SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
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GLOBIX CORPORATION
(Name of Registrant as Specified in its Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
LOGO
Corporate Headquarters
January 23, 2004
Dear Stockholder:
You are cordially invited to attend the 2004 Annual Meeting of Stockholders
of Globix Corporation, to be held at 10:00 a.m., local time, on Tuesday,
February 24, 2004, at the Globix Corporation headquarters at 139 Centre Street,
New York, New York 10013.
The formal items on the agenda are the election of seven directors and the
approval of the Globix Corporation 2003 Stock Option Plan. The Proxy Statement
provides information about each nominee and the Stock Option Plan. We do not
expect any other items of business to be raised.
We urge you to vote your shares promptly. As always, your vote is
important, and we appreciate your interest in Globix Corporation.
Sincerely yours,
STEVEN G. SINGER
Chairman of the Board of Directors
LOGO
Corporate Headquarters
NOTICE OF ANNUAL MEETING
January 23, 2004
Notice is hereby given that the 2004 Annual Meeting of the Stockholders of
Globix Corporation, a Delaware corporation, will be held at our offices at 139
Centre Street, New York, New York 10013 on Tuesday, February 24, 2004 at 10:00
a.m., local time, for purposes of:
1) electing seven directors;
2) acting on the proposal to adopt the Globix Corporation 2003 Stock Option
Plan; and
3) acting upon such other matters as may properly come before the meeting
or any adjournments, postponements or continuations of the meeting.
All Globix stockholders of record at the close of business on January 16,
2004 are entitled to vote at the meeting.
All stockholders are invited to attend the meeting. To ensure your
representation at the meeting, however, we urge you to vote your shares by mail
at the earliest convenience, whether or not you expect to attend the meeting. In
the event that you attend the meeting, you may vote in person even if you have
returned a proxy. Your vote is important.
Henry J. Holcombe
Corporate Secretary
PROXY STATEMENT
TABLE OF CONTENTS
QUESTIONS AND ANSWERS........................................................................................2
PROPOSAL ONE - ELECTION OF DIRECTORS.........................................................................7
Information as to Nominees For Election to The Board Of Directors.......................................7
Our Board Of Directors..................................................................................9
Committees of the Board of Directors....................................................................9
Directors' Compensation................................................................................11
Other Executive Officers...............................................................................11
REPORT OF THE AUDIT COMMITTEE...............................................................................13
Information Regarding Independent Auditors.............................................................14
Changes in Independent Auditors........................................................................14
REPORT OF THE COMPENSATION COMMITTEE........................................................................17
Chief Executive Officer Compensation...................................................................18
Compensation Committee Interlocks and Insider Participation............................................19
EXECUTIVE COMPENSATION......................................................................................20
Summary Compensation Table.............................................................................20
Option/SAR Grants In Last Fiscal Year..................................................................21
Aggregated Option/SAR Exercises In Last Fiscal And Fiscal Year-End Option Values.......................22
Employment Agreements..................................................................................23
STOCKHOLDER PERFORMANCE GRAPH...............................................................................24
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................................25
Principal Holders Of Common Stock......................................................................25
Section 16(a) Beneficial Ownership Reporting Compliance................................................29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................................................30
PROPOSAL TWO - ADOPTION OF THE 2003 STOCK OPTION PLAN.......................................................31
Administration of the Plan.............................................................................31
Eligibility............................................................................................31
Types of Awards that May Be Made under the Plan........................................................31
Shares Covered by the Plan.............................................................................32
Stock Options..........................................................................................32
Tax Consequences of Options............................................................................32
Amendment and Termination of the Plan..................................................................33
Rights Provided in the Event of a Change of Control....................................................33
Parachute Limitations..................................................................................34
Equity Compensation Plan Information Table.............................................................35
Appendix A: Audit Committee Charter
Appendix B: 2003 Stock Option Plan
This proxy statement is being furnished to you in connection with the
solicitation of proxies by the Board of Directors to be used at the 2004 Annual
Meeting of Stockholders of Globix Corporation ("Globix"). Copies of this proxy
statement are being mailed to stockholders of record beginning on or about
January 23, 2004. A copy of the Globix Annual Report on Form 10-K for the year
ended September 30, 2003 accompanies this proxy statement.
The Annual Meeting will be held on Tuesday, February 24, 2004 at our
principal executive offices located at 139 Centre Street, New York, New York
10013 at 10:00 a.m. for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders.
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QUESTIONS AND ANSWERS
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Q: WHAT AM I VOTING ON?
A: You are being asked by Globix to vote on the re-election of seven
directors, Peter K. Stevenson, Peter S. Brodsky, Peter L. Herzig, Steven
Lampe, Steven G. Singer, Raymond L. Steele and Steven A. Van Dyke. For more
information on each nominee, turn to "Information as to Nominees for
Election to the Board of Directors" beginning on page 7.
You are also being asked to approve the Globix Corporation 2003 Stock
Option Plan. For more information on this plan, please turn to "Adoption of
the 2003 Stock Option Plan" beginning on page 31.
Q: WHO IS ENTITLED TO VOTE?
A: Each of the recordholders of outstanding shares of Globix common stock at
the close of business on January 16, 2004 is entitled to one vote for each
share they own. As of the record date, 16,460,000 shares of common stock
were deemed issued and outstanding, 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 "Item 3 - Legal Proceedings" in our Annual
Report on Form 10-K enclosed with this proxy statement and are not entitled
to vote at the meeting. The remaining 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 "Item 3 - Legal Proceedings" in our Annual Report on Form
10-K, and are also not entitled to vote. Therefore, although 16,460,000
shares of common stock are deemed issued and outstanding as of the record
date, 16,065,948 shares of common stock are entitled to vote at the
meeting. Each share of common stock is entitled to one vote on each matter
which holders of shares of common stock are entitled to vote.
The shares of Globix common stock outstanding before its bankruptcy in 2002
were cancelled on the effective date of our plan of reorganization (April
25, 2002) and do not have the right to vote. Holders of these shares may
receive their pro rata share of the 164,600 shares being withheld following
the resolution of the shareholder derivative suit described above,
depending on the resolution of this suit.
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Q: HOW DO I VOTE?
A: You can vote in any one of the following ways:
o You can vote by mail by signing and dating your proxy card, and
mailing it in the enclosed prepaid envelope. If you mark your voting
instructions on the proxy card, your shares will be voted as you
instruct. If you return a signed card but do not provide voting
instructions, your shares will be voted for the named nominees for
election as directors and in favor of adoption of the 2003 Stock
Option Plan.
o You can vote in person at the Annual Meeting by delivering your
completed proxy card in person at the Annual Meeting or by completing
a ballot available upon request at the meeting. However, if you hold
your shares in a bank or brokerage account rather than in your own
name, you must obtain a legal proxy from your stockbroker in order to
vote at the meeting.
Regardless of how you choose to vote, your vote is important and we
encourage you to vote promptly.
Q: WILL ANY OTHER MATTERS BE VOTED ON?
A: We do not expect any other matters to be considered at the Annual Meeting.
However, if a matter not listed on the proxy card is legally and properly
brought before the Annual Meeting by a stockholder, the proxies will vote
on the matter in accordance with their judgment of what is in the best
interest of Globix.
Q: HOW MANY VOTES ARE NEEDED TO HOLD THE MEETING?
A: The presence in person or by proxy at the Annual Meeting of the holders of
one-third of the votes entitled to be cast at the Annual Meeting shall
constitute a quorum.
Q: HOW MANY VOTES ARE NEEDED TO ELECT THE NOMINEES FOR DIRECTOR?
A: Directors are elected by a plurality of the votes, which means the seven
nominees who receive the largest number of votes will be elected. There is
no cumulative voting.
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Q: HOW MANY VOTES ARE NEEDED TO APPROVE THE 2003 STOCK OPTION PLAN?
A: The affirmative vote of a majority of those votes cast at the meeting is
required to approve the 2003 Stock Option Plan.
Q: WHO WILL COUNT THE VOTES?
A: Representatives of Mellon Investor Services LLC, our Transfer Agent, will
count the votes. A representative from Mellon Investor Services LLC will
act as inspector of elections.
Q: HOW ARE VOTES COUNTED?
A: In determining whether we have a quorum, we count all properly submitted
proxies and ballots, including abstentions, broker non-votes and withheld
votes, as present and entitled to vote. However, abstentions and broker
non-votes, as well as votes withheld, are not considered votes cast and
will not be counted for or against a matter or nominee.
Q: WHAT SHARES ARE COVERED BY MY PROXY CARD?
A: You should have been provided a proxy card for each account in which you
own shares of Globix common stock either:
o directly in your name as the stockholder of record; or
o indirectly through a broker, bank or other holder of record.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It means that you have multiple accounts in which you own shares of Globix
common stock. Please vote all proxy cards you receive to ensure that all
your shares are voted. However, for your convenience we recommend that you
contact your broker, bank or our transfer agent to consolidate as many
accounts as possible under a single name and address. Our transfer agent is
Mellon Investor Services LLC. All communications concerning shares you hold
in your name, including address changes, name changes, requests to transfer
shares and similar issues, can be handled by making a toll-free call to
Mellon Investor Services LLC at 1-800-370-1163 or contacting them on the
internet at www.melloninvestor.com.
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Q: HOW CAN I CHANGE MY VOTE?
A: You can revoke your proxy and change your vote at any time before the polls
close at the Annual Meeting. You can do this by:
o signing another proxy with a later date; or
o voting again at the meeting.
Q: WHEN ARE STOCKHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING OF STOCKHOLDERS
DUE?
A: You may submit proposals for consideration at the 2005 annual meeting,
including director nominations, in accordance with the following:
o All stockholders who wish to include a proposal in our Proxy Statement
for the Annual Meeting in 2005 must provide notice to our Corporate
Secretary by certified mail - return receipt requested to Corporate
Secretary, Globix Corporation, 139 Centre Street, New York, New York
10013 a reasonable amount of time before the Company prints and mails
its Proxy Statement for the 2005 Annual Meeting. The notice must
satisfy the requirements for stockholder proposals under the federal
securities laws.
o All stockholders who wish to present a matter at the 2005 Annual
Meeting, but not include such matter in the Proxy Statement, must
provide notice to the Corporate Secretary in accordance with the
bylaws of Globix.
o All stockholders who wish to make a director nomination at our 2005
Annual Meeting must provide notice to our Corporate Secretary by
certified mail - return receipt requested to Corporate Secretary,
Globix Corporation, 139 Centre Street, New York, New York 10013 no
later than November 26, 2004 and no earlier than October 27, 2004.
However, if the 2005 Annual Meeting does not occur between January 25,
2005 and February 28, 2005, the notice must be received not later than
the close of business on the tenth day following the day on which
notice of the Annual Meeting is made or the date that the Annual
Meeting is publicly announced, whichever occurs first. The notice must
set forth the stockholder's name and address as they appear on
Globix's books and the class and number of shares of Globix common
stock which are beneficially owned by such stockholder. Additionally,
the notice must set forth, as to each person whom the stockholder
proposes to nominate for election as a director, all information
relating to such person that is required to be disclosed pursuant to
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Regulation 14A under the Securities Exchange Act of 1934 (including
such person's written consent to being named as a nominee and to
serving as a director if elected).
o You may contact the Globix Corporate Secretary at Globix's corporate
headquarters for a copy of the relevant Bylaw provisions regarding the
requirements for making stockholder proposals and nominating director
candidates.
Q: WHO PAYS THE COST OF SOLICITING THE PROXIES REQUESTED?
A: We will pay the expenses of soliciting proxies for the 2004 Annual Meeting,
including the costs of preparing, printing and mailing this Proxy
Statement, and payments to brokerage firms, banks and others for forwarding
solicitation materials to indirect owners of shares of Globix common stock.
