NEON Communications Group, Inc. – ‘S-4/A’ on 12/8/04

On:  Wednesday, 12/8/04, at 8:50pm ET   ·   As of:  12/9/04   ·   Accession #:  1019687-4-2766   ·   File #:  333-119666

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Pre-Effective Amendment to Registration of           397   2.00M 
                          Securities Issued in a                                 
                          Business-Combination Transaction                       
 2: EX-5        Opinion re: Legality                                   1      9K 
 3: EX-12       Statement re: Computation of Ratios                    2±    10K 
 4: EX-23.1     Consent of Experts or Counsel                          1      6K 
 5: EX-23.2     Consent of Experts or Counsel                          1      6K 
 6: EX-23.3     Consent of Experts or Counsel                          1      7K 
 7: EX-99.1     Miscellaneous Exhibit                                  2     10K 
 8: EX-99.2     Miscellaneous Exhibit                                  2     12K 
 9: EX-99.7     Miscellaneous Exhibit                                  1      7K 

S-4/A   —   Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents

S-4/A
1st Page of 397
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 2004

                                                     Registration No. 333-119666

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 1 TO
FORM S-4

 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

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
(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
GLOBIX CORPORATION
 139 CENTRE STREET
NEW YORK, NEW YORK 10013
(212) 334-8500
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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

COPIES TO:

 BONNIE J. ROE, ESQ.                             MELINDA BRUNGER, ESQ.
DAY, BERRY & HOWARD LLP                             ANDREWS KURTH LLP   
  875 THIRD AVENUE                              600 TRAVIS, SUITE 4200
NEW YORK, NY 10022                                HOUSTON, TX 77002 
TELEPHONE: (212) 829-3600                        TELEPHONE: (713) 220-4200

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

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective and all 
other conditions to the merger described in the joint proxy statement/prospectus
have been satisfied or waived.                                                  

S-4/A
2nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 2nd
      If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box. |_|                             

         If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following   
box and list the Securities Act of 1933 registration statement number of the    
earlier effective registration statement for the same offering. |_|             

   If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act of 1933, check the                              
following box and list the Securities Act of 1933 registration statement number 
of the earlier effective registration statement for the same offering. |_|      

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

                                                        [Enlarge/Download Table]
                         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 PER     AGGREGATE OFFERING       REGISTRATION FEE    
                                                                      SHARE                  PRICE                                 
----------------------------------------- -------------------- -------------------- ------------------------ ----------------------
                                                                                                                                   
Common Stock, $.01 par value(1)                 33,818,269           $ 4.28              $ 132,386,818          $16,773.41 (2)     
Convertible Preferred Stock, $.01                2,908,614           $ 3.60              $ 10,471,028           $ 1,326.68 (4)     
  par value(3)                                                                                                                     
TOTAL                                                                                                           $18,100.09 (5)     
----------------------------------------- -------------------- -------------------- ------------------------ ----------------------

(1)    This Registration Statement covers the maximum number of shares of Globix
     Corporation ("Globix") common stock, par value $.01 per share, that are
      estimated to be issued, directly or indirectly, upon the consummation of
     the proposed merger of a new wholly owned subsidiary of Globix with and
      into NEON Communications, Inc. ("NEON"), including (x) 30,909,655 shares
     of Globix common stock calculated based on the number of shares of NEON
common stock, par value $0.001 per share, issued and outstanding, 
 including shares underlying all outstanding options and warrants to
       purchase NEON common stock that are exercisable as of October 30, 2004 or
    that become fully exercisable immediately prior to the consummation of
the merger, calculated as of October 30, 2004 (24,246,670) and an 
  exchange ratio of 1.2748 shares of Globix common stock for each such
  share of NEON common stock and (y) 2,908,614 shares of Globix common
       stock issuable pursuant to the conversion of Globix convertible preferred
stock described in footnote 3 below.                              

(2)    Pursuant to Rule 457(f)(2) of the Securities Act of 1933, because there  
is currently no public trading market for NEON common stock, the  
  registration fee was computed on the basis of the book value of such
      securities computed as of December 1, 2004 ($5.46). This amount does not
    include 2,908,614 shares of Globix common stock that are issuable upon
       conversion of the Globix convertible preferred stock at the option of the
   holder at any time, by virtue of Rule 457(i) of the Securities Act of
1933.                                                             

(3)    This Registration Statement covers the maximum number of shares of Globix
  convertible preferred stock that are estimated to be issued upon the
     consummation of the proposed merger of a new wholly owned subsidiary of
   Globix with and into NEON, calculated based on the product of (a) the
    number of shares of NEON 12% Series A Cumulative Convertible Preferred
       Stock, par value $0.001 per share, issued and outstanding, after treating
      all accrued and unpaid dividends on the NEON convertible preferred stock
     immediately prior to the merger as if paid in additional shares of NEON
   convertible preferred stock, calculated as if the closing occurred on
       December 31, 2004 (1,396,137) and (b) an exchange ratio of 2.08333 shares
    of Globix convertible preferred stock to be created in connection with
 the merger for each such share of NEON convertible preferred stock.

S-4/A
3rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 3rd
(4)    Pursuant to Rule 457(f)(2) of the Securities Act of 1933, because there  
    is currently no public trading market for NEON 12% Series A Cumulative
   Convertible Preferred Stock, the registration fee was computed on the
   basis of the book value of such securities computed as of December 1,
     2004 ($11.25), reduced by the maximum amount of cash ($3.75) to be paid
by the Registrant in exchange for such securities.                

(5)    The amount of the registration fee has been paid as follows: (a) $8.56 is
    being paid with this amendment no 1 to the registration statement; and
      (b) $18,091.53 was previously paid in connection with the initial filing
of the registration statement on October 12, 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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), 
MAY DETERMINE.                                                                  

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

S-4/A
4th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 4th
--------------------------------------------------------------------------------
THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. THE REGISTRANT MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION 
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS  
JOINT PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND   
THE REGISTRANT IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE    
WHERE THE OFFER OR SALE IS NOT PERMITTED.                                       
--------------------------------------------------------------------------------
 SUBJECT TO COMPLETION, DATED DECEMBER ____, 2004.

[GLOBIX LOGO]                                                        [NEON LOGO]

Dear Globix and NEON Stockholders:                                              

After careful consideration, the board of directors of NEON   
Communications, Inc. ("NEON") has approved (with one director, Mr. Steven Lampe,
abstaining, and as to the first amendment, with two directors, Messrs. Lampe and
Robert Grubin, abstaining) and the board of directors of Globix Corporation     
("Globix") has approved (with one director, Mr. Lampe, abstaining) the merger of
a new wholly owned subsidiary of Globix with and into NEON, resulting in NEON   
becoming a wholly owned subsidiary of Globix.                                   

         If the merger is consummated, each outstanding share of common stock of
NEON would be converted into the right to receive 1.2748 shares of Globix common
stock and each outstanding share of NEON's 12% Series A Cumulative Convertible  
Preferred Stock ("NEON convertible preferred stock") would be converted into the
right to receive (a) $3.75 in cash and (b) 2.08333 shares of a new class of     
Globix convertible preferred stock to be created in connection with the merger  
("Globix convertible preferred stock") in exchange for each share of NEON       
convertible preferred stock immediately prior to the merger, treating all       
accrued and unpaid dividends on the NEON convertible preferred stock as if paid 
in additional shares of NEON convertible preferred stock immediately prior to   
the merger. The terms of the conversion are described in detail in the section  
entitled "Terms of the Merger Agreement and Related Transactions" beginning on  
page [___] of this joint proxy statement/prospectus.                            

   Globix common stock is traded on the OTC Bulletin Board under the
symbol "GBXX.OB." The closing price for Globix common stock reported on the OTC 
Bulletin Board on December 1, 2004 was $3.05 per share. Application has been    
made to list Globix common stock on the American Stock Exchange.                

     At the Globix special meeting, Globix stockholders will be asked to
consider and vote upon a proposal to approve the issuance of Globix common stock
to the security holders of NEON in the merger.                                  

 At the NEON special meeting, NEON stockholders will be asked to
consider and vote upon a proposal to approve the merger, the merger agreement   
and the transactions contemplated by the merger agreement and to approve a      
proposed amendment to the amended and restated certificate of incorporation and 
a proposed amendment to the certificate of designation with respect to the NEON 
convertible preferred stock, which is a constituent part of the certificate of  
incorporation.                                                                  

     YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend your
company's special meeting, please take the time to vote by promptly completing  
and mailing the enclosed proxy card in the postage-paid envelope provided.      
BEFORE YOU VOTE, PLEASE REVIEW THIS JOINT PROXY STATEMENT/PROSPECTUS AND IN     
PARTICULAR REVIEW THE MATTERS REFERRED TO UNDER "RISK FACTORS" BEGINNING ON PAGE
20 OF THIS JOINT PROXY STATEMENT/PROSPECTUS.                                    

On Behalf of the Board of Directors       On Behalf of the Board of Directors of
of Globix Corporation,                     NEON Communications, Inc.,           

/s/ Peter K. Stevenson                     /s/ Stephen E. Courter               
-------------------------------------      -------------------------------------
Peter K. Stevenson                         Stephen E. Courter, President,       
President and Chief Executive Officer      Chief Executive Officer and          
                           Chairman of the Board

 NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE 
ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 

THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED ___________, 2004 AND WAS
FIRST MAILED TO STOCKHOLDERS OF GLOBIX AND STOCKHOLDERS OF NEON 
 ON OR ABOUT ____________, 2004.
--------------------------------------------------------------------------------

S-4/A
5th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 5th
GLOBIX CORPORATION
139 Centre Street 
New York, New York 10013

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS 
TO BE HELD ON JANUARY 13, 2005

To the stockholders of Globix:                                                  

         A special meeting of the stockholders of Globix Corporation ("Globix"),
will be held at the offices of Globix at 139 Centre Street, New York, New York  
on January 13, 2005 at 10:00 a.m., local time, for the following purposes:      

         1. To consider and vote upon a proposal to issue shares of common stock
with a par value of $0.01 per share pursuant to the Agreement and Plan of       
Merger, dated as of July 19, 2004, as amended by the First Amendment to         
Agreement and Plan of Merger, dated as of October 8, 2004 (as amended, the      
"merger agreement"), by and among Globix and NEON Communications, Inc. ("NEON"),
pursuant to which a new wholly owned subsidiary of Globix will be merged with   
and into NEON and NEON will become a wholly owned subsidiary of Globix (the     
"merger"). A copy of the merger agreement and the first amendment to the merger 
agreement are attached as Appendices A-1 and A-2, respectively, to the joint    
proxy statement/prospectus accompanying this notice.                            

       2. To grant discretionary authority to adjourn or postpone the Globix
special meeting to solicit additional votes to approve the matter considered at 
the Globix special meeting, if necessary.                                       

     3. To consider and act upon any other matter that may properly come
before the special meeting or any adjournment or postponement of the special    
meeting.                                                                        

      The accompanying joint proxy statement/prospectus and proxy card are
being furnished to the stockholders of Globix in connection with the            
solicitation of proxies by Globix's board of directors for use at the special   
meeting of stockholders.                                                        

   Globix's board of directors (with one director, Mr. Steven Lampe,
abstaining) has approved the merger, the merger agreement and the transactions  
contemplated by the merger agreement and recommends that you vote "FOR" the     
proposed issuance of Globix common stock in connection with the merger and "FOR"
the proposal to grant discretionary authority to adjourn or postpone the Globix 
special meeting to solicit additional votes to approve the matter considered at 
the Globix special meeting, if necessary. The proposals are described in more   
detail in the accompanying joint proxy statement/prospectus, which you should   
read in its entirety before voting.                                             

       The board of directors has fixed the close of business on December 6,
2004 as the record date for determining the stockholders entitled to receive    
this notice, and to vote their shares at the special meeting or any adjournment 
or postponement of the special meeting.                                         

     WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD, WHICH YOU MAY REVOKE AT ANY   
TIME PRIOR TO ITS USE. PROMPTLY SIGNING AND RETURNING YOUR PROXY CARD WILL HELP 
ENSURE THE PRESENCE OF A QUORUM FOR THE SPECIAL MEETING. A postage-paid,        
self-addressed envelope is enclosed for your convenience. Your shares will be   
voted at the special meeting in accordance with your proxy.                     

                                        By Order of the Board of Directors
                            of Globix Corporation,

                            /s/ PETER K. STEVENSON
                                           -------------------------------------
                        Peter K. Stevenson
                                           President and Chief Executive Officer

S-4/A
6th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 6th
 NEON COMMUNICATIONS, INC.
2200 West Park Drive
Westborough, Massachusetts 01581

 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 13, 2005

To the stockholders of NEON:                                                    

    A special meeting of the stockholders of NEON Communications, Inc.
("NEON"), will be held at the offices of NEON at 2200 West Park Drive,          
Westborough, Massachusetts on January 13, 2005 at 10:00 a.m., local time, for   
the following purposes:                                                         

       1. To approve and adopt the Agreement and Plan of Merger, dated as of
July 19, 2004, as amended by the First Amendment to Agreement and Plan of       
Merger, dated as of October 8, 2004 (as amended, the "merger agreement"), by and
among Globix Corporation ("Globix") and NEON, pursuant to which a new wholly    
owned subsidiary of Globix will be merged with and into NEON, and the           
transactions contemplated by the merger agreement (the "merger"). As a result of
the merger, NEON will become a wholly owned subsidiary of Globix. A copy of the 
merger agreement and the first amendment to the merger agreement are attached as
Appendices A-1 and A-2, respectively, to the joint proxy statement/prospectus   
accompanying this notice.                                                       

  2. To approve and adopt an amendment to the amended and restated
certificate of incorporation ("certificate of incorporation") of NEON to provide
that the merger of a new wholly owned subsidiary of Globix with and into NEON is
not a "Liquidation Event" of NEON that would trigger the liquidation provision, 
which provides that upon the occurrence of a liquidation event (including a     
transaction such as the merger), all assets of NEON remaining after payment of  
all liabilities and subject to any preferential payments would be distributed   
ratably to its common stockholders. A copy of the proposed amendment to NEON's  
certificate of incorporation is included in the joint proxy statement/prospectus
in Appendix B-1.                                                                

        3. To approve and adopt an amendment to the certificate of designation
with respect to NEON's 12% Series A Cumulative Convertible Preferred Stock to   
provide that the merger of a new wholly owned subsidiary of Globix with and into
NEON is not a "Change of Control" of NEON that would trigger the change of      
control provisions in the certificate of designation, including the right of    
each holder of NEON convertible preferred stock to require NEON to purchase its 
shares of NEON convertible preferred stock for cash. A copy of the proposed     
amendment to NEON's certificate of designation is included in the joint proxy   
statement/prospectus in Appendix B-2.                                           

     4. To grant discretionary authority to adjourn or postpone the NEON
special meeting to solicit additional votes to approve the matters considered at
the NEON special meeting, if necessary.                                         

     5. To consider and act upon any other matter that may properly come
before the special meeting or any adjournment or postponement of the special    
meeting.                                                                        

      The accompanying joint proxy statement/prospectus and proxy card are
being furnished to the stockholders of NEON in connection with the solicitation 
of proxies by NEON's board of directors for use at the special meeting of       
stockholders.                                                                   

S-4/A
7th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 7th
 NEON's board of directors (with one director, Mr. Steven Lampe,
abstaining, and as to the first amendment, with two directors, Messrs. Lampe and
Robert Grubin, abstaining) has approved the merger, the merger agreement and the
transactions contemplated by the merger agreement and the amendments to the     
certificate of incorporation and the certificate of designation and recommends  
that you vote "FOR" approval and adoption of the merger, the merger agreement   
and the transactions contemplated by the merger agreement, "FOR" approval and   
adoption of the amendment of NEON's certificate of incorporation, "FOR" approval
and adoption of the amendment of the certificate of designation for the NEON    
convertible preferred stock and "FOR" the proposal to grant discretionary       
authority to adjourn or postpone the NEON special meeting to solicit additional 
votes to approve the matters considered at the NEON special meeting, if         
necessary. The proposals are described in more detail in the accompanying joint 
proxy statement/prospectus, which you should read in its entirety before voting.

       The board of directors has fixed the close of business on December 7,
2004 as the record date for determining the stockholders entitled to receive    
this notice, and to vote their shares at the special meeting or any adjournment 
or postponement of the special meeting.                                         

     WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD, WHICH YOU MAY REVOKE AT ANY   
TIME PRIOR TO ITS USE. PROMPTLY SIGNING AND RETURNING YOUR PROXY CARD WILL HELP 
ENSURE THE PRESENCE OF A QUORUM FOR THE SPECIAL MEETING. A postage-paid,        
self-addressed envelope is enclosed for your convenience. Your shares will be   
voted at the special meeting in accordance with your proxy.                     

                                              By Order of the Board of Directors
                                         of NEON Communications, Inc.,

                                  /s/ STEPHEN E. COURTER
                                              ----------------------------------
                              Stephen E. Courter
                                              President, Chief Executive Officer
                                     and Chairman of the Board

S-4/A
8th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 8th
ADDITIONAL INFORMATION

        Important business and financial information about Globix is contained
in documents filed with the Securities and Exchange Commission, referred to as  
the SEC, that are not included in, or delivered with, this joint proxy          
statement/prospectus. Globix will provide you with copies of this information,  
without charge, upon written or oral requests to:                               

Globix Corporation                                            
139 Centre Street                                             
New York, NY 10013                                            
(212) 334-8500                                                
Attention:  Eran Hertz                                        

      PLEASE REQUEST DOCUMENTS FROM GLOBIX NOT LATER THAN JANUARY 5, 2005.
UPON REQUEST, GLOBIX WILL MAIL ANY DOCUMENTS TO YOU BY FIRST CLASS MAIL BY THE  
NEXT BUSINESS DAY.                                                              

See the section entitled "Where You Can Find More Information"
beginning on page 175 of this joint proxy statement/prospectus for more         
information about the documents referred to in this joint proxy                 
statement/prospectus.                                                           

       You should rely only on the information contained in this joint proxy
statement/prospectus in deciding how to vote on the respective proposals        
described in this joint proxy statement/prospectus. No one has been authorized  
to provide you with information that is different from that contained in this   
joint proxy statement/prospectus. This joint proxy statement/prospectus is dated
[ ], 2004. You should not assume that the information contained in this joint   
proxy statement/prospectus is accurate as of any date other than that date.     

       This joint proxy statement/prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any securities or the solicitation  
of a proxy, in any jurisdiction to or from any person to whom it is unlawful to 
make any such offer or solicitation in such jurisdiction. Information contained 
in this joint proxy statement/prospectus regarding Globix and its wholly owned  
subsidiary to be created in connection with the merger has been provided by     
Globix and information contained in this joint proxy statement/prospectus       
regarding NEON has been provided by NEON.                                       

S-4/A
9th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 9th
 TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

QUESTIONS AND ANSWERS ABOUT THE PROPOSED MERGER................................1

SUMMARY........................................................................7

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL          
   INFORMATION................................................................16

COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA...........................17

MARKET PRICE DATA AND DIVIDEND INFORMATION....................................19

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS....................20

RISK FACTORS..................................................................21

THE SPECIAL MEETING OF GLOBIX CORPORATION STOCKHOLDERS........................39

THE SPECIAL MEETING OF NEON COMMUNICATIONS, INC. STOCKHOLDERS.................43

THE MERGER....................................................................48

TERMS OF THE MERGER AGREEMENT AND RELATED TRANSACTIONS........................83

APPROVAL OF AMENDMENT OF NEON'S CERTIFICATE OF INCORPORATION..................95

APPROVAL OF AMENDMENT OF CERTIFICATE OF DESIGNATION FOR NEON                    
   CONVERTIBLE PREFERRED STOCK................................................95

INFORMATION ABOUT GLOBIX......................................................96

         Selected Consolidated Financial Data of Globix......................103

Globix Management's Discussion and Analysis of Financial      
            Condition and Results of Operations..............................106

Share Ownership of Certain Beneficial Owners and Management   
            of Globix........................................................123

         Description of Globix Capital Stock.................................127

INFORMATION ABOUT NEON.......................................................132

         Selected Consolidated Financial Data of NEON........................140

NEON Management's Discussion and Analysis of Financial        
            Condition and Results of Operations..............................143

Security Ownership of Directors, Executive Officers and More  
            Than Five Percent Stockholders of NEON...........................153

MANAGEMENT OF GLOBIX AFTER MERGER............................................157

GLOBIX CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................168

SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF             
   GLOBIX FOLLOWING THE MERGER...............................................169

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL                   
   STATEMENTS OF GLOBIX CORPORATION AND NEON COMMUNICATIONS, INC.............174

COMPARISON OF STOCKHOLDERS' RIGHTS...........................................179

OTHER MATTERS................................................................190

i 

S-4/A
10th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 10th
WHERE YOU CAN FIND MORE INFORMATION..........................................191

GLOBIX FINANCIAL STATEMENTS..................................................F-1
NEON FINANCIAL STATEMENTS...................................................F-42

APPENDIX A-1      AGREEMENT AND PLAN OF MERGER                                  
APPENDIX A-2      FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER               
APPENDIX B-1      FORM OF CERTIFICATE OF AMENDMENT TO AMENDED AND RESTATED      
CERTIFICATE OF INCORPORATION OF NEON  
APPENDIX B-2      FORM OF CERTIFICATE OF AMENDMENT TO CERTIFICATE OF DESIGNATION
FOR NEON CONVERTIBLE PREFERRED STOCK  
APPENDIX C        SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW           
APPENDIX D        OPINION OF NEEDHAM & COMPANY, INC.                            
APPENDIX E        OPINION OF ADAMS HARKNESS, INC.                               
APPENDIX F        AFFIRMATION LETTER OF ADAMS HARKNESS, INC.                    

ii

S-4/A
11th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 11th
 QUESTIONS AND ANSWERS ABOUT THE PROPOSED MERGER

Q:       WHAT IS THE PROPOSED TRANSACTION UPON WHICH I AM BEING ASKED TO VOTE?  

A:       NEON and Globix propose to enter into a business combination pursuant  
       to the terms of a merger agreement. In the merger, a new wholly owned
        subsidiary of Globix will merge with and into NEON with NEON surviving
        the merger. As a result, NEON will become a wholly owned subsidiary of
Globix.                                                       

       In order to complete the merger, Globix stockholders must approve the
         issuance of shares of Globix common stock in connection with the merger
     and NEON stockholders must approve and adopt the merger, the merger
       agreement, and the transactions contemplated by the merger agreement,
       as well as an amendment to NEON's certificate of incorporation and an
    amendment to NEON's certificate of designation with respect to its
  convertible preferred stock. Each of Globix and NEON will hold a
special meeting of its respective stockholders to obtain these
approvals.                                                    

Q:       WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?                          

A:       Globix and NEON independently concluded that the merger will benefit   
        the two companies and thus the stockholders of each company. To review
      the reasons for the transaction in greater detail, see "The Merger -
 The NEON Special Committee's and NEON's Reasons for the Merger"
        beginning on page 61 of this joint proxy statement/prospectus and "The
      Merger - The Globix Special Committee's and Globix's Reasons for the
        Merger" beginning on page 54 of this joint proxy statement/prospectus.

Q:       WHAT WILL I RECEIVE IN THE MERGER IF I OWN NEON COMMON STOCK?          

A:       If the merger is completed, you will receive 1.2748 shares of Globix   
       common stock in exchange for each share of NEON common stock that you
own.                                                          

Q.       WHAT WILL I RECEIVE IN THE MERGER IF I OWN NEON CONVERTIBLE PREFERRED  
STOCK?                                                        

A.       If the merger is completed, you will receive (a) $3.75 in cash and (b) 
        2.08333 shares of a new class of Globix convertible preferred stock to
        be created in connection with the merger in exchange for each share of
        NEON convertible preferred stock that you own immediately prior to the
merger, treating all accrued and unpaid dividends on the NEON 
     convertible preferred stock as if paid in additional shares of NEON
convertible preferred stock immediately prior to the merger.  

Q.       WHAT WILL I RECEIVE IN THE MERGER IF I OWN NEON STOCK OPTIONS?         

A.       If the merger is completed, each option to acquire NEON common stock   
        that was granted under NEON's stock plans or otherwise granted by NEON
  and that is outstanding and unexercised immediately prior to the
       effective time of the merger will be modified and become an option to
     purchase Globix common stock. The number of shares of Globix common
     stock issuable pursuant to a NEON stock option will be equal to the
         number of shares of NEON common stock subject to the NEON stock option,
        assuming full vesting, multiplied by 1.2748 and the exercise price per
      share of Globix common stock will be equal to the exercise price per
        share of NEON common stock subject to the NEON stock option divided by
1.2748.                                                       

1 

S-4/A
12th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 12th
Q.       WHAT WILL I RECEIVE IN THE MERGER IF I OWN NEON CLASS A WARRANTS?      

A.       If the merger is completed, your Class A warrant will be converted into
       the right to receive 1.2748 shares of Globix common stock in exchange
        for each Class A warrant that you own. It is a condition to the merger
    that at least 90% of the Class A warrants be exercised immediately
       prior to consummation of the merger. The NEON common stock receivable
    upon their exercise will be converted into shares of Globix common
stock in the merger.                                          

Q.       WHAT WILL I RECEIVE IN THE MERGER IF I OWN NEON REDEEMABLE PREFERRED   
STOCK WARRANTS?                                               

A.       If the merger is completed, the redeemable preferred stock warrants    
         will expire in accordance with their terms and you will not receive any
       payment with respect to those warrants in connection with the merger.

Q:       WHAT IS THE EXCHANGE RATIO FOR THE NEON COMMON STOCK AND WHAT HAPPENS  
AS THE MARKET PRICE OF GLOBIX COMMON STOCK FLUCTUATES?        

A:       The exchange ratio for the NEON common stock is fixed at 1.2748 shares 
 of Globix common stock for each share of NEON common stock. The
        exchange ratio is a fixed number and therefore will not be affected by
       any fluctuations in the market price of Globix common stock; however,
       the value of the Globix common stock received by NEON stockholders in
       exchange for their NEON common stock will be dependent on the current
market price of Globix common stock.                          

Q:       WHAT IS THE EXCHANGE RATIO FOR THE NEON CONVERTIBLE PREFERRED STOCK AND
     WHAT HAPPENS AS THE MARKET PRICE OF GLOBIX COMMON STOCK FLUCTUATES?

A:       The NEON convertible preferred stock will be exchanged for a           
     combination of cash and a new class of Globix convertible preferred
stock to be created in connection with the merger. The cash   
     consideration for each share of NEON convertible preferred stock is
fixed at $3.75 and the exchange ratio for the NEON convertible
  preferred stock is fixed at 2.08333 shares of Globix convertible
     preferred stock for each share of NEON convertible preferred stock,
   treating all accrued and unpaid dividends on the NEON convertible
     preferred stock as if paid in additional shares of NEON convertible
         preferred stock immediately prior to the merger. The Globix convertible
        preferred stock will be created in connection with the merger so there
       currently exists no market price for the Globix convertible preferred
        stock. The Globix convertible preferred stock will be convertible into
   shares of Globix common stock initially at a rate of one share of
 Globix convertible stock into one share of Globix common stock;
       however, given the liquidation preference of $3.60, which is not tied
  to the market price of Globix common stock, and other rights and
         preferences associated with the Globix convertible preferred stock, the
        underlying value of the Globix convertible preferred stock may bear no
relation to the current market price of Globix common stock.  

Q:       WHAT IS THE EXCHANGE RATIO FOR THE CLASS A WARRANTS AND WHAT HAPPENS AS
THE MARKET PRICE OF GLOBIX COMMON STOCK FLUCTUATES?           

A.       The exchange ratio for the Class A warrants is fixed at 1.2748 shares  
        of Globix common stock for each Class A warrant. The exchange ratio is
       a fixed number and therefore will not be affected by any fluctuations
       in the market price of Globix common stock; however, the value of the
 Globix common stock received by you in exchange for the Class A
         warrants will be dependent on the current market price of Globix common
stock.                                                        

2 

S-4/A
13th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 13th
Q:       WILL GLOBIX STOCKHOLDERS RECEIVE ANY NEW SHARES AS A RESULT OF THE     
MERGER?                                                       

A.       No. Globix stockholders will continue to hold the Globix shares they   
currently own.                                                

Q:        WHEN AND WHERE WILL THE SPECIAL MEETINGS TAKE PLACE?                  

A:       The special meeting of NEON stockholders will be held on January 13,   
     2005 at 10:00 a.m., local time, at the offices of NEON at 2200 West
Park Drive, Westborough, Massachusetts 01581.                 

        The special meeting of Globix stockholders will be held on January 13,
        2005 at 10:00 a.m., local time, at the offices of Globix at 139 Centre
Street, New York, New York 10013.                             

Q:       WHO MUST APPROVE THE ISSUANCE OF SHARES OF GLOBIX COMMON STOCK IN      
CONNECTION WITH THE MERGER?                                   

A:       The listing requirements of the American Stock Exchange require the    
        holders of a majority of votes cast by Globix stockholders eligible to
      vote at the Globix special meeting to approve the issuance of Globix
common stock in connection with the merger.                   

Q:       WHO MUST APPROVE THE PROPOSAL TO GRANT DISCRETIONARY AUTHORITY TO      
      ADJOURN OR POSTPONE THE GLOBIX SPECIAL MEETING TO SOLICIT ADDITIONAL
VOTES, IF NECESSARY?                                          

A:       The approval of the holders of a majority of votes cast by stockholders
       eligible to vote at the Globix special meeting is required to approve
      the proposal to grant discretionary authority to adjourn or postpone
   the special meeting, if necessary, to solicit additional votes to
  approve the proposal to issue Globix common stock in the merger.

Q:       WHO MUST APPROVE THE MERGER, THE MERGER AGREEMENT AND THE TRANSACTIONS 
CONTEMPLATED BY THE MERGER AGREEMENT?                         

A:       In addition to the approvals of the board of directors of Globix (with 
        one director, Mr. Steven Lampe, abstaining) and the board of directors
     NEON (with one director, Mr. Lampe, abstaining, and as to the first
 amendment, with two directors, Messrs. Lampe and Robert Grubin,
 abstaining), which have already been obtained, the holders of a
       majority of NEON's outstanding common stock and convertible preferred
     stock that are entitled to vote at any annual or special meeting of
         NEON stockholders, voting together as a single class on an as-converted
        into common stock basis, must approve the merger, the merger agreement
        and the transactions contemplated by the merger agreement. Each holder
      of NEON convertible preferred stock is entitled to one vote for each
share of NEON convertible preferred stock.                    

Q:       WHO MUST APPROVE THE AMENDMENT TO NEON'S CERTIFICATE OF INCORPORATION? 

A:       In addition to the approval of the board of directors of NEON, which   
       has already been obtained (with one director, Mr. Lampe, abstaining),
       the following approvals of the stockholders of NEON must be obtained:

   o        holders of a majority of NEON's outstanding common stock
             entitled to vote at any annual or special meeting of NEON
 stockholders, voting as a separate class; and

       o        holders of a majority of NEON's outstanding common stock and
                convertible preferred stock that are entitled to vote at any
          annual or special meeting of NEON stockholders, voting
together as a single class.                 

3 

S-4/A
14th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 14th
Q:       WHO MUST APPROVE THE AMENDMENT TO THE NEON CERTIFICATE OF DESIGNATION? 

A:       In addition to the approval of the board of directors of NEON, which   
       has already been obtained (with one director, Mr. Lampe, abstaining),
       the following approvals of the stockholders of NEON must be obtained:

  o        holders of two-thirds of NEON's outstanding convertible
          preferred stock voting together as a single class; and

       o        holders of a majority of NEON's outstanding common stock and
                convertible preferred stock that are entitled to vote at any
          annual or special meeting of NEON stockholders, voting
together as a single class.                 

Q:       WHO MUST APPROVE THE GRANT OF DISCRETIONARY AUTHORITY TO ADJOURN OR    
   POSTPONE THE NEON SPECIAL MEETING TO SOLICIT ADDITIONAL VOTES, IF
NECESSARY?                                                    

A:       The approval of the holders of a majority of NEON's capital stock      
       present in person or represented by proxy and entitled to vote at any
  annual or special meeting of NEON stockholders, considered on an
as-converted into common stock basis, is required to grant    
         discretionary authority to adjourn or postpone the NEON special meeting
      to solicit additional votes to approve the matters considered at the
NEON special meeting, if necessary.                           

Q:       DO NEON STOCKHOLDERS HAVE DISSENTERS' OR APPRAISAL RIGHTS IN THE       
TRANSACTION?                                                  

A:       Under Delaware law, holders of NEON outstanding common stock and       
     convertible preferred stock who comply with the governing statutory
     provisions are entitled to appraisal rights to receive a judicially
     determined (through the Delaware state courts) fair value for their
      shares instead of the merger consideration. A copy of the applicable
 statute is attached to this joint proxy statement/prospectus as
Appendix C.                                                   

Q:       DO GLOBIX STOCKHOLDERS HAVE DISSENTERS' OR APPRAISAL RIGHTS IN THE     
TRANSACTION?                                                  

A:       No.                                                                    

Q:       WHAT DO I NEED TO DO NOW?                                              

A:       You should carefully read and consider the information contained in    
     this joint proxy statement/prospectus. You should then complete and
       sign your proxy card and return it in the enclosed return envelope as
  soon as possible so that your shares will be represented at your
company's special meeting.                                    

         If you are the record holder of NEON shares and you sign, date and mail
      your proxy card without identifying how you want to vote, your proxy
will be voted "FOR" the merger, the merger agreement and the  
        transactions contemplated by the merger agreement, "FOR" the amendment
    to NEON's certificate of incorporation, "FOR" the amendment to the
         certificate of designation for the NEON convertible preferred stock and
   "FOR" the proposal to grant discretionary authority to adjourn or
  postpone the NEON special meeting to solicit additional votes to
approve the matters considered at the NEON special meeting, if
         necessary. Except with respect to the adjournment/postponement proposal
        as to which a failure to vote will have no effect, if you do not vote,
         it will have the same effect as a vote "AGAINST" the proposals. You may
     also vote by appearing at the special meeting and voting in person.

4 

S-4/A
15th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 15th
      If you are the record holder of Globix shares and you sign, date and
     mail your proxy card without identifying how you want to vote, your
     proxy will be voted "FOR" approval of the issuance of Globix common
stock pursuant to the merger, and "FOR" the proposal to grant 
   discretionary authority to adjourn or postpone the Globix special
         meeting to solicit additional votes to approve the matter considered at
        the Globix special meeting, if necessary. If you do not vote, you will
        have no effect on the outcome of these proposals. You may also vote by
appearing at the special meeting and voting in person.        

Q:       IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER    
AUTOMATICALLY VOTE MY SHARES FOR ME?                          

A:       No. Your broker is not permitted to vote your shares without specific  
     instructions from you. Unless you follow the directions your broker
         provides you regarding how to instruct your broker to vote your shares,
         your shares will not be voted. Please check the voting information form
       used by your broker to see if it offers telephone or Internet voting.

Q:       WHAT IF I FAIL TO INSTRUCT MY BROKER?                                  

A:       The broker holding your shares in "street name" may vote the shares    
      only if you provide the broker with appropriate instructions. If you
         fail to instruct your broker to vote your shares and the broker submits
       an unvoted proxy, the resulting "broker non-vote" will be counted for
        the purpose of determining the existence of a quorum at your company's
       special meeting, but will not be voted on any of the proposals at the
        special meeting. A broker non-vote will therefore have the same effect
        as a vote against the proposals being submitted to stockholders at the
       NEON special meeting. A broker non-vote will not be considered a vote
         cast at the Globix special meeting and will therefore have no effect on
     the outcome of the proposals being submitted to stockholders at the
Globix special meeting.                                       

Q:       CAN I CHANGE MY VOTE AFTER I MAIL MY SIGNED PROXY?                     

A:       Yes. You can change your vote at any time before your proxy is voted at
        your company's special meeting of stockholders. You can do this in one
        of three ways. First, you can send a written notice to NEON or Globix,
  as applicable, stating that you would like to revoke your proxy.
       Second, you can complete and submit a new proxy. If you choose either
         of these two methods, you must submit your notice of revocation or your
  new proxy at the address for NEON on page 45 of this joint proxy
        statement/ prospectus if you are a NEON stockholder or page 41 of this
   joint proxy statement/prospectus if you are a Globix stockholder.
      Third, you can attend your company's special meeting of stockholders
       and vote in person. Your attendance alone will not revoke your proxy.

Q:       CAN I ATTEND THE SPECIAL MEETING AND VOTE MY SHARES IN PERSON?         

A:       Yes. You are invited to attend your company's stockholder meeting. If  
         your shares are held in "street name," then you are not the stockholder
       of record and you must ask the bank, broker, or other nominee holding
your shares how you can vote in person at the meeting.        

Q:       ARE THERE RISKS THAT I SHOULD CONSIDER IN CONNECTION WITH THE MERGER?  

A:       Yes. For example, the number of shares of Globix common stock that NEON
         common stockholders will receive at closing will not change even if the
       market price of Globix common stock increases or decreases before the
       completion of the proposed transaction. In evaluating the merger, you
   should carefully consider this and other factors discussed in the
     section entitled "Risk Factors," beginning on page 21 of this joint
proxy statement/prospectus.                                   

5 

S-4/A
16th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 16th
Q:       IF I OWN NEON COMMON STOCK WILL I RECOGNIZE A GAIN OR LOSS FOR FEDERAL 
INCOME TAX PURPOSES ON THE PROPOSED TRANSACTION?              

A:       It is intended that the merger will constitute a reorganization within 
         the meaning of section 368(a) of the Internal Revenue Code. As a result
      of reorganization treatment, a holder of NEON common stock would not
     recognize taxable gain or loss as a result of the merger. To review
     certain federal income tax consequences of the merger to holders of
        NEON common stock in greater detail, see "The Merger - Material United
       States Federal Income Tax Consequences," beginning on page 74 of this
joint proxy statement/prospectus.                             

Q:       IF I OWN NEON CONVERTIBLE PREFERRED STOCK WILL I RECOGNIZE A GAIN OR   
   LOSS FOR FEDERAL INCOME TAX PURPOSES ON THE PROPOSED TRANSACTION?

A:       A holder of NEON convertible preferred stock may recognize gain, but   
       not loss, with respect to cash received in exchange for such stock in
      the merger. To review certain federal income tax consequences of the
  merger to holders of NEON convertible preferred stock in greater
     detail, see "The Merger - Material United States Federal Income Tax
Consequences," beginning on page 74 of this joint proxy       
statement/prospectus.                                         

Q:       WILL I BE ABLE TO TRADE THE GLOBIX COMMON STOCK THAT I RECEIVE IN THE  
MERGER?                                                       

A:       Yes. The Globix common stock that you will receive in the merger will  
   be freely tradable unless you are an affiliate of Globix or NEON.

Q:       SHOULD I SEND IN MY NEON STOCK OR WARRANT CERTIFICATES NOW?            

A:       No, you should not send in your stock or warrant certificates with your
   proxy. You will receive instructions for exchanging your stock or
warrant certificates if the merger is consummated.            

Q:       WHEN DO YOU EXPECT TO COMPLETE THE MERGER?                             

A:       We expect to complete the merger promptly after we receive approval by 
  the NEON stockholders at the NEON special meeting and the Globix
      stockholders at the Globix special meeting, we receive all necessary
       regulatory approvals and all other conditions in the merger agreement
         have been met or waived. See "Terms of the Merger Agreement and Related
   Transactions - Conditions Precedent to Each Party's Obligation to
Effect the Merger" beginning on page 90 of this joint proxy   
statement/prospectus.                                         

Q:       WHO CAN HELP ANSWER MY QUESTIONS?                                      

A:       If you are a Globix stockholder with questions about the merger, how to
     vote or revoke your proxy, or if you need additional copies of this
         joint proxy statement/prospectus or the enclosed proxy card, you should
   contact Mr. James C. Schroeder, Globix's General Counsel at (212)
625-7231.                                                     

       If you are a NEON stockholder with questions about the merger, how to
     vote or revoke your proxy, or if you need additional copies of this
         joint proxy statement/prospectus or the enclosed proxy card, you should
    contact Mr. Christopher E. Dalton, NEON's Senior Counsel, at (508)
621-1714.                                                     

6 

S-4/A
17th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 17th
 SUMMARY

   FOR YOUR CONVENIENCE, WE HAVE PROVIDED A BRIEF SUMMARY OF CERTAIN
INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS SUMMARY    
HIGHLIGHTS SELECTED INFORMATION FROM THIS JOINT PROXY STATEMENT/PROSPECTUS AND  
DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND 
THE MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE  
MERGER AS WELL AS OTHER MATTERS TO BE CONSIDERED AT YOUR COMPANY'S STOCKHOLDER  
MEETING, YOU SHOULD CAREFULLY READ THIS ENTIRE JOINT PROXY STATEMENT/           
PROSPECTUS, THE MERGER AGREEMENT WHICH WE HAVE ATTACHED AS APPENDIX A-1 ALONG   
WITH THE FIRST AMENDMENT TO THE MERGER AGREEMENT WHICH WE HAVE ATTACHED AS      
APPENDIX A-2 TO THIS JOINT PROXY STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND  
MORE INFORMATION" ON PAGE 191 OF THIS JOINT PROXY STATEMENT/PROSPECTUS. WE HAVE 
INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO MORE COMPLETE         
DESCRIPTIONS OF THE TOPICS PRESENTED IN THE SUMMARY. IN THIS JOINT PROXY        
STATEMENT/ PROSPECTUS, "WE," "US" AND "OUR" MAY REFER TO EITHER GLOBIX OR NEON, 
DEPENDING ON THE CONTEXT IN WHICH THEY ARE USED, AND "YOU" AND "YOUR" REFER TO  
STOCKHOLDERS OF NEON OR GLOBIX, DEPENDING ON THE CONTEXT IN WHICH THEY ARE USED.

THE COMPANIES (PAGES 96 AND 132)                                                

GLOBIX CORPORATION                                            

139 Centre Street                                             
New York, New York 10013                                      
(212) 334-8500                                                

Globix is a provider of application, media and infrastructure 
management services. Globix provides flexible business solutions which combine  
skills, support, technology and experience to enable its 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, Globix helps its clients protect Internet revenue streams, improve
user satisfaction and reduce technology operating costs and risks. Globix's     
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. Globix  
and its subsidiaries have operations in New York, NY, London, UK, Santa Clara,  
CA, Fairfield, NJ, and Atlanta, GA. Globix common stock is traded on the OTC    
Bulletin Board under the symbol "GBXX.OB"                                       

NEON COMMUNICATIONS, INC.                                     

2200 West Park Drive                                          
Westborough, Massachusetts  01581                             
(508) 616-7800                                                

NEON is a facilities-based communications provider, supplying 
telecommunication services to communications companies and non-carrier customers
in the twelve-state Northeast and mid-Atlantic market. NEON is an independent   
provider of SONET and dense wave division multiplexing ("DWDM") services to a   
wide range of communications carriers including local, long distance and        
wireless telephone companies and Internet service providers. NEON also provides 
services to non-carrier customers such as financial institutions and colleges   
and universities.                                                               

         NEON owns and operates a high bandwidth fiber optic network, consisting
of approximately 4,600 route miles and over 218,000 fiber miles. Its network    
extends from Portland, ME to Washington, D.C. and includes metro and intercity  
coverage as well as co-location space in a number of large, mid-size and small  
markets in the Northeast and mid-Atlantic, including Boston, New York,          
Philadelphia, Newark, Baltimore, Washington, DC, Portland, Portsmouth,          
Springfield, Worcester, Albany, White Plains, Providence, Hartford, Hackensack, 
Reston, Vienna, and smaller communities along our network routes.               

7 

S-4/A
18th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 18th
SPECIAL MEETING OF GLOBIX CORPORATION STOCKHOLDERS (PAGE 39)                    

     A special meeting of the stockholders of Globix will be held at the
offices of Globix at 139 Centre Street, New York, New York on January 13, 2005  
at 10:00 a.m., local time. The board of directors of Globix has fixed the close 
of business on December 6, 2004 as the record date for determining the          
stockholders entitled to receive this notice, and to vote their shares at the   
special meeting or any adjournment or postponement of the special meeting.      

There were 16,460,000 shares of Globix common stock issued and
outstanding as of the Globix record date, although of these shares of common    
stock only 16,065,948 shares have been distributed. Of the 16,460,000 shares of 
common stock deemed issued and outstanding, 229,452 of these shares were placed 
in reserve in escrow pending the outcome of a class action lawsuit described in 
"Information About Globix - Legal Proceedings" beginning on page 102 of this    
joint proxy statement/prospectus and are not entitled to vote at the special    
meeting. Another 164,600 shares of common stock will be distributed following   
resolution of a shareholder derivative suit filed against Globix and certain of 
our former officers and directors, as described in "Information About Globix -  
Legal Proceedings" beginning on page 102 of this joint proxy                    
statement/prospectus and are also not entitled to vote. Therefore, although     
16,460,000 shares of common stock are deemed issued and outstanding as of the   
Globix record date, only 16,065,948 shares of common stock are entitled to vote 
at the meeting. Each holder of Globix common stock is entitled to one vote for  
each share held.                                                                

GLOBIX STOCKHOLDER VOTE REQUIRED FOR THE GLOBIX COMMON STOCK ISSUANCE IN THE    
MERGER (PAGE 40)                                                                

     Globix has submitted an application to list its common stock on the
American Stock Exchange. Under the rules of the American Stock Exchange, Globix 
stockholders must vote to approve the issuance of Globix common stock in        
connection with the merger in order for Globix and NEON to complete the merger. 
At the special meeting the Globix stockholders will vote to approve the issuance
of Globix common stock in connection with the merger and to grant discretionary 
authority to adjourn or postpone the Globix special meeting to solicit          
additional votes to approve the matter considered at the special meeting, if    
necessary. The listing requirements of the American Stock Exchange and the      
Globix bylaws require the approval of a majority of votes cast at the Globix    
special meeting of stockholders by Globix stockholders entitled to vote on the  
issuance of Globix common stock in connection with the merger. The approval of a
majority of votes cast at the Globix special meeting of stockholders by Globix  
stockholders entitled to vote is required to approve the proposal to grant      
discretionary authority to adjourn or postpone the special meeting to solicit   
additional votes to approve the matter considered at the special meeting, if    
necessary.                                                                      

SPECIAL MEETING OF NEON COMMUNICATIONS, INC. STOCKHOLDERS (PAGE 43)             

   A special meeting of the stockholders of NEON will be held at the
offices of NEON at 2200 West Park Drive, Westborough, Massachusetts 01581 on    
January 13, 2005 at 10:00 a.m., local time. The board of directors of NEON has  
fixed the close of business on December 7, 2004 as the record date for          
determining the stockholders entitled to receive this notice, and to vote their 
shares at the special meeting or any adjournment or postponement of the special 
meeting.                                                                        

        There were 16,117,799 shares of NEON common stock and 1,101,887 shares
of NEON convertible preferred stock issued and outstanding as of the record     
date. Each holder of NEON common stock is entitled to one vote per share and    
each holder of NEON convertible preferred stock is entitled to one vote for each
share of NEON convertible preferred stock.                                      

NEON STOCKHOLDER VOTE REQUIRED FOR THE MERGER AND OTHER PROPOSALS (PAGE 44)     

         At the special meeting the NEON stockholders will vote on the following
four agenda items:                                                              

 o to approve and adopt the merger agreement, the merger and the
transactions contemplated by the merger agreement;                              

8 

S-4/A
19th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 19th
o to approve and adopt an amendment to NEON's certificate of  
incorporation to provide that the merger of a new wholly owned subsidiary of    
Globix with and into NEON is not a "Liquidation Event" of NEON that would       
trigger the liquidation provision set forth in the certificate of incorporation 
which provides that upon the occurrence of a liquidation event all assets of    
NEON remaining after payment of all liabilities and subject to any preferential 
payments would be distributed ratably to its common stockholders;               

       o to approve and adopt an amendment to the certificate of designation
with respect to the NEON's convertible preferred stock to provide that the      
merger of the new wholly owned subsidiary of Globix with and into NEON is not a 
"Change of Control" of NEON that would trigger the change of control provisions 
set forth in the certificate of designation which would require the immediate   
repurchase of the NEON convertible preferred stock in cash; and                 

       o to approve the proposal to grant discretionary authority to adjourn
or postpone the NEON special meeting to solicit additional votes to approve the 
matters considered at the NEON special meeting, if necessary.                   

The required vote for each agenda item is described below.    

APPROVAL OF MERGER                                            

 Under Delaware law and NEON's certificate of incorporation, the
affirmative vote by the holders of a majority of NEON's outstanding common stock
and convertible preferred stock that are entitled to vote at any annual or      
special meeting of NEON stockholders, voting together as a single class, is     
required to approve the merger, the merger agreement and transactions           
contemplated by the merger agreement.                                           

APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION         

 Under Delaware law and NEON's certificate of incorporation, the
affirmative vote by the holders of a majority of NEON's outstanding common stock
entitled to vote at any annual or special meeting of NEON stockholders voting as
a separate class, and the affirmative vote by the holders of a majority of      
NEON's outstanding common stock and convertible preferred stock that are        
entitled to vote at any annual or special meeting of NEON stockholders, voting  
together as a single class, are required to approve the amendment to NEON's     
certificate of incorporation.                                                   

APPROVAL OF AMENDMENT OF CERTIFICATE OF DESIGNATION           

   Under Delaware law and NEON's certificate of incorporation (which
includes the certificate of designation), the affirmative vote by the holders of
two-thirds of NEON's outstanding convertible preferred stock, voting together as
a single class, and the affirmative vote by the holders of a majority of NEON's 
outstanding common stock and convertible preferred stock that are entitled to   
vote at any annual or special meeting of NEON stockholders, voting together as a
single class, are required to approve the amendment to the certificate of       
designation for the NEON convertible preferred stock.                           

     APPROVAL OF PROPOSAL TO GRANT DISCRETIONARY AUTHORITY TO ADJOURN OR
POSTPONE THE SPECIAL MEETING                                  

   The approval of the holders of a majority of NEON's capital stock
present in person or represented by proxy and entitled to vote, is required to  
approve the proposal to grant discretionary authority to adjourn or postpone the
special meeting to solicit additional votes to approve the matters considered at
the special meeting.                                                            

THE MERGER (PAGE 48)                                                            

     The merger agreement provides that a new wholly owned subsidiary of
Globix will merge with and into NEON. NEON will be the surviving corporation in 
the merger and will become a wholly owned subsidiary of Globix.                 

   RECOMMENDATION OF GLOBIX'S BOARD OF DIRECTORS AND REASONS FOR THE
MERGER (PAGE 55)                                              

The Globix board of directors (with one director, Mr. Lampe,  
abstaining) has determined that the merger is advisable and in the best         
interests of Globix and its stockholders. The Globix board of directors (with   
one director, Mr. Lampe, abstaining) recommends that Globix stockholders vote   
"FOR" the proposed issuance of Globix common stock in connection with the merger
and the other proposal.                                                         

9 

S-4/A
20th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 20th
        See "The Merger -- The Globix Special Committee's and Globix's Reasons
for the Merger" beginning at page 54 of this joint proxy statement/prospectus   
for reasons supporting the decision of the Globix board of directors.           

OPINION OF GLOBIX'S FINANCIAL ADVISOR  (PAGE 55)              

         Needham & Company, Inc. has delivered an opinion to a special committee
of the Globix board of directors, dated September 28, 2004, that, as of that    
date and based on and subject to the matters described in its opinion, the      
common stock exchange ratio was fair to the holders of Globix common stock from 
a financial point of view. See "The Merger - Opinion of Globix's Financial      
Advisor" beginning on page 55 of this joint proxy statement/prospectus. The full
text of the written opinion of Needham & Company is attached to this joint proxy
statement/prospectus as Appendix D. Globix stockholders should read this opinion
in its entirety for a description of the procedures followed, assumptions made, 
matters considered and limitations on the review undertaken in delivering the   
opinion. The Needham & Company opinion is addressed to the special committee of 
the Globix board of directors and does not constitute a recommendation to any   
Globix stockholder as to how that stockholder should vote or act on any matter  
relating to the merger.                                                         

        RECOMMENDATION OF NEON'S BOARD OF DIRECTORS AND REASONS FOR THE MERGER
(PAGE 62)                                                     

        The NEON board of directors (with one director, Mr. Lampe, abstaining,
and as to the first amendment, with two directors, Messrs. Lampe and Grubin,    
abstaining) has determined that the merger, the merger agreement and the        
transactions contemplated by the merger agreement and the proposed amendments to
NEON's certificate of incorporation and certificate of designation for NEON     
convertible preferred stock are advisable and in the best interests of NEON and 
its stockholders. The NEON board of directors (with one director, Mr. Lampe,    
abstaining), recommends that NEON stockholders vote "FOR" the proposal to       
approve and adopt the merger, the merger agreement and the transactions         
contemplated by the merger agreement and each of the other proposals.           

        See "The Merger -- The NEON Special Committee's and NEON's Reasons for
the Merger" beginning on page 61 of this joint proxy statement/prospectus for   
the reasons supporting the NEON board of directors' recommendations.            

OPINION OF NEON'S FINANCIAL ADVISOR  (PAGE 63)                

      Adams Harkness, Inc. (f/k/a Adams, Harkness & Hill, Inc.) provided a
fairness opinion to the NEON special committee and the board of directors on    
July 16, 2004 that, as of that date and based on and subject to the matters     
described in its written opinion, the proposed consideration to be received by  
the common stockholders of NEON in the merger was fair to the common            
stockholders of NEON from a financial point of view. On October 8, 2004 Adams   
Harkness provided an affirmation of its fairness opinion. See "The Merger -     
Opinion of NEON's Financial Advisor" beginning on page 63 of this joint proxy   
statement/prospectus. The full text of the written opinion of Adams Harkness    
dated July 16, 2004 is attached to this joint proxy statement/prospectus as     
Appendix E. A copy of the affirmation letter dated October 8, 2004 is attached  
to this joint proxy statement/prospectus as Appendix F. NEON stockholders should
read the opinion and the affirmation letter in their entirety for a description 
of the procedures followed, assumptions made, matters considered and limitations
on the review undertaken in delivering the opinion. Adams Harkness' opinion and 
affirmation letter are directed to the NEON special committee and the board of  
directors and do not constitute a recommendation to any NEON stockholder as to  
any matter relating to the merger.                                              

WHAT NEON STOCKHOLDERS WILL RECEIVE IN THE MERGER (PAGE 83)   

       In the merger, you will receive Globix common stock for each share of
NEON common stock that you own and a combination of cash and a new class of     
Globix convertible preferred stock to be created in connection with the merger  
for each share of NEON convertible preferred stock that you own. In the case of 
NEON common stock, each share is exchangeable for 1.2748 shares of Globix common
stock. In the case of NEON convertible preferred stock, each share is           
exchangeable for (a) $3.75 in cash and (b) 2.08333 shares of Globix convertible 
preferred stock, treating all accrued and unpaid dividends on the NEON          
convertible preferred stock as if paid in additional shares of NEON convertible 
preferred stock immediately prior to the merger.                                

10

S-4/A
21st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 21st
        Following the merger, based on 16,460,000 outstanding shares of Globix
common stock as of December 1, 2004, and assuming the issuance of an additional 
4,545,455 shares of Globix common stock in a debt-for-equity exchange that is a 
condition to the merger and is described in the section entitled "Terms of the  
Merger Agreement and Related Transactions - Debt-for-Equity Exchange" beginning 
on page 94 of this joint proxy statement/ prospectus, NEON common stockholders  
would beneficially own approximately 56.7% of the outstanding shares of common  
stock of the combined company (ignoring current cross ownership between the     
holders of Globix and NEON common stock, as further described in the section    
entitled "The Merger - Interests of Certain Persons in the Merger" beginning on 
page 71 of this joint proxy statement/prospectus) and current Globix common     
stockholders known to Globix would beneficially own approximately 76.4% of the  
outstanding shares of common stock of the combined company (due to current cross
ownership). The foregoing ownership percentages do not include the shares of    
NEON convertible preferred stock that are beneficially owned by certain common  
stockholders of NEON and that will be exchanged for Globix convertible preferred
stock in the merger or currently exercisable options or warrants (other than the
Class A warrants) held by NEON or Globix common stockholders. See "Securities   
Ownership of Certain Beneficial Owners and Management of Globix Following The   
Merger" beginning on page 169 of this joint proxy statement/prospectus for a    
more complete description of the beneficial ownership of Globix management, the 
Globix board of directors and owners of more than 5% of Globix common stock     
following the completion of the merger.                                         

TREATMENT OF NEON OPTIONS AND WARRANTS (PAGE 84)              

     Each option to acquire NEON common stock granted under NEON's stock
plans or otherwise granted by NEON that is outstanding and unexercised          
immediately prior to the effective time of the merger will be modified and      
become an option to purchase Globix common stock. At the effective time of the  
merger, Globix will modify NEON's options to provide for the purchase of Globix 
common stock, adjusting the number of shares issuable upon exercise and the     
exercise price of such option to reflect the exchange ratio in the merger       
applicable to the NEON common stock underlying such NEON option. The duration   
and other terms of each such modified option, including the vesting schedule    
(with credit for options already vested), will be the same as under the prior   
NEON stock option.                                                              

 NEON has three types of outstanding warrants: Class A warrants,
redeemable preferred stock warrants and warrants for NEON common stock issued to
Communications Technology Advisors LLC ("CTA"), which we refer to as "CTA       
warrants". The Class A warrants will be exercised immediately prior to the      
merger or will be converted into shares of Globix common stock in the merger.   
The redeemable preferred stock warrants will expire upon the merger in          
accordance with their terms. At the effective time of the merger, Globix will   
replace the CTA warrants with warrants to purchase Globix common stock,         
adjusting the number of shares issuable upon exercise and the exercise price of 
such warrants to reflect the exchange ratio in the merger applicable to the NEON
common stock.                                                                   

TOTAL CONSIDERATION GLOBIX WILL PAY (PAGE 83)                 

        In the merger, Globix will issue or reserve for issuance a total of up
to approximately 31.0 million shares of Globix common stock to be allocated     
among NEON's outstanding shares of common stock and outstanding warrants and    
options to purchase NEON common stock. In the merger, Globix will issue a new   
class of convertible preferred stock to be created in connection with the merger
to the holders of NEON convertible preferred stock and also pay $3.75 in cash   
per share of outstanding NEON convertible preferred stock, treating all accrued 
and unpaid dividends on the NEON convertible preferred stock as if paid in      
additional shares of NEON convertible preferred stock immediately prior to the  
merger. Globix will reserve a sufficient number of shares of Globix common stock
for issuance upon conversion of the Globix convertible preferred stock. Assuming
a December 31, 2004 closing date, Globix would pay approximately $5.2 million in
cash and issue a total of up to approximately 2,908,614 shares of Globix        
convertible preferred stock, having an aggregate liquidation value of           
approximately $10.5 million, to the holders of NEON convertible preferred stock.

11

S-4/A
22nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 22nd
EXCHANGE OF NEON CERTIFICATES (PAGE 85)                       

        After the merger occurs, the exchange agent will send a letter to NEON
stockholders that will provide instructions on exchanging your NEON stock       
certificates for Globix stock certificates. PLEASE DO NOT SEND ANY STOCK        
CERTIFICATES TO ANY TRANSFER AGENT AT THIS TIME.                                

APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS (PAGE 79)         

         The holders of Globix stock do not have dissenters' rights or appraisal
rights in connection with the merger.                                           

         ANY NEON STOCKHOLDER WHO OBJECTS TO THE MERGER IS PERMITTED BY DELAWARE
LAW TO SEEK RELIEF AS A DISSENTING STOCKHOLDER AND HAVE THE "FAIR VALUE" OF ITS 
SHARES OF NEON COMMON STOCK AND CONVERTIBLE PREFERRED STOCK DETERMINED BY A     
COURT AND PAID IN CASH.                                                         

        If you are a NEON stockholder and wish to dissent, you must deliver to
NEON, prior to the vote on the merger at the special meeting, a written demand  
for appraisal of your shares. You also must not vote in favor of the merger     
agreement. To not vote in favor of the merger agreement, you can either:        

  o        vote "no" in person at the special meeting or by proxy;

o        abstain from voting;                                 

o        fail to vote; or                                     

         o        if you returned a duly executed proxy, revoke your proxy prior
to the special meeting.                     

     The relevant provisions of Delaware law are technical in nature and
complex. If you wish to exercise appraisal rights and obtain appraisal of the   
fair value of your shares, you may wish to consult with legal counsel, because  
the failure to comply strictly with these provisions may result in waiver or    
forfeiture of your appraisal rights.                                            

      Beneficial owners of NEON common stock or NEON convertible preferred
stock, whose shares are held of record by another person, such as a bank, broker
or nominee, and who wish to seek appraisal, should instruct the record holder to
follow the appraisal procedures of Delaware law.                                

       A COPY OF THE RELEVANT SECTION OF DELAWARE LAW GOVERNING THIS PROCESS
IS ATTACHED AS APPENDIX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS.             

VOTING OF PROXIES AT THE SPECIAL MEETINGS (PAGES 40 AND 45)   

  Properly executed proxies received prior to or at your company's
meeting, and not revoked, will be voted at such meeting in accordance with the  
instructions indicated on such proxies. If no instruction is indicated, then    
unless the shares covered by the proxy are in a brokerage account, such proxies 
will be voted for each proposal at your company's special meeting. If you submit
a proxy that indicates an abstention from voting in all matters, your shares    
will be counted as present for the purpose of determining the existence of a    
quorum at the special meeting, but they will not be voted on any matter at the  
special meeting. Consequently, if you are a NEON stockholder your abstention    
will have the same effect as a vote against each proposal at the NEON special   
meeting. If your proxy indicates an abstention only as to a particular proposal,
that abstention will have the same effect as a vote against that particular     
proposal only. If you are a Globix stockholder your abstention will have no     
effect on the outcome of the proposals at the Globix special meeting.           

        If you hold your shares of Globix common stock or NEON common stock or
convertible preferred stock in a brokerage account, the broker holding such     
shares in "street name" may vote the shares only if you provide the broker with 
appropriate instructions. If an executed proxy statement is returned to your    
company by a broker holding shares of your company's common stock or convertible
preferred stock in street name, which indicates that the broker does not have   
discretionary authority to vote on one or more of the agenda items for the      
special meeting, the shares will be considered present at the meeting for       
purposes of determining a quorum, but will not be considered to have been voted 
in favor of or against the applicable proposal.                                 

12

S-4/A
23rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 23rd
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 71)          

       In addition to their interests as stockholders, some of the directors
and officers of NEON and of Globix may have interests in the merger that are    
different from, or in addition to, your interests. All officers and directors of
NEON, including Mr. Courter and William A. Marshall, Chief Financial Officer of 
NEON, have stock option agreements (and employment agreements in the case of Mr.
Courter and Mr. Marshall) that provide that, upon a change of control of NEON,  
including a transaction such as the merger, their unvested options will         
accelerate and become fully vested and exercisable. Options to purchase         
approximately 1,349,677 shares of NEON common stock held by NEON's officers and 
directors at a weighted average exercise price of $5.24 per share will be fully 
vested and exercisable immediately prior to the completion of the merger.       

    Pursuant to the merger agreement, Messrs. Barr, Cecin, Courter and
Forsgren, currently members of the board of directors of NEON, will join the    
nine member board of directors of Globix, and Mr. Lampe, currently a member of  
the board of directors of both NEON and Globix, will remain on the board of     
directors of Globix. Messrs. Stevenson, Herzig, Singer and Steele, currently    
members of the board of directors of Globix, will continue to serve on the board
of directors of Globix. In addition, Globix will indemnify the officers and     
directors of NEON for events occurring before and in connection with the merger 
and will continue NEON's directors' and officers' liability insurance coverage  
and fiduciary liability insurance coverage for at least five years after the    
merger.                                                                         

     Certain NEON stockholders who are affiliated with directors of NEON
and/or Globix beneficially own a significant number of NEON securities and a    
significant number of Globix securities. Some of these significant stockholders 
include LC Capital Master Fund Ltd., Loeb Partners Corp. and three trusts for   
the benefit of the children of the brother of Mr. Singer, who is the            
non-executive chairman of the board of directors of Globix, which we refer to   
collectively as the "Singer Trusts." See "The Merger - Interests of Certain     
Persons in the Merger" beginning on page 71 of this joint proxy                 
statement/prospectus.                                                           

    CTA provides consulting and business development services to NEON.
Additionally, under a letter agreement between NEON and CTA, CTA agreed to      
provide merger and acquisition advice and opportunities to NEON for a success   
fee. CTA has agreed to waive this fee in relation to the merger. NEON has issued
warrants for its common stock to certain current and former affiliates of CTA   
and to certain of such affiliates' designees as payment for CTA's services. One 
of CTA's employees, Wayne Barr, Jr., serves on NEON's board of directors and Mr.
Barr will serve on the Globix board of directors following the merger. A current
director of NEON, Mr. Peter Aquino, was affiliated with CTA at the time NEON's  
board of directors approved the merger.                                         

   CTA also provides consulting and business development services to
Globix. Under a letter agreement between Globix and CTA, CTA is entitled to a   
success fee if Globix consummates a sale, merger or a similar transaction with  
CTA's assistance. CTA has agreed to waive this fee in relation to the merger.   
Certain affiliates of CTA, including Mr. Barr, hold warrants exercisable for    
500,000 shares of Globix common stock at $3.00 per share through March 13, 2013,
which were purchased for $25,000. See "Description of Globix Capital Stock -    
Description of Globix Warrants" beginning on page 130 of this joint proxy       
statement/prospectus.                                                           

        The NEON board of directors and special committee and the Globix board
or directors and special committee were aware of and discussed these potentially
conflicting interests when they approved the merger.                            

WHAT IS NEEDED TO COMPLETE THE MERGER (PAGE 90)               

Several conditions must be satisfied before the merger will be
completed. These include:                                                       

o        adoption of the merger, the merger agreement and the 
                 transactions contemplated by the merger agreement by the NEON
stockholders as described above;            

o        approval of the amendments to NEON's certificate of  
             incorporation and certificate of designation for the NEON
         convertible preferred stock by the NEON stockholders;

13

S-4/A
24th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 24th
        o        approval of the issuance of Globix common stock in connection
with the merger by the Globix stockholders; 

o        approval of the merger in accordance with the        
           Hart-Scott-Rodino Antitrust Improvements Act of 1976 as
amended;                                    

     o        Globix's 11% senior note holders exchange $12.5 million in
               principal and accrued interest of Globix's 11% senior notes
              for approximately 4,545,455 shares of Globix common stock;

  o        the holders of 90% or more of the NEON Class A warrants
           exercise their Class A warrants and the Class A warrant
              agreement is amended to provide for the conversion of NEON
              Class A warrants into shares of Globix common stock in the
merger; and                                 

o        other contractual conditions set forth in the merger 
agreement.                                  

        If the law permits, Globix or NEON may each waive conditions for their
benefit and their stockholders' benefit and complete the merger even though one 
or more of these conditions has not been met. NEON's stockholder approval of the
merger, the merger agreement and the transactions contemplated by the merger    
agreement cannot be waived. We cannot assure you that the conditions will be    
satisfied or waived or that the merger will occur.                              

TERMINATION OF THE MERGER AGREEMENT (PAGE 92)                 

        Globix and NEON may mutually agree at any time to terminate the merger
agreement without completing the merger, even if the NEON stockholders have     
approved it. Also either company may decide, without the consent of the other,  
to terminate the merger agreement, subject to a variety of conditions, in a     
number of circumstances. These circumstance include, among others:              

o        certain breaches under the merger agreement;         

    o        any court or governmental entity issuing a final order or
 judgment preventing completion of the merger;

o        NEON stockholders not approving the merger;          

   o        Globix stockholders not approving the issuance of Globix
common stock in the merger;                 

   o        the board of directors of NEON having recommended to its
               stockholders an alternative sale or business transaction or
                 having withdrawn its recommendation of the merger (permitting
             Globix to terminate) or having approved an agreement with
               respect to such transaction (permitting NEON to terminate);

     o        the board of directors of Globix having recommended to its
               stockholders an alternative sale or business transaction or
           having withdrawn its recommendation with respect to the
                 issuance of Globix common stock in connection with the merger
                  (permitting NEON to terminate) or having approved an agreement
          with respect to such transaction (permitting Globix to
terminate); or                              

    o        the merger not having been completed by January 17, 2005,
                  which is 150 days from August 20, 2004, the expiration date of
                 the waiting period applicable to the completion of the merger
             under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.                           

        Generally, each company has agreed to pay its own fees and expenses if
the merger is not completed. NEON and Globix have also agreed that all expenses 
incurred in connection with the filing, printing and mailing of this joint proxy
statement/prospectus and the registration statement of which it is a part and   
the Hart-Scott-Rodino filing would be borne equally by Globix and NEON if the   
merger agreement is terminated. No specific termination or similar fees are     
imposed on a party terminating the merger agreement.                            

14

S-4/A
25th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 25th
AMENDMENT OF NEON'S CERTIFICATE OF INCORPORATION (PAGE 95)    

      Before completing the merger and after receiving the requisite vote,
NEON will file an amendment to its certificate of incorporation to amend the    
liquidation provision to exclude the merger from the definition of "Liquidation 
Event" in the certificate of incorporation. NEON's certificate of incorporation 
currently provides that upon the occurrence of a liquidation event (including a 
transaction such as the merger), all assets of NEON remaining after payment of  
all liabilities and subject to any preferential payments would be distributed   
ratably to its common stockholders.                                             

    See "Approval of Amendment of NEON's Certificate of Incorporation"
beginning on page 95 of this joint proxy statement/prospectus for a description 
of the effect of this amendment.                                                

AMENDMENT OF NEON'S CERTIFICATE OF DESIGNATION (PAGE 95)      

      Before completing the merger and after receiving the requisite vote,
NEON will file an amendment to the certificate of designation for the NEON      
convertible preferred stock to provide that the merger is not a "Change of      
Control" of NEON that would trigger the change of control provisions in the     
certificate of designation and would require the immediate repurchase by NEON of
the NEON convertible preferred stock in cash.                                   

  See "Approval of Amendment of NEON's Certificate of Designation"
beginning on page 95 of this joint proxy statement/prospectus for a description 
of the effect of this amendment.                                                

DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS (PAGE 179)          

When the merger is completed, holders of NEON common stock and
convertible preferred stock will become holders of Globix common stock and      
convertible preferred stock. Their rights after the merger will be governed by  
the Globix certificate of incorporation and bylaws rather than the NEON         
certificate of incorporation and bylaws, but will continue to be governed by    
Delaware law. See "Comparison of Stockholders Rights" beginning on page 179 of  
this joint proxy statement/prospectus.                                          

U.S. FEDERAL INCOME TAX CONSEQUENCES (PAGE 74)                

       The merger will qualify as a tax-free reorganization for U.S. federal
income tax purposes. These opinions of counsel with regard to the merger are    
subject to various assumptions, limitations and qualifications and will rely,   
among other things, upon information to be provided and representations to be   
made by Globix, NEON the transitory merger subsidiary to Day, Berry & Howard LLP
and Andrews Kurth LLP that have not yet been received by counsel. The           
consequence of a tax-free reorganization is that, neither Globix, NEON nor the  
newly formed wholly owned subsidiary of Globix to be merged with and into NEON  
will recognize gain or loss as a result of the merger. Holders of NEON common   
stock, Class A warrants, and CTA warrants will not recognize gain or loss as a  
result of their exchange of those securities for shares of Globix common stock  
(or with respect to CTA warrants, for Globix warrants) in the merger. Holders of
NEON convertible preferred stock may recognize gain, but not loss, with respect 
to their receipt of cash in exchange for their shares of NEON convertible       
preferred stock, but such holders will not recognize gain or loss with respect  
to their receipt of Globix convertible preferred stock in exchange for shares of
NEON convertible preferred stock in the merger. See "The Merger - Material      
United States Federal Income Tax Consequences" beginning on page 74 of this     
joint proxy statement/prospectus for greater detail.                            

       YOU SHOULD CONSULT YOUR TAX ADVISOR FOR A FULL EXPLANATION OF THE TAX
CONSEQUENCES OF THE MERGER TO YOU.                                              

ACCOUNTING TREATMENT (PAGE 73)                                

The merger will be accounted for using the purchase method of 
accounting and Globix will be deemed the acquirer for accounting and financial  
reporting purposes. Under the purchase method of accounting, the purchase price 
in the merger will be allocated among the NEON assets acquired and the NEON     
liabilities assumed to the extent of their fair value. The excess of the fair   
value of the identifiable net assets acquired over NEON's purchase price (i.e., 
negative goodwill) will be reduced by assigning it on a pro-rated basis to the  
estimated fair value of all identified noncurrent acquired assets.              

GOVERNMENTAL AND REGULATORY APPROVALS (PAGE 73)               

      The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and its related rules and regulations prohibit Globix and NEON  
from completing the merger until Globix and NEON each file notifications with   
the Antitrust Division of the Department of Justice and the Federal Trade       
Commission, and the HSR Act waiting period requirements have been satisfied.    
Globix and NEON each filed HSR Act notifications with the Federal Trade         
Commission and the Antitrust Division on August 13, 2004, and the waiting period
was terminated on August 20, 2004.                                              

15

S-4/A
26th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 26th
        Several of NEON's subsidiaries have authorizations from certain states
in the Northeast and mid-Atlantic regions to be competitive local exchange      
carriers, or CLECs. NEON and Globix must request approval of the merger from the
applicable agencies of some of these states and must notify the applicable      
agencies of the other states of the merger. NEON and Globix have filed all      
applicable documents required to be filed prior to completion of the merger to  
either seek authorization of the proposed merger or to give notification of the 
proposed merger.                                                                

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL INFORMATION 

  The following selected unaudited pro forma consolidated combined
financial information has been derived from, and should be read in conjunction  
with, the Unaudited Pro Forma Condensed Combined Consolidated Financial         
Information and related notes included in this joint proxy statement/prospectus 
on page 174. This information is based on the historical consolidated balance   
sheets and related historical consolidated statements of operations of Globix   
and the historical consolidated balance sheets and related historical           
consolidated statements of operations of NEON, using the purchase method of     
accounting for business combinations. Due to different fiscal year ends for     
Globix and NEON, the unaudited pro forma condensed combined consolidated        
statement of operations data combines the audited historical consolidated       
statement of operations data of Globix for the year ended September 30, 2004    
with the unaudited historical consolidated statement of operations data of NEON 
for the twelve months ended September 30, 2004, giving effect to the merger as  
if it had occurred on October 1, 2003.                                          

         This information is for illustrative purposes only. The companies might
have performed differently had they been combined as of the dates for which     
information is presented. You should not rely on the unaudited pro forma        
condensed combined consolidated financial information as being indicative of the
historical results that would have been achieved had the companies always been  
combined or the future results that the combined company will experience after  
the merger.                                                                     

                                                                [Download Table]
                                                            TWELVE MONTH   
                                                            PERIOD ENDED   
                                                         SEPTEMBER 30, 2004
                                                         ------------------
                                                             (IN THOUSANDS,
                                                              EXCEPT PER   
                                                              SHARE DATA)  
                                                         ------------------
                                                                           
PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF                     
OPERATIONS DATA (UNAUDITED):                                               

Revenue, net                                             $     107,741     
Loss from operations                                           (39,177)    
Loss before income tax benefit (expense) and                               
     extraordinary item                                        (46,190)    
Net loss before extraordinary item                             (44,902)    
Net loss                                                       (42,972)    
Net loss attributable to common stockholders                   (43,289)    
Basic and diluted loss per share                                 (0.89)    

                                                         SEPTEMBER 30, 2004
                                                         ------------------
                                                           (IN THOUSANDS)  
                                                         ------------------
PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET                    
DATA (UNAUDITED):                                                          
Cash, cash equivalent, short-term investments and                          
     marketable securities                               $      26,242     
Restricted cash and investments                                 12,993     
Working capital                                                 12,914     
Total assets                                                   279,699     
Current portion of long-term debt                                  555     
Long-term debt, less current portion                            82,778     
6% cumulative convertible preferred stock                       12,295     
Stockholders' equity                                           120,864     

            16

S-4/A
27th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 27th
 COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

     The following table presents specified historical per share data of
Globix and NEON and combined per share data on an unaudited pro forma basis     
after giving effect to the merger. This data is derived from, and should be read
in conjunction with, the separate historical consolidated financial statements  
of NEON and the separate historical consolidated financial statements of Globix,
each included in this joint proxy statement/prospectus, as well as the unaudited
pro forma condensed combined consolidated financial statements included in this 
joint proxy statement/prospectus. The unaudited pro forma combined per share    
data do not necessarily indicate the operating results that would have been     
achieved had the merger been completed as of the beginning of the earliest      
period presented and should not be taken as representative of future operations.
The results might have been different if the companies had always been combined.

     The number of shares used in the calculations assumes that all NEON
shares of common stock outstanding as of December 7, 2004, including shares     
issuable upon exercise of the NEON Class A warrants, are converted into shares  
of Globix common stock at the exchange ratio of 1.2748 and the issuance of      
4,545,455 shares of Globix common stock in the debt-for-equity exchange in      
connection with the merger.                                                     

  The unaudited pro forma combined book value per share represents
Globix's historical book value as adjusted for the fair value and number of     
shares issued in connection with the merger. Tangible book value per share      
represents Globix's historical tangible book value as adjusted for the fair     
value and number of shares issued in connection with the merger and the         
estimated goodwill and other intangible assets recorded in connection with the  
merger.                                                                         

         The NEON pro forma equivalent amounts are calculated by multiplying the
unaudited pro forma combined amounts by the exchange ratio of 1.2748.           

        The information in the following table is based on, and should be read
together with, the historical financial information that Globix and NEON have   
presented in this joint proxy statement/prospectus beginning on page F-1 and    
F-42, respectively.                                                             

17

S-4/A
28th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 28th
                                                        [Enlarge/Download Table]
                                  -------------------------------------------------------------------------------
                                                  HISTORICAL                              PRO FORMA              
                                  --------------------------------------    -------------------------------------
                                                              NEON                                               
                                       GLOBIX            AS OF AND FOR                                           
                                   AS OF AND FOR           THE TWELVE                                            
                                   THE YEAR ENDED         MONTHS ENDED                                           
                                    SEPTEMBER 30,         SEPTEMBER 30,                                NEON      
                                        2004                 2004               GLOBIX              EQUIVALENT   
                                  -----------------     ----------------    ----------------    ---------------- 
                                                                                                                 
Net loss per share:                                                                                              
  Basic and diluted                   $   (2.51)            $  (0.27)           $  (0.89)          $    (1.13)   
Book value per common share at                                                                                   
     period end                       $    1.03             $   7.35            $   2.49           $     3.17    
Tangible book value per share at                                                                                 
    period end                        $    0.56             $   7.35            $   2.25           $     2.87    

---------------                                                                 
     Neither Globix nor NEON pays any dividends on its shares of common stock.

                                    18

S-4/A
29th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 29th
MARKET PRICE DATA AND DIVIDEND INFORMATION

   Globix common stock is quoted on the OTC Bulletin Board under the
symbol "GBXX.OB." Quotations on the OTC Bulletin Board reflect inter-dealer     
prices, without retail mark-up, mark-down or commission and may not necessarily 
represent actual transactions. Globix has submitted an application to have its  
shares of common stock listed on the American Stock Exchange.                   

         The following table sets forth the high and low closing sale prices for
Globix common stock as reported on the OTC Bulletin Board for the periods       
indicated:                                                                      

                                                        [Enlarge/Download Table]
------------------------------- -------------------------------------- ----------------------------
          Fiscal 2003                           High                               Low             
        ---------------                       ---------                          -------           
------------------------------- -------------------------------------- ----------------------------
                                                                                                   
First Quarter (commencing                                                                          
10/31/02(1)..................                  $2.50                             $1.25             
------------------------------- -------------------------------------- ----------------------------
 Second                                                                                            
Quarter......................                   2.95                              2.00             
------------------------------- -------------------------------------- ----------------------------
Third                                                                                              
Quarter......................                   3.10                              1.70             
------------------------------- -------------------------------------- ----------------------------
Fourth                                                                                             
Quarter......................                   3.25                              2.66             
------------------------------- -------------------------------------- ----------------------------

------------------------------- -------------------------------------- ----------------------------
          Fiscal 2004                           High                               Low             
        ---------------                       ---------                          -------           
------------------------------- -------------------------------------- ----------------------------
 First                                                                                             
Quarter......................                  $5.05                             $2.55             
------------------------------- -------------------------------------- ----------------------------
 Second                                                                                            
Quarter......................                   4.65                              2.70             
------------------------------- -------------------------------------- ----------------------------
Third                                                                                              
Quarter......................                   4.00                              2.30             
------------------------------- -------------------------------------- ----------------------------
Fourth Quarter...............                   3.37                              2.60             
------------------------------- -------------------------------------- ----------------------------

------------------------------- -------------------------------------- ----------------------------
          Fiscal 2005                           High                               Low             
        ---------------                       ---------                          -------           
------------------------------- -------------------------------------- ----------------------------
First Quarter..(through                                                                            
December 1, 2004)............                  $3.30                             $2.51             
------------------------------- -------------------------------------- ----------------------------

 (1)     Globix common stock outstanding immediately prior to the effective date
       of the plan of reorganization under Chapter 11 of the U.S. Bankruptcy
      Code, April 25, 2002, was cancelled as of the effective date of such
  plan. The first reported trade of our common stock following the
      effective date of the plan of reorganization occurred on October 31,
2002.                                                         

        On December 1, 2004, there were 337 record holders of Globix stock. In
addition, the plan of reorganization provides that the 268 record holders of the
common stock of Globix on the effective date of the plan will be entitled to    
receive, in exchange for claims in respect of such stock, their pro rata portion
(which, under the terms of the Globix plan of reorganization, may be equal to   
zero) of 164,600 shares of the common stock following the effective date. While 
the distribution of these shares will not occur until the resolution of the     
stockholders' class action suit described in "Information About Globix -        
Business - Legal Proceedings," we estimate that the total number of holders of  
our common stock following this distribution will be approximately 431.         

      19

S-4/A
30th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 30th
        On July 16, 2004, the business day before the public announcement that
Globix and NEON had entered into the merger agreement, the closing price per    
share of Globix common stock on the OTC Bulletin Board was $2.85. On December 1,
2004, the latest practicable trading day before the printing of this joint proxy
statement/prospectus, the closing price per share of Globix common stock on the 
OTC Bulletin Board was $3.05.                                                   

Because the market price of Globix common stock is subject to 
fluctuation, the market value of the shares of Globix common stock that holders 
of NEON common stock will receive in the merger may increase or decrease prior  
to and following the vote on the merger. We urge stockholders to obtain current 
market quotations for Globix common stock. We cannot assure you of the future   
prices or trading markets for Globix common stock. The Globix convertible       
preferred stock to be issued in the merger is not currently traded in any       
securities market.                                                              

NEON MARKET PRICE DATA                                                          

    Neither NEON's common stock nor its convertible preferred stock is
traded in any securities market. On December 1, 2004, there were 155 record     
holders of NEON common stock and 46 record holders of NEON convertible preferred
stock.                                                                          

DIVIDEND INFORMATION                                                            

        Neither Globix nor NEON has ever paid any cash dividends on its shares
of common stock. Under the merger agreement, each company has agreed not to pay 
dividends pending the completion of the merger, without the written consent of  
the other, except that NEON may pay accrued but unpaid dividends on its         
convertible preferred stock in additional shares of NEON convertible preferred  
stock. The Globix board of directors presently intends to retain all earnings   
for use in its business and has no present intention to pay cash dividends      
before or after the merger, except that it will retain the option to pay accrued
dividends on the Globix convertible preferred stock issued in the merger in     
additional shares of Globix convertible preferred stock.                        

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus contains forward-looking
statements about the merger, Globix and NEON within the meaning of Section 27A  
of the Securities Act of 1933, as amended, and Section 21E of the Securities    
Exchange Act of 1934, as amended. Statements containing the words "believes,"   
"expects," "anticipates," "estimates," "plans," "projects," "predicts,"         
"intends," "seeks," "will," "may," "should," "would," "continues" and similar   
expressions, or the negative of these terms, constitute forward-looking         
statements that involve risks and uncertainties. Such statements are based on   
current expectations and are subject to risks, uncertainties and changes in     
condition, significance, value and effect. These risks include those discussed  
in the section entitled "Risk Factors" beginning on page 21 of this joint proxy 
statement/prospectus. Such risks, uncertainties and changes in condition,       
significance, value and effect could cause Globix's or NEON's actual results to 
differ materially from those anticipated events. In evaluating the merger       
agreement and the merger for purposes of the NEON special meeting and the       
issuance of Globix common stock in the merger for purposes of the Globix special
meeting, you should carefully consider the discussion of risks and uncertainties
discussed in the section entitled "Risk Factors" beginning on page 21 of this   
joint proxy statement/prospectus as well as elsewhere in this document.         

       All subsequent written and oral forward-looking statements concerning
the merger or other matters addressed in this joint proxy statement/prospectus  
and attributable to Globix or NEON or any person acting on their behalf are     
expressly qualified in their entirety by the cautionary statements contained or 
referred to in this section. Except to the extent required by applicable law or 
regulations, Globix and NEON undertake no obligation to update such             
forward-looking statements to reflect events or circumstances after the date of 
this joint proxy statement/prospectus or to reflect the occurrence of           
unanticipated events. In evaluating forward-looking statements, you should      
consider these risks and uncertainties, together with the other risks described 
from time to time in Globix's reports and documents filed with the Securities   
and Exchange Commission.                                                        

20  

S-4/A
31st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 31st
RISK FACTORS

       IN THE MERGER, NEON COMMON STOCKHOLDERS WILL RECEIVE SHARES OF GLOBIX
COMMON STOCK IN EXCHANGE FOR THEIR SHARES OF NEON COMMON STOCK AND NEON         
PREFERRED STOCKHOLDERS WILL RECEIVE GLOBIX CONVERTIBLE PREFERRED STOCK AND CASH 
IN EXCHANGE FOR THEIR SHARES OF NEON CONVERTIBLE PREFERRED STOCK. BY VOTING IN  
FAVOR OF THE ISSUANCE OF GLOBIX COMMON STOCK IN CONNECTION WITH THE MERGER,     
GLOBIX STOCKHOLDERS WILL BE VOTING FOR A BUSINESS COMBINATION WITH NEON. BEFORE 
DECIDING WHETHER OR NOT TO APPROVE THE MERGER AND THE OTHER PROPOSALS, BOTH NEON
STOCKHOLDERS AND GLOBIX STOCKHOLDERS SHOULD CONSIDER THE FOLLOWING RISKS AND    
UNCERTAINTIES THAT ARE APPLICABLE TO THE MERGER, GLOBIX AND NEON. IN ADDITION TO
THE OTHER INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, NEON  
STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN DECIDING   
WHETHER TO VOTE IN FAVOR OF THE MERGER, THE MERGER AGREEMENT AND THE            
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND THE OTHER PROPOSALS AND   
GLOBIX STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN     
DECIDING WHETHER TO VOTE IN FAVOR OF THE ISSUANCE OF GLOBIX COMMON STOCK IN     
CONNECTION WITH THE MERGER. YOU ALSO SHOULD KEEP THE FOLLOWING RISK FACTORS IN  
MIND WHEN YOU READ FORWARD-LOOKING STATEMENTS IN THIS JOINT PROXY               
STATEMENT/PROSPECTUS. PLEASE REFER TO THE SECTION ENTITLED "CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS" BEGINNING ON PAGE 20 OF THIS JOINT PROXY 
STATEMENT/PROSPECTUS.                                                           

 MERGER RELATED RISK FACTORS

THE EXCHANGE RATIO FOR GLOBIX COMMON STOCK THAT HOLDERS OF NEON COMMON STOCK    
WILL RECEIVE IN THE MERGER IS FIXED AND WILL NOT BE ADJUSTED IN THE EVENT OF ANY
CHANGE IN THE PRICE OF GLOBIX COMMON STOCK.                                     

   Holders of NEON common stock will receive 1.2748 shares of Globix
common stock for each share of NEON common stock owned. The exchange ratio for  
NEON common stock is fixed and will not be adjusted for any increase or decrease
in the market price of Globix common stock. Accordingly, the specific dollar    
value of Globix common stock to be received by NEON common stockholders in the  
merger will depend on the market value of Globix common stock at the time of the
merger. The market price of Globix common stock may decline, causing the value  
of the consideration received by NEON common stockholders in the merger to      
decline. Globix common stock is thinly traded on the OTC Bulletin Board. The    
market price of Globix common stock is extremely volatile and has fluctuated    
over a wide range. From August 31, 2003 to November 30, 2004, Globix common     
stock traded as high as $5.10 per share and as low as $2.00 per share. From July
16, 2004, the last trading day prior to the date on which the merger was        
announced, through November 30, 2004, the price of Globix common stock has      
fluctuated between $2.50 and $3.61.                                             

   In addition, there will be a period between the completion of the
merger and the time at which former NEON stockholders receiving stock           
consideration actually receive certificates evidencing Globix common stock.     
Accordingly, the value of the Globix common stock NEON stockholders actually    
receive may be more or less than the value of Globix common stock at the        
effective time of the merger resulting from the exchange. Until stock           
certificates are received, NEON stockholders will not be able to sell their     
Globix shares in the open market and, thus, will not be able to avoid losses    
resulting from any decline in the trading price of the Globix common stock      
during this period. Fluctuations in Globix's quarterly and annual results may   
affect the market price for Globix common stock and there are a number of       
factors that may affect Globix's future quarterly and annual results of         
operations. See "Risk Factors - Risk Factors Related to Globix," beginning on   
page 25 of this joint proxy statement/prospectus.                               

NEON IS NOT PERMITTED TO TERMINATE THE MERGER DUE TO A DECREASE IN GLOBIX'S     
STOCK PRICE.                                                                    

       NEON is not permitted to terminate the merger solely due to decreases
in Globix's stock price, even if those fluctuations would materially affect the 
value of the consideration NEON stockholders will receive in the merger.        

21  

S-4/A
32nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 32nd
DIRECTORS AND OFFICERS OF NEON AND GLOBIX MAY REAP MORE BENEFITS FROM THE MERGER
THAN ARE AVAILABLE TO STOCKHOLDERS OF NEON OR GLOBIX IN GENERAL, DUE TO CROSS   
OWNERSHIP OF INTERESTS IN THE COMPANIES BY CERTAIN DIRECTORS OR BECAUSE OF OTHER
INTERESTS THAT DIRECTORS AND OFFICERS HAVE OR BENEFITS THAT ARE AVAILABLE TO    
THEM. AS A RESULT, DIRECTORS AND OFFICERS OF NEON AND GLOBIX HAVE CONFLICTS OF  
INTEREST THAT MAY HAVE INFLUENCED THEIR DECISIONS TO APPROVE THE MERGER.        

     When considering the NEON board of directors' recommendation of the
merger, the merger agreement and the transactions contemplated by the merger    
agreement and the other proposals and the Globix board of directors'            
recommendation of the issuance of Globix common stock in the merger, you should 
consider that some directors and executive officers of NEON and Globix have     
interests in the merger and the other proposals that are in addition to, or     
different from, their interests as NEON stockholders or Globix stockholders, as 
the case may be. These interests are described in the section entitled "The     
Merger -- Interests of Certain Persons in the Merger," beginning on page 71 of  
this joint proxy statement/prospectus.                                          

These interests include:                                      

    o        CROSS OWNERSHIP. Two directors of NEON (Mr. Lampe and Mr.
             Grubin) are affiliated with entities that own interest in
            Globix, while two directors of Globix (Mr. Lampe and Mr.
                Singer) are affiliated with entities that also own interests
               in NEON. These entities together own approximately 41.5% of
           the NEON common stock and 47.1% of the NEON convertible
              preferred stock as of December 1, 2004. In the case of Mr.
             Singer, who is the non-executive chairman of the board of
            Globix, the affiliated entities are three trusts for the
          benefit of the children of his brother, which we refer
                  collectively as the "Singer Trusts." Various other significant
                  stockholders of NEON own common stock of Globix. The interests
              of stockholders with cross ownership in Globix and NEON in
                completing the merger may be different from the interests of
other NEON or Globix stockholders.          

        o        DEBT-FOR-EQUITY EXCHANGE. LC Capital Master Fund Ltd. and the
                 Singer Children's Management Trust, one of the Singer Trusts,
             are entitled to participate in the Globix debt-for-equity
             exchange which is described in more detail in the section
       entitled "Terms of the Merger Agreement and Related
                 Transactions - Debt-for-Equity Exchange" beginning on page 94
of this joint proxy statement/prospectus.   

       o        OFFICER AND DIRECTOR BENEFITS. All officers and directors of
            NEON, including Mr. Courter and Mr. Marshall, have stock
               option agreements (and employment agreements in the case of
                  Mr. Courter and Mr. Marshall) that provide that, upon a change
           of control of NEON, including a transaction such as the
             merger, their unvested options will accelerate and become
fully vested and exercisable.               

      o        BOARD OF DIRECTORS AND MANAGEMENT OF GLOBIX. Four of NEON's
                 current directors, Messrs. Courter, Barr, Cecin and Forsgren,
            will become directors of Globix in the merger and one of
              NEON's current directors, Mr. Lampe, is also a director of
           Globix and will remain on the Globix board of directors
             following the merger. Four of Globix's current directors,
            Messrs. Stevenson, Singer, Steele and Herzig will remain
              directors of Globix following the merger. NEON's Chairman,
            President and Chief Executive Officer, Mr. Courter, will
                 remain the Chairman, President and Chief Executive Officer of
              NEON and will be considered an executive officer of Globix
               following the merger, and the current officers of NEON will
             continue to be officers of NEON after consummation of the
merger.                                     

       o        INDEMNIFICATION. Under the merger agreement, Globix and NEON
                 will provide indemnification for present and former directors
                  and officers of NEON with respect to matters existing prior to
                the closing of the merger, including matters relating to the
                 merger. NEON will maintain directors' and officers' liability
                 insurance and fiduciary liability insurance for at least five
                  years after the merger benefiting such persons with respect to
        matters existing prior to or relating to the merger.

22  

S-4/A
33rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 33rd
         o        BUSINESS ADVISORS OF NEON AND GLOBIX. Communication Technology
                 Advisors LLC, which we refer to as "CTA," provides consulting
              and business development services to NEON. NEON has issued
               warrants for its common stock to certain current and former
                  affiliates of CTA and certain of such affiliates' designees as
                  payment for such services. One of CTA's employees, Wayne Barr,
              Jr., serves on NEON's board of directors and Mr. Barr will
                  serve on the Globix board of directors following the merger. A
                 current director of NEON, Mr. Aquino, was affiliated with CTA
              at the time NEON's board of directors approved the merger.
                Under a letter agreement between NEON and CTA, CTA agreed to
              provide merger and acquisition advice and opportunities to
               NEON for a success fee. CTA has agreed to waive this fee in
relation to the merger.                     

                  CTA also provides consulting and business development services
                to Globix and certain affiliates of CTA, including Mr. Barr,
                 hold warrants exercisable for 500,000 shares of Globix common
               stock at $3.00 per share through March 13, 2013, which were
             purchased for $25,000. See "Description of Globix Capital
                 Stock - Description of Globix Warrants" beginning on page 130
            of this joint proxy statement/prospectus. Under a letter
                  agreement between Globix and CTA, CTA is entitled to a success
         fee if Globix consummates a sale, merger or a similar
              transaction with CTA's assistance. CTA has agreed to waive
this fee in relation to the merger.         

THE HOLDERS OF NEON CONVERTIBLE PREFERRED STOCK WILL RECEIVE A SMALLER CASH     
PAYMENT IN CONNECTION WITH THE MERGER THAN THEY WOULD IF THE MERGER WERE TREATED
AS A "CHANGE OF CONTROL" UNDER NEON'S CERTIFICATE OF DESIGNATION.               

         As a result of the amendment to NEON's certificate of designation being
proposed to the NEON stockholders in this joint proxy statement/prospectus and  
the terms of the merger agreement, holders of NEON convertible preferred stock  
will receive a smaller cash payment in connection with the merger than they     
would if the merger were treated as a "Change of Control" under NEON's          
certificate of designation with respect to the NEON convertible preferred stock.
If the merger were deemed a change of control, each of the 1,101,887 shares of  
NEON convertible preferred stock outstanding as of the effective date of the    
merger would be entitled to be paid $11.3625, plus accrued but unpaid dividends 
of approximately $2.87 as of November 30, 2004, in cash, for an aggregate       
immediate cash payment of approximately $15,706,524. Under the terms of the     
merger, the holders of NEON convertible preferred stock will receive $3.75 in   
cash plus 2.08333 shares of a new class of Globix convertible preferred stock   
with a liquidation preference of $3.60 per share to be created in connection    
with the merger, for each share of NEON convertible preferred stock, treating   
all accrued and unpaid dividends on the NEON convertible preferred stock as if  
paid in additional shares of NEON convertible preferred stock immediately prior 
to the merger.                                                                  

THE STRUCTURE AND IMPLEMENTATION OF THE MERGER INVOLVES A NUMBER OF RISKS,      
INCLUDING RISKS OF INTEGRATING THE TWO BUSINESSES AND UNKNOWN LIABILITIES.      

      The merger involves the combination of two companies that previously
operated independently in markets with different economic, demographic and      
competitive characteristics, and is a complex transaction. The process of       
integrating operations could cause an interruption of, or loss of momentum in,  
the activities of one or more of the combined company's businesses and the loss 
of key personnel. Among the risks the merger involves are risks of successful   
integration, potential liabilities that may be incurred as a result of the      
merger and numerous other risks, including:                                     

      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        identifying and retaining key personnel, which may be
difficult in the combined company;          

      o        integrating accounting, engineering, information technology
         and administrative systems, which may be unexpectedly
difficult or costly;                        

23  

S-4/A
34th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 34th
       o        making significant cash expenditures that may be required to
         retain personnel, eliminate unnecessary resources and
integrate the two businesses;               

  o        maintaining uniform standards, controls, procedures and
                 policies, which may be harder than Globix and NEON anticipate
               and interfere with efficient administration of the combined
company; and                                

   o        changes in the businesses as a result of the merger that
              impair relationships with employees, customers or vendors.

      In addition, as a result of the merger, each of Globix and NEON will
succeed to any liabilities of the other company now existing or arising out of  
the other company's businesses prior to closing, including unknown 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 have a material adverse effect on business,    
results of operations and financial condition of the combined companies.        

LIMITATIONS MAY BE IMPOSED ON THE USE OF EITHER OR BOTH COMPANIES' NET OPERATING
LOSSES FOR INCOME TAX PURPOSES.                                                 

        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 Globix securities
as a result of Globix'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 Globix's plan of reorganization. As a result of the       
merger, NEON or Globix, or both, may experience another ownership change.       
Further, whether or not the merger causes an ownership change, NEON or Globix   
may each experience an ownership change after the merger as a result of changes 
of ownership pursuant to the merger and future changes of ownership. Additional 
limitations would be imposed as a result of any such ownership change. See "The 
Merger - Material United States Federal Income Tax Consequences," beginning on  
page 74 of this joint proxy statement/prospectus.                               

UNANTICIPATED ADDITIONAL COSTS RELATING TO THE MERGER COULD REDUCE GLOBIX'S     
FUTURE EARNINGS PER SHARE.                                                      

      Globix believes that it has reasonably estimated the likely costs of
integrating the operations of NEON into Globix, and the incremental costs, of   
operating as a combined company. However, it is possible that additional        
transaction costs such as fees or professional expenses, or additional future   
operating expenses, such as increased personnel costs or increased taxes, as    
well as other types of adverse developments, could have a material adverse      
effect on the results of operations and financial condition of Globix after the 
merger.                                                                         

IF THE MERGER IS NOT COMPLETED, GLOBIX AND NEON WILL EACH HAVE INCURRED         
SUBSTANTIAL EXPENSES WITHOUT REALIZING THE EXPECTED BENEFITS.                   

       Globix and NEON have incurred substantial expenses in connection with
the transactions described in this joint proxy statement/prospectus. The        
completion of the merger depends on the satisfaction of specified conditions and
the receipt of regulatory approvals and we cannot guarantee that the conditions 
to completion of the merger will be met. In particular, it is a closing         
condition to the merger that some of Globix's 11% senior note holders exchange  
$12.5 million in principal and accrued interest of 11% senior notes for         
approximately 4,545,455 shares of Globix common stock, and it is possible that  
Globix may not be able to complete the exchange based on a failure to receive   
the requisite approvals or that such 11% senior note holders will fail to       
consummate the exchange. In addition, each of Globix and NEON have the right to 
terminate the merger agreement in the event of a material adverse change in the 
other's business or in certain cases if they receive another acquisition        
proposal. If the merger is not completed, these expenses could have a material  
adverse impact on the financial condition of Globix and/or NEON because they    
would not have realized the expected benefits of the merger.                    

24  

S-4/A
35th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 35th
AFTER THE MERGER, STOCKHOLDERS OF NEON WILL HAVE DIFFERENT RIGHTS THAT MAY BE   
LESS ADVANTAGEOUS THAN THEIR CURRENT RIGHTS.                                    

     Upon completion of the merger, NEON stockholders will become Globix
stockholders. Although both companies are incorporated in Delaware, differences 
in NEON's certificate of incorporation and bylaws and Globix's certificate of   
incorporation and bylaws will result in changes to the rights of NEON           
stockholders when they become Globix stockholders. For more information, see the
section entitled "Comparison of Stockholders Rights," beginning on page 179 of  
this joint proxy statement/prospectus. A stockholder of NEON may conclude that  
his, her or its rights under Globix's certificate of incorporation and bylaws   
are more limited than his, her or its current rights under NEON's certificate of
incorporation, certificate of designation with respect to the convertible       
preferred stock and bylaws.                                                     

RISK FACTORS RELATED TO GLOBIX

        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 joint proxy statement/prospectus 
should be read in light of such factors. Any of the following factors could have
a material adverse effect on our business and our future operating results.     

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 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. For the year ended September 30, 2003, we had a loss from         
operations of $18.4 million and a net loss of approximately $25.3 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. 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 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 harm our business, financial condition and  
results of operations.                                                          

OUR ABILITY TO PAY THE PRINCIPAL AMOUNT OF THE 11% SENIOR NOTES WHEN DUE DEPENDS
ON OUR FUTURE OPERATING PERFORMANCE, 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 the 11% senior notes   
and on our other indebtedness depends on our future operating performance. Our  
outstanding indebtedness as of September 30, 2004 was approximately $95.8       
million and may increase to approximately $104 million on September 30, 2005 if 
our board of directors elects to pay interest in kind and not in cash on the    
notes. Future operating performance is subject to market conditions and business
factors that are often beyond our control. Consequently, we cannot assure you   
that we will have sufficient cash flows to pay the principal and interest on our
indebtedness. 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, restructure or
refinance our indebtedness or file for bankruptcy. The terms of our indebtedness
may restrict the use of these alternative measures, and we cannot assure you    
that these 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         

25  

S-4/A
36th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 36th
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.                      

        As of September 30, 2004, we were highly leveraged and our outstanding
indebtedness was approximately $95.8 million. Our 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 THE 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 the 11% senior notes contains a number of
covenants that impose significant operating and financial restrictions on us and
our subsidiaries. These restrictions 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.                                 

        The indenture under which our 11% senior notes were issued requires us
to pay interest in kind through 2004 and 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, 2004 resulted in
an additional $7.2 million in 11% senior notes.                                 

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;             

       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.                                  

OUR REORGANIZATION MAY HAVE ADVERSELY AFFECTED SOME OF OUR RELATIONSHIPS WITH   
CUSTOMERS AND SUPPLIERS, AND TOGETHER WITH OUR HIGHLY LEVERAGED FINANCIAL       
STRUCTURE MAY CONTINUE TO AFFECT THE WAY WE ARE VIEWED IN THE MARKET.           

   The continuing impact of our April 2002 bankruptcy reorganization
cannot be accurately quantified. However, our bankruptcy may have adversely     
affected our ability to negotiate favorable terms with vendors or retain        
customers. Our bankruptcy and continued leverage may cause customers to question
our financial soundness and may also affect the contractual terms that are      
available to us.                                                                

26  

S-4/A
37th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 37th
OUR BUSINESS COULD SUFFER FROM A LOSS OF MANAGEMENT PERSONNEL, WHICH COULD      
RESULT IN OUR INABILITY TO OPERATE AS EFFECTIVELY AS WE ANTICIPATED AND COULD   
REDUCE OUR REVENUE.                                                             

     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 success 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 result
in our inability to operate the company as effectively as we anticipate and     
could reduce our revenue.                                                       

WE MAY NOT BE ABLE TO ATTRACT OR RETAIN THE PERSONNEL WE NEED IN EACH OF THE    
CRITICAL AREAS OF OUR BUSINESS, WHICH COULD ADVERSELY AFFECT THE ABILITY OF OUR 
BUSINESS TO PERFORM ITS FUNCTIONS.                                              

     Our future success depends on our ability to attract and retain key
personnel for management, technical, sales and marketing and customer support   
positions. The failure to attract or retain qualified personnel in each 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.                                                                         

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.                                         

OUR SUCCESS WILL DEPEND ON OUR ABILITY TO INTEGRATE, OPERATE AND MAINTAIN AND   
UPGRADE OUR NETWORK AND FACILITIES, AND OUR FAILURE TO DO SO COULD CAUSE US TO  
LOSE CUSTOMERS 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.                                           

27  

S-4/A
38th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 38th
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 BUSINESS OR BE UNABLE TO OPERATE IN A COMPETITIVE MANNER.      

         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
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 adversely affect
the costs of maintaining our network and our ability to maintain or grow our    
business.                                                                       

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 will harm our business, financial condition  
and results of operations.                                                      

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. We         
currently maintain most of our computer systems in our facilities in New York,  
New York; Atlanta, Georgia; Santa Clara, California; and London, England. 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. Our business, financial condition   
and results of operations could be harmed by any damage or failure that         
interrupts or delays our operations.                                            

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 our cost of revenues for the year ended September
30, 2004 is 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, OUR ABILITY TO ATTRACT, RETAIN
AND SERVICE CUSTOMERS WOULD BE ADVERSELY AFFECTED.                              

        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.                                                               

28  

S-4/A
39th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 39th
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 subject to a high level of uncertainty and 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;                    

       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. If the number of users on the  
Internet does not increase and commerce over the Internet does not become more  
accepted and widespread, demand for our services may decrease and, as a result, 
our business would be harmed.                                                   

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, our
business, financial condition and results of operations will be harmed.         

CHANGES IN GOVERNMENT REGULATIONS RELATED TO THE INTERNET COULD RESTRICT OUR    
ACTIVITIES, EXPOSE US TO LIABILITY OR OTHERWISE ADVERSELY AFFECT OUR BUSINESS.  

      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 REVENUE.                                  

  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.                            

29  

S-4/A
40th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 40th
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 ADVERSELY AFFECT OUR RESULTS 
OF 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 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 MAY HAVE A SIGNIFICANT IMPACT ON OUR        
REVENUES AFFECTING OUR RESULTS FROM OPERATIONS.                                 

         We are subject to market risk associated with foreign currency exchange
rates. Approximately 42% of our revenues and approximately 28% of our operating 
costs and expenses for the year ended September 30, 2004 were denominated in    
British Pounds. 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; however, it may have a significant impact  
on our revenues. 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;         

30  

S-4/A
41st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 41st
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.                      

       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.          

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 quoted on the OTC Bulletin Board (the
"OTCBB"). Although the OTCBB is a quotation service operated by The Nasdaq Stock
Market and displays real-time quotes, last sale prices, and volume information  
on equity securities like our common stock, the stocks quoted on the OTCBB may  
not be viewed within the investment community as equivalent to stocks quoted on 
other markets, where there is a more active public trading market. In addition, 
because of the relatively small number of shares that are traded, prices may be 
volatile and it may be difficult to find a purchaser for any sizable amount of  
the stock. Although we have applied to have our common stock listed on the      
American Stock Exchange, 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 NEON stockholders that they will be able to resell the
shares of Globix common stock received in connection with the merger for a price
that is equal to or greater than the price of Globix common stock on the date   
the merger is completed.                                                        

FUTURE SALES OF OUR COMMON STOCK, INCLUDING THOSE ISSUED IN THE MERGER, MAY     
DEPRESS OUR STOCK PRICE.                                                        

        If our stockholders or option holders, including NEON stockholders and
option holders who are receiving Globix 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 this        
offering will be freely tradable, subject to limitations applicable to          
affiliates of NEON. In addition, we are obligated to register approximately 5   
million shares of our common stock received by certain stockholders in our      
bankruptcy, and we intend to complete the public offer and sale of such shares  
within a short time after the completion of the merger. We also have obligations
to register the approximately 4,545,455 shares issuable to certain holders of   
our 11% senior notes in the debt-for-equity exchange described in this joint    
proxy statement/prospectus within ninety days after the merger is completed.    

WE ARE NOT CURRENTLY REQUIRED TO MEET THE CORPORATE GOVERNANCE REQUIREMENTS     
APPLICABLE TO LISTED COMPANIES.                                                 

       Currently Globix common stock is quoted on the OTCBB where we are not
required to comply with any listing standards for our common stock. If our      
application for listing of our common stock on the American Stock Exchange is   
approved, we will have to meet a number of additional listing standards relating
to the independence of our board of directors and committees of our board, some 
of which we currently do not meet. We cannot assure you that our application for
listing on the America Stock Exchange will be approved.                         

31  

S-4/A
42nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 42nd
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 TO
BE ISSUED IN THE MERGER, 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 
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.                        

       Given the overlapping stock ownership between Globix and NEON, Globix
does not believe that the proposed merger of NEON with a wholly owned subsidiary
of Globix will constitute a change in control under the indenture.              

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.              

      Since our emergence from bankruptcy effective April 25, 2002, Globix
has had to face many challenging and complex accounting and financial reporting 
issues, including fresh start accounting, restructuring and the restatement of  
amounts in its financial statements as of and for the quarter ended March 31,   
2002. In addition, Globix experienced significant turnover in its financial     
reporting staff, as well as limited management resources. Globix fell behind in 
its SEC reporting for the year ended September 30, 2002, and experienced        

32  

S-4/A
43rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 43rd
difficulty in catching up with its filing obligations for the year ended        
September 30, 2002 while fulfilling its 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 created material weaknesses in our accounting and
internal control environment in summer 2003. For further information concerning 
our internal controls, see "Changes In and Disagreements With Accountants on    
Accounting and Financial Disclosure" beginning on page 121 of this joint proxy  
statement/prospectus.                                                           

AS A RESULT OF OUR APPLICATION OF FRESH START ACCOUNTING UNDER AMERICAN         
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS STATEMENT OF POSITION NO. 90-7,       
"FINANCIAL REPORTING BY ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE"   
(OTHERWISE KNOWN AS "SOP NO. 90-7"), AS OF MAY 1, 2002, OUR FINANCIAL STATEMENTS
AS OF AND FOR PERIODS SUBSEQUENT TO MAY 1, 2002 ARE NOT COMPARABLE TO OUR       
FINANCIAL STATEMENTS AS OF AND FOR PERIODS PRIOR TO MAY 1, 2002, WHICH MAY MAKE 
IT MORE DIFFICULT FOR YOU TO ASSESS OUR FINANCIAL PERFORMANCE.                  

        In connection with our emergence from bankruptcy on April 25, 2002, we
applied the principles of SOP No. 90-7 as of May 1, 2002. Accordingly, our      
assets and liabilities as of May 1, 2002 were revalued to fair market value, and
therefore our financial statements for periods subsequent to May 1, 2002 are not
comparable to our financial statements for periods prior to May 1, 2002. This   
may make it more difficult for third parties to assess our financial            
performance.                                                                    

YOU ARE UNLIKELY TO BE ABLE TO EXERCISE EFFECTIVE REMEDIES AGAINST ARTHUR       
ANDERSEN LLP, THE FORMER INDEPENDENT PUBLIC ACCOUNTANTS FOR GLOBIX, FOR ANY     
LIABILITY THAT THEY MIGHT OTHERWISE HAVE UNDER THE SECURITIES ACT OF 1933 OR    
OTHER SECURITIES LAWS.                                                          

         Globix's Consolidated Financial Statements for the year ended September
30, 2001 (its predecessor company financial statements prior to its emergence   
from bankruptcy in April 2002) were audited by Arthur Andersen LLP.             

On March 14, 2002, Arthur Andersen LLP was indicted on federal
obstruction of justice charges arising from the government's investigation of   
Enron Corp. On June 15, 2002, a jury in Houston, Texas, found Arthur Andersen   
LLP guilty of these federal obstruction of justice charges. In light of the jury
verdict and the underlying events, Arthur Andersen LLP subsequently             
substantially discontinued operations and dismissed essentially its entire      
workforce. You are, therefore, unlikely to be able to exercise effective        
remedies or collect judgments against Arthur Andersen LLP.                      

33

S-4/A
44th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 44th
RISK FACTORS RELATED TO NEON

    After the merger, NEON's operating results will have a significant
impact on the operating results of Globix. NEON's contribution to the combined  
results will depend upon the extent to which NEON achieves its own strategic    
plan. The following risk factors are ones that NEON believes may inhibit its    
ability to achieve its plan. The information contained in this joint proxy      
statement/prospectus should be read in light of such factors. Any of the        
following factors could have a material adverse effect on the business and      
future operating results of the combined company. In addition, these risks may  
have a material adverse effect on the business, financial condition or results  
of operations of NEON if the merger is not consummated.                         

RISKS RELATING TO OUR BUSINESS STRATEGY                                         

OUR BUSINESS STRATEGY DEPENDS UPON ANTICIPATED CUSTOMER DEMAND FOR OUR SERVICES,
AND OUR FAILURE TO OBTAIN CUSTOMERS FOR OUR SERVICES AT PROFITABLE RATES WOULD  
REDUCE OUR REVENUES.                                                            

       Our ability to become profitable depends upon our ability to secure a
market for our services and obtain service contracts with our communications    
customers. Many of our targeted customers may also be our potential competitors.
If our services are not satisfactory or cost competitive, our targeted customers
may utilize other providers where available, or construct their own networks,   
which would reduce their need for our services and create future sources of     
competition for us.                                                             

INTENSE COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY FROM A BROAD RANGE OF    
COMPETITORS MAY PREVENT US FROM OBTAINING CUSTOMERS, REQUIRE US TO LOWER PRICES 
AND REDUCE OUR REVENUES.                                                        

The telecommunications industry is highly competitive. We face
substantial competition from companies with significantly greater financial and 
other resources, whose capacity is interchangeable with the capacity we offer,  
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 us 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 WE OFFER A RELATIVELY NARROW RANGE OF SERVICES IN COMPARISON TO SOME OF 
OUR COMPETITORS, WE CANNOT ACHIEVE REVENUES COMPARABLE TO COMPANIES OFFERING A  
BROADER ARRAY OF SERVICES AND MAY BE AT A COMPETITIVE DISADVANTAGE WITH RESPECT 
TO THE SERVICES WE OFFER.                                                       

     Unlike more diversified telecommunications companies, we derive and
expect to continue to derive substantially all of our 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 our current services could limit our potential revenues   
and result in our having lower revenues than competitors which provide a wider  
array of services. While we are currently attempting to expand the breadth of   
our product offering, we cannot assure you that any new product offerings will  
achieve market acceptance.                                                      

DUE TO RAPIDLY EVOLVING TECHNOLOGIES IN OUR INDUSTRY AND THE UNCERTAINTY OF     
FUTURE GOVERNMENT REGULATION, OUR CURRENT BUSINESS PLAN MAY BECOME OBSOLETE AND 
WE MAY BE UNABLE TO MAINTAIN A COMPETITIVE POSITION IF WE ARE UNABLE TO         
SUCCESSFULLY ADJUST OUR 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 we        
provide. We cannot predict which of many possible future product and service    
offerings will be crucial to maintain our competitive position or what          
expenditures will be required to develop profitably and provide such products   
and services. Prices for our 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 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.                           

34  

S-4/A
45th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 45th
A LIMITED NUMBER OF CUSTOMERS HAVE ACCOUNTED FOR A SIGNIFICANT PERCENTAGE OF OUR
REVENUES AND ACCOUNTS RECEIVABLE.                                               

  Historically, a limited number of customers have accounted for a
significant percentage of our revenues and accounts receivable. In 2001 and     
2003, one customer accounted for 10% of net revenues. In 2002 and for the nine  
months ended September 30, 2004, no customer accounted for more than 10% of net 
revenues. As of December 31, 2002 and 2003, no customers had balances in excess 
of 10% of accounts receivable. As of September 30, 2004, one customer           
represented approximately 30% of accounts receivable. This amount was           
subsequently collected in full from the customer.                               

OUR SUCCESS DEPENDS ON OUR RETENTION OF CERTAIN KEY PERSONNEL, OUR ABILITY TO   
HIRE ADDITIONAL QUALIFIED PERSONNEL AND THE MAINTENANCE OF GOOD LABOR RELATIONS.

We depend on the performance of our executive officers and key
employees. In particular, our senior management has significant experience in   
the telecommunications industry and the loss of any of them could negatively    
affect our ability to execute our business strategy. Our future success also    
depends on our continuing ability to identify, hire, train and retain other     
highly qualified technical, operations, sales, marketing, financial, legal,     
human resource, and managerial personnel as we grow our business. Competition   
for such qualified personnel is high. Our business will be harmed if we cannot  
attract and retain the necessary qualified personnel.                           

AS A RESULT OF OUR APPLICATION OF FRESH START ACCOUNTING UNDER AMERICAN         
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS STATEMENT OF POSITION NO. 90-7,       
"FINANCIAL REPORTING BY ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE"   
(OTHERWISE KNOWN AS "SOP NO. 90-7"), AS OF DECEMBER 31, 2002, OUR FINANCIAL     
STATEMENTS AS OF AND FOR PERIODS SUBSEQUENT TO DECEMBER 31, 2002 ARE NOT        
COMPARABLE TO OUR FINANCIAL STATEMENTS FOR PERIODS PRIOR TO DECEMBER 31, 2002,  
WHICH MAY MAKE IT MORE DIFFICULT FOR YOU TO ASSESS OUR FINANCIAL PERFORMANCE.   

        In connection with our emergence from bankruptcy on December 20, 2002,
we have applied the principles of SOP No. 90-7 as of December 31, 2002.         
Accordingly our financial statements as of and for periods subsequent to        
December 31, 2002 are not comparable to our financial statements for periods    
prior to December 31, 2002. This may make it more difficult for third parties to
assess our financial performance.                                               

CONTINUING WEAKNESS IN THE TELECOMMUNICATIONS INDUSTRY MAY RESULT IN A LOSS OF  
REVENUE.                                                                        

      The continued downturn in the telecommunications industry may have a
significant impact on us. Several of our competitors and customers have filed   
for protection under the bankruptcy laws and we may be unable to collect        
receivables due to bankruptcies and business difficulties among our customers.  
Oversupply of capacity and an ongoing downward trend in bandwidth prices may    
continue if our 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 us at a competitive disadvantage.   

TERRORIST ATTACKS OR WAR MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND       
OPERATING RESULTS.                                                              

     The occurrence of terrorist attacks or armed conflicts may directly
impact our facilities or the facilities of our 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 our financial condition and operating     
results.                                                                        

UNCERTAINTY OR NEGATIVE PUBLICITY MAY HINDER OUR ABILITY TO OBTAIN NEW CUSTOMERS
OR UNDERMINE OUR COMMERCIAL RELATIONSHIP WITH EXISTING CUSTOMERS.               

         There is a possibility that uncertainty or adverse publicity concerning
negative perceptions about the industry as a whole could hinder our ability to  
obtain new customers or undermine our commercial relationship with existing     
customers. Potential customers may associate our bankruptcy with negative       
business implications and question the state of our finances and future         
prospects.                                                                      

35  

S-4/A
46th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 46th
RISKS RELATING TO THE EXPANSION AND OPERATION OF OUR FIBER OPTIC NETWORK        

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 OUR SERVICES IN ORDER TO SATISFY THE CURRENT AND FORECASTED DEMANDS OF  
OUR CUSTOMERS MAY SURPASS OUR AVAILABLE CASH, AND WE MAY BE UNABLE TO OBTAIN    
ADDITIONAL CAPITAL TO DEVELOP OUR SERVICES ON A TIMELY BASIS AND ON ACCEPTABLE  
TERMS.                                                                          

         Although we have expended significant resources in building our network
and the development of our customer base, we will require additional cash in    
order to expand our geographic coverage and the range of services which we can  
offer throughout our service area in order to be competitive in our market and  
to meet customer demands. These expenditures for expansion and for more         
services, together with associated operating expenses, will reduce our cash flow
and profitability until we establish an adequate customer base throughout all of
our coverage areas. To date, we have expended substantial amounts on            
construction of our network from the proceeds of our financing activities and   
have generated negative cash flow.                                              

WE OBTAIN SOME OF THE KEY COMPONENTS USED IN OUR 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 OUR OPERATIONS AND RESULT IN A          
SUBSTANTIAL LOSS OF REVENUES.                                                   

We depend upon a small group of suppliers for some of the key 
components and parts used in our network. In particular, we purchase 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   
our network could disrupt our operations.                                       

OUR FIBER OPTIC NETWORK, WHICH IS OUR 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 OUR CUSTOMERS AND, MORE
IMPORTANTLY, THE LOSS OF OUR CUSTOMERS' CONFIDENCE AND OUR BUSINESS REPUTATION. 

         Our success in marketing our services to our customers requires that we
provide high reliability, high bandwidth and a secure network. Our 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 our control that may cause interruptions in service or       
reduced capacity for customers. Our agreements with our customers typically     
provide for the payment of outage related credits (a predetermined reduction or 
offset against our 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 our net revenues. Significant or
lengthy outages would also undermine our customers' confidence in our fiber     
optic network and injure our business reputation.                               

36  

S-4/A
47th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 47th
RISKS RELATING TO OUR RIGHTS-OF-WAY                                             

WE COULD LOSE THE CONTRACT RIGHTS UPON WHICH WE RELY TO OPERATE AND MAINTAIN OUR
NETWORK IN THE EVENT OF BANKRUPTCY PROCEEDINGS RELATING TO ONE OR MORE OF THE   
THIRD PARTIES THAT HAVE GRANTED TO US THE RIGHT TO BUILD AND OPERATE OUR NETWORK
USING THEIR RIGHTS-OF-WAY.                                                      

     The construction and operation of significant portions of our 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 our indefeasible rights-of-use might be voidable in the event of 
bankruptcy of the grantor. If we were to lose an indefeasible right-of-use in a 
key portion of our network, our ability to service our customers could become   
seriously impaired and we could be required to incur significant expense to     
resume the operation of our fiber optic network in the affected areas.          

DESPITE OUR EXISTING RIGHTS-OF-WAY, WE MAY BE FORCED TO MAKE SUBSTANTIAL        
ADDITIONAL PAYMENTS TO THE AFFECTED LANDOWNERS OR REMOVE OUR NETWORK FROM THEIR 
PROPERTY, WHICH WOULD SIGNIFICANTLY HARM OUR BUSINESS AND OUR RESULTS OF        
OPERATIONS.                                                                     

      Our indefeasible rights-of-use and other rights-of-way depend on the
grantor's interest in the property on which our 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 our 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 our 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 OUR 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 OUR FIBER     
OPTIC NETWORK, WE MAY BE UNABLE TO CONSTRUCT AND OPERATE OUR FIBER OPTIC NETWORK
IN THE AFFECTED AREAS WITHOUT PERIODIC INTERRUPTIONS AND DELAYS CAUSED BY THE   
DAY-TO-DAY OPERATIONS OF THESE ENTITIES.                                        

      Our 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 our   
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 our network.                                  

MUNICIPAL REGULATION OF OUR 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 OPERATIONS.                                                     

  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   
our operations. Local authorities affect the timing and costs associated with   
our use of public rights-of-way.                                                

WE ARE CURRENTLY INVOLVED IN LITIGATION CONCERNING THE COST OF OUR RIGHTS OF WAY
IN THE WASHINGTON, D.C. AREA. IF THIS LITIGATION IS NOT RESOLVED IN OUR FAVOR,  
WE MAY NOT BE ABLE TO OPERATE PROFITABLY IN THIS GEOGRAPHIC AREA.               

   Our business in the Washington, D.C. metropolitan area depends on
rights of way granted by the Washington Metropolitan Area Transportation        
Authority (the "WMATA"). In litigation with the WMATA, we have claimed that the 
rates charged by the WMATA violate the Telecommunications Act of 1996, because  
we are required to pay a higher price per foot than other carriers and because  
the rates we are required to pay are prohibitively expensive. If this litigation
is not resolved in our favor, we could be required to pay the higher rates      
through 2009.                                                                   

37  

S-4/A
48th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 48th
RISKS RELATING TO GOVERNMENT REGULATION                                         

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 BUSINESS STRATEGIES.                    

    Regulation of the telecommunications industry is changing rapidly.
Existing and future federal, state, and local governmental regulations will     
greatly influence our 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 OUR REVENUES, ARE SUBJECT TO CONTRIBUTIONS TO THE FCC'S UNIVERSAL    
SERVICE FUND.                                                                   

While we generally do 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. Our 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, we would qualify for a de minimus exemption from contribution
to the Fund. Our 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 WE BECOME SUBJECT TO REGULATION AS A COMMON CARRIER IN THE FUTURE, WE WOULD  
BE SUBJECT TO ADDITIONAL REGULATORY REQUIREMENTS.                               

      We do not believe that we are 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 business. If we become 
regulated as a common carrier by the FCC, we would have to publicize the rates  
for our 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 us.                                         

       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 services.                  

STATE REGULATION OF COMPANIES PROVIDING TELECOMMUNICATIONS SERVICES VARIES      
SUBSTANTIALLY FROM STATE TO STATE AND WE MAY BECOME SUBJECT TO BURDENSOME AND   
RESTRICTIVE STATE REGULATIONS AS WE EXPAND OUR FIBER OPTIC NETWORK INTO A       
BROADER GEOGRAPHIC AREA, WHICH COULD INTERFERE WITH OUR OPERATIONS AND OUR      
ABILITY TO MEET OUR STRATEGIC OBJECTIVES.                                       

     We 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 
our 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    

38  

S-4/A
49th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 49th
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 our operations. Moreover, some of our rights-of-way  
depend on our status as a common carrier in these states, and if that status    
were to be successfully challenged, those rights-of-way could be terminated.    

YOU ARE UNLIKELY TO BE ABLE TO EXERCISE EFFECTIVE REMEDIES AGAINST ARTHUR       
ANDERSEN LLP, THE FORMER INDEPENDENT PUBLIC ACCOUNTANTS FOR NEON FOR ANY        
LIABILITY THAT THEY MIGHT OTHERWISE HAVE UNDER THE SECURITIES ACT OF 1933 OR    
OTHER SECURITIES LAWS.                                                          

       NEON's Consolidated Financial Statements as of December 31, 2001, and
for the year then ended (its predecessor company financial statements prior to  
its emergence from bankruptcy in December 2002), were audited by Arthur Andersen
LLP.                                                                            

On March 14, 2002, Arthur Andersen LLP was indicted on federal
obstruction of justice charges arising from the government's investigation of   
Enron Corp. On June 15, 2002, a jury in Houston, Texas, found Arthur Andersen   
LLP guilty of these federal obstruction of justice charges. In light of the jury
verdict and the underlying events, Arthur Andersen LLP subsequently             
substantially discontinued operations and dismissed essentially its entire      
workforce. You are, therefore, unlikely to be able to exercise effective        
remedies or collect judgments against Arthur Andersen LLP. In addition, Arthur  
Andersen LLP has not consented to the inclusion of its report for NEON in this  
joint proxy statement/prospectus, and the requirement to file its consent with  
respect to such report has been dispensed with in reliance on Rule 437a under   
the Securities Act of 1933. Because Arthur Andersen LLP has not consented to    
the inclusion of its report in this joint proxy statement/prospectus, you will  
not be able to recover against Arthur Andersen LLP under Section 11 of the      
Securities Act of 1933 for any untrue statement of a material fact contained in 
the financial statements audited by Arthur Andersen LLP or any omissions to     
state a material fact required to be stated in those financial statements.      

THE SPECIAL MEETING OF GLOBIX CORPORATION STOCKHOLDERS

GENERAL                                                                         

   Globix is furnishing this joint proxy statement/prospectus to its
stockholders in connection with the solicitation of proxies by the Globix board 
of directors for use at the special meeting of stockholders of Globix to be held
on January 13, 2005, and at any adjournment or postponement of the special      
meeting.                                                                        

      This document was first mailed to stockholders of Globix on or about
December [__], 2004.                                                            

DATE, TIME AND PLACE                                                            

     The special meeting will be held on January 13, 2005 at 10:00 a.m.,
local time, at the offices of Globix at 139 Centre Street, New York, NY 10013.  
Globix's telephone number is (212) 334-8500.                                    

PURPOSE OF THE SPECIAL MEETING                                                  

        The purpose of the Globix special meeting is to consider and vote upon
proposals to:                                                                   

1. Issue Globix common stock pursuant to the merger agreement;

    2. Grant discretionary authority to adjourn or postpone the Globix
special meeting to solicit additional votes to approve the matter considered at 
the Globix special meeting, if necessary; and                                   

         3. Consider and act upon any other matter that may properly come before
the special meeting or any adjournment or postponement of the special meeting.  

RECORD DATE AND VOTING                                                          

        Holders of record of common stock at the close of business on December
6, 2004 (referred to in this joint proxy statement/prospectus as the Globix     
record date) that are entitled to vote at any annual or special meeting of      
Globix stockholders are entitled to vote at the special meeting and any         
adjournment or postponement of the special meeting.                             

39  

S-4/A
50th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 50th
         On the Globix record date, there were 16,460,000 shares of common stock
outstanding. Of these shares of common stock, only 16,065,948 shares have been  
distributed. Of the 16,460,000 shares of common stock deemed issued and         
outstanding, 229,452 shares were placed in reserve in escrow pending the outcome
of a class action lawsuit described in "Information About Globix - Legal        
Proceedings" beginning on page 102 of this joint proxy statement/prospectus and 
are not entitled to vote at the special meeting. Another 164,600 shares of      
common stock will be distributed following resolution of a shareholder          
derivative suit filed against Globix and certain of our former officers and     
directors, as described in "Information About Globix - Legal Proceedings"       
beginning on page 102 of this joint proxy statement/prospectus and are also not 
entitled to vote. Therefore, although 16,460,000 shares of common stock are     
deemed issued and outstanding as of the Globix record date, only 16,065,948     
shares of common stock are entitled to vote at the special meeting.             

       Each share of common stock entitled to vote at the special meeting is
entitled to one vote on each matter properly brought before the special meeting.

         Under the applicable rules of the American Stock Exchange, the issuance
of shares of Globix common stock in connection with the merger requires the     
approval of a majority of votes cast by stockholders eligible to vote at the    
Globix special meeting.                                                         

         The approval of the holders of a majority of votes cast by stockholders
eligible to vote at the Globix special meeting is also required to approve the  
proposal to grant discretionary authority to adjourn or postpone the special    
meeting, if necessary, to solicit additional votes to approve the proposal to   
issue Globix common stock in the merger.                                        

       As of the close of business on the Globix record date for the special
meeting, Globix's directors and their respective affiliates beneficially owned  
and were entitled to vote approximately 5,348,581 shares of Globix common stock.

       As of the close of business on the record date, directors of NEON and
their respective affiliates beneficially owned 1,219,817 shares of Globix common
stock.                                                                          

VOTING OF PROXIES AT THE GLOBIX SPECIAL MEETING AND REVOCATION OF PROXIES       

     All shares of Globix common stock that are entitled to vote and are
represented at the Globix special meeting by properly executed proxies received 
prior to or at such meeting, and not revoked, will be voted at such meeting in  
accordance with the instructions indicated on such proxies. If no instruction is
indicated, then unless the shares covered by the proxy are in a brokerage       
account, such proxies will be voted "FOR" the proposed issuance of Globix common
stock pursuant to the merger and "FOR" the proposal to grant discretionary      
authority to adjourn or postpone the Globix special meeting to solicit          
additional votes to approve the matter considered at the Globix special meeting,
if necessary. If your shares are held in a brokerage account, please review     
"Quorum, Adjournment, Abstentions and Broker Non-Votes for Shares Held in a     
Brokerage Account" below.                                                       

       The Globix board of directors does not know of any matters other than
those described in the notice of the Globix special meeting that are to come    
before such meeting. If any other matters are properly presented at the Globix  
special meeting for consideration, the persons named in the enclosed proxy card 
and acting thereunder generally will have discretion to vote on such matters in 
accordance with their best judgment.                                            

      Any proxy given pursuant to the solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by:     

        o    filing with James C. Schroeder, the General Counsel of Globix, at
           or before the taking of a vote at the Globix special meeting, a
             written notice of revocation bearing a later date than the proxy;

         o    duly executing a later dated proxy relating to the same shares and
             delivering it to James C. Schroeder before the taking of the vote
at the Globix special meeting; or                   

o    attending the Globix special meeting and voting in person
              (although attendance at the Globix special meeting will not in and
of itself constitute a revocation of a proxy).      

40  

S-4/A
51st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 51st
        Any written notice of revocation or subsequent proxy should be sent to
Globix Corporation, 139 Centre Street, New York, New York 10013, Attn: James C. 
Schroeder, or hand-delivered to James C. Schroeder at or before the taking of   
the vote at the Globix special meeting in New York.                             

        Globix will be soliciting proxies on its own behalf. Globix intends to
solicit proxies through this joint proxy statement/prospectus and directly      
through its directors, officers and regular employees. Solicitation of some     
stockholders may be made in person or by mail, telephone, facsimile transmission
or other means of electronic transmission. Globix will bear its own expenses in 
connection with the solicitation of proxies for its special meeting of          
stockholders.                                                                   

QUORUM, ADJOURNMENT, ABSTENTIONS AND BROKER NON-VOTES FOR SHARES HELD IN A      
BROKERAGE ACCOUNT                                                               

     The representation in person, or by properly executed proxy, of the
holders of one-third of all shares of capital stock entitled to vote at the     
special meeting is necessary to constitute a quorum for the transaction of      
business at the special meeting of Globix.                                      

        Globix has appointed Mellon Investor Services LLC, its transfer agent,
to function as the inspector of elections of the special meeting. The inspector 
of elections will ascertain whether a quorum is present, tabulate votes and     
determine the voting results on all matters presented to Globix stockholders at 
the special meeting. If fewer shares of Globix common stock are voted for the   
approval of the proposal being considered at the special meeting than are       
required for approval of such proposal, and if stockholders approve the proposal
to grant discretionary authority to adjourn or postpone the special meeting, the
special meeting may be adjourned or postponed for the purpose of allowing       
additional time for obtaining additional proxies or votes, and, at any          
subsequent reconvening of the special meeting, all proxies will be voted in the 
same manner as the proxies would have been voted at the original convening of   
the special meeting, except for any proxies that have been effectively revoked  
or withdrawn prior to the subsequent reconvening of the special meeting.        

       If you submit a proxy that indicates an abstention from voting in all
matters, your shares will be counted as present for the purpose of determining  
the existence of a quorum at the special meeting, but they will not be voted on 
any matter at the special meeting. Consequently, your abstention will not be    
considered a vote cast and will have no effect in the outcome of the proposal to
approve the issuance of Globix common stock in connection with the merger or the
proposal to grant discretionary authority to adjourn or postpone the special    
meeting to solicit additional votes to approve the matter considered at the     
special meeting, if necessary. If your proxy indicates an abstention only as to 
a particular proposal, that abstention will have no effect on the outcome of    
that particular proposal only.                                                  

        If you hold your shares of Globix common stock in a brokerage account,
the broker holding such shares in "street name" may vote the shares only if you 
provide the broker with appropriate instructions. If an executed proxy statement
is returned to Globix by a broker holding shares of Globix common stock in      
street name, which indicates that the broker does not have discretionary        
authority to vote on one or more of the agenda items for the special meeting,   
the shares will be considered present at the meeting for purposes of determining
a quorum, but will not be considered to be votes cast in favor of or against the
applicable proposal and will have no effect on the outcome of such proposal.    
YOUR BROKER WILL VOTE YOUR SHARES ONLY IF YOU PROVIDE INSTRUCTIONS ON HOW TO    
VOTE BY FOLLOWING THE INSTRUCTIONS PROVIDED TO YOU BY YOUR BROKER. You are urged
to mark the applicable box on the proxy to indicate how to vote your shares. In 
addition, please note that if your shares are held in "street name" by a broker,
bank or other nominee, and you wish to vote in person at the Globix special     
meeting, you must bring to the special meeting a letter from your broker, bank  
or other nominee in order to vote your shares in person.                        

GLOBIX BOARD OF DIRECTORS RECOMMENDATION                                        

The Globix board of directors (with one director, Mr. Lampe,  
abstaining) has determined that the merger, the merger agreement and the        
transactions contemplated by the merger agreement are advisable and in the best 
interests of Globix and its stockholders. Accordingly, the Globix board of      
directors (with one director, Mr. Lampe, abstaining) has approved the merger,   
the merger agreement and the transactions contemplated by the merger agreement  
(including the issuance of Globix common stock in the merger) and recommends    
that Globix stockholders vote "FOR" approval of the issuance of Globix common   
stock in connection with the merger and "FOR" the proposal to grant             

42  

S-4/A
52nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 52nd
discretionary authority to adjourn or postpone the Globix special meeting to    
solicit additional votes to approve the matter considered at the special        
meeting, if necessary. In considering such recommendations, Globix stockholders 
should be aware that some Globix directors and officers have interests in the   
merger that are different from, or in addition to, those of Globix stockholders.
See "The Merger -- Interests of Certain Persons in the Merger," beginning on    
page 71 of this joint proxy statement/prospectus.                               

  THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF GLOBIX. ACCORDINGLY, GLOBIX STOCKHOLDERS ARE  
URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS DOCUMENT 
AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE  
ENCLOSED, POSTAGE-PAID ENVELOPE.                                                

 THE SPECIAL MEETING OF NEON COMMUNICATIONS, INC. STOCKHOLDERS

GENERAL                                                                         

 NEON is furnishing this joint proxy statement/prospectus to its
stockholders in connection with the solicitation of proxies by the NEON board of
directors for use at the special meeting of stockholders of NEON to be held on  
January 13, 2005, and at any adjournment or postponement of the special meeting.
This document is also being furnished to NEON stockholders by Globix as a       
prospectus of Globix in connection with the issuance by Globix of shares of     
Globix common stock and convertible preferred stock as contemplated by the      
merger agreement.                                                               

         This document was first mailed to stockholders of NEON on or about [ ],
2004.                                                                           

DATE, TIME AND PLACE                                                            

     The special meeting will be held on January 13, 2005 at 10:00 a.m.,
local time, at the offices of NEON at 2200 West Park Drive, Westborough,        
Massachusetts 01581. NEON's telephone number is (508) 616-7800.                 

PURPOSE OF THE SPECIAL MEETING                                                  

      The purpose of the NEON special meeting is to consider and vote upon
proposals to:                                                                   

1. Approve and adopt the merger, the merger agreement and the 
transactions contemplated by the merger agreement;                              

       2. Approve and adopt an amendment to the certificate of incorporation
of NEON to provide that the merger is not a "Liquidation Event" that would      
trigger the liquidation provision in the certificate of incorporation, which    
provides that upon the occurrence of a liquidation event, all assets of NEON    
remaining after payment of all liabilities and subject to any preferential      
payments would be distributed ratably to its common stockholders;               

     3. Approve and adopt an amendment to the certificate of designation
with respect to NEON's 12% Series A Cumulative Convertible Preferred Stock to   
provide that the merger is not a "Change of Control" of NEON that would trigger 
the change of control provisions in the certificate of designation, including   
the right of each holder of NEON convertible preferred stock to require NEON to 
purchase its shares of NEON convertible preferred stock;                        

  4. Grant discretionary authority to adjourn or postpone the NEON
special meeting to solicit additional votes to approve the matters considered at
the special meeting, if necessary; and                                          

         5. Consider and act upon any other matter that may properly come before
the special meeting.                                                            

A copy of the merger agreement and the first amendment to the merger agreement  
are included in Appendices A-1 and A-2, respectively, to this joint proxy       
statement/prospectus. A copy of the proposed amendments to NEON's certificate of
incorporation and the certificate of designation are included in this joint     
proxy statement/prospectus in Appendices B-1 and B-2, respectively. NEON        
stockholders are encouraged to read the merger agreement and the proposed       
amendments in their entirety.                                                   

43  

S-4/A
53rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 53rd
RECORD DATE AND VOTING                                                          

      Holders of record of common stock and convertible preferred stock of
NEON at the close of business on December 7, 2004 (referred to in this joint    
proxy statement/prospectus as the NEON record date) that are entitled to vote at
any annual or special meeting of NEON stockholders are entitled to vote at the  
special meeting and any adjournment or postponement of the special meeting.     

On the NEON record date, the following voting securities were 
outstanding:                                                                    

o        16,117,799 shares of common stock; and               

o        1,101,887 shares of convertible preferred stock.     

       Each share of common stock entitled to vote at the special meeting is
entitled to one vote on each matter properly brought before the special meeting.
Each share of NEON convertible preferred stock entitled to vote at the special  
meeting is entitled to one vote, which is the number of votes equal to the      
number of shares of common stock into which such share of NEON convertible      
preferred stock would be convertible as provided in the certificate of          
designation for the NEON convertible preferred stock. Approval of the merger    
agreement and the amendments of NEON's certificate of incorporation and the     
certificate of designation require special votes as described below.            

 Under Delaware law and NEON's certificate of incorporation, the
affirmative vote by the holders of a majority of NEON's outstanding common stock
and convertible preferred stock that are entitled to vote at any annual or      
special meeting of NEON stockholders, voting together as a single class, is     
required to approve the merger.                                                 

Under Delaware law and NEON's certificate of incorporation the
following stockholder approvals are required to approve the amendment to NEON's 
certificate of incorporation to amend the liquidation provision to exclude the  
merger from the definition of "Liquidation Event":                              

   o        holders of a majority of NEON's outstanding common stock
             entitled to vote at any annual or special meeting of NEON
 stockholders, voting as a separate class; and

       o        holders of a majority of NEON's outstanding common stock and
              preferred stock that are entitled to vote at any annual or
              special meeting of NEON stockholders, voting together as a
single class.                               

