<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2 TO
ANNUAL REPORT PURSUANT TO 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number: 000-24653
NORTHEAST OPTIC NETWORK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3056279
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2200 WEST PARK DRIVE
SUITE 200
WESTBOROUGH, MASSACHUSETTS 01581
(508) 616-7800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. /X/
The aggregate market value of the Common Stock held by non-affiliates of the
registrant, based on the last sale price of the Common Stock reported on the
Nasdaq National Market on March 31, 2000 was $474,822,429.
The number of shares of Common Stock outstanding as of March 31, 2000 was
16,624,380.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE>
NorthEast Optic Network, Inc. (the "Company") hereby further amends
its Annual Report on Form 10-K for the year ended December 31, 1999 in order
to correct certain executive compensation and beneficial ownership
information previously filed.
PART III
<PAGE>
Item 11. EXECUTIVE COMPENSATION
Compensation Earned
The following table sets forth the compensation for the fiscal years ended
December 31, 1997, 1998 and 1999 for (1) our chief executive officer and (2) our
three most highly compensated executive officers (other than our chief executive
officer) whose total annual salary and bonus exceeded $100,000 in 1999,
collectively referred to as the named executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------- ----------------
Shares
Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation (1)
- ------------------------------------ --------- ------------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Vincent C. Bisceglia........... 1999 $211,746 -- 299,628 $4,124
CHAIRMAN OF THE BOARD, CHIEF 1998 25,845 -- 350,000 --
EXECUTIVE OFFICER AND DIRECTOR 1997 -- -- -- --
Victor Colantonio.............. 1999 203,325 -- -- 4,994
VICE CHAIRMAN OF THE BOARD, 1998 174,556 500,000 649,628 4,800
PRESIDENT AND DIRECTOR 1997 150,000 2,885 -- --
William F. Fennell............. 1999 127,175 -- -- 3,840
CHIEF FINANCIAL OFFICER, 1998 111,436 -- 162,407 3,246
TREASURER AND ASSISTANT 1997 91,731 -- -- --
SECRETARY
Michael A. Musen............... 1999 115,855 -- 60,000 3,557
VICE PRESIDENT, OPERATIONS 1998 123,313 -- 40,601 3,592
1997 112,000 2,154 -- --
</TABLE>
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1. These amounts represent amounts paid by us on behalf of the named executive
officer as 401K contributions and group life insurance premiums.
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OPTION GRANTS
The table below contains information concerning the grant of options
to purchase shares of our common stock to each of the named executive
officers during the year ended December 31, 1999. The percentage of total
options granted to employees set forth below is based on an aggregate of
710,165 shares subject to options granted to our employees in 1999. All
options were granted at or above fair market value as determined by the board
of directors on the date of grant.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term (1)
---------------------------------------------------- -------------------------------
Number of Percent of
Securities Total Exercise
Underlying Options Price Per
Options Granted to Share Expiration
Name Granted Employees ($/sh) Date (2) 5% 10%
- ---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Vincent C. Biscaglia(3).. 299,628 42.1% $12.00 01/01/09 $2,261,213 $5,730,358
Victor Colantonio........ -- -- -- -- -- --
William F. Fennell....... -- -- -- -- -- --
Michael A. Musen(4)...... 60,000 8.4 29.38 08/18/09 1,108,427 2,808,971
</TABLE>
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1. The amounts shown in these columns represent hypothetical gains that could be
achieved if the options were exercised at the end of the option term. These
gains are based on assumed rates of stock appreciation of 5% and 10%, compounded
annually from the date the option was granted to its expiration date. The gains
shown are net of the option exercise price, but do not include deductions for
taxes or other expenses associated with an exercise. Actual gains, if any, on a
stock option exercise will depend on the future performance of our common stock,
the option holder's continued employment, and the date on which the option is
exercised.
2. The expiration date of each option is the tenth anniversary of the date on
which the option was granted.
3. This option becomes exercisable as to 137,221 shares on November 11, 2001
and as to the remaining shares on November 11, 2002.
4. This option is exercisable in three equal annual installments beginning
on August 18, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning each exercise of a
stock option during the fiscal-year ended December 31, 1999 by each of the named
executive officers and the number and "value" of unexercised options held by
each of the named executive officers on December 31, 1999. The value of an
unexercised option for purposes of this table is the difference between the fair
market value of our common stock on December 31, 1999 ($62.563 per share, as
quoted on the Nasdaq National Market) and the option's exercise price,
multiplied by the number of shares underlying the option.