In addition to use of the mail, proxies may be solicited personally or by
telephone by present and former officers, directors and other employees of
Globix without additional compensation, as well as by employees of Mellon
Investor Services LLC, our vote tabulator.
Q: WHERE CAN I GET A COPY OF THE GLOBIX ANNUAL REPORT?
A: If you were a stockholder of record on January 16, 2004, you should have
received a copy of our Annual Report on Form 10-K for the fiscal year ended
September 30, 2003 either with this Proxy Statement or prior to its
receipt. If you have not received the Annual Report on Form 10-K, please
write to the Corporate Secretary at the address below or call Globix at
(212) 334-8500 and a copy will be sent to you. Requests for copies of the
Annual Report on Form 10-K should be sent to: Corporate Secretary, Globix
Corporation, 139 Centre Street, New York, New York 10013. The Annual Report
on Form 10-K is also available on our Internet Web Site at
http://www.globix.com/about/ir.php.
6
PROPOSAL ONE - ELECTION OF DIRECTORS
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The number of directors on our Board of Directors is seven. All directors
of Globix serve for a term of one year. All of the nominees are currently
serving as directors. The Board has no reason to believe that any nominee will
be unable to serve as a director. If, however, a nominee should be unable to
serve at the time of the Annual Meeting, the shares of Globix common stock
properly represented by valid proxies will be voted for the election of a
substitute nominee recommended by the Board.
INFORMATION AS TO NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
The name and age of each nominee for election as director and his present
position with Globix are included below:
Name Age Position
Peter K. Stevenson 43 President, Chief Executive Officer and Director
Peter S. Brodsky 33 Director
Peter L. Herzig 41 Vice Chairman of the Board of Directors
Steven Lampe 44 Director
Steven G. Singer 42 Chairman of the Board of Directors
Raymond L. Steele 69 Director
Steven A. Van Dyke 44 Director
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, or CTA, 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 that 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.
Peter S. Brodsky has been a director of Globix since October 2001. Mr.
Brodsky is a partner of Hicks, Muse, Tate & Furst Incorporated and has been with
Hicks Muse since 1995. At Hicks Muse, Mr. Brodsky has focused on Hicks Muse's
media investments, specifically in radio, television, sports and software, and
serves as a director of several of Hicks Muse's portfolio companies. Prior to
joining Hicks Muse, Mr. Brodsky was employed in the investment banking
department of CS First Boston Corporation in New York. In addition to Globix,
Mr. Brodsky is a director of RCN Corporation, a publicly-traded
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company, and Activant Solutions, Inc. Mr. Brodsky received a Bachelor of Arts
degree from Yale University.
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 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 Globix, 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).
Steven A. Van Dyke has been a director of Globix since October 2002. Mr.
Van Dyke is the founder and co-managing principal of Bay Harbour Management,
L.C. Mr. Van Dyke joined Bay Harbour's predecessor firm in Louisville in 1986.
Mr. Van Dyke purchased the predecessor firm in 1987 and transitioned it to one
with a dedicated focus on distressed securities management. Mr. Van Dyke
8
sold a minority interest in the predecessor firm in December 1996 and changed
the name of the predecessor firm to Bay Harbour Management. Mr. Van Dyke
currently serves on the board of directors of Barneys New York, Inc., American
Banknote Corporation, a publicly traded corporation, and Buckhead America Corp.
Mr. Van Dyke graduated from the University of Kentucky in 1981 with his Bachelor
of Business Administration degree in Finance. He is a Chartered Financial
Analyst, and is a member of The Financial Analysts Society of Central Florida
and the Association for Investment Management and Research.
The Board of Directors unanimously recommends
that you vote FOR the director nominees listed above.
OUR BOARD OF DIRECTORS
The number of our Board of Directors is seven. Our directors are elected at
each annual stockholders' meeting, and serve until the next annual stockholders'
meeting and the election and qualification of their respective successors. Five
of the current members of our Board of Directors were selected in accordance
with the terms of the plan of reorganization to serve as the directors of Globix
following the effective date of the plan of reorganization. Mr. Van Dyke was
appointed to our Board of Directors by our current Board of Directors in October
2002. Mr. Steele was appointed to our Board of Directors by our current Board of
Directors in June 2003. The Board of Directors met nine times in fiscal year
2003.
Stockholders may communicate with any of our directors by writing to them
c/o Globix Corporation, 139 Centre Street, New York, New York 10013.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors has the following committees:
Name of Committee Functions of the Committee Number of Meetings
and Members in
fiscal 2003
AUDIT: This Committee is comprised entirely of non-employee 3
directors and its responsibilities include:
Raymond L. Steele, Chairman o appointing, determining funding for, overseeing and
replacing our independent auditors;
Peter L. Herzig o monitoring the independence and performance of our
independent auditors;
Steven A. Van Dyke o preapproving all audit and permitted non-audit
9
Name of Committee Functions of the Committee Number of Meetings
and Members in
fiscal 2003
services performed by the independent auditors;
o reviewing our annual and quarterly financial
statements;
o monitoring our accounting and financial reporting
process and systems of internal control;
o overseeing and providing direction on our conduct of
its business and compliance with its ethical and legal
responsibilities;
o overseeing our internal audit function; and
o facilitating open communication among the Board,
senior management, internal audit and the independent
auditors.
Name of Committee Functions of the Committee Number of Meetings
and Members in
fiscal 2003
COMPENSATION: This Committee is comprised entirely of non-employee 2
Steven G. Singer, Chairman directors and its responsibilities include:
o overseeing the compensation and benefits of
Peter S. Brodsky employees; and
o establishing executive compensation.
Steven Lampe
On January 8, 2004, the Board established a Nominating Committee having
responsibility for nominating directors of Globix. Steven G. Singer, Steven
Lampe and Raymond L. Steele were named to this Committee. All members of the
Nominating Committee are independent under the standards of the NASDAQ Stock
Market. The Nominating Committee does not have a charter. The Nominating
Committee will give consideration to director candidates recommended by security
holders in accordance with the procedures described in the Questions and Answers
section of this Proxy Statement. The Nominating Committee does not have a
specific process for identifying and evaluating nominees for
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director, but when considering nominations for membership on our Board of
Directors, the Nominating Committee seeks to identify persons who have the
highest capabilities, judgment and ethical standards and who have an
understanding of our business.
All of our directors attended over 75 percent of all meetings of the Board
of Directors and Committees on which they served during fiscal year 2003. Mr.
Steele, who joined the Board in June 2003, has attended all meetings of the
Board and all Audit Committee meetings since he joined the Board. Directors are
generally expected to attend our annual meeting of stockholders.
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.
OTHER EXECUTIVE OFFICERS
Name Age Position
Robert M. Dennerlein 43 Vice President and Chief Financial Officer
Henry J. Holcombe 40 Senior Vice President, Operations, Chief Techology Officer and
Secretary
John D. McCarthy 39 Senior Vice President, Corporate Development
Philip J. Cheek 38 Managing and Finance Director of Globix U.K. Ltd.
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 from Seton Hall University. He also holds a Bachelor of
Science in Accounting from Seton Hall University.
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Henry J. 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 US Military Academy at West Point.
John D. McCarthy has served as Senior Vice President, Corporate Development
since September 2002. 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.
Philip J. Cheek joined our U.K. 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 U.K. board of directors. Prior to his joining
Globix, 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.
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REPORT OF THE AUDIT COMMITTEE
----------------------------------------------------------------
The following shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission nor shall such information
be incorporated by reference into any future filing of Globix under the
Securities Act of 1933 or the Securities and Exchange Act of 1934.
The Audit Committee is composed of three directors, all of whom have been
determined by the Board of Directors to be "independent" as defined under the
rules of the NASDAQ Stock Market, Section 10A(m)(3) of the Securities Exchange
Act of 1934 and the rules and regulations of the Securities and Exchange
Commission, except Mr. Herzig who would not be deemed independent under the
rules of the NASDAQ Stock Market because he served as our Chief Executive
Officer from August 2001 through April 2002. All three members of the Audit
Committee have been determined by the Board of Directors to be "financial
experts" as defined by the Securities and Exchange Commission. The Committee
operates under a written charter adopted by the Board of Directors. This charter
was amended and restated on July 1, 2003. A copy of the charter is included as
Appendix A to this Proxy Statement.
Management is responsible for our internal controls, financial reporting
process and compliance with laws, and regulations and ethical business
standards. The independent auditors are responsible for performing an
independent audit of our consolidated financial statements in accordance with
generally accepted auditing standards and for issuing a report thereon. The
Committee monitors and oversees these processes.
The Audit Committee has reviewed and discussed the audited financial
statements of Globix for the fiscal year ended September 30, 2003 with
management, with the internal auditor and with Amper, Politziner & Mattia, P.C.
("Amper"), our independent auditors for the year ended September 30, 2003. In
addition, the Committee has held discussions with Amper covering the matters
required by Statement of Auditing Standards No. 61 (Communication with Audit
Committees), as amended. The Audit Committee has also received the written
disclosures and the letter from Amper required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and has held
discussions with Amper regarding that firm's independence.
13
Based on the Audit Committee's reviews and discussions with management and
the independent auditors as discussed above, the Committee recommended that the
Board of Directors include the audited financial statements of Globix in our
Annual Report on Form 10-K for the fiscal year ended September 30, 2003 for
filing with the Securities and Exchange Commission.
This report is furnished by the members of the Audit Committee.
Raymond L. Steele, Chairman
Peter L. Herzig
Steven A. Van Dyke
INFORMATION REGARDING INDEPENDENT AUDITORS
Amper charged Globix the following fees for services performed with respect
to fiscal 2003:
Audit Fees: $212,165
Financial Information Systems
Design and Implementation: $ 0
All other fees: $ 26,775
--------
TOTAL $238,940
========
All other fees consisted of audit-related services to the 401(k)
profit-sharing plan we maintain for our employees. The Audit Committee has
considered whether the provision of these services is compatible with
maintaining Amper's independence.
The Audit Committee has approved the engagement of Amper to serve as our
independent auditors for the fiscal year ending September 30, 2004.
Representatives of Amper will attend the Annual Meeting, will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
CHANGES IN INDEPENDENT AUDITORS
On July 31, 2002, we engaged PricewaterhouseCoopers LLP ("PWC") as our
independent auditors and dismissed Arthur Andersen LLP, which had previously
served as our independent auditors. The Board of Directors and Audit Committee
participated in and approved the decision to change independent auditors. 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
14
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, would have caused it to make reference to the subject matter of
the disagreement in connection with its report.
PWC served as our independent auditors 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 auditors. Accordingly, we
dismissed PWC as our independent auditors on September 12, 2003.
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 following:
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
15
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
have committed to returning to a normal recurring closing timetable that
includes formal management reviews and a monthly financial reporting package.
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 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 have not
consulted with Amper regarding any matter that would require reporting under
Item 304(a)(2) of Regulation S-K.
16
REPORT OF THE COMPENSATION COMMITTEE
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To our Stockholders:
The following shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission nor shall such information
be incorporated by reference into any future filing of Globix under the
Securities Act of 1933 or the Securities and Exchange Act of 1934.
The duties of the Compensation Committee include approval of salary and
other compensation arrangements for our executive officers. No member of the
Compensation Committee is a current or former officer or employee of Globix.
Globix has established a compensation philosophy around the principle of
having compensation reflect and reinforce our strategic and operational goals
and enhance long-term stockholder value. Our philosophy is to:
o Set compensation levels to attract, retain, reward and motivate
executive officers and employees;
o Align compensation with business objectives and performance and with
the interests of the stockholders;
o Position compensation to reflect the individual's performance as well
as the level of responsibility, skill and strategic value of the
employee; and
o Recognize the evolving organizational structure of Globix and directly
motivate executives to accomplish results within their spheres of
influence as well as foster a company-wide team spirit.
Globix attempts to target its compensation programs to provide compensation
opportunities that are perceived by its officers and employees to justify
continued service to Globix.