         Under Delaware law and NEON's certificate of incorporation of which the
certificate of designation is a part, the following stockholder approvals are   
required to approve the amendment to the certificate of designation with respect
to the NEON convertible preferred stock to exclude the merger from the          
definition of "Change of Control":                                              

  o        holders of two-thirds of NEON's outstanding convertible
    preferred stock, voting as a separate class; and

       o        holders of a majority of NEON's outstanding common stock and
              preferred stock that are entitled to vote at any annual or
              special meeting of NEON stockholders, voting together as a
single class.                               

   The approval of the holders of a majority of NEON's capital stock
present in person or represented by proxy and entitled to vote at any annual or 
special meeting of NEON stockholders, considered on an as-converted into common 
stock basis, is required to approve the proposal to grant discretionary         
authority to adjourn or postpone the special meeting to solicit additional votes
to approve the matters considered at the special meeting.                       

     As of the close of business on the NEON record date for the special
meeting, NEON's directors and their respective affiliates, beneficially owned   
and were entitled to vote approximately 5,687,273 shares of NEON common stock   
and 215,920 shares of NEON convertible preferred stock or approximately 36.0%   
and 19.6% of the shares of NEON's outstanding common stock and convertible      
preferred stock, respectively, entitled to vote at the special meeting and 34.6 
% of NEON's common stock and preferred stock entitled to vote at the special    
meeting as a single class.                                                      

44  

S-4/A
54th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 54th
   As of the close of business on the NEON record date, directors of
Globix and their affiliates beneficially owned 4,577,684 shares of NEON common  
stock and 474,520 shares of NEON convertible preferred stock.                   

VOTING OF PROXIES AT THE NEON SPECIAL MEETING AND REVOCATION OF PROXIES         

    All shares of NEON capital stock that are entitled to vote and are
present in person or represented at the NEON special meeting by properly        
executed proxies received prior to or at such meeting, and not revoked, will be 
voted at such meeting in accordance with the instructions indicated on such     
proxies. If no instruction is indicated, then unless the shares covered by the  
proxy are in a brokerage account, such proxies will be voted "FOR" approval and 
adoption of the merger, the merger agreement and the transactions contemplated  
by the merger agreement, "FOR" approval and adoption of the amendment of NEON's 
certificate of incorporation, "FOR" approval and adoption of the amendment of   
the certificate of designation for the NEON convertible preferred stock and     
"FOR" the proposal to grant discretionary authority to adjourn or postpone the  
NEON special meeting to solicit additional votes to approve the matters         
considered at the NEON special meeting, if necessary. If your shares are held in
a brokerage account, please review "Quorum, Adjournment, Abstentions and Broker 
Non-Votes for Shares Held in a Brokerage Account" beginning on page 42 of this  
joint proxy statement/prospectus.                                               

     The NEON board of directors does not know of any matters other than
those described in the notice of the NEON special meeting that are to come      
before such meeting. If any other matters are properly presented at the NEON    
special meeting for consideration, the persons named in the enclosed proxy card 
and acting thereunder generally will have discretion to vote on such matters in 
accordance with their best judgment.                                            

    Any proxy given pursuant to the solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by:     

     o        filing with Stephen Bogiages, the Secretary of NEON, at or
              before the taking of a vote at the NEON special meeting, a
              written notice of revocation bearing a later date than the
proxy;                                      

         o        duly executing a later dated proxy relating to the same shares
              and delivering it to Mr. Bogiages before the taking of the
vote at the NEON special meeting; or        

  o        attending the NEON special meeting and voting in person
                (although attendance at the NEON special meeting will not in
      and of itself constitute a revocation of a proxy).

        Any written notice of revocation or subsequent proxy should be sent to
NEON Communications, Inc., 2200 West Park Drive, Westborough, Massachusetts     
01581, Attn: Stephen Bogiages, Secretary, or hand-delivered to Mr. Bogiages at  
or before the taking of the vote at the NEON special meeting in Westborough,    
Massachusetts.                                                                  

    NEON will be soliciting proxies on its own behalf. NEON intends to
solicit proxies through this joint proxy statement/prospectus and directly      
through its directors, officers and regular employees. Solicitation of some     
stockholders may be made in person or by mail, telephone, facsimile transmission
or other means of electronic transmission.                                      

        NEON will bear its own expenses in connection with the solicitation of
proxies for its special meeting of stockholders. Globix will bear one half of   
all other expenses incurred in connection with the preparation and printing of  
this document and the preparation and filing of the registration statement of   
which this document forms a part.                                               

45  

S-4/A
55th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 55th
QUORUM, ADJOURNMENT, ABSTENTIONS AND BROKER NON-VOTES FOR SHARES HELD IN A      
BROKERAGE ACCOUNT                                                               

     The representation in person, or by properly executed proxy, of the
holders of a majority of all shares of capital stock entitled to vote at the    
special meeting is necessary to constitute a quorum for the transaction of      
business at the special meeting of NEON. In connection with the separate vote by
the holders of NEON's common stock with respect to the amendment to the         
certificate of incorporation, a majority of the total outstanding shares of     
NEON's common stock present in person or represented by proxy shall constitute a
quorum entitled to take action at the NEON special meeting. In connection with  
the separate vote by the holders of NEON's convertible preferred stock with     
respect to the amendment to the certificate of designation, a majority of the   
total outstanding shares of NEON's convertible preferred stock present in person
or represented by proxy shall constitute a quorum entitled to take action at the
NEON special meeting.                                                           

        NEON has appointed Stephen Bogiages, its Secretary, to function as the
inspector of elections of the special meeting. The inspector of elections will  
ascertain whether a quorum is present, tabulate votes and determine the voting  
results on all matters presented to NEON stockholders at the special meeting. If
fewer shares of NEON common and convertible preferred stock are voted for the   
approval of the proposals being considered at the special meeting than are      
required for approval of each such proposal, and if stockholders approve the    
proposal to grant discretionary authority to adjourn or postpone the special    
meeting, the special meeting may be adjourned or postponed for the purpose of   
allowing additional time for obtaining additional proxies or votes, and, at any 
subsequent reconvening of the special meeting, all proxies will be voted in the 
same manner as the proxies would have been voted at the original convening of   
the special meeting, except for any proxies that have been effectively revoked  
or withdrawn prior to the subsequent reconvening of the special meeting.        

       If you submit a proxy that indicates an abstention from voting in all
matters, your shares will be counted as present for the purpose of determining  
the existence of a quorum at the special meeting, but they will not be voted on 
any matter at the special meeting. Consequently, your abstention will have the  
same effect as a vote against the proposal to approve the merger, the merger    
agreement and the transactions contemplated by the merger agreement, the        
amendment to the certificate of incorporation and the amendment to the          
certificate of designation and the proposal to grant discretionary authority to 
adjourn or postpone the special meeting to solicit additional votes to approve  
the matters considered at the special meeting, if necessary. If your proxy      
indicates an abstention only as to a particular proposal, that abstention will  
have the same effect as a vote against that particular proposal only.           

       If you hold your shares of NEON common stock or convertible preferred
stock in a brokerage account, the broker holding such shares in "street name"   
may vote the shares only if you provide the broker with appropriate             
instructions. If an executed proxy statement is returned to NEON by a broker    
holding shares of NEON common stock or convertible preferred stock in street    
name, which indicates that the broker does not have discretionary authority to  
vote on one or more of the agenda items for the special meeting, the shares will
be considered present at the meeting for purposes of determining a quorum, but  
will not be considered to have been voted in favor of or against the applicable 
proposal. Consequently, your failure to instruct your broker as to a specific   
proposal will have the same effect as a vote against that proposal. YOUR BROKER 
WILL VOTE YOUR SHARES ONLY IF YOU PROVIDE INSTRUCTIONS ON HOW TO VOTE BY        
FOLLOWING THE INSTRUCTIONS PROVIDED TO YOU BY YOUR BROKER. You are urged to mark
the applicable box on the proxy to indicate how to vote your shares. In         
addition, please note that if your shares are held in "street name" by a broker,
bank or other nominee, and you wish to vote in person at the NEON special       
meeting, you must bring to the special meeting a letter from your broker, bank  
or other nominee in order to vote your shares in person.                        

46  

S-4/A
56th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 56th
NEON BOARD OF DIRECTORS RECOMMENDATION                                          

    The NEON board of directors has determined (with one director, Mr.
Lampe, abstaining, and as to the first amendment, with two directors, Messrs.   
Lampe and Grubin, abstaining) that the merger, the merger agreement and the     
transactions contemplated by the merger agreement, and the amendments of NEON's 
certificate of incorporation and the certificate of designation for the NEON    
convertible preferred stock are advisable and in the best interests of NEON and 
its stockholders. Accordingly, the NEON board of directors has approved (with   
one director, Mr. Lampe, abstaining, and as to the first amendment, with two    
directors, Messrs. Lampe and Grubin, abstaining) the merger, the merger         
agreement and the transactions contemplated by the merger agreement, and the    
amendments of NEON's certificate of incorporation and the certificate of        
designation for the NEON convertible preferred stock and recommends that NEON   
stockholders vote "FOR" adoption and approval of the merger, the merger         
agreement and the transactions contemplated by the merger agreement, "FOR"      
adoption and approval of the amendment of NEON's certificate of incorporation,  
"FOR" adoption and approval of the amendment of the certificate of designation  
for the NEON convertible preferred stock and "FOR" the proposal to grant        
discretionary authority to adjourn or postpone the NEON special meeting to      
solicit additional votes to approve the matters considered at the special       
meeting, if necessary. In considering such recommendations, NEON stockholders   
should be aware that some NEON directors and officers have interests in the     
merger that are different from, or in addition to, those of NEON stockholders,  
and that NEON and Globix have provided indemnification arrangements to directors
and officers of NEON. See "The Merger -- Interests of Certain Persons in the    
Merger," beginning on page 71 of this joint proxy statement/prospectus.         

  THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF NEON. ACCORDINGLY, NEON STOCKHOLDERS ARE URGED
TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS DOCUMENT AND TO
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE         
ENCLOSED, POSTAGE-PAID ENVELOPE.                                                

       NEON'S STOCKHOLDERS SHOULD NOT SEND ANY STOCK OR WARRANT CERTIFICATES
WITH THEIR PROXY CARDS. A TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER  
OF NEON COMMON AND CONVERTIBLE PREFERRED STOCK CERTIFICATES AND CLASS A WARRANTS
WILL BE MAILED TO NEON STOCKHOLDERS PROMPTLY FOLLOWING COMPLETION OF THE MERGER.
FOR MORE INFORMATION REGARDING THE PROCEDURES FOR EXCHANGING NEON STOCK AND     
WARRANT CERTIFICATES FOR GLOBIX STOCK CERTIFICATES, SEE "TERMS OF THE MERGER    
AGREEMENT AND RELATED TRANSACTIONS -- PROCEDURES FOR EXCHANGING STOCK AND       
WARRANT CERTIFICATES," BEGINNING ON PAGE 85 OF THIS JOINT PROXY                 
STATEMENT/PROSPECTUS.                                                           

47  

S-4/A
57th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 57th
THE MERGER

GENERAL                                                                         

The board of directors of NEON (with one director, Mr. Lampe, 
abstaining, and as to the first amendment, with two directors, Messrs. Lampe and
Grubin, abstaining) and the board of directors of Globix (with one director, Mr.
Lampe, abstaining) have each approved the merger agreement, which provides for  
the merger of a new wholly owned subsidiary of Globix with and into NEON. NEON  
will be the surviving corporation in the merger and as a result will be a wholly
owned subsidiary of Globix. Each share of NEON common stock outstanding         
immediately prior to the merger will be converted into the right to receive     
shares of Globix common stock, and each share of NEON convertible preferred     
stock issued and outstanding immediately prior to the merger will be converted  
into the right to receive a combination of cash and shares of a new class of    
Globix convertible preferred stock created in connection with the merger. The   
shares of NEON common stock and convertible preferred stock will be converted in
accordance with the terms specified in the merger agreement, as described under 
"Terms of the Merger Agreement and Related Transactions -- Conversion of Shares 
in the Merger," beginning on page 83 of this joint proxy statement/prospectus.  

BACKGROUND OF THE MERGER                                                        

        In October 2003, representatives of CTA approached Peter K. Stevenson,
Globix's Chief Executive Officer and President, about the possibility of Globix 
acquiring or merging with NEON.                                                 

      From November 2003 until mid-January 2004, Mr. Stevenson and Stephen
Courter, Chairman, President and Chief Executive Officer of NEON, had           
preliminary conceptual discussions regarding a possible combination involving   
NEON and Globix. Members of Globix's management, together with Globix's outside 
counsel, Day Berry & Howard LLP, studied the possibility of a combination       
between Globix and NEON, but determined that it would not be possible to pursue 
the transaction until the completion of Globix's sale of the property located at
415 Greenwich Street in New York City, which took place in January 2004, and the
purchase of a portion of Globix's 11% senior notes with a portion of the        
proceeds of that sale.                                                          

     In December 2003, Globix was approached by certain investment banks
regarding the possible acquisition by Globix of the domestic assets of a foreign
Internet company. Globix had previously entered into a confidentiality agreement
with the company in July 2003 to enable the parties to explore a potential      
transaction, and Globix determined at that time and again in December 2003 not  
to pursue the acquisition.                                                      

   On January 15, 2004, NEON's board of directors met to discuss and
consider, among other things, the status of preliminary discussions regarding   
the possibility of a business combination between Globix and NEON.              

       In late January 2004, after further discussions between Mr. Stevenson
and Mr. Courter, Globix and NEON entered into a confidentiality agreement to    
enable them to share information concerning their respective businesses on a    
confidential basis to assist in analyzing a possible combination involving      
Globix and NEON. During that time Globix also entered into a confidentiality    
agreement with Needham & Company, Inc., with a view toward engaging Needham &   
Company to serve as its financial advisor with respect to the possible          
combination.                                                                    

   From mid-January 2004 to mid-February 2004, Mr. Stevenson and Mr.
Courter continued periodic discussions regarding a possible combination of NEON 
and Globix.                                                                     

48  

S-4/A
58th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 58th
        On February 3, 2004, Mr. Stevenson and Robert M. Dennerlein, the Chief
Financial Officer of Globix, met with representatives of Needham & Company and  
CTA to discuss the potential combination. CTA provides consulting and business  
development services to NEON and also provides similar services to Globix. At   
that meeting, the parties discussed the fact that both companies had completed  
significant cost cutting and restructuring of their respective businesses since 
their respective bankruptcies in 2002, but both companies faced considerable    
pricing pressure from larger competitors that could offer a wider range of      
services. The presentation prepared by Globix noted that NEON and Globix had    
complementary portfolios of customers, which would enable each to offer their   
services to the others' customers, and that the combination could be expected to
provide various operational synergies to both NEON and Globix.                  

   Over the course of February 2004, members of Globix's management,
together with Day, Berry & Howard, reviewed in greater detail the issues        
surrounding a potential combination with NEON. In response to feedback from     
representatives of NEON, to the effect that NEON viewed Globix's level of debt  
as a significant negative factor in considering a potential combination,        
Globix's management considered whether it would be possible to reduce Globix's  
indebtedness prior to the completion of such combination. After reviewing       
various alternatives, Globix's management concluded that there was no attractive
opportunity for reducing indebtedness prior to the completion of the possible   
combination.                                                                    

    On February 26, 2004, NEON's board of directors met to discuss and
consider, among other things, an overview of the possible combination between   
NEON and Globix and the benefits that may arise from such combination.          
Additionally, the NEON board of directors received preliminary financial and    
business materials related to the possible combination. After discussing and    
considering the possible combination and the related materials, the NEON board  
of directors authorized NEON to engage legal counsel to assist the due diligence
efforts in order to further investigate a possible merger between Globix and    
NEON. Joshua Revitz's resignation as a NEON director was also presented at the  
same meeting.                                                                   

         In early March, 2004, NEON engaged the law firm of Andrews Kurth LLP as
its counsel in regards to the possible combination.                             

 On March 2, 2004, Globix's board of directors met by conference
telephone call to discuss, among other things, the possible combination with    
NEON. At this meeting, management presented the opportunity of merging with NEON
to the board, indicating that a merger could strengthen Globix's competitive    
position by expanding the number of services that it could offer and that it    
also offered the possibility of improving Globix's balance sheet and financial  
position. In light of the potential conflict of interests of certain members of 
the Globix board of directors in the possible combination, the board established
a special committee to consider and negotiate the possible combination with NEON
and authorized the special committee to begin negotiations with NEON. The       
initial members of the special committee were Mr. Stevenson and Mr. Herzig; on  
March 9, 2004, Raymond Steele joined the special committee and Mr. Stevenson    
became a nonvoting member of the special committee. In its deliberations on     
March 2, 2004, the Globix board considered the conflicts of interest that Mr.   
Singer, Mr. Lampe and Mr. Van Dyke have through direct or indirect ownership of 
equity interests in NEON and also, in the case of Mr. Lampe, his service on the 
board of directors of both Globix and NEON.                                     

         On March 3, 2004, the Globix special committee met to review the status
of the negotiations and discuss the engagement of an investment banking firm to 
provide a fairness opinion. Pursuant to instructions from the special committee,
Mr. Stevenson forwarded to Mr. Courter an initial draft of a term sheet and     
indicated that Day, Berry & Howard had been authorized to begin preparation of a
draft merger agreement. On March 8, 2004, the Globix special committee          
considered various proposals of investment banking firms to provide a fairness  
opinion and serve as financial advisors to Globix. On March 9, 2004, the Globix 
special committee approved the engagement of Needham & Company to provide a     
fairness opinion and on March 11, 2004, an engagement letter was signed with    
Needham & Company.                                                              

49

S-4/A
59th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 59th
     Comments on the initial draft term sheet were received on March 11,
2004 from Andrews Kurth LLP, as outside counsel to NEON. On March 15, 2004, Day,
Berry & Howard delivered the first draft of the merger agreement to NEON and    
Andrews Kurth. On March 21, 2004, Andrews Kurth sent comments on the first draft
to Globix and Day, Berry & Howard on behalf of NEON.                            

The Globix special committee continued to meet in person or   
telephonically regularly in March and once in April in order to monitor progress
of the draft term sheet and draft merger agreement and the due diligence review.

On March 24, 2004, NEON's board of directors met to consider  
presentations by NEON's outside legal counsel regarding the possible merger. The
board of directors also discussed and considered the formation and appointment  
of a special committee to consider, investigate and negotiate the possible      
merger. The board of directors also discussed appointing a new director to      
replace Mr. Revitz and that such director would be an independent director.     

         On March 25 and 26, 2004, Andrews Kurth conducted a legal due diligence
review of Globix at Globix's offices in New York. On March 26 and 27, Day, Berry
& Howard conducted a legal due diligence review of NEON at NEON's offices in    
Westborough, Massachusetts, and representatives of Day, Berry & Howard          
subsequently returned to NEON's offices at various times to continue Globix's   
legal due diligence review, with the last such on-site due diligence being      
conducted on May 12, 2004. Following the parties' on-site review activities,    
Andrews Kurth's and Day, Berry & Howard's legal due diligence reviews continued 
via mail and electronic-mail through mid-July as the parties continued to gather
and exchange documents and information responsive to the due diligence requests 
of each respective counsel.                                                     

       On April 22, 2004, NEON's board of directors appointed Jose A. Cecin,
Jr. to the NEON board of directors. Additionally, it received additional        
information and materials regarding the possible merger and considered a        
presentation by Mr. Courter regarding the materials and the status of           
negotiations. After discussing and considering the materials and the            
presentation, the NEON board of directors created a special committee of the    
NEON board of directors to review and further investigate the possible merger   
and designated John H. Forsgren and Mr. Cecin as members of the special         
committee.                                                                      

       On April 30, 2004, NEON's special committee of the board of directors
held an initial meeting. At the meeting, the special committee members          
discussed, among other things, the engagement of a financial advisor to issue a 
fairness opinion on the potential merger and selected Adams Harkness, Inc.      
(f/k/a Adams, Harkness & Hill, Inc.) as its financial advisor.                  

        On May 3, 2004, Day, Berry & Howard sent a revised draft of the merger
agreement to NEON and Andrews Kurth, and on May 13, 2004, Andrews Kurth provided
comments to the revised draft on behalf of NEON. The Globix special committee   
reviewed the status of negotiations on May 10 (when the status was also         
discussed with the entire Globix board of directors) and again on May 17, 2004. 

    On May 20, 2004, NEON's special committee retained the law firm of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. as counsel to the special   
committee. On May 21, 2004, NEON's special committee met and was briefed by     
Adams Harkness on the progress of its analysis. The NEON special committee was  
also briefed on the status of negotiations with Globix. On May 27, 2004, the    
NEON special committee met with NEON's board of directors to report on its      
efforts in regard to the potential merger, including its progress on due        
diligence. NEON's board of directors and the special committee also discussed   
and considered the terms of the potential merger.                               

         From May 21, 2004 until July 16, 2004, a number of drafts of the merger
agreement were negotiated and exchanged between the parties. During the period  
from May 21, 2004 through July 16, 2004, the parties and their respective       
special committees discussed and negotiated several issues, including, but not  
limited to, the exchange ratio for shares of NEON common stock, the             
consideration to be given to holders of NEON's convertible preferred stock, the 
directors of the surviving corporation and Globix following the merger, the     
scope of representations and warranties to be made by each of NEON and Globix,  
whether representations and warranties would survive the merger, conduct of     
business by NEON and Globix in the period between the signing of the merger     
agreement and the merger closing, the completion of a financial due diligence   
review process after signing the merger agreement, events that would give either
or both of NEON and Globix the right to terminate the merger agreement, and     
provisions that would allow each of NEON and Globix to consider alternative     
acquisition proposals if the fiduciary duties of the board of directors of      
either company required such consideration.                                     

50  

S-4/A
60th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 60th
       On June 18, 2004, Day, Berry & Howard circulated the initial draft of
the certificate of designation for the proposed new series of Globix convertible
preferred stock. The proposed exchange ratio of 1.2748 shares of Globix common  
stock for each share of NEON common stock was incorporated into a revised draft 
of the merger agreement circulated by Andrews Kurth on July 2, 2004, based on   
the discussions between the parties.                                            

         From June 3, 2004 to July 14, 2004, the NEON special committee met with
its financial advisor and legal counsel numerous times to consider various      
valuation parameters for NEON and Globix, revised drafts of the merger agreement
and the terms of the potential merger. The NEON special committee also discussed
its fiduciary duties in considering the possible merger. During this period,    
Adams Harkness also continued its due diligence review of NEON and Globix.      

  Also during this time period, the NEON special committee, NEON's
management and/or their respective legal advisors and Adams Harkness met or held
telephonic conversations to discuss various due diligence issues. Among other   
things, the participants discussed NEON management's view of Globix's and NEON's
relative business strengths and NEON's reasons for pursuing a merger of the two 
companies at this time, which are described in more detail below under "-- The  
NEON Special Committee's and NEON's Reasons for the Merger."                    

         From June 1, 2004 to July 14, 2004, the Globix special committee met on
numerous occasions, both with and without legal counsel and members of          
management, to consider the status of negotiations, the terms and conditions of 
the merger agreement and the Globix convertible preferred stock, the calculation
of the exchange rate, the due diligence review and other matters relating to the
merger. On June 18, 2004 the Globix special committee hired Dechert LLP as      
independent legal counsel. On June 21, 2004, the Globix special committee met   
with Needham & Company to discuss its preliminary financial analysis of the     
proposed merger. On July 12, the Globix special committee met jointly with the  
nominating committee of the Globix board of directors to consider the possible  
appointment of certain members of the NEON board of directors to the Globix     
board of directors following the merger.                                        

On July 14, 2004, NEON's board of directors and NEON's special
committee separately heard and considered the presentation of Mr. Courter and   
legal counsel to both NEON and NEON's special committee regarding the status of 
operational, financial, business and legal due diligence.                       

         On July 14, 2004, the Globix special committee met with representatives
of Needham & Company, Day, Berry & Howard and Dechert, as well as members of    
management, to consider the proposed merger agreement and to review the         
presentation of Needham & Company concerning its financial analysis of the      
proposed merger. The special committee met thereafter in executive session with 
its independent counsel and then met with the full board of directors, again    
with representatives of Needham & Company, Day, Berry & Howard and Dechert, as  
well as members of management. The full board reviewed presentations by Needham 
& Company, members of management and legal counsel and posed various questions  
concerning the terms of the merger. At that time, representatives of Needham &  
Company indicated that, in accordance with the terms of the merger agreement,   
Needham & Company was in a position to deliver, as of the expected July 19 date 
of the merger agreement, its written opinion as to the fairness, from a         
financial point of view, to the holders of Globix common stock of the ratio for 
exchanging NEON common stock for Globix common stock pursuant to the merger     
agreement, after taking into account the consideration to be offered to the     
holders of NEON preferred stock in the merger and the exchange of shares of     
Globix common stock for Globix 11% senior notes that is a condition to closing  
of the merger. Following these discussions, the Globix board of directors, by   
the unanimous vote of all of the Globix directors, other than Mr. Lampe who     
abstained, determined that, subject to receipt of final approval of the special 
committee and receipt of the written opinion of Needham & Company, the          
transaction was advisable and in the best interests of Globix and its           
stockholders and approved the entry into the merger agreement and the           
transactions contemplated thereby.                                              

       On July 15, 2004, the NEON special committee had a telephonic meeting
with its legal and financial advisors. The special committee's advisors         
summarized the status of the merger agreement negotiations. Adams Harkness also 
presented its valuation analyses relating to NEON, Globix and the combined      
entity. On July 15, 2004, NEON's board of directors also met to discuss and     
consider the merger and the merger agreement.                                   

51  

S-4/A
61st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 61st
       On July 16, 2004, the NEON special committee had a telephonic meeting
with its various advisors, as well as Mr. Courter and legal counsel. Mr. Courter
and legal counsel reported to the special committee the results of the completed
due diligence with respect to Globix. Representatives of Mintz Levin informed   
the special committee of the results of the negotiations with Globix regarding  
the merger agreement based on information from NEON's legal counsel and NEON. In
addition, Adams Harkness delivered its opinion that the ratio for exchanging    
NEON common stock for Globix common stock pursuant to the merger agreement is   
fair, from a financial point of view, to the holders of NEON common stock (as   
stockholders of NEON), which opinion was subsequently confirmed in writing. Upon
completing its deliberations, and subject to finalizing the merger agreement,   
the special committee unanimously determined that the merger agreement and the  
transactions contemplated thereby are advisable, and in the best interests of,  
the holders of NEON common stock and NEON convertible preferred stock (as       
stockholders of NEON) and unanimously recommended that NEON's board of directors
adopt and approve the merger agreement and the transactions contemplated by the 
merger agreement and declare advisable and recommend that the stockholders of   
NEON adopt and approve the merger agreement and the transactions contemplated by
the merger agreement.                                                           

        Immediately following the NEON special committee meeting, a telephonic
meeting of NEON's board of directors was held. All of the members of NEON's     
board of directors were present. The NEON special committee delivered its       
recommendation to the NEON board of directors that the board of directors       
approve the merger, the merger agreement and the transactions contemplated by   
the merger agreement and declare advisable and recommend that the stockholders  
of NEON adopt and approve the merger, the merger agreement and the transactions 
contemplated by the merger agreement. The NEON board of directors, by the       
unanimous vote of all of the NEON directors, other than Mr. Lampe who abstained,
determined that the merger, the merger agreement and the transactions           
contemplated by the merger agreement are advisable, and in the best interests   
of, the holders of NEON common stock and NEON convertible preferred stock (as   
stockholders of NEON), approved the merger, the merger agreement and the        
transactions contemplated by the merger agreement and declared advisable and    
recommended that the stockholders of NEON adopt and approve the merger, the     
merger agreement and the transactions contemplated by the merger agreement.     

 On July 16, 2004, the parties exchanged final versions of their
disclosure documents and the merger agreement, which were sent out that evening 
to the parties and their financial advisors and legal counsel, and the          
independent board committees and their financial advisors and legal counsel.    

        On the afternoon of July 16, 2004, the Globix special committee held a
telephonic meeting at which representatives of Day, Berry & Howard, Dechert and 
Needham & Company were also present. The Globix special committee discussed the 
changes made to the draft merger agreement since July 14 and gave its final     
approval to the merger agreement and the transactions contemplated by the merger
agreement.                                                                      

     On the morning of July 19, 2004, Needham & Company delivered to the
Globix special committee its written opinion to the effect that, as of that date
and based upon and subject to the matters described in the opinion, and after   
taking into account the consideration to be offered to the holders of NEON      
preferred stock in the merger and the exchange of shares of Globix common stock 
for Globix 11% senior notes that is a condition to closing of the merger, the   
common stock exchange ratio pursuant to the merger agreement was fair to the    
holders of Globix common stock from a financial point of view.                  

  The merger agreement was executed on July 19, 2004 following the
receipt by Globix of the written opinion of Needham & Company, and Globix and   
NEON issued a joint press release announcing the signing of the merger          
agreement.                                                                      

         In late August, 2004, NEON received communications from certain holders
of NEON's convertible preferred stock to the effect that such holders believed  
that the conversion price of the proposed Globix convertible preferred stock,   
which was originally set at $8.82 per share, was too high in light of the then  
current trading values of the Globix common stock of approximately $3.00 per    
share. As the conversion price is based on the amount of the liquidation        
preference that is surrendered upon conversion of the preferred stock into      
common stock, the holders believed that they should have the right to receive   
more shares of common stock for the aggregate liquidation preference of the     
preferred stock. On August 23, Mr. Courter shared these concerns with Mr.       
Stevenson. Given the fact that a favorable vote of the holders of the NEON      

52  

S-4/A
62nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 62nd
convertible preferred stock is required for the merger, NEON and Globix,        
together with CTA, discussed the possibility of lowering the conversion price   
per share of the Globix convertible preferred stock (and proportionately        
increasing the aggregate number of shares that could be acquired upon conversion
of the Globix convertible preferred stock into Globix common stock) in exchange 
for a reduction of the rate at which dividends accrue on the Globix convertible 
preferred stock. Globix management then consulted with Needham & Company and    
discussed the possible impact of the revised terms on the fairness, from a      
financial point of view, to the holders of Globix common stock of the common    
stock exchange ratio. On September 1, 2004, the board of directors of Globix    
held a telephonic meeting to consider and approve an amendment to the merger    
agreement to revise the conversion price and liquidation preference per share   
and to reduce the dividend rate of the preferred stock. At the meeting,         
management presented two possible scenarios:                                    

     o        a conversion price and liquidation preference per share of
               $3.60 per share and a dividend rate of 6 percent per annum;
and                                         

     o        a conversion price and liquidation preference per share of
               $4.64 per share and a dividend rate of 9 percent per annum.

         The Globix board of directors noted that both scenarios would result in
a dilution of the Globix common stock, but that the lowered dividend rate would 
offset some of the dilution on a going forward basis. In addition, the Globix   
board of directors noted that the lowered conversion price and liquidation      
preference per share would encourage Globix preferred stockholders to convert   
their preferred stock into common stock and to think of their interests as      
allied with the holders of the Globix common stock, rather than relying on their
rights as preferred stockholders. The Globix board of directors directed        
management to negotiate a revised conversion price, liquidation preference and  
dividend rate following either of the two scenarios that were presented at the  
meeting, or at a conversion price, liquidation preference and dividend rate     
falling between the two scenarios. The Globix board of directors (with Mr. Lampe
abstaining) and the special committee then approved and adopted an amendment to 
the merger agreement containing such terms, subject to receipt of a bring down  
letter or new fairness opinion from Needham & Company reflecting the revised    
terms and final approval of the special committee. In considering the amendment 
to the merger agreement, the Globix board of directors took into account the    
fact that Mr. Lampe indirectly holds, and Mr. Singer's family holds, interests  
in the NEON preferred stock.                                                    

     On September 2, 2004, at the instruction of Globix management, Day,
Berry & Howard delivered to NEON and its counsel a draft amendment to the merger
agreement changing the Globix convertible preferred stock conversion rate to    
$3.60 per share and the dividend rate to 6 percent per annum. Minor changes were
then discussed by counsel to both parties. On the morning of September 17, 2004,
the NEON board of directors (with two directors, Messrs. Lampe and Grubin,      
abstaining) approved the amendment to the merger agreement. In approving the    
amendment, the NEON board of directors considered a report from the special     
committee. The special committee reported that, after discussions with their    
legal and financial advisors, they had concluded that the amendment did not     
change their approval and recommendation of the merger agreement, as amended. On
October 8, 2004, the special committee received a letter from Adams Harkness,   
which affirmed that the exchange ratio provided in the merger agreement, as     
amended, was fair, from a financial point of view, to the holders of NEON common
stock (as stockholders of NEON).                                                

  The Globix special committee met by telephone conference call on
September 20, 2004 and approved the amendment to the merger agreement, subject  
to receipt of a revised fairness opinion. On September 28, 2004, Needham &      
Company delivered to the Globix special committee its written opinion to the    
effect that, as of that date and based upon and subject to the matters described
in the opinion, and after taking into account the consideration to be offered to
the holders of NEON preferred stock in the merger and the exchange of shares of 
Globix common stock for Globix 11% senior notes that is a condition to closing  
of the merger, the common stock exchange ratio pursuant to the amended merger   
agreement was fair to the holders of Globix common stock from a financial point 
of view. The parties exchanged executed copies of the amendment to the merger   
agreement on October 8, 2004.                                                   

53  

S-4/A
63rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 63rd
THE GLOBIX SPECIAL COMMITTEE'S AND GLOBIX'S REASONS FOR THE MERGER              

        Since Globix emerged from bankruptcy reorganization in April 2002, its
board of directors has actively reviewed various strategies for increasing      
stockholder value. A key objective has been to redress the imbalance between    
revenues and costs that has historically been a feature of Globix's business,   
either by increasing the revenue base or by cutting costs. A second objective   
has been to reduce leverage by buying back or paying off higher cost            
indebtedness.                                                                   

      Growth through acquisition of related businesses has been one of the
strategies reviewed by the Globix board of directors in this process. Such      
acquisitions could enable Globix to offer a broader range of services to compete
more effectively with larger companies, while providing a larger revenue base to
support Globix's existing indebtedness. The ability to achieve operating        
efficiencies by combining administrative or other functions has also been a     
consideration in reviewing possible acquisitions. In addition, market conditions
have made it possible to acquire related businesses at what are perceived to be 
discounted prices. In pursuing its acquisition strategy, the Globix board of    
directors has reviewed potential transactions involving smaller companies, like 
Aptegrity, Inc., whose acquisition could gradually expand the range of services 
that Globix provides, as well as larger companies, such as NEON, that could     
significantly increase the size of Globix's business and enhance its ability to 
compete against the much larger companies that offer managed Internet           
applications and infrastructure services. At the same time, the board has       
considered the various risks presented by acquisitions, the other demands on the
company's resources and the uncertainty that the potential benefits of any      
acquisition will be achieved.                                                   

   In reviewing the proposed merger with NEON and making its final
determination to approve the merger agreement, Globix and the Globix special    
committee considered, among other things:                                       

o        the Globix special committee's view that Globix, on a stand alone      
     basis, runs a long term risk of not being able to meet its business
plan due to its heavy debt load;                              

o        the Globix special committee's view that the combination of the two    
companies would be beneficial because:                        

   o        the two companies have complementary products that, when
                  offered together, would be more attractive to a wider range of
           potential customers than the single offerings of either
company;                                    
       o        the two companies have different customer bases and would be
                able to cross-sell their products to each others' customers;
      o        the combination would result in various administrative cost
savings;                                    
    o        the common ownership of the two companies would ease some
transition issues;                          
         o        Globix would benefit from a larger platform from which to sell
its services; and                           
       o        Globix would benefit from a larger asset base to support its
indebtedness.                               

o        the Globix special committee's view that the combination presented the 
following risks:                                              

         o        the disruption in the business of both companies caused by the
                 transaction and the management time required to integrate the
two businesses;                             
o        the lack of geographic diversity in NEON's business; 

      o        the fact that the range of NEON's service offerings is very
narrow; and                                 
       o        the fact that the anticipated synergies and cost savings are
speculative.                                

o        the business, financial condition, results of operations, prospects,   
       current business strategy and competitive position of each of Globix,
      NEON and the combined company, as well as general economic and stock
market conditions;                                            

54  

S-4/A
64th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 64th
o        discussions with management and information provided by management as  
  to its analysis of the transaction and the businesses of the two
companies; and                                                

o        the ability of the combined companies to use their historical net      
        operating losses to offset income tax liabilities following completion
of the transaction.                                           

In considering the valuation of NEON and the fairness of the  
transaction to Globix and its stockholders, the Globix board of directors and   
the Globix special committee considered, among other things:                    

o        the historical trading values of the Globix common stock and the fact  
that the NEON common stock is not publicly traded;            

o        the impact of Globix's proportionately high level of debt on the       
trading values of the Globix common stock;                    

o        the contribution analysis, accretion/dilution analysis, selected       
     company analysis, selected transaction analysis and other financial
   analyses presented by Needham & Company to the special committee;

o        the opinion delivered to the special committee by Needham & Company as 
      to the fairness, from a financial point of view, of the common stock
exchange ratio to the holders of the Globix common stock; and 

o        the value of the debt-for-equity exchange to Globix and its            
contribution to the reduction of Globix's indebtedness.       

      In reviewing the transaction, the Globix board and special committee
concluded that the potential benefits of the transaction outweighed the         
potential risks and that, in light of the potential benefits of the transaction,
the consideration to be offered to the holders of NEON stock and warrants is    
fair to the stockholders of Globix. The preceding discussion of the information 
and factors considered by the Globix board and special committee is not intended
to be exhaustive, but is believed to include all material factors considered by 
the board and the special committee. In evaluating the merger, the members of   
the Globix board and the special committee took into account their knowledge of 
the business, financial condition and prospects of Globix and the advice of its 
advisors. In light of the number and variety of the factors considered by the   
board and the special committee, the board and the special committee did not    
find it practicable to assign relative weights to the foregoing factors. Rather,
the board and the special committee made their determinations based on the total
mix of information available to them.                                           

RECOMMENDATIONS OF GLOBIX'S BOARD OF DIRECTORS                                  

The Globix board of directors (with one director, Mr. Lampe,  
abstaining) has determined that the merger, the merger agreement and the        
transactions contemplated by the merger agreement are advisable and in the best 
interests of Globix and its stockholders. Accordingly, the Globix board of      
directors (with one director, Mr. Lampe, abstaining) has approved the merger,   
the merger agreement and the transactions contemplated by the merger agreement  
(including the issuance of Globix common stock in the merger) and recommends    
that stockholders vote "FOR" approval of the issuance of Globix common stock in 
connection with the merger and "FOR" the proposal to grant discretionary        
authority to adjourn or postpone the Globix special meeting to solicit          
additional votes to approve the matter considered at the special meeting, if    
necessary.                                                                      

OPINION OF GLOBIX'S FINANCIAL ADVISOR                                           

  Globix retained Needham & Company to render an opinion as to the
fairness, from a financial point of view, of the exchange ratio pursuant to the 
merger agreement to the holders of Globix common stock. The exchange ratio was  
determined through arm's length negotiations between Globix and NEON and not by 
Needham & Company.                                                              

55  

S-4/A
65th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 65th
        On July 19, 2004, Needham & Company delivered to the special committee
of the Globix board of directors its written opinion that, as of that date and  
based upon and subject to the assumptions and other matters described in the    
opinion, the common stock exchange ratio pursuant to the merger agreement was   
fair to the holders of Globix common stock from a financial point of view. On   
September 28, 2004, Needham & Company delivered to the special committee its    
written opinion that, as of that date and based upon and subject to the         
assumptions and other matters described in the opinion, the common stock        
exchange ratio pursuant to the amended merger agreement was fair to the holders 
of Globix common stock from a financial point of view. THE NEEDHAM & COMPANY    
OPINION IS ADDRESSED TO THE SPECIAL COMMITTEE OF THE GLOBIX BOARD OF DIRECTORS, 
IS DIRECTED ONLY TO THE FINANCIAL TERMS OF THE MERGER AGREEMENT, AS AMENDED, AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY GLOBIX STOCKHOLDER AS TO HOW THAT   
STOCKHOLDER SHOULD VOTE ON, OR TAKE ANY OTHER ACTION RELATING TO, THE ISSUANCE  
OF SHARES IN THE MERGER.                                                        

        The complete text of the September 28, 2004 Needham & Company opinion,
which sets forth the assumptions made, matters considered, limitations on and   
scope of the review undertaken by Needham & Company, is attached to this joint  
proxy statement/prospectus as Appendix D. The summary of the September 28, 2004 
Needham & Company opinion set forth in this joint proxy statement/prospectus is 
qualified in its entirety by reference to the Needham & Company opinion. GLOBIX 
STOCKHOLDERS SHOULD READ THE NEEDHAM & COMPANY OPINION CAREFULLY AND IN ITS     
ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE FACTORS CONSIDERED,  
AND THE ASSUMPTIONS MADE BY NEEDHAM & COMPANY.                                  

    In arriving at its opinion, Needham & Company, among other things:

 o        reviewed a draft of the amended merger agreement dated
September 28, 2004;                         

     o        reviewed certain publicly available information concerning
            Globix and NEON and certain other relevant financial and
            operating data of Globix and NEON furnished to Needham &
Company by Globix and NEON;                 

      o        reviewed the historical stock prices and trading volumes of
Globix common stock;                        

         o        held discussions with members of management of Globix and NEON
           concerning the respective companies' current and future
           business prospects and joint prospects for the combined
         companies, including potential cost savings and other
             synergies that may be achieved by the combined companies;

      o        reviewed certain financial forecasts with respect to Globix
                 and NEON prepared by the respective managements of Globix and
      NEON, including, with respect to Globix, forecasts
              characterized by Globix management as a downside scenario;

o        compared certain publicly available financial data of
               companies whose securities are traded in the public markets
                  and that Needham & Company deemed relevant to similar data for
NEON;                                       

 o        reviewed the financial terms of certain other business
                  combinations that Needham & Company deemed generally relevant;
and                                         

    o        performed and/or considered such other studies, analyses,
            inquiries and investigations as Needham & Company deemed
appropriate.                                

     In arriving at its opinion, Needham & Company did not independently
verify, nor did Needham & Company assume responsibility for independent         
verification of, any of the information reviewed by or discussed with it and    
assumed and relied on the accuracy and completeness of that information. Needham
& Company assumed that the financial forecasts for Globix and NEON provided to  
it by their respective managements and the joint prospects of the combined      
companies were reasonably prepared on bases reflecting the best currently       
available estimates and judgments of management of Globix and NEON, at the time 
of preparation, of the future operating and financial performance of Globix and 
NEON and the combined companies. Needham & Company relied upon the estimates of 
Globix and NEON of the potential cost savings and other synergies, including the
amount and timing thereof, that may be achieved as a result of the merger.      

56  

S-4/A
66th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 66th
Needham & Company did not assume any responsibility for or make or obtain any   
independent evaluation, appraisal or physical inspection of the assets or       
liabilities of Globix or NEON. Needham & Company's opinion states that it was   
based on economic, monetary and market conditions existing as of its date.      
Needham & Company expressed no opinion as to what the value of Globix common    
stock will be when issued to the stockholders of NEON pursuant to the merger or 
the prices at which Globix common stock will actually trade at any time. In     
addition, Needham & Company was not asked to consider, and the Needham & Company
opinion does not address, Globix's underlying business decision to engage in the
merger or the Globix debt-for-equity exchange or the relative merits of the     
merger or the Globix debt-for-equity exchange as compared to other business     
strategies that might be available to Globix.                                   

         No limitations were imposed by Globix on Needham & Company with respect
to the investigations made or procedures followed by Needham & Company in       
rendering its opinion.                                                          

    In preparing its opinion, Needham & Company performed a variety of
financial and comparative analyses. The following paragraphs summarize the      
material financial analyses performed by Needham & Company in arriving at its   
opinion. Some of the summaries of the financial analyses include information    
presented in tabular format. The tables are not intended to stand alone, and in 
order to more fully understand the financial analyses used by Needham & Company,
the tables must be read together with the full text of each summary.            

   For purposes of the contribution, selected companies and selected
transaction analyses, the terms transaction value and market value represent the
value, or deemed value based upon the merger consideration or exchange ratio, of
the relevant company's common equity, and the terms aggregate transaction value 
and enterprise value represent, with respect to the relevant company, market    
value plus debt, less cash.                                                     

        CONTRIBUTION ANALYSIS. Needham & Company reviewed and analyzed the pro
forma contribution of each of Globix and NEON to pro forma combined August 31,  
2004 balance sheet information, and pro forma projected calendar 2004 through   
calendar 2007 combined operating results. In calculating the pro forma projected
combined operating results, Needham & Company used financial forecasts prepared 
by Globix and NEON management and assumed no cost savings or other synergies.   
Needham & Company reviewed, among other things, the pro forma contributions to  
revenue, gross profit, earnings before interest and taxes, or EBIT, earnings    
before interest, taxes, depreciation and amortization, or EBITDA, cash and      
equivalents, total assets, stockholders' equity, working capital and enterprise 
value. This analysis indicated that NEON would have contributed:                

 o        42.9% of pro forma combined cash and cash equivalents;
o        54.4% of pro forma combined total assets;            
o        86.3% of pro forma combined stockholder's equity;    
o        25.3% of pro forma combined net working capital; and 
o        39.6% of pro forma combined enterprise value.        

         This analysis also indicated that NEON would contribute the percentages
shown in the following table of                                                 

  o        last twelve months, or LTM, and projected calendar 2004
               through projected calendar 2007 pro forma combined revenue;
     o        LTM and projected calendar 2004 through projected calendar
2007 pro forma combined gross profit;       
     o        LTM and projected calendar 2004 through projected calendar
2007 pro forma combined EBIT; and           
     o        LTM and projected calendar 2004 through projected calendar
2007 pro forma combined EBITDA.             

                                                                [Download Table]
               LTM   CY 2004E  CY 2005E  CY 2006E  CY 2007E
               ---   --------  --------  --------  --------
                                                           
Revenue       43.5%    43.5%     47.8%     49.4%     50.5% 
Gross profit  33.7%    34.9%     43.0%     45.9%     48.3% 
EBIT           N/M      N/M       N/M       N/M      43.1% 
EBITDA         N/M      N/M      74.3%     60.0%     56.7% 

         The results of the contribution analysis are not necessarily indicative
of the contributions that the respective businesses may have in the future.     

57

S-4/A
67th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 67th
         Based on the exchange ratio, after taking into account the transactions
contemplated by the merger agreement, including the Globix's debt-for-equity    
exchange, and using the treasury stock method to calculate the number of shares 
of Globix common stock outstanding, NEON common stockholders would beneficially 
own approximately 56.7% of the outstanding shares of common stock of the        
combined company (ignoring current cross ownership between the holders of Globix
and NEON common stock, as further described in the section entitled "The Merger 
- Interests of Certain Persons in the Merger" beginning on page 71 of this joint
proxy statement/prospectus). The foregoing ownership percentage does not include
the shares of NEON convertible preferred stock that are beneficially owned by   
certain common stockholders of NEON and that will be exchanged for Globix       
convertible preferred stock in the merger or currently exercisable options or   
warrants (other than the Class A warrants) held by NEON or Globix common        
stockholders.                                                                   

     ACCRETION/DILUTION ANALYSIS. Needham & Company reviewed various pro
forma financial impacts of the merger on the holders of Globix and NEON common  
stock based on the Globix closing stock price of $2.85 on July 16, 2004, the    
last trading day prior to announcement of the merger, and the common stock      
exchange ratio of 1.2748 and estimated financial results of Globix and NEON for 
calendar years 2004, 2005 and 2006, and assuming cost savings and other         
synergies resulting from the merger. The estimated financial results and cost   
savings and other synergies were based upon Globix management estimates. Based  
upon these projections and assumptions, Needham & Company noted that the merger 
would result in accretion to the projected earnings per share of Globix for each
of calendar years 2004, 2005 and 2006. The actual operating or financial results
achieved by the combined entity may vary from projected results, and these      
variations may be material.                                                     

SELECTED COMPANY ANALYSIS. Using information provided by NEON 
management, Needham & Company compared selected historical and projected        
financial and market data ratios for NEON to the corresponding publicly         
available data and ratios of certain publicly traded companies that Needham &   
Company deemed relevant because their lines of businesses are similar to NEON's 
line of business. These companies, referred to as the selected companies,       
consisted of the following:                                                     

Level 3 Communications, Inc.;               
Corvis Corporation;                         
Cogent Communications Group, Inc.;          
FiberNet Telecom Group, Inc.;               
XO Communications, Inc.; and                
VersaTel Telecom International N.V.         

 The table below sets forth information concerning the following
multiples for the selected companies and for NEON:                              

o        Enterprise value as a multiple of LTM revenues;      
    o        Enterprise value as a multiple of projected calendar 2004
revenues;                                   
    o        Enterprise value as a multiple of projected calendar 2005
revenues; and                               
o        Enterprise value as a multiple of LTM EBITDA.        

Needham & Company also compared, for the selected companies,  

o        Enterprise value as a multiple of LTM EBIT;          
o        Price as a multiple of LTM earnings per share;       
      o        Price as a multiple of projected calendar 2004 earnings per
share; and                                  
      o        Price as a multiple of projected calendar 2005 earnings per
share;                                      

but determined these comparisons were not meaningful because of NEON's losses.  

58

S-4/A
68th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 68th
         Needham & Company calculated multiples for the selected companies based
on the closing stock prices of those companies on August 31, 2004 and for NEON  
based on the Globix closing stock price of $2.85 on July 16, 2004 and the       
exchange ratio of 1.2748 shares of Globix common stock for each share of NEON   
common stock.                                                                   

                                                        [Enlarge/Download Table]
                                                         SELECTED COMPANIES                                 
                                  -------------------------------------------------------------------       

                                      HIGH               LOW               MEAN           MEDIAN        NEON
                                      ----               ---               ----           ------        ----
                                                                                                            
Enterprise value to LTM revenues      3.7x               0.4x              1.5x            1.3x         1.6x

Enterprise value to projected         1.6x               0.3x              0.9x            0.9x         1.5x
calendar 2004 revenues                                                                                      

Enterprise value to projected         1.7x               0.3x              0.9x            0.7x         1.1x
calendar 2005 revenues                                                                                      

Enterprise value to LTM EBITDA       13.4x               6.5x             10.3x           10.9x        19.0x

     No company, transaction or business used in the preceding "Selected
Company Analysis," or the following "Selected Transaction Analysis" as a        
comparison is identical to Globix, NEON or the merger. Accordingly, an          
evaluation of the results of these analyses is not entirely mathematical;       
rather, it involves complex considerations and judgments concerning differences 
in the financial and operating characteristics and other factors that could     
affect the acquisition, public trading or other values of the selected companies
or selected transactions or the business segment, company or transaction to     
which they are being compared.                                                  

    SELECTED TRANSACTION ANALYSIS. Needham & Company analyzed publicly
available financial information for the following selected telecommunications   
industry merger and acquisition transactions, which represent transactions since
January 1, 2002 involving targets with an equity value of between $30 million   
and $200 million:                                                               

ACQUIRER                                  TARGET            
--------                                  ------            
ITC DeltaCom, Inc.                        BTI Telecom Corp. 
    CenturyTel, Inc.                          Digital Teleport, Inc.
Level 3 Communications, Inc.              Genuity Inc.      
          Xspedius Management Corp. LLC             e.spire Communications, Inc.

         In examining the selected transactions, Needham & Company analyzed, for
the selected transactions and for NEON, the enterprise value as a multiple of   
revenue for the last 12 months. Of the transactions analyzed, Needham & Company 
believed that the acquisition by CenturyTel of Digital Teleport was the most    
relevant for purposes of the selected transaction analysis because of the       
similarity of the target's line of business and size to those of NEON, and noted
this transaction had a multiple of enterprise value to LTM revenues of 1.8x.    

     Needham & Company calculated multiples for NEON based on the Globix
closing stock price of $2.85 on July 16, 2004, the exchange ratio of 1.2748     
shares of Globix common stock for each share of NEON common stock.              

        The following table sets forth information concerning the multiples of
enterprise value to LTM revenues for the selected transactions.                 

59

S-4/A
69th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 69th
                                                        [Enlarge/Download Table]
                                                    SELECTED TRANSACTIONS                                           
                                 -------------------------------------------------------------                      
                                    HIGH               LOW            MEAN           MEDIAN     GLOBIX / NEON MERGER
                                    ----               ---            ----           ------     --------------------
                                                                                                                    
Enterprise value to LTM revenue     3.1x              0.4x            1.6x            1.4x              1.6x        

        OTHER ANALYSES. In rendering its opinion, Needham & Company considered
various other analyses, including a discounted cash flow sensitivity analysis   
and a history of trading prices and volumes for Globix common stock.            

The summary set forth above does not purport to be a complete 
description of the analyses performed by Needham & Company in connection with   
the rendering of its opinion. The preparation of a fairness opinion involves    
various determinations as to the most appropriate and relevant quantitative and 
qualitative methods of financial analyses and the application of those methods  
to the particular circumstances and, therefore, such an opinion is not readily  
susceptible to summary description. Accordingly, Needham & Company believes that
its analyses must be considered as a whole and that selecting portions of its   
analyses or the factors it considered, without considering all analyses and     
factors, could create a misleading or incomplete view of the process underlying 
its opinion. In its analyses, Needham & Company made numerous assumptions with  
respect to industry performance, general business and economic and other        
matters, many of which are beyond the control of Globix and NEON. Any estimates 
contained in these analyses are not necessarily indicative of actual values or  
predictive of future results or values, which may be significantly more or less 
favorable. Additionally, analyses relating to the values of businesses or assets
do not purport to be appraisals or necessarily reflect the prices at which      
businesses or assets may actually be sold. Accordingly, these analyses and      
estimates are inherently subject to substantial uncertainty. Needham & Company's
opinion and its related analyses were only one of many factors considered by the
special committee of Globix's board of directors in its evaluation of the       
proposed merger and should not be viewed as determinative of the views of the   
special committee of Globix's board of directors or management with respect to  
the common stock exchange ratio or the merger.                                  

         Under the terms of its engagement letter with Needham & Company, Globix
has paid or agreed to pay Needham & Company fees for rendering the Needham &    
Company opinion that Globix and Needham & Company believe are customary in      
transactions of this nature. None of Needham & Company's fees are contingent on 
consummation of the merger. Whether or not the merger is consummated, Globix has
agreed to reimburse Needham & Company for certain of its out-of-pocket expenses 
and to indemnify it against specified liabilities relating to or arising out of 
services performed by Needham & Company in rendering its opinion.               

       Needham & Company is a nationally recognized investment banking firm.
As part of its investment banking services, Needham & Company is regularly      
engaged in the evaluation of businesses and their securities in connection with 
mergers and acquisitions, negotiated underwritings, secondary distributions of  
securities, private placements and other purposes. Needham & Company was        
retained by the special committee of the Globix board of directors to render an 
opinion in connection with the merger based on Needham & Company's experience as
a financial advisor in mergers and acquisitions as well as Needham & Company's  
familiarity with technology companies. Needham & Company has had no other       
investment banking relationship with Globix, and has had no investment banking  
relationship with NEON, during the past two years. Needham & Company may in the 
future provide investment banking and financial advisory services to Globix and 
NEON unrelated to the proposed merger, for which services Needham & Company     
expects to receive compensation. In the normal course of its business, Needham &
Company may actively trade the equity securities of Globix for its own account  
or for the account of its customers and, therefore, may at any time hold a long 
or short position in these securities.                                          

60

S-4/A
70th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 70th
THE NEON SPECIAL COMMITTEE'S AND NEON'S REASONS FOR THE MERGER                  

THE NEON SPECIAL COMMITTEE'S REASONS FOR THE MERGER           

       In reaching its determination, the NEON special committee considered:

         o        the NEON special committee's conclusion that entering into the
merger agreement at this time would provide greater value to NEON's stockholders
than they would receive if NEON remained a stand-alone entity due to, among     
other factors, the greater diversification of products and services that could  
be offered by the combined entity;                                              

    o        the NEON special committee's conclusion that the economic
terms contained in the merger agreement represented the best economic terms that
could be obtained from Globix;                                                  

       o        the NEON special committee's conclusion that the expenditure
of approximately $5 million of available cash by the combined company to        
eliminate a portion of the NEON convertible preferred stock was a prudent       
financial decision based upon:                                                  

      o        the combined company's liquidity position
post-merger,              

                o        the high dividend rate on the convertible preferred
stock, and                

           o        the combined company's new right to redeem the
                 convertible preferred stock a year earlier;

    o        the business, financial condition, results of operations,
prospects, current business strategy and competitive position of each of NEON,  
Globix and the new combined company, as well as general economic and stock      
market conditions;                                                              

 o        the information from, analysis by and the substance of
discussions with NEON management in support of the merger;                      

         o        the NEON special committee's conclusion that, since the merger
consideration to be received by NEON common stockholders would be in the form of
publicly tradable Globix securities, the exchange of NEON securities in the     
merger would provide:                                                           

                 o        increased liquidity for the common stockholders, and

           o        improved access to the capital markets for the
combined company;         

    o        the NEON special committee's belief that the merger would
allow Globix and NEON to realize cost savings as a result of certain business   
synergies;                                                                      

   o        the fact that the receipt of Globix capital stock by the
holders of NEON capital stock in the merger is expected to be tax-free to such  
holders, as well as to Globix and NEON; and                                     

       o        the opinion of Adams Harkness to the effect that, based upon
and subject to the assumptions, qualifications and limitations stated in its    
opinion, as of the date of its opinion, the exchange ratio of 1.2748 shares of  
Globix common stock for each outstanding share of NEON common stock to be paid  
to the holders thereof in the merger was fair, from a financial point of view,  
to the holders of NEON common stock (as stockholders of NEON), and the reports  
and analyses presented to the NEON special committee by Adams Harkness in       
connection with the opinion. See "--Opinion of NEON's Financial Advisor"        
beginning on page 63 of this joint proxy statement/prospectus.                  

61

S-4/A
71st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 71st
         The NEON special committee also considered a number of negative factors
in its deliberations concerning the merger, including:                          

  o        the fact that the merger agreement does not provide the
holders of NEON capital stock with any protection against fluctuations in the   
market price of Globix common stock during the period from the signing of the   
merger agreement to the completion of the merger;                               

        o        the reduction in the combined company's liquidity as a result
of the combined company's expenditure of approximately $5 million of available  
cash to eliminate a portion of the NEON convertible preferred stock;            

 o        the combined company's liquidity position post-merger;

 o        the loss of control over the future operations of NEON
following the merger;                                                           

      o        the fact that the merger agreement provides that Globix has
the right not to proceed with the transaction under certain circumstances,      
including in the event that greater than fifteen percent (15%) of NEON's common 
stockholders or convertible preferred stockholders elect to exercise their      
appraisal rights;                                                               

   o        the ability of Globix to reduce its pre-merger debt; and

     o        the other factors discussed in this joint proxy statement/
prospectus under the section entitled "Risk Factors," beginning on page 21 of   
this joint proxy statement/prospectus.                                          

      The NEON special committee believed that these negative factors were
substantially outweighed by the benefits anticipated from the merger. The       
preceding discussion of the information and factors considered by the NEON board
of directors is not intended to be exhaustive, but is believed to include all   
material factors considered by the NEON board of directors. Mr. Lampe, a        
director on the NEON and Globix boards of directors, abstained from voting on   
the merger. In evaluating the merger, the members of the NEON special committee 
considered their knowledge of the business, financial condition and prospects of
NEON, and the advice of its advisors. In light of the number and variety of     
factors that the NEON special committee considered in connection with their     
evaluation of the merger, the NEON special committee did not find it practicable
to assign relative weights to the foregoing factors. Rather, the NEON special   
committee made its determination based upon the total mix of information        
available to it.                                                                

NEON'S REASONS FOR THE MERGER                                 

      In determining the fairness of the terms of the merger and approving
the merger agreement and the transactions contemplated by the merger agreement, 
the NEON board of directors considered the factors described above under "--The 
NEON Special Committee's Reasons for the Merger" beginning on page 61 of this   
joint proxy statement/prospectus. In approving the merger agreement and the     
transactions contemplated by the merger agreement, the NEON board of directors  
concurred with and adopted the analysis of the NEON special committee with      
respect to the financial evaluation of NEON and of the exchange ratio.          

      In evaluating the merger, the members of the NEON board of directors
considered their knowledge of the business, financial condition and prospects of
NEON, and the advice of its advisors. In light of the number and variety of     
factors that NEON's board of directors considered in connection with their      
evaluation of the merger, NEON's board of directors did not find it practicable 
to assign relative weights to the foregoing factors. Rather, NEON's board of    
directors made its determination based upon the total mix of information        
available to it.                                                                

62  

S-4/A
72nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 72nd
RECOMMENDATIONS OF NEON'S BOARD OF DIRECTORS                  

        The NEON board of directors (with one director, Mr. Lampe, abstaining,
and as to the first amendment, with two directors, Messrs. Lampe and Grubin,    
abstaining) has approved the merger, the merger agreement and the transactions  
contemplated by the merger agreement, and on the basis of the recommendation of 
the NEON special committee, determined that the terms of the merger are         
advisable and in the best interests of NEON and its stockholders. Accordingly,  
the NEON board of directors (with one director, Mr. Lampe, abstaining)          
recommends that NEON's stockholders vote "FOR" the merger, the merger agreement 
and the transactions contemplated by the merger agreement, "FOR" the amendment  
to NEON's certificate of incorporation, "FOR" the amendment to the certificate  
of designation for the NEON convertible preferred stock and "FOR" the proposal  
to grant discretionary authority to adjourn or postpone the NEON special meeting
to solicit additional votes to approve the matters considered at the NEON       
special meeting, if necessary.                                                  

OPINION OF NEON'S FINANCIAL ADVISOR                                             

      Adams Harkness, Inc. (f/k/a Adams, Harkness & Hill, Inc.) provided a
fairness opinion to the NEON special committee on July 16, 2004 that, as of the 
date of such fairness opinion, the exchange ratio payable pursuant to the merger
agreement was fair, from a financial point of view, to the holders of NEON      
common stock (as stockholders of NEON). The full text of the July 16, 2004      
fairness opinion, which sets forth assumptions made, matters considered and     
limitations on the review undertaken in connection with the fairness opinion, is
attached as Appendix E to this joint proxy statement/prospectus and is          
incorporated herein by reference (the "Adams Harkness fairness opinion"). The   
Adams Harkness fairness opinion, referred to herein, does not constitute a      
recommendation as to how any NEON stockholder should vote with respect to the   
merger. NEON stockholders are urged to, and should, read the fairness opinion in
its entirety.                                                                   

        The NEON special committee retained Adams Harkness to assist it in its
evaluation of the proposed merger. Pursuant to the terms of Adams Harkness'     
engagement letter, Adams Harkness was retained by the NEON special committee to 
render an opinion as to the fairness, from a financial point of view, to the    
stockholders of NEON of the consideration to be received, or the exchange ratio 
to be employed, as the case may be, by such stockholders in connection with the 
merger. Adams Harkness is a nationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and their securities in        
connection with mergers and acquisitions, negotiated underwritings, private     
placements and valuations for corporate and other purposes.                     

      At the meeting of the NEON special committee on July 16, 2004, Adams
Harkness rendered its fairness opinion, in writing, that, as of that date, based
upon and subject to the various considerations set forth in such fairness       
opinion, the exchange ratio of 1.2748 set forth in the draft merger agreement   
dated as of July 16, 2004 is fair, from a financial point of view, to the       
holders of NEON common stock (as stockholders of NEON).                         

     The Adams Harkness fairness opinion is directed to the NEON special
committee and addresses only the fairness, from a financial point of view, of   
the exchange ratio of 1.2748 set forth in the merger agreement. The description 
of the Adams Harkness fairness opinion set forth in this joint proxy            
statement/prospectus is only a summary and NEON stockholders should refer to the
full text of the Adams Harkness fairness opinion.                               

      The following is a summary of the various sources of information and
valuation methodologies used by Adams Harkness in arriving at its fairness      
opinion. To assess the fairness of the transaction, Adams Harkness employed     
analyses based on the following:                                                

     o        relative valuations for each of NEON and Globix based on a
                 discounted cash flow valuation analysis for each company on a
stand-alone basis;                          

o        each company's implied pro forma revenue and EBITDA  
contribution to the combined entity;        

        o        valuation metrics derived from selected comparable companies;
and                                         

o        valuation metrics derived from selected precedent    
transactions.                               

63  

S-4/A
73rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 73rd
     In conducting its investigation and analysis and in arriving at its
opinion, Adams Harkness reviewed the information and took into account the      
investment, financial and economic factors it deemed relevant and material under
the circumstances. The material actions undertaken by Adams Harkness in         
connection with the preparation and rendering of its fairness opinion were as   
follows:                                                                        

        o        reviewed the terms of the merger agreement furnished to Adams
                  Harkness by legal counsel to the NEON special committee which,
                  for the purposes of the Adams Harkness fairness opinion, Adams
             Harkness assumed, with the permission of the NEON special
              committee, to be identical in all material respects to the
merger agreement to be executed;            

    o        analyzed and discussed with management of NEON and Globix
             certain historical and projected financial statements and
               other financial and operating data concerning each company,
                including with respect to Globix, forecasts characterized by
Globix management as a downside scenario;   

    o        reviewed and analyzed the historical common stock trading
history of Globix;                          

     o        conducted due diligence discussions with members of senior
          management of NEON and Globix concerning the financial
                performance, operations, business strategy and prospects for
such company, respectively;                 

  o        reviewed and analyzed the potential pro forma financial
               effects of the merger on the projected financial results of
the consolidated entity;                    

     o        compared the results of operations of Globix with those of
              certain companies Adams Harkness deemed to be relevant and
comparable;                                 

       o        compared the terms and conditions of the merger with certain
                 mergers and acquisitions Adams Harkness deemed to be relevant
and comparable;                             

      o        reviewed and analyzed the current capitalization of each of
       NEON and Globix, as well as the projected pro forma
               capitalization of Globix after giving effect to the merger;
and                                         

     o        performed such other financial studies, investigations and
                  analyses and took into account such other matters as it deemed
              necessary, including Adams Harkness' assessment of general
                  economic, market and monetary conditions as of the date of the
Adams Harkness fairness opinion.            

      In rendering its fairness opinion, Adams Harkness assumed and relied
upon the accuracy and completeness of all of the financial and other information
that was publicly available or provided to Adams Harkness by, or on behalf of,  
NEON and Globix, and did not independently verify such information. Adams       
Harkness also relied on the assurances of NEON's management that they were not  
aware of any facts that would make such information misleading. Adams Harkness  
assumed, with the NEON special committee's consent, that:                       

       o        with respect to forecasts reviewed relating to the prospects
          of NEON or Globix, that such forecasts were reasonably
             prepared on bases reflecting the best currently available
                 estimates and judgments of the management of NEON and Globix,
                respectively, as to the future financial performance of such
company;                                    

        o        all material assets and liabilities (contingent or otherwise,
                 known or unknown) of each of NEON and Globix are as set forth
              in the historic and projected financial statements of each
such company as provided to Adams Harkness; 

       o        obtaining any regulatory and other approvals and third party
              consents required for consummation of the merger would not
             have a material effect on the anticipated benefits of the
merger; and                                 

64  

S-4/A
74th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 74th
       o        the merger would be consummated in accordance with the terms
set forth in the merger agreement.          

        In conducting its review, Adams Harkness did not obtain an independent
evaluation or appraisal of any of the assets or liabilities (contingent or      
otherwise) of NEON or Globix. Adams Harkness' fairness opinion did not predict  
or take into account any possible economic, monetary or other changes which may 
occur, or information which may come available, after the date of its written   
fairness opinion.                                                               

   For purposes of its analyses, Adams Harkness assumed, among other
things, that there would be 25,156,262 pro forma fully diluted shares of NEON   
common stock outstanding, and 22,326,902 fully diluted shares of Globix common  
stock outstanding, immediately prior to the effective time of the merger.       

DISCOUNTED CASH FLOW ANALYSIS                                 

    Adams Harkness analyzed certain historical and projected financial
statements of NEON and Globix, provided by management of NEON and Globix,       
respectively, in performing a discounted cash flow analysis for each company.   
Adams Harkness relied on such information and assumed such information to be    
complete and accurate in all material respects. Through these analyses, Adams   
Harkness assessed the stand-alone value for each company based on the valuation 
implied by the present value of the company's future cash flows using selected  
discount rates. Implied equity values were then calculated using most recent    
(March 31, 2004) balance sheet information (assuming, based on discussions with 
management of NEON and Globix, the conversion of $12.5 million of Globix debt   
into equity). Terminal values were calculated by tax affecting out-year free    
cash flows at 40% and capitalizing this amount using a sensitized range of      
long-term growth rates (reflective of historical and projected performance) and 
weighted average costs of capital ("WACC"). The present value of tax shields    
relating to an out-year residual net operating loss balance was added to the    
valuation of both companies.                                                    

      Adams, Harkness also paid close attention to the fact that NEON is a
private company. In arriving at an appropriate valuation, Adams Harkness applied
a discount to the value of NEON's securities based on its view that valuations  
of private securities are subject to a discount relative to the market price of 
comparable public securities, reflecting the inability to freely trade such     
private securities in the public marketplace. For purposes of its analysis,     
Adams Harkness applied a 26% valuation discount (reflecting a 30% base discount,
reduced to adjust for NEON's size).                                             

         In arriving at the appropriate discount rates to apply to each company,
Adams Harkness performed WACC calculations, based on the respective balance     
sheet information of each company as of March 31, 2004 (adjusted, in the case of
Globix, to reflect the anticipated conversion of $12.5 million of Globix debt   
into equity prior to closing). For purposes of this calculation, Adams Harkness:

   o        calculated beta, in the case of Globix, using comparable
             publicly traded companies, and in the case of NEON, using
                 Ibbotson SIC code small company composite data because of the
            limited number of comparable, publicly traded companies;

 o        assumed a risk free rate of 4.5% (based on the 10 year
               Treasury Note yield as of July 15, 2004), and a market risk
premium of 7%;                              

o        applied a 7% size premium adjustment to the base WACC
calculated for each company; and            

    o        applied a 26% premium to NEON's cost of equity capital to
                 reflect the impact of the lack of a liquid, public market for
NEON's securities.                          

     Based on these assumptions, Adams Harkness performed three-year and
five-year discounted cash flow analyses for each company, sensitized in each    
case to account for a range of long-term revenue growth rates and WACCs. For    
NEON, Adams Harkness utilized long-term revenue growth rates between 5.5% and   
6.5%, and WACCs ranging from 25.0% to 26.0%. Based on the above assumptions and 
sensitivities, Adams Harkness' three-year discounted cash flow analysis resulted
in a range of implied equity values for NEON between $51.8 million and $53.5    
million, and the five-year discounted cash flow analysis resulted in a range of 
implied equity values for NEON between $66.3 million and $70.9 million.         

65  

S-4/A
75th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 75th
    For Globix, Adams Harkness utilized long-term revenue growth rates
between 4.5% and 5.5%, and WACCs ranging from 14.0% to 15.0%. Based on the above
assumptions and sensitivities, Adams Harkness' three-year discounted cash flow  
analysis resulted in a range of implied equity values for Globix between $31.7  
million and $47.3 million, and the five-year discounted cash flow analysis      
resulted in a range of implied equity values for Globix between $37.5 million   
and $52.4 million.                                                              

Using the ranges of equity values listed above, Adams Harkness
calculated ranges of implied NEON pro forma ownership in the consolidated       
entity. Based on each company's three-year discounted cash flow analysis, Adams 
Harkness derived a range of implied NEON pro forma equity ownership in the      
consolidated entity of between 53% and 62%. Based on each company's five-year   
discounted cash flow analysis, Adams Harkness derived a range of implied NEON   
pro forma equity ownership in the consolidated entity of between 58% and 64%.   

CONTRIBUTION ANALYSIS                                         

         Based on management projections, Adams Harkness analyzed each company's
implied pro forma ownership in the consolidated entity based on the percentage  
of projected revenues and EBITDA each company will contribute to the            
consolidated entity. Because of each company's limited operating history        
following emergence from bankruptcy, Adams Harkness primarily focused on each   
company's projected revenue and EBITDA contribution for the calendar years 2004 
- 2006.                                                                         

         The following table reflects the projected revenue contribution of each
of NEON and Globix to the consolidated entity based on each company's respective
revenue projections:                                                            

                                                        [Enlarge/Download Table]
                          -------------------------------------------------------------------
                                     Revenue Contribution to Consolidated Entity             
                                     -------------------------------------------             

                                  Year                      NEON                  Globix     
                                  ----                      ----                  ------     
                          --------------------- ----------------------------- ---------------
                                                                                             
                          CY 2004E                         43.4%                  56.6%      
                          --------------------- ----------------------------- ---------------
                          CY 2005E                         46.6%                  53.4%      
                          --------------------- ----------------------------- ---------------
                          CY 2006E                         51.6%                  48.4%      
                          --------------------- ----------------------------- ---------------
                          CY 2007E                         55.9%                  44.1%      
                          --------------------- ----------------------------- ---------------
                          CY 2008E                         59.5%                  40.5%      
                          --------------------- ----------------------------- ---------------

         The following table reflects the projected EBITDA contribution of each              
of NEON and Globix to the consolidated entity based on each company's respective             
EBITDA projections:                                                                          

                          -------------------------------------------------------------------
                                      EBITDA Contribution to Consolidated Entity             
                                      ------------------------------------------             

                                  Year                      NEON                  Globix     
                                  ----                      ----                  ------     
                          --------------------- ----------------------------- ---------------
                          CY 2004E                         57.2%                  42.8%      
                          --------------------- ----------------------------- ---------------
                          CY 2005E                         59.6%                  40.4%      
                          --------------------- ----------------------------- ---------------
                          CY 2006E                         69.2%                  30.8%      
                          --------------------- ----------------------------- ---------------
                          CY 2007E                         73.5%                  26.5%      
                          --------------------- ----------------------------- ---------------
                          CY 2008E                         75.8%                  24.2%      
                          --------------------- ----------------------------- ---------------

66  

S-4/A
76th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 76th
PUBLIC COMPANY PEER ANALYSIS                                                    

         Adams Harkness established a group of publicly traded companies that it
deemed comparable to each of NEON and Globix based on similarity of services    
offered, markets served and financial performance (collectively, for purposes of
this section, the "Peer Group Companies"), and analyzed certain operating       
performance characteristics and public market valuation metrics of such Peer    
Group Companies. Such information included:                                     

 o        last twelve months revenue and projected 2004 and 2005
revenue;                                    

o        last twelve months earnings before interest and taxes
             depreciation and amortization, referred to as EBITDA, and
 projected 2004 and 2005 projected EBITDA; and

       o        ratio of enterprise value to last twelve months revenue, and
2004 and 2005 projected revenue.            

        NEON is a privately held regional service provider of advanced optical
networking solutions and services in the Northeast and mid-Atlantic markets.    
Adams Harkness established the following group of four publicly traded companies
in the communications and information services industry that it deemed          
comparable to NEON (in alphabetical order):                                     

                                                        [Enlarge/Download Table]
-------------------------------- ---------------- ----------------- ---------------- -----------------
                                                                       Last Twelve      Last Twelve   
                                       Market        Enterprise          Months           Months      
           Company                     Value          Value (1)        Revenue (2)      EBITDA (2)    
           -------                     -----          ---------        -----------      ----------    
-------------------------------- ---------------- ----------------- ---------------- -----------------
                                   (IN MILLIONS)    (IN MILLIONS)     (IN MILLIONS)    (IN MILLIONS)  
-------------------------------- ---------------- ----------------- ---------------- -----------------
                                                                                                      
Corvis Corp                           $600.4            $317.4            $459.6             NMF      
-------------------------------- ---------------- ----------------- ---------------- -----------------
Fiber Net Telecom Group                $48.5             $57.0             $30.5             NA       
-------------------------------- ---------------- ----------------- ---------------- -----------------
Global Crossing                       $277.9            $172.9          $2,932.0             NA       
-------------------------------- ---------------- ----------------- ---------------- -----------------
Level 3 Communications              $2,071.2          $6,242.2          $1,619.0           $412.0     
-------------------------------- ---------------- ----------------- ---------------- -----------------

  (1) Market value is derived from share prices as of the close of
     trading on July 15, 2004 and the financial data information and the
number of fully diluted shares outstanding are taken from each
   company's most recent SEC filings. To determine enterprise value,
     market value is adjusted for a company's debt and cash positions by
adding the debt balance and subtracting the cash balance.     
       (2) Last twelve months revenue and last twelve months EBITDA data are
  obtained from each Peer Group Company's most recent SEC filings.

67  

S-4/A
77th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 77th
       Globix is a publicly traded (OTC Bulletin Board) provider of hosting,
network and applications solutions for businesses in the US and UK, based in New
York, NY and employing approximately 250 employees. Globix offers web hosting,  
dedicated internet access and networking services, streaming media, content     
delivery, network security solutions, virtual private networks, and managed     
network services. Adams Harkness established the following group of eight       
publicly traded companies in the hosting and network applications industry that 
it deemed comparable to Globix (in alphabetical order):                         

                                                        [Enlarge/Download Table]
-------------------------------- ---------------- ----------------- ---------------- -----------------
                                                                       Last Twelve      Last Twelve   
                                       Market        Enterprise          Months           Months      
           Company                     Value          Value (1)        Revenue (2)      EBITDA (2)    
           -------                     -----          ---------        -----------      ----------    
-------------------------------- ---------------- ----------------- ---------------- -----------------
                                   (IN MILLIONS)    (IN MILLIONS)     (IN MILLIONS)    (IN MILLIONS)  
-------------------------------- ---------------- ----------------- ---------------- -----------------
                                                                                                      
Corio Inc                             $116.3              $83.3            $67.4            $1.6      
------------------------------- ----------------- ----------------- ---------------- -----------------
Equant                              $1,561.1           $1,232.0         $2,948.9          $208.5      
------------------------------- ----------------- ----------------- ---------------- -----------------
Equinix Inc                           $532.4             $560.2           $128.8            $5.7      
------------------------------- ----------------- ----------------- ---------------- -----------------
Interland Inc                          $47.3              $17.2           $106.0             NMF      
------------------------------- ----------------- ----------------- ---------------- -----------------
InterNAP Network Services             $347.7             $270.0           $140.7           $10.6      
------------------------------- ----------------- ----------------- ---------------- -----------------
NaviSite Inc                           $90.5              $95.0            $73.9             NMF      
------------------------------- ----------------- ----------------- ---------------- -----------------
Raindance Communications              $109.6              $71.6            $74.8           $12.9      
------------------------------- ----------------- ----------------- ---------------- -----------------
Savvis Communications                 $142.3             $173.6           $305.8             NMF      
------------------------------- ----------------- ----------------- ---------------- -----------------

  (1) Market value is derived from share prices as of the close of
     trading on July 15, 2004 and the financial data information and the
number of fully diluted shares outstanding are taken from each

   company's most recent SEC filings. To determine enterprise value,
     market value is adjusted for a company's debt and cash positions by
adding the debt balance and subtracting the cash balance.     
       (2) Last twelve months revenue and last twelve months EBITDA data are
  obtained from each Peer Group Company's most recent SEC filings.

      Based on its expertise in the valuation of publicly-traded companies
and, in particular, its research into the performance variables considered by   
investors when assessing relative value among the Peer Group Companies, Adams   
Harkness concluded that, because of the limited set of comparable companies,    
most without valuation metrics applicable to NEON or Globix, the valuations     
implied for both NEON and Globix through peer group analyses were rendered less 
meaningful than those derived from certain other analyses.                      

PRECEDENT TRANSACTION ANALYSIS                                

Adams Harkness assessed the transaction premiums and relative 
valuations associated with selected precedent publicly disclosed acquisitions it
deemed relevant. Adams Harkness reviewed five precedent transactions related    
specifically to communications and information services companies. Each of the  
five precedent transactions were announced after July 23, 2003. Adams Harkness  
analyzed the transaction value to last twelve months revenue multiple and the   
transaction value to EBITDA multiple paid in each transaction.                  

Premiums paid in precedent public company change of control   
transactions typically imply the range of consideration acquirors are willing to
pay above a seller's stock price prior to or at the time of the announcement of 
the relevant transaction. However, since market conditions change over time,    
valuation metrics derived from precedent transactions may or may not be accurate
proxies for value at a given point in time.                                     

68  

S-4/A
78th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 78th
         Adams Harkness identified two precedent transactions with available and
applicable valuation metrics it deemed relevant to NEON. In chronological order,
the selected transactions were:                                                 

                                                        [Enlarge/Download Table]
   -------------------------- --------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------
                                                                  Value of   Enterprise  Target Net  Target LTM    Ent             
                                                       Date      Transaction    Value     Sales LTM     EBITDA      Val/   Ent Val/
          Target Name            Acquiror Name      Announced     ($ mil)      ($ mil)    ($ mil)      ($ mil)     Sales   EBITDA  
   -------------------------- --------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------
                                                                                                                                   
                              Reliance Gateway                                                                                     
   FLAG Telecom Group Ltd     Net Pvt Ltd           10/16/2003     194.8       176.0      148.5       (39.7)      1.2x      NMF    
   -------------------------- --------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------

   Focal Communications       Corvis Corporation     3/8/2004      210.0       297.0      306.9        15.7       1.0x     18.9x   
   -------------------------- --------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------

         Adams Harkness identified three precedent transactions with available                                                     
and applicable valuation metrics it deemed relevant to Globix. In chronological                                                    
order, the selected transactions were:                                                                                             

   -------------------------- --------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------
                                                                  Value of   Enterprise  Target Net  Target LTM    Ent             
                                                       Date      Transaction    Value     Sales LTM     EBITDA      Val/   Ent Val/
          Target Name            Acquiror Name      Announced     ($ mil)      ($ mil)    ($ mil)      ($ mil)     Sales   EBITDA  
   -------------------------- --------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------

   Digex Inc.            WorldCom Inc               7/24/2003      25.5        242.4      154.4        12.2       1.6x     19.8x   
   --------------------- -------------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------

   Axcelerant Inc        GRIC Communications Inc    8/12/2003      51.9        46.6        16.1        (2.8)      2.9x      NMF    
   --------------------- -------------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------

   Host Europe PLC       PIPEX Communications PLC    4/2/2004      55.0        46.5        30.4         6.2       1.5x     7.5x    
   --------------------- -------------------------- ----------- ------------ ---------- ----------- ------------ ------- ----------

   As part of its analysis of the above transactions, Adams Harkness
analyzed the ratio of enterprise value to last twelve months revenue of the     
target companies, as well as analyzing the enterprise value to EBITDA of the    
target companies. Based on this analysis, Adams Harkness applied a range of     
ratios of transaction value to last twelve months revenue and EBITDA multiples. 
The results of the analysis offered a mean enterprise value to last twelve      
months revenue of 1.6x, and a mean enterprise value to EBITDA of 15.4x. However,
because of the limited number of precedent transactions with available and      
applicable valuation metrics, Adams Harkness concluded that the valuations      
implied for each of NEON and Globix through precedent transaction analyses were 
less meaningful than those derived from certain other analyses.                 

69  

S-4/A
79th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 79th
SUMMARY OF FINANCIAL AND COMPARATIVE ANALYSES                 

        The foregoing summary does not purport to be a complete description of
the analyses performed by Adams Harkness. The preparation of a fairness opinion 
is a complex process. Adams Harkness believes that its analyses must be         
considered as a whole, and that selecting portions of such analysis without     
considering all analyses and factors would create an incomplete view of the     
processes underlying its fairness opinion. Any estimates contained in Adams     
Harkness' analyses are not necessarily indicative of actual values, which may be
significantly more or less favorable than as set forth therein. Estimates of    
values of companies do not purport to be appraisals or necessarily to reflect   
the prices at which companies may actually be sold. Such estimates are          
inherently subject to uncertainty. Adams Harkness advised the NEON special      
committee that the financial and comparative analyses conducted by it in        
rendering its fairness opinion (specifically, the discounted cash flow analysis,
the pro forma ownership analysis, the peer group analysis and the selected      
precedent transactions analysis) constituted a "going concern" analysis of NEON.
Taken together, the information and analyses employed by Adams Harkness lead to 
Adams Harkness' overall opinion that the exchange ratio of 1.2748 set forth in  
the merger agreement is fair, from a financial point of view, to holders of NEON
common stock (as stockholders of NEON).                                         

AFFIRMATION OF FAIRNESS OPINION                             

 On October 8, 2004 Adams, Harkness provided to the NEON special
committee, in writing, an affirmation of its fairness opinion that, as of such  
date, based upon and subject to the various considerations and assumptions set  
forth in the affirmation of the fairness opinion, the exchange ratio is fair,   
from a financial point of view, to holders of NEON common stock (as stockholders
of NEON). The full text of the affirmation of the fairness opinion dated October
8, 2004, which sets forth, among other things, the assumptions made, procedures 
followed, matters considered, and limitations on the scope of the review        
undertaken by Adams, Harkness in rendering its affirmation of its opinion, is   
attached as Appendix F to this joint proxy statement/prospectus and is          
incorporated herein by reference. The Adams, Harkness affirmation of its        
fairness opinion is directed to the NEON special committee and addresses only   
the fairness, from a financial point of view, of the Exchange Ratio pursuant to 
the merger agreement as of October 8, 2004, and does not address any other      
aspect of the merger or constitute a recommendation to any holder of common     
stock as to how to vote at the special meeting. In connection with Adams,       
Harkness' affirmation of its fairness opinion review and arriving at the        
fairness opinion and this affirmation thereof, Adams, Harkness has not          
independently verified any information received from NEON or Globix, have relied
on such information, and have assumed that all such information is complete and 
accurate in all material respects. Adams, Harkness has also relied on the       
assurances of management of NEON that they are not aware of any facts that would
make such information misleading. With respect to any forecasts reviewed,       
relating to the prospects of NEON or Globix, Adams, Harkness has assumed, and   
received written confirmation thereof, that they have been reasonably prepared  
on bases reflecting the best currently available estimates and judgments of     
management of NEON and Globix, respectively, as to the future financial         
performance of such company. In particular, with permission of the NEON special 
committee, in connection with the Adams, Harkness affirmation of the fairness   
opinion, Adams, Harkness has relied on the financial projections prepared by    
Globix management and utilized in the analysis supporting the fairness opinion  
of July 16, 2004, and not any subsequently shared financial modeling scenarios. 

70

S-4/A
80th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 80th
MATERIAL CONTRACTS BETWEEN GLOBIX AND NEON                                      

       Other than contracts relating to the merger agreement and the merger,
which are described in the section entitled "Terms of the Merger Agreement and  
Related Transactions" beginning on page 83 of this joint proxy                  
statement/prospectus, there are no material contracts between Globix and NEON.  

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

       INTERESTS OF GLOBIX'S AND NEON'S DIRECTORS AND OFFICERS IN THE MERGER

       When NEON's stockholders are considering the recommendation of NEON's
board of directors that they vote in favor of the adoption of the merger, the   
merger agreement and the transactions contemplated by the merger agreement and  
the other proposals set forth in this joint proxy statement/prospectus, NEON    
stockholders should be aware that some of the directors and officers of NEON    
have interests in the merger and participate in arrangements that are different 
from, or are in addition to, those of NEON stockholders generally. The NEON     
board of directors and its special committee were aware of these interests and  
considered them, among other matters, when they adopted and approved the merger,
the merger agreement and the transactions contemplated by the merger agreement  
(with Mr. Lampe abstaining from the voting, and as to the first amendment, with 
Messrs. Lampe and Grubin, abstaining from voting).                              

Similarly, when Globix's stockholders are considering the     
recommendation of Globix's board of directors that they vote in favor of the    
issuance of Globix common stock in connection with the merger, Globix           
stockholders should be aware that some of the directors and officers of Globix  
have interests in the merger and participate in arrangements that are different 
from, or are in addition to, those of Globix stockholders generally. The Globix 
board of directors and its special committee were aware of these interests and  
considered them, among other matters, when they adopted and approved the merger,
the merger agreement and the transactions contemplated by the merger agreement  
(with Mr. Lampe abstaining from the voting).                                    

    These special interests on behalf of Globix and NEON directors and
officers include the following:                                                 

       SIGNIFICANT HOLDERS OF GLOBIX AND NEON SECURITIES ARE AFFILIATED WITH
NEON AND GLOBIX DIRECTORS                                     

         Certain NEON stockholders who beneficially own a significant percentage
of NEON securities also beneficially own a significant percentage of the Globix 
common stock. Beneficial ownership of the equity securities of Globix and NEON  
by significant stockholders is disclosed under "Share Ownership of Certain      
Beneficial Owners and Management of Globix," "Security Ownership of Directors,  
Executive Officers and More Than Five Percent Stockholders of NEON" and         
"Securities Ownership of Certain Beneficial Owners and Management of Globix     
Following the Merger" on pages 123, 153 and 169 of this joint proxy             
statement/prospectus. These persons may have interests in the merger that are   
different from, or are in addition to, those of NEON stockholders generally.    

         Steven Lampe, a director of both Globix and NEON, is affiliated with LC
Capital Master Fund Ltd., which holds approximately 7.4% of the outstanding     
common stock of Globix and 10.4% and 15.6%, respectively, of the outstanding    
common stock and convertible preferred stock of NEON, as of December 1, 2004.   
Mr. Singer, the non-executive chairman of the board of directors of Globix, is a
trustee of certain trusts for the benefit of his brother's children. These and  
other trusts for the benefit of his brother's children (collectively, the       
"Singer Trusts") hold approximately 6.9% of the outstanding common stock of     
Globix and 3.2% and 27.5%, respectively, of the outstanding common stock and    
convertible preferred stock of NEON, as of December 1, 2004. Robert Grubin, a   
director of NEON, is a partner at Loeb Partners Corp., which holds approximately
2.5% of the outstanding common stock of Globix and 13.8% and 4.0%, respectively,
of the outstanding common stock and convertible preferred stock of NEON, as of  
December 1, 2004.                                                               

71

S-4/A
81st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 81st
DEBT-FOR-EQUITY EXCHANGE                                      

      It is a condition to the closing of the merger that some of Globix's
11% senior note holders exchange $12.5 million in principal and accrued interest
of Globix's 11% senior notes for approximately 4,545,455 shares of Globix common
stock at a price per share of $2.75, the approximate trading price of the Globix
common stock at the time the parties reached an agreement on the overall amount 
of the exchange. LC Capital Master Fund Ltd. and the Singer Children's          
Management Trust, one of the Singer Trusts, have agreed to participate in the   
debt-for-equity exchange which is described in more detail in the section       
entitled "Terms of the Merger Agreement and Related Transactions -              
Debt-for-Equity Exchange" beginning on page 94 of this joint proxy              
statement/prospectus.                                                           

ACCELERATED VESTING OF OPTIONS                                

   All officers and directors of NEON, including Mr. Courter and Mr.
Marshall, have stock option agreements (and employment agreements in the case of
Mr. Courter and Mr. Marshall) that provide that, upon a change of control of    
NEON, including a transaction such as the merger, their unvested options will   
accelerate and become fully vested and exercisable. Options to purchase         
approximately 1,349,677 shares of NEON common stock held by NEON's officers and 
directors at a weighted exercise price of $5.24 per share will be fully vested  
and exercisable immediately prior to the completion of the merger.              

INDEMNIFICATION AND DIRECTORS AND OFFICERS INSURANCE          

 The merger agreement requires Globix and NEON, as the surviving
corporation, to indemnify and hold harmless each present and former director and
officer of NEON and other persons entitled to indemnification under the         
certificate of incorporation and bylaws or similar organizational documents of  
NEON or any of its subsidiaries as in effect on the date of the merger agreement
against any costs or expenses reasonably incurred in connection with any        
threatened, pending or completed claim, action, suit, proceeding or             
investigation brought against such indemnified person and arising out of or     
pertaining to matters existing or occurring with respect to NEON or any of its  
subsidiaries at or prior to the effective time of the merger to the fullest     
extent permitted under NEON's organizational documents and applicable law. Each 
indemnified person will be entitled to advancement of expenses incurred in the  
defense of any claim, action, suit, proceeding or investigation from Globix and 
NEON to the fullest extent permitted by the Delaware General Corporation Law and
the Sarbanes-Oxley Act of 2002. However, any person to whom expenses are        
advanced must provide an undertaking to repay such advances if it is ultimately 
determined that such person is not entitled to indemnification.                 

      Additionally, the merger agreement requires that NEON maintain for a
period of at least five years policies of directors' and officers' liability    
insurance and fiduciary liability insurance for the benefit of the indemnified  
persons with respect to claims arising from facts or events that occurred on or 
before the effective time of the merger, including in respect of the            
transactions contemplated by the merger agreement.                              

BUSINESS ADVISORS OF NEON AND GLOBIX                          

    CTA provides consulting and business development services to NEON.
Under a letter agreement between NEON and CTA, CTA agreed to present merger and 
acquisition advice and opportunities to NEON for a success fee. CTA has agreed  
to waive this fee in relation to the merger. NEON has issued to certain current 
and former affiliates of CTA and certain of such affiliates' designees warrants 
exercisable for 300,000 shares of NEON common stock at $6.06 per share through  
October 23, 2008 and warrants exercisable for 350,000 shares of NEON common     
stock at $5.30 per share through December 3, 2007, as payment for such services.
CTA purchased the warrants exercisable for 350,000 shares of NEON common stock  
for $25,000. One of CTA's employees, Wayne Barr, Jr., serves on NEON's board of 
directors and Mr. Barr will serve on the board of directors of Globix following 
the merger. A current director of NEON, Mr. Aquino, was affiliated with CTA at  
the time NEON's board of directors approved the merger.                         

72  

S-4/A
82nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 82nd
      CTA provides similar consulting and business development services to
Globix. Under a letter agreement between Globix and CTA, CTA is entitled to a   
success fee if Globix consummates a sale, merger or similar transaction with    
CTA's assistance. CTA has agreed to waive this fee in relation to the merger.   
Certain affiliates of CTA, including Mr. Barr, hold warrants exercisable for    
500,000 shares of Globix common stock at $3.00 per share through March 13, 2013,
which were purchased for $25,000. See "Description of Globix Capital Stock -    
Description of Globix Warrants" beginning on page 130 of this joint proxy       
statement/prospectus.                                                           

OPERATION OF GLOBIX AND NEON AFTER THE MERGER                                   

         Following the merger, the stockholders of NEON will become stockholders
of Globix, and their rights as stockholders will be governed by Globix's        
certificate of incorporation and bylaws, each as amended to date and currently  
in effect, and the laws of the State of Delaware. See "Comparison of Stockholder
Rights," beginning on page 179 of this joint proxy statement/prospectus.        

       After the merger, NEON, as the surviving entity following the merger,
will continue to operate as a wholly owned subsidiary of Globix. Upon the       
completion of the merger, Mr. Courter, the chairman of the board, president and 
chief executive officer of NEON, will be the chairman of the board, president   
and chief executive officer and a director of the wholly owned subsidiary NEON  
and will be a director of Globix, and all other executive officers and directors
of NEON before the merger will serve in such capacities after the merger,       
subject to the authority of the board of directors of Globix after the merger.  

         After the merger, the board of directors of Globix will be comprised of
nine members, including four persons who are currently directors of Globix      
(Messrs. Herzig, Singer, Steele and Stevenson), four persons who are currently  
directors of NEON (Messrs. Barr, Cecin, Courter and Forsgren) and one person who
is currently a director of both companies (Mr. Lampe). The management of Globix 
after the transaction will remain unchanged, except that Mr. Courter may be     
deemed an executive officer of Globix for purposes of the Securities Exchange   
Act of 1934, by virtue of his position with a principal business unit of Globix.
For further information, see "Management of Globix After the Merger," beginning 
on page 157 of this joint proxy statement/prospectus.                           

ACCOUNTING TREATMENT                                                            

      Globix intends to account for the merger as a purchase in accordance
with generally accepted accounting principles in the United States. Globix has  
been identified as the acquirer for accounting purposes as a result of the      
following: Globix will pay part of the consideration to acquire NEON in cash,   
part through the issuance of Globix common stock and convertible preferred stock
and part through the assumption of NEON warrants and options; the merged        
company's management and operations are expected to be controlled by Globix's   
board of directors which will consist of four individuals who are currently     
members of the board of directors of Globix, four individuals who are currently 
members of the board of directors of NEON and one individual who is currently a 
member of the board of directors of both NEON and Globix; and the current       
holders of Globix common stock are expected to continue to hold the majority of 
the common stock of the combined company following the merger, factoring in     
cross ownership between the two companies.                                      

       The purchase price will be allocated to NEON's assets and liabilities
based on their estimated fair values at the time of completion of the merger.   
The excess of the fair value of the identifiable net assets acquired over the   
purchase price (i.e. negative goodwill) which is expected to be approximately   
$25.7 million, will be reduced to zero by assigning it on a pro rata basis to   
the estimated fair value of all identified noncurrent acquired assets. Following
the completion of the merger, the results of operations of NEON will be included
in the consolidated financial statements of Globix from the date of the         
acquisition.                                                                    

GOVERNMENTAL AND REGULATORY APPROVALS                                           

     The Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended
(the "HSR Act") and its related rules and regulations prohibit Globix and NEON  
from completing the merger until Globix and NEON each file notifications with   
the Antitrust Division of the Department of Justice and the Federal Trade       
Commission, and the HSR Act waiting period requirements have been satisfied.    
Even after the HSR Act waiting period expires or is terminated, and even after  
the merger is completed, the Antitrust Division or the Federal Trade Commission 
could challenge the merger on antitrust grounds. In addition, before or after   
the merger is completed, states and private litigants could also challenge the  
merger on antitrust grounds. Globix and NEON each filed HSR Act notifications   
with the Federal Trade Commission and the Antitrust Division on August 13, 2004,
and the waiting period was terminated on August 20, 2004.                       

73  

S-4/A
83rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 83rd
       NEON's subsidiary, NEON Connect, Inc., has competitive local exchange
carrier, or CLEC, authorization in several states in the Northeast and          
mid-Atlantic regions. Of these several states, Vermont, New Jersey and Delaware 
require that approval must be granted in order for NEON Connect, Inc.'s parent  
company, NEON, to merge with and into a wholly owned subsidiary of Globix.      
Similarly, NEON's subsidiary NorthEast Optic Network of New York, Inc. also has 
authorization to be a CLEC in the State of New York. The State of New York also 
requires that approval be granted by the state in order for NEON, as the parent 
of NorthEast Optic Network of New York, Inc., to consummate the merger. Each of 
these states requires the approval as a means of ensuring that after the merger 
has taken place, the new organization will maintain the obligations that each   
state requires in order to be a CLEC. NEON and Globix have submitted            
applications to the state agencies that oversee public utilities in each of the 
four states identified above.                                                   

        NEON has received approval from each of the state agencies of Vermont,
Delaware and New York. Approval from the state of New Jersey is pending subject 
to customary authorization process.                                             

 NEON Connect, Inc. also possesses CLEC authorizations in Maine,
Maryland, Massachusetts, New Hampshire, Rhode Island and Washington, D.C. In    
each of these jurisdictions, the agency that oversees public utilities requires 
that it be notified of the merger, as part of regulating CLECs. The State of New
Hampshire requires the notification before the merger closes and the remaining  
jurisdictions require notification after the merger is completed. NorthEast     
Optic Network of Connecticut, Inc., a subsidiary of NEON, also possesses        
authorization to be a CLEC in the State of Connecticut. Connecticut, as part of 
regulating competitive local exchange carriers, also requires that its agency   
which oversees public utilities receive a notice of the merger after the merger 
is completed.                                                                   

      NEON Optica is a party to a franchise agreement with the City of New
York and a fiber optic cable license agreement with the City of White Plains,   
New York. Both of these agreements require the respective cities to give their  
prior written consent in the event of a change of control of NEON Optica or any 
person holding control of NEON Optica. NEON has solicited from the cities the   
required consents and is working with each of the cities to obtain those        
consents.                                                                       

      Other than the SEC declaring Globix's registration statement on Form
S-4 relating to this transaction effective, approval under the HSR Act and      
approval from certain state agencies with regard to CLEC authorization, Globix  
and NEON do not believe that any additional material governmental filings are   
required in connection with the merger.                                         

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES                          

This discussion is based on the Internal Revenue Code of 1986, as amended       
(referred to in this discussion as the "Code"), and on Treasury regulations,    
administrative rulings and court decisions in effect as of the date of this     
joint proxy statement/prospectus, all of which may change at any time, possibly 
with retroactive effect.                                                        

A. TO THE HOLDERS OF NEON SECURITIES                                            

        The following discussion summarizes the material United States federal
income tax consequences of the merger that are generally applicable to holders  
of NEON common stock, NEON convertible preferred stock, NEON Class A warrants,  
NEON redeemable preferred stock warrants, and NEON CTA warrants (collectively,  
"NEON Securities"). This discussion assumes that holders of NEON Securities hold
their securities as capital assets within the meaning of Section 1221 of the    
Code. This discussion does not address all aspects of United States federal     
income taxation that may be important to a holder of NEON Securities in light of
his, her or its particular circumstances or particular tax status, including,   
without limitation, the following:                                              

         o        holders of securities who are not citizens or residents of the
United States;                              

o        financial institutions;                              

o        tax exempt organizations;                            

74  

S-4/A
84th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 84th
o        mutual funds;                                        

o        pension funds;                                       

o        insurance companies;                                 

o        dealers in securities or foreign currency;           

        o        holders of securities who acquired their shares in connection
     with stock option grants or in other compensatory
transactions; and                           

       o        holders of securities who hold their securities as part of a
hedge, straddle or conversion transaction.  

In addition, the following discussion does not address the tax
consequences of other transactions effectuated prior to or after the merger,    
whether or not such transactions are in connection with the merger. Furthermore,
neither estate and gift nor foreign, state or local tax considerations are      
addressed. No ruling has been obtained from the Internal Revenue Service        
regarding the tax consequences of the merger, and the following discussion is   
not binding on the Internal Revenue Service.                                    

        WE URGE HOLDERS OF NEON SECURITIES TO CONSULT THEIR OWN TAX ADVISOR(S)
AS TO THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF
THE MERGER AND THEIR RELATED REPORTING OBLIGATIONS IN LIGHT OF THEIR PARTICULAR 
CIRCUMSTANCES.                                                                  

     The merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, by virtue of Section 368(a)(2)(E) of the Code, with 
each of Globix, NEON the transitory merger subsidiary of Globix formed for      
purposes of this transaction ("Merger Corp."), qualifying as a "party to a      
reorganization" under Section 368(b) of the Code. Qualifying as a               
"reorganization" within the meaning of Section 368(a) of the Code would result  
in the following federal income tax consequences, subject to the limitations and
qualifications referred to above:                                               

Recognition of Gain or Loss                                   
---------------------------                                   

               o    No gain or loss will be recognized by holders of NEON common
                   stock solely with respect to their receipt of Globix common
stock in the merger.                    

          o    The Internal Revenue Service (the "IRS") has ruled that
                    amounts received in a reorganization with respect to accrued
                 dividends, where there has been no declaration to pay the
            dividends, are treated as part of the reorganization
                  consideration and not as a payment of the accrued dividend
                (though the reorganization consideration, in whole or in
                    part, may be treated as a dividend under the rules discussed
                    below). Provided that amounts distributed to holders of NEON
             convertible preferred stock in respect of the accrued
                    dividends that have not been declared are treated as part of
                 the reorganization consideration, no gain or loss will be
                 recognized by holders of NEON convertible preferred stock
           with respect to their receipt of Globix convertible
                 preferred stock in the merger. However, gain, if any, but
                  not loss, will be recognized with respect to cash received
              by a holder of NEON convertible preferred stock in the
                merger, but only to the extent of the lesser of the cash
                  received or the excess of the sum of the cash received and
                 the fair market value of the Globix convertible preferred
                    stock received over the holder's basis in the shares of NEON
       convertible preferred stock exchanged therefor.

75  

S-4/A
85th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 85th
            o    Gain recognized by a holder of NEON convertible preferred
                    stock, if any, will be capital gain (taxed to individuals at
                   a maximum tax rate of 15% if the shares of NEON convertible
                 preferred stock have been held for more than one year and
           otherwise at ordinary income tax rates and taxed to
                  corporations at a maximum tax rate of 35%) unless the cash
                    received for NEON convertible preferred stock has the effect
                  of a dividend under the provisions of Sections 356 and 302
              of the Code, in which case the gain will be treated as
                  dividend income (taxed to individuals at a maximum rate of
                   15% in the case of qualifying dividends and to corporations
              at a maximum tax rate of 35%, though the amount of the
                   dividend to corporate holders may be reduced by a dividends
                    received deduction, as discussed below) to the extent of the
              holder's ratable share of any earnings and profits, as
                  calculated for federal income tax purposes, and any excess
                    will be capital gain. The receipt of cash generally will not
              have the effect of a dividend if it is not essentially
               equivalent to a dividend under Section 302(b)(1) of the
                 Code, which generally requires that there be a meaningful
                  reduction of the interest such holder otherwise would have
                  had in Globix immediately following the merger had part of
                    its convertible preferred stock not been exchanged for cash.
                   The IRS has indicated that any reduction in the interest of
                   a minority shareholder that owns a very small percentage of
                    the shares of a public and widely held corporation will be a
                  meaningful reduction and therefore will not be essentially
              equivalent to a dividend where the holder exercises no
                   control over corporate affairs. For purposes of determining
                    whether a holder of NEON convertible preferred stock has had
                 a meaningful reduction of its interest as a result of the
                  merger, the constructive ownership rules of Section 318 of
            the Code apply in comparing such holder's percentage
                interest in Globix immediately after the merger with the
                   percentage of Globix such holder would have owned if it had
                   received Globix convertible preferred stock in lieu of cash
                  in the merger. Generally, the constructive ownership rules
                under Section 318 treat a holder as owning (i) shares of
               stock owned by certain relatives, related corporations,
                    partnership, estates or trusts, and (ii) shares of stock the
              holder has an option to acquire. As discussed above, a
               holder's receipt of cash that is treated as essentially
                  equivalent to a dividend up to the amount of the lesser of
              the cash received or the excess of the sum of the cash
                    received and the fair market value of the Globix convertible
               preferred stock received over the holder's basis in the
            shares of NEON convertible preferred stock exchanged
              therefor, will be taxed as dividend income only to the
            extent of the holder's ratable share of earnings and
                 profits, calculated under federal income tax rules. It is
                    not clear whether the relevant earnings and profits are only
                 those of NEON or also include the earnings and profits of
                Globix. NEON and Globix have each tentatively determined
                   that they do not anticipate having earnings and profits. If
                   this proves to be the case, the amount that would otherwise
                  have been treated as dividend income will be capital gain.
            Until such time as NEON and Globix make such a final
              determination, there can be no assurance as to whether
                    either or both of them has earnings and profits. A corporate
                  holder of NEON convertible preferred stock may be eligible
                   for a dividends received deduction on any amount treated as
                   a dividend, as discussed above. However, the benefit of the
                    dividends received deduction may be reduced or eliminated by
                 many exceptions to and restrictions on dividends received
                  deductions, including restrictions relating to the holding
                 period of stock, debt-financed portfolio stock, taxpayers
          that pay the alternative minimum tax and so-called
                    "extraordinary dividends" within the meaning of Section 1059
                  of the Code. If Section 1059 applies to a corporate holder
                   of NEON convertible preferred stock, the IRS probably would
                  take the position that the basis of the Globix convertible
               preferred stock received by such holder must be reduced
                    under Section 1059 by the amount of dividend income excluded
             by such corporate holder as a result of the dividends
               received deduction, and if the amount of such exclusion
                 exceeds such basis, the excess will be treated as capital
gain.                                   

76  

S-4/A
86th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 86th
               o    No gain or loss will be recognized by a holder of NEON Class
               A warrants with respect to its receipt solely of Globix
common stock in the merger.             

            o    Capital loss will be recognized by a holder of redeemable
                preferred stock warrants of NEON upon expiration of such
                 warrants in an amount equal to the holder's cost or other
                  basis for such warrants. Under current law, capital losses
                   are deductible only to the extent of capital gains plus, in
                   the case of a non-corporate taxpayer, ordinary income of up
to $3,000 in any year.                  

             o    No gain or loss will be recognized by a holder of NEON CTA
                 warrants with respect to its receipt solely of Globix CTA
warrants in the merger.                 

Basis of Globix Stock Received in the Merger                  
--------------------------------------------                  

             o    Except as described above with regard to certain corporate
                  holders of NEON convertible preferred stock, the aggregate
                tax basis of (i) the Globix common stock received in the
               merger by a holder of NEON common stock or NEON Class A
             warrants; (ii) the Globix convertible preferred stock
              received in the merger by a holder of NEON convertible
                 preferred stock; or (iii) the Globix warrants received in
                the merger by a holder of NEON CTA warrants will in each
                  case be the same as each such holder's aggregate tax basis
               in the NEON common stock, Class A warrants, convertible
               preferred stock or CTA warrants surrendered in exchange
              therefor, decreased by the amount of cash received and
                  increased by the amount of gain recognized on the exchange
                 (including any portion of such gain that was treated as a
dividend).                              

Holding Period                                                
--------------                                                

             o    The holding period for the Globix common stock received in
              the merger by a holder of NEON common stock or Class A
                warrants will include the period during which the holder
                  held the NEON common stock or Class A warrants surrendered
in exchange therefor.                   

          o    The holding period for the Globix convertible preferred
                    stock received in the merger by a holder of NEON convertible
                preferred stock will include the period during which the
                    holder held the NEON convertible preferred stock surrendered
in exchange therefor.                   

             o    The holding period for the Globix CTA warrants received in
                    the merger by a holder of NEON CTA warrants will include the
                 period during which the holder held the NEON CTA warrants
surrendered in exchange therefor.       

Globix Convertible Preferred Stock Redemption Premium         
-----------------------------------------------------         

        Under certain circumstances, Section 305 of the Code requires that any
excess of the redemption price of preferred stock over its issue price be       
treated, prior to its receipt, as a constructive distribution. A constructive   
distribution would be taken into account by the holders of the preferred stock  
on an economic accrual basis over the period that stock is outstanding and      
generally would be treated as a taxable dividend to the extent of the issuer's  
current and accumulated earnings and profits. Although constructive             
distributions on the Globix convertible preferred stock could be argued to      
result from the redemption and change of control rights applicable to the stock 
or from cumulative dividends on the stock that are not paid, and although this  
issue is not free from doubt, a holder of Globix convertible preferred stock    
probably would not be treated as receiving constructive distributions under     
Section 305 with respect to the Globix convertible preferred stock.             

77  

S-4/A
87th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 87th
Dissenters' Rights                                            
------------------                                            

         A dissenting stockholder who perfects dissenters' rights under Delaware
law generally will recognize gain or loss with respect to his, her or its shares
of NEON Securities equal to the difference between the amount of cash received  
and the basis in such shares. Such gain or loss generally will be long-term     
capital gain or loss, provided the shares were held for more than one year prior
to disposition. Interest, if any, awarded by a court in an appraisal proceeding 
would be included in such stockholder's income as ordinary income.              

Withholding                                                   
-----------                                                   

   Under the Code, payment to a holder of NEON Securities may, under
certain circumstances, be subject to backup withholding at a 28% rate with      
respect to the amount of cash, if any, received pursuant to the merger. Any     
amount withheld under the backup withholding rules is not an additional tax and 
may be refunded or credited against the holder's federal income tax liability,  
provided the required information is furnished to the IRS.                      

       Successful Challenge by the IRS to the Tax-Free Reorganization Status
       ---------------------------------------------------------------------
of Merger                                                     
---------                                                     

        The above summary of certain tax consequences of the merger to holders
of NEON Securities is not binding on the IRS and the parties are not requesting 
a ruling from the IRS in connection with the merger. A successful IRS challenge 
to the "tax-free reorganization" status of the merger would result in a holder  
of NEON Securities recognizing gain or loss with respect to the NEON Securities 
surrendered equal to the difference between the holder's basis in the NEON      
Securities surrendered and the fair market value, as of the effective time of   
the merger, of the consideration (including Globix common stock, Globix         
convertible preferred stock, Globix warrants, and cash) received in exchange for
such NEON Securities. In such event, the holder's aggregate basis in the Globix 
common stock, Globix convertible preferred stock or Globix warrants so received 
would equal their fair market value and their holding period would begin the day
after the merger.                                                               

B. TO GLOBIX AND NEON                                                           

Recognition of Gain or Loss                                   
---------------------------                                   

        Neither Globix, Merger Corp. nor NEON will recognize gain or loss as a
result of the merger.                                                           

Limitation on NEON and Globix Tax Attributes                  
--------------------------------------------                  

         Under Section 382 of the Code, following an "ownership change," special
limitations apply to the use by a "loss corporation" of its (i) net operating   
loss ("NOL") carryforwards arising before the ownership change and (ii) net     
unrealized built-in losses ("NUBILs") (if such losses existed immediately before
the ownership change and exceed a statutory threshold amount) recognized during 
the five years following the ownership change ((i) and (ii) are referred to     
collectively as the "Applicable Tax Attributes"). After an ownership change, the
amount of the loss corporation's taxable income for each post-change taxable    
year that may be offset by the Applicable Tax Attributes is limited to the      
product of the "long-term tax-exempt rate" (published by the IRS for the month  
of the ownership change) multiplied by the value of the loss corporation's stock
(the "Section 382 Limitation"). To the extent that the loss corporation's       
Section 382 Limitation in a given taxable year exceeds its taxable income for   
the year, that excess increases the Section 382 Limitation in future taxable    
years.                                                                          

         NEON had NOL carryforwards of approximately $79 million at December 31,
2003. These NOL carryforwards expire through 2023 and are subject to review and 
possible adjustment by the IRS. As a result of its bankruptcy reorganization in 
2002, NEON experienced an ownership change, subjecting approximately $65 million
of its NOL carryforwards to a Section 382 Limitation of approximately $6 million
per year.                                                                       

78  

S-4/A
88th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 88th
 Globix had NOL carryforwards of approximately $173.2 million at
September 30, 2004. These NOL carryforwards expire through 2024 and are subject 
to review and possible adjustment by the IRS. As a result of its bankruptcy     
reorganization in 2002, Globix experienced an ownership change, subjecting      
approximately $45 million of its NOL carryforwards and NUBILs (assuming Globix  
is found to have had NUBILs that exceeded the threshold at the time of its 2002 
bankruptcy reorganization) to a Section 382 Limitation. Globix has not yet      
determined the amount of the Section 382 Limitation or whether its NUBILs       
exceeded the threshold amount.                                                  

    As a result of the merger, NEON or Globix, or both, may experience
another ownership change. Under Section 382, the determination of whether an    
ownership change has occurred is based on ownership shifts involving persons or 
groups that are or are deemed to be "5% shareholders." Although NEON and Globix 
will each be tested for an ownership change, cross-ownership in NEON and Globix 
may be taken into account in determining whether a change in ownership has      
occurred as a result of the merger. If the merger results in an ownership change
for either NEON or Globix, or both, another Section 382 Limitation will apply to
the Applicable Tax Attributes of NEON and/or Globix, as the case may be,        
including both those that existed at the time of the bankruptcy ownership change
and Applicable Tax Attributes that arose thereafter. Only the Section 382       
Limitation resulting from the merger, if any, would apply to Applicable Tax     
Attributes that arose subsequent to NEON's or Globix's bankruptcy               
reorganization, as the case may be. NEON and Globix have not yet determined     
whether the merger will result in another ownership change of either of them.   
Further, whether or not the merger causes an ownership change, NEON or Globix   
may each experience an ownership change after the merger as a result of future  
changes in the ownership of their stock that could result in additional Section 
382 Limitations.                                                                

        Under regulations governing consolidated returns of affiliated groups,
NOL carryforwards of an acquired company or group can be used only to offset the
acquired company or group's taxable income, not to offset the taxable income of 
other members of the acquiring corporation's consolidated group. If, however,   
the shareholders of the acquired corporation in a merger receive more than 50   
percent of the fair market value of the stock of the acquiring corporation (as a
result of owning stock in the acquired corporation), the acquired company or    
group is treated as remaining in existence for purposes of the consolidated     
return rules (with the acquiring company as the new parent). In that case, the  
NOL limitation applies to the acquiring corporation, rather than to the acquired
corporation. As a result of this rule, NEON's consolidated group will be treated
as remaining in existence with Globix as the new parent and Globix's            
consolidated group will be treated as terminated. The use of Globix's NOL       
carryforwards will be limited under the above rule, unless Globix experiences a 
Section 382 ownership change as a result of the merger, in which case Globix's  
NOL carryforwards will be subject to a Section 382 Limitation but will not be   
subject to the consolidated group taxable income limitation.                    

APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS                                     

      Under Delaware law, the holders of NEON outstanding common stock and
convertible preferred stock who comply with the governing statutory provisions  
are entitled to appraisal rights to receive a judicially determined fair value  
for their shares instead of the merger consideration. The stockholders of Globix
are not entitled to appraisal rights in connection with the merger. If the      
merger is consummated, a holder of record of NEON stock on the date of making a 
demand for appraisal, as described below, will be entitled to have those shares 
appraised by the Delaware Court of Chancery under Section 262 of the Delaware   
General Corporation Law, or DGCL, and to receive payment for the "fair value" of
those shares instead of the consideration provided for in the merger agreement. 
In order to be eligible to receive this payment, however, a NEON stockholder    
must (1) continue to hold its shares through the time of the merger, and, as a  
result, a stockholder who is the record holder of shares of NEON common stock   
and convertible preferred stock on the date the written demand for appraisal is 
made, but who thereafter transfers those shares before the effective time of the
merger, will lose any right to appraisal in respect of those shares; (2)        
strictly comply with the procedures discussed under Section 262; and (3) not    
vote in favor of the merger or consent thereto in writing, and, as a result, a  
stockholder who submits a proxy and wishes to exercise appraisal rights must    
vote against the merger agreement or abstain from voting on the merger agreement
because a proxy which does not contain voting instructions will, unless revoked,
be voted in favor of the merger agreement. This joint proxy statement/prospectus
is being sent to all holders of record of NEON common stock and convertible     
preferred stock on the record date for the NEON special meeting and constitutes 

79  

S-4/A
89th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 89th
notice of the appraisal rights available to those holders under Section 262. The
written demand for appraisal must be in addition to and separate from any proxy 
or vote. Neither voting (in person or by proxy) against, abstaining from voting 
or failing to vote on the proposed merger agreement will constitute a written   
demand for appraisal within the meaning of Section 262.                         

         THE STATUTORY RIGHT OF APPRAISAL GRANTED BY SECTION 262 REQUIRES STRICT
COMPLIANCE WITH THE PROCEDURES IN SECTION 262. FAILURE TO FOLLOW ANY OF THESE   
PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF DISSENTERS' RIGHTS UNDER    
SECTION 262. THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL PROVISIONS OF SECTION  
262.                                                                            

         The following summary is not a complete statement of Section 262 of the
DGCL, and is qualified in its entirety by reference to Section 262, which is    
incorporated herein by reference, together with any amendments to the laws that 
may be adopted after the date of this joint proxy statement/prospectus. A copy  
of Section 262 is attached as Appendix C to this joint proxy                    
statement/prospectus.                                                           

      A holder of NEON stock who elects to exercise appraisal rights under
Section 262 must deliver a written demand for appraisal of its shares of NEON   
prior to the vote on the merger. The written demand must reasonably inform NEON 
of the identity of the holder and that the holder intends to demand the         
appraisal of the holder's shares. All demands should be delivered to NEON, 2200 
West Park Drive, Westborough, Massachusetts, 01581, Attention: Christopher E.   
Dalton, Esq.                                                                    

       Only a holder of shares of NEON stock on the date of making a written
demand for appraisal who continuously holds those shares through the time of the
merger is entitled to seek appraisal. Simply voting against the approval and    
adoption of the merger agreement does not constitute a demand for appraisal     
rights and does not constitute a waiver of appraisal rights. Demand for         
appraisal must be executed by or for the holder of record, fully and correctly, 
as that holder's name appears on the holder's stock certificates representing   
shares of NEON stock, should specify the holder's name and mailing address, the 
number of shares of NEON common stock and convertible preferred stock owned and 
that the holder intends to demand appraisal of the holder's shares. If NEON     
stock is owned of record in a fiduciary capacity by a trustee, guardian or      
custodian, the demand should be made in that capacity. If NEON stock is owned of
record by more than one person, as in a joint tenancy or tenancy in common, the 
demand should be made by or for all owners of record. An authorized agent,      
including one or more joint owners, may execute the demand for appraisal for a  
holder of record; that agent, however, must identify the record owner or owners 
and expressly disclose in the demand that the agent is acting as agent for the  
record owner or owners of the shares.                                           

      A record holder such as a broker who holds shares of NEON stock as a
nominee for beneficial owners, some of whom desire to demand appraisal, must    
exercise appraisal rights on behalf of those beneficial owners with respect to  
the shares of NEON stock held for those beneficial owners. In that case, the    
written demand for appraisal should state the number of shares of NEON stock    
covered by it. Unless a demand for appraisal specifies a number of shares, the  
demand will be presumed to cover all shares of NEON stock held in the name of   
the record owner.                                                               

        BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO EXERCISE
APPRAISAL RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO COMPLY WITH THE STATUTORY  
REQUIREMENTS WITH RESPECT TO THE EXERCISE OF APPRAISAL RIGHTS BEFORE THE DATE OF
THE NEON SPECIAL MEETING.                                                       

         Within 10 days after the merger, the surviving or resulting corporation
is required to send notice of the effectiveness of the merger to each           
stockholder who prior to the time of the merger complies with the requirements  
of Section 262 and has delivered notice of intent to demand appraisal.          

80  

S-4/A
90th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 90th
    Within 120 days after the merger, the surviving corporation or any
stockholder who has complied with the requirement of Section 262 may file a     
petition in the Delaware Court of Chancery demanding a determination of the fair
value of the shares of NEON stock held by all stockholders seeking appraisal. If
no petition is filed by either the surviving corporation or any dissenting      
stockholder within the 120-day period, the rights of all dissenting stockholders
to appraisal will cease. Stockholders seeking to exercise appraisal rights      
should not assume that the surviving corporation will file a petition with      
respect to the appraisal of the fair value of their shares or that the surviving
corporation will initiate any negotiations with respect to the fair value of    
those shares. The surviving corporation is under no obligation to and has no    
present intention to take any action in this regard. Accordingly, stockholders  
who wish to seek appraisal of their shares should initiate all necessary action 
with respect to the perfection of their appraisal rights within the time periods
and in the manner prescribed in Section 262. FAILURE TO FILE THE PETITION ON A  
TIMELY BASIS WILL CAUSE THE STOCKHOLDER'S RIGHT TO AN APPRAISAL TO CEASE.       

        A stockholder timely filing a petition for appraisal with the Delaware
Court of Chancery must deliver a copy to the surviving corporation, which will  
then be obligated within 20 days to provide the Register in Chancery with a duly
verified list containing the names and addresses of all stockholders who have   
demanded payment for their shares and with whom agreements as to the value of   
their shares have not been reached by the surviving corporation. After notice to
those stockholders, the Delaware Court of Chancery may conduct a hearing on the 
petition to determine which stockholders have become entitled to appraisal      
rights. The Court of Chancery may require stockholders who have demanded an     
appraisal of their shares and who hold stock represented by certificates to     
submit their certificates to the Register in Chancery for notation thereon of   
the pendency of the appraisal proceedings. If any stockholder fails to comply   
with such requirement, the Delaware Court of Chancery may dismiss the           
proceedings as to that stockholder.                                             

       Within 120 days after the time of the merger, any stockholder who has
complied with subsections (a) and (d) of Section 262 is entitled, upon written  
request, to receive from the surviving corporation a statement setting forth the
total number of shares of NEON stock not voted in favor of the merger with      
respect to which demands for appraisal have been received by NEON and the number
of holders of those shares. The statement must be mailed within 10 days after   
NEON has received the written request or within 10 days after the time for      
delivery of demands for appraisal under subsection (d) of Section 262 has       
expired, whichever is later.                                                    

    If a petition for an appraisal is filed in a timely manner, at the
hearing on the petition, the Delaware Court of Chancery will determine which    
stockholders are entitled to appraisal rights and will appraise the shares of   
NEON stock owned by those stockholders. The court will determine the fair value 
of those shares, exclusive of any element of value arising from the             
accomplishment or expectation of the merger, together with a fair rate of       
interest, to be paid, if any, upon the fair value.                              

      Stockholders who consider seeking appraisal should consider that the
fair value of their shares under Section 262 could be more than, the same as, or
less than, the value of the consideration provided for in the merger agreement  
without the exercise of appraisal rights. The Court of Chancery may determine   
the cost of the appraisal proceeding and assess it against the parties as the   
Court deems equitable. Upon application of a dissenting stockholder, the Court  
may order that all or a portion of the expenses incurred by any dissenting      
stockholder in connection with the appraisal proceeding (including, without     
limitation, reasonable attorney's fees and the fees and expenses of experts) be 
charged pro rata against the value of all shares of NEON stock entitled to      
appraisal. In the absence of a court determination or assessment, each party    
bears its own expenses. Final decisions by the Court of Chancery in appraisal   
proceedings are subject to appeal to the Delaware Supreme Court.                

       Any stockholder who has demanded appraisal in compliance with Section
262 will not, after the merger, be entitled to vote such stock for any purpose  
or receive payment of dividends or other distributions, if any, on the NEON     
stock, except for dividends or distributions, if any, payable to stockholders of
record at a date prior to the merger.                                           

81  

S-4/A
91st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 91st
         A stockholder may withdraw a demand for appraisal and accept the Globix
common stock and/or preferred stock and cash, as applicable, at any time within 
60 days after the merger by delivering to NEON a written withdrawal of the      
stockholder's demand for appraisal. If an appraisal proceeding is properly      
instituted, it may not be dismissed as to any stockholder without the approval  
of the Delaware Court of Chancery, and any such approval may be conditioned on  
the Court of Chancery's deeming the terms to be just. If, after the merger, a   
holder of NEON stock who had demanded appraisal for its shares fails to perfect 
or loses its right to appraisal, those shares will be treated under the merger  
agreement as if they were converted into Globix common stock and/or preferred   
stock at the time of the merger.                                                

         IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF THE DELAWARE CORPORATE
LAW, ANY NEON STOCKHOLDER WHO IS CONSIDERING EXERCISING APPRAISAL RIGHTS SHOULD 
CONSULT A LEGAL ADVISOR.                                                        

82

S-4/A
92nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 92nd
TERMS OF THE MERGER AGREEMENT AND RELATED TRANSACTIONS

THE MERGER AGREEMENT

    THE FOLLOWING IS A BRIEF SUMMARY OF THE MATERIAL PROVISIONS OF THE
MERGER AGREEMENT AS AMENDED BY THE FIRST AMENDMENT TO THE MERGER AGREEMENT,     
COPIES OF WHICH ARE ATTACHED AS APPENDICES A-1 AND A-2, RESPECTIVELY, TO THIS   
JOINT PROXY STATEMENT/PROSPECTUS AND INCORPORATED HEREIN BY REFERENCE.          
STOCKHOLDERS OF NEON AND GLOBIX ARE URGED TO READ THE MERGER AGREEMENT IN ITS   
ENTIRETY FOR A MORE COMPLETE DESCRIPTION OF THE MERGER. IN THE EVENT OF ANY     
DISCREPANCY BETWEEN THE TERMS OF THE MERGER AGREEMENT AND THE FOLLOWING SUMMARY,
THE MERGER AGREEMENT WILL CONTROL.                                              

THE MERGER                                                                      

   Following the approval of the merger and adoption of the merger
agreement by the stockholders of NEON and the approval of the issuance of Globix
common stock in connection of the merger by the stockholders of Globix and the  
satisfaction or waiver of the other conditions to the merger set forth in the   
merger agreement, Cornerstone Merger Corp., a wholly owned subsidiary of Globix,
will merge with and into NEON, with NEON continuing as the surviving corporation
under the name "NEON Communications, Inc." and as a wholly owned subsidiary of  
Globix.                                                                         

THE EFFECTIVE TIME                                                              

    At the closing of the merger, the parties will cause the merger to
become effective by filing a certificate of merger with the Delaware Secretary  
of State. The parties anticipate that the closing of the merger will occur in   
the first quarter of calendar 2005 but cannot assure you as to the exact timing.

DIRECTORS AND OFFICERS OF NEON AFTER THE MERGER                                 

       At the effective time of the merger, the directors of NEON before the
merger will remain the directors of NEON, and the officers of NEON before the   
merger will remain officers of NEON.                                            

CONVERSION OF SHARES IN THE MERGER                                              

Upon completion of the merger:                                

     o    each outstanding share of NEON common stock, other than shares
             held in treasury, will be converted into, and will have the right
           to receive, 1.2748 shares of Globix common stock (the "exchange
ratio");                                            

         o    all accrued and unpaid dividends on the NEON convertible preferred
            stock through the closing date of the merger shall be treated as
              if paid in shares of NEON convertible preferred stock based on the
          liquidation preference of $11.25 per share of NEON convertible
          preferred stock and each outstanding share of NEON convertible
          preferred stock, other than shares held in treasury or held by
             Globix but including the shares treated as issued with respect to
          accrued but unpaid dividends, will be converted into, and will
          have the right to receive, $3.75 in cash and 2.08333 shares of
              Globix convertible preferred stock with the terms described in the
   section entitled "Description of Globix Capital Stock -
          Description of Preferred Stock," beginning on page 128 of this
          joint proxy statement/prospectus. A copy of the certificate of
              designation for the Globix convertible preferred stock is included
              as an exhibit to the first amendment to the merger agreement which
is attached as Appendix A-2 to this joint proxy     
statement/prospectus;                               

        o    each outstanding Class A warrant of NEON issued under the Class A
            warrant agreement dated as of December 23, 2002 between NEON and
              American Stock Transfer & Trust Company, as warrant agent, will be
          exercised immediately prior to the merger or will be converted
             into, and will have the right to receive, 1.2748 shares of Globix
common stock;                                       

83  

S-4/A
93rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 93rd
         o    each outstanding redeemable preferred stock warrant of NEON issued
              under the redeemable preferred stock warrant agreement dated as of
              December 23, 2002 between NEON and American Stock Transfer & Trust
           Company, as warrant agent, will expire at the effective time of
            the merger and the holders of the expired warrants will not have
              any rights to receive payments with respect to those warrants; and

         o    each outstanding NEON CTA warrant will be converted into, and will
              have the right to receive, a Globix warrant with substantially the
          terms described in the section entitled "Description of Globix
              Capital Stock - Description of Globix Warrants," beginning on page
          124 of this joint proxy statement/prospectus, representing the
           right to acquire a number of shares of Globix common stock that
           equals the number of shares of NEON common stock for which such
          warrant was exercisable multiplied by the exchange ratio, at a
        purchase price equal to the purchase price per share of NEON
        common stock subject to such warrant divided by the exchange
ratio.                                              

        For a description of the differences between the rights of the holders
of Globix capital stock and holders of NEON capital stock, see "Comparison of   
Stockholders Rights" beginning on page 179 of this joint proxy                  
statement/prospectus.                                                           

TREATMENT OF NEON OPTIONS                                                       

         At the effective time of the merger, each option to acquire NEON common
stock that was granted under NEON's stock plans or otherwise granted by NEON and
that is outstanding and unexercised immediately prior to the effective time of  
the merger will be modified and become an option to purchase Globix common      
stock. In each case, the number of shares of Globix common stock subject to the 
modified stock option will be equal to the number of shares of NEON common stock
subject to the NEON stock option, assuming full vesting, multiplied by the      
exchange ratio (and rounding any fractional share to the nearest whole share)   
and the exercise price per share of Globix common stock will be equal to the    
exercise price per share of NEON common stock subject to the NEON stock option  
divided by the exchange ratio. The duration and other terms of each such        
modified NEON stock option, including the vesting schedule, will be the same as 
the prior NEON stock option. It is the intention of Globix and NEON that each   
NEON stock option that qualifies before the merger as an "incentive stock       
option" under Section 422 of the Internal Revenue Code of 1986, as amended,     
will, to the extent permitted by applicable law, continue to qualify as an      
incentive stock option. See "The Merger -- Interests of NEON's Directors,       
Officers and Significant Stockholders in the Merger" beginning on page 71 of    
this joint proxy statement/prospectus for a discussion of the treatment of the  
acceleration of vesting schedules of executive officers pursuant to the merger. 

TAX TREATMENT OF NEON OPTION HOLDERS                                            

      Neither the merger nor the modification of NEON options and the NEON
option plan will be taxable to holders of NEON options. It is anticipated that  
NEON will amend the NEON option plan to provide for the issuance of Globix      
common stock upon exercise of outstanding options granted under the NEON option 
plan. Provided that all the requirements of Treasury Regulations section 1.424-1
are met, it is the intention of Globix and NEON that each NEON option that      
qualified before the merger as an "incentive stock option" under Section 422 of 
the Internal Revenue Code of 1986, as amended, will continue to qualify as an   
incentive stock option after the merger and after the amendment of the NEON     
option plan to provide for the issuance of Globix common stock upon exercise of 
options previously granted under the NEON option plan. If Globix, as the sole   
shareholder of NEON, timely approves the amendment of the NEON option plan in   
accordance with Treasury Regulations section 1.424-1, additional incentive stock
options for the issuance of Globix stock may be issued under the NEON option    
plan.                                                                           

        The accelerated vesting of options held by certain NEON employees as a
result of the merger will not be an excess parachute payment to such employees  
and will not result in the recognition of income by, or imposition of an excise 
tax on, such employees or the disallowance of a deduction by NEON.              

84  

S-4/A
94th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 94th
THE EXCHANGE AGENT                                                              

       Globix will authorize a bank, trust company or such other person that
is reasonably acceptable to Globix and NEON to act as exchange agent in the     
merger. Promptly after the merger, Globix will deposit with the exchange agent  
shares of Globix common stock, Globix convertible preferred stock and cash (the 
"merger consideration") to be paid in exchange for the NEON common stock, NEON  
convertible preferred stock and NEON Class A warrants.                          

PROCEDURES FOR EXCHANGING STOCK AND WARRANT CERTIFICATES                        

       Within five days after the effective time of the merger, the exchange
agent will mail to the holders of record of NEON capital stock and NEON Class A 
warrants a letter of transmittal and instructions on how to surrender their NEON
stock certificates or warrant certificates, as the case may be, in exchange for 
the merger consideration. HOLDERS OF NEON CAPITAL STOCK AND CLASS A WARRANTS    
SHOULD NOT SURRENDER THEIR NEON STOCK CERTIFICATES OR WARRANT CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.                 

Upon surrendering their NEON stock certificates or warrant    
certificates, the letter of transmittal and any other documents required by the 
exchange agent, the holders of NEON stock certificates or warrant certificates  
will be entitled to a certificate representing that number of shares of Globix  
common stock, or Globix convertible preferred stock and cash, as the case may   
be, to which the holder is entitled. Until surrendered to the exchange agent,   
outstanding NEON stock certificates and Class A warrant certificates will be    
deemed from and after the effective time of the merger to evidence only the     
ownership of the number of full shares of Globix common stock, or Globix        
convertible preferred stock and cash, into which their NEON securities were     
converted at the effective time and any dividends and other distributions, as   
applicable.                                                                     

DIVIDENDS WITH RESPECT TO UNEXCHANGED SHARES                                    

Until each NEON stockholder surrenders his or her NEON stock  
certificate or warrant certificate in exchange for a Globix stock certificate,  
that stockholder will not receive any dividends or other distributions declared 
or made by Globix after the effective time of the merger, if any. However, once 
that stockholder surrenders his or her NEON stock certificate or warrant        
certificate to the exchange agent, he or she will receive (i) a Globix stock    
certificate, (ii) cash with respect to NEON convertible preferred stock         
exchanged and (iii) at the appropriate payment date with respect to such        
dividends, the amount of any dividends or other distributions with a record date
after the effective time of the merger, if any.                                 

NO FRACTIONAL SHARES                                                            

   No fractional shares of Globix common stock or Globix convertible
preferred stock will be issued in connection with the merger. Instead, the      
aggregate of all converted shares issued to each NEON stockholder will be       
rounded up to the nearest whole share.                                          

RETURN OF EXCHANGE FUND                                                         

         Any shares of Globix capital stock and cash that the exchange agent has
not distributed six months after the effective time of the merger will be       
delivered to Globix upon demand. Certificates representing NEON capital stock   
and Class A warrants must thereafter be surrendered for exchange to Globix. None
of Globix, NEON or the exchange agent will be liable for any shares of Globix   
capital stock, dividends or distributions with respect thereto, or cash         
delivered to a public official pursuant to any abandoned property, escheat or   
similar laws.                                                                   

LOST, STOLEN OR DESTROYED STOCK CERTIFICATES                                    

       If a certificate representing NEON capital stock or warrants is lost,
stolen or destroyed, the exchange agent will issue the applicable merger        
consideration in exchange for the certificate only upon the making of an        
affidavit of such loss, theft or destruction by the claimant, and, if required  
by Globix or the exchange agent, the posting of a bond as indemnity against any 
claim that may be made against Globix or the exchange agent with respect to such
certificate.                                                                    

85  

S-4/A
95th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 95th
REPRESENTATIONS AND WARRANTIES                                                  

       In the merger agreement, each of NEON and Globix has made a number of
representations and warranties to the other with respect to it and its          
subsidiaries, where applicable, that relate to a number of matters, including:  

         o    its incorporation, good standing and qualification to do business;

       o    its power and authority to own, lease and operate its properties
and to carry on its business;                       

o    its certificate of incorporation and bylaws;             

o    its capitalization;                                      

o    its authority to enter into the merger agreement;        

       o    the effect of the merger, or entering into the merger agreement,
on its outstanding obligations;                     

o    required consents, waivers and approvals;                

o    regulatory approvals required to complete the merger;    

    o    with respect to Globix, its filings and reports with the SEC;

o    its financial statements and liabilities;                

        o    changes in its business since the date of its more recent audited
              balance sheet (September 30, 2003 for Globix and December 31, 2003
for NEON);                                          

      o    the completeness and accuracy of information being supplied for
              inclusion in this joint proxy statement/prospectus and the related
registration statement;                             

o    vote required with respect to the merger;                

      o    title to and operation of the assets and properties it owns and
leases;                                             

    o    the receipt of an opinion from its financial advisor that the
          exchange ratio is fair, from a financial point of view, to its
common stockholders;                                

   o    identification of transactions with certain related parties;

      o    litigation with respect to the corporation or its subsidiaries;

         o    its intellectual property, the other intellectual property that it
 uses and infringement of other intellectual property;

o    its compliance with applicable laws;                     

         o    permits required to conduct its business and compliance with those
permits;                                            

o    accounts receivable and warranties;                      

o    customers and suppliers;                                 

o    unlawful business practices;                             

o    its taxes;                                               

o    its employee benefit plans;                              

       o    its hazardous material activities and environmental liabilities;

o    its agreements, contracts and commitments;               

    o    brokers' and finders' fees in connection with the merger; and

o    its insurance.                                           

86  

S-4/A
96th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 96th
The representations and warranties in the merger agreement are
complicated and are not easily summarized. Globix and NEON urge you to read     
carefully the articles in the merger agreement entitled "Representations and    
Warranties of NEON" and "Representations and Warranties of Globix."             

CONDUCT OF BUSINESS OF NEON AND GLOBIX PENDING THE MERGER                       

         Each of NEON and Globix has agreed that until the closing of the merger
(or the merger agreement terminates), or unless the other party to the merger   
agreement consents in writing or as required by law, it and its subsidiaries    
will conduct their respective businesses in the usual, regular and ordinary     
course in all material respects, in substantially the same manner in which it   
was conducted prior to July 19, 2004, and not enter into any new material line  
of business. Each of NEON and Globix further agrees to discharge or satisfy     
claims, liabilities or obligations only in the usual, regular and ordinary      
course of business. Each of NEON and Globix has also agreed to use all          
commercially reasonable efforts to:                                             

o    carry on and preserve its present lines of business;     

o    maintain their rights and franchises; and                

      o    maintain its relationships with customers, suppliers and others
with which it has business dealings.                

