreement and the other Loan Documents. Except for the
waiver set forth in Article IV of this Seventh Amendment, the execution and
delivery by the Lenders of this Seventh Amendment shall not constitute a waiver,
forbearance or other indulgence with respect to any Potential Event of Default
or Event of Default now existing or hereafter arising.

     Section 6.04 Counterparts; Integration; Effectiveness.

     This Seventh Amendment may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract. This Seventh Amendment and any agreements referred to herein
constitute the entire contract among the parties hereto relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral

                                       15

<PAGE>

or written, relating to the subject matter hereof. In addition to the
requirements set forth above in Section 6.01, this Seventh Amendment shall
become effective when it shall have been executed by each of the Borrowers and
each of the Lenders, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and, subject to and in accordance with Section
9.16 of the Credit Agreement, their respective successors and assigns. Delivery
of an executed counterpart of a signature page of this Seventh Amendment by
telecopy shall be as effective as delivery of a manually executed counterpart of
this Seventh Amendment.

     Section 6.05 Severability.

     Any provision of this Seventh Amendment held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability without
affecting the validity, legality or enforceability of the remaining provisions
hereof, and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

     Section 6.06 Governing Law.

     This Seventh Amendment shall be construed in accordance with and governed
by the laws of the State of New York without regard to the conflicts of law
provisions thereof, other than Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York.

     Section 6.07 Headings.

     Article and Section headings used herein are for convenience of reference
only, are not part of this Seventh Amendment and shall not affect the
construction of, or be taken into consideration in interpreting, this Seventh
Amendment.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       16

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Seventh Amendment
to be duly executed by their respective authorized officers as of the day and
year first above written.

                                        FIBERNET OPERATIONS, INC.

                                        By: /s/ Michael S. Liss
                                            ------------------------------
                                        Name:   Michael S. Liss
                                        Title:  President

                                        DEVNET L.L.C.

                                        By: /s/ Michael S. Liss
                                            ------------------------------
                                        Name:   Michael S. Liss
                                        Title:  Chairman

                                        DEUTSCHE BANK AG NEW YORK BRANCH

                                        By: /s/ David J. Bell
                                            ------------------------------
                                            Name:   David J. Bell
                                            Title:  Director

                                        By: /s/ Alexander Richarz
                                            ------------------------------
                                            Name:   Alexander Richarz
                                            Title:  Vice President

                                        WACHOVIA INVESTORS, INC.

                                        By: /s/ Matthew Berk
                                            ------------------------------
                                            Name:   Matthew Berk
                                            Title:  Authorized Officer

                                        BANK ONE, N.A.

                                        By: /s/ Michele L. Quentin
                                            ------------------------------
                                            Name:   Michele L. Quentin
                                            Title:  Assistant Vice President

<PAGE>

                                        IBM CREDIT CORPORATION

                                        By: /s/ Luc Grenon
                                            ------------------------------
                                            Name:   Luc Grenon
                                            Title:  Director, Credit Operations

                                        NORTEL NETWORKS INC.

                                        By: /s/ Elias Makris
                                            ------------------------------
                                            Name:   Elias Makris
                                            Title:  Director, Customer Finance

                                        TORONTO DOMINION (TEXAS), INC.

                                        By: /s/ Jane Nixon
                                            ----------------------------
                                            Name:   Jane Nixon
                                            Title:  Vice PresidentEXHIBIT 10.4

                             NOTE EXCHANGE AGREEMENT

     NOTE EXCHANGE AGREEMENT, dated as of October __, 2002 (this "Agreement"),
by and among FiberNet Telecom Group, Inc., a Delaware corporation (the
"Company"), and SDS Merchant Fund, LP (the "Purchaser").

                                 R E C I T A L S

     WHEREAS, the Purchaser has purchased from Nortel Networks Inc. ("Nortel")
that certain promissory note, issued on December 7, 2001 by the Company, in the
initial principal amount of $2,321,117.00 (the "Note"), pursuant to a Note
Purchase Agreement, of even date herewith, by and among Nortel and the Purchaser
(the "Purchase Agreement");

     WHEREAS, the Company has agreed that, immediately upon completion of the
purchase of the Note pursuant to the Purchase Agreement, it will issue to the
Purchaser, in exchange for the Note, an aggregate of 9,002,040 shares of common
stock, par value $.001 per share, of the Company (the "Shares"); and

     WHEREAS, the Company and the Purchaser desire to enter into this Agreement
to set forth certain matters relating to such exchange.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto hereby agree as follows:

                                   ARTICLE I.

                                    Exchange

     Section 1.1. Exchange of Note for Shares. Upon the following terms and
conditions, and in consideration of and in express reliance upon such terms and
conditions and the representations, warranties and covenants of this Agreement,
the Purchaser shall, immediately upon completion of the purchase of the Note
pursuant to the Purchase Agreement, surrender to the Company for exchange, the
Note, together with all appropriate endorsements and instruments of transfer,
and, in exchange therefor, the Company shall issue to the Purchaser the Shares.
The exchange described in this Section 1.1 is referred to herein as the
"Exchange".