Compensation decisions for the fiscal year ended September 30, 2003 were
based on the following considerations:
o Existing contractual compensation arrangements with the senior
executive officers;
o Compensation opportunities perceived to be necessary to retain
executive officers;
o The importance of the executives to our current and future success;
17
o The significance of the executive's compensation cost relative to its
impact on our financial success over the next few years; and
o The maintenance, where practical, of internal compensation
relationships that provide rationale and flexibility in organizational
staffing.
Stock options granted to executive officers during fiscal 2003 will vest in
part based on the substantial achievement by Globix (as determined by the
Compensation Committee) of certain components (revenues, cash and earnings
before interest, taxes, depreciation and amortization) of the Globix operating
plan in fiscal 2003, 2004 and 2005.
CHIEF EXECUTIVE OFFICER COMPENSATION
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) to be 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% of the outstanding shares of our common stock on a fully
diluted basis. One hundred percent of these options have vested. Fifty percent
have vested based on the passage of time. The remaining 50 percent have vested
based on the determination by the Compensation Committee that Globix had
substantially achieved the performance targets specified in Mr. Stevenson's
original employment agreement. On March 14, 2003, the Compensation Committee
determined that these performance targets, which were oriented towards the
achievement of positive cash flow, had been met for purposes of the vesting of
the options. The Committee believes that these bonus and option grants have
provided and will provide appropriate incentives for Mr. Stevenson to work for
long-term growth and stock performance.
This report is furnished by the members of the Compensation Committee.
Steven G. Singer, Committee Chair
Peter S. Brodsky
Steven Lampe
18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Brodsky is a partner of Hicks, Muse, Tate & Furst Incorporated, which
is an affiliate of various stockholders that are parties to a Registration
Rights Agreement with Globix. See "Certain Relationships and Related
Transactions," beginning on page 30.
19
EXECUTIVE COMPENSATION
----------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the total compensation
for the fiscal years ended September 30, 2003, September 30, 2002 and September
30, 2001 for our Chief Executive Officer, our four other most highly compensated
executive officers during the fiscal year ended September 30, 2003 who held
office as of September 30, 2003 and one additional individual who would have
been included in the group of the most highly compensated executive officers but
who left his position prior to September 30, 2003.
Annual Compensation
-------------------
Securities
Underlying
Name and Principal Salary Bonus Other Annual Options/ All Other
Position Year ($) ($) Compensation($) SARs (#) Compensation
------------------ ---- --- --- --------------- -------- ------------
Peter K. Stevenson(1) 2003 284,684 150,000 79,105(2) 548,667(3) ---
President and Chief 2002 127,333 75,000 50,000(4) --- 1,459(5)
Executive Officer
Robert M. Dennerlein(6) 2003 108,077 42,916 --- 100,000(7) ---
Chief Financial Officer
Henry J. Holcombe(8) 2003 170,000 53,125 79,623(9) 106,582(7) ---
Senior Vice President 2002 34,375 --- 27,621(10) --- ---
of Operations, Corporate
Secretary and Chief
Technology Officer
John D. McCarthy(11) 2003 190,000 62,938 --- 146,316(7) ---
Senior Vice President, 2002 190,000 27,000 --- 100,000(12) ---
Corporate Development 2001 109,494 5,833 --- 20,000(12) ---
Philip J. Cheek(13) 2003 178,333 41,625 --- 30,000(7) 17,833(14)
Managing and Finance 2002 119,662 18,097 --- --- 11,966(14)
Director, Globix U.K. Ltd. 2001 100,675 14,806 --- --- 11,703(14)
Gregory P. Leahy(15) 2003 106,421 --- --- 100,590(16) 46,247(17)
Former General Counsel 2002 152,917 20,000 --- 10,000(18) ---
and Corporate Secretary 2001 136,820 --- --- 4,000(18) ---
(1) Mr. Stevenson became our President and Chief Executive Officer on April 15,
2002.
(2) 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.
(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. These options were granted to Mr. Stevenson on March
14, 2003 pursuant to our 2003 Stock Option Plan, but
20
the obligation to issue the options to Mr. Stevenson is not subject to the
approval of the 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, 2002, as his permanent
residence is located outside of the New York area.
(5) Represents the amount of premiums for life insurance benefits for Mr.
Stevenson paid by Globix in the five month period ended September 30, 2002.
(6) Mr. Dennerlein became our Chief Financial Officer on May 12, 2003. He
joined Globix in January 2003.
(7) Subject to the approval of our 2003 Stock Option Plan.
(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 contributed by Globix Ltd. to its profit sharing
plan.
(15) Mr. Leahy resigned from Globix on July 12, 2003, however, he provided
consulting services to the Company from April to July of 2003. He joined
Globix as Associate General Counsel in July 1999 and became our General
Counsel and Corporate Secretary in February 2002.
(16) These options, which were subject to the approval of our 2003 Stock Option
Plan, were forfeited when Mr. Leahy resigned from Globix on July 12, 2003.
(17) Represents the amount of severance paid to Mr. Leahy in connection with his
resignation from Globix.
(18) 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.
21
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on grants of stock options in
fiscal 2003 to the officers listed in the Summary Compensation Table. All of the
options, other than those granted to Mr. Stevenson, are subject to stockholder
approval of the 2003 Stock Option Plan, and will be null and void in the event
that the 2003 Stock Option Plan is not approved.
Number of Percent of Potential Realizable Value
Securities Total at Assumed Annual Rate of
Underlying Options/SARS Stock Price Appreciation
Options/ Granted to Exercise or for Option Term
SARs Employees in Base Price Expiration -----------------------------
Name Granted(#)(1) Fiscal Year ($/Share) Date 5% ($) 10%($)
----------------------- --------------- ---------------- -------------- ------------- ------------- ---------------
Peter K. Stevenson 548,667 40.47% $3.04 4/15/12 396,571 1,619,513
Robert M. Dennerlein 35,000 2.58% $3.04 1/20/13 25,296 103,304
65,000 4.79% $3.04 6/13/13 120,034 308,180
Henry J. Holcombe 71,582 5.28% $3.04 11/26/12 51,736 211,278
35,000 2.58% $3.04 6/13/13 64,634 165,943
John D. McCarthy 146,316 10.79% $3.04 11/26/12 105,749 431,858
Philip J. Cheek 30,000 2.21% $3.04 6/13/13 55,401 142,237
Gregory P. Leahy 100,590 7.42% $3.04 expired 72,701 296,896
(1) Fifty percent of the total number of shares granted under the 2003 Stock
Option Plan will vest on the first, second and third anniversaries of the
grant date of such options. The remaining fifty percent will vest over a
period of three years based upon the substantial achievement by Globix (as
determined by the Compensation Committee) of certain components of the
Globix operating plan in fiscal years 2003, 2004 and 2005. For Mr.
Stevenson, the Compensation Committee determined in March 2003 that the
financial performance measures had been achieved for purposes of the
vesting of 50 percent of his options. On April 15, 2003, the remaining
274,334 shares vested under his options based on the passage of one year
since the date of his employment agreement. Upon a "change in control" (as
defined in the stock option agreements entered into by Globix with Messrs.
Stevenson, Dennerlein, Holcombe, McCarthy and Cheek), all of the shares
covered by options granted to them that have not yet vested will fully
vest. Mr. Leahy's options were forfeited when he resigned from Globix on
July 12, 2003.
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, 2003.
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 -------------------------- ------------------
Name Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
--------------------------- ------------ ----------------- -------------- ------------------- --------------- ------------------
Peter K. Stevenson --- --- 548,667 $0 ---
Robert M. Dennerlein --- --- --- 100,000 --- $0
Henry J. Holcombe --- --- --- 106,582 --- $0
John D. McCarthy --- --- --- 146,316 --- $0
Philip J. Cheek --- --- --- 30,000 --- $0
Gregory P. Leahy --- --- --- 100,590 --- $0
(1) Based on a sales price of $2.66 per share of our common stock on the OTC
Bulletin Board on September 30, 2003.
22
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. Fifty
percent have vested based on the passage of time. The remaining 50 percent have
vested based on the achievement of performance targets as described in the the
Compensation Committee report on page 17. Under his employment agreement, Mr.
Stevenson is also entitled to reimbursement for certain travel expenses between
his home in Virginia and our offices in New York City, and for the expense of
maintaining an office in Virginia.
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.
Henry J. Holcombe On July 15, 2002, we entered into an agreement with Henry
J. 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.
23
STOCKHOLDER PERFORMANCE GRAPH
----------------------------------------------------------------
The graph depicted below shows the total shareholder returns for our common
stock as compared against the NASDAQ market index and the Media General Internet
Software and Service Index. To our knowledge, our common stock did not trade
from April 25, 2002, the effective date of our plan of reorganization, until
October 31, 2002. Following its distribution in October 2002, our common stock
has traded on the OTC Bulletin Board, as depicted in the performance graph
below. We have not provided a performance graph with respect to our common stock
for periods prior to the effective date of the plan of reorganization, as we do
not believe that this information will assist investors in evaluating Globix.
COMPARE 11-MONTH CUMULATIVE TOTAL RETURN AMONG GLOBIX CORPORATION,
NASDAQ MARKET INDEX AND MEDIA GENERAL INTERNET SOFTWARE AND SERVICE INDEX
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
10/31/02 12/31/02 3/31/03 6/30/03 9/30/03
-------- -------- ------- ------- -------
GLOBIX CORPORATION 100.00 80.00 100.00 120.00 106.40
MGFS GROUP INDEX 100.00 106.37 126.01 171.94 196.67
NASDAQ Market index 100.00 100.45 100.98 122.29 135.10
ASSUMES $100 INVESTED ON OCT. 23, 2002
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING SEPT. 30, 2003
24
SHARE OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
----------------------------------------------------------------
PRINCIPAL HOLDERS OF COMMON STOCK
The following table and the accompanying notes set forth certain
information, as of December 31, 2003 (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
director of Globix, (3) each officer named in the Summary Compensation Table and
(4) all directors and executive officers as a group.
Name and Address Number of Percent of
of Beneficial Owner Shares(1, 2) Class
------------------- ------------ -----
Goldman, Sachs & Co. 1,605,513(3) 9.75%
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 2,493,042(6) 15.15%
c/o Mackay Shields Financial Corp.
9 West 57th Street
New York, NY 10019
JGD Management Corp. 1,630,936(7) 9.91%
350 Park Avenue
New York, New York 10022
Peter S. Brodsky ---(8) *
Peter L. Herzig --- *
Steven Lampe 1,219,817(9) 7.41%
Steven G. Singer 1,107,088(10) 6.73%
Raymond L. Steele --- *
Peter K. Stevenson 548,667(11) 3.33%
Steven Van Dyke 172,017(12) 1.05%
25
Name and Address Number of Percent of
of Beneficial Owner Shares(1, 2) Class
------------------- ------------ -----
Robert M. Dennerlein ---(13) *
Henry J. Holcombe ---(14) *
John D. McCarthy ---(15) *
Philip J. Cheek ---(16) *
Gregory P. Leahy ---(17) *
All directors and executive officers as a group (11
persons) 3,047,589 18.52%
-----------------
(*) 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 31, 2003 was 16,460,000. As used in this proxy
statement, "voting power" is the power to vote or direct the voting of
shares and investment power" is the power to dispose or direct the
disposition of shares. Except as noted, each stockholder listed has sole
voting and investment power with respect to the shares shown as being
beneficially owned by such stockholder.
(2) On June 25, 2002, we entered into a Stipulation and Order with the lead
plaintiffs in the class action lawsuit described in the section of the
Annual Report on Form 10-K entitled "Business--Legal Proceedings." 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) of the shares of our common stock and the
notes being held in escrow. Assuming that our liability insurance is
sufficient to cover any judgment or settlement in the class action lawsuit
and that the shares of our 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, each of Mackay
Shields and Goldman Sachs & Co. (and each other former holder of our 12.5%
notes on the effective date of the plan
26
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.