       In addition, until the closing of the merger (or the merger agreement
terminates), or unless the other party to the merger agreement consents in      
writing, each of NEON and Globix has agreed not to:                             

         o    declare or pay dividends or make other distributions in respect to
             any of its capital stock, except for dividends by subsidiaries of
            NEON or Globix, as the case may be, to such corporation or other
            subsidiaries thereof and except for accruals of dividends on the
NEON convertible preferred stock;                   

      o    effect any stock splits, combinations or recapitalizations with
respect to its capital stock;                       

o    repurchase or redeem shares of its capital stock, except 
           repurchases of shares in connection with its stock option plans
consistent with past practices;                     

         o    issue or authorize the issuance of any securities convertible into
             or exercisable for its capital stock (including indebtedness with
      voting rights), other than issuances of capital stock upon
              exercise of outstanding options or warrants; issuances by a wholly
            owned subsidiary of capital stock to NEON or Globix, as the case
              may be, or to another wholly owned subsidiary of such company; the
     issuance of 341,936 shares of NEON common stock to Mode 1
          Communications, Inc. or any exchange of outstanding 11% senior
            notes of Globix for shares of Globix common stock in one or more
             private transactions, after NEON and Globix shall have negotiated
            in good faith any modifications to the merger agreement required
by such exchange;                                   

         o    amend its charter or bylaws or the charter or bylaws of any of its
subsidiaries;                                       

     o    acquire or agree to acquire, by merging or consolidating with,
        acquiring a substantial portion of the assets of or making a
substantial equity investment in, other entities;   

       o    sell, lease, encumber or otherwise dispose of property or assets
              (including capital stock of its subsidiaries) that are material to
its business, other than internal reorganizations or
    consolidations involving existing subsidiaries; sales or
              encumbrances in the ordinary course of business, liens for current
        property taxes and other governmental changes not yet due or
          delinquent and being contested in good faith and with adequate
              reserves; statutory liens of landlord or mechanics in the ordinary
           course; equipment leases and purchase money security interests;

87  

S-4/A
97th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 97th
      o    make any loans to or investments in any other person other than
           loans to subsidiaries or financing transactions in the ordinary
course of business;                                 

         o    incur or guarantee indebtedness, issue or sell any debt securities
     or rights to such debt securities, or engage in any asset
           securitization transaction, except in each case in the ordinary
              course of business consistent with past practice or under existing
credit facilities or intercompany indebtedness;     

        o    materially change its method of accounting, except as required by
          generally accepted accounting principles in the United States;
           change its fiscal year; make or revoke any election relating to
             taxes; settle or compromise any material tax liability; or change
              any material aspects of its method of accounting for tax purposes;

      o    adopt, amend or terminate any employee benefit plan, consulting
              agreement or any other employee benefit fund, award or arrangement
        for the benefit of any director, officer or employee of such
              corporation or any of its subsidiaries, other than in the ordinary
             course of business consistent with past practice or to the extent
not material;                                       

       o    increase compensation, benefits (including severance) or bonuses
        to any employee, officer, director or consultant, other than
       annual increases in salary to current non-officer employees
           granted in the ordinary course of business consistent with past
practice;                                           

         o    enter into, amend or terminate any change of control, retention or
           severance agreement for the benefit of any director, officer or
employee of the corporation or its subsidiaries;    

       o    adopt a plan of liquidation, dissolution or other reorganization
       (other than the merger) or alter the corporate structure or
ownership of any of its subsidiaries;               

         o    enter into, renew or modify any contract with respect to which the
           aggregate annual payments to it or from it to a third party are
         expected to exceed $500,000, except in the ordinary course of
business consistent with past practice; or          

         o    enter into any agreement, commitment or arrangement to take any of
the prohibited actions listed above.                

      The agreements related to the conduct of each of NEON's and Globix's
business in the merger agreement are complicated and not easily summarized. We  
urge you to read the section in the merger agreement entitled "Covenants        
Relating to Conduct of Business" carefully.                                     

     Notwithstanding the covenants described above, the merger agreement
provides that each party to the agreement shall exercise complete control and   
supervision over its and its subsidiaries' operations pending the merger,       
consistent with the terms of the merger agreement. The parties have formed a    
transition committee comprised of senior personnel of both parties to develop   
transition plans for the post-closing period. Each party has also agreed to use 
commercially reasonable efforts to manage its business so that, assuming a      
September 30, 2004 merger, NEON would have approximately $7 million of          
unrestricted cash on a consolidated basis (including cash, if any, used to      
redeem NEON convertible preferred stock) and Globix would have approximately $18
million of unrestricted cash on a consolidated basis, in each case immediately  
prior to the merger.                                                            

ADDITIONAL AGREEMENTS OF GLOBIX AND NEON                                        

       Pursuant to the merger agreement, Globix and NEON have also agreed to
use commercially reasonable efforts to take all necessary, proper or appropriate
actions to consummate the transactions contemplated by the merger agreement. In 
particular, Globix and NEON agreed to file a pre-merger notification and report 
form under the HSR Act, which was filed on August 13, 2004 and the HSR Act      
waiting period was terminated on August 20, 2004.                               

88  

S-4/A
98th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 98th
       Each of Globix and NEON has agreed to use its reasonable best efforts
to have the S-4 registration statement of which this joint proxy                
statement/prospectus forms a part declared effective by the SEC.                

      In accordance with its certificate of incorporation and bylaws, NEON
will take all action necessary to convene a meeting or meetings of the holders  
of NEON stock, to be held as promptly as practicable after the S-4 registration 
statement is declared effective.                                                

         Subject to the fiduciary duty exception described below, the NEON board
of directors:                                                                   

  o    will recommend approval of the merger, the amendment to the
             certificate of incorporation and the amendment to the certificate
of designation by its stockholders;                 

o    will not withdraw or modify its recommendation; and      

     o    will take all lawful action to solicit stockholder approval as
promptly as possible.                               

        In accordance with its certificate of incorporation and bylaws, Globix
will take all action necessary to convene a meeting or meetings of the holders  
of Globix common stock, to be held as promptly as practicable after the S-4     
registration statement is declared effective.                                   

     Subject to the fiduciary duty exception described below, the Globix
board of directors:                                                             

       o    will recommend approval of the issuance of Globix's common stock
in the merger;                                      

o    will not withdraw or modify its recommendation; and      

     o    will take all lawful action to solicit stockholder approval as
promptly as possible.                               

    The merger agreement does not preclude either NEON or Globix from,
prior to the receipt of the requisite stockholder approval, providing           
information to or entering into negotiations with, a third party with respect to
an alternative acquisition proposal if the board of directors of NEON or Globix,
as applicable, concludes in good faith that it is required to do so under       
applicable law. Further, if the board of directors of NEON or Globix, as        
applicable, concludes in good faith that it is required to do so under          
applicable law and has either entered into, or resolved to enter into, an       
agreement (or agreement in principle) to effect a competing acquisition or other
business combination proposal, it may withdraw, modify or change its            
recommendations to its stockholders in order to comply with its fiduciary       
duties.                                                                         

      Unless the merger agreement is terminated, each of the NEON board of
directors and the Globix board of directors is obligated to convene its         
respective stockholder meeting whether or not it continues to recommend the     
merger or the common stock issuance in the merger, as applicable.               

DIRECTORS' AND OFFICERS' INDEMNIFICATION                                        

       Globix has agreed and shall cause NEON as the surviving subsidiary in
the merger to agree, to fulfill and honor in all respects the indemnification   
obligations of NEON to its present and former officers and directors pursuant to
the indemnification provisions of NEON's and its subsidiaries' certificate of   
incorporation, bylaws and other charter documents arising out of or pertaining  
to matters existing or occurring with respect to NEON or any of its subsidiaries
prior to or at the effective time of the merger. The merger agreement provides  
that Globix shall cause NEON to maintain directors' and officers' liability     
insurance and fiduciary liability insurance with respect to claims arising from 
facts or events occurring on or before the effective date of the merger for a   
period of at least five years from the date of the completion of the merger.    

89  

S-4/A
99th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 99th
FINANCIAL DUE DILIGENCE                                                         

Before mailing of this joint proxy statement/prospectus, the  
accountants for Globix and NEON completed a limited financial due diligence     
review of the other party to the merger agreement and prepared a report to be   
presented for review by the board of directors and special committee of each of 
Globix and NEON. Each party was obligated to notify the other party by September
15, 2004 of any issues arising as a result of such financial due diligence. No  
such notifications were provided.                                               

CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER            

         The following conditions must be satisfied before the merger can become
effective:                                                                      

       o    holders of NEON capital stock must have approved the merger, the
            merger agreement and the transactions contemplated by the merger
   agreement, and the amendment to the NEON certificate of
incorporation and to the certificate of designation;

  o    no court or governmental entity shall have enacted, issued,
              promulgated, enforced or entered, or instituted a proceeding to do
        so, any law, statute, ordinance, rule, regulation, judgment,
        decree, injunction or other order that is in effect and that
         restrains, enjoins or otherwise prohibits consummation of the
merger;                                             

         o    holders of Globix capital stock must have approved the issuance of
Globix common stock in connection with the merger;  

       o    all applicable waiting periods under the HSR Act have expired or
been terminated;                                    

  o    Globix and NEON have obtained all authorizations, consents,
      orders, declarations or approvals of, or filings with, any
          governmental authority required in connection with the merger,
            which the failure to obtain, make or occur would have the effect
  of restraining or prohibiting the merger or any of the
             transactions contemplated or would have a material adverse effect
on Globix, assuming the merger had taken place;     

o    the S-4 registration statement of which this joint proxy 
              statement/prospectus forms a part must have become effective under
       the Securities Act of 1933, all necessary blue sky or state
            securities or other authorizations shall have been received, and
              there must be no stop order or threat of proceedings by the SEC to
            suspend the effectiveness of the S-4 registration statement; and

    o    the number of shares of NEON common stock that are dissenting
              shares shall be no greater than 15% of the outstanding NEON common
              stock and the number of shares of NEON convertible preferred stock
          that are dissenting shares shall be no greater than 15% of the
outstanding NEON convertible preferred stock.       

CONDITIONS PRECEDENT TO GLOBIX'S OBLIGATIONS                                    

Globix's obligations to effect the merger are subject to the  
fulfillment or satisfaction, prior to or on the closing date of the merger, of  
each of the following conditions:                                               

     o    each of NEON's representations and warranties contained in the
              merger agreement must be true and correct in all material respects
             as of the closing, other than representations and warranties that
   expressly relate to an earlier date (in which case such
          representations and warranties must be true as of such earlier
date);                                              

      o    NEON shall have performed and complied in all material respects
          with all agreements to be performed prior to or on the closing
date;                                               

90  

S-4/A
100th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 100th
       o    Globix shall have received a favorable legal opinion dated as of
           the closing date from its counsel that the merger constitutes a
      reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended;          

      o    there shall not have been any changes, circumstances or effects
      which, individually or in the aggregate, have had or could
            reasonably be expected to have a material adverse effect on NEON
and its subsidiaries taken as a whole;              

    o    there shall not be any litigation pending or threatened which
       could reasonably be expected to prohibit the merger, impose
             limitations on Globix's ownership or operations of NEON after the
             merger or compel Globix or any of its affiliates to dispose of or
              hold separate any portion of the business of NEON or any of NEON's
subsidiaries;                                       

    o    NEON and each subsidiary shall have entered into a subsidiary
         guaranty and security agreement with respect to the indenture
   dated as of April 23, 2002 among Globix, certain of its
subsidiaries and HSBC Bank USA, as trustee;         

        o    Globix shall have received a Foreign Investment Real Property Tax
             Act certificate that neither NEON nor any office or subsidiary is
a US real property holding corporation;             

         o    NEON or the applicable subsidiary shall have received all consents
           or waivers in order to avoid the occurrence, as a result of the
              merger, of loss or substantial diminution in value of any material
           contract to which NEON or a subsidiary is a party or any permit
applicable to NEON or a subsidiary; and             

         o    the holders of 90% or more of the NEON Class A warrants shall have
              exercised their Class A warrants and the Class A warrant agreement
         shall have been amended to provide for the conversion of NEON
Class A warrants into shares of Globix common stock.

CONDITIONS PRECEDENT TO NEON'S OBLIGATIONS                                      

         NEON's obligations to effect the merger are subject to the satisfaction
of the following conditions prior to the closing date of the merger:            

       o    each of Globix's representations and warranties contained in the
              merger agreement must be true and correct in all material respects
             as of the closing, other than representations and warranties that
   expressly relate to an earlier date (in which case such
          representations and warranties must be true as of such earlier
date);                                              

        o    Globix shall have performed and complied in all material respects
          with all agreements to be performed prior to or on the closing
date;                                               

         o    NEON shall have received a favorable legal opinion dated as of the
       closing date from its counsel that the merger constitutes a
      reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended;          

      o    there shall not have been any changes, circumstances or effects
      which, individually or in the aggregate, have had or could
              reasonably be expected to have a material adverse effect on Globix
and its subsidiaries taken as a whole;              

    o    there shall not be any litigation pending or threatened which
       could reasonably be expected to prohibit the merger, impose
             limitations on Globix's ownership or operations of NEON after the
             merger or compel Globix or any of its affiliates to dispose of or
              hold separate any portion of the business of NEON or any of NEON's
subsidiaries;                                       

91  

S-4/A
101st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 101st
  o    Globix or the applicable subsidiary shall have received all
             consents or waivers in order to avoid the occurrence, as a result
            of the merger, of loss or substantial diminution in value of any
           material contract to which Globix or a subsidiary is a party or
any permit applicable to Globix or a subsidiary; and

        o    Globix shall have acquired 11% senior notes in an amount equal to
              $12,500,000, including principal and accrued interest, in exchange
        for shares of Globix common stock valued at $2.75 per share.

TERMINATION OF THE MERGER AGREEMENT                                             

         The merger agreement may be terminated, and the merger may be abandoned
at any time prior to the closing date, whether before or after stockholder      
approval:                                                                       

o    by the mutual written agreement of Globix and NEON;      

o    by Globix or NEON if:                                    

            *    the closing date has not occurred within 150 days after the
                   expiration or termination of the waiting period applicable to
            the merger under the HSR Act, except that the right to
                  terminate the merger agreement is not available to any party
                who has caused the delay in the closing date by failing to
         fulfill its obligations under the merger agreement;

       *    any court or other governmental authority of competent
               jurisdiction issues an order or takes any other final and
               non-appealable action restraining, enjoining or otherwise
                prohibiting the merger, except that the right to terminate
              the merger agreement is not available to any party whose
                   failure to fulfill its obligations under the merger agreement
       has been the cause of the issuance of such order;

            *    the other party shall have failed to comply in any material
                  respect with any of its covenants or agreements contained in
                the merger agreement required to be complied with prior to
                   the date of such termination, which failure to comply has not
               been cured within five business days following receipt by
                   such other party of written notice of such failure to comply;

      *    the holders of NEON common stock and NEON convertible
                 preferred stock do not approve the merger, the amendment to
                   the NEON certificate of incorporation or the amendment to the
NEON certificate of designation;          

      *    the holders of Globix common stock do not approve the
       issuance of Globix common stock in the merger; or

             *    shares of NEON common stock representing greater than 15% of
         the outstanding NEON common stock or shares of NEON
                  convertible preferred stock representing greater than 15% of
                  the outstanding NEON convertible preferred stock, each as of
the record date, dissent from the merger. 

o    by NEON if:                                              

            *    the board of directors of Globix shall not have recommended
            or shall have resolved not to recommend, or shall have
                  qualified, changed, modified or withdrawn its recommendation
                 of the issuance of Globix common stock in the merger to its
    stockholders, or shall have resolved to do so;

           *    the board of directors of Globix shall have recommended to
              the stockholders of Globix any transaction involving the
                  acquisition of all or substantially all of Globix's business
            other than the merger or shall have resolved to do so;

           *    there has been a breach of a representation or warranty of
                 Globix that gives rise to a failure of the fulfillment of a
                 condition of NEON's obligations to effect the merger, which
                   breach has not been cured within five business days following
        receipt by Globix of written notice of the breach;

92  

S-4/A
102nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 102nd
            *    there shall have been any changes, circumstances or effects
                which, individually or in the aggregate, have had or could
                 reasonably be expected to have a material adverse effect on
    Globix and its subsidiaries, taken as a whole;

            *    on or prior to September 15, 2004, NEON shall have notified
                 Globix in writing that the results of the review by NEON of
                the financial due diligence report by the auditors of NEON
        provided to the board of directors of NEON are not
             satisfactory and reflect a material adverse effect with
                  respect to Globix and its subsidiaries, taken as a whole, as
              determined in good faith by the special committee of the
              board of directors of NEON, after a full discussion with
    Globix of all issues raised in such review; or

      *    the board of directors of NEON has approved a merger,
               acquisition or other agreement (including an agreement in
              principle) to effect a competing acquisition or business
combination proposal.                     

o    by Globix if:                                            

              *    the board of directors of NEON shall not have recommended, or
         shall have resolved not to recommend, or shall have
                  qualified, changed, modified or withdrawn its recommendation
                  of the merger to its stockholders, or shall have resolved to
do so;                                    

             *    the board of directors of NEON shall have recommended to the
        stockholders of NEON any transaction involving the
                acquisition of all or substantially all of NEON's business
             other than the merger, or shall have resolved to do so;

           *    there has been a breach of a representation or warranty of
               NEON that gives rise to a failure of the fulfillment of a
                   condition of Globix's obligations to effect the merger, which
              breach has not cured within five business days following
      receipt by NEON of written notice of the breach;

            *    there shall have been any changes, circumstances or effects
                which, individually or in the aggregate, have had or could
                   reasonably be expected to have a material adverse effect with
             respect to NEON and its subsidiaries, taken as a whole;

              *    on or prior to September 15, 2004, Globix shall have notified
                 NEON in writing that the results of the review by Globix of
                  the financial due diligence report by the auditors of Globix
          provided to the board of directors of Globix are not
             satisfactory and reflect a material adverse effect with
                respect to NEON and its subsidiaries, taken as a whole, as
              determined in good faith by the special committee of the
                board of directors of Globix, after a full discussion with
     NEON of all the issues raised in the review; or

        *    the board of directors of Globix has approved a merger,
               acquisition or other agreement (including an agreement in
           principle) to effect a competing acquisition or other
business combination proposal.            

EFFECTS OF TERMINATION; PAYMENT OF EXPENSES                                     

        If the merger agreement is terminated for any of the reasons specified
above, all provisions of the merger agreement shall terminate, except that each 
party shall continue to be bound by confidentiality obligations set forth in the
merger agreement, shall be bound to cover its expenses of the merger described  
below and shall be liable for any fraud or willful breach of a covenant         
contained in the merger agreement.                                              

      If the merger agreement is not consummated, all associated costs and
expenses, including fees and disbursements of counsel, financial advisors and   
accountants, shall be paid by the party incurring the costs, except that        
printing expenses and filing fees under the Securities Act of 1933, the         
Securities Exchange Act of 1934, applicable Blue Sky regulations and the HSR Act
will be shared equally by Globix and NEON.                                      

93  

S-4/A
103rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 103rd
        If the merger is consummated, Globix and the surviving subsidiary will
pay all costs and expenses incurred in connection with the merger and the       
transactions contemplated by the merger.                                        

WAIVER AND AMENDMENT OF THE MERGER AGREEMENT                                    

        At any time prior to the effective time of the merger, Globix and NEON
may agree in writing to:                                                        

         o    extend the time for the performance of any obligation or other act
required to be performed under the merger agreement;

   o    waive any inaccuracies in the representations and warranties
          contained in the merger agreement or in any document delivered
pursuant to the merger agreement;                   

o    waive compliance with any of the agreements or conditions
contained in the merger agreement; or               

o    amend the merger agreement.                              

RESTRICTIONS ON RESALES BY AFFILIATES                                           

         The shares of Globix common stock and convertible preferred stock to be
issued to NEON stockholders in the merger have been registered under the        
Securities Act of 1933. These shares may be traded freely and without           
restriction by those stockholders not deemed to be "affiliates" of NEON as that 
term is defined under the Securities Act of 1933. An affiliate of a corporation,
as defined by the rules promulgated under the Securities Act of 1933, is a      
person who directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, that corporation. Any        
transfer by an affiliate of NEON must be one permitted by the resale provisions 
of Rule 145 promulgated under the Securities Act of 1933. If a NEON affiliate   
becomes an affiliate of Globix, any transfer must be permitted by the resale    
provisions of Rule 144 promulgated under the Securities Act of 1933 or otherwise
permitted under the Securities Act of 1933.                                     

SOLICITATION OF CLASS A WARRANTHOLDERS                                          

   As one of the conditions to Globix's obligation to consummate the
merger, and as required by the merger agreement, NEON must solicit the consent  
of the holders of at least ninety percent (90%) of the Class A warrants to      
exercise their respective Class A warrants prior to or as of the effective time 
of the merger. Additionally, NEON is required to solicit the consent of at least
a majority of the holders of the Class A warrants to amend the warrant agreement
pursuant to which the Class A warrants are issued to provide that upon a merger 
of NEON the Class A warrant holders may receive the same type of consideration  
as the holders of NEON common stock immediately prior to such merger. Messrs.   
Lampe and Grubin, currently directors of NEON, collectively, indirectly         
beneficially own approximately 20% of the issued and outstanding Class A        
warrants. Each of Messrs. Lampe and Grubin has provided notice to NEON that     
their respective affiliates intend to exercise their respective Class A warrants
prior to or as of the effective date of the merger.                             

DEBT-FOR-EQUITY EXCHANGE                                                        

      NEON's obligations to effect the merger are conditioned in part upon
Globix completing a number of private debt-for-equity exchange transactions with
some existing debt holders in which Globix will exchange certain of its 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 Globix common  
stock at a price per share of $2.75, the approximate trading price of the Globix
common stock at the time the parties reached an agreement on the overall amount 
of the exchange. Globix has entered into securities exchange agreements with    
York Capital Management (an affiliate of JGD Management Corp.), MacKay Shields  
LLC, LC Capital Master Fund Ltd., Goldman Sachs & Co., the Singer Children's    
Management Trust, one of the Singer Trusts, an individual investor and Cypress  
Management Partnership in order to effect the debt-for-equity exchange. Each of 
the exchanging debt holders, except for Cypress Management Partnership and the  
individual investor, is itself or is affiliated with a holder of 5% or more of  
the Globix common stock. Each of the exchanging holders, other than Goldman     
Sachs & Co., Lloyd Miller and Cypress Management Partnership has a significant  
interest in NEON or is affiliated with a holder of a significant interest in    
NEON. Mr. Singer, who is the non-executive chairman of the board of directors of
Globix, is a trustee of the Singer Children's Management Trust. Mr. Lampe, who  
is a director of both Globix and NEON, is an affiliate of LC Capital Master Fund
Ltd.                                                                            

94  

S-4/A
104th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 104th
    Under the terms of the securities exchange agreements, each of the
debt-for-equity exchange transactions is to be effected at the time of the      
merger or at an earlier time mutually agreed upon. Globix has agreed to file a  
registration statement with the Securities and Exchange Commission as promptly  
as possible, but not later than 90 days after the closing of the merger, in     
order to register the shares of common stock issued in exchange for its 11%     
senior notes. With respect to registration of the shares of common stock issued 
in the debt-for-equity exchange, Globix has 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 90 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.                                                      

  The merger agreement provides that in the event Globix wishes to
exchange additional 11% senior notes in excess of $12,500,000 for additional    
shares of its common stock, Globix and NEON will negotiate in good faith all of 
the modifications to the merger agreement that would be necessary or appropriate
to reflect any additional exchange.                                             

 APPROVAL OF AMENDMENT OF NEON'S
CERTIFICATE OF INCORPORATION

       Approval of a majority of the outstanding shares of NEON common stock
and NEON convertible preferred stock entitled to vote, voting as a single class,
and a majority of the outstanding shares of NEON common stock entitled to vote, 
voting as a separate class, is required to authorize the amendment to NEON's    
certificate of incorporation. The amendment would except the merger from the    
definition of liquidation event in NEON's certificate of incorporation. The     
certificate of incorporation currently provides that upon the occurrence of a   
liquidation event, subject to any preferential rights of preferred stock, all   
remaining NEON assets will be distributed ratably to the holders of NEON common 
stock. A liquidation event is currently defined to include, among other things, 
any consolidation, merger or share exchange of NEON in which the holders of     
NEON's voting stock outstanding immediately prior to such consolidation, merger 
or share exchange do not in the aggregate hold a majority of the voting stock of
the surviving or resulting entity.                                              

   The full text of the liquidation provisions of the certificate of
incorporation relating to the definition of liquidation event as such provisions
will be amended if the merger agreement and the merger are approved, is set     
forth in Appendix B-1 hereto.                                                   

       You should carefully read the liquidation event provision and consult
with legal counsel regarding the impact of the amendment to the certificate of  
incorporation to amend the liquidation provision.                               

      NEON's board of directors (with one director, Mr. Lampe, abstaining)
has approved the amendment to the certificate of incorporation and recommends   
that you vote "FOR" approval and adoption of the amendment of NEON's certificate
of incorporation.                                                               

 APPROVAL OF AMENDMENT OF CERTIFICATE OF DESIGNATION
FOR NEON CONVERTIBLE PREFERRED STOCK

       Approval of a majority of the outstanding shares of NEON common stock
and NEON convertible preferred stock entitled to vote, voting as a single class,
and two-thirds of the outstanding shares of NEON convertible preferred stock    
entitled to vote, voting as a separate class, is required to authorize the      
amendment to the certificate of designation with respect to the NEON convertible
preferred stock. The amendment would except the merger from the definition of   
change of control as set forth in the certificate of designation.               

95  

S-4/A
105th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 105th
      The full text of the provisions of the certificate of designation of
the NEON convertible preferred stock relating to the definition of change of    
control, as such provisions will be amended if the merger agreement and the     
merger are approved, is set forth as Appendix B-2 hereto.                       

      NEON's board of directors (with one director, Mr. Lampe, abstaining)
has approved the amendment to the certificate of designation and recommends that
you vote "FOR" approval and adoption of the amendment of the certificate of     
designation for the NEON convertible preferred stock.                           

INFORMATION ABOUT GLOBIX

OUR COMPANY                                                                     

    We are a provider of Internet services to businesses. Our services
include:                                                                        

        o    Hosting and co-location in our secure and fault-tolerant Internet
data centers;                                       

    o    Network services and connectivity to the Internet through our
         domestic and international Internet Protocol (IP) fiber based
network;                                            

         o    Internet based managed services focusing on application management
          and operating system management, security services and storage
services; and                                       

        o    Media services including: streaming media, webcasting and digital
asset management solutions.                         

         Our target market for our services is small to large size businesses in
a broad range of industries, including media, publishing, financial services,   
retail, healthcare, governmental agencies, manufacturing, technology and        
non-profit organizations. No single customer comprised more than 10% of our     
revenues in the fiscal years ended September 30, 2004 or 2003. We sell our      
services to businesses primarily through our direct sales force.                

 Our customers use our services to operate and maintain computer
equipment in a secure, fault-tolerant environment with connectivity to a        
high-speed, high-capacity, direct link to the Internet, through our own network,
and to support Internet applications. Our employees are located in New York, New
York; Atlanta, Georgia; Santa Clara, California; Fairfield, New Jersey; and     
London, England.                                                                

       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    
joint proxy statement/prospectus. Our SEC filings are 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.                                                 

On April 8, 2002, the bankruptcy court confirmed the plan of  
reorganization. On April 25, 2002, all conditions necessary for the 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" beginning on page 100 of this joint proxy         
statement/prospectus, for a discussion of our reorganization pursuant to Chapter
11 of the United States Bankruptcy Code.                                        

96  

S-4/A
106th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 106th
WHAT WE OFFER OUR CUSTOMERS                                                     

     We provide our customers with a range of Internet-based services,
including network infrastructure and expertise to build, maintain, operate and  
support Internet-based operations. Our primary services include:                

INTERNET HOSTING AND CO-LOCATION                                                

   We currently operate Internet data centers in New York, New York;
Atlanta, Georgia; Santa Clara, California; and London, England. Our Internet    
data centers include electrical infrastructure, precision environmental control 
systems, fire suppression systems and comprehensive security systems.           

    We offer co-location solutions for customers who choose to own and
maintain their own servers, but require the physically secure,                  
climate-controlled environment provided by our Internet data centers and        
connectivity to our network. We offer hosting services in a dedicated server    
environment. This service includes providing hardware usage, bandwidth and      
managed services to meet customer-specific needs.                               

MANAGED SERVICES                                                                

   We provide managed system and network services to our hosting and
co-location customers. Such services include a wide variety of maintenance,     
administration and problem resolution services for many popular operating       
systems, Internet network devices, software security solutions and web based    
applications. In addition we also offer media service, such as streaming media  
for business communication. Streaming media is a process by which audio, video  
or other multimedia is delivered in a streaming or continuous fashion over the  
Internet or over a company's intranet.                                          

        On October 31, 2003, we acquired the business and substantially all of
the assets of Aptegrity, Inc., a provider of web application and operations     
management services. The acquisition of Aptegrity has enabled us to provide     
remote management of a wider range of custom and off-the-shelf Web-based        
applications. By managing e-commerce, database, content management and customer 
relationship management software for our clients, we help them to protect       
Internet revenue streams, reduce technology operating costs and operating risk, 
and improve user satisfaction.                                                  

         With the purchase of Aptegrity we gained new clients and the ability to
offer higher-revenue managed services to our existing customer base. In addition
we provide hosting and co-location services to some of Aptegrity's              
pre-acquisition customers. Since the acquisition of Aptegrity our customers have
increased their spending with us on average. We attribute this to the greater   
utilization of our bundled services as a result of the broader range of services
we are able to provide to our customers.                                        

NETWORK SERVICES AND INTERNET ACCESS                                            

 We provide access to our network to our hosting and co-location
customers in our Internet data centers as well as Internet access services which
provide businesses with high-speed continuous access to the Internet from their 
own premises. In addition, we provide other services, such as domain name       
registration, local loop provisioning, Internet address assignment, router      
configuration, e-mail configuration and management and technical consulting     
services.                                                                       

      Our network infrastructure is designed for high availability and low
latency, and utilizes a single autonomous system number. As a result, traffic is
carried on a network controlled by Globix to the greatest extent possible and   
therefore does not suffer from the congestion or high latency of public         
networks.                                                                       

   The domestic Globix backbone is a Packet over Synchronous Optical
Network ("SONET"), which provides a mechanism for using the speed and efficient 
management capabilities of SONET for data transport. Essentially, it provides a 
method for carrying data packets in SONET frames that will operate at speeds up 
to OC-48 (2.4Gbs). The OC-48 Globix domestic backbone connects to our data      
centers and to our backbone points of presence in Boston, Chicago, Los Angeles, 
Seattle and Washington, D.C.                                                    

97  

S-4/A
107th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 107th
   Our European backbone is a Packet over SONET currently connecting
London, Amsterdam, Frankfurt and Paris. The domestic and European networks are  
connected by two OC-3 (155Mbps) transatlantic crossings.                        

 Our United States and European network sections interconnect to
numerous network access points, commercial Internet exchanges and other         
Internet, application and network service providers.                            

     Our network operations are directed from our 139 Centre Street data
center in New York, New York, which is staffed 24 hours a day, seven days a     
week. Network administrators located in our operations center monitor our       
network infrastructure. Our network administrators are able to identify and     
correct network problems either themselves or by dispatching system engineers   
located at our customer support centers.                                        

CUSTOMER SUPPORT CENTERS                                                        

      Our customer support call centers are operated 24 hours a day, seven
days a week, and are equipped with telecommunications systems capable of        
automatic call distribution, automatic number identification, quality assurance 
recording and archiving, and intelligent call routing. A trouble ticketing and  
knowledge database of customer information and history supports our customer    
service operations.                                                             

GOVERNMENT REGULATION                                                           

         In the United States, our Internet services are currently classified by
the Federal Communications Commission as information services, which are not    
subject to significant regulation, rather than as telecommunications or common  
carrier services, which are subject to a comprehensive regulatory framework.    
Similarly, our Internet services are not significantly regulated in certain     
foreign jurisdictions in which we conduct business.                             

      In certain other foreign jurisdictions in which we operate, however,
our provision of certain Internet services may be subject to the jurisdictions' 
laws and regulations governing telecommunications services and/or common        
carriers. In jurisdictions where these laws and regulations currently apply to  
certain types of our Internet solutions, we endeavor to take all reasonable     
steps necessary to ensure that we comply with these laws and regulations. This  
may require us to, among other things, obtain regulatory authorizations and pay 
fees each year to regulatory authorities.                                       

      The laws and regulations applicable to Internet-related services are
evolving in the United States and many other jurisdictions. As these laws and   
regulations evolve, it is possible that we could be regulated in additional     
jurisdictions as a telecommunications services provider and/or as a common      
carrier. As a result, we may become subject to, among other things, additional  
licensing requirements, fee payment obligations, common carrier obligations,    
network access changes and/or universal service obligations.                    

      In addition to the telecommunications and/or common carrier laws and
regulations that currently govern certain of our services in some jurisdictions 
and that may, in the future, govern our Internet services in the United States  
and other jurisdictions, new laws and regulations related to the provision of   
Internet services may be adopted, implemented and/or challenged at the federal, 
state and/or local levels in the United States and at corresponding levels in   
foreign jurisdictions. These laws and regulations may address, among other      
things, issues of user privacy, obscenity, pricing, consumer protection,        
taxation, advertising, intellectual property rights, information security,      
liability for certain types of content and the convergence of traditional       
telecommunications services with Internet communications. A number of laws and  
regulations related to these issues are currently being considered by United    
States and foreign regulators.                                                  

       It is impossible to predict the nature of any new laws or regulations
that will be applicable to our services, whether currently existing laws and    
regulations will be newly-applied to our services or the manner in which        
currently existing laws and regulations applicable to us will be interpreted and
enforced. The adoption of new laws or regulations or the application of existing
laws or regulations in a manner that is adverse to our company might decrease   
demand for our Internet solutions, impose taxes, fees or other charges or other 
costly technical requirements on our company or otherwise increase our cost of  
doing business. Any of these developments could harm our business, financial    
position, results of operations and cash flows.                                 

98  

S-4/A
108th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 108th
        The Digital Millennium Copyright Act ("DMCA") includes a limitation on
liability of on-line service providers for copyright infringement for           
transmitting, routing or providing connections, transient storage, caching or   
storage at the direction of a user. This limitation on liability applies if the 
service provider had no actual knowledge or awareness of the copyright          
infringement and if certain other conditions are met. It is not yet clear how   
the DMCA will be applied to limit liability that we may face in the future for  
any possible copyright infringement or copyright-related issues relating to the 
activities of our customers. The DMCA also requires Internet service providers  
to follow certain "notice and take-down" procedures in order to be able to take 
advantage of the limitation on liability provided for in the DMCA.              

         We have implemented the procedures required by the DMCA and require our
users to agree to an "acceptable use" policy which prohibits the use of our     
facilities for illegal purposes. There can be no assurance, however, that our   
procedures and acceptable use policy will shield us from liability. Despite     
enactment of the DMCA, the law relating to the liability of companies that      
provide Internet-related services for information carried on or disseminated    
through their networks remains largely unsettled. Claims could be made against  
us under currently existing or future laws in the United States or other        
jurisdictions for defamation, obscenity, negligence, copyright, trademark       
infringement or other legal theories based on the nature and content of the     
materials disseminated through our networks.                                    

EMPLOYEES AND EMPLOYEE RELATIONS                                                

         As of September 30, 2004, we had approximately 240 full-time employees:
approximately 188 in the United States and 52 outside the United States. In     
addition to our full-time employees, we also employ part-time personnel from    
time to time in various departments to meet fluctuations in work levels. None of
our employees are covered by a collective bargaining agreement.                 

COMPETITION                                                                     

 Our competitors include other Internet service providers with a
significant national or global presence and a focus on business customers. Among
these competitors are IBM, Digex, Savvis, Akamai, NaviSite, EDS, Speedera, Data 
Return, Rackspace and Equinix. Our competitors also include telecommunications  
companies, such as AT&T, British Telecom, Level 3, MCI and Sprint. We believe   
that competition is based upon a number of factors, including price, quality of 
service and financial stability.                                                

Of the competitors mentioned, some compete only in hosting and
infrastructure services, and some compete only in media services. Very few      
provide services that compete across our entire services portfolio. We believe  
our competitive differentiation from those that do is our flexibility, speed and
ability to customize a bundled solution across all of our service capabilities. 

     Competitive pressure impacts Globix's business in two primary ways:
customer churn and pricing pressure. For these purposes, churn means            
contractual revenue loss due to customer cancellations and downgrades, net of   
upgrades and additions to service.                                              

     Churn due to customer cancellations comes from three major sources:
customers no longer needing our services due to bankruptcy or exiting of a      
product line, customers taking our services in-house and customers replacing our
services with services from a competitor. Customer churn due to downgrades is   
caused mainly by customers not needing all the services we offered them in the  
past (as a result of exiting a product line, taking services in-house or using a
competitor's services), or customers renewing their contracts for identical     
services but at a lower price, which is mainly as a result of competitive       
pricing pressure. Due to difficulty in determining the root cause of contract   
cancellations and downgrades, it is impossible to determine precisely the       
percentage of churn that is due to competitive pressure is inexact. However, we 
believe that competitive pressure is a significant cause of contract            
cancellations and downgrades. Conversely, obtaining contracts formerly provided 
by our competitors is also a major source of new contract adds.                 

         Our primary strategy for dealing with contract cancellations related to
competitive pressure is first to sell valued added services to clients who have 
contracted only commodity services. We expect these value added services to     
offer product differentiation and increase exit costs, thereby decreasing       
cancellation rates. Second, we expect to continue to offset customer            
cancellations with new contract adds obtained through direct marketing efforts  
focused at prospective clients who potentially contract services with our       
competitors.                                                                    

      Pricing pressure from competition specifically affects our commodity
products and services such as bandwidth and co-location. We believe that pricing
pressure for our managed services is considerably less significant.             

99  

S-4/A
109th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 109th
   Our primary strategy for dealing with price pressure is to bundle
higher value-added services with our core infrastructure services to provide    
increased product differentiation.                                              

TRADEMARKS AND PATENTS                                                          

We currently have eight trademark applications and one patent 
application pending in the United States Patent and Trademark Office.           
Registration of the same trademarks has been applied for or granted in certain  
foreign countries. Additionally, Globix acquired the U.S. and European Union    
registered trademarks of Aptegrity(R) and Minding your E-Business(R) in the     
acquisition of Aptegrity, Inc.                                                  

OUR CHAPTER 11 BANKRUPTCY REORGANIZATION                                        

       On April 8, 2002, the United States Bankruptcy Court for the District
of Delaware confirmed our plan of reorganization, which became effective on     
April 25, 2002. As of the effective date of the plan, all of our existing       
securities were cancelled and:                                                  

        o    each holder of the 12.5% senior notes became entitled to receive,
            in exchange for its claims in respect of the 12.5% senior notes,
its pro rata share of:                              

             o   $120 million in aggregate principal amount of the 11%
enior notes, and                    

                  o   13,991,000 shares of our common stock, representing 85% of
                 the shares of our common stock issued and outstanding
         following the effective date of the plan; and

o    each holder of shares of our preferred stock outstanding 
      immediately prior to the effective date of the plan became
         entitled to receive, in exchange for its claims in respect of
            these shares of preferred stock, its pro rata share of 2,304,400
             shares of our common stock, representing 14% of the shares of our
            common stock issued and outstanding following the effective date
of the plan; and                                    

        o    each holder of shares of our common stock outstanding immediately
      prior to the effective date of the plan became entitled to
             receive, in exchange for its claims in respect of these shares of
            common stock, its pro rata share of 164,600 shares of our common
           stock, representing 1% of the shares of our common stock issued
     and outstanding following the effective date of the plan.

  The plan provides that all of the shares of our common stock are
subject to dilution by the exercise of management incentive stock options,      
representing up to 10% of the shares of our issued and outstanding common stock 
on a fully-diluted basis following the effective date of the plan. As of        
September 30, 2004, the number of outstanding options representing the right to 
acquire 956,565 shares of common stock had been granted to members of our       
management.                                                                     

      A total of 16,460,000 shares of our common stock and $120 million in
aggregate principal amount of the 11% senior notes were deemed to be issued and 
outstanding on the effective date of the plan. As of September 30, 2002,        
however, no shares of our common stock or 11% senior notes had been distributed.
In October 2002, we distributed a total of 16,295,400 shares of common stock and
$120 million in aggregate principal amount of 11% senior notes. Pursuant to the 
terms of a Stipulation and Order that we entered into with the lead plaintiffs  
in the class action lawsuit described in " - Legal Proceedings" beginning on    
page 102 of this joint proxy statement/prospectus, 229,452 of these shares of   
common stock and $1,968,000 in aggregate principal amount of the 11% senior     
notes were placed in reserve in escrow pending the outcome of the class action  
lawsuit. In the event that any judgment or settlement entered into in connection
with the class action lawsuit requires us to pay an amount in excess of our     
liability insurance, then we will be required to issue to the class action      
litigants and their attorneys all (in the event that this excess is $10 million 
or greater) or a portion of (in the event that this excess is less than $10     
million) the shares of common stock and 11% senior notes held in escrow. Based  
on an August 12, 2004 court approval of a settlement agreement pursuant to which
Globix would not be required to pay an amount in excess of our liability        

100 

S-4/A
110th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 110th
insurance, described under "- Legal Proceedings," beginning on page 102 of this 
joint proxy statement/prospectus, Globix does not believe that the shares of    
common stock and 11% senior notes held in escrow are likely to be distributed to
the class action litigants and their attorneys, and such shares and notes will  
accordingly be available for distribution to Globix security holders under the  
plan. Distribution of the remaining 164,600 shares of common stock deemed to    
have been issued on the effective date of the plan, which are allocable under   
the terms of the plan to the holders of our common stock outstanding immediately
prior to the effective date of the plan, will occur following the resolution of 
the stockholder derivative suit against our company and certain of our former   
officers and directors described in " - Legal Proceedings" beginning on page 102
of this joint proxy statement/prospectus.                                       

Through September 30, 2004, we had acquired in the open market
approximately $26.1 million in aggregate principal amount of our 11% senior     
notes and related accrued interest of approximately $1.9 million for an         
aggregate purchase price of approximately $20.2 million, and had issued         
approximately an additional $18.5 million in 11% senior notes in payment of     
accrued interest on the 11% senior notes. The indenture governing the 11% senior
notes requires interest to be paid in kind through 2004, and permits interest to
be paid in kind for two years thereafter at the discretion of our board of      
directors. In addition, on March 3, 2004, we purchased $40.3 million in         
principal amount of the 11% senior notes pursuant to an offer to purchase as    
described in " - Properties" below. Our indebtedness at September 30, 2004      
consisted of approximately $72.2 million in aggregate principal amount of our   
11% senior notes, approximately $3.3 million in related accrued interest,       
approximately $370 thousand of capital lease obligations and approximately $20  
million of mortgage debt on our New York City headquarters and data center.     

PROPERTIES                                                                      

         In July 1998, we purchased the land and the approximately 155,000 gross
square foot building located at 139 Centre Street, New York, New York.          
Construction at this facility was completed in July 1999 and the building houses
an Internet data center and offices for our executive, technical, sales and     
administrative personnel. In December 2002 we retained the services of a real   
estate broker to lease office space equivalent to approximately one third of our
139 Centre Street facility. As of September 30, 2004, we had leased office space
in approximately 25% of this facility to third parties for periods ranging      
between two to six years. The estimated average annualized rental income is     
approximately $0.9 million.                                                     

 In July 1998, we signed a lease commencing January 15, 1999 for
approximately 60,000 gross square feet of space in Santa Clara, California. The 
facility contains an Internet data center and offices for technical, sales and  
administrative personnel. In October 1998, we signed a lease for the rental of  
approximately 38,000 gross square feet of space at Prospect House, 80 New Oxford
Street, London, England. Construction at both of these facilities was completed 
in July 1999.                                                                   

    Prospect House contains an Internet data center and some technical
staff while the balance of technical personnel, as well as sales and            
administrative personnel, are located in our other London facility at 1 Oliver's
Yard. In July 2000, we entered into a lease for the Oliver's Yard facility,     
which consists of approximately 210,000 gross square feet of space. Construction
and fit-out of one floor of Internet data center space has been completed and   
the facility became operational in June 2001. In April 2002 we renegotiated our 
lease for this Internet data center, resulting in our retaining a total of      
60,000 gross square feet of space. We sublease access office space in our London
offices to third parties for periods ranging between 3 to 10 years. The         
estimated average annualized income is approximately $800 thousand.             

    In August 2000, in connection with our acquisition of Comstar.net,
Incorporated, we acquired our existing leases for an Internet data center in    
Atlanta, Georgia containing approximately 5,000 gross square feet of space.     

         In September 2000 we purchased the land and approximately 187,000 gross
square foot building located at 415 Greenwich Street, New York, New York. During
October 2003 we reached an agreement to sell the property for total cash        
consideration of approximately $60 million. The agreement was subject to various
closing conditions which were not satisfied until January 2004. The sale of the 
property was completed on January 22, 2004 for approximately $48.7 million in   
net proceeds. On March 3, 2004, we used approximately $44 million of the net    
proceeds to repurchase approximately $40.3 million in principal amount of our   
outstanding 11% senior notes at par value plus accrued interest in the amount of
approximately $3.7.                                                             

101 

S-4/A
111th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 111th
  In November 2003, our company assumed Aptegrity, Inc.'s lease of
approximately 5,600 square feet in Fairfield, New Jersey for approximately      
$11,000 a month ending December 2006.                                           

       We believe that the facilities that we plan to continue to occupy are
adequate for our current and foreseeable needs and that additional space will be
available, either through leasing or purchasing, when needed.                   

LEGAL PROCEEDINGS                                                               

       On January 28, 2002, a derivative suit was filed in the United States
District Court for the Southern District of New York against our company, as    
nominal defendant, and certain of our current and former directors and officers.
The action is entitled Susan Boney, Individually and Derivatively on behalf of  
Nominal Defendant Globix Corp, Plaintiff v. the named former Board of Directors 
(pre-Bankruptcy), Defendants and Globix Corp, a Delaware Corporation, Nominal   
Defendant. Plaintiffs brought the action against the former board and certain   
executives seeking damages and expenses for breach of fiduciary duty for        
violations of federal and state securities laws alleging misrepresentations of  
Globix's financial performance from 2000 through 2001. We believe that the      
allegations in this lawsuit are without merit and we intend to vigorously defend
against them. In addition, the plaintiff has not pursued her claims since the   
filing of the lawsuit. Although there can be no assurance as to the outcome or  
effect of this lawsuit, we do not believe, based on currently available         
information, that the ultimate liabilities, if any, resulting from this lawsuit 
will have a material adverse impact on our business, financial condition,       
results of operations or cash flows.                                            

       On August 12, 2004, the United States District Court for the Southern
District of New York approved the settlement of a class action lawsuit entitled 
In re Globix Corp Securities Litigation, No. 02-CV-00082. This lawsuit named as 
defendants Globix and our former officers Marc Bell, Peter Herzig (who remains a
director of Globix) and Brian Reach, and asserted claims under sections 10(b)   
and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated     
thereunder on behalf of all persons or entities who purchased our securities    
between November 16, 2000 and December 27, 2001. The lawsuit alleged that the   
defendants had failed to disclose the true state of the company's financial     
condition during this period. Under the settlement, which remains subject to    
appeal, the company has agreed to pay $3,500,000 (all of which would be covered 
by insurance) to settle all claims against it. A motion for reconsideration of  
the fee award has been filed by those plaintiffs' law firms whose fees were not 
included in the settlement. Although there can be no assurance as to the outcome
of the motion, Globix does not believe that the ultimate liabilities, if any,   
resulting from this appeal will have a material adverse impact on our business, 
financial condition, results of operations or cash flows.                       

         On June 25, 2002, we entered into a Stipulation and Order with the lead
plaintiffs in the class action lawsuit. The Stipulation and Order provides that 
229,452 shares of our common stock and $1,968,000 in aggregate principal amount 
of the 11% senior notes will be held in escrow pending the outcome of the class 
action lawsuit. In the event that any judgment or settlement entered into in    
connection with the class action lawsuit requires us to pay an amount in excess 
of our liability insurance, we will be required to issue to the class action    
litigants and their attorneys all (in the event that this excess is $10 million 
or greater) or a portion of (in the event that this excess is less than $10     
million) the shares of our common stock and the 11% senior notes being held in  
escrow. Based on the court approval of the settlement agreement, Globix does not
believe that the shares of common stock and 11% senior notes that are being held
in escrow are likely to be distributed to the class action litigants and their  
attorneys.                                                                      

    On November 12, 2003, we were served with a complaint filed in the
United States Court for Southern District of New York, entitled Alfred G.       
Binford v. Globix Corporation, alleging breach of contract claims related to the
failure to make payments under an employment letter, as amended, seeking damages
in the amount of $2,113,000. Although there can be no assurance as to the       
outcome or effect of this lawsuit, we do not believe, based on currently        
available information, that the ultimate liabilities, if any, resulting from    
this lawsuit will have a material adverse impact on our business, financial     
condition, results of operations or cash flows. Globix has accrued its estimated
liability.                                                                      

102   

S-4/A
112th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 112th
     We are from time to time involved in other legal proceedings in the
ordinary course of our business operations. Although there can be no assurance  
as to the outcome or effect of any legal proceedings to which we are a party, we
do not believe, based on currently available information, that the ultimate     
liabilities, if any, arising from any such legal proceedings would have a       
material adverse impact on our business, financial condition, results of        
operations or cash flows.                                                       

SELECTED CONSOLIDATED FINANCIAL DATA OF GLOBIX

         The following selected historical consolidated financial data as of and
for the years ended September 30, 2004 and September 30, 2003 (Successor        
Company), five months ended September 30, 2002 (Successor Company), the seven   
months ended April 30, 2002 (Predecessor Company), and as of and for the fiscal 
years ended September 30, 2001 and 2000 (Predecessor Company) have been derived 
from our audited consolidated financial statements and related notes.           

        This information should be read together with, and is qualified in its
entirety by reference to, our consolidated financial statements included        
elsewhere in this joint proxy statement/prospectus, and the notes thereto and   
the information set forth in "Globix Management's Discussion and Analysis of    
Financial Condition and Results of Operations" beginning on page 106 of this    
joint proxy statement/prospectus.                                               

        As a result of the application of fresh start accounting under SOP No.
90-7 as of May 1, 2002 our financial results for the fiscal year ended September
30, 2002 include two different bases of accounting and, accordingly, the        
operating results and cash flows of the Successor Company and the Predecessor   
Company have been separately disclosed. For the purposes of this joint proxy    
statement/prospectus and the financial statements and related notes contained in
this joint proxy statement/prospectus, references to the "Predecessor Company"  
are references to our company for periods prior to April 30, 2002 (the last day 
of the calendar month in which we emerged from bankruptcy) and references to the
"Successor Company" are references to our company for periods subsequent to     
April 30, 2002. The Successor Company's financial statements are not comparable 
to the Predecessor Company's financial statements.                              

103   

S-4/A
113th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 113th
                                                        [Enlarge/Download Table]
                              (IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE DATA)                              

                                                     SUCCESSOR COMPANY                              PREDECESSOR COMPANY             
                                       ---------------------------------------------   ---------------------------------------------
                                                                        FIVE MONTHS    SEVEN MONTHS                                 
                                        YEAR ENDED      YEAR ENDED         ENDED          ENDED         YEAR ENDED      YEAR ENDED  
                                       SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,     APRIL 30,     SEPTEMBER 30,   SEPTEMBER 30,
                                           2004            2003             2002           2002            2001            2000     
                                       -------------   -------------   -------------   -------------   -------------   -------------
                                                                                                                                    
Consolidated Statement of                                                                                                           
Operations Data:                                                                                                                    
Revenue                                $     61,190    $     60,177    $     30,723    $     51,273    $    104,210    $     81,287 
Operating costs and expenses:                                                                                                       
  Cost of revenues (excluding                                                                                                       
    depreciation, amortization,                                                                                                     
    certain payroll and occupancy                                                                                                   
    shown below)                             19,747          19,990          10,458          22,123          40,609          42,513 
  Selling, general and administrative        43,518          44,430          29,313          57,206         124,821          98,113 
  Loss (gain) on impairment of assets        17,972              --              --           2,578           3,500              -- 
  Restructuring and other charges                                                                                                   
    (credits)                                    --          (1,020)             --          24,834          56,109              -- 
  Depreciation and amortization              13,828          15,523           6,060          28,115          36,657          18,228 
                                       -------------   -------------   -------------   -------------   -------------   -------------
Total operating costs and expenses           95,065          78,923          45,831         134,856         261,696         158,854 
  Other operating income                         --             345              --              --              --              -- 
                                       -------------   -------------   -------------   -------------   -------------   -------------
Loss from operations                        (33,875)        (18,401)        (15,108)        (83,583)       (157,486)        (77,567)
  Interest and financing expense, net       (10,925)        (13,962)         (5,866)        (32,487)        (51,846)        (33,082)
  Other income (expense)                      1,667           1,232            (157)           (509)         (1,379)          1,779 
  Gain (loss) on debt discharge               1,747           6,023              --         427,066              --         (17,577)
  Reorganization items                           --              --              --          (7,762)             --              -- 
  Fresh start accounting adjustments             --              --              --        (148,569)             --              -- 
  Minority interest in subsidiary                --              --              --           5,778              --              -- 
                                       -------------   -------------   -------------   -------------   -------------   -------------
Income (loss) before income taxes                                                                                                   
  and cumulative effect of a change                                                                                                 
  in accounting principle                   (41,386)        (25,108)        (21,131)        159,934        (210,711)       (126,447)
Income tax expense                               --             167              --              --              --              -- 
                                       -------------   -------------   -------------   -------------   -------------   -------------
Income (loss) before cumulative                                                                                                     
  effect of a change in accounting                                                                                                  
  principle                                 (41,386)        (25,275)        (21,131)        159,934        (210,711)       (126,447)
Cumulative effect of a change in                                                                                                    
  accounting principle                           --              --              --              --          (2,332)             -- 
                                       -------------   -------------   -------------   -------------   -------------   -------------

                                                                104                                                                 

S-4/A
114th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 114th
(CONTINUED)                                                                                                                         
                                                    SUCCESSOR COMPANY                              PREDECESSOR COMPANY              
                                       ---------------------------------------------   ---------------------------------------------
                                                                        FIVE MONTHS    SEVEN MONTHS                                 
                                        YEAR ENDED      YEAR ENDED         ENDED          ENDED         YEAR ENDED      YEAR ENDED  
                                       SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,     APRIL 30,     SEPTEMBER 30,   SEPTEMBER 30,
                                           2004            2003             2002           2002            2001            2000     
                                       -------------   -------------   -------------   -------------   -------------   -------------
Net income (loss)                           (41,386)        (25,275)        (21,131         159,934        (213,043)       (126,447)
  Dividends and accretion on                                                                                                        
    preferred stock                              --              --              --          (3,178)         (7,104)         (5,768)
                                       -------------   -------------   -------------   -------------   -------------   -------------
Net income (loss) attributable to                                                                                                   
  common stockholders                  $    (41,386)   $    (25,275)   $    (21,131    $    156,756    $   (220,147)   $   (132,215)
                                       =============   =============   =============   =============   =============   =============
Earnings (loss) per common share:                                                                                                   
  Basic:                                                                                                                            
    Before cumulative effect of a                                                                                                   
      change in accounting principle   $      (2.51)   $      (1.54)   $      (1.28)   $       3.96    $      (5.66)   $      (3.73)
    Cumulative effect of a change in                                                                                                
      accounting principle                       --              --              --                           (0.06)             -- 
                                       -------------   -------------   -------------   -------------   -------------   -------------
Basic earnings (loss) per share                                                                                                     
  attributable to common                                                                                                            
  stockholders                         $      (2.51)   $      (1.54)   $      (1.28)   $       3.96    $      (5.72)   $      (3.73)
                                       =============   =============   =============   =============   =============   =============
Weighted average common shares                                                                                                      
  outstanding - basic                    16,460,000      16,460,000      16,460,000      39,618,856      38,476,909      35,484,040 
                                       =============   =============   =============   =============   =============   =============
  Diluted:                                                                                                                          
    Before cumulative effect of a                                                                                                   
      change in accounting principle   $      (2.51)   $      (1.54)   $      (1.28)   $       3.30    $      (5.66)   $      (3.73)
    Cumulative effect of a change in                                                                                                
      accounting principle                       --              --              --              --           (0.06)             -- 
                                       -------------   -------------   -------------   -------------   -------------   -------------
Diluted earnings (loss) per share                                                                                                   
  attributable to common                                                                                                            
  stockholders                         $      (2.51)   $      (1.54)   $      (1.28)   $       3.30    $      (5.72)   $      (3.73)
                                       =============   =============   =============   =============   =============   =============
Weighted average common shares                                                                                                      
  outstanding - diluted                  16,460,000      16,460,000      16,460,000      48,507,456      38,476,909      35,484,040 
                                       =============   =============   =============   =============   =============   =============
Other Consolidated Financial Data:                                                                                                  
Net cash provided by (used in)                                                                                                      
  operating activities                 $     (1,568)   $    (12,188    $      3,679    $    (59,684)   $   (140,543)   $    (94,318)
Net cash provided by (used in)                                                                                                      
  investing activities                 $     42,177    $       (858)   $     (6,461)   $      5,842    $   (113,271)   $   (149,939)
Net cash provided by (used in)                                                                                                      
  financing activities                 $    (53,423)   $    (10,539)   $     (2,279)   $     (4,946)   $        387    $    509,395 
Consolidated Balance Sheet Data:                                                                                                    
Cash, cash equivalent, short-term                                                                                                   
  investments and marketable                                                                                                        
  securities                           $     20,158    $     33,260    $     54,281                    $    113,112    $    378,510 
Restricted cash and investments        $      4,737    $      6,928    $      9,097                    $     33,870    $     43,178 
Working capital                        $     15,466    $     28,449    $     42,421                    $     78,340    $    366,139 
Total assets                           $    138,542    $    222,282    $    262,720                    $    552,988    $    729,591 
Current portion of long-term debt      $        555    $      1,510    $      1,520                    $      6,687    $      2,173 
Long-term debt, less current portion   $     95,278    $    140,389    $    151,274                    $    630,750    $    621,809 
Mandatory redeemable convertible                                                                                                    
  preferred stock                      $         --    $         --    $         --                    $     83,230    $     76,042 
Stockholders' equity (deficit)         $     16,875    $     53,351    $     72,547                    $   (237,325)   $    (18,030)

                                                   105

S-4/A
115th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 115th
 GLOBIX MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The following discussion and analysis of our financial condition and
results of operations should be read together with our consolidated financial   
statements and the accompanying notes and "Selected Consolidated Financial Data 
of Globix" beginning on page 103 of this joint proxy statement/prospectus. The  
following discussion contains forward-looking statements. These forward-looking 
statements are based on our current expectations, assumptions, estimates and    
projections about our company and our industry. Our results could differ        
materially from those anticipated in these forward-looking statements as a      
result of various factors, including the risks and uncertainties discussed in   
"Risk Factors" beginning on page 21 of this joint proxy statement/prospectus and
elsewhere in this joint proxy statement/prospectus. The results shown herein are
not necessarily indicative of the results to be expected in any future periods. 

       As is more fully discussed in Note 1 ("Basis of Presentation") to the
consolidated financial statements, we reported under fresh start accounting     
pursuant to SOP 90-7 as of May 1, 2002 resulting in a change in the basis of    
accounting in the underlying assets and liabilities of our company at the       
effective date of our plan of reorganization. Accordingly, the financial        
statements of the Successor Company and the Predecessor Company are not         
comparable. Where appropriate, we have combined the actual results of operations
for the Successor Company for the five months ended September 30, 2002 and the  
Predecessor Company for the seven months ended April 30, 2002 as pro forma      
combined 2002 operating results in order to present a more meaningful           
comparative analysis to the operating results of the prior fiscal year.         
Successor Company and Predecessor Company financial data are derived from the   
consolidated financial statements that appear elsewhere in this joint proxy     
statement/prospectus. In addition to the basis in accounting differences noted  
above, our operating results for fiscal 2002 were significantly impacted by:    

      o        items associated with the Predecessor Company's bankruptcy,
                including debt discharge, restructuring activities and other
                charges related to certain bankruptcy activities and certain
                 changes in accounting estimates recorded in the third quarter
fiscal 2002; and                            

   o        the Successor Company recognizing the effects of reduced
              depreciation, additional amortization and reduced interest
          expense arising from the revaluation of our assets and
                 liabilities and the reduced amount of the Successor Company's
              outstanding debt following the effective date of the plan.

OVERVIEW                                                                        

   Globix is a provider of Internet services for small to large size
businesses in a broad range of industries. Our company 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. On April 8, 2002, the bankruptcy court confirmed the plan of 
reorganization. Effective April 25, 2002, all conditions necessary for the plan 
of reorganization to become effective were satisfied or waived and we emerged   
from Chapter 11 bankruptcy protection. For additional information about our     
reorganization, see "Our Chapter 11 Bankruptcy Reorganization" beginning on page
100 of this joint proxy statement/prospectus.                                   

        Since Globix emerged from bankruptcy reorganization in April 2002, its
management has actively reviewed various strategies for increasing stockholder  
value. A key objective has been to redress the imbalance between revenues and   
costs that has historically been a feature of Globix' business, by increasing   
the revenue base and by cutting costs. A second objective has been to reduce    
leverage by buying back or paying off higher cost indebtedness.                 

106   

S-4/A
116th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 116th
     Globix has attempted to address customer churn, industry-wide price
competition and price decreases in its traditional offerings of hosting and     
network services by broadening the range of services it offers through the      
addition of value added services as part of its managed services business. By   
focusing on providing value added services Globix believes it will be able to   
increase its monthly recurring revenue per customer or average revenue per unit 
(ARPU). We calculate ARPU by dividing our average contracted monthly recurring  
revenue for the period by our average number of contracted customers during the 
period. During the fiscal year ended September 30, 2004 there was a 6% decrease 
in our total number of customers, while our ARPU increased to approximately $3.4
thousand as of September 30, 2004 compared to approximately $2.7 thousand as of 
September 30, 2003. In addition, during the fiscal year ended September 2004 we 
saw an improvement in our monthly average churn rate in comparison to 2003. In  
2004 our monthly positive change in contract rate (negative churn) averaged 0.3%
during the fiscal year ended September 30, 2004 compared to a monthly average   
churn rate of 1.7% in the fiscal year ended September 30, 2003. We define churn 
as contractual revenue losses as a percentage of total contractual revenue due  
to customer cancellations and downgrades, net of upgrades, and additions of new 
services.                                                                       

      In addition, Globix has cut the costs of its operations by combining
offices, eliminating redundancy within its operations and selling or leasing    
excess office space. This process of cost cutting was largely completed with the
sale of the property at 415 Greenwich Street in New York, New York.             

         Growth through acquisition offers the possibility of revenue growth and
the expansion of service offerings, to enable Globix to offer a broader range of
services to compete more effectively, while providing a larger revenue base to  
support Globix's existing indebtedness. The ability to achieve operating        
efficiencies by combining administrative or other functions has also been a     
consideration in reviewing possible acquisitions. In addition, market conditions
have made it possible to acquire related businesses at what are perceived to be 
relatively low prices. In pursuing its acquisition strategy, Globix has reviewed
potential transactions involving smaller companies, like Aptegrity, Inc., whose 
acquisition gradually expands the range of services that Globix provides, as    
well as larger companies, such as NEON, that could significantly increase the   
size of Globix' business and enhance its ability to compete against much larger 
competitors.                                                                    

     In order to increase its operating flexibility and address concerns
about its long term financial viability, Globix has also attempted to decrease  
its indebtedness through the repurchase of its 11% senior notes and the         
repurchase or early payment of other financial obligations.                     

         Although Globix operates in one operating segment, there are four major
service lines as follows:                                                       

INTERNET HOSTING AND CO-LOCATION                              

    We offer co-location solutions for customers who choose to own and
maintain their own servers, but require the physically secure,                  
climate-controlled environment provided by our Internet data centers and        
connectivity to our network. We offer hosting services in a dedicated server    
environment. This service includes providing hardware usage, bandwidth and      
managed services to meet customer-specific needs.                               

MANAGED SERVICES                                              

       We provide managed application, system, network and media services to
our hosting and co-location customers. Such services include a wide variety of  
maintenance, administration and problem resolution services for many popular    
operating systems, Internet network devices, software security solutions,       
web-based applications, as well as streaming media delivered in a streaming or  
continuous fashion over the Internet or over a company's intranet.              

107 

S-4/A
117th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 117th
NETWORK SERVICES AND INTERNET ACCESS                          

  We provide access to our network for our hosting and co-location
customers located inside of our Internet data centers as well as Internet access
services which provide businesses with high-speed continuous access to the      
internet from their own premises. In addition, we provide other services, such  
as domain name registration, local loop provisioning, Internet address          
assignment, router configuration, e-mail configuration and management and       
technical consulting services.                                                  

OTHER                                                         

      Our other services, which we categorize as "other," are comprised of
hardware and software sales and other non-recurring revenue. For the fiscal year
ended September 30, 2003, "other" also includes revenue from DSL customer       
accounts which were sold during the second quarter of fiscal year 2003.         

For a more detailed description of these service lines see the
"Information About Globix" section beginning on page 96 of this joint proxy     
statement/prospectus.                                                           

CRITICAL ACCOUNTING POLICIES AND ESTIMATES                                      

   Our discussion and analysis of financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the     
United States. The preparation of our financial statements requires us to make  
estimates that affect the reported amounts of assets, liabilities, revenue and  
expenses and related disclosures of contingent assets and liabilities. We base  
our accounting estimates on historical experience and other factors that are    
believed to be reasonable under the circumstances. However, actual results may  
vary from these estimates under different assumptions or conditions. The        
following is a summary of our critical accounting policies and estimates:       

REVENUE RECOGNITION                                           

      Revenue consists primarily of Internet hosting, co-location, managed
services, network services and Internet access.                                 

     We recognize revenue in accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin ("SAB"), No. 104 "Revenue Recognition"   
which revises and rescinds certain sections of SAB No. 101, "Revenue            
Recognition". The changes noted in SAB 104 did not have a material effect on    
Globix's consolidated financial statements. Globix recognizes revenue when      
delivery has occurred, persuasive evidence of an agreement exists, the fee is   
fixed or determinable and collectability is probable. SAB No. 104 expresses the 
view of the Securities and Exchange Commission's staff in applying accounting   
principles generally accepted in the United States of America to certain revenue
recognition issues. Under the provisions of SAB No. 104, set up and installation
revenue are deferred and recognized over the estimated length of the customer   
relationship, which in the case of our business is approximately 36 months.     
Prior to April 30, 2002, the estimated length of the customer relationship was  
12-18 months. Monthly service revenue under recurring agreements related to     
Internet hosting, co-location, network services, Internet access and managed    
services is recognized over the period that service is provided. Revenue derived
from project or event type managed service engagements is recognized over the   
life of the engagement. Payments received in advance of providing services are  
deferred until the period that these services are provided.                     

108 

S-4/A
118th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 118th
COST OF REVENUE                                               

    Cost of revenue consists primarily of telecommunications costs for
Internet access and managed hosting and includes the cost of hardware and       
software purchased for resale to customers and payroll cost which relates to    
certain managed services. Cost of revenue excludes certain payroll, occupancy,  
depreciation and amortization. Telecommunications costs include the cost of     
providing local loop for connecting dedicated access customers to Globix's      
network, leased line and associated costs related to connecting with Globix's   
peering partners and costs associated with leased lines connecting Globix's     
facilities to its backbone and aggregation points of presence.                  

INTANGIBLE ASSETS                                             

    We adopted SFAS No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets" when we emerged from bankruptcy in April 
2002. SFAS 141 requires all business combinations to be accounted for using the 
purchase method of accounting and that certain intangible assets acquired in a  
business combination must be recognized as assets separate from goodwill. SFAS  
No. 142 addresses the recognition and measurement of goodwill and other         
intangible assets subsequent to their acquisition. SFAS No. 142 also addresses  
the initial recognition and measurement of intangible assets acquired outside of
a business combination whether acquired individually or with a group of other   
assets. SFAS No. 142 provides that intangible assets with indefinite lives and  
goodwill will not be amortized but, will be tested at least annually for        
impairment. If an impairment is indicated then the asset will be written down to
its fair value typically based upon its future expected discounted cash flows.  

Our intangible assets following bankruptcy are as follows:    

o    trademarks and trade name;                               

o    network build-out/know-how; and                          

o    customer contracts.                                      

      We amortize intangible assets by the straight-line method over their
estimated useful lives. Trademarks and trade name are amortized over a period of
7-15 years, network build-out/know-how is amortized over 8 years and the        
customer contracts are amortized over 2-3 years.                                

ESTIMATES                                                     

       The preparation of financial statements requires us to make estimates
and assumptions that affect the reported amount of assets and disclosure of     
contingent assets and liabilities at the date of the financial statements and   
the reported amounts of revenue and expenses during the reported period. Use of 
estimates and assumptions include, but are not limited to, allowance for        
doubtful accounts, credit reserve and deferred tax valuation allowance.         

ALLOWANCE FOR DOUBTFUL ACCOUNTS AND CREDIT RESERVE            

       At each reporting period we evaluate on a specific basis the economic
condition of our customers and their ability and intent to pay their debt. If   
such evaluation shows that it is probable that a customer will not settle his   
full obligation, a reserve against accounts receivable in general and           
administrative expense is recorded for the non-recoverable amount. We also      
maintain a general bad debt reserve, which is based on the aging of our         
customers receivables and historical trends. In addition during each reporting  
period we must make estimates of potential future credits, which will be issued 
in respect of current revenues. We analyze historical credits and changes in    
customer demands regarding our current billings when evaluating credit reserves.
If such analysis shows that it is probable that a credit will be issued, we     
reserve the estimated credit amount against revenues in the current period. As  
of September 30, 2004 and September 30, 2003 the balance of bad debt reserve    
amounted to approximately $2.2 million and $2.6 million, respectively.          

109   

S-4/A
119th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 119th
ACCOUNTING FOR INCOME TAXES                                   

As part of the process of preparing our consolidated financial
statements we are required to estimate our income tax expense in each of the    
jurisdictions in which we operate. This process involves us estimating our      
actual current tax exposure together with assessing temporary differences       
resulting from differing treatment of items, such as accruals and reserves, for 
tax and accounting purposes. These differences result in deferred tax assets and
liabilities, which are included within our consolidated balance sheet. We must  
then assess the likelihood that our deferred tax assets will be recovered from  
future taxable income and to the extent we believe that recovery is not likely, 
we must establish a valuation allowance. Management currently estimates that it 
is more likely than not that these assets will not be realized in the           
foreseeable future and accordingly a 100% valuation allowance is recorded       
against the deferred tax assets.                                                

FISCAL YEAR ENDED SEPTEMBER 30, 2004 COMPARED TO THE FISCAL YEAR ENDED SEPTEMBER
30, 2003                                                                        

       REVENUE. Revenue for the year ended September 30, 2004 increased 1.7%
or approximately $1.0 million to $61.2 million from $60.1 million for the year  
ended September 30, 2003. On a fourth quarter comparison, revenue increased $2.2
million or 14% to $16 million for the quarter ended September 30, 2004 compared 
to $13.8 million for the quarter ended September 30, 2003. In addition on a     
quarter over quarter basis revenue increased by $0.3 million or 2% for the      
quarter ended September 30, 2004 compared to the quarter ended June 30, 2004    
continuing the trend of increased revenue on a quarter over quarter basis for   
the fourth straight quarter.                                                    

         During the year ended September 30, 2004 our monthly positive change in
contract rate (negative churn) averaged 0.3% compared to a monthly average      
churn rate of 1.7% for the fiscal year ended September 30, 2003. During the year
ended September 30, 2004, new contracts averaged 2.0% per month and contract    
upgrades averaged 1.6% per month, offset by a 1.7% monthly average in contract  
downgrades and a 1.6% average in contract cancellations per month. We define    
churn as contractual revenue losses as a percentage of total contractual revenue
due to customer cancellations and downgrades, net of upgrades, and additions of 
new services. Cancellations refer to customers that have either stopped using   
our services completely or remained a customer but terminated a particular      
service. Downgrades are a result of customers taking less of a particular       
service or renewing their contract for identical services at a lower price.     

        During the fiscal year ended September 30, 2004, our monthly recurring
revenue per customer (ARPU) averaged approximately $3.3 thousand compared to an 
average ARPU of approximately $2.7 thousand in the fiscal year ended September  
30, 2003, despite a decrease of approximately 88 customers or 6% from 1,457     
customers in September 30, 2003 to 1,369 at September 20, 2004. This is due     
mainly to our focus on higher-revenue managed services customers as a result of 
the acquisition of Aptegrity. We calculate ARPU by dividing our average         
contracted monthly recurring revenue for the period by our average number of    
contracted customers during the period.                                         

        Revenue breakdown for our four major service lines of Internet Hosting
and Co-Location, Managed Services, Network Services and Internet Access, and    
Hardware and Software Sales, DSL and Other is as follows. Revenue from Internet 
Hosting and Co-Location decreased by $2.3 million or 9% to $23.8 million in     
fiscal year 2004 compared to 26.0 million in fiscal year 2003. Revenue from     
Network Services and Internet Access revenue decreased by $1.6 million or 8% to 
$17.5 million in fiscal year 2004 compared to $19.0 million in fiscal year 2003.
The decreases in these two major services lines are mainly due to lower revenue 
under recurring contracts or churn. Revenue from Hardware and Software Sales,   
DSL and Other decreased by $0.8 million or 46% to $1.0 million in fiscal year   
2004 compared to $1.8 million in fiscal year 2003. This decrease was primarily  
due to $0.7 million reduction in DSL revenue as a result of the sale of our DSL 
customer accounts during fiscal year 2003 and a decrease of $0.5 million in     
lower margin Hardware and Software sales. Revenue from Managed Services         
increased by $5.7 million or 42% to $19.0 million in the year ended September   
30, 2004 compared to $13.3 million in the year ended September 30, 2003. This   
increase is the direct result of the acquisition of Aptegrity and our continued 
focus on adding value-added services through our Managed Services line of       
business. The above analysis includes the positive effect of foreign exchange   
rates between the U.S. dollar and the British Pound in the amount of            
approximately $2.8 million on our revenue year over year.                       

110   

S-4/A
120th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 120th
         COST OF REVENUE. Cost of revenue for the year ended September 30, 2004,
decreased $243 thousand to $19.7 million from $20.0 million for the same period 
in 2003. This was mainly due to $2.9 million decrease in our network cost       
resulting from our continued focus on deriving efficiencies and cost savings    
from our network. Additional decrease of approximately $134 thousand resulted   
from lower hardware costs as a result of our shift away from lower margin       
hardware sales. These decreases were offset in part by additional labor costs of
$2.8 million associated with the business acquired from Aptegrity and our       
continued focus on Managed Services. The aforementioned analysis includes the   
adverse effect of foreign exchange rates between the U.S. dollar and the British
Pound in the amount of approximately $392 thousand on cost of revenue year over 
year. As a result of the variances described above gross margins increased to   
67.7% for the year ended September 30, 2004 compared to 66.8% for the same      
period ended September 30, 2003.                                                

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and     
administrative expenses decreased by approximately $900 thousand to $43.5       
million as compared to $44.4 million for the year ended September 30, 2003. The 
decrease in selling, general and administrative expenses was mainly due to a one
time non-cash charge of $1.1 million in the second quarter of fiscal 2003       
related to warrants granted to one of Globix's consultants. Bad debt expenses   
decreased $1.2 million to approximately $0.7 million for year ended September   
30, 2004, compared to $1.9 million in the same period last year, as a result of 
improvement in collections and a reduction in the number of high-risk customer  
account receivable balances. Other cost savings amounting to approximately $1.0 
million resulted from our efforts to reduce our operating cost. These were      
offset mainly by a $1.7 million credit recorded during the year ended September 
30, 2003 as a result of the settlement of the Rabbi Trust litigation. In        
addition, our marketing expenses were up by approximately $0.7 million to $1.2  
million in the year ended September 30, 2004 as a result of our increased       
efforts to enhance long-term growth and improve our public relations. The       
aforementioned analysis includes the adverse effect of foreign exchange rate in 
the amount of approximately $1.5 million on selling, general and administrative 
period over period.                                                             

     LOSS ON IMPAIRMENT OF ASSETS. Impairment charges for the year ended
September 30, 2004 amounted to approximately $18 million as a result of the     
write-down of the cost basis of Globix's property located at 415 Greenwich      
Street in New York, NY to its market value less cost to sell of approximately   
$11.5 million. The sale of the 415 Greenwich Street property was consummated on 
January 22, 2004 for total cash consideration of $60 million.                   

        DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased
$1.7 million to $13.8 million for the year ended September 30, 2004, as compared
to $15.5 million in the year ended September 30, 2003. The decrease resulted    
from $1.7 million of depreciation expenses recorded in the year ended September 
30, 2003 related to the 415 Greenwich Street property which was not depreciated 
during the same period in 2004 and from lower capital spending, offset by       
amortization of intangible assets resulting from the acquisition of Aptegrity in
the amount of $292 thousand.                                                    

         INTEREST AND FINANCING EXPENSES. Interest and financing expense for the
year ended September 30, 2004 was $11.5 million, compared to $15.1 million for  
the same period in 2003. The decrease was attributable to the lower average     
balance of the 11% senior notes outstanding in fiscal 2004 compared to fiscal   
2003, which resulted from the repurchases we made throughout fiscal 2004 of     
approximately $47.3 million of our 11% senior notes offset by an increase in the
balance of the 11% senior notes of approximately $7.2 million from the required 
payment in kind of the related accrued interest in May, 2004.                   

        INTEREST INCOME. Interest income for the year ended September 30, 2004
was $540 thousand, compared to $1.2 million, for the same period in 2003. The   
decrease was primarily due to a decrease in our cash and investments.           

       OTHER INCOME, NET. Other income for the year ended September 30, 2004
was $1.7 million, compared to $1.2 million, for the same period in 2003. The    
increase was due primarily to the receipt of $450 thousand for an insurance     
claim filed in connection with the September 11, 2001 terrorist attack, and $850
thousand from leasing office space in our 139 Centre Street facility, offset by 
other non-operational expenses.                                                 

111   

S-4/A
121st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 121st
  NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. As a result of the
factors described above, we reported net loss of $41.4 million, or $2.51 basic  
and diluted loss per share for the year ended September 30, 2004, as compared to
a net loss of $25.3 million, or $1.54 basic and diluted loss per share for the  
year ended September 30, 2003.                                                  

FISCAL YEAR ENDED SEPTEMBER 30, 2003 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
2002                                                                            

         REVENUE. Revenue for the fiscal year ended September 30, 2003 decreased
26.6% to $60.1 million from $82.0 million for the fiscal year ended September   
30, 2002. This decrease in revenues was mainly attributable to customer churn   
which accounted for $19.8 million, or approximately 90.4% of our revenue        
decrease. During fiscal 2003 our monthly churn averaged approximately 1.7%. Of  
this average monthly churn, 1.8% was related to downgrades, 3.2% was related to 
cancellations, partially offset by decreases in churn of 1.7% and 1.6% related  
to new and upgraded contracts, respectively. Revenues also declined due to a    
decrease in lower margin hardware and software sales. Hardware and software     
sales decreased $2.1 million, or 77.3%, as a result of our shift away from lower
margin hardware and software sales. This decrease accounted for 9.6% of our     
total revenue decline.                                                          

       COST OF REVENUE AND GROSS MARGIN. Cost of revenue for the fiscal year
ended September 30, 2003 decreased to $20.0 million from $32.6 million for the  
fiscal year ended September 30, 2002. A decrease of $10.8 million or 85.7% of   
our cost of revenue decrease, realized within non-hardware related costs        
reflects our continued focus on network reconfiguration. A decrease of $1.8     
million, or 14.3% of our cost of revenue decrease, in hardware costs reflects   
our shift away from lower margin hardware sales. Gross margin increased to 66.8%
for the fiscal year ended September 30, 2003 from 60.0% for the fiscal year     
ended September 30, 2002. The increase in gross margin is primarily attributable
to the movement away from lower margin products and the reduction of network    
cost as a result of our focus on network reconfiguration. During fiscal year    
2003, Globix sold its DSL services in the second quarter and shifted away from  
hardware sales, both low margin products. In addition, Globix reduced certain   
network costs through contract renegotiations with certain major vendors.       

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $44.4 million, or 73.8% of revenue, for the year   
ended September 30, 2003, compared to $29.3 million, or 95.0% of revenue, for   
the five months ended September 30, 2002. For the seven-month period ended April
30, 2002, selling, general and administrative expenses were $57.2 million, or   
111.6% of revenue. For the fiscal year ended September 30, 2002 selling, general
and administrative expenses totaled $86.5 million, or 106% of revenue.          

   The decrease in selling, general and administrative expenses as a
percentage of revenue for the fiscal year ended September 30, 2003 from both the
five-month period ended September 30, 2002 and the seven month period ended     
April 30, 2002, was in part due to a decrease in salaries and benefits in       
connection with our restructuring efforts, which focused on significant         
reductions in facilities and personnel. During the year ended September 30,     
2003, salaries and benefits were $21.3 million, or 35.5% of revenue, as compared
to $12.4 million, or 40.0% of revenue, in the five month period ended September 
30, 2002. For the seven month period ended April 30, 2002, salaries and benefits
were $33.7 million, or 66.0% of revenue. For the fiscal year ended September 30,
2002, salaries and benefits totaled $46.1 million, or 56.0% of revenue. The     
number of our employees decreased from approximately 262 as of September 30,    
2002 to approximately 209 as of September 30, 2003.                             

  For the year ended September 30, 2003, bad debt expense was $1.9
million, representing 3.1% of revenue, compared to $1.9 million, or 6.0% of     
revenue, for the five-month period ended September 30, 2002. For the seven-month
period ended September 30, 2002, bad debt expense was $4.3 million, or 8.0% of  
revenue. For the fiscal year ended September 30, 2002, bad debt expense was $6.2
million, or 8.0% of revenue. The decrease in bad debt expense for the fiscal    
year ended September 30, 2003 was partially attributable to improvements in     
collections as well as a proactive reduction in the number of high risk customer
account receivable balances.                                                    

112   

S-4/A
122nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 122nd
        RESTRUCTURING AND OTHER EXPENSES. We recorded a reversal in the fiscal
year 2003 of approximately $1.0 million to our previously recorded restructuring
charges. Reversals related to contract settlement charges in the amount of $0.8 
million and facility closings charges of $0.2 million were primarily for        
settling certain facility contracts and purchase commitments for amounts lower  
than originally planned.                                                        

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization in the
year ended September 30, 2003 was $15.5 million or 25.8% of revenue, as compared
to $6.1 million, or 20% of revenue, in the five-month period ended September 30,
2002. Depreciation and amortization in the seven month period ended April 30,   
2002 was $28.1 million or 55.0% of revenue. For the fiscal year ended September 
30, 2002, depreciation and amortization was $34.2 million, or 41.7% of revenue. 
The decrease in depreciation and amortization expenses for the fiscal year 2003 
compared to the fiscal year 2002 was attributable to a decrease in our capital  
spending in connection with our restructuring plan as well as the impact of     
fresh start accounting, in particular the revaluation of our tangible and       
intangible assets as of April 30, 2002.                                         

       OTHER OPERATING INCOME. Other operating income resulted from the sale
of DSL customer accounts in the amount of $345 thousand during the fiscal year  
ended September 30, 2003.                                                       

  INTEREST AND FINANCING EXPENSE AND INTEREST INCOME. Interest and
financing expense for the year ended September 30, 2003 was $15.1 million, or   
25.2% of revenue, compared to $6.7 million, or 22.0% of revenue, in the five    
months ended September 30, 2002. Interest and financing expense in the          
seven-month period ended April 30, 2002 was $34.5 million, or 67.0% of revenue. 
For the fiscal year ended September 30, 2002, interest and financing expense    
totaled $41.2 million, or 50.0% of revenue. The decrease in interest and        
financing expense was primarily attributable to the reduction in our outstanding
indebtedness pursuant to the plan of reorganization and to the repurchase of    
approximately $19 million in principal value of the 11% senior notes during the 
fiscal year 2003.                                                               

        Interest income in the year ended September 30, 2003 was $1.2 million,
or 2.0% of revenue, compared to $0.8 million, or 3.0% of revenue, in the        
five-month period ended September 30, 2002. Interest income in the seven-month  
period ended April 30, 2002 was $2.0 million, or 4.0% of revenue. For the fiscal
year ended September 30, 2002, interest income was $2.8 million, or 3.0% of     
revenue. This decreasing trend was primarily attributable to the reduced amount 
of our cash investments and the impact of declining interest rates as compared  
to the prior fiscal year.                                                       

      OTHER INCOME (EXPENSE). Other income in the year ended September 30,
2003 was $1.2 million compared to an expense of $0.6 million in the fiscal year 
ended September 30, 2002. This increase is due primarily to write-offs of       
strategic investments in the amount of $490 thousand in the prior period and    
insurance receipts in the amount of $88 thousand associated with the September  
11, 2001 terrorist attack received in the current year.                         

       GAIN ON DISCHARGE OF DEBT. Gain on discharge of debt was $6.0 million
for the fiscal year ended September 30, 2003. The gain is a direct result of the
repurchase of approximately $19 million in principal value of the 11% senior    
notes. We did not recognize any gain on discharge of debt during the five-month 
period ended September 30, 2002. The gain on the discharge of approximately     
$427.1 million recorded in the seven-month period ended April 30, 2002 resulted 
from the exchange of the 12.5% senior notes for the 11% senior notes under the  
plan of reorganization.                                                         

  INCOME TAX EXPENSE. Income tax expense for the fiscal year ended
September 30, 2003, in the amount of $167 thousand, represents our estimated    
income taxes due in the United Kingdom. We did not record any income tax        
expenses during the fiscal year ended September 30, 2002.                       

       NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS. As a result of
the factors described above, we reported net loss of $25.3 million and net loss 
attributable to common stockholders of $25.3 million, or $1.54 basic and diluted
loss per share for the fiscal year ended September 30, 2003, as compared to a   
net income of $138.8 million and net income attributable to common stockholders 
of $135.6 million, or $2.67 basic earnings per share and $2.01 diluted earnings 
per share, respectively, for the fiscal year ended September 30, 2002.          

113   

S-4/A
123rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 123rd
LIQUIDITY AND CAPITAL RESOURCES                                                 

         Historically our cost structure exceeded our revenue base mainly due to
high labor costs resulting from higher than necessary head count, significant   
level of overhead due to numerous locations and overlapping within our network. 
This has led us historically to experience negative cash flows from operations  
and incur net losses. Our management believes that steps taken as part of our   
restructuring efforts to reduce facilities and personnel, combined with our     
ongoing efforts to derive efficiencies from our network have reduced our cash   
outflows to a level that meets our current revenue rate. Our ability to         
generate positive cash flows from operations and achieve profitability is       
dependent upon our ability to grow our revenue while maintaining our current    
cost structure and network efficiencies. Management believes that by maintaining
a monthly positive change in contract rate (negative churn), by continuing to   
focus on providing managed services solutions and by keeping close control over 
costs and expenditures it will be able to meet its revenue and profitability    
targets. Additionally, since emerging from bankruptcy our management has taken  
several significant steps to reduce our level of outstanding indebtedness and is
committed to further reduce our financial obligations by settling them in cash, 
converting into equity instruments, refinancing or any other manner, which may  
be beneficial to us. The indenture governing our 11% senior notes permits       
interest to be paid in kind in 2005 and 2006 at the discretion of our board of  
directors. Although there can be no assurance, Globix management believes that  
its board will elect payment of interest in kind in 2005.                       

       As of September 30, 2004 our cash and cash equivalent, short-term and
long-term investments amounted to approximately $21.7 million. In addition      
during fiscal year 2004 we used approximately $1.6 million in operating         
activities, which we believe represents our recurring cash-flow activities      
following the complete consummation of our plan of reorganization and under our 
current cost structure. We further believe that this cash and investment balance
is sufficient to meet our 2005 anticipated day to day operating expenses,       
commitments, working capital, capital expenditures and interest payment of      
approximately $8.0 million under our 11% senior notes if our board does not     
elect payment of interest in kind.                                              

       However, in the longer term there can be no assurance that we will be
successful in achieving sufficient profitability, attracting new customers,     
maintaining our existing churn levels or reducing our outstanding indebtedness. 
In addition, in the future, we may make acquisitions or repurchase indebtedness 
of our company, which, in turn, may adversely affect our liquidity. In such     
cases management will have to take drastic steps to reduce its operating        
expenses to meet its then revenue base and liquidity needs. Such steps may      
include further reduction of our headcount, consolidation or elimination of     
facilities, termination of low margin customers and negotiating with our        
creditors to restructure our indebtedness, mainly but not limited to our 11%    
senior notes.                                                                   

    On March 1, 2002, our company and two of our wholly owned domestic
subsidiaries, Comstar.net, Inc. and ATC Merger Corp., filed voluntary petitions 
under Chapter 11 of the United States Bankruptcy Code, together with the 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.                     

      On April 8, 2002, the bankruptcy court confirmed the plan. Effective
April 25, 2002, all conditions necessary for the plan to become effective were  
satisfied or waived and we emerged from Chapter 11 bankruptcy protection.       

      As of the effective date of the plan, all of our existing securities
were cancelled and:                                                             

         o        each holder of our 12.5% senior notes due 2010 became entitled
                  to receive, in exchange for its claims in respect of the 12.5%
senior notes, its pro rata share of:        

       o        $120 million in aggregate principal amount of our 11% senior
notes, and                                  

         o        13,991,000 shares of our common stock, representing 85% of the
               shares of our common stock issued and outstanding following
the effective date of the plan; and         

114   

S-4/A
124th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 124th
   o        each holder of shares of our preferred stock outstanding
              immediately prior to the effective date of the plan became
                 entitled to receive, in exchange for its claims in respect of
          these shares of preferred stock, its pro rata share of
                 2,304,400 shares of our common stock, representing 14% of the
               shares of our common stock issued and outstanding following
the effective date of the plan; and         

o        each holder of shares of our common stock outstanding
              immediately prior to the effective date of the plan became
                 entitled to receive, in exchange for its claims in respect of
             its shares of common stock, its pro rata share of 164,600
                shares of our common stock, representing 1% of the shares of
         our common stock issued and outstanding following the
effective date of the plan.                 

       All of the shares of our common stock issued pursuant to the plan are
subject to dilution by the exercise of management incentive stock options,      
representing up to 10% of the shares of our issued and outstanding common stock 
on a fully-diluted basis following the effective date of the plan.              

      A total of 16,460,000 shares of our common stock and $120 million in
aggregate principal amount of the 11% senior notes were deemed to be issued and 
outstanding on the effective date of the plan pursuant to the terms of the plan.
As of September 30, 2002, however, no shares of our common stock or 11% senior  
notes had been distributed. In October 2002, we distributed a total of          
16,295,400 shares of common stock and $120 million in aggregate principal amount
of 11% senior notes. Pursuant to the terms of a Stipulation and Order that we   
entered into with the lead plaintiffs in the class action lawsuit described in  
"Item 3 - Legal Proceedings," 229,452 of these shares of common stock and       
$1,968,000 in aggregate principal amount of these 11% senior notes were placed  
in reserve in escrow pending the outcome of the class action lawsuit. In the    
event that any judgment or settlement entered into in connection with the class 
action lawsuit requires us to pay an amount in excess of our liability          
insurance, then we will be required to issue to the class action litigants and  
their attorneys all (in the event that this excess is $10 million or greater) or
a portion of (in the event that this excess is less than $10 million) the shares
of common stock and 11% senior notes held in escrow. Based on an August 12, 2004
court approval of a settlement agreement pursuant to which Globix would not be  
required to pay an amount in excess of our liability insurance described under  
"Item 3 -Legal Proceedings," Globix believes that the shares of common stock and
11% senior notes held in escrow are not likely to be distributed to the class   
action litigants and their attorneys, and such shares and notes will accordingly
be available for distribution to Globix security holders under the plan.        
Distribution of the remaining 164,600 shares of common stock deemed to have been
issued on the effective date of the plan, which are allocable under the terms of
the plan to the holders of our common stock outstanding immediately prior to the
effective date of the plan, will occur following the resolution of the          
stockholder derivative suit against our company and certain of our former       
officers and directors described in "Item 3 - Legal Proceedings".               

   The indenture governing the 11% senior notes contains a number of
covenants that impose significant operating and financial restrictions on us and
our subsidiaries. These restrictions significantly limit, and in some cases     
prohibit, among other things, the ability of our company and certain of our     
subsidiaries to incur additional indebtedness, create liens on assets, enter    
into business combinations or engage in certain activities with our             
subsidiaries.                                                                   

FISCAL YEAR ENDED SEPTEMBER 30, 2004                                            

        As of September 30, 2004, we had cash and cash equivalents, short-term
and long-term investments totaling to approximately $21.7 million compared to   
approximately $32.4 million on September 30, 2003. This decrease of $10.7       
million included a $12.4 million decrease in cash and cash equivalents to $12.1 
million at September 30, 2004 from $24.5 million at September 30, 2003. This was
mainly attributable to operating activities, investing activities and financing 
activities as described below. During the year ended September 30, 2004, we     
completed the sale of the 415 Greenwich Street property for approximately $48.7 
million in net proceeds, of which approximately $44 million was used to purchase
a portion of our 11% senior notes at par plus accrued interest as required      
pursuant to the indenture and the remainder was used for working capital.       

115   

S-4/A
125th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 125th
        OPERATING ACTIVITIES. Net cash used in operating activities during the
year ended September 30, 2004 was approximately $1.6 million in comparison to   
$12.2 million, which was used in operating activities during the year ended     
September 30, 2003. The improvement in our cash burn is due to the pay-down of  
the remaining pre-bankruptcy obligations to our vendors and others during fiscal
2003, our continuing improvement in collections, the reduction in the number of 
high-risk customer account receivable balances and our ongoing focus on cost    
control by adjusting our expenditure rate to our revenues. We believe that the  
change in our accounts receivable, accounts payable and accrued liabilities     
during fiscal 2004 represents our recurring cash-flow activities following the  
complete consummation of our plan of reorganization.                            

     Our $1.6 million use of cash in operating activities was attributed
mainly to our net loss of $41.4 million, which included non-cash depreciation   
and amortization expenses of $13.8 million and a non-cash impairment charge of  
$18.0 million resulting from a write-down of the 415 Greenwich Street property  
to its fair market value less cost for sale, offset by a non-cash gain on debt  
discharge of $1.7 million resulting from the repurchase of a portion of our 11% 
senior notes. Changes in assets and liabilities resulted in an increase to      
operating cash flow of approximately $9.5 million, which was mainly attributed  
to a $9.4 million increase in accrued interest on the 11% senior notes, which   
we expect will be paid in kind during May 2005.                                 

        INVESTING ACTIVITIES. Net cash provided by investing activities during
the year ended September 30, 2004 was $42.2 million. Approximately $48.7 million
resulted from the sale of the 415 Greenwich Street property and approximately   
$1.0 million, net resulted from the sale of our investment in Globecomm Systems,
Inc. and other investments. This was offset by the use of $2.3 million for the  
acquisition of Aptegrity, $4.7 million for capital expenditures and $1.5 million
of deferred acquisition cost that we incurred as part of the proposed merger    
with NEON.                                                                      

        FINANCING ACTIVITIES. Net cash used in financing activities during the
year ended September 30, 2004 was $53.4 million. Approximately $49.6 million of 
the cash used in financing activities was attributed to the repurchase of a     
portion of our 11% senior notes and related accrued interest in the open market 
and as part of an offer to the holders of the 11% senior notes in connection    
with the sale of the 415 Greenwich Street property. $2.7 million was used to    
prepay a long-term note payable and the remaining $1.1 million was used for     
payment and settlement of certain contractual obligations.                      

FISCAL YEAR ENDED SEPTEMBER 30, 2003                                            

As of September 30, 2003, we had cash and cash equivalents of 
approximately $24.5 million compared to approximately $47.6 million on September
30, 2002.                                                                       

        OPERATING ACTIVITIES. For the fiscal year ended September 30, 2003 net
cash used in operating activities was approximately $12.2 million attributable  
mainly to a net loss of $25.3 and non-cash gains of approximately $6.0 million  
and $1.0 million for discharges resulting from our repurchase of the 11% senior 
notes and reversal of restructuring accruals recorded in prior years,           
respectively, offset by depreciation and amortization expenses of approximately 
$15.5 million, an increase in our provision of doubtful accounts of             
approximately $1.9 million and a non-cash charge of approximately $1.0 million  
recorded in respect of warrants issued to a consultant. Changes in assets and   
liabilities resulted in an increase to operating cash-flow of approximately $2.0
million.                                                                        

       INVESTING ACTIVITIES. Cash used for investing activities for the year
ended September 30, 2003 amounted to approximately $0.9 million, which          
attributed mainly to capital expenditures in the amount of approximately $1.2   
million.                                                                        

116   

S-4/A
126th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 126th
         In September 2000 we purchased the land and approximately 187,000 gross
square foot building located at 415 Greenwich Street, New York, New York. During
October 2003 we reached an agreement to sell the property for total cash        
consideration of approximately $60 million. The agreement was subject to various
closing conditions which were not satisfied until January 2004. The sale of the 
property was completed on January 22, 2004 and resulted in approximately $48.7  
million in net proceeds. On March 3, 2004, we used approximately $44 million of 
the net proceeds to repurchase approximately $40.3 million in principal amount  
of our outstanding 11% senior notes at par value plus accrued interest in the   
amount of approximately $3.7. We intend to use the remaining balance of the net 
proceeds from the sale for working capital purposes. Consummation of the sale   
also eliminated certain obligations that we incurred in connection with the     
purchase and rehabilitation of the property.                                    

         On October 31, 2003, Globix paid approximately $2.0 million (subject to
final settlement) for the acquisition of the business, substantially all of the 
assets and the assumption of certain liabilities of Aptegrity, Inc., a provider 
of web application and operations management services.                          

      FINANCING ACTIVITIES. Cash used in financing activities for the year
ended September 30, 2003 amounted to approximately $10.5 million. Approximately 
$14.6 million were used to repurchase a portion of our 11% senior notes,        
approximately $0.9 million were used to buy-out certain of our capital leased   
equipments and approximately $1.1 million were used to amortize scheduled       
payments under our mortgage and capital lease agreements, offset by a           
contribution of approximately $6 million from the minority interest investor    
mentioned above.                                                                

         On October 3, 2003, we repurchased in the open market for approximately
$5.6 million additional portion of our outstanding 11% senior notes.            

117   

S-4/A
127th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 127th
SEGMENT INFORMATION                                                             

       Our activities fall within one operating segment. The following table
sets forth geographic segment information for the year ended September 30, 2004 
and 2003 (Successor Company), five months ended September 30, 2002 (Successor   
Company), and for the seven months ended April 30, 2002 (Predecessor Company):  

                                                        [Enlarge/Download Table]
                                                                                                             PREDECESSOR  
                                                                       SUCCESSOR COMPANY                       COMPANY    
                                                      ----------------------------------------------------  --------------
                                                                                             FIVE MONTHS     SEVEN MONTHS 
                                                        YEAR ENDED         YEAR ENDED           ENDED           ENDED     
                                                       SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,    APRIL 30,   
                                                           2004               2003              2002             2002     
                                                      --------------     --------------     --------------  --------------
                                                                                                                          
Revenues:                                                                                                                 
      United States ................................. $      35,537      $      36,833      $      20,410   $      37,747 
       Europe (mainly the United Kingdom) ...........        25,653             23,344             10,313          13,526 
                                                      --------------     --------------     --------------  --------------
       Consolidated ................................. $      61,190      $      60,177      $      30,723   $      51,273 
                                                      ==============     ==============     ==============  ==============

Operating income (loss):                                                                                                  
      United States.................................. $     (37,755)     $     (22,631)     $     (15,069)  $     (54,433)
       Europe (mainly the United Kingdom) ...........         3,880              4,230                (39)        (29,150)
                                                      --------------     --------------     --------------  --------------
       Consolidated ................................. $     (33,875)     $     (18,401)     $     (15,108)  $     (83,583)
                                                      ==============     ==============     ==============  ==============

Long-lived assets:                                                                                                        
      United States ................................. $      64,978      $     137,279      $     148,559                 
       United Kingdom ...............................        25,844             25,351             26,151                 
                                                      --------------     --------------     --------------                
       Consolidated ................................. $      90,822      $     162,630      $     174,710                 
                                                      ==============     ==============     ==============                

     Although our company operates in one operating segment, there are 4
major service lines as detailed in the table below. Data for fiscal year 2002   
have not been provided due to impracticability.                                 

                                                        [Enlarge/Download Table]
                                                               SUCCESSOR COMPANY        
                                                      ----------------------------------
                                                        YEAR ENDED         YEAR ENDED   
                                                       SEPTEMBER 30,      SEPTEMBER 30, 
                                                           2004               2003      
                                                      --------------     -------------- 
                                                                                        
Internet Hosting and Co-Location..................... $      23,760      $      26,048  
Managed Services.....................................        18,996             13,342  
Network Services and Internet Access.................        17,483             19,034  
Hardware and Software Sales, DSL and Other ..........           951              1,753  
                                                      --------------     -------------- 
Revenue, net                                          $      61,190      $      60,177  
                                                      ==============     ============== 

118   

S-4/A
128th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 128th
INCOME TAXES                                                                    

         Globix is in an accumulated loss position for both financial and income
tax reporting purposes. Globix has United States Federal income tax loss        
carryforwards of approximately $173.2 million at September 30, 2004. These      
income tax loss carryforwards expire at various times through 2024. The United  
States Federal income tax loss carryforwards were reduced upon emergence from   
bankruptcy due to the Internal Revenue Code's rules and regulations related to  
the cancellation of indebtedness income that is excluded from taxable income.   
Since the bankruptcy plan provided for substantial changes in our ownership, our
use of net operating loss carryforwards from the period prior to bankruptcy may 
be limited. Globix has not yet determined the impact, if any, that changes in   
ownership have had on net operating loss carryforwards. As of September 30,     
2004, Globix also had net operating loss carryforwards of approximately $24.3   
million from its United Kingdom subsidiaries, which do not expire under United  
Kingdom tax rules. For financial reporting purposes, income tax benefits through
September 30, 2004 related to both United States Federal and foreign income tax 
losses are fully offset by a valuation allowance due to the uncertainty of our  
ability to realize income tax benefits by generating taxable income in the      
future.                                                                         

       Our emergence from bankruptcy in fiscal 2002 did not create a new tax
reporting entity. Accordingly, the adjustments required to adopt fresh start    
accounting are not applicable for our tax reporting and, therefore, deferred tax
items were recognized concurrently with the recognition of the respective fresh 
start accounting adjustments. In addition, pursuant to SOP 90-7, reversals of   
the valuation allowance recorded against deferred tax assets that existed as of 
the emergence date will first reduce intangibles, until exhausted, and          
thereafter will be reported as additional paid in capital as opposed to income  
tax expense. The balance of the valuation allowance for which this treatment is 
required was approximately $80 million at September 30, 2004 and 2003.          

INDEBTEDNESS                                                                    

         Our indebtedness at September 30, 2004 consisted of approximately $72.2
million in aggregate principal amount of our 11% senior notes, approximately    
$3.3 million in related accrued interest, approximately $370 thousand of capital
lease obligations and approximately $19.9 million in mortgage debt. Total       
borrowings at September 30, 2004 were approximately $95.9 million, which        
included $0.6 million in current obligations and $95.3 million of the 11% senior
notes, related accrued interest, long-term mortgage and capital lease           
obligations. The indenture governing the 11% senior notes requires interest to  
be paid in kind through 2004, and permits interest to be paid in kind for two   
years thereafter at the discretion of our board of directors.                   

         In September 2000 we purchased the land and approximately 187,000 gross
square foot building located at 415 Greenwich Street, New York, New York. During
October 2003 we reached an agreement to sell the property for total cash        
consideration of approximately $60 million. The agreement was subject to various
closing conditions which were not satisfied until January 2004. The sale of the 
property was completed on January 22, 2004 and resulted in approximately $48.7  
million in net proceeds. On March 3, 2004, we used approximately $44 million of 
the net proceeds to repurchase approximately $40.3 million in principal amount  
of our outstanding 11% senior notes at par value plus accrued interest in the   
amount of approximately $3.7. Consummation of the sale also eliminated certain  
obligations that we incurred in connection with the purchase and rehabilitation 
of the property. In addition, through September 30, 2004 we acquired in the open
market approximately $26.1 million in aggregate principal amount of our 11%     
senior notes and approximately $1.9 million of related accrued interest for an  
aggregate purchase price of approximately $20.2 million in open market purchases
and issued an additional $18.5 million in 11% senior notes as payment of accrued
interest on the 11% senior notes.                                               

COMMITMENTS                                                                     

As of September 30, 2004, we had commitments to certain       
telecommunications carriers totaling $25.6 million payable in various years     
through 2009. Additionally, we have various agreements to lease facilities and  
equipment and are obligated to make future minimum lease payments of            
approximately $76 million on operating leases expiring in various years through 
2017.                                                                           

119 

S-4/A
129th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 129th
       As of September 30, 2004 we had contractual obligations due in future
periods as follows:                                                             

                                                        [Enlarge/Download Table]
                                                     Less than 1                                    After 5   
Contractual Obligations                  Total          year         2-3 years      4-5 years        years    
                                     -------------  -------------  -------------  -------------  -------------
                                                                                                              
11% senior notes                     $     72,202   $         --   $         --   $     72,202   $         -- 
11% senior notes - Accrued Interest         3,349             --             --          3,349             -- 
Mortgage Payable                           33,979          2,142          4,284          4,284         23,269 
Capital Lease Obligations                     370            249            121             --             -- 
Operating Leases                           76,029          6,777         13,673         13,701         41,878 
Telecommunications Commitments             25,564          9,738         11,909          3,917             -- 
                                     -------------  -------------  -------------  -------------  -------------

Total Contractual Cash Obligations   $    211,493   $     18,906   $     29,987   $     97,453   $     65,147 
                                     =============  =============  =============  =============  =============

RECENT TECHNICAL ACCOUNTING PRONOUNCEMENTS                                      

         In April 2003, the Financial Accounting Standards Board issued SFAS No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging          
Activities." SFAS No. 149 clarifies under what circumstances a contract with an 
initial net investment meets the characteristics of a derivative as discussed in
Statement No. 133. It also specifies when a derivative contains a financing     
component that warrants special reporting in the Consolidated Statement of Cash 
Flows. SFAS No. 149 amends certain other existing pronouncements in order to    
improve consistency in reporting these types of transactions. The new guidance  
is effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. The adoption of this      
standard did not have a material impact on our consolidated financial           
statements.                                                                     

       In May 2003, the Financial Accounting Standards Board issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of Both 
Liabilities and Equity." SFAS No. 150 specifies that instruments within its     
scope embody obligations of the issuer and that, therefore, the issuer must     
classify them as liabilities. SFAS No. 150 requires issuers to classify as      
liabilities the following three types of free standing financial instruments:   
(1) mandatorily redeemable financial instruments; (2) obligations to repurchase 
the issuer's equity shares by transferring assets and (3) certain obligations to
issue a variable number of shares. SFAS No. 150 defines a "freestanding         
financial instrument" as a financial instrument that (1) is entered into        
separately and apart from any of the entity's other financial instruments or    
equity transactions or (2) is entered into in conjunction with some other       
transaction and can be legally detached and exercised on a separate basis. For  
all financial instruments entered into or modified after May 31, 2003, SFAS No. 
150 is effective immediately. For all other instruments of public companies,    
SFAS No. 150 goes into effect at the beginning of the first interim period      
beginning after June 15, 2003. For contracts that were created or modified      
before May 31, 2003 and still exist at the beginning of the first interim period
beginning after June 15, 2003, entities should record the transition to SFAS No.
150 by reporting the cumulative effect of a change in an accounting principle.  
SFAS No. 150 prohibits entities from restating financial statements for earlier 
years presented. The adoption of this standard did not have a material impact on
our consolidated financial statements.                                          

         In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research Bulletin (ARB) No.  
51", which relates to the identification of, and financial reporting for,       
variable-interest entities (VIEs). FIN No. 46 requires that if an entity is the 
primary beneficiary of a variable interest entity, the assets, liabilities and  
results of operations of the variable interest entity should be included in the 
consolidated financial statements of the entity. The provisions of FIN No. 46   
are effective immediately for all arrangements entered into after January 31,   
2003. For those arrangements entered into prior to February 1, 2003, the        
provision of FIN No. 46 are required to be adopted at the beginning of the first
interim or annual period beginning after June 15, 2003. In October 2003, FASB   
Staff Position deferred the effective date for existing VIE arrangements created
before February 1, 2003 to the first interim or annual reporting period that    
ends after December 15, 2003. The adoption of this standard did not have a      
material impact on the company's consolidated financial statements.             

120 

S-4/A
130th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 130th
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                      

    At September 30, 2004, investments consisted of an investment in a
limited partnership that invests in fixed income securities and investments in  
fixed rate investment grade and government securities denominated in U.S.       
dollars. At September 30, 2004, the majority of our investments were due to     
mature within twelve months and the carrying value of these investments         
approximated fair value.                                                        

        As of September 30, 2004 marketable securities included our investment
in EDGAR Online Inc., which is recorded at fair market value. We do not hedge   
our exposure to fluctuations in the value of our investments in equity          
securities.                                                                     

      At September 30, 2004, $4.7 million of our cash and investments were
restricted in accordance with the terms of certain collateral obligations.      

     We are also subject to market risk associated with foreign currency
exchange rates. Approximately 42% of our revenues and approximately 28% of our  
operating costs and expenses for the year ended September 30, 2004 were         
denominated in British Pounds. 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. The company believes that an immediate increase or 
decrease of 5% of the U.S. Dollar in comparison to the British Pound would not  
have a material impact on its operating results or cash flows.                  

     We believe that we have limited exposure to financial market risks,
including changes in interest rates. The fair value of our investment portfolio 
or related income would not be significantly impacted by changes in interest    
rates due mainly to the short-term nature of the majority of our investment     
portfolio. An increase or decrease in interest rates would not significantly    
increase or decrease interest expense on debt obligations, due to the fixed     
nature of the substantial majority of our debt obligations.                     

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL       
DISCLOSURE                                                                      

        On July 31, 2002, we engaged PricewaterhouseCoopers LLP ("PWC") as our
independent accountants and dismissed Arthur Andersen LLP, which had previously 
served as our independent accountants. The board of directors and audit         
committee participated in and approved the decision to change independent       
accountants. The audit reports of Arthur Andersen on the consolidated financial 
statements of Globix and its subsidiaries as of and for the fiscal years ended  
September 30, 2000 and 2001 did not contain an adverse opinion or disclaimer of 
opinion, nor were they modified as to uncertainty, audit scope or accounting    
principles. The audit report for the year ended September 30, 2001 contained a  
going concern modification. During the fiscal years ended September 30, 2000 and
2001, there were no disagreements on any matter of accounting principles or     
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused it to make reference to the subject matter of the disagreement in   
connection with its report.                                                     

      PWC served as our independent accountants from July 31, 2002 through
September 12, 2003. At a meeting held on September 12, 2003, our audit committee
recommended and approved a change in our independent accountants. Accordingly,  
we dismissed PWC as our independent accountants on September 12, 2003.          

121 

S-4/A
131st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 131st
      PWC's reports on our financial statements for the seven-month period
ended April 30, 2002 and as of and for the five month period ended September 30,
2002 contained no adverse opinion or disclaimer of opinion and were not         
qualified or modified as to uncertainty, audit scope or accounting principle.   

      From the date of PWC's engagement on July 31, 2002 through September
12, 2003, there have been no disagreements with PWC on any matter of accounting 
principles or practices, financial statement disclosure, or auditing scope or   
procedure, which disagreements, if not resolved to the satisfaction of PWC,     
would have caused PWC to make reference thereto in its report on the financial  
statements for such periods.                                                    

      From the date of PWC's engagement on July 31, 2002 through September
12, 2003, there have been no "reportable events" as that term is defined in Item
304(a)(1)(v) of Regulation S-K, except that on August 13, 2003 PWC provided us  
with a management letter reporting to us the matter described in the following  
paragraphs:                                                                     

        Since our emergence from bankruptcy in April 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 for the quarter ended March 31, 2002. In addition,  
we have experienced significant turnover in our financial reporting staff, as   
well as limited management resources. We fell behind in our periodic reporting  
to the Securities and Exchange Commission 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 year
ended September 30, 2003. PWC reported that the combined effect of these        
challenges had stressed the capabilities of our accounting staff and created    
material weaknesses within our accounting and reporting controls. The management
letter indicated that the shortage of qualified accounting personnel had        
required PWC to perform significantly more work in connection with the audit of 
our financial statements for the seven-month period ended April 30, 2002 and the
five-month period ended September 30, 2002. The management letter recommended   
hiring at least two additional senior financial staff members, one of whom would
be required to be the controller.                                               

    We agreed with these findings and recommendations and as such, the
management letter noted that we had hired a controller who began work on July   
15, 2003. In addition, in order to resolve the problems described above, we     
hired a new senior accountant in May 2003, a new manager of external reporting  
in October 2003 and a new senior accountant in November 2003. In addition, we   
returned to a normal recurring closing timetable that includes formal management
reviews and a monthly financial reporting package in January 2004. Finally, by  
completing our fiscal 2002 reporting, we have significantly reduced the burden  
on our internal accounting staff.                                               

       At its meeting on September 12, 2003, our audit committee recommended
and approved the engagement of Amper, Politziner & Mattia PC, which firm we     
refer to as "Amper," as our independent auditors. Accordingly, we engaged Amper 
as our independent auditors, effective September 12, 2003. During the two most  
recent fiscal years and through September 12, 2003, we had not consulted with   
Amper regarding any matter that would require reporting under Item 304(a)(2) of 
Regulation S-K.                                                                 

122 

S-4/A
132nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 132nd
 SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GLOBIX

PRINCIPAL HOLDERS OF COMMON STOCK                                               

  The following table and the accompanying notes set forth certain
information, as of December 1, 2004 (except as set forth below), concerning the 
beneficial ownership of our common stock by: (1) each person who is known by us 
to beneficially own more than five percent of our common stock, (2) each current
director of Globix, (3) each officer of Globix named in the Summary Compensation
Table and (4) all current directors and executive officers as a group.          

                                                                [Download Table]
NAME AND ADDRESS                                       NUMBER OF     PERCENT OF
OF BENEFICIAL OWNER                                  SHARES(1),(2)     CLASS   
-------------------                                  -------------     -----   
                                                                               
Goldman, Sachs & Co.                                  1,405,513(3)     8.54%   
85 Broad Street                                                                
New York, NY 10004                                                             

HM Parties(4)                                         2,304,400(5)    14.00%   
c/o Hicks, Muse, Tate & Furst Incorporated                                     
200 Crescent Court, Suite 1600                                                 
Dallas, Texas 75201                                                            

MacKay Shields LLC                                    2,482,491(6)    15.08%   
c/o MacKay Shields Financial Corp.                                             
9 West 57th Street                                                             
New York, NY 10019                                                             

JGD Management Corp.                                  1,027,733(7)     6.24%   
350 Park Avenue                                                                
New York, New York 10022                                                       

Kingdon Capital Management, LLC                       1,397,076(8)     8.49%   
152 West 57th Street, 50th Floor                                               
New York, NY 10019                                                             

Peter S. Brodsky                                             --(9)        *    

Peter L. Herzig                                              --           *    

Steven Lampe                                          1,219,817(10)    7.41%   

Steven G. Singer                                      1,138,007(11)    6.91%   

Raymond L. Steele                                            --           *    

Peter K. Stevenson                                      548,667(12)    3.23%   

Steven Van Dyke                                         168,609(13)    1.02%   

Robert M. Dennerlein                                     55,833(14)       *    

H. Jameson Holcombe                                      65,221(15)       *    

                                                123                            

S-4/A
133rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 133rd
NAME AND ADDRESS                                       NUMBER OF     PERCENT OF
OF BENEFICIAL OWNER                                  SHARES(1),(2)     CLASS   
-------------------                                  -------------     -----   

John D. McCarthy                                         97,546(16)       *    

Philip J. Cheek                                          15,000(17)       *    

All directors and executive officers as a group                                
(12 persons)                                          3,317,034(18)   19.23%   

*        Less than 1%.                                                          

(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 December 1, 2004 was 16,460,000. As used in
         this joint proxy statement/prospectus, "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 this joint proxy statement/prospectus entitled "Information About
         Globix --Legal Proceedings" beginning on page 102 of this joint proxy
         statement/prospectus. The Stipulation and Order provides that 229,452
        shares of our common stock and $1.968 million in aggregate principal
    amount of our 11% senior notes will be held in reserve in escrow
          pending the outcome of the class action lawsuit. In the event that any
    judgment or settlement entered into in connection with the class
          action lawsuit requires us to pay an amount in excess of our liability
         insurance, we will be required to issue to the class action litigants
         and their attorneys all (in the event that this excess is $10 million
      or greater) or a portion of (in the event that this excess is less
        than $10 million) the shares of our common stock and the notes being
        held in escrow. On August 12, 2004, the United States District Court
        for the Southern District of New York approved the settlement of the
         class action lawsuit in an amount which would be covered by liability
        insurance. Although the settlement remains subject to appeal, Globix
    believes that its liability insurance is sufficient to cover any
          judgment or settlement in the class action lawsuit and that the shares
     of Globix common stock and the notes being held in escrow will be
         distributed in accordance with the plan or reorganization rather than
          to the class action litigants and their attorneys. Accordingly, MacKay
        Shields LLC and Goldman Sachs & Co. (and each other former holder of
        our 12.5% notes on the effective date of the plan of reorganization)
    will be entitled to receive a portion of these 229,452 shares of
        common stock based on its percentage ownership of the 12.5% notes on
the effective date of the plan of reorganization.           

124 

S-4/A
134th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 134th
(3)      This information is as of August 31, 2004 and based on information     
provided to us by Goldman Sachs & Co.                         

(4)      "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 these shares are owned of record by HM4 EQ Globix
         Coinvestors, LLC; and (v) 51,475 of these shares are owned of record by
HM4 SBS Globix Coinvestors, LLC.                              

(5)      Thomas O. Hicks is the President and Chief Executive Officer 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 and has the
  ultimate legal authority over all investment decisions made with
     respect to the shares of our common stock owned of record by 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, Dan H. Blanks, Joe
    Colonnetta, Jack D. Furst, a director of Globix from December 1999
      through April 2002, Lyndon Lea, John R. Muse, Rick Neuman and Andrew
        Rosen are partners of Hicks, Muse, Tate & Furst Incorporated, which is
        an affiliate of Mr. Hicks and of the HM Parties, and serve as officers
      of each of the HM Parties. In addition, Messrs. Hicks, Muse, Lea and
     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,
      Blanks, Colonnetta, Furst, Lea, 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)      This information is as of November 19, 2004 and based on information   
        provided to us by MacKay Shields LLC, the pecuniary interests in these
       shares are held by a number of clients for whom MacKay Shields LLC is
        the discretionary investment advisor or subadvisor. MacKay Shields LLC
       has voting and investment control over these shares and, accordingly,
is deemed to beneficially own these shares.                   

(7)      According to information provided to us by JGD Management Corp. these  
      shares are held by certain managed accounts and investment funds for
    whom JGD Management Corp. is the discretionary investment advisor.

(8)      According to information provided to us by Kingdon Capital Management, 
      LLC, these shares are directly beneficially owned by Kingdon Capital
   Management, LLC and held of record by Kingdon Associates, Kingdon
      Partners, Kingdon Family Partnership LP and M. Kingdon Offshore N.V.

(9)      Mr. Brodsky is a partner of Hicks, Muse, Tate & Furst Incorporated,    
    which is an affiliate of Mr. Hicks and each of the HM Parties, and
   serves as an officer of each of the HM Parties. Consequently, Mr.
   Brodsky may be deemed to beneficially own all or a portion of the
       shares of our common stock owned of record by each of the HM Parties.
         Mr. Brodsky disclaims the existence of a group and disclaims beneficial
       ownership of shares of our common stock of which he is not the record
owner.                                                        

(10)     Mr. Lampe is affiliated with LC Capital Master Fund Ltd., which owns   
      these shares. Mr. Lampe has voting and investment control over these
       shares and, consequently, is deemed to beneficially own these shares.

(11)     Mr. Singer is co-trustee of two trusts for the benefit of his brother's
    children and as trustee has voting and investment control over the
       517,979 shares of our common stock held in the trusts. Mr. Singer and
     his sister-in-law, Karen Singer, filed a Schedule 13G to report the
       beneficial ownership of these shares and an additional 589,109 shares
         held in a trust for the benefit of Mr. Singer's brother's children, for
which Karen Singer serves as sole trustee. Mr. 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 common stock held in the Singer
Trusts.                                                       

125   

S-4/A
135th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 135th
(12)     Pursuant to the terms of Mr. Stevenson's employment agreement described
in "Executive Compensation - Employment Agreements - Peter K. 
       Stevenson", on March 14, 2003, we granted to Mr. Stevenson options to
       acquire 548,667 shares of our common stock pursuant to our 2003 Stock
       Option Plan. As of December 31, 2003, all of these stock options were
vested.                                                       

(13)     Mr. Van Dyke is the founder and co-managing principal of Bay Harbour   
         Management L.C. Bay Harbour Management serves as investment advisor for
Bay Harbour 90-1, Ltd., Bay Harbour Partners, Ltd., Zurich    
       Institutional Benchmarks Master Fund Ltd. and HFR DS Strategic Master
       Trust, which collectively owned (as of August 1, 2003) 168,609 shares
         of our common stock, or approximately 1.02 percent of the shares of our
 outstanding common stock. Bay Harbour Management has voting and
         investment control over these shares and, accordingly, may be deemed to
        beneficially own these shares. Mr. Van Dyke is the natural person with
voting and investment control over these shares.              

(14)     Includes options to purchase 55,833 shares that are exercisable within 
       60 days of December 1, 2004, including 16,667 options which vested on
    September 30, 2004 assuming determination by Globix's compensation
      committee of its board of directors that certain performance targets
have been achieved.                                           

(15)     Includes options to purchase 65,221 shares that are exercisable within 
       60 days of December 1, 2004, including 17,764 options which vested on
    September 30, 2004 assuming determination by Globix's compensation
      committee of its board of directors that certain performance targets
have been achieved.                                           

(16)     Includes options to purchase 97,544 shares that are exercisable within 
       60 days of December 1, 2004, including 24,386 options which vested on
    September 30, 2004 assuming determination by Globix's compensation
      committee of its board of directors that certain performance targets
have been achieved.                                           

(17)     Includes options to purchase 15,000 shares that are exercisable within 
      60 days of December 1, 2004, including 5,000 options which vested on
    September 30, 2004 assuming determination by Globix's compensation
      committee of its board of directors that certain performance targets
have been achieved.                                           

(18)     Includes options to purchase an aggregate of 790,599 shares that are   
  exercisable within 60 days of December 1, 2004, including 67,984
      options which vested on September 30, 2004 assuming determination by
        Globix's compensation committee of its board of directors that certain
performance targets have been achieved.                       

    Unless otherwise indicated, the address for the individuals listed
above is c/o Globix Corporation, 139 Centre St., New York, NY 10013.            

126 

S-4/A
136th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 136th
 DESCRIPTION OF GLOBIX CAPITAL STOCK

DESCRIPTION OF COMMON STOCK                                                     

     The following summary is a description of the material terms of our
common stock, does not purport to be complete and is subject in all respects to 
the applicable provisions of Delaware law and of our constituent documents and  
of the constituent documents of our subsidiaries.                               

GENERAL                                                                         

       Our company is authorized to issue 500,000,000 shares of common stock
with a par value of $0.01 per share. We are also authorized to issue 5,000,000  
shares of preferred stock with a par value of $0.01 per share. As of December 1,
2004, 16,460,000 shares of common stock were issued and outstanding (including  
229,452 shares held in reserve pending the outcome of a class action lawsuit and
164,600 shares held in reserve pending resolution of a shareholder derivative   
suit, each as described in detail in the section entitled "Information About    
Globix - Legal Proceedings" beginning on page 102 of this joint proxy           
statement/prospectus) and no shares of our preferred stock were authorized or   
outstanding. Our board of directors is authorized, subject to any limitations   
prescribed by law and limitations set forth in the indenture, dated as of April 
23, 2002, among Globix, the subsidiary guarantors listed therein and HSBC Bank  
USA, as trustee, to provide for the issuance of preferred stock in one or more  
series and to fix or alter the dividend rate, voting rights, redemption price,  
liquidation preference and any other rights, powers and preferences as our board
of directors may determine from time to time. The indenture limits, among other 
things, our ability to pay dividends and to issue stock with a mandatory        
redemption date prior to the maturity date of the notes.                        

      All shares of our common stock are identical and entitle the holders
thereof to the same rights and privileges. The issued and outstanding shares of 
our common stock are validly issued, fully paid and non-assessable. The holders 
of outstanding shares of our common stock are entitled to receive dividends out 
of assets legally available therefore at such times and in such amounts as our  
board of directors may from time to time determine in its discretion. The       
holders of our common stock have no preemptive rights to purchase any of our    
securities. Upon liquidation, dissolution or winding up of our company, the     
holders of our common stock are entitled to receive pro rata our assets which   
are legally available for distribution, after payment of all debts and other    
liabilities and subject to the prior rights of any holders of any preferred     
stock then outstanding. Each outstanding share of our common stock is entitled  
to one vote on all matters submitted to a vote of stockholders.                 

DELAWARE ANTI-TAKEOVER LAW                                                      

       We are subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from     
engaging in any business combination with any interested stockholder for a      
period of three years following the date that the stockholder became an         
interested stockholder, unless:                                                 

        o        prior to that date, the board of directors of the corporation
               approved either the business combination or the transaction
            which resulted in the stockholder becoming an interested
stockholder;                                

     o        upon consummation of the transaction which resulted in the
                  stockholder becoming an interested stockholder, the interested
             stockholder owned at least 85% of the voting stock of the
                  corporation outstanding at the time the transaction commenced,
              excluding for purposes of determining the number of shares
               outstanding those shares owned by persons who are directors

127 

S-4/A
137th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 137th
          and also officers and by employee stock plans in which
            employee participants do not have the right to determine
                  confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or  

     o        on or subsequent to that date, the business combination is
                approved by the board of directors of the corporation and is
               authorized at an annual or special meeting of stockholders,
                  and not by written consent, by the affirmative vote of holders
                 of at least 66 2/3% of the outstanding shares of voting stock
      which are not owned by the interested stockholder.

TRANSFER AGENT AND REGISTRAR                                                    

 The transfer agent and registrar for our common stock is Mellon
Investor Services LLC.                                                          

DESCRIPTION OF PREFERRED STOCK                                                  

       In connection with the merger, Globix will designate 4,500,000 of the
5,000,000 shares of its authorized but undesignated preferred stock with a par  
value of $0.01 per share as a new series of 6% Series A Cumulative Convertible  
Preferred Stock ("Globix convertible preferred stock"). Existing shares of NEON 
convertible preferred stock will be converted into cash and shares of the Globix
convertible preferred stock in the merger as described in the section entitled  
"Terms of the Merger Agreement and Related Transactions - Conversion of Shares  
in the Merger" beginning on page 83 of this joint proxy statement/prospectus The
designation and issuance of this new series of Globix convertible preferred     
stock is permitted under the terms of Globix's indenture, dated April 23, 2002, 
among Globix, the subsidiary guarantors listed therein and HSBC Bank USA, as    
trustee. A copy of the certificate of designation for the Globix convertible    
preferred stock is included as an exhibit to the first amendment to the merger  
agreement which is attached as Appendix A-2 to this joint proxy                 
statement/prospectus.                                                           

        All shares of Globix convertible preferred stock will be identical and
entitle the holders thereof to the same rights and privileges.                  

         Shares of Globix convertible preferred stock will rank senior to shares
of its common stock with respect to dividend rights and upon the liquidation,   
dissolution or winding-up of Globix. So long as there are 200,000 shares of     
Globix convertible preferred stock outstanding, Globix will not be permitted to 
authorize or issue shares of capital stock, or securities convertible into      
shares of capital stock, that rank senior to or equal to the Globix convertible 
preferred stock without first obtaining the affirmative vote or consent of the  
holders of 66 2/3% of the outstanding Globix convertible preferred stock.       

       The holders of Globix convertible preferred stock will be entitled to
cumulative preferential dividends when declared accruing at the rate of $0.216  
per share per year or $0.108 per share semi-annually, payable semi-annually in  
arrears on June 15 or December 15 of each year, commencing on December 15, 2004.
Dividends may be paid in cash or in additional shares of Globix convertible     
preferred stock at Globix's option. Accumulated unpaid dividends will accrue and
cumulate dividends at a rate of 6% per annum.                                   

      The liquidation preference of the Globix convertible preferred stock
will be $3.60 per share, plus an amount equal to all accrued and unpaid         
dividends. The Globix convertible preferred stock liquidation preference will be
payable upon any voluntary or involuntary liquidation, dissolution or winding-up
of Globix, but only after payment in full of Globix's outstanding debt          
obligations and any securities of Globix that rank senior to the Globix         
convertible preferred stock. Generally, a voluntary sale, conveyance, exchange  
or transfer of all or substantially all of Globix's assets, or the merger or    
consolidation of Globix, will not be deemed a voluntary or involuntary          
liquidation, dissolution or winding-up of Globix.                               

128 

S-4/A
138th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 138th
        The Globix convertible preferred stock will be convertible into shares
of Globix common stock at the option of a holder at any time with an initial    
conversion rate of one share of Globix common stock issued for each share of    
Globix convertible preferred stock converted. The conversion rate will be       
subject to adjustment for certain dilutive events, including, but not limited   
to, stock splits, Globix's issuance of convertible securities at a price per    
share less than the current market price for shares of Globix common stock, and 
certain distributions by Globix of cash, securities, indebtedness or other      
non-cash assets to the holders of its common stock. No adjustments to the       
conversion rate will be required unless and until an adjustment would effect at 
least a 1% increase or decrease in such rate. Any adjustments below the 1%      
threshold will be aggregated until together they would effect an increase or    
decrease in the conversion rate of at least a 1%.                               

The Globix convertible preferred stock is subject to automatic
conversion upon the affirmative vote of the holders of at least 66 2/3% of the  
outstanding shares of Globix convertible preferred stock or the day immediately 
following the date on which the closing price of Globix common stock has equaled
or exceeded $10.80 for a period of 45 consecutive trading days.                 

         The Globix convertible preferred stock will be entitled to one vote for
each share of common stock into which such share of Globix convertible preferred
stock is convertible and will vote with the holders of Globix common stock as a 
single class with respect to any question or matter on which holders of Globix  
common stock have a right to vote.                                              

       Globix may elect to redeem the Globix convertible preferred stock, in
whole or in part, for $3.816 per share in 2005 and 2006, $3.708 per share in    
2007 and $3.60 per share in 2008, plus, in each case, all accrued and unpaid    
dividends. In the event of a partial redemption, Globix must effect the         
redemption with respect to holders of the Globix convertible preferred stock on 
a pro rata basis, except that Globix may elect to redeem all of the shares of   
holders with fewer than 100 shares.                                             

      In the event of a change in control of Globix, each holder of Globix
convertible preferred stock will have the option to require Globix 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. Globix will not be      
required to redeem any shares upon a change in control prior to repurchasing any
securities ranking senior to the Globix convertible preferred stock, including  
the Globix 11% senior notes pursuant to the terms of the indenture.             

        A "change in control" for purposes of the Globix convertible preferred
stock generally means:                                                          

   o        a person or group, other than certain permitted holders,
                becomes the direct or indirect beneficial owner of more than
       50% of the outstanding voting securities of Globix;

         o        during any consecutive two-year period, individuals who at the
                 beginning of the period constituted the board of directors of
               Globix cease for any reason to constitute a majority of the
directors then in office;                   

  o        a merger or consolidation of Globix, or Globix conveys,
              transfers or leases all or substantially all of its assets
                (other than a transaction in which no person or group, other
             than certain permitted holders, owns 50% of the surviving
corporation); and                           

 o        Globix is liquidated or dissolved, or adopts a plan of
liquidation or dissolution.                 

The "permitted holders" for purposes of the Globix convertible
preferred stock include certain major stockholders of both NEON and Globix prior
to the merger.                                                                  

129 

S-4/A
139th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 139th
        Shares of Globix convertible preferred stock that are redeemed for, or
converted into, shares of common stock, or that are otherwise reacquired by     
Globix may not be reissued as shares of Globix convertible preferred stock, and 
will instead be returned to the status of authorized, unissued shares of        
undesignated preferred stock.                                                   

         Holders of outstanding shares of Globix convertible preferred stock are
entitled to receive certain annual and quarterly financial reports of Globix.   
However, if Globix has filed copies of such reports with the SEC, it is not     
obligated to provide them to holders of outstanding shares of Globix convertible
preferred stock unless and until such holders request copies from Globix.       

         Globix may amend the terms of the Globix convertible preferred stock or
waive certain of its provisions with the affirmative vote or consent of a       
majority of the holders of the Globix convertible preferred stock, provided that
the consent of each holder will generally be required with respect to any       
amendment or waiver that would adversely affect a fundamental right of such     
holder and that the provisions governing a change in control may be amended,    
modified or waived only with the consent of the holders of 66 2/3% of the Globix
convertible preferred stock then outstanding.                                   

DESCRIPTION OF GLOBIX WARRANTS                                                  

       Communication Technology Advisors LLC ("CTA") provides consulting and
business development services to NEON for which certain of its current and      
former affiliates and certain of such affiliates' designees have received       
warrants exercisable for 300,000 shares of NEON common stock at $6.06 per share 
through October 23, 2008 and warrants exercisable for 350,000 shares of NEON    
common stock at $5.30 per share through December 31, 2007 as payment for such   
services. CTA purchased the warrants exercisable for 350,000 shares of NEON     
common stock for $25,000. CTA provides similar consulting and business          
development services to Globix and certain affiliates of CTA, including Mr.     
Barr, hold warrants exercisable for 500,000 shares of Globix common stock at    
$3.00 per share through March 13, 2013, which were purchased for $25,000.       

        In connection with the merger, each outstanding NEON warrant issued to
CTA will be converted into, and will have the right to receive, a Globix warrant
with substantially the terms described below, representing the right to acquire 
a number of shares of Globix common stock determined by multiplying the number  
of shares of NEON common stock subject to such NEON CTA warrant immediately     
prior to the merger by 1.2748, at a purchase price per share equal to the       
purchase price per share of NEON common stock subject to such NEON CTA warrant  
divided by 1.2748.                                                              

         Each of the current Globix warrants issued to affiliates of CTA and the
Globix warrants to be issued in exchange for the NEON CTA warrants in connection
with the merger have substantially similar terms. Each Globix warrant issued in 
exchange for a NEON CTA warrant in connection with the merger will grant the    
holder of such warrant the right to subscribe for and purchase shares of Globix 
common stock at a specified exercise price for a specified time period as set   
forth in the warrant. The exercise price will be payable in cash or             
alternatively will permit cashless exercise by the holder. The standard exercise
period for the Globix warrants issued in exchange for the NEON CTA warrants will
be five years and the minimum number of shares of common stock for which a      
Globix warrant or any portion thereof may be exercisable at any one time is     
10,000.                                                                         

       If Globix at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding shares of common stock into a    
greater number of shares, then as of the record date for effecting such         
subdivision the number of shares issuable upon exercise of any Globix warrant   
will be proportionately increased and the exercise price in effect immediately  
prior to such subdivision shall be proportionately decreased. If Globix at any  
time combines (by reverse stock split, recapitalization or otherwise) its       
outstanding shares of common stock into a smaller number of shares, then as of  
the record date for effecting such combination the number of shares issuable    
upon exercise of any Globix warrant will be proportionately decreased and the   
exercise price in effect immediately prior to such combination shall be         
proportionately increased.                                                      

130   

S-4/A
140th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 140th
        In the event of any consolidation or merger of Globix with or into any
other corporation, entity or person, or (a) any other corporate reorganization, 
in which Globix shall not be the continuing or surviving entity of such         
consolidation, merger or reorganization or in connection with which the common  
stock (or other securities issuable upon exercise of a Globix warrant) shall be 
changed into or exchanged for stock of any other entity or cash or other        
property, (b) any transaction in which in excess of 50% of Globix's voting power
is transferred to a person not a stockholder immediately prior to the           
consummation of such transaction, (c) any sale of all or substantially all of   
the assets of Globix or (d) a similar capital reorganization or reclassification
of Globix common stock, then, in each case, the holder of the Globix warrant, on
exercise at any time after the consummation or effective date of such event or  
transaction, will be entitled to receive the stock, other securities, cash or   
other property to which such holder would have been entitled upon the date of   
such event or transaction if such holder had exercised the Globix warrant       
immediately prior to such event or transaction.                                 

         Until a Globix warrant has been exercised in accordance with its terms,
the holder of such warrant will not have any voting rights or other rights or   
obligations as a stockholder of Globix with respect to the shares of Globix     
common stock issuable upon exercise of such warrant. The terms and provisions of
the Globix Warrants will provide that they may not be amended or waived without 
the prior written consent of Globix and the holder.                             

131 

S-4/A
141st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 141st
INFORMATION ABOUT NEON

OUR COMPANY                                                                     

      We are a leading facilities-based communications provider, supplying
telecommunication services to communications companies and non-carrier customers
in the twelve-state Northeast and mid-Atlantic market. NEON is an independent   
provider of SONET and DWDM services to a wide range of communications carriers  
including local, long distance and wireless telephone companies and Internet    
service providers. We also provide services to non-carrier customers such as    
financial institutions and colleges and universities.                           

        We own and operate a high bandwidth fiber optic network, consisting of
approximately 4,600 route miles and over 218,000 fiber miles. Our network       
extends from Portland, Maine to Washington, D.C. and includes metro and         
intercity coverage as well as co-location space in a number of large, mid-size  
and small markets in the Northeast and mid-Atlantic, including Boston, New York,
Philadelphia, Newark, Baltimore, Washington, DC, Portland, Portsmouth,          
Springfield, Worcester, Albany, White Plains, Providence, Hartford, Hackensack, 
Reston, Vienna, and smaller communities along our network routes.               

        We have deployed a portion of our network using utility rights of way,
which we believe provide a competitive advantage compared to alternative rights 
of way in our territory, such as railbeds and highways. Our utilization of      
utility rights of way allows us to provide alternative routes to our customers  
which, when combined with their existing routes over more conventional rights of
way, provide reliable redundant routes that do not share common points of       
failure with the other conventional routes. These utility rights of way also    
enable us to provide more direct connections to our customers.                  

      Our principal executive offices are located at 2200 West Park Drive,
Westborough, Massachusetts, 01581, and our telephone number at that location is 
(508) 616-7800. Although we maintain a website at www.neoninc.com, we do not    
intend that the information available through our website be incorporated into  
this joint proxy statement/prospectus.                                          

NEON SERVICES                                                                   

    We connect our customers to our network's backbone through carrier
hotels, NEON points of presence ("POPs"), central offices or by building        
connections to our customers' facilities. We offer our customers the following  
services:                                                                       

        o        SONET Private Line - Physically diverse looped SONET services
              at bandwidth levels including DS-3, OC-3, OC-12 and OC-48.

  o        Wavelength (DWDM) - Flexible and scalable high capacity
           transport at 2.5 Gbps and 10 Gbps, configured as either
protected or unprotected wavelengths.       

        o        Central Office Access - Connections to major carrier networks
             throughout the NEON footprint over NEON's fully protected
SONET network.                              

     o        Co-location - Secure, carrier class conditioned, and power
            ready space, racks and cabinets strategically located to
                 facilitate high bandwidth connectivity to other POPs, carrier
                hotels, local switch offices and numerous service providers.

132 

S-4/A
142nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 142nd
   o        Network Control Center services - Includes monitoring of
            circuit and node status, alarming when performance falls
           outside established thresholds and producing management
reports.                                    

    o        Dark Fiber - Fiber strands contained within a fiber optic
          cable which has been laid but does not include optical
transmission equipment.                     

OUR FIBER OPTIC NETWORK                                                         

      Our network is primarily optical and incorporates mid- to late-1990s
fiber optic technology. Our network consists of fiber optic communication paths,
which allow for high-speed, high-quality transmission of voice, data and video  
communications. Fiber optic systems use laser generated light waves to transmit 
voice, data and video in digital formats through ultra-thin strands of glass.   
Fiber optic systems are generally characterized by large circuit capacity, are  
resistant to external signal interference and connect directly to digital       
switching equipment or digital microwave systems.                               

         We offer end-to-end fiber optic capacity utilizing bi-directional SONET
ring architecture, which has the ability to route customer traffic in two       
directions around a ring design thereby minimizing service interruptions due to 
fiber cuts. Our network is continuously monitored on a 24-hour, 7 day a week    
basis from our Network Control Center at our headquarters in Westborough,       
Massachusetts to maintain quality control and to alert us of any degradation of 
signal or loss of fiber capacity, and to pinpoint the location of such          
difficulty and enable us to repair or replace impaired fiber quickly.           

RIGHT-OF-WAY AGREEMENTS                                                         

        We use rights-of-way and licenses from utilities for major portions of
our network in the Northeast and mid-Atlantic regions. These utility            
rights-of-way and licenses provide urban and intercity coverage at lower cost   
and have a simpler approval process than the lengthy and expensive approval     
process for alternative rights-of-way. Furthermore, installing cable in utility 
rights-of-way or via license arrangements is typically easier and faster than   
alternative rights-of-way, such as easement agreements. The lower cost, simpler 
approval process and easier and faster installation process are the result of   
placing our cables in existing underground conduits and ducts or on existing    
towers and poles. Other forms of rights-of-way, such as those along highways and
railroad tracks, require burying cables in trenches. In addition, our utility   
rights-of-way and licenses provide the potential to establish communications    
connections to nearly every building, business park and industrial complex in   
our service territory.                                                          

In 2003, NEON acquired all of the equity interests in Columbia
Transmission Communications Corporation ("Columbia Transmission"). Columbia     
Transmission became a wholly owned subsidiary of NEON and was renamed NEON      
Transcom, Inc. NEON Transcom utilizes traditional rights-of-way, in the form of 
easement agreements, that were established with individual land owners by       
Columbia Transmission before it was acquired by NEON. NEON Transcom and NEON now
only manage the individual rights-of-way that are presently in place. This part 
of NEON's network runs from New York City to the greater Washington, D.C. area  
and represents a relatively small portion of NEON's entire network. This part of
the network is a redundant section of network that parallels NEON's original    
network from New York City to the Washington, D.C. areas.                       

OUR CUSTOMERS                                                                   

       We are carrier neutral and provide services to a variety of companies
providing voice and data communications services. We also provide services to   
non-carrier customers that require bandwidth services such as financial         
institutions, colleges and universities. Our network enables these companies to 
link geographically separated central offices and points of presence with       
primary or redundant connections in their networks. Our facilities also enable  
our carrier customers to connect their networks directly into the premises of   
their end-users.                                                                

133 

S-4/A
143rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 143rd
To date, we have entered into contracts with approximately 100
customers, including several Fortune 500 companies. Our customers include common
carriers, internet infrastructure companies, wireless service providers,        
international communication providers and a number of non-carrier customers. Our
revenue is derived principally from lit fiber services under contracts ranging  
from one to five years that provide for monthly payments. Dark fiber service    
contracts have terms of approximately 20 years and generally provide for monthly
payments. In addition, the contracts typically provide for outage related       
credits, a predetermined reduction or offset against the customer's lease rate  
when a customer's leased facility is non-operational or does not meet the       
customer's operating parameters, and also typically require us to maintain      
adequate insurance coverage, including product liability coverage.              