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Aggregated Option Exercised in Fiscal 1999
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-Money
Options at Fiscal Year-End Options at Fiscal Year-End
Shares Acquired
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Vincent C. Bisceglia....... 51,827 $3,149,361 110,580 487,221 $6,245,006 $25,744,405
Victor Colantonio.......... 85 4,420 324,729 324,814 16,419,272 16,423,570
William F. Fennell......... 28,500 1,553,330 52,704 81,203 2,664,872 4,105,867
Michael A. Musen........... -- -- 40,602 60,000 2,052,958 1,991,280
</TABLE>
EMPLOYMENT, TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Bisceglia serves as our chief executive officer pursuant to the terms
of an employment agreement dated November 12, 1998 and made effective November
5, 1998. The agreement has an initial term expiring on December 31, 2001 and is
automatically extended for one year periods unless either party gives notice no
later than the immediately preceding July 1 of its desire to terminate the
agreement. The agreement provides for an annual base salary of not less than
$210,000 and for the grant of two options in November 1998 and a third option in
January 1999. The first two options cover 350,000 shares in the aggregate which
become exercisable at $6.0875 per share, as to 162,407 shares on each of
November 11, 1999 and 2000 and as to 25,186 shares on November 11, 2001; the
third option covers 299,628 shares and becomes exercisable at $12.00 per share
as to 137,221 shares on November 11, 2001 and as to 162,407 shares on November
11, 2002. In addition to being eligible to participate in our executive and
employee plans, Mr. Bisceglia has an opportunity to earn an annual bonus of up
to 35% of his base salary upon achieving certain performance goals. If Mr.
Bisceglia's employment is terminated for any reason other than death, total
disability or cause or if we elects not to renew the agreement after the
occurrence of a change of control, Mr. Bisceglia will be entitled to receive a
lump sum payment in an amount equal to 2.99 times his then-current base salary.
If in the absence of a change of control the agreement is not renewed or Mr.
Bisceglia's employment is terminated for any reason other than death, total
disability or cause or by him within six months of a constructive discharge, Mr.
Bisceglia will be entitled to receive a lump sum payment in an amount equal to
his base salary in effect immediately preceding his termination or constructive
discharge, as the case may be.
Mr. Colantonio serves as our president pursuant to the terms of an
employment agreement dated October 15, 1997, as amended. The agreement has an
initial term of three years and is automatically extended for one-year terms
thereafter unless either party gives written notice no later than the
immediately preceding April 1 of its desire to terminate the agreement. The
agreement provides for an annual base salary of not less than $150,000. If
Mr. Colantonio's employment is terminated without cause after the occurrence
of a change of control, Mr. Colantonio will be entitled to receive a lump sum
payment in an amount equal to 2.99 times his then-current base salary. Upon
consummation of our initial public offering of Common Stock, Mr. Colantonio's
annual base salary was increased to $200,000, as provided for in the
agreement. Mr. Colantonio and the Company have decided not to renew Mr.
Colantonio's current agreement, but intend to negotiate a new agreement
commensurate with Mr. Colantonio's position as Vice Chairman and President
and which takes into account the fact that the Company is now publicly
traded, among other matters.
Mr. Fennell serves as our chief financial officer pursuant to the terms of
an employment agreement dated July 1, 1998. The agreement has an initial term
expiring on July 30, 2001. The agreement provides for an annual base salary of
not less than $125,000 per year, as well as an option to purchase 162,407 shares
of our common stock at $12.00 per share evidenced by a stock option agreement
which provides that the option vests as to 40,602 shares on each of May 20,
1998, August 5, 1999 and August 5, 2000 and as to 40,601 shares on August 5,
2001. Pursuant to the agreement,
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<PAGE>
Mr. Fennell is also entitled to participate in our executive incentive plan and
has an opportunity to earn an annual bonus, targeted at 25% of his base salary.
Mr. Musen serves as our vice president, operations pursuant to the terms of
an employment agreement dated September 29, 1994. The agreement has a term of
three years and renews automatically on an annual basis unless terminated by
either party on at least 180 days' notice. The agreement provides for an annual
base salary of not less than $112,000. In addition, in June 1998 the board of
directors granted to Mr. Musen an option to purchase 40,601 shares of our common
stock, exercisable in full upon August 5, 1998 with an exercise price per share
of $12.00.
