UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 2002
IFX Corporation
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(Exact name of Registrant as Specified in Its Charter)
Delaware 0-15187 36-3399452
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(State or Other Jurisdiction of (Commission file number) (I.R.S. Employer
Incorporation or Organization) Identification No.)
IFX Corporation
15050 NW 79/th/ Court
Miami Lakes, Florida 33016
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(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
(305) 512-1100
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(Registrant's Telephone Number, Including Area Code)
_______________________________________________________________
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
(a) Convertible Promissory Notes. On October 31, 2002, the Registrant issued to
each of UBS Capital Americas III, L.P. and UBS Capital LLC (collectively, the
"Purchasers") a Convertible Promissory Note in the amounts of $2,755,000 and
$145,000, respectively (together, the "Notes"). Copies of the Notes are attached
hereto as Exhibits 10.1 and 10.2 and are incorporated herein by reference.
The Notes mature on September 30, 2007 (the "Maturity Date"), and carry an
interest rate of ten percent per annum. At any time prior to the Maturity Date,
the Purchasers can convert the principal amount of the Notes plus accrued and
unpaid interest into shares of the Registrant's Series D Convertible Preferred
Stock (or, if necessary under Delaware law, a new class of preferred stock
having the same rights, preferences, and privileges as the Series D Convertible
Preferred Stock) at a conversion price equal to $1.20 per share (as adjusted for
stock splits, combinations, stock dividends and the like) of Series D
Convertible Preferred Stock. The Series D Convertible Preferred Stock to be
issued upon any such conversion shall have the same rights, preferences and
privileges as the shares of the Series D Convertible Preferred Stock issued in
the Registrant's Series D financing. In the event that the Purchasers do not
own Registrant common stock at the time of the conversion to Series D
Convertible Preferred Stock pursuant to the Notes, then in lieu of the "common
to preferred" conversion right provided under the terms of the Series D
financing, and in addition to the shares of Series D Convertible Preferred Stock
issuable as stated above, the Purchasers shall receive 0.0342 shares of Series D
Convertible Preferred Stock for each dollar of the Notes plus accrued and unpaid
interest converted. Alternatively, in the event that the Registrant enters into
an agreement to issue "Qualified Financing Securities" prior to the Maturity
Date, then the Purchasers can convert the principal amount of the Notes plus
accrued and unpaid interest into Qualified Financing Securities at a conversion
price equal to the purchase price per Qualified Financing Security. A "Qualified
Financing Security" means a security issued by Registrant pursuant to an
agreement executed after October 31, 2002 that provides the Registrant debt or
equity financing in connection with the issuance of securities by the Registrant
consisting of common stock or other securities that are convertible,
exercisable, or exchangeable into shares of the Registrant's common stock.
(b) Employment Agreements. On October 31, 2002, the Registrant entered into
revised employment agreements (collectively, the "Agreements," which are
attached hereto as Exhibits 10.3, 10.4 and 10.5, and are incorporated herein by
reference) with Michael Shalom (to serve as Chief Executive Officer), Joel
Eidelstein (to serve as President), and Jose Leiman (to serve as General
Counsel) (each an "Employee" or collectively, the "Employees"). The employment
agreements provide for an annual salary of $175,000 for each of Mr. Shalom and
Mr. Eidelstein and $182,000 for Mr. Leiman. In addition, the agreement with Mr.
Eidelstein provides for the payment of a $35,000 cash bonus upon signing of the
agreement. The Agreements have a term of one year subject to automatic rolling
extensions to maintain the one year term, unless notified otherwise by either
the Registrant or the Employee. The Agreements provide that if the Employee is
involuntarily terminated during the term of the employment agreement (except for
cause) ("Involuntary Termination") (i) he receives a lump sum amount of accrued
but unpaid salary, (ii) he receives an amount equal to one-third of the
Employee's annualized salary for the current year payable semi-monthly over four
(4) months, (iii) he is entitled to the continuation of benefits for six months
or, at the option of the Employee, the right to receive the cash value thereof
payable semi-monthly over four (4) months, (iv) all options held by the Employee
under the Registrant's 1998 Stock Option and Incentive Plan, as amended, vest
immediately, and (v) Messrs. Shalom and Eidelstein are granted the vested right
to receive 24,300 shares and Mr. Leiman is granted the vested right to receive
25,300 shares of a new class of the Registrants' Convertible Preferred Stock,
with such stock to have the terms set forth in the Amended and Restated Put
Agreement dated as of August 15, 2002, by and among Registrant, UBS Capital
Americas III, L.P. and UBS Capital LLC ("Series E Preferred Stock"), less
applicable withholding. If an Involuntary Termination occurs within one year
after a "Change in Control" of the Registrant, then the Employees shall receive
the payments described above, except that the Employee in lieu of an amount
equal to one-third of the Employee's annualized salary shall receive
seventy-five percent of Employee's annualized salary in the year of the
Liquidity Event payable semi-monthly over nine months.