Our customer base includes the following:                     

     INCUMBENT LOCAL EXCHANGE CARRIERS AND INDEPENDENT TELCOS. Incumbent
     local exchange carriers typically require some interstate paths for
internal communications, signal control and operator services.
       Incumbent local exchange carriers also require intrastate capacity to
       connect central offices to one another and to connect central offices
to points of presence and customer premises.                  

 FACILITIES BASED INTEREXCHANGE CARRIERS. Interexchange carriers
   typically require (a) regional short haul connectivity from their
        national backbone facilities to originate and terminate traffic deeper
        into the customer base; (b) redundant routing to ensure reliability in
    their networks; and (c) additional capacity for their customers as
minutes of use and IP bandwidth requirements increase.        

 COMPETITIVE LOCAL EXCHANGE CARRIERS. Competitive local exchange
         carriers typically require interconnection between their local networks
and extensions further into the community.                    

INTERNET SERVICE PROVIDERS. Internet Service Providers ("ISP")
       typically require distribution channels to interexchange carriers and
         local exchange carrier switches as well as interconnection to other ISP
        switches to provide access to the Internet to consumers and commercial
customers via local networks.                                 

        WIRELESS COMMUNICATION COMPANIES. Wireless companies typically require
      land based back hauling of traffic from towers to their switches and
         also capacity between their switches with interexchange carriers, POPs,
   and incumbent local exchange carriers' central offices. Microwave
      carriers typically require fiber optic capacity to replace microwave
service as their primary source of communications capacity.   

     CABLE TELEVISION COMPANIES. Cable companies typically require fiber
     optic capacity to upgrade their systems to higher speed bandwidths,
    which allow them to increase the number of channels available, add
         interactive programming and Internet and data transfer capabilities and
to consolidate head end facilities.                           

  We also provide services to several international communications
providers and a number of non-carrier customers.                                

SALES AND MARKETING                                                             

         We employ a direct sales and marketing strategy which allows us to take
a consultative approach in selling services to our customers. Our sales force is
trained to focus on product differentiation and superior customer service. We   
also offer our customers a competitive price. We incentivize our sales force to 
focus on selling long-term contracts. Our sales force consists of 21 employees, 
including 4 management, marketing and administrative support personnel.         

134 

S-4/A
144th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 144th
SUPPLY RELATIONSHIPS                                                            

    We have entered into agreements and arrangements for the supply of
equipment and services relating to the construction and maintenance of our      
network. In choosing our suppliers, we use such criteria as the quality and     
performance of the product for the intended purpose, pricing, and the ability of
the supplier to meet our delivery schedule and technical support requirements.  
We purchase optronic network equipment and network services generally from      
Nortel Networks, Cisco Systems, Lucent Technologies and ECI Telecom. We believe 
that there are alternative suppliers or alternative components for all of the   
components contained in our network. However, 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 our network could disrupt our operations and, if such   
disruption continued for an extended period of time, it could have a material   
adverse effect on our business, financial condition and results of operations.  

COMPETITION                                                                     

    The telecommunications industry is highly competitive, and we face
substantial competition. Many of our existing and potential competitors have    
financial, management and other resources that are substantially greater than   
ours, as well as other competitive advantages, including established reputations
in the communications market. Our current and projected competitors generally   
fall into five segments:                                                        

         INCUMBENT LOCAL EXCHANGE CARRIERS AND INTEREXCHANGE CARRIERS. Incumbent
         local exchange carriers include Regional Bell Operating Companies, such
        as Verizon and SBC/SNET. Interexchange carriers include such companies
         as AT&T, MCI and Sprint. These communications carriers currently own or
       lease fiber optic networks in our current and proposed service areas.
       Incumbent local exchange carriers and interexchange carriers dominate
        their respective local markets in the cities connected by our network.

NATIONAL LONG-HAUL FIBER CARRIERS. Carriers such as Qwest     
        Communications, Wiltel, Global Crossing and Level 3 Communications own
         or lease fiber optic networks in our current and proposed service areas
   and employ advanced technology comparable to that of our network.

    REGIONAL CARRIERS. Regional carriers include Cavalier/Elantic, PPL
Telecom and Progress Telecom.                                 

         DARK FIBER PROVIDERS. Providers of dark fiber include AboveNet, NEESCom
(National Grid), NSTAR, FiberTech and Sunesys.                

METRO CARRIERS. Metro carriers include Consolidated Edison    
Communications, LGN and FiberNet.                             

        Most communications carriers already own fiber optic cables as part of
their communications networks, and each of these carriers could, and some do,   
compete directly with us in the market for leasing fiber capacity. We also face 
potential competition from the utilities in certain portions of our network.    

GOVERNMENTAL REGULATION                                                         

        NEON's core business is that of a carrier's carrier and therefore, our
core business is not directly subject to common carrier regulation. Several of  
NEON's subsidiaries however, have been certified to provide common carrier      
services through their authorizations as competitive local exchange carriers, or
CLECs. These authorizations for CLEC's are granted by state governments, but    
subject these subsidiaries to the Telecommunications Act of 1996 as well as     

135 

S-4/A
145th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 145th
state laws. NEON's core business as a carrier's carrier is, however, part of an 
industry that is highly regulated by federal, state and local governments whose 
regulatory actions are often subject to judicial modification. In light of the  
changes that are occurring in the regulation of telecommunications, we cannot   
forecast whether or not we will be subject to additional regulation in the      
future.                                                                         

FEDERAL REGULATION                                                              

      Federal regulation has the greatest impact on the telecommunications
industry and has undergone major changes in the last eight years as the result  
of the adoption by Congress of the Telecommunications Act of 1996 on February 8,
1996. The Telecommunications Act is the most comprehensive reform of the        
nation's telecommunications laws since the Communications Act of 1934, as       
amended, was enacted. The Telecommunications Act imposes a number of access and 
interconnection requirements on telecommunications carriers and on all local    
exchange providers, including competitive local exchange carriers, with         
additional requirements imposed on incumbent local exchange carriers. The       
Telecommunications Act provides a detailed list of items which are subject to   
these interconnection requirements, as well as a detailed set of duties for all 
affected carriers. All telecommunications carriers must interconnect with the   
facilities of other carriers and not install features that will interfere with  
the interoperability of networks.                                               

        After lengthy legal proceedings, the Federal Communications Commission
("FCC") adopted revised guidelines implementing the interconnection and local   
competition provisions of the Telecommunications Act. In order to foster        
competition in the local exchange market, the FCC required incumbent local      
exchange carriers to offer unbundled access to their telecommunications networks
to competitive local exchange carriers at cost-based rates, including access to 
dark fiber. This could decrease the demand for fiber provided by the company.   
The degree of access the incumbent local exchange carriers are required to      
provide to their unbundled network elements is currently under review by the    
FCC. However, the long and short term effects of the FCC's guidelines have yet  
to be ascertained.                                                              

      Aside from the impact of the Telecommunications Act, we believe that
federal regulation does not affect our core business directly because we are not
currently regulated as a common carrier under federal law. Federal law imposes  
certain legal requirements on common carriers who engage in interstate or       
foreign communication by wire or radio. These legal requirements apply to       
telecommunications carriers to the extent they engage in the provision of       
telecommunications services. Telecommunications carriers that provide           
telecommunications services and common carriers are essentially the same. Each  
provides communications services directly to the public or to some group of     
potential users on a nondiscriminatory basis subject to standardized rates,     
terms and conditions. We do not believe our core business offers our fiber      
capacity in this manner, because we enter into individual agreements on a       
selective basis with prospective customers who use our services and facilities  
to support their own functions such as carrier's carrier or common carriers     
services. We therefore do not believe that our core business' provision of dark 
or lit fiber capacity constitutes telecommunications service or common carriage 
as defined by the FCC or under the common carrier provisions of the             
Communications Act of 1934. Our core business' lit and dark fiber is provided on
a private basis as a carrier's carrier. There are no assurances, however, that  
the leasing of lit or dark fiber will not be subject to further regulation under
the Communications Act of 1934.                                                 

         Accordingly, it is conceivable that the FCC would subject our provision
of fiber capacity to common carrier regulation. In 1994, the U.S. Court of      
Appeals for the District of Columbia Circuit remanded to the FCC the question of
the FCC's authority to regulate dark fiber. In addition, the FCC has been       
petitioned by certain railroad, power and telecommunications associations, none 
of which are affiliated with us, to clarify the regulatory status of fiber      
capacity providers. To date, the FCC has not indicated an intention to rule on  
this remand.                                                                    

136 

S-4/A
146th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 146th
      If, and to the extent that, we were deemed to be a common carrier we
would be required to comply with several regulatory requirements, including, but
not limited to, the duty to:                                                    

     o        provide such services indiscriminately upon any reasonable
request;                                    

o        charge rates and adopt practices, classifications and
regulations that are just and reasonable;   

   o        avoid unreasonable discrimination in charges, practices,
regulations, facilities and services;       

        o        pay into federal funds for Telecommunications Relay Services,
                the North American Numbering Administration and Local Number
Portability;                                

       o        limit our use of Customer Proprietary Network Information to
             provisioning of the services in connection with which the
  Customer Proprietary Network was obtained; and

    o        comply with various reporting, regulatory fee payment and
           publication of rates. We might also be required to file
               tariffs setting forth the rates for our services or to make
            our rates otherwise publicly available. These regulatory
        requirements could impose substantial burdens on us.

      Notably, however, similarly situated competitors would be subject to
comparable regulatory obligations.                                              

    As a provider of interstate telecommunications in our provision of
leased fiber capacity, our revenues from such leases to end users are subject to
contributions to the FCC's Universal Service Fund, a fund that was established  
to ensure the availability of affordable basic telecommunications services. As a
general matter, revenues received from other telecommunications carriers for    
fiber capacity we provide are not subject to contribution to the Universal      
Service Fund. However, our revenues from the provision of fiber capacity to     
telecommunications carriers who themselves are exempt from contributing to the  
Universal Service Fund because their contribution would be less than $10,000    
would be subject to such contribution if the carrier notifies us that it is not 
contributing directly, in which case the carrier is considered to be an end     
user. In addition, if a carrier purchasing our capacity uses it for its own     
purposes, then we would be subject to such contribution for the revenue         
generated from that carrier because it too would be considered an end user.     
Because certain internet service providers are deemed end users, our revenues   
received pursuant to fiber capacity leases to such entities would be subject to 
contributions to the Universal Service Fund. If such contribution would be less 
than $10,000, we would qualify for a de minimus exemption from contribution to  
the Universal Service Fund. The assessment rate is calculated quarterly and is  
currently set at 8.9% of gross end-user revenues. The assessment rate may be    
higher in subsequent years. However, the majority of our current revenue does   
not qualify as "end-user" revenue. Our 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. The  
FCC is currently reviewing its rules for recovery of Universal Service Fund     
contributions and evaluating who is required to contribute to the Universal     
Service Fund. The outcome of these proceedings could affect the amount we are   
required to contribute to the Universal Service Fund in the future.             

       Federal telecommunications law may also affect our business by virtue
of the inter relationships that exist among us and incumbent local exchange     
carriers and interexchange carriers. For example, the FCC is currently reviewing
existing obligations of the incumbent local exchange carriers to make available 
certain unbundled network elements to their competitors at cost-based rates.    
While it is not possible to predict the precise effect any changes in the       
current unbundling rules will have on our business or financial condition, the  
elimination or relaxing of these obligations on the incumbent local exchange    
carriers could eliminate one of the principal disincentives for use of incumbent
local exchange carrier facilities by interexchange carriers, which could have a 
material adverse effect on the use of our fiber optic networks by interexchange 
carriers.                                                                       

137 

S-4/A
147th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 147th
STATE REGULATION                                                                

       The Telecommunications Act prohibits state and local governments from
enforcing any law, rule or legal requirement that prohibits or has the effect of
prohibiting any person from providing any interstate or intrastate              
telecommunications service. In addition, under current FCC policies, any        
dedicated transmission service or facility that is used more than 10% of the    
time for the purpose of interstate or foreign communication is subject to FCC   
jurisdiction to the exclusion of any state regulation. Notwithstanding these    
prohibitions and limitations, states regulate telecommunications services,      
including through certification of providers of intrastate services (or         
competitive local exchange carriers), regulation of intrastate rates and service
offerings, and other regulations and retain jurisdiction under the              
Telecommunications Act to adopt, on a competitively neutral basis, regulations  
necessary to preserve and advance universal service, protect the public safety  
and welfare, ensure the continued quality of telecommunications services and    
safeguard the rights of consumers. Accordingly, the degree of state involvement 
in local telecommunications services may be substantial.                        

     The state regulatory environment varies substantially from state to
state. At present, we do not anticipate that the regulatory requirements to     
which we will be subject in the Northeast and Mid-Atlantic markets will have any
material adverse effect on our operations. An exception to this statement,      
however, is obtaining approvals from the states of Vermont, Delaware, New York  
and New Jersey for NEON to merge with Globix. Under current regulations, each of
these four states require that when a company has been granted authorization to 
be a competitive local exchange carrier and its parent company will be sold or  
merged with another company, the subsidiary must receive the approval of the    
state before the sale or merger of the parent company. In any state that does   
not grant the approval, a material adverse effect may result to NEON's business.
In some jurisdictions, our pricing flexibility for intrastate services may be   
limited because of regulation, although our direct competitors will be subject  
to similar restrictions. However, there can be no assurance that future         
regulatory, judicial, or legislative action will not have a material adverse    
effect on us.                                                                   

LOCAL GOVERNMENT REGULATION                                                     

         In addition to federal and state laws, local governments exercise legal
authority that may impact our business. For example, local governments, such as 
the City of Boston and the City of New York, typically retain the ability to    
license public rights-of-way, subject to the limitation that local governments  
may not prohibit persons from providing telecommunications services. Local      
authorities affect the timing and costs associated with our use of public       
rights-of-way. These regulations may have an adverse effect on our business.    

EMPLOYEES                                                                       

      At September 30, 2004, we employed 133 people. Our employees are not
represented by any labor union and we consider our relationship with employees  
to be satisfactory. In the normal course of business, we have contracted with   
third parties to perform a portion of the engineering, routine maintenance and  
construction supervision and construction activities associated with the        
construction of our fiber optic network.                                        

138   

S-4/A
148th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 148th
PROPERTIES                                                                      

        The NEON network and its component assets are the principal properties
currently owned by us or with respect to which we have indefeasible rights of   
use and leases. We own substantially all of the communications equipment        
currently utilized in our business and hold certain ownership interests in the  
cable comprising the NEON network. Our installed fiber optic cable is laid along
the various rights-of-way held by us. Other fixed assets are located at various 
leased locations in geographic areas we serve. Substantially all of our assets  
are held by NEON Optica, Inc. and its subsidiaries. The principal asset of NEON 
Communications, Inc. is all of the outstanding capital stock of NEON Optica,    
Inc.                                                                            

    Our executive, administrative and sales offices are located at our
principal office in Westborough, Massachusetts. We lease this space             
(approximately 25,000 square feet) pursuant to a 3-year lease that commenced in 
November 2002.                                                                  

LEGAL PROCEEDINGS                                                               

       On November 9, 2004 NEON Transcom, Inc., a wholly-owned subsidiary of
NEON, filed against Washington Metropolitan Area Transit Authority ("WMATA") in 
United States District Court for the District of Columbia a declaratory judgment
that rights-of-way fees provided for under a license agreement violate the      
Telecommunications Act of 1996, as amended, and further seeking an injunction   
preventing WMATA from requiring payment of the fees and holding NEON Transcom,  
Inc. in default under the License Agreement, dated October 5, 1999 between WMATA
and NEON. The matter is styled NEON Transcom, Inc. vs. Washington Metropolitan  
Area Transit Authority. On November 22, 2004, NEON received correspondence from 
WMATA's counsel notifying NEON that WMATA intends to file a claim against NEON. 
WMATA is seeking payment of approximately $847,000 owed to WMATA under the      
License Agreement. Although there can be no assurance as to the outcome or      
effect of WMATA's threatened lawsuit, we do not believe, based on currently     
available information, that the ultimate liabilities, if any, resulting from    
this lawsuit will have a material adverse impact on our business, financial     
condition, results of operations or cash flows.                                 

139 

S-4/A
149th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 149th
SELECTED CONSOLIDATED FINANCIAL DATA OF NEON

         The following tables set forth our selected consolidated financial data
as of and for the periods indicated. The selected consolidated financial data as
of December 31, 2002 and 2003 and for the years ended December 31, 2001, 2002   
and 2003 have been derived from the audited Consolidated Financial Statements   
and Notes to Consolidated Financial Statements of NEON included elsewhere in    
this joint proxy statement/prospectus. The Consolidated Financial Statements as 
of and for the years ended December 31, 2003 and 2002 were audited by BDO       
Seidman, LLP, an independent registered public accounting firm, while the       
Consolidated Financial Statements for the year ended December 31, 2001 were     
audited by Arthur Andersen, LLP. The selected consolidated financial data as of 
December 31, 1999, 2000 and 2001 and for the years ended December 31, 1999 and  
2000 were derived from audited Consolidated Financial Statements and Notes to   
Consolidated Financial Statements of the Company not included herein which were 
audited by Arthur Andersen LLP. The selected consolidated financial data as of  
September 30, 2004 and for the nine months ended September 30, 2003 and 2004    
have been derived from the unaudited Consolidated Financial Statements of the   
Company included elsewhere in this registration statement and include, in the   
opinion of management, all adjustments (consisting only of normal recurring     
accruals) necessary for a fair presentation of the financial position and       
results of operations as of and for such periods. NEON's results of operations  
for the nine months ended September 30, 2004 may not be representative of its   
results of operations for the full year. The following financial information is 
qualified by reference to and should be read in conjunction with "NEON          
Management's Discussion and Analysis of Financial Condition and Results of      
Operations" beginning on page 143 of this joint proxy statement/prospectus and  
the Consolidated Financial Statements and Notes to Consolidated Financial       
Statements included elsewhere in this registration statement.                   

        As a result of the application of fresh start accounting under SOP No.
90-7 as of December 31, 2002, our financial results for the fiscal year ended   
December 31, 2002, include two different bases of accounting and, accordingly,  
the operating results and cash flows of the Successor Company and the           
Predecessor Company have been separately disclosed. For the purposes of the     
joint proxy statement/prospectus, references to the "Predecessor Company" are   
references to NEON for periods prior to December 31, 2002 (the last of the      
calendar month in which we emerged from bankruptcy) and references to the       
"Successor Company" are references to NEON for periods as of and subsequent to  
December 31, 2002. The Successor Company's financial statements are not         
comparable to the Predecessor Company's financial statements.                   

                                                        [Enlarge/Download Table]
                                                                                          SUCCESSOR                                 
                                                                                         COMPANY YEAR         SUCCESSOR COMPANY     
                                               PREDECESSOR COMPANY                          ENDED                NINE MONTHS        
                                              YEAR ENDED DECEMBER 31,                    DECEMBER 31,        ENDED SEPTEMBER 30,    
                            ----------------------------------------------------------- -------------- -----------------------------
                                 1999           2000           2001           2002           2003           2003           2004     
                            -------------  -------------  --------------  -------------  -------------  -------------  -------------
                                                                                                                                    
STATEMENT OF OPERATIONS                                                                                                             
  DATA(1):                                                                                                                          
Revenues .................. $  5,665,276   $ 13,182,953   $  26,550,645   $ 33,674,213   $ 41,588,308   $ 30,836,345   $ 35,798,784 
Operating expenses(2) .....   19,895,829     38,908,620     121,120,199     58,757,599     46,409,366     33,906,437     40,316,132 
                            -------------  -------------  --------------  -------------  -------------  -------------  -------------
Loss from operations ......  (14,230,553)   (25,725,667)    (94,569,554)   (25,083,386)    (4,821,058)    (3,070,092)    (4,517,348)
Other income (expense),                                                                                                             
  net .....................  (13,299,215)   (16,085,834)    (22,111,846)   (16,661,551)       554,390        423,020        264,669 
                            -------------  -------------  --------------  -------------  -------------  -------------  -------------
Loss before benefit from                                                                                                            
  income taxes,                                                                                                                     
  extraordinary item and                                                                                                            
  cumulative effect                                                                                                                 
  of change in                                                                                                                      
  accounting principle ....  (27,529,768)   (41,811,501)   (116,681,400)   (41,744,937)    (4,266,668)    (2,647,072)    (4,252,679)
Benefit from income                                                                                                                 
  taxes(3) ................           --             --              --             --      1,287,322      1,287,322             -- 
Extraordinary items(3) ....           --             --              --     26,513,191      1,930,984      1,930,984             -- 
Cumulative effect of                                                                                                                
  change in accounting                                                                                                              
  principle(4) and (5) ....           --     (1,724,007)             --    (72,311,911)            --             --             -- 
                            -------------  -------------  --------------  -------------  -------------  -------------  -------------
Net income (loss) ......... $(27,529,768)  $(43,535,508)  $(116,681,400)  $(87,543,657)  $ (1,048,362)  $    571,234   $ (4,252,679)
                            =============  =============  ==============  =============  =============  =============  =============

                                                                140                                                                 

S-4/A
150th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 150th
                                                                                          SUCCESSOR                                 
                                                                                         COMPANY YEAR         SUCCESSOR COMPANY     
                                               PREDECESSOR COMPANY                          ENDED                NINE MONTHS        
                                              YEAR ENDED DECEMBER 31,                    DECEMBER 31,        ENDED SEPTEMBER 30,    
                            ----------------------------------------------------------- -------------- -----------------------------
                                 1999           2000           2001           2002           2003           2003           2004     
                            -------------  -------------  --------------  -------------  -------------  -------------  -------------
OTHER FINANCIAL DATA(1):                                                                                                            

Cash (used in) provided                                                                                                             
  by operating activities.. $(17,970,325)  $ (9,760,691)  $ (10,488,858)  $ (8,590,553)  $  6,107,478   $  3,157,315   $  5,258,247 
Cash used in investing                                                                                                              
  activities ..............  (68,323,061)   (16,660,455)    (40,927,865)    (6,512,860)    (4,539,606)    (1,582,770)    (9,461,520)
Cash (used in) provided                                                                                                             
  by financing activities..   33,323,983     42,302,915      43,360,680     21,564,285     (5,688,757)    (4,448,916)       589,032 
Net increase (decrease)                                                                                                             
  in cash and cash                                                                                                                  
  equivalents .............  (52,969,403)    15,881,769      (8,056,043)     6,460,872     (4,120,885)    (2,874,371)    (3,614,241)
                            -------------  -------------  --------------  -------------  -------------  -------------  -------------
Capital expenditures ......   48,583,642     76,716,670      41,916,091      8,494,813      8,292,941      5,705,991      8,785,920 
                            -------------  -------------  --------------  -------------  -------------  -------------  -------------
Deficiency to fixed                                                                                                                 
  charges(6) ..............   30,454,069     45,297,677     122,057,701            N/A            N/A            N/A            N/A 



                                         PREDECESSOR COMPANY                   SUCCESSOR COMPANY         SUCCESSOR COMPANY          
                                         AS OF DECEMBER 31,                    AS OF DECEMBER 31,       AS OF SEPTEMBER 30,         
                           ---------------------------------------------  ----------------------------  -------------------         
                                 1999           2000           2001           2002           2003               2004                
                            -------------  -------------  --------------  -------------  -------------  -------------------         
                                                                                                                                    
BALANCE SHEET DATA(1):                                                                                                              
Working capital                                                                                                                     
  (deficiency)(7) ......... $ 67,969,107   $   (132,478)  $ (38,773,810)  $  9,725,480   $ 12,351,063       $  5,684,247            
Total assets ..............  280,633,376    281,936,691     352,268,141    165,123,095    167,008,415        165,642,143            
Long-term debt ............  180,000,000    180,000,000     205,417,760             --             --                 --            
Total liabilities(8) ......  213,166,586    246,014,818     292,295,716     30,876,349     31,487,912         34,373,191            
Cumulative convertible                                                                                                              
  preferred stock .........           --             --              --     12,441,028     13,978,739         15,261,986            
Stockholders' equity ......   67,466,790     35,921,873      59,972,425    121,805,718    121,541,764        116,006,966            

     (1)  As discussed more fully in the Overview section of NEON Management's
   Discussion and Analysis of Financial Condition and Results of
     Operations and note 3 to the Consolidated Financial Statements,
         during 2002, we completed a restructuring whereby we eliminated all
       of our long-term debt and related accrued interest. In connection
        with our restructuring, we adopted fresh start reporting effective
         December 31, 2002. Therefore, the financial information for periods
          ending after December 31, 2002 and balance sheet data as of December
          31, 2002 and thereafter is generally not comparable to the financial
information for prior periods.                            

   (2)  Operating expenses for 2001 include a one time, non-cash charge of
          $60,000,000 related to the write-down of subscription receivable, as
     discussed more fully in note 5 of our notes to the Consolidated
Financial Statements.                                     

(3)  The benefit from income taxes in 2003 represents the income tax
         benefit related to current operating losses used to offset the gain
      on acquisition discussed in note 2 to the Consolidated Financial
          Statements. The extraordinary item in 2002 represents the net impact
        of the reorganization discussed in note 1 above. The extraordinary
     item in 2003 represents a gain, net of taxes, on an acquisition
  discussed more fully in note 2 to the Consolidated Financial
Statements.                                               

141 

S-4/A
151st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 151st
      (4)  In December 1999, the Securities and Exchange Commission issued Staff
      Accounting Bulletin (SAB) No. 101, Revenue Recognition, which we
          adopted in the fourth quarter of 2000. Under the guidance of SAB No.
           101, we recognize revenues from nonrecurring installation charges and
    design, engineering and construction services ratably over the
         multi-year network services terms to which the nonrecurring charges
           ultimately relate. Prior to the issuance of SAB No. 101, revenues for
       these nonrecurring services were generally recognized as services
          were performed since we had no further obligations. We were required
        to adopt this new accounting guidance as of January 1, 2000 and we
       reported a cumulative effect of change in accounting principle of
          approximately $1,724,000 related to nonrecurring revenues recognized
prior to January 1, 2000.                                 

(5)  In January 2002, we adopted Statement of Financial Accounting  
  Standards No. 142 "Goodwill and Other Intangible Assets." In
     connection with the transition to the new accounting method, we
          determined that the carrying value of our assets was impaired and we
          recorded a one-time, non-cash charge of approximately $72,312,000 as
  the cumulative effect of a change in accounting principle to
     write-off all of our goodwill and other identifiable intangible
assets.                                                   

      (6)  For purposes of calculating the deficiency to fixed charges: earnings
    consist of loss before income tax benefit, plus fixed charges,
           excluding capitalized interest, and fixed charges consist of interest
      expenses and capitalized interest, plus amortization of deferred
financing costs.                                          

  (7)  Working capital for the year ended December 31, 2001 reflects the
           entire balance of NEON Optica's 15% equipment note as a result of our
         default on the note following our election not to make the December
31, 2001 payment under this note.                         

(8)  Total liabilities includes deferred revenue for all periods    
           presented. For December 31, 2003 and June 30, 2004, total liabilities
 also includes an asset retirement obligation related to the
           acquisition of Columbia Transmission as discussed more fully in notes
2 and 4 to the Consolidated Financial Statements.         

142 

S-4/A
152nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 152nd
NEON MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

      The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the "Selected          
Consolidated Financial Data of NEON" and the Consolidated Financial Statements  
and Notes to Consolidated Financial Statements included elsewhere in this joint 
proxy statement/prospectus. Certain information contained in the discussion and 
analysis set forth below and elsewhere in this joint proxy statement/prospectus,
including information with respect to our plans and strategy for our business,  
includes forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on our
current expectations and assumptions about our company and our industry and     
involve risks and uncertainties. In evaluating such statements, you should      
specifically consider the various factors identified in this joint proxy        
statement/prospectus that could cause results to differ materially from those   
expressed in such forward-looking statements, including matters set forth in the
section entitled "Risk Factors" beginning on page 21 of this joint proxy        
statement/prospectus. The results shown herein are not necessarily indicative of
the results to be expected in any future periods.                               

         As discussed below, we adopted fresh-start reporting effective December
31, 2002. Therefore, financial information for the Successor Company is         
generally not comparable to such information for the Predecessor Company.       

OVERVIEW                                                                        

      We are a leading facilities-based communications provider, supplying
telecommunication services to communications companies and non carrier customers
in the twelve-state Northeast and mid-Atlantic market. NEON is an independent   
provider of SONET and DWDM services to a wide range of communications carriers  
including local, long distance and wireless telephone companies and Internet    
service providers. We also provide services to non-carrier customers such as    
financial institutions and colleges and universities.                           

       Our network is a high bandwidth fiber optic network with proximity to
vital markets. We provide bandwidth to cities and towns beyond the "first tier" 
markets of Boston, New York, Philadelphia, Newark, Baltimore and Washington, DC.
Our "second tier" and "third tier" markets include Portland, Portsmouth,        
Springfield, Worcester, Albany, White Plains, Providence, Hartford, Hackensack, 
Reston, Vienna and smaller communities along our network routes. We intend to   
further expand our network in the Northeast and mid-Atlantic market on a success
basis to serve customer needs.                                                  

Our principal services include:                               

        o        SONET Private Line - Physically diverse looped SONET services
              at bandwidth levels including DS-3, OC-3, OC-12 and OC-48.

  o        Wavelength (DWDM) - Flexible and scalable high capacity
           transport at 2.5 Gbps and 10 Gbps, configured as either
protected or unprotected wavelengths.       

        o        Central Office Access - Connections to major carrier networks
             throughout the NEON footprint over NEON's fully protected
SONET network.                              

     o        Co-location - Secure, carrier class conditioned, and power
            ready space, racks and cabinets strategically located to
                 facilitate high bandwidth connectivity to other POPs, carrier
                hotels, local switch offices and numerous service providers.

143 

S-4/A
153rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 153rd
   o        Network Control Center services - Includes monitoring of
            circuit and node status, alarming when performance falls
           outside established thresholds and producing management
reports.                                    

    o        Dark fiber - Fiber strands contained within a fiber optic
          cable which has been laid but does not include optical
transmission equipment.                     

         Our network service revenues include short-term leases of lit fiber and
longer-term leases of dark fiber at fixed-cost pricing over multi-year terms.   
Other services revenues include co-location services at our facilities as well  
as nonrecurring design, engineering, and construction services. We generally    
receive fixed monthly payments from our customers for the leasing of capacity on
our network and the use of co-location facilities and recognize revenues ratably
over the term of the applicable customer agreement. Design, engineering, and    
construction services revenues are non-refundable and are generally recognized  
ratably over the term of the related network services arrangement (generally    
ranging from one to twenty years).                                              

       Our costs consist primarily of cost of revenues; selling, general and
administrative expenses; depreciation and amortization; and, through mid-2002,  
interest expense. Cost of revenues relates to lease payments for fiber optic    
facilities, operations and maintenance costs, type II circuits, right of way    
fees and property taxes. Selling, general and administrative expenses relate to 
expenses in connection with sales, marketing, operations and administration,    
including personnel, office facilities advertising and promotion, and management
and information technology. Depreciation and amortization expense is associated 
with our network.                                                               

     Since our inception, we have expanded our network and increased our
annual revenue every year. We funded a substantial portion of our network       
expansion and growth through 2002 with proceeds from our public offering of debt
and equity in 1998 and convertible debt issuances and vendor financing in 2001. 
Such funding amounted to approximately $300 million. However, as the result of a
prolonged downturn in the telecommunications market, we continued to experience 
net losses and negative cash flow from operating activities through 2002. During
2002, we entered into discussions with a group of note holders representing     
approximately two-thirds of our senior notes and holders of our 15% and 18%     
notes regarding the restructuring of their debt. Such restructuring was         
ultimately pursued in bankruptcy in order to bind all creditors to the terms of 
the plan of reorganization. Accordingly, on June 25, 2002, we filed a voluntary 
petition for relief under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy    
Court"). Our Plan of Reorganization was confirmed by the Bankruptcy Court on    
November 13, 2002 and became effective on December 20, 2002. We recorded this   
transaction as of December 31, 2002, which we refer to as the "effective date." 
Under the plan of reorganization, on the effective date our senior notes and 15%
equipment note were exchanged for common stock in the Successor Company. Our 18%
subordinated convertible notes, and all of our outstanding shares of common     
stock were cancelled. Former creditors collectively purchased approximately     
$12.4 million of new Series A 12% Cumulative Convertible Preferred Stock. In our
restructuring, we eliminated all of our debt and accrued interest amounting to  
approximately $250 million. As discussed more fully in note 3 to the            
Consolidated Financial Statements, in connection with the restructuring, we     
adopted fresh start reporting effective on December 31, 2002. Therefore, the    
financial information presented after December 31, 2002 and the balance sheet   
information as of December 31, 2002 and thereafter, is generally not comparable 
to the financial information for prior periods. The presentation of financial   
information of the "Predecessor Company" represents the Company's financial     
information for the specific periods prior to the Company's adoption of fresh   
start reporting.                                                                

         On September 12, 2003, we acquired Columbia Transmission Communications
Corporation ("Columbia Transmission") from Columbia Energy Group, a wholly owned
subsidiary of NiSource, Inc. Columbia Transmission became a wholly owned        
subsidiary of NEON and was renamed NEON Transcom, Inc. NEON Transcom owns and   
operates a diverse dark fiber network that runs from New York City to           
Washington, D.C. As discussed more fully in note 2 to the Consolidated Financial
Statements, we accounted for the acquisition as a purchase under Statement of   
Financial Accounting Standards No. 141 and included the operating results of    
Columbia Transmission in our Consolidated Statements of Operations since the    
acquisition date.                                                               

144   

S-4/A
154th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 154th
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES             

   Our discussion and analysis of financial condition and results of
operations are based upon our Consolidated Financial Statements, which have been
prepared in accordance with accounting principles generally accepted in the     
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and          
liabilities. On an ongoing basis, we evaluate our estimates, including those    
related to revenue recognition, the allowance for doubtful accounts and the     
value of long-lived tangible and intangible assets. We base our estimates on    
historical experience and on various other assumptions that we believe to be    
reasonable under the circumstances, the results of which form the basis for     
making judgments about the carrying values of assets and liabilities that are   
not readily apparent from other sources. Actual results may differ from these   
estimates.                                                                      

       We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our Consolidated 
Financial Statements.                                                           

REVENUE RECOGNITION                                           

       The services we provide include short term leases of lit fiber (fixed
amounts of capacity on fiber optic transmission lines that use optronics        
equipment installed by us) and longer term leases of dark fiber (fiber optic    
transmission lines leased without optronics equipment installed by us) at fixed 
cost pricing over multi year terms. Revenues from telecommunications network    
services are recognized ratably over the term of the applicable lease agreements
with customers, which range from one to 20 years, provided there exists         
persuasive evidence of an arrangement, the fee is fixed or determinable and     
collectability of the related receivables is reasonably assured. Amounts billed 
in advance of the service provided are recorded as deferred revenue. We also    
lease space to customers at our co-location facilities. Other service revenues  
include these co-location service revenues as well as revenues from nonrecurring
installation charges and design, engineering and construction services.         

  We recognize revenues from nonrecurring installation charges and
design, engineering and construction services ratably over the multi-year       
network services terms to which the nonrecurring charges relate provided there  
exists persuasive evidence of an arrangement, the fee is fixed or determinable  
and collectability of the related receivables is reasonably assured.            

We have contracts with customers that provide service-level   
commitments, which may obligate us to provide credits against billings if       
service is interrupted or does not meet the customer's operating parameters.    
These amounts are accounted for as reductions of revenue. To date, credits      
granted under these arrangements have not been material.                        

ALLOWANCE FOR DOUBTFUL ACCOUNTS                               

   We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. We     
specifically analyze accounts receivable and historical bad debts, customer     
concentrations and current economic trends when evaluating the adequacy of the  
allowance for doubtful accounts. If the financial condition of our customers    
were to deteriorate, resulting in an impairment of their ability to make        
payments, additional allowances may be required.                                

145 

S-4/A
155th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 155th
LONG-LIVED TANGIBLE AND INTANGIBLE ASSETS                     

       We review our long-lived assets, including our property and equipment
and other intangibles, for impairment whenever events or changes in             
circumstances indicate that the carrying value of the assets may not be         
recoverable in accordance with Statement of Financial Accounting Standards      
("SFAS") No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED       
ASSETS. SFAS No. 144 requires that one accounting model be used for long-lived  
assets to be disposed of by sale, whether previously held and used or newly     
acquired. We believe that the carrying values of our long-lived assets are      
realizable as of September 30, 2004.                                            

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS        

        Financial instruments that subject us to significant concentrations of
credit risk consist primarily of cash and cash equivalents and accounts         
receivable. Our cash and cash equivalents are invested in financial instruments 
with high credit ratings. We do not require collateral or other securities to   
support customer receivables; however, we perform regular credit evaluations of 
our customers' financial condition and maintain allowances for potential credit 
losses. Concentration of credit risk with respect to accounts receivable is     
limited to customers to whom we make significant sales.                         

        For the years ended December 31, 2001 and 2003, one customer accounted
for 10% of net revenues. For the year ended December 31, 2002 and the nine      
months ended September 30, 2004, no customer accounted for more than 10% of net 
revenues. As of December 31, 2002 and 2003, no customers had balances in excess 
of 10% of accounts receivable. As of September 30, 2004, one customer           
represented approximately 30% of accounts receivable. This amount was           
subsequently collected in full from the customer.                               

    We have no significant off-balance-sheet or other concentration of
credit risks at December 31, 2002 or 2003 or September 30, 2004.                

RESULTS OF OPERATIONS                                                           

NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2003                                                                        

        Revenues increased by $5.0 million, or 16.1%, to $35.8 million for the
nine months ended September 30, 2004 compared to $30.8 million for the nine     
months ended September 30, 2003. Revenues in 2004 were generated by recurring   
lease services of $31.9 million and other service revenues of $3.9 million which
consist of co-location revenues and amortization of nonrecurring charges for    
design, engineering, construction and related services. The increase in revenues
for 2004 related primarily to growth in booking and provisioning customer orders
for network services. For the nine months ended September 30, 2004, revenues    
consisted of lit services (77%), dark services (12%) and other services (11%)   
compared to 77%, 13% and 10%, respectively, for the nine months ended September 
30, 2003.                                                                       

        Cost of revenues was $19.6 million for the nine months ended September
30, 2004, an increase of 35.6% as compared to $14.5 million for the nine months 
ended September 30, 2003. The increase in cost of revenues is due to operating  
costs for Columbia Transmission which was acquired in September 2003 to expand  
our network in the mid-Atlantic market as well as the overall growth in our     
business volume during 2004. As a percentage of revenues, cost of revenues      
increased to 54.7% for the nine months ended September 30, 2004, compared to    
46.9% for the nine months ended September 30, 2003. The increase in cost of     
revenues as a percentage of revenues reflects the Columbia Transmission         
acquisition offset to some extent by revenue growth and improving network       
utilization in the Northeast.                                                   

146 

S-4/A
156th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 156th
        Selling, general and administrative expenses ("SG&A") of $12.8 million
for the nine months ended September 30, 2004, was comparable to $12.8 million   
for the nine months ended September 30, 2003. This reflects our focus on overall
cost management. As a percentage of revenues, SG&A expenses decreased to 35.8%  
for the nine months ended September 30, 2004, compared to 41.5% for the nine    
months ended September 30, 2003. The improvement in SG&A expenses as a          
percentage of revenues reflects the growth in our revenues and our focus on     
operating efficiencies and overall cost management.                             

       Depreciation and amortization expense increased 19.0% to $7.9 million
for the nine months ended September 30, 2004, compared to $6.6 million for the  
nine months ended September 30, 2003. This increase reflects the expansion of   
our communications network in our Northeast and mid-Atlantic service areas.     

  Other income decreased to $0.3 million for the nine months ended
September 30, 2004 compared to $0.4 million for the nine months ended September 
30, 2003. This decrease was due primarily to lower interest rates and lower cash
balances during 2004 compared to 2003.                                          

         For the nine months ended September 30, 2004, we recorded a net loss of
$4.3 million compared to net income of $0.6 million for the comparable period in
2003. The increase in our net loss for 2004 is due primarily to costs related to
the operation of Columbia Transmission which was expected to be dilutive to our 
results for approximately 24 months. Results for 2003 also reflect a gain from  
the acquisition of Columbia Transmission totaling $3.2 million. The acquisition 
is discussed more fully in the Overview section above and in Note 2 to the      
Consolidated Financial Statements.                                              

YEAR ENDED DECEMBER 31, 2003 COMPARED TO THE YEAR ENDED DECEMBER 31, 2002       

        Revenues increased by $7.9 million, or 23.5%, to $41.6 million for the
year ended December 31, 2003 compared to $33.7 million for the year ended       
December 31, 2002. Revenues in 2003 were generated by recurring lease services  
of $37.5 million and other service revenues of $4.1 million. The primary reason 
for the increase in revenues was the growth in booking and provisioning of      
customer orders for additional network services. For 2003, revenues consisted of
lit services (78%), dark services (13%) and other services (9%) compared to 72%,
19% and 9%, respectively for 2002.                                              

        Cost of revenues totaled $20.9 million for the year ended December 31,
2003, an increase of 18.1% as compared to the $17.7 million for the year ended  
December 31, 2002. The increase in cost of revenues reflects the overall growth 
in our business volume during 2003 and costs related to the operation of        
Columbia Transmission. As a percentage of revenues, cost of revenues decreased  
to 50.2% for the year ended December 31, 2003, compared to 52.5% for 2002. The  
improvement in cost of revenues as a percentage of revenues reflects our revenue
growth and improving network utilization offset to some extent by costs related 
to Columbia Transmission.                                                       

      Selling, general and administrative expenses decreased 6.9% to $16.5
million for the year ended December 31, 2003 compared to $17.8 million for the  
year ended December 31, 2002. The decrease in SG&A expenses reflects the impact 
of headcount reductions in 2002 and January 2003, cost reduction activities     
undertaken during our restructuring in 2002 and overall cost management during  
the year. As a percentage of revenues, SG&A expenses decreased to 39.7% for the 
year ended December 31, 2003, compared to 52.7% for 2002. The improvement in    
SG&A expenses as a percentage of revenues reflects the factors discussed above. 

       Depreciation and amortization expense decreased 61.4% to $9.0 million
for the year ended December 31, 2003, compared to $23.3 million for the year    
ended December 31, 2002. This decrease reflects the adoption of fresh start     
reporting as of December 31, 2002 in connection with our restructuring discussed
above and the related revaluation of our assets to fair value on such date.     

147 

S-4/A
157th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 157th
        Interest and other income increased 27.6% to $0.6 million for the year
ended December 31, 2003 compared to $0.5 million for the year ended December 31,
2002. This increase was due primarily to higher cash balances during 2003       
compared to 2002. This increase was offset to some extent by the decline in     
interest rates during 2003.                                                     

      Interest and other expense was reduced to $15,000 for the year ended
December 31, 2003 compared to $17.1 million for the year ended December 31, 2002
as the result of our restructuring in 2002 and the related elimination of debt. 
During 2002, interest expense related to NEON Optica's $180 million 12 3/4%     
senior notes Due 2008, 18% subordinated convertible notes and 15% equipment note
payable.                                                                        

     For the year ended December 31, 2003 we recorded a net loss of $1.0
million compared to a net loss of $87.5 million in 2002. This improvement       
reflects the improved operating results discussed above, the restructuring and  
related elimination of debt accomplished in 2002 and a gain on the acquisition  
of Columbia Transmission. Our restructuring and acquisition are discussed more  
fully in the Overview section above and in notes 3 and 2, respectively, to the  
Consolidated Financial Statements.                                              

YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2001       

        Revenues increased by $7.1 million, or 26.8%, to $33.7 million for the
year ended December 31, 2002 compared to $26.6 million for the year ended       
December 31, 2001. Revenues in 2002 were generated by recurring lease services  
of $30.5 million and other service revenues of $3.2 million. The primary reason 
for the increase in revenues was the growth in demand for our lit services      
during 2002. For 2002 revenues consisted of lit services (72%), dark services   
(19%) and other services (9%) compared to 69%, 18% and 13%, respectively for    
2001.                                                                           

 Cost of revenues for the year ended December 31, 2002 was $17.7
million, an increase of 3.4% as compared to the $17.1 million for the year ended
December 31, 2001. The increase in cost of revenues reflects the overall growth 
in our business volume during 2002. As a percentage of revenues, cost of        
revenues improved to 52.5% from 64.4% in 2001 due primarily to improved network 
utilization.                                                                    

       Selling, general and administrative expenses decreased 29.1% to $17.8
million for the year ended December 31, 2002 compared to $25.0 million for the  
year ended December 31, 2001, reflecting headcount reductions during 2001 and   
2002 and savings related to our restructuring efforts during 2002. As a         
percentage of revenues, SG&A expenses decreased to 52.7% of revenues in 2002    
compared to 94.3% in 2001. This improvement reflects the growth in our revenues 
as well as our cost reduction activities during 2001 and 2002.                  

        Depreciation and amortization expense increased 22.8% to $23.3 million
for the year ended December 31, 2002, compared to $19.0 million for the year    
ended December 31, 2001. This increase resulted primarily from increased capital
expenditures related to the expansion of our communications network in our      
Northeast and mid-Atlantic service areas.                                       

        Interest and other income decreased 86.6% to $0.5 million for the year
ended December 31, 2002 compared to $3.3 million for the year ended December 31,
2001. This decrease was due primarily to lower cash and investment balances for 
2002 compared to 2001.                                                          

   Interest and other expense decreased in 2002 as the result of our
restructuring activities whereby we stopped accruing interest expense beginning 
July 2002.                                                                      

148 

S-4/A
158th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 158th
       For the year ended December 31, 2002, we recorded a net loss of $87.5
million compared to a net loss of $116.7 million for the year ended December 31,
2001. The decrease in net loss is primarily attributable to the gain from our   
restructuring as discussed more fully in note 3 to the Consolidated Financial   
Statements, and the improved results from operations discussed above.           

LIQUIDITY AND CAPITAL RESOURCES                                                 

       Through 2001, the design, construction and development of our network
and the purchase of telecommunications equipment required substantial capital   
investment. We funded a substantial portion of these expenditures through our   
public offerings of equity and debt completed on August 5, 1998, which resulted 
in net proceeds to us of approximately $218 million (after deducting expenses), 
of which $72 million was placed in escrow to cover the first seven semi annual  
interest payments on our 12 3/4% senior notes due 2008, as well as additional   
convertible debt issuances totaling $26.5 million in 2001 and vendor financing  
of approximately $46.5 million.                                                 

 As discussed in the Overview section above and in note 3 to the
Consolidated Financial Statements, during 2002, we completed a restructuring    
pursuant to Chapter 11 of the Bankruptcy Code which eliminated all of our debt  
and related accrued interest. In connection with our restructuring, we received 
approximately $12.4 million from the issuance of Series A 12% Cumulative        
Convertible Preferred Stock to fund future growth. Since 2002 we have focused   
our capital spending primarily on the purchase of telecommunications equipment  
and deployment of network facilities to support customer demands. We have funded
our activities from available cash and cash from operations. We expect to       
continue to experience negative cash flow after investing activities for the    
foreseeable future. Accordingly, our ability to continue to grow our network and
to support related customer demands will be limited by our current capital      
resources and cash provided from operations until sufficient cash flow after    
investing activities is generated.                                              

     Cash provided by operating activities was $5.3 million for the nine
months ended September 30, 2004 compared to $3.2 million for the same period in 
2003. Cash provided by operating activities for the year ended December 31, 2003
was $6.1 million compared to cash used in operating activities of $8.6 million  
for the year 2002. The improvement in cash provided by operating activities     
reflects our improved operating results and our focus on working capital        
management. Net cash provided by operating activities was used primarily to fund
investing activities in 2003 and 2004.                                          

     Net cash used in investing activities was $9.5 million for the nine
months ended September 30, 2004 and $4.5 million and $6.5 million for the years 
ended December 31, 2003 and 2002, respectively. Cash used in investing          
activities consisted primarily of capital expenditures for the purchase of      
telecommunications equipment and network development to expand our              
communications network in the Northeast and mid Atlantic regions to support     
customer demands.                                                               

       Net cash provided by (used in) financing activities was approximately
$0.6 million for the nine months ended September 30, 2004. For the years ended  
December 31, 2003 and 2002 financing activities used $5.7 million and provided  
$21.6 million, respectively. In 2003 cash was used primarily to increase        
short-term restricted investments. In 2002 cash was provided primarily from the 
issuance of preferred stock and a decrease in restricted investments.           

         At September 30, 2004, we had unrestricted cash and cash equivalents of
$11.3 million compared to $14.9 million at December 31, 2003. Our ability to    
generate cash from operations and achieve profitability is dependent upon our   
ability to grow our revenue and to continue to control operating costs and      
capital expenditures. We are dependent upon our cash on hand and cash generated 
from operations to support our capital requirements and, as discussed above, we 
expect to experience negative cash flow after investing activities for the      
foreseeable future. We believe that our existing cash and cash equivalents in   
addition to our cash from operations will be sufficient to fund our operations  
and capital expenditures for at least the next 12 months. However, there can be 
no assurance that we will be successful in implementing our business plan or    
that changes in assumptions or conditions will not adversely affect our         
financial condition or liquidity position.                                      

149   

S-4/A
159th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 159th
     NEON is currently involved in a dispute over rights of way fees, in
which WMATA is claiming fees of $847,000 under a 1999 license agreement. NEON   
has filed suit seeking declaratory judgment that such fees violate the          
Telecommunications Act of 1996.                                                 

     If we elect to pursue a material strategic acquisition or expansion
opportunities, our cash needs may be increased substantially, both to finance   
any such acquisitions and to finance development efforts in new markets.        

COMMITMENTS                                                                     

         As of December 31, 2003, we had contractual cash obligations as follows
($ in 000's):                                                                   

                                                        [Enlarge/Download Table]
                                             PAYMENTS DUE BY PERIOD                                             

                                                                                     FISCAL 2006       AFTER    
       CONTRACTUAL OBLIGATIONS           TOTAL         FISCAL 2004    FISCAL 2005    THROUGH 2008   FISCAL 2008 
-----------------------------------  -------------    -------------  -------------  -------------  -------------
                                                                                                                
Operating leases                     $     26,547     $      2,676   $      2,497   $      6,084   $     15,290 
Fiber leases                              181,533            7,917          8,825         26,523        138,268 
                                     -------------    -------------  -------------  -------------  -------------
Total contractual cash obligations   $    208,080     $     10,593   $     11,322   $     32,607   $    153,558 
                                     =============    =============  =============  =============  =============

    Other than changes in the normal course of business, there were no
material changes in contractual cash obligations through September 30, 2004.    

 As discussed more fully in note 2 to the Consolidated Financial
Statements, we have recorded an other long-term liability of approximately $1.8 
million for the asset retirement obligation related to the acquisition of       
Columbia Transmission.                                                          

  We do not maintain any off-balance sheet financing arrangements.

   We have employment agreements with two officers. These agreements
provide for employment and related compensation and restrict the individuals    
from competing, as defined, with us during the terms of their agreements. These 
agreements also provide for stock options under the 2002 Plan and for severance 
payments upon termination under circumstances defined in these agreements.      

INCOME TAXES                                                                    

      We are in an accumulated loss position for both financial and income
tax reporting purposes. We have income tax loss carry forwards to offset future 
taxable income, if any, of approximately $79 million at December 31, 2003. These
income tax loss carry forwards expire through 2023 and are subject to review and
possible adjustment by the Internal Revenue Service. As the result of our       
bankruptcy restructuring in 2002 we believe the use of approximately $65 million
of our tax loss carry forwards is limited to approximately $6 million per year. 
In addition, the occurrence of certain events, including significant changes in 
ownership interests, may limit the amount of net operating loss carry forwards  
available for use in any given year. A full valuation allowance has been        
recorded in the Consolidated Financial Statements to offset these carry forwards
because their future realizability is uncertain.                                

150 

S-4/A
160th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 160th
TRANSACTIONS WITH RELATED PARTIES                                               

  We have agreements with Northeast Utilities which were initially
entered into in 1994 and 1995 and cover the provision of rights-of-way along    
electric utility towers and inside urban electric utility ducts. Pursuant to    
these agreements, we acquired indefeasible rights-of-use in fiber optic         
filaments along Northeast Utilities' rights-of-way and we pay Northeast         
Utilities mileage-based annual fees and a percentage of the gross revenues that 
we generate on the portion of our network located on Northeast Utilities'       
rights-of-way, as such gross revenues exceed predefined limits specified in the 
agreements with Northeast Utilities. To date, none of the limits has been       
exceeded. Northeast Utilities has waived a portion of our right-of-way fees on  
certain route segments through September 2004. Under the agreements, 12 fibers  
on designated route segments of our network in Northeast Utilities service      
territory are owned by and have been set aside for Northeast Utilities use.     
After June 30, 2005, Northeast Utilities may lease the 12 fibers to third       
parties and is free to use these fibers to compete with us. At December 31, 2003
and 2002, approximately $1.4 million and $1.8 million associated with the       
construction of the 12 fibers are included in prepaid rights-of-way fees in the 
consolidated balance sheet, respectively. In accordance with the adoption of    
fresh start reporting, we revalued the prepaid right-of-way fees at December 31,
2002 based upon an independent appraisal. Such fees are being recognized as a   
cost of revenues ratably over 5 years, the estimated remaining useful life.     

         In connection with our restructuring, Mode 1, an affiliate of Northeast
Utilities, agreed to purchase up to $3.5 million of common stock, at the market 
price on the date of purchase, to cover the payment of future amounts due to    
Northeast Utilities through December 31, 2004. During 2003, Mode 1 purchased    
approximately 236,000 shares of the Company's common stock for approximately    
$1.4 million and purchased approximately 342,000 shares of the Company's common 
stock in 2004 for approximately $2.1 million. In accordance with our agreement, 
we used the proceeds from such sales to pay certain 2003 and 2004 operating     
costs due to Northeast Utilities.                                               

      We paid Northeast Utilities approximately $428,000, $26,000 and $1.4
million (proceeds from stock sale) in 2001, 2002 and 2003, respectively, and    
approximately $1.4 million was included in other long-term liabilities at       
December 31, 2002 and accrued expenses at December 31, 2003.                    

      We paid approximately $0.2 million to Central Maine Power, a related
party prior to the effective date of our restructuring, for right-of-way fees   
for the year ended December 31, 2001. We also paid Central Maine Power and/or   
Union Water and Power, an affiliate of Central Maine Power, approximately $1.0  
million for materials, labor and other contractor charges for the year ended    
December 31, 2001.                                                              

    We believe that the fees payable under the agreements with related
parties are reasonable and are comparable to those which would have been        
negotiated on an arm's-length basis with an unaffiliated third party.           

   We have employment agreements with two officers. These agreements
provide for employment and related compensation and restrict the individuals    
from competing, as defined, with the company during the terms of their          
agreements. These agreements also provide for stock options under our 2002 Stock
Option Plan and for severance payments upon termination under circumstances     
defined in these agreements.                                                    

151 

S-4/A
161st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 161st
RECENT ACCOUNTING PRONOUNCEMENTS                                                

    In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures certain 
financial instruments with characteristics of both liabilities and equity and   
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances), because that instrument     
represents an obligation. Many of those instruments were previously classified  
as equity. The statement is effective for financial instruments entered into or 
modified after May 31, 2003, and otherwise is effective at the beginning of the 
first interim period beginning after June 15, 2003, except for mandatory        
redeemable financial instruments of nonpublic entities, which are subject to the
provisions for the first fiscal period beginning after December 15, 2003. The   
adoption of SFAS No. 150 did not have a material effect on our financial        
position, results of operations or cash flows.                                  

     In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities." FIN 46 requires that the criteria for consolidation be based
upon analysis of risks and rewards, not control, and represents a significant   
and complex modification of previous accounting principles. FIN 46 is effective 
for consolidated financial statements issued after June 30, 2003. We do not     
believe the adoption of FIN 46 will have a material effect on our consolidated  
results of operations, financial position or cash flows.                        

    In December 2003, the Securities and Exchange Commission published
Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition." SAB No. 104   
was effective upon issuance and supersedes SAB No. 101, "Revenue Recognition in 
Financial Statements," and rescinds the accounting guidance contained in SAB No.
101 related to multiple-element revenue arrangements that was superseded by EITF
Issue No. 00-21. The adoption of SAB No. 104 did not have a material effect on  
our financial position, results of operations, or cash flows.                   

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                      

   At September 30, 2004, cash equivalents and short-term restricted
investments consist of investments in money market accounts. We do not have     
operations subject to risks of foreign currency fluctuations, nor do we         
currently use derivative financial instruments in our operations or investment  
portfolio. We also do not have any indebtedness.                                

152 

S-4/A
162nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 162nd
 SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND MORE THAN
FIVE PERCENT STOCKHOLDERS OF NEON 

  The following table and the accompanying notes set forth certain
information, as of December 1, 2004 (except as set forth below), concerning the 
beneficial ownership of NEON common stock and NEON convertible preferred stock  
by: (1) each person who is known by NEON to beneficially own more than five     
percent of NEON common stock and NEON convertible preferred stock, (2) each     
director of NEON, (3) each executive officer of NEON and (4) all directors and  
executive officers as a group.                                                  

                                                        [Enlarge/Download Table]
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
                                                                                               SHARES OF NEON      PERCENT OF CLASS 
                                                     SHARES OF NEON       PERCENT OF CLASS      CONVERTIBLE         OF CONVERTIBLE  
NAME AND ADDRESS OF BENEFICIAL OWNER                COMMON STOCK (1)     OF COMMON STOCK    PREFERRED STOCK (1)    PREFERRED STOCK  
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
                                                                                                                                    
Citadel Investment Group LLC                            2,000,000              12.4%                     -                  -       
131 South Dearborn St., 36th Floor                                                                                                  
Chicago, IL 60603 (2)                                                                                                               
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
LC Capital Master Fund Ltd.                             2,538,686              14.9%               171,476               15.6%      
Lampe Conway & Co. LLC                                                                                                              
730 Fifth Avenue, Ste. 1002                                                                                                         
New York, NY 10019 (3)                                                                                                              
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Loeb Partners Corp.                                     2,456,326              15.0%                44,444                4.0%      
61 Broadway                                                                                                                         
New York, NY 10006 (4)                                                                                                              
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Greywolf Capital Management LP                            857,955               5.3%                     -                  -       
411 West Putnam Avenue                                                                                                              
Greenwich, CT 06830 (5)                                                                                                             
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
MacKay Shields LLC                                      7,524,804              40.0%               538,220               48.8%      
9 W 57th Street, 73rd FL                                                                                                            
New York, NY 10019 (6)                                                                                                              
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Mode 1 Communications, Inc.                             2,136,550              13.2%                     -                  -       
c/o Northeast Utilities Service Co.                                                                                                 
107 Selden Street                                                                                                                   
Berlin, CT 06037 (7)                                                                                                                
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
The Singer Trusts                                       2,038,998              11.6%               303,044               27.5%      
560 Sylvan Avenue                                                                                                                   
Englewood Cliffs, NJ 07632 (8)                                                                                                      
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
JGD Management Corp.                                      904,333               5.6%                     -                  -       
390 Park Ave., 15th Floor                                                                                                           
New York, New York 10022 (9)                                                                                                        
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Stephen E. Courter (10)                                   450,000               2.7%                     -                  -       
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
William A. Marshall (11)                                  325,000               2.0%                     -                  -       
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Jeffrey C. MacHaffie (12)                                 185,000               1.1%                     -                  -       
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Kurt J. Van Wagenen (13)                                  275,000               1.7%                     -                  -       
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Peter D. Aquino(14)                                       169,954               1.0%                     -                  -       
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Wayne Barr, Jr. (15)                                      169,954               1.0%                     -                  -       
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Jose A. Cecin, Jr. (16)                                     2,407                 *                      -                  -       
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
John H. Forsgren (17)                                   2,138,167              13.3%                     -                  -       
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Robert M. Grubin (18)                                   2,456,326              15.0%                44,444                4.0%      
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
Steven G. Lampe (19)                                    2,538,686              14.9%               171,476               15.6%      
------------------------------------------------- --------------------- ------------------- --------------------- ------------------
NEON directors and executive officers as a group        8,710,494              46.3%               215,920               19.6%      
------------------------------------------------- --------------------- ------------------- --------------------- ------------------

(*) Less than 1%.                                                                                                                   

                                                                153                                                                 

S-4/A
163rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 163rd
    (1)  The information regarding beneficial ownership of NEON common stock
           and NEON convertible preferred 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 NEON 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 December 1, 2004 was 16,117,799. As used in this joint proxy
         statement/prospectus, "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)  According to information provided to NEON, Citadel Limited     
          Partnership is the portfolio manager for each of Citadel Equity Fund
        Ltd. and Citadel Credit Trading Ltd. Citadel Equity Fund Ltd. owns
           1,400,000 shares of NEON common stock and Citadel Credit Trading Ltd.
         owns 600,000 shares of NEON common stock. Citadel Investment Group,
        L.L.C. acts as the general partner of Citadel Limited Partnership.

 (3)  LC Capital Master Fund Ltd. directly beneficially owns 1,673,543
          shares of NEON common stock and 857,689 Class A warrants and 171,476
 shares of NEON convertible preferred stock. LC Capital also
    indirectly beneficially owns 7,454 shares of NEON common stock
        pursuant to stock options granted to Mr. Lampe, an affiliate of LC
        Capital, that will accelerate, become fully vested and exercisable
   immediately prior to a change of control of NEON, including a
transaction such as the merger.                           

   (4)  Loeb Partners Corp. directly beneficially owns 2,226,570 shares of
         NEON common stock and 222,302 Class A warrants and 44,444 shares of
     NEON convertible preferred stock. Loeb Partners also indirectly
           beneficially owns 7,454 shares of NEON common stock pursuant to stock
         options granted to Mr. Grubin, an affiliate of Loeb Partners Corp.,
           that will accelerate, become fully vested and exercisable immediately
           prior to a change of control of NEON, including a transaction such as
the merger.                                               

    (5)  Greywolf Capital Management LP indirectly beneficially owns 857,955
         shares of NEON common stock through Greywolf Capital Partners II LP
and Greywolf Capital Overseas Fund.                       

     (6)  This information is as of November 19, 2004 and based on information
        provided to NEON by MacKay Shields LLC, the pecuniary interests in
          these shares are held by a number of clients for whom MacKay Shields
       LLC is the discretionary investment advisor or subadvisor. MacKay
          Shields LLC has voting and investment control over these shares and,
    accordingly, is deemed to beneficially own these shares. These
           beneficially owned securities include 4,832,750 shares of NEON common
  stock, 2,692,054 Class A warrants and 538,220 shares of NEON
convertible preferred stock.                              

   (7)  Mode 1 Communications, Inc. directly, and NU Enterprises, Inc. and
      Northeast Utilities, Inc. indirectly, beneficially own 2,129,096
           shares of NEON common stock. Mode 1 also indirectly beneficially owns
         7,454 shares of NEON common stock pursuant to stock options granted
        to Mr. Forsgren, and subsequently assigned to Northeast Utilities,
       the parent of Mode 1 Communications, that will accelerate, become
           fully vested and exercisable immediately prior to a change of control
of NEON, including a transaction such as the merger.      

 154

S-4/A
164th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 164th
     (8)  The Singer Trusts indirectly beneficially own 523,230 shares of NEON
           common stock through the Singer Children's Management Trust as record
      holder, 1,296,560 Class A warrants through the Singer Children's
         Management Trust as record holder, 219,208 Class A warrants through
       the Second Gary & Karen Singer Children's Trust as record holder,
           259,218 shares of NEON convertible preferred stock through the Singer
       Children's Management Trust as record holder and 43,826 shares of
      NEON convertible preferred stock through the Second Gary & Karen
Singer Children's Trust as record holder.                 

(9)  According to information provided to NEON, JGD Management Corp.
      indirectly owns 820,333 shares of NEON common stock through York
      Credit Opportunities Fund, L.P. and 84,000 shares of NEON common
stock through York Global Value Partners, L.P.            

    (10) Mr. Courter, an officer and director of NEON, directly beneficially
       owns these shares pursuant to stock options that will accelerate,
          become fully vested and exercisable immediately prior to a change of
  control of NEON, including a transaction such as the merger.

   (11) Mr. Marshall, an officer of NEON, directly beneficially owns these
         shares pursuant to stock options that will accelerate, become fully
        vested and exercisable immediately prior to a change of control of
NEON, including a transaction such as the merger.         

    (12) Mr. MacHaffie, an officer of NEON, directly beneficially owns these
         shares pursuant to stock options that will accelerate, become fully
        vested and exercisable immediately prior to a change of control of
NEON, including a transaction such as the merger.         

      (13) Mr. Van Wagenen, an officer of NEON, directly beneficially owns these
         shares pursuant to stock options that will accelerate, become fully
        vested and exercisable immediately prior to a change of control of
NEON, including a transaction such as the merger.         

 (14) Mr. Aquino, a director of NEON, directly beneficially owns 7,454
     shares of NEON common stock pursuant to stock options that will
          accelerate, become fully vested and exercisable immediately prior to
      a change of control of NEON, including a transaction such as the
 merger. Additionally, as of December 31, 2004 he indirectly
           beneficially owns 162,500 CTA warrants that are directly beneficially
           owned by PDA Group, LLC, of which Mr. Aquino is an executive officer.

      (15) Mr. Barr, a director of NEON, directly beneficially owns 7,454 shares
          of NEON common stock pursuant to stock options that will accelerate,
          become fully vested and exercisable immediately prior to a change of
  control of NEON, including a transaction such as the merger.
        Additionally, he indirectly beneficially owns 162,500 CTA warrants
           that are directly beneficially owned by Rita Barr, Mr. Barr's spouse.

(16) Mr. Cecin, a director of NEON, directly beneficially owns these
         shares pursuant to stock options that will accelerate, become fully
        vested and exercisable immediately prior to a change of control of
NEON, including a transaction such as the merger.         

(17) Mr. Forsgren, a director of NEON, is affiliated with Mode 1    
          Communications, which directly beneficially owns 2,136,550 shares of
      NEON common stock (including 341,936 shares that NEON intends to
          issue to Mode 1 prior to consummation of the merger and 7,454 shares
   of NEON common stock pursuant to stock options granted to Mr.
           Forsgren and subsequently assigned to Northeast Utilities, the parent
         of Mode 1). Mr. Forsgren directly beneficially owns 1,617 shares of
         NEON stock. According to information provided to NEON, Mr. Forsgren
      has disclaimed beneficial ownership of all shares of NEON common
stock except for 1,617 shares.                            

155 

S-4/A
165th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 165th
(18) Mr. Grubin is affiliated with Loeb Partners, which directly    
      beneficially owns 2,226,570 shares of NEON common stock, 222,302
       Class A warrants, and 44,444 shares of NEON convertible preferred
         stock. Mr. Grubin directly beneficially owns 7,454 options for NEON
common stock that will accelerate, become fully vested and
   exercisable immediately prior to a change of control of NEON,
           including a transaction such as the merger. Mr. Grubin has voting and
          investment control over these shares and, consequently, is deemed to
beneficially own these shares.                            

(19) Mr. Lampe is affiliated with LC Capital Master Fund Ltd., which
       directly beneficially owns 1,673,543 shares of NEON common stock,
     857,689 Class A warrants and 171,476 shares of NEON convertible
         preferred stock. Mr. Lampe directly beneficially owns 7,454 options
         for NEON common stock that will accelerate, become fully vested and
   exercisable immediately prior to a change of control of NEON,
          including a transaction such as the merger. Mr. Lampe has voting and
          investment control over these shares and, consequently, is deemed to
beneficially own these shares.                            

156 

S-4/A
166th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 166th
 MANAGEMENT OF GLOBIX AFTER MERGER

        Set forth below is the name, age as of September 30, 2004, and a brief
account of the business experience of each person who will be a director of     
Globix after the merger.                                                        

                                                                [Download Table]
          Name          Age                    Position                     
          ----          ---                    --------                     
                                                                            
Peter K. Stevenson      44   President, Chief Executive Officer and Director
Peter L. Herzig         41   Vice Chairman of the Board of Directors        
Steven Lampe            45   Director                                       
Steven G. Singer        43   Chairman of the Board of Directors             
Raymond L. Steele       69   Director                                       
Wayne Barr, Jr. (1)     40   Director                                       
Jose A. Cecin, Jr. (1)  41   Director                                       
Stephen E. Courter (1)  49   President and Chief Executive Officer of NEON, 
                             and Director                                   
John Forsgren (1)       58   Director                                       

(1)      Such person is currently an officer or director of NEON and will assume
       the stated position with Globix upon the effectiveness of the merger.

OUR BOARD OF DIRECTORS                                                          

    Effective upon the merger, the number of directors on our board of
directors will be nine. Our directors are elected at each annual stockholders'  
meeting, and serve until the next annual stockholders' meeting or the election  
and qualification of their respective successors. Four of the current members of
our board of directors (Messrs. Stevenson, Herzig, Singer and Lampe) were       
selected in accordance with the terms of the plan of reorganization under       
Chapter 11 of the U.S. Bankruptcy Code approved April 8, 2002 to serve as the   
directors of Globix following the effective date of the plan. Mr. Steele was    
appointed to our board of directors in June 2003. Messrs. Barr, Cecin, Courter  
and Forsgren are being appointed to our board of directors in accordance with   
the terms of the merger agreement.                                              

        Peter S. Brodsky and Steven Van Dyke, who are currently members of our
board of directors, are expected to resign in connection with the closing of the
merger.                                                                         

   Peter K. Stevenson joined Globix as president and chief executive
officer in April 2002 and also serves as a member of our board of directors. Mr.
Stevenson has over 20 years of experience in the communications industry. Prior 
to joining Globix, Mr. Stevenson was a senior consultant to Communication       
Technology Advisors LLC, from January 2002 through April 2002, a restructuring  
boutique focusing on distressed telecommunications companies through the        
provision of strategic planning advice, restructuring assistance and overall    
business advice. CTA currently provides Globix with a wide array of business    
advisory services. Mr. Stevenson is a founder of Net One Group, Inc., a northern
Virginia based telecom investment and management company focused on developing  
and operating next generation broadband services networks. From January 2001 to 
January 2002, Mr. Stevenson served as a strategic advisor to the board of       
directors of Net Uno, one of the largest cable television, CLEC and ISP carriers
in Venezuela. From January 1998 to December 2000, Mr. Stevenson was a corporate 
officer of Net Uno and president and chief operating officer of Net Uno's Data  
and Telephone Group. From February 1996 to June 1998, Mr. Stevenson was partner 
in, and vice president for, Wave International, an international                
telecommunications investment and management firm focused on developing         
companies in international markets. Mr. Stevenson graduated with a Bachelor of  
Science degree from Saint Francis University in Loretto, Pennsylvania.          

157 

S-4/A
167th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 167th
       Peter L. Herzig has served as vice chairman of our board of directors
since May 2002. From August 2001 through April 2002, Mr. Herzig served as our   
chief executive officer. Mr. Herzig joined Globix in October 2000, served as    
chief operating officer from March 2001 through August 2001 and served as senior
vice president and chief operating officer-Application Services Group from      
October 2000 through March 2001. Prior to joining Globix, Mr. Herzig served as  
executive vice president and chief financial officer at iWon.com from March 2000
to October 2000, where his responsibilities included managing iWon's            
relationship with Globix. Prior to joining iWon.com, Mr. Herzig was a senior    
managing director and head of global capital markets services for Bear, Stearns 
& Co. Inc. from February 1998 through March 2000, where he provided strategic   
capital-structure advisory services to a broad spectrum of domestic and         
international clients, including many new media technology companies            
experiencing growth with the expansion of the Internet. Prior to Bear Stearns,  
Mr. Herzig worked at Goldman Sachs & Co. from July 1989 through February 1998.  
Mr. Herzig has a Bachelor of Arts degree from Dartmouth College and a Masters in
Business Administration degree from Columbia University.                        

        Steven Lampe has been a director of Globix since April 2002. Mr. Lampe
is a managing member of Lampe, Conway & Co. LLC, an investment management       
company which he co-founded in June 1999. Prior to his work at Lampe, Conway,   
Mr. Lampe managed Lone Star Securities Fund, a distressed investment fund, from 
June 1997 through June 1999. Prior to his employment with Lone Star, Mr. Lampe  
worked at Smith Management, a private investment company, from February 1988    
through June 1997. Mr. Lampe has a Bachelor of Arts degree from Middlebury      
College and a Masters in Business Administration degree from Harvard University.

  Steven G. Singer has been a director of Globix since April 2002.
Effective December 15, 2002, Mr. Singer became chairman of our board of         
directors. Mr. Singer is the chairman and chief executive officer of American   
Banknote Corporation, a publicly-traded corporation and 200 year-old global     
security printer of documents of inherent value, including currency, passports, 
credit cards, stock and bond certificates, and related products and services. He
also serves as the non-executive chairman of the board of Motient Corporation, a
publicly traded corporation, and as the Chapter 7 Trustee of American Pad &     
Paper Company. From 1993 through November 2000, Mr. Singer was the executive    
vice president and chief operating officer of Romulus Holdings, Inc., a         
family-owned investment vehicle, and, from 1994 through the present, has served 
as the chairman of Pure 1 Systems, a manufacturer and distributor of water      
treatment products. Mr. Singer has a Bachelor of Arts degree, summa cum laude,  
from the University of Pennsylvania and a Juris Doctor degree from the Harvard  
Law School.                                                                     

      Raymond L. Steele has been a director of Globix since June 2003. Mr.
Steele is a retired businessman. In addition to our company, Mr. Steele is a    
member of the board of directors of Dualstar Technologies Corporation and       
American Banknote Corporation. From August 1997 until October 2000, Mr. Steele  
served as a board member of Video Services Corp. Prior to his retirement, Mr.   
Steele held various senior positions such as executive vice president of        
Pacholder Associates, Inc. (from August 1990 until September 1993), executive   
advisor at the Nickert Group (from 1989 through 1990), and vice president, trust
officer and chief investment officer of the Provident Bank (from 1984 through   
1988).                                                                          

Stephen E. Courter, NEON's chairman of the board of directors,
president and chief executive officer, joined NEON in December 2000 in his      
current position. Mr. Courter held his current position with NEON when the      
company filed for bankruptcy in June, 2002. Prior to joining NEON, Mr. Courter  
was managing director and chief executive officer of Energis N.V., a            
facilities-based network service provider in Holland from June 1998 to December 
2000. From December, 1995 to June, 1998, Mr. Courter was vice president of      
finance and assistant general manager of GlobalOne, a joint venture between     
Sprint, Deutsche Telecom and France Telecom. Prior to joining GlobalOne, from   
August, 1987 to November, 1995, he served in various positions of increasing    
responsibility at Sprint International. Earlier in his career, Mr. Courter      
worked for IBM Corporation and KPMG Peat Marwick LLP.                           

158 

S-4/A
168th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 168th
       John H. Forsgren has served as one of NEON's directors since May 1998
and as NEON's interim chief executive officer from August 2000 to December 2000.
Mr. Forsgren has served as vice chairman, executive vice president and chief    
financial officer of Northeast Utilities and various subsidiaries since 1996.   
>From December 1994 to July 1996, he served as a managing director of Chase     
Manhattan Bank.                                                                 

      Wayne Barr, Jr. is a founding member and Senior Managing Director of
Capital & Technology Advisors LLC and Communication Technology Advisors LLC,    
financial and operational restructuring firms with offices in Albany, New York  
and Reston, Virginia. Mr. Barr is also a founding member of TechOne Capital     
Group LLC, a private investment firm based in Albany, New York. Prior to        
starting these firms, Mr. Barr was the Associate General Counsel of CAI Wireless
Systems, Inc., a wireless spectrum company located in Albany, New York, which   
was sold to MCI WorldCom in 1999. Mr. Barr began his career as an attorney in   
private practice in New York City and in Albany. He received his J.D., degree   
from Albany Law School of Union University and is a member of the New York State
Bar. Mr. Barr has served as a member of the board of directors of NEON since    
December 2002 and is a member of the board of directors of Evident Technologies,
Inc. and a member of the Board of Trustees of the New York Racing Association,  
Inc.                                                                            

   Jose A. Cecin, Jr. is a Managing Director of the Windsor Group, a
leading middle-market investment bank, and directs the firm's telecommunications
practice. He is also active in the firm's defense and aerospace practice. Mr.   
Cecin has over eighteen years of management experience and has had a strong     
focus on telecommunications, financing and corporate development over the last  
thirteen years. Prior to joining the Windsor Group, Mr. Cecin was one of two    
founders of Cambrian Communications, a telecommunications service provider,     
where he served as chief operating officer and a director. Prior to founding    
Cambrian in 1999, Mr. Cecin was on the founding team of Wave International, a   
telecommunications management company focused on infrastructure opportunities in
developing markets. Prior to Wave International, Mr. Cecin served as Managing   
Director of Corporate Development at Bell Atlantic Corporation (now Verizon).   
Mr. Cecin has served on the board of directors and board of advisors of several 
private companies. Mr. Cecin earned a BS degree in Electrical Engineering from  
the United States Military Academy at West Point and an MBA from Stanford       
University.                                                                     

GLOBIX DIRECTORS' COMPENSATION                                                  

 Under our compensation program for directors, our directors are
entitled to receive:                                                            

      o        $2,000 per month for directors and $4,000 per month for the
Chairman;                                   

       o        an additional $250 per month for service on the Compensation
                  Committee of our board of directors (or $500 per month for the
Chairman of the Compensation Committee);    

o        an additional $500 per month for service on the Audit
                Committee of our board of directors (or $1,000 per month for
the Chairman of the Audit Committee); and   

        o        an additional $1,000 for each board of directors or committee
meeting in excess of four per year.         

NEON DIRECTORS' COMPENSATION                                                    

 Of the current NEON directors, Messrs. Barr, Cecin, Courter and
Forsgren are expected to become directors of Globix upon the effective date of  
the merger.                                                                     

    Under the NEON directors' compensation program, NEON's nonemployee
directors are compensated $20,000 per year, which payments are payable at the   
option of NEON in cash or with options to purchase NEON common stock. NEON's    
only employee director, Mr. Courter, is not compensated for such director       
services.                                                                       

159 

S-4/A
169th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 169th
OTHER EXECUTIVE OFFICERS                                                        

                                                                [Download Table]
         Name         Age                     Position                         
         ----         ---                     --------                         
                                                                               
Robert M. Dennerlein   45  Vice President and Chief Financial Officer          
H. Jameson Holcombe    41  Senior Vice President, Operations, Chief Technology 
                           Officer and Secretary                               
John D. McCarthy       40  Senior Vice President, Business Development and U.S.
                           Sales and Marketing                                 
Philip J. Cheek        39  Managing and Finance Director of Globix U.K. Ltd.   
James C. Schroeder     57  Vice President and General Counsel                  

      Robert M. Dennerlein joined Globix in January 2003 as vice president
and corporate controller and became our chief financial officer on May 12, 2003.
Prior to joining Globix, from August 2001 until January 2003, Mr. Dennerlein    
served as vice president and controller for OpNext, a global optical components 
joint venture created by a spinoff from Hitachi and a venture capital investment
by Clarity Partners. From July 1999 until August 2001, Mr. Dennerlein served as 
the director of accounting and external reporting for Agere Systems (formerly   
the Microelectronics division of Lucent Technologies). From June 1992 until July
1999, Mr. Dennerlein held various management positions at International         
Specialty Products, a global specialty chemicals manufacturer. He served as     
senior director, ISP Financial Services from July 1997 until July 1999 and prior
to that controller, ISP International Operations from May 1995 until July 1997. 
Mr. Dennerlein is a Certified Public Accountant and received a Masters in       
International Business degree from Seton Hall University. He also holds a       
Bachelor of Science in Accounting from Seton Hall University.                   

         H. Jameson Holcombe joined Globix in July 2002 as senior vice president
of operations, a position he continues to hold. In April, 2003 he became our    
corporate secretary and on August 11, 2003 he became our chief technology       
officer. Prior to joining Globix, Mr. Holcombe served as chief information      
officer of Cambrian Communications from February 2000 through July 2002. From   
August 1997 to January 2000, Mr. Holcombe served as a senior principal          
consultant at C-Change, Inc. in San Rafael CA, leading project teams to deliver 
e-commerce initiatives for entertainment, telecommunications and financial      
services clients. Mr. Holcombe received a Masters degree in Computer Science    
from George Washington University in Washington, D.C. and a Masters in Business 
Administration degree from Chaminade University in Honolulu. Mr. Holcombe       
received his undergraduate degree from the United States Military Academy at    
West Point.                                                                     

John D. McCarthy has served as senior vice president, business
development since September 2002 and as senior vice president of US sales and   
marketing since October 2003. Prior to that, he served as acting chief financial
officer from March 2002 through September 2002. Mr. McCarthy also resumed the   
duties of acting chief financial officer from November 2002 to May 2003. Mr.    
McCarthy served as vice president of financial planning and analysis from August
2001 through March 2002 and as managing director for the Application Services   
Group from the time he joined Globix in March 2001 through August 2001. Prior to
joining Globix, Mr. McCarthy served as vice president, finance for LC39 Venture 
Group LLC, a New York based technology incubator and venture capital fund, from 
April 2000 to March 2001. From November 1998 through April 2000, he held        
management positions with an e-commerce startup and acted as a consultant to    
several entrepreneurial ventures. From 1996 to 1998, Mr. McCarthy was vice      
president, director of business affairs with divisions of Young & Rubicam. Mr.  
McCarthy received a Masters in Business Administration degree from The Wharton  
School of Business of the University of Pennsylvania and a Masters degree in    
International Studies from Wharton's Lauder Institute. Mr. McCarthy received his
undergraduate degree from Connecticut College.                                  

160 

S-4/A
170th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 170th
       Philip J. Cheek joined our United Kingdom subsidiary, Globix Ltd., in
July 2000 as European finance director. Mr. Cheek was subsequently appointed to 
the additional position of managing director of Globix Ltd. on July 12, 2001. He
currently serves on the Globix Ltd. United Kingdom board of directors. Prior to 
his joining Globix Ltd., Mr. Cheek served in various financial positions with   
Fritz Companies, an international freight company (now part of UPS) from April  
1996 through July 2000. Mr. Cheek graduated as a qualified ACCA in 1992 with a  
professional training practice Maxwells Chartered Accountants.                  

     James C. Schroeder joined Globix in February 2000 as Deputy General
Counsel. In December 2003 he was promoted to General Counsel and is responsible 
for overseeing all of Globix's legal activities including real estate and sales 
contracts. Prior to joining Globix, Mr. Schroeder was in private practice.      
Earlier in his career Mr. Schroeder served as in-house counsel for Philips      
Electronics NA and McKesson, Inc. Mr. Schroeder holds a BA from the University  
of Southern California. He received his JD from Pepperdine University and his   
LLM from New York University.                                                   

161 

S-4/A
171st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 171st
GLOBIX AND NEON EXECUTIVE COMPENSATION                                          

GLOBIX SUMMARY COMPENSATION TABLE                             

The following summary compensation table sets forth the total 
compensation for the fiscal years ended September 30, 2004, September 30, 2003  
and September 30, 2002 for Globix's Chief Executive Officer, Globix's four other
most highly compensated executive officers during the fiscal year ended         
September 30, 2004 who held office as of September 30, 2004.                    

                                                        [Enlarge/Download Table]
                                           ANNUAL COMPENSATION                                              
                                           -------------------                                              

                                                                                 SECURITIES                 
                                                                 OTHER ANNUAL    UNDERLYING                 
                                         SALARY        BONUS     COMPENSATION     OPTIONS/      ALL OTHER   
NAME AND PRINCIPAL POSITION     YEAR       ($)          ($)         ($)           SARS (#)     COMPENSATION 
----------------------------- -------  -----------  -----------  -------------  ------------   ------------ 
                                                                                                            
Peter K. Stevenson(1)           2004      308,000    168,750(2)        ---            ---            ---    
  PRESIDENT AND CHIEF           2003      284,684    150,000        79,105(4)     548,667(3)                
  EXECUTIVE OFFICER             2002      127,333     75,000        50,000(5)         ---          1,459(6) 

Robert M. Dennerlein(7)         2004      176,250     13,000(2)        ---            ---            ---    
  CHIEF FINANCIAL OFFICER       2003      108,077     42,916           ---        100,000            ---    

H. Jameson Holcombe(8)          2004      185,000     13,000(2)        ---            ---            ---    
  SENIOR VICE PRESIDENT         2003      170,000     53,125        79,623(9)     106,582            ---    
  OF OPERATIONS, CORPORATE      2002       34,375        ---        27,621(10)        ---            ---    
  SECRETARY AND CHIEF                                                                                       
  TECHNOLOGY OFFICER                                                                                        

John D. McCarthy(11)            2004      190,000     18,000(2)        ---            ---            ---    
  SENIOR VICE PRESIDENT,        2003      190,000     62,938           ---        146,316            ---    
  CORPORATE DEVELOPMENT         2002      190,000     27,000           ---        100,000(12)        ---    

Philip J. Cheek(13)             2004      197,134        ---         3,584(14)        ---         19,893(15)
  MANAGING AND FINANCE          2003      178,333     41,625         3,213(16)     30,000         17,833(15)
  DIRECTOR, GLOBIX U.K. LTD.    2002      119,662     18,097         2,955(17)        ---         11,966(15)


(1)      Mr. Stevenson became our President and Chief Executive Officer on April
15, 2002.                                                     

(2)      Amounts shown represent a special one-time bonus paid in March 2004    
        occasioned by the successful completion of the sale of the property at
   415 Greenwich Street in New York, New York. Year end bonuses have
not yet been determined, but will be included in the summary  
       compensation table in Globix's proxy statement relating to its annual
meeting to be held in 2005.                                   

(3)      Pursuant to Mr. Stevenson's employment agreement dated as of April 15, 
      2002, we agreed to grant to Mr. Stevenson options to acquire 548,667
         shares of our common stock, which options were granted to Mr. Stevenson
on March 14, 2003 pursuant to our 2003 Stock Option Plan.     

(4)      Represents the amount that we reimbursed Mr. Stevenson for his housing 
         and travel costs in the fiscal year ended September 30, 2003, including
     amounts reimbursed for taxes associated with these payments, as his
permanent residence is located outside of the New York area.  

162 

S-4/A
172nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 172nd
(5)      Represents the amount that we reimbursed Mr. Stevenson for his housing 
      and travel costs in the fiscal year ended September 30, 2002, as his
permanent residence is located outside of the New York area.  

(6)      Represents the amount of premiums for life insurance benefits for Mr.  
       Stevenson paid by Globix in the five month period ended September 30,
2002.                                                         

(7)      Mr. Dennerlein became our Chief Financial Officer on May 12, 2003. He  
joined Globix in January 2003.                                

(8)      Mr. Holcombe joined Globix in July 2002 as Senior Vice President of    
     Operations. He became our Corporate Secretary in April 2003 and our
Chief Technology Officer on August 11, 2003.                  

(9)      Represents the amount that we reimbursed Mr. Holcombe for his housing  
         and travel costs in the fiscal year ended September 30, 2003, including
     amounts reimbursed for taxes associated with these payments, as his
permanent residence is located outside of the New York area.  

(10)     Represents the amount that we reimbursed Mr. Holcombe for his housing  
      and travel costs in the fiscal year ended September 30, 2002, as his
permanent residence is located outside of the New York area.  

(11)     Mr. McCarthy has served as our Senior Vice President, Corporate        
      Development since September 2002. He joined Globix on March 5, 2001.

(12)     These options were granted prior to the effective date of our plan of  
        reorganization and were cancelled on the effective date of the plan of
reorganization.                                               

(13)     Mr. Cheek joined our U.K. subsidiary, Globix Ltd., in July 2000. He was
    appointed Managing and Finance Director of Globix Ltd. on July 12,
2001.                                                         

(14)     Represents the amount that we reimbursed Mr. Cheek for his travel costs
         in the fiscal year ended September 30, 2004, as his permanent residence
is located outside of the London area.                        

(15)     Represents the amount contributed by Globix Ltd. to its profit sharing 
plan.                                                         

(16)     Represents the amount that we reimbursed Mr. Cheek for his travel costs
         in the fiscal year ended September 30, 2003, as his permanent residence
is located outside of the London area.                        

(17)     Represents the amount that we reimbursed Mr. Cheek for his travel costs
         in the fiscal year ended September 30, 2002, as his permanent residence
is located outside of the London area.                        

163 

S-4/A
173rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 173rd
NEON SUMMARY COMPENSATION TABLE                               

        The following table sets forth compensation information for Stephen E.
Courter, the chief executive officer of NEON who is expected to be an executive 
officer of Globix, for the fiscal years ended December 31, 2001, 2002 and 2003. 

                                                        [Enlarge/Download Table]
                                          ANNUAL COMPENSATION                                          
                                          -------------------                                          
-------------------------------------------------------------------------------------------------------
                                                                             SECURITIES                
                                                               OTHER ANNUAL  UNDERLYING                
                                         SALARY       BONUS    COMPENSATION    OPTIONS/     ALL OTHER  
NAME AND PRINCIPAL POSITION     YEAR       ($)          ($)        ($)         SARS (#)    COMPENSATION
----------------------------- ------- ------------- ---------- ------------  ------------  ------------
                                                                                                       
Stephen E. Courter (1)          2003    268,750(2)   137,500       5,645      450,000(5)          --   
  PRESIDENT, CHIEF              2002    244,712(3)        --       7,719           --             --   
  EXECUTIVE OFFICER AND         2001    239,423       89,500(4)    5,228           --             --   
   CHAIRMAN OF THE BOARD                                                                               
----------------------------- ------- ------------- ---------- ------------  ------------  ------------

--------------------------------------------------------------------------------
(1)      Mr. Courter became NEON's President, Chief Executive Officer and       
Chairman of the Board in December 2000.                       

(2)      Mr. Courter's employment agreement dated February 13, 2003 provides    
       that his base compensation would be $275,000 for fiscal year 2003 but
Mr. Courter earned and was paid $268,750.                     

(3)      Mr. Courter's base salary was $250,000 for fiscal years 2001 and 2002. 
   However, Mr. Courter voluntarily reduced his base salary from the
   middle of 2001 through the beginning of 2002 by 10% due to NEON's
financial condition at the time.                              

(4)      This bonus was earned as part of NEON's management incentive plan, but 
has not been paid. Pursuant to NEON's reorganization plan, the
         management incentive bonus will be paid in a lump sum on the earlier of
      (i) the date NEON achieves positive cash flow from operations (after
      giving effect to the payment(s) of such bonus), (ii) the date of Mr.
   Courter's employment termination, or (iii) the date NEON entirely
ceases operations.                                            

(5)      Pursuant to Mr. Courter's employment agreement dated February 13, 2003,
       NEON agreed to grant to Mr. Courter options to acquire 450,000 shares
    of NEON common stock, which options were granted to Mr. Courter on
March 7, 2003.                                                

164 

S-4/A
174th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 174th
NEON OPTION/SAR GRANTS IN LAST FISCAL YEAR                    

         The following table provides information on grants of NEON common stock
options in fiscal 2003 to the NEON officer listed in the Summary Compensation   
Table.                                                                          

                                                        [Enlarge/Download Table]
                         NUMBER OF                                                   POTENTIAL REALIZABLE VALUE AT
                         SECURITIES   PERCENT OF TOTAL                               ASSUMED ANNUAL RATE OF STOCK 
                         UNDERLYING     OPTIONS/SARs                                 PRICE APPRECIATION FOR OPTION
                          OPTIONS/      GRANTED TO     EXERCISE OR                               TERM             
                            SARs        EMPLOYEES IN    BASE PRICE    EXPIRATION     -----------------------------
NAME                     GRANTED(#)     FISCAL YEAR     ($/SHARE)        DATE             5% ($)         10%($)   
---------------------- -------------- ---------------- ----------- ----------------- --------------- -------------
                                                                                                                  
Stephen E. Courter       450,000(1)         24%           $5.30         3/7/13         1,498,500(*)   3,802,500(*)

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

(*)      Based on the fair market value of $5.30 per share of NEON common stock 
on the date of grant of March 7, 2003.                        

(1)      All of Mr. Courter's stock options will accelerate, become fully vested
   and exercisable immediately prior to a change of control of NEON,
including a transaction such as the merger.                   

  GLOBIX AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL AND FISCAL
YEAR-END OPTION VALUES                                        

        The following table presents information concerning options granted to
the officers included in the Summary Compensation Table during the fiscal year  
ended September 30, 2004.                                                       

                                                        [Enlarge/Download Table]
                                   VALUE                                                                                    
                        NUMBER OF  REALIZED                       NUMBER OF SECURITIES          VALUE OF UNEXERCISED        
                        SHARES     (MARKET PRICE                  UNDERLYING UNEXERCISED        IN-THE-MONEY OPTIONS/SARs AT
                        ACQUIRED   AT EXERCISE                    OPTIONS AT FISCAL YEAR END    FISCAL YEAR END(1)          
                        ON         LESS EXERCISE  EXERCISE PRICE  ----------------------------  ----------------------------
NAME                    EXERCISE   PRICE)         ($/SHARE)       EXERCISABLE    UNEXERCISABLE  EXERCISABLE    UNEXERCISABLE
----------------------  ---------  -------------  --------------  ------------   -------------  ------------   -------------
                                                                                                                            
Peter K. Stevenson         ---          ---            3.04        548,667              ---       $115,220       $    ---   
Robert M. Dennerlein       ---          ---            3.04         50,000           50,000         10,500         10,500   
H. Jameson Holcombe        ---          ---            3.04         53,291           53,291         11,191         11,191   
John D. McCarthy           ---          ---            3.04         73,158           73,158         15,363         15,363   
Philip J. Cheek            ---          ---            3.04         15,000           15,000          3,150          3,150   

(1)      Based on a sales price of $3.25 per share of our common stock on the   
OTC Bulletin Board on September 30, 2004.                     

165 

S-4/A
175th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 175th
NEON AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES 

        The following table presents information concerning options granted to
Mr. Courter during the fiscal year ended December 31, 2003.                     

                                                        [Enlarge/Download Table]
                                   VALUE                                                                     
                        NUMBER OF  REALIZED       NUMBER OF SECURITIES           VALUE OF UNEXERCISED        
                        SHARES     (MARKET PRICE  UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS/SARs AT
                        ACQUIRED   AT EXERCISE    OPTIONS AT FISCAL YEAR END(1)  FISCAL YEAR END(2)          
                        ON         LESS EXERCISE  -----------------------------  ----------------------------
NAME                    EXERCISE   PRICE)         EXERCISABLE    UNEXERCISABLE   EXERCISABLE    UNEXERCISABLE
----------------------  ---------  -------------  ------------   --------------  ------------   -------------
                                                                                                             
Stephen E. Courter         ---          ---         150,000         300,000        $114,000       $228,000   

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

(1)      All of Mr. Courter's stock options will accelerate, become fully vested
   and exercisable immediately prior to a change of control of NEON,
including a transaction such as the merger.                   

(2)      Based on the fair market value of $6.06 per share of NEON common stock 
         as of January 30, 2004, the closest date on which the fair market value
     of the NEON common stock was determined. All of Mr. Courter's stock
options will accelerate, become fully vested and exercisable  
immediately prior to a change of control of NEON, including a 
transaction such as the merger.                               

EMPLOYMENT AGREEMENTS                                                           

  PETER K. STEVENSON. Effective April 15, 2002, we entered into an
employment agreement with Peter K. Stevenson for his services as our President  
and Chief Executive Officer. The original term of the agreement extended until  
July 31, 2003. As of August 1, 2003, the agreement was amended to extend the    
term until July 31, 2004, subject to extension for successive six month periods 
with the mutual consent of Globix and Mr. Stevenson, and to make certain other  
changes in Mr. Stevenson's compensation and severance arrangements. Under the   
amended agreement, Mr. Stevenson's base salary is $308,000 per year. Mr.        
Stevenson is also eligible for an annual bonus in an amount up to 50 percent of 
his base salary, payable at the discretion of the Compensation Committee, if he 
achieves the targets (objective and subjective) established by the Compensation 
Committee. In addition, under the terms of Mr. Stevenson's employment agreement 
we agreed to grant to Mr. Stevenson options to acquire 548,667 shares of our    
common stock, or 3 percent of the outstanding shares of our common stock on a   
fully diluted basis. One hundred percent of these options have vested.          

         Mr. Stevenson's employment agreement provides that in the event that we
terminate his employment with Globix for any reason other than cause, or if Mr. 
Stevenson terminates his employment with our Company for good reason, then Mr.  
Stevenson is entitled to twelve months' salary.                                 

     H. JAMESON HOLCOMBE. On July 15, 2002, we entered into an agreement
with H. Jameson Holcombe outlining the terms of Mr. Holcombe's employment as our
Vice President, Operations. Mr. Holcombe's base salary is $165,000 per year,    
which will be increased no less frequently than once per year in accordance with
our policies. Mr. Holcombe is also eligible to receive a bonus of 30 percent of 
his base salary, which is contingent upon our Company meeting certain           
performance targets mutually agreed upon by Globix and Mr. Holcombe. Further, we
are required to reimburse Mr. Holcombe for his travel each week to New York and 
his reasonable living expenses while in New York. Our agreement with Mr.        
Holcombe also provides that he is eligible to receive stock options under our   
2003 Stock Option Plan. We are entitled to terminate Mr. Holcombe's employment  
at any time.                                                                    

166 

S-4/A
176th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 176th
       STEPHEN E. COURTER. Effective February 13, 2003, NEON entered into an
employment agreement with Stephen E. Courter for his services as NEON's         
President, Chief Executive Officer and Chairman of the board of directors. The  
original term of the employment agreement was extended until December 31, 2003  
and provided for the agreement to be automatically extended for successive      
twelve-month periods, subject to early termination. Under the agreement, Mr.    
Courter's initial base salary is $275,000 per year and will be reviewed and     
determined annually by NEON's compensation committee of the board of directors. 
Mr. Courter is also eligible for an annual bonus initially at 50 percent of his 
base salary, payable in accordance with NEON's compensation program established 
and administered by NEON's board of directors. In addition, under the terms of  
Mr. Courter's employment agreement NEON agreed to grant to Mr. Courter options  
to acquire 450,000 shares of NEON common stock.                                 

         Mr. Courter's employment agreement provides that in the event that NEON
terminates his employment with NEON for any reason (other than for cause, as    
defined in the employment agreement), then Mr. Courter is entitled to twelve    
months' salary and incentive compensation at the then current compensation rate 
and twelve months' benefit continuation at the then current level. Additionally,
all unvested stock options to purchase NEON common stock will accelerate, become
fully vested and exercisable. Upon a change of control of NEON, including a     
transaction such as the merger, all unvested stock options will become fully    
vested and exercisable immediately prior to the change of control event.        

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

         Mr. Singer, the Chairman of Globix's board of directors and a member of
the compensation committee of the board of directors, was paid a success fee by 
Globix in the amount of $169,000 in connection with sale by Globix of the       
property located at 415 Greenwich Street, New York, New York in January 2004.   

167 

S-4/A
177th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 177th
 GLOBIX CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       In September 2002, Globix paid Peter L. Herzig a lump sum of $250,000
in connection with his resignation as Chief Executive Officer of Globix.        

      In January 2004, Globix paid Steven Singer, the Chairman of Globix's
board of directors and a member of the compensation committee of the board of   
directors, a success fee in the amount of $169,000 in connection with sale by   
Globix of the property located at 415 Greenwich Street, New York, New York. Mr. 
Stevenson, Globix's president and chief executive officer, was also paid a      
success fee in the amount of $169,000 by Globix in connection with the sale of  
the property. Globix paid similar success fees in lesser amounts to certain     
other executive officers in connection with the sale of the property.           

    CTA provides consulting and business development services to NEON.
Additionally, CTA agreed to present merger and acquisition advice and           
opportunities to NEON for a success fee which CTA has agreed to waive in        
relation to the merger. NEON has issued to certain current and former affiliates
of CTA and certain of such affiliates' designees warrants exercisable for       
300,000 shares of NEON common stock at $6.06 per share through October 23, 2008 
and warrants exercisable for 350,000 shares of NEON common stock at $5.30 per   
share through December 3, 2007, as payment for its consulting and business      
development services. CTA purchased the warrants exercisable for 350,000 shares 
of NEON common stock for $25,000. One of CTA's employees, Wayne Barr, Jr.,      
serves on NEON's board of directors. Mr. Barr will also serve on Globix's board 
of directors after consummation of the merger. A current director of NEON, Mr.  
Aquino, was affiliated with CTA at the time NEON's board of directors approved  
the merger.                                                                     

      CTA provides similar consulting and business development services to
Globix. Under a letter agreement between Globix and CTA, CTA is entitled to a   
success fee if Globix consummates a sale, merger or a similar transaction with  
CTA's assistance. CTA has agreed to waive this fee in relation to the merger.   
Certain affiliates of CTA, including Mr. Barr, hold warrants exercisable for    
500,000 shares of Globix common stock at $3.00 per share through March 13, 2013,
which were purchased for $25,000.                                               

168 

S-4/A
178th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 178th
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OF GLOBIX FOLLOWING THE MERGER

The following table sets forth certain information, assuming the consummation of
the merger on December 31, regarding the beneficial ownership of Globix common  
stock and Globix convertible preferred stock by: (i) each person who is known by
Globix to own beneficially more than 5% of the outstanding shares of Globix     
common stock or Globix convertible preferred stock following the merger; (ii)   
each director of Globix following the merger; (iii) each officer of Globix named
in the Summary Compensation Table; and (iv) all of the directors and executive  
officers of Globix as a group following the merger.                             

Except as noted below, the address of each person listed on the table is c/o    
Globix Corporation, 139 Centre Street, New York, New York 10013.                

                                                        [Enlarge/Download Table]
----------------------------------------- ---------------------------------- ------------------------------- ---------------
           NAME AND ADDRESS                           COMMON STOCK                    PREFERRED STOCK                       
         OF BENEFICIAL OWNER                       BENEFICIALLY OWNED                BENEFICIALLY OWNED                     
----------------------------------------- ---------------------------------- -------------------------------                
                                                                                                              PERCENTAGE OF 
                                                                                                                 VOTING     
                                                                                                                SECURITIES  
                                                                                                              BENEFICIALLY  
                                                NUMBER        PERCENTAGE(1)      NUMBER       PERCENTAGE(2)      OWNED(3)   
----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
                                                                                                                            
MacKay Shields LLC(4)(5)                     13,456,930          27.70%        1,420,721        48.85%           28.90%     
c/o MacKay Shields Financial Corp.                                                                                          
9 West 57th Street                                                                                                          
New York, NY 10019                                                                                                          

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Citadel Investment Group LLC(6)               2,549,600           5.25             -               -              4.95      
131 Dearborn St., 36th Floor                                                                                                
Chicago, IL 60604                                                                                                           

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
LC Capital Master Fund Ltd.(7) (8)            4,910,679          10.11          452,639          15.56           10.41      
Lampe Conway & Co. LLC                                                                                                      
730 Fifth Avenue, Ste. 1002                                                                                                 
New York, NY 10019                                                                                                          

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Loeb Partners Corp. (9)                       3,547,995           7.30          117,317          4.03             7.12      
61 Broadway                                                                                                                 
New York, NY 10006                                                                                                          

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Mode 1 Communications, Inc.(10)               2,723,674           5.61             -               -              5.29      
c/o Northeast Utilities Service Co.                                                                                         
107 Selden Street                                                                                                           
Berlin, CT 06037                                                                                                            

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
JGD Management Corp. (11)                     2,980,577           6.14             -               -              5.79      
350 Park Avenue                                                                                                             
New York, NY 10022                                                                                                          
----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------

                                                          169                                                               

S-4/A
179th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 179th
----------------------------------------- ---------------------------------- ------------------------------- ---------------
           NAME AND ADDRESS                           COMMON STOCK                    PREFERRED STOCK                       
         OF BENEFICIAL OWNER                       BENEFICIALLY OWNED                BENEFICIALLY OWNED                     
----------------------------------------- ---------------------------------- -------------------------------                
                                                                                                              PERCENTAGE OF 
                                                                                                                 VOTING     
                                                                                                                SECURITIES  
                                                                                                              BENEFICIALLY  
                                                NUMBER        PERCENTAGE(1)      NUMBER       PERCENTAGE(2)      OWNED(3)   
----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Peter K. Stevenson(12)                         548,667            1.12             -               -              1.05      

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Peter L. Herzig                                   -                -               -               -               *        

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Steven Lampe(7) (8)                           4,910,679          10.11          452,639          15.56           10.41      

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Steven G. Singer(13)                          4,137,322           8.52          799,935          27.50            9.59      

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Raymond L. Steele                                 -                *               -               -               *        

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Wayne Barr, Jr. (14)                           341,657             *               -               -               *        

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Jose A. Cecin, Jr.(15)                          3,068              *               -               -               *        

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Stephen E. Courter(16)                         573,660            1.17             -               -              1.10      

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
John Forsgren(17)                             2,725,735           5.61             -               -              5.29      

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Robert M. Dennerlein(18)                       55,833              *               -               -               *        

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
H. Jameson Holcombe(19)                        65,221              *               -               -               *        

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
John D. McCarthy(20)                           97,546              *               -               -               *        

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
Philip J. Cheek(21)                            15,000              *               -               -               *        

----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------
All directors and officers of Globix         13,482,723          26.80         1,252,574         43.06           27.69      
as a group (14 persons)(22)                                                                                                 
----------------------------------------- ------------------ --------------- -------------- ---------------- ---------------

(*)      Less than 1%                                                           

(1)      Except as noted below, 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

170 

S-4/A
180th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 180th
        days. For purposes of calculating the beneficial ownership percentages
      set forth above, assuming consummation of the merger on December 31,
        2004 and conversion of all Class A Warrants of NEON into Globix common
    stock in the merger and the issuance of 4,545,455 shares of Globix
     common stock in the debt-for-equity exchange in connection with the
     merger, the total number of shares of our common stock deemed to be
         outstanding as of December 1, 2004 is 48,578,364. As used in this joint
    proxy statement/prospectus, "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.

        The number of shares of common stock held by a named individual in the
        chart and the number of shares of common stock deemed outstanding does
     not include the shares of Globix convertible preferred stock, which
     shares are convertible at any time at the option of the holder into
       shares of Globix common stock, initially on a one-for-one basis, with
      one vote for every share of common stock into which such convertible
   preferred stock is convertible. The percentage of common stock is
         intended to show voting power with respect to common stock only, to the
         extent that matters before the stockholders require a class vote of the
       common stock. Beneficial ownership percentages applicable to both the
     Globix common stock and Globix preferred stock are listed under the
  column in the chart captioned "Percentage of Voting Securities."

(2)      For purposes of calculating the beneficial ownership percentages set   
      forth above, assumes consummation of the merger on December 31, 2004
     and is based on the issuance of an aggregate of 2,908,614 shares of
   Globix convertible preferred stock to holders of NEON convertible
       preferred stock in partial exchange for all of the outstanding shares
of NEON convertible preferred stock.                          

(3)      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, assuming consummation of the
       merger on December 31, 2004 and conversion of all Class A Warrants of
 NEON into Globix common stock in the merger and the issuance of
         4,545,455 shares of Globix common stock in the debt-for-equity exchange
         in connection with the merger, and assuming an issuance of an aggregate
         of 2,908,614 shares of Globix convertible preferred stock to holders of
     NEON convertible preferred stock in partial exchange for all of the
       outstanding shares of NEON convertible preferred stock in the merger,
the total number of shares of our common stock and convertible
    preferred stock deemed to be outstanding as of December 1, 2004 is
51,459,538.                                                   

(4)      On June 25, 2002, we entered into a Stipulation and Order with the lead
        plaintiffs in the class action lawsuit described in "Information About
      Globix--Legal Proceedings" beginning on page 102 of this joint proxy
       statement/prospectus. The Stipulation and Order provides that 229,452
      shares of our common stock and $1.968 million in aggregate principal
  amount of our 11% senior notes will be held in reserve in escrow
        pending the outcome of the class action lawsuit. In the event that any
         judgment or settlement entered into in connection with the class action
 lawsuit requires us to pay an amount in excess of our liability
       insurance, we will be required to issue to the class action litigants
       and their attorneys all (in the event that this excess is $10 million
         or greater) or a portion of (in the event that this excess is less than
         $10 million) the shares of our common stock and the notes being held in
      escrow. On August 12, 2004, the United States District Court for the
    Southern District of New York approved the settlement of the class
 action lawsuit in an amount which would be covered by liability
       insurance and accordingly, although the settlement remains subject to
        appeal, Globix believes that the shares of Globix common stock and the
       notes being held in escrow will be distributed in accordance with the

171 

S-4/A
181st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 181st
      plan or reorganization rather than to the class action litigants and
         their attorneys. Accordingly, MacKay Shields LLC (and each other former
holder of our 12.5% notes on the effective date of the plan of
        reorganization) will be entitled to receive a portion of these 229,452
       shares of common stock based on its percentage ownership of the 12.5%
notes on the effective date of the plan of reorganization.    

(5)      This information is as of November 19, 2004 and based on information   
        provided to us by MacKay Shields LLC, the pecuniary interests in these
       shares are held by a number of clients for whom MacKay Shields LLC is
        the discretionary investment advisor or subadvisor. MacKay Shields LLC
       has voting and investment control over these shares and, accordingly,
  is deemed to beneficially own these shares. These shares include
1,381,819 shares of Globix common stock to be issued in the   
debt-for-equity exchange in connection with the merger.       

(6)      According to information provided to NEON, Citadel Limited Partnership 
   is the portfolio manager for each of Citadel Equity Fund Ltd. and
     Citadel Credit Trading Ltd. Citadel Equity Fund Ltd. owns 1,784,720
  shares of NEON common stock and Citadel Credit Trading Ltd. owns
       764,880 shares of NEON common stock. Citadel Investment Group, L.L.C.
acts as the general partner of Citadel Limited Partnership.   

(7)      Mr. Lampe is affiliated with LC Capital Master Fund Ltd., which owns   
      these shares. Mr. Lampe has voting and investment control over these
       shares and, consequently, is deemed to beneficially own these shares.
     The 4,901,177 shares of Globix common stock attributed to Mr. Lampe
       also include 454,595 shares of Globix common stock to be issued to LC
         Capital in the debt-for-equity exchange in connection with the merger).

(8)      LC Capital Master Fund Ltd. directly beneficially owns 4,901,177 shares
         of Globix common stock (including 454,595 shares of Globix common stock
     to be issued in the debt-for-equity exchange in connection with the
         merger). LC Capital indirectly beneficially owns 9,502 shares of Globix
         common stock pursuant to currently exercisable stock options granted to
Mr. Lampe, who is an affiliate of LC Capital.                 

(9)      Loeb Partners Corp. directly beneficially owns 3,538,493 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 an
affiliate of Loeb Partners.                                   

(10)     Mode 1 Communications, Inc. directly beneficially owns 2,723,674 shares
       of Globix common stock, including 9,502 shares of Globix common stock
     pursuant to currently exercisable stock options. These options were
        originally granted to Mr. Forsgren, who is an affiliate of Mode 1, and
        subsequently transferred to Northeast Utilities, the parent of Mode 1.

(11)     According to information provided to us by JGD Management Corp. these  
      shares are held by certain managed accounts and investment funds for
    whom JGD Management Corp. is the discretionary investment advisor.
         These shares include 800,000 shares of Globix common stock to be issued
in the debt-for-equity exchange in connection with the merger.

(12)     Pursuant to the terms of Mr. Stevenson's employment agreement described
in "Executive Compensation - Employment Agreements - Peter K. 
        Stevenson", on March 14, 2003, Globix granted to Mr. Stevenson options
         to acquire 548,667 shares of Globix common stock pursuant to the Globix
  2003 Stock Option Plan, all of which stock options are currently
vested.                                                       

172 

S-4/A
182nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 182nd
(13)     Mr. Singer is co-trustee of two trusts for the benefit of his brother's
    children and as trustee has voting and investment control over the
      517,979 shares of Globix common stock held in the trusts. Mr. Singer
         and his sister-in-law, Karen Singer, filed a Schedule 13G to report the
       beneficial ownership of these shares and an additional 620,028 shares
        of Globix common stock held in a trust for the benefit of Mr. Singer's
        brother's children, for which Karen Singer serves as sole trustee. Mr.
      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. Mr. Singer indirectly beneficially owns an additional
       2,319,868 shares of Globix common stock through the Singer Children's
         Management Trust, and 279,446 shares of Globix common stock through the
       Second Gary & Karen Singer Children's Trust. Mr. Singer disclaims any
    interest in the Globix common stock held in the Singer Trusts. The
       4,137,322 shares of Globix common stock attributed to Mr. Singer also
   include 400,000 shares of Globix common stock to be issued to the
      Singer Children's Management Trust, one of the Singer Trusts, in the
debt-for-equity exchange in connection with the merger.       

(14)     Mr. Barr directly beneficially owns 9,502 shares of Globix common stock
       pursuant to currently exercisable stock options and 125,000 shares of
  Globix common stock pursuant to a currently exercisable warrant.
         Additionally, Mr. Barr indirectly beneficially owns a warrant currently
         exercisable for 207,155 shares of Globix common stock which is directly
beneficially owned by Rita Barr, Mr. Barr's spouse.           

(15)     Mr. Cecin beneficially owns these shares pursuant to currently         
exercisable stock options.                                    

(16)     Mr. Courter beneficially owns these shares pursuant to stock options   
  that are fully vested and exercisable as a result of the merger.

(17)     Mr. Forsgren is affiliated with Mode 1 Communications, which           
     beneficially owns 2,723,674 shares of Globix common stock including
9,502 shares of Globix common stock pursuant to stock options 
    originally granted to Mr. Forsgren and subsequently transferred to
      Northeast Utilities, the parent of Mode 1 and which are fully vested
  and exercisable as a result of the merger. Mr. Forsgren directly
     beneficially owns 2,061 shares of Globix common stock. Mr. Forsgren
        disclaims beneficial ownership of all such shares other than the 2,061
shares held directly.                                         

(18)     Includes options to purchase 55,833 shares that are exercisable within 
     60 days of August 1, 2004, including 16,667 options which vested on
    September 30, 2004 assuming determination by Globix's compensation
      committee of its board of directors that certain performance targets
have been achieved.                                           

(19)     Includes options to purchase 65,221 shares that are exercisable within 
     60 days of August 1, 2004, including 17,764 options which vested on
    September 30, 2004 assuming determination by Globix's compensation
      committee of its board of directors that certain performance targets
have been achieved.                                           

(20)     Includes options to purchase 97,544 shares that are exercisable within 
     60 days of August 1, 2004, including 24,386 options which vested on
    September 30, 2004 assuming determination by Globix's compensation
      committee of its board of directors that certain performance targets
have been achieved.                                           

(21)     Includes options to purchase 15,000 shares that are exercisable within 
    60 days of August 1, 2004, including 5,000 options which vested on
    September 30, 2004 assuming determination by Globix's compensation
      committee of its board of directors that certain performance targets
have been achieved.                                           

(22)     Includes options and warrants to purchase an aggregate of 1,681,673    
 shares that are exercisable within 60 days of December 1, 2004,
      including 67,984 options which vested on September 30, 2004 assuming
  determination by Globix's compensation committee of its board of
directors that certain performance targets were achieved.     

173 

S-4/A
183rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 183rd
UNAUDITED PRO FORMA CONDENSED COMBINED
 CONSOLIDATED FINANCIAL STATEMENTS
 OF GLOBIX CORPORATION AND NEON COMMUNICATIONS, INC.

   The following unaudited pro forma condensed combined consolidated
financial statements give effect to the proposed merger of Globix Corporation   
("Globix") and NEON Communications, Inc. ("NEON"). The merger will be accounted 
for under the purchase method of accounting in accordance with Statement of     
Financial Accounting Standard (SFAS) No. 141, "Business Combinations." Under the
purchase method of accounting, the total estimated purchase price will be       
allocated to NEON's assets acquired and liabilities assumed in connection with  
the merger, based on their estimated fair values as of the completion of the    
merger.                                                                         

       The unaudited pro forma condensed combined consolidated balance sheet
as of September 30, 2004 gives effect to the proposed merger as if it occurred  
on September 30, 2004. Globix' and NEON's consolidated balance sheet information
was derived from their audited and unaudited September 30, 2004 consolidated    
balance sheets, respectively. The unaudited pro forma condensed combined        
consolidated statement of operations is presented as if the proposed merger     
occurred on October 1, 2003. The unaudited pro forma condensed combined         
consolidated statement of operations combine the audited results of operations  
of Globix for its fiscal year ended September 30, 2004 with the unaudited       
results of operations of NEON for its twelve month period ended September 30,   
2004, which combines NEON's unaudited consolidated statement of operations for  
the nine months ended September 30, 2004 with its unaudited consolidated        
statement of operations for the three months ended December 31, 2003.           

   The unaudited pro forma condensed combined consolidated financial
statements have been prepared by Globix management for illustrative purposes    
only and are not necessarily indicative of the condensed consolidated financial 
position or results of operations in future periods or the results that actually
would have been realized had Globix and NEON been a combined company during the 
specified periods. The pro forma adjustments are based on the information       
available at the time of the preparation of this document. The unaudited pro    
forma condensed combined consolidated financial statements, including the notes 
thereto, are qualified in their entirety by reference to, and should be read in 
conjunction with, the audited consolidated financial statements of Globix as of 
and for the year ended September 30, 2004 included herein starting on page F-1, 
the audited consolidated financial statements of NEON as of and for the year    
ended December 31, 2003 included herein starting on page F-42 and the unaudited 
consolidated financial statements of NEON for the nine months ended September   
30, 2004 included herein starting on page F-45.                                 

174 

S-4/A
184th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 184th
                                                        [Enlarge/Download Table]
                                         UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED                                        
                                                 BALANCE SHEET OF GLOBIX CORPORATION                                                
                                                  (IN THOUSANDS EXCEPT SHARE DATA)                                                  

                                             Historical                         Pro Forma Adjustments                               
                                    -----------------------------   ---------------------------------------------                   
                                                                                                                        Pro Forma   
                                       Globix           NEON                                                            Condensed   
                                    September 30,   September 30,                                                       Combined    
                                        2004            2004             (A)             (B)             (C)           Consolidated 
                                    -------------   -------------   -------------   -------------   -------------      -------------
                                                                                                                                    
ASSETS                                                                                                                              
Current assets:                                                                                                                     
Cash and cash equivalent            $     12,075    $     11,320    $         --    $         --    $     (5,236) (1)  $     18,159 
Short-term investments                     7,625              --              --              --              --              7,625 
Marketable securities                        458              --              --              --              --                458 
Accounts receivable, net                   6,157           3,668              --              --              --              9,825 
Prepaid expenses and other                                                                                                          
  current assets                           5,101             936              --              --              --              6,037 
Restricted cash and investments            2,413           8,256              --              --              --             10,669 
                                    -------------   -------------   -------------   -------------   -------------      -------------
         Total current assets             33,829          24,180              --              --          (5,236)            52,773 
Investments                                1,988              --              --              --              --              1,988 
Investments, restricted                    2,324              --              --              --              --              2,324 
Property, plant and equipment,                                                                                                      
  net                                     90,822         137,776              --              --         (21,539) (5)       207,059 
Intangible assets, net                     7,656              --              --              --           3,790  (6)        11,446 
Other assets                               1,923           3,686              --              --          (1,500) (7)         4,109 
                                    -------------   -------------   -------------   -------------   -------------      -------------
         Total assets               $    138,542    $    165,642    $         --    $         --    $    (24,485)      $    276,699 
                                    =============   =============   =============   =============   =============      =============

LIABILITIES, CUMULATIVE                                                                                                             
  CONVERTIBLE PREFERRED STOCK                                                                                                       
  AND STOCKHOLDERS' EQUITY                                                                                                          
Current liabilities:                                                                                                                
Current portion of capital                                                                                                          
  lease obligation and mortgage                                                                                                     
  payable                           $        555    $         --    $         --    $         --    $         --       $        555 
Accounts payable                           6,599           6,060              --              --              --             12,659 
Accrued liabilities and other             11,209          12,436              --              --           3,000  (7)        26,645 
                                    -------------   -------------   -------------   -------------   -------------      -------------
     Total current liabilities            18,363          18,496              --              --           3,000             39,859 
Capital lease obligation, net                                                                                                       
  of current portion                         121              --              --              --              --                121 

Mortgage payable                          19,606              --              --              --              --             19,606 
11% Senior Notes                          72,202              --         (11,952)             --              --             60,250 
Accrued interest - 11% Senior                                                                                                       
  Notes                                    3,349              --            (548)             --              --              2,801 
Other long term liabilities                8,026          15,877              --              --              --             23,903 
                                    -------------   -------------   -------------   -------------   -------------      -------------
     Total liabilities                   121,667          34,373         (12,500)             --           3,000            146,540 
                                    -------------   -------------   -------------   -------------   -------------      -------------

CUMULATIVE CONVERTIBLE PREFERRED                                                                                                    
  STOCK                                       --          15,262              --         (15,262)         12,295  (2)        12,295 

STOCKHOLDERS' EQUITY                                                                                                                
Common stock                                 165              16              45             (16)            276  (3)           486 
Additional paid-in capital               100,012         121,292          13,728        (124,158)         91,213  (3)(4)    204,953 
Deferred compensation                         (8)             --              --              --              --                 (8)
Accumulated other comprehensive                                                                                                     
  income                                   4,498              --              --              --              --              4,498 
Accumulated deficit                      (87,792)         (5,301)         (1,273)          8,167              --            (89,065)
                                    -------------   -------------   -------------   -------------   -------------      -------------
     Total stockholders' equity           16,875         116,007          12,500        (116,007)         91,489            120,864 
                                    -------------   -------------   -------------   -------------   -------------      -------------
     Total liabilities, cumulative                                                                                                  
       convertible preferred stock                                                                                                  
       and stockholders' equity     $    138,542    $    165,642    $         --    $   (131,269)   $    106,784       $    276,699 
                                    =============   =============   =============   =============   =============      =============

                                                               175                                                                  

S-4/A
185th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 185th
                                                        [Enlarge/Download Table]
                                UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED                              
                                   STATEMENT OF OPERATIONS OF GLOBIX CORPORATION                                 
                                        (IN THOUSANDS EXCEPT PER SHARE DATA)                                     

                                                       Historical                                                
                                             -------------------------------                                     
                                                                   NEON                                          
                                                Globix         Twelve Months                         Pro Forma   
                                              Year Ended           Ended                             Condensed   
                                             September 30,     September 30,       Pro Forma         Combined    
                                                 2004              2004           Adjustments       Consolidated 
                                             -------------     -------------     -------------      -------------
                                                                                                                 
Revenue, net                                 $     61,190      $     46,551      $         --       $    107,741 
Operating costs and expenses:                                                                                    
     Cost of revenue                               19,747            26,030                --             45,777 
     Selling, general and                                                                                        
     administrative                                43,518            16,524                --             60,042 
     Loss on impairment of assets                  17,972                --                --             17,972 
     Depreciation and amortization                 13,828            10,265              (966) (D)        23,127 
                                             -------------     -------------     -------------      -------------
Total operating costs and expenses:                95,065            52,819              (966)           146,918 
Loss from operations                              (33,875)           (6,268)              966            (39,177)
     Other income (expense), net                   (9,258)              395             1,375  (E)        (7,488)
     Gain on debt discharge                         1,747                --                --              1,747 
     Loss on Conversion of debt to equity              --                --            (1,273) (A)        (1,273)
                                             -------------     -------------     -------------      -------------
Loss before income tax benefit (expense)                                                                         
  and extraordinary item                          (41,386)           (5,873)            1,068            (46,191)
Income tax benefit (expense)                           --             1,288                --              1,288 
                                             -------------     -------------     -------------      -------------
Net loss before extraordinary item                (41,386)           (4,585)            1,068            (44,903)
Gain on acquisition, net of taxes                      --             1,930                --              1,930 
                                             -------------     -------------     -------------      -------------
Net loss                                          (41,386)           (2,655)            1,068            (42,973)
Dividends on 6% cumulative convertible                                                                           
  preferred stock                                      --                --               317  (F)           317 
                                             -------------     -------------     -------------      -------------
Net loss attributable to common                                                                                  
  stockholders                               $    (41,386)     $     (2,655)     $        751       $    (43,290)
                                             =============     =============     =============      =============
Basic and diluted loss per share:            $      (2.51)                                          $      (0.89)
                                             =============                                          =============
Weighted average common shares                                                                                   
  outstanding - basic and diluted              16,460,000                          32,118,364  (G)    48,578,364 
                                             =============                       =============      =============

                                                               176                                               

S-4/A
186th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 186th
(A)  To reflect the conversion of $12,500 of Globix's 11% senior notes and      
accrued interest into 4,545,455 shares of Globix common stock and the 
  resulting loss on the debt extinguishment of approximately $1.3 million.
(B)  To eliminate NEON's Stockholders' Equity                                   
(C)  To allocate the preliminary purchase price, as follows:                    

                                                        [Enlarge/Download Table]
TOTAL PURCHASE PRICE:                                                                                           
                                                                                                                
Cash                                             $       5,236                                                  
Fair value of Globix' 6% cumulative convertible         12,295                                                  
preferred stock                                                                                                 
Fair value of Globix' common stock                      83,589                                                  
Fair value of options and warrants assumed               7,900                                                  
Estimated acquisition related costs                      4,500                                                  
                                                 --------------                                                 
  Total purchase price                           $     113,520                                                  
                                                 ==============                                                 

ALLOCATION OF PURCHASE PRICE:                                                                                   

Acquired tangible assets                         $     141,103   Net of allocated estimated negative goodwill in
                                                                   the amount of approximately $24,877          
Acquired intangible assets                               3,790   Net of allocated estimated negative goodwill in
                                                                   the amount of approximately $811             
Liabilities assumed                                     34,373                                                  
                                                 --------------                                                 
  Total preliminary purchase price allocation    $     110,520                                                  
                                                 ==============                                                 

                                   177

S-4/A
187th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 187th
1.   The estimated cash consideration represents approximately 33% of NEON's 12%
 cumulative convertible preferred stock including accumulated dividends,
which will be redeemed by Globix at the closing of the merger.        
2.   The remaining 67% of NEON's 12% cumulative convertible preferred stock     
including accumulated dividends will be redeemed by Globix through the
 issuance of approximately 2,908,614 6% cumulative convertible preferred
stock with a fair value estimated at $12,295.                         
3.   The fair value of Globix' common stock was estimated using a price per     
   share of $3.03, representing Globix' average share price during the three
     days period before and after the announcement of the merger, and a total of
approximately 27,572,909 common stock $.01 par value to be issued by  
Globix.                                                               
4.   Globix is expected to assume approximately 2.8 million options and 830     
     thousand warrants with an average exercise price of approximately $4.20 and
$4.43, respectively. The fair value of options and warrants assumed by
    Globix was estimated at $7.9 million using the Black-Scholes pricing model
     with the following assumptions: average expected life of 3 years, risk free
interest of 2.7%, expected dividend yield of 0% and volatility of     
approximately 125%.                                                   
5.   To increase the carrying amount of NEON's property, plant and equipment to 
   their estimated fair value by approximately $3.3 million, net of negative
 goodwill allocation in the amount of approximately $24.9 million, which
have an estimated useful life of 15 years.                            
6.   Intangible assets acquired consist of customer contracts estimated at      
    approximately $2.8 million, net and trade names estimated at approximately
    $0.9 million, net which will be amortized by the straight line method over
their estimated remaining useful lives of 10 years and 5 years,       
respectively.                                                         
7.   Represents Globix' estimated direct costs incurred as part of the merger.  
(D)  To reflect the adjustment to fair value of acquired tangible and intangible
assets as if the proposed merger has occurred on October 1, 2003.     
(E)  To eliminate interest expenses on the converted 11% Senior Notes as if the 
conversion has occurred on October 1, 2003.                           
(F)  To reflect the dividends on the Globix' 6% cumulative convertible preferred
stock as if issued at October 1, 2003.                                
(G)  Pro forma basic and diluted net loss per share for the twelve months ended 
September 30, 2004 is computed by dividing the pro forma net loss     
    attributable to common stockholders for the period by the weighted average
 common shares outstanding for the period. The adjustments to historical
   weighted average shares outstanding resulted from the inclusion of shares
     to be issued in connection with the proposed merger and shares to be issued
   as part of the conversion of the $12,500 of 11% Senior Notes, as if those
transactions occurred at October 1, 2003.                             

178 

S-4/A
188th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 188th
COMPARISON OF STOCKHOLDERS' RIGHTS

GENERAL                                                                         

       Both NEON and Globix are corporations organized under the laws of the
State of Delaware and are therefore subject to the Delaware general corporation 
law. However, there are some differences in the certificates of incorporation   
and bylaws of NEON and Globix and other governing documents that affect the     
rights of their respective stockholders.                                        

CAPITALIZATION                                                                  

    GLOBIX. Globix is authorized to issue 500,000,000 shares of common
stock and 5,000,000 shares of preferred stock. On December 1, 2004, 16,460,000  
shares of Globix common stock were outstanding (including 229,452 shares held in
reserve pending the outcome of a class action law suit and 164,600 shares held  
in reserve pending resolution of a shareholder derivative suit, each as         
described in detail in the section entitled "Information About Globix - Legal   
Proceedings" beginning on page 102 of this joint proxy statement/prospectus and 
no shares of Globix preferred stock were outstanding. Globix's board has the    
authority, without stockholder approval, to issue shares of preferred stock from
time to time in one or more series and to fix the rights and preferences,       
including dividends, redemption, liquidation, voting rights, and other rights as
the board may determine, of each such series of preferred stock. In connection  
with the merger, Globix will designate 4,500,000 shares of its preferred stock  
as a new 6% Series A Cumulative Convertible Preferred Stock, which will be      
issued to holders of NEON's existing 12% Series A Cumulative Convertible        
Preferred Stock in partial exchange for their shares as described in this joint 
proxy statement/prospectus.                                                     

  NEON. Under NEON's current certificate of incorporation, NEON is
authorized to issue 100,000,000 shares of common stock and 30,000,000 shares of 
preferred stock, of which 21,354,000 shares have been designated as Redeemable  
Preferred Stock, and 2,500,000 shares have been designated as 12% Series A      
Cumulative Convertible Preferred Stock. NEON's board has the authority, without 
stockholder approval, to issue shares of the remaining 6,146,000 shares of      
preferred stock from time to time in one or more series and to fix the rights   
and preferences, including voting rights, of each such series of preferred      
stock, which rights and preferences may be superior, junior or equal to that of 
NEON's other series of preferred stock.                                         

         As of December 1, 2004 there were (i) 16,117,799 shares of common stock
outstanding, (ii) 1,101,887 shares of convertible preferred stock outstanding,  
and (iii) no shares of redeemable preferred stock outstanding. As of December 1,
2004, there were (i) 5,511,405 shares of NEON's common stock reserved for       
issuance pursuant to outstanding Class A warrants, (ii) 650,000 shares of NEON's
common stock reserved for issuance pursuant to the NEON CTA warrants, (iii)     
2,204,177 shares of NEON's common stock reserved for issuance pursuant to NEON's
equity compensation plan, (iv) 1,101,887 shares of NEON common stock reserved   
for issuance pursuant to conversion of NEON convertible preferred stock, and (v)
16,598,004 shares of redeemable preferred stock reserved for issuance pursuant  
to warrants.                                                                    

VOTING RIGHTS                                                                   

        GLOBIX. Each holder of Globix common stock is entitled to one vote for
each share held. Holders of Globix convertible preferred stock will be entitled 
to one vote for each share of common stock into which a share of Globix         
convertible preferred stock is convertible, which initially will be one. Holders
of Globix convertible preferred stock will vote together with the holders of    
common stock as a single class with respect to any question or matter that      
holders of common stock have a right to vote on. Globix's stockholders are not  
entitled to cumulative voting for directors. Globix's certificate of            
incorporation prevents it from issuing non-voting equity securities.            

179 

S-4/A
189th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 189th
         NEON. Each holder of NEON common stock is entitled to one vote for each
share held. Holders of NEON's outstanding convertible preferred stock are       
entitled to one vote for each share of common stock into which a share of NEON  
convertible preferred stock is converted. Like Globix's stockholders, NEON's    
stockholders are not entitled to cumulative voting.                             

CONSENT RIGHTS - CONVERTIBLE PREFERRED STOCK                                    

   GLOBIX. The certificate of designation with respect to the Globix
convertible preferred stock to be issued in connection with the merger will     
provide that holders of convertible preferred stock are entitled to certain     
consent rights. These include the requirement that the consent of the holders of
66 2/3% of the outstanding convertible preferred stock be obtained with respect 
to (i) the authorization or issuance of shares of any class or series of stock  
with senior or equivalent rights with respect to dividends and liquidation      
preferences, (ii) any amendment, modification or waiver of the provisions       
regarding changes of control, and (iii) any election by the holders to convert  
all of the outstanding convertible preferred stock into shares of common stock. 

       NEON. The current certificate of designation for the NEON convertible
preferred stock provides that holders of convertible preferred stock are        
entitled to certain consent rights. These include the requirement that the      
consent of the holders of 66 2/3% of the outstanding convertible preferred stock
be obtained with respect to (i) the authorization or issuance of shares of any  
class or series of stock with senior or equivalent rights with respect to       
dividends and liquidation preferences, (ii) any amendment, modification or      
waiver of the provisions regarding changes of control, and (iii) any election by
the holders to convert all of the outstanding convertible preferred stock into  
shares of common stock.                                                         

NUMBER OF DIRECTORS                                                             

         GLOBIX. Globix's amended and restated bylaws provide for a seven-member
board of directors. The stockholders or directors may by majority vote increase 
or decrease the size of the board provided that the number of directors is not  
less than two and that no decrease in the number of directors decreases the term
of any incumbent director. Globix currently has seven directors, however the    
board of directors of Globix will be expanded to nine members in connection with
the merger. See "The Merger - Operation of Globix and NEON after the Merger,"   
beginning on page 73 of this joint proxy statement/prospectus. At the annual    
stockholders' meeting, the stockholders elect a single class of directors who   
hold office until the next annual stockholders' meeting and the election and    
qualification of their respective successors. Directors need not be stockholders
of Globix.                                                                      

     NEON. NEON's amended and restated bylaws provide that the number of
directors comprising the board of directors shall be determined by resolution of
the board, and that the number of directors cannot be less than three nor more  
than nine. Presently, the number is set at 7. The number of directors may be    
decreased by a majority of the directors then in office only to eliminate       
vacancies resulting from death, resignation, removal or expiration of the term  
of one or more directors. NEON's amended and restated bylaws provide for a      
single class of directors who are elected at the annual stockholders' meeting by
the stockholders having a right to vote on such election. Each director holds   
office until the date of the first annual meeting following the annual meeting  
at which such director was elected provided that the term of each director is   
subject to the election and qualification of his or her successor and to his or 
her earlier death, resignation or removal. Directors need not be stockholders of
NEON.                                                                           

180 

S-4/A
190th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 190th
REMOVAL OF DIRECTORS                                                            

      GLOBIX. Globix's amended and restated bylaws provide that a director
may be removed at any time for or without cause by stockholder vote, which under
Globix's amended and restated bylaws means a majority of the votes cast by      
holders entitled to vote, and for cause by the board.                           

        NEON. NEON's amended and restated bylaws provide that any director may
be removed with or without cause, and another person may be elected to serve the
remainder of his or her term, by the affirmative vote of the holders of at least
a majority of the shares of the capital stock issued and outstanding and        
entitled to vote, which would include the common stock and convertible preferred
stock.                                                                          

FILLING VACANCIES ON THE BOARD OF DIRECTORS                                     

        GLOBIX. Globix's amended and restated bylaws provide that vacancies on
the board of directors occurring for any reason, including vacancies resulting  
from an increase in the number of directors, but excluding vacancies resulting  
from the removal of directors without cause, may be filled by vote of the board 
of directors or, if the number of directors in office is less than a quorum, by 
vote of a majority of the directors then in office. Vacancies occurring for any 
reason may also be filled by the stockholders.                                  

      NEON. NEON's amended and restated bylaws provide that any vacancy on
the board of directors, however occurring, including vacancies resulting from   
enlargement of the board, shall be filled only by vote of a majority of the     
directors then in office, even if less than a quorum, or by the sole remaining  
director. A director elected to fill a vacancy shall be elected for the         
unexpired term of his or her predecessor in office, and a director chosen to    
fill a position resulting from an increase in the number of directors shall hold
office until the next election of directors, subject to the election and        
qualification of his or her successor and to his or her earlier death,          
resignation or removal.                                                         

NOMINATION OF DIRECTORS                                                         

       GLOBIX. Nominations of persons for election to the board of directors
of Globix may be made at the annual meeting of stockholders or any special      
meeting called for the purpose of electing directors. Nominations may be made by
the board of directors or by any stockholder of Globix who is a stockholder of  
record and who complies in a timely manner with the notice procedures set forth 
in Globix's bylaws. For a notice from a stockholder to be timely it must        
generally be delivered to or received at Globix's executive offices in New York,
New York not less than 90 days or more than 120 days prior to the anniversary of
the last annual meeting of stockholders. In the case of a special meeting of    
stockholders called for the purpose of electing directors, the notice must be   
delivered or received not later than the close of business on the 10th day      
following the day on which notice of the date of the special stockholders       
meeting was mailed or the special meeting date was publicly disclosed, whichever
comes first. The notice must include certain information about the person being 
nominated to serve as director and about the stockholder making the nomination, 
including the type of information that would be required in a proxy statement or
other filings required in connection with the solicitation of proxies. The      
notice must also include the proposed director nominee's written consent to     
serve if elected. If the chairman of the annual or special stockholders meeting 
determines that a nomination was not properly made, the chairman is required to 
declare that the nomination is defective and will be disregarded.               

     NEON. NEON's amended and restated bylaws do not provide a means for
which stockholders may nominate members to the NEON board of directors.         

181 

S-4/A
191st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 191st
CHARTER AMENDMENTS                                                              

 GLOBIX. Globix's certificate of incorporation may be amended in
accordance with Delaware law, which provides that the certificate of            
incorporation may be amended with the affirmative vote of a majority of the     
voting power of all outstanding shares of the capital stock of Globix. Globix   
does reserve the right to amend, alter, change or repeal any provision of its   
certificate of incorporation as may be prescribed by law, and states that the   
rights and powers of stockholders, directors and officers are subject to this   
reservation of power. The convertible preferred stock will be authorized        
pursuant to the terms of a certificate of designation which will provide that   
Globix may amend the terms of the convertible preferred stock or waive certain  
provisions of the certificate of designation with the affirmative vote or       
consent of a majority of the holders of the convertible preferred stock,        
provided that the consent of each holder will generally be required with respect
to any amendment or waiver that would adversely affect the rights of a holder   
and that the provisions governing a change in control may be amended, modified  
or waived only with the consent of the holders of 66 2/3% of the convertible    
preferred stock then outstanding.                                               

        NEON. NEON's certificate of incorporation may be amended in accordance
with Delaware law, which provides that the certificate of incorporation may be  
amended with the affirmative vote of a majority of the voting power of all      
outstanding shares of the capital stock of NEON. In addition, the certificate of
designation for the convertible preferred stock provides that NEON may not amend
the certificate of designation without the consent of holders of the convertible
preferred stock if certain actions with respect to the convertible preferred    
stock as described in the certificate of designation would adversely affect such
holders. Like Globix, NEON also reserves the right to amend, alter, change or   
repeal any provision of its certificate of incorporation as may be prescribed by
law, and states that the rights and powers of stockholders, directors and       
officers are subject to this reservation of power. The certificates of          
designation for the redeemable preferred stock and the convertible preferred    
stock have their own amendment provisions as described below.                   

    The certificate of designation for the convertible preferred stock
provides that NEON may amend the terms of the convertible preferred stock or    
waive certain of its provisions with the affirmative vote or consent of a       
majority of the holders of the convertible preferred stock, provided that the   
consent of each holder will generally be required with respect to any amendment 
or waiver that would adversely affect the rights of a holder and that the       
provisions governing a change in control may be amended, modified or waived only
with the consent of the holders of 66 2/3% of the convertible preferred stock   
then outstanding.                                                               

   The certificate of designation for the redeemable preferred stock
provides that NEON may amend the terms of the redeemable preferred stock or     
waive certain of its provisions with the affirmative vote or consent of a       
majority of the holders of the redeemable preferred stock, provided that the    
consent of each holder will generally be required with respect to any amendment 
or waiver that would adversely affect the rights of a holder. No shares of      
redeemable preferred stock are currently outstanding.                           

AMENDMENTS TO BYLAWS                                                            

    GLOBIX. Globix's amended and restated certificate of incorporation
provides that the affirmative vote of at least a majority of the entire board of
directors shall be required to adopt, amend, alter, or repeal the company's     
bylaws. Pursuant to Globix's amended and restated certificate of incorporation  
the bylaws may also be amended by the affirmative vote of the holders of at     
least eighty percent of the voting power of shares entitled to vote at an       
election of directors.                                                          

182 

S-4/A
192nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 192nd
         NEON. NEON's amended and restated bylaws provide that the bylaws may be
amended by the affirmative vote of a majority of the directors present at any   
regular or special meeting of the board of directors at which a quorum is       
present. The bylaws may also be amended by the affirmative vote of the holders  
of a majority of the shares of the capital stock issued and outstanding and     
entitled to vote at any regular or special meeting of stockholders, provided    
that notice of such amendment shall have been included in the notice of such    
regular or special meeting.                                                     

ACTION BY WRITTEN CONSENT                                                       

    GLOBIX. Globix's amended and restated certificate of incorporation
provides that any action required or permitted to be taken by the stockholders  
of the company must be effected at a duly called annual or special meeting of   
stockholders. Subject to the provisions of the Globix amended and restated      
certificate of incorporation requiring action to be taken at an annual or       
special meeting of the stockholders, Globix's amended and restated bylaws       
provide that any stockholder action may be taken without a meeting by written   
consent if it is signed by the holders of outstanding shares necessary to       
authorize or take such action at a meeting at which all shares entitled to vote 
thereon were present and voted. In the event of any action taken without a      
meeting by less than unanimous consent, prompt notice of the action must be     
given to those stockholders who have not consented in writing.                  

