As filed with the Securities and Exchange Commission on May 24, 2005
Registration No. 333-_______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GLOBIX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3781263
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
7389
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
----------------------------------
139 CENTRE STREET, NEW YORK, NEW YORK 10013
TELEPHONE: (212) 334-8500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PETER K. STEVENSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
139 CENTRE STREET, NEW YORK, NEW YORK 10013
TELEPHONE: (212) 334-8500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE
-----------------------------------
WITH A COPY TO:
BONNIE J. ROE, ESQ.
DAY, BERRY & HOWARD LLP
875 THIRD AVENUE
NEW YORK, NY 10022
TELEPHONE: (212) 839-3600
-----------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable on or after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities are being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
=============================================== =============== ====================== ========================== ==================
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price Aggregate Offering Price Registration Fee
Per Share
----------------------------------------------- --------------- ---------------------- -------------------------- ------------------
Common Stock, par value $0.01 per share....... 11,183,876 $2.86 (1) $31,985,885.36 (2) $3,764.74 (3)
=============================================== =============== ====================== ========================== ==================
(1) Pursuant to Rule 457(c) of the Securities Act, the proposed maximum
offering price per unit and the proposed maximum aggregate offering price
are based on the average of the high and low prices of the common stock on
the American Stock Exchange, as reported on May 20, 2005.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) of the Securities Act.
(3) Includes $4,237.19, $2,821.55 of which was previously paid in connection
with Globix Corporation's registration statement on Form S-1 filed with the
Securities and Exchange Commission on July 25, 2002 (File No. 333-97067)
and $1,415.64 of which was previously paid in connection with Globix
Corporation's registration statement on Form S-1, (File No. 333-113857)
filed with the Securities and Exchange Commission on March 23, 2004.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING HOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
--------------------------------------------------------------------------------
PROSPECTUS
(Subject to Completion) Dated May ___, 2005
[GLOBIX LOGO]
GLOBIX CORPORATION
11,183,876 SHARES OF COMMON STOCK
-----------------------
Shares of our common stock are being offered from time to time by the
selling holders named in this prospectus under the caption "Selling Holders." We
will not receive any proceeds from the sale of shares of our common stock or
notes by the selling holders.
The shares of common stock are being registered to permit the selling
holders to sell these shares from time to time to the public. The selling
holders may sell the common stock through ordinary brokerage transactions or
through any other means described in the section of this prospectus entitled
"Plan of Distribution." We do not know when or in what amounts a selling holder
may offer securities for sale. The selling holders may sell any, all or none of
the common stock or notes offered by this prospectus.
Our common stock trades on the American Stock Exchange under the
ticker symbol "GEX." On May 18, 2005, the closing sale price of one share of our
common stock was $3.00.
-----------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 2.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is May ___, 2005
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY............................................................1
RISK FACTORS..................................................................2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS....................15
USE OF PROCEEDS..............................................................16
SELLING SECURITY HOLDERS.....................................................16
PLAN OF DISTRIBUTION.........................................................21
LEGAL MATTERS................................................................23
EXPERTS.....................................................................23
INCORPORATION BY REFERENCE...................................................24
WHERE YOU CAN FIND MORE INFORMATION..........................................24
-i-
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED HEREIN BY REFERENCE. IN THIS PROSPECTUS, "WE," "US," "OUR COMPANY"
AND "OUR" REFER TO GLOBIX CORPORATION AND ITS SUBSIDIARIES, UNLESS THE CONTEXT
OTHERWISE REQUIRES.
OUR COMPANY
We are a provider of application, media and infrastructure management services.
We provide flexible business solutions which combine skills, support, technology
and experience to enable our customers to use the Internet as a way to provide
business benefits and sustain a competitive advantage. By managing complex
applications, media and infrastructure environments, we help our clients protect
Internet revenue streams, improve user satisfaction and reduce technology
operating costs and risks. Our clients include operating divisions of Fortune
100 companies as well as mid-sized enterprises in a number of vertical markets
including media and publishing, technology, financial services, health care and
government.
Through our wholly owned subsidiary, NEON Communications, Inc. ("NEON"), we own
and operate a high bandwidth fiber optic network, extending from Portland, ME to
Washington, DC. Through this network we provide metro and intercity
telecommunications coverage, as well as co-location space, to local and long
distance telecommunications carriers and a small number of non-carrier
customers, including universities, colleges and financial institutions, in
various markets in the Northeast and mid-Atlantic regions, including Boston, New
York, Philadelphia, Newark, NJ, Baltimore, MD, Washington, DC, Portland, ME,
Portsmouth, NH, Springfield, MA, Worcester, MA, Albany, NY, White Plains, NY,
Providence, RI, Hartford, CT, Hackensack, NJ, Reston, VA and smaller communities
along our network routes.
We, and our subsidiaries, have operations in New York, NY, London, UK, Boston,
MA, Santa Clara, CA, Fairfield, NJ, and Atlanta, GA. Our common stock is traded
on the American Stock Exchange under the symbol "GEX".
Our principal executive offices are located at 139 Centre Street, New York, New
York 10013, and our telephone number at that location is (212) 334-8500.
Although we maintain a website at www.globix.com, we do not intend that the
information available through our website be incorporated into this registration
statement. Our SEC filings will be available on our website.
Globix was founded in 1989 and in 1998 undertook a major expansion plan in order
to pursue opportunities resulting from the growth of the Internet. On March 1,
2002, Globix filed a voluntary petition under Chapter 11 of the United States
Bankruptcy Code, together with a prepackaged plan of reorganization, with the
United States Bankruptcy Court for the District of Delaware. We continued to
operate in Chapter 11 in the ordinary course of business and received permission
from the bankruptcy court to pay our employees, trade, and certain other
creditors in full and on time, regardless of whether these claims arose prior to
or after the Chapter 11 filing.
Effective April 25, 2002, all conditions necessary for our plan of
reorganization to become effective were satisfied or waived and we emerged from
Chapter 11 bankruptcy protection. For additional information, see "Our Chapter
11 Bankruptcy Reorganization" in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission on December 9, 2004, for a discussion of our
plan of reorganization.
On March 7, 2005, we acquired NEON through the merger of a wholly owned
subsidiary of Globix with and into NEON, resulting in NEON becoming a wholly
owned subsidiary of Globix.
THE OFFERING
The selling holders named in this prospectus are offering up to 11,183,876
shares of common stock from time to time through ordinary brokerage transactions
or through any other means described in the section of this prospectus entitled
"Plan of Distribution." We have agreed to register these shares on their behalf.
We will not receive any of the proceeds of the offering.
As of May 19, 2005 we had outstanding 48,449,009 shares of common stock and
2,971,753 shares of preferred stock. The preferred stock is convertible into
common stock on a share-for-share basis.
-1-
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider all of the information contained in this prospectus or
incorporated herein by reference before making an investment in our common
stock. In particular, you should consider the risk factors described under "Risk
Factors" beginning on page 2.
RISK FACTORS
An investment in our common stock involves a high degree of risk. There are a
number of important factors that could affect our business and future operating
results, including without limitation, the factors set forth below. The
information contained in this prospectus should be read in light of such
factors.
RISKS RELATED TO OUR FINANCIAL CONDITION AND HIGHLY LEVERAGED FINANCIAL
STRUCTURE
WE HAVE A HISTORY OF LOSSES WHICH IF IT CONTINUES IN THE FUTURE WILL EVENTUALLY
MAKE US UNABLE TO MEET OUR FINANCIAL OBLIGATIONS.
We have experienced significant losses since we began operations. Despite
improvement in our operating margins since our emergence from bankruptcy, we may
continue to incur losses in the future. For the six months ended March 31, 2005,
we had a loss from operations of $9.1 million and a net loss of $17.5 million,
while for the year ended September 30, 2004, we had a loss from operations of
$33.9 million and a net loss of $41.4 million. $18.0 million of the loss from
operations and net loss during the year ended September 30, 2004 was
attributable to a writedown of our property located at 415 Greenwich Street in
New York City, which we sold in January 2004.
NEON has also experienced significant losses since it commenced operations. For
the year ended December 31, 2004, it had a loss from operations of $29.4 million
(including $22 million in asset write-downs associated with its acquisition by
Globix and $2 million attributable to costs incurred in connection with the
acquisition) and a net loss of $29.1 million.
Our ability to achieve and sustain operating profits depends on our ability to
reduce our indebtedness and operating expenses and increase our revenue base
while integrating the operations of NEON. If we are unable to reduce expenses
sufficiently or build up our revenue base, we will not become profitable. If we
are unable to become profitable, we will eventually become unable to meet our
financial obligations.
OUR ABILITY TO PAY THE PRINCIPAL AMOUNT OF OUR 11% SENIOR NOTES WHEN DUE DEPENDS
ON OUR FUTURE OPERATING PERFORMANCE AND ABILITY TO OBTAIN NEW FINANCING, AND
FAILURE TO SATISFY THESE OBLIGATIONS COULD RESULT IN THESE OBLIGATIONS BECOMING
DUE AND PAYABLE, RESULTING IN BANKRUPTCY.
Historically, we have not generated positive cash flows from operations. Our
ability to pay principal and interest on our 11% senior notes and on our other
indebtedness depends on our future operating performance. Our outstanding
indebtedness as of May 1, 2005 was approximately $88 million. If our cash flows
and capital resources are insufficient to allow us to make scheduled payments on
our indebtedness, we may have to reduce or delay capital expenditures, sell
assets, seek additional capital or restructure or refinance our indebtedness. We
can provide no assurance as to the availability or terms of any new financing.
The terms of our indebtedness may also restrict the use of some alternative
means of satisfying our obligations, and we cannot assure you that any
alternative measures would satisfy our scheduled debt service obligations. If we
cannot make scheduled payments on our indebtedness, we will be in default and,
as a result:
o our debt holders could declare all outstanding principal and
interest to be due and payable; and
o we could be forced into bankruptcy.
OUR OUTSTANDING INDEBTEDNESS RESTRICTS OUR FINANCIAL AND OPERATING FLEXIBILITY.
THIS COULD PLACE US AT A COMPETITIVE DISADVANTAGE THAT COULD IN TURN AFFECT OUR
ABILITY TO GENERATE CASH FLOW AND FULFILL OUR OBLIGATIONS.
-2-
We are highly leveraged and our outstanding indebtedness could:
o limit our ability to obtain additional financing to operate or
grow our business;
o require us to use the proceeds of certain asset sales to
redeem indebtedness;
o limit our financial flexibility in planning for and reacting
to industry changes;
o place us at a competitive disadvantage as compared to less
leveraged companies; and
o in 2007, after the fourth anniversary of the issuance of the
11% senior notes, require us to dedicate a significant portion
of our cash flow to payments on our debt, reducing the
availability of our cash flow for other purposes.
COVENANTS IN THE INDENTURE GOVERNING OUR 11% SENIOR NOTES IMPOSE LIMITATIONS ON
OUR ABILITY TO BORROW AND INVEST, WHICH COULD SEVERELY IMPAIR OUR ABILITY TO
EXPAND OR FINANCE OUR FUTURE OPERATIONS.
The indenture governing our 11% senior notes contains covenants that limit our
ability to incur additional indebtedness, create liens on assets, dispose of
assets, enter into business combinations or engage in certain activities with
our subsidiaries.