(3) This information is as of December 31, 2002, as set forth in a Schedule 13G
filed by Goldman Sachs & Co. with the Securities and Exchange Commission on
February 11, 2003.
(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) 11,430 of these shares are owned of
record by HM PG-IV Globix, LLC; (iv) 34,177 of such shares are owned of
record by HM 4-EQ Globix Coinvestors, LLC; and (v) 51,475 of these shares
are owned of record by HM 4-SBS Globix Coinvestors, LLC.
(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. 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) According to information provided to us by MacKay Shields, the pecuniary
interests in these shares are held by a number of institutional investors
for whom MacKay Shields is the discretionary investment advisor. MacKay
Shields has voting and investment control over these shares and,
accordingly, is deemed to beneficially own these shares. A number of
individuals at MacKay Shields LLC have voting and investment control over
these shares.
(7) According to a Form 4 filed on October 24, 2003, JGD Management Corp. owned
1,630,936 shares and ceased its obligations to report transactions under
Section 16 of the Securities Exchange Act of 1934 as of that date.
According to the Form 4, JGD Management Corp manages certain managed
accounts and the following investment funds: York Capital Management, L.P.,
York Distressed Opportunities Fund, L.P., York Global Value Partners, L.P.,
York Investment Limited, York Offshore Investors Unit Trust, York Select,
L.P. and York Select Unit Trust. JGD Management Corp. disclaims any
beneficial interest ownership of the securities held by the managed
accounts and the investment funds except to the extent of its pecuniary
interest therein. The address for JGD Management Corp. is 350 Park Avenue
New York, NY 10022.
(8) 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
27
existence of a group and disclaims beneficial ownership of shares of our
common stock of which he is not the record owner.
(9) Mr. Lampe is affiliated with LC Capital, which owns these shares. Mr. Lampe
has voting and investment control over these shares and, consequently, is
deemed to beneficially own these shares.
(10) 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 trusts.
(11) 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.
(12) 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 December 31, 2003) 172,017 shares of our common
stock, or approximately 1.05 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.
(13) Does not include options to purchase 100,000 shares that are subject to
stockholder approval of the 2003 Stock Option Plan. All but 16,666.66 of
these shares are also subject to vesting.
(14) Does not include options to purchase 106,582 shares that are subject to
stockholder approval of the 2003 Stock Option Plan. All but 17,763.67 of
these shares are also subject to vesting.
(15) Does not include options to purchase 146,316 shares that are subject to
stockholder approval of the 2003 Stock Option Plan. All but 24,386 of these
shares are also subject to vesting.
(16) Does not include options to purchase 30,000 shares that are subject to
stockholder approval of the 2003 Stock Option Plan. All but 5,000 of these
shares are also subject to vesting.
(17) Does not include options to purchase 100,590 shares, which were forfeited
when Mr. Leahy resigned from Globix on July 12, 2003.
Unless otherwise indicated, the address for the individuals listed above is
c/o Globix Corporation, 139 Centre St., New York, NY 10013.
28
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The federal securities laws require Globix directors and executive
officers, and persons who own more than ten percent of the outstanding shares of
common stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of any equity
securities of Globix on Forms 3, 4, and 5. To our knowledge, based on review of
copies of such reports furnished to Globix and representations by these
individuals that no other reports were required, all required reports have been
filed on a timely basis on behalf of all persons subject to these requirements
except that Messrs. Stevenson, Cheek, Dennerlein, Holcombe, McCarthy, Lampe and
Van Dyke did not timely file Form 3 Initial Statements of Beneficial Ownership
at the time of appointment as a director or officer. All required Form 3s have
since been filed.
29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------------------------
In connection with our plan of reorganization, on April 23, 2002, we
entered into a registration rights agreement with certain holders of our common
stock and our 11% senior notes (the "notes") whose ability to sell the common
stock or notes is restricted because of their percentage ownership of the common
stock or notes. One of our directors, Mr. Brodsky, is a partner of Hicks Muse
Tate and Furst Incorporated which is affiliated with certain holders of common
stock and notes that are parties to the Registration Rights Agreement.
Subject to certain adjustments, we are required to bear all expenses
incident to the registration of the notes and our common stock. We agreed to
indemnify the holders of the restricted securities against all liabilities,
whether under the securities laws or otherwise, arising out of disclosure
deficiencies in the registration statement. Our indemnity obligation does not,
however, extend to liability for information pertaining to a holder and
furnished to Globix by or on behalf of such holder for inclusion in the
registration statement.
Subject to certain adjustments, we are obligated to file and keep the
registration statement continuously effective, supplemented and amended for a
period ending on the earlier of:
o the date on which all of the notes and the shares of our common stock
have been sold pursuant to the registration statement or pursuant to
Rule 144 under the Securities Act;
o the three year anniversary of the date on which the Securities and
Exchange Commission declares the registration statement effective; and
o the date on which there are no longer any shares of our common stock
or notes outstanding.
In September 2002, we paid Peter L. Herzig a lump sum of $250,000 in
connection with his resignation as Chief Executive Officer of Globix.
30
PROPOSAL TWO - ADOPTION OF THE 2003 STOCK OPTION PLAN
----------------------------------------------------------------
On March 14, 2003, the Board adopted the Globix Corporation 2003 Stock
Option Plan (the "Plan"), subject to stockholder approval within one year. If
approved by stockholders, the 2003 Plan will be deemed to have become effective
on March 14, 2003.
The Board believes that the Plan will enhance our ability to attract and
retain highly qualified officers, directors, key employees and other persons to
serve Globix. The Board believes that the approval of the Plan is in the best
interests of Globix and its stockholders.
The following is a brief description of the Plan. The full text of the Plan
is attached as Appendix B hereto.
ADMINISTRATION OF THE PLAN
The selection of key employees who may participate in the Plan, and the
terms and conditions of each award, will be determined by the Board of
Directors. The Board may delegate to a committee such powers and authorities
related to the administration of the Plan as the Board may determine, provided
that each member of the committee is a "non-employee director" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934 and an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code. The
Board (or the committee if such powers are delegated to it) will have full
power, discretion and authority to interpret, construe and administer the Plan,
and all decisions, determinations or actions of the Board pursuant to the Plan
will be final and binding on all persons for all purposes. The Board may also
appoint one or more separate committees of the Board, each composed of one or
more directors of Globix who need not be outside directors, who may administer
the Plan with respect to employees or service providers who are not officers or
directors. The Board has delegated the administration of the Plan to the
Compensation Committee.
ELIGIBILITY
Employees and service providers of Globix and its affiliates are eligible
to receive grants under the Plan. Currently, there are approximately 250 persons
who would be eligible to receive awards under the Plan. The maximum number of
shares of stock subject to options that can be granted under the Plan to any
person is 775,000 per year.
31
TYPES OF AWARDS THAT MAY BE MADE UNDER THE PLAN
Stock options granted under the Plan may be of two types: (i) incentive
stock options and (ii) nonqualified stock options.
SHARES COVERED BY THE PLAN
The Plan permits the granting of awards covering 1,829,000 shares of common
stock. Options to purchase 1,128,976 shares have been granted under the Plan,
subject to stockholder approval. All but 548,667 of these shares (representing
options granted to Mr. Stevenson) will be forfeited in the event that the Plan
is not approved.
Any shares that are reserved for options that lapse, expire or are
forfeited, and any shares that are exchanged (actually or constructively) by
optionees as full or partial payment to Globix for shares acquired on the
exercise of an option, may be available for subsequent grants under the Plan.
STOCK OPTIONS
Options granted under the Plan may be either non-qualified stock options or
incentive stock options qualifying for special tax treatment under Section 422
of the Internal Revenue Code. The exercise price of any incentive stock option
may not be less than the fair market value the underlying stock on the grant
date. If the grantee holds more than 10 percent of our stock, the option
exercise price may not be less than 110 percent of the fair market value of the
stock on the grant date. In no case may the exercise price of any option be less
than the par value of a share of common stock. The exercise price is payable in
cash, shares of common stock previously owned by the optionee or such other
forms of payment permitted by law or the award agreement.
Generally, each option will expire on the tenth anniversary of the date of
grant. In the case of an option intended to qualify as an incentive stock
option, the option will expire on the fifth anniversary of the date of grant, if
the optionee is a holder of more than 10 percent of our stock.
TAX CONSEQUENCES OF OPTIONS
Non-Qualified Stock Options. On the exercise of a non-qualified stock
option, the optionee will recognize ordinary income for federal income tax
purposes on the amount by which the fair market value of the stock on the date
of exercise exceeds the exercise price of the option. The optionee will be taxed
on this amount in the year of exercise, and Globix will generally be allowed a
deduction in this amount for federal income tax purposes in the same year. When
the optionee disposes of shares acquired on the exercise of a non-qualified
stock option, any amount received in excess of the fair market value of the
32
shares on the date of exercise will be treated as long- or short-term capital
gain to the optionee, depending on the holding period for the shares. If the
amount received is less than the market value of the shares on the date of
exercise, the loss will be treated as long- or short-term capital loss,
depending upon the holding period of the shares.
Incentive Stock Options. On the exercise of an incentive stock option, no
ordinary income will be recognized by the optionee. If the optionee holds the
shares for over one year after the date of exercise, then on the sale of the
shares (i) the excess of the sale proceeds over the aggregate exercise price of
the option will be long-term capital gain to the optionee, and (ii) Globix will
not be entitled to a tax deduction under such circumstances. Generally if the
optionee sells or otherwise disposes of the shares within one year after the
date of exercise, the excess of the fair market value of such shares at the time
of exercise over the aggregate exercise price (but generally not more than the
amount of gain realized on the disposition) will be ordinary income to the
optionee at the time of such disposition. This is sometimes referred to as a
"disqualifying disposition." Globix generally will be entitled to a federal tax
deduction equal to the amount of ordinary income recognized by the optionee upon
a disqualifying disposition.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time, amend, suspend or terminate the Plan as to any
shares of stock as to which grants have not been made. An amendment will be
contingent on the approval of our stockholders to the extent stated by the Board
or required by applicable law. No grants may be made after termination of the
Plan. No amendment, suspension or termination of the Plan may, without the
consent of the grantee, impair rights or obligations under any grant theretofore
awarded under the Plan.
RIGHTS PROVIDED IN THE EVENT OF A CHANGE OF CONTROL
The Plan provides for certain special rights upon the occurrence of a
"Change of Control," which is defined as (i) the dissolution or liquidation of
Globix or a merger, consolidation or reorganization of Globix with one or more
other entities in which Globix is not the surviving entity, (ii) a sale of
substantially all the assets of Globix to another person or entity, (iii) any
transaction (including without limitation a merger or reorganization in which
Globix is the surviving entity) which results in any person or entity (other
than persons who are stockholders or affiliates immediately prior to the
transaction) owning more than 50 percent of the combined voting power of all
classes of Globix stock, or (iv) a change in the membership of the Board of
Directors if, over any period of 24 consecutive months, individuals who were
members of the Board at the beginning of the period (or who were nominated to
the Board by such persons) fail to constitute a majority of the Board at the end
of such period.
33
Immediately prior to the scheduled consummation of a Change of Control, all
options outstanding under the Plan will become immediately exercisable and will
remain exercisable for a period of 15 days, unless prior to the scheduled
consummation of the Change of Control, the Board elects, in its sole discretion,
to cancel any outstanding grants of options and pay or deliver to the holders of
options an amount in cash or securities equal to the excess of the Change of
Control transaction price over the exercise price of the option.