         NEON. NEON's amended and restated certificate of incorporation does not
limit the ability of NEON stockholders to vote by written consent in lieu of a  
meeting. Consequently, under Delaware law, any action required that may be taken
at an annual or special meeting of stockholders may be taken without a meeting, 
without prior notice and without a vote, if NEON obtains written consents from  
the holders of outstanding stock having not less than the minimum number of     
votes that would be necessary to authorize or take such action at a meeting at  
which all shares entitled to vote on the action were present.                   

NOTICE OF STOCKHOLDER ACTIONS                                                   

         GLOBIX. Globix's amended and restated bylaws provide that a stockholder
may properly bring business before an annual meeting of stockholder if timely   
written notice has been given to the Secretary of the company and if it is      
brought by a stockholder of record (both as of the date for giving timely notice
and on the record date for stockholders entitled to vote at the meeting). In    
order for notice to be timely it must be delivered or mailed to, and received   
at, Globix's principal executive offices not less than 90 days nor more than 120
days prior to the anniversary date of the immediately preceding annual meeting  
of stockholders, except that if the annual meeting at which the stockholder     
wishes to bring business is called for a date that is not 30 days before or     
after the anniversary of the preceding annual meeting, a notice must be received
no later than the close of business on the tenth day following the earlier of   
the day on which the notice of the date of the annual meeting was mailed or the 
day that public disclosure of the date was made. With respect to each matter    
proposed to be brought before an annual meeting, the notice must include (i) a  
brief description of the matter and the reasons for bringing it before the      
annual meeting, (ii) the name and address of the stockholder providing the      
notice, (iii) the class or series and number of shares of capital stock owned by
the stockholder providing the notice, (iv) a description of all arrangements or 
understandings between the stockholder and anyone else (including their names)  
in connection with the stockholder's proposal and any material interest of the  
stockholder in the matter proposed, and (v) a representation that the           
stockholder intends to appear in person or by proxy at the annual meeting for   
which the notice is provided.                                                   

   NEON. Under Delaware law, special meetings of stockholders may be
called by the board of directors or by persons authorized in the corporation's  
certificate of incorporation or bylaws. NEON's bylaws state that special        
meetings may be called by the chairman of the board of directors, the president 
or the board of directors.                                                      

183 

S-4/A
193rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 193rd
RIGHT TO CALL SPECIAL MEETING OF STOCKHOLDERS                                   

     GLOBIX. Globix's amended and restated bylaws provide that a special
meeting of stockholders may be called by the board of directors or the chairman 
of the board of directors.                                                      

         NEON. NEON's amended and restated bylaws provide that a special meeting
of stockholders may be called at any time by the chairman of the board of       
directors, the president or the board of directors.                             

DIVIDENDS                                                                       

    GLOBIX. Under the Delaware law, Globix's board may declare and pay
dividends upon shares of Globix stock, but only out of funds available for the  
payment of dividends as provided by law. Globix's amended and restated          
certificate of incorporation allows the board of directors to fix annual        
dividend rights of any series of preferred stock that it may authorize for      
issuance from Globix's authorized but undesignated preferred stock. The         
certificate of designation for the new Globix convertible preferred stock will  
provide that shares of the convertible preferred stock are entitled to receive, 
when, as and if dividends are declared by the board of directors, cumulative    
preferential dividends from the issue date of the shares of convertible         
preferred stock at an annual rate of $0.216 per share, or $0.108 semi-annually. 
Dividends on the convertible preferred stock may be paid in cash or in          
additional shares of convertible preferred stock. Accumulated unpaid dividends  
will accrue and cumulate dividends at an annual rate of 6%, and dividends cannot
be declared or paid unless all dividends from preceding periods have been paid, 
or sufficient amounts have been set aside for such payment. Unless full         
cumulative dividends on all outstanding shares of convertible preferred stock   
for all past periods have been paid, Globix may not declare dividends with      
respect to its common stock.                                                    

       NEON. NEON's certificate of incorporation provides that dividends may
be declared and paid on the common stock as and when determined by the board of 
directors, subject to the preferential rights of any outstanding preferred      
stock. NEON's certificate of incorporation also permits the board of directors  
to authorize and issue shares of preferred stock from its undesignated preferred
stock, with such dividends rights as it may determine. The certificate of       
designation for NEON's convertible preferred stock provides that shares of the  
convertible preferred stock are entitled to receive, when, as and if dividends  
are declared by the board of directors, cumulative preferential dividends from  
the issue date of the shares of convertible preferred stock at an annual rate of
$1.35 per share, or $0.675 semi-annually. Dividends on the convertible preferred
stock may be paid in cash or in additional shares of convertible preferred      
stock. Accumulated unpaid dividends will accrue and cumulate dividends at an    
annual rate of 12%, and dividends cannot be declared or paid unless all         
dividends from preceding periods have been paid, or sufficient amounts have been
set aside for such payment. Unless full cumulative dividends on all outstanding 
shares of convertible preferred stock for all past periods have been paid, NEON 
may not declare dividends with respect to its common stock.                     

LIQUIDATION RIGHTS                                                              

    GLOBIX. The new Globix convertible preferred stock to be issued in
connection with the merger will be entitled to a liquidation preference of $3.60
per share, plus accrued unpaid dividends, prior and in preference to any        
payments to holders of common stock upon any voluntary or involuntary           
liquidation, dissolution or winding up of Globix and after payment in full of   
Globix's outstanding debt obligations including its 11% senior notes due 2008.  
Subject to the satisfaction of any preferential payments and after payment of,  
or provisions for, certain claims and obligations as required under Delaware    
law, any additional amounts available for distribution in the event of a        
dissolution of Globix would, under Delaware law, be payable to the holders of   
common stock.                                                                   

184 

S-4/A
194th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 194th
       NEON. NEON's convertible preferred stock is entitled to a liquidation
preference of $11.25 per share, plus accrued and unpaid dividends, prior and in 
preference to any payments to holders of common stock upon any voluntary or     
involuntary liquidation, dissolution or winding up of NEON and after payment in 
full of NEON's outstanding debt obligations. Upon a "Liquidation Event" as      
defined in NEON's certificate of incorporation, and subject to the preferential 
rights of the convertible preferred stock, all remaining assets of NEON are     
divided ratably among the holders of common stock. A "Liquidation Event" means  
(i) the liquidation, dissolution or winding up of NEON, whether voluntary or    
involuntary, (ii) a sale, lease or transfer of all or substantially all of      
NEON's assets, or (iii) any consolidation, merger or share exchange of NEON in  
which the holders of NEON's voting stock outstanding immediately prior to such  
consolidation, merger or share exchange do not in the aggregate hold a majority 
of the voting stock of the surviving or resulting entity outstanding immediately
following such consolidation, merger or share exchange (excluding, however, a   
merger or other reorganization solely for the purpose of changing NEON's        
jurisdiction or organization or name, and a merger of NEON with or into a wholly
owned subsidiary of NEON that is incorporated in the United States). NEON       
proposes to amend the definition of "Liquidation Event" as set forth in NEON's  
certificate of incorporation in connection with the merger. See "Approval of    
Amendment of NEON's Certificate of Incorporation," beginning on page 95 of this 
joint proxy statement/prospectus.                                               

    Additionally, NEON has authorized a series of redeemable preferred
stock. No shares of redeemable preferred stock are outstanding although there   
are 16,598,004 shares subject to warrants that will expire upon consummation of 
the merger. Shares of redeemable preferred stock rank junior to the NEON        
convertible preferred stock and on par with the NEON common stock with respect  
to liquidation rights and are entitled to receive $.01 per share upon a         
liquidation of NEON after payment of NEON's outstanding debt obligations and the
senior liquidation preference of the convertible preferred stock. In certain    
events, shares of redeemable preferred stock are required to be redeemed by NEON
at the price paid for shares of common stock with respect to the same event. If 
that amount is not equal to or greater than $10.62, the event does not trigger a
mandatory redemption of the redeemable preferred stock.                         

Pursuant to the terms of the warrant agreement governing the  
outstanding warrants for NEON redeemable preferred stock, the warrants currently
outstanding will expire upon consummation of the merger because the merger will 
be deemed a change of control under the warrant agreement, but not an event that
triggers the ability to exercise the warrants because the consideration to be   
received by holders of common stock in the merger is less than $10.62 per share.
Since the warrants expire upon a change of control and the merger will          
constitute a change of control, the warrants will expire upon consummation of   
the merger. Although under the terms of the warrant agreement, the holders of   
warrants for redeemable preferred shares are entitled to receive payment for    
their warrants equal to the difference between (i) the amount a holder would be 
entitled to receive if the holder exercised the warrant prior to its expiration,
which is $.01 and (ii) the purchase price per share under the warrants, which is
$.01, there is no difference between these numbers with respect to the merger,  
and consequently, no payment will be due to the holders of the warrants with    
respect to the merger.                                                          

CONVERSION AND REDEMPTION                                                       

GLOBIX                                                        

    CONVERSION RIGHTS. Holders of the new Globix convertible preferred
stock will have the right at any time to convert their shares of convertible    
preferred stock into shares of common stock based on the applicable conversion  
rate, which as of the date of initial issuance will be one share of common stock
for each share of convertible preferred stock.                                  

185 

S-4/A
195th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 195th
        The convertible preferred stock will automatically convert into common
stock at the then effective applicable conversion ratio, upon (1) the           
affirmative vote of the holders of 66 2/3% of the outstanding shares of         
convertible preferred stock, or (2) the day immediately following the date on   
which the closing price of the Globix common stock has equaled or exceeded      
$10.80 per share (as adjusted for stock splits, combinations or similar capital 
changes) for a period of 45 consecutive trading days.                           

    The number of shares of common stock into which preferred stock is
convertible will be generally subject to adjustment in the following            
circumstances, subject to certain exceptions:                                   

        o    any issuance of common stock as a dividend or distribution to all
holders of common stock;                            

     o    any subdivision or combination of outstanding shares of common
stock;                                              

         o    if Globix issues rights or warrants to all or substantially all of
            the holders of common stock entitling them to purchase shares of
          common stock at a price per share less than the current market
price of the common stock;                          

     o    if Globix issues to all or substantially all of the holders of
              common stock any shares of Globix capital stock (other than common
              stock), evidences of indebtedness, other non-cash assets or rights
             or warrants to purchase its securities (other than common stock);

       o    if Globix distributes to all or substantially all of the holders
             of common stock cash that exceeds an amount equal to 10.0% of the
              product of the current market price of the common stock multiplied
              by the number of shares of common stock outstanding on the date of
calculation; or                                     

      o    any merger or consolidation with or into another corporation or
    the sale of all or substantially all of Globix's assets.

         REDEMPTION RIGHTS. Globix has the right or obligation to redeem the new
convertible preferred stock as follows:                                         

         o    Globix may, at its option, redeem the convertible preferred stock,
        in whole or in part after 2005. The redemption price for any
          redemptions in 2005 or 2006 will be equal to $3.816 per share,
            plus accrued and unpaid dividends to the date of redemption. The
         redemption price for any redemptions in 2007 will be equal to
              $3.708 per share, plus accrued and unpaid dividends to the date of
            redemption. The redemption price for any redemptions in 2008 and
            after will be $3.60 per share, plus accrued and unpaid dividends
to the date of redemption.                          

      o    In the event of a redemption as described above in which only a
            portion of the outstanding shares of convertible preferred stock
     will be redeemed, Globix will be obligated to effect such
             redemption on a pro rata basis, except that Globix may redeem all
   of the shares held by holders of fewer than 100 shares.

o    In the event of a "Change in Control" as described in the
           certificate of designation for the convertible preferred stock,
             each holder of convertible preferred stock will have the right to
             require Globix to purchase such holder's shares for a price equal
             to $3.636 plus accrued and unpaid dividends to the purchase date.

186 

S-4/A
196th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 196th
NEON                                                          

         CONVERSION RIGHTS. Holders of NEON convertible preferred stock have the
right at any time to convert their shares of convertible preferred stock into   
shares of common stock based on the applicable conversion rate, which as of the 
record date is one share of common stock for each share of convertible preferred
stock.                                                                          

       The NEON convertible preferred stock would automatically convert into
common stock at the then effective applicable conversion ratio, upon (1) the    
affirmative vote of the holders of 66 2/3% of the outstanding shares of         
convertible preferred stock, or (2) the day immediately following the date on   
which the closing price of the NEON common stock has equaled or exceeded $33.75 
per share (as adjusted for stock splits, combinations or similar capital        
changes) for a period of 45 consecutive trading days.                           

    The number of shares of common stock into which preferred stock is
convertible is generally subject to adjustment in the following circumstances,  
subject to certain exceptions:                                                  

        o    any issuance of common stock as a dividend or distribution to all
holders of common stock;                            

     o    any subdivision or combination of outstanding shares of common
stock;                                              

       o    if NEON issues rights or warrants to all or substantially all of
            the holders of common stock entitling them to purchase shares of
          common stock at a price per share less than the current market
price of the common stock;                          

   o    if NEON issues to all or substantially all of the holders of
            common stock any shares of NEON capital stock (other than common
              stock), evidences of indebtedness, other non-cash assets or rights
             or warrants to purchase its securities (other than common stock);

        o    if NEON distributes to all or substantially all of the holders of
          common stock cash that exceeds an amount equal to 10.0% of the
              product of the current market price of the common stock multiplied
              by the number of shares of common stock outstanding on the date of
calculation; or                                     

      o    any merger or consolidation with or into another corporation or
  the sale of all or substantially all of NEON's assets.

   REDEMPTION RIGHTS. NEON has the right or obligation to redeem the
convertible preferred stock as follows:                                         

       o    NEON may, at its option, redeem the convertible preferred stock,
        in whole or in part after 2006. The redemption price for any
              redemption in 2006 is equal to $11.925 per share, plus accrued and
            unpaid dividends to the date of redemption. The redemption price
            for any redemptions in 2007 is equal to $11.5875 per share, plus
       accrued and unpaid dividends to the date of redemption. The
            redemption price for any redemptions in 2008 and after is $11.25
       per share, plus accrued and unpaid dividends to the date of
redemption.                                         

      o    In the event of a redemption as described above in which only a
            portion of the outstanding shares of convertible preferred stock
              will be redeemed, NEON is obligated to effect such redemption on a
              pro rata basis, except that NEON may redeem all of the shares held
by holders of fewer than 100 shares.                

o    In the event of a "Change in Control" as described in the
           certificate of designation for the convertible preferred stock,
       each holder of convertible preferred stock has the right to
              require NEON to purchase such holder's shares for a price equal to
            $11.3625 plus accrued and unpaid dividends to the purchase date.

187 

S-4/A
197th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 197th
           NEON proposes to amend the definition of "Change in Control" as
             set forth in NEON's certificate of designation in connection with
    the merger. See "Approval of Amendment of Certificate of
           Designation for NEON Convertible Preferred Stock," beginning on
page 95 of this joint proxy statement/prospectus.   

REGISTRATION RIGHTS                                                             

     GLOBIX. Globix shares to be issued in the merger will be registered
under the Securities Act of 1933. In addition, pursuant to the merger agreement,
Globix agrees to use its commercially reasonable efforts to maintain the        
effectiveness of the registration statement for a period of one year following  
the closing date of the merger.                                                 

  NEON. Set forth below is a summary of the registration rights of
certain holders of common stock and the holders of convertible preferred stock  
pursuant to NEON's registration rights agreement entered into among NEON and    
certain of its stockholders. The term "registrable securities," as used below,  
means (i) common stock issued pursuant to NEON's bankruptcy reorganization plan,
(ii) shares of common stock issuable upon conversion of the convertible         
preferred stock, (iii) shares of common stock issuable upon exercise of the     
class A warrants, and (iv) the redeemable preferred stock warrants. Securities  
cease being "registrable securities" if and when (i) there is an effective      
registration statement with respect to such securities and they have been sold  
pursuant thereto, (ii) the securities are no longer outstanding, (iii) the      
securities are publicly distributed in accordance with Rule 144, or (iv) the    
securities may be distributed to the public free from any restrictions imposed  
by Rule 144 and without the requirement of the filing of a registration         
statement with respect to such securities.                                      

DEMAND REGISTRATION RIGHTS. If holders of at least 25% of the 
registrable securities then outstanding and entitled to registration request in 
writing that NEON file a registration statement under the Securities Act of 1933
covering the registration, then NEON is obligated to use its reasonable best    
efforts to cause the requested shares to be registered. However, NEON is not    
obligated to effect:                                                            

o    more than three such registrations in total;             

  o    more than one such registration in any 12 month period; and

     o    any such registration within 90 days immediately following the
         effective date of any registration statement pertaining to an
          underwritten public offering of securities of NEON for its own
             account (except registrations on Form S-4 or on Form S-8 relating
    solely to securities issued pursuant to a benefit plan).

      PIGGYBACK REGISTRATION RIGHTS. The holders of registrable securities
are also entitled to "piggyback" registration rights on all NEON registrations, 
except registrations on Form S-4 or on Form S-8 relating solely to securities   
issued pursuant to a benefit plan. NEON may at any time in its sole discretion  
delay or abandon such a registration without the consent of any holder. If the  
registration is an underwritten offering, and the securities requested by any   
holder differ from the type of securities to be registered by NEON and the      
managing underwriter of the registration advises NEON that inclusion of such    
different securities would cause an adverse effect on the offering, NEON may    
notify the affected holder and either reduce the number of such securities      
included in the offering so that no adverse effect would occur, or exclude such 
securities altogether if no amount of reduction would prevent the occurrence of 
an adverse effect.                                                              

      FORM S-3 REGISTRATION RIGHTS. One or more holders of at least 25% of
the registrable securities then outstanding may also request registrations on   
Form S-3 provided Form S-3 is available for such offering. There is no limit on 
the number of Form S-3 registrations holders may request.                       

188 

S-4/A
198th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 198th
   STANDSTILL PERIOD. In the event of a firm commitment underwritten
public offering of registrable securities NEON agrees not to effect any public  
sale of securities similar to the registrable securities without the consent of 
the managing underwriter for a period of time beginning 15 days prior to the    
effective date of the registration statement relating to such registrable       
securities and ending on the earlier of (1) 90 days after such effective date   
and (2) the end of the public distribution of such registrable securities.      

         SUSPENSION PERIOD. NEON may, by written notice to each holder, postpone
the filing or effectiveness of a registration statement filed pursuant to the   
registration rights agreement or otherwise suspend the holders' registration    
rights for any period of time determined by NEON if there is any pending or     
imminent event with respect to NEON that the board of directors determines would
require the disclosure of material, non-public information in order to make the 
registration statement not misleading, or NEON is not otherwise required to     
disclose such event, or if public disclosure at that time would have a material 
adverse effect on NEON's business, financial condition or prospects, or would   
materially adversely affect a pending or proposed acquisition.                  

        HOLDER STANDSTILL PERIOD. Each holder of registrable securities agrees
that it will not, without the prior written consent of a managing underwriter   
for any underwritten offering of similar securities effect any disposition of   
similar securities during a period commencing 15 days prior to the effective    
date of any registration statement relating to such securities and ending on the
earlier of (1) 90 days after such effective date and (2) the end of the public  
distribution of such registrable securities.                                    

         INDEMNIFICATION. NEON will indemnify the other parties to the agreement
and certain related parties against any losses, claims, damages, expenses or    
liabilities, joint or several, to which they may become subject based on any    
untrue statement or alleged untrue statement of material fact contained in, or  
material fact omitted from, a registration statement covering registrable       
securities.                                                                     

       Each holder of registrable securities included in a registration that
NEON effected must indemnify NEON, its officers and directors, and each other   
person who controls NEON against any losses, claims, damages, expenses or       
liabilities, joint or several, to which they may become subject based on any of 
the violations enumerated above to the extent such violation occurs in reliance 
upon written information supplied by such holder for use in such registration. A
holders indemnification liability is limited to the net proceeds received by    
such holder in the sale of registrable securities pursuant to such registration.

         EXPENSES. NEON is obligated to pay all registration and filing fees and
certain other expenses, including the reasonable fees and expenses of one       
counsel to the holders participating in a registration. Individual holders are  
responsible for underwriting fees, discounts or commissions, any out-of-pocket  
expenses and applicable transfer taxes.                                         

         AMENDMENT. The registration rights agreement may be amended or modified
upon NEON's consent and the consent of holders holding a majority of the        
registrable securities then outstanding.                                        

189 

S-4/A
199th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 199th
 OTHER MATTERS

LEGAL MATTERS                                                                   

     The United States federal income tax consequences described in this
joint proxy statement/prospectus are the subject of opinions issued by Day,     
Berry and Howard LLP, counsel to Globix, and Andrews Kurth LLP, counsel to NEON.

EXPERTS                                                                         

         Globix's consolidated financial statements as of September 30, 2004 and
September 30, 2003, and for each of the years in the three year period ended    
September 30, 2004 have been included in this joint proxy statement/prospectus  
and in the registration statement of which this joint proxy statement/prospectus
is a part in reliance upon the reports of the following firms, upon the         
authority of said firms as experts in accounting and auditing:                  

         The financial statements of Globix for the seven months ended April 30,
2002 and for the five months ended September 30, 2002 included in this joint    
proxy statement/prospectus have been so included in reliance on the reports of  
PricewaterhouseCoopers LLP, an independent registered public accounting firm,   
given on the authority of said firm as experts in auditing and accounting; and  

 Amper, Politziner & Mattia PC, an independent registered public
accounting firm, with regard to the consolidated financial statements for the   
fiscal years ending September 30, 2003 and September 30, 2004.                  

        NEON's consolidated financial statements as of and for the years ended
December 31, 2003 and 2002 have been included in this joint proxy               
statement/prospectus and in the registration statement of which this joint proxy
statement/prospectus is a part in reliance upon the report of BDO Seidman, LLP, 
an independent registered public accounting firm, and upon the authority of said
firm as experts in accounting and auditing. NEON's consolidated financial       
statements as of and for the year ended December 31, 2001 have been included in 
this joint proxy statement/prospectus and in the registration statement of which
this joint proxy statement/prospectus is a part in reliance upon the report of  
Arthur Andersen, LLP; however as described in the section of this joint proxy   
statement/prospectus entitled "Risk Factors," NEON was unable to obtain Arthur  
Andersen LLP's consent with respect to the use of its report in this joint proxy
statement/prospectus and in the registration statement of which this joint proxy
statement/prospectus is a part.                                                 

OTHER PROPOSALS                                                                 

      As of the date of this joint proxy statement/prospectus, neither the
NEON board of directors nor the Globix board of directors knows of any other    
matter that will be presented for consideration at its respective special       
meetings other than as described in this joint proxy statement/prospectus. If   
any other matters come before the special meetings or any adjournments or       
postponements thereof and are voted upon, the enclosed proxies will confer      
discretionary authority on the individuals named as proxies therein to vote the 
shares represented by such proxies as to any such matters. The individuals named
as proxies for the NEON special meeting intend to vote or not to vote in        
accordance with the recommendation of the management of NEON. The individuals   
named as proxies for the Globix special meeting intend to vote or not to vote in
accordance with the recommendation of the management of Globix.                 

190 

S-4/A
200th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 200th
 WHERE YOU CAN FIND MORE INFORMATION

      Globix files annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any of this           
information at the SEC's public reference room at 450 Fifth Street N.W., Room   
1024, Washington, D.C. 20549. You may obtain information on the operation of the
SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also  
maintains an Internet web site that contains reports, proxy statements and other
information regarding issuers, like Globix, that file electronically with the   
SEC. The address of that site is http://www.sec.gov.                            

     Globix has filed a registration statement on Form S-4 of which this
joint proxy statement/prospectus is a part. The registration statement registers
the distribution to NEON stockholders of the shares of Globix common stock and  
preferred stock to be issued in connection with the merger.                     

       This joint proxy statement/prospectus, which constitutes part of that
registration statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further      
information with respect to Globix or the shares of common stock or preferred   
stock being issued in the merger, reference is made to the registration         
statement, including the schedules and exhibits thereto. Statements contained in
this joint proxy statement/prospectus as to the contents of any contract or     
other document referred to herein are not necessarily complete and, where such  
contract is an exhibit to the registration statement, each such statement is    
qualified in all respects by the provisions of such exhibit, to which such      
reference is made. Any document that Globix files may be inspected and copied at
the SEC's public reference room at 450 Fifth Street N.W., Room 1024, Washington,
D.C. 20549.                                                                     

     Exhibits and schedules to this joint proxy statement/prospectus are
available from Globix without charge, excluding any exhibits to those documents 
unless the exhibit is specifically incorporated by reference as an exhibit in   
this joint proxy statement/prospectus. You can also obtain such exhibits and    
schedules by requesting them in writing or by telephone from Globix at the      
following address:                                                              

Globix Corporation
 139 Centre Street
New York, New York 10013
 Attn: General Counsel
Telephone (212) 334-8500

    You can also contact Globix at its website, www.Globix.com. If you
would like to request documents, please do so by January 5, 2005 to receive them
before the special meeting.                                                     

        This document constitutes the prospectus of Globix and the joint proxy
statement of NEON and Globix. Globix has supplied all information contained in  
this joint proxy statement/prospectus relating to Globix and NEON has supplied  
all such information relating to NEON.                                          

       Neither Globix nor NEON has authorized anyone to give any information
or make any representation about the merger, Globix or NEON that is different   
from, or in addition to, that contained in this joint proxy                     
statement/prospectus. Therefore, if anyone does give you information of this    
sort, you should not rely on it. The information contained in this document     
speaks only as of the date of this document, unless the information specifically
indicates that another date applies.                                            

191 

S-4/A
201st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 201st
                                                        [Enlarge/Download Table]
                                                                                                                                   
                                             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                            

                                                                                                                               PAGE
                                                                                                                               ----

Report of Independent Registered Public Accounting Firm........................................................................F-2 

Report of Independent Registered Public Accounting Firm........................................................................F-3 

Report of Independent Registered Public Accounting Firm........................................................................F-4 

Consolidated Balance Sheets-as of September 30, 2004 and 2003..................................................................F-5 

Consolidated Statements of Operations- For the Year Ended September 30, 2004 (Successor Company), Year Ended September 30,         
2003 (Successor Company), Five Months Ended September 30, 2002 (Successor Company) and Seven Months Ended April 30, 2002           
(Predecessor Company)..........................................................................................................F-6 

Statements of Changes in Stockholders' Equity (Deficit) and Comprehensive Income (Loss)- for the Year Ended September 30,          
2004 (Successor Company), Year Ended September 30, 2003 (Successor Company), Five Months Ended September 30, 2002                  
(Successor Company) and Seven Months Ended April 30, 2002 (Predecessor Company)................................................F-7 

Consolidated Statements of Cash Flows- for the Year Ended September 30, 2004 (Successor Company), Year Ended September 30,         
2003 (Successor Company), Five Months Ended September 30, 2002 (Successor Company) and Seven Months Ended April 30, 2002           
(Predecessor Company)..........................................................................................................F-8 

Notes to Consolidated Financial Statements.....................................................................................F-10

                                                                F-1                                                                

S-4/A
202nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 202nd
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Globix Corporation:               

We have audited the accompanying consolidated balance sheets of Globix          
Corporation (a Delaware Corporation) and Subsidiaries as of September 30, 2004  
and 2003, and the related consolidated statements of operations, changes in     
stockholders' equity and comprehensive income (loss), and cash flows for each of
the two years in the period ended September 30, 2004. These financial statements
are the responsibility of the Company's management. Our responsibility is to    
express an opinion on these financial statements based on our audits.           

We conducted our audits in accordance with the standards of the Public Company  
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the          
consolidated financial statements are free of material misstatement. An audit   
includes examining, on a test basis, evidence supporting the amounts and        
disclosures in the financial statements. An audit also includes assessing the   
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our 
audits provide a reasonable basis for our opinion.                              

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of Globix Corporation  
and Subsidiaries as of September 30, 2004 and 2003, and the results of its      
operations and its cash flows for each of the two years in the period ended     
September 30, 2004, in conformity with U.S. generally accepted accounting       
principles.                                                                     

In connection with our audits of the financial statements referred to above, we 
audited Schedule II - Valuation and Qualifying Accounts. In our opinion, the    
financial schedule, when considered in relation to the financial statements     
taken as a whole, presents fairly, in all material respects, the information    
stated therein.                                                                 

/s/ Amper, Politziner & Mattia PC                                               

December 1, 2004                                                                
Edison, New Jersey                                                              

F-2 

S-4/A
203rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 203rd
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Globix Corporation:               

In our opinion, the accompanying consolidated statements of operations, cash    
flows and changes in stockholders' equity for the five months ended September   
30, 2002 present fairly, in all material respects, the consolidated results of  
operations and cash flows of Globix Corporation and its subsidiaries (the       
Successor Company) in conformity with accounting principles generally accepted  
in the United States of America. In addition, in our opinion, the financial     
statement schedule for the five months ended September 30, 2002 presents fairly,
in all material respects, the information set forth therein when read in        
conjunction with the related consolidated financial statements. These financial 
statements and financial statement schedule are the responsibility of the       
Company's management; our responsibility is to express an opinion on these      
financial statements and financial statement schedule based on our audit. We    
conducted our audit of these statements in accordance with the standards of the 
Public Company Accounting Oversight Board (United States). Those standards      
require that we plan and perform the audit to obtain reasonable assurance about 
whether the financial statements are free of material misstatement. An audit    
includes examining, on a test basis, evidence supporting the amounts and        
disclosures in the financial statements, assessing the accounting principles    
used and significant estimates made by management, and evaluating the overall   
financial statement presentation. We believe that our audit provides a          
reasonable basis for our opinion.                                               

As discussed in Note 3, the United States Bankruptcy Court for the District of  
Delaware confirmed the Company's Prepackaged Plan of Reorganization (the "plan")
on April 8, 2002. Confirmation of the plan substantially alters rights and      
interests of equity security holders as provided for in the plan. The plan was  
substantially consummated on April 25, 2002 and the Company emerged from        
bankruptcy. In connection with its emergence from bankruptcy, the Company       
adopted fresh start accounting as of May 1, 2002.                               

/s/ PricewaterhouseCoopers LLP                                                  

New York, New York                                                              

February 3, 2003                                                                

F-3 

S-4/A
204th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 204th
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Globix Corporation:               

In our opinion, the accompanying consolidated statements of operations, cash    
flows and changes in stockholders' deficit for the seven months ended April 30, 
2002 present fairly, in all material respects, the consolidated results of      
operations and cash flows of Globix Corporation and its subsidiaries (the       
Predecessor Company) for the seven months ended April 30, 2002 in conformity    
with accounting principles generally accepted in the United States of America.  
In addition, in our opinion, the financial statement schedule for the seven     
months ended April 30, 2002 presents fairly, in all material respects, the      
information set forth therein when read in conjunction with the related         
consolidated financial statements. These financial statements and financial     
statement schedule are the responsibility of the Company's management; our      
responsibility is to express an opinion on these financial statements and       
financial statement schedule based on our audit. We conducted our audit of these
statements in accordance with the standards of the Public Company Accounting    
Oversight Board (United States). Those standards require that we plan and       
perform the audit to obtain reasonable assurance about whether the financial    
statements are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the financial    
statements, assessing the accounting principles used and significant estimates  
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.          

As discussed in Note 3, the Company filed a petition on March 1, 2002 with the  
United States Bankruptcy Court for the District of Delaware for reorganization  
under the provisions of Chapter 11 of the Bankruptcy Code. The Company's        
Prepackaged Plan of Reorganization was substantially consummated on April 25,   
2002 and the Company emerged from bankruptcy. In connection with its emergence  
from bankruptcy, the Company adopted fresh start accounting.                    

As discussed in Note 4, the Company changed the manner in which it accounts for 
goodwill and other intangible assets upon adoption of Statement of Financial    
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets,"  
on May 1, 2002.                                                                 

/s/ PricewaterhouseCoopers LLP                                                  

New York, New York                                                              

February 3, 2003                                                                

F-4 

S-4/A
205th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 205th
                                                        [Enlarge/Download Table]
                                          GLOBIX CORPORATION AND SUBSIDIARIES                                        
                                              CONSOLIDATED BALANCE SHEETS                                            
                                (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                              

                                                                                                 SUCCESSOR COMPANY   
                                                                                              -----------------------
                                                                                                    SEPTEMBER 30,    
                                                                                              -----------------------
                                                                                                 2004         2003   
                                                                                              ----------   ----------
                                                                                                                     
ASSETS                                                                                                               
Current assets:                                                                                                      
Cash and cash equivalents .................................................................   $  12,075    $  24,503 
Short-term investments ....................................................................       7,625        7,226 
Marketable securities .....................................................................         458        1,531 
Accounts receivable, net of allowance for doubtful accounts of $2,248 and                                            
   $2,646, respectively ...................................................................       6,157        6,012 
Prepaid expenses and other current assets .................................................       5,101        4,497 
Restricted cash ...........................................................................       2,413        2,195 
                                                                                              ----------   ----------
          Total current assets ............................................................      33,829       45,964 
Investments ...............................................................................       1,988          697 
Investments, restricted ...................................................................       2,324        4,733 
Property, plant and equipment, net ........................................................      90,822      162,630 
Intangible assets, net of accumulated amortization of $3,699 and $1,997, respectively......       7,656        8,158 
Other assets ..............................................................................       1,923          100 
                                                                                              ----------   ----------
          Total assets ....................................................................   $ 138,542    $ 222,282 
                                                                                              ==========   ==========

LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                 
Current liabilities:                                                                                                 
Current portion of capital lease obligation and mortgage payable ..........................   $     555    $   1,510 
Accounts payable ..........................................................................       6,599        5,846 
Accrued liabilities .......................................................................       8,357        8,522 
Deferred revenue ..........................................................................       2,852        1,637 
                                                                                              ----------   ----------
          Total current liabilities .......................................................      18,363       17,515 
Capital lease obligations, net of current portion .........................................         121          374 
Mortgage payable ..........................................................................      19,606       19,912 
11% Senior Notes ..........................................................................      72,202      112,321 
Accrued interest - 11% Senior Notes .......................................................       3,349        5,182 
Other long term liabilities ...............................................................       8,026       10,659 
Put-option liability ......................................................................          --        2,968 
                                                                                              ----------   ----------
          Total liabilities ...............................................................     121,667      168,931 
                                                                                              ----------   ----------

Commitments and contingencies (Note 19):                                                                             

STOCKHOLDERS' EQUITY:                                                                                                
Common stock, $.01 par value; 500,000,000 shares authorized; 16,460,000                                              
    issued and outstanding, for all periods presented .....................................         165          165 
Additional paid-in capital ................................................................     100,012       97,191 
Deferred compensation .....................................................................          (8)          -- 
Accumulated other comprehensive income ....................................................       4,498        2,401 
Accumulated deficit .......................................................................     (87,792)     (46,406)
                                                                                              ----------   ----------
          Total stockholders' equity ......................................................      16,875       53,351 
                                                                                              ----------   ----------
          Total liabilities and stockholders' equity ......................................   $ 138,542    $ 222,282 
                                                                                              ==========   ==========

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

                                                          F-5                                                        

S-4/A
206th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 206th
                                                        [Enlarge/Download Table]
                         GLOBIX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS                        
                                  (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)                                 

                                                                                                              PREDECESSOR 
                                                                             SUCCESSOR COMPANY                  COMPANY   
                                                             ---------------------------------------------  --------------
                                                                                             FIVE MONTHS     SEVEN MONTHS 
                                                              YEAR ENDED      YEAR ENDED        ENDED            ENDED    
                                                             SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,     APRIL 30,  
                                                                 2004            2003            2002            2002     
                                                             -------------   -------------   -------------   -------------
                                                                                                                          
Revenue, net .............................................   $     61,190    $     60,177    $     30,723    $     51,273 
Operating costs and expenses:                                                                                             
    Cost of revenue (excluding depreciation,                                                                              
      amortization, occupancy and certain payroll) .......         19,747          19,990          10,458          22,123 
    Selling, general and administrative ..................         43,518          44,430          29,313          57,206 
    Loss on impairment of assets .........................         17,972              --              --           2,578 
    Restructuring and other charges (credits) ............             --          (1,020)             --          24,834 
    Depreciation and amortization ........................         13,828          15,523           6,060          28,115 
                                                             -------------   -------------   -------------   -------------
                   Total operating costs and expenses ....         95,065          78,923          45,831         134,856 
    Other operating income ...............................             --             345              --              -- 
                                                             -------------   -------------   -------------   -------------
Loss from operations .....................................        (33,875)        (18,401)        (15,108)        (83,583)
    Interest and financing expense .......................        (11,465)        (15,141)         (6,653)        (34,511)
    Interest income ......................................            540           1,179             787           2,024 
    Other (expense) income, net ..........................          1,667           1,232            (157)           (509)
    Gain on discharge of debt ............................          1,747           6,023              --         427,066 
    Minority interest in subsidiary ......................             --              --              --           5,778 
    Reorganization items .................................             --              --              --          (7,762)
    Fresh start accounting adjustments ...................             --              --              --        (148,569)
                                                             -------------   -------------   -------------   -------------
Income (loss) before income taxes ........................        (41,386)        (25,108)        (21,131)        159,934 
Income tax expense .......................................             --             167              --              -- 
                                                             -------------   -------------   -------------   -------------
Net income (loss) ........................................        (41,386)        (25,275)        (21,131)        159,934 
Dividends and accretion on preferred stock ...............             --              --              --          (3,178)
                                                             -------------   -------------   -------------   -------------
Net income (loss) attributable to common stockholders ....   $    (41,386)   $    (25,275)   $    (21,131)   $    156,756 
                                                             =============   =============   =============   =============
Earnings (loss) per common share:                                                                                         
Basic income(loss) per share attributable to common                                                                       
    stockholders .........................................   $      (2.51)   $      (1.54)   $      (1.28)   $       3.96 
                                                             =============   =============   =============   =============
Weighted average common shares outstanding--diluted ......     16,460,000      16,460,000      16,460,000      39,618,856 
                                                             =============   =============   =============   =============
Diluted (loss) income per share attributable to common                                                                    
    stockholders .........................................   $      (2.51)   $      (1.54)   $      (1.28)   $       3.30 
                                                             =============   =============   =============   =============
Weighted average common shares outstanding--diluted ......     16,460,000      16,460,000      16,460,000      48,507,456 
                                                             =============   =============   =============   =============

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

                                                           F-6                                                            

S-4/A
207th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 207th
                                                        [Enlarge/Download Table]
                                                 GLOBIX CORPORATION AND SUBSIDIARIES                                                
                       STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE INCOME (LOSS)                      
                                              (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)                                             

                                                                                             ACCUMULATED                            
                                                                                                OTHER                      TOTAL    
                                                                    ADDITIONAL              COMPREHENSIVE              STOCKHOLDERS'
                                                 COMMON STOCK        PAID-IN     DEFERRED       INCOME    ACCUMULATED     EQUITY    
                                              SHARES      AMOUNT     CAPITAL   COMPENSATION     (LOSS)      DEFICIT      (DEFICIT)  
                                           ------------ ---------  ----------  ------------  -----------  ------------  ------------
                                                                                                                                    
Balance, October 1, 2001                                                                                                            
  (Predecessor Company) .................   41,920,229  $    419   $ 171,176   $    (7,097)  $   (2,703)  $  (399,120)  $  (237,325)
Amortization of deferred                                                                                                            
  compensation ..........................           --        --          --         7,027           --            --         7,027 
Cancellation of restricted                                                                                                          
  stock .................................      (23,750)       --         (70)           70           --            --            -- 
Dividends and accretion on                                                                                                          
  preferred stock .......................           --        --      (3,178)           --           --            --        (3,178)
Comprehensive Income (loss):                                                                                                        
     Net income .........................           --        --          --            --           --       159,934            -- 
     Unrealized holding gains ...........           --        --          --            --        1,185            --            -- 
     Foreign currency translation                                                                                                   
         adjustments ....................           --        --          --            --       (1,807)           --            -- 
Total Comprehensive Income ..............           --        --          --            --           --            --       159,312 
Fresh start accounting adjustments ......  (25,436,479)     (254)    (74,816)           --        3,325       239,186       167,441 
                                           ------------ ---------  ----------  ------------  -----------  ------------  ------------
Balance, May 1, 2002                                                                                                                
  (Successor Company) ...................   16,460,000       165      93,112            --           --            --        93,277 
Comprehensive Income (loss):                                                                                                        
     Net loss ...........................           --        --          --            --           --       (21,131)           -- 
     Unrealized holding losses ..........           --        --          --            --       (1,430)           --            -- 
     Foreign currency translation                                                                                                   
         adjustments ....................           --        --          --            --        1,831            --            -- 
Total Comprehensive Loss ................           --        --          --            --           --            --       (20,730)
                                           ------------ ---------  ----------  ------------  -----------  ------------  ------------
Balance, September 30, 2002                                                                                                         
  (Successor Company) ...................   16,460,000       165      93,112            --          401       (21,131)       72,547 
Issuance of warrants to consultants .....           --        --       1,050            --           --            --         1,050 
Capital contribution in minority-owned                                                                                              
  subsidiary, net .......................           --        --       5,997            --           --            --         5,997 
Put-option ..............................           --        --      (2,968)           --           --            --        (2,968)
Comprehensive Income (loss):                                                                                                        
     Net loss ...........................           --        --          --            --           --       (25,275)           -- 
     Unrealized holding gains ...........           --        --          --            --          195            --            -- 
     Foreign currency translation                                                                                                   
         adjustments ....................           --        --          --            --        1,805            --            -- 
Total Comprehensive Loss ................           --        --          --            --           --            --       (23,275)
                                           ------------ ---------  ----------  ------------  -----------  ------------  ------------
Balance, September 30, 2003                                                                                                         
  (Successor Company) ...................   16,460,000       165      97,191            --        2,401       (46,406)       53,351 
Capital distribution in minority-owned                                                                                              
  subsidiary, net .......................           --        --        (202)           --           --            --          (202)
Deferred stock-based compensation .......           --        --          30           (30)          --            --            -- 
Amortization of deferred compensation ...           --        --          --            22           --            --            22 
Purchase of warrants by a consultant ....           --        --          25            --           --            --            25 
Put-option cancellation .................           --        --       2,968            --           --            --         2,968 
Comprehensive Income (loss):                                                                                                        
     Net loss ...........................           --        --          --            --           --       (41,386)           -- 
     Unrealized holding losses ..........           --        --          --            --         (168)           --            -- 
     Reclassification of unrealized                                                                                                 
         holding losses to net                                                                                                      
         realized losses ................           --        --          --            --          259            --            -- 
     Foreign currency translation                                                                                                   
         adjustments ....................           --        --          --            --        2,006            --            -- 
Total Comprehensive Loss ................           --        --          --            --           --            --       (39,289)
                                           ------------ ---------  ----------  ------------  -----------  ------------  ------------
Balance, September 30, 2004                                                                                                         
  (Successor Company) ...................   16,460,000  $    165   $ 100,012   $        (8)  $    4,498   $   (87,792)  $    16,875 
                                           ============ =========  ==========  ============  ===========  ============  ============

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

                                                                F-7                                                                 

S-4/A
208th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 208th
                                                        [Enlarge/Download Table]
                              GLOBIX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS                           
                                                       (AMOUNTS IN THOUSANDS)                                                     

                                                                                                                      PREDECESSOR 
                                                                                  SUCCESSOR COMPANY                     COMPANY   
                                                                  ------------------------------------------------  --------------
                                                                                                     FIVE MONTHS      SEVEN MONTHS
                                                                    YEAR ENDED       YEAR ENDED         ENDED            ENDED    
                                                                   SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,      APRIL 30, 
                                                                       2004             2003             2002             2002    
                                                                  --------------   --------------   --------------  --------------
                                                                                                                                  
Cash Flows From Operating Activities                                                                                              
Net Income (Loss) .............................................   $     (41,386)   $     (25,275)   $     (21,131)  $     159,934 
Operating activities:                                                                                                             
 Depreciation and amortization ................................          13,828           15,523            6,060          28,115 
 Provision for uncollectible receivables ......................             780            1,861            1,904           4,284 
 Services contributed to minority-owned subsidiary ............              --               --               --             372 
 Gain on debt discharge .......................................          (1,747)          (6,023)              --        (427,066)
 Restructuring and other charge (net of cash payment) .........              --           (1,020)              --           8,233 
 Unrealized loss (gain) on short-term investment ..............            (784)            (439)              57              -- 
 Loss on impairment of investment .............................              --               --               --             490 
 Loss on impairment of assets .................................          17,972               --               --           2,578 
 Loss (gain) on sale of marketable securities .................             249               --               --             (27)
 Amortization of debt issuance costs ..........................              --               --               --             650 
 Amortization of deferred compensation and issuance of                                                                            
    stock warrants ............................................              22            1,050               --           7,027 
 Write-off of note receivable .................................              --               --            4,078              -- 
 Minority interest in subsidiary ..............................              --               --               --          (5,778)
 Fresh start accounting adjustment ............................              --               --               --         148,569 
Changes in assets and liabilities:                                                                                                
 Decrease (increase) in accounts receivable ...................            (100)            (639)           3,565          (3,449)
 Decrease (increase) in prepaid expenses and other current                                                                        
    assets ....................................................             229            3,306            4,210          (4,574)
 Decrease (increase) in other assets ..........................            (357)             125               16              54 
 Increase (decrease) in accounts payable ......................             427           (3,195)           1,362          (5,181)
 Increase (decrease) in accrued liabilities ...................             324           (7,093)          (1,762)            497 
 Increase  in accrued interest ................................           9,367           12,359            5,500          31,431 
 Other ........................................................            (392)          (2,728)            (180)         (1,152)
                                                                  --------------   --------------   --------------  --------------
Net Cash Provided by (Used in) Operating Activities ...........          (1,568)         (12,188)           3,679         (54,993)
                                                                  --------------   --------------   --------------  --------------
Cash Flows From Investing Activities                                                                                              
 Investments in short-term and long-term investments ..........          (1,436)          (2,017)          (5,449)             -- 
 Proceeds from restricted cash and investments ................           2,366            2,329              166          24,235 
 Proceeds from sale of marketable securities ..................           1,000               --               --              64 
 Proceeds from sale of property plant and equipment ...........          48,694               --               --              -- 
 Payment for business acquired from Aptegrity (Appendix A).....          (2,287)              --               --              -- 
 Deferred acquisition cost ....................................          (1,465)              --               --              -- 
 Return on strategic investments ..............................              --               --               51             193 
 Purchase of property, plant and equipment ....................          (4,695)          (1,170)          (1,229)        (23,341)
                                                                  --------------   --------------   --------------  --------------
Net Cash Provided by (Used in) Investing Activities ...........          42,177             (858)          (6,461)          1,151 
                                                                  --------------   --------------   --------------  --------------
Cash Flows From Financing Activities                                                                                              
 Repurchase of 11% Senior Notes ...............................         (49,573)         (14,612)              --              -- 
 Proceeds from exercise of stock options and warrants, net ....              25               --               --              -- 
 Capital contribution (distribution) in minority-owned                                                                            
    subsidiary, net ...........................................            (202)           5,997               --              -- 
 Settlement of capital lease obligations ......................            (439)            (850)              --              -- 
 Repayment of long-term note payable ..........................          (2,666)              --               --              -- 
 Repayment of mortgage payable and capital lease obligation ...            (568)          (1,074)          (2,279)         (4,946)
                                                                  --------------   --------------   --------------  --------------
Net Cash Provided by (Used in) Financing Activities ...........         (53,423)         (10,539)          (2,279)         (4,946)
Effect of Exchange Rates Changes on Cash and Cash                                                                                 
    Equivalents ...............................................             386              526              (99)              8 
                                                                  --------------   --------------   --------------  --------------
Decrease in Cash and Cash Equivalents .........................         (12,428)         (23,059)          (5,160)        (58,780)
Cash and Cash Equivalents, Beginning of Period ................          24,503           47,562           52,722         111,502 
                                                                  --------------   --------------   --------------  --------------
Cash and Cash Equivalents, End Period .........................   $      12,075    $      24,503    $      47,562   $      52,722 
                                                                  ==============   ==============   ==============  ==============

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

                                                                 F-8                                                              

S-4/A
209th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 209th
                                                        [Enlarge/Download Table]
                              GLOBIX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS                           
                                                       (AMOUNTS IN THOUSANDS)                                                     

                                                                                                                      PREDECESSOR 
                                                                                  SUCCESSOR COMPANY                     COMPANY   
                                                                   ------------------------------------------------  -------------
                                                                                                      FIVE MONTHS    SEVEN MONTHS 
                                                                    YEAR ENDED        YEAR ENDED         ENDED           ENDED    
                                                                   SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     APRIL 30, 
                                                                       2004              2003             2002            2002    
                                                                   -------------     -------------    -------------  -------------
                                                                                                                                  
Supplemental Disclosure of Cash Flow Information:                                                                                 
Cash paid for interest ........................................    $      5,797      $      2,294     $        975   $      2,101 
Cash paid for income taxes ....................................    $        179      $         --     $         --   $         -- 
Non-cash investing and financing activities:                                                                                      
11% Senior Notes issued in payment of accrued interest ........    $      7,155      $     11,298     $         --   $         -- 
Equipment acquired under capital lease obligations ............    $         --      $         --     $         --   $      1,036 
Capital expenditures included in accounts payable, capital                                                                        
  liabilities and other long term liabilities .................    $         --      $         --     $        168   $        273 
Cumulative dividends and accretion on preferred stock .........    $         --      $         --     $         --   $      3,178 
Mandatorily redeemable convertible preferred stock ............    $         --      $         --     $         --   $     83,230 
Restructuring of debt .........................................    $         --      $         --     $         --   $    427,066 
Put-option ....................................................    $     (2,968)     $      2,968     $         --   $         -- 

APPENDIX A - PAYMENT FOR BUSINESS ACQUIRED FROM APTEGRITY:                                                                        

                                                                                                                      PREDECESSOR 
                                                                                  SUCCESSOR COMPANY                     COMPANY   
                                                                   ------------------------------------------------  -------------
                                                                                                      FIVE MONTHS    SEVEN MONTHS 
                                                                    YEAR ENDED        YEAR ENDED         ENDED           ENDED    
                                                                   SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     APRIL 30, 
                                                                       2004              2003             2002            2002    
                                                                   -------------     -------------    -------------  -------------
Current assets ................................................    $       (696)     $         --     $         --   $         -- 
Property, plant and equipment .................................            (738)               --               --             -- 
Current liabilities ...........................................             347                                                   
Other intangible assets .......................................          (1,200)               --               --             -- 
                                                                   -------------     -------------    -------------  -------------
                                                                   $     (2,287)     $         --     $         --   $         -- 
                                                                   =============     =============    =============  =============

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

                                                                 F-9                                                              

S-4/A
210th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 210th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

1. GENERAL                                                                      

Globix Corporation and its subsidiaries ("Globix", the "Company" or the         
"Successor Company") is a provider of Internet solutions to businesses. The     
solutions include secure and fault-tolerant Internet data centers with network  
services providing network connectivity to the Internet and Internet-based      
managed services and application services, which include co-location, dedicated 
hosting, streaming media, and messaging services. The Company currently offers  
services from facilities in New York City, New York, Fairfield, New Jersey,     
Santa Clara, California, Atlanta, Georgia and London, England.                  

The financial statements presented have been prepared by the Company in         
accordance with accounting principles generally accepted in the United States of
America and the rules and regulations of the Securities and Exchange Commission.
As a result of the application of fresh start accounting as of May 1, 2002, in  
accordance with the American Institute of Certified Public Accountants Statement
of Position No. 90-7 ("SOP 90-7"), "Financial Reporting by Entities in          
Reorganization Under the Bankruptcy Code", the Company's financial results for  
the fiscal year ended September 30, 2002 include two different bases of         
accounting and, accordingly, the operating results and cash flows of the        
Successor Company and the Predecessor Company have been separately disclosed.   
For the purposes of these financial statements, references to the "Predecessor  
Company" are references to the Company for periods prior to April 30, 2002 (the 
last day of the calendar month in which the Company emerged from bankruptcy) and
references to the "Successor Company" are references to the Company for periods 
subsequent to April 30, 2002. The Successor Company's financial statements are  
not comparable to the Predecessor Company's financial statements. Although April
25, 2002 was the effective date of Globix's emergence from bankruptcy (the      
"Effective Date"), for financial reporting convenience purposes, the Company    
accounted for the consummation of the Plan of Reorganization (the "Plan") as of 
April 30, 2002.                                                                 

The following table describes the periods presented in the financial statements 
and related notes thereto:                                                      

PERIOD                                                  REFERRED TO AS    
------                                                  --------------    

 From May 1, 2002 through September 30, 2004             "Successor Company"

   From October 1, 2001 through April 30, 2002             "Predecessor Company"

The Company has historically experienced negative cash flow from operations and 
has incurred net losses. For the year ended September 30, 2004 the Company had a
net loss of $41,386 and an accumulated deficit at September 30, 2004 of $87,792.
Our ability to generate positive cash flows from operations and achieve         
profitability is dependant upon our ability to grow our revenue while           
maintaining our current cost structure and network efficiencies. Our management 
believes that steps taken as part of our restructuring efforts to reduce        
facilities and personnel, combined with ongoing efforts to derive efficiencies  
from our network, reduced our cash outflows to a level that meets our current   
revenue rate. The Company believes that its cash and investments are sufficient 
to meet its 2005 anticipated day-to-day operating expenses, commitments, working
capital, capital expenditure and approximately $8,000 of interest payments under
its 11% Senior Notes if its Board of Directors elects to make such payment in   
cash and not in kind. However, there can be no assurance that we will be        
successful in achieving sufficient profitability, attracting new customers,     
maintaining our existing revenue levels or reducing our outstanding             
indebtedness. In addition, in the future, the Company may make acquisitions or  
repurchase its indebtedness, which, in turn, may adversely affect the Company's 
liquidity. In such cases management will have to take drastic steps to reduce   
its operating expenses to meet its then revenue base and liquidity needs. Such  
steps may include further reduction of our headcount, consolidation or          
elimination of facilities, termination of low margin customers and negotiating  
with our creditors to restructure our indebtedness mainly but not limited to our
11% senior notes.                                                               

Approximately 39% of the Company's cost of revenue for the year ended September 
30, 2004 is derived from services provided by 3 major telecommunication         
carriers. While the Company believes that most of these services can be obtained
from other alternative carriers, an interruption in services from one of these  
carriers or other suppliers could limit the Company's ability to serve its      
customers, which would adversely affect the Company's results of operations. No 
single customer comprised more than 10% of the Company's revenues for any of the
periods presented.                                                              

F-10

S-4/A
211th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 211th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

2. MERGERS AND ACQUISITIONS                                                     

On October 31, 2003, Globix acquired for cash the business, substantially all of
the assets and assumed certain liabilities of Aptegrity, Inc. ("Aptegrity"), a  
provider of web application and operations management services for a total net  
cash consideration of approximately $2,300. The acquisition was accounted for as
a purchase; accordingly, the purchase price has been allocated to the assets    
acquired. The allocation of the purchase price among the identifiable intangible
assets was based upon the Company's estimates of fair value of those assets. The
Company has recorded $800 in respect of acquired trademarks and trade names     
which are being amortized on a straight-line basis over 7 years and $400 was    
recorded in respect of customer contracts which are being amortized on a        
straight-line basis over 2 years. The operations of Aptegrity are included in   
the consolidated statements from November 1, 2003. Pro forma information has not
been provided due to immateriality of Aptegrity's results of operations.        

On July 19, 2004, Globix signed a definitive merger agreement with NEON         
Communications, Inc. ("Neon"), a privately held provider of optical networking  
services for customers in the Northeast and mid-Atlantic markets. Neon's revenue
for the year ended December 31, 2003 was $41,600. Under the merger agreement,   
holders of Neon common stock, options and warrants will receive 1.2748 shares of
Globix common stock for each share of common stock, options or warrants owned by
the holder. As a result of the merger, Neon will become a wholly owned          
subsidiary of Globix, and holders of Neon common stock and warrants will receive
approximately 27.6 million shares of Globix common stock, representing          
approximately 56.7% of the outstanding shares of common stock of the combined   
entity. In addition at the closing, the combined entity's cash will be used to  
redeem one third of Neon's preferred stock and accrued dividends at closing and 
Globix will issue convertible preferred stock for the balance. Assuming a       
December 31, 2004 closing, Neon preferred stockholders will receive in the      
aggregate approximately $5,200 in cash and approximately 2,908,614 shares of a  
class of Globix preferred stock to be created in the merger, having an aggregate
liquidation value of approximately $10,500. The new Globix preferred stock will 
vote together with the common stock and will be convertible into shares of      
Globix common stock. The Globix preferred stock will accrue dividends at a rate 
of 6% per annum and will be redeemable only at the option of Globix, and at the 
option of the holders upon a change in control.                                 

Following the merger, the Board of Globix will include 4 members of the Board of
Directors of Neon, 4 members of the current Globix Board and 1 member who       
currently serves on both the Globix and the Neon Boards.                        

The transaction is subject to a number of conditions, including approval of the 
merger by Neon stockholders, the registration of the Globix common stock and    
preferred stock to be issued in the merger and other regulatory approvals. The  
merger is also conditioned upon a debt for equity exchange where, in a private  
transaction, certain of Globix's senior secured note holders will exchange      
$12,500 in principal and accrued interest of its 2008 11% Senior Notes for      
approximately 4,545,455 shares of Globix common stock.                          

F-11

S-4/A
212th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 212th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

3. REORGANIZATION AND EMERGING FROM CHAPTER 11                                  

On March 1, 2002, the Company and two of its wholly-owned subsidiaries,         
Comstar.net, Inc. and ATC Merger Corp., filed voluntary petitions under Chapter 
11 of the U.S. Bankruptcy Code, together with a prepackaged Plan with the United
States Bankruptcy Court for the District of Delaware. The Company continued to  
operate in Chapter 11 in the ordinary course of business and received permission
from the bankruptcy court to pay its 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.                                                 

On April 8, 2002, the bankruptcy court confirmed the Plan. Effective April 25,  
2002, all conditions necessary for the Plan to become effective were satisfied  
or waived and the Company emerged from Chapter 11 bankruptcy protection.        

As of the Effective Date of the Plan, all of the Company's existing securities  
were cancelled and:                                                             

o        Each holder of the Company's 12.5% Senior Notes due 2010 (the "12.5%   
        Senior Notes"), became entitled to receive, in exchange for its claims
in respect of the 12.5% Senior Notes, its pro rata share of:  

o        $120,000 in aggregate principal amount of the Company's 11% Senior     
Secured Notes due 2008 (the "11% Senior Notes"), and          

o        13,991,000 shares of the Company's common stock, representing 85% of   
 the shares of the Company's common stock issued and outstanding
following the Effective Date of the Plan;                     

o        Each holder of shares of the Company's preferred stock outstanding     
        immediately prior to the Effective Date of the Plan became entitled to
   receive, in exchange for its claims in respect of these shares of
preferred stock, its pro rata share of 2,304,400 shares of the
         Company's common stock, representing 14% of the shares of the Company's
         common stock issued and outstanding following the Effective Date of the
Plan; and                                                     

o        Each holder of shares of the Company's common stock outstanding        
        immediately prior to the Effective Date of the Plan became entitled to
   receive, in exchange for its claims in respect of these shares of
     common stock, its pro rata share of 164,600 shares of the Company's
     common stock, representing 1% of the shares of the Company's common
        stock issued and outstanding following the Effective Date of the Plan.

A total of 16,460,000 shares of the Company's common stock and $120,000 in      
aggregate principal amount of the 11% Senior Notes were deemed to be issued and 
outstanding on the Effective Date pursuant to the terms of the Plan, and are    
deemed to be issued and outstanding for purposes of these financial statements. 
As of September 30, 2002, however, no shares of the Company's common stock or   
11% Senior Notes had been distributed. In October 2002, the Company distributed 
a total of 16,295,400 shares of common stock and $120,000 in aggregate principal
amount of 11% Senior Notes. Pursuant to the terms of a Stipulation and Order    
that the Company entered into with the lead plaintiffs in the class action      
lawsuit described in Note 19, 229,452 of these shares of common stock and $1,968
in aggregate principal amount of these 11% Senior Notes were placed in reserve  
in escrow pending the outcome of the class action lawsuit. In the event that any
judgment or settlement entered into in connection with the class action lawsuit 
requires the Company to pay an amount in excess of its liability insurance, then
the Company will be required to issue to the class action litigants and their   
attorneys all (in the event that this excess is $10,000 or greater) or a portion
of (in the event that this excess is less than $10,000) of the shares of common 
stock and 11% Senior Notes held in escrow. Distribution of the remaining 164,600
shares of common stock deemed to have been issued on the Effective Date, which  
are allocable under the terms of the Plan to the holders of the Company's common
stock outstanding immediately prior to the Effective Date of the Plan, will     
occur following the resolution of the shareholder derivative suit against the   
Company and certain former officers and directors described in Note 19.         

F-12

S-4/A
213th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 213th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

MANAGEMENT ESTIMATES                                                            

The preparation of the Company's financial statements in accordance with        
accounting principles generally accepted in the United States of America        
requires management to make estimates and assumptions. Such estimates and       
assumptions affect the reported amounts of assets, liabilities, revenue and     
expenses and related disclosures of contingent assets and liabilities.          

Significant estimates include estimates of the collectibility of accounts       
receivable, the useful lives and ultimate realizability of property, equipment, 
intangible assets, deferred tax assets and restructuring reserves. Estimates and
assumptions are reviewed periodically and the effects of revisions are reflected
in the period that they are determined to be necessary. Actual results may vary 
from these estimates under different assumptions or conditions.                 

PRINCIPLES OF CONSOLIDATION                                                     

The consolidated financial statements include the accounts of the Company and   
its subsidiaries. Included in the Company's consolidated results is a 0.01%     
owned subsidiary, 415 Greenwich GC Tenant, LLC. The Company controls all        
financial aspects of this entity. All significant intercompany accounts and     
transactions have been eliminated in consolidation.                             

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities". FIN 46 classifies entities into two groups: (1) those for which      
voting interest are used to determine consolidation; and (2) those for which    
other interests (variable interest) are used to determine consolidation. FIN 46 
deals with the identification of Variable Interest Entities ("VIE") and the     
business enterprise which should include the assets, liabilities,               
non-controlling interests, and results of activities of a VIE in its            
consolidated financial statements. FIN 46 has become effective during 2003. The 
adoption of FIN 46 did not have an effect on the Company's consolidated         
financial statements.                                                           

REVENUE RECOGNITION                                                             

Revenue consists primarily of Internet Hosting, Co-Location, Managed Services,  
Network Services and Internet Access.                                           

We recognize revenue in accordance with the Securities and Exchange Commission's
Staff Accounting Bulletin, or SAB No. 104 "Revenue Recognition " which revises  
or rescinds certain sections of SAB No. 101, "Revenue Recognition". The changes 
noted in SAB 104 did not have a material effect on the Company's consolidated   
financial statements. The Company recognizes revenue when delivery has occurred,
persuasive evidence of an agreement exists, the fee is fixed or determinable and
collectability is probable. SAB No. 104 expresses the view of the Securities and
Exchange Commission's staff in applying accounting principles generally accepted
in the United States of America to certain revenue recognition issues. Under the
provisions of SAB No. 104, set up and installation revenue are deferred and     
recognized over the estimated length of the customer relationship, which in the 
case of our business is approximately 36 months. Prior to April 30, 2002, the   
estimated length of the customer relationship was 12-18 months.                 

The Company maintains a provision for potential future credits which will be    
issued in respect of current revenues.                                          

Monthly service revenue under recurring agreements related to Internet Hosting, 
Co-Location, Network Services, Internet Access and Managed Services is          
recognized over the period the service is provided. Revenue derived from project
or event type Managed Service engagements is recognized over the life of the    
engagement. Payments received in advance of providing services are deferred     
until the period that these services are provided.                              

During the year ended September 30, 2002, the Company provided $802 and         
purchased $551 of data center services from a telecommunications operator. $318 
of the transactions billed were settled monetarily, with the balance of $445    
settled by offsetting or netting the remainder.                                 

F-13

S-4/A
214th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 214th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

COST OF REVENUE                                                                 

Cost of revenue consists primarily of telecommunications costs for Internet     
access and managed hosting and includes the cost of hardware and software       
purchased for resale to customers and payroll cost which relates to certain     
managed services. Cost of revenue excludes certain payroll, occupancy and       
depreciation and amortization. Telecommunications costs include the cost of     
providing local loop for connecting dedicated access customers to the Company's 
network, leased line and associated costs related to connecting with the        
Company's peering partners and costs associated with leased lines connecting the
Company's facilities to its backbone and aggregation points of presence.        

CONCENTRATIONS OF CREDIT RISK                                                   

Financial instruments that potentially subject the Company to concentrations of 
credit risk consist primarily of cash and cash equivalents, short-term          
investments, restricted cash, marketable securities and accounts receivable. The
Company maintains cash and cash equivalents, short-term investments and         
restricted cash with various major financial institutions, which invest         
primarily in U.S. Government instruments, high quality corporate obligations,   
certificates of deposit and commercial paper. The Company's cash and cash       
equivalent and investments in the U.S may be in excess of insured limits and are
not insured in other jurisdictions. The Company believes that the financial     
institutions that hold the Company's investments are financially sound and,     
accordingly, minimal credit risk exists with respect to these investments.      

The Company believes that concentrations of credit risk with respect to trade   
accounts receivable are limited due to the Company's large number of customers. 
The Company performs ongoing credit evaluations of its customers and maintains  
reserves for potential losses. No single customer of the Company individually   
comprised more than 10% of the Company's revenues for all periods presented.    

In December 2000, the Company received a note for $4,100 relating to the        
settlement of a lease of a data center property. This note was to be paid on    
either the sale of the property, the lease of at least 95% of the property, or  
two years from the date of the note. The obligor has indicated that it has      
insufficient funds to satisfy the debt and does not intend to make payment.     
While the Company has made demand and intends to vigorously pursue legal remedy,
in light of the financial condition of the obligor, the Company has written off 
the entire amount during the five month period ended September 30, 2002.        

Short-term investments and marketable securities are well diversified and       
accordingly minimal credit risk exists with respect to these investments.       

F-14

S-4/A
215th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 215th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH                                      

The Company considers all highly liquid investments with an original maturity of
three months or less to be cash and cash equivalents.                           

Included in restricted cash are funds held in escrow related to a mortgage on   
the Company's property located at 139 Centre Street and required share capital  
held in escrow for the Company's European subsidiaries. These funds are         
primarily invested in highly liquid investments with an original maturity of    
three months or less. The classification is determined based on the expected    
term of the collateral requirement or the availability of the funds and not the 
maturity date of the underlying securities.                                     

MARKETABLE SECURITIES                                                           

Investment in marketable equity securities covered by SFAS No. 115 "Accounting  
for Certain Investments in Debt and Equity Securities", were designated as      
available-for-sale. Accordingly, these securities are stated at fair value, with
unrealized gains/ losses reported in accumulated other comprehensive income     
(loss). Realized gain and losses are calculated based on specific identification
method. Other-than-temporary declines in value from the original cost are       
charged to operations in the period in which the loss occurs. In determining    
whether other-than- temporary decline in the market value has occurred, the     
Company considers the duration that and the extent to which market value is     
below original cost. As of September 30, 2004 no impairment has been recorded.  
At September 30, 2004 and 2003, marketable securities had a cost basis of       
approximately $1,590 and $2,800 and a balance of unrealized losses of $1,132 and
$1,226, respectively which was included in the Company's accumulated other      
comprehensive loss, a separate component of the stockholders' equity. During    
fiscal 2004 the Company sold certain marketable securities with a cost basis of 
$1,250 and fair market value of approximately $979 for a net consideration of   
approximately $1,000 resulting in a loss of $249.                               

INVESTMENTS                                                                     

Short-term investments consist of an investment in a limited partnership which  
invests in fixed income securities and certain investments which do not meet the
requirements to be reported as cash and cash equivalents. The limited           
partnership is accounted for in accordance with APB No. 18, "The Equity Method  
of Accounting for Investments in Common Stock". At September 30, 2004 and 2003  
the limited partnership had a cost basis of $5,000 and $5,000, respectively and 
the unrealized gain from applying the equity method amounted to approximately   
$380 and $523, respectively, which were recorded in the Company's consolidated  
statements of operations.                                                       

Also included in investments are investments in mortgage and asset backed       
securities which do not meet the requirements to be reported as cash and cash   
equivalents. These investments are classified as available for sale securities  
and reported at fair value, with unrealized gains and losses excluded from      
earnings and reported in other comprehensive income or loss in stockholders'    
equity. At September 30, 2004 and 2003, these investments had a cost of $3,742  
and $2,466, respectively and the balance of unrealized loss from the "mark to   
market" adjustment of $12 and $9, respectively, which was included in the       
Company's accumulated other comprehensive loss, a separate component of the     
stockholders' equity.                                                           

Included in restricted investments as of September 30, 2004 and 2003 are amounts
held in escrow related to the lease of the Company's facility located at        
Prospect House, 80 New Oxford Street, London, United Kingdom of approximately   
$2,000. In addition restricted investments as of September 30, 2003 included    
collateral funds for the note payable of $2,600. These funds are primarily      
invested in highly liquid investments with an original maturity of three months 
or less. The classification is determined based on the expected term of the     
escrow requirement and not the maturity date of the underlying securities.      
During April 2004, the Company reached an agreement with the holder of its      
$2,600 note payable to prepay the note prior to its maturity for a total        
consideration of $2,666, representing the face value of the note, accrued       
interest of $11 and a $55 settlement fee. Following the settlement the $2,600   
included in the Company's long-term restricted investment were released from    
escrow.                                                                         

ACCOUNTS RECEIVABLE                                                             

Accounts receivable are recorded at the invoiced amount and are non-interest    
bearing. At each reporting period the Company evaluates, on a specific basis,   
the economic condition of its customers and their ability and intent to pay     
their debt. If such evaluation shows that it is probable that a customer will   
not settle his full obligation, a reserve against accounts receivable in general
and administrative expense is recorded for the non-recoverable amount. The      
Company also maintains a general bad debt reserve based on the aging of its     
customer's receivables and historical trends. In addition, during each reporting
period the Company must make estimates of potential future credits, which will  
be issued in respect of current revenues. The Company analyzes historical       
credits and changes in customer demands regarding its current billings when     
evaluating credit reserves. If such analysis shows that it is probable that a   
credit will be issued, the Company reserves the estimated credit amount against 
revenues in the current period.                                                 

F-15

S-4/A
216th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 216th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

PROPERTY, PLANT AND EQUIPMENT                                                   

Property, plant and equipment are stated at depreciated historical cost adjusted
for impairment and include fresh start adjustments. All identifiable assets     
recognized in accordance with fresh start accounting were recorded at the       
Effective Date of the Plan based upon an independent appraisal. Depreciation is 
provided using the straight-line method for financial reporting purposes and    
accelerated methods for income tax purposes. The estimated useful lives of      
property are as follows:                                                        

                                                         YEARS
                                                         -------
Buildings and buildings improvements.......................   10 - 44     
Computer hardware and software and network equipment ......    2 - 7      
Office furniture and equipment ............................    3 - 7      

Leasehold improvements are amortized over the term of the lease or life of the  
asset, whichever is shorter. Maintenance and repairs are charged to expense as  
incurred. The cost of additions and betterments are capitalized. The cost and   
related accumulated depreciation of property retired or sold are removed from   
the applicable accounts and any gain or loss is taken into income.              

Software obtained for internal use is stated at depreciated historical cost     
adjusted for impairments and fresh start adjustments and is depreciated using   
the straight-line method over its estimated useful life.                        

The Company's long-lived assets are reviewed for impairment in accordance with  
Statement of Financial Accounting Standard No. 144 "Accounting for the          
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144") whenever events or
changes in circumstances indicate that the carrying amount of an asset may not  
be recoverable. Recoverability of assets to be held and used is measured by a   
comparison of the carrying amount of an asset to the future undiscounted cash   
flows expected to be generated by the assets. If such assets are considered to  
be impaired, the impairment to be recognized is measured by the amount by which 
the carrying amount of the assets exceeds the fair value of the assets.         

F-16

S-4/A
217th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 217th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

INTANGIBLE ASSETS                                                               

The Company adopted Statement of Financial Accounting Standards No. 141,        
"Business Combinations" ("SFAS 141") and Statement of Financial Accounting      
Standard No. 142, "Goodwill and other Intangible Assets "("SFAS 142") at the    
Effective Date of the Plan. SFAS 141 requires all business combinations to be   
accounted for using the purchase method of accounting and that certain          
intangible assets acquired in a business combination must be recognized as      
assets separate from goodwill. SFAS 142 addresses the recognition and           
measurement of goodwill and other intangible assets subsequent to their         
acquisition. SFAS 142 also addresses the initial recognition and measurement of 
intangible assets acquired outside of a business combination whether acquired   
individually or with a group of other assets. This statement provides that      
intangible assets with indefinite lives and goodwill will not be amortized but, 
will be tested at least annually for impairment. If impairment is indicated then
the asset will be written down to its fair value typically based upon its future
expected discounted cash flows.                                                 

For the seven month period ended April 30, 2002 goodwill amortization amounted  
to $1,141. If the Company had adopted SFAS 142 as of October 1, 2001 and        
discontinued goodwill amortization, the Company's net income and loss per common
share on a pro forma basis would have been as follows:                          

                                                        [Enlarge/Download Table]
                                                                                                        PREDECESSOR 
                                                                 SUCCESSOR COMPANY                        COMPANY   
                                                ----------------------------------------------------  --------------
                                                                                       FIVE MONTHS     SEVEN MONTHS 
                                                  YEAR ENDED         YEAR ENDED            ENDED           ENDED    
                                                 SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,     APRIL 30,  
                                                     2004               2003               2002            2002     
                                                --------------     --------------     --------------  --------------
                                                                                                                    
Net income (loss) ............................. $     (41,386)     $     (25,275)     $     (21,131)  $     159,934 
  Add back goodwill amortization ..............            --                 --                 --           1,141 

Adjusted net income (loss) ....................       (41,386)           (25,275)           (21,131)        161,075 
  Dividends and accretion on                                                                                        
    preferred stock ...........................            --                 --                 --          (3,178)
                                                --------------     --------------     --------------  --------------
Adjusted net income (loss)                                                                                          
  attributed to common stockholders ........... $     (41,386)     $     (25,275)     $     (21,131)  $     157,897 
                                                ==============     ==============     ==============  ==============
Adjusted earnings (loss) per common share:                                                                          
Basic earnings (loss) per share                                                                                     
  attributable to common stockholders ......... $       (2.51)     $       (1.54)     $       (1.28)  $        3.99 
                                                ==============     ==============     ==============  ==============
Diluted earnings (loss) per share                                                                                   
  attributable to common stockholders ......... $       (2.51)     $       (1.54)     $       (1.28)  $        3.32 
                                                ==============     ==============     ==============  ==============

Intangible assets of the Successor Company are as follows:                      

o     trademarks and trade name;                        

o     network build-out/know-how; and                   

o     customer contracts.                               

The Company amortizes intangible assets by the straight line method over their  
estimated useful lives. Trademarks and trade name are amortized over a period of
7-15 years, network build out/know how are being amortized over 8 years and the 
customer contracts are amortized over 2-3 years.                                

Intangible assets are reviewed for impairment in accordance with SFAS No. 144.  
During the seven month period ended April 30, 2002, the Company recorded an     
impairment charge of $3,221 of intangible assets related to the acquisition of  
Comstar.net, Inc., which ceased its operations. No impairment of intangible     
assets was recognized during the years ended September 30, 2004 and 2003.       

F-17

S-4/A
218th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 218th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

INCOME TAXES                                                                    

Deferred income taxes are provided in accordance with SFAS No. 109, "Accounting 
for Income Taxes" for differences between financial statement and income tax    
bases of assets and liabilities using enacted tax rates in effect in the years  
in which the differences are expected to reverse. The Company provides a        
valuation allowance on net deferred tax assets when it is more likely than not  
that these assets will not be realized. Certain tax benefits existed as of the  
Effective Date of the Plan but were offset by valuation allowances. The         
utilization of these benefits to reduce income taxes paid to U.S. Federal and   
state and foreign jurisdictions does not reduce the Company's income tax        
expense. Realization of net operating loss, tax credits and other deferred tax  
benefits from pre-emergence attributes will first reduce intangible assets until
exhausted, and thereafter will be credited to additional paid in capital.       

COMPREHENSIVE INCOME                                                            

SFAS No. 130, "Reporting Comprehensive Income", requires the reporting of       
comprehensive income in addition to net income from operations. Comprehensive   
income is a more inclusive financial reporting method that includes amounts that
historically have not been recognized in the calculation of net income.         
Comprehensive Income and Accumulated Other Comprehensive Income (Loss) includes 
net income, foreign currency translation, and unrealized gain (loss) on         
financial instruments and is included in the Consolidated Statements of         
Stockholders' Equity (Deficit).                                                 

FOREIGN CURRENCY TRANSLATION                                                    

The financial statements of the Company's foreign subsidiaries have been        
translated in accordance with SFAS No. 52, "Foreign Currency Translation". These
subsidiaries' assets and liabilities are translated into U.S. Dollars at the    
year-end rate of exchange. Income and expense items are translated at the       
average exchange rate during the year. The resulting foreign currency           
translation adjustment is included in stockholders' equity as a component of    
accumulated other comprehensive income. Transaction gains and losses are        
recorded in the consolidated statement of operations.                           

F-18

S-4/A
219th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 219th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

STOCK-BASED COMPENSATION                                                        

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation", which  
establishes a fair value based method of accounting for stock-based compensation
plans, the Company has elected to follow Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees" for recognizing stock-based       
compensation expense for financial statement purposes. For companies that choose
to continue applying the intrinsic value method, SFAS No. 123 mandates certain  
pro forma disclosures as if the fair value method had been utilized. The Company
accounts for stock based compensation to consultants in accordance with EITF    
96-18, "Accounting for Equity Instruments That Are Issued to Other Than         
Employees for Acquiring, or in Conjunction with Selling, Goods or Services" and 
SFAS No. 123.                                                                   

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based     
Compensation - Transition and Disclosure - an amendment of FASB Statement No.   
123", which provides optional transition guidance for those companies electing  
to voluntarily adopt the accounting provisions of SFAS No. 123. In addition,    
SFAS No. 148 mandates certain new disclosures that are incremental to those     
required by SFAS No. 123. The Company continued to account for stock-based      
compensation in accordance with APB No. 25.                                     

The following table illustrates the effect on income (loss) attributable to     
common stockholders and earnings (loss) per share if the Company had applied the
fair value recognition provisions of SFAS No. 123 to stock-based employee       
compensation.                                                                   

                                                        [Enlarge/Download Table]
                                                                                                         PREDECESSOR 
                                                                      SUCCESSOR COMPANY                    COMPANY   
                                                     --------------------------------------------------  ------------
                                                                                          FIVE MONTHS    SEVEN MONTHS
                                                      YEAR ENDED         YEAR ENDED          ENDED          ENDED    
                                                     SEPTEMBER 30,      SEPTEMBER 30,     SEPTEMBER 30,     APRIL 30,
                                                         2004               2003              2002           2002    
                                                     -------------     --------------     -------------  ------------

                                                                                                                     
Net income (loss), as reported attributable                                                                          
   to common stockholders ......................     $    (41,386)     $     (25,275)     $    (21,131)  $   156,756 
                                                     =============     ==============     =============  ============
Pro-forma net income (loss) attributed to                                                                            
   common stockholders .........................     $    (41,901)     $     (26,488)     $    (21,131)  $   151,621 
                                                     =============     ==============     =============  ============
Earning (loss) per share attributable to                                                                             
   common stockholders                                                                                               
Basic - as reported ............................     $      (2.51)     $       (1.54)     $      (1.28)  $      3.96 
                                                     =============     ==============     =============  ============
Basic - Pro-forma ..............................     $      (2.55)     $       (1.61)     $      (1.28)  $      3.83 
                                                     =============     ==============     =============  ============
Diluted - as reported ..........................     $      (2.51)     $       (1.54)     $      (1.28)  $      3.30 
                                                     =============     ==============     =============  ============
Diluted - Pro-forma ............................     $      (2.55)     $       (1.61)     $      (1.28)  $      3.19 
                                                     =============     ==============     =============  ============

Under SFAS No. 123 the fair value of each option grant is estimated on the date                                      
of grant using the Black-Scholes option-pricing model with the following                                             
weighted-average assumptions:                                                                                        

                                                                                                         PREDECESSOR 
                                                                      SUCCESSOR COMPANY                    COMPANY   
                                                     --------------------------------------------------  ------------
                                                                                          FIVE MONTHS    SEVEN MONTHS
                                                      YEAR ENDED         YEAR ENDED          ENDED          ENDED    
                                                     SEPTEMBER 30,      SEPTEMBER 30,     SEPTEMBER 30,    APRIL 30, 
                                                         2004               2003              2002           2002    
                                                     -------------     --------------     -------------  ------------
Expected life (in years) ...................             5.0                4.2                --            6.0     
Risk-free interest rate.....................             3.2%               2.7%               --            4.7%    
Volatility..................................             120%               128%               --            133%    
Dividend yield..............................             0.0%               0.0%               --            0.0%    

                                                          F-19                                                       

S-4/A
220th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 220th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

EARNINGS (LOSS) PER SHARE                                                       

Basic earnings or loss per share is calculated by dividing net loss attributable
to common shareholders by the weighted average number of shares of common stock 
outstanding during the period. Diluted earnings or loss per share is calculated 
by dividing net income (loss) attributable to common shareholders by the        
weighted average number of common shares outstanding, adjusted for potentially  
dilutive securities. The following table summarizes the equivalent number of    
common shares assuming the related securities that were outstanding for each of 
the periods presented had been converted, but not included in the calculation of
diluted loss per share because such shares are antidilutive:                    

                                                        [Enlarge/Download Table]
                                                                                   PREDECESSOR       
                                                  SUCCESSOR COMPANY                 COMPANY          
                                 ----------------------------------------------   ------------       
                                                                  FIVE MONTHS     SEVEN MONTHS       
                                  YEAR ENDED       YEAR ENDED        ENDED           ENDED           
                                 SEPTEMBER 30,    SEPTEMBER 30,   SEPTEMBER 30,      APRIL 30,       
                                     2004             2003            2002            2002           
                                 -------------   --------------   -------------   ------------       
                                                                                                     
Employee Stock Options........      1,184,853        1,101,756              --     10,021,258        
Warrants......................        500,000          500,000              --        194,797        
                                 -------------   --------------   -------------   ------------       
                                    1,684,853        1,601,756              --     10,216,055        
                                 =============   ==============   =============   ============       

The following is a reconciliation of basic earnings per share to diluted                             
earnings per share:                                                                                  

                                                                    PREDECESSOR COMPANY              
                                                     ------------------------------------------------
                                                             SEVEN MONTHS ENDED APRIL 30, 2002       
                                                     ------------------------------------------------
                                                       NUMERATOR          DENOMINATOR      PER SHARE 
                                                     INCOME (LOSS)           SHARES          AMOUNT  
                                                     -------------       --------------   -----------
 Basic earnings per share:                                                                           
 Net income......................................    $    159,934                                    
 Dividends and accretion on preferred stock......          (3,178)                                   
                                                     -------------       -------------               
 Net income attributable to common stockholders      $    156,756          39,618,856     $     3.96 
                                                     =============       =============    ===========

 Add back dividends on preferred stock...........           3,178           8,888,600                

 Diluted earnings per share:                                                                         
                                                     -------------       -------------               
 Net income attributable to common stockholders      $    159,934          48,507,456     $     3.30 
                                                     =============       ==============   ===========

                      F-20

S-4/A
221st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 221st
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

RECENT ACCOUNTING PRONOUNCEMENTS                                                

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on     
Derivative Instruments and Hedging Activities". SFAS No. 149 clarifies under    
what circumstances a contract with an initial net investment meets the          
characteristics of a derivative as discussed in Statement No. 133. It also      
specifies when a derivative contains a financing component that warrants special
reporting in the Consolidated Statement of Cash Flows. SFAS No. 149 amends      
certain other existing pronouncements in order to improve consistency in        
reporting these types of transactions. The new guidance is effective for        
contracts entered into or modified after June 30, 2003, and for hedging         
relationships designated after June 30, 2003. The adoption of this standard did 
not have a material impact on the Company's consolidated financial statements.  

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial    
Instruments with Characteristics of Both Liabilities and Equity". SFAS No. 150  
specifies that instruments within its scope embody obligations of the issuer and
that, therefore, the issuer must classify them as liabilities. SFAS No. 150     
requires issuers to classify as liabilities the following three types of free   
standing financial instruments: (1) mandatorily redeemable financial            
instruments; (2) obligations to repurchase the issuer's equity shares by        
transferring assets and (3) certain obligations to issue a variable number of   
shares. SFAS No. 150 defines a "freestanding financial instrument" as a         
financial instrument that (1) is entered into separately and apart from any of  
the entity's other financial instruments or equity transactions or (2) is       
entered into in conjunction with some other transaction and can be legally      
detached and exercised on a separate basis. For all financial instruments       
entered into or modified after May 31, 2003, SFAS No. 150 is effective          
immediately. For all other instruments of public companies, SFAS No. 150 goes   
into effect at the beginning of the first interim period beginning after June   
15, 2003. For contracts that were created or modified before May 31, 2003 and   
still exist at the beginning of the first interim period beginning after June   
15, 2003, entities should record the transition to SFAS No. 150 by reporting the
cumulative effect of a change in an accounting principle. SFAS No. 150 prohibits
entities from restating financial statements for earlier years presented. The   
adoption of SFAS No. 150 did not have a material impact on the Company's        
consolidated financial statements.                                              

RECLASSIFICATIONS                                                               

Certain amounts from prior years have been reclassified to conform with current 
year presentation.                                                              

5. FRESH START ACCOUNTING                                                       

In accordance with SOP 90-7, the Company determined its enterprise value as of  
the emergence date at $240,000. This amount was based upon several generally    
accepted valuation methodologies including discounted cash flows, comparable    
public company analysis and comparable mergers and acquisitions analysis. The   
tangible assets were valued using the costs and market comparables methods. The 
intangible assets were valued using the income approach and the cost approach   
methods. Certain of the following assumptions which were used by the Company in 
determining the enterprise value are highly subjective:                         

     o   3-15- year cash flow depending on the asset evaluated, with no residual
value assigned;                                               
o   Corporate income tax rate of 45%;                                 
o   Discount rate of 20%.                                             

The assigned equity values are based upon the reorganized value of the ongoing  
business and include significant estimates made by management based on          
information available as of the Effective Date. Valuation methodologies require 
the input of highly subjective assumptions. Actual future results and events    
could differ substantially from current estimates and assumptions. Any changes  
in valuation could affect the Company's balance sheet.                          

In accordance with the principles of fresh start accounting, the Company has    
adjusted the value of its assets and liabilities to their fair values as of     
April 30, 2002. The equity value of the Successor Company at May 1, 2002 was    
calculated as follows:                                                          

Enterprise Value........................................     $       240,000    
11% Senior Notes........................................            (120,000)   
Mortgage Payable........................................             (20,536)   
Capitalized Leases......................................              (6,187)   
                                                          ----------------
Equity value of Successor Company                            $        93,277    
                                                          ================

F-21

S-4/A
222nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 222nd
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The net effect of all fresh start accounting adjustments resulted in a charge of
$148,569 which is reflected in the Predecessor Company's statement of operations
for the seven month period ended April 30, 2002. The interest of $11,507 on the 
12.5% Senior Notes for the period March 1, 2002 through the Effective Date was  
not accrued in accordance with SOP 90-7.                                        

On the Effective Date of the Plan, the Company recognized a gain of $427,066    
associated with the exchange of the 12.5% Senior Notes for the 11% Senior Notes 
and shares of the Company's common stock under the Plan. As a result of the     
adoption of SFAS No. 145, "Rescission of SFAS Nos. 4, 44, and 64, Amendment of  
SFAS 13, and Technical Corrections as of April 2002", the gain was reclassified 
from extraordinary item to a gain on extinguishment of debt included in the     
Predecessor Company's Statement of Operations for the seven month period ended  
April 30, 2002                                                                  

The Successor Company's gain on discharge of debt at April 30, 2002 was         
calculated as follows:                                                          

                                                        [Enlarge/Download Table]

                                                                                                                     
Carrying value of 12.5% Senior Notes.......................................    $   600,000                           
Carrying value of related accrued interest.................................         43,750                           
Carrying value of 11% Senior Notes.........................................       (120,000)                          
Carrying value of capitalized costs associated with 12.5% Senior Notes.....        (17,398)                          
85% of equity value of Successor Company...................................        (79,286)                          
                                                                               ------------                          
     Gain on discharge of debt                                                 $   427,066                           
                                                                               ============                          

The effects of the transactions contemplated by the Plan and the application of                                      
fresh start accounting on the Company's consolidated balance sheet are as                                            
follows:                                                                                                             

                                                PREDECESSOR                                               SUCCESSOR  
                                                  COMPANY                                                  COMPANY   
                                                  APRIL 30,         DEBT                 FRESH START       APRIL 30, 
                                                    2002          DISCHARGE             ADJUSTMENTS(1)       2002    
                                               --------------   -------------         ----------------  -------------
ASSETS                                                                                                               
Cash and cash equivalents                      $      52,722    $         --          $            --   $     52,722 
Marketable securities                                  2,757              --                       --          2,757 
Accounts receivable, net                              11,959              --                       --         11,959 
Prepaid expenses and other current assets             17,264              --                   (2,024)        15,240 
Restricted cash.                                       4,018              --                       --          4,018 
                                               --------------   -------------         ----------------  -------------
       Total current assets                           88,720              --                   (2,024)        86,696 
Investments, restricted                                5,114              --                       --          5,114 
Property, plant and equipment, net                   333,063              --                 (155,693)       177,370 
Debt issuance costs, net                              18,250         (17,398)(a)                 (852)            -- 
Intangible assets, net                                    --              --                   10,155         10,155 
Other assets                                             500              --                     (208)           292 
                                               --------------   -------------         ----------------  -------------
       Total assets                            $     445,647    $    (17,398)         $      (148,622)  $    279,627 
                                               ==============   =============         ================  =============

                                                            F-22                                                     

S-4/A
223rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 223rd
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                        [Enlarge/Download Table]
                                                                       PREDECESSOR                                     SUCCESSOR 
                                                                        COMPANY                                         COMPANY  
                                                                        APRIL 30,      DEBT             FRESH START     APRIL 30,
                                                                          2002      DISCHARGE          ADJUSTMENTS(1)     2002   
                                                                       ----------   ----------         -------------   ----------
                                                                                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                   
Current portion of capital lease                                                                                                 
   obligation and mortgage payable ................................     $   5,239    $      --         $     (1,690)   $   3,549 
Accounts payable ..................................................         7,782           --                 (110)       7,672 
Accrued liabilities ...............................................        26,067       (2,713)(b)           (2,264)      21,090 
Accrued restructuring .............................................         3,122           --                   --        3,122 
                                                                       ----------   ----------         -------------   ----------
       Total current liabilities ..................................        42,210       (2,713)              (4,064)      35,433 
Liabilities not subject to compromise:                                                                                           
Capital lease obligation, net of current                                                                                         
   portion ........................................................         6,383           --               (3,499)       2,884 
Mortgage payable ..................................................        20,291           --                   --       20,291 
11% Senior Notes ..................................................            --      120,000(c)                --      120,000 
Other long-term liabilities .......................................           232           --                7,510        7,742 
                                                                       ----------   ----------         -------------   ----------
       Total liabilities not subject to compromise ................        69,116      117,287                  (53)     186,350 
Liabilities subject to compromise .................................       643,750    (643,750)(c),(d)            --           -- 
                                                                       ----------   ----------         -------------   ----------
       Total liabilities ..........................................       712,866     (526,463)                 (53)     186,350 
MANDATORILY REDEEMABLE                                                                                                           
   CONVERTIBLE PREFERRED STOCK ....................................        83,695      (83,695)(e)               --           -- 
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY ..............................      (350,914)     592,760             (148,569)      93,277 
                                                                       ----------   ----------         -------------   ----------
       Total liabilities and                                                                                                     
         stockholders' (deficit) equity ...........................     $ 445,647    $ (17,398)        $   (148,622)   $ 279,627 
                                                                        ==========   ==========        =============   ==========

(a) To remove debt issuance cost associated with the 12.5% Senior Notes.                                                         
(b) To remove accrued dividends payable on mandatorily redeemable convertible                                                    
    preferred stock.                                                                                                             
(c) To exchange 12.5% Senior Notes for 11.0% Senior Notes.                                                                       
(d) To remove accrued interest on 12.5% Senior Notes.                                                                            
(e) To remove mandatorily redeemable convertible preferred stock.                                                                
(1) To adjust assets and liabilities to fair value.                                                                              

6. REORGANIZATION ITEMS                                                                                                          

Reorganization expenses are expenses incurred by the Predecessor Company in                                                      
connection with its reorganization under Chapter 11 of the Bankruptcy Code.                                                      
Reorganization items included in the Predecessor Company's Statement of                                                          
Operations include professional fees directly related to the Predecessor                                                         
Company's bankruptcy. Reorganization expenses included in the statement of                                                       
operations were approximately $7,762 for the seven-month period ended April 30,                                                  
2002. No reorganization items were incurred by the Company in any of the other                                                   
periods presented.                                                                                                               

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS                                                                                     

                                                        SUCCESSOR COMPANY                                                        
                                                  ------------------------------                                                 
                                                          SEPTEMBER 30,                                                          
                                                  ------------------------------                                                 
                                                      2004             2003                                                      
                                                  ------------     -------------                                                 
Prepaid expenses.............................     $     4,036      $      3,797                                                  
Accrued interest income......................              16                 7                                                  
Notes receivables............................             219               152                                                  
Other........................................             830               541                                                  
                                                  ------------     -------------                                                 
                                                  $     5,101      $      4,497                                                  
                                                  ============     =============                                                 

                                      F-23                                                                                       

S-4/A
224th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 224th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

8. PROPERTY, PLANT AND EQUIPMENT                                                

Property, plant and equipment consist of the following:                         

                                                        [Enlarge/Download Table]
                                                                     SUCCESSOR COMPANY     
                                                               ----------------------------
                                                                       SEPTEMBER 30,       
                                                               ----------------------------
                                                                   2004            2003    
                                                               -----------     ------------
                                                                                           
Land.......................................................... $    1,170      $     2,713 
Building and building improvements............................     49,428           84,380 
Leasehold improvements........................................     42,486           75,286 
Computer hardware and software and network equipment..........     20,166           15,454 
Furniture and equipment.......................................      4,632            3,846 
                                                               -----------     ------------
                                                                  117,882          181,679 
Less: Accumulated depreciation and amortization...............    (27,060)         (19,136)
Add: Construction in progress.................................         --               87 
                                                               -----------     ------------
Property, plant and equipment, net............................ $   90,822      $   162,630 
                                                               ===========     ============

Depreciation expense, were $12,126, $14,069, $5,517 and $26,974 for the year    
ended September 30, 2004, the year ended September 30, 2003, the five months    
ended September 30, 2002 and the seven months ended April 30, 2002,             
respectively. During the seven month period ended April 30, 2002, the Company   
determined that impaired assets previously held for disposal were to be used in 
operations and accordingly $643 of this charge was reversed. The Company did not
record any impairment of property, plant and equipment during the year ended    
September 30, 2003.                                                             

During October 2003 the Company reached an agreement, which was subject to      
various closing conditions, to sell the property located at 415 Greenwich       
Street, New York, NY ("the Property") for total cash consideration of           
approximately $60,000. The sale of the Property was completed on January 22,    
2004. In connection with the sale the Company recorded during the year ended    
September 30, 2004, an impairment charge of $17,972 to write-down the Property  
to its market value less cost to sell of approximately $12,000, reflecting a    
$7,000 payment required to be made to a third party investor in the Property    
(See Note 9), approximately $1,800 of property taxes due in connection with the 
sale, $450 of sale related bonuses (See Note 21) and other related expenses. On 
March 3, 2004, the Company used approximately $44,000 of the net proceeds to    
repurchase $40,274 in principal amount of its outstanding 11% Senior Notes Due  
2008 at par value plus accrued interest in the amount of $3,716. The Company    
intends to use the remaining balance of the net proceeds from the sale for      
working capital purposes.                                                       

Certain computer and network equipment are recorded under capital leases that   
aggregated approximately $685 and $1,770 as of September 30, 2004 and 2003,     
respectively. Accumulated amortization on the assets recorded under capital     
leases aggregated approximately $129 and $257 as of September 30, 2004 and 2003,
respectively. As part of the sale of the Property during the year ended         
September 30, 2004, the Company paid $319 to terminate several capital lease    
obligations totaling $785. The early termination resulted in a gain of $466,    
which was offset from the impairment charge recorded as part of the sale of the 
Property. In addition, the Company purchased certain of its equipment recorded  
under capital lease for a total consideration of $120. The acquired assets had a
carrying value of approximately $213 and the related balance of the capital     
lease was $194. The transaction resulted in a net reduction of $74 to the       
balance of the Company's property and equipment. During the year ended September
30, 2003, the Company purchased certain of its equipment recorded under capital 
lease for a total consideration of $850. The acquired assets had a net carrying 
value of $1,364 and the related balance of the capital lease was $1,690. The    
transaction resulted in a net reduction of $840 in the balance of the Company's 
network equipment.                                                              

ATC Merger Corp. ("ATC Corp."), a wholly owned subsidiary of the Company, owns  
the land and building located at 139 Centre Street, New York, New York ("139    
Centre St. Building"). The nine-story building with approximately 160,000 square
feet of floor space houses the Company's corporate headquarters and one of its  
Internet data center facilities. A former owner has the right to purchase the   
Centre Street property and is entitled to additional consideration if the       
Company sells the property in an amount equal to the greater of (a) $1,000      
(subject to increase after June 1, 2018 by ten percent and an additional ten    
percent every fifth year thereafter), or (b) 10% of the gross sales price of the
property if the sales price is greater than $17,500. As to the use of the 139   
Centre St. Building to secure the Company's mortgage note see Note 15.          

F-24

S-4/A
225th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 225th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

9. MINORITY INTEREST                                                            

In September 2000, the Company purchased the Property. The Property is a        
certified historic structure eligible for historic tax credits ("Tax Credits")  
based on qualified expenditures, as defined in the Internal Revenue Code.       

In June 2001, the Company entered into an agreement whereby the Tax Credits     
generated from the renovation of the Property will be utilized by a third party 
(the "Investor") via a subsidiary (the"LLC") in consideration for a capital     
contribution to the LLC of approximately $16,549, which represents a 99.9%      
interest in the LLC. As of September 30, 2004, the LLC had received             
approximately $11,872 of such capital contribution and paid a total of $299 as  
capital distribution . As a result of the sale of the Property the Company will 
not receive the remaining balance of capital contribution or make any additional
capital distributions, see also Note 8.                                         

Although the Company's ownership of the LLC is 0.1%, the Company has            
consolidated the financial statements of the LLC since inception due to         
effective control of the LLC by the Company resulting in a minority interest in 
subsidiary in the accompanying consolidated financial statements. The following 
table reflects the summary statement of operations data for the LLC for the year
ended September 30, 2004, the year ended September 30, 2003, the five months    
ended September 30, 2002 and the seven months ended April 30, 2002:             

                                                        [Enlarge/Download Table]
                                                                                           PREDECESSOR
                                                        SUCCESSOR COMPANY                    COMPANY  
                                          ----------------------------------------------  ------------
                                                                           FIVE MONTHS    SEVEN MONTHS
                                           YEAR ENDED       YEAR ENDED        ENDED          ENDED    
                                          SEPTEMBER 30,    SEPTEMBER 30,   SEPTEMBER 30,     APRIL 30,
                                              2004             2003            2002           2002    
                                          -------------   --------------   -------------  ------------
                                                                                                      
Revenue.................................. $      1,925    $       7,700    $      3,208   $     4,492 
Net Loss.................................       (3,152)            (439)           (195)       (7,374)
                                          =============   ==============   =============  ============
Basic and diluted loss per share                                                                      
 attributable to common stockholders..... $      (0.08)   $       (0.01)   $      (0.01)  $     (0.19)
                                          =============   ==============   =============  ============

The Investor had a Put Option with the Company which provided that during the 6 
months following the 61st month after the date of the certification of the      
qualifying rehabilitation expenditures (the "Certification Date") which occurred
on September 17, 2002, the Investor may require the Company to purchase the     
Investor's interest in the LLC for an amount equal to 25% of the Investor's     
capital contribution in the LLC. If the Investor does not exercise its Put      
Option, the Company may exercise a Call Option during a period of 24 months     
following the 73rd month after the Certification Date. The Call Option allows   
the Company to acquire the Investor interest in LLC for the greater of the fair 
market value of the Investor interest in the LLC or an amount equal, on an after
tax basis, to taxes payable by the Investor upon the sale of its investment. In 
connection with the $7,000 termination payment (See Note 8), the Investor agreed
to cancel the Put Option.                                                       

The Put Option was recorded at its fair value and was marked to fair value      
through stockholders' equity. At September 30, 2003 the fair value of this      
option approximated $2,968. As a result of the cancellation of the Put Option   
during the year ended September 30, 2004, the Company reversed the put-option   
liability through stockholder's equity and accordingly the balance of the Put   
Option as of September 30, 2004 is $0.                                          

See also Note 8 as to the sale of the Property during January 2004 and the      
related payment to the Investor.                                                

F-25

S-4/A
226th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 226th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

10. INTANGIBLE ASSETS                                                           

                                                        [Enlarge/Download Table]
                                                             SUCCESSOR COMPANY                       
                                    -----------------------------------------------------------------
                                           SEPTEMBER 30, 2004                SEPTEMBER 30, 2003      
                                    -----------------------------------------------------------------
                                     GROSS CARRYING     ACCUMULATED    GROSS CARRYING     ACCUMULATED
                                         AMOUNT        AMORTIZATION        AMOUNT        AMORTIZATION
                                    ---------------    ------------    --------------    ------------
                                                                                                     
Trademarks and trade names......... $        2,372     $       358     $       1,584     $       149 
Network build-out know-how.........          7,453           2,251             7,453           1,320 
Customer contracts.................          1,530           1,090             1,118             528 
                                    ---------------    ------------    --------------    ------------
                                    $       11,355     $     3,699     $      10,155     $     1,997 
                                    ===============    ============    ==============    ============

Identifiable intangible assets amortization expense amounted to $1,702, $1,454, 
$543 and $0, for the year ended September 30, 2004, for the year ended September
30, 2003, for the five months ended September 30, 2002 and for the seven months 
ended April 30, 2002, respectively.                                             

Estimated future annual amortization expense as of September 30, 2004 is as     
follows:                                                                        

YEAR ENDING SEPTEMBER 30,                                                       
-------------------------                                                       
2005 ............................    $  1,573                                   
2006 ............................       1,167                                   
2007 ............................       1,150                                   
2008 ............................       1,150                                   
2009 ............................       1,150                                   
Thereafter.......................       1,466                                   
   ---------
Total............................    $  7,656                                   
   =========

11. ACCRUED LIABILITIES                                                         

Accrued liabilities consist of the following:                                   

                                                       SUCCESSOR COMPANY
                                                    ------------------------
                                                     SEPTEMBER 30,
                                                    ------------------------
                                                    2004          2003
                                                    ----------    ----------
Franchise tax, sales tax and property tax.........    $   1,127     $   1,663   
Salaries, benefits and commissions................        1,856         1,521   
Telecommunications accrual........................        2,429         2,370   
Negative leasehold obligation.....................          710           678   
Restructuring ....................................           25            68   
Professional fees ................................          785           586   
Other  ...........................................        1,425         1,636   
                                                    ----------    ----------
                                                   $   8,357     $   8,522
                                                    ==========    ==========

F-26

S-4/A
227th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 227th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

12. RESTRUCTURING AND OTHER                                                     

The Company recorded net restructuring of $24,834 in the seven month period     
ended April 30, 2002 in order to reduce certain Internet data center lease      
obligations and close certain network access points and network aggregation     
points, resulting in the termination of certain employees, lease obligations and
write-off of certain equipment, leasehold improvements and other costs. This    
amount is comprised of $28,395 of which $16,407 was for the write-off of        
previously escrowed lease deposit and landlord inducement and legal payments,   
$6,922 was for the write-off of equipment and leasehold improvements, $2,120 for
facilities closings and $2,946 was associated with employee terminations (148   
employees). These were offset by reversals of $3,561, related to revised        
estimates and a $1,184 vendor settlement related to an asset impaired in the    
prior year. Reversals related to contract settlement charges and facility       
closings were primarily for settling certain facility contracts and purchase    
commitments for amounts lower than originally planned. Reversals related to     
fiscal 2001 asset write downs were primarily related to adjustments to estimated
Plant, Property and Equipment impairment. Actual impairment amounts were less   
than the original estimates. The Company believes these actions will result in  
ongoing annual operating expense savings of approximately $24,000.              

The following table displays the activity and balances of the restructuring     
reserve account:                                                                

                                                        [Enlarge/Download Table]
                                                                RESTRUCTURING                                   OTHER               
                                              ---------------------------------------------------  ---------------------------------
                                                  EMPLOYEE         CONTRACT           FACILITY          ASSETS                      
                                                TERMINATION       SETTLEMENTS         CLOSING         WRITE-DOWN          TOTAL     
                                              --------------   ----------------   ---------------  ----------------  ---------------
                                                                                                                                    
 October 1, 2001 Balance                                                                                                            
  (Predecessor Company) ....................  $       1,006     $        4,050    $        1,953   $         2,182   $        9,191 
 Additional Restructure Charge..............          2,946             16,407             2,120             6,922           28,395 
 Deductions-Non-Cash........................           (889)                --              (422)           (6,922)          (8,233)
 Deductions-Cash............................         (2,520)           (18,480)           (1,669)               --          (22,669)
 Reversal to Fiscal 2001 Plan...............             --               (678)             (701)           (2,182)          (3,561)
                                              --------------   ----------------   ---------------  ----------------  ---------------
 April 30, 2002 Balance                                                                                                             
  (Predecessor Company) ....................            543              1,299             1,281                --            3,123 
 Deductions-Cash............................           (400)                --              (895)               --           (1,295)
                                              --------------   ----------------   ---------------  ----------------  ---------------
 September 30, 2002 Balance                                                                                                         
  (Successor Company) ......................            143              1,299               386                --            1,828 
 Deduction-Cash.............................           (143)              (485)             (112)               --             (740)
 Reversal of accruals.......................             --               (814)             (206)               --           (1,020)
                                              --------------   ----------------   ---------------  ----------------  ---------------
 September 30, 2003 (Successor                                                                                                      
  Company) .................................             --                 --                68                --               68 
 Deduction-Cash.............................             --                                  (43)               --              (43)
 September 30, 2004 (Successor                --------------   ----------------   ---------------  ----------------  ---------------
  Company) .................................  $          --     $           --    $           25   $            --   $           25 
                                              ==============   ================   ===============  ================  ===============

The remaining liability is expected to be settled in cash.                                                                          

                                                                F-27                                                                

S-4/A
228th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 228th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

13. OTHER LONG TERM LIABILITIES                                                 

Other long-term liabilities consist of the following:                           

                                               SUCCESSOR COMPANY
                                              --------------------------
                                               SEPTEMBER 30,
                                              --------------------------
                                             2004           2003
                                              ------------    ----------
Note payable................................      $        --     $   2,600     
Negative leasehold obligation...............            6,905         7,247     
Deferred rent...............................              829           486     
Other.......................................              292           326     
                                              ------------    ----------
                                             $     8,026     $  10,659
                                              ============    ==========

The Company had a $2,600 note payable, due November 15, 2005. The note bears    
interest, payable monthly, at the rate of Prime plus 1%. The note was           
collateralized by an irrevocable standby letter of credit. The related funds    
were included in restricted investments on the accompanying consolidated balance
sheet for September 30, 2003. During April 2004, the Company reached an         
agreement with the holder of its $2,600 note payable to prepay the note prior to
its maturity for a total consideration of $2,666, representing the face value of
the note, accrued interest of $11 and a $55 settlement fee. Following the       
settlement the $2,600 included in the Company's long-term restricted investment 
were released from escrow.                                                      

On July 21, 1999, the Company established a trust (the "Rabbi Trust") for the   
benefit of a former executive. The trust agreement was for three years beginning
in April 1999 through March 1, 2002. The agreement was amended on March 21,     
2001, and provided for payments from the Rabbi Trust commencing April 2001.     
Payments were made from the Trust until March 1 2002, when Globix and two of its
wholly-owned subsidiaries filed for Chapter 11. The Company was in litigation   
over the trust which was settled pursuant to court order confirmation of the    
settlement dated June 13, 2003. Pursuant to this settlement, Mr. Bell received a
distribution of $990 and the Company received a distribution of approximately   
$1,700. The amount of approximately $100 was retained by the trustee to cover   
the costs of winding up the trust. See also Note 19.                            

In connection with fresh start accounting at the Effective Date, the Company    
recorded a Negative Leasehold Liability associated with three of its Internet   
data centers. The Negative Leasehold Liability amount was determined by         
independent appraisal and based upon research of the local market condition in  
each market and estimation of the net effective market rental rates in          
comparison to the Company's contractual lease rates through expiration of the   
lease. Such liability will be amortized to reduce lease expense over the        
remaining life of the lease as follows:                                         

YEAR ENDING SEPTEMBER 30,                                                       
----------------------------------                                              
2005 .............................     $       710                              
2006 .............................             710                              
2007 .............................             710                              
2008 .............................             710                              
2009..............................             710                              
Thereafter........................           4,065                              
          ------------
Total.............................           7,615                              
Less: Current Portion.............            (710)                             
          ------------
Long-term Portion.................     $     6,905                              
          ============

F-28

S-4/A
229th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 229th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

14. 12.5% SENIOR NOTES AND 11% SENIOR NOTES                                     

In February 2000, the Company issued $600,000 in aggregate principal amount of  
its 12.5% Senior Notes in a private placement resulting in net proceeds of      
approximately $580,000. In connection with the offer of the 12.5% Senior Notes  
the Company incurred costs of approximately $20,000 that were being amortized   
over ten years using the effective interest method.                             

As of the Effective Date, all of the existing 12.5% Senior Notes were cancelled 
and each holder of the 12.5% Senior Notes became entitled to receive, in        
exchange for its 12.5% Senior Notes, its pro rata share of $120,000 in aggregate
principal amount of the 11% Senior Notes and 13,991,000 shares of the Company's 
common stock, representing 85% of the shares of the Company's common stock      
issued and outstanding following the Effective Date. The interest of $11,507 on 
the 12.5% Senior Notes for the period March 1, 2002 through the Effective Date  
was not accrued in accordance with SOP 90-7. See Note 5 as to the accounting    
treatment applied under the Fresh Start Accounting.                             

The Company is deemed to have issued the 11% Senior Notes on the Effective Date 
in one series that is initially limited to $120,000 aggregate principal amount  
of 11% Senior Notes. However, none of the 11% Senior Notes had been distributed 
as of September 30, 2002. In October 2002, the Company distributed $120,000 in  
aggregate principal amount of the 11% Senior Notes, which included $1,968 in    
aggregate principal amount of Senior Notes placed in reserve in escrow pursuant 
to a Stipulation and Order entered into with the lead plaintiffs in the class   
action lawsuit described in Note 19.                                            

The 11% Senior Notes will mature on May 1, 2008. The 11% Senior Notes bear      
interest at 11% per annum, payable annually in May of each year, commencing on  
May 1, 2003. Interest on the 11% Senior Notes for the first two year period     
following the initial date of issuance is payable in kind by the issuance of    
additional notes with terms identical to the 11% Senior Notes (other than the   
date of issuance) in a principal amount equal to the interest payment then due. 
For the two year period thereafter, interest is payable in cash or, at the      
Company's option when authorized by its board of directors, in additional notes 
with terms identical to the 11% Senior Notes (other than the date of issuance), 
or in any combination of cash and additional notes. For the remaining two years 
until maturity, interest is payable in cash.                                    

The 11% Senior Notes were issued under an indenture dated as of April 23, 2002  
(the "Indenture"), among the Company, HSBC Bank USA, as trustee (the "Trustee") 
and Bluestreak Digital, Inc., Gamenet Corporation, NAFT Computer Service        
Corporation, NAFT International Ltd., PFM Communications, Inc., GRE Consulting, 
Inc., 415 Greenwich GC, LLC, 415 Greenwich GC Tenant, LLC, 415 Greenwich GC MM, 
LLC, Comstar.net, Inc. and Comstar Telecom & Wireless, Inc., as the initial     
Subsidiary Guarantors. See Note 22 for additional disclosures related to the    
Subsidiary Guarantors. During 2003, the Company merged each of these subsidiary 
guarantors, other than 415 Greenwich GC, 415 Greenwich GC Tenant, LLC, 415      
Greenwich GC MM, LLC, with into the Company. Under the terms of the Indenture,  
the guarantees by 415 Greenwich GC, LLC, 415 Greenwich GC Tenant, LLC and 415   
Greenwich GC MM, LLC ceased to be effective upon the sale of the Property (See  
Note 8).                                                                        

Each holder of the 11% Senior Notes will have the right to require the Company  
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 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
50% or more of the Company's outstanding voting securities;   

o        At any time during the two-year period following the distribution of   
       the 11% Senior Notes, the individuals that comprise a majority of the
     Company's board of directors on the date of distribution of the 11%
        Senior Notes, plus any new directors elected to the Company's board of
        directors during this two-year period, cease to comprise a majority of
the Company's board of directors;                             

o        Subject to certain exceptions, the Company consolidates with or merges 
 with or into another entity, the Company sells or leases all or
 substantially all of its assets to another entity or any entity
    consolidates with or merges with or into the Company, in each case
     pursuant to a transaction in which the Company's 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 the Company's
outstanding voting stock,                                     

The Company does not believe that the proposed merger with Neon will constitute 
a change in control given the overlapping ownership between the Company and     
Neon.                                                                           

F-29

S-4/A
230th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 230th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The Indenture contains a number of covenants that impose significant operating  
and financial restrictions on the Company and its subsidiaries. These           
restrictions significantly limit, and in some cases prohibit, among other       
things, the ability of the Company and certain of its subsidiaries to incur     
additional indebtedness, create liens on assets, enter into business            
combinations or engage in certain activities with subsidiaries. As of September 
30, 2004 and 2003, the Company was in compliance with the material operating and
financial restrictions imposed upon the Company contained in the Indenture.     

During the year ended September 30, 2003, the Company repurchased in the open   
market for $14,612 a portion of its outstanding 11% Senior Notes, which had a   
principal value of approximately $19,074 and associated accrued interest of     
$1,561. As a result of the repurchase the Company recorded a gain on discharge  
of debt in the amount of $6,023. During the year ended September 30, 2003 the   
Company issued an additional $11,298 in 11% Senior Notes as payment of accrued  
interest on the 11% Senior Notes.                                               

On October 3, 2003, the Company repurchased in the open market for $5,583 a     
portion of its outstanding 11% Senior Notes, which had a principal value of     
$7,000 and associated accrued interest of $330. As a result of the repurchase   
the Company recorded a gain on discharge of debt in the amount of $1,747. On    
March 3, 2004, following the sale of the Property, the Company used             
approximately $44,000 to repurchase $40,274 in principal amount of its          
outstanding 11% Senior Notes at par value plus accrued interest in the amount of
$3,716 (See also Note 8). During the year ended September 30, 2004 the Company  
issued an additional $7,155 in 11% Senior Notes as payment of accrued interest  
on the 11% Senior Notes.                                                        

15. MORTGAGE PAYABLE                                                            

On January 25, 2000, the Company borrowed $21,000 from a financial institution  
pursuant to a mortgage note secured by the Company's property at 139 Centre     
Street, New York. Interest is payable at 9.16% (subject to adjustment on        
February 11, 2010) based on a 25 year amortization schedule. Principal and      
interest payments of $178.5 are payable monthly and any balance of the principal
and all accrued and unpaid interest is due and payable in February 2025.        

Future mortgage payments due under as of September 30, 2004 are as follows:     

YEAR ENDING SEPTEMBER 30,                                                       
-------------------------                                                       
2005..............................................      $    2,142              
2006..............................................           2,142              
2007..............................................           2,142              
2008..............................................           2,142              
2009..............................................           2,142              
Thereafter .......................................          23,269              
Less: Amount representing interest................         (14,067)             
                                          ------------
Present value of net mortgage payments............          19,912              
Less: Principal Current Portion...................            (306)             
                                          ------------
Long-term Portion.................................      $   19,606              
                                          ============

F-30

S-4/A
231st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 231st
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

16. STOCKHOLDERS' EQUITY                                                        

RESTRICTED STOCK GRANT                                                          

In December 2000, the Company granted 3,063,490 shares of restricted stock to   
certain employees and directors. The restricted stock awards vested 25% per year
over a four-year period on the anniversary date of the grant. In connection with
this restricted stock grant, the Company recorded a deferred compensation charge
of $8,999 in stockholders' equity. This deferred compensation was to be recorded
as compensation expense over the four-year vesting period. In April 2002, the   
Company's board of directors approved the vesting of 100% of the remaining      
unvested restricted shares. This resulted in a non-cash charge to compensation  
expense of $5,100 in April 2002. Compensation expense recorded in the seven     
month period ended April 30, 2002 was $7,027.                                   

STOCK OPTION PLANS                                                              

On March 14, 2003, the Company's board of directors approved the 2003 Stock     
Option Plan (the "2003 Plan"). The 2003 Plan provides for the grant of stock    
options to purchase up to 1,828,889 shares of the Company's common stock to any 
employee, officer, director, or consultant of the Company at an exercise price  
equal to at least the fair market value at the date of grant. All options       
granted under the 2003 Plan shall terminate no later than ten years from the    
date of grant, 50% of options granted under the 2003 Plan vest ratably over a   
period of up to 3 years with certain acceleration clauses while the remainder of
the 50% vest upon meeting certain financial conditions. As of September 30, 2004
644,036 options are available for future grants. While the 2003 Plan was        
approved by the Company's stockholders during the annual stockholders meeting in
February 2004 all prior grants approved by the Company's board of directors were
considered as granted for accounting purposes.                                  

Outstanding options, which are subject to meeting certain financial conditions, 
are accounted for in accordance with FIN 28, "Accounting for Stock Appreciation 
Rights and Other Variable Stock Option or Award Plans an interpretation of APB  
Opinions No. 15 and 25". These options are subject to variable accounting and   
are valued quarterly over their respective periods until all performance goals  
are satisfied or until the options are vested, forfeited or cancelled. For the  
year ended September 30, 2004 the Company recorded deferred stock compensation  
of $30 and a non-cash charge of $22 representing the amortization of deferred   
stock compensation of $22. These balances were based on the amount by which the 
common stock closing price at September 30, 2004 exceeded the exercise price of 
the unvested variable options. As of September 30, 2003 the closing price of the
common stock was below the exercise price and accordingly the Company did not   
record any expense in respect of unvested variable options for the year ended   
September 30, 2003.                                                             

Until the Effective Date the Company's shareholders approved several options    
plans. As a result of the Company's reorganization, all outstanding options and 
warrants granted under those plans were cancelled and such plans were considered
void as of the Effective Date.                                                  

Summary Stock Option Activity                                                   

The following table summarizes stock option information with respect to all     
stock options for the three years ended September 30, 2003:                     

                                                        [Enlarge/Download Table]
                                                                NUMBER OF    WEIGHTED AVERAGE
                                                                 SHARES       EXERCISE PRICE 
                                                               ------------  ----------------
                                                                                             
Options outstanding, October 1, 2001 .........................  10,394,781    $        8.66  
   Granted                                                       3,219,200             0.45  
   Canceled                                                     (3,592,723)            5.83  
                                                               ------------                  
Options outstanding, April 30, 2002 ..........................  10,021,258    $        7.03  
   Canceled                                                    (10,021,258)            7.03  
                                                               ------------                  
Options outstanding, May 1, 2002 and September 30, 2002 ......          --    $          --  
   Granted                                                       1,355,976             3.04  
   Canceled                                                       (254,220)            3.04  
                                                               -----------                   
Options outstanding, September 30, 2003 ......................   1,101,756    $        3.04  
   Granted                                                         175,000             4.10  
   Canceled                                                        (91,903)            3.04  
                                                               ------------                  
Options outstanding, September 30, 2004 ......................   1,184,853    $        3.20  
                                                               ============                  

                                      F-31                                                   

S-4/A
232nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 232nd
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The weighted average fair value of options granted was $3.41 and $1.89 for the  
years ended September 30, 2004 and 2003, respectively, and $0.41 for the seven  
months ended April 30, 2002.                                                    

On March 14, 2003, the Company's board of directors approved the sale to        
Communication Technology Advisors, LLC ("CTA") of a fully vested warrant        
exercisable for 500,000 shares of the Company's common stock at an exercise     
price of $3.00 per share. CTA provides consulting services to the Company and   
was a related party until June 24, 2003 (See Note 21). During January 2004, CTA 
purchased the warrants for $25. Following the purchase of the warrant, it will  
be immediately exercisable for a period of 10 years from the date of issuance.  
Since CTA is a provider of services to the Company the value of the warrant is  
expensed as determined by using the Black Scholes valuation model. The          
assumptions used in the Black- Scholes model include the risk free rate of      
2.92%, volatility of 133%, no dividend yield, a contractual life of 10 years and
an expected life of five years with a fair market value of $2.50. The fair value
of the warrant of $ 1,050 was expensed as part of SG&A during the year ended    
September 30, 2003. The CTA warrant is not included in the aforementioned table.

In April 1998, the Company completed a $160.0 million debt financing consisting 
of 160,000 units, each unit consisting of a note in the principal amount of one 
thousand dollars and one warrant to purchase 14.08 shares of common stock (total
of 2,252,800 shares of common stock) at a purchase price of $3.51 per share. Of 
the 2,252,800 shares underlying the original 160,000 warrants, 194,797 shares   
remained, until canceled on the Effective Date.                                 

17. 401(K) PLAN                                                                 

The Company offers its eligible U.S. employees the opportunity to participate in
a defined contribution retirement plan qualifying under the provisions of       
Section 401(k) of the Internal Revenue Code ("the 401(k) Plan"). Each employee  
is eligible to contribute, on a tax-deferred basis, a portion of annual earnings
not to exceed certain federal income tax limitations. The Company made          
discretionary contributions for all eligible employees who contribute to the    
401(k) Plan in an amount not exceeding 50% of each participant's first 4% of    
compensation contributed as elective deferrals for the Plan year. The Company   
contributed approximately $110 to the 401(k) Plan during the period ended April 
30, 2002. The Company ceased making contributions to the 401(k) Plan effective  
January 1, 2002.                                                                

F-32

S-4/A
233rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 233rd
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

18. INCOME TAXES                                                                

The Company accounts for income taxes under SFAS. No. 109, "Accounting for      
Income Taxes". This statement applies an asset and liability approach that      
requires the recognition of deferred tax assets and liabilities with respect to 
the expected future tax consequences of events that have been recognized in the 
consolidated financial statements and the Company's tax returns.                

The provision for income taxes for the periods below differs from the amount    
computed by applying the federal statutory rate due to the following:           

                                                        [Enlarge/Download Table]
                                                                                                   PREDECESSOR 
                                                              SUCCESSOR COMPANY                      COMPANY   
                                              --------------------------------------------------  -------------
                                                                                   FIVE MONTHS     SEVEN MONTHS
                                               YEAR ENDED        YEAR ENDED           ENDED            ENDED   
                                              SEPTEMBER 30,     SEPTEMBER 30,      SEPTEMBER 30,     APRIL 30, 
                                                  2004              2003               2002            2002    
                                              -------------     -------------      -------------  -------------
                                                                                                               
 Statutory Federal income tax rate......          (35)%             (35)%              (35)%            35%    
 State and local taxes, net of Federal                                                                         
     benefit............................          (10)%             (10)%              (10)%            14%    
 Other:                                            --                --                 --               5%    

 Valuation Allowance. ..................           45%               45%                45%            (54)%   
 Effective income tax rate..............           --                --                 --              --     

Significant components of the deferred tax assets and liabilities are as                                       
follows:                                                                                                       

                                                          SUCCESSOR COMPANY                                    
                                                  ----------------------------------                           
                                                            SEPTEMBER 30,                                      
                                                  ----------------------------------                           
                                                       2004                2003                                
                                                  --------------       -------------                           
Deferred tax assets:                                                                                           
Net operating loss carryforwards.............     $      85,222        $     48,318                            
Restructuring reserve........................                --                 364                            
Allowance for doubtful accounts..............               516                 589                            
Depreciation and amortization................            31,323              46,771                            
Deferred rent................................               373                 219                            
Deferred revenue.............................               272                 783                            
Other........................................                11                  31                            
                                                  --------------       -------------                           
Total deferred tax assets                               117,717              97,075                            
Less: valuation allowance....................          (117,717)            (97,075)                           
                                                  --------------       -------------                           
Total net deferred tax assets                     $          --        $         --                            
                                                  ==============       =============                           

The Company is in an accumulated loss position for both financial and income tax
reporting purposes. The Company has U.S. Federal income tax loss carryforwards  
of approximately $173,158 at September 30, 2004. These income tax loss          
carryforwards expire through 2024. The U.S. Federal income tax loss             
carryforwards were reduced upon emergence from bankruptcy due to the Internal   
Revenue Code's rules and regulations related to the cancellation of indebtedness
income that is excluded from taxable income. Since the Plan provided for        
substantial changes in the Company's ownership, the Company's use of its net    
operating loss carryforward may be limited. The Company has not yet determined  
the impact, if any that changes in ownership have had on net operating loss     
carryforwards. As of September 30, 2004, the Company also has net operating loss
carryforwards of approximately $24,335 from its United Kingdom Subsidiaries,    
which do not expire under U.K. tax rules. For financial reporting purposes,     
income tax benefits through September 30, 2004 related to both U.S. Federal and 
foreign income tax losses are fully offset by a valuation allowance due to the  
uncertainty of the Company's ability to realize income tax benefits by          
generating taxable income in the future.                                        

F-33

S-4/A
234th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 234th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The Company's emergence from bankruptcy in fiscal 2002 did not create a new tax 
reporting entity. Accordingly, the adjustments required to adopt fresh start    
accounting are not applicable for the Company's tax reporting and therefore,    
deferred tax items were recognized concurrently with the recognition of the     
respective fresh start accounting adjustments. In addition pursuant to SOP No.  
90-7, reversals of the valuation allowance recorded against deferred tax assets 
that existed as of the emergence date will first reduce intangibles until       
exhausted and thereafter are reported as additional paid in capital as opposed  
to income tax expense. The balance of the valuation allowance for which this    
treatment is required was approximately $80,400 at September 30, 2004 and 2003. 

19. COMMITMENTS AND CONTINGENCIES                                               

Leases                                                                          

The Company has minimum monthly usage/maintenance levels with certain of its    
telecommunications carriers expiring in various years through 2009. The Company 
also leases certain of its facilities and various equipment under non-cancelable
operating leases expiring in various years through 2017. Total lease expense for
under operating leases for the year ended September 30, 2004, the year ended    
September 30, 2003, the seven months ended April 30, 2002 and for the five      
months ended September 30, 2002 was $6,502, $5,800, $6,101 and $2,993,          
respectively.                                                                   

Future minimum payments due under these operating leases and telecommunications 
carrier usage commitments as of September 30, 2004 are as follows:              

YEAR ENDING SEPTEMBER 30,            TELECOM          LEASES          TOTAL     
-----------------------------    -------------    ------------    --------------
2005.........................     $     9,738     $     6,777     $      16,515 
2006.........................           7,947           6,863            14,810 
2007.........................           3,962           6,810            10,772 
2008.........................           3,842           6,826            10,668 
2009.........................              75           6,875             6,950 
Thereafter...................              --          41,878            41,878 
                                 -------------    ------------    --------------
Total                             $    25,564     $    76,029     $     101,593 
                                 =============    ============    ==============

Capital Lease Obligation                                                        

Future minimum lease payments due under capital leases as of September 30, 2004 
are as follows:                                                                 

YEAR ENDING SEPTEMBER 30,                                                       
-------------------------                                                       
2005..............................................      $      249              
2006..............................................             121              
Less: Amount representing interest................             (--)             
                                           -----------
Present value of net minimum lease payments.......             370              
Less: Principal Current Portion...................            (249)             
                                           -----------
Long-term Portion.................................      $      121              
                                           ===========

Rentals Due From Third Parties                                                  

As of September 30, 2004, we leased to third parties office space in our New    
York building for periods ranging between two to six years and subleased space  
in our London offices for periods ranging between three to ten years. Lease     
income for the year ended September 30, 2004 and 2003 was approximately $1,640  
and $430. Lease income for the five months ended September 30, 2002 and the     
seven months ended April 30, 2002 were immaterial.                              

F-34

S-4/A
235th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 235th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

As of September 30, 2004, future minimum rental and sublease income are as      
follows:                                                                        

YEAR ENDING SEPTEMBER 30,                                                       
-----------------------------                                                   
2005.........................         $   1,645                                 
2006.........................             1,720                                 
2007.........................             1,308                                 
2008.........................               957                                 
2009.........................               760                                 
Thereafter...................             2,112                                 
      ----------
Total                                 $   8,502                                 
      ==========

Letters of Credit                                                               

As of September 30, 2003 the Company had collateralized letters of credit       
aggregating to $2,600. The related funds are included in restricted cash and    
investments on the accompanying consolidated balance sheet for September 30,    
2003. Following the payment of the long-term note payable in April 2004, the    
collateral was cancelled, see also Note 13.                                     

Employment and Other Contractual Agreements                                     

Peter K. Stevenson                                                              

Effective April 15, 2002, the Company entered into an employment agreement with 
Peter K. Stevenson for his services as the Company's President and Chief        
Executive Officer. Mr. Stevenson's employment agreement expired in July 2003,   
and was extended until July 31, 2004 subject to extension for successive six    
month periods with the mutual consent of Globix and Mr. Stevenson. Mr.          
Stevenson's base salary is $308 per year. Mr. Stevenson is also eligible for an 
annual bonus equal to up to 50% of his base salary which is contingent upon the 
Company meeting certain performance targets and a bonus contingent on the       
success the Company may have in the purchase or sale of certain assets or       
disposition or acquisition of certain business in sums to be determined by the  
Company's compensation committee. In addition, under the terms of Mr.           
Stevenson's employment agreement, Mr. Stevenson was granted options to acquire  
548,667 shares of the Company's common stock. As of September 30, 2004 and 2003 
all of Mr. Stevenson's options were fully vested.                               

Mr. Stevenson's employment agreement provides that in the event that the Company
terminates his employment for any reason other than cause, if Mr. Stevenson     
terminates his employment for good reason or if Mr. Stevenson's employment      
terminates as a result of his death or permanent disability, then Mr. Stevenson 
is entitled to a years' salary.                                                 

Contingencies                                                                   

On January 28, 2002, a derivative suit was filed in the United States District  
Court for the Southern District of New York against the Company, as nominal     
defendant, and certain of our current and former directors and officers. The    
action is entitled Susan Boney, Individually and Derivatively on behalf of      
Nominal Defendant Globix Corp, Plaintiff v. the named former Board of Directors 
(pre-Bankruptcy), Defendants and Globix Corp, a Delaware Corporation, Nominal   
Defendant. Plaintiffs brought the action against the former board and certain   
executives seeking damages and expenses for breach of fiduciary duty for        
violations of federal and state securities laws alleging misrepresentations of  
Globix's financial performance from 2000 through 2001. We believe that the      
allegations in this lawsuit are without merit and we intend to vigorously defend
against them. In addition, the plaintiff has not pursued her claims since the   
filing of the lawsuit. Although there can be no assurance as to the outcome or  
effect of this lawsuit, we do not believe, based on currently available         
information, that the ultimate liabilities, if any, resulting from this lawsuit 
will have a material adverse impact on our business, financial condition,       
results of operations or cash flows.                                            

On August 12, 2004, the United States District Court for the Southern District  
of New York approved the settlement of a class action lawsuit entitled In re    
Globix Corp Securities Litigation, No. 02-CV-00082. This lawsuit named as       
defendants Globix and our former officers Marc Bell, Peter Herzig (who remains a
director of Globix) and Brian Reach, and asserted claims under sections 10(b)   
and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated     
thereunder on behalf of all persons or entities who purchased our securities    
between November 16, 2000 and December 27, 2001. The lawsuit alleged that the   
defendants failed to disclose the true state of the Company's financial         
condition during this period. Under the settlement, which remains subject to    
appeal, the Company has agreed to pay $3,500 (all of which would be covered by  
insurance) to settle all claims against it. A motion for reconsideration of the 
fee award has been filed by those plaintiffs' law firms whose fees were not     
included in the settlement. Although there can be no assurance as to the outcome
of the motion, the Company does not believe that the ultimate liabilities, if   
any, resulting from this appeal will have a material adverse impact on our      
business, financial condition, results of operations or cash flows.             

F-35

S-4/A
236th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 236th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

On June 25, 2002, we entered into a Stipulation and Order with the lead         
plaintiffs in the class action lawsuit. The Stipulation and Order provides that 
229,452 shares of our common stock and $1,968 in aggregate principal amount of  
the 11% Senior Notes will be held in escrow pending the outcome of the class    
action lawsuit. In the event that any judgment or settlement entered into in    
connection with the class action lawsuit requires us to pay an amount in excess 
of our liability insurance, we will be required to issue to the class action    
litigants and their attorneys all (in the event that this excess is $10,000 or  
greater) or a portion of (in the event that this excess is less than $10,000)   
the shares of our common stock and the 11% Senior Notes being held in escrow.   
Based on the court approval of the settlement agreement, the Company does not   
believe that the shares of common stock and 11% Senior Notes that are being held
in escrow are likely to be distributed to the class action litigants and their  
attorneys.                                                                      

On June 12, 2002, Robert B. Bell, a former officer and director of the Company, 
filed a complaint in the United States District Court for the Southern District 
of New York, entitled Robert B. Bell v. Arnold M. Bressler, as Trustee, and     
Globix Corporation, alleging breach of contract claims related to the failure to
make payments under a trust, which the Company refers to as the Rabbi Trust,    
that Globix formed pursuant to an employment agreement with Mr. Bell. In        
addition, in connection with the same underlying issues, on July 24, 2002 the   
Company filed a complaint in the United States Bankruptcy Court for the District
of Delaware entitled Globix Corporation v. Arnold N. Bressler, as Trustee of the
Globix Corporation Rabbi Trust and Robert B. Bell. Subsequently, these          
litigations were consolidated in the United States Bankruptcy Court matter.     

This consolidated action was settled on June 13, 2003. As a result of the       
settlement, Mr. Bell received a distribution of approximately $990 and Globix   
received a distribution of approximately $1,700 from the Rabbi Trust.           

On February 6, 2003, a putative derivative suit was filed in New York State     
Supreme Court (County of New York) against the Company, as nominal defendant,   
and Lehman Brothers Inc., Chase Securities, Inc., Credit Suisse First Boston    
Corporation, Merrill Lynch Pierce Fenner & Smith Incorporation, Salomon Smith   
Barney Inc. and ABN Amro Securities LLC (as successor to ING Barings, LLC), the 
initial purchasers in our February 2000 offering of the 12.5% Senior Notes. The 
suit alleges that the underwriting discount granted to the initial purchasers of
the 12.5% Notes violated Section 5-531 of the New York General Obligations Law, 
which limits the amount that can be charged by a loan broker. On March 6, 2003, 
the plaintiff and the initial purchasers entered into a tolling agreement that  
would result in the dismissal of the action without prejudice pending action on 
a motion to dismiss an amended complaint submitted in a similar case involving  
debt securities issued by another corporation. On March 13, 2003, the court     
dismissed the action without prejudice. On July 17, 2003, the plaintiff and the 
initial purchasers extended their tolling agreement to allow the plaintiff to   
re-file a complaint against the Company at any time during a period of ten days 
following the disposition on appeal in the case involving the other corporation.
On February 2, 2004, the case against the other corporation was decided against 
the plaintiff and accordingly no further action has been taken against the      
Company.                                                                        

On November 12, 2003, the Company was served with a complaint filed in the      
United States Court for Southern District of New-York, entitled Alfred G.       
Binford v. Globix Corporation, alleging breach of contract claims related to the
failure to make payments under an employment letter, as amended, seeking damages
in the amount of $2,113. Although there can be no assurance as to the outcome or
effect of this lawsuit, we do not believe, based on currently available         
information, that the ultimate liabilities, if any, resulting from this lawsuit 
will have a material adverse impact on our business, financial condition,       
results of operations or cash flows. The Company has accrued its estimated      
liability. A court date is expected in the second quarter of fiscal 2005.       

From time to time Globix is involved in legal proceedings in the ordinary course
of our business operations. Although there can be no assurance as to the outcome
or effect of any legal proceedings to which the Company is a party, the Company 
does not believe, based on currently available information, that the ultimate   
liabilities, if any, arising from any such legal proceedings would have a       
material adverse impact on our business, financial condition, results of        
operations or cash flows.                                                       

F-36

S-4/A
237th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 237th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

20. SEGMENT INFORMATION                                                         

The Company reports segment information under SFAS No. 131, "Disclosures about  
Segments of an Enterprise and Related Information". Effective April 1, 2001 and 
for the fiscal year ended September 30, 2001, the Company began to evaluate its 
results of operations based on one operating segment. Previously the Company    
reported under two operating segments.                                          

                                                        [Enlarge/Download Table]
                                                                                                       PREDECESSOR 
                                                                    SUCCESSOR COMPANY                    COMPANY   
                                                   -------------------------------------------------  -------------
                                                                                        FIVE MONTHS    SEVEN MONTHS
                                                    YEAR ENDED        YEAR ENDED           ENDED           ENDED   
                                                   SEPTEMBER 30,     SEPTEMBER 30,     SEPTEMBER 30,     APRIL 30, 
                                                       2004               2003             2002            2002    
                                                   -------------     -------------     -------------  -------------
                                                                                                                   
Revenues:                                                                                                          
      United States ..........................     $     35,537      $     36,833      $     20,410   $     37,747 
      Europe (mainly the United Kingdom) .....           25,653            23,344            10,313         13,526 
                                                   -------------     -------------     -------------  -------------
      Consolidated ...........................     $     61,190      $     60,177      $     30,723   $     51,273 
                                                   =============     =============     =============  =============

Operating income (loss):                                                                                           
      United States ..........................     $    (37,755)     $    (22,631)     $    (15,069)  $    (54,433)
      Europe (mainly the United Kingdom) .....            3,880             4,230               (39)       (29,150)
                                                   -------------     -------------     -------------  -------------
      Consolidated ...........................     $    (33,875)     $    (18,401)     $    (15,108)  $    (83,583)
                                                   =============     =============     =============  =============

Long-lived assets:                                                                                                 
      United States ..........................     $     64,978      $    137,279      $    148,559                
      United Kingdom .........................           25,844            25,351            26,151                
                                                   -------------     -------------     -------------               
      Consolidated ...........................     $     90,822      $    162,630      $    174,710                
                                                   =============     =============     =============               

Although the Company operates in one operating segment, there are 4 major                                          
service lines as detailed in the table below. Data for fiscal year 2002 has not                                    
been provided due to impracticability.                                                                             

                                                                 SUCCESSOR COMPANY                                 
                                                          -----------------------------                            
                                                           YEAR ENDED      YEAR ENDED                              
                                                          SEPTEMBER 30,   SEPTEMBER 30,                            
                                                              2004            2003                                 
                                                          -------------   -------------                            
Internet Hosting and Co-Location.....................     $     23,760    $     26,048                             
Managed Services.....................................           18,996          13,342                             
Network Services and Internet Access.................           17,483          19,034                             
Hardware and Software Sales, DSL and Other ..........              951           1,753                             
                                                          -------------   -------------                            
Revenue, net                                              $     61,190    $     60,177                             
                                                          =============   =============                            

                                      F-37                                                                         

S-4/A
238th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 238th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

21. RELATED PARTY TRANSACTIONS                                                  

CONSULTING AGREEMENT WITH COMMUNICATION TECHNOLOGY ADVISORS                     

The Company and Communication Technology Advisors LLC ("CTA"), are parties to a 
consulting agreement. Jared E. Abbruzzese, who was a member of the Company's    
board of directors as of September 30, 2002 and resigned during the year ended  
September 30, 2003, is the Founder and Chairman of CTA and is actively engaged  
in all aspects of CTA's business.                                               

Under this agreement, the Company engaged CTA to act as the Office of the Chief 
Restructuring Officer, providing the Company with a wide range of business      
advisory services. As consideration for the services provided by CTA, the       
Company pays CTA a monthly fee of $65. The Company also reimburses CTA for its  
out-of-pocket expenses incurred in connection with rendering services to the    
Company during the term of the agreement. In addition to the monthly fee and    
expense reimbursement, CTA is also entitled to a success fee in the amount of   
$1,500 upon the achievement of certain success milestones. On August 14, 2004,  
CTA waived any rights that it might have to the success fee with respect to the 
proposed merger with Neon and accordingly no accrual for the success fee was    
required as of September 30, 2004.                                              

CTA was originally introduced to the Company as a financial advisor to the      
unofficial committee of holders of the 12.5% Senior Notes prior to the          
commencement of the Company's Chapter 11 case. CTA received a total of $594 in  
fees in connection with its service as financial advisor to the unofficial      
committee and to the Company and was reimbursed a total of $46 for out-of-pocket
expenses through September 30, 2002. As a result of this engagement, the Company
was introduced to Peter K. Stevenson, currently the Company's president and     
Chief Executive Officer, who was among several CTA representatives providing    
advisory services to the unofficial committee and to several other clients of   
CTA unrelated to the Company. Mr. Stevenson does not own an equity interest in  
CTA, nor is he actively consulting for or employed by CTA.                      