OUR LEVERAGE WILL INCREASE AS A RESULT OF THE PAYMENT OF INTEREST IN KIND, WHICH
COULD MAKE IT MORE DIFFICULT TO REPAY OR REFINANCE OUR INDEBTEDNESS AND PLACE US
AT AN OPERATIONAL AND COMPETITIVE DISADVANTAGE, CAUSING US TO LOSE CUSTOMERS AND
REVENUES.
The indenture under which our 11% senior notes permits us to pay interest in
kind at the discretion of our board of directors through 2006. The additional
issuances of 11% senior notes could further restrict our financial and operating
flexibility, limit our ability to obtain additional financing, place us at a
competitive disadvantage when compared to our competitors with less debt, and
make it more difficult to meet our financial obligations upon the maturity of
the 11% senior notes. The payment of interest in kind on May 1, 2005 resulted in
an additional $6.8 million in 11% senior notes.
IF OUR BOARD OF DIRECTORS DETERMINES TO ENGAGE IN CERTAIN CHANGE OF CONTROL
TRANSACTIONS, OR IF A THIRD PARTY WERE TO ACQUIRE MORE THAN 50% OF OUR STOCK OR
ACQUIRE CONTROL OF OUR BOARD OF DIRECTORS, WE OR THE THIRD PARTY COULD BE
REQUIRED TO PURCHASE OUR 11% SENIOR NOTES AND OUR CONVERTIBLE PREFERRED STOCK,
AND THE FAILURE TO DO SO WOULD RESULT IN AN EVENT OF DEFAULT UNDER THE INDENTURE
GOVERNING THE NOTES AND/OR A BREACH OF OUR OBLIGATIONS WITH RESPECT TO OUR
CONVERTIBLE PREFERRED STOCK.
In the event that:
o subject to certain exceptions, any person, entity or group of
persons or entities becomes the beneficial owner, directly or
indirectly, of more than 50% of our outstanding voting
securities;
o at any time during any two-year period following the
distribution of the 11% senior notes, the individuals who
comprised a majority of our board of directors at the
beginning of such two year period, plus any new directors
whose election to our board was approved by a majority of
those directors, cease to comprise a majority of our board of
directors; or
o subject to certain exceptions, we consolidate with or merge
with or into another entity, we sell or lease all or
substantially all of our assets to another entity or any
entity consolidates with or merges into or with our company,
in each case pursuant to a transaction in which our
outstanding voting securities are changed into or exchanged
for cash, securities or other property, unless no person,
entity or group of persons or entities owns, immediately after
the transaction, more than 50% of our outstanding voting
stock,
then each holder of the 11% senior notes will have the right to require us to
repurchase all or a portion of its 11% senior notes for a purchase price equal
to 101% of the principal amount of that holder's 11% senior notes plus accrued
and unpaid interest to the date of repurchase. There can be no assurance that we
will have sufficient funds available to make any required repurchases of 11%
senior notes or that the terms of our other indebtedness will permit us to make
-3-
any required repurchases of 11% senior notes. If we are unable to repurchase a
holder's 11% senior notes in connection with one of the events described above,
then this would constitute an event of default under the indenture governing the
11% senior notes.
Additionally, in the event of a change in control, each holder of our
convertible preferred stock will have the option to require us to redeem its
shares at a price equal to $3.636 per share plus all accrued and unpaid
dividends up to the date that such shares are redeemed. We cannot redeem any
shares of our convertible preferred stock upon a change in control prior to
repurchasing any securities ranking senior to our convertible preferred stock,
including the 11% senior notes. Therefore, if we are unable to repurchase all of
the 11% senior notes in connection with a change in control we would not be able
to redeem any shares of our convertible preferred stock.
RISKS RELATED TO OUR ACQUISITION STRATEGY
WE MAY ENCOUNTER UNEXPECTED COSTS IN INTEGRATING THE OPERATIONS OF GLOBIX AND
NEON AND CANNOT ASSURE YOU THAT THE INTEGRATION WILL BE SUCCESSFUL.
The merger with NEON involved the combination of two companies that previously
operated independently in markets with different economic, demographic and
competitive characteristics. The process of integrating operations could cause
an interruption of, or loss of momentum in, the activities of one or more of our
combined businesses and the loss of key personnel. Among the risks that may be
incurred as a result of the merger are:
o failure to successfully cross-sell services to customers of
the two businesses;
o failure to achieve expected cost savings in integrating
operations;
o diversion of management attention from business matters to
integration issues;
o difficulties in identifying and retaining key personnel;
o difficulties in integrating accounting, engineering,
information technology and administrative systems, which may
be unexpectedly costly;
o the need for significant cash expenditures to retain
personnel, eliminate unnecessary resources and integrate the
two businesses;
o difficulties in imposing uniform standards, controls,
procedures and policies, which may be harder than we
anticipate and interfere with efficient administration of the
combined company; and
o the impairment of relationships with employees, customers or
vendors as a result of changes in the business.
In addition, as a result of the merger we acquired NEON's liabilities. These
liabilities may include liabilities to customers, suppliers or employees, as
well as potential liabilities that can arise in the ordinary course of business.
Failure to overcome these risks or any other problems encountered in connection
with the merger could weaken our financial condition and result in further
operating losses.
OUR ACQUISITION STRATEGY MAY PROVE TO BE UNSUCCESSFUL, WHICH COULD RESULT IN
FURTHER LOSSES AND AN INABILITY TO MEET OUR FINANCIAL OBLIGATIONS.
In order to increase our revenue base, we may make investments in or acquire
businesses, products, services or technologies. Consequently, we are subject to
the following risks:
o we may not be able to make investments or acquisitions on
terms which prove advantageous;
-4-
o acquisitions may cause a disruption in our ongoing business,
distract our management and other resources and make it
difficult to maintain the operations, organization and
procedures of our company or the acquired business; and
o we may not be able to retain key employees of the acquired
business or to maintain good relations with its customers or
suppliers.
WE MAY NOT BE ABLE TO USE EITHER GLOBIX'S OR NEON'S OR BOTH COMPANIES' NET
OPERATING LOSSES FOR U.S. FEDERAL INCOME TAX PURPOSES, WHICH MAY INCREASE OUR
TAX LIABILITY.
Changes in the ownership of NEON securities as a result of NEON's plan of
reorganization have caused there to be an annual limitation on the use of net
operating loss carry forwards that arose prior to the effective date of NEON's
plan of reorganization. Similarly, changes in the ownership of our securities as
a result of our plan of reorganization have caused there to be an annual
limitation on the use of net operating loss carry forwards that arose prior to
the effective date of our plan of reorganization. As a result of the merger with
NEON, we or NEON or both, may experience another ownership change. Further,
whether or not the merger causes an ownership change, we may experience an
ownership change as a result of future changes of ownership. Additional
limitations would be imposed as a result of any such ownership change which may
increase our U.S. federal income tax liability.
RISKS RELATED TO OUR BUSINESS GENERALLY
OUR REVENUES COULD DECLINE SIGNIFICANTLY IF WE CONTINUE TO LOSE CUSTOMERS OR
HAVE OUR EXISTING CUSTOMERS REDUCE THEIR LEVEL OF SPENDING ON OUR SERVICES.
We have experienced and may continue to experience declines in revenue due to
customers leaving us or staying with us but choosing to decrease their spending
on our services. One of our biggest challenges has been to limit these revenue
declines. Although we have reduced the level of revenue declines due to customer
loss, we continue to experience declines in price per service. Continued
declines in revenue could eventually result in an inability to meet our
financial obligations.
Intense competition and overcapacity in the telecommunications market could also
result in a decline in revenues at our NEON subsidiary, which could also
eventually result in our inability to meet our financial obligations.
OUR HIGHLY LEVERAGED FINANCIAL STRUCTURE MAY AFFECT THE WAY WE ARE VIEWED IN THE
MARKET.
Our highly leveraged financial structure may limit our ability to negotiate
favorable terms with vendors or retain customers. Our bankruptcy, the bankruptcy
of NEON and our continued leverage may cause customers to question our financial
soundness and may also affect the contractual terms that are available to us.
OUR BUSINESS COULD SUFFER FROM A LOSS OF MANAGEMENT PERSONNEL, WHICH COULD AT
LEAST TEMPORARILY REDUCE OUR EFFICIENCY AND CONTROL OVER OUR OPERATIONS AND
REDUCE OUR REVENUES OR EARNINGS.
Since our emergence from bankruptcy, we have undertaken a number of changes in
management as well as reductions in staffing. In the year following our
bankruptcy, we replaced our Chief Executive Officer and Chief Financial Officer
as well as other members of senior management. As a result, our business
experienced a lack of continuity in management. Our ability to operate
effectively depends largely on the experience, skills and performance of our
senior management team. The loss or unavailability to us of any member of our
senior management team could at least temporarily reduce our efficiency and
control over operations and could reduce our revenues or earnings.
WE MAY NOT BE ABLE TO ATTRACT OR RETAIN THE PERSONNEL WE NEED IN CRITICAL AREAS
OF OUR BUSINESS, WHICH COULD REDUCE OUR EFFICIENCY, IMPAIR THE QUALITY OF OUR
SERVICES OR OTHERWISE ADVERSELY AFFECT THE ABILITY OF OUR BUSINESS TO PERFORM
ITS FUNCTIONS.
We may experience difficulties in attracting and retaining key personnel for
management, technical, sales and marketing and customer support positions. The
failure to attract or retain qualified personnel in any of these critical areas
could adversely affect the ability of our business to perform its functions.
Further efforts to control management costs, given our flat organizational
structure, could have an additional adverse impact on employee morale.
-5-
BECAUSE WE ARE DEPENDENT ON COMPUTER AND COMMUNICATION SYSTEMS, A SYSTEMS
FAILURE WOULD CAUSE A SIGNIFICANT DISRUPTION TO OUR BUSINESS.
Our business depends on the efficient and uninterrupted operation of our
computer and communications hardware systems and infrastructure. While we have
taken precautions against systems failure, interruptions could result from
natural disasters as well as power loss, our inability to acquire fuel for our
backup generators, telecommunications failure, terrorist attacks and similar
events. We also lease telecommunications lines from local, regional and national
carriers, whose service may be interrupted. Any damage or failure that
interrupts or delays our operations could result in the loss of customers and
revenues.
RISKS RELATED TO THE INTERNET SERVICE BUSINESS
COMPETITION FOR THE INTERNET SERVICES THAT WE PROVIDE IS INTENSE AND WE EXPECT
THAT COMPETITION WILL CONTINUE TO INTENSIFY, WHICH COULD RESULT IN OUR
ENCOUNTERING SIGNIFICANT PRICING PRESSURE.
Our competitors include other Internet service providers with a significant
national or global presence that focus on business customers, such as IBM,
Digex, EDS, NaviSite, Savvis, Akamai, Speedera, Data Return, Rackspace and
Equinix. Our competitors also include telecommunications companies, such as
AT&T, British Telecom, Level 3, MCI and Sprint. Many of our existing
competitors, as well as a number of potential new competitors, have:
o longer operating histories;
o greater name recognition;
o larger customer bases;
o larger networks;
o more and larger facilities; and
o significantly greater financial, technical and marketing
resources.
New competitors, including large computer hardware, software, media and other
technology and telecommunications companies, may enter our market and rapidly
acquire significant market share. As a result of increased competition and
vertical and horizontal integration in the industry, we expect to continue to
encounter significant pricing pressures. These pricing pressures could result in
significantly lower average selling prices for our services. For example,
telecommunications companies operating outside of NEON's geographic market may
be able to provide customers with reduced communications costs in connection
with their Internet access services, significantly increasing pricing pressures
on us. We may not be able to offset the effects of any price reductions with an
increase in the number of our customers, higher revenue from value-added
services, cost reductions or otherwise.