The 15 day period described above will begin on the date the grantee
receives notice of the scheduled consummation of the Change of Control and will
end on the later of the actual date of consummation of the Change of Control or
the fifteenth day following the delivery of the notice to grantee from Globix or
the acquiring party. Any exercise of an option during such 15 day period will be
conditioned upon the consummation of the Change of Control and will be effective
only immediately before the consummation of the event. Upon consummation of the
Change of Control, the Plan and all outstanding but unexercised options will
terminate. The Board will send written notice of an event that will result in
such a termination to all individuals who hold options not later than the time
at which Globix gives notice thereof to its stockholders.
The above-described provisions will not apply to a Change of Control if
provision is made in writing in connection with the Change of Control for the
assumption or continuation of the options then granted, or for the substitution
of options relating to the stock of a successor entity, or a parent or
subsidiary of a successor entity, with appropriate adjustments as to the number
of shares (disregarding any consideration that is not common stock) and option
exercise prices.
If Globix is the surviving entity in any reorganization, merger or
consolidation that does not constitute a Change of Control, each option granted
under the Plan will represent the right to purchase those securities to which a
holder of the number of shares of common stock subject to such option would have
been entitled immediately following such reorganization, merger or
consolidation, with a corresponding proportionate adjustment of the option
exercise price per share so that the aggregate option price thereafter will be
the same as the aggregate option exercise price immediately prior to the
reorganization, merger or consolidation. Subject to any contrary language in the
agreement evidencing a grant, any restrictions applicable to such grant will
apply as well to any replacement shares received by the grantee as a result of
the reorganization, merger or consolidation.
PARACHUTE LIMITATIONS
In connection with a change in control, awards under the Plan to certain
individuals may become subject to excise taxation under Section 280G of the
Internal Revenue Code as so-called
34
"Parachute Payments." Under the Plan, an individual who would otherwise be
subject to the excise tax has the right, under certain circumstances, to reduce
or eliminate rights granted to the individual under the Plan so as to avoid have
the benefits under the Plan be subject to excise tax under Section 280G of the
Internal Revenue Code.
EQUITY COMPENSATION PLAN INFORMATION TABLE
The following table provides information about shares of our common stock
that may be issued upon the exercise of options and rights under existing equity
compensation plans as of December 31, 2003.
------------------------------ --------------------------- ---------------------------- --------------------------------------
Number of Securities to Weighted average exercise Number of securities remaining
be issued upon exercise price of outstanding available for issuance under equity
of outstanding options, options, warrants and compensation plans (excluding
warrants and rights rights securities reflected in column (a))
Plan Category (a) (#) (b)($) (c) (#)
------------- ------- ------ -------
------------------------------ --------------------------- ---------------------------- --------------------------------------
Equity compensation plans 0 $0 0
approved by security
holders(1)
------------------------------ --------------------------- ---------------------------- --------------------------------------
Equity compensation plans
not approved by security
holders
------------------------------
Grant to Mr. Stevenson(2) 548,667 $3.04 0
------------------------------
Warrant issued to 500,000 $3.00 0
affiliates of Communications
Technology Advisors (3)
------------------------------ --------------------------- ---------------------------- --------------------------------------
Total: 1,048,667 $3.02 0
------------------------------ --------------------------- ---------------------------- --------------------------------------
(1) Does not include awards under our 2003 Stock Option Plan that are subject
to stockholder approval of the Plan.
(2) Represents the award to Mr. Stevenson under his employment agreement, which
will be made under the 2003 Stock Option Plan, but is not subject to
stockholder approval of the Plan.
(3) Represents a warrant issued to affiliates to Communications Technology
Advisors, a firm engaged by Globix to provide restructuring advice. The
warrant was purchased for $25,000.
The Board of Directors unanimously recommends
that you vote FOR the proposal to approve the Globix
Corporation 2003 Stock Option Plan.
BY ORDER OF THE BOARD OF DIRECTORS
Henry J. Holcombe
Corporate Secretary
Dated: January 23, 2003
35
Appendix A
Globix Corporation
Audit Committee Charter
Purpose
The Audit Committee is appointed by the Board of Directors (the "Board") of
Globix Corporation (the "Company") to assist the Board in monitoring (1) the
integrity of the financial statements of the Company, (2) the independent
auditor's qualifications and independence, (3) the performance of the Company's
internal audit function and independent auditors, (4) the effectiveness of the
Company's internal control structure, and (5) the compliance by the Company with
legal and regulatory requirements.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy statement.
Guiding Principles
The guiding principles to be considered by the Audit Committee in carrying out
its responsibilities in reviewing a particular matter shall include
consideration of (1) whether the financial statements fairly present the results
of operations of the Company in accordance with generally accepted accounting
principles; (2) whether the treatment of the matter is consistent with the
Company's practices in prior accounting periods; (3) whether the presentation of
the matter is reasonably comprehensive under the circumstances; (4) whether the
disclosure regarding the matter contains any material misstatement or fails to
disclose a matter which reasonably would be considered material to the Company's
security holders; and (5) whether the presentation varies in a material way from
principles of convention or conservatism.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent auditor.
Committee Membership
The Audit Committee shall consist of no fewer than three members. The members of
the Audit Committee shall satisfy the independence and experience requirements
of the NASDAQ Stock Market ("NASDAQ"), Section 10A(m)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the
Commission, in each case with respect to audit committees. At least one member
of the Audit Committee shall be an "audit committee financial expert" as defined
by the Commission.
The members of the Audit Committee shall be appointed by the Board on the
recommendation of the Nominating Committee. Audit Committee members may be
replaced by the Board.
A-1
Meetings
The Audit Committee shall meet as often as it determines necessary, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management, the internal auditors and the independent auditor in separate
executive sessions. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent auditor to attend a
meeting of the Committee or to meet with any members of, or consultants to, the
Committee.
Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint, determine funding
for, oversee and replace the outside auditors as set forth in Section 10A(m)(2)
of the Exchange Act. The Audit Committee shall be directly responsible for the
compensation and oversight of the work of the independent auditor (including
resolution of disagreements between management and the independent auditor
regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work. The independent auditor shall report directly to the
Audit Committee.
The Audit Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor, subject to the de minimus exceptions for
non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which
are approved by the Audit Committee prior to the completion of the audit. The
Audit Committee may form and delegate authority to subcommittees consisting of
one or more members when appropriate, including the authority to grant
preapprovals of audit and permitted non-audit services, provided that decisions
of such subcommittee to grant preapprovals shall be presented to the full Audit
Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate, to engage and determine funding for independent legal,
accounting or other advisors. The Company shall provide for appropriate funding,
as determined by the Audit Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an audit report and
to any advisors employed by the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit Committee
shall review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor the annual
audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of its Form
10-Q, including the results of the independent auditor's review of the
quarterly financial statements.
A-2
3. Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of
the Company's financial statements, including any significant changes in
the Company's selection or application of accounting principles, any major
issues as to the adequacy of the Company's internal controls and any
special steps adopted in light of material control deficiencies.
4. Review and discuss quarterly reports from the independent auditors on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor.
(c) Other material written communications between the independent auditor
and management, such as any management letter or schedule of
unadjusted differences.
5. Discuss with management the Company's earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information, as well as
financial information and earnings guidance provided to analysts and rating
agencies. Such discussion may be done generally (consisting of discussing
the types of information to be disclosed and the types of presentations to
be made).
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
8. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management.
9. Ensure that a public announcement of the Company's receipt of an audit
opinion that contains a going concern qualification is made promptly.
Oversight of the Company's Relationship with the Independent Auditor
10. Review and evaluate the lead partner of the independent auditor team.
11. Obtain and review a report from the independent auditor at least annually
regarding (a) the independent auditor's internal quality-control
procedures, (b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried out
by the firm, (c) any steps taken to deal with any such issues, and (d) all
relationships between the independent auditor and the Company. Evaluate the
qualifications, performance and independence of the independent auditor,
including considering whether the auditor's quality controls are adequate
and the provision of permitted non-audit services is compatible with
maintaining the auditor's independence, taking into
A-3
account the opinions of management and internal auditors. The Audit
Committee shall present its conclusions with respect to the independent
auditor to the Board.
12. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law, and consider whether, in order to
assure continuing auditor independence, it is appropriate to adopt a policy
of rotating the independent auditing firm on a regular basis.
13. Recommend to the Board policies for the Company's hiring of employees or
former employees of the independent auditor who participated in any
capacity in the audit of the Company.
14. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
15. Discuss with the national office of the independent auditor issues on which
they were consulted by the Company's audit team and matters of audit
quality and consistency.
Oversight of the Company's Internal Audit Function
16. Review the appointment and replacement of the senior internal auditing
executive.
17. Review the significant reports to management prepared by the internal
auditing department and management's responses.
18. Discuss with the independent auditor and management the internal audit
department responsibilities, budget and staffing and any recommended
changes in the planned scope of the internal audit.
Effectiveness of Internal Controls
19. Review management's plan for establishing and maintaining internal
controls, the framework used to evaluate its control structure and
management's subsequent assessment of the effectiveness of the internal
controls.
20. Review disclosures made to the Audit Committee by the Company's CEO and CFO
during their certification process for the Form 10-K and Form 10-Q about
any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management
or other employees who have a significant role in the Company's internal
controls.
Compliance Oversight Responsibilities
21. Obtain from the independent auditor assurance that Section 10A(b) of the
Exchange Act has not been implicated.
22. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company and its
subsidiary/foreign affiliated entities are in conformity with applicable
legal requirements and the Company's Code of Business Conduct and Ethics.
Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Business Conduct and Ethics.
23. Review reports and disclosures of insider and affiliated party transactions
and, to the extent required by NASDAQ rules, approve all related party
transactions.
A-4
24. Establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls
or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing
matters.
25. Discuss with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports which raise
material issues regarding the Company's financial statements or accounting
policies.
26. Discuss with the Company's General Counsel legal matters that may have a
material impact on the financial statements or the Company's compliance
policies.
Adopted July 1, 2003
A-5
Appendix B
------------------------------------------------------------------
GLOBIX CORPORATION
2003 STOCK OPTION PLAN
------------------------------------------------------------------
B-1
TABLE OF CONTENTS
Page
----
1. PURPOSE..............................................................................4
2. DEFINITIONS..........................................................................4
3. ADMINISTRATION OF THE PLAN...........................................................7
3.1. Board.......................................................................7
3.2. Committee...................................................................7
3.3. Grants......................................................................8
3.4. No Liability................................................................9
3.5. Compliance with Section 162(m) of the Code..................................9
4. STOCK SUBJECT TO THE PLAN............................................................9
5. EFFECTIVE DATE, DURATION AND AMENDMENTS..............................................9
5.1. Effective Date..............................................................9
5.2. Term........................................................................9
5.3. Amendment and Termination of the Plan.......................................9
6. GRANT ELIGIBILITY AND LIMITATIONS...................................................10
6.1. Corporation or Subsidiary Employees; Service Providers; Other Persons......10
6.2. Successive Grants..........................................................10
6.3. Limitation on Shares of Stock Subject to Grants............................10
6.4. Limitations on Incentive Stock Options.....................................10
6.5. Tandem and Substitute Grants...............................................10
7. AWARD AGREEMENT.....................................................................10
8. TERMS AND CONDITIONS OF OPTIONS.....................................................11
8.1. Option Price...............................................................11
8.2. Vesting....................................................................11
8.3. Term.......................................................................11
8.4. Termination of Service.....................................................11
8.5. Limitations on Exercise of Option..........................................12
8.6. Method of Exercise.........................................................12
8.7. Rights of Holders of Options...............................................12
8.8. Delivery of Stock Certificates.............................................12
9. TRANSFERABILITY OF OPTIONS..........................................................12
9.1. Transferability of Options.................................................12
9.2. Family Transfers...........................................................12
10. FORM OF PAYMENT FOR OPTIONS......................................................13
10.1. General Rule...............................................................13
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10.2. Cashless Exercise..........................................................13
10.3. Other Forms of Payment.....................................................13
11. PARACHUTE LIMITATIONS............................................................13
12. REQUIREMENTS OF LAW..............................................................14
12.1. General....................................................................14
12.2. Rule 16b-3.................................................................14
13. EFFECT OF CHANGES IN CAPITALIZATION..............................................15
13.1. Changes in Stock...........................................................15
13.2. Reorganization in Which the Corporation Is the Surviving
Entity Which does not Constitute a Change of Control....................15
13.3. Change of Control..........................................................15
13.4. Adjustments................................................................16
13.5. No Limitations on Corporation..............................................16
14. GENERAL PROVISIONS...............................................................16
14.1. Disclaimer of Rights.......................................................16
14.2. Nonexclusivity of the Plan.................................................17
14.3. Withholding Taxes..........................................................17
14.4. Captions...................................................................17
14.5. Other Provisions...........................................................17
14.6. Number And Gender..........................................................17
14.7. Severability...............................................................17
14.8. Governing Law..............................................................18
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GLOBIX CORPORATION
2003 STOCK OPTION PLAN
Globix Corporation, a Delaware corporation (the "Corporation"), sets forth
herein the terms of its 2003 Stock Option Plan (the "Plan"), as follows:
1. PURPOSE
The Plan is intended to enhance the Corporation's and its Affiliates' (as
defined herein) ability to attract and retain highly qualified officers,
directors, key employees, and other persons, and to motivate such officers,
directors, key employees, and other persons to serve the Corporation and its
Affiliates and to expend maximum effort to improve the business results and
earnings of the Corporation, by providing to such officers, directors, key
employees and other persons an opportunity to acquire or increase a direct
proprietary interest in the operations and future success of the Corporation. To
this end, the Plan provides for the grant of stock options which may be
non-qualified stock options or incentive stock options, as provided herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "Affiliate" means, with respect to the Corporation, any company or
other trade or business that controls, is controlled by or is under common
control with the Corporation within the meaning of Rule 405 of Regulation C
under the Securities Act, including, without limitation, any Subsidiary.