Pursuant to the provisions of our Amended and Restated 1998 Stock Incentive
Plan, under which the foregoing options were granted, all options become
exercisable in full upon a change in control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Messrs. Bisceglia and Colantonio served on the board of
directors and served as executive officers. No interlocking relationship exists
between any member of our compensation committee and any member of any other
corporation's board of directors or compensation committee.
The current members of our compensation committee are Ms. Courage and
Messrs. Forsgren and McClain. None of our executive officers have served as a
director or member of the compensation committee (or other committee serving an
equivalent function) of any other entity, whose executive officers served as a
director of or member of our compensation committee.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act and regulations of the Securities and
Exchange Commission (the "Commission") thereunder require our executive officers
and directors, and persons who own more than ten percent of a registered class
of the our equity securities, to file reports of initial ownership and changes
in ownership with the Commission and the National Association of Securities
Dealers, Inc. Such officers, directors and ten-percent stockholders are also
required by the rules of the Commission to furnish us with copies of all Section
16(a) forms they file. Based solely on our review of the copies of such forms
received by it, or written representations from certain reporting persons that
no other reports were required for such persons, we believe that, during or with
respect to the period from January 1, 1999 to December 31, 1999, all of our
executive officers, directors and ten-percent stockholders complied with their
Section 16(a) filing obligations.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee seeks to achieve two primary goals in connection
with executive compensation programs and decisions regarding individual
compensation. First, the Compensation Committee structures executive
compensation programs in a manner that it believes will enable the company to
attract and retain key executives. In order to ensure continuity of certain key
members of management, in 1998 the Board of Directors approved multi-year
employment contracts for our executive officers. Second, executive compensation
programs are intended to provide executives with an equity interest in us so as
to link a portion of their compensation with the performance of our common
stock.
The compensation programs for executives established by the Compensation
Committee consist of a base salary plus an annual cash bonus and/or a
stock-based equity incentive award.
In establishing base salaries for executive officers, the Compensation
Committee monitored salaries at other companies, particularly those that are in
the same industry as we are or related industries and/or located in the same
general geographic area as we are, considered historic salary levels of the
individual and the nature of the individual's experience and responsibilities
and compared the individual's base salary with those of other executives. To the
extent determined to be appropriate, the Compensation Committee also considered
our financial performance and the individual's performance.
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In establishing bonuses for executive officers, including the Chief
Executive Officer, the Compensation Committee considered a combination of
individual and corporate performance goals to be achieved during the coming
year.
It is not currently the policy of the Compensation Committee to grant stock
options to executives annually, and the timing of grants to executives, if any,
will depend upon a number of factors, including new hires of executives, the
executives' current stock and option holdings and such other factors as the
Compensation Committee deems relevant. When granting stock options, it has
generally been the policy of the Compensation Committee to fix the exercise
price at 100% of the fair market value of our common stock on the date of grant.
The compensation of the Chief Executive Officer is currently governed by
his employment agreement established in 1998, which is described under the
heading "Employment, Termination and Change-in-Control Arrangements," above.
COMPENSATION OF DIRECTORS
The board of directors has adopted a Board Compensation Plan which provides
for the payment of certain fees to non-employee directors. The Board
Compensation Plan specifies that each non-employee director will be paid $20,000
per year of service as a director, payable quarterly in arrears; $500 per board
meeting attended; $250 per committee meeting attended; $300 per telephonic board
meeting attended; and $150 per telephonic committee meeting attended. All
directors are reimbursed for their expenses of attending board and committee
meetings.
Also pursuant to the Board Compensation Plan, each non-employee director
was granted an initial option to purchase 16,241 shares of our common stock
which is exercisable at $12.00 per share. New non-employee directors will be
granted an option to purchase 16,241 shares of our common stock exercisable at
the then current market price per share. In addition, at the first meeting of
directors following each annual meeting of stockholders, each non-employee
director will be granted an additional option to purchase one-tenth of one
percent (0.1%) of the number of shares of our common stock outstanding on a
fully diluted basis at the then current market price. Options granted under the
Board Compensation Plan vest in four equal installments on the date of grant and
on the first three anniversaries of the date of grant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 31, 2000 by (1) each person who owns
beneficially more than 5% of the outstanding shares of our common stock, which
includes the selling stockholder, (2) each of our directors, (3) our chief
executive officer and the four other most highly compensated executive officers
and (4) all of our directors and executive officers as a group.