Messrs. Shalom and Eidelstein were also granted the vested right to receive
23,333 and 11,667 shares, respectively, of Series E Preferred Stock, less
applicable withholding. With respect to such right (as well as the right to
receive shares of Series E Preferred Stock upon an Involuntary Termination, as
described above), the Employee shall have no right to receive such shares until
immediately prior to the first to occur of:
a) a Change of Control of Registrant, b) a Liquidity Event of Registrant, or c)
a Liquidation of Registrant, as determined under the Certificate of Designation
creating the Series E Preferred Stock of Registrant.
In addition, the Agreements provide that if Employee is employed by Registrant
at the time of a Liquidity Event or if Employee was involuntarily terminated
within 90 days prior to the commencement of or during the process leading to
such Liquidity Event, Registrant shall pay a bonus to Employee (a "Targeted
Bonus") if the Equity Value (as defined in the Agreements) of the Registrant
paid with respect to such Liquidity Event is at least $30 million. The amount of
the Targeted Bonus to be paid to Employee will equal 24.75% for Messrs. Shalom
and Eidelstein, and 25.75 % for Mr. Leiman, of the "Total Senior Management
Bonus Pool". The "Total Senior Management Bonus Pool" with respect to a
Liquidity Event shall equal 2.5% of the Equity Value paid with respect to such
Liquidity Event, prior to the determination of the Total Senior Management Bonus
Pool. However, if the Equity Value equals or exceeds $100 million prior to the
determination of any Total Senior Management Bonus Pool, then the Total Senior
Management Bonus Pool shall equal $2.5 million plus 5% of that portion of the
Equity Value in excess of $100 million. If stockholders of Registrant receive
non-cash consideration in connection with a Liquidity Event, then an allocable
portion of the Targeted Bonus shall be paid to Employee in the form of such
non-cash consideration, with the amount of such non-cash consideration to be
paid to Employee in the same ratio that the Purchasers receive cash and non-cash
consideration. A "Liquidity Event" is a consummation of a transaction whereby an
independent third party agrees to acquire more than 50% of the outstanding stock
of Registrant or substantially all of Registrant's assets.
Effective as of the date of the Agreements, Messrs. Shalom and Eidelstein were
each granted an option to purchase 125,000 shares, and Mr. Leiman 130,000
shares, of Registrant's Series D Convertible Preferred Stock. The exercise price
for the option is equal to $1.20 per share of Series D Convertible Preferred
Stock (as adjusted for stock splits, combinations, stock dividends and the
like). The option will vest monthly over 24 months starting three months from
the date of the Agreements, but will vest immediately in connection with an
Involuntary Termination. The options have a term ending ten (10) years from the
date of the Agreements. Options that are vested may be exercised for ninety (90)
days following Employee's death, disability or an Involuntary Termination. If
the Employee is terminated for cause or terminates employment other than as a
result of death, disability or an Involuntary Termination, the option will cease
to be exercisable effective as of the effective date of termination. Unvested
options will terminate immediately as of termination of Employee's employment
with Registrant.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
Exhibit Number Description of Exhibit
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10.1 Convertible Promissory Note dated October 31, 2002, issued by the
Registrant to UBS Capital Americas III, L.P.
10.2 Convertible Promissory Note dated October 31, 2002, issued by the
Registrant to UBS Capital LLC
10.3 Employment Agreement dated as of October 31, 2002, between Michael
Shalom and the Registrant
10.4 Employment Agreement dated as of October 31, 2002, between Joel
Eidelstein and the Registrant
10.5 Employment Agreement dated as of October 31, 2002, between Jose
Leiman and the Registrant
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IFX Corporation
By: /s/ Joel Eidelstein
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Joel Eidelstein,
President
Date: November 8, 2002
IFX CORPORATION
EXHIBIT INDEX
Exhibit Number Description of Exhibit
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10.1 Convertible Promissory Note dated October 31, 2002, issued by the
Registrant to UBS Capital Americas III, L.P.
10.2 Convertible Promissory Note dated October 31, 2002, issued by the
Registrant to UBS Capital LLC
10.3 Employment Agreement dated as of October 31, 2002, between Michael
Shalom and the Registrant
10.4 Employment Agreement dated as of October 31, 2002, between Joel
Eidelstein and the Registrant
10.5 Employment Agreement dated as of October 31, 2002, between Jose
Leiman and the Registrant