2.2 "Award Agreement" means the written agreement between the Corporation
and a Grantee that evidences and sets out the terms and conditions of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in Section 0
hereof.
2.4 "Board" means the Board of Directors of the Corporation.
2.5 "Cause" means, as determined by the Board and unless otherwise provided
in an applicable agreement with the Corporation or an Affiliate, (i) gross
negligence or willful misconduct in connection with the performance of duties,
gross insubordination, or any act or failure to act that has, or with the
passage of time could have, an adverse impact on the Corporation; (ii)
conviction of a criminal offense (other than minor traffic offenses); or (iii)
material breach of any term of any employment, consulting or other services,
confidentiality, intellectual property or non-competition agreements, if any,
between the Service Provider and the Corporation or an Affiliate.
2.6 "Change of Control" means (i) the dissolution or liquidation of the
Corporation or a merger, consolidation, or reorganization of the Corporation
with one or more other entities in which the Corporation is not the surviving
entity, (ii) a sale of substantially all of the assets of the Corporation to
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another person or entity, (iii) any transaction (including without limitation a
merger or reorganization in which the Corporation is the surviving entity) which
results in any person or entity (other than persons who are shareholders or
Affiliates immediately prior to the transaction) owning more than 50% of the
combined voting power of all classes of stock of the Corporation, or (iv) the
cessation, during any period of twenty-four (24) consecutive months, of
individuals who at the beginning of such period constituted the Board (excluding
any new director elected during such period whose election or nomination for
election by the Corporation's shareholders was approved by a vote of the
directors then still in office who were directors at the beginning of such
twenty-four (24)-month period) to constitute a majority of the Board.
2.7 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.8 "Committee" means a committee of, and designated from time to time by
resolution of, the Board, which shall be constituted as provided in Section 3.2.
2.9 "Corporation" means Globix Corporation.
2.10 "Disability" means, as determined by the Corporation, that the Grantee
is unable to perform each of the essential duties of such Grantee's position by
reason of a medically determinable physical or mental impairment which is
potentially permanent in character or which can be expected to last for a
continuous period of not less than 12 months; provided, however, that, with
respect to rules regarding expiration of an Incentive Stock Option following
termination of the Grantee's Service, Disability shall mean the Grantee is
unable to engage in any substantial gainful activity by reason of a medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
2.11 "Effective Date" means the date the Plan is approved by the Board.
2.12 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.13 "Fair Market Value" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares were traded over-the-counter on the date in
question but were not classified as a national market issue, and are regularly
traded in this manner, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices quoted by the
Nasdaq system for such date;
(b) If the Common Shares were traded over-the-counter on the date in
question and were classified as a national market issue, and are regularly
traded in this manner, then the Fair Market Value shall be equal to the
last-transaction price quoted by the Nasdaq system for such date;
(c) If the Common Shares were traded on a stock exchange on the date
in question, and are regularly traded in this manner, then the Fair Market Value
shall be equal to the closing price reported by the applicable composite
transactions report for such date; and
(d) If none of the foregoing is applicable, then the Fair Market Value
shall be determined by the Committee in good faith on such basis as it deems
appropriate.
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Whenever possible, the determination of Fair Market Value by the
Committee under paragraphs (a), (b), or (c) shall be based on the prices
reported in The Wall Street Journal. Such determination shall be conclusive and
binding on all persons.
2.14 "Family Member" means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister,
brother-in-law, or sister-in-law, including adoptive relationships, of the
Grantee, any person sharing the Grantee's household (other than a tenant or
employee), a trust in which any one or more of these persons have more than
fifty percent of the beneficial interest, a foundation in which any one or more
of these persons (or the Grantee) control the management of assets, and any
other entity in which one or more of these persons (or the Grantee) own more
than fifty percent of the voting interests.
2.15 "Grant" means an award of an Option under the Plan.
2.16 "Grant Date" means, as determined by the Board or authorized
Committee, the latest to occur of (i) the date as of which the Board approves a
Grant, (ii) the date on which the recipient of a Grant first becomes eligible to
receive a Grant under Section 6 hereof, or (iii) such other date as may be
specified by the Board.
2.17 "Grantee" means a person who receives or holds a Grant under the Plan.
2.18 "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.19 "Non-qualified Stock Option" means an Option that is not an Incentive
Stock Option.
2.20 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.21 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.22 "Other Agreement" shall have the meaning set forth in Section 11
hereof.
2.23 "Outside Director" means a member of the Board who is not an officer
or employee of the Corporation.
2.24 "Plan" means this Globix Corporation 2003 Stock Option Plan.
2.25 "Securities Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.
2.26 "Service" means service as an employee, officer, director or other
Service Provider of the Corporation or an Affiliate, including any approved
leave of absence. Unless otherwise stated in the applicable Award Agreement, a
Grantee's change in position or duties shall not result in interrupted or
terminated Service, so long as such Grantee continues to be an employee,
officer, director or other Service Provider of the Corporation or an Affiliate.
Service does not terminate when a Grantee is on a bona fide leave of absence;
provided, however, that the leave of absence was approved by the Corporation in
writing if the terms of the leave provide for continued Service crediting or
Service crediting is required by applicable law. Service will be treated as
terminating three months after the commencement of a leave of absence, unless
the Grantee's right to return to work is guaranteed by law or contract. In any
event, Service terminates when the Grantee's approved leave of absence ends,
unless
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the Grantee immediately returns to work as an active employee. Subject to the
preceding sentences, whether a termination of Service shall have occurred for
purposes of the Plan shall be determined by the Board, which determination shall
be final, binding and conclusive.
2.27 "Service Provider" means an employee, officer or director of the
Corporation or a Subsidiary, or a natural person who is a consultant or adviser
providing services to the Corporation or Subsidiary as of the date of Grant that
are not in connection with the offer or sale of securities in a capital raising
transaction, and do not directly or indirectly promote or maintain a market for
the Corporation's securities.
2.28 "Stock" means the common stock, par value $.01 per share, of the
Corporation.
2.29 "Subsidiary" means any "subsidiary corporation" of the Corporation
within the meaning of Section 424(f) of the Code.
2.30 "Termination Date" means the date upon which an Option shall terminate
or expire, as set forth in Section 8.3 hereof.
2.31 "Ten Percent Stockholder" means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Corporation, its parent or any of its Subsidiaries. In determining
stock ownership, the attribution rules of Section 424(d) of the Code shall be
applied.
3. ADMINISTRATION OF THE PLAN
3.1. Board.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Corporation's certificate
of incorporation and by-laws and applicable law. The Board shall have full power
and authority to take all actions and to make all determinations required or
provided for under the Plan, any Grant or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Grant or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Corporation's certificate of incorporation and
by-laws and applicable law. The interpretation and construction by the Board of
any provision of the Plan, any Grant or any Award Agreement shall be final and
conclusive.
3.2. Committee.
The Board from time to time may delegate to the Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 above and other applicable provisions, as the Board shall
determine, consistent with the certificate of incorporation and by-laws of the
Corporation and applicable law.
(i) Except as provided in Subsection (ii) and except as the Board may
otherwise determine, the Committee, if any, appointed by the Board to
administer the Plan shall consist of two or more Outside Directors of the
Corporation who: (a) qualify as "outside directors" within the meaning of
Section 162(m) of the Code and who (b) meet such other requirements as may
be
B-7
established from time to time by the Securities and Exchange Commission for
plans intended to qualify for exemption under Rule 16b--3 (or its
successor) under the Exchange Act.
(ii) The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Corporation who need
not be Outside Directors, who may administer the Plan with respect to
employees or other Service Providers who are not officers or directors of
the Corporation, may grant Grants under the Plan to such employees or other
Service Providers, and may determine all terms of such Grants.
In the event that the Plan, any Grant or any Award Agreement entered into
hereunder provides for any action to be taken by or determination to be made by
the Board, such action may be taken or such determination may be made by the
Committee if the power and authority to do so has been delegated to the
Committee by the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or determination by the
Committee shall be final, binding and conclusive. To the extent permitted by
law, the Committee may delegate its authority under the Plan to a member of the
Board.
3.3. Grants.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority to:
(i) designate Grantees,
(ii) determine the type or types of Grants to be made to a Grantee,
(iii) determine the number of shares of Stock to be subject to a Grant,
(iv) establish the terms and conditions of each Grant (including, but not
limited to, the exercise price of any Option, the nature and duration of any
restriction or condition (or provision for lapse thereof) relating to the
vesting, exercise, transfer, or forfeiture of a Grant or the shares of Stock
subject thereto, and any terms or conditions that may be necessary to qualify
Options as Incentive Stock Options),
(v) prescribe the form of each Award Agreement evidencing a Grant, and
(vi) amend, modify, or supplement the terms of any outstanding Grant. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Grants to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom.
As a condition to any subsequent Grant, the Board shall have the right, at
its discretion, to require Grantees to return to the Corporation Grants
previously made under the Plan. Subject to the terms and conditions of the Plan,
any such new Grant shall be upon such terms and conditions as are specified by
the Board at the time the new Grant is made. The Board shall have the right, in
its discretion, to make Grants in substitution or exchange for any other award
under another plan of the Corporation, any Affiliate, or any business entity to
be acquired by the Corporation or an Affiliate. The Corporation may retain the
right in an Award Agreement to cause a forfeiture of the gain realized by a
Grantee on account of actions taken by the Grantee in violation or breach of or
in conflict with any non-competition agreement, any agreement prohibiting
solicitation of employees or clients of the Corporation or any Affiliate thereof
or any confidentiality obligation with respect to the Corporation or any
Affiliate thereof or otherwise in competition with the Corporation or any
Affiliate thereof, to the extent specified in such Award Agreement applicable to
the Grantee. Furthermore, the Corporation may annul a Grant if the Grantee is
B-8
an employee of the Corporation or an Affiliate thereof and is terminated for
Cause as defined in the applicable Award Agreement or the Plan, as applicable.