IF WE ARE UNABLE TO MAINTAIN AND UPGRADE OUR NETWORK AND FACILITIES, WE COULD
LOSE CUSTOMERS AND REVENUES OR BE UNABLE TO OFFER COMPETITIVE SERVICES.
A key element of our business strategy is the maintenance and upgrading of our
facilities and network, which has required, and will continue to require,
management time and the periodic expenditure of capital. Any interruption in our
ability to deliver services over our network due to market disruptions or third
party insolvencies may make us less attractive to future customers and may
hamper our ability to retain our current customers which, in turn, could
adversely affect our entire business.
OUR BUSINESS RELIES ON THIRD-PARTY DATA COMMUNICATIONS AND TELECOMMUNICATIONS
PROVIDERS THAT COULD INCREASE PRICES OR INTERRUPT SERVICE, WHICH IN TURN COULD
CAUSE US TO LOSE CUSTOMERS AND REVENUES.
Our existing network relies on many third-party data communications and
telecommunications providers, located in the United States and abroad. These
carriers are subject to price constraints, including tariff controls, that in
the future may be relaxed or lifted. In addition, certain of these providers,
including MCI, Global Crossing and Cable and Wireless, have filed for protection
-6-
under Chapter 11 under the U.S. Bankruptcy Code, which may affect the
availability and quality of the services that these entities provide. Price
increases or the lack of service availability and quality could increase the
costs of maintaining our network and result in the loss of customers and
revenues.
WE MAY NOT BE ABLE TO OBTAIN COMPUTER HARDWARE AND SOFTWARE ON THE SCALE AND AT
THE TIMES WE NEED AT AN AFFORDABLE COST, AND FAILURE TO DO SO OVER AN EXTENDED
PERIOD OF TIME COULD CAUSE US TO LOSE CUSTOMERS OR BE UNABLE TO OFFER
COMPETITIVE SERVICE.
We rely on outside vendors to supply us with computer hardware, software and
networking equipment. We primarily use products from Cisco, Compaq, Juniper
Networks and Sun Microsystems, either leased or purchased from the manufacturer
or a third-party vendor. Consequently, our expertise is concentrated in products
from these manufacturers. We also rely on Cisco for network design and
installation services. If we are unable over an extended period of time to
obtain the products and services that we need on a timely basis and at
affordable prices, it could result in the loss of customers and revenues.
OUR DEPENDENCE ON A LIMITED NUMBER OF SUPPLIERS EXPOSES US TO POSSIBLE
INTERRUPTIONS THAT COULD DELAY OR PREVENT US FROM PROVIDING OUR SERVICES.
Approximately 39% of the cost of revenues of Globix for the year ended September
30, 2004 was derived from services provided by three major telecommunication
carriers, MCI, Verizon and British Telecom. While we believe that most of these
services can be obtained from other alternative carriers, an interruption in
service from one of these carriers or other suppliers could limit our ability to
serve customers, which would adversely affect our results of operations.
IF OUR SECURITY MEASURES PROVED TO BE INADEQUATE, WE COULD LOSE CUSTOMERS.
Our infrastructure is potentially vulnerable to physical or electronic
break-ins, viruses, denial of service attacks or similar problems. If someone
were to circumvent our security measures, he or she could jeopardize the
security of confidential information stored on our systems, misappropriate
proprietary information or cause interruptions in our operations. We may be
required to make significant additional investments and efforts to protect
against or remedy security breaches. Security breaches that result in access to
confidential information could damage our reputation and expose us to a risk of
loss or liability. The security services that we offer in connection with our
customers' networks cannot assure complete protection from computer viruses,
break-ins and other disruptive problems. Although we attempt to contractually
limit our liability in such instances, the occurrence of these problems may
result in claims against us or liability on our part. These claims, regardless
of their ultimate outcome, could result in costly litigation and could harm our
business and reputation and impair our ability to attract and retain customers
for our services.
BECAUSE OUR BUSINESS DEPENDS ON THE CONTINUED GROWTH, USE AND IMPROVEMENT OF THE
INTERNET, ANY DECREASE IN INTERNET USAGE COULD DECREASE THE DEMAND FOR OUR
SERVICES, AND REDUCE OUR REVENUES.
Our services are targeted toward businesses that use the Internet. The Internet
is characterized by rapidly changing technology, evolving industry standards and
frequent new service introductions. Accordingly, we are subject to the risks and
difficulties frequently encountered in new and rapidly evolving markets.
Critical issues concerning the commercial use of the Internet remain unresolved
and may affect the growth of Internet use, especially in the market we target.
Despite growing interest in the many commercial uses of the Internet, many
businesses have been deterred from purchasing Internet services for a number of
reasons, including:
o inadequate protection of the confidentiality of stored data
and information moving across the Internet;
o inconsistent quality of service;
o inability to integrate business applications on the Internet;
o the need to deal with multiple vendors, whose products are
frequently incompatible;
-7-
o lack of availability of cost-effective, high-speed services;
and
o concern over the financial viability of Internet service
providers.
Capacity constraints caused by growth in Internet usage may, unless resolved,
impede further growth in Internet use.
OUR BUSINESS REQUIRES US TO ADAPT TO TECHNOLOGICAL CHANGES, AND SIGNIFICANT
TECHNOLOGICAL CHANGES COULD RENDER OUR EXISTING SERVICES OBSOLETE.
We must adapt to our rapidly changing market by continually improving the
responsiveness, functionality and features of our services to meet our
customers' needs. If we are unable to respond to technological advances and
conform to emerging industry standards in a cost-effective and timely basis, we
could lose customers and there could cease to be a market for our services.
CHANGES IN GOVERNMENT REGULATIONS RELATED TO THE INTERNET COULD RESTRICT OUR
ACTIVITIES, EXPOSE US TO LIABILITY OR INCREASE OUR COSTS.
There are an increasing number of laws and regulations pertaining to the
Internet. These laws or regulations relate to liability for content and
information received from or transmitted over the Internet, user privacy and
security, taxation, the enforcement of online contracts, consumer protection and
other issues concerning services. The government may also seek to regulate some
aspects of our activities as basic telecommunications services. Moreover, the
applicability to the Internet of existing laws governing copyright, trademark,
trade secret, obscenity, libel, consumer protection, privacy and other issues is
uncertain and developing. We cannot predict the impact that future regulation or
regulatory changes may have on our business.
WE COULD BE LIABLE FOR VIOLATING THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES, WHICH COULD RESULT IN US HAVING TO PAY A LICENSE FEE OR DAMAGES TO
THIRD PARTIES, WHICH WOULD REDUCE OUR REVENUES.
Despite our efforts to protect the intellectual property that is important to
the operation of our business, a third party could bring a claim of infringement
against us or any of our material suppliers. If such a claim were settled or
adjudicated against us or one of our material suppliers, we could be forced to
pay for a license to continue using the intellectual property. There is no
guarantee that we could obtain such a license, or that it would be available on
reasonable terms. Alternatively, we could be forced to defend ourselves against
infringement claims, which could be costly and which could result in us having
to pay damages to third parties.
WE MAY BE LIABLE FOR THE MATERIAL THAT OUR CUSTOMERS DISTRIBUTE OVER THE
INTERNET, WHICH COULD RESULT IN LEGAL CLAIMS AGAINST US.
The law relating to the liability of online service providers, private network
operators and Internet service providers for content and information carried on
or disseminated through their networks is currently unsettled. While we have
taken steps to contractually limit our liability in these areas, we could become
subject to legal claims relating to the content of the web sites we host. For
example, lawsuits could be brought against us claiming that material
inappropriate for viewing by young children can be accessed from the web sites
that we host. Claims could also involve matters such as defamation, invasion of
privacy, violations of "anti-spamming" legislation, copyright and trademark
infringement. Internet service providers have been sued in the past, sometimes
successfully, based on the material disseminated over their networks. We may
take additional measures to reduce our exposure to these risks, which could be
costly or result in some customers not doing business with us. In addition,
defending ourselves against claims, or paying damage awards to third parties,
could strain our management and financial resources.
WE FACE RISKS ASSOCIATED WITH DIFFERING REGULATORY REGIMES AND MARKETS AS A
RESULT OF OUR INTERNATIONAL OPERATIONS, WHICH COULD EXPOSE US TO LIABILITY FOR
NONCOMPLIANCE OR INCREASE THE COST OF OUR INTERNATIONAL OPERATIONS.
A substantial percentage of our business is located in the United Kingdom. We
face problems of managing our business under differing regulatory regimes in
areas such as intellectual property, telecommunications and employee relations.
As a result, we may find it more difficult and expensive to hire and train
employees and to manage international operations together with our United States
operations. Because we have limited experience operating in markets outside the
United States and the United Kingdom, we may have difficulty adapting our
-8-
services to different international market needs. We may also be unsuccessful in
our efforts to market and sell these services to customers abroad. If we fail to
successfully address these risks, our international operations may be adversely
affected.
CURRENCY EXCHANGE RATE FLUCTUATIONS COULD REDUCE OUR REVENUES OR INCREASE OUR
COSTS.
We are subject to market risk associated with foreign currency exchange rates.
Approximately 42% of Globix's revenues and approximately 28% of its operating
costs and expenses for the year ended September 30, 2004 were denominated in
British Pounds. An increase in the cost of the British Pound would increase our
revenues but also increase costs incurred in the United Kingdom. We believe that
an immediate increase or decrease of 5% of the Dollar in comparison to the
British Pound would not have a material impact on our operating results or cash
flows. To date, we have not utilized financial instruments to minimize our
exposure to foreign currency fluctuations. We will continue to analyze risk
management strategies to minimize foreign currency exchange risk in the future.
OUR RESULTS OF OPERATIONS FLUCTUATE ON A QUARTERLY AND ANNUAL BASIS AND WE
EXPECT TO CONTINUE EXPERIENCING FLUCTUATIONS IN OUR FUTURE QUARTERLY AND ANNUAL
RESULTS OF OPERATIONS, WHICH COULD AFFECT THE MARKET PRICE OF OUR SECURITIES.
Our results of operations fluctuate on a quarterly and annual basis. We expect
to continue experiencing fluctuations in our future quarterly and annual results
of operations due to a variety of factors, many of which are outside our
control, including:
o timing of contractual cancellations and renewals;
o demand for and market acceptance of our services;
o introductions of new services by us and our competitors;
o customer retention;
o capacity utilization of our data centers and assets;
o timing of customer installations;
o our mix of services sold;
o the timing and magnitude of our capital expenditures;
o changes in our pricing policies and those of our competitors;
o fluctuations in bandwidth used by customers;
o our retention of key personnel;
o reliable continuity of service and network availability;
o costs related to the acquisition of network capacity;
o arrangements for interconnections with third-party networks;
o the provision of customer discounts and credits;
o the introduction by third parties of new Internet and
networking technologies;
o licenses and permits required to construct facilities, deploy
networking infrastructure or operate in the United States and
foreign countries; and
o other general economic factors.
-9-
Fluctuations in our quarterly or annual results as a result of one or more of
these factors could affect the market price of our securities.
RISKS RELATED TO THE NEON FIBER OPTIC NETWORK BUSINESS
OUR BUSINESS STRATEGY DEPENDS UPON ANTICIPATED CUSTOMER DEMAND FOR OUR FIBER
OPTIC NETWORK SERVICES, AND FAILURE TO OBTAIN CUSTOMERS FOR THESE SERVICES AT
PROFITABLE RATES WOULD REDUCE NEON'S REVENUES AND THEREFORE OUR REVENUES.