Neither CTA, nor any of its principals or affiliates as of September 30, 2002 or
thereafter was a stockholder of the Company, nor does it hold any debt of the   
Company (other than indebtedness as a result of consulting fees and expense     
reimbursement owed to CTA in the ordinary course under its existing agreement   
with the Company). See Note 16 for warrant granted by the Company to CTA.       

>From September 2002 through December 2002, CTA subleased office space from Net 
One Group, Inc., a company founded by Mr. Stevenson. CTA paid a total of $4.8 in
rent to Net One Group under the sublease.                                       

CTA has advised the Company that in connection with the conduct of its business 
in the ordinary course it routinely advises clients in, and appears in          
restructuring cases involving, telecommunications companies throughout the      
country. CTA has also advised the Company that certain holders of the Company's 
common stock and/or debt securities and/or certain of their respective          
affiliates or principals are current clients of CTA in matters unrelated to the 
Company, former clients of CTA in matters unrelated to the Company and          
affiliates of clients who are (or were) represented by CTA in matters unrelated 
to the Company.                                                                 

The consulting services described above were approved by a majority of the      
Company's disinterested directors.                                              

For the years ended September 30, 2004 and 2003, the Company recorded in respect
of CTA, consulting expenses and reimbursement of expenses of $827 and $810,     
respectively. Although CTA continues to provide the Company with ongoing        
consulting services, it is no longer considered a related party as of September 
30, 2004 and 2003.                                                              

BONUSES PAYMENT AS PART OF THE SALE OF THE PROPERTY                             

As part of the sale of the Property (See Note 8), the Company paid bonuses of   
$450 to certain of the Company's Executive Officers and employees, which        
included a $169 payment to the Chairman of the Board of Directors for his       
contributions in connection with the sale and $169 payment to the Company's     
Chief Executive Officer.                                                        

LIFE INSURANCE AND DISABILITY FOR PETER K. STEVENSON                            

Peter K. Stevenson, the Company's President and Chief Executive Officer,        
receives life insurance and disability insurance benefits in excess of the      
benefits that are offered to the Company's other employees. These benefits are  
payable to an entity controlled by Mr. Stevenson. The premiums for these        
benefits totaled $6.3 for the five month period ended September 30, 2002. No    
further amounts were paid during fiscal years 2003 and 2004. These benefits were
approved by a majority of the Company's disinterested directors.                

F-38

S-4/A
239th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 239th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

22. GUARANTEES                                                                  

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),        
"Guarantors Accounting and Disclosure Requirements for Guarantees, Including    
Indirect Guarantees of Indebtedness of Others". FIN 45 requires a liability to  
be recognized at the time a company issues a guarantee for the fair value of the
obligations assumed under certain guarantee agreements. Additional disclosures  
about guarantee agreements are also required in the interim and annual financial
statements. The adoption of FIN 45 did not have an effect on the Company's      
results of operations or financial position.                                    

Guaranty to the Investor                                                        

As part of the sale of the Property (See Note 8), the Company guaranteed to     
indemnify and hold the Investor harmless from any adverse consequences, that the
Investor may suffer by reason of any non-compliance by the Company, that        
directly impaired his ability to use the Historic Tax Credits ("HTC"),          
associated with the Property. The guaranty is limited to the amount of the HTC  
used by the Investor estimated at approximately $10,160. The Company estimated  
the fair value of the guaranty as immaterial based on a discounted cash-flow    
model.                                                                          

Subsidiary Guarantors                                                           

Under the terms of the indenture governing the 11% Senior Notes, the following  
subsidiaries of the Company have fully and unconditionally and jointly and      
severally guaranteed the full and prompt performance of the Company's           
obligations under the 11% Senior Notes and the Indenture, including the payment 
of principal of and premium, if any, on and interest on the 11% Senior Notes:   
Bluestreak Digital, Inc., Gamenet Corporation, Naft Computer Service            
Corporation, Naft International Ltd., PFM Communications, Inc., GRE Consulting, 
Inc., 415 Greenwich GC, LLC, 415 Greenwich GC Tenant, LLC, 415 Greenwich GC MM, 
LLC, Comstar.Net, Inc. and Comstar Telecom & Wireless, Inc. The Company merged  
each of these subsidiary guarantors, other than 415 Greenwich GC, LLC, 415      
Greenwich GC Tenant, LLC and 415 Greenwich GC MM, LLC, with and into the        
Company. Under the terms of the Indenture, the guarantees by 415 Greenwich GC,  
LLC, 415 Greenwich GC Tenant, LLC and 415 Greenwich GC MM, LLC ceased to be     
effective upon the sale of the Property (See Note 8).                           

23. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS                        

The carrying value of cash, cash equivalents, restricted cash, receivables,     
payables, and current portion of capital lease obligation and mortgage payable  
included in the consolidated balance sheets approximate their fair value due to 
the their short-term maturity.                                                  

The fair value of marketable securities and investments are based on quoted     
market prices.                                                                  

The fair market value of the 11% Senior Notes as of September 30, 2004 is       
approximately $58,000 based on the repurchase price paid by the Company on      
October 3, 2003 and current bids the Company received from unaffiliated parties 
to buy-back their 11% Senior Notes (see Note 14).                               

F-39

S-4/A
240th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 240th
 GLOBIX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

24. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)                               

                                                        [Enlarge/Download Table]
                                                                           SUCCESSOR COMPANY                           
                                                    -------------------------------------------------------------------
                                                                              QUARTER ENDED                            
                                                    -------------------------------------------------------------------
                                                     DECEMBER 31,       MARCH 31,         JUNE 30,        SEPTEMBER 30,
                                                         2003             2004              2004              2004     
                                                    -------------     -------------     -------------     -------------
                                                                                                                       
Net revenues ...................................... $     14,385      $     15,029      $     15,729      $     16,047 
Operating costs and expenses:                                                                                          
   Cost of revenues (excluding depreciation,                                                                           
    amortization, payroll and occupancy shown                                                                          
    below) ........................................        4,876             4,974             4,935             4,962 
   Selling, general and administrative ............       10,944            10,740            10,870            10,964 
   Loss on impairment of assets ...................       17,313               659                --                -- 
   Depreciation and amortization ..................        3,371             3,473             3,519             3,465 
                                                    -------------     -------------     -------------     -------------
Total operating costs and expenses ................       36,504            19,846            19,324            19,391 
Loss from operations: .............................      (22,119)           (4,817)           (3,595)           (3,344)
   Interest and financing expense, net ............       (3,274)           (2,921)           (2,366)           (2,364)
   Other income (expense) .........................          297               899               412                59 
   Gain on debt discharge .........................        1,747                --                --                -- 
                                                    -------------     -------------     -------------     -------------
Loss before income taxes ..........................      (23,349)           (6,839)           (5,549)           (5,649)
Income tax expense ................................           --                35                21               (56)
                                                    -------------     -------------     -------------     -------------
Net loss attributable to common stockholders ...... $    (23,349)     $     (6,874)     $     (5,570)     $     (5,593)
                                                    =============     =============     =============     =============
Basic and diluted loss per share attributed to                                                                         
 common stockholders .............................. $      (1.42)     $      (0.42)     $      (0.34)     $      (0.34)
                                                    =============     =============     =============     =============

                                                                           SUCCESSOR COMPANY                           
                                                    -------------------------------------------------------------------
                                                                              QUARTER ENDED                            
                                                    -------------------------------------------------------------------
                                                     DECEMBER 31,       MARCH 31,         JUNE 30,        SEPTEMBER 30,
                                                         2003             2004              2004              2004     
                                                    -------------     -------------     -------------     -------------
Net revenues ...................................... $     16,480      $     15,368      $     14,519      $     13,810 
Operating costs and expenses:                                                                                          
   Cost of revenues (excluding depreciation,                                                                           
    amortization, payroll and occupancy shown                                                                          
below) ............................................        5,624             5,274             4,601             4,491 
   Selling, general and administrative ............       11,891            12,570             9,253            10,716 
   Restructuring charges ..........................                             --                --            (1,020)
   Depreciation and amortization ..................        3,727             4,116             4,057             3,623 
                                                    -------------     -------------     -------------     -------------
Total operating costs and expenses ................       21,242            21,960            17,911            17,810 
                                                    -------------     -------------     -------------     -------------
   Other operating income .........................                            345                                     
Loss from operations: .............................       (4,762)           (6,247)           (3,392)           (4,000)
   Interest and financing expense, net ............       (3,516)           (3,214)           (3,463)           (3,769)
   Other income (expense) .........................          182               204               220               626 
   Gain on debt discharge .........................        2,727             2,044             1,154                98 
   Minority interest in subsidiary ................          108               120               105              (333)
                                                    -------------     -------------     -------------     -------------
Net loss before income taxes ......................       (5,261)           (7,093)           (5,376)           (7,378)
Income tax expense ................................                                                                167 
                                                    -------------     -------------     -------------     -------------
Net loss attributable to common stockholders ...... $     (5,261)     $     (7,093)     $     (5,376)     $     (7,545)
                                                    =============     =============     =============     =============
Basic and diluted loss per share attributed to                                                                         
 common stockholders .............................. $      (0.32)     $      (0.43)     $      (0.33)     $      (0.46)
                                                    =============     =============     =============     =============

                                                        F-40                                                           

S-4/A
241st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 241st
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS                                 

                                                        [Enlarge/Download Table]
                 COLUMN A                    COLUMN B             COLUMN C           COLUMN D      COLUMN E 
-----------------------------------------  -------------  -----------------------  ------------  -----------
                                                                  ADDITIONS                                 
                                                          -----------------------                           
                                            BALANCE AT    CHARGES TO     CHARGES                 BALANCE AT 
                                           BEGINNING OF   COSTS AND      TO OTHER                  END OF   
                                              PERIOD       EXPENSES      ACCOUNTS  DEDUCTIONS      PERIOD   
                                           ------------   ----------     --------  ----------    ---------- 
                                                                                                            
Allowance for Doubtful Accounts                                                                             

Predecessor Company (October 1,                                                                             
2001 to April 30, 2002) .................     8,052         4,284           94       (9,618)        2,812   

Successor Company (May 1, 2002                                                                              
to September 30, 2002) ..................     2,812         1,904           80       (2,231)        2,565   

Successor Company (October 1,                                                                               
2002 to September 30, 2003) .............     2,565         1,997           24       (1,940)        2,646   

Successor Company (October 1,                                                                               
2003 to September 30, 2004) .............     2,646           780           24       (1,202)        2,248   

Deferred Tax Valuation Allowance                                                                            

Predecessor Company (October 1,                                                                             
2001 to April 30, 2002) .................   167,421        40,400       66,021     (193,402)       80,440   

Successor Company (May 1, 2002                                                                              
to September 30, 2002) ..................    80,440         9,737           --           --        90,177   

Successor Company (October 1,                                                                               
2002 to September 30, 2003) .............    90,177         6,898           --           --        97,075   

Successor Company (October 1,                                                                               
2003 to September 30, 2004) .............    97,075        20,642           --           --       117,717   


                                        F-41

S-4/A
242nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 242nd
                                                                [Download Table]
                          INDEX TO FINANCIAL STATEMENTS                         

                            NEON COMMUNICATIONS, INC.                           
                        CONSOLIDATED FINANCIAL STATEMENTS                       
                  YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003                  
            NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2004 (UNAUDITED)           

                                                                                
Report of independent registered public accounting firm - BDO Seidman, LLP  F-43

Report of independent auditors - Arthur Andersen LLP                        F-44

Consolidated financial statements:                                              

   Balance sheets                                                           F-45

   Statements of operations                                                 F-46

   Statements of preferred stock and stockholders' equity                   F-47

   Statements of cash flows                                                 F-48

   Notes to consolidated financial statements                               F-49

                                      F-42                                      

S-4/A
243rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 243rd
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders of                                                          
NEON Communications, Inc.                                                       
Westborough, Massachusetts                                                      

We have audited the accompanying consolidated balance sheets of NEON            
Communications, Inc. and subsidiaries as of December 31, 2003 and 2002, and the 
related consolidated statements of operations, preferred stock and stockholders'
equity and cash flows for the years then ended. These financial statements are  
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.                   

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

As discussed in Note 3, the Company emerged from Chapter 11 bankruptcy on       
December 20, 2002, pursuant to a plan of reorganization confirmed by the        
Bankruptcy Court by order dated November 13, 2002. The Company has recorded this
transaction as of December 31, 2002. Accordingly, the accompanying consolidated 
financial statements of the successor company have been prepared in conformity  
with fresh start accounting provisions of the AICPA's Statement of Position     
("SOP") 90-7, "Financial Reporting by Entities in Reorganization Under the      
Bankruptcy Code," issued November 19, 1990. In accordance with the requirements 
of SOP 90-7, the reorganized company has been accounted for as a new entity (the
"Successor Company") with assets, liabilities and a capital structure having    
carrying values not comparable with any prior periods of the Predecessor        
Company.                                                                        

As discussed in Note 4, the Company changed the manner in which it accounts for 
goodwill and other intangible assets upon adoption of the accounting standards  
in Statement of Financial Accounting Standards ("SFAS") No. 142 on January 1,   
2002.                                                                           

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of NEON Communications,
Inc. and subsidiaries as of December 31, 2003 and 2002 and the consolidated     
results of their operations and their cash flows for the years then ended, in   
conformity with accounting principles generally accepted in the United States of
America.                                                                        

/s/ BDO Seidman, LLP                                                            

Boston, Massachusetts                                                           
March 23, 2004                                                                  

F-43

S-4/A
244th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 244th
Provided below, pursuant to Rule 2-02(e) of Regulation S-X, is a copy of the    
accountants report issued by Arthur Andersen LLP, our former independent public 
accountants, in connection with the filing of our Annual Report on Form 10-K for
the year ended December 31, 2001 as amended by Amendment No. 1 on Form 10-K/A   
filed on April 30, 2001. THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR      
ANDERSEN IN CONNECTION WITH THE FILING OF THIS JOINT PROXY STATEMENT/PROSPECTUS.
We are unable to obtain a reissued accountants report from Arthur Andersen, and 
we will be unable to obtain future accountants reports from Arthur Andersen,    
because Arthur Andersen has discontinued its auditing practice. This means that 
we will also be unable to obtain consents to incorporate any financial          
statements audited by Arthur Andersen into registration statements that we may  
file in the future. Accordingly, investors will not be able to sue Arthur       
Andersen pursuant to section 11(a) (4) of the Securities Act with respect to any
such registration statements and, therefore, ultimate recovery on a successful  
claim may be limited. The ability of investors to recover from Arthur Andersen  
may also be limited as a result of Arthur Andersen's financial condition or     
other matters resulting from the various civil and criminal lawsuits against    
that firm.                                                                      

REPORT OF INDEPENDENT AUDITORS

To the Stockholders of                                                          
NEON Communications, Inc.                                                       
Westborough, Massachusetts                                                      

We have audited the accompanying consolidated balance sheets of NEON            
Communications, Inc. and subsidiaries as of December 31, 2000 and 2001, and the 
related consolidated statements of operations, stockholders' equity and cash    
flows for each of the three years ended December 31, 2001. These financial      
statements are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

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

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of NEON Communications,
Inc. and subsidiaries as of December 31, 2000 and 2001 and the results of their 
operations and their cash flows for each of the three years ended December 31,  
2001 in conformity with accounting principles generally accepted in the United  
States of America.                                                              

The accompanying consolidated financial statements have been prepared assuming  
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is projecting an operating loss for 2002 of   
approximately $3 million and will not generate sufficient cash flow from        
operations to fully fund operating costs, capital expenditures and debt service 
for the year. To conserve cash for operations, the Company elected not to make  
payments on an equipment note which gives the lender the right to accelerate the
due date of its note and could trigger cross-acceleration provisions in NEON    
Optica's senior debt (see Note 7). These factors raise significant doubt about  
the Company's ability to continue as a going concern. Management's plans in     
regard to these matters are also described in Note 1. The financial statements  
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts, including the Company's investment in property and   
equipment ($238,040,852), or the amount and classification of liabilities that  
might result should the Company be unable to continue as a going concern.       

/s/ Arthur Andersen LLP                                                         

Boston, Massachusetts                                                           
April 12, 2002                                                                  

F-44

S-4/A
245th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 245th
                                                        [Enlarge/Download Table]
                                               NEON COMMUNICATIONS, INC.                                              
                                              CONSOLIDATED BALANCE SHEETS                                             

                                                                              DECEMBER 31,               SEPTEMBER 30,
                                                                        2002                2003            2004      
----------------------------------------------------------------------------------------------------------------------
                                                                                                         (UNAUDITED)  
                                                                                                                      
ASSETS                                                                                                                

CURRENT ASSETS:                                                                                                       
   Cash and cash equivalents                                      $  19,054,987      $  14,934,102      $  11,319,861 
   Short-term restricted investments (Note 4)                         2,556,627          8,254,915          8,256,305 
   Accounts receivable, net of reserves of approximately                                                              
     $1,512,000 and  $2,291,000 and $1,797,000 in 2002,                                                               
     2003 and 2004, respectively (Note 4)                             1,969,819          1,799,123          3,667,511 
   Prepaid expenses and other current assets                          1,463,731          2,225,185            936,403 
----------------------------------------------------------------------------------------------------------------------

     Total current assets                                            25,045,164         27,213,325         24,180,080 
----------------------------------------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT, net (Note 6)                                137,312,417        136,605,867        137,776,057 

OTHER ASSETS, net (Note 7)                                            2,765,514          3,189,223          3,686,006 
----------------------------------------------------------------------------------------------------------------------

     Total assets                                                 $ 165,123,095      $ 167,008,415      $ 165,642,143 
======================================================================================================================

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY                                                                 

CURRENT LIABILITIES:                                                                                                  
   Accounts payable                                               $   5,170,877      $   3,685,991      $   6,060,074 
   Accrued expenses (Note 14)                                         8,194,577          8,902,788          9,996,471 
   Deferred revenue (Note 4)                                          1,954,230          2,273,483          2,439,288 
----------------------------------------------------------------------------------------------------------------------

     Total current liabilities                                       15,319,684         14,862,262         18,495,833 
----------------------------------------------------------------------------------------------------------------------

DEFERRED REVENUE, net of current portion (Note 4)                    14,131,196         14,857,995         13,998,659 
----------------------------------------------------------------------------------------------------------------------

OTHER LONG-TERM LIABILITIES (Notes 2 and 11)                          1,425,469          1,767,655          1,878,699 
----------------------------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES (Note 12)                                                                               
----------------------------------------------------------------------------------------------------------------------

PREFERRED STOCK (Note 8), $0.001 par value; 30,000,000 shares                                                         
 authorized:                                                                                                          
   Redeemable preferred stock - 21,354,000 shares authorized;                                                         
     no shares issued or outstanding                                         --                 --                 -- 
   12% Series A cumulative convertible preferred stock -                                                              
     2,500,000 shares authorized; 1,101,887 shares issued                                                             
     and outstanding (at liquidation value)                          12,441,028         13,978,739         15,261,986 
----------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY (Note 8):                                                                                        
   Common stock, $0.001 par value; 100,000,000 shares                                                                 
      authorized, 15,536,250, 15,771,872 and 15,775,863                                                               
      shares issued and outstanding in 2002, 2003 and                                                                 
      2004, respectively                                                 15,537             15,772             15,776 
   Subscription receivable                                              (62,452)                --                 -- 
   Additional paid-in capital                                       121,852,633        122,574,354        121,292,231 
   Accumulated deficit                                                       --         (1,048,362)        (5,301,041)
----------------------------------------------------------------------------------------------------------------------

     Total stockholders' equity                                     121,805,718        121,541,764        116,006,966 
----------------------------------------------------------------------------------------------------------------------

     Total liabilities, preferred stock and stockholders'                                                             
       equity                                                     $ 165,123,095      $ 167,008,415      $ 165,642,143 
======================================================================================================================

See accompanying notes to consolidated financial statements.                                                          

                                                          F-45                                                        

S-4/A
246th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 246th
                                                        [Enlarge/Download Table]
                                                      NEON COMMUNICATIONS, INC.                                                     
                                                CONSOLIDATED STATEMENTS OF OPERATIONS                                               

                                                                YEARS ENDED DECEMBER 31,                     NINE MONTHS ENDED      
                                                      PREDECESSOR      PREDECESSOR      SUCCESSOR              SEPTEMBER 30,        
                                                        COMPANY          COMPANY         COMPANY             SUCCESSOR COMPANY      
                                                          2001            2002             2003            2003            2004     
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                (UNAUDITED)         
                                                                                                                                    
REVENUES (Note 4):                                                                                                                  
   Network services                                   $  23,274,823   $  30,507,541   $  37,516,681   $  27,754,580   $  31,927,778 
   Other services                                         3,275,822       3,166,672       4,071,627       3,081,765       3,871,006 
------------------------------------------------------------------------------------------------------------------------------------

     Total revenues                                      26,550,645      33,674,213      41,588,308      30,836,345      35,798,784 

EXPENSES:                                                                                                                           
   Cost of revenues                                      17,099,583      17,688,266      20,887,915      14,454,518      19,596,322 
   Selling, general and administrative                   25,026,073      17,750,466      16,521,960      12,806,313      12,808,402 
   Depreciation and amortization (Note 4)                18,994,543      23,318,867       8,999,491       6,645,606       7,911,408 
   Write-down of subscription receivable (Note 5)        60,000,000              --              --              --              -- 
------------------------------------------------------------------------------------------------------------------------------------

     Total expenses                                     121,120,199      58,757,599      46,409,366      33,906,437      40,316,132 
------------------------------------------------------------------------------------------------------------------------------------

     Loss from operations                               (94,569,554)    (25,083,386)     (4,821,058)     (3,070,092)     (4,517,348)

OTHER INCOME (EXPENSE):                                                                                                             
   Interest and other income                              3,329,722         446,540         569,590         423,020         266,536 
   Interest and other expense                           (25,441,568)    (17,108,091)        (15,200)             --          (1,867)
------------------------------------------------------------------------------------------------------------------------------------

     Total other income (expense), net                  (22,111,846)    (16,661,551)        554,390         423,020         264,669 
------------------------------------------------------------------------------------------------------------------------------------

LOSS BEFORE BENEFIT FROM INCOME TAXES,                                                                                              
  EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT                                                                                         
  OF CHANGE IN ACCOUNTING PRINCIPLE                    (116,681,400)    (41,744,937)     (4,266,668)     (2,647,072)     (4,252,679)

BENEFIT FROM INCOME TAXES (Note 2)                               --              --       1,287,322       1,287,322              -- 
------------------------------------------------------------------------------------------------------------------------------------

LOSS BEFORE EXTRAORDINARY ITEMS AND CUMULATIVE                                                                                      
  EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE             (116,681,400)    (41,744,937)     (2,979,346)     (1,359,750)     (4,252,679)
------------------------------------------------------------------------------------------------------------------------------------

EXTRAORDINARY ITEMS:                                                                                                                
   Reorganization items (Note 3)                                 --      26,513,191              --              --              -- 
    Gain on acquisition, net of income tax expense                                                                                  
       of $1,287,322 (Note 2)                                    --              --       1,930,984       1,930,984              -- 
------------------------------------------------------------------------------------------------------------------------------------

        Total extraordinary items                                --      26,513,191       1,930,984       1,930,984              -- 
------------------------------------------------------------------------------------------------------------------------------------

INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE                                                                                    
  IN ACCOUNTING PRINCIPLE                              (116,681,400)    (15,231,746)     (1,048,362)        571,234      (4,252,679)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING                                                                                           
  PRINCIPLE (Note 4)                                             --     (72,311,911)             --              --              -- 
------------------------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS)                                     $(116,681,400)  $ (87,543,657)  $  (1,048,362)  $     571,234   $  (4,252,679)
====================================================================================================================================

See accompanying notes to consolidated financial statements.                                                                        

                                                                 F-46                                                               

S-4/A
247th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 247th
                                                        [Enlarge/Download Table]
                                                  NEON COMMUNICATIONS, INC.                                                 
                             CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS' EQUITY                            

                                              PREFERRED STOCK                  COMMON STOCK         RESTRICTED COMMON STOCK 
                                              ---------------                  ------------         ----------------------- 
YEARS ENDED DECEMBER 31,                                                                                                    
2001, 2002 AND 2003 AND                                LIQUIDATION                                                          
NINE MONTHS ENDED SEPTEMBER 30, 2004          SHARES      VALUE            SHARES      PAR VALUE      SHARES      PAR VALUE 
--------------------------------------------------------------------   -----------------------------------------------------
                                                                                                                            
BALANCE, December 31, 2000 (predecessor)          --   $        --       18,753,870    $ 187,539     2,580,412    $ 25,804  
   Exercise of common stock options               --            --              780            8            --          --  
   Issuance costs for common stock                                                                                          
     transaction                                  --            --               --           --            --          --  
   Amendment of stock purchase                                                                                              
     agreement and write down of                                                                                            
     subscription receivable (Note 5)             --            --        1,193,440       11,934    (1,193,440)    (11,934) 
   Beneficial conversion related to                                                                                         
     issuance of convertible notes                --            --               --           --            --          --  
   Receipt of assets due under stock                                                                                        
     purchase agreement (Note 5)                  --            --               --           --            --          --  
   Net loss                                       --            --               --           --            --          --  
--------------------------------------------------------------------   -----------------------------------------------------

BALANCE, December 31, 2001 (predecessor)          --            --       19,948,090      199,481     1,386,972      13,870  
   Forgiveness of subscription                                                                                              
     receivable (Note 5)                          --            --               --           --            --          --  
   Impairment of subscription                                                                                               
     receivable (Note 5)                          --            --               --           --            --          --  
   Receipt of assets due under stock                                                                                        
     purchase agreement (Note 5)                  --            --               --           --            --          --  
   Net loss                                       --            --               --           --            --          --  
   Cancellation of old common stock                                                                                         
     pursuant to the Plan of                                                                                                
     Reorganization (Note 3)                      --            --      (19,948,090)    (199,481)   (1,386,972)    (13,870) 
   Elimination of deficit upon adoption                                                                                     
     of fresh start reporting (Note 3)            --            --               --           --            --          --  
   Issuance of new common stock                                                                                             
     pursuant to the Plan of                                                                                                
     Reorganization (Note 8)                      --            --       13,984,712       13,985            --          --  
   Issuance of new preferred stock                                                                                          
     (Note 8)                              1,101,887    12,396,198               --           --            --          --  
   Issuance of new common stock to                                                                                          
     Northeast Utilities (Note 11)                --            --        1,551,538        1,552            --          --  
   Accretion of dividends on preferred                                                                                      
     stock (Note 8)                               --        44,830               --           --            --          --  
--------------------------------------------------------------------   -----------------------------------------------------

BALANCE, December 31, 2002 (successor)     1,101,887    12,441,028       15,536,250       15,537            --          --  
   Payment received on subscription                                                                                         
     receivable                                   --            --               --           --            --          --  
   Stock based compensation                                                                                                 
     associated with stock options                                                                                          
     issued (Note 9)                              --            --               --           --            --          --  
   Stock-based compensation                                                                                                 
     associated with issuance of                                                                                            
     warrants (Note 8)                            --            --               --           --            --          --  
   Sale of common stock to Northeast                                                                                        
     Utilities (Note 11)                          --            --          235,622          235            --          --  
   Accretion of dividends on                                                                                                
     preferred stock (Note 8)                     --     1,537,711               --           --            --          --  
   Net loss                                       --            --               --           --            --          --  
--------------------------------------------------------------------   -----------------------------------------------------

BALANCE, December 31, 2003 (successor)     1,101,887    13,978,739       15,771,872       15,772            --          --  
   Accretion of dividends on                                                                                                
     preferred stock (Note 8)                                                                                               
     (unaudited)                                  --     1,283,247               --           --            --          --  
   Exercise of common stock options                                                                                         
     (unaudited)                                  --            --            3,991            4            --          --  
   Net loss (unaudited)                           --            --               --           --            --          --  

BALANCE, September 30, 2004 (successor)                                                                                     
  (unaudited)                              1,101,887   $15,261,986       15,775,863    $  15,776            --    $     --  
====================================================================   =====================================================

(CONTINUED BELOW)                                                                                                           

                                                            F-47a                                                           

S-4/A
248th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 248th
                                                        [Enlarge/Download Table]
                                          NEON COMMUNICATIONS, INC.                                          
                     CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS' EQUITY                     
                                                 (CONTINUED)                                                 

YEARS ENDED DECEMBER 31,                                                                                     
2001, 2002 AND 2003 AND                     SUBSCRIPTION      PAID-IN         ACCUMULATED     STOCKHOLDERS'  
NINE MONTHS ENDED SEPTEMBER 30, 2004         RECEIVABLE       CAPITAL           DEFICIT          EQUITY      
------------------------------------------------------------------------------------------------------------ 
                                                                                                             
BALANCE, December 31, 2000 (predecessor)   $(167,431,217)   $ 289,445,281    $ (86,305,534)   $  35,921,873  
   Exercise of common stock options                   --            7,309               --            7,317  
   Issuance costs for common stock                                                                           
     transaction                                      --         (285,350)              --         (285,350) 
   Amendment of stock purchase                                                                               
     agreement and write down of                                                                             
     subscription receivable (Note 5)         60,000,000               --               --       60,000,000  
   Beneficial conversion related to                                                                          
     issuance of convertible notes                    --        1,150,000               --        1,150,000  
   Receipt of assets due under stock                                                                         
     purchase agreement (Note 5)              79,859,985               --               --       79,859,985  
   Net loss                                           --               --     (116,681,400)    (116,681,400) 
------------------------------------------------------------------------------------------------------------ 

BALANCE, December 31, 2001 (predecessor)     (27,571,232)     290,317,240     (202,986,934)      59,972,425  
   Forgiveness of subscription                                                                               
     receivable (Note 5)                      10,000,000               --               --       10,000,000  
   Impairment of subscription                                                                                
     receivable (Note 5)                       4,162,440               --               --        4,162,440  
   Receipt of assets due under stock                                                                         
     purchase agreement (Note 5)              13,408,792               --               --       13,408,792  
   Net loss                                           --               --      (87,543,657)     (87,543,657) 
   Cancellation of old common stock                                                                          
     pursuant to the Plan of                                                                                 
     Reorganization (Note 3)                          --     (290,317,240)              --     (290,530,591) 
   Elimination of deficit upon adoption                                                                      
     of fresh start reporting (Note 3)                --               --      290,530,591      290,530,591  
   Issuance of new common stock                                                                              
     pursuant to the Plan of                                                                                 
     Reorganization (Note 8)                          --      112,486,015               --      112,500,000  
   Issuance of new preferred stock                                                                           
     (Note 8)                                    (62,452)              --               --          (62,452) 
   Issuance of new common stock to                                                                           
     Northeast Utilities (Note 11)                    --        9,411,448               --        9,413,000  
   Accretion of dividends on preferred                                                                       
     stock (Note 8)                                   --          (44,830)              --          (44,830) 
------------------------------------------------------------------------------------------------------------ 

BALANCE, December 31, 2002 (successor)           (62,452)     121,852,633               --     121,805,718   
   Payment received on subscription                                                                          
     receivable                                   62,452               --               --           62,452  
   Stock based compensation                                                                                  
     associated with stock options                                                                           
     issued (Note 9)                                  --          120,147               --          120,147  
   Stock-based compensation                                                                                  
     associated with issuance of                                                                             
     warrants (Note 8)                                --          711,650               --          711,650  
   Sale of common stock to Northeast                                                                         
     Utilities (Note 11)                              --        1,427,635               --        1,427,870  
   Accretion of dividends on                                                                                 
     preferred stock (Note 8)                         --       (1,537,711)              --      (1,537,711)  
   Net loss                                           --               --       (1,048,362)      (1,048,362) 
------------------------------------------------------------------------------------------------------------ 

BALANCE, December 31, 2003 (successor)                --      122,574,354       (1,048,362)     121,541,764  
   Accretion of dividends on                                                                                 
     preferred stock (Note 8)                                                                                
     (unaudited)                                      --       (1,283,247)              --       (1,283,247) 
   Exercise of common stock options                                                                          
     (unaudited)                                      --            1,124               --            1,128  
  Net loss (unaudited)                                --               --       (4,252,679)      (4,252,679) 
-------------------------------------------------------------------------------------------------------------
BALANCE, September 30, 2004 (successor)                                                                      
  (unaudited)                              $          --    $ 121,292,231    $  (5,301,041)   $ 116,006,966  
============================================================================================================ 

See accompanying notes to consolidated financial statements.                                                 

                                                    F-47b                                                    

S-4/A
249th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 249th
                                                        [Enlarge/Download Table]
                                                     NEON COMMUNICATIONS, INC.                                                    
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS                                              

                                                               YEARS ENDED DECEMBER 31,            NINE MONTHS ENDED SEPTEMBER 30,
                                                      PREDECESSOR     PREDECESSOR       SUCCESSOR                                 
                                                        COMPANY         COMPANY          COMPANY           SUCCESSOR COMPANY      
                                                         2001            2002             2003           2003             2004    
==================================================================================================================================
                                                                                                              (UNAUDITED)         
                                                                                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                             
   Net loss                                         $(116,681,400)  $ (87,543,657)  $  (1,048,362)  $     571,234   $  (4,252,679)
   Adjustments to reconcile net loss to net cash                                                                                  
    used in operating activities:                                                                                                 
   Write-down of subscription receivable (Note 5)      60,000,000              --              --              --              -- 
   Cumulative effect of change in accounting                                                                                      
     principle (Note 4)                                        --      72,311,911              --              --              -- 
   Gain on acquisition (Note 2)                                --              --      (3,218,306)     (3,218,306)             -- 
   Noncash stock-based compensation expense                                                                                       
     (Note 9)                                                  --              --         120,147              --              -- 
   Loss (gain) on disposal of property and                                                                                        
     equipment                                         (1,489,785)        110,319              --         (12,903)        (13,226)
   Amortization of prepaid right-of-way fees                                                                                      
     (Note 7)                                           4,388,246       3,610,139         387,369         290,527         290,527 
   Depreciation and amortization (Note 4)              18,994,543      23,318,867       8,999,491       6,645,606       7,911,408 
   Reorganization items (Note 3)                               --     (32,720,640)             --              --              -- 
   Changes in current assets and current                                                                                          
    liabilities, net of acquisitions:                                                                                             
     Accounts receivable                               (2,044,385)      2,800,298         343,233      (1,361,255)     (1,868,388)
     Prepaid expenses and other current assets         (1,171,366)       (180,867)        (30,841)       (344,231)      1,288,784 
     Accounts payable                                   7,494,237       4,452,525          (4,095)       (183,136)      1,784,789 
     Accrued expenses                                   7,878,164       6,032,788        (487,210)       (613,483)      1,093,681 
     Deferred revenue                                  12,142,888        (782,236)      1,046,052       1,383,262        (976,649)
----------------------------------------------------------------------------------------------------------------------------------

      Net cash provided by (used in) operating                                                                                    
        activities                                    (10,488,858)     (8,590,553)      6,107,478       3,157,315       5,258,247 
----------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                             
 Proceeds from sale of property and equipment           4,034,830          99,820              --          12,903         111,710 
 Purchase of property and equipment                   (41,916,091)     (8,494,813)     (8,292,941)     (5,705,991)     (8,785,920)
 Cash acquired from acquisition, net of cash paid                                                                                 
  (Note 2)                                                     --              --       4,520,115       4,520,115              -- 
 Decrease (increase) in other assets                   (3,046,604)      1,882,133        (766,780)       (409,797)       (787,310)
----------------------------------------------------------------------------------------------------------------------------------

      Net cash used for investing activities          (40,927,865)     (6,512,860)     (4,539,606)     (1,582,770)     (9,461,520)
----------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                             
  Increase (decrease) in accounts payable -                                                                                       
    communications network                               (370,078)     (3,674,166)     (1,480,791)       (242,736)        589,294 
  Proceeds from issuance of convertible debt           26,500,000              --              --              --              -- 
  Payments of long-term obligations                    (5,781,250)             --              --              --              -- 
  (Increase) decrease in restricted cash and                                                                                      
    investments                                        21,049,452      11,697,553      (5,698,288)     (5,696,502)         (1,390)
  Proceeds from stock subscription receivable           2,240,589       1,207,152          62,452          62,452              -- 
  Net proceeds from issuance of preferred stock                --      12,333,746              --              --              -- 
  Proceeds from sale of common stock                           --              --       1,427,870       1,427,870           1,128 
  Payment of common stock issuance costs                 (285,350)             --              --              --              -- 
  Proceeds from exercise of common stock options            7,317              --              --              --              -- 
----------------------------------------------------------------------------------------------------------------------------------

      Net cash (used in) provided by                                                                                              
        financing activities                           43,360,680      21,564,285      (5,688,757)     (4,448,916)        589,032 
----------------------------------------------------------------------------------------------------------------------------------

NET (DECREASE) INCREASE IN CASH AND CASH                                                                                          
  EQUIVALENTS                                          (8,056,043)      6,460,872      (4,120,885)     (2,874,371)     (3,614,241)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR           20,650,158      12,594,115      19,054,987      19,054,987      14,934,102 
----------------------------------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD            $  12,594,115   $  19,054,987   $  14,934,102   $  16,180,616   $  11,319,861 
==================================================================================================================================

SUPPLEMENTAL CASH FLOW DISCLOSURES (Note 16)                                                                                      
==================================================================================================================================

See accompanying notes to consolidated financial statements.                                                                      

                                                               F-48                                                               

S-4/A
250th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 250th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     NATURE OF BUSINESS AND BASIS OF PRESENTATION                             

NATURE OF BUSINESS                                                              

NEON Communications, Inc. (the "Company" or "NEON") and its subsidiaries are    
engaged in the ownership, management, operation and installation of fiber optic 
telecommunication networks. The Company is a leading provider of advanced       
optical networking solutions and services in the Northeast and Mid-Atlantic     
regions of the United States.                                                   

To date, the Company has recorded revenues principally from network transport   
and related services contracts. The market for fiber optic telecommunications in
which the Company operates is changing rapidly due to technological             
advancements, the introduction of new products and services, the increasing     
demands placed on equipment in worldwide telecommunications networks and the    
demand for telecommunications capacity compared to the supply currently         
available.                                                                      

FACTORS AFFECTING COMPARABILITY OF FINANCIAL INFORMATION                        

As a consequence of the implementation of fresh start reporting effective on    
December 31, 2002 (Note 3), the financial information presented in the          
consolidated statements of operations, and consolidated statements of cash flows
for the years ended December 31, 2001 and 2002 is generally not comparable to   
the financial information for prior or subsequent periods. The presentation of  
financial information of the "Predecessor Company" represents the Company's     
financial information for the specified periods prior to the Company's adoption 
of fresh start reporting.                                                       

INTERIM FINANCIAL INFORMATION                                                   

The consolidated financial statements as of September 30, 2004 and for the nine 
months ended September 30, 2004 and 2003 are unaudited. In the opinion of       
management, the unaudited financial statements include all adjustments          
(consisting of normal recurring accruals) necessary for a fair presentation of  
the financial position, results of operations and cash flows for the interim    
periods presented. The results of operations for the periods ended September 30,
2004 and 2003 are not necessarily indicative of the operating results to be     
expected for the full year. Additionally, certain disclosures have been omitted 
for the interim periods. The accompanying footnotes contain unaudited data      
applicable to these interim periods.                                            

2.     BUSINESS COMBINATIONS                                                    

ACQUISITION OF TRANSCOM                                                         

On September 12, 2003, the Company acquired Columbia Transmission Communications
Corporation ("Transcom") from Columbia Energy Group, a wholly owned subsidiary  
of NiSource, Inc. Transcom owns a diverse dark fiber network that runs from New 
York City to Washington, D.C. Additionally, since the transaction resulted in   
negative goodwill, all long-term assets were written down to a zero value in    
accordance with SFAS No. 141, "Accounting for the Impairment or Disposal of     
Long-Lived Assets".                                                             

The aggregate purchase price for Transcom of approximately $1,058,000 consisted 
of $500,000 in cash and approximately $558,000 in direct acquisition costs.     

The aggregate purchase price of Transcom was allocated to the acquired assets   
and assumed liabilities as follows:                                             

Cash and cash equivalents                                        $    5,226,000 
Accounts receivable                                                     172,000 
Prepaid and other current assets                                        775,000 
Accounts payable and accrued expenses                                  (129,000)
Asset retirement obligation                                          (1,768,000)
Extraordinary gain on acquisition                                    (3,218,000)
--------------------------------------------------------------------------------
                                                                $    1,058,000
================================================================================

The acquisition of Transcom is accounted for as a purchase under Statement of   
Financial Accounting Standards (SFAS") No. 141, "Business Combinations."        
Accordingly, the operating results of Transcom have been included in the        
Company's consolidated statements of operations since the acquisition date.     

F-49

S-4/A
251st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 251st
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       RESTRUCTURING                                                          

The Company engaged Credit Suisse First Boston ("CSFB") as its financial advisor
during the fourth quarter of 2001. Along with CSFB, the Company was in          
discussions with a group of note holders, representing more than two-thirds of  
NEON Optica's, a subsidiary of the Company, $180 million Senior Notes and the   
holders of the 15% equipment note and the Company's 18% subordinated convertible
notes, regarding the restructuring of their debt. Such restructuring was        
ultimately pursued in bankruptcy in order to bind all creditors to the terms of 
the Plan of Reorganization. Accordingly, on June 25, 2002, the Company filed a  
voluntary petition for relief under Chapter 11 of the United States Bankruptcy  
Code ("the Bankruptcy Code") in the United States Bankruptcy Court for the      
District of Delaware (the "Bankruptcy Court").                                  

The Company's Plan of Reorganization ("POR") was confirmed by the Bankruptcy    
Court on November 13, 2002 and became effective on December 20, 2002 (the       
"Effective Date"). The Company has recorded this transaction as of December 31, 
2002. Under the POR, on the Effective Date:                                     

  o  The Company's outstanding Senior Notes having a principal amount of
     $180 million, plus accrued and unpaid interest of $8.3 million were
exchanged for common stock in the Successor Company.          

  o  The Company's 15% equipment note having a principal amount of $40.5
million, plus accrued and unpaid interest of $4.5 million were
exchanged for common stock in the Successor Company.          

   o  All of the Company's outstanding 18% subordinated convertible notes,
    having a total principal amount of $16.5 million, plus accrued and
unpaid interest of $4 million, were cancelled.                

     o  All of the Company's outstanding shares of common stock and restricted
common stock were cancelled.                                  

o  Former creditors collectively purchased in a private offering,   
 1,101,887 shares of the new Series A 12% Cumulative Convertible
      Preferred Stock (the "12% preferred stock"), for a purchase price of
approximately $12.4 million.                                  

Reorganization items are composed of expenses that were realized or incurred by 
the Company as a result of its reorganization under Chapter 11 of the Bankruptcy
Code. Reorganization items consisted of the following:                          

Professional fees and related expenses                        $      (6,416,000)
Interest income                                                          64,000 
Loss from write-down of assets to fair value                       (104,525,000)
Write-off of deferred financing fees and other assets                (6,167,000)
Gain from cancellation of debt, net of value of                                 
 common stock issued                                               143,557,000
--------------------------------------------------------------------------------
Total reorganization items                                    $      26,513,000 
================================================================================

Professional fees and related expenses represent legal, financial advisory and  
other expenses directly related to the bankruptcy proceedings. Under the        
Bankruptcy Code, interest on the outstanding senior notes, the 18% subordinated 
convertible notes and the 15% equipment note ceased to accrue during the        
Bankruptcy Proceedings.                                                         

FRESH START REPORTING                                                           

Effective December 31, 2002, the Company adopted fresh start reporting in       
accordance with the provisions of Statement of Position (SOP) 90-7, "Financial  
Reporting by Entities in Reorganization Under the Bankruptcy Code." Fresh start 
reporting resulted in a new operating entity for accounting purposes with assets
and liabilities adjusted to fair value and beginning retained earnings set to   
zero. Under SFAS No. 141, "Business Combinations," fair value is defined as the 
amount at which an asset (or liability) could be bought (or incurred) or sold   
(or settled) in a current transaction, other than a forced or liquidation sale. 
Pursuant to SFAS No. 141, the Company used the purchase method of accounting to 
allocate its reorganization value to its net assets. The reorganization value   
was determined to be $125 million, including the sale of 1,101,887 shares of    
preferred stock for $12.4 million as of December 31, 2002 and was supported by  
an independent financial advisor, which applied the following two valuation     
methodologies:                                                                  

F-50

S-4/A
252nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 252nd
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    o  DISCOUNTED CASH FLOW APPROACH. The discounted cash flow approach is a
      fundamental analysis of evaluating the Company's cash flows over the
      planning period (6.5 years) and discounting the annual future values
         (including a terminal value of 6 times earnings before interest, taxes,
       depreciation and amortization) to the present period using a discount
rate (18%).                                                   

   o  MARKET APPROACH. The market approach measures the estimated value of
assets by compiling and analyzing data with respect to actual 
     purchase-and-sale market transactions for, and listings of, similar
         assets. Adjustments to the market values of the similar assets are made
        to compensate for differences in location, time of sale, profitability
         and physical characteristics between the subject assets and the similar
assets, and to indicate a fair value for the subject assets.  

Whether an approach was used, and the extent to which an approach was relied    
upon, depended on the nature of the asset, the context of the valuation and the 
quality and quantity of information available. General procedures used to       
perform the fair value analysis included the following:                         

  o  Discussions with management and site engineers concerning the fixed
      assets, customers, company structure, strategy, technology and trade
name;                                                         

o  Industry analysis specifically related to customer turnover,     
         profitability, growth and other key variables relating to the valuation
of the customer relationships, technology and trade name; and 

    o  Historical financial analysis of the Company to compare operating and
financial data of the Company to those of the industry.       

The Company's reorganization value represented the value of the reorganized     
consolidated entity. This value was viewed as the fair value of the Company's   
capital, comprising the value of long-term capital investment, including both   
long-term debt and equity, and the approximate amount a willing buyer would have
paid for the Company's net assets immediately after the reorganization was      
completed. The calculated reorganization value was based upon a variety of      
estimates and assumptions about circumstances and events, not all of which have 
taken place to date. These estimates and assumptions are inherently subject to  
significant economic and competitive uncertainties beyond the Company's control,
including, but not limited to, the Company's ability to obtain and perform new  
contracts in a profitable manner.                                               

As discussed more fully in Note 11, the Company also exchanged common stock for 
cash and assets from Mode 1 Communications, Inc. and Northeast Utilities having 
an aggregate value of approximately $9.4 million.                               

The effects of the POR and the application of fresh start reporting on the      
Company's consolidated balance sheet as of December 31, 2002 were as follows:   

                                                        [Enlarge/Download Table]
                                                                    Fresh Start                                       
                                                                    Effects of          Accounting                    
                                                  Predecessor         Plan of          Adjustments/        Successor  
                                                    Company        Reorganization          Other            Company   
======================================================================================================================
                                                                                                                      
Current assets:                                                                                                       
  Cash and cash equivalents                     $   6,583,000     $  12,472,000 (a)  $          --      $  19,055,000 
  Short-term restricted investments                 2,556,000                --                 --          2,556,000 
  Accounts receivable, net                          1,970,000                --                 --          1,970,000 
  Prepaid expenses and other current assets         1,521,000           (57,000)(b)             --          1,464,000 
----------------------------------------------------------------------------------------------------------------------

    Total current assets                           12,630,000        12,415,000                 --         25,045,000 
----------------------------------------------------------------------------------------------------------------------

Property and equipment, net                       235,203,000         5,352,000 (c)   (103,243,000) (n)   137,312,000 

Other assets, net                                   9,734,000        (5,686,000)(d)     (1,282,000) (n)     2,766,000 
----------------------------------------------------------------------------------------------------------------------

    Total assets                                $ 257,567,000     $  12,081,000      $(104,525,000)     $ 165,123,000 
======================================================================================================================

                                                               F-51                                                   

S-4/A
253rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 253rd
                                                        [Enlarge/Download Table]
                                                 NEON COMMUNICATIONS, INC.                                               
                                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                       

                                                                                         Fresh Start                     
                                                                       Effects of         Accounting                     
                                                   Predecessor           Plan of          Adjustments/        Successor  
                                                     Company          Reorganization         Other             Company   
=========================================================================================================================
                                                                                                                         
Current liabilities:                                                                                                     
  Accounts payable                                $  11,638,000      $  (6,467,000) (e) $          --      $   5,171,000 
  Accrued expenses                                   26,691,000        (18,496,000) (f)            --          8,195,000 
  Deferred revenue                                    1,954,000                 --                 --          1,954,000 
  Current portion of long-term obligations           38,230,000        (38,230,000) (g)            --                 -- 
-------------------------------------------------------------------------------------------------------------------------

    Total current liabilities                        78,513,000        (63,193,000)                --         15,320,000 
-------------------------------------------------------------------------------------------------------------------------

Deferred revenue, net of current portion             14,131,000                 --                 --         14,131,000 
-------------------------------------------------------------------------------------------------------------------------

Long-term obligations, net of current portion       196,363,000       (196,363,000) (g)            --                 -- 
-------------------------------------------------------------------------------------------------------------------------

Other long-term liabilities - related party           1,425,000                 --                 --          1,425,000 
-------------------------------------------------------------------------------------------------------------------------

Successor - preferred stock                                  --         12,396,000  (j)        45,000 (m)     12,441,000 
-------------------------------------------------------------------------------------------------------------------------

Stockholders' equity (deficit):                                                                                          
  Successor - common stock                                   --             16,000  (i)            --             16,000 
  Predecessor - common stock                            199,000           (199,000) (h)            --                 -- 
  Predecessor - restricted common stock                  14,000            (14,000) (h)            --                 -- 
  Successor - subscription receivable                        --            (62,000) (j)            --            (62,000)
  Additional paid-in-capital                        290,317,000       (168,420,000) (k)       (45,000) (n)   121,852,000 
  Accumulated deficit                              (323,395,000)       427,920,000  (l)  (104,525,000) (n)            -- 
-------------------------------------------------------------------------------------------------------------------------

    Total stockholders' equity (deficit)            (32,865,000)       259,241,000       (104,570,000)       121,806,000 
-------------------------------------------------------------------------------------------------------------------------

    Total liabilities, preferred stock and                                                                               
    stockholders' equity                          $ 257,567,000      $  12,081,000      $(104,525,000)     $ 165,123,000 
=========================================================================================================================

(a) Represents the purchase price of the new 12% preferred stock of           
     approximately $12.4 million and the write-down of old outstanding checks of
approximately $0.1 million                                            

 (b) Represents the write-off of deposits on facilities that have been abandoned
in accordance with the POR.                                           

 (c) Represents the receipt of fixed assets in exchange for new common stock and
    the discharge of debt owed, net of the write-off of fixed assets abandoned
in accordance with the POR.                                           

(d) Represents the write-off of deferred financing fees associated with the   
     senior notes, the convertible notes and the equipment note of approximately
$3.8 million, $0.6 million, and $1.0 million, respectively, and the   
write-off of other assets of approximately $0.3 million.              

(e) Represents the settlement of accounts payable claims with stock.          

(f) Represents the settlement of accrued expenses claims with stock, the      
  write-down of certain liabilities and the write-down of accrued interest
   associated with the senior notes, the convertible notes and the equipment
note of approximately $8.3 million, $4.0 million, and $4.5 million,   
respectively.                                                         

(g) Represents the discharge of indebtedness in accordance with the POR.      

(h) Represents the cancellation of common stock and restricted common stock of
the Predecessor Company in accordance with the POR.                   

(i) Represents the issuance of new common stock in accordance with the POR.   

(j) Represents the issuance of the new 12% preferred stock and its related    
subscription receivable.                                              

F-52

S-4/A
254th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 254th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(k) Represents the issuance of new common stock, new 12% preferred stock and  
the write-down of additional-paid-in-capital associated with the      
cancellation of the common stock and restricted common stock of the   
Predecessor Company in accordance with the POR.                       

(l) Represents the elimination of historical accumulated deficit.             

(m) Records the accretion of dividends on the new 12% preferred stock from the
date of issuance, December 20, 2002.                                  

(n) Represents an adjustment to fair value of property and equipment and other
  assets of approximately $104.5 million and the accretion of dividends on
the new 12% preferred stock of $45,000.                               

4.     SIGNIFICANT ACCOUNTING POLICIES                                          

The accompanying consolidated financial statements reflect the application of   
certain accounting policies as described below and elsewhere in the notes to    
consolidated financial statements.                                              

PRINCIPLES OF CONSOLIDATION                                                     

The accompanying consolidated financial statements include the results of       
operations of NEON Communications, Inc. and its wholly owned subsidiaries. All  
significant intercompany transactions and balances have been eliminated in      
consolidation.                                                                  

MANAGEMENT ESTIMATES                                                            

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make  
estimates and assumptions that affect the reported amounts of assets and        
liabilities and disclosure of contingent assets and liabilities at the date of  
the financial statements and the reported amounts of revenues and expenses      
during the reporting period. On an ongoing basis, management evaluates its      
estimates, including those related to the allowance for doubtful accounts, and  
the value of long-lived tangible and intangible assets. Actual amounts could    
differ from those estimates.                                                    

REVENUE RECOGNITION AND ALLOWANCE FOR DOUBTFUL ACCOUNTS                         

The network services the Company provides includes short-term leases of lit     
fiber (fixed amounts of capacity on fiber optic transmission lines that use     
optronics equipment installed by the Company) and long-term leases of dark fiber
(fiber optic transmission lines leased without optronics equipment installed by 
the Company) at fixed-cost pricing over multiple year terms. Revenues from      
telecommunications network services are recognized ratably over the term of the 
applicable lease agreements with customers, which range from one to 20 years,   
provided there exists persuasive evidence of an arrangement, the fee is fixed or
determinable and collectibility of the related receivables is reasonably        
assured. Amounts billed in advance of the services provided are recorded as     
deferred revenue. Certain of the Company's lease agreements provide for a refund
of the unrecognized deferred income if the Company is unable to provide such    
services described in the lease agreement. The Company also leases space to     
customers at its collocation facilities. Other services revenues include these  
collocation service revenues as well as revenues from nonrecurring installation 
charges and design, engineering and construction services.                      

The Company recognizes revenues from nonrecurring installation charges and      
design, engineering and construction services ratably over the multiple year    
network services terms to which the nonrecurring charges relate, provided there 
exists persuasive evidence of an arrangement, the fee is fixed or determinable  
and collectibility of the related receivable is reasonably assured.             

The Company has contracts with customers that provide service-level commitments,
which may obligate the Company to provide credits against billings if service is
interrupted or does not meet the customer's operating parameters. These amounts 
are accounted for as reductions of revenue. To date, credits granted under these
arrangements have not been material.                                            

Revenues are recorded net of provisions for allowances, which are estimated     
based on current economic factors. The provisions for allowances for the years  
ended December 31, 2001, 2002 and 2003 represented approximately 2%, 4% and 3%  
of gross revenues, respectively.                                                

The Company maintains an allowance for doubtful accounts to cover estimated     
losses resulting from the inability of the Company's customers to make required 
payments. The Company specifically analyzes accounts receivable and historical  
bad debts, customer concentrations and current economic trends when evaluating  
the adequacy of its allowance for doubtful accounts.                            

F-53

S-4/A
255th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 255th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INCOME TAXES                                                                    

The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes," the objective of which is to recognize the amount of current and        
deferred income taxes payable or refundable at the date of the financial        
statements as a result of all events that have been recognized in the           
accompanying consolidated financial statements, as measured by enacted tax laws.

CASH, CASH EQUIVALENTS AND SHORT-TERM RESTRICTED INVESTMENTS                    

The Company accounts for investments under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Cash equivalents are highly liquid  
investments with original maturities of three months or less. Cash equivalents  
consist of money market accounts at December 31, 2002 and 2003, and September   
30, 2004.                                                                       

At December 31, 2002 and 2003, and September 30, 2004, short-term restricted    
investments included a money market and an escrow account with original         
maturities of greater than three months with maturities less than a year from   
the balance sheet date. These investments are used as collateral for certain    
bonds and other obligations related to the Company's network.                   

DEPRECIATION AND AMORTIZATION                                                   

As part of fresh start reporting (Note 3), all property, equipment and other    
long-term assets were revalued to estimated fair value, which became the        
Successor Company's new cost basis for financial reporting purposes, as of      
December 31, 2002. All capital additions made subsequent to December 31, 2002   
are stated at cost.                                                             

The Company provides for depreciation and amortization using the straight-line  
method to allocate the cost of property and equipment and long-term assets over 
their estimated useful lives, as follows:                                       

Assets                                                                 Years  
================================================================================

Communications network infrastructure                                15-20 years
Network and office equipment                                           5-7 years
Leasehold improvements                                Lesser of estimated useful
                                                           life or term of lease
Furniture and fixtures                                                   7 years
Prepaid right-of-way fees                                      Term of agreement

Applicable interest charges incurred during the construction of new facilities  
are capitalized as elements of cost and are depreciated over the assets'        
estimated useful lives. Interest capitalized for the years ended December 31,   
2001, 2002 and 2003 was approximately $6.0 million, $1.9 million, and $0,       
respectively.                                                                   

LONG-LIVED ASSETS                                                               

The Company reviews its long-term assets, including its property and equipment  
and other intangibles for impairment whenever events or changes in circumstances
indicate that the carrying value of the assets may not be recoverable in        
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of     
Long-Lived Assets." The Company believes that the carrying values of its        
long-lived assets were realizable as of December 31, 2003 and 2002 and September
30, 2004.                                                                       

CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS                          

Financial instruments that subject the Company to significant concentrations of 
credit risk consist primarily of cash and cash equivalents and accounts         
receivable. The Company's cash and cash equivalents are invested in financial   
instruments with high credit ratings. The Company does not require collateral or
other securities to support customer receivables; however, it performs regular  
credit evaluations of its customers' financial condition and maintains          
allowances for potential credit losses. Concentration of credit risk with       
respect to accounts receivable is limited to customers to whom the Company makes
significant sales.                                                              

For the years ended December 31, 2001 and 2003, one customer accounted for 10%  
of net revenues. For the year ended December 31, 2002 and the nine months       
September 30, 2004, no customer accounted for more than 10% of net revenues. As 
of December 31, 2002 and 2003, no customers had balances in excess of 10% of    
accounts receivable. As of September 30, 2004, one customer represented         
approximately 30% of accounts receivable. This amount was subsequently collected
in full from the customer.                                                      

F-54

S-4/A
256th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 256th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has no significant off-balance-sheet or other concentration of      
credit risks at December 31, 2002 or 2003 or September 30, 2004.                

FAIR VALUE OF FINANCIAL INSTRUMENTS                                             

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires 
disclosure about the fair value of financial instruments. Financial instruments 
consist of cash and cash equivalents, accounts receivable and accounts payable. 
The estimated fair values of the cash and cash equivalents, accounts receivable 
and accounts payable approximates their carrying values due to their short-term 
nature.                                                                         

COMPREHENSIVE INCOME (LOSS)                                                     

SFAS No. 130, "Reporting Comprehensive Income," requires disclosure of all      
components of comprehensive income (loss) on an annual and interim basis.       
Comprehensive income (loss) is defined as the change in equity of a business    
enterprise during a period from transactions and other events and circumstances 
from non owner sources. Comprehensive loss is the same as reported net loss for 
all periods presented.                                                          

INTANGIBLE ASSET IMPAIRMENT                                                     

In January 2002, the Company adopted SFAS No. 142, "Goodwill and Other          
Intangible Assets," which requires that goodwill and other intangible assets    
with indefinite lives no longer be amortized but instead be measured for        
impairment at least annually, or when events indicate that there may be         
impairment. In connection with the transition to this new accounting standard,  
the Company was required to assess whether there was an indication that goodwill
and other intangible assets were impaired as of the date of adoption by         
comparing the fair value and the carrying value of its assets and liabilities,  
including goodwill and other intangible assets, at such date. Based on this fair
value assessment, the Company recorded a one-time, non-cash transitional        
impairment loss, which is recognized as the cumulative effect of a change in    
accounting principle in the accompanying 2002 consolidated statement of         
operations, of approximately $72.3 million, to write off all of its goodwill and
other identifiable intangible assets of $49.4 million and $22.9 million,        
respectively.                                                                   

STOCK-BASED COMPENSATION                                                        

The Company accounts for its stock-based compensation plans under Accounting    
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to        
Employees," and, accordingly, accounts for employee stock-based compensation    
utilizing the intrinsic value method. SFAS No. 123, "Accounting for Stock-Based 
Compensation," ("SFAS 123"), established a fair value based method of accounting
for stock-based compensation plans. The Company has adopted the disclosure only 
alternative under SFAS 123, which requires disclosure of the pro forma effects  
on earnings and earnings per share as if SFAS 123 had been adopted as well as   
certain other information.                                                      

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based     
Compensation - Transition and Disclosure - an amendment of SFAS Statement No.   
123." This statement amends SFAS 123 to provide alternative methods of          
transition for a voluntary change to the fair value based method of accounting  
for stock-based employee compensation. In addition, SFAS 148 amends the         
disclosure requirements of SFAS 123 to require prominent disclosures in both    
annual and interim financial statements about the method of accounting for      
stock-based employee compensation and the effect of the method used on reported 
results. SFAS 148 also requires that those effects be disclosed more prominently
by specifying the form, content, and location of those disclosures. The Company 
has adopted the increased disclosure requirements of SFAS 148. The Company will 
continue to use the intrinsic value method of accounting for stock-based        
employee compensation.                                                          

F-55

S-4/A
257th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 257th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Had compensation cost for the Company's option plans been determined using the  
fair value method at the grant dates in accordance with SFAS No. 123, the effect
on the Company's net loss would have been as follows:                           

                                                        [Enlarge/Download Table]
                                                                      (PREDECESSOR      (PREDECESSOR         (SUCCESSOR  
                                                                        COMPANY)           COMPANY)            COMPANY)  
DECEMBER 31,                                                              2001               2002                2003    
=========================================================================================================================
                                                                                                                         
Net loss as reported                                                 $(116,681,000)     $ (87,544,000)     $  (1,048,000)

Add: stock-based employee compensation expense                                                                           
 included in reported net loss                                                  --                 --            120,000 

Deduct: total stock-based employee compensation determined under                                                         
 fair value method for all awards                                       (5,554,000)                --           (361,000)
-------------------------------------------------------------------------------------------------------------------------
Pro forma net loss                                                   $(122,235,000)     $ (87,544,000)     $  (1,289,000)
=========================================================================================================================

Following are the assumptions that were used to estimate the fair value of each                                          
option grant using the Black-Scholes option pricing model:                                                               

DECEMBER 31,                                                              2001               2002                2003    
=========================================================================================================================
Risk free interest rate                                                   3.3%                N/A                3.0%    

Expected dividend yield                                                   None                N/A                None    

Expected lives                                                          3 years               N/A              3 years   

Volatility                                                                307%                N/A                 0%     

The weighted average fair value of options granted during the years ended       
December 31, 2001 and 2003 was $7.73 and $0.51, respectively. The weighted      
average remaining contractual life of options outstanding at December 31, 2003  
was approximately 9.2 years.                                                    

There were no options granted during the year ended December 31, 2002.          

RECLASSIFICATIONS                                                               

Certain prior-period amounts have been reclassified to conform to the current   
period presentation.                                                            

ASSET RETIREMENT OBLIGATIONS                                                    

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement    
Obligations." SFAS No. 143 requires entities to record the fair value of a      
liability for an asset retirement obligation in the period in which it is       
incurred. When the liability is initially recorded, the entity capitalizes the  
cost, thereby increasing the carrying amount of the related long-lived asset.   
Over time, the liability is accreted, and the capitalized cost is depreciated   
over the useful life of the related asset. Through the acquisition of Transcom, 
the Company acquired assets and a related asset retirement obligation (Note 2). 
The asset retirement obligation liability totaled approximately $1.8 million at 
December 31, 2003. Accretion expense from the date of acquisition to December   
31, 2003 was not deemed material. Accretion for the nine months ended September 
30, 2004 was approximately $86,000.                                             

RECENT ACCOUNTING PRONOUNCEMENTS                                                

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial    
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150  
establishes standards for how an issuer classifies and measures certain         
financial instruments with characteristics of both liabilities and equity and   
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances), because that instrument     
represents an obligation. Many of those instruments were previously classified  
as equity. The statement is effective for financial instruments entered into or 
modified after May 31, 2003, and otherwise is effective at the beginning of the 
first interim period beginning after June 15, 2003, except for mandatorily      
redeemable financial instruments of nonpublic entities, which are subject to the
provisions for the first fiscal period beginning after December 15, 2003. The   
adoption of SFAS No. 150 is not expected to have a material effect on the       
Company's financial position, results of operations or cash flows.              

F-56

S-4/A
258th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 258th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest    
Entities." FIN 46 requires that the criteria for consolidation be based upon    
analysis of risks and rewards, not control, and represents a significant and    
complex modification of previous accounting principles. FIN 46 is effective for 
consolidated financial statements issued after June 30, 2003. The Company does  
not believe the adoption of FIN 46 will have a material effect on the Company's 
consolidated results of operations, financial position or cash flows.           

In December 2003, the Securities and Exchange Commission ("SEC") published Staff
Accounting Bulletin ("SAB") No. 104, "Revenue Recognition." SAB No. 104 was     
effective upon issuance and supersedes SAB No. 101, "Revenue Recognition in     
Financial Statements," and rescinds the accounting guidance contained in SAB No.
101 related to multiple-element revenue arrangements that was superseded by EITF
Issue No. 00-21. The adoption of SAB No. 104 did not have a material effect on  
the Company's financial position, results of operations, or cash flows.         

5.     NETWORK CONNECTIVITY PURCHASES IN EXCHANGE FOR STOCK                     

On September 14, 2000, the Company entered into an agreement with Consolidated  
Edison Communications, Inc. ("CEC") under which CEC agreed to grant the Company 
an indefeasible right to use ("IRU") fiber optic facilities on the CEC network, 
to provide connectivity from NEON's backbone network to CEC's local distribution
facilities, and to contribute to the Company cash totaling $11.3 million through
April 15, 2005. As part of the agreement, the Company issued 2,476,735 shares of
common stock to CEC, of which 56% was restricted as of December 31, 2001. In    
connection with this transaction, the Company recorded a subscription receivable
for the value of these assets, based upon an independent appraisal of the value 
of the tangible and intangible assets received in consideration for the stock   
provided under this agreement. As network assets were received under this       
agreement, the related subscription receivable amount was transferred to fixed  
and intangible assets. As of December 31, 2001 and 2002, approximately $77.6    
million and $89.8 million of the subscription receivable had been transferred to
fixed and intangible assets and $1.8 million and $3.0 million had been received 
in cash, respectively. As discussed more fully in Note 4, the Company wrote off 
all of its intangible assets during the year ended December 31, 2002. During    
2002, in connection with the POR, the Company and CEC entered into an agreement 
whereby CEC granted the Company an IRU for the original fiber optic facilities  
provided and additional fiber optic facilities in New York City in exchange for 
CEC's remaining obligations under the September 2000 agreement. The Company and 
CEC also entered into standard commercial agreements to cover future            
transactions between the parties.                                               

On September 14, 2000, the Company entered into a similar agreement with Exelon.
Under the initial agreement, the Company issued 2,131,143 shares of common stock
to Exelon and received cash totaling approximately $3.3 million from Exelon. In 
connection with this agreement, the Company recorded a subscription receivable  
for the value of the assets, based on an independent appraisal of the value of  
the tangible and intangible assets to be received. On August 10, 2001, the      
Company closed financing of $11.5 million in the form of an 18% subordinated    
convertible note with Exelon and modified the September 2000 agreement. The     
Exelon convertible note purchase agreement provided for an additional $10       
million from Exelon, payable either in cash or forgiveness of indebtedness      
represented by the Exelon convertible note in lieu of providing the IRU,        
services and other cash proceeds required under the September 2000 agreement    
with Exelon.                                                                    

Upon closing the Exelon convertible note, the Company recorded a one-time,      
non-cash charge to operations of $60 million to write-down the subscription     
receivable related to the Exelon transaction. Prior to the modification of the  
September 2000 agreement in August 2001, the Company had received $4.5 million  
of cash from Exelon under this agreement. During 2002, Exelon delivered notice  
to the Company to apply the $10 million as forgiveness of indebtedness under the
Exelon convertible note.                                                        

The Company incurred approximately $285,000 of non-reimbursable costs related to
these transactions which are shown as a reduction of additional paid-in capital 
in the 2001 statement of stockholders' equity.                                  

F-57

S-4/A
259th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 259th
                           NEON COMMUNICATIONS, INC.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.     PROPERTY AND EQUIPMENT                                                   

Property and equipment consists of:                                             

                                                        [Enlarge/Download Table]
                                                                     DECEMBER 31,            SEPTEMBER 30,
                                                                2002             2003            2004     
                                                                                              (UNAUDITED) 
==========================================================================================================
                                                                                                          
Communications network infrastructure                      $105,690,000     $112,993,000     $112,993,000 
Communications network construction-in-process               13,344,000        9,064,000       17,423,000 
Network and office equipment                                 14,434,000       19,520,000       19,703,000 
Leasehold improvements                                        3,315,000        3,315,000        3,644,000 
Furniture and fixtures                                          529,000          713,000          838,000 
----------------------------------------------------------------------------------------------------------
                                                            137,312,000      145,605,000      154,601,000 
Less: Accumulated depreciation and amortization                      --        8,999,000       16,825,000 
----------------------------------------------------------------------------------------------------------
                                                           $137,312,000     $136,606,000     $137,776,000 
==========================================================================================================

In accordance with the adoption of fresh start reporting (Note 3), the Company                            
revalued its property and equipment to estimated fair value at December 31, 2002                          
based upon an independent valuation. Additions beginning in 2003 are stated at                            
cost.                                                                                                     

7.     OTHER ASSETS                                                                                       

Other assets consist of the following:                                                                    



                                                                     DECEMBER 31,            SEPTEMBER 30,
                                                                2002             2003            2004     
                                                                                              (UNAUDITED) 
==========================================================================================================
                                                                                                          
Prepaid right-of-way fees, related party                    $1,787,000       $1,787,000        $1,787,000 
Long-term lease receivable                                     130,000               --                -- 
Other                                                          848,000        1,789,000         2,577,000 
----------------------------------------------------------------------------------------------------------

                                                             2,765,000        3,576,000         4,364,000 

Less: Accumulated amortization                                      --          387,000           678,000 
----------------------------------------------------------------------------------------------------------

                                                            $2,765,000       $3,189,000        $3,686,000 
==========================================================================================================

In accordance with the adoption of fresh start reporting (Note 3), the Company  
revalued its remaining long-term assets at December 31, 2002.                   

LONG-TERM LEASE RECEIVABLE                                                      

In January 2001, the Company entered into an agreement with CEC, a related party
prior to the effective date of the POR, in which the Company granted CEC a      
20-year IRU in certain fibers and a 36-month lease of certain other fibers along
a route segment between White Plains, NY and New York City. The 36-month lease  
will convert into a 17-year IRU at the end of the lease period upon a one-time  
payment of $1.00. The agreement provided for an up-front payment from CEC of    
$4.0 million and an additional $3.2 million due from CEC in monthly payments of 
$88,125 over the 36-month lease period. The Company accounted for this          
transaction as a fixed asset sale and sales type lease and recorded a gain in   
2001 of approximately $1.5 million as other income. The Company received        
payments under this agreement of approximately $0.7 million, $1.3 million, and  
$1.1 million during the years ended December 31, 2001, 2002 and 2003,           
respectively. At December 31, 2003, approximately $0.2 million is due to the    
Company under this agreement. This amount is included in prepaid expenses and   
other current assets on the 2003 accompanying consolidated balance sheet.       

F-58

S-4/A
260th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 260th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.     PREFERRED STOCK AND STOCKHOLDERS' EQUITY                                 

GENERAL                                                                         

Under the terms of the Amended and Restated Certificate of Incorporation, the   
Board of Directors is authorized, subject to any limitations prescribed by law, 
without stockholder approval, to issue authorized shares of preferred stock in  
one or more series. Each series of preferred stock shall have rights,           
preferences, privileges and restrictions, including voting rights, dividend     
rights, conversion rights, redemption privileges and liquidation preferences, as
shall be determined by the Board of Directors.                                  

SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK                                 

The Company had designated 2,500,000 shares of its preferred stock as 12% Series
A Cumulative Convertible Preferred Stock (Series A Preferred Stock). Each share 
of Series A Preferred Stock is convertible into one share of the Company's      
common stock at the option of the holder, is entitled to one vote, has a        
liquidation preference of $11.25 per share plus accrued dividends, and is senior
to the Company's common stock and Redeemable Preferred Stock. Dividends on such 
shares are payable semi-annually on June 15 and December 15 of each year at a   
rate of $0.675 per share when and if declared by the Board of Directors. As of  
December 31, 2003, $1,582,541 in dividends had accrued on the Series A Preferred
Stock. At the Company's option, dividends are payable in cash or additional     
shares of Series A Preferred Stock. At the Company's option, shares of Series A 
Preferred Stock can be redeemed in whole or in part at $11.93 per share in 2006,
$11.59 per share in 2007 and $11.25 per share in 2008 and thereafter. In the    
event of a change of control, as defined, each holder of Series A Preferred     
Stock can require the Company to redeem its shares for $11.36 per share plus    
accrued and unpaid dividends. Accordingly, in accordance with SEC requirements, 
the Series A Preferred Stock is not included in stockholders' equity.           
Additionally, each share of Series A Preferred Stock shall be automatically     
converted into shares of common stock at the conversion rate then in effect upon
the affirmative vote of the holders of at least 66 2/3% of the outstanding      
shares of the Series A Preferred Stock or on the day immediately following the  
date on which the closing price of the common stock has equaled or exceeded     
$33.75 for a period of 45 consecutive trading days, if and when it is publicly  
traded.                                                                         

REDEEMABLE PREFERRED STOCK AND WARRANTS                                         

At December 31, 2003 and 2002, the Company had designated 21,354,000 shares of  
its preferred stock as Redeemable Preferred Stock to reserve for shares issuable
upon the exercise of the same number of Redeemable Preferred Stock Warrants     
issued or issuable in connection with the Company's POR. The Redeemable         
Preferred Stock Warrants were issued to the Company's unsecured creditors and   
Series A Preferred Stock and Class A Warrant holders. Additional Redeemable     
Preferred Stock Warrants will be issued to certain option holders as such       
options vest and for paid-in-kind (PIK) dividends, if any, on Series A Preferred
Stock. Each Redeemable Preferred Stock Warrant entitles the holder to purchase  
one share of Redeemable Preferred Stock at $0.01 per share through December 20, 
2012 upon a change of control, as defined, where the consideration equals or    
exceeds $10.62 per share of common stock (a Triggering Event). Each share of    
Redeemable Preferred Stock is entitled to one vote, has a liquidation preference
of $0.01 per share, and is junior to the Series A Preferred Stock. Upon the     
closing of a Triggering Event, the Company shall redeem the Redeemable Preferred
Stock for the lesser of $8.02 per share or the excess of the fully diluted per  
share proceeds over $10.62. In the event that the Triggering Event does not     
close within a 12 month period, the redemption price per share for the          
Redeemable Preferred Stock is reduced to $0.01 per share and the Company shall  
redeem the outstanding Redeemable Preferred Stock and issue new warrants to     
purchase such shares with the same terms as the previously issued Redeemable    
Preferred Stock Warrants. At December 31, 2003 and 2002, approximately          
16,600,000 Redeemable Preferred Stock Warrants were issued.                     

COMMON STOCK                                                                    

At December 31, 2002, the Company had 15,536,250 shares of new common stock     
reserved for issuance in connection with the Company's POR. These shares were   
issued in 2003, but are recorded as issued and outstanding as of December 20,   
2002, the deemed effective date of the POR.                                     

CLASS A WARRANTS                                                                

In connection with the sale of the Series A Preferred Stock, the Company issued 
5,511,405 Class A Warrants to the holders of such preferred stock. Each Class A 
Warrant entitles the holder to purchase one share of the Company's common stock 
for $0.01 per share on or before December 20, 2012. Prior to the exercise of the
Class A Warrants, holders do not have any rights as stockholders. At December   
31, 2003 and 2002, the Company has reserved 5,511,405 shares, of its common     
stock for shares issuable upon the exercise of the Class A Warrants.            

F-59

S-4/A
261st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 261st
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REGISTRATION RIGHTS AGREEMENT                                                   

On December 20, 2002, the Company entered into a Registration Rights Agreement  
(the Agreement) with certain purchasers of the Series A Preferred Stock and     
certain other stockholders (the holders) as provided for by the POR. Pursuant to
the Agreement, the holders of at least 25% of the registerable securities of the
Company, as defined, may request up to three demand registrations, subject to   
certain limitations set forth in the Agreement. The holders also have certain   
piggyback registration rights. Under the Agreement, registration expenses are   
generally borne by the Company and underwriting fees and commissions are        
allocated on a pro-rata basis among the Company and the participating holders.  

WARRANTS                                                                        

During 2003, the Company issued two warrants to financial consultants in        
exchange for services to purchase a total of 650,000 shares of the Company's    
common stock at exercise prices ranging from $5.30 - $6.06. The fair value of   
these warrants was approximately $712,000. Approximately $360,000 of this value 
related to amounts owed at December 31, 2002, that were included in             
reorganization items in the 2002 consolidated statement of operations. The      
remaining $352,000 was included as a direct acquisition cost in the purchase    
price for Transcom (see Note 2).                                                

9.     STOCK OPTION PLANS                                                       

The Company's 1998 Stock Incentive Plan (the "1998 Plan") was adopted by the    
Board of Directors in May 1998. In connection with the Company's POR, the 1998  
Plan was terminated.                                                            

Stock option activity under the 1998 Plan for the years ended December 31, 2001 
and 2002 is as follows:                                                         

                                                   NUMBER       WEIGHTED AVERAGE
                                                OF SHARES       EXERCISE PRICE
================================================================================
Outstanding, December 31, 2000                   2,140,000        $   26.16     
Granted                                        1,702,000             7.72   
Exercised                                         (1,000)            9.38   
Canceled                                        (368,000)           39.05   
--------------------------------------------------------------------------------
Outstanding, December 31, 2001                   3,473,000            15.76     
Canceled                                        (336,000)           19.30   
Canceled due to POR                           (3,137,000)           15.38   
--------------------------------------------------------------------------------

Outstanding, December 31, 2002                          --        $      --     
================================================================================
Exercisable, December 31, 2002                          --        $      --     
================================================================================

The Company's 2002 Stock Incentive Plan (the "2002 Plan") was adopted under the 
POR. The 2002 Plan provides for the grant of incentive stock options,           
nonstatutory stock options, restricted stock awards and other stock-based       
awards, including the grant of shares based on certain conditions, the grant of 
securities convertible into common stock and the grant of stock appreciation    
rights. Under the 2002 Plan, the Company can issue options to purchase up to    
2,469,000 shares of common stock.                                               

The Company's 2003 Directors' Stock Option Plan ("2003 Plan") was adopted by the
Board of Directors in October 2003. Under the 2003 Plan, the Company can issue  
options to purchase up to 125,000 shares of common stock.                       

As of December 31, 2003, a total of 599,500 and 101,114 stock options are       
available for issuance under the 2002 and 2003 stock option plans, respectively.

F-60

S-4/A
262nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 262nd
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock option activity under the 2003 and 2002 Plans for the years ended December
31, 2003 and 2002 is as follows:                                                

                                                                      Exercise
                                                                       Price
                                     Number Of                        Weighted
                                       Shares           Range          Average
================================================================================
Outstanding, December 31, 2002               --      $          --     $     -- 
 Granted                             2,021,886      $0.27 - $6.06         5.27
 Exercised                                  --                 --           --
 Canceled                             (128,500)              5.30         5.30
--------------------------------------------------------------------------------
Outstanding, December 31, 2003        1,893,386      $0.27 - $6.06         5.27 
================================================================================

Exercisable, December 31, 2003          227,316      $0.27 - $5.30     $   4.77 
================================================================================

Effective January 1, 2003, the Company awarded stock-options to purchase 23,886 
shares of its common stock to the Company's non-management directors with an    
exercise price of $0.27 per share. The fair market value of these options was   
$5.30 per share. The options vest over a one year period. Accordingly,          
compensation expense in the amount of $120,147 related to these awards was      
charged to expense during the year ended December 31, 2003. This value is       
included in selling, general and administrative expenses in the 2003            
consolidated statement of operations.                                           

10.      INCOME TAXES                                                           

The income tax benefit for the years ended December 31, 2001, 2002, and 2003    
consisted of the following:                                                     

                               2001              2002             2003
================================================================================
Current:                                                                        
 Federal                      $         --      $         --      $         --
 State                                  --                --                --

Deferred:                                                                       
  Federal                       (39,672,000)      (29,765,000)       (1,435,000)
  State                          (4,667,000)       (3,467,000)         (253,000)
--------------------------------------------------------------------------------
                                (44,339,000)      (33,232,000)       (1,688,000)
Less: Valuation allowance        44,339,000        33,232,000         1,688,000 
--------------------------------------------------------------------------------
Total                          $         --      $         --      $         -- 
================================================================================

The components of the deferred taxes at December 31, 2002 and 2003 were         
approximately as follows:                                                       

                                              2002                  2003
================================================================================
Net operating losses                         $ 24,876,000          $ 31,996,000 
Gain from asset impairment                     44,576,000            44,576,000 
Depreciation                                  (11,516,000)          (17,959,000)
Reserves and accruals, not                                                      
 currently deductible                          8,355,000             9,378,000
--------------------------------------------------------------------------------
                                              66,291,000            67,991,000

Valuation allowance                           (66,291,000)          (67,991,000)
--------------------------------------------------------------------------------

Net deferred tax asset                       $         --          $         -- 
================================================================================

F-61

S-4/A
263rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 263rd
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2003, the Company had federal and state net operating loss   
carry forwards for the period subsequent to the reorganization available to     
offset future taxable income, if any, of approximately $79 million. These carry 
forwards expire through 2023 and are subject to the review and possible         
adjustment by the Internal Revenue Service. Changes in the ownership of the     
Company stock as a result of the POR has caused there to be an annual limitation
on the use of net operating loss carry forwards that arose prior to the         
effective date of the Company's POR. Additional limitations may be imposed as a 
result of future changes of ownership, including changes of ownership pursuant  
to the proposed merger, that would apply to subsequently generated net operating
loss carry forwards as well. A full valuation allowance has been recorded in the
accompanying consolidated financial statements to offset these carry forwards   
because their future realizability is uncertain.                                

11.    OTHER RELATED PARTY TRANSACTIONS                                         

NORTHEAST UTILITIES AGREEMENTS                                                  

In connection with the Company's POR, the Company entered into a Stock Purchase 
Agreement with Mode 1 Communications, Inc. ("Mode 1"), a subsidiary of Northeast
Utilities ("NU") and amended certain agreements ("Amended Agreements"),         
concerning the provisions of certain rights-of-way use of electric utility      
towers and inside urban electric utility ducts, with the three principal        
operating subsidiaries of NU (collectively, "Northeast Utilities").             

Under the Stock Purchase Agreement, Mode 1 acquired approximately 1,552,000     
shares of the Company's common stock in exchange for approximately $3.4 million 
due to Northeast Utilities and other consideration. Mode 1 also agreed to       
purchase up to $3.5 million of common stock, at the market price on the date of 
purchase, to cover the payment of future amounts due to Northeast Utilities     
through December 31, 2004. During 2003, Mode 1 purchased approximately 236,000  
shares of the Company's common stock for approximately $1.4 million. In         
accordance with the Stock Purchase Agreement, the Company used the proceeds from
such sale to pay certain 2003 operating costs due to Northeast Utilities. The   
Company and Mode 1 also entered into the Registration Rights Agreement discussed
in Note 8 and a Stockholders Agreement. The Stockholders Agreement between the  
Company, Mode 1 and certain purchasers of the Series A Preferred Stock and      
certain other stockholders provides for Mode 1 to designate one member of the   
Company's Board of Directors for as long as Mode 1 owns at least 67% of its     
initial shares or not less then 4% of the Company's outstanding shares.         

The Amended Agreements with Northeast Utilities provide the Company with an     
option to purchase up to eight of the fibers initially designated for Northeast 
Utilities, at the then market price, through June 30, 2005 and a right-of-first 
refusal through June 30, 2010 for all of the fiber assets owned or controlled by
Northeast Utilities. Under the Amended Agreements, Northeast Utilities also     
agreed to defer approximately $1.4 million due from the Company until December  
31, 2004. Mode 1 and Northeast Utilities also agreed not to compete with the    
Company in the provision of wholesale telecommunications transport services     
through June 30, 2005.                                                          

The Amended Agreements with Northeast Utilities were initially entered into in  
1994 and 1995 and cover the provision of rights-of-way along electric utility   
towers and inside urban electric utility ducts. Pursuant to these agreements,   
the Company acquired indefeasible rights-of-use in fiber optic filaments along  
Northeast Utilities' rights-of-way and pays Northeast Utilities mileage-based   
annual fees and a percentage of the gross revenues that the Company generates on
the portion of its network located on Northeast Utilities' rights-of-way, as    
such gross revenues exceed predefined limits specified in the agreements with   
Northeast Utilities. To date, none of the limits has been exceeded. Northeast   
Utilities has waived a portion of the Company's right-of-way fees on certain    
route segments through September 2004. Under the agreements, 12 fibers on       
designated route segments of the Company's network in Northeast Utilities       
service territory are owned by and have been set aside for Northeast Utilities  
use. After June 30, 2005, Northeast Utilities may lease the 12 fibers to third  
parties and is free to use these fibers to compete with the Company. At December
31, 2003 and 2002, approximately $1.4 million and $1.8 million associated with  
the construction of the 12 fibers is included in prepaid rights-of-way fees in  
the accompanying consolidated balance sheet, respectively. In accordance with   
the adoption of fresh start reporting (Note 2), the Company revalued the prepaid
right-of-way fees at December 31, 2002 based upon an independent appraisal. Such
fees are being recognized as a cost of revenues ratably over 5 years, the       
estimated remaining useful life.                                                

The Amended Agreements with Northeast Utilities have a term of 40 years and     
expire in September 2034. Thereafter, they automatically renew for five-year    
terms, unless one of the parties has given a one-year advance notice of         
termination. In the event that Northeast Utilities gives such a notice and      
terminates the agreements, it must either, at its option, pay to the Company an 
amount equal to the fair market value of the network built on Northeast         

F-62

S-4/A
264th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 264th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Utilities' rights-of-way less the 12 fibers set aside for Northeast Utilities'  
use, or allow NEON to retain its indefeasible rights-of-way and receive from the
Company an annual payment equal to 10% of the Company's gross revenue from the  
fiber optic network on Northeast Utilities' rights-of-way, which payment would  
be in addition to the other annual payments under the agreements with Northeast 
Utilities.                                                                      

The Company paid Northeast Utilities approximately $428,000, $26,000 and $1.4   
million in 2001, 2002 and 2003, respectively, and approximately $1.4 million was
included in other long-term liabilities at December 31, 2001 and 2002 and       
accrued expenses at December 31, 2003.                                          

The Company paid approximately $0.2 million to Central Maine Power, a related   
party prior to the effective date of the POR, for right-of-way fees for the year
ended December 31, 2001. The Company also paid Central Maine Power and/or Union 
Water and Power, an affiliate of Central Maine Power, approximately $1 million  
for materials, labor and other contractor charges for the year ended December   
31, 2001.                                                                       

The Company believes that the fees payable under the agreements with related    
parties are reasonable and are comparable to those which would have been        
negotiated on an arm's-length basis with an unaffiliated third party.           

EMPLOYMENT AGREEMENTS                                                           

The Company has employment agreements with two officers. These agreements       
provide for employment and related compensation and restrict the individuals    
from competing, as defined, with the Company during the terms of their          
agreements. These agreements also provide for stock options under the 2002 Plan 
and for severance payments upon termination under circumstances defined in these
agreements.                                                                     

12.    OTHER COMMITMENTS AND CONTINGENCIES                                      

LEASE COMMITMENTS                                                               

The Company leases certain collocation facilities, vehicles, and office         
equipment and facilities under noncancelable operating leases which expire at   
various dates through October 2021. Future minimum lease payments required under
these leases at December 31, 2003 were approximately as follows:                

YEAR ENDING DECEMBER 31,                                                        
================================================================================
2004                                                             $    2,676,000 
2005                                                                  2,497,000 
2006                                                                  2,081,000 
2007                                                                  2,054,000 
2008                                                                  1,949,000 
Thereafter                                                           15,290,000 
--------------------------------------------------------------------------------
Total                                                            $   26,547,000 
================================================================================
Rent expense charged to operations under the Company's operating leases was     
approximately $5.4 million, $4.5 million and $3.5 million in the years ended    
December 31, 2001, 2002 and 2003, respectively.                                 

The Company leases fibers for various segments of its network under operating   
leases that expire at various dates through December 2034. Future minimum lease 
payments required under these fiber optic leases at December 31, 2003 were      
approximately as follows:                                                       

YEAR ENDING DECEMBER 31,                                                        
================================================================================
2004                                                            $     7,917,000 
2005                                                                  8,825,000 
2006                                                                  8,868,000 
2007                                                                  8,850,000 
2008                                                                  8,805,000 
Thereafter                                                          138,268,000 
--------------------------------------------------------------------------------
Total                                                           $   181,533,000 
================================================================================

F-63

S-4/A
265th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 265th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiber lease expense charged to operations under the above agreements was        
approximately $5.3 million, $6.9 million and $7.8 million in the years ended    
December 31, 2001, 2002 and 2003, respectively.                                 

LITIGATION                                                                      

On November 9, 2004 NEON Transcom, Inc., a wholly-owned subsidiary of NEON,     
filed against Washington Metropolitan Area Transit Authority ("WMATA") in United
States District Court for the District of Columbia a declaratory judgment that  
rights-of-way fees provided for under a license agreement violate the           
Telecommunications Act of 1996, as amended, and further seeking an injunction   
preventing WMATA from requiring payment of the fees and holding NEON Transcom,  
Inc. in default under the License Agreement, dated October 5, 1999 between WMATA
and NEON. The matter is styled NEON Transcom, Inc. vs. Washington Metropolitan  
Area Transit Authority. On November 22, 2004, NEON received correspondence from 
WMATA's counsel notifying NEON that WMATA intends to file a claim against NEON. 
WMATA is seeking payment of approximately $847,000 owed to WMATA under the      
License Agreement. Although there can be no assurance as to the outcome or      
effect of WMATA's threatened lawsuit, management does not believe, based on     
currently available information, that the ultimate liabilities, if any,         
resulting from this lawsuit will have a material adverse impact on the business,
financial condition, results of operations or cash flows of the Company.        

Certain claims arising in the ordinary course of business are pending against   
the Company. In the opinion of management, these claims are not expected to have
a material effect on operations.                                                

13.    401(K) PLAN                                                              

The Company maintains the NEON Communications, Inc. 401(k) Plan (the "Plan")    
under Section 401(k) of the Internal Revenue Code ("IRC") covering all eligible 
employees. Under the Plan, a participant may elect to defer receipt of a stated 
percentage of his or her compensation, subject to limitation under the IRC,     
which would otherwise be payable to the participant for any plan year. For the  
year ended December 31, 2001, the Company made matching contributions of        
approximately $165,000. The Company did not match contributions to the Plan for 
the years ended December 31, 2002 and 2003.                                     

14.    ACCRUED EXPENSES                                                         

Accrued expenses at December 31, 2002 and 2003 consisted of the following:      

                                                   2002               2003
================================================================================
Accrued property and other taxes                   $2,338,000        $2,716,000 
Accrued professional fees                           1,625,000           172,000 
Accrued payables to related parties                   152,000         1,582,000 
Accrued payroll and benefits                        1,828,000         2,138,000 
Accrued commissions                                   194,000           293,000 
Accrued other                                       2,058,000         2,002,000 
--------------------------------------------------------------------------------
                                                  $8,195,000        $8,903,000
================================================================================

15.    SEGMENT DISCLOSURE                                                       

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related          
Information," requires certain financial and supplementary information to be    
disclosed on an annual and interim basis for each reportable operating segment  
of an enterprise. Operating segments are defined as components of an enterprise 
about which separate financial information is available that is evaluated       
regularly by the chief operating decision maker, or decision making group, in   
deciding how to allocate resources and in assessing performance. The Company's  
chief operating decision makers are the Company's Executive Management Team.    

The Company operates in one business segment, the provision of advanced optical 
networking solutions and services. The Company analyzes and reports revenues    
based on lit fiber, dark fiber, collocation and other services. The Company does
not allocate for management reporting or segment reporting purposes its cost of 
revenues and property and equipment, which represent the primarily operating    
costs, communications network and equipment that support its revenues.          
Similarly, selling, general and administrative expenses are not allocated to    
revenue components for management or segment reporting purposes.                

Management utilizes several measurements to evaluate its operations and allocate
resources. However, the principal measurements are consistent with the Company's
financial statements. The accounting policies of the segments are the same as   
those described in Note 4. All of the Company's revenues are generated and all  
of its assets are located in the United States.                                 

F-64

S-4/A
266th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 266th
 NEON COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue information for the Company was approximately as follows:               

                                                                       SUCCESSOR
                                     PREDECESSOR COMPANY               COMPANY
DECEMBER 31,                         2001              2002              2003   
================================================================================
Revenues:                                                                       
Lit fiber leases                 $18,395,000       $24,077,000       $32,287,000
Dark fiber leases                  4,880,000         6,430,000         5,229,000
Collection services                1,363,000         1,203,000         1,281,000
Other services (1)                 1,913,000         1,964,000         2,791,000
--------------------------------------------------------------------------------
Total Revenues                   $26,551,000       $33,674,000       $41,588,000
================================================================================

(1) Includes amortization of nonrecurring fees for installation and design,     
engineering and construction services.                                          

16.    SUPPLEMENTAL CASH FLOW DISCLOSURE                                        

                                                        [Enlarge/Download Table]
                                                                         YEARS ENDED                  NINE MONTHS ENDED             
                                                        ============================================================================
                                                                         DECEMBER 31,                   SEPTEMBER 30,               
                                                          PREDECESSOR     PREDECESSOR      SUCCESSOR      SUCCESSOR       SUCCESSOR 
                                                            COMPANY         COMPANY         COMPANY        COMPANY         COMPANY  
                                                              2001            2002            2003           2003           2004    
====================================================================================================================================
                                                                                                                                    
Supplemental disclosure of cash flow information:                                                                                   
Cash paid during the year for:                                                                                                      

Interest                                                 $ 25,606,000    $ 11,475,000   $         --    $         --   $         -- 
====================================================================================================================================
Taxes                                                    $    229,000    $    158,000   $    809,000    $    557,000   $    723,000 
====================================================================================================================================
Supplemental disclosure of noncash investing and                                                                                    
  financing activities:                                                                                                             
Beneficial conversion related to issuance of                                                                                        
  convertible notes (Note 7)                             $  1,150,000    $         --   $         --    $         --   $         -- 
====================================================================================================================================
Decrease in stock subscription receivable                $(79,860,000)   $         --   $         --    $         --   $         -- 
====================================================================================================================================
Issuance of equipment note payable                       $ 46,250,000    $         --   $         --    $         --   $         -- 
====================================================================================================================================
Issuance of common stock in exchange for assets                                                                                     
  and reduction in accounts payable                      $         --    $  9,411,000   $         --    $         --   $         -- 
====================================================================================================================================
Cancellation of old common stock and restricted                                                                                     
  common stock in connection with POR (Note 3)           $         --    $290,531,000   $         --    $         --   $         -- 
====================================================================================================================================
Repayment of subscription receivable with certain                                                                                   
  property and equipment (Note 5)                        $         --    $ 12,202,000   $         --    $         --   $         -- 
====================================================================================================================================
Noncash forgiveness of long-term debt (Note 5)           $         --    $ 10,000,000   $         --    $         --   $         -- 
====================================================================================================================================
Warrants issued in lieu of cash payments (Note 8)        $         --    $         --   $    360,000    $    360,000   $         -- 
====================================================================================================================================
Accretion of dividends on 12% Series A Preferred Stock   $         --    $     45,000   $  1,538,000    $  1,141,000   $  1,283,000 
====================================================================================================================================
On September 12, 2003, the Company acquired                                                                                         
  Columbia Transmission Communications                                                                                              
  Corporation (Note 2):                                                                                                             
     Accounts receivable                                 $         --    $         --   $    172,000    $         --   $         -- 
     Prepaid expenses and other current assets           $         --    $         --   $    775,000    $         --   $         -- 
     Accounts payable and accrued expenses               $         --    $         --   $   (129,000)   $         --   $         -- 
     Asset retirement obligation                         $         --    $         --   $ (1,768,000)   $         --   $         -- 
     Warrants issued in lieu of cash payment for                                                                                    
      acquisition costs (Note 8)                         $         --    $         --   $   (352,000)   $         --   $         -- 
     Cash acquired from purchase, net of cash paid       $         --    $         --   $  4,520,000    $         --   $         -- 
------------------------------------------------------------------------------------------------------------------------------------
Gain on acquisition                                      $         --    $         --   $  3,218,000    $         --   $         -- 
====================================================================================================================================

                                                  F-65

S-4/A
267th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 267th
APPENDIX A-1                                                                    

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

AGREEMENT AND PLAN OF MERGER

 BETWEEN

GLOBIX CORPORATION

 and

 NEON COMMUNICATIONS, INC.

 DATED AS OF July 19, 2004

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

NOTE: This agreement has been conformed to include the amendments thereto that  
have been made by the first amendment to the merger agreement dated as of       
October 8, 2004 among the parties to this agreement. Provisions of this         
---------                                                                       
agreement that have been deleted by virtue of the first amendment are shown by  
brackets (i.e., [..old language in merger agreement...]). New provisions added  
to this agreement by virtue of the first amendment are shown by all capital     
letters and underlining (i.e., ...NEW LANGUAGE IN MERGER AGREEMENT...). This    
                    --------------------------------
conformed version of the agreement does not contain the exhibits referenced     
herein, including Exhibit 1.8(c)(ii), which Exhibit 1.8(c)(ii) has been         
modified pursuant to the first amendment and is attached as Exhibit A to the    
first amendment. A copy of the original agreement prior to the first amendment, 
including all original exhibits, was filed with the Securities and Exchange     
Commission by Globix Corporation on July 21, 2004 as Exhibit 2.1 to a filing on 
Form 8-K.                                                                       

S-4/A
268th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 268th
 TABLE OF CONTENTS
 -----------------

                                                                            PAGE
                                                                            ----

ARTICLE I THE MERGER...........................................................1

    Section 1.1    The Merger..................................................1
    Section 1.2    Closing.....................................................2
    Section 1.3    Effective Time..............................................2
    Section 1.4    Effects of the Merger.......................................2
    Section 1.5    Charter.....................................................2
    Section 1.6    Bylaws......................................................2
    Section 1.7    Officers and Directors of the Surviving Corporation.........2
    Section 1.8    Effect on Capital Stock.....................................2
    Section 1.9    Treatment of NEON Options...................................4

ARTICLE II EXCHANGE OF CERTIFICATES............................................5

    Section 2.1    Exchange of Certificates....................................5
    Section 2.2    Exchange Procedures.........................................5
    Section 2.3    Dividends; Transfer Taxes; Withholding......................5
    Section 2.4    Return of Exchange Fund.....................................6
    Section 2.5    No Further Ownership Rights in NEON Securities..............6
    Section 2.6    Closing of NEON Transfer Books..............................7
    Section 2.7    Lost Certificates...........................................7
    Section 2.8    Dissenting Shares...........................................7
    Section 2.9    Further Assurances..........................................8

ARTICLE III REPRESENTATIONS AND WARRANTIES.....................................8

    Section 3.1    Representations and Warranties of NEON......................8
    Section 3.2    Representations and Warranties of Globix...................27

ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS..........................47

    Section 4.1    Covenants of NEON..........................................47
    Section 4.2    Covenants of Globix........................................50
    Section 4.3    No Control.................................................53

ARTICLE V ADDITIONAL AGREEMENTS...............................................53

    Section 5.1    Preparation of Proxy Statement; Stockholders Meetings......53
    Section 5.2    Access to Information......................................54
    Section 5.3    Reasonable Efforts.........................................55
    Section 5.4    Public Announcements.......................................56
    Section 5.5    Employee Benefits Matters..................................56
    Section 5.6    Fees and Expenses..........................................56
    Section 5.7    Directors' and Officers' Indemnity.........................57
    Section 5.8    Consents, Waivers and Other Approvals......................57
    Section 5.9    Committee for Transition Issues............................58
    Section 5.10   Schedules..................................................58
    Section 5.11   Financial Review...........................................58
    Section 5.12   Cooperation................................................58

-i- 

S-4/A
269th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 269th
ARTICLE VI CONDITIONS PRECEDENT...............................................59

    Section 6.1    Conditions to Each Party's Obligation to Effect the Merger.59
    Section 6.2    Additional Conditions to Obligations of Globix.............60
    Section 6.3    Additional Conditions to Obligations of NEON...............61

ARTICLE VII TERMINATION AND AMENDMENT.........................................63

    Section 7.1    Termination................................................63
    Section 7.2    Effect of Termination......................................65
    Section 7.3    Amendment..................................................65
    Section 7.4    Extension; Waiver..........................................65

ARTICLE VIII SURVIVAL.........................................................65

    Section 8.1    Non-Survival of Representations, Warranties and Agreements.65

ARTICLE IX GENERAL PROVISIONS.................................................66

    Section 9.1    Amendment and Waiver.......................................66
    Section 9.2    Notices....................................................66
    Section 9.3    Interpretation.............................................67
    Section 9.4    Counterparts...............................................67
    Section 9.5    Entire Agreement; No Third Party Beneficiaries.............67
    Section 9.6    Governing Law..............................................67
    Section 9.7    Severability...............................................68
    Section 9.8    Assignment.................................................68
    Section 9.9    Submission to Jurisdiction; Waivers........................68
    Section 9.10   Enforcement................................................68
    Section 9.11   Definitions................................................69
    Section 9.12   Additional Definitions.....................................72

EXHIBITS                                                                        
--------                                                                        

Exhibit 1.5             -  Certificate of Incorporation of the Surviving        
Corporation               
Exhibit 1.6             -  Bylaws of the Surviving Corporation                  
Exhibit 1.7             -  Officers and Directors of the Surviving Corporation  
         and Globix After the Effective Time
Exhibit 1.8(c)(ii)      -  Certificate of Designation of Globix Preferred Stock 
Exhibit 1.8 (c)(iii)    -  Amendment to Class A Warrant Agreement               
Exhibit 1.8(c)(v)       -  Globix Warrant                                       
Exhibit 5.11            -  Financial Review Procedures                          

-ii-

S-4/A
270th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 270th
      This AGREEMENT AND PLAN OF MERGER, dated as of July 19, 2004 (this
"AGREEMENT"), between GLOBIX CORPORATION, a Delaware corporation ("GLOBIX"), and
NEON COMMUNICATIONS, INC., a Delaware corporation ("NEON").                     

 WITNESSETH:

      WHEREAS, prior to the Closing Date (as defined below) Globix shall
incorporate a new wholly-owned subsidiary Delaware corporation to be called     
"Cornerstone Merger Corp." or such other name as Globix may determine ("MERGER  
SUB" and together with NEON, the "CONSTITUENT CORPORATIONS");                   

       WHEREAS, the respective Boards of Directors of Globix and NEON have
each determined that the merger of Merger Sub with and into NEON (the "MERGER"),
upon the terms and subject to the conditions set forth in this Agreement, is    
advisable and in the best interests of their respective stockholders, and such  
Boards of Directors have approved such Merger pursuant to which each outstanding
share of Common Stock, par value $0.001 per share of NEON (the "NEON COMMON     
STOCK") and each outstanding share of 12% Series A Cumulative Convertible       
Preferred Stock, par value $0.001 per share (the "NEON CONVERTIBLE PREFERRED    
STOCK"), issued and outstanding immediately prior to the Effective Time (as     
defined in Section 1.3), and certain other securities of NEON, other than shares
owned or held directly or indirectly by Globix or directly by NEON, will be     
converted into the right to receive the Merger Consideration (as defined in     
Section 1.8(c));                                                                

   WHEREAS, for federal income tax purposes, it is intended by the
parties hereto that the Merger shall qualify as a reorganization within the     
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the 
"CODE"); and the parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Code;                   

    WHEREAS, Globix and NEON desire to make certain representations,
warranties, covenants and agreements in connection with the transactions        
contemplated hereby and also to prescribe various conditions to the transactions
contemplated hereby.                                                            

        NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and     
intending to be legally bound hereby, the parties hereto agree as follows:      

 ARTICLE I

THE MERGER
----------

        Section 1.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General        
Corporation Law (the "DGCL"), Merger Sub shall be merged with and into NEON at  
the Effective Time. From and after the Effective Time, the separate corporate   
existence of Merger Sub shall cease and NEON shall continue its corporate       
existence under the DGCL as the surviving corporation (the "SURVIVING           
CORPORATION").                                                                  

-1- 

S-4/A
271st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 271st
        Section 1.2 CLOSING. Subject to the terms and conditions hereof, the
closing of the Merger (the "CLOSING") will take place on the third Business Day 
after the satisfaction or waiver (subject to applicable law) of the conditions  
set forth in Article VI (excluding conditions that, by their terms, cannot be   
satisfied until the Closing Date), unless another time or date is agreed to in  
writing by the parties hereto (any such date, the "CLOSING DATE"). The Closing  
shall be held at the offices of Day, Berry & Howard LLP, One Canterbury Green,  
Stamford, Connecticut, unless another place is agreed to by the parties hereto. 

    Section 1.3 EFFECTIVE TIME. As soon as practicable following the
Closing, the parties shall (i) file a certificate of merger (the "CERTIFICATE OF
Merger") in such form as is required by, and executed in accordance with the    
relevant provisions of, the DGCL, and (ii) make all other filings required under
the DGCL. The Merger shall become effective at such time as the Certificate of  
Merger is duly filed with, and accepted by, the Secretary of State of the State 
of Delaware, or at such subsequent time as Globix and NEON shall agree and      
specify in the Certificate of Merger (the date and time the Merger becomes      
effective being the "EFFECTIVE TIME").                                          

       Section 1.4 EFFECTS OF THE MERGER. At and after the Effective Time,
the Merger will have the effects set forth in the DGCL. Without limiting the    
generality of the foregoing, and subject thereto, at the Effective Time all the 
property, rights, privileges, powers and franchises of the Constituent          
Corporations shall be vested in the Surviving Corporation, and all debts,       
liabilities, obligations and duties of the Constituent Corporations shall become
the debts, liabilities, obligations and duties of the Surviving Corporation.    

       Section 1.5 CHARTER. The certificate of incorporation of NEON as in
effect immediately prior to the Effective Time, shall upon the Effective Time   
and by virtue of the Merger be amended to read in its entirety as set forth in  
Exhibit 1.5, and as so amended shall be the certificate of incorporation of the 
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.                                                              

         Section 1.6 BYLAWS. The bylaws of NEON as in effect immediately prior
to the Effective Time shall upon the Effective Time be amended to read in their 
entirety as set forth in Exhibit 1.6, and as so amended shall be the bylaws of  
the Surviving Corporation until thereafter changed or amended as provided       
therein or by applicable law.                                                   

        Section 1.7 OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION. The
officers and directors of the Surviving Corporation and of Globix after the     
Effective Time will be as set forth on Exhibit 1.7.                             

     Section 1.8 EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, NEON or  
the holders of any securities of the Constituent Corporations:                  

          (a) Each issued and outstanding share of common stock, par value $0.01
per share, of Merger Sub shall be converted into one validly issued, fully paid 
and nonassessable share of common stock of the Surviving Corporation.           

-2- 

S-4/A
272nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 272nd
      (b) All shares of NEON Common Stock and NEON Convertible Preferred
Stock that are held in the treasury of NEON and any shares of NEON Common Stock 
and NEON Convertible Preferred Stock owned by Globix or Merger Sub shall        
automatically be canceled and retired and shall cease to exist and no capital   
stock of Globix or other consideration shall be delivered in exchange therefor. 

 (c) Subject to the provisions of Sections 2.4 and 2.9 hereof:

                  (i) each share of NEON Common Stock issued and outstanding
    immediately prior to the Effective Time (other than shares to be
       canceled in accordance with Section 1.8(b)) shall be converted into
      the right to receive 1.2748 shares (with the aggregate of all such
        converted shares of each stockholder rounded up to the nearest whole
         share) (such number being referred to herein as the "EXCHANGE RATIO")
         of common stock, par value $0.01 per share, of Globix ("GLOBIX COMMON
STOCK");                                                    

              (ii) [(A)] (B) all accrued and unpaid dividends to the
---               
          Closing Date shall be treated as if paid in shares of NEON Convertible
   PREFERRED Stock issued immediately prior to the Effective Time;
---------                                                   

                    (A) each share of NEON Convertible Preferred Stock
         issued and outstanding immediately prior to the Effective Time (other
     than shares to be canceled in accordance with Section 1.8(b), but
       including those shares treated as issued in accordance with Section
          1.8(c)(ii)(A) above), shall be converted into the right to receive (1)
        $3.75 in cash (the "PREFERRED CASH CONSIDERATION") and (2) [0.85034]
   2.08333 shares of Globix preferred stock with substantially the
-------                                                     
         terms set forth in Exhibit 1.8(c)(ii) (the "GLOBIX PREFERRED STOCK");

                   (iii) each outstanding Class A Warrant of NEON issued under
     the Class A Warrant Agreement, dated as of December 23, 2002 (the
          "CLASS A WARRANT AGREEMENT"), between NEON and American Stock Transfer
     & Trust Company, as warrant agent (a "CLASS A WARRANT"), shall be
      converted into the right to receive 1.2748 shares of Globix Common
         Stock (with the aggregate of all such converted shares of each holder
 rounded up to the nearest whole share) in accordance with the
provisions of Exhibit 1.8(c)(iii);                          

                   (iv) each outstanding Redeemable Preferred Stock Warrant of
       NEON issued under the Redeemable Preferred Stock Warrant Agreement,
  dated as of December 23, 2002, between NEON and American Stock
         Transfer & Trust Company, as warrant agent (the "REDEEMABLE PREFERRED
          STOCK WARRANTS") shall expire at the Effective Time according to their
       terms, and the holders thereof shall not have any rights to receive
payments therefor or with respect thereto; and              

                (v) each outstanding NEON CTA Warrant shall be converted
     into the right to receive a Globix Warrant with substantially the
          terms set forth on Exhibit 1.8(c)(v) (a "GLOBIX WARRANT") representing
  the right to acquire a number of shares of Globix Common Stock
       (rounded to the nearest whole number) determined by multiplying the
 number of shares of NEON Common Stock subject to such warrant

-3- 

S-4/A
273rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 273rd
       immediately prior to the Effective Time by the Exchange Ratio, at a
         purchase price per share (rounded to the nearest whole cent) equal to
     the purchase price per share of NEON Common Stock subject to such
   warrant immediately prior to the Effective Time, divided by the
Exchange Ratio.                                             

       The shares of Globix Common Stock referred to in Sections 1.8(c)(i)
and (iii), the Globix Preferred Stock and Preferred Cash Consideration referred 
to in Section 1.8(c)(ii), and the Globix Warrants referred to in Section        
1.8(c)(v) are together referred to as the "MERGER CONSIDERATION". All such      
shares of NEON Common Stock and NEON Convertible Preferred Stock and NEON       
warrants (sometimes collectively referred to herein as, "NEON SECURITIES"), when
so converted, shall no longer be outstanding and shall automatically be canceled
and retired and each holder of a certificate representing any such shares shall 
cease to have any rights with respect thereto, except the right to receive the  
Merger Consideration into which such NEON Securities are converted and any      
dividends and other distributions in accordance with Section 2.3.               

         (d) At the Effective Time, each then outstanding NEON Option, whether
or not then vested or exercisable, shall be modified as set forth in Section    
1.9; provided that any right of a holder of any such NEON Option to acquire     
Redeemable Preferred Stock or Redeemable Preferred Stock Warrants, as           
applicable, shall terminate at the Effective Time.                              

      Section 1.9 TREATMENT OF NEON OPTIONS. At the Effective Time, each
then outstanding NEON Option, whether or not then vested or exercisable, shall  
be modified and become and represent an option to acquire, on the same terms and
conditions (including, without limitation, vesting (with credit for amounts     
already vested) and acceleration) as were applicable to such NEON Option prior  
to the Effective Date, a number of shares of Globix Common Stock (rounded to the
nearest whole number) determined by multiplying the number of shares of NEON    
Common Stock subject to such NEON Option immediately prior to the Effective Time
by the Exchange Ratio, at an exercise price per share (rounded to the nearest   
whole cent) equal to the exercise price per share of NEON Common Stock subject  
to such NEON Option immediately prior to the Effective Time, divided by the     
Exchange Ratio. It is the intention of the parties hereto that each NEON Option 
so modified will, to the extent permitted by applicable laws, continue to       
qualify as an "incentive stock option" within the meaning of Section 422 of the 
Code to the same extent such NEON Option qualified as an incentive stock option 
immediately prior to the Effective Time. As soon as practicable after the       
Effective Time, the Surviving Corporation shall deliver to each Person who,     
immediately prior to the Effective Time, was a holder of an outstanding NEON    
Option, an instrument evidencing the modification of such NEON Option as        
provided in this Section 1.9. As of the Effective Time, Globix and NEON shall   
have taken all corporate action necessary to approve the modification of the    
NEON Options and the amendment of the NEON Stock Option Plans, to authorize the 
issuance of Globix Common Stock upon exercise of the NEON Options as modified   
pursuant hereto, to cause Globix, as the sole shareholder of the Surviving      
Corporation, to vote all of its shares in the Surviving Corporation in favor of 
approval of the NEON Stock Option Plans as so modified in accordance with the   
shareholder approval requirements of Section 422 of the Code and the regulations
promulgated and proposed thereunder, and to reserve for issuance a sufficient   
number of shares of Globix Common Stock for delivery upon exercise of the NEON  
Options as modified pursuant hereto. Globix shall use commercially reasonable   
efforts to cause the issuance of shares of Globix Common Stock issuable upon    

-4- 

S-4/A
274th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 274th
exercise of any modified NEON Options to be registered as soon as is reasonably 
practicable following the Effective Time pursuant to an effective registration  
statement on Form S-8 under the Securities Act of 1933, as amended (the         
"SECURITIES ACT"), and to maintain the effectiveness of such registration       
statement thereafter for so long as any of such modified NEON Options remain    
outstanding; and if the Globix Common Stock is then listed for trading on any   
exchange or market, Globix shall use commercially reasonable efforts to cause   
shares issuable upon exercise of modified NEON Options to be so listed.         

ARTICLE II

EXCHANGE OF CERTIFICATES
------------------------

        Section 2.1 EXCHANGE OF CERTIFICATES. Globix shall authorize a bank,
trust company, or such other person or persons as shall be reasonably acceptable
to Globix and NEON, to act as Exchange Agent hereunder (the "EXCHANGE AGENT").  
As soon as practicable after the Effective Time, Globix shall deposit with the  
Exchange Agent, in trust for the holders of NEON Securities converted in the    
Merger, the Merger Consideration (other than the Globix Warrants) (such Merger  
Consideration, together with any dividends or distributions with respect        
thereto, being hereinafter referred to as the "EXCHANGE FUND"). The Exchange    
Agent shall deliver the Globix Common Stock contemplated to be issued pursuant  
to Sections 1.8(c)(i) and (iii) and the Globix Preferred Stock and Preferred    
Cash Consideration to be issued pursuant to Section 1.8(c)(ii), in each case out
of the Exchange Fund. The Exchange Fund shall not be used by Globix for any     
purpose other than as contemplated by Section 1.8.                              

 Section 2.2 EXCHANGE PROCEDURES. Five Business Days after the
Effective Time, the Exchange Agent shall mail to each record holder of a        
certificate or certificates (including warrant certificates as applicable) which
immediately prior to the Effective Time represented outstanding NEON Securities 
converted in the Merger (the "CERTIFICATES") a letter of transmittal (which     
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the Certificates to the   
Exchange Agent, and shall contain instructions for use in effecting the         
surrender of the Certificates in exchange for the Merger Consideration). Subject
to Section 2.1, upon surrender for cancellation to the Exchange Agent of a      
Certificate together with such letter of transmittal, duly executed, and the    
Class A Warrant Exercise Price, if applicable, the holder of such Certificate   
shall be entitled to receive in exchange therefor the Merger Consideration into 
which the NEON Securities represented by the surrendered Certificate shall have 
been converted pursuant to Section 1.8, and certain dividends and other         
distributions in accordance with Section 2.3. Any Certificate so surrendered    
shall forthwith be canceled.                                                    

Section 2.3 DIVIDENDS; TRANSFER TAXES; WITHHOLDING.         

         (a) No dividends or other distributions that are declared on or after
the Effective Time on Globix Common Stock or Globix Preferred Stock, or are     
payable to the holders of record thereof on or after the Effective Time, will be
paid to any person entitled by reason of the Merger to receive a certificate    
representing Globix Common Stock or Globix Preferred Stock until such person    
surrenders the related Certificate or Certificates, as provided in Section 2.2. 
Subject to the effect of applicable law, there shall be paid to each record     
holder of a new certificate representing such Globix Common Stock or Globix     

-5- 

S-4/A
275th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 275th
Preferred Stock: (a) at the time of such surrender, the amount of any dividends 
or other distributions theretofore paid with respect to the shares of Globix    
Common Stock or Globix Preferred Stock represented by such new certificate and  
having a record date on or after the Effective Time and a payment date prior to 
such surrender and (b) at the appropriate payment date, the amount of any       
dividends or other distributions payable with respect to such shares of Globix  
Common Stock or Globix Preferred Stock and having a record date on or after the 
Effective Time but prior to such surrender and a payment date on or subsequent  
to such surrender. In no event shall the person entitled to receive such        
dividends or other distributions be entitled to receive interest on such        
dividends or other distributions.                                               

        (b) If any Merger Consideration is to be paid to or issued in a name
other than that in which the Certificate surrendered in exchange therefor is    
registered, it shall be a condition of such exchange that the Certificate so    
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates for  
such shares of Globix Common Stock or Globix Preferred Stock, as the case may   
be, in a name other than that of the registered holder of the Certificate       
surrendered, or shall establish to the satisfaction of the Exchange Agent that  
such tax has been paid or is not applicable.                                    

    (c) Globix or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to 
any holder of NEON Securities such amounts as Globix or the Exchange Agent is   
required to deduct and withhold with respect to the making of such payment under
the Code or under any provision of state, local or foreign tax law. To the      
extent that amounts are so withheld by Globix or the Exchange Agent, such       
withheld amounts shall be treated for all purposes of this Agreement as having  
been paid to the holder of the NEON Securities in respect of which such         
deduction and withholding was made by Globix or the Exchange Agent.             

         Section 2.4 RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former holders of NEON Securities for six    
months after the Effective Time shall be delivered to Globix, upon demand of    
Globix, and any such former security holders who have not theretofore complied  
with this Article II shall thereafter look only to Globix for payment of their  
claim for Merger Consideration and any dividends or distributions with respect  

to Globix Common Stock or Globix Preferred Stock. Neither Globix nor the        
Surviving Corporation shall be liable to any former holder of NEON Securities   
for any such Merger Consideration and dividends and distributions held in the   
Exchange Fund which are delivered to a public official pursuant to any          
applicable abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered prior to such date on which any Merger Consideration  
or any dividends or distributions with respect to Globix Common Stock or Globix 
Preferred Stock in respect of such Certificate would escheat to or become the   
property of any Governmental Entity, any Merger Consideration in respect of such
Certificates shall, to the extent permitted by applicable Laws, become the      
property of Globix, free and clear of all claims or interest of any person      
previously entitled thereto.                                                    

          Section 2.5 NO FURTHER OWNERSHIP RIGHTS IN NEON SECURITIES. The Merger
Consideration issued upon the surrender for exchange of Certificates in         
accordance with the terms hereof (including any cash paid pursuant to Section   

-6- 

S-4/A
276th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 276th
2.3) shall be deemed to have been issued in full satisfaction of all rights     
pertaining to the NEON Securities represented by such Certificates and the      
modification of the NEON Options pursuant to and in accordance with Section 1.9 
shall be deemed to be in full satisfaction of all rights pertaining to NEON     
Options including any right to acquire Redeemable Preferred Stock or Redeemable 
Preferred Warrants, as applicable.                                              

          Section 2.6 CLOSING OF NEON TRANSFER BOOKS. At the Effective Time, the
stock transfer books of NEON shall be closed and no transfer of shares of NEON  
capital stock shall thereafter be made on the records of NEON. If, after the    
Effective Time, Certificates are presented to the Surviving Corporation, the    
Exchange Agent or Globix, such Certificates shall be canceled and exchanged as  
provided in this Article II.                                                    

     Section 2.7 LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the  
person claiming such Certificate to be lost, stolen or destroyed and, if        
required by Globix or the Exchange Agent, the posting by such person of a bond, 
in such reasonable amount as Globix or the Exchange Agent may direct as         
indemnity against any claim that may be made against them with respect to such  
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or 
destroyed Certificate, Merger Consideration and any dividends or other          
distributions to which the holders thereof are entitled pursuant to Section 2.3.

Section 2.8 DISSENTING SHARES.                              

    (a) Notwithstanding any other provision of this Agreement to the
contrary, shares of NEON Common Stock and NEON Convertible Preferred Stock that 
are outstanding immediately prior to the Effective Time and which are held by   
stockholders of NEON who shall not have voted in favor of the Merger or         
consented thereto in writing and who shall have demanded properly in writing    
appraisal for such shares in accordance with Section 262 of the DGCL and who    
shall not have withdrawn such demand or otherwise have forfeited appraisal      
rights (collectively, the "DISSENTING SHARES") shall not be converted into or   
represent the right to receive the Merger Consideration. Such stockholders of   
NEON shall be entitled to receive payment of the appraised value of such shares 
of NEON Common Stock and/or NEON Convertible Preferred Stock held by them in    
accordance with the provisions of such Section 262, except that all Dissenting  
Shares held by stockholders of NEON who shall have failed to perfect or who     
effectively shall have withdrawn or lost their rights to appraisal of such      
shares of NEON Common Stock or NEON Convertible Preferred Stock under such      
Section 262 shall thereupon be deemed to have been converted into and to have   
become exchangeable, as of the Effective Time, for the right to receive, without
interest, the Merger Consideration upon surrender, in the manner provided in    
Section 2.2 of the Certificate or Certificates which immediately prior to the   
Effective Time represented such shares of NEON Common Stock and NEON Convertible
Preferred Stock and the delivery of the other documents required to be delivered
pursuant to such Section 2.2.                                                   

         (b) NEON shall give Globix prompt notice of any demands for appraisal
received by NEON, withdrawals of such demands, and any other instruments served 
pursuant to the DGCL and received by NEON and NEON and Globix shall participate 
jointly prior to the Closing in all negotiations and proceedings with respect to
demands for appraisal under the DGCL. NEON shall not, except with the prior     
written consent of Globix, make any payment with respect to any demands for     
appraisal, or offer to settle, or settle, any such demands.                     

-7- 

S-4/A
277th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 277th
      Section 2.9 FURTHER ASSURANCES. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,     
bills of sale, assignments or assurances or any other acts or things are        
necessary, desirable or proper (a) to vest, perfect or confirm, of record or    
otherwise, in the Surviving Corporation its right, title or interest in, to or  
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the       
purposes of this Agreement, the Surviving Corporation and its proper officers   
and directors or their designees shall be authorized to execute and deliver, in 
the name and on behalf of either of the Constituent Corporations, all such      
deeds, bills of sale, assignments and assurances and to do, in the name and on  
behalf of either Constituent Corporation, all such other acts and things as may 
be necessary, desirable or proper to vest, perfect or confirm the Surviving     
Corporation's right, title or interest in, to or under any of the rights,       
privileges, powers, franchises, properties or assets of such Constituent        
Corporation and otherwise to carry out the purposes of this Agreement.          

 ARTICLE III

REPRESENTATIONS AND WARRANTIES
------------------------------

     Section 3.1 REPRESENTATIONS AND WARRANTIES OF NEON. Except as set
forth in the NEON Disclosure Schedule delivered by NEON to Globix in connection 
with the execution of this Agreement (the "NEON DISCLOSURE SCHEDULE") (each     
Section of which qualifies the correspondingly numbered representation and      
warranty or covenant to the extent specified therein), NEON represents and      
warrants to Globix as follows:                                                  

(a) ORGANIZATION, STANDING AND POWER.                       

                  (i) Each of NEON and its Subsidiaries (i) is a corporation
        or other entity duly incorporated or organized, validly existing and
    in good standing under the laws of its state of incorporation or
          organization, (ii) has all requisite power and authority to own, lease
        and operate its properties and to carry on its business as now being
      conducted, and (iii) as set forth in Section 3.1(a)(i) of the NEON
     Disclosure Schedule, is duly qualified and in good standing to do
        business in each jurisdiction in which the nature of its business or
       the ownership or leasing of its properties makes such qualification
      necessary, except in the case of clause (iii) for such failures as
          could not, individually or in the aggregate, reasonably be expected to
have a NEON Material Adverse Effect.                        

                    (ii) Section 3.1(a)(ii) of the NEON Disclosure Schedule sets
        forth a complete and accurate list of all of NEON's Subsidiaries and
          NEON's direct or indirect equity interest therein. Except as set forth
        in Section 3.1(a)(ii) of the NEON Disclosure Schedule, neither NEON,
    nor any of its Subsidiaries, (A) directly or indirectly owns any
  equity, membership, partnership or similar interest in, or any
    interest convertible into or exchangeable or exercisable for any
equity, membership, partnership or similar interest in, any 
         corporation, partnership, joint venture, limited liability company or

-8- 

S-4/A
278th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 278th
 other business association or entity, whether incorporated or
     unincorporated, or (B) has, since the NEON Confirmation Effective
  Date, been a general partner or managing member of any general
        partnership, limited partnership, limited liability company or other
       entity as to which NEON or any of its Subsidiaries has any material
liability.                                                  

                   (iii) The copies of the charter, articles or certificate of
          incorporation and by-laws (or similar governing documents) of NEON and
          each of its Subsidiaries which were made available to Globix are true,
          complete and correct copies of such documents as in effect on the date
of this Agreement.                                          

                    (iv) All minute books and stock record books of NEON and its
        Subsidiaries have been made available to Globix or its counsel prior
to the execution of this Agreement.                         

(b) CAPITAL STRUCTURE.                                      

            (i) The authorized capital stock of NEON consists of
    100,000,000 shares of NEON Common Stock and 30,000,000 shares of
    Preferred Stock, $0.001 par value per share (the "NEON PREFERRED
    STOCK"), of which NEON Preferred Stock 2,500,000 such shares are
          designated as NEON Convertible Preferred Stock, 21,354,000 such shares
      are designated as Redeemable Preferred Stock (the "NEON REDEEMABLE
       PREFERRED STOCK"), and the remaining shares of NEON Preferred Stock
       are undesignated. The rights and privileges of each class of NEON's
         capital stock are as set forth in NEON's certificate of incorporation
       and the certificates of designation thereto, as amended to the date
       hereof. As of the date hereof, (A) 15,775,863 shares of NEON Common
      Stock are issued and outstanding and 341,936 shares of NEON Common
       Stock are reserved for issuance to Mode 1 Communications, Inc., (B)
       1,101,887 shares of NEON Convertible Preferred Stock are issued and
     outstanding, (C) no shares of NEON Redeemable Preferred Stock are
        issued or outstanding, (D) 5,511,405 shares of NEON Common Stock are
          reserved for issuance pursuant to the terms of the outstanding Class A
     Warrants and 650,000 shares of NEON Common Stock are reserved for
        issuance pursuant to the terms of the outstanding NEON CTA Warrants,
       and (E) no shares of NEON capital stock are held in the treasury of
          NEON or by any Subsidiaries of NEON. All of the issued and outstanding
         shares of NEON Common Stock and NEON Convertible Preferred Stock have
been duly authorized, and are validly issued, fully paid,   
          nonassessable and free of preemptive rights created by statute, NEON's
  certificate of incorporation or bylaws. None of the issued and
          outstanding shares of NEON Common Stock and NEON Convertible Preferred
          Stock have been issued in violation of any applicable federal or state
       law or any preemptive rights or rights to subscribe for or purchase
securities.                                                 

                  (ii) Except as set forth in Section 3.1(b)(ii) of the NEON
     Disclosure Schedule, there are no voting trusts, proxies or other
         agreements or understandings with respect to any NEON Common Stock or
          NEON Convertible Preferred Stock to which NEON or, to the Knowledge of
      NEON, any other Person is a party or by which it or any such other
       Person is bound. Section 3.1(b)(ii) of the NEON Disclosure Schedule
         lists all issued and outstanding shares of NEON Common Stock and NEON
          Convertible Preferred Stock that are otherwise subject to a repurchase
         or redemption right or right of first refusal in favor of NEON or any
       other Person. NEON has delivered to Globix a certificate certifying

-9- 

S-4/A
279th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 279th
       (A) the name and address of each record holder of NEON Common Stock
    and NEON Convertible Preferred Stock, (B) the number and type of
          shares held by each such stockholder, and (C) any restrictions imposed
          by NEON on the transfer of such shares. Except as set forth in Section
          3.1(b)(ii) of the NEON Disclosure Schedule and as contemplated by this
        Agreement, there are no registration rights, and there are no rights
  agreements, "poison pill" anti-takeover plans or other similar
    agreement or restrictive arrangement to which NEON or any of its
         Subsidiaries is a party or by which it or they are bound with respect
          to any equity security of any class of NEON or any of its Subsidiaries
   or with respect to any equity security, partnership interest or
       similar ownership interest of any class of any of its Subsidiaries.

                 (iii) Section 3.1(b)(iii) of the NEON Disclosure Schedule
      lists the number of shares of NEON Common Stock and NEON Preferred
        Stock reserved for future issuance pursuant to stock options granted
     and outstanding as of the date of this Agreement and the plans or
other arrangements under which such options were granted    
        (collectively, the "NEON STOCK OPTION PLANS") and NEON has delivered
      to Globix a certificate with respect to the outstanding options to
 purchase shares of NEON Common Stock and NEON Preferred Stock
          (including restricted stock) (the "NEON OPTIONS") under the NEON Stock
          Option Plans, certifying with respect to each NEON Option (A) the name
         of each holder, (B) the number of shares of NEON Common Stock or NEON
        Preferred Stock subject to such NEON Option, (C) the relationship of
          the holder to NEON, (D) the exercise price, (E) the date of grant, (F)
  the vesting schedule, if any, and expiration date thereof, and
         including the extent to which any vesting has occurred as of the date
          of this Agreement, and (G) whether (and to what extent) the vesting of
       such NEON Option will be accelerated in any way by the transactions
         contemplated by this Agreement or by the termination of employment or
    engagement or change in position of any holder thereof following
          consummation of the Merger. Section 3.1(b)(iii) of the NEON Disclosure
     Schedule shows the number of shares of NEON Common Stock and NEON
      Preferred Stock reserved for future issuance pursuant to warrants,
       convertible securities or other outstanding rights (other than NEON
      Options) to purchase, or obligations to otherwise issue, shares of
        NEON Common Stock or NEON Preferred Stock outstanding as of the date
        of this Agreement (such outstanding warrants, convertible securities
 or other rights, the "NEON CONVERTIBLE SECURITIES"). NEON has
          delivered to Globix a certificate certifying with respect to such NEON
         Convertible Securities (A) the agreement or document under which such
         NEON Convertible Securities were granted, (B) a complete and accurate
        list of the names of all holders of NEON Convertible Securities, (C)
  the number and type of shares subject to such NEON Convertible
         Securities, (D) the exercise price, (E) the date of grant and (F) the
 expiration date thereof. As of and at the Effective Time, the
      Redeemable Preferred Stock Warrants will expire according to their
    terms, and the holders thereof shall cease to have any rights to
      receive payments therefor or with respect thereto. Except for NEON
         Options, neither NEON nor any of its Subsidiaries has outstanding any
     stock appreciation rights, phantom stock, performance based stock
          awards or similar stock rights or obligations. NEON has made available
         to Globix accurate and complete copies of all NEON Stock Option Plans
        and the forms of all stock option agreements evidencing NEON Options
and NEON Convertible Securities.                            

-10-

S-4/A
280th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 280th
                    (iv) The shares of stock of each of NEON's Subsidiaries held
     by NEON (directly or indirectly) are the only shares of each such
          Subsidiary issued and outstanding, and there are no options, warrants,
      equity securities, calls, rights, commitments or agreements of any
       character to which any of Subsidiary of NEON is a party or by which
    any such Subsidiaries is bound obligating it to issue, exchange,
transfer, deliver or sell, or cause to be issued, exchanged,
         transferred, delivered or sold, additional shares of capital stock or
       other equity interests of such Subsidiary or any security or rights
          convertible into or exchangeable or exercisable for any such shares or
          other equity interests, or obligating any Subsidiary to grant, extend,
          accelerate the vesting of, otherwise modify or amend or enter into any
     such option, warrant, equity security, call, right, commitment or
   agreement. All the outstanding shares of capital stock or other
    ownership interests of each Subsidiary of NEON have been validly
        issued and are fully paid and nonassessable and are owned (of record
         and beneficially) by NEON, free and clear of all Liens. Except as set
       forth in Section 3.1(b)(iv) of the NEON Disclosure Schedule and (A)
for the capital stock or other ownership interests of its   
    Subsidiaries, (B) as acquired in the ordinary course of business
         pursuant to foreclosure, workout, settlement, bankruptcy arrangements
       or similar transactions, and (C) for security interests held in the
         ordinary course of business, neither NEON nor any of its Subsidiaries
      directly or indirectly owns any equity, membership, partnership or
         similar interest in, or any interest convertible into or exchangeable
     or exercisable for any equity, membership, partnership or similar
     interest in, any corporation, partnership, joint venture, limited
      liability company or other business association or entity, whether
      incorporated or unincorporated that is material to the business of
       NEON and its Subsidiaries, taken as a whole. Except as set forth in
    Section 3.1(b)(iv) of the NEON Disclosure Schedule, no action is
       required to be taken by NEON, its Board of Directors or any trustee
       under any NEON Stock Option Plans or any holder of NEON Options, to
         effect the treatment of NEON Options described in Section 1.9 hereof.

                (v) Except as set forth in Section 3.1(b)(v) of the NEON
       Disclosure Schedule, NEON has never declared, nor is there accrued,
      any dividend or other distribution with respect to any NEON Common
Stock or NEON Preferred Stock.                              

(c) AUTHORITY; NO CONFLICTS.                                

                   (i) NEON has all requisite corporate power and authority to
          enter into this Agreement, to perform its obligations hereunder and to
   consummate the transactions contemplated hereby, subject to the
         receipt of the NEON Required Vote. The execution and delivery of this
          Agreement and the consummation of the transactions contemplated hereby
      have been duly authorized by all necessary corporate action on the
   part of NEON, subject to the receipt of the NEON Required Vote.
  Without limiting the generality of the foregoing, the Board of
          Directors of NEON, at a meeting duly called and held, by the requisite
  vote of all directors (i) received a fairness opinion that the
        Exchange Ratio is fair from a financial point of view to the holders
          of NEON Common Stock (as stockholders of NEON) and determined that the

-11-

S-4/A
281st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 281st
      Merger is in the best interests of NEON and its stockholders, (ii)
         adopted this Agreement in accordance with the provisions of the DGCL,
         (iii) directed that this Agreement and the Merger be submitted to the
        stockholders of NEON for their adoption and approval and resolved to
         recommend that the stockholders of NEON vote in favor of the adoption
      of this Agreement and the approval of the Merger, and (iv) fixed a
         record date for the determination of stockholders of NEON entitled to
        vote to adopt this Agreement (the "RECORD DATE"). This Agreement has
        been duly executed and delivered by NEON and constitutes a valid and
        binding agreement of NEON, enforceable against it in accordance with
          its terms, except as such enforceability may be limited by bankruptcy,
          insolvency, reorganization, moratorium and similar laws relating to or
  affecting creditors generally, or by general equity principles
 (regardless of whether such enforceability is considered in a
proceeding in equity or at law).                            

                   (ii) The execution and delivery of this Agreement does not,
 and the consummation of the Merger and the other transactions
 contemplated hereby will not, conflict with, or result in any
          violation of, or constitute a default (with or without notice or lapse
       of time, or both) under, or require an offer to purchase to be made
          under, or give rise to a right of termination, amendment, cancellation
       or acceleration of any obligation or the loss of a material benefit
      under, or the creation of a Lien on any assets (any such conflict,
        violation, default, right of termination, amendment, cancellation or
      acceleration, loss or creation, a "VIOLATION"): (A) subject to the
       receipt of the NEON Required Vote, pursuant to any provision of the
        certificate of incorporation or by-laws of NEON or similar governing
     documents of any of its Subsidiaries, or (B) except as could not,
      individually or in the aggregate, reasonably be expected to have a
       NEON Material Adverse Effect and subject to obtaining or making the
        NEON Required Consents, pursuant to any Contract or NEON Plan or any
  Law applicable to NEON or its Subsidiaries or their respective
   properties or assets. Section 3.1(c)(ii) of the NEON Disclosure
         Schedule lists all material consents, waivers and approvals under any
         NEON Material Contract required to be obtained in connection with the
      consummation of the Merger and the other transactions contemplated
hereby.                                                     

                 (iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Person or any 
     Governmental Entity is required by or with respect to NEON or any
        Subsidiary of NEON as a result of the execution and delivery of this
     Agreement by NEON or the consummation of the Merger and the other
        transactions contemplated hereby, except for those required under or
          in relation to (A) the Hart-Scott-Rodino Antitrust Improvements Act of
       1976, as amended (the "HSR ACT"), (B) filing of the Proxy Statement
        with the SEC and its effectiveness under the Securities Exchange Act
   of 1934, as amended (the "EXCHANGE ACT"), (C) the filing of the
     Certificate of Merger pursuant to the DGCL, (D) the NEON Required
       Vote, (E) notices and consents from Governmental Entities and other
          Persons that regulate CLEC's, franchises and licenses, (F) the matters
        listed in Section 3.1(c)(ii) of the NEON Disclosure Schedule and (G)
    such consents, approvals, orders, authorizations, registrations,
          declarations and filings, the failure of which to make or obtain could
          not, individually, or in the aggregate, reasonably be expected to have
a NEON Material Adverse Effect. Consents, approvals, orders,
          authorizations, registrations, declarations and filings required under
      or in relation to any of the foregoing clauses (A) through (G) are
hereinafter referred to as "NEON REQUIRED CONSENTS."        

-12-

S-4/A
282nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 282nd
(d) FINANCIAL STATEMENTS.                                   

                   (i) NEON has delivered to Globix true and correct copies of
        (a) audited consolidated balance sheets of NEON and its consolidated
       Subsidiaries as at December 31 of the years 2001, 2002 and 2003 and
 the related consolidated statements of operations, changes in
         stockholders' equity and cash flows for each of the fiscal years then
         ended, including the notes thereto, together with the reports thereon
      (1) of BDO Seidman, independent auditors, with respect to 2002 and
          2003 only, and (2) Arthur Anderson, independent auditors, with respect
       to 2001 only, and (b) an unaudited consolidated balance sheet as at
        May 31, 2004 (the "INTERIM BALANCE SHEET") and the related unaudited
     consolidated statements of operations and cash flows for the five
 months then ended (the "NEON FINANCIAL STATEMENTS"). The NEON
    Financial Statements fairly present in all material respects the
       consolidated financial condition, results of operations, changes in
    stockholders' equity and cash flows of NEON and its consolidated
        Subsidiaries as at the respective dates and for the periods referred
         to in such financial statements, all in accordance with United States
        generally accepted accounting principles ("GAAP") applied on a basis
          consistent with prior periods (except as indicated in footnotes to the
         NEON Financial Statements), subject in the case of interim statements
       to normal and recurring year-end adjustments that have not been and
 are not likely to be material in amount, and the absence of a
       statement of stockholders' equity and the absence of notes that, if
         presented, would not differ materially from the notes included in the
immediately preceding year-end financial statements.        

                  (ii) No financial statements of any entity other than NEON
   and its Subsidiaries are required by GAAP to be included in the
consolidated financial statements of NEON.                  

(e) NO UNDISCLOSED LIABILITIES; INDEBTEDNESS.               

          (i) Except (a) as and to the extent of the amounts
         specifically reflected or reserved on the audited balance sheet as at
      December 31, 2003 (including the notes thereto) (the "NEON AUDITED
BALANCE SHEET") included in the NEON Financial Statements or
         intercompany accounts not reflected in the Audited Balance Sheet, (b)
          obligations under NEON Material Contracts entered into in the ordinary
      course of business and consistent with past practice which are not
      required by GAAP to be reflected on the Audited Balance Sheet, (c)
  liabilities and obligations incurred in the ordinary course of
        business consistent with past practice since the date of the Audited

       Balance Sheet, (d) obligations under this Agreement and liabilities
          permitted to be incurred pursuant to Section 4.1, and (e) as set forth
          in Section 3.1(e)(i) of the NEON Disclosure Schedule, neither NEON nor
     any of its Subsidiaries has any liabilities or obligations of any
    nature whether absolute, accrued, contingent or otherwise, which
         individually or in the aggregate would reasonably be expected to have
a NEON Material Adverse Effect.                             

                    (ii) Section 3.1(e)(ii) of the NEON Disclosure Schedule sets
        forth a complete and accurate list of all loan or credit agreements,
notes, bonds, mortgages, indentures and other agreements and
        instruments pursuant to which any indebtedness of NEON or any of its
          Subsidiaries in an aggregate principal amount in excess of $100,000 is
       outstanding or may be incurred and the respective principal amounts
outstanding thereunder as of the date of this Agreement.    

