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