NEON's ability to become profitable depends upon its ability to secure a market
for its services and obtain service contracts with its communications customers.
Many of NEON's targeted customers may also be its potential competitors. If its
services are not satisfactory or cost competitive, NEON's targeted customers may
utilize other providers where available, or construct their own networks, which
would reduce their need for NEON's services and create future sources of
competition for NEON.
INTENSE COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY FROM A BROAD RANGE OF
COMPETITORS MAY PREVENT NEON FROM OBTAINING CUSTOMERS, REQUIRE IT TO LOWER
PRICES AND REDUCE ITS REVENUES AND THEREFORE OUR REVENUES.
The telecommunications industry is highly competitive. Our fiber optic network
business faces substantial competition from companies with significantly greater
financial and other resources, whose capacity is interchangeable with the
capacity that NEON offers, including incumbent local telephone companies,
national long-haul and regional carriers, dark fiber providers and metro
carriers. In addition, potential competitors capable of offering services
similar to those offered by NEON include other communications service providers
that own and operate their own networks and equipment, including cable
television companies, electric utilities, microwave carriers, satellite
carriers, wireless communication system operators and end-users with private
communications networks.
BECAUSE NEON OFFERS A RELATIVELY NARROW RANGE OF SERVICES IN COMPARISON TO SOME
OF ITS COMPETITORS, IT CANNOT ACHIEVE REVENUES COMPARABLE TO COMPANIES OFFERING
A BROADER ARRAY OF SERVICES AND MAY BE AT A COMPETITIVE DISADVANTAGE WITH
RESPECT TO THE SERVICES IT OFFERS.
Unlike more diversified telecommunications providers, NEON derives and expects
to continue to derive substantially all of its revenues from the leasing of
fiber optic capacity on a wholesale basis to our customers, most of whom are
telecommunications companies and Internet service providers serving end-users.
The limited nature of its current services could limit its potential revenues
and result in NEON having lower revenues than competitors which provide a wider
array of services. While NEON is currently attempting to expand the breadth of
its product offering, we cannot assure you that any new product offerings will
achieve market acceptance.
DUE TO RAPIDLY EVOLVING TECHNOLOGIES IN THE FIBER OPTIC NETWORK INDUSTRY AND THE
UNCERTAINTY OF FUTURE GOVERNMENT REGULATION, NEON'S CURRENT BUSINESS PLAN MAY
BECOME OBSOLETE AND IT MAY LOSE CUSTOMERS AND REVENUE IF IT IS UNABLE TO
SUCCESSFULLY ADJUST ITS PRODUCTS, SERVICES AND BUSINESS STRATEGIES AS REQUIRED.
In the future, we may become subject to more intense competition due to the
development of new technologies, an increased supply of domestic and
international transmission capacity, the consolidation in the industry among
local and long distance service providers and the effects of deregulation
resulting from the Telecommunications Act of 1996. The introduction of new
services and products or the emergence of new technologies may change the cost
or increase the supply of services and products similar to those that it
provides. We cannot predict which of many possible future product and service
offerings will be crucial to maintain Neon's competitive position or what
expenditures will be required to develop profitably and provide such products
and services. Prices for NEON's services to carriers specifically, and
interstate services in general, may decline over the next several years due
primarily to price competition to the extent that network providers continue to
install networks that compete with our fiber optic network. We also believe that
there will be technological advances that will permit substantial increases in
the transmission capacity of both new and existing fiber.
-10-
A LIMITED NUMBER OF CUSTOMERS HAVE ACCOUNTED FOR A SIGNIFICANT PERCENTAGE OF
NEON'S REVENUES AND ACCOUNTS RECEIVABLE, AND THE LOSS OF ANY SINGLE ONE OF THESE
CUSTOMERS COULD RESULT IN A SIGNIFICANT LOSS OF REVENUES FOR NEON AND THEREFORE
FOR US.
Historically, a limited number of customers have accounted for a significant
percentage of NEON's revenues and accounts receivable. For the year ended
December 31, 2004, one customer accounted for approximately 15% of net revenues.
For the years ended December 31, 2003 and 2002 two customers each accounted for
approximately 10% of net revenues. As of December 31, 2004, one customer
represented approximately 50% of accounts receivable. This amount was
subsequently collected in full from the customer.
CONTINUING WEAKNESS IN THE TELECOMMUNICATIONS INDUSTRY MAY RESULT IN A LOSS OF
REVENUE FOR NEON.
The continued downturn in the telecommunications industry may have a significant
impact on NEON. Several of NEON's competitors and customers have filed for
protection under the bankruptcy laws and NEON may be unable to collect
receivables due to bankruptcies and business difficulties among its customers.
Oversupply of capacity and an ongoing downward trend in bandwidth prices may
continue if its competitors do not successfully consolidate. Even if they do
successfully consolidate, they may do so to our detriment. Competitors who
successfully complete restructuring or bankruptcy reorganization processes or
who introduce new product offerings may put NEON at a competitive disadvantage.
TERRORIST ATTACKS OR WAR MAY ADVERSELY AFFECT NEON'S FINANCIAL CONDITION AND
OPERATING RESULTS.
The occurrence of terrorist attacks or armed conflicts may directly impact
NEON's facilities or the facilities of its suppliers or customers. In addition,
such attacks or conflicts may result in increased volatility in the United
States and global financial markets. Any of these occurrences could potentially
have a material impact on NEON's financial condition and operating results and
therefore our financial condition and operating results.
THE SUCCESSFUL, TIMELY AND COST-EFFECTIVE EXPANSION OF OUR FIBER OPTIC NETWORK
WITHIN THE NORTHEAST AND MID-ATLANTIC REGIONS IS CRUCIAL TO OUR BUSINESS PLAN,
AND DEPENDS UPON NUMEROUS FACTORS BEYOND OUR CONTROL.
Our ability to achieve our strategic objectives depends in large part upon the
successful, timely and cost-effective expansion of our fiber optic network
within the Northeast and mid-Atlantic regions. The failure of both affiliated
and third party suppliers or contractors to meet their obligations to construct
and maintain significant portions of our fiber optic network in a timely and
cost-effective manner could affect our ability to execute our business plan.
THE EXPENDITURES NECESSARY TO SUFFICIENTLY EXPAND OUR FIBER OPTIC NETWORK AND
DEVELOP NEON'S SERVICES IN ORDER TO SATISFY THE CURRENT AND FORECASTED DEMANDS
OF ITS CUSTOMERS MAY SURPASS ITS AVAILABLE CASH, AND WE MAY BE UNABLE TO OBTAIN
ADDITIONAL CAPITAL TO DEVELOP THESE SERVICES ON A TIMELY BASIS AND ON ACCEPTABLE
TERMS.
Although NEON has expended significant resources in building its network and the
development of its customer base, NEON will require additional cash in order to
expand its geographic coverage and the range of services which it can offer
throughout its service area in order to be competitive in its market and to meet
customer demands. These expenditures for expansion and for more services,
together with associated operating expenses, will reduce its cash flow and
profitability until it establishes an adequate customer base throughout all of
our coverage areas. To date, NEON has expended substantial amounts on
construction of its network from the proceeds of its financing activities and
has generated negative cash flow.
NEON OBTAINS SOME OF THE KEY COMPONENTS USED IN ITS FIBER OPTIC NETWORK FROM A
SINGLE SOURCE OR A LIMITED GROUP OF SUPPLIERS, AND THE PARTIAL OR COMPLETE LOSS
OF ONE OF THESE SUPPLIERS COULD DISRUPT ITS OPERATIONS AND RESULT IN A
SUBSTANTIAL LOSS OF REVENUES.
NEON depends upon a small group of suppliers for some of the key components and
parts used in its network. In particular, NEON purchases fiber optic equipment
from Nortel Networks, Cisco Systems, Lucent Technologies and ECI Telecom. Any
delay or extended interruption in the supply of any of the key components,
changes in the pricing arrangements with our suppliers and manufacturers or
delay in transitioning a replacement supplier's product into its network could
disrupt its operations.
-11-
NEON'S FIBER OPTIC NETWORK, WHICH IS ITS SOLE SOURCE OF REVENUE, IS VULNERABLE
TO PHYSICAL DAMAGE, CATASTROPHIC OUTAGES, POWER LOSS AND OTHER DISRUPTIONS
BEYOND OUR CONTROL, AND THE OCCURRENCE OF ANY OF THESE FAILURES COULD RESULT IN
IMMEDIATE LOSS OF REVENUES, PAYMENT OF OUTAGE CREDITS TO ITS CUSTOMERS AND, MORE
IMPORTANTLY, THE LOSS OF NEON'S CUSTOMERS' CONFIDENCE AND ITS BUSINESS
REPUTATION.
NEON's success in marketing its services to its customers requires that NEON
provide high reliability, high bandwidth and a secure network. NEON's network
and the infrastructure upon which it depends are subject to physical damage,
power loss, capacity limitations, software defects, breaches of security and
other disruptions beyond NEON's control that may cause interruptions in service
or reduced capacity for customers. NEON's agreements with its customers
typically provide for the payment of outage related credits (a predetermined
reduction or offset against NEON's lease rate when a customer's leased facility
is non-operational or otherwise does not meet certain operating parameters) or
damages in the event of a disruption in service. These credits or damages could
be substantial and could significantly decrease NEON's net revenues. Significant
or lengthy outages would also undermine customers confidence in NEON's fiber
optic network and injure its business reputation.
NEON COULD LOSE THE CONTRACT RIGHTS UPON WHICH IT RELIES TO OPERATE AND MAINTAIN
ITS NETWORK IN THE EVENT OF BANKRUPTCY PROCEEDINGS RELATING TO ONE OR MORE OF
THE THIRD PARTIES THAT HAVE GRANTED TO NEON THE RIGHT TO BUILD AND OPERATE ITS
NETWORK USING THEIR RIGHTS-OF-WAY.
The construction and operation of significant portions of NEON's fiber optic
network depends upon contract rights known as indefeasible rights-of-use.
Indefeasible rights-of-use are commonly used in the telecommunications industry,
but remain a relatively new concept in property law. Although indefeasible
rights-of-use give the holder a number of rights to control the relevant
rights-of-way or fiber optic filaments, legal title remains with the grantor of
the rights. Therefore, the legal status of indefeasible rights-of-use remains
uncertain, and NEON's indefeasible rights-of-use might be voidable in the event
of bankruptcy of the grantor. If NEON were to lose an indefeasible right-of-use
in a key portion of its network, its ability to service its customers could
become seriously impaired and NEON could be required to incur significant
expense to resume the operation of its fiber optic network in the affected
areas.
DESPITE NEON'S EXISTING RIGHTS-OF-WAY, WE MAY BE FORCED TO MAKE SUBSTANTIAL
ADDITIONAL PAYMENTS TO THE AFFECTED LANDOWNERS OR REMOVE ITS NETWORK FROM THEIR
PROPERTY, WHICH WOULD SIGNIFICANTLY HARM OUR BUSINESS AND RESULTS OF OPERATIONS.
NEON's indefeasible rights-of-use and other rights-of-way depend on the
grantor's interest in the property on which its network is located. To the
extent that a grantor of an indefeasible right-of-use or other rights-of-way has
a limited easement in the underlying property and not full legal title, the
adequacy of NEON's indefeasible rights-of-use or other rights-of-way could be
challenged in court. We believe that the easements granted by a substantial
number of landowners to grantors of NEON's indefeasible rights-of-use are
similar in scope to those with respect to which claims have been asserted, and
we cannot guarantee that claims will not be made in the future.