-13-

S-4/A
283rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 283rd
    (f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.1(f) of the NEON Disclosure Schedule, and except for actions that     
would be permitted pursuant to Section 4.1, and except as otherwise contemplated
hereby, from the date of the Audited Balance Sheet to the date hereof: (i) NEON 
and its Subsidiaries have conducted their business in all material respects in  
the ordinary course in the same manner as heretofore conducted; (ii) there has  
not been any NEON Material Adverse Effect; (iii) NEON has not (A) declared, set 
aside or paid any dividends or other distribution (whether in cash, stock or    
property) in respect of any of its capital stock; (B) split, combined or        
reclassified any of its capital stock or issued or authorized any issuance of   
any other securities in respect of, in lieu of or in substitution for shares of,
its capital stock, (iv) NEON has not changed its methods of accounting for      
financial accounting or tax purposes in any manner that could be reasonably     
expected to have a significant adverse effect on its financial statements; (v)  
NEON has not made or revoked any material express or deemed election relating to
Taxes; and (vi) neither NEON nor any of its Subsidiaries has (A) waived in      
writing any material rights, (B) suffered any extraordinary loss or             
extraordinary losses (as defined in Opinion No. 30 of the Accounting Principles 
Board of the American Institute of Certified Public Accountants and any         
amendments or interpretations thereof) which could reasonably be expected to    
have a NEON Material Adverse Effect, (C)(1) granted any severance or termination
payment, (2) entered into any employment, deferred compensation, consulting,    
severance, indemnification, change in control, retention or other similar       
agreement or arrangement, (3) increased any compensation or benefits payable or 
to become payable under any existing severance or termination pay policy or     
employment, deferred compensation, stock loan, consulting, severance, change in 
control, retention or other similar agreement or arrangement, or (4) increased  
the compensation, bonus, incentive or other benefits payable to (or to become   
payable to) former or current directors, officers, employees or consultants of  
NEON or any of its Subsidiaries, other than an increase in annual salary or     
hourly wage rates granted to current employees (other than officers) in the     
ordinary course of business, consistent with past practice or otherwise not     
material, (D) made or agreed to make any increase in any NEON Plan or adopt a   
new employee benefit plan, which in either case could result in a material      
increase in liability to NEON, (E) other than in the ordinary course of business
or as otherwise not material, sold or transferred any of the assets of NEON or  
its Subsidiaries, or (F) made any capital expenditures in respect of its        
business or operations not in the ordinary course of business or otherwise      
material. NEON and its Subsidiaries have not agreed or committed (directly or   
indirectly) to do any of the foregoing.                                         

       (g) INFORMATION SUPPLIED. None of the information supplied or to be
supplied in writing by NEON for inclusion or incorporation by reference in the  
registration statement on Form S-4 (together with any amendments or supplements 
thereto, the "REGISTRATION STATEMENT") and the proxy statement/prospectus       
included therein (together with any amendments or supplements thereto, the      
"PROXY STATEMENT") relating to the issuance of Globix Common Stock in connection
with the Merger, the NEON Stockholders Meeting and the Globix Stockholders      
Meeting (if applicable) with the Securities and Exchange Commission (the "SEC") 
will (A) in the case of the Registration Statement, at the time it becomes      

-14-

S-4/A
284th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 284th
effective, contain any untrue statement of a material fact or omit to state any 
material fact required to be stated therein or necessary in order to make the   
statements therein not misleading, or (B) in the case of the Proxy Statement, at
the time of the mailing of the Proxy Statement, at the time of the NEON         
Stockholders Meeting and the Globix Stockholders Meeting (if applicable) and at 
the Effective Time, contain any untrue statement of a material fact or omit to  
state any material fact required to be stated therein or necessary in order to  
make the statements therein, in light of the circumstances under which they are 
made, not misleading, or necessary to correct any statement in any earlier      
communication with respect to the solicitation of proxies for the NEON          
Stockholders Meeting or Globix Stockholders Meeting (if applicable) which has   
become false or misleading. If at any time prior to the Effective Time any event
with respect to NEON, its officers and directors or any of its Subsidiaries     
shall occur which is required to be described in the Proxy Statement or the     
Registration Statement, such event shall be so described, and an appropriate    
amendment or supplement shall be promptly filed with the SEC and, as required by
law, disseminated to the stockholders of NEON and Globix. The Registration      
Statement will comply (with respect to NEON) as to form in all material respects
with the provisions of the Securities Act, and the Proxy Statement will comply  
(with respect to NEON) as to form in all material respects with the provisions  
of the Exchange Act. Notwithstanding the foregoing provisions of this Section   
3.1(g), no representation or warranty is made by NEON with respect to statements
made or incorporated by reference in the Proxy Statement or the Registration    
Statement based on information supplied in writing by Globix or Merger Sub for  
inclusion or incorporation by reference therein. For purposes of the foregoing, 
it is understood and agreed that information concerning or related to NEON and  
the NEON Stockholders Meeting will be deemed to have been supplied by NEON and  
information concerning or related to Globix and Merger Sub and the Globix       
Stockholders Meeting (if applicable) shall have been supplied by Globix.        

 (h) ASSETS. Except as set forth in Section 3.1(h) of the NEON
Disclosure Schedule, NEON has good and valid title or a valid leasehold interest
in, free and clear of all Liens other than Permitted Liens, to (i) all of its   
assets and properties as reflected on the Audited Balance Sheet, except for     
assets and properties disposed of in the ordinary course of business, or as     
permitted by Section 4.1, since the date of the Audited Balance Sheet, and (ii) 
all of NEON's other assets, real property, interests in real property, rights,  
franchises, licenses and properties, tangible or intangible, real or personal,  
wherever located which are material to the conduct of its business, other than  
property that is leased or licensed, with respect to which NEON or any of its   
Subsidiaries has valid and enforceable leases or licenses under which there     
exists no default, event of default or event which, with notice or lapse of time
or both, would constitute a default, except for such defaults which have not had
or are not reasonably likely to have, either individually or in the aggregate, a
NEON Material Adverse Effect.                                                   

   (i) VOTE REQUIRED. The affirmative vote of the holders of (i) a
majority of the outstanding shares of NEON Common Stock and NEON Convertible    
Preferred Stock entitled to vote and voting as a single class on the Merger,    
(ii) a majority of the outstanding shares of NEON Common Stock and NEON         
Convertible Preferred Stock entitled to vote and voting as a single class and a 
majority of the outstanding shares of NEON Common Stock entitled to vote and    
voting as a separate class on the amendment to the Certificate of Incorporation 
of NEON and (iii) two-thirds of the outstanding shares of the NEON Convertible  
Preferred Stock voting as a separate class on the amendment of the Certificate  
of Designation of the NEON Convertible Preferred Stock (collectively, the "NEON 
REQUIRED VOTE") are the only votes of the holders of any class or series of NEON
capital stock necessary to approve the Merger and the other transactions        
contemplated hereby, including the amendments to NEON's charter contemplated    
hereby.                                                                         

-15-

S-4/A
285th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 285th
      (j) OPINION OF FINANCIAL ADVISOR. NEON has received the opinion of
Adams, Harkness & Hill, Inc. (the "NEON FINANCIAL ADVISOR"), dated the date of  
this Agreement, to the effect that, as of such date, the Exchange Ratio is fair,
from a financial point of view, to the holders of NEON Common Stock (as         
stockholders of NEON).                                                          

(k) RELATED PARTY TRANSACTIONS.                             

               (i) For purposes of this Section 3.1(k), the term "NEON
        AFFILIATED PERSON" means (A) any holder of 5% or more of NEON Common
        Stock or NEON Convertible Preferred Stock, (B) any director, officer
          or senior executive of NEON or any Subsidiary, (C) any Person, firm or
          corporation that directly or indirectly controls, is controlled by, or
    is under common control with, NEON or any Subsidiary, or (D) any
member of the immediate family of any of such persons.      

                  (ii) Except as set forth in Section 3.1(k)(ii) of the NEON
Disclosure Schedule, since December 31, 2003, NEON and its  
Subsidiaries have not, in the ordinary course of business or
       otherwise, (A) purchased, leased or otherwise acquired any material
        property or assets or obtained any material services from, (B) sold,
      leased or otherwise disposed of any material property or assets or
          provided any material services to (except with respect to remuneration
         for services rendered in the ordinary course of business as director,
       officer or employee of NEON or any Subsidiary), (C) entered into or
       modified in any manner any contract with, or (D) borrowed any money
   from, or made or forgiven any loan or other advance (other than
         expenses or similar advances made in the ordinary course of business)
to, any NEON Affiliated Person.                             

                    (iii) Except as set forth in Section 3.1(k)(iii) of the NEON
      Disclosure Schedule, since December 31, 2003, (A) the contracts of
       NEON and its Subsidiaries do not include any material obligation or
     commitment between NEON or any Subsidiary and any NEON Affiliated
       Person, (B) the assets of NEON or any Subsidiary do not include any
        receivable or other obligation or commitment from an NEON Affiliated
         Person to NEON or any Subsidiary, and (C) the liabilities of NEON and
      its Subsidiaries do not include any payable or other obligation or
         commitment from NEON or any Subsidiary to any NEON Affiliated Person.

                    (iv) Section 3.1(k)(iv) of the NEON Disclosure Schedule sets
        forth a complete and accurate list of each Contract to which NEON or
        any of its Subsidiaries is a party or bound with any NEON Affiliated
          Person (other than any Subsidiary which is a direct or indirect wholly
        owned Subsidiary of NEON). Section 3.1(k)(iv) of the NEON Disclosure
  Schedule sets forth a complete and accurate description of all
transactions with any NEON Affiliated Person or any of its  
  Subsidiaries or any transaction that would be subject to proxy
        statement disclosure pursuant to Item 404 of Regulation S-K to which

-16-

S-4/A
286th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 286th
     NEON or any of its Subsidiaries is a party or bound. Complete and
         accurate copies of all the agreements, contracts and arrangements set
         forth in Section 3.1(k)(iv) of the NEON Disclosure Schedule have been
made available to Globix.                                   

          (l) LITIGATION. Except as disclosed in writing to Globix, there are no
Claims pending or, to the Knowledge of NEON, threatened against NEON or any of  
its Subsidiaries, or any properties or rights of NEON or any of its             
Subsidiaries, before any Governmental Entity, nor is there any judgment, decree,
injunction, ruling or order of any Governmental Entity or arbitrator outstanding
specifically against NEON or any of its Subsidiaries, except for any of the     
foregoing as could not, individually or in the aggregate, reasonably be expected
to have a NEON Material Adverse Effect. To the Knowledge of NEON, there has not 
been any investigation of NEON or any of its Subsidiaries conducted by any      
Governmental Entity during the two years prior to the date hereof which was     
concluded and resulted in a significant adverse effect on the ability of NEON   
and its Subsidiaries to conduct their respective businesses.                    

(m) COMPLIANCE WITH LAWS; PERMITS.                          

                 (i) Since the NEON Confirmation Effective Date, except as
disclosed to Globix in a certificate, NEON and each of its  
       Subsidiaries has complied with, is not in violation of, and has not
   received any notice alleging any violation with respect to, any
        applicable provisions of any statute, law or regulation with respect
    to the conduct of its business, the employment of any current or
        former employees, or the ownership or operation of its properties or
          assets, except for failures to comply or violations that, individually
       or in the aggregate, have not had, and are not reasonably likely to
have, a NEON Material Adverse Effect.                       

                  (ii) Except as set forth in Section 3.1(m)(ii) of the NEON
   Disclosure Schedule, NEON and each of its Subsidiaries have all
        permits, licenses and franchises from Governmental Entities required
      to conduct their businesses as now being conducted or as presently
      contemplated to be conducted (the "NEON Permits"), except for such
          permits, licenses and franchises the absence of which, individually or
          in the aggregate, has not had, and is not reasonably likely to have, a
          NEON Material Adverse Effect. NEON and each of its Subsidiaries are in
  compliance with the terms of the NEON Permits, except for such
       failures to comply that, individually or in the aggregate, have not
       had, and are not reasonably likely to have, a NEON Material Adverse
 Effect. Except as set forth in Section 3.1(m)(ii) of the NEON
       Disclosure Schedule, all NEON Permits are in full force and effect,
     and no NEON Permit shall cease to be effective as a result of the
         consummation of the transactions contemplated by this Agreement. NEON
     and its Subsidiaries have not received any notice of any material
 default under or material violation of, any such NEON Permit.

(n) ACCOUNTS RECEIVABLE; WARRANTIES.                        

                (i) Except as set forth in Section 3.1(n)(i) of the NEON
 Disclosure Schedule, all accounts receivable of NEON, whether
        reflected in the Interim Balance Sheet or otherwise, represent sales
         actually made in the ordinary course of business, have been reflected
         properly in its books and records in accordance with GAAP and are not
 subject to any material contractual setoffs or counterclaims.

-17-

S-4/A
287th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 287th
                  (ii) Except as set forth in Section 3.1(n)(ii) of the NEON
          Disclosure Schedule, no product or service manufactured, sold, leased,
   licensed, delivered or otherwise provided by NEON or any of its
Subsidiaries is subject to any guaranty or warranty.        

         (o) CUSTOMERS AND SUPPLIERS. As of the date of this Agreement, except
as set forth in Section 3.1(o) of the NEON Disclosure Schedule, (i) no material 
customer of NEON or any of its Subsidiaries has indicated to NEON or any of its 
Subsidiaries that it will stop, or decrease the rate of, buying products or     
services from NEON or any of its Subsidiaries, and (ii) no material supplier or 
exclusive supplier of NEON or any of its Subsidiaries has indicated to NEON or  
any of its Subsidiaries that it will stop, or decrease the rate of, supplying   
materials, products or services to them.                                        

       (p) CERTAIN BUSINESS PRACTICES. Neither NEON nor any Subsidiary has
(i) used any funds for unlawful contributions, gifts, entertainment or other    
unlawful payments related to a political activity, (ii) made any unlawful       
payment to any foreign or domestic government official or employee or to any    
foreign or domestic political party or campaign or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (iii) consummated any     
transaction or made any payment or entered into any agreement or arrangement or 
taken any other action in violation of Section 1128B(b) of the Social Security  
Act, as amended.                                                                

(q) TAXES.                                                  

                (i) Except as set forth in Section 3.1(q)(i) of the NEON
      Disclosure Schedule or to the extent otherwise not material, as to
        amount or otherwise, individually or in the aggregate, including all
     matters subject to the representations in this Section 3.1(q)(i):

                         (A) NEON and its Subsidiaries have timely filed or,
         if not yet due, will timely file all Tax Returns required to be filed
          by them on or before the Closing Date and all such Tax Returns are or,
        in the case of Tax Returns not yet filed, will be, true, correct and
        complete in all material respects and NEON and its Subsidiaries have
         paid when due all Taxes reported thereon or, in the case of Taxes not
yet due, will pay such Taxes when due.                      

                     (B) NEON and its Subsidiaries have paid or have
      established on the most recent financial statements required to be
   provided to Globix hereunder, in accordance with GAAP, adequate
        accruals for the payment of all Taxes (whether or not shown on a Tax
      Return), including contingent Tax liabilities, with respect to all
        Taxable periods ending on or before the Closing Date and all Taxable
          periods starting before and ending after the Closing Date, but only to
    the extent attributable to the portion of such periods up to and
    including the Closing Date and, in each case, only to the extent
 properly accrued as of the date of such most recent financial
statements required to be provided to Globix hereunder.     

                        (C) NEON has made or will make available to Globix
       signed copies of all Tax Returns filed by NEON and its Subsidiaries
          relating to the four (4) most recent Taxable years ending on or before
the Closing Date.                                           

-18-

S-4/A
288th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 288th
                    (D) No extension of time has been requested or
      granted for NEON or any of its Subsidiaries to file any Tax Return
       that has not yet been filed or to pay any Tax that has not yet been
  paid and NEON and its Subsidiaries have not granted a power of
    attorney that remains outstanding with regard to any Tax matter.

                           (E) There is no pending or, to the Knowledge of NEON,
        threatened examination, investigation, audit, suit, action, claim or
      proceeding relating to Taxes (a "TAX AUDIT") of NEON or any of its
Subsidiaries.                                               

                          (F) Globix has received copies of all material audit
       reports and correspondence between NEON or its Subsidiaries and any
      Tax Authority issued or made during the last three (3) years and a
   complete summary of all oral communications between NEON or its
         Subsidiaries and any Tax Authority relating to any Tax Audits of NEON
       or its Subsidiaries during such years, including without limitation
    any Tax Audit that is in progress or for which a still effective
extension of the statute of limitations was granted.        

                      (G) Neither NEON nor any of its Subsidiaries has
          within the last four (4) years received notice of a determination by a
        Tax Authority that Taxes are owed by NEON or any of its Subsidiaries
        (such determination to be referred to as a "TAX DEFICIENCY") and, to
       the Knowledge of NEON, no Tax Deficiency is proposed or threatened.

                        (H) All Tax Deficiencies have been paid or finally
         settled and all amounts determined by settlement to be owed have been
paid.                                                       

                         (I) There are no Liens, other than Permitted Liens,
    arising from or related to Taxes on or pending against NEON, its
Subsidiaries or any of their properties.                    

                       (J) There are no presently outstanding waivers or
     extensions or requests for waiver or extension of the time within
which a Tax Deficiency may be asserted or assessed.         

                          (K) No issue has been raised in any Tax Audit which,
       by application of similar principles to any past, present or future
      period, would result in an adjustment to the amounts reported in a
subsequent period.                                          

                        (L) NEON has not changed any Tax accounting method
      during any of the seven (7) most recent Taxable years ending on or
         before the Closing Date. NEON and its Subsidiaries have not taken any
        action, whether or not required, that has resulted or will result in
        deferring a liability for Taxes of NEON or its Subsidiaries from any
      taxable period ending on or before the Closing Date to any taxable
      period ending after such date, unless such action is in accordance
with past practice.                                         

                         (M) Neither NEON nor its Subsidiaries has ever been
        required to include in income any adjustment pursuant to section 481
       of the Code and no Tax Authority has ever made or proposed any such
    adjustment. Neither NEON nor its Subsidiaries has entered into a
      closing agreement, as described in section 7121 of the Code, or an
        advance pricing agreement or other agreement with a taxing authority
relating to Taxes.                                          

-19-

S-4/A
289th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 289th
                    (N) Neither NEON nor its Subsidiaries owns any
          property that is tax-exempt use property within the meaning of section
          168(h) of the Code, that is described in section 168(f)(8) of the Code
      as in effect prior to its amendment by the Tax Reform Act of 1986,
   that is tax-exempt bond financed property within the meaning of
       Section 168(g) of the Code or that is "limited use property" within
the meaning of Rev. Proc. 76-30.                            

                         (O) Neither NEON nor its Subsidiaries is a party to
      any arrangement to which sections 162(m) or 280G of the Code could
under any circumstances apply.                              

                       (P) Neither NEON nor its Subsidiaries has filed a
    consent pursuant to section 341(f) of the Code or agreed to have
section 341(f)(2) apply to the disposition of any asset.    

               (Q) Neither NEON nor its Subsidiaries has
       participated in or cooperated with any international boycott within
the meaning of section 999 of the Code.                     

                         (R) Neither NEON nor its Subsidiaries is now or has
          ever been (a) an includable member of an "affiliated group" within the
         meaning of section 1504(a) of the Code other than an affiliated group
          consisting only of NEON and one or more of its current Subsidiaries or
          otherwise liable for the Taxes of a person other than NEON pursuant to
    Treasury Regulation section 1.1502-6 or any similar provision of
  state, local or foreign law, whether or not as a transferee, a
          successor, by operation of law, by contract or otherwise, (b) a member
          of any consolidated, combined or unitary Tax Return filing group other
       than a group consisting only of NEON and one or more of its current
         Subsidiaries, (c) a party to any Tax sharing agreement, Tax indemnity
        agreement or similar agreement, arrangement or practice with respect
          to Taxes, including an agreement that obligates it to make any payment
       computed by reference to the Taxes, Taxable income or Tax losses of
     any other individual or entity, (d) a personal holding company as
          defined in section 542 of the Code, (e) the owner of an interest in an
       entity that is or is treated as a Tax partnership, trust, regulated
         investment company as defined in section 851 of the Code, real estate
     investment trust as defined in section 856 of the Code or foreign
          personal holding company as defined in section 552(a) of the Code, (f)
        a United States shareholder as defined in section 951(b) of the Code
        of a controlled foreign corporation as defined in section 957 of the
      Code, (g) a United States real property holding company within the
      meaning of section 897(c)(2) of the Code or (h) a shareholder of a
         passive foreign investment company, as defined in section 1297 of the
Code.                                                       

                         (S) NEON has not entered into a gain recognition or
          other agreement requiring it to take into account Taxable income or to
         incur a Tax liability that it would not have had to take into account
or would not have had to incur but for such agreement.      

-20-

S-4/A
290th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 290th
                         (T) NEON has disclosed on its federal, state, local
         and foreign income Tax Returns all positions taken therein that could
give rise to a penalty under section 6662 of the Code or any
corresponding provision of state, local or foreign Tax law. 

              (U) NEON and its Subsidiaries have never
   participated, directly or indirectly, in a transaction which is
described in Treasury Regulation sections 1.6011-4(b)(2) or 
  1.6011-4(b)(3) nor have they ever held "an interest" in a "tax
       shelter," as those terms are defined in Treasury Regulation section
301.6112-1.                                                 

                           (V) NEON has no deferred intercompany gains or losses
          that have not been fully taken into income for income Tax purposes and
       there is no excess loss account with respect to stock of any of its
Subsidiaries.                                               

                           (W) No unresolved claim and to the Knowledge of NEON,
       no claim has ever been made by a Tax Authority in a jurisdiction in
         which NEON does not pay Taxes or file Tax Returns that such entity is
or may be subject to Tax in such jurisdiction.              

                          (X) NEON and its Subsidiaries have never requested a
private ruling from a Tax Authority on any matter.          

                      (Y) Neither NEON nor its Subsidiaries has been a
          "distributing corporation" or a "controlled corporation" in connection
with a distribution described in Section 355 of the Code.   

                       (Z) Neither NEON nor its Subsidiaries nor, to the
         Knowledge of NEON, any NEON Affiliated Person has taken any action or
    failed to take any action that would cause the Merger to fail to
          qualify as a tax-free reorganization under Section 368(a) of the Code,
         and no facts exist that would cause the Merger to fail to so qualify.

                        (AA) The net operating losses, alternative minimum
         tax net operating losses, net capital losses, alternative minimum tax
        net capital losses, Tax credits, alternative minimum tax credits and
        other Tax attributes of NEON and its subsidiaries are not subject to
       any consolidated return limitation, limitation under section 382 of
the Code or any other limitation on their use, allowance or 
availability.                                               

                      (BB) NEON has retained all supporting and backup
          papers, receipts, spreadsheets and other information necessary for the
       preparation of all Tax Returns that have not yet been filed and the
        defense of Tax Audits involving all Taxable periods either (I) ended
         on or during the six (6) years prior to the Closing Date or (II) from
  which there are unutilized net operating loss, capital loss or
investment tax credit carryovers.                           

                 (CC) NEON has collected and remitted to the
   appropriate Tax Authorities all sales and use and similar Taxes
   required to have been collected and remitted on or prior to the
   Closing Date and has been furnished, and if required has filed,
          properly completed exemption certificates for all exempt transactions.
         NEON has maintained and has in its possession all records, supporting
          documents and exemption and resale certificates required by applicable
        sales Tax statutes and regulations to be retained in connection with
        the collection and remittance of sales and use and similar Taxes for
all periods up to and including the Closing Date.           

-21-

S-4/A
291st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 291st
         Each reference to a provision in this Section 3.1(q) shall be treated
         for state, local and foreign Tax purposes as a reference to analogous
or similar provisions of state and local law.               

(r) EMPLOYEE BENEFITS; EMPLOYEES.                           

                  (i) Section 3.1(r)(i) of the NEON Disclosure Schedule sets
       forth a list of each "employee benefit plan" (within the meaning of
        Section 3(3) of the Employee Retirement Income Security Act of 1974,
     as amended ("ERISA")), severance, change in control or employment
     plan, program or agreement, and vacation, incentive, bonus, stock
          option, stock purchase, stock loan, and restricted stock plan, program
         or policy to which NEON is a party or that is sponsored or maintained
     by NEON, any of its Subsidiaries, any of their affiliates and any
        trade or business (whether or not incorporated) which is or has ever
        been under common control, or which is or has ever been treated as a
        single employer, with any of them under Section 4.14(b), (c), (m) or
   (o) of the Code ("ERISA AFFILIATE"), in which present or former

    employees of NEON or any of its Subsidiaries or ERISA Affiliates
        ("NEON EMPLOYEES") participate (collectively, the "NEON PLANS"). All
    NEON Plans set forth on Section 3.1(r)(i) of the NEON Disclosure
  Schedule, if any, that would result in the payment to any NEON
        Employee of any money or other property or accelerate or provide any
    other rights or benefits thereto as a result of the transactions
  contemplated by this Agreement, whether or not such payment or
        acceleration would constitute a parachute payment within the meaning
          of Section 280G of the Code, are so indicated by an asterisk. The NEON
        Plans are in compliance in all material respects with all applicable
       requirements of ERISA, the Code, and other applicable Laws and have
       been administered in all material respects in accordance with their
        terms and such Laws, and there has been no material violation of any
          reporting or disclosure requirement imposed by ERISA or the Code. Each
     NEON Plan which is intended to be qualified within the meaning of
         Section 401 of the Code has received a Favorable Letter (as such term
is defined in Rev. Proc. 2003-44 Section 5.01(4)) as to its 
    qualification, and nothing has occurred that could reasonably be
       expected to cause the loss of such qualification or the loss of the
       tax-exempt status for any trust maintained with respect to any such
NEON Plan.                                                  

                  (ii) Except as set forth in Section 3.1(r)(ii) of the NEON
       Disclosure Schedule, neither NEON nor Globix shall, at or after the
    Effective Time, have any liability with respect to any change in
         control, "continuity" or severance agreement, plan, program or policy
 with or with respect to any NEON Employee. In accordance with
      applicable law, each NEON Plan can be amended or terminated at any
          time, without consent from any other party and without liability other
         than for notice obligations with respect to amendment or termination,
    if any, and benefits accrued as of the date of such amendment or
        termination. NEON and its ERISA Affiliates have made full and timely
         payment of all material amounts required to be contributed or paid as
  expenses under the terms of each NEON Plan and applicable law.

-22-

S-4/A
292nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 292nd
          (iii) No NEON Plan is subject to Title IV of ERISA
         (including any "multiemployer plan" (as defined in Section 4001(a)(3)
         of ERISA)), and neither NEON nor any of its ERISA Affiliates has ever
   contributed or been obligated to contribute to any pension plan
        subject to Title IV of ERISA (including any multiemployer plan), nor
          could NEON or any ERISA Affiliate have any liability under Title IV of
ERISA.                                                      

                  (iv) No event or condition has occurred in connection with
     which NEON or any of its ERISA Affiliates would be subject to any
      liability, encumbrance or Lien with respect to any NEON Plan under
         ERISA, the Code or any other applicable Law or under any agreement or
   arrangement pursuant to or under which NEON or any of its ERISA
Affiliates are required to indemnify any person against such
liability.                                                  

              (v) True, correct and complete copies of the following
   documents with respect to each of the NEON Plans have been made
        available to Globix by NEON, to the extent applicable: (A) any plans
          or agreements, all amendments thereto and related trust documents, and
    amendments thereto; (B) the three most recent Forms 5500 and all
       schedules thereto and the most recent actuarial report, if any; (C)
      the most recent IRS determination letter; and (D) any summary plan
descriptions or other employee communications.              

                (vi) With respect to any NEON Plan, no actions, suits or
          claims (other than routine claims for benefits in the ordinary course)
are pending or, to the Knowledge of NEON, threatened.       

                    (vii) Except as set forth in Section 3.1(r)(vii) of the NEON
Disclosure Schedule, none of the NEON Plans provide for     
          post-employment life or health insurance, benefits or coverage for any
     participant or any beneficiary of a participant, except as may be
        required under the Consolidated Omnibus Budget Reconciliation Act of
   1985, as amended ("COBRA") and any such participation is at the
expense of the participant or the participant's beneficiary.

                 (viii) Except as set forth in Section 3.1(r)(viii) of the
          NEON Disclosure Schedule, neither NEON, nor, to the Knowledge of NEON,
  any other fiduciary or party-in-interest of any NEON Plan, has
          participated in, engaged in or been a party to any transaction that is
         prohibited under Section 4975 of the Code or Section 406 of ERISA and
      not exempt under Section 4975 of the Code or Section 408 of ERISA,
         respectively. With respect to any NEON Plan, (A) neither NEON nor any
     of its ERISA Affiliates has had asserted against it any claim for
        taxes under Chapter 43 of Subtitle D of the Code and Section 5000 of
         the Code, or for penalties under ERISA Section 502(c), 502 (i) or 502
     (l), nor, to the Knowledge of NEON, is there a basis for any such
        claim, and (B) no officer, director or employee of NEON or any ERISA
       Affiliate has committed a breach of any fiduciary responsibility or
obligation imposed by Title I of ERISA.                     

                  (ix) Except as set forth in Section 3.1(r)(ix) of the NEON
        Disclosure Schedule, there will be no payment, accrual of additional
          benefits, acceleration of payments or vesting of any benefit under any
        NEON Plan or any other agreement or arrangement to which NEON or any
        of its Subsidiaries is a party, and no employee, officer or director
  of NEON or its Subsidiaries will become entitled to severance,
  termination allowance or similar payments, solely by reason of
        entering into or in connection with the transactions contemplated by
this Agreement.                                             

-23-

S-4/A
293rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 293rd
                (x) Except as set forth in Section 3.1(r)(x) of the NEON
   Disclosure Schedule, no NEON Plan is subject to the laws of any
country other than the United States.                       

                    (xi) None of the NEON Employees is represented in his or her
     capacity as an employee of NEON or any of its Subsidiaries by any
          labor organization, nor has NEON or any of its Subsidiaries recognized
         any labor organization nor has any labor organization been elected as
 the collective bargaining agent of any such employees. To the
        Knowledge of NEON, there is no union organization activity involving
        any of the NEON Employees, pending or threatened in writing, nor has
       there been any union representation involving such employees within
        the past two years. To the Knowledge of NEON, except as set forth in
    Section 3.1(r)(xi) of the NEON Disclosure Schedule, there are no
         complaints, charges or claims against NEON or any of its Subsidiaries
    pending or, threatened in writing, by or before any Governmental
     Entity based on, arising out of, in connection with, or otherwise
         relating to the employment or termination of employment or failure to
          employ by NEON or any of its Subsidiaries, of any individual. NEON and
        its Subsidiaries are in compliance in all material respects with all
     laws, regulations and orders relating to the employment of labor,
      including all such laws, regulations and orders relating to wages,
         hours, the Worker Adjustment and Retraining Notification Act ("WARN")
        and any similar state or local "mass layoff' or "plant ---- closing"
        law, collective bargaining, discrimination, civil rights, safety and
   health, workers' compensation and the collection and payment of
       withholding and/or social security taxes and any similar tax. There
        has been no "mass layoff" or "plant closing" as defined by WARN with
   respect to NEON or any of its Subsidiaries in the 90 day period
immediately prior to the date hereof.                       

                   (xii) No more than fifteen (15) "leased employees," as that
         term is defined in Section 414(n) of the Code or any other person who
        is not classified as a common law employee of NEON, perform services
       for NEON or any ERISA Affiliate. No person who is not classified by
         NEON as a common law employee is eligible to participate in, nor does
such person participate in, any NEON Plan and no retroactive
          participation in any NEON Plan would result due to reclassification of
such an individual as a common law employee of NEON.        

                   (xiii) To the Knowledge of NEON, no employee of NEON or any
   Subsidiary of NEON is in material breach as of the date of this
Agreement of any term of any employment contract, inventions
    disclosure agreement, confidentiality agreement, non-competition
        agreement, or any restrictive covenant to a former employer relating
   to the right of any such employee to be employed by NEON or any
         Subsidiary of NEON because of the nature of the business conducted or
        presently proposed to be conducted by NEON or any Subsidiary of NEON
         or relating to the use of trade secrets or proprietary information of
others.                                                     

-24-

S-4/A
294th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 294th
       (s) ENVIRONMENTAL MATTERS. Except as set forth in Section 3.1(s) of
the NEON Disclosure Schedules, (i) NEON, its Subsidiaries, and their activities 
and operations are in compliance in all material respects with applicable local,
state or federal environmental statute, regulation, requirement, ordinance,     
decree, judgment or order relating to pollution or protection of the environment
and human health or safety, including the Comprehensive Environmental Response, 
Compensation, and Liability Act of 1980, as amended and in effect (collectively,
the "ENVIRONMENTAL LAWS"); (ii) to the Knowledge of NEON, there are no legal,   
administrative, arbitral or other proceedings, claims, actions, causes of       
action, private environmental investigations or remediation activities or       
governmental investigations of any nature with respect to any Environmental Laws
(collectively, "ENVIRONMENTAL CLAIMS") pending or, to the Knowledge of NEON,    
threatened against NEON or its Subsidiaries; (iii) to the Knowledge of NEON,    
there are no conditions or circumstances that reasonably could be expected to   
result in the imposition on NEON or any of its Subsidiaries of, any material    
liability or obligation under Environmental Laws; and (iv) to the Knowledge of  
NEON, there has not been any release, discharge or disposal of any hazardous or 
toxic materials or wastes at, on or under the facilities owned or leased by NEON
or its Subsidiaries that require notification, investigation or remediation by  
NEON or its Subsidiaries pursuant to, or that are reasonably anticipated to give
rise to material liabilities or costs to NEON or its Subsidiaries under,        
applicable Environmental Laws.                                                  

(t) PROPERTIES.                                             

                  (i) Section 3.1(t)(i) of the NEON Disclosure Schedule sets
       forth a complete and accurate list of all real property that either
NEON or any of its Subsidiaries owns.                       

                    (ii) Section 3.1(t)(ii) of the NEON Disclosure Schedule sets
          forth a complete and accurate list all real property leased, subleased
         or licensed by NEON or any of its Subsidiaries, except for easements,
  rights of way and regeneration facilities and, with respect to
   licensed real property, any such agreements with respect to (A)
    Collocation Sites and (B) central office sites under tariff (the
         "LEASED REAL PROPERTY"). Except as set forth in Section 3.1(t)(ii) of
     the NEON Disclosure Schedule and except for any exceptions to the
        following as could not, individually or in the aggregate, reasonably
        be expected to have a NEON Material Adverse Effect: (i) each of NEON
         and its Subsidiaries has valid leasehold interests in the Leased Real
        Property (as landlord or as tenant) by or from it, free and clear of
      all Liens other than Permitted Liens (as defined in Section 9.11);
     (ii) all leases pursuant to which NEON or any of its Subsidiaries
          leases (as landlord or as tenant) any Leased Real Property are in full
       force and effect and grant in all respects the leasehold estates or
        rights of occupancy or use they purport to grant; and (iii) NEON and
        its Subsidiaries have not received any written notice of any default
        either on the part of NEON or any of its Subsidiaries under any such
          lease and, to the Knowledge of NEON, no event has occurred which, with
       notice or the lapse of time, or both, would constitute a default on
         the part of NEON or any of its Subsidiaries under any of such leases.

(u) AGREEMENTS, CONTRACTS AND COMMITMENTS.                  

            (i) NEON has made available to Globix a complete and
     accurate list of all Contracts that are material to the business,
assets, liabilities, capitalization, condition (financial or
     otherwise) or results of operations of NEON and its Subsidiaries,
       taken as a whole (collectively, the "NEON MATERIAL Contracts"). For
         purposes of this section, materiality is defined as any Contract that
          requires or is reasonably anticipated to involve aggregate payments to
     or from NEON or its Subsidiaries in excess of $500,000 in any one
        year. NEON has made available to Globix a complete and accurate copy

-25-

S-4/A
295th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 295th
       of each NEON Material Contract (excluding individual orders related
      thereto). As of the date of this Agreement, except as set forth in
         Section 3.1(u)(i) of the NEON Disclosure Schedule, each NEON Material
        Contract is in full force and effect. Except as set forth on Section
          3.1(u)(i) of the NEON Disclosure Schedule, neither NEON nor any of its
          Subsidiaries is in material default under (x) any Contract to which it
          is a party or by which it or any of its properties or assets is bound,
         which violations or defaults would, individually or in the aggregate,
   have, or are reasonably likely to have, a NEON Material Adverse
Effect, or (y) any NEON Material Contract.                  

                  (ii) Except as set forth on Section 3.1(u)(ii) of the NEON
     Disclosure Schedule, there is no non-competition or other similar
          agreement, commitment, judgment, injunction or order, or any agreement
       materially restricting the right to sell services, to which NEON or
      any of its Subsidiaries is a party or is subject that has or could
         reasonably be expected to have the effect of prohibiting or impairing
         in any material respect the conduct of the business of NEON or any of
 its Subsidiaries as currently conducted and as proposed to be
conducted.                                                  

                (iii) Neither NEON nor any of its Subsidiaries is or has
        been suspended or debarred from bidding on contracts or subcontracts
          with any Governmental Entity; no such suspension or debarment has been
initiated or, to the Knowledge of NEON, threatened; and the 
 consummation of the transactions by NEON contemplated by this
       Agreement will not result in any such suspension or debarment that,
         individually or in the aggregate, is reasonably likely to have a NEON
        Material Adverse Effect. To the Knowledge of NEON, there is no valid
   basis for (a) the suspension or debarment of NEON or any of its
   Subsidiaries from bidding on contracts or subcontracts with any
Governmental Entity or (b) any claim pursuant to an audit or
        investigation by any of the entities named in the foregoing sentence
          that, individually or in the aggregate, is reasonably likely to have a
        NEON Material Adverse Effect. To the Knowledge of NEON, neither NEON
     nor any of its Subsidiaries has any Contracts which require it to
         obtain or maintain a security clearance with any Governmental Entity.

          (v) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or       
finder's fee or any other similar commission or fee in connection with any of   
the transactions contemplated by this Agreement based upon arrangements made by 
or on behalf of NEON, except the NEON Financial Advisor, whose fees and expenses
will be paid by NEON in accordance with NEON's agreement with such firm, based  
upon arrangements made by or on behalf of NEON and previously disclosed to      
Globix.                                                                         

     (w) INSURANCE. NEON has made available to Globix a summary of all
material fire and casualty, general liability, business interruption, and       
sprinkler and water damage insurance policies maintained by NEON or any of its  
Subsidiaries. NEON and each of its Subsidiaries have made any and all payments  
required to maintain such policies in full force and effect. Neither NEON nor   
any of its Subsidiaries has received written notice of default under any such   
policy, and has not received written notice of any pending or threatened        
termination or cancellation, coverage limitation or reduction with respect to   
such policy.                                                                    

(x) INTELLECTUAL PROPERTY.                                  

                  (i) Except as disclosed in writing to Globix, NEON and its
         Subsidiaries own, or otherwise possess licenses or other valid rights
         to use all Intellectual Property used to conduct the business of NEON
     and its Subsidiaries as currently conducted or contemplated to be
       conducted (in each case excluding generally commercially available,
      off-the-shelf software programs licensed pursuant to shrinkwrap or
"click-and-accept" licenses).                               

-26-

S-4/A
296th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 296th
             (ii) Except as would not have a NEON Material Adverse
         Effect, the execution and delivery of this Agreement and consummation
          of the Merger will not result in the breach of, or create on behalf of
      any third party the right to terminate or modify, (A) any license,
       sublicense or other agreement relating to any Intellectual Property
        owned by NEON (the "NEON INTELLECTUAL PROPERTY") or (B) any license,
 sublicense and other agreement as to which NEON or any of its
    Subsidiaries is a party and pursuant to which NEON or any of its
  Subsidiaries is authorized to use any third party Intellectual
          Property (the "THIRD PARTY INTELLECTUAL PROPERTY"). NEON has delivered
          to Globix a certificate certifying a complete and accurate list of the
         NEON Intellectual Property (other than unregistered copyrights, trade
        secrets and confidential information) and NEON has made available to
       Globix a complete and accurate list of all Third Party Intellectual
Property.                                                   

              (iii) Except as disclosed in writing to Globix, to the
         Knowledge of NEON, as of the date of this Agreement, (A) no person is
       challenging, infringing on, misappropriating or otherwise violating
         any material right of NEON or any of its Subsidiaries with respect to
     any Intellectual Property owned by and/or licensed to NEON or its
          Subsidiaries, (B) the use of any Intellectual Property by NEON and its
        Subsidiaries does not infringe on, constitute a misappropriation of,
      or otherwise violate the rights of any person and is in accordance
    with any applicable license pursuant to which NEON or any of its
         Subsidiaries acquired the right to use any Intellectual Property, and
         (C) neither NEON nor any of its Subsidiaries has received any written
          notice of any assertion or claim of infringement, pending or not, with
          respect to any Intellectual Property used by NEON or its Subsidiaries.

                   (iv) Except as disclosed in writing to Globix, all patents,
   trademarks, service marks and copyrights, and registrations and
applications therefor, which are held by NEON or any of its 
         Subsidiaries are valid and subsisting. NEON and its Subsidiaries have
      taken reasonable measures to protect the proprietary nature of the
NEON Intellectual Property.                                 

                 (v) No Intellectual Property owned or licensed by NEON or
     its Subsidiaries is being used or enforced in a manner that would
       result in the abandonment, cancellation or unenforceability of such
Intellectual Property.                                      

                  (vi) Sections 3.1(h), 3.1(t) and 3.1(u) shall not apply to
        the NEON Intellectual Property and this Section 3.1(x) shall prevail
       in the event of any conflict between this Section 3.1(x) on the one
  hand and Sections 3.1(h), 3.1(t) and 3.1(u) on the other hand.

       Section 3.2 REPRESENTATIONS AND WARRANTIES OF GLOBIX. Except as set
forth in the Globix Disclosure Schedule delivered by Globix to NEON in          
connection with the execution of this Agreement (the "GLOBIX DISCLOSURE         
SCHEDULE") (each Section of which qualifies the correspondingly numbered        
representation and warranty or covenant to the extent specified therein), Globix
represents and warrants to NEON as follows:                                     

-27-

S-4/A
297th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 297th
(a) ORGANIZATION, STANDING AND POWER.                       

                    (i) Each of Globix and its Subsidiaries (i) is a corporation
        or other entity duly incorporated or organized, validly existing and
    in good standing under the laws of its state of incorporation or
          organization, (ii) has all requisite power and authority to own, lease
        and operate its properties and to carry on its business as now being
        conducted, and (iii) as set forth in Section 3.2(a)(i) of the Globix
     Disclosure Schedule, is duly qualified and in good standing to do
        business in each jurisdiction in which the nature of its business or
       the ownership or leasing of its properties makes such qualification
      necessary, except in the case of clause (iii) for such failures as
          could not, individually or in the aggregate, reasonably be expected to
have a Globix Material Adverse Effect.                      

                 (ii) Section 3.2(a)(ii) of the Globix Disclosure Schedule
sets forth a complete and accurate list of all of Globix's  
         Subsidiaries and Globix's direct or indirect equity interest therein.
      Except as set forth in Section 3.2(a)(ii) of the Globix Disclosure
          Schedule, neither Globix, nor any of its Subsidiaries, (A) directly or
  indirectly owns any equity, membership, partnership or similar
    interest in, or any interest convertible into or exchangeable or
  exercisable for any equity, membership, partnership or similar
     interest in, any corporation, partnership, joint venture, limited
      liability company or other business association or entity, whether
incorporated or unincorporated, or (B) has, since the Globix
          Confirmation Effective Date, been a general partner or managing member
      of any general partnership, limited partnership, limited liability
         company or other entity as to which Globix or any of its Subsidiaries
has any material liability.                                 

                   (iii) The copies of the charter, articles or certificate of
        incorporation and by-laws (or similar governing documents) of Globix
      and each of its Subsidiaries which were made available to NEON are
       true, complete and correct copies of such documents as in effect on
the date of this Agreement.                                 

                  (iv) All minute books and stock record books of Globix and
          its Subsidiaries have been made available to NEON or its counsel prior
to the execution of this Agreement.                         

               (v) Prior to the Closing Date, Globix shall incorporate
     Merger Sub solely for the purpose of engaging in the transactions
         contemplated hereby. As of the Closing Date, Merger Sub (A) will be a
        corporation duly incorporated, validly existing and in good standing
        under the laws of the State of Delaware, (B) will have all requisite
         power to take such action as required pursuant to this Agreement, (C)
        will have no debt or other liabilities, and will not have engaged in
     any business activities or conducted any operations other than in
    connection with the transactions contemplated hereby, other than
     executing the subsidiary guaranty required pursuant to the Globix
Indenture.                                                  

(b) CAPITAL STRUCTURE.                                      

-28-

S-4/A
298th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 298th
              (i) The authorized capital stock of Globix consists of
      500,000,000 shares of Globix Common Stock, and 5,000,000 shares of
     preferred stock, par value $.01 per share, all of which shares of
         preferred stock are undesignated shares. The rights and privileges of
     each class of Globix's capital stock are as set forth in Globix's
       certificate of incorporation. As of the date hereof, (A) 16,460,000
        shares of Globix Common Stock are issued and outstanding, and (B) no
          shares of Globix Common Stock are held in the treasury of Globix or by
        any Subsidiaries of Globix. All of the issued and outstanding shares
     of Globix Common Stock have been duly authorized, and are validly
   issued, fully paid, nonassessable and free of preemptive rights
       created by statute, certificate of incorporation or bylaws. None of
     the issued and outstanding shares of Globix Common Stock has been
     issued in violation of any applicable federal or state law or any
        preemptive rights or rights to subscribe for or purchase securities.
     The authorized capital stock of Merger Sub shall consist of 1,000
         shares of common stock, par value $0.01 per share ("MERGER SUB COMMON
    STOCK"). The rights and privileges of each class of Merger Sub's
   capital stock shall be set forth in Merger Sub's certificate of
         incorporation. As of the Closing Date, (A) 1,000 shares of Merger Sub
         Common Stock will be issued and outstanding and held beneficially and
          of record by Globix, and (B) no shares of Merger Sub Common Stock will
          be held in the treasury of Merger Sub or by any Subsidiaries of Merger
         Sub. As of the Closing Date, all of the issued and outstanding shares
       of Merger Sub Common Stock will be duly authorized, validly issued,
      fully paid, nonassessable and free of preemptive rights created by
       statute, certificate of incorporation or bylaws. None of the issued
       and outstanding shares of Merger Sub Common Stock will be issued in
      violation of any applicable federal or state law or any preemptive
rights or rights to subscribe for or purchase securities.   

                    (ii) Except as set forth in Section 3.2(b)(ii) of the Globix
     Disclosure Schedule, there are no voting trusts, proxies or other
        agreements or understandings with respect to any Globix Common Stock
         to which Globix or, to the Knowledge of Globix, any other Person is a
   party or by which it or any such other Person is bound. Section
     3.2(b)(ii) of the Globix Disclosure Schedule lists all issued and
        outstanding shares of Globix Common Stock that are otherwise subject
          to a repurchase or redemption right or right of first refusal in favor
    of Globix or any other Person and Globix has delivered to NEON a
         certificate certifying (A) the name and address of each record holder
      of Globix Common Stock, (B) the number of shares held by each such
  stockholder, and (C) any restrictions imposed by Globix on the
         transfer of such shares. Except as set forth in Section 3.2(b)(ii) of
         the Globix Disclosure Schedule and as contemplated by this Agreement,
         there are no registration rights, and there are no rights agreements,
   "poison pill" anti-takeover plans or other similar agreement or
        restrictive arrangement which Globix or any of its Subsidiaries is a
     party or by which it or they are bound with respect to any equity
        securities of any class of Globix or any of its Subsidiaries or with
   respect to any equity security, partnership interest or similar
   ownership interest of any class of any of its Subsidiaries. THE
                                                               ---
         FOREGOING NOTWITHSTANDING, THE SHARES OF GLOBIX COMMON STOCK ISSUABLE
          ----------------------------------------------------------------------
       IN THE GLOBIX DEBT PURCHASE WILL BE SUBJECT TO REGISTRATION RIGHTS,
          ----------------------------------------------------------------------
          AND GLOBIX WILL GRANT THE PARTICIPANTS IN THE GLOBIX DEBT PURCHASE THE
          ----------------------------------------------------------------------
          RIGHT TO PURCHASE UP TO AN ADDITIONAL 5% OF THE SHARES ACQUIRED BY THE
          ----------------------------------------------------------------------
PARTICIPANTS AT A PURCHASE PRICE OF $2.75 PER SHARE IF THE  
          ----------------------------------------------------------------------
         REGISTRATION STATEMENT IS NOT EFFECTIVE WITHIN 90 DAYS OF THE CLOSING
          ----------------------------------------------------------------------
          UNDER THE MERGER AGREEMENT AND AN ADDITIONAL 5% OF THE SHARES ACQUIRED
          ----------------------------------------------------------------------
         IN THE GLOBIX DEBT PURCHASE 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.                                                
------------                                                

                   (iii) Section 3.2(b)(iii) of the Globix Disclosure Schedule
         lists the number of shares of Globix Common Stock reserved for future
        issuance pursuant to stock options granted and outstanding as of the
          date of this Agreement and the plans or other arrangements under which
     such options were granted (collectively, the "GLOBIX STOCK OPTION
          PLANS") and Globix has delivered to NEON a certificate with respect to
     the outstanding options to purchase shares of Globix Common Stock
        (including restricted stock) (the "GLOBIX OPTIONS") under the Globix
         Stock Option Plans, certifying with respect to each Globix Option (A)
      the number of shares of Globix Common Stock subject to such Globix
          Option, (B) the relationship of the holder to Globix, (C) the exercise

-29-

S-4/A
299th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 299th
       price, (D) the date of grant, (E) the vesting schedule, if any, and
          expiration date thereof, and including the extent to which any vesting
          has occurred as of the date of this Agreement, and (F) whether (and to
         what extent) the vesting of such Globix Option will be accelerated in
        any way by the transactions contemplated by this Agreement or by the
        termination of employment or engagement or change in position of any
holder thereof following consummation of the Merger. Section
     3.2(b)(iii) of the Globix Disclosure Schedule shows the number of
          shares of Globix Common Stock reserved for future issuance pursuant to
       warrants, convertible securities or other outstanding rights (other
        than Globix Options) to purchase, or obligations to otherwise issue,
    shares of Globix Common Stock outstanding as of the date of this
         Agreement (such outstanding warrants, convertible securities or other
         rights, the "GLOBIX CONVERTIBLE SECURITIES"). Globix has delivered to
         NEON a certificate certifying with respect to such Globix Convertible
    Securities (A) the agreement or document under which such Globix
         Convertible Securities were granted, (B) a complete and accurate list
       of all holders of Globix Convertible Securities, (C) the number and
         type of shares subject to such Globix Convertible Securities, (D) the
     exercise price, (E) the date of grant and (F) the expiration date
     thereof. Except for Globix Options, neither Globix nor any of its
       Subsidiaries has outstanding any stock appreciation rights, phantom
    stock, performance based stock awards or similar stock rights or
        obligations. Globix has made available to NEON accurate and complete
          copies of all Globix Stock Option Plans, the forms of all stock option
agreements evidencing Globix Options and Globix Convertible 
          Securities. THE FOREGOING NOTWITHSTANDING, THE SHARES OF GLOBIX COMMON
                      ----------------------------------------------------------
 STOCK ISSUABLE IN THE GLOBIX DEBT PURCHASE WILL BE SUBJECT TO
          ----------------------------------------------------------------------
      REGISTRATION RIGHTS, AND GLOBIX WILL GRANT THE PARTICIPANTS IN THE
          ----------------------------------------------------------------------
        GLOBIX DEBT PURCHASE THE RIGHT TO PURCHASE UP TO AN ADDITIONAL 5% OF
          ----------------------------------------------------------------------
        THE SHARES ACQUIRED BY THE PARTICIPANTS AT A PURCHASE PRICE OF $2.75
          ----------------------------------------------------------------------
      PER SHARE IF THE REGISTRATION STATEMENT IS NOT EFFECTIVE WITHIN 90
          ----------------------------------------------------------------------
          DAYS OF THE CLOSING UNDER THE MERGER AGREEMENT AND AN ADDITIONAL 5% OF
          ----------------------------------------------------------------------
          THE SHARES ACQUIRED IN THE GLOBIX DEBT PURCHASE 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.                             
-------------------------------                             

                 (iv) The shares of stock of each of Globix's Subsidiaries
       held by Globix (directly or indirectly) are the only shares of each
     such Subsidiary issued and outstanding, and there are no options,
         warrants, equity securities, calls, rights, commitments or agreements
          of any character to which any of Subsidiary of Globix is a party or by
          which any such Subsidiaries is bound obligating it to issue, exchange,
transfer, deliver or sell, or cause to be issued, exchanged,
         transferred, delivered or sold, additional shares of capital stock or
       other equity interests of such Subsidiary or any security or rights
          convertible into or exchangeable or exercisable for any such shares or
          other equity interests, or obligating any Subsidiary to grant, extend,
          accelerate the vesting of, otherwise modify or amend or enter into any
     such option, warrant, equity security, call, right, commitment or
   agreement. All the outstanding shares of capital stock or other
      ownership interests of each Subsidiary of Globix have been validly
        issued and are fully paid and nonassessable and are owned (of record
       and beneficially) by Globix, free and clear of all Liens. Except as
         set forth in Section 3.2(b)(iv) of the Globix Disclosure Schedule and
 (A) for the capital stock or other ownership interests of its
    Subsidiaries, (B) as acquired in the ordinary course of business
         pursuant to foreclosure, workout, settlement, bankruptcy arrangements
       or similar transactions, and (C) for security interests held in the
ordinary course of business, neither Globix nor any of its  

-30-

S-4/A
300th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 300th
    Subsidiaries directly or indirectly owns any equity, membership,
        partnership or similar interest in, or any interest convertible into
          or exchangeable or exercisable for any equity, membership, partnership
        or similar interest in, any corporation, partnership, joint venture,
      limited liability company or other business association or entity,
  whether incorporated or unincorporated that is material to the
        business of Globix and its Subsidiaries, taken as a whole. Except as
         set forth in Section 3.2(b)(iv) of the Globix Disclosure Schedule, no
       action is required to be taken by Globix, its Board of Directors or
          any trustee under any Globix Stock Option Plans or the stockholders of
       Globix to effect the treatment of NEON Options described in Section
1.9 hereof.                                                 

                  (v) Except as set forth in Section 3.2(b)(v) of the Globix
         Disclosure Schedule, Globix has never declared, nor is there accrued,
        any dividend or other distribution with respect to any Globix Common
Stock.                                                      

                 (vi) All of the shares of Globix Common Stock issuable at
         the Effective Time in accordance with this Agreement will be, when so
         issued, duly authorized, validly issued, fully paid and nonassessable
          and free of preemptive rights created by statute, Globix's certificate
       of incorporation or bylaws and will, when issued, be registered for
        sale under the Securities Act, registered under the Exchange Act and
 registered or exempt from registration under applicable state
         securities laws. All of the shares of Globix Preferred Stock issuable
          in exchange for NEON Convertible Preferred Stock at the Effective Time
    in accordance with this Agreement, will be, when so issued, duly
        authorized, validly issued, fully paid and nonassessable and free of
 preemptive rights created by statute, Globix's certificate of
         incorporation or bylaws and will, when issued, be registered for sale
       under the Securities Act and registered or exempt from registration
under applicable state securities laws.                     

(c) AUTHORITY; NO CONFLICTS.                                

                 (i) Each of Globix and its Subsidiaries has all requisite
          corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions
         contemplated hereby, subject to the receipt of the Globix Stockholder
         Vote (if applicable). The execution and delivery of this Agreement by
          Globix and the consummation by Globix of the transactions contemplated
         hereby have been duly authorized by all necessary corporate action on
  the part of Globix, subject to the Globix Stockholder Vote (if
          applicable). As of the Closing Date, the consummation by Merger Sub of
        the transactions contemplated hereby shall have been duly authorized
          by all necessary corporate action on the part of Merger Sub and on the
          part of Globix as the sole stockholder of Merger Sub. Without limiting
         the generality of the foregoing, the Board of Directors of Globix, at
          a meeting duly called and held, by the requisite vote of all directors
          (i) received a fairness opinion that the Exchange Ratio is fair from a
         financial point of view to the holders of the Globix Common Stock and
         determined that the Merger is in the best interests of Globix and its

-31-

S-4/A
301st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 301st
    stockholders, (ii) adopted this Agreement in accordance with the
         provisions of the DGCL and (iii) in the event of a Globix Stockholder
      Vote, fixed a record date for the determination of stockholders of
  Globix entitled to vote at the Globix Stockholders Meeting (if
       applicable). This Agreement has been duly executed and delivered by
   Globix and constitutes a valid and binding agreement of Globix,
      enforceable against Globix in accordance with its terms, except as
 such enforceability may be limited by bankruptcy, insolvency,
        reorganization, moratorium and similar laws relating to or affecting
       creditors generally, or by general equity principles (regardless of
          whether such enforceability is considered in a proceeding in equity or
at law).                                                    

                   (ii) The execution and delivery of this Agreement does not,
 and the consummation of the Merger and the other transactions
        contemplated hereby will not, result in a Violation: (A) pursuant to
         any provision of the certificate of incorporation or bylaws of Globix
     or similar governing documents of any of its Subsidiaries, or (B)
        except as could not, individually or in the aggregate, reasonably be
    expected to have a Globix Material Adverse Effect and subject to
     obtaining or making the Globix Required Consents, pursuant to any
  Contract or Globix Plan or any Law applicable to Globix or its
  Subsidiaries or their respective properties or assets. Section
   3.2(c)(ii) of the Globix Disclosure Schedule lists all material
       consents, waivers and approvals under any Globix Material Contracts
      required to be obtained in connection with the consummation of the
Merger and the other transactions contemplated hereby.      

                 (iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Person or any 
       Governmental Entity is required by or with respect to Globix or any
          Subsidiary of Globix as a result of the execution and delivery of this
       Agreement by Globix or the consummation of the Merger and the other
        transactions contemplated hereby, except for those required under or
      in relation to (A) the HSR Act, (B) the filing of the Registration
          Statement with the SEC and its effectiveness under the Securities Act,
         (C) the filing of the Certificate of Merger pursuant to the DGCL, (D)
       compliance with applicable state securities laws (if applicable) in
          connection with the issuance of the Globix Common Stock in the Merger,
    (E) the Globix Stockholder Vote (if applicable), (F) the matters
       listed in Section 3.2(c)(ii) of the Globix Disclosure Schedule, and
        (G) such consents, approvals, orders, authorizations, registrations,
         declarations and filings the failure of which to make or obtain could
         not, individually or in the aggregate, reasonably be expected to have
  a Globix Material Adverse Effect. Consents, approvals, orders,
          authorizations, registrations, declarations and filings required under
      or in relation to any of the foregoing clauses (A) through (G) are
hereinafter referred to as "GLOBIX REQUIRED CONSENTS".      

-32-

S-4/A
302nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 302nd
(d) SEC FILINGS; FINANCIAL STATEMENTS.                      

                (i) Globix has filed all periodic reports required to be
       filed with the SEC under the Exchange Act for the fiscal year ended
    September 30, 2003 and thereafter (collectively, the "GLOBIX SEC
         REPORTS"), each of which, as finally amended, has complied as to form
    in all material respects with the applicable requirements of the
        Securities Act and the rules and regulations promulgated thereunder,
 or the Exchange Act and the rules and regulations promulgated
thereunder, each as in effect on the date so filed.         

            (ii) The consolidated financial statements of Globix
        (including any related notes thereto) (a) included in the Globix SEC
         Reports and (b) an unaudited consolidated balance sheet as of May 31,
        2004 and the related unaudited consolidated statements of operations
   and cash flows for the eight months then ended (the "GLOBIX SEC
       FINANCIAL STATEMENTS"), fairly present in all material respects the
  consolidated financial position of Globix and its consolidated
        subsidiaries as of the dates thereof and the consolidated results of
        their operations, changes in stockholders' equity and cash flows for
         the respective periods set forth therein, in each case, in accordance
          with GAAP applied on a basis consistent with prior periods (except, in
      the case of unaudited consolidated statements, including quarterly
       statements, (A) as permitted by Form 10-Q of the SEC, (B) as may be
       indicated in footnotes thereto or in the Globix SEC Reports and (C)
      that they are subject to normal and recurring year-end adjustments
       that have not been and are not likely to be material in amount, and
        the absence of notes that, if presented, would not differ materially
 from the notes included in the immediately preceding year-end
financial statements).                                      

              (iii) No financial statements of any entity other than
          Globix and its Subsidiaries are required by GAAP to be included in the
consolidated financial statements of Globix.                

(e) NO UNDISCLOSED LIABILITIES; INDEBTEDNESS.               

          (i) Except (a) as and to the extent of the amounts
      specifically reflected or reserved on the audited balance sheet of
       Globix as of September 30, 2003 (including, the notes thereto) (the
        "GLOBIX AUDITED BALANCE SHEET") included in the Globix SEC Financial

   Statements or intercompany accounts not reflected in the Globix
          Audited Balance Sheet, (b) obligations under Globix Material Contracts
       entered into in the ordinary course of business and consistent with
       past practice which are not required by GAAP to be reflected on the
          Globix Audited Balance Sheet, (c) liabilities and obligations incurred
          in the ordinary course of business consistent with past practice since
       the date of the Globix Audited Balance Sheet, (d) obligations under
       this Agreement and liabilities permitted to be incurred pursuant to
       Section 4.2 and (e) as set forth in Section 3.2(e)(i) of the Globix
       Disclosure Schedule, neither Globix nor any of its Subsidiaries has
  any liabilities or obligations of any nature whether absolute,
  accrued, contingent or otherwise, which individually or in the
    aggregate would reasonably be expected to have a Globix Material
Adverse Effect.                                             

-33-

S-4/A
303rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 303rd
                 (ii) Section 3.2(e)(ii) of the Globix Disclosure Schedule
 sets forth a complete and accurate list of all loan or credit
        agreements, notes, bonds, mortgages, indentures and other agreements
          and instruments pursuant to which any indebtedness of Globix or any of
  its Subsidiaries in an aggregate principal amount in excess of
 $100,000 is outstanding or may be incurred and the respective
   principal amounts outstanding thereunder as of the date of this
Agreement.                                                  

    (f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.2(f) of the Globix Disclosure Schedule, and except for actions that   
would be permitted pursuant to Section 4.2 and except as otherwise contemplated 
hereby, from the date of the Globix Audited Balance Sheet to the date hereof:   
(i) Globix and its Subsidiaries have conducted their business in all material   
respects in the ordinary course in the same manner as heretofore conducted; (ii)
there has not been any Globix Material Adverse Effect; (iii) Globix has not (A) 
declared, set aside or paid any dividends or other distribution (whether in     
cash, stock or property) in respect of any of its capital stock; (B) split,     
combined or reclassified any of its capital stock or issued or authorized any   
issuance of any other securities in respect of, in lieu of or in substitution   
for shares of, its capital stock, (iv) Globix has not changed its methods of    
accounting for financial accounting or tax purposes in any manner that could be 
reasonably expected to have a significant adverse effect on its financial       
statements; (v) Globix has not made or revoked any material express or deemed   
election relating to Taxes; and (vi) neither Globix nor any of its Subsidiaries 
has (A) waived in writing any material rights, (B) suffered any extraordinary   
loss or extraordinary losses (as defined in Opinion No. 30 of the Accounting    
Principles Board of the American Institute of Certified Public Accountants and  
any amendments or interpretations thereof) which could reasonably be expected to
have a Globix Material Adverse Effect, (C)(1) granted any severance or          
termination payment, (2) entered into any employment, deferred compensation,    
consulting, severance, indemnification, change in control, retention or other   
similar agreement or arrangement, (3) increased any compensation or benefits    
payable or to become payable under any existing severance or termination pay    
policy or employment, deferred compensation, stock loan, consulting, severance, 
change in control, retention or other similar agreement or arrangement, or (4)  
increased the compensation, bonus, incentive or other benefits payable to (or to
become payable to) former or current directors, officers, employees or          
consultants of Globix or any of its Subsidiaries, other than an increase in     
annual salary or hourly wage rates granted to current employees (other than     
officers) in the ordinary course of business, consistent with past practice or  
otherwise not material), (D) made or agreed to make any increase in any Globix  
Plan or adopt a new employee benefit plan, which in either case could result in 
a material increase in liability to Globix, (E) other than in the ordinary      
course of business or as otherwise not material, sold or transferred any of the 
assets of Globix or its Subsidiaries, or (F) made any capital expenditures in   
respect of its business or operations not in the ordinary course of business or 
otherwise material. Globix and its Subsidiaries have not agreed or committed    
(directly or indirectly) to do any of the foregoing.                            

       (g) INFORMATION SUPPLIED. None of the information supplied or to be
supplied in writing by Globix or Merger Sub for inclusion or incorporation by   
reference in the Registration Statement and the Proxy Statement will (A) in the 
case of the Registration Statement, at the time it becomes effective, contain   
any untrue statement of a material fact or omit to state any material fact      
required to be stated therein or necessary in order to make the statements      
therein not misleading, or (B) in the case of the Proxy Statement, at the time  
of the mailing of the Proxy Statement, at the time of the NEON Stockholders     

-34-

S-4/A
304th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 304th
Meeting and the Globix Stockholders Meeting (if applicable) and at the Effective
Time, contain any untrue statement of a material fact or omit to state any      
material fact required to be stated therein or necessary in order to make the   
statements therein, in light of the circumstances under which they are made, not
misleading, or necessary to correct any statement in any earlier communication  
with respect to the solicitation of proxies for the NEON Stockholders Meeting or
the Globix Stockholders Meeting (if applicable) which has become false or       
misleading. If at any time prior to the Effective Time any event with respect to
Globix, its officers and directors or any of its Subsidiaries shall occur which 
is required to be described in the Proxy Statement or the Registration          
Statement, such event shall be so described, and an appropriate amendment or    
supplement shall be promptly filed with the SEC and, as required by law,        
disseminated to the stockholders of NEON and Globix. The Registration Statement 
will comply (with respect to Globix) as to form in all material respects with   
the provisions of the Securities Act, and the Proxy Statement will comply (with 
respect to Globix) as to form in all material respects with the provisions of   
the Exchange Act. Notwithstanding the foregoing provisions of this Section      
3.2(g), no representation or warranty is made by Globix with respect to         
statements made or incorporated by reference in the Proxy Statement based on    
information supplied by NEON for inclusion or incorporation by reference        
therein. For purposes of the foregoing, it is understood and agreed that        
information concerning or related to Globix or Merger Sub or the Globix         
Stockholders Meeting (if applicable) will be deemed to have been supplied by    
Globix and information concerning or related to NEON and the NEON Stockholders  
Meeting shall be deemed to have been supplied by NEON.                          

   (h) ASSETS. Except as set forth in Section 3.2(h) of the Globix
Disclosure Schedule, Globix has good and valid title or a valid leasehold       
interest in, free and clear of all Liens other than Permitted Liens, to (i) all 
of its assets and properties as reflected on the Globix Audited Balance Sheet,  
except for assets and properties disposed of in the ordinary course of business,
or as permitted pursuant to Section 4.2, since the date of the Globix Audited   
Balance Sheet, and (ii) all of Globix's other assets, real property, interests  
in real property, rights, franchises, licenses and properties, tangible or      
intangible, real or personal, wherever located which are material to the conduct
of its business, other than property that is leased or licensed, with respect to
which Globix or any of its Subsidiaries has valid and enforceable leases or     
licenses under which there exists no default, event of default or event which,  
with notice or lapse of time or both, would constitute a default, except for    
such defaults which have not had or are not reasonably likely to have, either   
individually or in the aggregate, a Globix Material Adverse Effect.             

         (i) VOTE REQUIRED. On or prior to the Closing Date, Globix shall duly
execute and deliver a written consent as the only stockholder of Merger Sub, (i)
approving the Merger and (ii) approving the modification of the NEON Stock      
Option Plans in accordance with the shareholder approval requirements of Section
422 of the Code and the regulations promulgated and proposed thereunder (the    
"MERGER SUB APPROVAL"), which will not be amended, modified or withdrawn prior  
to Closing. The Globix Stockholder Vote, if applicable, is the only vote of the 
holders of any class or series of Globix capital stock necessary to approve the 
Merger and the other transactions contemplated hereby, including the issuance of
the shares of Globix Common Stock included in the Merger Consideration and the  
transactions contemplated by Section 1.9, if applicable.                        

-35-

S-4/A
305th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 305th
        (j) OPINION OF FINANCIAL ADVISOR. Globix has received the opinion of
Needham & Company, Inc. (the "GLOBIX FINANCIAL ADVISOR"), dated the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is fair, from
a financial point of view, to the holders of the Globix Common Stock.           

(k) RELATED PARTY TRANSACTIONS.                             

                 (i) For purposes of this Section 3.2(k), the term "GLOBIX
       AFFILIATED PERSON" means (A) any holder of 5% or more of the Globix
         Common Stock, (B) any director, officer or senior executive of Globix
        or any Subsidiary, (C) any Person, firm or corporation that directly
        or indirectly controls, is controlled by, or is under common control
      with, Globix or any Subsidiary, or (D) any member of the immediate
family of any of such persons.                              

                    (ii) Except as set forth in Section 3.2(k)(ii) of the Globix
 Disclosure Schedule, since September 30, 2003, Globix and its
Subsidiaries have not, in the ordinary course of business or
       otherwise, (A) purchased, leased or otherwise acquired any material
        property or assets or obtained any material services from, (B) sold,
      leased or otherwise disposed of any material property or assets or
          provided any material services to (except with respect to remuneration
         for services rendered in the ordinary course of business as director,
         officer or employee of Globix or any Subsidiary), (C) entered into or
       modified in any manner any contract with, or (D) borrowed any money
   from, or made or forgiven any loan or other advance (other than
         expenses or similar advances made in the ordinary course of business)
to, any Globix Affiliated Person.                           

               (iii) Except as set forth in Section 3.2(k)(iii) of the
 Globix Disclosure Schedule, since September 30, 2003, (A) the
        contracts of Globix and its Subsidiaries do not include any material
     obligation or commitment between Globix or any Subsidiary and any
        Globix Affiliated Person, (B) the assets of Globix or any Subsidiary
          do not include any receivable or other obligation or commitment from a
     Globix Affiliated Person to Globix or any Subsidiary, and (C) the
         liabilities of Globix and its Subsidiaries do not include any payable
          or other obligation or commitment from Globix or any Subsidiary to any
Globix Affiliated Person.                                   

                 (iv) Section 3.2(k)(iv) of the Globix Disclosure Schedule
     sets forth a complete and accurate list of each Contract to which
         Globix or any of its Subsidiaries is a party or bound with any Globix
     Affiliated Person (other than any Subsidiary which is a direct or
          indirect wholly owned Subsidiary of Globix). Section 3.2(k)(iv) of the
 Globix Disclosure Schedule sets forth a complete and accurate
        description of all transactions with any Globix Affiliated Person or
       any of its Subsidiaries or any transaction that would be subject to
        proxy statement disclosure pursuant to Item 404 of Regulation S-K to
         which Globix or any of its Subsidiaries is a party or bound. Complete
         and accurate copies of all the agreements, contracts and arrangements
          set forth in Section 3.2(k)(iv) of the Globix Disclosure Schedule have
been made available to NEON.                                

-36-

S-4/A
306th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 306th
        (l) LITIGATION. Except as disclosed in writing to NEON, there are no
Claims pending or, to the Knowledge of Globix, threatened against Globix or any 
of its Subsidiaries, or any properties or rights of Globix or any of its        
Subsidiaries, before any Governmental Entity, nor is there any judgment, decree,
injunction, ruling or order of any Governmental Entity or arbitrator outstanding
specifically against Globix or any of its Subsidiaries, except for any of the   
foregoing as could not, individually or in the aggregate, reasonably be expected
to have a Globix Material Adverse Effect. To the Knowledge of Globix, there has 
not been any investigation of Globix or any of its Subsidiaries conducted by any
Governmental Entity during the two years prior to the date hereof which was     
concluded and resulted in a significant adverse effect on the ability of Globix 
and its Subsidiaries to conduct their respective businesses.                    

(m) COMPLIANCE WITH LAWS; PERMITS.                          

                   (i) Since the Globix Confirmation Effective Date, except as
disclosed to NEON in a certificate, Globix and each of its  
       Subsidiaries has complied with, is not in violation of, and has not
   received any notice alleging any violation with respect to, any
        applicable provisions of any statute, law or regulation with respect
    to the conduct of its business, the employment of any current or
        former employees, or the ownership or operation of its properties or
          assets, except for failures to comply or violations that, individually
       or in the aggregate, have not had, and are not reasonably likely to
have, a Globix Material Adverse Effect.                     

                    (ii) Except as set forth in Section 3.2(m)(ii) of the Globix
     Disclosure Schedule, Globix and each of its Subsidiaries have all
        permits, licenses and franchises from Governmental Entities required
      to conduct their businesses as now being conducted or as presently
        contemplated to be conducted (the "GLOBIX PERMITS"), except for such
          permits, licenses and franchises the absence of which, individually or
          in the aggregate, has not had, and is not reasonably likely to have, a
       Globix Material Adverse Effect. Globix and each of its Subsidiaries
      are in compliance with the terms of the Globix Permits, except for
        such failures to comply that, individually or in the aggregate, have
     not had, and are not reasonably likely to have, a Globix Material
    Adverse Effect. Except as set forth in Section 3.2(m)(ii) of the
        Globix Disclosure Schedule, all Globix Permits are in full force and
        effect, and no Globix Permit shall cease to be effective as a result
of the consummation of the transactions contemplated by this
          Agreement. Globix and its Subsidiaries have not received any notice of
        any material default under or material violation of, any such Globix
Permit.                                                     

(n) ACCOUNTS RECEIVABLE; WARRANTIES.                        

                   (i) All accounts receivable of Globix, whether reflected in
 the most recent Globix SEC Financial Statements or otherwise,
          represent sales actually made in the ordinary course of business, have
       been reflected properly in its books and records in accordance with
   GAAP and are not subject to any material contractual setoffs or
counterclaims.                                              

                    (ii) Except as set forth in Section 3.2(n)(ii) of the Globix
          Disclosure Schedule, no product or service manufactured, sold, leased,
     licensed, delivered or otherwise provided by Globix or any of its
Subsidiaries is subject to any guaranty, or warranty.       

-37-

S-4/A
307th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 307th
         (o) CUSTOMERS AND SUPPLIERS. As of the date of this Agreement, except
as set forth in Section 3.2(o) of the Globix Disclosure Schedule, (i) no        
material customer of Globix or any of its Subsidiaries has indicated to Globix  
or any of its Subsidiaries that it will stop, or decrease the rate of, buying   
products or services from Globix or any of its Subsidiaries, and (ii) no        
material supplier or exclusive supplier of Globix or any of its Subsidiaries has
indicated to Globix or any of its Subsidiaries that it will stop, or decrease   
the rate of, supplying materials, products or services to them.                 

         (p) CERTAIN BUSINESS PRACTICES. Neither Globix nor any Subsidiary has
(i) used any funds for unlawful contributions, gifts, entertainment or other    
unlawful payments related to a political activity, (ii) made any unlawful       
payment to any foreign or domestic government official or employee or to any    
foreign or domestic political party or campaign or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (iii) consummated any     
transaction or made any payment or entered into any agreement or arrangement or 
taken any other action in violation of Section 1128B(b) of the Social Security  
Act, as amended.                                                                

(q) TAXES.                                                  

                  (i) Except as set forth in Section 3.2(q)(i) of the Globix
      Disclosure Schedule or to the extent otherwise not material, as to
        amount or otherwise, individually or in the aggregate, including all
     matters subject to the representations in this Section 3.2(q)(i):

                           (A) Globix and its Subsidiaries have timely filed or,
         if not yet due, will timely file all Tax Returns required to be filed
          by them on or before the Closing Date and all such Tax Returns are or,
        in the case of Tax Returns not yet filed, will be, true, correct and
          complete in all material respects and Globix and its Subsidiaries have
         paid when due all Taxes reported thereon or, in the case of Taxes not
yet due, will pay such Taxes when due.                      

                       (B) Globix and its Subsidiaries have paid or have
      established on the most recent financial statements required to be
          provided to NEON hereunder, in accordance with GAAP, adequate accruals
        for the payment of all Taxes (whether or not shown on a Tax Return),
     including contingent Tax liabilities, with respect to all Taxable
        periods ending on or before the Closing Date and all Taxable periods
      starting before and ending after the Closing Date, but only to the
          extent attributable to the portion of such periods up to and including
   the Closing Date and, in each case, only to the extent properly
   accrued as of the date of such most recent financial statements
required to be provided to NEON hereunder.                  

                        (C) Globix has made or will make available to NEON
        all Tax Returns filed by Globix and its Subsidiaries relating to the
      four (4) most recent Taxable years ending on or before the Closing
Date.                                                       

                    (D) No extension of time has been requested or
        granted for Globix or any of its Subsidiaries to file any Tax Return
       that has not yet been filed or to pay any Tax that has not yet been
    paid and Globix and its Subsidiaries have not granted a power of
    attorney that remains outstanding with regard to any Tax matter.

-38-

S-4/A
308th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 308th
                     (E) There is no pending or, to the Knowledge of
      Globix, threatened Tax Audit of Globix or any of its Subsidiaries.

                        (F) NEON has received copies of all material audit
         reports and correspondence between Globix or its Subsidiaries and any
      Tax Authority issued or made during the last three (3) years and a
     complete summary of all oral communications between Globix or its
    Subsidiaries and any Tax Authority relating to any Tax Audits of
   Globix or its Subsidiaries during such years, including without
     limitation any Tax Audit that is in progress or for which a still
  effective extension of the statute of limitations was granted.

                        (G) Neither Globix nor any of its Subsidiaries has
      within the last four (4) years received notice of a Tax Deficiency
     and, to the Knowledge of Globix, no Tax Deficiency is proposed or
threatened.                                                 

                        (H) All Tax Deficiencies have been paid or finally
         settled and all amounts determined by settlement to be owed have been
paid.                                                       

                         (I) There are no Liens, other than Permitted Liens,
      arising from or related to Taxes on or pending against Globix, its
Subsidiaries or any of their properties.                    

                       (J) There are no presently outstanding waivers or
     extensions or requests for waiver or extension of the time within
which a Tax Deficiency may be asserted or assessed.         

                          (K) No issue has been raised in any Tax Audit which,
       by application of similar principles to any past, present or future
      period, would result in an adjustment to the amounts reported in a
subsequent period.                                          

                          (L) Globix has not changed any Tax accounting method
      during any of the seven (7) most recent Taxable years ending on or
       before the Closing Date. Globix and its Subsidiaries have not taken
         any action, whether or not required, that has resulted or will result
         in deferring a liability for Taxes of Globix or its Subsidiaries from
          any taxable period ending on or before the Closing Date to any taxable
      period ending after such date, unless such action is in accordance
with past practice.                                         

                           (M) Neither Globix nor its Subsidiaries has ever been
        required to include in income any adjustment pursuant to section 481
       of the Code and no Tax Authority has ever made or proposed any such
      adjustment. Neither Globix nor its Subsidiaries has entered into a
     closing agreement, as described in section 7121 of the Code or an
        advance pricing agreement or other agreement with a taxing authority
relating to Taxes.                                          

                      (N) Neither Globix nor its Subsidiaries owns any
          property that is tax-exempt use property within the meaning of section
          168(h) of the Code, that is described in section 168(f)(8) of the Code
      as in effect prior to its amendment by the Tax Reform Act of 1986,
   that is tax-exempt bond financed property within the meaning of
       Section 168(g) of the Code or that is "limited use property" within
the meaning of Rev. Proc. 76-30.                            

-39-

S-4/A
309th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 309th
                           (O) Neither Globix nor its Subsidiaries is a party to
      any arrangement to which sections 162(m) or 280G of the Code could
under any circumstances apply.                              

                         (P) Neither Globix nor its Subsidiaries has filed a
    consent pursuant to section 341(f) of the Code or agreed to have
section 341(f)(2) apply to the disposition of any asset.    

                 (Q) Neither Globix nor its Subsidiaries has
       participated in or cooperated with any international boycott within
the meaning of section 999 of the Code.                     

                           (R) Neither Globix nor its Subsidiaries is now or has
          ever been (a) an includable member of an "affiliated group" within the
         meaning of section 1504(a) of the Code other than an affiliated group
         consisting only of Globix and one or more of its current Subsidiaries
   or otherwise liable for the Taxes of a person other than Globix
   pursuant to Treasury Regulation section 1.1502-6 or any similar
 provision of state, local or foreign law, whether or not as a
transferee, a successor, by operation of law, by contract or
        otherwise, (b) a member of any consolidated, combined or unitary Tax
        Return filing group other than a group consisting only of Globix and
   one or more of its current Subsidiaries, (c) a party to any Tax
    sharing agreement, Tax indemnity agreement or similar agreement,
         arrangement or practice with respect to Taxes, including an agreement
      that obligates it to make any payment computed by reference to the
          Taxes, Taxable income or Tax losses of any other individual or entity,
        (d) a personal holding company as defined in section 542 of the Code
       or foreign personal holding company as defined in section 552(a) of
     the Code, (e) the owner of an interest in an entity that is or is
        treated as a Tax partnership, trust, regulated investment company as
       defined in section 851 of the Code, real estate investment trust as
          defined in section 856 of the Code or foreign personal holding company
 as defined in section 552(a) of the Code, (f) a United States
        shareholder as defined in section 951(b) of the Code of a controlled
    foreign corporation as defined in section 957 of the Code, (g) a
     United States real property holding company within the meaning of
   section 897(c)(2) of the Code or (h) a shareholder of a passive
       foreign investment company, as defined in section 1297 of the Code.

                           (S) Globix has not entered into a gain recognition or
          other agreement requiring it to take into account Taxable income or to
         incur a Tax liability that it would not have had to take into account
or would not have had to incur but for such agreement.      

                           (T) Globix has disclosed on its federal, state, local
         and foreign income Tax Returns all positions taken therein that could
give rise to a penalty under section 6662 of the Code or any
corresponding provision of state, local or foreign Tax law. 

                (U) Globix and its Subsidiaries have never
   participated, directly or indirectly, in a transaction which is
described in Treasury Regulation sections 1.6011-4(b)(2) or 
  1.6011-4(b)(3) nor have they ever held "an interest" in a "tax
       shelter," as those terms are defined in Treasury Regulation section
301.6112-1.                                                 

-40-

S-4/A
310th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 310th
                      (V) Globix has no deferred intercompany gains or
    losses that have not been fully taken into income for income Tax
         purposes and there is no excess loss account with respect to stock of
any of its Subsidiaries.                                    

                     (W) No unresolved claim and to the Knowledge of
Globix, no claim has ever been made by a Tax Authority in a 
       jurisdiction in which Globix does not pay Taxes or file Tax Returns
      that such entity is or may be subject to Tax in such jurisdiction.

                          (X) Globix and its Subsidiaries have never requested
a private ruling from a Tax Authority on any matter.        

                        (Y) Neither Globix nor its Subsidiaries has been a
          "distributing corporation" or a "controlled corporation" in connection
with a distribution described in Section 355 of the Code.   

                         (Z) Neither Globix nor its Subsidiaries nor, to the
          Knowledge of Globix, any Globix Affiliated Person has taken any action
       or failed to take any action that would cause the Merger to fail to
          qualify as a tax-free reorganization under Section 368(a) of the Code,
         and no facts exist that would cause the Merger to fail to so qualify.

                        (AA) The net operating losses, alternative minimum
         tax net operating losses, net capital losses, alternative minimum tax
        net capital losses, Tax credits, alternative minimum tax credits and
          other Tax attributes of Globix and its subsidiaries are not subject to
       any consolidated return limitation, limitation under section 382 of
the Code or any other limitation on their use, allowance or 
availability.                                               

                        (BB) Globix has retained all supporting and backup
          papers, receipts, spreadsheets and other information necessary for the
       preparation of all Tax Returns that have not yet been filed and the
        defense of Tax Audits involving all Taxable periods either (I) ended
         on or during the six (6) years prior to the Closing Date or (II) from
  which there are unutilized net operating loss, capital loss or
investment tax credit carryovers.                           

                   (CC) Globix has collected and remitted to the
   appropriate Tax Authorities all sales and use and similar Taxes
   required to have been collected and remitted on or prior to the
   Closing Date and has been furnished, and if required has filed,
          properly completed exemption certificates for all exempt transactions.
Globix has maintained and has in its possession all records,
          supporting documents and exemption and resale certificates required by
   applicable sales Tax statutes and regulations to be retained in
      connection with the collection and remittance of sales and use and
       similar Taxes for all periods up to and including the Closing Date.

         Each reference to a provision in this Section 3.2(q) shall be treated
         for state, local and foreign Tax purposes as a reference to analogous
or similar provisions of state and local law.               

-41-

S-4/A
311th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 311th
(r) EMPLOYEE BENEFITS; EMPLOYEES.                           

                    (i) Section 3.2(r)(i) of the Globix Disclosure Schedule sets
       forth a list of each "employee benefit plan" (within the meaning of
      Section 3(3) of ERISA), severance, change in control or employment
     plan, program or agreement, and vacation, incentive, bonus, stock
          option, stock purchase, stock loan, and restricted stock plan, program
or policy to which Globix is a party or that is sponsored or
     maintained by Globix, any of its Subsidiaries, any of their ERISA
        Affiliates, in which present or former employees of Globix or any of
         its Subsidiaries or ERISA Affiliates ("GLOBIX EMPLOYEES") participate
     (collectively, the "GLOBIX PLANS"). All Globix Plans set forth on
     Section 3.2(r)(i) of the Globix Disclosure Schedule, if any, that
      would result in the payment to any Globix Employee of any money or
        other property or accelerate or provide any other rights or benefits
thereto as a result of the transactions contemplated by this
Agreement, whether or not such payment or acceleration would
        constitute a parachute payment within the meaning of Section 280G of
      the Code, are so indicated by an asterisk. The Globix Plans are in
        compliance in all material respects with all applicable requirements
of ERISA, the Code, and other applicable Laws and have been 
        administered in all material respects in accordance with their terms
  and such Laws, and there has been no material violation of any
          reporting or disclosure requirement imposed by ERISA or the Code. Each
       Globix Plan which is intended to be qualified within the meaning of
         Section 401 of the Code has received a Favorable Letter (as such term
is defined in Rev. Proc. 2003-44 Section 5.01(4)) as to its 
    qualification, and nothing has occurred that could reasonably be
       expected to cause the loss of such qualification or the loss of the
       tax-exempt status for any trust maintained with respect to any such
Globix Plan.                                                

                    (ii) Except as set forth in Section 3.2(r)(ii) of the Globix
       Disclosure Schedule, neither NEON nor Globix shall, at or after the
    Effective Time, have any liability with respect to any change in
         control, "continuity" or severance agreement, plan, program or policy
   with or with respect to any Globix Employee. In accordance with
        applicable law, each Globix Plan can be amended or terminated at any
          time, without consent from any other party and without liability other
         than for notice obligations with respect to amendment or termination,
    if any, and benefits accrued as of the date of such amendment or
          termination. Globix and its ERISA Affiliates have made full and timely
         payment of all material amounts required to be contributed or paid as
    expenses under the terms of each Globix Plan and applicable law.

            (iii) No Globix Plan is subject to Title IV of ERISA
         (including any "multiemployer plan" (as defined in Section 4001(a)(3)
      of ERISA)), and neither Globix nor any of its ERISA Affiliates has
        ever contributed or been obligated to contribute to any pension plan
        subject to Title IV of ERISA (including any multiemployer plan), nor
         could Globix or any ERISA Affiliate have any liability under Title IV
of ERISA.                                                   

                  (iv) No event or condition has occurred in connection with
       which Globix or any of its ERISA Affiliates would be subject to any
        liability, encumbrance or Lien with respect to any Globix Plan under
         ERISA, the Code or any other applicable Law or under any agreement or
     arrangement pursuant to or under which Globix or any of its ERISA
Affiliates are required to indemnify any person against such
liability.                                                  

-42-

S-4/A
312th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 312th
              (v) True, correct and complete copies of the following
     documents with respect to each of the Globix Plans have been made
        available to NEON by Globix, to the extent applicable: (A) any plans
          or agreements, all amendments thereto and related trust documents, and
    amendments thereto; (B) the three most recent Forms 5500 and all
       schedules thereto and the most recent actuarial report, if any; (C)
      the most recent IRS determination letter; and (D) any summary plan
descriptions or other employee communications.              

                  (vi) With respect to any Globix Plan, no actions, suits or
          claims (other than routine claims for benefits in the ordinary course)
are pending or, to the Knowledge of Globix, threatened.     

               (vii) Except as set forth in Section 3.2(r)(vii) of the
    Globix Disclosure Schedule, none of the Globix Plans provide for
          post-employment life or health insurance, benefits or coverage for any
     participant or any beneficiary of a participant, except as may be
        required under COBRA and any such participation is at the expense of
the participant or the participant's beneficiary.           

                 (viii) Except as set forth in Section 3.2(r)(viii) of the
      Globix Disclosure Schedule neither Globix, nor to the Knowledge of
       Globix, any other fiduciary or party-in-interest of any Globix Plan
      has participated in, engaged in or been a party to any transaction
       that is prohibited under Section 4975 of the Code or Section 406 of
         ERISA and not exempt under Section 4975 of the Code or Section 408 of
     ERISA, respectively. With respect to any Globix Plan, (A) neither
          Globix nor any of its ERISA Affiliates has had asserted against it any
          claim for taxes under Chapter 43 of Subtitle D of the Code and Section
          5000 of the Code, or for penalties under ERISA Section 502(c), 502 (i)
         or 502 (l), nor, to the Knowledge of Globix, is there a basis for any
         such claim, and (B) no officer, director or employee of Globix or any
          ERISA Affiliate has committed a breach of any fiduciary responsibility
or obligation imposed by Title I of ERISA.                  

                    (ix) Except as set forth in Section 3.2(r)(ix) of the Globix
        Disclosure Schedule, there will be no payment, accrual of additional
          benefits, acceleration of payments or vesting of any benefit under any
        Globix Plan or any other agreement or arrangement to which Globix or
   any of its Subsidiaries is a party, and no employee, officer or
  director of Globix or its Subsidiaries will become entitled to
          severance, termination allowance or similar payments, solely by reason
        of entering into or in connection with the transactions contemplated
by this Agreement.                                          

                  (x) Except as set forth in Section 3.2(r)(x) of the Globix
     Disclosure Schedule, no Globix Plan is subject to the laws of any
country other than the United States.                       

                  (xi) None of the Globix Employees is represented in his or
       her capacity as an employee of Globix or any of its Subsidiaries by
     any labor organization, nor has Globix or any of its Subsidiaries
         recognized any labor organization nor has any labor organization been
        elected as the collective bargaining agent of any such employees. To
    the Knowledge of Globix, there is no union organization activity
        involving any of Globix Employees, pending or threatened in writing,

-43-

S-4/A
313th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 313th
        nor has there been any union representation involving such employees
        within the past two years. To the Knowledge of Globix, except as set
        forth in Section 3.2(r)(xi) of the Globix Disclosure Schedule, there
     are no complaints, charges or claims against Globix or any of its
    Subsidiaries pending or, threatened in writing, by or before any
        Governmental Entity based on, arising out of, in connection with, or
        otherwise relating to the employment or termination of employment or
  failure to employ by Globix or any of its Subsidiaries, of any
    individual. Globix and its Subsidiaries are in compliance in all
       material respects with all laws, regulations and orders relating to
     the employment of labor, including all such laws, regulations and
        orders relating to wages, hours, WARN and any similar state or local
"mass layoff' or "plant closing" law, collective bargaining,
          discrimination, civil rights, safety and health, workers' compensation
        and the collection and payment of withholding and/or social security
        taxes and any similar tax. There has been no "mass layoff" or "plant
    closing" as defined by WARN with respect to Globix or any of its
   Subsidiaries in the 90 day period immediately prior to the date
hereof.                                                     

                   (xii) No more than fifteen (15) "leased employees," as that
         term is defined in Section 414(n) of the Code or any other person who
          is not classified as a common law employee of Globix, perform services
         for Globix or any ERISA Affiliate. No person who is not classified by
      Globix as a common law employee is eligible to participate in, nor
       does such person participate in, any Globix Plan and no retroactive
         participation in any Globix Plan would result due to reclassification
of such an individual as a common law employee of Globix.   

                   (xiii) To the Knowledge of Globix, no employee of Globix or
         any Subsidiary of Globix is in material breach as of the date of this
Agreement of any term of any employment contract, inventions
    disclosure agreement, confidentiality agreement, non-competition
        agreement, or any restrictive covenant to a former employer relating
     to the right of any such employee to be employed by Globix or any
        Subsidiary of Globix because of the nature of the business conducted
        or presently proposed to be conducted by Globix or any Subsidiary of
 Globix or relating to the use of trade secrets or proprietary
information of others.                                      

       (s) ENVIRONMENTAL MATTERS. Except as set forth in Section 3.2(s) of
the Globix Disclosure Schedule, (i) Globix, its Subsidiaries, and their         
activities and operations are in compliance in all material respects with       
Environmental Laws; (ii) to the Knowledge of Globix, there are no Environmental 
Claims pending or, to the Knowledge of Globix, threatened against Globix or its 
Subsidiaries; (iii) to the Knowledge of Globix, there are no conditions or      
circumstances that reasonably could be expected to result in the imposition on  
Globix or any of its Subsidiaries of, any material liability or obligation under
Environmental Laws; and (iv) to the Knowledge of Globix, there has not been any 
release, discharge or disposal of any hazardous or toxic materials or wastes at,
on or under the facilities owned or leased by Globix or its Subsidiaries that   
require notification, investigation or remediation by Globix or its Subsidiaries
pursuant to, or that are reasonably anticipated to give rise to material        
liabilities or costs to Globix or its Subsidiaries under, applicable            
Environmental Laws.                                                             

-44-

S-4/A
314th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 314th
(t) PROPERTIES.                                             

                    (i) Section 3.2(t)(i) of the Globix Disclosure Schedule sets
       forth a complete and accurate list of all real property that either
Globix or any of its Subsidiaries owns.                     

                 (ii) Section 3.2(t)(ii) of the Globix Disclosure Schedule
     sets forth a complete and accurate list all real property leased,
          subleased or licensed by Globix or any of its Subsidiaries, except for
          easements, rights of way and regeneration facilities and, with respect
      to licensed real property, any such agreements with respect to (A)
    Collocation Sites and (B) central office sites under tariff (the
  "GLOBIX LEASED REAL PROPERTY"). Except as set forth in Section
   3.2(t)(ii) of the Globix Disclosure Schedule and except for any
    exceptions to the following as could not, individually or in the
       aggregate, reasonably be expected to have a Globix Material Adverse
       Effect: (i) each of Globix and its Subsidiaries has valid leasehold
   interests in the Globix Leased Real Property (as landlord or as
 tenant) by or from it, free and clear of all Liens other than
       Permitted Liens; (ii) all leases pursuant to which Globix or any of
        its Subsidiaries leases (as landlord or as tenant) any Globix Leased
        Real Property are in full force and effect and grant in all respects
       the leasehold estates or rights of occupancy or use they purport to
      grant; and (iii) Globix and its Subsidiaries have not received any
        written notice of any default either on the part of Globix or any of
          its Subsidiaries under any such lease and, to the Knowledge of Globix,
     no event has occurred which, with notice or the lapse of time, or
        both, would constitute a default on the part of Globix or any of its
Subsidiaries under any of such leases.                      

(u) AGREEMENTS, CONTRACTS AND COMMITMENTS.                  

            (i) Globix has made available to NEON a complete and
     accurate list of all Contracts that are material to the business,
assets, liabilities, capitalization, condition (financial or
       otherwise) or results of operations of Globix and its Subsidiaries,
         taken as a whole (collectively, the "GLOBIX MATERIAL CONTRACTS"). For
         purposes of this section, materiality is defined as any Contract that
          requires or is reasonably anticipated to involve aggregate payments to
       or from Globix or its Subsidiaries in excess of $500,000 in any one
        year. Globix has made available to NEON a complete and accurate copy
         (excluding individual orders related thereto) of each Globix Material
      Contract. As of the date of this Agreement, except as set forth in
    Section 3.2(u)(i) of the Globix Disclosure Schedule, each Globix
         Material Contract is in full force and effect. Except as set forth on
       Section 3.2(u)(i) of the Globix Disclosure Schedule, neither Globix
    nor any of its Subsidiaries is in material default under (x) any
Contract to which it is a party or by which it or any of its
      properties or assets is bound, which violations or defaults would,
       individually or in the aggregate, have, or are reasonably likely to
      have, a Globix Material Adverse Effect, or (y) any Globix Material
Contract.                                                   

                    (ii) Except as set forth on Section 3.2(u)(ii) of the Globix
     Disclosure Schedule, there is no non-competition or other similar
          agreement, commitment, judgment, injunction or order, or any agreement
         materially restricting the right to sell services, to which Globix or
      any of its Subsidiaries is a party or is subject that has or could
         reasonably be expected to have the effect of prohibiting or impairing
        in any material respect the conduct of the business of Globix or any
    of its Subsidiaries as currently conducted and as proposed to be
conducted.                                                  

-45-

S-4/A
315th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 315th
                  (iii) Neither Globix nor any of its Subsidiaries is or has
        been suspended or debarred from bidding on contracts or subcontracts
          with any Governmental Entity; no such suspension or debarment has been
 initiated or, to the Knowledge of Globix, threatened; and the
   consummation of the transactions by Globix contemplated by this
       Agreement will not result in any such suspension or debarment that,
    individually or in the aggregate, is reasonably likely to have a
        Globix Material Adverse Effect. To the Knowledge of Globix, there is
          no valid basis for (a) the suspension or debarment of Globix or any of
       its Subsidiaries from bidding on contracts or subcontracts with any
Governmental Entity or (b) any claim pursuant to an audit or
        investigation by any of the entities named in the foregoing sentence
          that, individually or in the aggregate, is reasonably likely to have a
       Globix Material Adverse Effect. To the Knowledge of Globix, neither
         Globix nor any of its Subsidiaries has any Contracts which require it
    to obtain or maintain a security clearance with any Governmental
Entity.                                                     

          (v) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or       
finder's fee or any other similar commission or fee in connection with any of   
the transactions contemplated by this Agreement based upon arrangements made by 
or on behalf of Globix, except the Globix Financial Advisor, whose fees and     
expenses will be paid by Globix in accordance with Globix's agreement with such 
firm based upon arrangements made by or on behalf of Globix and previously      
disclosed to NEON.                                                              

     (w) INSURANCE. Globix has made available to NEON a summary of all
material fire and casualty, general liability, business interruption, and       
sprinkler and water damage insurance policies maintained by Globix or any of its
Subsidiaries. Globix and each of its Subsidiaries have made any and all payments
required to maintain such policies in full force and effect. Neither Globix nor 
any of its Subsidiaries has received written notice of default under any such   
policy, and has not received written notice of any pending or threatened        
termination or cancellation, coverage limitation or reduction with respect to   
such policy.                                                                    

(x) INTELLECTUAL PROPERTY.                                  

                  (i) Except as disclosed in writing to NEON, Globix and its
         Subsidiaries own, or otherwise possess licenses or other valid rights
    to use all Intellectual Property used to conduct the business of
         Globix and its Subsidiaries as currently conducted or contemplated to
          be conducted (in each case excluding generally commercially available,
      off-the-shelf software programs licensed pursuant to shrinkwrap or
"click-and-accept" licenses).                               

               (ii) Except as would not have a Globix Material Adverse
         Effect, the execution and delivery of this Agreement and consummation
          of the Merger will not result in the breach of, or create on behalf of
      any third party the right to terminate or modify, (A) any license,
       sublicense or other agreement relating to any Intellectual Property
   owned by Globix (the "GLOBIX INTELLECTUAL PROPERTY") or (B) any
        license, sublicense and other agreement as to which Globix or any of
          its Subsidiaries is a party and pursuant to which Globix or any of its

-46-

S-4/A
316th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 316th
  Subsidiaries is authorized to use any Third Party Intellectual
     Property. Globix has delivered to NEON a certificate certifying a
         complete and accurate list of the Globix Intellectual Property (other
than unregistered copyrights, trade secrets and confidential
     information) and Globix has made available to NEON a complete and
accurate list of all Third Party Intellectual Property.     

            (iii) Except as disclosed in writing to NEON, to the
          Knowledge of Globix, as of the date of this Agreement (A) no person is
       challenging, infringing on, misappropriating or otherwise violating
      any right of Globix or any of its Subsidiaries with respect to any
   Intellectual Property owned by and/or licensed to Globix or its
        Subsidiaries, (B) the use of any Intellectual Property by Globix and
        its Subsidiaries does not infringe on, constitute a misappropriation
          of, or otherwise violate the rights of any person and is in accordance
      with any applicable license pursuant to which Globix or any of its
         Subsidiaries acquired the right to use any Intellectual Property, and
   (C) neither Globix nor any of its Subsidiaries has received any
        written notice of any assertion or claim of infringement, pending or
        not, with respect to any Intellectual Property used by Globix or its
Subsidiaries.                                               

                 (iv) Except as disclosed in writing to NEON, all patents,
   trademarks, service marks and copyrights, and registrations and
 applications therefor, which are held by Globix or any of its
      Subsidiaries are valid and subsisting. Globix and its Subsidiaries
       have taken reasonable measures to protect the proprietary nature of
the Globix Intellectual Property.                           

                   (v) No Intellectual Property owned or licensed by Globix or
     its Subsidiaries is being used or enforced in a manner that would
       result in the abandonment, cancellation or unenforceability of such
Intellectual Property.                                      

                  (vi) Sections 3.2(h), 3.2(t) and 3.2(u) shall not apply to
          the Globix Intellectual Property and this Section 3.2(x) shall prevail
       in the event of any conflict between this Section 3.2(x) on the one
  hand and Sections 3.2(h), 3.2(t) and 3.2(u) on the other hand.

ARTICLE IV

 COVENANTS RELATING TO CONDUCT OF BUSINESS
 -----------------------------------------

          Section 4.1 COVENANTS OF NEON. During the period from the date of this
Agreement and continuing until the Effective Time, NEON agrees as to itself and 
its Subsidiaries that (except as contemplated by this Agreement (including the  
Schedules thereto), as required by Law or by the rules and regulations of a     
Governmental Entity, or to the extent that Globix shall otherwise consent in    
writing, which consent shall not be unreasonably withheld or delayed):          

-47-

S-4/A
317th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 317th
(a) ORDINARY COURSE.                                        

             (i) Except as otherwise provided or permitted in this
          Section 4.1, NEON and its Subsidiaries shall and shall be permitted to
  carry on their respective businesses in the usual, regular and
       ordinary course in all material respects, in substantially the same
       manner as heretofore conducted, and shall and shall be permitted to
    use all commercially reasonable efforts to preserve intact their
       present lines of business, maintain their rights and franchises and
     preserve their relationships with customers, suppliers and others
    having business dealings with them to the end that their ongoing
   businesses shall not be impaired in any material respect at the
Effective Time, and shall pay, discharge or satisfy claims, 
      liabilities or obligations (whether absolute, accrued, asserted or
        unasserted, contingent or otherwise), only in the usual, regular and
ordinary course of business.                                

            (ii) NEON shall not, and shall not permit any of its
  Subsidiaries to, enter into any new material line of business.

          (b) DIVIDENDS; CHANGES IN SHARE CAPITAL. NEON shall not, and shall not
permit any of its Subsidiaries to, (i) declare or pay any dividends on or make  
other distributions in respect of any of its capital stock, except for dividends
by Subsidiaries of NEON to NEON or another wholly owned Subsidiary of NEON and  
except for accrual of dividends on the NEON Convertible Preferred Stock, (ii)   
split, combine or reclassify any of its capital stock or issue or authorize or  
propose the issuance of any other securities in respect of, in lieu of or in    
substitution for, shares of its capital stock, except for any such transaction  
by a wholly owned Subsidiary of NEON which remains a wholly owned Subsidiary    
after consummation of such transaction, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or   
exercisable for any shares of its capital stock other than the purchase from    
time to time by NEON of NEON Common Stock in the ordinary course of business    
consistent with past practice in connection with the NEON Stock Option Plans.   

        (c) ISSUANCE OF SECURITIES. NEON shall not, and shall not permit any
of its Subsidiaries to, issue or sell, or authorize or propose the issuance or  
sale of, any shares of its capital stock of any class, any indebtedness with    
voting rights or any securities convertible into or exercisable for, or any     
rights, warrants or options to acquire, any such shares or any indebtedness with
voting rights, or any stock appreciation, phantom stock or similar stock rights 
with respect to NEON or its Subsidiaries, or enter into any agreement or        
commitment with respect to any of the foregoing, other than (i) the issuance of 
341,936 shares of NEON Common Stock to Mode 1 Communications, Inc., (ii) the    
issuance of NEON Common Stock upon the exercise of NEON Options, Class A        
Warrants or the NEON CTA Warrants, or the conversion of NEON Convertible        
Preferred Stock, in each case outstanding as of the date hereof in accordance   
with their respective terms, or (iii) issuances by a wholly-owned Subsidiary of 
NEON of capital stock to NEON or another wholly-owned Subsidiary of NEON.       

          (d) GOVERNING DOCUMENTS. NEON and its Subsidiaries shall not amend, in
the case of Subsidiaries, in any material respect, their respective charter,    
articles or certificates of incorporation, by-laws or other governing documents.

-48-

S-4/A
318th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 318th
        (e) NO ACQUISITIONS. NEON shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,  
or by purchasing a substantial equity interest in or a substantial portion of   
the assets of, or by any other manner, any business or any corporation,         
partnership, association or other business organization or division thereof.    

   (f) NO DISPOSITIONS. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of NEON, (ii) in the ordinary    
course of business, (iii) pursuant to Permitted Liens of the type described in  
clauses (i) and (ii) of the definition of Permitted Liens, or (iv) as set forth 
in Section 3.1(f) of the NEON Disclosure Schedule, NEON shall not, and shall not
permit any Subsidiary of NEON to, sell, lease, encumber or otherwise dispose of,
or agree to sell, lease, encumber or otherwise dispose of, any of its assets    
(including capital stock of Subsidiaries of NEON) which are material,           
individually or in the aggregate, to NEON and its Subsidiaries.                 

       (g) INVESTMENTS; INDEBTEDNESS. NEON shall not, and shall not permit
any of its Subsidiaries to (i) make any loans, advances or capital contributions
to, or investments in, any other Person, other than (A) by NEON or a Subsidiary 
of NEON to or in NEON or any wholly owned Subsidiary of NEON, or (B) financing  
transactions in the ordinary course of business (including in connection with   
any financing transactions of the type or similar to those previously engaged in
by NEON and its Subsidiaries, in amounts consistent therewith, taking into      
account any growth in the business of NEON and its Subsidiaries) or (ii) create,
incur, assume or suffer to exist any indebtedness, issuances of debt securities,
guarantees, loans or advances, or engage in any asset securitization transaction
(whether accounted for as a sale of assets or as a financing transaction) not in
existence as of the date of this Agreement except (A) intercompany indebtedness 
between NEON and any of its wholly owned Subsidiaries or between such wholly    
owned Subsidiaries, or (B) in the ordinary course of business.                  

    (h) ACCOUNTING METHODS; INCOME TAX ELECTIONS. NEON shall not (i)
materially change its methods of accounting or accounting principles or         
practices used by it, except as required by changes in GAAP as concurred in by  
NEON's independent accountants, (ii) change its fiscal year, (iii) make or      
revoke any material express or deemed election relating to Taxes, (iv) settle or
compromise any Tax liability material to NEON and its Subsidiaries taken as a   
whole or (v) change (or make a request to any Tax Authority to change) any      
material aspect of its method of accounting for Tax purposes. NEON shall, and   
shall cause each of its Subsidiaries to, duly and timely file all Tax Returns   
and other documents required to be filed with federal, state, local and other   
Tax Authorities, subject to timely extensions permitted by law and except where 
any failure to file timely would not have a material cost; PROVIDED, HOWEVER,   
that NEON shall promptly notify Globix if it is availing itself of such         
extensions.                                                                     

         (i) COMPENSATION. Except as required by Law or an existing agreement,
NEON shall not, and shall not permit any of its Subsidiaries to: (i) enter into,
adopt or amend or terminate any (A) employment, consulting, indemnification,    
bonus, profit sharing, compensation, termination, stock option, stock           
appreciation right, restricted stock, performance unit, stock equivalent, stock 
purchase, pension, retirement, deferred compensation or other employee benefit  
agreement, trust, plan, fund, award or other arrangement for the benefit or     
welfare of any director, officer or employee of NEON or any of its Subsidiaries 
in any manner (other than amendments to maintain the tax qualified status of any

-49-

S-4/A
319th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 319th
NEON Plan under the Code), other than in the ordinary course of business        
consistent with past practice or to the extent not material, or (B) change in   
control, "continuity", retention or severance agreement or other similar plan,  
program, policy, agreement or arrangement for the benefit or welfare of any     
director, officer or employee of NEON or any of its Subsidiaries in any manner  
(other than amendments to maintain the tax qualified status of any NEON Plan    
under the Code); (ii) increase any compensation or benefits payable or to become
payable under any existing (A) employment, stock loan, or consulting or other   
similar agreement or arrangement, other than in the ordinary course of business 
consistent with past practice or to the extent not material, or (B) severance or
termination pay policy, deferred compensation, change in control, retention or  
other similar agreement or arrangement; (iii) increase the compensation, bonus, 
incentive or other benefits payable to (or to become payable to) former or      
current directors, officers, employees or consultants of NEON or any of its     
Subsidiaries, other than an increase in annual salary or hourly wage rates      
granted to current employees (other than officers) in the ordinary course of    
business, consistent with past practice; (iv) make any contribution, other than 
regularly scheduled contributions, to any NEON Plan; or (v) make a commitment or
agree to do any of the foregoing.                                               

          (j) FUNDAMENTAL TRANSACTIONS. NEON shall not, and shall not permit any
of its material Subsidiaries to, adopt a plan of complete or partial            
liquidation, dissolution, restructuring, recapitalization or other              
reorganization (other than the Merger) or alter through merger, liquidation,    
reorganization, or restructuring the corporate structure or ownership of any of 
its Subsidiaries (other than the liquidation of dormant Subsidiaries or the     
merger of dormant Subsidiaries into NEON or another Subsidiary of NEON).        

     (k) MATERIAL CONTRACTS. Except in the ordinary course of business
consistent with past practices or in connection with an action permitted        
pursuant to this Section 4.1, neither NEON nor any of its Subsidiaries shall    
enter into, renew or modify any Contract which, if in effect on the date hereof,
would have been a NEON Material Contract.                                       

   (l) COMMITMENTS. NEON shall not and shall not permit any of its
Subsidiaries to enter into an agreement, contract, commitment or arrangement to 
take any of the actions prohibited by the foregoing provisions of this Section  
4.1.                                                                            

       Section 4.2 COVENANTS OF GLOBIX. During the period from the date of
this Agreement and continuing until the Effective Time, Globix agrees as to     
itself and its Subsidiaries that (except as contemplated by this Agreement      
(including the Schedules thereto), as required by Law or by the rules and       
regulations of a Governmental Entity, or to the extent that NEON shall otherwise
consent in writing, which consent shall not be unreasonably withheld or         
delayed):                                                                       

(a) ORDINARY COURSE.                                        

             (i) Except as otherwise provided or permitted in this
 Section 4.2, Globix and its Subsidiaries shall carry on their
          respective businesses in the usual, regular and ordinary course in all
     material respects, in substantially the same manner as heretofore
   conducted, and shall use all commercially reasonable efforts to
          preserve intact their present lines of business, maintain their rights
   and franchises and preserve their relationships with customers,
      suppliers and others having business dealings with them to the end
       that their ongoing businesses shall not be impaired in any material
      respect at the Effective Time, and shall pay, discharge or satisfy
  claims, liabilities or obligations (whether absolute, accrued,
        asserted or unasserted, contingent or otherwise), only in the usual,
regular and ordinary course of business.                    

-50-

S-4/A
320th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 320th
              (ii) Globix shall not, and shall not permit any of its
  Subsidiaries to, enter into any new material line of business.

        (b) DIVIDENDS; CHANGES IN SHARE CAPITAL. Globix shall not, and shall
not permit any of its Subsidiaries to, (i) declare or pay any dividends on or   
make other distributions in respect of any of its capital stock, except for     
dividends by Subsidiaries of Globix to Globix or another wholly owned Subsidiary
of Globix, (ii) split, combine or reclassify any of its capital stock or issue  
or authorize or propose the issuance of any other securities in respect of, in  
lieu of or in substitution for, shares of its capital stock, except for any such
transaction by a wholly owned Subsidiary of Globix which remains a wholly owned 
Subsidiary after consummation of such transaction, or (iii) repurchase, redeem  
or otherwise acquire any shares of its capital stock or any securities          
convertible into or exercisable for any shares of its capital stock other than  
the purchase from time to time by Globix of Globix Common Stock in the ordinary 
course of business consistent with past practice in connection with the Globix  
Stock Option Plans.                                                             

          (c) ISSUANCE OF SECURITIES. Globix shall not, and shall not permit any
of its Subsidiaries to, issue or sell, or authorize or propose the issuance or  
sale of, any shares of its capital stock of any class, any indebtedness with    
voting rights or any securities convertible into or exercisable for, or any     
rights, warrants or options to acquire, any such shares or any indebtedness with
voting rights, or any stock appreciation, phantom stock or similar stock rights 
with respect to Globix or its Subsidiaries, or enter into any agreement or      
commitment with respect to any of the foregoing, other than (i) the issuance of 
Globix Common Stock upon the exercise of Globix Options and the Globix CTA      
Warrants outstanding as of the date hereof in accordance with their terms, (ii) 
issuances by a wholly-owned Subsidiary of Globix of capital stock to Globix or  
another wholly-owned Subsidiary of Globix, and (iii) any exchange of outstanding
11% Senior Secured Notes due 2008 of Globix ("SENIOR SECURED NOTES") for shares 
of Globix Common Stock in one or more public or private transactions pursuant to
the Globix Debt Purchase, provided that, in the event that Globix desires to    
exchange additional Senior Secured Notes for Globix Common Stock, the parties   
agree to negotiate in good faith all of the modifications to the provisions of  
this Agreement that are necessary or appropriate to reflect any such additional 
exchange.                                                                       

         (d) GOVERNING DOCUMENTS. Globix and its Subsidiaries shall not amend,
in the case of Subsidiaries, in any material respect, their respective charter, 
articles or certificates of incorporation, by-laws or other governing documents.

          (e) NO ACQUISITIONS. Globix shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,  
or by purchasing a substantial equity interest in or a substantial portion of   
the assets of, or by any other manner, any business or any corporation,         
partnership, association or other business organization or division thereof.    

   (f) NO DISPOSITIONS. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Globix, (ii) in the ordinary  
course of business, (iii) pursuant to Permitted Liens of the type described in  
clauses (i) and (ii) of the definition of Permitted Liens or (iv) as set forth  

-51-

S-4/A
321st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 321st
in Section 3.2(f) of the Globix Disclosure Schedule, Globix shall not, and shall
not permit any Subsidiary of Globix to, sell, lease, encumber or otherwise      
dispose of, or agree to sell, lease, encumber or otherwise dispose of, any of   
its assets (including capital stock of Subsidiaries of Globix) which are        
material, individually or in the aggregate, to Globix and its Subsidiaries.     

         (g) INVESTMENTS; INDEBTEDNESS. Globix shall not, and shall not permit
any of its Subsidiaries to (i) make any loans, advances or capital contributions
to, or investments in, any other Person, other than (A) by Globix or a          
Subsidiary of Globix to or in Globix or any wholly owned Subsidiary of Globix,  
or (B) financing transactions in the ordinary course of business (including in  
connection with any financing transactions of the type or similar to those      
previously engaged in by Globix and its Subsidiaries, in amounts consistent     
therewith, taking into account any growth in the business of Globix and its     
Subsidiaries) or (ii) create, incur, assume or suffer to exist any indebtedness,
issuances of debt securities, guarantees, loans or advances, or engage in any   
asset securitization transaction (whether accounted for as a sale of assets or  
as a financing transaction) not in existence as of the date of this Agreement   
except (A) intercompany indebtedness between Globix and any of its wholly owned 
Subsidiaries or between such wholly owned Subsidiaries, or (B) in the ordinary  
course of business.                                                             

      (h) ACCOUNTING METHODS; INCOME TAX ELECTIONS. Globix shall not (i)
materially change its methods of accounting or accounting principles or         
practices used by it, except as required by changes in GAAP as concurred in by  
Globix's independent accountants, (ii) change its fiscal year, (iii) make or    
revoke any material express or deemed election relating to Taxes, (iv) settle or
compromise any Tax liability material to Globix and its Subsidiaries taken as a 
whole or (v) change (or make a request to any Tax Authority to change) any      
material aspect of its method of accounting for Tax purposes. Globix shall, and 
shall cause each of its Subsidiaries to, duly and timely file all Tax Returns   
and other documents required to be filed with federal, state, local and other   
Tax Authorities, subject to timely extensions permitted by law and except where 
any failure to file timely would not have a material cost; PROVIDED, HOWEVER,   
that Globix shall promptly notify NEON if it is availing itself of such         
extensions.                                                                     

         (i) COMPENSATION. Except as required by Law or an existing agreement,
Globix shall not, and shall not permit any of its Subsidiaries to: (i) enter    
into, adopt or amend or terminate any (A) employment, consulting,               
indemnification, bonus, profit sharing, compensation, termination, stock option,
stock appreciation right, restricted stock, performance unit, stock equivalent, 
stock purchase, pension, retirement, deferred compensation or other employee    
benefit agreement, trust, plan, fund, award or other arrangement for the benefit
or welfare of any director, officer or employee of Globix or any of its         
Subsidiaries in any manner (other than amendments to maintain the tax qualified 
status of any Globix Plan under the Code), other than in the ordinary course of 
business consistent with past practice or to the extent not material, or (B)    
change in control, "continuity", retention or severance agreement or other      
similar plan, program, policy, agreement or arrangement for the benefit or      
welfare of any director, officer or employee of Globix or any of its            
Subsidiaries in any manner (other than amendments to maintain the tax qualified 
status of any Globix Plan under the Code); (ii) increase any compensation or    
benefits payable or to become payable under any existing (A) employment, stock  
loan, or consulting or other similar agreement or arrangement, other than in the

-52-

S-4/A
322nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 322nd
ordinary course of business consistent with past practice or to the extent not  
material, or (B) severance or termination pay policy, deferred compensation,    
change in control, retention or other similar agreement or arrangement; (iii)   
increase the compensation, bonus, incentive or other benefits payable to (or to 
become payable to) former or current directors, officers, employees or          
consultants of Globix or any of its Subsidiaries, other than an increase in     
annual salary or hourly wage rates granted to current employees (other than     
officers) in the ordinary course of business, consistent with past practice;    
(iv) make any contribution, other than regularly scheduled contributions, to any
Globix Plan; or (v) make a commitment or agree to do any of the foregoing.      

        (j) FUNDAMENTAL TRANSACTIONS. Globix shall not, and shall not permit
any of its material Subsidiaries to, adopt a plan of complete or partial        
liquidation, dissolution, restructuring, recapitalization or other              
reorganization (other than the Merger) or alter through merger, liquidation,    
reorganization, or restructuring the corporate structure or ownership of any of 
its Subsidiaries (other than the liquidation of dormant Subsidiaries or the     
merger of dormant Subsidiaries into Globix or another Subsidiary of Globix.)    

     (k) MATERIAL CONTRACTS. Except in the ordinary course of business
consistent with past practice or in connection with an action permitted pursuant
to this Section 4.2, neither Globix nor any of its Subsidiaries shall enter     
into, renew or modify any Contract which, if in effect on the date hereof, would
have been a Globix Material Contract.                                           

     (l) COMMITMENTS. Globix shall not and shall not permit any of its
Subsidiaries to enter into an agreement, contract, commitment or arrangement to 
take any of the actions prohibited by the foregoing provisions of this Section  
4.2.                                                                            

Section 4.3 NO CONTROL.                                     

          (a) Nothing contained in this Agreement shall give Globix, directly or
indirectly, the right to control or direct NEON's or its Subsidiaries'          
operations prior to the Effective Time. NEON shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision over   
its and its Subsidiaries' operations prior to the Effective Time.               

        (b) Nothing contained in this Agreement shall give NEON, directly or
indirectly, the right to control or direct Globix's or its Subsidiaries'        
operations prior to the Effective Time. Globix shall exercise, consistent with  
the terms and conditions of this Agreement, complete control and supervision    
over its and its Subsidiaries' operations prior to the Effective Time.          

 ARTICLE V

 ADDITIONAL AGREEMENTS
 ---------------------

     Section 5.1 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETINGS

        (a) NEON and Globix shall promptly prepare and file with the SEC the
Proxy Statement and Globix shall prepare and file with the SEC the Registration 
Statement, in which the Proxy Statement will be included as a prospectus. Each  
of Globix and NEON shall use its reasonable best efforts to have the            
Registration Statement declared effective under the Securities Act as promptly  
as practicable after such filing. As promptly as practicable after the          

-53-

S-4/A
323rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 323rd
Registration Statement shall have become effective, NEON shall mail the Proxy   
Statement to its stockholders and Globix shall mail the Proxy Statement to its  
stockholders. NEON shall promptly notify Globix if, at any time prior to the    
Effective Time, any event with respect to NEON, its officers and directors or   
any of its Subsidiaries shall occur that is required to be described in the     
Proxy Statement or the Registration Statement, filed with the SEC or, as        
required by law, disseminated to the stockholders of NEON or Globix. Globix     
shall promptly notify NEON if, at any time prior to the Effective Time, any     
event with respect to Globix, its officers and directors or any of its          
Subsidiaries shall occur that is required to be described in the Proxy Statement
or the Registration Statement, filed with the SEC or, as required by law,       
disseminated to the stockholders of NEON or Globix. Globix shall also take any  
action (other than qualifying to do business in any jurisdiction in which it is 
now not so qualified) required to be taken under any applicable state securities
laws in connection with the issuance of Globix Common Stock in the Merger, and  
NEON shall furnish all information concerning NEON and the holders of NEON      
Common Stock and NEON Convertible Preferred Stock as may be reasonably requested
in connection with any such action.                                             

    (b) NEON will, as soon as practicable following the date of this
Agreement and the finalizing of the Proxy Statement for distribution, duly call,
give notice of, convene and hold a meeting of stockholders (the "NEON           
STOCKHOLDERS MEETING") for the purpose of considering the matters to be         
considered under the NEON Required Vote, solicit proxies in favor of approval   
and adoption of this Agreement and the other matters contemplated by the NEON   
Required Vote and at such meeting call for a vote and cause proxies solicited by
NEON giving the proxyholder voting discretion or authority to be voted in favor 
of approval and adoption of this Agreement and the other matters contemplated by
the NEON Required Vote or otherwise according to the instructions provided in   
such proxies. NEON has, through its Board of Directors, recommended to its      
stockholders the adoption and approval of this Agreement and shall not withdraw,
modify or change such recommendation; PROVIDED, HOWEVER, that the Board of      
Directors of NEON may withdraw, modify or change such recommendation in order to
comply with its fiduciary duties if it (i) has concluded in good faith that it  
is required to do under applicable law, and (ii) enters into a merger,          
acquisition or other agreement (including an agreement in principle) to effect a
competing acquisition or other business combination proposal or the Board of    
Directors resolves to do so (a "NEON ALTERNATIVE PROPOSAL").                    

          (c) In the event of a Globix Stockholder Vote, Globix will, as soon as
practicable following the date of this Agreement, or (if later) the date such   
Globix Stockholder Vote shall become required, and the finalizing of the Proxy  
Statement for distribution, duly call, give notice of, convene and hold a       
meeting of stockholders (the "GLOBIX STOCKHOLDERS MEETING") for the purpose of  
considering the matters to be considered under the Globix Stockholder Vote,     
solicit proxies in favor of the matters contemplated by the Globix Stockholder  
Vote and at such meeting call for a vote and cause proxies solicited by Globix  
giving the proxyholder voting discretion or authority to be voted in favor of   
the matters contemplated by the Globix Stockholder Vote or otherwise according  
to the instructions provided in such proxies. In the event of a Globix          
Stockholder Vote, Globix has, through its Board of Directors, recommended to its
stockholders the [adoption and approval of this agreement,] ISSUANCE OF THE     
                                                       ---------------
SHARES OF GLOBIX COMMON STOCK INCLUDED IN THE MERGER CONSIDERATION, and it shall
------------------------------------------------------------------              
not withdraw, modify or change such recommendation; PROVIDED, HOWEVER, that the 
Board of Directors of Globix may withdraw, modify or change such recommendation 
in order to comply with its fiduciary duties if it (i) has concluded in good    
faith that it is required to do so under applicable law, and (ii) enters into a 
merger, acquisition or other agreement (including an agreement in principle) to 
effect a competing acquisition or other business combination proposal or the    
Board of Directors resolves to do so (a "GLOBIX ALTERNATIVE PROPOSAL").         

        (d) Globix shall use commercially reasonable efforts to maintain the
effectiveness of the Registration Statement for a period of one year following  
the Closing Date to enable holders of 10% of Globix Common Stock following the  
Closing who are not affiliated with directors or officers of Globix or NEON to  
sell their shares of Globix Common Stock received in the Merger.                

Section 5.2 ACCESS TO INFORMATION.                          

-54-

S-4/A
324th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 324th
        (a) Upon reasonable notice, NEON and Globix shall, during the period
after the execution and delivery of this Agreement and prior to the Effective   
Time, (i) afford to the officers, employees, accountants, counsel, investment   
bankers and other representatives of one another reasonable access, during      
normal business hours, to their respective properties, books, records and       
Contracts, (ii) furnish to one another information concerning the business,     
properties, prospects, assets (tangible and intangible), liabilities, financial 
statements, ratings, regulatory compliance, risk management, books, records,    
contracts, agreements, commitments and personnel as each may reasonably request,
and (iii) make reasonably available, during normal business hours, to one       
another their respective appropriate officers and employees for discussion of   
their respective businesses, properties, prospects, assets, liabilities,        
financial statements, ratings, regulatory compliance, risk management, books,   
records, contracts, agreements, commitments and personnel as each may reasonably
request (subject to contractual limitations).                                   

          (b) Globix and NEON and their respective representatives will hold any
such information in confidence to the extent required by, and in accordance     
with, the provisions of the confidentiality agreement dated on or about January 
29, 2004, between NEON and Globix (the "CONFIDENTIALITY AGREEMENT").            

         (c) Any investigation by Globix shall not qualify the representations
and warranties of NEON, and any investigation by NEON shall not qualify the     
representations and warranties of Globix.                                       

Section 5.3 REASONABLE EFFORTS.                             

      (a) Subject to the terms and conditions of this Agreement, each of
Globix and NEON shall, and shall cause its Subsidiaries to, use commercially    
reasonable efforts (i) to take, or cause to be taken, all actions necessary,    
proper or advisable to comply promptly with all legal requirements which may be 
imposed on such party or its Subsidiaries with respect to the Merger and,       
subject to the conditions set forth in Article VI hereof, to consummate the     
Merger as promptly as practicable and (ii) to obtain (and to cooperate with the 
other party to obtain) the NEON Required Consents and the Globix Required       
Consents, and to comply with the terms and conditions of any NEON Required      
Consent and Globix Required Consent.                                            

       (b) Without limiting the foregoing, NEON and Globix shall duly file
with the United States Federal Trade Commission and the Antitrust Division of   
the Department of Justice the premerger notification and report form (the "HSR  
FILING") required under the HSR Act with respect to the Merger as promptly as   
practical following the date hereof. The HSR Filings shall be in substantial    
compliance with the requirements of the HSR Act. Each party shall cooperate with
the other party to the extent necessary to assist the other party in the        
preparation of its HSR Filing, to request early termination of the waiting      
period required by the HSR Act and, if requested, to promptly amend or furnish  
additional information thereunder. Globix and NEON shall furnish to each other  
all such information as is necessary to prepare any such registration,          
declaration or filing. Globix and NEON each shall pay the filing fees with      
respect to the HSR Filing as provided in Section 5.6(a), as well as any other   
such registration, declaration or filing. Globix and NEON shall keep each other 
apprised of the status of any communications with, and any inquiries or requests
for additional information from, any Governmental Entity with respect to the    
Merger.                                                                         

-55-

S-4/A
325th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 325th
      (c) Notwithstanding anything to the contrary, (i) neither NEON nor
Globix shall be under any obligation to litigate before or with, or contest any 
order or decree, or defend against any such actions or proceedings commenced by 
any Governmental Entity in respect of the antitrust, competition, merger control
or similar laws and rules or regulations, and (ii) neither Globix nor any of its
Subsidiaries or affiliates shall be obligated to propose or agree to accept any 
undertaking or condition, to enter into any consent decree, to make any         
divestiture or accept any operational restriction, or take or commit to take any
action that could reasonably be expected to limit (A) the freedom of action of  
Globix or its Subsidiaries or Affiliates with respect to the operation of, or   
Globix's or its Subsidiaries' or Affiliates' ability to retain, NEON or any     
businesses, product lines or assets of NEON, or (B) the ability to retain, own  
or operate any portion of the businesses, product lines, or assets, of Globix or
any of its Subsidiaries or Affiliates, or alter or restrict in any way the      
business or commercial practices of NEON, Globix, their respective Subsidiaries 
or their respective Affiliates. If any such party or any Affiliate thereof      
receives a request for additional information or documentary material from any  
such Governmental Entity with respect to the Merger, then such party will       
endeavor in good faith to make, or cause to be made, as soon as possible and    
after consultation with the other parties, an appropriate response in compliance
with such request. Globix, on the one hand, and NEON, on the other hand, shall  
promptly inform the other of any material communication from the United States  
Federal Trade Commission, the Department of Justice or any other Governmental   
Entity regarding the Merger.                                                    

          (d) Prior to the Closing, each party shall use commercially reasonable
efforts to refrain from taking any action or failing to take any action, which  
action or failure to act would cause, or be reasonably likely to cause, the     
Merger to fail to qualify as a reorganization within the meaning of Section     
368(a) of the Code.                                                             

     Section 5.4 PUBLIC ANNOUNCEMENTS. No public or other announcement
concerning the transactions contemplated hereby will be made except by the      
mutual consent of Globix and NEON, subject in any event to the public reporting 
and disclosure requirements of Globix. Subject to the foregoing, Globix will use
its reasonable efforts to submit to NEON any release or public announcements for
its comment prior to issuance, and NEON agrees to provide Globix with comments  
on any such release or public announcement within one Business Day of receipt.  

   Section 5.5 EMPLOYEE BENEFITS MATTERS. Until December 31, 2004,
employees of NEON who remain employed by NEON following the Merger shall be     
entitled to employee benefits that are substantially the same as those provided 
to employees of NEON immediately prior to the Merger. After December 31, 2004,  
and until the end of a period to be determined by the Transition Committee,     
employees of NEON shall continue to be provided with such employee benefits or  
shall be provided with employee benefits as determined by the Transition        
Committee. After such transition period, the employee benefits of NEON employees
shall be determined by the Board of Directors of Globix. If there is any change 
in the benefit plans provided to employees of NEON between December 31, 2004 and
the end of the transition period as determined by the Transition Committee, all 
such employees participating in such benefit plans shall be offered immediate   
participation in the most nearly comparable Globix benefit plans. Except as     
required by law, no preexisting condition exclusions shall be applicable to     
employees electing immediate participation in such Globix benefit plans, and no 
waiting period or exclusions shall be applicable to employees electing immediate
participation in such new benefit plans. All of such employees' periods of      
service with NEON shall be counted for all purposes of any Globix employee      
benefit plans in which they may become participants.                            

        Section 5.6 FEES AND EXPENSES. If the Merger is not consummated, all
costs and expenses incurred in connection with this Agreement and the           
transactions contemplated hereby, including transfer Taxes and the fees and     
disbursements of counsel, financial advisors and accountants, as well as fees of
separate counsel, financial advisors, or accountants for employees or others,   

-56-

S-4/A
326th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 326th
shall be paid by the party incurring such costs and expenses out of the separate
funds of such party, not to be reimbursed by the other, provided that all       
printing expenses and all filing fees (including filing fees under the Exchange 
Act, any Blue Sky laws and the HSR Act) shall be divided equally between Globix 
and NEON. If the Merger is consummated, all costs and expenses incurred in      
connection with this Agreement and the transactions contemplated hereby         
described in the preceding sentence, to the extent not already paid, shall be   
paid by Globix and the Surviving Corporation.                                   

Section 5.7 DIRECTORS' AND OFFICERS' INDEMNITY.             

 (a) Globix shall and shall cause the Surviving Corporation to
indemnify and hold harmless each present and former director and officer of NEON
and other Persons entitled to indemnification ("COVERED PERSONS") under the     
certificate of incorporation and bylaws or similar organizational documents of  
NEON or any of its Subsidiaries as in effect on the date of this Agreement (the 
"NEON DOCUMENTS") against any costs or expenses (including attorneys' fees),    
judgments, fines, losses, claims, amounts paid in settlement, damages or        
liabilities (collectively, "COSTS") reasonably incurred in connection with any  
threatened, pending or completed claim, action, suit, proceeding or             
investigation, whether civil, criminal, administrative or investigative, brought
against a Covered Person and arising out of or pertaining to matters existing or
occurring with respect to NEON or any of its Subsidiaries at or prior to the    
Effective Time, whether asserted or claimed prior to, at or after the Effective 
Time, to the fullest extent permitted under the NEON Documents and applicable   
Law. Each Covered Person will be entitled to advancement of expenses incurred in
the defense of any claim, action, suit, proceeding or investigation from Globix 
and the Surviving Corporation within ten (10) Business Days of receipt from the 
Covered Person of a request therefor to the fullest extent permitted by the DGCL
and the Sarbanes-Oxley Act of 2002; PROVIDED, HOWEVER, that any person to whom  
expenses are advanced provides an undertaking, to the extent required by the    
DGCL, to repay such advances if it is ultimately determined that such person is 
not entitled to indemnification.                                                

      (b) Globix shall cause the Surviving Corporation to maintain for a
period of at least five years policies of directors' and officers' liability    
insurance and fiduciary liability insurance for the benefit of the Covered      
Persons with respect to claims arising from facts or events that occurred on or 
before the Effective Time, including in respect of the transactions contemplated
by this Agreement, such insurance coverage to be the same coverage as in effect 
for NEON prior to the Effective Time.                                           

        (c) If Globix, the Surviving Corporation, any of its Subsidiaries or
any of their respective successors or assigns (i) consolidates with or merges   
with or into any other Person and shall not be the continuing or surviving      
corporation or entity of such consolidation or merger, or (ii) transfers or     
conveys all or substantially all of its properties and assets to any Person,    
then, and in each such case, to the extent necessary, proper provision shall be 
made so that the successors and assigns of Globix, the Surviving Corporation,   
such Subsidiary or such successor or assign assume the obligations set forth in 
this Section 5.7.                                                               

         (d) This Section 5.7 shall survive the consummation of the Merger and
the Effective Time and is intended to benefit and shall be enforceable by the   
Covered Persons and their respective heirs, executors and personal              
representatives and shall be binding on and enforceable against Globix and the  
Surviving Corporation and their respective successors and assigns.              

Section 5.8 CONSENTS, WAIVERS AND OTHER APPROVALS.          

         (a) NEON and its Subsidiaries shall use their commercially reasonable
efforts to obtain all consents, waivers and other approvals necessary in order  
to avoid the occurrence, as a result of the Merger, of any (i) Violation under  
any NEON Material Contract, or (ii) the loss or diminution in value of any NEON 
Permit.                                                                         

-57-

S-4/A
327th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 327th
(b) Globix and its Subsidiaries shall use their commercially reasonable efforts 
to obtain all consents, waivers and other approvals necessary in order to avoid 
the occurrence, as a result of the Merger, of any (i) Violation under any Globix
Material Contract, or (ii) the loss or diminution in value of any Globix Permit.

        Section 5.9 COMMITTEE FOR TRANSITION ISSUES. Subject in all cases to
Section 4.3, upon the execution of this Agreement, NEON and Globix shall cause  
their respective Chief Executive Officers, and Globix shall cause its Chairman  
of the Board, to form a committee (the "TRANSITION COMMITTEE") to develop       
transition plans for the post-Closing period, including employee benefits       
arrangements for NEON employees as specified in Section 5.5. In addition, the   
Chief Executive Officer of NEON shall have the right to appoint a qualified     
member of the Board of Directors of NEON to such joint committee. A qualified   
member shall be one of those directors set forth on Exhibit 1.7 of this         
Agreement.                                                                      

        Section 5.10 SCHEDULES. Disclosure on a schedule that is part of, or
provided pursuant to, this Agreement will not signify or be deemed an           
acknowledgment that the disclosure is material or required to be included in the
schedule. NEON or Globix may, from time to time prior to the Closing by written 
notice to the other party, supplement or amend their respective Disclosure      
Schedules or additional disclosure documents provided pursuant to this Agreement
to correct any matter that could constitute a breach of any representation or   
warranty of NEON or Globix contained in this Agreement. No such supplement or   
amendment will act to cure or correct a breach of a representation or warranty  
for purposes of Sections 6.2 or 6.3 until after the Closing Date. If the Closing
occurs, then all matters disclosed pursuant to any such supplement or amendment 
at or prior to the Closing shall be waived, and the Disclosure Schedules or     
additional disclosure documents, as the case may be, as so supplemented or      
amended at the time of Closing shall thereafter constitute the Disclosure       
Schedules or additional disclosure documents, as the case may be, for purposes  
of this Agreement (including Article VIII).                                     

       Section 5.11 FINANCIAL REVIEW. Following the date of this Agreement
and prior to the delivery of the Proxy Statement, Globix and NEON shall each    
cause their respective independent auditors to perform a financial due diligence
review of the other party in accordance with the procedures described on Exhibit
5.11 attached hereto, which review shall be completed no later than August 15,  
2004, and to prepare a report of such review that shall be presented for review 
by the Board of Directors and Special Committee of each of NEON and Globix. Each
party agrees that it shall notify the other party no later than September 15,   
2004 of any issue that arises as a result of such report and requires further   
discussion between the parties.                                                 

      Section 5.12 COOPERATION. NEON agrees, during the period after the
execution and delivery of this Agreement and prior to the Effective Time, to use
its commercially reasonable efforts to manage its business so that, assuming the
Merger were to occur on September 30, 2004, NEON would have approximately       
$7,000,000 in unrestricted cash on a consolidated basis immediately prior to the
Merger and any payment of Preferred Cash Consideration pursuant to Section      
1.8(c)(ii). Globix agrees, during the period after the execution and delivery of
this Agreement and prior to the Effective Time, to use its commercially         
reasonable efforts to manage its business so that, assuming that the Merger were
to occur on September 30, 2004, Globix would have approximately $18,000,000 in  
unrestricted cash on a consolidated basis immediately prior to the Merger.      

-58-

S-4/A
328th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 328th
ARTICLE VI

CONDITIONS PRECEDENT
--------------------

   Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The obligations of NEON and Globix to effect the Merger are subject to  
the satisfaction or waiver on or prior to the Closing Date of the following     
conditions:                                                                     

        (a) STOCKHOLDER APPROVAL. NEON shall have obtained the NEON Required
Vote approving the Merger and the other transactions contemplated hereby,       
including the amendment to NEON's certificate of incorporation contemplated     
hereby. Globix shall have received the Globix Stockholder Vote, if applicable.  

(b) NO ORDER. No court or other Governmental Entity having  
jurisdiction over NEON or Globix, or any of their respective Subsidiaries, shall
have enacted, issued, promulgated, enforced or entered any law, rule,           
regulation, executive order, decree, injunction or other order (whether         
temporary, preliminary or permanent) which is then in effect and has the effect 
of, directly or indirectly, restraining, prohibiting or restricting the Merger  
or any of the transactions contemplated hereby; PROVIDED, HOWEVER, that the     
provisions of this Section 6.1(b) shall not be available to any party whose     
failure to fulfill its obligations pursuant to Section 5.3 shall have been the  
cause of, or shall have resulted in, the enforcement or entering into of any    
such law, rule, regulation, executive order, decree, injunction or other order. 

(c) HSR AND OTHER APPROVALS/CONSENTS OR WAIVERS.            

          (i) The waiting period (and any extension thereof)
        applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.                            

                  (ii) All authorizations, consents, orders, declarations or
    approvals of, or filings with, or terminations or expirations of
        waiting periods imposed by, any Person or Governmental Entity, which
  the failure to obtain, make or occur would have the effect of,
       directly or indirectly, restraining, prohibiting or restricting the
        Merger or any of the transactions contemplated hereby or would have,
      individually or in the aggregate, a Globix Material Adverse Effect
          (assuming the Merger had taken place), shall have been obtained, shall
have been made or shall have occurred.                      

     (d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No    
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been      
initiated or, to the Knowledge of Globix or NEON, threatened by the SEC. All    
necessary state securities or blue sky filings shall have been made and required
authorizations shall have been received.                                        

         (e) DISSENTING SHARES. The number of shares of NEON Common Stock that
are Dissenting Shares shall be no greater than fifteen percent (15%) of the     
outstanding NEON Common Stock and the number of shares of NEON Convertible      
Preferred Stock that are Dissenting Shares shall be no greater than fifteen     
percent (15%) of the outstanding NEON Convertible Preferred Stock, each as of   
the Record Date.                                                                

-59-

S-4/A
329th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 329th
   Section 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF GLOBIX. The
obligations of Globix to effect the Merger are subject to the satisfaction of,  
or waiver by Globix, on or prior to the Closing Date of the following additional
conditions:                                                                     

       (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of NEON set forth in this Agreement (i) that is qualified as to      
materiality and Material Adverse Effect shall have been true and correct at and 
as of the Closing Date as if made at and as of the Closing Date, and (ii) that  
is not so qualified shall have been true and correct in all material respects at
and as of the Closing Date as if made at and as of the Closing Date (except, in 
each case, for those representations and warranties which address matters only  
as of a particular date, in which case, they shall be true and correct, or true 
and correct in all material respects, as applicable, as of such date); and      
Globix shall have received a certificate of the chief executive officer and the 
chief financial officer of NEON certifying to the satisfaction of the conditions
set forth in this Section 6.2(a).                                               

        (b) PERFORMANCE OF OBLIGATIONS OF NEON. NEON shall have performed or
complied with all agreements and covenants required to be performed by it under 
this Agreement at or prior to the Closing Date that are qualified as to         
materiality and shall have performed or complied in all material respects with  
all other agreements and covenants required to be performed by it under this    
Agreement at or prior to the Closing Date that are not so qualified as to       
materiality, and Globix shall have received a certificate of the chief executive
officer and the chief financial officer of NEON to such effect.                 