Any Grant shall be contingent upon the Grantee executing the appropriate Award
Agreement.
3.4. No Liability.
No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Grant or
Award Agreement.
3.5. Compliance with Section 162(m) of the Code.
Section 162(m) of the Code, added by the Omnibus Budget Reconciliation Act
of 1993, generally limits the tax deductibility to publicly held companies of
compensation in excess of $1,000,000 paid to certain "covered employees"
("Covered Employees"). If the Corporation is subject to Section 162(m) of the
Code, it is the Corporation's intention to preserve the deductibility of such
compensation to the extent it is reasonably practicable and to the extent it is
consistent with the Corporation's compensation objectives. For purposes of this
Plan, Covered Employees of the Corporation shall be those employees of the
Corporation described in Section 162(m)(3) of the Code.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 13 hereof, the number of
shares of Stock available for issuance under the Plan shall be one million eight
hundred twenty-nine thousand (1,829,000). Stock issued or to be issued under the
Plan shall be authorized but unissued shares; or, to the extent permitted by
applicable law, issued shares that have been reacquired by the Corporation. If
any shares covered by a Grant are not purchased or are forfeited, or if a Grant
otherwise terminates without delivery of any Stock subject thereto, then the
number of shares of Stock counted against the aggregate number of shares
available under the Plan with respect to such Grant shall, to the extent of any
such forfeiture or termination, again be available for making Grants under the
Plan.
5. EFFECTIVE DATE, DURATION AND AMENDMENTS
5.1. Effective Date.
The Plan shall be effective as of the Effective Date, subject to approval
of the Plan by the Corporation's stockholders within one year of the Effective
Date. Upon approval of the Plan by the stockholders of the Corporation as set
forth above, all Grants made under the Plan on or after the Effective Date shall
be fully effective as if the stockholders of the Corporation had approved the
Plan on the Effective Date. If the stockholders fail to approve the Plan within
one year after the Effective Date, any Grants made hereunder shall be null and
void and of no effect.
5.2. Term.
The Plan shall terminate automatically ten (10) years after its adoption by
the Board and may be terminated on any earlier date as provided in Section 5.3.
B-9
5.3. Amendment and Termination of the Plan.
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made. An amendment shall be contingent on approval of the Corporation's
stockholders to the extent stated by the Board or required by applicable law. No
Grants shall be made after termination of the Plan. No amendment, suspension, or
termination of the Plan shall, without the consent of the Grantee, impair rights
or obligations under any Grant theretofore awarded under the Plan.
6. GRANT ELIGIBILITY AND LIMITATIONS
6.1. Corporation or Subsidiary Employees; Service Providers; Other Persons.
Subject to this Section 6, Grants may be made under the Plan to any Service
Provider to the Corporation or of any Affiliate, including any Outside Director.
6.2. Successive Grants.
An eligible person may receive more than one Grant, subject to such
restrictions as are provided herein.
6.3. Limitation on Shares of Stock Subject to Grants.
During any time when the Corporation has a class of equity security
registered under Section 12 of the Exchange Act, the maximum number of shares of
Stock subject to Options that can be awarded under the Plan to any person
eligible for a Grant under Section 6 hereof is seven hundred seventy-five
thousand (775,000) per year. The preceding limitations in this Section 6.3 are
subject to adjustment as provided in Section 13 hereof.
6.4. Limitations on Incentive Stock Options.
An Option shall constitute an Incentive Stock Option only (i) if the
Grantee of such Option is an employee of the Corporation or any Subsidiary of
the Corporation; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become
exercisable for the first time during any calendar year (under the Plan and all
other plans of the Grantee's employer and its Affiliates) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
6.5. Tandem and Substitute Grants.
Grants under the Plan may, in the discretion of the Board, be granted in
tandem with or in substitution or exchange for any other Grant or any award
granted under another plan of the Corporation, any Affiliate, or any business
entity to be acquired by the Corporation or an Affiliate, or any other right of
a Grantee to receive payment from the Corporation or any Affiliate. Such tandem
and substitute or exchange Grants may be granted at any time. If a Grant is made
in substitution or exchange for another Grant, the Board shall require the
surrender of such other Grant in consideration for the new Grant.
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7. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement,
in such form or forms as the Board shall from time to time determine, which
specifies the number of shares subject to the Grant. Award Agreements granted
from time to time or at the same time need not contain similar provisions but
shall be consistent with the terms of the Plan. Each Award Agreement shall
specify whether such Grant is intended to be a grant of Non-qualified Stock
Options or Incentive Stock Options, and in the absence of such specification
such options shall be deemed Non-qualified Stock Options.
8. TERMS AND CONDITIONS OF OPTIONS
8.1. Option Price.
The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price of each Incentive
Stock Option shall be at least the Fair Market Value on the Grant Date of a
share of Stock; provided, however, that in the event that a Grantee is a Ten
Percent Stockholder, the Option Price of an Option granted to such Grantee that
is intended to be an Incentive Stock Option shall be not less than 110 percent
of the Fair Market Value of a share of Stock on the Grant Date. In no case shall
the Option Price of any Option be less than the par value of a share of Stock.
8.2. Vesting.
Subject to Sections 8.3 and 13.3 hereof, each Option granted under the Plan
shall become exercisable at such times and under such conditions as shall be
determined by the Board and stated in the Award Agreement. For purposes of this
Section 8.2, fractional numbers of shares of Stock subject to an Option shall be
rounded down to the next nearest whole number. The Board may provide, for
example, in the Award Agreement for (i) accelerated exercisability of the Option
in the event the Grantee's Service terminates on account of death, Disability or
another event, (ii) expiration of the Option prior to its term in the event of
the termination of the Grantee's Service, (iii) immediate forfeiture of the
Option in the event the Grantee's Service is terminated for Cause or (iv)
unvested Options to be exercised subject to the Corporation's right of
repurchase with respect to unvested shares of Stock. No Option shall be
exercisable in whole or in part prior to the date the Plan is approved by the
Stockholders of the Corporation as provided in Section 5.1 hereof.
8.3. Term.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee is a
Ten Percent Stockholder, an Option granted to such Grantee that is intended to
be an Incentive Stock Option shall not be exercisable after the expiration of
five years from its Grant Date.
8.4. Termination of Service.
Each Award Agreement shall set forth the extent to which the Grantee shall
have the right to exercise the Option following termination of the Grantee's
Service. Such provisions shall be determined in the sole discretion of the
Board, need not be uniform among all Options issued pursuant to the Plan, and
may reflect distinctions based on the reasons for termination of Service.
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8.5. Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
stockholders of the Corporation as provided herein, or after ten years following
the Grant Date, or after the occurrence of an event referred to in Section 13
hereof which results in termination of the Option.
8.6. Method of Exercise.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Corporation of written notice of exercise on any business day, at the
Corporation's principal office, on the form specified by the Corporation. Such
notice shall specify the number of shares of Stock with respect to which the
Option is being exercised and shall be accompanied by payment in full of the
Option Price of the shares for which the Option is being exercised.
8.7. Rights of Holders of Options.
Unless otherwise stated in the applicable Award Agreement, an individual
holding or exercising an Option shall have none of the rights of a stockholder
(for example, the right to receive cash or dividend payments or distributions
attributable to the subject shares of Stock or to direct the voting of the
subject shares of Stock) until the shares of Stock covered thereby are fully
paid and issued to him. Except as provided in Section 13 hereof, no adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date of such issuance.
8.8. Delivery of Stock Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing his or her ownership of the shares
of Stock subject to the Option.
9. TRANSFERABILITY OF OPTIONS
9.1. Transferability of Options.
Except as provided in Section 9.2, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's
guardian or legal representative) may exercise an Option. Except as provided in
Section 9.2, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.
9.2. Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may transfer,
not for value, all or part of an Option which is not an Incentive Stock Option
to any Family Member. For the purpose of this Section 9.2, a "not for value"
transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic
relations order in settlement of marital property rights; or (iii) a transfer to
an entity in which more than fifty percent of the voting interests are owned by
Family Members (or the Grantee) in exchange for an interest in that entity.
Following a transfer under this Section 9.2, any such Option shall continue to
be subject to the same terms and conditions as were applicable immediately prior
to transfer. Subsequent transfers of transferred Options are prohibited except
to Family Members of the original Grantee in
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accordance with this Section 9.2 or by will or the laws of descent and
distribution. The events of termination of Service of Section 8.4 hereof shall
continue to be applied with respect to the original Grantee, following which the
Option shall be exercisable by the transferee only to the extent, and for the
periods specified, in Section 8,4.
10. FORM OF PAYMENT FOR OPTIONS
10.1. General Rule.
Payment of the Option Price for the shares purchased pursuant to the
exercise of an Option shall be made in cash or in cash equivalents acceptable to
the Corporation.
10.2. Cashless Exercise.
To the extent the Award Agreement so provides and the Corporation at the
time of exercise so approves, payment of the Option Price for shares purchased
pursuant to the exercise of an Option may be made all or in part by delivery (on
a form acceptable to the Board) of an irrevocable direction to a licensed
securities broker acceptable to the Corporation to sell shares of Stock and to
deliver all or part of the sales proceeds to the Corporation in payment of the
Option Price and any withholding taxes described in Section 14.3. Note that
applicable law may restrict the applicability of this provision for persons who
at the time of exercise are officers or directors of the Corporation. In
addition, this provision shall not apply if the shares of stock covered by the
Grant are not registered under the Securities Act of 1933 and any applicable
state or foreign securities laws.
10.3. Other Forms of Payment.
To the extent the Award Agreement so provides and is otherwise permitted by
law, payment of the Option Price for shares purchased pursuant to exercise of an
Option may be made in any other form that is consistent with applicable laws,
regulations and rules.
11. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Corporation or any Affiliate, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option held by the
Grantee shall not become exercisable or vested (i) to the extent that such right
to exercise or vesting, taking into account all other rights, payments, or
benefits to or for the Grantee under this Plan, all Other Agreements, and all
Benefit Arrangements, would cause any benefit to the Grantee under this Plan to
be considered a "parachute payment" within the meaning of Section 280G(b)(2) of
the Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Corporation under this Plan, all Other Agreements, and all
Benefit Arrangements would be less than the maximum after-tax amount that could
be received by the Grantee without causing any such benefit to be considered a
Parachute Payment. In the event that the receipt of any such right to exercise
or vesting under this Plan, in conjunction with all other rights,
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payments, or benefits to or for the Grantee under any Other Agreement or any
Benefit Arrangement would cause the Grantee to be considered to have received a
Parachute Payment under this Plan that would have the effect of decreasing the
after-tax amount received by the Grantee as described in clause (ii) of the
preceding sentence, then the Grantee shall have the right, in the Grantee's sole
discretion, to designate those rights, payments, or benefits under this Plan,
any Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the benefit to the Grantee under this Plan be
deemed to be a Parachute Payment.