BECAUSE SIGNIFICANT PORTIONS OF NEON'S FIBER OPTIC NETWORK ARE CONSTRUCTED UPON
RIGHTS-OF-WAY CONTROLLED BY UTILITY COMPANIES AND MUNICIPALITIES WHICH GENERALLY
PLACE THE OPERATION OF THEIR FACILITIES AHEAD OF THE OPERATION OF NEON'S FIBER
OPTIC NETWORK, NEON MAY BE UNABLE TO CONSTRUCT AND OPERATE ITS FIBER OPTIC
NETWORK IN THE AFFECTED AREAS WITHOUT PERIODIC INTERRUPTIONS AND DELAYS CAUSED
BY THE DAY-TO-DAY OPERATIONS OF THESE ENTITIES.
NEON's rights-of-way agreements with Northeast Utilities, Central Maine Power
and Consolidated Edison Communications, Inc. and various other entities contain
provisions which acknowledge the right of these entities to make the provision
of their services to their own customers their top priority. These companies are
required only to exercise "reasonable care" with respect to NEON's facilities
and are otherwise free to take whatever actions they deem appropriate with
respect to ensuring or restoring service to their customers, any of which
actions could impair operation of NEON's network.
MUNICIPAL REGULATION OF NEON'S ACCESS TO PUBLIC RIGHTS-OF-WAY IS SUBJECT TO
CHANGE AND COULD IMPOSE ADMINISTRATIVE BURDENS THAT WOULD RESULT IN ADDITIONAL
COSTS TO US OR LIMIT OUR FIBER OPTIC NETWORK OPERATIONS.
-12-
Local governments typically retain the ability to license public rights-of-way,
subject to the federal requirement that local governments may not prohibit the
provision of telecommunications services. Changes in local government regulation
could impose additional costs on our business and limit its operations. Local
authorities affect the timing and costs associated with its use of public
rights-of-way.
FEDERAL REGULATION OF THE TELECOMMUNICATIONS INDUSTRY IS CHANGING RAPIDLY AND WE
COULD BECOME SUBJECT TO UNFAVORABLE NEW RULES AND REQUIREMENTS WHICH COULD
IMPOSE SUBSTANTIAL FINANCIAL AND ADMINISTRATIVE BURDENS ON US AND INTERFERE WITH
OUR ABILITY TO SUCCESSFULLY EXECUTE OUR FIBER OPTIC NETWORK BUSINESS STRATEGIES.
Regulation of the telecommunications industry is changing rapidly. Existing and
future federal, state, and local governmental regulations will greatly influence
NEON's viability. Consequently, undesirable regulatory changes could adversely
affect our business, financial condition and results of operations. For example,
the FCC recently issued rules under the Telecommunications Act of 1996 which
would have required that competitive local exchange carriers, such as NEON, be
allowed to purchase the use of certain elements of the telecommunications
network owned and operated by incumbent local exchange carriers. By purchasing
these elements, competitive local exchange carriers would have been able to
provide services in a cost-effective manner to their customers. However, the
FCC's rules were challenged in court by the incumbent local exchange carriers.
The U.S. Court of Appeals for the District of Columbia Circuit sided with the
incumbent local exchange carriers and has required the FCC to formulate new
rules. Any new rules issued by the FCC may not provide competitive local
exchange carriers with the ability to purchase the use of all of the elements of
the incumbent local exchange carrier's network, and as a result the competitive
local exchange carriers may not be able to continue providing services to their
customers that they are currently providing.
REVENUES FROM TELECOMMUNICATIONS PROVIDED TO END-USERS, WHICH REPRESENT A
PORTION OF NEON'S REVENUES, ARE SUBJECT TO CONTRIBUTIONS TO THE FCC'S UNIVERSAL
SERVICE FUND, AND INCREASES IN THE AMOUNT NEON IS REQUIRED TO CONTRIBUTE COULD
INCREASE OUR COSTS UNEXPECTEDLY.
While NEON generally does not deal directly with end-users of telecommunications
and are therefore generally exempt from contributing to the FCC's Universal
Service Fund, the FCC treats certain Internet service providers purchasing
telecommunications as end-users. NEON's revenues from providing
telecommunications to end-users, which represent a portion of our revenues, are
therefore currently subject to an assessment of 8.9%. Such assessments vary and
may increase from quarter to quarter. If the annual contribution amount would be
less than $10,000, NEON would qualify for a de minimus exemption from
contribution to the Fund. NEON's required contributions to the Universal Service
Fund for the year ended December 31, 2003 and the nine months ended September
30, 2004 were approximately $168,000 and $140,000, respectively.
IF NEON BECOMES SUBJECT TO REGULATION AS A COMMON CARRIER IN THE FUTURE, WE
WOULD BE SUBJECT TO ADDITIONAL REGULATORY REQUIREMENTS.
We do not believe that NEON is currently a "common carrier," but that status
could change based on differing interpretations of current regulations,
regulatory changes and changes in the way we conduct our fiber optic network
business. If NEON becomes regulated as a common carrier by the FCC, it would
have to publicize the rates for its services and submit other reports, and would
be required to contribute to federal funds including, but not limited to, those
established for Telecommunications Relay Services, for the management of the
North American Numbering Plan and for Local Number Portability. These regulatory
requirements could impose substantial burdens on Globix.
The Telecommunications Act of 1996 requires incumbent local telephone companies
to provide elements of their networks to competitors on an unbundled basis. The
FCC determined that dark fiber is a network element that incumbent local
telephone companies must provide to others. The availability of this alternative
source of supply may increase competition among providers of dark fiber services
and could decrease the demand for our fiber optic network services.
STATE REGULATION OF COMPANIES PROVIDING TELECOMMUNICATIONS SERVICES VARIES
SUBSTANTIALLY FROM STATE TO STATE AND NEON MAY BECOME SUBJECT TO BURDENSOME AND
RESTRICTIVE STATE REGULATIONS AS IT EXPANDS ITS FIBER OPTIC NETWORK INTO A
BROADER GEOGRAPHIC AREA, WHICH COULD INTERFERE WITH ITS OPERATIONS AND OUR
ABILITY TO MEET OUR STRATEGIC OBJECTIVES.
-13-
NEON may be subject to state regulation, which can vary substantially from state
to state. NEON subsidiaries have obtained authority to provide intrastate
telecommunications services on a competitive common carrier basis in its market
area. Therefore, these subsidiaries are subject to the obligations that
applicable law places on all similarly certificated common carriers including
the filing of tariffs, state regulation of certain service offerings, pricing,
payment of regulatory fees and reporting requirements. The costs of compliance
with these regulatory obligations, or any of the regulatory requirements of
other states to which we might become subject, could have a material adverse
effect on NEON's operations. Moreover, some of NEON's rights-of-way depend on
its status as a common carrier in these states, and if that status were to be
successfully challenged, those rights-of-way could be terminated.
RISKS RELATING TO FINANCIAL ACCOUNTING
AS A RESULT OF VARIOUS FINANCIAL ACCOUNTING COMPLEXITIES, ACCOUNTING STAFF
TURNOVER AND ACCOUNTING STAFF SHORTAGES, WE EXPERIENCED MATERIAL WEAKNESSES IN
OUR ACCOUNTING AND INTERNAL CONTROL ENVIRONMENT IN SUMMER 2003 THAT RESULTED IN
THE DELAY AND LATE FILING OF SEC REPORTS FILED DURING SUMMER 2003. AS A RESULT,
OUR DISCLOSURE CONTROLS AND PROCEDURES WERE INEFFECTIVE UNTIL THE MATERIAL
WEAKNESSES WERE REMEDIATED.
Since our emergence from bankruptcy effective April 25, 2002, we have had to
face many challenging and complex accounting and financial reporting issues,
including fresh start accounting, restructuring and the restatement of amounts
in our financial statements as of and for the quarter ended March 31, 2002. In
addition, we experienced significant turnover in our financial reporting staff,
as well as limited management resources. We fell behind in our SEC reporting for
the year ended September 30, 2002, and experienced difficulty in catching up
with our filing obligations for the year ended September 30, 2002 while
fulfilling our responsibilities for the fiscal year 2003. The combined effect of
these challenges placed a strain on our internal accounting resources in summer
2003 and resulted in further delays in the preparation and filing of periodic
reports that were filed in summer 2003. The strain on our internal accounting
resources and the delays in the preparation and filing of periodic reports
resulted in material weaknesses in our accounting and internal control
environment in summer 2003. We addressed these issues and implemented necessary
changes by hiring additional personnel and returning to a normal recurring
closing timetable that includes formal management reviews and monthly financial
reporting and have significantly reduced the burden on our internal accounting
staff. Any controls and procedures, no matter how well designed and operated,
however, can provide only reasonable assurance of achieving the desired control
objectives. For further information concerning our internal controls, see
"Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure" in our Annual Report on Form 10-K, filed with the Securities and
Exchange Commission on December 9, 2004.
RISKS RELATED TO OUR COMMON STOCK
BECAUSE OUR COMMON STOCK IS THINLY TRADED, PRICES ARE MORE LIKELY TO BE VOLATILE
AND IT MAY BE HARDER FOR OUR STOCKHOLDERS TO SELL ANY SIZABLE NUMBER OF SHARES.
Our common stock is currently traded on the American Stock Exchange. Until April
13, 2005 our common stock was quoted on the OTC Bulletin Board. We cannot assure
you that an active and liquid trading market will develop in our common stock,
or if one does develop that it will continue. The development of an active
public trading market depends upon the existence of willing buyers and sellers
and is not within our control. For these reasons, we cannot assure our
stockholders that they will be able to resell shares of our common stock for a
price that is equal to or greater than the price of our common stock on the date
the stock is acquired.
FUTURE SALES OF OUR COMMON STOCK, INCLUDING THOSE ISSUED IN THE MERGER WITH
NEON, MAY DEPRESS OUR STOCK PRICE.
If our stockholders or option holders, including former NEON stockholders and
option holders who received our common stock and stock options in the merger,
sell substantial amounts of our common stock in the public market, the market
price of our common stock could fall. All the shares sold in the merger with
NEON are freely tradable, subject to limitations applicable to affiliates of
NEON.
-14-
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains historical and forward-looking statements. The
forward-looking statements are based on current information and expectations and
are subject to risks and uncertainties that could cause the company's actual
results to differ materially from those expressed or implied in such statements.
You should carefully review all information, including the financial statements
and the notes to the financial statements included in this prospectus.
In addition to the risk factors described in "Risk Factors" beginning on page 2
of this prospectus, the following important factors could affect future results,
causing these results to differ materially from those expressed in our
forward-looking statements:
o our successful integration of the NEON operations;
o our ability to maintain and increase revenue by retaining
existing customers and attracting new customers;
o our ability to match our operating cost structure with revenue
to achieve positive cash flow;
o our ability to conduct business with critical vendors on
acceptable terms;
o the sufficiency of existing cash and cash flow to complete our
business plan and fund our working capital requirements;
o the insolvency of vendors, customers and other parties
critical to our business;
o our existing debt obligations and history of operating losses;
o our ability to integrate, operate and upgrade or downgrade our
network;
o our ability to recruit and retain sufficient and qualified
personnel needed to staff our operations;
o our ability to raise additional capital, if necessary;
o potential marketplace or technology changes, rendering
existing products and services obsolete;
o changes in or the lack of anticipated changes in the
regulatory environment, including potential legislation
increasing our exposure to content distribution and
intellectual property liability;
o commencement of war, armed hostilities, terrorist activities
or other similar international calamity directly or indirectly
involving or affecting the United States or the United
Kingdom;
o our ability to obtain and retain customers for our fiber optic
network business; and
o our ability to successfully adjust our products, services and
business strategies as required for our fiber optic network
business.