     Section 1.2. Closing. The closing (the "Closing") of the Exchange shall
take place at the same place as, and immediately following, the "Closing", as
defined in the Purchase Agreement. The date of the Closing is referred to herein
as the "Closing Date".

                                  ARTICLE II.

                         Representations and Warranties

     Section 2.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser, as of the date hereof and the
Closing Date, as follows:

<PAGE>

     (a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary except for
any jurisdictions (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect. For the purposes of this
Agreement, "Material Adverse Effect" means any condition, circumstance, or
situation that would prohibit or hinder the Company from executing this
Agreement and/or performing any of its obligations hereunder or thereunder in
any material respect.

     (b) Authorization; Enforcement. The Company has the requisite power and
authority to enter into and perform this Agreement and to consummate the
Exchange. The execution, delivery and performance of this Agreement by the
Company have been duly and validly authorized by all necessary corporate action,
and no further consent or authorization is required for the Company to effect
the transactions contemplated hereby. When executed and delivered by the
Company, the Agreement shall constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by other equitable principles of general application.

     (c) Issuance of Shares. The Shares have been duly authorized by all
necessary corporate action and, when issued in accordance with the terms hereof
upon surrender of the Note in the Exchange, the Shares shall be validly issued
and outstanding, fully paid and non-assessable.

     (d) No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby does not and will not (i) violate any provision of the
Company's Certificate of Incorporation or Bylaws, each as amended to date, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party or by which any of the
Company's properties or assets are bound, or (iii) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or by which any property or asset of the Company is bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state securities laws) above, except, for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under federal, state, foreign or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or consummate the Exchange in accordance with the terms hereof (other
than any filings, consents and approvals which may be required to be made by the
Company under

                                       2

<PAGE>

applicable state and federal securities laws, rules or regulations, or the rules
of the Nasdaq SmallCap Market, prior to or subsequent to the Closing).

     Section 2.2. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company, as of the date hereof and as of
the Closing Date, as follows:

     (a) Organization and Standing of the Purchaser. The Purchaser is a limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization.

     (b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to consummate the
Exchange. The execution, delivery and performance of this Agreement the
Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary organizational action, and no further
consent or authorization is required for the Purchaser to effect the
transactions contemplated hereby. When executed and delivered by the Purchaser,
this Agreement shall constitute valid and binding obligations of the Purchaser
enforceable against the Purchaser in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.

     (c) No Conflict. The execution, delivery and performance of this Agreement
by the Purchaser and the consummation by the Purchaser of the transactions
contemplated hereby does not and will not (i) violate any provision of the
Purchaser's organizational documents, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or obligation to
which the Purchaser is a party or by which the Purchaser's properties or assets
are bound, or (iii) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Purchaser or by
which any property or asset of the Purchaser is bound or affected, except, in
all cases, other than violations pursuant to clauses (i) or (iii) (with respect
to federal and state securities laws) above, except, for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, materially and adversely affect
Purchaser's ability to perform its obligations hereunder.

     (d) Acquisition for Investment. The Purchaser is acquiring the Shares
solely for its own account for the purpose of investment and not with a view to
or for sale in connection with any distribution. The Purchaser does not have a
present intention to sell any of the Shares, nor a present arrangement (whether
or not legally binding) or intention to effect any distribution of any of the
Shares, to or through any person or entity.

     (e) Assessment of Risks. The Purchaser acknowledges that it (i) has such
knowledge and experience in financial and business matters that such Purchaser
is capable of evaluating the

                                       3

<PAGE>

merits and risks of such Purchaser's investment in the Company (by virtue of its
purchase of Shares hereunder), (ii) is able to bear the financial risks
associated with an investment in the Shares and (iii) has been given full access
to such records of the Company and to the officers of the Company as it has
deemed necessary or appropriate to conduct its due diligence investigation with
respect to the Shares.

     (f) No General Solicitation. The Purchaser acknowledges that the Shares
were not offered to the Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio or (ii) any seminar or meeting to which the
Purchaser was invited by any of the foregoing means of communications.

     (g) Accredited Investor. The Purchaser is an "accredited investor" (as
defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended).

     (h) Legend. The Purchaser hereby acknowledges and agrees that the
certificates or other documents representing the Shares may contain the
following, or a substantially similar, legend, which legend shall be removed
only upon receipt by the Company of an opinion of its counsel, which opinion
shall be satisfactory to the Company, that such legend may be so removed:

          THE SECURITIES REPRESENTED HEREBY (THE "SECURITIES") HAVE
          NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS
          AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
          UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
          APPLICABLE STATE SECURITIES LAWS OR FIBERNET TELECOM GROUP,
          INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
          REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
          UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
          NOT REQUIRED.

     (i) Certain Fees. The Purchaser has not employed any broker or finder or
incurred any liability for any brokerage, investment banking, commission,
finders', structuring or financial advisory fees or other similar fees in
connection with this Agreement or the transactions contemplated hereby.