       (c) OPINIONS. Globix shall have received an opinion of Day, Berry &
Howard LLP, in form and substance reasonably satisfactory to Globix, dated as of
the Effective Time, on the basis of facts, representations and assumptions that 
are consistent with the state of facts existing as of the Effective Time        
substantially to the effect that, for federal income tax purposes, the Merger   
will constitute a "reorganization" within the meaning of Section 368(a) of the  
Code. In rendering such opinion, Day, Berry & Howard LLP may receive and rely   
upon customary representations from Globix and NEON.                            

    (d) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement
through and including the time immediately prior to the Effective Time, there   
shall not have been any changes, circumstances or effects which, individually or
in the aggregate, have had or could reasonably be expected to have, a NEON      
Material Adverse Effect.                                                        

          (e) LITIGATION. There shall not be pending or threatened (as evidenced
by a writing), any suit, action or proceeding by a federal, state or foreign    
governmental entity or any other Person (other than a suit, action or proceeding
based on facts solely relating to Globix or Merger Sub or any of their          
respective Subsidiaries) which could reasonably be expected to (i) restrain,    
prohibit or declare illegal the consummation of the Merger, (ii) in connection  
with the Merger, prohibit or impose any material limitations on Globix's or     
Merger Sub's ownership or operation (or that of any of their respective         
Affiliates) of all or a material portion of NEON's businesses or assets after   
giving effect to the Merger, or (iii) in connection with the Merger, compel     
Globix or Merger Sub or their respective Subsidiaries and Affiliates to dispose 
of or hold separate any portion of the business or assets of NEON or any of its 
Subsidiaries (after giving effect to the Merger).                               

(f) GLOBIX INDENTURE REQUIREMENTS. NEON and each of NEON's  
Subsidiaries shall have entered into a Subsidiary Guaranty Agreement and a      
Security Agreement pursuant to the terms of the Indenture, dated as of April 23,
2002, among Globix, certain of its Subsidiaries and HSBC Bank USA, as Trustee   
(the "GLOBIX INDENTURE").                                                       

-60-

S-4/A
330th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 330th
          (g) FIRPTA CERTIFICATE. Globix shall have received a statement meeting
the requirements of Treasury Regulation Section 1.1445-2(c)(3) that neither NEON
nor any of NEON's Subsidiaries is a United States real property holding         
corporation.                                                                    

 (h) THIRD PARTY/GOVERNMENTAL CONSENTS. NEON or the applicable
Subsidiary shall have obtained all consents, waivers and other approvals        
necessary in order to avoid the occurrence, as a result of the Merger, of loss  
or material diminution in value of any NEON Permits and NEON Material Contracts.

  (i) EXERCISE OF CLASS A WARRANTS; AMENDMENT OF CLASS A WARRANT
AGREEMENT. The holders of ninety percent (90%) or more of the Class A Warrants  
shall have exercised their respective Class A Warrants prior to or as of the    
Effective Time, and NEON shall have used commercially reasonable efforts to     
assist with and facilitate the exercise of all of the Class A Warrants prior to 
or as of the Effective Time. The Class A Warrant Agreement shall have been      
amended with the consent of at least a majority of the holders of the Class A   
Warrant Agreement as provided in Exhibit 1.8(c)(iii) to permit the conversion of
Class A Warrants into shares of Globix Common Stock.                            

 Section 6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF NEON. The
obligations of NEON to effect the Merger are subject to the satisfaction of, or 
waiver by NEON, on or prior to the Closing Date of the following additional     
conditions:                                                                     

       (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Globix set forth in this Agreement (i) that is qualified as to    
materiality and Material Adverse Effect shall have been true and correct at and 
as of the Closing Date as if made at and as of the Closing Date, and (ii) that  
is not so qualified shall have been true and correct in all material respects at
and as of the Closing Date as if made at and as of the Closing Date (except, in 
each case, for those representations and warranties which address matters only  
as of a particular date, in which case, they shall be true and correct, or true 
and correct in all material respects, as applicable, as of such date), and NEON 
shall have received a certificate of the chief executive officer and the chief  
financial officer of Globix certifying to the satisfaction of the conditions set
forth in this Section 6.3(a).                                                   

    (b) PERFORMANCE OF OBLIGATIONS OF GLOBIX AND MERGER SUB. Each of
Globix and Merger Sub shall have performed or complied with all agreements and  
covenants required to be performed by it under this Agreement at or prior to the
Closing Date that are qualified as to materiality and shall have performed or   
complied in all material respects with all agreements and covenants required to 
be performed by it under this Agreement at or prior to the Closing Date that are
not so qualified as to materiality, and NEON shall have received a certificate  
of the chief executive officer and the chief financial officer of Globix to such
effect.                                                                         

-61-

S-4/A
331st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 331st
          (c) OPINION. NEON shall have received an opinion of Andrews Kurth LLP,
in form and substance reasonably satisfactory to NEON, dated as of the Effective
Time, on the basis of facts, representations and assumptions that are consistent
with the state of facts existing as of the Effective Time substantially to the  
effect that, for federal income tax purposes, the Merger will constitute a      
"reorganization" within the meaning of Section 368(a) of the Code. In rendering 
such opinion, Andrews Kurth LLP may receive and rely upon customary             
representations from Globix, Merger Sub and NEON.                               

    (d) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement
through and including the time immediately prior to the Effective Time, there   
shall not have been any changes, circumstances or effects which, individually or
in the aggregate, have had or could reasonably be expected to have, a Globix    
Material Adverse Effect.                                                        

          (e) LITIGATION. There shall not be pending or threatened (as evidenced
by a writing), any suit, action or proceeding by a federal, state or foreign    
governmental entity or any other Person (other than a suit, action or proceeding
based on facts solely relating to NEON or any of its Subsidiaries) which could  
reasonably be expected to (i) restrain, prohibit or declare illegal the         
consummation of the Merger, (ii) in connection with the Merger, prohibit or     
impose any material limitations on Globix's or Merger Sub's ownership or        
operation (or that of any of their respective Affiliates) of all or a material  
portion of NEON's businesses or assets after giving effect to the Merger, or    
(iii) in connection with the Merger, compel Globix or Merger Sub or their       
respective Subsidiaries and Affiliates to dispose of or hold separate any       
portion of the business or assets of NEON or any of its Subsidiaries (after     
giving effect to the Merger).                                                   

   (f) THIRD PARTY/GOVERNMENTAL CONSENTS. Globix or the applicable
Subsidiary shall have obtained all consents, waivers and other approvals        
necessary in order to avoid the occurrence, as a result of the Merger, of loss  
or material diminution in value of any Globix Permits and Globix Material       
Contracts.                                                                      

     (g) DEBT PURCHASE. Prior to the Effective Time, Globix shall have
acquired Senior Secured Notes in an amount equal to $12,500,000.00 including    
principal and interest accrued thereon in exchange for shares of Globix Common  
Stock valued at $2.75 per share (the "GLOBIX DEBT PURCHASE").                   

-62-

S-4/A
332nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 332nd
 ARTICLE VII

 TERMINATION AND AMENDMENT
 -------------------------

         Section 7.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated   
herein may be abandoned at any time prior to the Effective Time, whether before 
or after stockholder approval thereof:                                          

        (a) By the mutual consent duly authorized by the Boards of Directors
of Globix and NEON.                                                             

(b) By either of NEON or Globix if:                         

               (i) any Governmental Entity shall have issued an order,
       decree or ruling or taken any other action in each case permanently
       restraining, enjoining or otherwise prohibiting the Merger and such
     order, decree, ruling or other action shall have become final and
        non-appealable; PROVIDED, that the right to terminate this Agreement
          pursuant to this Section 7.1(b)(i) shall not be available to any party
     whose failure to fulfill any of its obligations contained in this
         Agreement has been the cause of, or resulted in, the issuance of such
order, decree or ruling;                                    

                (ii) the Merger has not been effected on or prior to the
       close of business on the date that is 150 days after the earlier of
         the expiration or termination of the waiting period applicable to the
          consummation of the Merger under the HSR Act; PROVIDED, that the right
         to terminate this Agreement pursuant to this Section 7.1(b)(ii) shall
     not be available to any party whose failure to fulfill any of its
     obligations contained in this Agreement has been the cause of, or
          resulted in, the failure of the Merger to have occurred on or prior to
the aforesaid date;                                         

                (iii) the other party shall have failed to comply in any
         material respect with any of its covenants or agreements contained in
         this Agreement required to be complied with prior to the date of such
       termination, which failure to comply has not been cured within five
         Business Days following receipt by such other party of written notice
of such failure to comply;                                  

                  (iv) the holders of NEON Common Stock and NEON Convertible
     Preferred Stock do not approve the matters submitted for the NEON
Required Vote;                                              

             (v) in the event of a Globix Stockholder Vote, if the
 holders of the Globix Common Stock do not approve the matters
submitted for the Globix Stockholder Vote; or               

                (vi) if shares of NEON Common Stock representing greater
      than fifteen percent (15%) of the outstanding NEON Common Stock or
        shares of NEON Convertible Preferred Stock representing greater than
       fifteen percent (15%) of the outstanding NEON Convertible Preferred
  Stock, each as of the Record Date, shall be Dissenting Shares.

(c) By NEON if:                                             

-63-

S-4/A
333rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 333rd
                    (i) in the event of a Globix Stockholder Vote, and the Board
    of Directors of Globix shall not have recommended, or shall have
         resolved not to recommend, or shall have qualified, changed, modified
   or withdrawn its recommendation [of] TO ITS STOCKHOLDERS OF THE
                                        --------------------------
        ISSUANCE OF THE SHARES OF GLOBIX COMMON STOCK INCLUDED IN the Merger
---------------------------------------------------------   
        or declaration that the Merger CONSIDERATION is advisable and in the
               -------------
        best interest of Globix and its stockholders, or shall have resolved
to do so;                                                   

                    (ii) the Board of Directors of Globix shall have recommended
to the stockholders of Globix any transaction involving the 
      acquisition of all or substantially all of Globix's business other
than the Merger or shall have resolved to do so;            

            (iii) there has been a breach of a representation or
         warranty of Globix that gives rise to a failure of the fulfillment of
      a condition of NEON's obligations to effect the Merger pursuant to
          Section 6.3, which breach has not been cured within five Business Days
following receipt by Globix of written notice of the breach;

                (iv) there shall have been any changes, circumstances or
      effects, which individually or in the aggregate, have had or could
    reasonably be expected to have a Globix Material Adverse Effect;

              (v) on or prior to September 15, 2004, NEON shall have
        notified Globix in writing that the results of the review by NEON of
          the financial due diligence report by the auditors of NEON provided to
   the Board of Directors of NEON pursuant to Section 5.11 are not
 satisfactory and reflect a Globix Material Adverse Effect, as
      determined in good faith by the Special Committee of NEON, after a
       full discussion with Globix of all issues raised in such review; or

               (vi) the Board of Directors of NEON has approved a NEON
Alternative Proposal.                                       

(d) By Globix if:                                           

         (i) the Board of Directors of NEON shall not have
       recommended, or shall have resolved not to recommend, or shall have
       qualified, changed, modified or withdrawn its recommendation of the
      Merger or declaration that the Merger is advisable and in the best
       interest of NEON and its stockholders, or shall have resolved to do
so;                                                         

                  (ii) the Board of Directors of NEON shall have recommended
         to the stockholders of NEON any transaction involving the acquisition
        of all or substantially all of NEON's business other than the Merger
or shall have resolved to do so;                            

            (iii) there has been a breach of a representation or
         warranty of NEON that gives rise to a failure of the fulfillment of a
      condition of Globix's obligations to effect the Merger pursuant to
          Section 6.2, which breach has not been cured within five Business Days
following receipt by NEON of written notice of the breach;  

-64-

S-4/A
334th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 334th
                (iv) there shall have been any changes, circumstances or
      effects, which individually or in the aggregate, have had or could
  reasonably be expected to have a NEON Material Adverse Effect;

                (v) on or prior to September 15, 2004, Globix shall have
        notified NEON in writing that the results of the review by Globix of
         the financial due diligence report by the auditors of Globix provided
        to the Board of Directors of Globix pursuant to Section 5.11 are not
          satisfactory and reflect a NEON Material Adverse Effect, as determined
  in good faith by the Special Committee of Globix, after a full
discussion with NEON of all issues raised in such review; or

                   (vi) the Board of Directors of Globix has approved a Globix
Alternative Proposal.                                       

         Section 7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided in Section 7.1, written notice thereof shall         
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement (other than      
Sections 5.2(b), 5.6 and 7.2 hereof) shall forthwith become null and void, and  
there shall be no liability on the part of Globix, Merger Sub, NEON or their    
respective officers and directors, except (i) as provided in Section 5.6, and   
(ii) nothing shall relieve any party from liability for fraud or any willful    
breach of a covenant contained in this Agreement.                               

       Section 7.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,  
at any time before or after receipt of the NEON Required Vote or Globix         
Stockholder Vote (if applicable) or approval of the Merger by Merger Sub's      
stockholder, but, after any such approval, no amendment shall be made which by  
law or in accordance with the rules of any relevant stock exchange requires     
further approval by such stockholders without such further approval. This       
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.                                                  

     Section 7.4 EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto may to the extent legally allowed, (i) extend the time 
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties       
contained herein or in any document delivered pursuant hereto, and (iii) waive  
compliance with any of the agreements or conditions contained herein. Any       
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party. 
The failure of any party to this Agreement to assert any of its rights under    
this Agreement or otherwise shall not constitute a waiver of those or any other 
rights.                                                                         

ARTICLE VIII

SURVIVAL
--------

Section 8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND 
AGREEMENTS. None of the representations, warranties, covenants or other         
agreements in this Agreement or in any instrument delivered pursuant to this    
Agreement, including any rights arising out of any breach of such               
representations, warranties, covenants or other agreements, shall survive the   
Effective Time, except (i) for those covenants and agreements contained herein  
and therein that by their terms apply or are to be performed in whole or in part
after the Effective Time, and (ii) for this Article VIII.                       

-65-

S-4/A
335th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 335th
ARTICLE IX

GENERAL PROVISIONS
------------------

      Section 9.1 AMENDMENT AND WAIVER. No amendment of any provision of
this Agreement shall be effective, unless the same shall be in writing and      
signed by Globix and NEON. Any failure of any party to comply with any          
obligation, agreement or condition hereunder may only be waived in writing by   
the other parties, but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to    
take any action with respect to any breach of this Agreement or default by      
another party shall constitute a waiver of such party's right to enforce any    
provision hereof or to take any such action.                                    

       Section 9.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed duly given (i) on the date of delivery  
if delivered personally, or if by facsimile upon confirmation of receipt, (ii)  
on the first business day following the date of dispatch if delivered by a      
recognized next-day courier service, or (iii) on the day of receipt if delivered
by registered or certified mail, return receipt requested, postage prepaid. All 
notices hereunder shall be delivered in one of the means set forth above to the 
addresses set forth below, or pursuant to such other instructions as may be     
designated in writing by the party to receive such notice:                      

(a)     if to Globix or Merger Sub, to:                     

Globix Corporation                          
139 Centre Street                           
New York, New York 10013                    
   Attn: James C. Schroeder, Esq., General Counsel
Facsimile: (212) 625-7725                   

       with a copy (which shall not constitute notice) to:

Day, Berry & Howard, LLP                    
One Canterbury Green                        
Stamford, Connecticut 06901-2047            
Attn: Bonnie J. Roe, Esq.                   
Facsimile: (203) 977-7301                   

(b)     if to NEON, to:                                     

NEON Communications, Inc.                   
2200 West Park Drive                        
Westborough, MA 01581                       
      Attn:  Christopher E. Dalton, Esq., Senior Counsel
Facsimile: (508) 616-7895                   

       with a copy (which shall not constitute notice) to:

Andrews Kurth LLP                           
450 Lexington Ave., 15th Floor              
New York, New York 10017                    
Attention: Paul N. Silverstein, Esq.        
Facsimile: (212) 850-2929                   

-66-

S-4/A
336th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 336th
          Section 9.3 INTERPRETATION. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of or  
Exhibit or Schedule to this Agreement (or Section of a Disclosure Schedule, if  
so stated) unless otherwise indicated. The table of contents, index of defined  
terms and headings contained in this Agreement are for reference purposes only  
and shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this        
Agreement, they shall be deemed to be followed by the words "without            
limitation". The words "hereof", "herein" and "hereunder" and words of similar  
import when used in this Agreement shall refer to this Agreement as a whole and 
not to any particular provision of this Agreement. The term "or" is not         
exclusive.                                                                      

      Section 9.4 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement  
and shall become effective when one or more counterparts have been signed by    
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.                                 

Section 9.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. 

          (a) This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties   
with respect to the subject matter hereof, other than the Confidentiality       
Agreement, which shall survive the execution and delivery of this Agreement. The
parties hereto acknowledge and agree that, except as otherwise expressly set    
forth in this Agreement, the rights and obligations of NEON and Globix under any
other agreement between the parties not relating to the subject matter hereto   
shall not be affected by any provision of this Agreement.                       

    (b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or      
remedy of any nature whatsoever under or by reason of this Agreement, other than
Section 5.7 and as necessary to permit or require Merger Sub to consummate the  
transactions contemplated hereby.                                               

      Section 9.6 GOVERNING LAW. Except to the extent that rights of the
stockholders of NEON and Globix and the transactions contemplated hereby,       
including the Merger, are governed by the laws of the State of Delaware, this   
Agreement shall be governed and construed in accordance with the laws of the    
State of New York that apply to contracts entered into and performed in the     
State of New York.                                                              

-67-

S-4/A
337th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 337th
    Section 9.7 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or      
public policy, all other terms and provisions of this Agreement shall           
nevertheless remain in full force and effect so long as the economic or legal   
substance of the transactions contemplated hereby is not affected in any manner 
materially adverse to any party. Upon such determination that any term or other 
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the      
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally   
contemplated to the greatest extent possible.                                   

         Section 9.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties      
hereto, in whole or in part (whether by operation of law or otherwise), without 
the prior written consent of the other parties, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be   
enforceable by the parties and their respective successors and assigns.         

       Section 9.9 SUBMISSION TO JURISDICTION; WAIVERS. Each of Globix and
NEON irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof  
brought by another party hereto or its successors or assigns may be brought and 
determined in the Chancery Courts of the State of Delaware and any Federal court
of the United States of America sitting in the State of Delaware, and each of   
Globix and NEON hereby irrevocably submits with regard to any such action or    
proceeding for itself and in respect to its property, generally and             
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each 
of Globix and NEON hereby irrevocably waives, and agrees not to assert, by way  
of motion, as a defense, counterclaim or otherwise, in any action or proceeding 
with respect to this Agreement, (a) any claim that it is not personally subject 
to the jurisdiction of the above-named courts for any reason other than the     
failure to serve process in accordance with applicable law, (b) that it or its  
property is exempt or immune from jurisdiction of any such court or from any    
legal process commenced in such courts (whether through service of notice,      
attachment prior to judgment, attachment in aid of execution of judgment,       
execution of judgment or otherwise), and (c) to the fullest extent permitted by 
applicable law, that (i) the suit, action or proceeding in any such court is    
brought in an inconvenient forum, (ii) the venue of such suit, action or        
proceeding is improper and (iii) this Agreement, or the subject matter hereof,  
may not be enforced in or by such courts.                                       

       Section 9.10 ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not  
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this 
being in addition to any other remedy to which they are entitled at law or in   
equity.                                                                         

-68-

S-4/A
338th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 338th
Section 9.11 DEFINITIONS. As used in this Agreement:          

         "AFFILIATE" of a specified Person shall mean any Person who would be an
affiliate of the specified Person pursuant to Rule 12b-2 under the Securities   
Exchange Act of 1934, as amended.                                               

 "BUSINESS DAY" means any day on which banks are not required or
authorized to close in New York, New York.                                      

     "CLAIM" means any claim, action, suit, proceeding or investigation.

       "CLASS A WARRANT EXERCISE PRICE" means $0.01 per share of NEON Common
Stock.                                                                          

    "COLLOCATION SITES" means premises at which the telecommunications
equipment of one party are located and are terminated or will be terminated with
the telecommunications equipment necessary to provide interconnection or access 
to the telecommunications equipment of a second party, where such premises are  
owned, leased or licensed by the second party.                                  

   "CONTRACT" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral) that is intended to be legally binding.   

        "CLEC" means a company, known as a Competitive Local Exchange Carrier,
authorized to provide telecommunications services in competition with an        
Incumbent Local Exchange Carrier (or "ILEC"), where the ILEC is, with respect to
a certain geographic area, the local telecommunications service provider that   
provided such services within that certain geographic area as of the date of    
enactment of the Telecommunications Act of 1996 (Telecommunications Act of 1996,
Pub. LA. No. 104-104, 110 Stat. 56 (1996)) and continues to provide             
telecommunications services in the same area.                                   

"GLOBIX CONFIRMATION EFFECTIVE DATE" means April 25, 2002.    

     "GLOBIX CTA WARRANTS" means those warrants of Globix disclosed in
writing to NEON pursuant to Section 3.2(b)(iii).                                

     "GLOBIX MATERIAL ADVERSE EFFECT" means, with respect to Globix, any
event, change, circumstance or effect that, individually or together with any   
other event, change, circumstance or effect, is or could reasonably be expected 
to be materially adverse to the business, operations, properties, prospects,    
assets, liabilities, financial condition or results of operations of Globix and 
its Subsidiaries taken as a whole (other than events, changes, circumstances or 
effects that result from economic factors affecting the economy as a whole).    

-69-

S-4/A
339th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 339th
       "GLOBIX STOCKHOLDER VOTE" means if (i) prior to the Effective Time,
the Globix Common Stock is traded on the Nasdaq Small Cap Market OR THE AMERICAN
                                                                 ---------------
STOCK EXCHANGE or (ii) the Board of Directors of Globix shall otherwise so      
--------------                                                                  
require as of the date of this Agreement, the affirmative vote of the holders of
the percentage of the shares of Globix Common Stock required to approve the     
matters submitted to a vote of the stockholders of Globix, which may consist of 
the following matters: (A) the election of directors of Globix to serve on the  
Board of Directors of Globix following the Merger, (B) the issuance of shares of
Globix Common Stock pursuant to the terms of this Agreement, and (C) the        
issuance of shares of Globix Common Stock in respect of NEON Options granted    
prior to the Merger under the NEON Stock Option Plans in accordance with the    
terms of Section 1.9 of this Agreement.                                         

          "GOVERNMENTAL ENTITY" means the United States government or any United
States domestic state, municipal or local government, any instrumentality,      
subdivision, court, administrative agency or commission or other authority      
thereof, or any United States domestic quasi-governmental or private body       
exercising any regulatory, taxing, importing or other United States domestic    
governmental or quasi-governmental authority.                                   

     "INTELLECTUAL PROPERTY" means (i) all trademarks, trademark rights,
trade names, trade name rights, trade dress and other indications of origin,    
corporate names, brand names, domain names, logos, certification rights, service
marks, applications for trademarks and for service marks, know-how and other    
proprietary rights and information, the goodwill associated with the foregoing  
and registration in any jurisdiction of, and applications in any jurisdictions  
to register, the foregoing, including any extension, modification or renewal of 
any such registration or application; (ii) all inventions, discoveries and ideas
(whether patentable or unpatentable and whether or not reduced to practice), in 
any jurisdiction, all improvements thereto, and all patents, patent rights,     
applications for patents (including divisions, continuations, continuations in  
part and renewal applications), and any renewals, extensions or reissues        
thereof, in any jurisdiction; (iii) nonpublic information, trade secrets and    
confidential information and rights in any jurisdiction to limit the use or     
disclosure thereof by any person; (iv) writings and other works, whether        
copyrightable or not, in any jurisdiction, and all registrations or applications
for registration of copyrights in any jurisdiction, and any renewals or         
extensions thereof; (v) all computer software and applications (including data  
and related documentation); (vi) processes, formulae, methods, schematics,      
technology, know-how and any similar intellectual property or proprietary       
rights; and (vii) all copies and tangible documentation thereof and any claims  
or causes of action arising out of or relating to any infringement or           
misappropriation of any of the foregoing.                                       

      "KNOWLEDGE" with respect to (i) NEON or similar references means the
actual knowledge of any of Stephen E. Courter, William A. Marshall, Kurt J. Van 
Wagenen, Jeffrey C. MacHaffie and Christopher E. Dalton, after reasonable       
inquiry of the executive or senior managerial employees responsible for the     
relevant matters, and (ii) Globix or similar references means the actual        
knowledge of any of Peter K. Stevenson, Robert M. Dennerlein, H. Jameson        
Holcombe, John D. McCarthy, James C. Schroeder and John Washuta (with respect to
Taxes only), after reasonable inquiry of the executive or senior managerial     
employees responsible for the relevant matters.                                 

"LAW" means any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order, judgment or decree, administrative or       
judicial decision, and any other executive or legislative proclamation.         

-70-

S-4/A
340th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 340th
     "LIENS" means any pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever.                            

"NEON CONFIRMATION EFFECTIVE DATE" means December 20, 2002.   

         "NEON CTA WARRANTS" means those warrants of NEON other than the Class A
Warrants disclosed in writing to Globix pursuant to Section 3.1(b)(iii).        

        "NEON MATERIAL ADVERSE EFFECT" means, with respect to NEON, any event,
change, circumstance or effect that, individually or together with any other    
event, change, circumstance or effect, is or could reasonably be expected to be 
materially adverse to the business, operations, properties, prospects, assets,  
liabilities, financial condition or results of operations of NEON and its       
Subsidiaries taken as a whole (other than events, changes, circumstances or     
effects that result from economic factors affecting the economy as a whole).    

   "PERMITTED LIENS" means, with respect to a Person, the collective
reference to (i) Liens for current property taxes, assessments and other        
governmental charges not yet due and payable or delinquent or being contested in
good faith by appropriate proceedings and for which adequate reserves have been 
established in accordance with GAAP, (ii) statutory liens of landlords,         
mechanics, carriers, warehousemen, and other Liens imposed by law incurred in   
the ordinary course of business, original purchase price conditional sales      
contracts and equipment leases with third parties and liens securing purchase   
money security interests entered into in the ordinary course of business, (iii) 
easements, patent reservations, covenants, rights of way and other similar      
restrictions of record, (iv) any conditions that may be shown by a current,     
accurate survey or physical inspection of any Real Property, and (v) (A) zoning,
building and other similar restrictions, (B) mortgages, liens, security interest
or encumbrances that have been placed by any developer, landlord or third party 
on Real Property over which the Person or any Subsidiary has easement rights or 
on any of the leased real property of such Person and subordination or similar  
agreements relating thereto, and (C) unrecorded easements, covenants, rights of 
way and other similar restrictions, none of which items set forth in clauses    
(A), (B) and (C), individually or in the aggregate, materially impair the       
continued use and operation of the Real Property to which they relate in the    
business of the Person and its Subsidiaries taken as a whole as presently       
conducted.                                                                      

       "PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or   
group (as defined in the Exchange Act).                                         

         "SUBSIDIARY" when used with respect to any Person means any corporation
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding     
partnerships the general partnership interests of which held by such party or   
any Subsidiary of such party do not have a majority of the voting interests in  
such partnership), or (ii) at least a majority of the securities or other       
interests of which having by their terms ordinary voting power to elect a       
majority of the Board of Directors or others performing similar functions with  
respect to such corporation or other organization is directly or indirectly     
owned or controlled by such party or by any one or more of its Subsidiaries, or 
by such party and one or more of its Subsidiaries.                              

-71-

S-4/A
341st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 341st
    "TAX" (including, with correlative meaning, "TAXES" and "TAXABLE")
means (i)(A) any net income, gross income, business and occupation, admissions, 
gross receipts, sales, use, value added, ad valorem, transfer, transfer gains,  
franchise, profits, license, withholding, payroll, employment, excise,          
severance, stamp, rent, recording, occupation, premium, real or personal        
property, intangibles, environmental or windfall profits tax, alternative or    
add-on minimum tax, customs duty or other tax, fee, duty, levy, impost,         
assessment or charge of any kind whatsoever (including but not limited to taxes 
assessed to or on real property and water and sewer rents relating thereto),    
together with (B) any interest and any penalty, addition to tax or additional   
amount imposed by any governmental body (domestic or foreign) (a "TAX           
AUTHORITY") responsible for the imposition of any such tax; (ii) any liability  
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of being a member of an affiliated, unitary or combined  
group with any other corporation at any time prior to the Closing Date; and     
(iii) any liability for the payment of any amount of the type described in the  
preceding clause (i) as a result of a contractual obligation to any other       
Person.                                                                         

       "TAX RETURN" means any report, return or other information (including
any attached schedules or any amendments to such report, return, document,      
declaration or any other information) required to be supplied to or filed with  
any taxing authority or jurisdiction (foreign or domestic) with respect to any  
Tax, including an information return, any document with respect to or           
accompanying payments or estimated Taxes, or with respect to or accompanying    
requests for the extension of time in which to file any such report, return     
document, declaration or other information.                                     

     Section 9.12 ADDITIONAL DEFINITIONS. As defined elsewhere in this
Agreement:                                                                      

"AGREEMENT" is defined in the Preamble on page 1.             

"AICPA" is defined in Section 3.1(f).                         

"CERTIFICATE OF MERGER" is defined in Section 1.3.            

"CERTIFICATES" is defined in Section 2.2.                     

"CLASS A WARRANT" is defined in Section 1.8(c)(iii).          

"CLOSING" is defined in Section 1.2.                          

"CLOSING DATE" is defined in Section 1.2.                     

-72-

S-4/A
342nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 342nd
"CODE" is defined in the Preamble on page 1.                  

"COBRA" is defined in Section 3.1(r)(vii).                    

"CONFIDENTIALITY AGREEMENT" is defined in Section 5.2(b).     

  "CONSTITUENT CORPORATIONS" is defined in the Preamble on page 1.

"COSTS" is defined in Section 5.7(a).                         

"COVERED PERSONS" is defined in Section 5.7(a).               

"DGCL" is defined in Section 1.1.                             

"DISSENTING SHARES" is defined in Section 2.9(a).             

"EFFECTIVE TIME" is defined in Section 1.3.                   

"ENVIRONMENTAL CLAIMS" is defined in Section 3.1(s).          

"ENVIRONMENTAL LAWS" is defined in Section 3.1(s).            

"ERISA" is defined in Section 3.1(r)(i).                      

"ERISA AFFILIATE" is defined in Section 3.1(r)(i).            

"EXCHANGE ACT" is defined in Section 3.1(c)(iii).             

"EXCHANGE AGENT" is defined in Section 2.1(a).                

"EXCHANGE FUND" is defined in Section 2.1(a).                 

"GAAP" is defined in Section 3.1(d)(i).                       

"GLOBIX" is defined in the Preamble on page 1.                

"GLOBIX AFFILIATED PERSON" is defined in Section 3.2(k)(i).   

"GLOBIX ALTERNATIVE PROPOSAL" is defined in Section 5.1(c).   

 "GLOBIX AUDITED BALANCE SHEET" is defined in Section 3.2(e)(i).

"GLOBIX COMMON STOCK" is defined in Section 1.8(c)(i).        

    "GLOBIX CONVERTIBLE SECURITIES" is defined in Section 3.2(b)(iii).

"GLOBIX DEBT PURCHASE" is defined in Section 6.3(h).          

"GLOBIX DISCLOSURE SCHEDULE" is defined in Section 3.2.       

"GLOBIX EMPLOYEES" is defined in Section 3.2(r)(i).           

-73-

S-4/A
343rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 343rd
"GLOBIX FINANCIAL ADVISOR" is defined in Section 3.2(j).      

"GLOBIX INDENTURE" is defined in Section 6.2(g).              

  "GLOBIX INTELLECTUAL PROPERTY" is defined in Section 3.2(x)(ii).

 "GLOBIX LEASED REAL PROPERTY" is defined in Section 3.2(t)(ii).

"GLOBIX MATERIAL CONTRACTS" is defined in Section 3.2(u)(i).  

"GLOBIX OPTIONS" is defined in Section 3.2(b)(iii).           

"GLOBIX PERMITS" is defined in Section 3.2(m)(ii).            

"GLOBIX PLANS" is defined in Section 3.2(r)(i).               

"GLOBIX PREFERRED STOCK" is defined in Section 1.8(c)(ii).    

     "GLOBIX SEC FINANCIAL STATEMENTS" is defined in Section 3.2(d)(ii).

"GLOBIX SEC REPORTS" is defined in Section 3.2(d)(i).         

"GLOBIX STOCK OPTION PLANS" is defined in Section 3.2(b)(iii).

"GLOBIX STOCKHOLDERS MEETING" is defined in Section 5.1(c).   

"GLOBIX WARRANT" is defined in Section 1.8(c)(v).             

"HSR ACT" is defined in Section 3.1(c)(iii).                  

"HSR FILING" is defined in Section 5.3(b).                    

"INTERIM BALANCE SHEET" is defined in Section 3.1(d)(i).      

"LEASED REAL PROPERTY" is defined in Section 3.1(t)(ii).      

"MERGER" is defined in the Preamble on page 1.                

"MERGER CONSIDERATION" is defined in Section 1.8(c).          

"MERGER SUB" is defined in the Preamble on page 1.            

"MERGER SUB APPROVAL" is defined in Section 3.2(i).           

"MERGER SUB COMMON STOCK" is defined in Section 3.2(b)(i).    

"NEON" is defined in the Preamble on page 1.                  

"NEON AFFILIATED PERSON" is defined in Section 3.1(k)(i).     

-74-

S-4/A
344th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 344th
"NEON ALTERNATIVE PROPOSAL" is defined in Section 5.1(b).     

"NEON AUDITED BALANCE SHEET" is defined in Section 3.1(e)(i). 

"NEON COMMON STOCK" is defined in the Preamble on page 1.     

       "NEON CONVERTIBLE PREFERRED STOCK" is defined in the Preamble on page
1.                                                            

  "NEON CONVERTIBLE SECURITIES" is defined in Section 3.1(b)(iii).

"NEON DISCLOSURE SCHEDULE" is defined in Section 3.1.         

"NEON DOCUMENTS" is defined in Section 5.7(a).                

"NEON EMPLOYEES" is defined in Section 3.1(r)(i).             

"NEON FINANCIAL ADVISOR" is defined in Section 3.1(j).        

"NEON FINANCIAL STATEMENTS" is defined in Section 3.1(d)(i).  

"NEON INTELLECTUAL PROPERTY" is defined in Section 3.1(x)(ii).

"NEON MATERIAL CONTRACTS" is defined in Section 3.1(u)(i).    

"NEON OPTIONS" is defined in Section 3.1(b)(iii).             

"NEON PERMITS" is defined in Section 3.1(m)(ii).              

"NEON PLANS" is defined in Section 3.1(r)(i).                 

"NEON PREFERRED STOCK" is defined in Section 3.1(b)(i).       

    "NEON REDEEMABLE PREFERRED STOCK" is defined in Section 3.1(b)(i).

"NEON REQUIRED CONSENTS" is defined in Section 3.1(c)(iii).   

"NEON REQUIRED VOTE" is defined in Section 3.1(i).            

"NEON SECURITIES" is defined in Section 1.8(c).               

"NEON STOCK OPTION PLANS" is defined in Section 3.1(b)(iii).  

"NEON STOCKHOLDERS MEETING" is defined in Section 5.1(b).     

  "PREFERRED CASH CONSIDERATION" is defined in Section 1.8(c)(ii).

"PROXY STATEMENT" is defined in Section 3.1(g).               

"RECORD DATE " is defined in Section 3.1(c)(i).               

         "REDEEMABLE PREFERRED STOCK WARRANTS" is defined in Section 1.8(c)(iv).

"REGISTRATION STATEMENT" is defined in Section 3.1(g).        

"SEC" is defined in Section 3.1(g).                           

-75-

S-4/A
345th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 345th
"SECURITIES ACT" is defined in Section 1.9.                   

"SENIOR SECURED NOTES" is defined in Section 4.2(c).          

"SURVIVING CORPORATION" is defined in Section 1.1.            

"TAX DEFICIENCY" is defined in Section 3.1(q)(i)(G).          

       "THIRD PARTY INTELLECTUAL PROPERTY" is defined in Section 3.1(x)(ii).

"TRANSITION COMMITTEE" is defined in Section 5.9.             

"VIOLATION" is defined in Section 3.1(c)(ii).                 

"WARN" is defined in Section 3.1(r)(xi).                      

[SIGNATURE PAGE FOLLOWS]

-76-

S-4/A
346th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 346th
 IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be signed by their respective officers or authorized               
representatives thereunto duly authorized, all as of the date first above       
written.                                                                        

         NEON COMMUNICATIONS, INC.

           By:  /S/ STEPHEN E. COURTER
                            ----------------------------------
                           Name:  Stephen E. Courter
                                     Title: Chairman of the Board, Chief
                                               Executive Officer and President

  GLOBIX CORPORATION

           By:  /S/ PETER K. STEVENSON
                             -----------------------------------
                           Name:  Peter K. Stevenson
                                      Title: President and Chief Executive
                       Officer

-77-

S-4/A
347th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 347th
APPENDIX A-2                                                                    

 FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER

This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "First Amendment") is 
dated as of October 8, 2004, between GLOBIX CORPORATION, a Delaware             
---------                                               
corporation ("Globix") and NEON COMMUNICATIONS, INC., a Delaware corporation    
("NEON").                                                                       

 WITNESSETH:

  WHEREAS, Globix and NEON are parties to an Agreement and Plan of
Merger, dated as of July 19, 2004 (the "Merger Agreement");                     

WHEREAS, Globix and NEON wish to amend the Merger Agreement in
accordance with Section 9.1 of the Merger Agreement as mutually agreed to and as
set forth herein.                                                               

      NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and     
intending to be legally bound hereby, the parties hereto agree as follows:      

        1. Section 1.8(c)(ii) of the Merger Agreement is hereby amended in its
entirety to read as follows:                                                    

         "(ii) (A) all accrued and unpaid dividends to the Closing Date shall be
         treated as if paid in shares of NEON Convertible Preferred Stock issued
immediately prior to the Effective Time;                      

           (B) each share of NEON Convertible Preferred Stock issued and
        outstanding immediately prior to the Effective Time (other than shares
       to be canceled in accordance with Section 1.8(b), but including those
   shares treated as issued in accordance with Section 1.8(c)(ii)(A)
        above), shall be converted into the right to receive (1) $3.75 in cash
       (the "Preferred Cash Consideration") and (2) 2.08333 shares of Globix
   preferred stock with substantially the terms set forth in Exhibit
1.8(c)(ii) (the "Globix Preferred Stock");"                   

        2. Exhibit 1.8(c)(ii) of the Merger Agreement is hereby superseded and
replaced in its entirety with a new Exhibit 1.8(c)(ii) in the form attached     
hereto as Exhibit A.                                                            

         3. Section 5.1(c) of the Merger Agreement is hereby amended by amending
the second sentence thereof in its entirety to read as follows:                 

     "In the event of a Globix Stockholder Vote, Globix has, through its
         Board of Directors, recommended to its stockholders the issuance of the
         shares of Globix Common Stock included in the Merger Consideration, and
        it shall not withdraw, modify or change such recommendation; provided,
        however, that the Board of Directors of Globix may withdraw, modify or
         change such recommendation in order to comply with its fiduciary duties
    if it (i) has concluded in good faith that it is required to do so
     under applicable law, and (ii) enters into a merger, acquisition or
   other agreement (including an agreement in principle) to effect a
     competing acquisition or other business combination proposal or the
Board of Directors resolves to do so (a "Globix Alternative   
Proposal")."                                                  

S-4/A
348th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 348th
       4. Section 7.1(c)(i) of the Merger Agreement is hereby amended in its
entirety to read as follows:                                                    

   " (i) in the event of a Globix Stockholder Vote, and the Board of
        Directors of Globix shall not have recommended, or shall have resolved
 not to recommend, or shall have qualified, changed, modified or
         withdrawn its recommendation to its stockholders of the issuance of the
       shares of Globix Common Stock included in the Merger Consideration or
      declaration that the Merger is advisable and in the best interest of
Globix and its stockholders, or shall have resolved to do so;"

       5. Section 9.11 of the Merger Agreement is hereby amended by amending
the defined term "Globix Stockholder Vote" in its entirety to read as follows:  

      ""GLOBIX STOCKHOLDER VOTE" means if (i) prior to the Effective Time,
         the Globix Common Stock is traded on the Nasdaq Small Cap Market or The
        American Stock Exchange or (ii) the Board of Directors of Globix shall
        otherwise so require as of the date of this Agreement, the affirmative
      vote of the holders of the percentage of the shares of Globix Common
  Stock required to approve the matters submitted to a vote of the
         stockholders of Globix, which may consist of the following matters: (A)
        the election of directors of Globix to serve on the Board of Directors
      of Globix following the Merger, (B) the issuance of shares of Globix
   Common Stock pursuant to the terms of this Agreement, and (C) the
      issuance of shares of Globix Common Stock in respect of NEON Options
  granted prior to the Merger under the NEON Stock Option Plans in
accordance with the terms of Section 1.9 of this Agreement."  

     6. Sections 3.2(b)(ii) and (iii) of the Merger Agreement are hereby
amended to add the following sentence to the end of each of Sections 3.2(b)(ii) 
and (iii):                                                                      

   "The foregoing notwithstanding, the shares of Globix Common Stock
      issuable in the Globix Debt Purchase will be subject to registration
   rights, and Globix will grant the participants in the Globix Debt
     Purchase the right to purchase up to an additional 5% of the shares
        acquired by the participants at a purchase price of $2.75 per share if
   the registration statement is not effective within 90 days of the
       Closing under the Merger Agreement and an additional 5% of the shares
       acquired in the Globix Debt Purchase 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."                                       

  7. Each party represents and warrants that (i) the execution and
delivery of this First Amendment has been duly and validly authorized and       
approved by its Board of Directors, and (ii) this First Amendment has been duly 
and validly executed and delivered and constitutes its valid and binding        
agreement, enforceable against it in accordance with its terms.                 

-2- 

S-4/A
349th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 349th
      8. This First Amendment may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become    
effective when one or more counterparts have been signed by each of the parties 
and delivered to the other parties, it being understood that all parties need   
not sign the same counterpart.                                                  

       9. Capitalized terms used and not otherwise defined herein shall have
the meanings attributed thereto in the Merger Agreement. Upon execution hereof, 
each reference in the Merger Agreement to "this Agreement," "hereby," "herein," 
"hereof" or words of similar import referring to the Merger Agreement shall mean
and refer to the Merger Agreement as amended by this First Amendment.           

       10. Except as expressly provided herein, the Merger Agreement remains
in full force and effect. The Merger Agreement, as amended by this First        
Amendment, constitutes the entire understanding of the parties regarding the    
subject matter hereof and cannot be modified except by written agreement of the 
parties.                                                                        

[SIGNATURE PAGE FOLLOWS]

-3- 

S-4/A
350th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 350th
       IN WITNESS WHEREOF, each of the parties hereto have caused this First
Amendment to be signed by their respective officers or authorized               
representatives thereunto duly authorized, all as of the date first above       
written.                                                                        

                   NEON COMMUNICATIONS, INC.

                    By: /s/ Stephen B. Courter
                                         ---------------------------------------
                          Name: Stephen B. Courter
                                     Title: Chairman of the Board, Chief
                                               Executive Officer and President

            GLOBIX CORPORATION

                    By: /s/ Peter K. Stevenson
                                         ---------------------------------------
                          Name: Peter K. Stevenson
                            Title: President and Chief
                                 Executive Officer

S-4/A
351st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 351st
 EXHIBIT A
 ---------

EXHIBIT 1.8(c)(ii)
------------------

 CERTIFICATE OF DESIGNATION OF PREFERENCES

 AND RELATIVE, PARTICIPATING, OPTIONAL AND

 OTHER SPECIAL RIGHTS OF

 PREFERRED STOCK AND QUALIFICATIONS,

LIMITATIONS AND RESTRICTIONS THEREOF

OF

6% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK

OF

GLOBIX CORPORATION

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

PURSUANT TO SECTION 151 OF THE

GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

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

 -1-

S-4/A
352nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 352nd
 Globix Corporation (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that (i) pursuant to authority conferred upon the board of directors    
(the "Board of Directors") by its Amended and Restated Certificate of           
Incorporation (the "Certificate of Incorporation"), and pursuant to the         
provisions of Section 151 of the General Corporation Law of the State of        
Delaware, said Board of Directors is authorized to issue Preferred Stock of the 
Company in one or more series; and (ii) the resolutions set forth below (the    
"Resolutions") were duly adopted by the Board of Directors, by a vote at a      
meeting duly called and duly held on ________ __, 2004;                         

       "WHEREAS, the Board of Directors of the Company is authorized, within
the limitations and restrictions stated in the Certificate of Incorporation of  
the Company, to provide by resolution or resolutions for the issuance of shares 
of its preferred stock, par value $0.01 per share (the "Preferred Stock"), and  
by filing a certificate of designation in the manner prescribed under the laws  
of the State of Delaware, to fix and amend the voting powers, full or limited,  
or no voting powers, and the designation, preferences and relative,             
participating, optional and other special rights, if any, and qualification,    
limitations and restrictions thereof;                                           

         WHEREAS, the Board of Directors of the Company desires to authorize and
fix the terms of a series of Preferred Stock and the number of shares           
constituting such series; and                                                   

        WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings specified in Section 14 hereof;                               

       NOW, THEREFORE, BE IT RESOLVED that, pursuant to the authority vested
in the Board of Directors by its Certificate of Incorporation, the Board of     
Directors does hereby designate, create, authorize and provide for the issuance 
of 6% Series A Cumulative Convertible Preferred Stock, par value $0.01 per      
share, with a liquidation preference of $3.60 per share, consisting of 4,500,000
shares having the designation, preferences, relative, participating, optional   
and other special rights and the qualification, limitations and restrictions    
thereof that are set forth in the Certificate of Incorporation and in this      
Resolution as follows:                                                          

   1. DESIGNATION. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company a series of Preferred Stock   
designated as the "6% Series A Cumulative Convertible Preferred Stock" (the     
"Convertible Preferred Stock"). The authorized number of shares constituting the
Convertible Preferred Stock shall be 4,500,000. The liquidation preference of   
the Convertible Preferred Stock shall be $3.60 per share (the "Liquidation      
Preference"). The date the Convertible Preferred Stock is first issued is       
referred to as the "Issue Date."                                                

         2. RANK. The Convertible Preferred Stock will, with respect to dividend
rights and rights upon the liquidation, dissolution or winding up of the        
Company, rank (i) junior to each class of Capital Stock or series of Preferred  
Stock, established hereafter by the Board of Directors, the terms of which      
expressly provide that such class or series will rank senior to the Convertible 
Preferred Stock as to dividend rights and upon liquidation, dissolution or      
winding up of the Company ("Senior Capital Stock"); (ii) pari passu with each   
class of Capital Stock or series of Preferred Stock, established hereafter by   

 -2-

S-4/A
353rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 353rd
the Board of Directors, the terms of which expressly provide that such class or 
series will rank on a parity with the Convertible Preferred Stock as to dividend
rights and upon the liquidation, dissolution or winding up of the Company       
("Parity Capital Stock") and (iii) senior to all series of common stock, par    
value $0.01 per share, of the Company (the "Common Stock") and to any Capital   
Stock or series of Preferred Stock, established hereafter by the Board of       
Directors, that expressly provides that it will rank junior to the Convertible  
Preferred Stock as to dividend rights and upon the liquidation, dissolution or  
winding up of the Company ("Junior Capital Stock").                             

3. DIVIDENDS.                                                 

               (a) The Holder of shares of the Convertible Preferred Stock
        will be entitled to receive, when, as and if dividends are declared by
      the Board of Directors out of funds of the Company legally available
        therefor, cumulative preferential dividends from the Issue Date of the
         Convertible Preferred Stock accruing at the rate of $0.216 per share of
Convertible Preferred Stock per annum, or $0.108 per share of 
     Convertible Preferred Stock semi-annually, payable semi-annually in
         arrears on June 15 and December 15 of each year, commencing on December
  15, 2004 or, if any such date is not a Business Day, on the next
   succeeding business day (each, a "Dividend Payment Date"), to the
  Holders of record on the 10th day prior to the relevant Dividend
        Payment Date (each, a "Record Date"). Accrued but unpaid dividends, if
         any, may be paid on such dates as determined by the Board of Directors.

                 (b) Dividends payable on the Convertible Preferred Stock will
        be computed on the basis of a 360-day year of twelve 30-day months and
         will be deemed to accrue on a daily basis. Dividends on the Convertible
Preferred Stock will accrue from the Issue Date.              

                 (c) Any dividend on the Convertible Preferred Stock shall be,
        at the option of the Company, payable (i) in cash, or (ii) through the
         issuance of a number of additional shares (including fractional shares)
       of Convertible Preferred Stock (the "Additional Shares") equal to the
dividend amount divided by the Liquidation Preference of such 
Additional Shares.                                            

              (d) The Convertible Preferred Stock will not be redeemable
      unless all dividends accrued through such redemption date shall have
    been paid in full. Notwithstanding anything to the contrary herein
  contained, the Company shall not be required to declare or pay a
       dividend if another person (including, without limitation, any of its
         subsidiaries) pays an amount to the Holders equal to the amount of such
         dividend on behalf of the Company and, in such event, the dividend will
be deemed paid for all purposes.                              

                (e) Dividends on the Convertible Preferred Stock will accrue
    whether or not the Company has earnings or profits, whether or not
         there are funds legally available for the payment of such dividends and
         whether or not dividends are declared. Dividends will accumulate to the
extent they are not paid on the Dividend Payment Date for the 
       semi-annual period to which they relate. Accumulated unpaid dividends
   will accrue and cumulate dividends at a rate of 6% per annum. The
      Company will take all reasonable actions required or permitted under
    Delaware law to permit the payment of dividends on the Convertible
Preferred Stock.                                              

-3- 

S-4/A
354th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 354th
                 (f) No dividend whatsoever shall be declared or paid upon, or
      any sum set apart for the payment of dividends upon, any outstanding
       share of the Convertible Preferred Stock with respect to any dividend
     period unless all dividends for all preceding dividend periods have
         been declared and paid upon, or declared and a sufficient sum set apart
  for the payment of such dividend upon, all outstanding shares of
      Convertible Preferred Stock. Unless full cumulative dividends on all
    outstanding shares of Convertible Preferred Stock due for all past
       dividend periods shall have been declared and paid, or declared and a
         sufficient sum for the payment thereof set apart, then: (i) no dividend
      (other than, in the case of Junior Capital Stock, a dividend payable
         solely in shares of Junior Capital Stock or options, warrants or rights
    to purchase Junior Capital Stock, or in the case of Parity Capital
       Stock, a dividend payable solely in shares of Junior Capital Stock or
        Parity Capital Stock or options, warrants or rights to purchase Junior
        Capital Stock or Parity Capital Stock) shall be declared or paid upon,
       or any sum set apart for the payment of dividends upon, any shares of
Parity Capital Stock or Junior Capital Stock; (ii) no other   
       distribution shall be declared or made upon, or any sum set apart for
    the payment of any distribution upon, any shares of Parity Capital
        Stock or Junior Capital Stock; (iii) no shares of Parity Capital Stock
   or Junior Capital Stock or any warrants, rights, calls or options
        exercisable for or convertible into any Parity Capital Stock or Junior
     Capital Stock shall be purchased, redeemed or otherwise acquired or
     retired for value (excluding an exchange for shares of other Parity
    Capital Stock or Junior Capital Stock or a purchase, redemption or
        other acquisition from the proceeds of a substantially concurrent sale
     of Parity Capital Stock or Junior Capital Stock, and repurchases of
         Capital Stock held by an employee in connection with the termination of
         such employee's termination) by the Company or any of its subsidiaries;
      and (iv) no monies shall be paid into or set apart or made available
        for a sinking or other like fund for the purchase, redemption or other
       acquisition or retirement for value of any shares of a Parity Capital
         Stock or Junior Capital Stock or any warrants, rights, calls or options
        exercisable for or convertible into any Parity Capital Stock or Junior
         Capital Stock by the Company or any of its subsidiaries. Holders of the
     Convertible Preferred Stock shall not be entitled to any dividends,
   whether payable in cash, property or stock, in excess of the full
cumulative dividends as herein described.                     

        (g) Dividends on account of arrears and dividends in
         connection with any optional redemption may be declared and paid at any
  time, without reference to any regular Dividend Payment Date, to
    holders of record on such date, not more than 45 days prior to the
   payment thereof, as may be fixed by the Board of Directors of the
Company.                                                      

       4. LIQUIDATION RIGHTS. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company after payment in full of the           
outstanding debt obligations of the Company and the liquidation preference (and 
any accrued and unpaid dividends) on Senior Capital Stock, if any, each Holder  
of shares of the Convertible Preferred Stock shall be entitled to payment out of
the assets of the Company available for distribution of the Liquidation         
Preference per share of the Convertible Preferred Stock held by such Holder,    
plus an amount equal to the accrued and unpaid dividends on the Convertible     
Preferred Stock to the date fixed for liquidation, dissolution or winding up,   

-4- 

S-4/A
355th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 355th
before any distribution is made on any Junior Capital Stock, including, without 
limitation, any series of Common Stock of the Company. After payment in full of 
the Liquidation Preference and an amount equal to the accrued and unpaid        
dividends to which Holders of Convertible Preferred Steak are entitled, such    
Holders will not be entitled to any further participation in any distribution of
assets of the Company. However, neither the voluntary sale, conveyance, exchange
or transfer (for cash, shares of stock, securities or other consideration) of   
all or substantially all of the property or assets of the Company nor the       
consolidation or merger of the Company with or into one or more corporations    
will be deemed to be a voluntary or involuntary liquidation, dissolution or     
winding up of the Company, unless such sale, conveyance, exchange, transfer,    
consolidation or merger shall be in connection with a liquidation, dissolution  
or winding up of the Company.                                                   

5. REDEMPTION.                                                

                (a) OPTIONAL REDEMPTION. The Convertible Preferred Stock may
      be redeemed, in whole or in part, at the option of the Company after
         2005 at the redemption prices specified below (expressed as percentages
        of the Liquidation Preference thereof), in each case, together with an
 amount equal to accrued and unpaid dividends on the Convertible
Preferred Stock and Additional Shares (if any), to the date of
        redemption, upon not less than 15 nor more than 60 days' prior written
         notice, during the 12-month period commencing on December 16 of each of
the years set forth below:                                    

              Period                                    Redemption Price

        2005 and 2006                                   106%
        2007                                            103%
            2008 and thereafter                             100.000%

                (b) GENERAL. On and after any date fixed for redemption (the
         "Redemption Date"), provided that the Company has made available at the
        office of the Transfer Agent a sufficient amount of cash to effect the
         redemption, dividends will cease to accrue on the Convertible Preferred
       Stock called for redemption (except that, in the case of a Redemption
    Date after a dividend payment Record Date and prior to the related
      Dividend Payment Date, holders of Convertible Preferred Stock on the
        dividend payment Record Date will be entitled on such Dividend Payment
         Date to receive the dividend payable on such shares), such shares shall
        no longer be deemed to be outstanding and all rights of the holders of
   such shares as holders of Convertible Preferred Stock shall cease
        except the right to receive the cash deliverable upon such redemption,
without interest from the Redemption Date.                    

                  (c) PARTIAL REDEMPTION. In the event of a redemption of only a
        portion of the then outstanding shares of Convertible Preferred Stock,
      the Company shall effect such redemption on a pro rata basis, except
        that the Company may redeem all of the shares held by Holders of fewer
      than 100 shares (or all of the shares held by Holders who would hold
 less than 100 shares as a result of such redemption), as may be
determined by the Company.                                    

-5- 

S-4/A
356th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 356th
                (d) MECHANICS. With respect to a redemption pursuant hereto,
     the Company will send a written notice of redemption by first class
         mail to each holder of record of shares of Convertible Preferred Stock,
      not fewer than 15 days nor more than 60 days prior to the Redemption
     Date at its registered address (the "Redemption Notice"); provided,
         however, that no failure to give such notice nor any deficiency therein
      shall affect the validity of the procedure for the redemption of any
       shares of Convertible Preferred Stock to be redeemed except as to the
         holder or holders to whom the Company has failed to give said notice or
    except as to the holder or holders whose notice was defective. The
Redemption Notice shall state:                                

    (i)      the redemption price;

                           (ii)     whether all or less than all the outstanding
                                 shares of the Convertible Preferred Stock
                                  are to be redeemed and the total number of
                                 shares of the Convertible Preferred Stock
       being redeemed;

   (iii)    the Redemption Date;

                     (iv)     that the holder is to surrender to the
                               Company, in the manner, at the place or
                               places and at the price designated, his
                                    certificate or certificates representing the
                                   shares of Convertible Preferred Stock to be
     redeemed; and

                  (v)      that dividends on the shares of the
                                  Convertible Preferred Stock to be redeemed
                                    shall cease to accumulate on such Redemption
                               Date unless the Company defaults in the
                        payment of the redemption price.

Each holder of Convertible Preferred Stock shall surrender the certificate or   
certificates representing such shares of Convertible Preferred Stock to the     
Company, duly endorsed (or otherwise in proper form for transfer, as determined 
by the Company), in the manner and at the place designated in the Redemption    
Notice, and on the Redemption Date the full redemption price for such shares    
shall be payable in cash to the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be    
canceled and retired. In the event that less than all of the shares represented 
by any such certificate are redeemed, a new certificate shall be issued         
representing the unredeemed shares.                                             

6. VOTING RIGHTS/CONSENT.                                     

                (a) GENERAL. Except as otherwise required under the Delaware
  General Corporation Law, the holder of each share of Convertible
    Preferred Stock shall have the right to one vote for each share of
  Common Stock into which such share of Common Stock could then be
 converted (with any fractional share determined on an aggregate
      conversion basis being rounded to the nearest whole share), and with
    respect to such vote such holder shall have full voting rights and
       powers equal to the voting rights and powers of the holders of Common
        Stock, and shall be entitled, notwithstanding any provision hereof, to
        notice of any stockholders' meeting in accordance with the Amended and
         Restated Bylaws of the Company, and shall be entitled to vote, together
     with holders of Common Stock as a single class, with respect to any
        question or matter upon which holders of Common Stock have to right to
vote.                                                         

-6- 

S-4/A
357th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 357th
                 (b) ISSUANCE OF ADDITIONAL STOCK. For so long as there are at
      least 200,000 shares of Convertible Preferred Stock outstanding, the
  Company may not authorize, create (by way of reclassification or
      otherwise) or issue any Senior Capital Stock or Parity Capital Stock
         (including additional shares of Convertible Preferred Stock (other than
     the issuance of shares of Convertible Preferred Stock in payment of
     dividends on the Convertible Preferred Stock as provided in Section
3(c) hereof)), or any obligation or security convertible or   
     exchangeable into, or evidencing a right to purchase, shares of any
 class or series of Senior Capital Stock or Parity Capital Stock
       (including additional shares of Convertible Preferred Stock), without
       the affirmative vote or consent of the holders of at least 66 2/3% of
the outstanding shares of Convertible Preferred Stock.        

7. CHANGE OF CONTROL.                                         

                 (a) GENERAL. In the event of a Change of Control, each Holder
  shall have the right to require the Company to purchase all or a
      portion of such Holder's Convertible Preferred Stock (the "Change of
       Control Offer") as of the date that is no earlier than 30 days and no
        more than 60 days after the Change of Control Notice Date (the "Change
      of Control Purchase Date") for a purchase price equal to 101% of the
      Liquidation Preference together with accrued and unpaid dividends to
       but not including the Change of Control Purchase Date (the "Change of
 Control Purchase Price"). No funds shall be paid by the Company
         pursuant to a Change of Control Offer prior to the Company's repurchase
         of any securities ranking senior to the Convertible Preferred Stock and
   requiring repurchase pursuant to the change of control provisions
      governing such senior securities, including, without limitation, the
      repurchase of the Company's 11% Senior Secured Notes due 2008 issued
         pursuant to that certain Indenture, dated as of April 23, 2002, between
        the Company, certain subsidiaries of the Company and HSBC Bank USA, as
Trustee (the "Indenture").                                    

                (b) COMPANY NOTICE. Within 30 days after the occurrence of a
       Change of Control, the Company shall mail to all Holders of record of
   the Convertible Preferred Stock a written notice of the Change of
      Control, the date of such notice being the "Change of Control Notice
        Date." The notice shall include the form of Change of Control Purchase
    Notice (as defined in subsection (c) below) to be completed by the
Holder and shall state:                                       

                      (i)      the date of such Change of Control and,
                                  briefly, the events causing such Change of
Control;

                      (ii)     the date by which the Change of Control
                                  Purchase Notice pursuant to this Section 7
      must be given;

                   (iii)    the Change of Control Purchase Date;

                    (iv)     the Change of Control Purchase Price;

-7- 

S-4/A
358th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 358th
                    (v)      briefly, the conversion rights of the
                    Convertible Preferred Stock;

                           (vi)     the name and address of the Paying Agent and
           the Transfer Agent;

                (vii)    the then current Conversion Rate;

                           (viii)   that Convertible Preferred Stock as to which
                                    a Change of Control Purchase Notice has been
                                given may be converted into Common Stock
                             only to the extent that the Change of
                                  Control Purchase Notice has been withdrawn
                            in accordance with the terms of this
                   Certificate of Designation;

                         (ix)     the procedures that the Holder must follow
                                to exercise rights under this Section 7;

                         (x)      the procedures for withdrawing a Change of
                                    Control Purchase Notice, including a form of
                 notice of withdrawal; and

               (xi)     that the Holder must satisfy the
                                 requirements set forth in the Convertible
                               Preferred Stock in order to convert the
                    Convertible Preferred Stock.

               (c) EXERCISE. A Holder may exercise its rights specified in
       subsection (a) of this Section 7 upon delivery of a written notice of
        the exercise of such rights (a "Change of Control Purchase Notice") to
    the Paying Agent at any time prior to the close of business on the
        third Business Day next preceding the Change of Control Purchase Date,
stating:                                                      

      (i)      the name of the Holder;

                         (ii)     the certificate numbers of the Convertible
                                    Preferred Stock that the Holder will deliver
        to be purchased;

                  (iii)    the number of shares of Convertible
                                    Preferred Stock that the Holder will deliver
            to be purchased; and

                          (iv)     that such Convertible Preferred Stock shall
                              be purchased pursuant to the terms and
                                   conditions specified in this Certificate of
     Designations.

The delivery of such Convertible Preferred Stock to the Paying Agent (together  
with all necessary endorsements) at the office of the Paying Agent shall be a   
condition to the receipt by the Holder of the Change of Control Purchase Price  
therefor; provided, however, that such Change of Control Purchase Price shall be
so paid pursuant to this Section 7 only if the Convertible Preferred Stock so   
delivered to the Paying Agent shall conform in all respects to the description  
thereof set forth in the related Change of Control Purchase Notice.             

-8- 

S-4/A
359th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 359th
                  (d) PAYMENT. Upon receipt by the Paying Agent of the Change of
        Control Purchase Notice specified in subsection (c) of this Section 7,
       the Paying Agent shall promptly so notify the Company, and the Holder
       of the Convertible Preferred Stock in respect of which such Change of
        Control Purchase Notice was given shall (unless such Change of Control
         Purchase Notice is withdrawn as specified below) thereafter be entitled
        to receive solely the Change of Control Purchase Price with respect to
         such Convertible Preferred Stock. Such Change of Control Purchase Price
      shall be paid to such Holder promptly following the later of (i) the
  Change of Control Purchase Date with respect to such Convertible
    Preferred Stock (provided the conditions in subsection (c) of this
      Section 7 have been satisfied) and (ii) the time of delivery of such
       Convertible Preferred Stock to the Paying Agent by the Holder thereof
         in the manner required by subsection (c) of this Section 7. Convertible
         Preferred Stock in respect of which a Change of Control Purchase Notice
       has been given by the Holder thereof may not be converted into shares
        of Common Stock on or after the date of the delivery of such Change of
       Control Purchase Notice unless such Change of Control Purchase Notice
has first been validly withdrawn.                             

              (e) WITHDRAWAL. A Change of Control Purchase Notice may be
       withdrawn by means of a written notice of withdrawal delivered by the
         Holder to the office of the Paying Agent at any time prior to the close
     of business on the Business Day immediately preceding the Change of
Control Purchase Date, specifying:                            

      (i)      the name of the Holder;

                         (ii)     the certificate numbers of the Convertible
                                Preferred Stock in respect of which such
                                notice of withdrawal is being submitted;

                  (iii)    the number of shares of Convertible
                                  Preferred Stock with respect to which such
                                    notice of withdrawal is being submitted; and

                    (iv)     the number of shares, if any, of each
                                Convertible Preferred stock that remains
                                 subject to the original Change of Control
                                    Purchase Notice and that has been or will be
                              delivered for purchase by the Company.

             (f) COMPANY DEPOSIT WITH PAYING AGENT. At or before 11:00
  a.m., New York City time, on the second Business Day immediately
        following a Change of Control Purchase Date, the Company shall deposit
with the Paying Agent an amount of money sufficient to pay the
    aggregate Change of Control Purchase Price of all of the shares of
        Convertible Preferred Stock that are to be purchased as of such Change
       of Control Purchase Date plus accrued and unpaid dividends thereon up
         to but not including the Change of Control Purchase Date. The manner in
  which the deposit required by this subsection (f) is made by the
   Company shall be at the option of the Company, provided that such
         deposit shall be made in a manner such that the Paying Agent shall have
    immediately available funds on the second Business Day immediately
following the Change of Control Purchase Date.                

-9- 

S-4/A
360th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 360th
              (g) FAILURE TO EXERCISE. If a Holder does not exercise the
    right to require the Company to purchase such Holder's Convertible
       Preferred Stock, each share of such Convertible Preferred Stock shall
       thereafter be convertible into the right to receive the consideration
    receivable as a result of the Change of Control by a holder of the
        number of shares of Common Stock into which such Convertible Preferred
   Stock was convertible immediately prior to the Change of Control.

                  (h) DEFINITION OF CHANGE OF CONTROL. A Change of Control shall
    be deemed to have occurred if any of the following occurs: (a) any
         "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
   of the Securities Exchange Act of 1934, as amended (the "Exchange
     Act")), other than Permitted Holders, is or becomes the "beneficial
     owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
        except that a person shall be deemed to have "beneficial ownership" of
      all shares that such person has or has the right to acquire, whether
    such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total  
     outstanding Voting Stock of the Company; (b) during any consecutive
  two-year period, individuals who at the beginning of such period
      constituted the Board of Directors of the Company (together with any
    new directors whose election to such Board or whose nomination for
         election by the stockholders of the Company was approved by a vote of a
majority of the directors then still in office who were either
directors at the beginning of such period or whose election or
    nomination for election was previously so approved), cease for any
   reason to constitute a majority of the Board of Directors then in
      office; (c) the Company consolidates with or merges with or into any
        person or conveys, transfers or leases all or substantially all of its
      assets to any person, or any corporation consolidates with or merges
        into or with the Company, in any such event, pursuant to a transaction
         in which the outstanding Voting Stock of the Company is changed into or
     exchanged for cash, securities or other property, except (i) to the
extent necessary to reflect a change in the jurisdiction of   
       incorporation of the Company or (ii) where no "person" or "group" (as
      such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
         owns, other than Permitted Holders, immediately after such transaction,
       directly or indirectly, more than 50% of the total outstanding Voting
         Stock of the surviving corporation; or (d) the Company is liquidated or
    dissolved or adopts a plan of liquidation or dissolution. The good
         faith determination by the Board, based upon advice of outside counsel,
     of the beneficial ownership of securities of the Company within the
 meaning of Rules 13d-3 or 13d-5 under the Exchange Act shall be
       conclusive, absent contrary controlling precedent or contrary written
   interpretation published by the Commission. No inference shall be
   created that officers or employees of the Company are acting as a
        "person" or "group" (as such terms are used in Sections 13(d) or 14(d)
    of the Exchange Act) with the power to designate a majority of the
members of the Board solely because such officers or employees
constitute a majority of the members of the Board.            

                 (i) The provisions of this Section 7 may be amended, modified
       or waived only with the consent of holders of not less than sixty-six
         and two-thirds percent (66-2/3%) of the shares of Convertible Preferred
Stock then outstanding.                                       

-10-

S-4/A
361st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 361st
8. CONVERSION RATES.                                          

         (a) Each share of Convertible Preferred Stock will be
         convertible at the option of the Holder, at any time, unless previously
redeemed or repurchased, into the number of fully paid and    
         non-assessable shares of Common Stock (calculated as to each conversion
        rounded up to the nearest 1/100th of a share) obtained by dividing the
        Liquidation Preference by the Conversion Price (as defined below) (the
       "Conversion Rate"). The Conversion Price shall initially be $3.60 per
      share of the Convertible Preferred Stock (subject to the adjustments
        described below, the "Conversion Price"). The right to convert a share
       of the Convertible Preferred Stock called for redemption or delivered
for repurchase will terminate at the close of business on the 
       Redemption Date for such Convertible Preferred Stock or in accordance
     with the terms of Section 7 hereof, with respect to a repurchase in
connection with a Change of Control.                          

         (b) The right of conversion attaching to any share of
       Convertible Preferred Stock may be exercised by the Holder thereof by
    delivering the share to be converted to the office of the Transfer
   Agent, or any agency or office of the Company maintained for that
purpose, accompanied by a duly signed and completed notice of 
         conversion in form reasonably satisfactory to the Transfer Agent of the
       Company. The conversion date will be the date on which the shares and
         the duly signed and completed notice of conversion are so delivered. As
      promptly as practicable on or after the conversion date, the Company
will issue and deliver to the Transfer Agent a certificate or 
      certificates for the number of full shares of Common Stock, issuable
       upon conversion, with any fractional shares rounded up to full shares
         or, at the Company's option, payment in cash in lieu of any fraction of
        a share, based on the Closing Price of the Common Stock on the Trading
     Day preceding the conversion date. Such certificate or certificates
        will be delivered by the Transfer Agent to the appropriate Holder on a
       book-entry basis or by mailing certificates evidencing the additional
      shares to the Holders at their respective addresses set forth in the
     register of Holders maintained by the Transfer Agent. All shares of
    Common Stock issuable upon conversion of the Convertible Preferred
     Stock will be fully paid and nonassessable and will rank pari passu
      with the other shares of Common Stock outstanding from time to time.
      Any shares of Convertible Preferred Stock surrendered for conversion
        during the period from the close of business on any Record Date to the
       opening of business on the next succeeding Dividend Payment Date must
       be accompanied by payment of an amount equal to the dividends payable
      on such Dividend Payment Date on the shares of Convertible Preferred
        Stock being surrendered for conversion. No other payment or adjustment
    for dividends, or for any dividends in respect of shares of Common
   Stock, will be made upon conversion. Except as otherwise provided
      herein, dividends accrued shall not be paid on Convertible Preferred
 Stock converted. If any Holder surrenders shares of Convertible
      Preferred Stock for conversion between a Record Date and the related
  Dividend Payment Date, then notwithstanding such conversion, the
    dividend payable on such Dividend Payment Date will be paid to the
 Holder on such Record Date. Holders of Common Stock issued upon
     conversion will not be entitled to receive any dividends payable to
   holders of Common Stock as of any record time before the close of
business on the conversion date.                              

-11-

S-4/A
362nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 362nd
          (c) Each share of Convertible Preferred Stock shall be
       automatically converted into shares of Common Stock at the Conversion
        Rate then in effect (i) upon the affirmative vote of the holders of at
     least sixty-six and two-thirds percent (66-2/3%) of the outstanding
shares of such Convertible Preferred Stock, or (ii) on the day
         immediately following the date on which the Closing Price of the Common
     Stock has equaled or exceeded $10.80 (as adjusted for stock splits,
         combinations or similar capital changes) for a period of 45 consecutive
      Trading Days. Upon the occurrence of either of the foregoing events,
the outstanding shares of Convertible Preferred Stock shall be
      converted automatically without any further action by the holders of
   such shares and whether or not the certificates representing such
        shares are surrendered to the Company or its transfer agent; provided,
        however, that the Company shall not be obligated to issue certificates
     evidencing the shares of Common Stock issuable upon such conversion
         unless the certificates evidencing such shares of Convertible Preferred
    Stock are either delivered to the Company or its transfer agent as
    provided below, or the holder notifies the Company or its Transfer
      Agent that such certificates have been lost, stolen or destroyed and
    executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such  
certificates.                                                 

                  (d) The Conversion Rate shall be adjusted from time to time by
the Company as follows:                                       

            (i)      In case the Company shall (A) pay a dividend in
                     shares of Common Stock to all holders of Common
                        Stock, (B) make a distribution in shares of Common
                         Stock to all holders of Common Stock, (C) subdivide
                           its outstanding Common Stock into a greater number of
                        shares or (D) combine its outstanding Common Stock
                          into a smaller number of shares, the Conversion Rate
                           in effect immediately prior thereto shall be adjusted
                    so that the Holder of any share of Convertible
                           Preferred Stock thereafter surrendered for conversion
                           shall be entitled to receive that number of shares of
                           Common Stock which it would have owned had such share
                   of Convertible Preferred Stock been converted
                          immediately prior to the happening of such event. An
                           adjustment made pursuant to this subsection (i) shall
                           become effective immediately after the record date in
                          the case of a dividend in shares or distribution and
                  shall become effective immediately after the
                  effective date in the case of subdivision or
combination.              

                  (ii)     In case the Company shall issue rights or warrants to
                           all or substantially all holders of any series of its
                     Common Stock entitling them to subscribe for or
                    purchase shares of Common Stock (or securities
                         convertible into Common Stock) at a price per share
                     less than the current Market Price per share of
                           Common Stock at the record date for the determination
                        of shareholders entitled to receive such rights or
                         warrants, the Conversion Rate in effect immediately
                      prior thereto shall be adjusted so that the same
                        shall equal the rate determined by multiplying the
                         Conversion Rate in effect immediately prior to such
                         record date by a fraction, of which the denominator

-12-

S-4/A
363rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 363rd
                   shall be the number of shares of Common Stock
                         outstanding on such record date, plus the number of
                      shares which the aggregate offering price of the
                           total number of shares of Common Stock so offered (or
                       the aggregate conversion price of the convertible
                           securities so offered) would purchase at such current
                           Market Price, and of which the numerator shall be the
                          number of shares of Common Stock outstanding on such
                         record date plus the number of additional shares of
                         Common Stock offered (or into which the convertible
                  securities so offered are convertible). Such
                        adjustment shall be made successively whenever any
                          such rights or warrants are issued, and shall become
                         effective immediately after such record date. If at
                       the end of the period during which such rights or
                         warrants are exercisable not all rights or warrants
                        shall have been exercised, the adjusted Conversion
                           Rate shall be immediately readjusted to what it would
                          have been based upon the number of additional shares
                       of Common Stock actually issued (or the number of
                        shares of Common Stock issuable upon conversion of
              convertible securities actually issued).

           (iii)    In case the Company shall distribute to all or
                       substantially all holders of its Common Stock any
                        shares of Capital Stock of the Company (other than
                      Common Stock), evidence of indebtedness or other
                          non-cash assets (including securities of any company
                           other than the Company) or shall distribute to all or
                          substantially all holders of its Common Stock rights
                         or warrants to subscribe for or purchase any of its
                           securities (excluding those referred to in subsection
                        (ii) above), then in each such case the Conversion
                         Rate shall be adjusted so that the same shall equal
                       the rate determined by multiplying the Conversion
                          Rate in effect immediately prior to the date of such
                          distribution by a fraction, of which the denominator
                        shall be the current Market Price per share of the
                          Common Stock on the record date mentioned below less
                   the fair market value on such record date (as
                 determined by the Board of Directors, whose
                        determination shall be conclusive evidence of such
                      fair market value) of the portion of the Capital
                        Stock, evidences of indebtedness or other non-cash
                         assets so distributed or of such rights or warrants
                         applicable to one share of Common Stock (determined
                          on the basis of the number of shares of Common Stock
                       outstanding on the record date), and of which the
                           numerator shall be the current Market Price per share
                   of the Common Stock on such record date. Such
                         adjustment shall become effective immediately after
                           the record date for the determination of shareholders
            entitled to receive such distribution.
                          Notwithstanding the foregoing, in the event that the
                        Company shall distribute rights or warrants (other
                      than those referred to in subsection (ii) above)

-13-

S-4/A
364th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 364th
                         ("Rights") pro rata to holders of Common Stock, the
                   Company may, in lieu of making any adjustment
                          pursuant to this Section 8, make proper provision so
                          that each Holder of a share of Convertible Preferred
                   Stock who converts such shares of Convertible
                        Preferred Stock (or any portion thereof) after the
                        record date for such distribution and prior to the
                     expiration or redemption of the Rights shall be
                           entitled to receive upon such conversion, in addition
                      to the shares of Common Stock issuable upon such
                       conversion (the "Conversion Shares"), a number of
                     Rights to be determined as follows: (i) if such
                       conversion occurs on or prior to the date for the
                       distribution to the holders of Rights of separate
              certificates evidencing such Rights (the
                        "Distribution Date"), the same number of Rights to
                          which a holder of a number of shares of Common Stock
                          equal to the number of Conversion Shares is entitled
                           at the time of such conversion in accordance with the
                           terms and provisions of and applicable to the Rights,
                  and (ii) if such conversion occurs after the
                           Distribution Date, the same number of Rights to which
                           a holder of the number of shares of Common Stock into
                         which the number of shares of Convertible Preferred
                          Stock so converted was convertible immediately prior
                          to the Distribution Date would have been entitled on
                        the Distribution Date in accordance with the terms
                     and provisions of and applicable to the Rights.

                 (iv)     In case the Company shall, by dividend or otherwise,
                          at any time distribute (a "Triggering Distribution")
                       to all or substantially all holders of its Common
                           Stock cash in an aggregate amount that, together with
                           the aggregate amount of all cash distributions to all
                           or substantially all holders of its Common Stock made
                           within the 12 months preceding the date of payment of
                         the Triggering Distribution and in respect of which
                    no Conversion Rate adjustment pursuant to this
                           Section 8 has been made, exceeds 10.0% of the product
                           of the current Market Price per share of Common Stock
                          on the Business Day immediately preceding the day on
                           which such Triggering Distribution is declared by the
                          Company (the "Determination Date") multiplied by the
                          number of shares of Common Stock outstanding on such
                        date (excluding shares held in the treasury of the
                         Company), the Conversion Rate shall be increased so
                      that the same shall equal the rate determined by
                multiplying such Conversion Rate in effect
                      immediately prior to the Determination Date by a
                     fraction, of which the denominator shall be the
                           current Market Price per share of the Common Stock on
                          the Determination Date less the amount of cash (plus

-14-

S-4/A
365th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 365th
                           the fair market value of such other consideration) so
                           distributed within such 12 months (including, without
                         limitation, the Triggering Distribution) applicable
                           to one share of Common Stock (determined on the basis
                         of the number of shares of Common Stock outstanding
                           on the Determination Date) and the numerator shall be
                       such current Market Price per share of the Common
                       Stock on the Determination Date, such increase to
                          become effective immediately prior to the opening of
                         business on the day following the date on which the
      Triggering Distribution is paid.

                 (v)      In case any transaction or event (including, without
                    limitation, any merger, consolidation, sale of
                         assets, tender or exchange offer, reclassification,
                           compulsory share exchange or liquidation) shall occur
                          in which all or substantially all outstanding Common
                           Stock is converted into or exchanged for stock, other
                      securities, cash or assets (each, a "Fundamental
                       Change"), the holder of each share of Convertible
                          Preferred Stock outstanding immediately prior to the
                          occurrence of such Fundamental Change shall have the
                          right upon any subsequent conversion to receive (but
                        only out of legally available funds, to the extent
                        required by applicable law) the kind and amount of
                        stock, other securities, cash and assets that such
                       holder would have received if such share had been
          converted immediately prior thereto.

              (vi)     In any case in which this Section 8 shall require
                           that an adjustment be made following a record date or
                           a Determination Date, as the case may be, established
                           for purposes of this Section 8, the Company may elect
                           to defer (but only until five Business Days following
                          the filing by the Company with the Transfer Agent of
                         the certificate described in subsection (i) of this
                         Section 8) issuing to the Holder of any Convertible
                         Preferred Stock converted after such record date or
                       Determination Date the shares of Common Stock and
                           other Capital Stock of the Company issuable upon such
                          conversion over and above the shares of Common Stock
                          and other Capital Stock of the Company issuable upon
                         such conversion only on the basis of the Conversion
                          Rate prior to adjustment; and, in lieu of the shares
                       the issuance of which is so deferred, the Company
                           shall issue or cause its transfer agents to issue due
                         bills or other appropriate evidence prepared by the
                         Company of the right to receive such shares. If any
                           distribution in respect of which an adjustment to the
                      Conversion Rate is required to be made as of the
                       record date, effective date or Determination Date
                    therefor is not thereafter made or paid by the
                          Company for any reason, the Conversion Rate shall be
                           readjusted to the Conversion Rate which would then be
                         in effect if such record date had not been fixed or
                       such effective date or Determination Date had not
occurred.                 

         (vii)    No adjustment in the Convention Price or the
                     corresponding Conversion Rate shall be required
                         unless such adjustment would require an increase or
                     decrease of at least 1% in such rate; provided,
                           however, that any adjustments which by reason of this
                    paragraph are not required to be made shall be
                   carried forward and taken into account in any

-15-

S-4/A
366th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 366th
                        subsequent adjustment. All calculations under this
                         paragraph shall be made by the Company and shall be
                made to the nearest cent or to the nearest
                      one-hundredth of a share, as the case may be. No
                           adjustment need be made for a change in the par value
          or no par value of the Common Stock.

                  (viii)   No adjustment need be made for a transaction referred
                       to in this Section 8 if all holders of all of the
                         Company's securities are entitled to participate in
                         the transaction on a basis and with notice that the
                  Board of Directors determines to be fair and
                           appropriate in light of the basis and notice on which
                holders of Common Stock participate in the
                       transaction. The Company shall give notice to the
               Transfer Agent of any such determination.

                 (ix)     No adjustment need to be made for rights to purchase
                           Common Stock or issuances of Common Stock pursuant to
                     a Company plan for reinvestment of dividends of
                          interest. No adjustment need be made for a change to
                      the par value or a change to no par value of the
                      Common Stock. To the extent that the Convertible
                           Preferred Stock becomes convertible into the right to
                         receive cash, no adjustment need be made thereafter
                           as to the cash. Interest will not accrue on the cash.

                (x)      To the extent that any occurrence specified in this
                           Section 8(d) shall affect only a particular series of
                          Common Stock, then any adjustment in respect thereof
                         shall be computed as though all reference to Common
                       Stock were to such series of Common Stock. To the
                          extent that any occurrence specified in this Section
                           8(d) shall affect a particular series of Common Stock
                         differently from other series of Common Stock, then
                         any adjustment in respect thereof shall be computed
                 separately for each series of Common Stock.

                 (e) The Company shall be entitled to make such adjustments in
        the Conversion Rate, in addition to those required by Section 8, as it
     in its discretion shall determine to be advisable in order that any
     stock dividends, subdivisions of shares, distributions of rights to
         purchase stock or securities or distributions of securities convertible
     into or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.                            

               (f) The Company may from time to time reduce the Conversion
       Rate by an amount for any period of time if the period is at least 20
       days or such longer period as required by law and if the reduction is
        irrevocable during the period; provided, however, that in no event may
       the Conversion Rate be reduced such that the Conversion Price is less
than the par value of a share of Common Stock.                

-16-

S-4/A
367th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 367th
             (g) Whenever the Conversion Rate is adjusted, the Company
      shall promptly file with the Transfer Agent an Officers' Certificate
      briefly stating the facts requiring the adjustment and the manner of
computing it.                                                 

                  (h) The Company shall provide to the Holders reasonable notice
        of any event that would result in an adjustment to the Conversion rate
   so as to permit the Holders to effect a conversion of Convertible
        Preferred Stock into shares of Common Stock prior to the occurrence of
such event.                                                   

9. CERTAIN COVENANTS.                                         

                (a) PAYMENTS FOR CONSENT. Neither the Company nor any of its
         subsidiaries shall, directly or indirectly, pay or cause to be paid any
         consideration, whether by way of dividend or other distribution, fee or
       otherwise, to any Holder of shares of the Convertible Preferred Stock
       for or as an inducement to any consent, waiver or amendment of any of
  the terms or provisions of the Certificate of Designation or the
        Convertible Preferred Stock unless such consideration is offered to be
         paid and is paid to all Holders of the Convertible Preferred Stock that
     consent, waive or agree to amend in the time frame set forth in the
       solicitation documents relating to such consent, waiver or agreement.

         (b) REPORTS. Whether or not required by the rules and
         regulations of the Commission, so long as any shares of the Convertible
   Preferred Stock are outstanding, the Company shall furnish to the
       Holders of the Convertible Preferred Stock (i) as soon as practicable
         after the end of each fiscal year of the Company a consolidated balance
       sheet, as at the end of such fiscal year, a consolidated statement of
         operations for such year and a consolidated statement of cash flows for
       such year, accompanied by a report and opinion thereon by independent
  public accountants of national standing selected by the Board of
        Directors; (ii) as soon as practicable after the end of each quarterly
       accounting period of the Company, a consolidated balance sheet of the
       Company as of the end of each such fiscal quarter, and a consolidated
       statement of income and a consolidated statement of cash flows of the
         Company for such period and for the current fiscal year to date as well
    as any additional information necessary to satisfy the information
         requirements of Rule 144A(d)(4) promulgated under the Securities Act of
      1933, as amended. In the event the Company has filed any such report
      with the Commission, it shall not be obligated to separately furnish
       the report to any Holder unless and until such Holder requests a copy
of the report.                                                

      10. REISSUANCE OF CONVERTIBLE PREFERRED STOCK. Shares of Convertible
Preferred Stock redeemed for or converted into Common Stock or that have been   
reacquired in any manner shall not be reissued as shares of Convertible         
Preferred Stock and shall (upon compliance with any applicable provisions of the
laws of Delaware) have the status of authorized and unissued shares of Preferred
Stock undesignated as to series and may be redesignated and reissued as part of 
any series of Preferred Stock; provided, however, that so long as any shares of 
Convertible Preferred Stock are outstanding, any issuance of such shares must be
in compliance with the terms hereof.                                            

-17-

S-4/A
368th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 368th
   11. BUSINESS DAY. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,    
such payment redemption or exchange shall be made on the immediately succeeding 
Business Day,                                                                   

  12. AMENDMENT, SUPPLEMENT AND WAIVER. The Company may amend this
Certificate of Designation with the affirmative vote or consent of the holders  
of a majority of the shares of Convertible Preferred Stock then outstanding     
(including votes or consents obtained in connection with a tender offer or      
exchange offer for the Convertible Preferred Stock) and, except as otherwise    
provided by applicable law, any past default or failure to comply with any      
provision of this Certificate of Designation may also be waived with the consent
of such holders. Notwithstanding the foregoing, however, without the consent of 
each Holder affected, an amendment (including any amendment or restatement of   
the Company's Certificate of Incorporation) or waiver may not (with respect to  
any shares of the Convertible Preferred Stock held by a non-consenting Holder); 
(i) alter the voting rights with respect to the Convertible Preferred Stock or  
reduce the number of shares of the Convertible Preferred Stock whose Holders    
must consent to an amendment, supplement or waiver, (ii) reduce the Liquidation 
Preference of any share of the Convertible Preferred Stock or adversely alter   
the provisions with respect to the redemption of the Convertible Preferred      
Stock, (iii) reduce the rate of or change the time for payment of dividends on  
any share of the Convertible Preferred Stock, (iv) waive a default in the       
payment of dividends on the Convertible Preferred Stock, (v) make any share of  
the Convertible Preferred Stock payable in money other than United States       
dollars, (vi) make any change in the provisions of the Certificate of           
Designation relating to waivers of the rights of Holders of the Convertible     
Preferred Stock to receive the Liquidation Preference, to receive dividends on  
the Convertible Preferred Stock or (vii) make any change in the foregoing       
amendment and waiver provisions.                                                

         Notwithstanding the foregoing, without the consent of any Holder of the
Convertible Preferred Stock, the Company may (to the extent permitted by, and   
subject to the requirements of, Delaware law) amend or supplement this          
Certificate of Designation to cure any ambiguity, defect or inconsistency, to   
provide for uncertificated shares of the Convertible Preferred Stock in addition
to or in place of certificated shares of the Convertible Preferred Stock, to    
make any change that would provide any additional rights or benefits to the     
Holders of the Convertible Preferred Stock or to make any change that the Board 
of Directors determines, in good faith, is not materially adverse to Holders of 
the Convertible Preferred Stock or is required for the Company to comply with   
the Indenture as in effect on the Issue Date.                                   

13. TRANSFER AND EXCHANGE. When Convertible Preferred Stock is
presented to the Transfer Agent with a request to register the transfer of such 
Convertible Preferred Stock or to exchange such Convertible Preferred Stock for 
an equal number of shares of Convertible Preferred Stock of other authorized    
denominations, the Transfer Agent shall register the transfer or make the       
exchange as requested if its reasonable requirements for such transaction are   
met and such transfer or exchange is in compliance with applicable laws or      
regulations.                                                                    

      14. CERTAIN DEFINITIONS. As used in this Certificate of Designation,
the following terms shall have the following meanings (and (1) terms defined in 
the singular have comparable meanings when used in the plural and vice versa,   
(2) "including" means including without limitation, (3) "or" is not exclusive   
and (4) an accounting term not otherwise defined has the meaning assigned to it 
in accordance with United States generally accepted accounting principles as in 
effect on Issue Date and all accounting calculations will be determined in      
accordance with such principles), unless the content otherwise requires:        

-18-

S-4/A
369th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 369th
       "Affiliate" of any specified Person means (i) any other Person which,
directly or indirectly, controls, is controlled by or is under direct or        
indirect common control with, the specified Person, (ii) any other Person that  
owns, directly or indirectly, 10% or more of the specified Person's Voting Stock
or (iii) any executive officer or director of the specified Person.             

        "Board of Directors" mean the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of the Board.                

"Business Day" means each day which is not a legal holiday.   

        "Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated  
and whether voting and/or non-voting) of, such Person's capital stock, including
Preferred Stock, and any and all rights (other than any evidence of             
indebtedness), warrants or options exchangeable for or convertible into such    
capital stock.                                                                  

       "Closing Price" means on any day the reported last sale price on such
day, or in case no sale takes place on such day, the average of the reported    
closing bid and ask prices on the principal national securities exchange (which 
shall include the Nasdaq National Market) on which such stock is listed or      
admitted to trading (and if the Common Stock is listed or admitted to trading on
more than one U.S. national or non-U.S. securities exchange, the Company shall  
determine, in its reasonable discretion, the principal securities exchange on   
which such Common Stock is listed or admitted to trading), or if not listed or  
admitted to trading on any securities exchange, the average of the closing bid  
and ask prices as furnished by any independent registered broker-dealer firm,   
selected by the Company for that purpose, in each case adjusted for any stock   
split during the relevant period.                                               

"Commission" means the Securities and Exchange Commission.    

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

 "Holders" means the registered holders from time to time of the
Convertible Preferred Stock.                                                    

       "Market Price," for any security as of any date, means the average of
the daily Closing Price for the five consecutive trading days ending on such    
date for such security or, if no Closing Prices are available for such security,
the current market value shall be an amount equal to the fair market value of   
such security determined in the good faith judgment of the Board of Directors of
the Company.                                                                    

       "Officers' Certificate" means a certificate signed by two officers of
the Company.                                                                    

     "Paying Agent" means the paying agent for the Convertible Preferred
Stock appointed by the Company, which initially shall be Mellon Investor        
Services.                                                                       

-19-

S-4/A
370th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 370th
       "Permitted Holders" means (i) AIG/SUN America Investments, Inc., (ii)
American General, (iii) AIM Capital Management, (iv) American Express Financial 
Advisors, (v) Goldman, Sachs & Co. Special Situations Investing, (vi) LC Capital
Partners, LP, (vii) Lehman Brothers, (viii) Lord Abbett, (ix) Mackay Shields,   
(x) Morgan Stanley Asset Management, (xi) Oppenheimer Funds, (xii) Putnam       
Investments, (xiii) Romulus Holdings, Inc., (xiv) Triage Capital Management,    
(xv) Commonwealth Advisors, Inc., (xvi) Lutheran Brotherhood, (xvii) Lampe      
Conway & Co. LLC, (xviii) Bay Harbour Management, (xix) Loeb Partners Corp., and
(xx) with respect to each of the foregoing, any majority-owned Affiliate        
thereof.                                                                        

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

  "Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of  
such Person's preferred or preference stock, and including, without limitation, 
all classes and series of preferred or preference stock of such Person.         

"Securities Act" means the Securities Act of 1933, as amended.

"Trading Day" means, in respect of any securities exchange or 
securities market, each Monday, Tuesday, Wednesday, Thursday and Friday, other  
than any day on which securities are not traded on the applicable securities    
exchange or in the applicable securities market.                                

         "Transfer Agent" means the transfer agent for the Convertible Preferred
Stock appointed by the Company, which initially shall be Mellon Investor        
Services.                                                                       

        "Voting Stock" means, with respect to any Person, the Capital Stock of
any class or kind ordinarily having the power to vote for the election of       
directors or other members of the governing body of such Person."               

-20-

S-4/A
371st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 371st
IN WITNESS WHEREOF, said Globix Corporation, has caused this  
Certificate of Designation to be signed by __________________, its              
________________________, this ____ day of _________, 2004.                     

                  GLOBIX CORPORATION

   By:
                                            ------------------------------------
             Name:
              Title:

-21-

S-4/A
372nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 372nd
APPENDIX B-1                                                                    

 FORM OF
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
 NEON COMMUNICATIONS, INC.

        Pursuant to Section 242 of the General Corporation Law of the State of
Delaware (the "DGCL"), NEON Communications, Inc., a Delaware corporation (the   
"Corporation"), does hereby certify as follows:                                 

 FIRST: The name of the Corporation is NEON Communications, Inc.

      SECOND: The Amended and Restated Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation") was originally filed with the  
Secretary of State of the State of Delaware on December 20, 2002.               

 THIRD: On _________________, 2004 the Board of Directors of the
Corporation (the "Board of Directors") duly adopted a resolution setting forth  
the following amendment to the Certificate of Incorporation (the "Amendment"),  
as amended to date:                                                             

    The definition of "Liquidation Event" set forth in Article FOURTH,
Section A(4) of the Certificate of Incorporation is hereby amended and restated 
to read in its entirety as follows:                                             

     ""Liquidation Event" shall mean (i) the liquidation, dissolution or
         winding up of the Corporation, whether voluntary or involuntary, (ii) a
      sale, lease or transfer of all or substantially all of the assets of
       the Corporation, or (iii) any consolidation, merger or share exchange
     of the Corporation in which the holders of the Corporation's voting
      stock outstanding immediately prior to such consolidation, merger or
      share exchange do not in the aggregate hold a majority of the voting
    stock of the surviving or resulting entity outstanding immediately
    following such consolidation, merger or share exchange, excluding,
         however, (x) a merger or other reorganization solely for the purpose of
        changing the Corporation's jurisdiction of organization or name, (y) a
         merger of the Corporation with or into a wholly-owned subsidiary of the
        Corporation that is incorporated in the United States and (z) a merger
      of a wholly owned subsidiary of Globix Corporation with and into the
    Corporation that has been duly approved by the stockholders of the
Corporation."                                                 

FOURTH: On ______________, 2004, at a special meeting of the  
stockholders of the Corporation, duly called and held upon notice in accordance 
with Section 222 of the DGCL, the necessary number of shares as required by     
statute were voted for the Amendment.                                           

         FIFTH: The Amendment was duly adopted in accordance with the provisions
of Section 242 of the DGCL.                                                     

(Signature page follows)

S-4/A
373rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 373rd
     IN WITNESS WHEREOF, the Corporation has caused this Amendment to be
signed pursuant to Section 103(a)(2) of the DGCL by the undersigned duly        
authorized officer of the Corporation, as of the ___ day of ____________, 2004. 

                     NEON COMMUNICATIONS, INC.

By: 
                                         ---------------------------------------
 Name:
                                           -------------------------------------
  Title:
                                            ------------------------------------

S-4/A
374th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 374th
APPENDIX B-2                                                                    

 FORM OF
CERTIFICATE OF AMENDMENT
TO
 CERTIFICATE OF DESIGNATION OF PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF PREFERRED 
STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
OF
 12% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
 NEON COMMUNICATIONS, INC.

       Pursuant to Section 151(g) and Section 242 of the General Corporation
Law of the State of Delaware (the "DGCL"), NEON Communications, Inc., a Delaware
corporation (the "Corporation"), does hereby certify as follows:                

 FIRST: The name of the Corporation is NEON Communications, Inc.

      SECOND: The Amended and Restated Certificate of Incorporation of the
Corporation was originally filed with the Secretary of State of the State of    
Delaware on December 20, 2002 and the Certificate of Designation of Preferences 
and Relative, Participating, Optional and Other Special Rights of Preferred     
Stock and Qualifications, Limitations and Restrictions Thereof of 12% Series A  
Cumulative Convertible Preferred Stock of the Corporation (the "Certificate of  
Designation") was originally filed with the Secretary of State of the State of  
Delaware on December 20, 2002.                                                  

 THIRD: On _________________, 2004 the Board of Directors of the
Corporation (the "Board of Directors") duly adopted a resolution setting forth  
the following amendment to the Certificate of Designation (the "Amendment"), as 
amended to date:                                                                

         The first sentence of Section 7(h) of the Certificate of Designation is
hereby amended and restated to read in its entirety as follows:                 

                "A Change of Control shall be deemed to have occurred if any
         of the following occurs: (a) any "person" or "group" (as such terms are
         used in Sections 13(d) or 14(d) of the Securities Exchange Act of 1934,
      as amended (the "Exchange Act")), excluding Permitted Holders, is or
    becomes the "beneficial owner" (as defined in Rules 13d-3 or 13d-5
      under the Exchange Act, except that a person shall be deemed to have
  "beneficial ownership" of all securities that such person has or
  acquires the right to acquire, whether such right is exercisable
         immediately or only after the passage of time), directly or indirectly,
       of more than 50% of the total voting power of all Voting Stock of the
  Company (except that the person or group shall not be deemed the
        "beneficial owner" of shares tendered pursuant to a tender or exchange
         offer made by that person or group of any of their Affiliates until the
         tendered shares are accepted for purchase or exchange) or has, directly
        or indirectly, the right to elect or designate a majority of the Board
       of Directors of the Company, or (b) the Company consolidates with, or
     merges with or into, another person other than any such transaction
       where (i) the "beneficial owners" (as so defined) of the Voting Stock
     of the Company immediately before such transaction own, directly or
        indirectly, immediately after such transaction, at least a majority of
     the voting power of all Voting Stock of the surviving or transferee
corporation or its parent corporation immediately after such  
transaction, as applicable, and (ii) immediately after such   
        transaction, no "person" or "group" (as such terms are defined above),
        excluding the Permitted Holders, is the "beneficial owner" (as defined
         above), directly or indirectly, of more than 50% of the Voting Stock of
        such surviving or transferee corporation or its parent corporation, as
   applicable, or has, directly or indirectly, the right to elect or
    designate a majority of the board of directors of the surviving or
         transferee corporation or its parent corporation, as applicable, or (c)
during any consecutive two-year period, individuals who at the

S-4/A
375th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 375th
    beginning of such period constituted the Board of Directors of the
         Company (together with any new directors whose election by the Board or
      whose nomination for election by the stockholders of the Company was
        approved by a vote of a majority of the directors then still in office
    who were either directors at the beginning of such period or whose
       election or nomination for election was previously so approved) cease
         for any reason to constitute a majority of the Board then in office, or
 (d) the Company sells, assigns, or otherwise disposes of all or
      substantially all of its assets; provided, however, that a Change of
         Control shall not be deemed to have occurred as a result of a merger of
   a wholly owned subsidiary of Globix Corporation with and into the
Company that has been duly approved by the stockholders of the
Company."                                                     

        FOURTH: On ___________, 2004, at a special meeting of the stockholders
of the Corporation, duly called and held upon notice in accordance with Section 
222 of the DGCL, the necessary number of shares as required by statute were     
voted for the Amendment.                                                        

         FIFTH: The Amendment was duly adopted in accordance with the provisions
of Section 242 of the DGCL.                                                     

(Signature page follows)

S-4/A
376th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 376th
IN WITNESS WHEREOF, NEON Communications, Inc. has caused this 
Certificate of Amendment to Certificate of Designation to be signed pursuant to 
Section 103(a)(2) of the DGCL by the undersigned duly authorized officer of the 
Corporation, as of this ___ day of ______________, 2004.                        

                             NEON COMMUNICATIONS, INC.

       By:
                                             -----------------------------------
         Name:
                                                   -----------------------------
          Title:
                                                   -----------------------------

S-4/A
377th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 377th
APPENDIX C
----------

DELAWARE GENERAL CORPORATION LAW

 SECTION 262

APPRAISAL RIGHTS

SS. 262.   APPRAISAL RIGHTS                                   

        (a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this  
section with respect to such shares, who continuously holds such shares through 
the effective date of the merger or consolidation, who has otherwise complied   
with subsection (d) of this section and who has neither voted in favor of the   
merger or consolidation nor consented thereto in writing pursuant to ss. 228 of 
this title shall be entitled to an appraisal by the Court of Chancery of the    
fair value of the stockholder's shares of stock under the circumstances         
described in subsections (b) and (c) of this section. As used in this section,  
the word "stockholder" means a holder of record of stock in a stock corporation 
and also a member of record of a nonstock corporation; the words "stock" and    
"share" mean and include what is ordinarily meant by those words and also       
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a       
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository. 

        (b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be 
effected pursuant to ss. 251 (other than a merger effected pursuant to ss.      
251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title:                                                                     

              (1) Provided, however, that no appraisal rights under this
     section shall be available for the shares of any class or series of
       stock, which stock, or depository receipts in respect thereof, at the
     record date fixed to determine the stockholders entitled to receive
      notice of and to vote at the meeting of stockholders to act upon the
   agreement of merger or consolidation, were either (i) listed on a
        national securities exchange or designated as a national market system
         security on an interdealer quotation system by the National Association
       of Securities Dealers, Inc. or (ii) held of record by more than 2,000
 holders; and further provided that no appraisal rights shall be
  available for any shares of stock of the constituent corporation
       surviving a merger if the merger did not require for its approval the
      vote of the stockholders of the surviving corporation as provided in
subsection (f) of ss. 251 of this title.                      

         (2) Notwithstanding paragraph (1) of this subsection,
       appraisal rights under this section shall be available for the shares
     of any class or series of stock of a constituent corporation if the
        holders thereof are required by the terms of an agreement of merger or
       consolidation pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264
of this title to accept for such stock anything except:       

C-1 

S-4/A
378th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 378th
                        a. Shares of stock of the corporation surviving or
              resulting from such merger or consolidation, or depository
receipts in respect thereof;                

                     b. Shares of stock of any other corporation, or
                 depository receipts in respect thereof, which shares of stock
             (or depository receipts in respect thereof) or depository
                 receipts at the effective date of the merger or consolidation
              will be either listed on a national securities exchange or
         designated as a national market system security on an
               interdealer quotation system by the National Association of
                 Securities Dealers, Inc. or held of record by more than 2,000
holders;                                    

                        c. Cash in lieu of fractional shares or fractional
                depository receipts described in the foregoing subparagraphs
a. and b. of this paragraph; or             

                           d. Any combination of the shares of stock, depository
                receipts and cash in lieu of fractional shares or fractional
                depository receipts described in the foregoing subparagraphs
a., b. and c. of this paragraph.            

              (3) In the event all of the stock of a subsidiary Delaware
       corporation party to a merger effected under ss. 253 of this title is
      not owned by the parent corporation immediately prior to the merger,
      appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.                                         

     (c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of   
any class or series of its stock as a result of an amendment to its certificate 
of incorporation, any merger or consolidation in which the corporation is a     
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision, 
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.                   

(d) Appraisal rights shall be perfected as follows:           

                 (1) If a proposed merger or consolidation for which appraisal
        rights are provided under this section is to be submitted for approval
      at a meeting of stockholders, the corporation, not less than 20 days
     prior to the meeting, shall notify each of its stockholders who was
     such on the record date for such meeting with respect to shares for
        which appraisal rights are available pursuant to subsection (b) or (c)
         hereof that appraisal rights are available for any or all of the shares
     of the constituent corporations, and shall include in such notice a
         copy of this section. Each stockholder electing to demand the appraisal
       of such stockholder's shares shall deliver to the corporation, before
         the taking of the vote on the merger or consolidation, a written demand
 for appraisal of such stockholder's shares. Such demand will be

 C-2

S-4/A
379th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 379th
        sufficient if it reasonably informs the corporation of the identity of
        the stockholder and that the stockholder intends thereby to demand the
     appraisal of such stockholder's shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A 
   stockholder electing to take such action must do so by a separate
       written demand as herein provided. Within 10 days after the effective
  date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent 
        corporation who has complied with this subsection and has not voted in
       favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or          

               (2) If the merger or consolidation was approved pursuant to
ss. 228 or ss. 253 of this title, then, either a constituent  
       corporation before the effective date of the merger or consolidation,
      or the surviving or resulting corporation within 10 days thereafter,
     shall notify each of the holders of any class or series of stock of
      such constituent corporation who are entitled to appraisal rights of
       the approval of the merger or consolidation and that appraisal rights
         are available for any or all shares of such class or series of stock of
       such constituent corporation, and shall include in such notice a copy
 of this section. Such notice may, and, if given on or after the
        effective date of the merger or consolidation, shall, also notify such
        stockholders of the effective date of the merger or consolidation. Any
        stockholder entitled to appraisal rights may, within 20 days after the
         date of mailing of such notice, demand in writing from the surviving or
   resulting corporation the appraisal of such holder's shares. Such
       demand will be sufficient if it reasonably informs the corporation of
  the identity of the stockholder and that the stockholder intends
         thereby to demand the appraisal of such holder's shares. If such notice
    did not notify stockholders of the effective date of the merger or
        consolidation, either (i) each such constituent corporation shall send
a second notice before the effective date of the merger or    
       consolidation notifying each of the holders of any class or series of
      stock of such constituent corporation that are entitled to appraisal
         rights of the effective date of the merger or consolidation or (ii) the
       surviving or resulting corporation shall send such a second notice to
  all such holders on or within 10 days after such effective date;
         provided, however, that if such second notice is sent more than 20 days
         following the sending of the first notice, such second notice need only
         be sent to each stockholder who is entitled to appraisal rights and who
        has demanded appraisal of such holder's shares in accordance with this
        subsection. An affidavit of the secretary or assistant secretary or of
       the transfer agent of the corporation that is required to give either
        notice that such notice has been given shall, in the absence of fraud,
      be prima facie evidence of the facts stated therein. For purposes of
      determining the stockholders entitled to receive either notice, each
       constituent corporation may fix, in advance, a record date that shall
 be not more than 10 days prior to the date the notice is given,
         provided, that if the notice is given on or after the effective date of
      the merger or consolidation, the record date shall be such effective
       date. If no record date is fixed and the notice is given prior to the
       effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.      

 C-3

S-4/A
380th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 380th
(e) Within 120 days after the effective date of the merger or 
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to   
appraisal rights, may file a petition in the Court of Chancery demanding a      
determination of the value of the stock of all such stockholders.               
Notwithstanding the foregoing, at any time within 60 days after the effective   
date of the merger or consolidation, any stockholder shall have the right to    
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of   
the merger or consolidation, any stockholder who has complied with the          
requirements of subsections (a) and (d) hereof, upon written request, shall be  
entitled to receive from the corporation surviving the merger or resulting from 
the consolidation a statement setting forth the aggregate number of shares not  
voted in favor of the merger or consolidation and with respect to which demands 
for appraisal have been received and the aggregate number of holders of such    
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the    
period for delivery of demands for appraisal under subsection (d) hereof,       
whichever is later.                                                             

         (f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which   
shall within 20 days after such service file in the office of the Register in   
Chancery in which the petition was filed a duly verified list containing the    
names and addresses of all stockholders who have demanded payment for their     
shares and with whom agreements as to the value of their shares have not been   
reached by the surviving or resulting corporation. If the petition shall be     
filed by the surviving or resulting corporation, the petition shall be          
accompanied by such a duly verified list. The Register in Chancery, if so       
ordered by the Court, shall give notice of the time and place fixed for the     
hearing of such petition by registered or certified mail to the surviving or    
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at    
least 1 week before the day of the hearing, in a newspaper of general           
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication  
shall be approved by the Court, and the costs thereof shall be borne by the     
surviving or resulting corporation.                                             

    (g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an   
appraisal for their shares and who hold stock represented by certificates to    
submit their certificates of stock to the Register in Chancery for notation     
thereon of the pendency of the appraisal proceedings; and if any stockholder    
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.                                                               

      (h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any  
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon   
the amount determined to be the fair value. In determining such fair value, the 
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of 
interest which the surviving or resulting corporation would have had to pay to  

 C-4

S-4/A
381st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 381st
borrow money during the pendency of the proceeding. Upon application by the     
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery 
or other pretrial proceedings and may proceed to trial upon the appraisal prior 
to the final determination of the stockholder entitled to an appraisal. Any     
stockholder whose name appears on the list filed by the surviving or resulting  
corporation pursuant to subsection (f) of this section and who has submitted    
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally          
determined that such stockholder is not entitled to appraisal rights under this 
section.                                                                        

         (i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court 
may direct. Payment shall be so made to each such stockholder, in the case of   
holders of uncertificated stock forthwith, and the case of holders of shares    
represented by certificates upon the surrender to the corporation of the        
certificates representing such stock. The Court's decree may be enforced as     
other decrees in the Court of Chancery may be enforced, whether such surviving  
or resulting corporation be a corporation of this State or of any state.        

    (j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon  
application of a stockholder, the Court may order all or a portion of the       
expenses incurred by any stockholder in connection with the appraisal           
proceeding, including, without limitation, reasonable attorney's fees and the   
fees and expenses of experts, to be charged pro rata against the value of all   
the shares entitled to an appraisal.                                            

       (k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection (d)  
of this section shall be entitled to vote such stock for any purpose or to      
receive payment of dividends or other distributions on the stock (except        
dividends or other distributions payable to stockholders of record at a date    
which is prior to the effective date of the merger or consolidation); provided, 
however, that if no petition for an appraisal shall be filed within the time    
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of such          
stockholder's demand for an appraisal and an acceptance of the merger or        
consolidation, either within 60 days after the effective date of the merger or  
consolidation as provided in subsection (e) of this section or thereafter with  
the written approval of the corporation, then the right of such stockholder to  
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the   
approval of the Court, and such approval may be conditioned upon such terms as  
the Court deems just.                                                           

       (l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they        
assented to the merger or consolidation shall have the status of authorized and 
unissued shares of the surviving or resulting corporation.                      

 C-5

S-4/A
382nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 382nd
APPENDIX D                                                                      

                                                              September 28, 2004

Special Committee of the Board of Directors                                     
Globix Corporation                                                              
139 Centre Street                                                               
New York, NY 10013                                                              

Gentlemen:                                                                      

We understand that Globix Corporation ("Globix") and NEON     
Communications, Inc. ("NEON") propose to enter into a First Amendment to        
Agreement and Plan of Merger (the "Amendment") that amends certain terms of the 
Agreement and Plan of Merger dated July 19, 2004 between Globix and NEON (the   
"Merger Agreement"). Under the Merger Agreement, as proposed to be amended by   
the Amendment (the "Amended Merger Agreement"), upon the terms and subject to   
the conditions set forth in the Amended Merger Agreement, a wholly-owned        
subsidiary of Globix will be merged with and into NEON and NEON will become a   
wholly-owned subsidiary of Globix (the "Merger"). The terms of the Merger will  
be set forth more fully in the Amended Merger Agreement.                        

     Pursuant to the Amended Merger Agreement, we understand that at the
Effective Time (as defined in the Merger Agreement), (a) each issued and        
outstanding share of 12% Series A Cumulative Convertible Preferred Stock, par   
value $0.001 per share, of NEON ("NEON Preferred Stock") (after treating all    
accrued dividends as having been paid in additional shares of NEON Preferred    
Stock) will be converted into the right to receive (x) $3.75 in cash and (y)    
2.08333 of a share of Globix preferred stock with substantially such terms as   
are set forth in the Amended Merger Agreement ("Globix Preferred Stock") (the   
"Preferred Stock Exchange") and (b) each issued and outstanding share of Common 
Stock, par value $0.001 per share, of NEON ("NEON Common Stock") will be        
converted into the right to receive the number of shares of common stock, par   
value $0.01 per share, of Globix ("Globix Common Stock") equal to the Exchange  
Ratio (as defined below). The Exchange Ratio shall equal 1.2748 shares of Globix
Common Stock for each share of NEON Common Stock.                               

      We also understand that, pursuant to the Amended Merger Agreement, a
condition to the obligations of NEON to effect the Merger is that Globix shall  
have acquired $12.5 million in the aggregate of principal amount and interest   
accrued thereon to the date of exchange of its 11% Senior Secured Notes due 2008
in exchange for an aggregate of approximately 4,545,455 shares of Globix Common 
Stock (the "Globix Debt Purchase").                                             

D-1 

S-4/A
383rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 383rd
Special Committee of the Board of Directors                                     
Globix Corporation                                                              
September 28, 2004                                                              
Page 2                                                                          

      You have asked us to advise you as to the fairness, from a financial
point of view, of the Exchange Ratio to the holders of Globix Common Stock.     

        For purposes of this opinion we have, among other things: (i) reviewed
the Merger Agreement and a draft of the Amendment dated September 16, 2004; (ii)
reviewed certain publicly available information concerning Globix and NEON and  
certain other relevant financial and operating data of Globix and NEON furnished
to us by Globix and NEON; (iii) reviewed the historical stock prices and trading
volumes of the Globix Common Stock; (iv) held discussions with members of       
management of Globix and NEON concerning the respective companies' current and  
future business prospects and joint prospects for the combined companies,       
including the potential cost savings and other synergies that may be achieved by
the combined companies; (v) reviewed certain financial forecasts with respect to
Globix and NEON prepared by the respective managements of Globix and NEON; (vi) 
compared certain publicly available financial data of companies whose securities
are traded in the public markets and that we deemed relevant to similar data for
NEON; (vii) reviewed the financial terms of certain other business combinations 
that we deemed generally relevant; and (viii) performed and/or considered such  
other studies, analyses, inquiries and investigations as we deemed appropriate. 

       In connection with our review and in arriving at our opinion, we have
assumed and relied on the accuracy and completeness of all of the financial and 
other information reviewed by us for purposes of this opinion and have neither  
attempted to verify independently nor assumed responsibility for verifying any  
of such information. In addition, we have assumed, with your consent, that the  
Merger will qualify as a reorganization within the meaning of Section 368(a) of 
the Internal Revenue Code of 1986 and that the Merger will be consummated upon  
the terms and subject to the conditions set forth in the draft Amended Merger   
Agreement dated September 16, 2004 without material alteration or waiver        
thereof. With respect to the financial forecasts for Globix and NEON provided to
us by their respective managements and the joint prospects of the combined      
companies, we have assumed, with your consent and based upon discussions with   
the management of Globix and NEON, that such forecasts have been reasonably     
prepared on bases reflecting the best currently available estimates and         
judgments of such managements, at the time of preparation, of the future        
operating and financial performance of Globix and NEON and the combined         
companies, and we have relied, without independent verification, upon the       
estimates of such managements of the potential cost savings and other synergies,
including the amount and timing thereof, that may be achieved as a result of the
proposed Merger. We express no opinion with respect to any of such forecasts,   
projections or estimates or the assumptions on which they were based. We have   
relied on advice of counsel and independent accountants to Globix as to all     
legal and financial reporting matters with respect to Globix, the Merger and the
Amended Merger Agreement. We have not assumed any responsibility for or made or 
obtained any independent evaluation, appraisal or physical inspection of the    
assets or liabilities of Globix or NEON. Further, our opinion is based on       

D-2 

S-4/A
384th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 384th
Special Committee of the Board of Directors                                     
Globix Corporation                                                              
September 28, 2004                                                              
Page 3                                                                          

economic, monetary and market conditions as they exist and can be evaluated as  
of the date hereof and we assume no responsibility to update or revise our      
opinion based upon circumstances and events occurring after the date hereof. Our
opinion as expressed herein is limited to the fairness, from a financial point  
of view, of the Exchange Ratio to the holders of Globix Common Stock and does   
not address Globix's underlying business decision to engage in the Merger and   
the Globix Debt Purchase or the relative merits of the Merger and the Globix    
Debt Purchase as compared to other strategies that might be available to Globix.
Our opinion does not constitute a recommendation to any stockholder of Globix as
to how such stockholder should vote on the proposed Merger.                     

         We are not expressing any opinion as to what the value of Globix Common
Stock or Globix Preferred Stock will be when issued pursuant to the Merger or   
the prices at which Globix Common Stock will actually trade at any time.        

         Needham & Company, Inc., as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in        
connection with mergers and acquisitions, negotiated underwritings, secondary   
distributions of securities, private placements and other purposes. We have been
engaged by Globix as financial advisor to render this opinion and will receive a
fee for our services, none of which is contingent upon consummation of the      
Merger. In addition, Globix has agreed to indemnify us for certain liabilities  
arising out of our role as financial advisor and out of the rendering of this   
opinion. In the ordinary course of our business, we may actively trade the      
equity securities of Globix for our own account or for the accounts of customers
and, accordingly, may at any time hold a long or short position in such         
securities.                                                                     

  This letter and the opinion expressed herein are provided at the
request and for the information of the Special Committee of the Board of        
Directors of Globix and may not be quoted or referred to or used for any purpose
without our prior written consent, except that this letter may be disclosed in  
connection with any registration statement or proxy statement used in connection
with the Merger so long as this letter is quoted in full in such registration   
statement or proxy statement.                                                   

        Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, and after taking into account the Preferred Stock Exchange and 
the Globix Debt Purchase, the Exchange Ratio is fair to the holders of Globix   
Common Stock from a financial point of view.                                    

                                     Very truly yours,

                                               /s/ NEEDHAM & COMPANY, INC.

D-3 

S-4/A
385th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 385th
APPENDIX E                                                                      

July 16, 2004                                                                   

Special Committee of the Board of Directors                                     
NEON Communications, Inc.                                                       
2200 West Park Drive                                                            
Westborough, MA 01581                                                           

Members of the Special Committee:                                               

You have requested our opinion (the "Fairness Opinion") as to the fairness, from
a financial point of view, to the holders of common stock of NEON               
Communications, Inc. (the "Company") (as stockholders of the Company) of the    
Exchange Ratio (as hereinafter defined) set forth in the Agreement and Plan of  
Merger dated as of July 16, 2004 (the "Agreement"), by and among the Company and
Globix Corporation ("Globix"). The Agreement provides for, among other things,  
the merger of a new wholly-owned subsidiary of Globix ("Merger Sub") with and   
into the Company (the "Transaction"), pursuant to which each issued and         
outstanding share of common stock in the Company shall be converted into the    
right to receive 1.2748 shares (the "Exchange Ratio") of common stock, par value
$0.01 per share, of Globix ("Globix Common Stock"). The Transaction is intended 
to qualify as a reorganization within the meaning of Section 368 (a) of the     
United States Internal Revenue Code of 1986, as amended. The terms and          
conditions of the Transaction are more fully described in the Agreement.        

Adams, Harkness & Hill, Inc., as part of its investment banking activities, is  
regularly engaged in the valuation of businesses and their securities in        
connection with mergers and acquisitions, underwritings, distributions of listed
and unlisted securities, private placements and valuations for corporate and    
other purposes. In the ordinary course of our business we may hold long or short
positions of Globix's common stock for either our customers or our own account. 
We will receive a fee for providing this Fairness Opinion that is not contingent
upon the consummation of the Transaction.                                       

In developing our Fairness Opinion, we have, among other things:                

(i)    reviewed the terms of the Agreement dated July 16, 2004 furnished to us  
       by legal counsel to the Special Committee which, for the purposes of this
      Fairness Opinion, we have assumed, with your permission, to be identical
in all material respects to the agreement to be executed;         

(ii)   analyzed and discussed with management of the Company and Globix certain 
 historic and projected financial statements and other financial and
operating data concerning each company;                           

(iii)  reviewed and analyzed the historical common stock trading history of     
Globix;                                                           

(iv)   conducted due diligence discussions with members of senior management of 
      the Company and Globix concerning the financial performance, operations,
business strategy and prospects for such company, respectively;   

(v)    reviewed and analyzed the potential pro forma financial effects of the   
Transaction on the projected financial results of the consolidated
entity;                                                           

(vi)   compared the results of operations of Globix with those of certain       
companies we deemed to be relevant and comparable;                

(vii)  compared the terms and conditions of the Transaction with certain mergers
and acquisitions we deemed to be relevant and comparable;         

(viii) reviewed and analyzed the current capitalization of each of the Company  
     and Globix, as well as the projected pro forma capitalization of Globix
after giving effect to the Transaction;                           

(ix)   performed such other financial studies, investigations and analyses and  
    took into account such other matters as we deemed necessary, including
      our assessment of general economic, market and monetary conditions as of
the date hereof.                                                  

E-1 

S-4/A
386th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 386th
In connection with our review and arriving at our Fairness Opinion, we have not 
independently verified any information received from the Company or Globix, have
relied on such information, and have assumed that all Special Committee of the  
Board of Directors NEON Communications, Inc. July 16, 2004 Page 2 such          
information is complete and accurate in all material respects. We have also     
relied on the assurances of management of the Company that they are not aware of
any facts that would make such information misleading. With respect to any      
forecasts reviewed relating to the prospects of the Company or Globix, we have  
assumed that they have been reasonably prepared on bases reflecting the best    
currently available estimates and judgments of management of the Company and    
Globix, respectively, as to the future financial performance of such company.   

Our Fairness Opinion is rendered on the basis of securities market conditions   
prevailing as of the date hereof and on the conditions and prospects, financial 
and otherwise, of the Company and as known to us on the date hereof. It should  
be understood that (i) subsequent developments may affect the conclusions       
expressed in this opinion if this opinion were rendered as of a later date, and 
(ii) Adams, Harkness & Hill, Inc. disclaims any obligation to advise any person 
of any change in any manner affecting this opinion that may come to our         
attention after the date of this opinion. We have also assumed that, in the     
course of obtaining necessary regulatory and third party approvals and consents 
for the Transaction, no modification, delay, limitation, restriction, or        
conditions will be imposed that will have an adverse effect on the Company,     
Globix or the contemplated benefits of the Transaction, and the Transaction will
be consummated in accordance with the terms of the Agreement, without waiver,   
modification or amendment of any material term, condition or agreement therein. 
We have also assumed that the final Agreement, when executed, will conform to   
the draft reviewed by us in all respects material to our analysis. We have not  
conducted, nor have we received copies of, any independent valuation or         
appraisal of any of the assets of the Company or Globix. In addition, we have   
assumed that any material liabilities (contingent or otherwise, known or        
unknown) of the Company or Globix are as set forth in the historic and projected
financial statements of the Company and Globix, respectively. This Fairness     
Opinion is necessarily based upon the information available to us and facts and 
circumstances as they exist and are subject to evaluation on the date hereof;   
events occurring after the date hereof could materially affect the assumptions  
used in preparing this Fairness Opinion.                                        

We are not expressing any opinion herein as to the price at which Globix shares 
have traded, the actual value of the Globix Common Stock when issued in the     
Transaction or the price at which Globix Common Stock may trade at any time in  
the future. We have not undertaken to reaffirm or revise this Fairness Opinion  
or otherwise comment upon any events occurring after the date hereof and do not 
have any obligation to update, revise or reaffirm this Fairness Opinion.        

It is agreed between the Special Committee of the Board of Directors and Adams, 
Harkness & Hill, Inc. that this letter is directed to, may be relied upon by and
is for the information of the Special Committee and the Board of Directors of   
the Company only, may not be relied upon by any other person, and may not be    
used for any other purpose without our prior written consent. It is also agreed 
that this Fairness Opinion does not address the relative merits of the          
Transaction or the other business strategies that might be available to the     
Company, nor does it address the decision of the Board of Directors to proceed  
with the Transaction. We have been engaged by the Company solely to render this 
Fairness Opinion to the Special Committee in connection with the Transaction. We
have not participated in, or provided any advice with respect to, the pricing   
determination, structuring or negotiation of the Transaction. This letter does  
not constitute a recommendation to any shareholder as to how such shareholder   
should vote on the proposed Transaction.                                        

Based upon and subject to the foregoing, it is our opinion that, as of the date 
hereof, the Exchange Ratio is fair, from a financial point of view to holders of
Company common stock (as stockholders of the Company).                          

Sincerely,                                                                      

ADAMS, HARKNESS & HILL, INC.                                                    

E-2 

S-4/A
387th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 387th
APPENDIX F                                                                      

October 8, 2004                                                                 

Special Committee of the Board of Directors                                     
NEON Communications, Inc.                                                       
2200 West Park Drive                                                            
Westborough, MA 01581                                                           

Members of the Special Committee:                                               

You have requested an affirmation of our opinion (the "Fairness Opinion"), dated
July 16, 2004, as to the fairness, from a financial point of view, to the       
holders of common stock of NEON Communications, Inc. (the "Company") (as        
stockholders of the Company) of the Exchange Ratio (as hereinafter defined) set 
forth in the Agreement and Plan of Merger dated as of July 16, 2004 (the        
"Agreement"), by and among the Company and Globix Corporation ("Globix"). The   
Agreement, as amended October 8, 2004, provides for, among other things, the    
merger of a new wholly-owned subsidiary of Globix ("Merger Sub") with and into  
the Company (the "Transaction"), pursuant to which each issued and outstanding  
share of common stock of the Company shall be converted into the right to       
receive 1.2748 shares (the "Exchange Ratio") of common stock, par value $0.01   
per share, of Globix ("Globix Common Stock"). The Transaction is intended to    
qualify as a reorganization within the meaning of Section 368 (a) of the United 
States Internal Revenue Code of 1986, as amended. The terms and conditions of   
the Transaction are more fully described in the Agreement.                      

Adams Harkness, Inc., as part of its investment banking activities, is regularly
engaged in the valuation of businesses and their securities in connection with  
mergers and acquisitions, underwritings, distributions of listed and unlisted   
securities, private placements and valuations for corporate and other purposes. 
In the ordinary course of our business we may hold long or short positions of   
Globix's common stock for either our customers or our own account. We will      
receive a fee for providing the Fairness Opinion and this affirmation thereof is
not contingent upon the consummation of the Transaction.                        

In connection with our affirmation of the Fairness Opinion, we have, among other
things:                                                                         

(i)     reviewed the terms of the Agreement dated October 8, 2004, as amended,  
furnished to us by legal counsel to the Special Committee;      

(ii)    analyzed and discussed with management of the Company and Globix certain
   historic and projected financial statements and other financial and
operating data concerning each company;                         

(iii)   reviewed and analyzed the historical common stock trading history of    
Globix;                                                         

(iv)    conducted due diligence discussions with members of senior management of
        the Company and Globix concerning the financial performance, operations,
business strategy and prospects for such company, respectively; 

(v)     reviewed and analyzed the potential pro forma financial effects of the  
  Transaction on the projected financial results of the consolidated
entity;                                                         

(vi)    compared the results of operations of Globix with those of certain      
companies we deemed to be relevant and comparable;              

(vii)   compared the terms and conditions of the Transaction with certain       
 mergers and acquisitions we deemed to be relevant and comparable;

(viii)  reviewed and analyzed the current capitalization of each of the Company 
       and Globix, as well as the projected pro forma capitalization of Globix
after giving effect to the Transaction;                         

(ix)    performed such other financial studies, investigations and analyses and 
      took into account such other matters as we deemed necessary, including
        our assessment of general economic, market and monetary conditions as of
the date hereof.                                                

F-1 

S-4/A
388th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 388th
                                     Special Committee of the Board of Directors
                                                       NEON Communications, Inc.
                                                                 October 8, 2004
                                                                          Page 2

In connection with our review and arriving at the Fairness Opinion and this     
affirmation thereof, we have not independently verified any information received
from the Company or Globix, have relied on such information, and have assumed   
that all such information is complete and accurate in all material respects. We 
have also relied on the assurances of management of the Company that they are   
not aware of any facts that would make such information misleading. With respect
to any forecasts reviewed relating to the prospects of the Company or Globix, we
have assumed, and have received written confirmation thereof, that they have    
been reasonably prepared on bases reflecting the best currently available       
estimates and judgments of management of the Company and Globix, respectively,  
as to the future financial performance of such company. In particular, with     
permission of the Special Committee, in connection with our affirmation of the  
Fairness Opinion, we have relied on the financial projections prepared by Globix
management and utilized in the analysis supporting our Fairness Opinion of July 
16, 2004, and not any subsequently shared financial modeling scenarios.         

Our affirmation of the Fairness Opinion is rendered on the basis of securities  
market conditions prevailing as of the date hereof and on the conditions and    
prospects, financial and otherwise, of the Company and Globix as known to us on 
the date hereof. It should be understood that (i) subsequent developments may   
affect the conclusions expressed in this opinion if this opinion were rendered  
as of a later date, and (ii) Adams Harkness, Inc. disclaims any obligation to   
advise any person of any change in any manner affecting this opinion that may   
come to our attention after the date of this opinion. We have also assumed that,
in the course of obtaining necessary regulatory and third party approvals and   
consents for the Transaction, no modification, delay, limitation, restriction,  
or conditions will be imposed that will have an adverse effect on the Company,  
Globix or the contemplated benefits of the Transaction, and the Transaction will
be consummated in accordance with the terms of the Agreement, without waiver,   
modification or amendment of any material term, condition or agreement therein. 
We have not conducted, nor have we received copies of, any independent valuation
or appraisal of any of the assets of the Company or Globix. In addition, we have
assumed that any material liabilities (contingent or otherwise, known or        
unknown) of the Company or Globix are as set forth in the historic and projected
financial statements of the Company and Globix, respectively. This affirmation  
of our Fairness Opinion is necessarily based upon the information available to  
us and facts and circumstances as they exist and are subject to evaluation on   
the date hereof; events occurring after the date hereof could materially affect 
the assumptions used in preparing our affirmation of the Fairness Opinion.      

We are not expressing any opinion herein as to the price at which Globix shares 
have traded, the actual value of the Globix Common Stock when issued in the     
Transaction or the price at which Globix Common Stock may trade at any time in  
the future. We have not undertaken to subsequently reaffirm or revise this      
affirmation of the Fairness Opinion or otherwise comment upon any events        
occurring after the date hereof and do not have any obligation to update, revise
or reaffirm this affirmation of the Fairness Opinion.                           

It is agreed between the Special Committee of the Board of Directors and Adams  
Harkness, Inc. that this letter is directed to, may be relied upon by and is for
the information of the Special Committee and the Board of Directors of the      
Company only, may not be relied upon by any other person, and may not be used   
for any other purpose without our prior written consent. It is also agreed that 
neither our Fairness Opinion nor this affirmation thereof addresses the relative
merits of the Transaction or the other business strategies that might be        
available to the Company, nor does it address the decision of the Board of      
Directors to proceed with the Transaction. We have been engaged by the Company  
solely to render the Fairness Opinion and this affirmation thereof to the       
Special Committee in connection with the Transaction. We have not participated  
in, or provided any advice with respect to, the pricing determination,          
structuring or negotiation of the Transaction. This letter does not constitute a
recommendation to any shareholder as to how such shareholder should vote on the 
proposed Transaction.                                                           

Based upon and subject to the foregoing, it is our opinion that, as of the date 
hereof, the Exchange Ratio is fair, from a financial point of view to holders of
Company common stock (as stockholders of the Company).                          

Sincerely,                                                                      

ADAMS HARKNESS, INC.                                                            

F-2 

S-4/A
389th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 389th
 PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.      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    

II-1

S-4/A
390th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 390th
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          
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 21.      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.
  (included as Appendix A-1 to the joint proxy
              statement/prospectus forming a part of this Registration
Statement)                                

      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. (included as Appendix A-2 to the joint
       proxy statement/prospectus forming a part of this
Registration Statement)                   

      2.3        Amended Joint Prepackaged Plan of Globix and certain of the
    Globix's subsidiaries, dated April 8, 2002 (3)

     2.4        Form of Securities Exchange Agreement, dated September 15,
2004 (4)                                  

      3.1        Amended and Restated Certificate of Incorporation of Globix
(5)                                       

3.2        Amended and Restated Bylaws of Globix (5)            

       3.3        Certificate of Amendment to Amended and Restated Certificate
               of Incorporation of NEON (included as Appendix B-1 to the
             joint proxy statement/prospectus forming a part of this
Registration Statement)                   

    3.4        Certificate of Amendment to Certificate of Designation of
                 Preferences and Relative, Participating, Optional and Other
           Special Rights of Preferred Stock and Qualifications,
          Limitations and Restrictions Thereof of 12% Series A
                 Cumulative Convertible Preferred Stock of NEON (included as
                  Appendix B-2 to the joint proxy statement/prospectus forming
a part of this Registration Statement)    

        3.5        Section 262 of the Delaware General Corporation Law (included
                   as Appendix C to the joint proxy statement/prospectus forming
a part of this Registration Statement)    

II-2

S-4/A
391st Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 391st
    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 (5)                              

       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 (5) 

4.3        Form of Warrant issued to affiliates of Communication
Technology Advisors (6)                   

       5          Opinion of Day, Berry & Howard LLP as to the validity of the
shares of common stock and preferred stock

   8.1        Opinion of Day, Berry & Howard LLP regarding certain tax
aspects of the merger ***                 

8.2        Opinion of Andrews Kurth LLP regarding certain tax   
aspects of the merger ***                 

       10.1       Purchase Agreement between Young Woo and Globix, dated as of
June 2, 1998 **(1)                        

   10.4       Employment Agreement between Peter L. Herzig and Globix,
dated as of October 2, 2001 (2)           

    10.8       Consulting Agreement, dated as of April 19, 2002, between
          Globix and Communication Technology Advisors LLC (6)

10.9       Agreement between Globix and Communication Technology
Advisors, dated as of November 1, 2002 (6)

10.10      Agreement between Globix and Communication Technology
Advisors, dated as of February 1, 2003 (6)

       10.11      Registration Rights Agreement between Globix and the holders
                 of Globix's securities party thereto, dated as of April 23,
2002 (6)                                  

      10.12      Employment Agreement between Globix and Peter K. Stevenson,
dated as of April 15, 2002 (6)            

   10.14      Letter Agreement between Globix and H. Jameson Holcombe,
dated July 15, 2002 (6)                   

   10.15      Amendment, dated as of August 1, 2003, to the Employment
         Agreement between Globix and Peter K. Stevenson (7)

  10.16      Contract of Sale, dated as of October 10, 2003, between
Globix and Heritage Partners LLC (7)      

II-3

S-4/A
392nd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 392nd
12         Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends                 

16         Letter re: Change in Certifying Accountant (8)       

21         List of Subsidiaries (7)                             

23.1       Consent of PricewaterhouseCoopers LLP                

23.2       Consent of Amper, Politziner & Mattia PC             

     23.3       Consent of BDO Seidman, LLP, independent registered public
accounting firm                           

        23.4       Consent of Day, Berry & Howard LLP (included in Exhibit 5 and
Exhibit 8.1).                             

    23.5       Consent of Andrews Kurth LLP (included in Exhibit 8.2)***

24.1       Powers of Attorney (see signature page)              

99.1       Form of Proxy Card for Globix                        

99.2       Form of Proxy Card for NEON                          

        99.3       Opinion of Needham & Company, Inc. (included as Appendix D to
                 the joint proxy statement/prospectus forming a part of this
Registration Statement)                   

        99.4       Opinion of Adams Harkness, Inc.(f/k/a Adams, Harkness & Hill,
      Inc.) (included as Appendix E to the joint proxy
              statement/prospectus forming a part of this Registration
Statement)                                

   99.5       Affirmation Letter of Adams Harkness, Inc. (f/k/a Adams,
                 Harkness & Hill, Inc.) (included as Appendix F to the joint
       proxy statement/prospectus forming a part of this
Registration Statement)                   

99.6       Consent of Needham & Company, Inc.*                  

   99.7       Consent of Adams Harkness, Inc. (f/k/a Adams, Harkness &
Hill, Inc.)                               

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

*          Previously filed.                                    

      **         Confidential treatment granted for certain portions of this
                   Exhibit pursuant to Rule 406 promulgated under the Securities
Act of 1933.                              

***        To be filed by amendment.                            

    (1)        Incorporated by reference to the Company's Report on Form
8-K/A filed on September 18, 1998.        

II-4

S-4/A
393rd Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 393rd
      (2)        Incorporated by reference to the Company's Annual Report on
Form 10-K filed on December 31, 2001.     

       (3)        Incorporated by reference to the Company's Current Report on
Form 8-K filed on April 23, 2002.         

       (4)        Incorporated by reference to the Company's Current Report on
Form 8-K filed on October 13, 2004.       

      (5)        Incorporated by reference to the Company's Quarterly Report
on Form 10-Q filed on May 15, 2002.       

      (6)        Incorporated by reference to the Company's Annual Report on
Form 10-K filed on March 26, 2003.        

      (7)        Incorporated by reference to the Company's Annual Report on
Form 10-K filed on December 18, 2003.     

        (8)        Incorporated by reference to the Company's Report on Form 8-K
filed on September 19, 2003.              

(b)     Financial Statement Schedules.                                          

(c)     N/A                                                                     

ITEM 22.          UNDERTAKINGS.                                                 

(a)     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:                                  

          (i)      To include any prospectus required by section
             10(a)(3) of the Securities Act of 1933;

             (ii)     To reflect in the prospectus any facts or events
                          arising after the effective date of the registration
                  statement (or the most recent post-effective
                      amendment thereof) which, individually or in the
                      aggregate, represent a fundamental change in the
                information in the registration statement.
                    Notwithstanding the foregoing, any increase or
                      decrease in volume of securities offered (if the
                        total dollar value of securities offered would not
                         exceed that which was registered) and any deviation
                       from the low or high end of the estimated maximum
                    offering range may be reflected in the form of
                       prospectus filed with the Securities and Exchange
                   Commission pursuant to Rule 424(b) if, in the
                          aggregate, the changes in volume and price represent
                        no more than a 20% change in the maximum aggregate
                     offering price set forth in the "Calculation of
                           Registration Fee" table in the effective registration
statement;                

II-5

S-4/A
394th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 394th
                (iii)    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.  

         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
of 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.       

(b) The undersigned registrant hereby undertakes to respond to requests for     
information that is incorporated by reference into the prospectus pursuant to   
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of    
such request, and to send the incorporated documents by first class mail or     
other equally prompt means. This includes information contained in documents    
filed subsequent to the effective date of the registration statement through the
date of responding to the request.                                              

(c) The undersigned registrant hereby undertakes to supply by means of a        
post-effective amendment all information concerning a transaction, and the      
company being acquired involved therein, that was not the subject of and        
included in the registration statement when it became effective.                

(d) That prior to any public reoffering of the securities registered hereunder  
through use of a prospectus which is a part of this registration statement, by  
any person or party who is deemed to be an underwriter within the meaning of    
Rule 145(c), the Registrant undertakes that such reoffering prospectus will     
contain the information called for by the applicable registration form with     
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form; and       

II-6

S-4/A
395th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 395th
(e) That every prospectus (a) that is filed pursuant to the immediately         
preceding paragraph, or (b) that purports to meet the requirements of Section   
10(a)(3) of the Securities Act of 1933 and is used in connection with an        
offering of securities subject to the Rule 415, will be filed as part of an     
amendment to the registration statement and will not be used until such         
amendment is effective, and that, for purposes 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.                                         

II-7

S-4/A
396th Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 396th
SIGNATURES

 Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment no. 1 registration statement to be    
signed on its behalf by the undersigned, thereunto duly authorized.             

Date:    December 8, 2004              GLOBIX CORPORATION                       

                        By: /s/ Peter K. Stevenson
                                          --------------------------------------
                      Peter K. Stevenson
                                      President, Chief Executive Officer

  Pursuant to the requirements of the Securities Act of 1933, this
amendment no. 1 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: December 8, 2004

                            /s/ Robert M. Dennerlein
                                          --------------------------------------
                        Robert M. Dennerlein
                           Chief Financial Officer
                                       (principal financial and accounting
            officer)
                          Date: December 8, 2004

                         /s/ Peter S. Brodsky*
                                          --------------------------------------
                    Peter S. Brodsky
            Director
                          Date: December 8, 2004

II-8

S-4/A
Last Page of 397
TOC
1st
Previous
Next
↓Bottom
Just 397th
                        /s/ Peter L. Herzig*
                                          --------------------------------------
                   Peter L. Herzig
            Director
                          Date: December 8, 2004

                     /s/ Steven Lampe*
                                          --------------------------------------
                Steven Lampe
            Director
                          Date: December 8, 2004

                         /s/ Steven G. Singer*
                                          --------------------------------------
                    Steven G. Singer
            Director
                          Date: December 8, 2004

                          /s/ Raymond L. Steele*
                                          --------------------------------------
                     Raymond L. Steele
            Director
                          Date: December 8, 2004

                           /s/ Steven A. Van Dyke*
                                          --------------------------------------
                      Steven A. Van Dyke
            Director
                          Date: December 8, 2004

                        By:  /s/ Robert M. Dennerlein*
                                          --------------------------------------
                         Robert M. Dennerlein,
                    Attorney-in-fact
                          Date: December 8, 2004

II-9