These factors and the other risk factors described in this prospectus are not
necessarily all of the important factors that could cause our actual results to
differ materially from those expressed in any of our forward-looking statements.
Other unknown or unpredictable factors also could harm our future results. The
forward-looking statements included in this prospectus are made only as of the
date of this prospectus and we cannot assure you that projected results or
events will be achieved. We do not assume any responsibility for updating the
forward-looking information contained in this prospectus.
-15-
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of our
common stock offered by the selling holders.
SELLING HOLDERS
Under this prospectus, the selling holders and the transferees, assignees,
donees, distributees, pledgees or other successors-in-interest for certain of
their shares may offer and sell from time to time up to an aggregate of
11,183,876 shares of our common stock, consisting of the following:
o 4,545,455 shares issued in the debt-for-equity exchange
described below;
o 4,744,735 shares issued in connection with our bankruptcy in
April 2002 to persons who may be deemed affiliates of us, and
who are party to the registration rights agreement described
below;
o 1,796,686 shares acquired in private transactions from persons
who were party to the registration rights agreement; and
o 97,000 shares acquired in an additional private transaction
described below.
DEBT-FOR-EQUITY EXCHANGE
On March 7, 2005 we acquired NEON through the merger of a wholly owned
subsidiary of Globix with and into NEON, resulting in NEON becoming a wholly
owned subsidiary. NEON's obligations to effect the merger were conditioned in
part upon our completing a number of private debt-for-equity exchange
transactions with some of our existing debt holders. We were obligated to
exchange certain of our 11% senior notes in an aggregate amount of $12,500,000
in principal and accrued interest in return for issuing approximately 4,545,455
shares of our common stock at a price per share of $2.75, the approximate
trading price of our common stock at the time the parties reached an agreement
on the overall amount of the exchange. The terms of the exchange were set forth
in separate securities exchange agreements with York Capital Management, MacKay
Shields LLC, LC Capital Master Fund Ltd., Goldman Sachs & Co., the Singer
Children's Management Trust, Lloyd Miller, an individual investor, and Cypress
Management Partnership. The exchange with each of these holders took place
simultaneously with the merger.
Under the terms of the securities exchange agreements, we agreed to file a
registration statement with the Securities and Exchange Commission as promptly
as possible in order to register the shares of common stock issued in exchange
for our 11% senior notes. With respect to registration of the shares of common
stock issued in the debt-for-equity exchange, we granted the exchanging holders
the right to purchase additional shares of Globix common stock equal to (1) up
to 5% of the shares acquired by them at a purchase price of $2.75 per share if
the registration statement is not effective within 120 days after the closing of
the merger, and (2) an additional 5% of the shares acquired by them at a
purchase price of $2.75 per share if the registration statement is not effective
for more than 90 days during the first twelve months commencing on the 90th day
following the closing of the merger.
We agreed to indemnify the holders of the securities issued in the
debt-for-equity exchange against all liabilities, whether under the securities
laws or otherwise, arising out of disclosure deficiencies in the registration
statement. Our indemnity obligation does not, however, extend to liability for
information pertaining to a holder and furnished to Globix by or on behalf of
such holder for inclusion in the registration statement.
We are obligated to file and keep the registration statement continuously
effective, supplemented and amended for a period of three years, or until such
earlier time as all of the shares of common stock issued in the debt-for-equity
exchange have been sold or may be sold without restriction under Rule 144(k)
under the Securities Act of 1933.
-16-
REGISTRATION RIGHTS AGREEMENT
In connection with our emergence from bankruptcy on April 25, 2002, we entered
into a registration rights agreement with certain persons who received more than
10% of our common stock in the bankruptcy. Among these persons were MacKay
Shields LLC and certain affiliates of Hicks Muse Tate & Furst Incorporated (the
persons referred to as the "HM Parties" in the table below). The parties to the
registration rights agreement received their shares of Globix common stock
covered by the registration rights agreement as a result of their ownership of
senior notes or preferred stock of our predecessor in bankruptcy.
Under the registration rights agreement, we are required to bear all expenses
incident to the registration of our common stock under the registration rights
agreement. We agreed to indemnify the holders of the restricted securities
against all liabilities, whether under the securities laws or otherwise, arising
out of disclosure deficiencies in the registration statement. Our indemnity
obligation does not, however, extend to liability for information pertaining to
a holder and furnished to Globix by or on behalf of such holder for inclusion in
the registration statement.
Subject to certain adjustments, we are obligated to file and keep the
registration statement continuously effective, supplemented and amended for a
period ending on the earlier of:
o the date on which all of the shares of our common stock have
been sold pursuant to the registration statement or pursuant
to Rule 144 under the Securities Act of 1933;
o the three year anniversary of the date on which the Securities
and Exchange Commission declares the registration statement
effective; or
o the date on which there are no longer any shares of our common
stock outstanding.
OTHER TRANSACTIONS
In September 2003, a former holder of 1,796,686 shares of our common stock sold
all such shares in private transactions, and the purchasers succeeded to such
former holder's rights under the registration rights agreement. In March 2005, a
trust for the benefit of the children of Steven G. Singer, our Chairman of the
Board, and a trust for the benefit of family members of Peter K. Stevenson, our
President and Chief Executive Officer, purchased 80,000 and 17,000 shares,
respectively, from a former employee of Globix in connection with the settlement
of certain employment-related litigation between Globix and the former employee.
In connection with this transaction, our board of directors agreed to grant
registration rights for the shares purchased from the former employee.
TABLE OF SELLING HOLDERS
The table below sets forth the names of the selling holders of shares of our
common stock and the number of shares of our common stock beneficially owned by
these selling holders as of May 19, 2005. Each of the following selling holders,
is itself or is affiliated with a holder of 5% or more of our common stock: LC
Capital Master Fund Ltd., Loeb Partners Corp., MacKay Shields, LLC, Singer
Children's Management Trust and Gary and Karen Singer Children's Trusts. Except
as otherwise indicated, each person listed in the table below has informed us
that it has (1) voting and investment power with respect to its shares of our
common stock and (2) record and beneficial ownership with respect to its shares
of our common stock.
If all of the shares of our common stock listed below are sold pursuant to this
prospectus, then the selling holders will sell 11,183,876 shares of our common
stock, or 23.08% of the total number of shares of our common stock outstanding.
The information set forth in the table below was provided to us by the selling
holders listed below.
-17-
BENEFICIAL OWNERSHIP OF SHARES OF BENEFICIAL OWNERSHIP OF
COMMON STOCK BEFORE COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OFFERING(1) (2) TO BE SOLD AFTER OFFERING
------------------------------------ ----------------------------- --------------- ------------------------------
Shares Percentage Shares Percentage
------ ---------- ------ ----------
Cypress Management Partnership(3) 254,545 0.53 254,545 0 0
100 Pine Street, Suite 2700
San Francisco, CA 94111
Goldman, Sachs & Co.(4) 2,260,059 4.66 854,546 1,405,513 2.90
85 Broad Street
New York, NY 10004
HM Parties (5) 2,304,400 4.76 2,304,400 0 0
c/o Hicks, Muse, Tate & Furst
Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
JGD Management Corp. (6) 2,150,578 4.44 1,249,172 901,406 1.86
d/b/a York Capital Management
350 Park Avenue
New York, NY 10022
LC Capital Master Fund Ltd. (7) 5,373,141 10.98 903,716 4,469,425 9.14
Lampe Conway & Co. LLC
680 Fifth Avenue, Suite 1202
New York, NY 10019
Lloyd Miller(8) 414,608 0.86 400,000 14,608 0.03
4550 Gordon Drive
Naples, FL 34102
Loeb Partners Corp. (9) 3,299,330 6.79 449,171 2,850,159 5.87
61 Broadway
New York, NY 10006
MacKay Shields, LLC (10) 14,787,671 29.64 3,822,154 10,965,517 21.98
c/o MacKay Shields Financial Corp.
9 West 57th Street
New York, NY 10019
Singer Children's Management 4,092,596 8.33 400,000 3,692,596 7.51
Trust (11)
560 Sylvan Avenue
Englewood Cliffs, NJ 07632
Gary and Karen Singer Children's Trusts 915,623 1.89 449,172 466,451 0.96
(12)
560 Sylvan Avenue
Englewood Cliffs, NJ 07632
Steven Singer Children's Trust(13) 80,000 .17 80,000 0 0
113 Jackson Drive
Cresskill NJ 07626
-18-
Kathryn Ann Stevenson Trust(14) 565,667 1.15 17,000 548,667 1.12
c/o Peter K. Stevenson
Globix Corporation
139 Centre Street
New York, NY 10013
-------------- -------------------
Total: 11,183,876
-------------- -------------------
(1) The information regarding beneficial ownership of our common stock has
been presented in accordance with the rules of the Securities and
Exchange Commission. Under these rules, a person may be deemed to
beneficially own any shares as to which such person, directly or
indirectly, has or shares voting power or investment power and also any
shares of our common stock as to which such person has the right to
acquire voting or investment power within 60 days through the exercise
of any stock option or other right. The percentage of beneficial
ownership as to any person as of a particular date is calculated by
dividing (a) (i) the number of shares beneficially owned by such person
plus (ii) the number of shares as to which such person has the right to
acquire voting or investment power within 60 days by (b) the total
number of shares outstanding as of such date, plus any shares that such
person has the right to acquire from Globix within 60 days. For
purposes of calculating the beneficial ownership percentages set forth
above, the total number of shares of our common stock deemed to be
outstanding as of May 19, 2005 was 48,449,009. As used in this proxy
statement, "voting power" is the power to vote or direct the voting of
shares and "investment power" is the power to dispose or direct the
disposition of shares. Except as noted, each stockholder listed has
sole voting and investment power with respect to the shares shown as
being beneficially owned by such stockholder.
(2) On June 25, 2002, we entered into a Stipulation and Order with the lead
plaintiffs in the class action lawsuit described in the section of the
Annual Report on Form 10-K entitled "Business--Legal Proceedings."
Under the Stipulation and Order, 229,452 shares of our common stock
were held in reserve in escrow pending the outcome of the class action
lawsuit. As a result of the settlement of such lawsuit in February
2005, and the subsequent expiration of the appeals period relating
thereto, each of MacKay Shields and Goldman Sachs & Co. (and each other
former holder of our 12.5% senior notes on the effective date of our
plan of reorganization) will be entitled to receive a portion of these
229,452 shares of common stock based on its percentage ownership of our
12.5% senior notes on the effective date of the plan.
(3) Cypress Management Partnership received all of its shares in the
debt-for-equity exchange. Jonathan Marcus and Richard Dirickson,
stockholders of the investment advisor to Cypress Management
Partnership, share voting and investment control over these securities.
Cypress Management Partnership is or may be an affiliate of a
registered broker-dealer. Cypress Management Partnership may also be
deemed to be an underwriter for the purposes of this registration
statement. We have been informed by Cypress Management Partners that it
acquired the securities offered by this prospectus for its own account
in the ordinary course of business, and that, at the time it acquired
the securities, it had no agreement or understanding, direct or
indirect, with any person to distribute the securities.