                                  ARTICLE III.

                            Covenants of the Parties

     Section 3.1. Covenants. The parties hereto hereby covenant with each other
as follows, which covenants, as applicable, are for the benefit of such parties
and their respective permitted assigns:

                                       4

<PAGE>

     (a) Further Assurances. From and after the Closing Date, upon the request
of the Purchaser or the Company, the Company and the Purchaser shall execute and
deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.

     (b) Commercially Reasonable Efforts. Each party hereto will use
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable,
consistent with applicable law, to consummate and make effective in the most
expeditious manner practicable the transactions contemplated hereby, including
without limitation, making all required regulatory and other filings required by
applicable law as promptly as practicable after the date hereof.

                                  ARTICLE IV.

                                   Conditions

     Section 4.1. Conditions Precedent to the Obligation of the Company to
Close. The obligation hereunder of the Company to close and effect the Exchange
at the Closing is subject to the satisfaction or waiver, at or before the
Closing of the conditions set forth below:

     (a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time, except for representations and warranties that are expressly
made as of a particular date, which shall be true and correct in all material
respects as of such date.

     (b) Performance by the Purchaser. The Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing.

     (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.

     (d) Surrender of Note. The Purchaser shall have surrendered to the Company
the Note together with all appropriate indorsements other appropriate
instruments of transfer.

The conditions set forth in this Section 4.1 are for the Company's sole benefit
and may be waived only by the Company at any time in its sole discretion.

     Section 4.2. Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to close and effect the
Exchange is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below:

                                       5

<PAGE>

     (a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects as of the Closing Date, except for
representations and warranties that speak as of a particular date, which shall
be true and correct in all material respects as of such date.

     (b) Performance by the Company. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.

     (c) No Injunction, Statute or Rule. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.

     (d) Certificates. The Company shall have delivered to the Purchaser
certificates representing the Shares (in such denominations as the Purchaser may
request) being acquired by the Purchaser at the Closing.

     (e) Warrants. The Company shall have delivered to the Purchaser the
Warrants (in such denominations as the Purchaser may request) being acquired by
the Purchaser at the Closing.

The conditions set forth in this Section 4.2 are for the Purchaser's sole
benefit and may be waived only by the Purchaser at any time in its sole
discretion.

                                   ARTICLE V.

                                  Miscellaneous

     Section 5.1. Fees and Expenses. Each party hereto shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.

     Section 5.2. Entire Agreement; Amendment. This Agreement and the Purchase
Agreement contain the entire understanding and agreement (written or oral) of
the parties hereto with respect to the subject matter hereof and, except as
specifically set forth herein or in the Purchase Agreement, neither the Company
nor the Purchaser make any representation, warranty, covenant or undertaking
with respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by each party hereto. Any amendment or waiver effected in
accordance with this Section 5.2 shall be binding upon each such party and its
permitted assigns.

     Section 5.3. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered

                                       6

<PAGE>

on a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

If to the Company:            FiberNet Telecom Group, Inc.
                              570 Lexington Avenue
                              New York, New York 10022
                              Attention: President
                              Fax No.: (212) 421-8860

with copies (which copies
shall not constitute notice
to the Company) to:           Willkie Farr & Gallagher
                              787 Seventh Avenue
                              New York, New York 10019
                              Attention: Gordon Caplan
                              Fax No.: (212) 728-8111

If to the Purchaser:          SDS Merchant Fund, L.P.
                              c/o SDS Capital Partners
                              53 Forest Avenue, 2nd Floor
                              Old Greenwich, Connecticut 06870
                              Attention:  Steve Derby
                              Fax No.:  (203) 967-5851

with copies (which copies
shall not constitute notice
to the Purchaser) to:         Jenkens & Gilchrist Parker Chapin LLP
                              The Chrysler Building
                              405 Lexington Avenue
                              New York, New York 10174
                              Attention:  Christopher S. Auguste
                              Fax No.: (212) 704-6288

Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.

     Section 5.4. Waivers. No waiver by either party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.

                                       7

<PAGE>

     Section 5.5. Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

     Section 5.6. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither party hereto may assign its rights or obligations under this Agreement
(by operation of law or otherwise) without the prior written consent of each
other party hereto, and any attempted assignment without such consent shall be
void ab initio.

     Section 5.7. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person or entity.

     Section 5.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions thereof. This Agreement shall not
be interpreted or construed with any presumption against the party causing this
Agreement to be drafted.

     Section 5.9. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.

     Section 5.10. Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       8

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Note Exchange
Agreement to be duly executed by their respective authorized officers as of the
date first above written.

                               FIBERNET TELECOM GROUP, INC.

                               By: /s/ Michael S. Liss
                                  -------------------------------------
                                  Name:  Michael S. Liss
                                  Title: President and Chief Executive Officer

                               SDS MERCHANT FUND, L.P.

                               By:  SDS Capital Partners, LLC,
                                       its general partner

                               By: /s/ Steve Derby
                                  -------------------------------------
                                  Name:  Steve Derby
                                  Title: Managing Member

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