12. REQUIREMENTS OF LAW
12.1. General.
The Corporation shall not be required to sell or issue any shares of Stock
under any Grant if the sale or issuance of such shares would constitute a
violation by the Grantee, any other individual exercising an Option, or the
Corporation of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations, or of the Corporation's Insider Trading Policy then in effect. If
at any time the Corporation shall determine, in its discretion, that the
listing, registration or qualification of any shares subject to a Grant upon any
securities exchange or under any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issuance or purchase of
shares hereunder, no shares of Stock may be issued or sold to the Grantee or any
other individual exercising an Option pursuant to such Grant unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Corporation,
and any delay caused thereby shall in no way affect the date of termination of
the Grant. Specifically, in connection with the Securities Act, upon the
exercise of any Option unless a registration statement under such Act is in
effect with respect to the shares of Stock covered by such Grant, the
Corporation shall not be required to sell or issue such shares unless the Board
has received evidence satisfactory to it that the Grantee or any other
individual exercising an Option may acquire such shares pursuant to an exemption
from registration under the Securities Act. To the extent required by the
Securities Act of 1933 or any state or foreign securities law, the Corporation
may also require the Grantee to execute a stock restriction agreement with
respect to any shares of Stock acquired pursuant to the Plan and may require any
stock certificates to bear any legends reflecting any applicable legal
restrictions on transfer. Any determination in this connection by the Board
shall be final, binding, and conclusive. The Corporation may, but shall in no
event be obligated to, register any securities covered hereby pursuant to the
Securities Act. The Corporation shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares of
Stock pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable until the shares of Stock
covered by such Option are registered or are exempt from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
12.2. Rule 16b-3.
During any time when the Corporation has a class of equity security
registered under Section 12 of the Exchange Act, it is the intent of the
Corporation that Grants pursuant to the Plan and the exercise of Options granted
hereunder will qualify for the exemption provided by Rule 16b-3 under the
Exchange Act. To the extent that any provision of the Plan or action by the
Board does not comply with the requirements of Rule 16b-3, it shall be deemed
inoperative to the extent permitted by law and deemed advisable by the Board,
and shall not affect the validity of the Plan. In the event that Rule 16b-3 is
revised or replaced, the
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Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.
13. EFFECT OF CHANGES IN CAPITALIZATION
13.1. Changes in Stock.
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or kind
of shares or other securities of the Corporation on account of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Corporation occurring after the Effective Date,
the number and kinds of shares for which grants of Options may be made under the
Plan shall be adjusted proportionately and accordingly by the Corporation. In
addition, the number and kind of shares for which Grants are outstanding shall
be adjusted proportionately and accordingly so that the proportionate interest
of the Grantee immediately following such event shall, to the extent
practicable, be the same as immediately before such event. Any such adjustment
in outstanding Options shall not change the aggregate Option Price payable with
respect to shares that are subject to the unexercised portion of an outstanding
Option, as applicable, but shall include a corresponding proportionate
adjustment in the Option Price per share. The conversion of any convertible
securities of the Corporation shall not be treated as an increase in shares
effected without receipt of consideration. Notwithstanding the foregoing, in the
event of any distribution to the Corporation's stockholders of securities of any
other entity or other assets (other than dividends payable in cash or stock of
the Corporation) without receipt of consideration by the Corporation, the
Corporation may, in such manner as the Corporation deems appropriate, adjust (i)
the number and kind of shares subject to outstanding Grants and/or (ii) the
exercise price of outstanding Options to reflect such distribution.
13.2. Reorganization in Which the Corporation Is the Surviving Entity Which
does not Constitute a Change of Control.
Subject to Section 13.3 hereof, if the Corporation shall be the surviving
entity in any reorganization, merger, or consolidation of the Corporation with
one or more other entities which does not constitute a Change of Control, any
Option theretofore granted pursuant to the Plan shall pertain to and apply to
the securities to which a holder of the number of shares of Stock subject to
such Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing a Grant, any
restrictions applicable to such Grant shall apply as well to any replacement
shares received by the Grantee as a result of the reorganization, merger or
consolidation.
13.3. Change of Control.
Subject to the exceptions set forth in the last sentence of this
Section 13.3 and the last sentence of Section 13.4 either of the following two
actions shall be taken:
(i) prior to the scheduled consummation of a Change of Control,
all Options outstanding hereunder shall become immediately exercisable and shall
remain exercisable for a period of fifteen days, or
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(ii) prior to the consummation of a Change of Control, the Board
may elect, in its sole discretion, to cancel any outstanding Grants of Options
and pay or deliver, or cause to be paid or delivered, to the holder thereof an
amount in cash or securities having a value (as determined by the Board acting
in good faith) equal to the product of the number of shares of Stock subject to
the Option (the "Grant Shares") multiplied by the amount, if any, by which (A)
the formula or fixed price per share paid to holders of shares of Stock pursuant
to such transaction exceeds (B) the Option Price applicable to such Grant
Shares.
With respect to the 15-day exercise window described in paragraph (i)
above, (a) such 15-day window shall begin on the date the Grantee receives
notice of the scheduled consummation of the Change of Control and shall end on
the later of the actual date of consummation of the Change of Control or the
fifteenth day following the delivery of the notice to the Grantee from the
Corporation or the acquiring party, (b) any exercise of an Option during such
fifteen-day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event, and
(c) upon consummation of any Change of Control the Plan, and all outstanding but
unexercised Options shall terminate. The Board shall send written notice of an
event that will result in such a termination to all individuals who hold Options
not later than the time at which the Corporation gives notice thereof to its
stockholders. This Section 13.3 shall not apply to any Change of Control to the
extent that provision is made in writing in connection with such Change of
Control for the assumption or continuation of the Options theretofore granted,
or for the substitution for such Options for new common stock options relating
to the stock of a successor entity, or a parent or subsidiary thereof, with
appropriate adjustments as to the number of shares (disregarding any
consideration that is not common stock) and option exercise prices, in which
event the Plan, Options theretofore granted shall continue in the manner and
under the terms so provided.
13.4. Adjustments.
Adjustments under this Section 13 related to shares of Stock or securities
of the Corporation shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share. The Board may provide in the Award
Agreements at the time of grant, or any time thereafter with the consent of the
Grantee, for different provisions to apply to a Grant in place of those
described in Sections 13.1, 13.2 and 13.3. Any adjustments under this Section 13
applicable to Incentive Stock Options shall comply with the provisions of
Section 424(a) of the Code.
13.5. No Limitations on Corporation.
The making of Grants pursuant to the Plan shall not affect or limit in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure or to merge, consolidate, dissolve, or liquidate, or to sell or
transfer all or any part of its business or assets.
14. GENERAL PROVISIONS
14.1. Disclaimer of Rights.
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Corporation or any Affiliate, or to interfere in any way with any
contractual or other right or authority of the Corporation either to increase or
decrease the
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compensation or other payments to any individual at any time, or to terminate
any employment or other relationship between any individual and the Corporation.
In addition, notwithstanding anything contained in the Plan to the contrary,
unless otherwise stated in the applicable Award Agreement, no Grant granted
under the Plan shall be affected by any change of duties or position of the
Grantee, so long as such Grantee continues to be a director, officer, consultant
or employee of the Corporation or an Affiliate. The obligation of the
Corporation to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the manner
and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Corporation to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
Grantee or beneficiary under the terms of the Plan.
14.2. Nonexclusivity of the Plan.
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Corporation for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
14.3. Withholding Taxes.
The Corporation or an Affiliate, as the case may be, shall have the right
to deduct from payments of any kind otherwise due to a Grantee any Federal,
state, or local taxes of any kind required by law to be withheld with respect to
the issuance of any shares of Stock upon the exercise of an Option. At the time
of exercise, the Grantee shall pay to the Corporation or the Affiliate, as the
case may be, any amount that the Corporation or the Affiliate may reasonably
determine to be necessary to satisfy such withholding obligation. The
Corporation or an Affiliate, as the case may be, may agree to accept shares of
Stock of equivalent Fair Market Value (determined in accordance with Section
2.13) in payment of any such withholding obligation if the Grantee requests to
make payment in such manner.
14.4. Captions.
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
14.5. Other Provisions.
Each Grant under the Plan may contain such other terms and conditions not
inconsistent with the Plan as may be determined by the Board, in its sole
discretion.
14.6. Number And Gender.
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
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14.7. Severability.
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
14.8. Governing Law.
The validity and construction of this Plan and the instruments evidencing
the Grant hereunder shall be governed by the laws of the State of Delaware,
other than any conflicts or choice of law rule or principle that might otherwise
refer construction or interpretation of this Plan and the instruments evidencing
the Grants hereunder to the substantive laws of any other jurisdiction.
* * *
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____________________________________________________________________________________________________________________________________
Please Mark [ ]
Here for
Address Change
or Comments
SEE REVERSE SIDE
WITHHOLD
authority only FOR AGAINST ABSTAIN
1. Election of Directors for those WITHHOLD 2. Proposal to approve the Company's [ ] [ ] [ ]
nominees whose authority for 2003 Stock Option Plan.
Nominees for Director are: FOR all name(s) I have ALL
nominees written below nominees 3. In their discretion, the Proxies are authorized to vote upon
01 Peter K. Stevenson such other business as may properly come before the meeting or
02 Peter S. Brodsky [ ] [ ] [ ] any adjournment or adjournments thereof.
03 Peter L. Herzig
04 Steven Lampe
05 Steven G. Singer
06 Raymond Steele and
07 Steven A. Van Dyke.
__________________________________
Signature___________________________________________Signature___________________________________________Date________________________
SIGNATURE(S) should be exactly as name or names appear on this Proxy Card. If acting as attorney, executor, trustee or other
representative capacity, sign name and title.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
/\ FOLD AND DETACH HERE /\
____________________________________________________________________________________________________________________________________
PROXY GLOBIX(TM)
[LOGO] ----------------------------
The Global Internet Exchange
GLOBIX CORPORATION
Annual Meeting of Shareholders - Tuesday, February 24, 2004.
The undersigned shareholder of Globix Corporation (the "Company") hereby appoints Henry J. Holcombe and Steven G. Singer, or
either of them, the attorney and proxy of the undersigned, with full power of substitution, to vote, as indicated herein, all the
common shares of the Company standing in the name of the undersigned at the close of business on January 16, 2004 at the Annual
Meeting of Shareholders of the Company to be held at the offices of the Company at 139 Centre Street, New York, New York 10013 at
10:00 a.m., local time, on Tuesday, February 24, 2004, and at any and all adjournments thereof, with all the powers the undersigned
would possess if then and there personally present and especially (but without limiting the general authorization and power hereby
given) to vote in respect to all matters which may properly come before the meeting in accordance with and as more fully described
in the Notice of Meeting and Proxy Statement for the meeting, receipt of which is acknowledged.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED FOR THE ELECTION OF THE PROPOSED DIRECTORS AND FOR THE
PROPOSAL TO APPROVE THE 2003 STOCK OPTION PLAN UNLESS OTHERWISE INDICATED.
If the undersigned hold(s) any shares in a fiduciary, custodial or joint capacity or capacities, this proxy is signed by the
undersigned in every such capacity as well as individually.
(Please fill in the reverse side and return promptly in the enclosed envelope.)
(Continued and to be marked,dated and signed, on the other side)
____________________________________________________________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
/\ FOLD AND DETACH HERE /\
You can now access your Globix Corporation account online.
Access your Globix Corporation shareholder account online via Investor ServiceDirect(R) (ISD).
Mellon Investor Services LLC, agent for Globix Corporation, now makes it easy and convenient to get current information on your
shareholder account. After a simple and secure process of establishing a Personal Identification Number (PIN), you are ready to log
in and access your account to:
o View account status o Make address changes
o View certificate history o Establish/change your PIN
Visit us on the web at http://www.melloninvestor.com
and follow the instructions shown on this page.
Step 1: FIRST TIME USERS - Establish a PIN Step 2: Log in for Account Access Step 3: Account Status Screen
You must first establish a Personal You are now ready to log in. To access You are now ready to access your account
Identification Number (PIN) online by your account please enter your: information. Click on the appropriate
following the directions provided in the button to view or initiate transactions.
upper right portion of the web screen as o SSN or Investor ID
follows. You will also need your Social o PIN o Certificate History
Security Number (SSN) or Investor ID o Then click on the [Submit] button o Issue Certificate
available to establish a PIN. o Address Change
If you have more than one account, you
The confidentiality of your personal will now be asked to select the
information is protected using secure appropriate account.
socket layer (SSL) technology.
o SSN or Investor ID
o Then click on the [Establish PIN]
button
Please be sure to remember your PIN, or
maintain it in a secure place for future
reference.
For Technical Assistance Call 1-877-978-7778 between
9am-7pm Monday-Friday Eastern Time
____________________________________________________________________________________________________________________________________