(4) Goldman Sachs & Co. acquired 854,546 shares in the debt-for-equity
exchange. Goldman Sachs & Co. is a registered broker-dealer and is or
may be an affiliate of a registered broker-dealer. Goldman Sachs & Co.
may also be deemed to be an underwriter for the purposes of this
registration statement. We have been informed by Goldman Sachs & Co.
that it acquired the securities offered by this prospectus for its own
account in the ordinary course of business, and that, at the time it
acquired the securities, it had no agreement or understanding, direct
or indirect, with any person to distribute the securities.
(5) The HM Parties received all of their shares in exchange for preferred
stock of our predecessor company in our bankruptcy. The HM Parties are
party to the registration rights agreement. "HM Parties" refers
collectively to HM4 Globix Qualified Fund, LLC, HM4 Globix Private
Fund, LLC, HM PG-IV Globix, LLC, HM 4-EQ Globix Coinvestors, LLC and HM
4-SBS Globix Coinvestors, LLC. Of the 2,304,400 shares held by the HM
Parties: (i) 2,092,487 of these shares are owned of record by HM4
Globix Qualified Fund, LLC; (ii) 14,831 of these shares are owned of
record by HM4 Globix Private Fund, LLC; (iii) 111,430 of these shares
are owned of record by HM PG-IV Globix, LLC; (iv) 34,177 of such shares
are owned of record by HM 4-EQ Globix Coinvestors, LLC; and (v) 51,475
of these shares are owned of record by HM 4-SBS Globix Coinvestors,
LLC.
-19-
Thomas O. Hicks is chairman of each of the HM Parties and is the sole
member of the ultimate general partner of the controlling member of
each of the HM Parties. Accordingly, Mr. Hicks may be deemed to
beneficially own all or a portion of the shares of our common stock
owned of record by the HM Parties. Peter S. Brodsky, a director of
Globix from October 2001 to March 7, 2005, Joe Colonnetta, Jack D.
Furst, a director of Globix from December 1999 through April 2002, John
R. Muse, Rick Neuman and Andrew Rosen are partners of Hicks, Muse, Tate
& Furst Incorporated, which is an affiliate of the HM Parties. In
addition, Messrs. Muse & Furst are members of the management committee
of Hicks, Muse, Tate & Furst Incorporated. Consequently, these
individuals may be deemed to beneficially own all or a portion of the
shares of our common stock owned of record by the HM Parties. Each of
Messrs. Hicks, Brodsky, Colonnetta, Furst, Muse, Neuman and Rosen
disclaims the existence of a group and disclaims beneficial ownership
of the shares of our common stock of which he is not the record owner.
(6) York Select, L.P., York Select Unit Trust, York Distressed
Opportunities Funds, L.P. and York Global Value Partners, L.P.
purchased an aggregate of 449,172 shares in a private transaction from
a former holder of our common stock, succeeding to such former holder's
rights under the registration rights agreement with respect to such
shares. JGD Management Corp., d/b/a York Capital Management, acquired
800,000 shares in the debt-for-equity exchange. James G. Dinan holds
sole voting and investment control over certain of the shares listed in
the table and holds a controlling interest in certain affiliated
entities holding shares listed in the table.
(7) LC Capital Master Fund Ltd. purchased 449,171 shares in a private
transaction from a former holder of our common stock, succeeding to
such former holder's rights under the registration rights agreement
with respect to such shares. In addition, LC Capital Master Fund Ltd.
acquired 454,545 shares in the debt-for-equity exchange. LC Capital
Master Fund Ltd. directly beneficially owns 5,363,639 shares of Globix
common stock (including 462,462 shares that may be acquired upon
conversation of the preferred stock). LC Capital indirectly
beneficially owns 9,502 shares of Globix common stock pursuant to
currently exercisable stock options granted to Steven Lampe, who is a
director of Globix and was a director of NEON. Mr. Lampe and Richard F.
Conway, each of whom is a Managing Member of Lampe, Conway & Co. LLC,
the investment advisor to LC Capital Master Fund, Ltd., exercise voting
and investment control over these securities.
(8) Lloyd Miller acquired 400,000 shares in the debt-for-equity exchange
through the following entities over which he exercises voting and
investment control: Lloyd I. Miller Trust A-4, Milgrat (GGG), Milfam I,
L.P. and Milfam II, L.P. Milfam II also holds 14,608 shares of
preferred stock which are convertible into the same number of shares
of common stock.
(9) Loeb Partners Corporation purchased 449,171 shares in a private
transaction from a former holder of our common stock, succeeding to
such former holder's rights under the registration rights agreement
with respect to such shares. Loeb Partners and its affiliates, Loeb
Arbitrage Fund and Loeb Offshore Fund Ltd. together beneficially own
3,289,828 shares of Globix common stock. Loeb Partners indirectly
beneficially owns 9,502 shares of Globix common stock pursuant to
currently exercisable stock options granted to Mr. Grubin, a former
director of NEON, who is a Vice President of Loeb Partners. Thomas L.
Kempner is its President and a director and its Chief Executive
Officer. Norman N. Mintz is a Vice President and also a director.
Gideon King is its Executive Vice President. Loeb Partners is a
registered broker-dealer and is or may be an affiliate of a registered
broker-dealer. Loeb Partners may also be deemed to be an underwriter
for the purposes of this registration statement. We have been informed
by Loeb Partners that it acquired the securities offered by this
prospectus for its own account in the ordinary course of business, and
that, at the time it acquired the securities, it had no agreement or
understanding, direct or indirect, with any person to distribute the
securities.
(10) Of the shares to be sold by MacKay Shields LLC pursuant to this
prospectus, 2,440,335 shares were acquired in our bankruptcy in
exchange for 12% senior notes of our predecessor company, and 1,381,819
were acquired in the debt-for-equity exchange. According to information
provided to us by MacKay Shields LLC, the pecuniary interests in the
shares listed under its name in the table are held by a number of
institutional investors for whom MacKay Shields is the discretionary
investment advisor. Included in these shares are 1,434,953 shares that
may be acquired on conversion of preferred stock. MacKay Shields LLC
has voting and investment control over these shares and, accordingly,
is deemed to beneficially own these shares. Donald E. Morgan and a
number of other individuals employed by MacKay Shields LLC have voting
and investment control over these shares. MacKay Shields LLC is or may
be affiliated with two registered broker-dealers, NYLIFE Distributors
LLC and NYLIFE Securities Inc., and may be deemed to be an underwriter
for purposes of this registration statement. We have been informed by
MacKay Shields LLC that the securities were acquired in the ordinary
course of business and that, at the time the securities were acquired,
it had no agreement or understanding, direct or indirect, with any
person to distribute the securities.
-20-
(11) The Singer Children's Management Trust acquired 400,000 shares in the
debt-for-equity exchange. Steven Singer's sister-in-law, Karen Singer,
serves as sole trustee for the Singer Children's Management Trust, a
trust for the benefit of Steven Singer's brother's children, which
trust holds 4,092,596 shares of common stock (including 699,099 shares
that may be acquired on conversion of the preferred stock). Steven
Singer and his sister-in-law disclaim membership in a group, as such
term is defined in Section 13(d)(3) of the Securities Exchange Act of
1934, and disclaim any other interest in the Globix common stock held
in the trusts.
(12) The Gary and Karen Singer Children's Trust purchased 449,172 shares in
a private transaction from a former holder of our common stock,
succeeding to such former holder's rights under the registration rights
agreement with respect to such shares. Steven G. Singer is co-trustee
of the Gary and Karen Singer Children's Trust and the Second Gary and
Karen Singer Children's Trust, two trusts for the benefit of Steven
Singer's brother's children. As trustee, Mr. Singer has voting and
investment control over the 915,623 shares of common stock held in the
trusts (including 118,197 shares that may be acquired on conversion of
the preferred stock). Steven G. Singer disclaims any other interest in
the Globix common stock held in the trust.
(13) The Steven Singer Children's Trust, a trust for the benefit of Steven
Singer's children, acquired 80,000 shares in a private transaction from
a former employee as described above. Mr. Singer's brother, Gary
Singer, is the sole trustee of the trust. Steven Singer has no voting
or investment control over the shares held in the trust. Steven Singer
and his brother disclaim membership in a group, as such term is defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, and
disclaim any other interest in the Globix common stock held in the
trust.
(14) The Kathryn Ann Stevenson Trust, a trust for the benefit of certain
family members of Peter K. Stevenson, acquired 17,000 shares in a
private transaction from a former employee as described above. Peter K.
Stevenson and Kathryn Ann Stevenson are the initial trustees of the
trust. Mr. Stevenson disclaims beneficial ownership of the shares held
in the trust. Mr. Stevenson beneficially owns 548,667 shares of our
common stock that may be acquired under a currently exercisable
employee stock option.
PLAN OF DISTRIBUTION
We are registering the shares of our common stock on behalf of the selling
holders. A selling holder is a person named in the Table of Selling Holders that
begins on page 18 and, in the case of shares covered by the registration rights
agreement, also includes any donee, pledgee, transferee or other
successor-in-interest selling shares of our common stock received after the date
of this prospectus from a selling holder as a gift, pledge, partnership
distribution or other non-sale related transfer. All costs, expenses and fees in
connection with the registration of the shares of our common stock offered by
this prospectus will be borne by our company, other than brokerage commissions
and similar selling expenses, if any, attributable to the sale of shares of our
common stock, which will be borne by the selling holders. Sales of shares of our
common stock may be effected by selling holders from time to time in one or more
types of transactions (which may include block transactions) on the American
Stock Exchange, in the over-the-counter market, in negotiated transactions,
through put or call options transactions relating to the shares of our common
stock, through short sales of shares of our common stock, or a combination of
these methods of sale, at market prices prevailing at the time of sale, or at
negotiated prices. These transactions may or may not involve brokers or dealers.
We are not aware of any agreements, understandings or arrangements among the
selling holders and any underwriters or broker-dealers regarding the sale of the
shares of our common stock held by the selling holders, nor is there an
underwriter or coordinated broker acting in connection with the proposed sale of
shares of our common stock by the selling holders.
-21-
The selling holders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with these transactions,
broker-dealers or other financial institutions may engage in short sales of the
shares of our common stock in the course of hedging positions they assume with
selling holders. The selling holders may also enter into options or other
transactions with broker-dealers or other financial institutions which require
the delivery to these broker-dealers or other financial institutions of shares
of our common stock, which shares of our common stock these broker-dealer or
other financial institution may resell pursuant to this prospectus (as amended
or supplemented to reflect such transaction). The selling holders may also
engage in short sales of shares and, in those instances, this prospectus may be
delivered in connection with the short sales and the shares offered under this
prospectus may be used to cover the short sales.
The selling holders may make these transactions by selling shares of our common
stock directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from selling holders and/or the
purchasers of shares of our common stock for whom these broker-dealers may act
as agents or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The selling holders and any broker-dealers that act in connection with the sale
of shares of our common stock may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933, and any commissions
received by them or any profit on the resale of the shares of our common stock
sold by them while acting as principals might be deemed to be underwriting
discounts or commissions under the Securities Act of 1933. Neither we nor any of
the selling holders can currently estimate the amount of any such compensation.
The selling holders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of shares of our common stock
or notes against certain liabilities, including liabilities arising under the
Securities Act of 1933.
Because selling holders may be "underwriters" within the meaning of Section
2(11) of the Securities Act of 1933, the selling holders may be subject to the
prospectus delivery requirements of the Securities Act of 1933. The rules and
regulations set forth in Regulation M promulgated under the Securities Exchange
Act of 1934 provide that during the period that any person is engaged in a
distribution of the shares within the meaning of Regulation M, that person
usually may not purchase the shares. The selling holders are subject to the
rules and regulations of the Securities Act of 1933 and the Securities Exchange
Act of 1934, including Regulation M, which may limit the timing of purchases and
sales of shares by the selling holders. Regulation M's prohibition on purchases
may include purchases to cover short positions by the selling holders, and a
selling holder's failure to cover a short position at a lender's request and
subsequent purchases by the lender in the open market of shares to cover such
short positions, may constitute an inducement to buy shares which is prohibited
by Regulation M. Consequently, this may affect the marketability of the shares.
We have informed the selling holders that the anti-manipulative provisions of
Regulation M may apply to their sales in the market.
Selling holders also may resell all or a portion of the shares of our common
stock in open market transactions in reliance upon Rule 144 under the Securities
Act of 1933, provided that they meet the criteria and conform to the
requirements of Rule 144.
Upon our company being notified by a selling holder that any material
arrangement has been entered into with a broker-dealer for the sale of shares of
our common stock through a block trade, special offering, exchange distribution
or secondary distribution or a purchase by a broker or dealer, a supplement to
this prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act of 1933, disclosing:
- the name of each such selling holder and of the participating
broker-dealer(s);
- the number of shares of our common stock involved;
- the initial price at which these shares were sold;
- the commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation
to verify the information set out or incorporated by reference
in this prospectus; and
- other facts material to the transactions.
-22-
In addition, in the case of shares covered by the registration rights agreement,
upon our company being notified by a selling holder that a donee, pledgee,
transferee or other successor-in-interest intends to sell more than 500 shares
of our common stock, a supplement to this prospectus will be filed.
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will be passed
upon for our company by Day, Berry & Howard LLP, New York, NY 10022.
EXPERTS
Our consolidated financial statements as of September 30, 2004 and September 30,
2003 have been incorporated by reference in this prospectus and in the
registration statement of which this prospectus is a part in reliance upon the
report of Amper, Politziner & Mattia, P.C. an independent registered public
accounting firm, given on the authority of said firm as experts in auditing and
accounting. Our consolidated financial statements incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the seven months
ended April 30, 2002 and for the five months ended September 30, 2002 have been
so included in reliance on the reports of PricewaterhouseCoopers LLP, an
independent registered public accounting firm.
NEON's consolidated financial statements as of and for the year ended December
31, 2004 have been incorporated by reference in this prospectus and in the
registration statement of which this prospectus is a part in reliance upon the
report of Amper, Politziner & Mattia, P.C., an independent registered public
accounting firm, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Neon Communications, Inc. and
subsidiaries as of December 31, 2003 and for the years ended December 31, 2003
and 2002 incorporated by reference in this prospectus and in the Registration
Statement have been audited by BDO Seidman, LLP, an independent registered
public accounting firm, to the extent and for the periods set forth in their
report incorporated by reference in this Registration Statement, and are
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting
-23-
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by reference"
the information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and the
information that we file later with the Securities and Exchange Commission will
automatically update and supersede this information. We incorporate by reference
in this prospectus the following documents filed by us with the Securities and
Exchange Commission:
o Our Annual Report on Form 10-K for the year ended September
30, 2004, as amended;
o Our Current Reports on Form 8-K filed with the SEC on October
13, 2004, January 11, 2005, February 9, 2005, February 17,
2005, March 11, 2005 (as amended on Form 8-K/A filed on May
20, 2005), May 4, 2005 and May 13, 2005;
o Our Quarterly Reports on Form 10-Q for the quarters ended
December 31, 2004 and March 31, 2005;
o Our Proxy Statement for our Annual Meeting of Stockholders
filed on May 23, 2005; and
o The description of our common stock contained in our
registration statement on Form 8-A (File No. 001-14168) filed
under the Securities Exchange Act.
Any statement made in a document incorporated by reference or deemed
incorporated herein by reference is deemed to be modified or superseded for
purposes of this prospectus if a statement contained in this prospectus or in
any other subsequently filed document which is also incorporated or deemed
incorporated by reference herein modifies or supersedes that statement. Any such
statement so modified or superseded shall not be deemed except as modified or
superseded, to constitute a part of this prospectus. We also incorporate by
reference all documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act after the date of this prospectus and prior to the
termination of this offering.
Statements made in this prospectus or in any document incorporated by reference
in this prospectus as to the contents of any contract or other document referred
to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the documents incorporated by reference, each such statement being
qualified in all material respects by such reference.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Globix Corporation
139 Centre Street
New York, New York 10013
Telephone: (212) 334-8500
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information with the
Securities and Exchange Commission. Our Securities and Exchange Commission
filings are available at the Securities and Exchange Commission's web site at
http://www.sec.gov. You may read and copy any document we file with the
Securities and Exchange Commission at the Securities and Exchange Commission's
public reference facilities located in Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the operation of its
public reference facilities. You may request a copy of any of our filings with
the Securities and Exchange Commission, or any of the agreements or other
documents that constitute exhibits to those filings, at no cost, by writing or
telephoning us at the following address or phone number:
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Globix Corporation
139 Centre Street
New York, New York 10013
Telephone (212) 334-8500
You should rely only on the information provided in this prospectus or
incorporated by reference herein. No person has been authorized to provide you
with different information. The information in this prospectus is accurate as of
the date on the front cover. You should not assume that the information
contained in this prospectus is accurate as of any other date.
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[GLOBIX LOGO]
GLOBIX CORPORATION
11,183,876 SHARES OF COMMON STOCK
------------------
PROSPECTUS
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses payable by our company in
connection with this registration statement. All of these expenses are
estimates, other than the filing fees payable to the Securities and Exchange
Commission.
Filing fee-Securities and Exchange Commission .................... $ 3,764.74
Fees and expenses of legal counsel ............................... $ 80,000
Printing expenses ................................................ $ 5,000
Fees and expenses of accountants ................................. $ 35,000
Miscellaneous expenses ........................................... $ 5,000
Total $ 128,764.74
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, or DGCL, empowers
a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
or she was or is a director, officer, employee or agent of the corporation, or
was or is serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding if the person identified acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Section 145 of the
DGCL further empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she was or is a director,
officer, employee or agent of the corporation, or was or is serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
such action or suit if the person identified acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification may be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the court in which
such action or suit was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnity for such
expenses that the court shall deem proper. Section 145 further provides that to
the extent a director or officer of a corporation has been successful in the
defense of any action, suit or proceeding referred to above or in the defense of
any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith. The statute provides that indemnification pursuant
to its provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Our Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws, provide, in effect, that to the full extent and under the circumstances
permitted by Section 145 of the DGCL, we shall indemnify any person who was or
is a party or is threatened to be made a party to any action, suit or proceeding
of the type described above by reason of the fact that he or she was or is a
director, officer, employee or agent of our company.
Our Amended and Restated Certificate of Incorporation relieves our directors
from monetary damages to our company or our stockholders for breach of such
director's fiduciary duty as a director to the fullest extent permitted by the
DGCL. Under Section 102(b)(7) of the DGCL, a corporation may relieve its
directors from personal liability to such corporation or its stockholders for
monetary damages for any breach of their fiduciary duty as directors except (i)
for any breach of the director's duty of loyalty to our company or our
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stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the director derived an improper
personal benefit.
In addition, we carry an insurance policy for the protection of our directors
and executive officers against any liability asserted against them in their
official capacities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT NO. EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Merger dated as of July 19, 2004 by
and between Globix Corporation and NEON Communications,
Inc.(1)
2.2 First Amendment to Agreement and Plan of Merger dated as of
October 8, 2004 by and between Globix Corporation and NEON
Communications, Inc. (1)
2.3 Amended Joint Prepackaged Plan of Globix and certain of the
Globix's subsidiaries, dated April 8, 2002 (2)
2.4 Form of Securities Exchange Agreement, dated September 15,
2004 (3)
4.1 Indenture, dated as of April 23, 2002, between Globix, as
issuer, the Subsidiary Guarantors of Globix named therein
and HSBC Bank USA, as trustee, relating to the 11% senior
notes due 2008 (4)
4.2 Form of Pledge and Security Agreement, dated as of April 23,
2002, between each Subsidiary Guarantor of Globix and HSBC
Bank USA, as Collateral Agent/Trustee (4)
4.3 Certificate of Designation of Preferences and Relative,
Participating Optional and Special Rights of Preferred Stock
and Qualifications, Limitations and Restrictions Thereof of
6% Series A Cumulative Convertible Preferred Stock of Globix
Corporation (5)
4.4 Registration Rights Agreement between Globix and the holders
of Globix's securities party thereto, dated as of April 23,
2002 (6)
5 Opinion of Day, Berry & Howard LLP as to the validity of the
shares of common stock
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Amper, Politziner & Mattia PC with respect to
their report on certain financial statements of Globix
23.3 Consent of Amper, Politziner & Mattia PC with respect to
their report on certain financial statements of NEON
23.4 Consent of BDO Seidman, LLP, independent registered public
accounting firm
23.5 Consent of Day, Berry & Howard LLP (included in Exhibit 5).
24 Powers of Attorney (see signature page)
II-2
--------------------------------------------------------------------------------
(1) Incorporated by reference to Globix's Registration Statement
on Form S-4 (No. 333-119666) originally field on October 12,
2004.
(2) Incorporated by reference to Globix's Current Report on Form
8-K filed on April 23, 2002.
(3) Incorporated by reference to Globix's Current Report on Form
8-K filed on October 13, 2004.
(4) Incorporated by reference to Globix's Quarterly Report on
Form 10-Q filed on May 15, 2002.
(5) Incorporated by reference to Globix's Current Report on Form
8-K filed on March 11, 2005.
(6) Incorporated by reference to Globix's Annual Report on Form
10-K filed on March 26, 2003.
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ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement to include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on May 24, 2005.
GLOBIX CORPORATION
By: /s/ Peter K. Stevenson
----------------------------------
Peter K. Stevenson
President, Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Peter K. Stevenson or Robert M.
Dennerlein, or any one of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement on Form S-3 and all documents relating
thereto, and to file the same with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
/s/ Peter K. Stevenson
--------------------------------------------
Peter K. Stevenson
President, Chief Executive Officer and
Director
(principal executive officer)
Date: May 24, 2005
/s/ Robert M. Dennerlein
--------------------------------------------
Robert M. Dennerlein
Chief Financial Officer
(principal financial and accounting officer)
Date: May 24, 2005
/s/ Wayne Barr, Jr.
--------------------------------------------
Wayne Barr, Jr.
Director
Date: May 24, 2005
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/s/ Jose A. Cecin, Jr.
--------------------------------------------
Jose A. Cecin, Jr.
Director
Date: May 24, 2005
/s/ Stephen E. Courter
--------------------------------------------
Stephen E. Courter
Director
Date: May 24, 2005
/s/ John Forsgren
--------------------------------------------
John Forsgren
Director
Date: May 24, 2005
/s/ Peter L. Herzig
--------------------------------------------
Peter L. Herzig
Director
Date: May 24, 2005
/s/ Steven Lampe
--------------------------------------------
Steven Lampe
Director
Date: May 24, 2005
/s/ Steven G. Singer
--------------------------------------------
Steven G. Singer
Director
Date: May 24, 2005
/s/ Raymond L. Steele
--------------------------------------------
Raymond L. Steele
Director
Date: May 24, 2005
II-6