The number of shares of common stock deemed outstanding includes:
- - 16,624,380 shares of our common stock outstanding as of March 31, 2000; and
- - shares issuable pursuant to options held by each person included in this
table which may be exercised within 60 days after March 31, 2000, as set
forth below.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting and investment power
with respect to shares. Unless otherwise indicated below, to our knowledge, all
persons named in the table have sole voting and investment power with respect to
their shares of common stock, except to the extent authority is shared by
spouses under applicable law. The inclusion of any shares in this table does not
constitute an admission of beneficial ownership for the person named below.
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<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned
Name of Beneficial Owner Number Percentage
- ------------------------ --------- ----------
<S> <C> <C>
CMP Group, Inc. (1).......... 6,180,801 37.2%
41 Anthony Avenue
Augusta, Maine 04330
Northeast Utilities (2)...... 4,774,038 28.7
107 Selden Street
Berlin, Connecticut 06037
Vincent C. Bisceglia (3)..... 74,607 *
Victor Colantonio (4)........ 215,029 1.3
William F. Fennell (5)....... 21,604 *
Michael C. Musen (6)......... 31,501 *
Katherine Dietze Courage
(7)........................ 17,462 *
Arthur W. Adelberg (8)....... 8,542 *
F. Michael McClain (9)....... 17,462 *
Gary D. Simon (10)........... 5,462 *
John H. Forsgren (11)........ 5,462 *
All directors and executive
officers as a group
(9 persons) (12).......... 397,131 2.4
</TABLE>
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* Represents less than 1% of the outstanding shares of common stock.
(1) All 6,180,801 shares of common stock are held by New England Business Trust.
New England Business Trust is owned by New England Investment Corp., a
wholly-owned subsidiary of Mainecom Services which is a wholly-owned
subsidiary of CMP Group, Inc. The trustees of New England Business Trust are
New England Investment Corp. and Joseph D. Fay. All actions of New England
Business Trust require the signature of both trustees. Joseph D. Fay is
General Counsel, Secretary and Clerk of Mainecom Services and a director of
New England Investment Corp. Mr. McClain, one of our directors, is Vice
President, corporate development of CMP Group, Inc. Mr. Adelberg, one of our
directors, is Executive Vice President and Chief Financial Officer of CMP
Group, Inc. each of Mr. Adelberg and Mr. McClain disclaim beneficial
ownership of the shares held by CMP Group, Inc., except to the extent of his
pecuniary interest, if any.
(2) All shares beneficially owned by Northeast Utilities are held by Mode 1
Communications, Inc., a wholly-owned subsidiary of Northeast Utilities
Enterprises, Inc., which is in turn, a wholly-owned subsidiary of Northeast
Utilities. Mr. Forsgren, one of our directors, is the Executive Vice
President and Chief Financial Officer of Northeast Utilities and certain of
its affiliates. Mr. Simon, one of our directors, is the Senior Vice
President, strategy and development for Northeast Utilities Service Company,
a subsidiary of Northeast Utilities. each of Messrs. Forsgren and Simon
disclaims beneficial ownership of the shares held by Mode 1 except to the
extent of his pecuniary interest, if any.
(3) Includes 58,180 shares issuable pursuant to options.
(4) Includes 213,729 shares issuable pursuant to options and 300 shares held of
record by Mr. Colantonio's minor child, as to which shares Mr. Colantonio
disclaims beneficial ownership except as to the extent of his pecuniary
interest, if any.
(5) Represents 21,204 shares issuable pursuant to options and 400 shares held of
record by Mr. Fennell's minor children, as to which shares Mr. Fennell
disclaims beneficial ownership except to the extent of his pecuniary
interest, if any.
(6) Includes 300 shares held of record by Mr. Musen's minor child as to which
shares Mr. Musen disclaims beneficial ownership except to the extent of his
pecuniary interest, if any.
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<PAGE>
(7) Represents 17,462 shares issuable pursuant to options.
(8) Includes 8,042 shares issuable pursuant to options.
(9) Represents 17,462 shares issuable pursuant to options.
(10) Represents 5,462 shares issuable pursuant to options.
(11) Represents 5,462 shares issuable pursuant to options.
(12) Includes 347,003 shares issuable pursuant to options.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to its
Annual Report on Form 10-K/A to be signed on its behalf by the undersigned,
thereunto duly authorized, in Westborough, Massachusetts, on this 1st day of
May 2000.
NORTHEAST OPTIC NETWORK, INC.
By: /s/ Vincent C. Bisceglia
------------------------
Vincent C. Bisceglia
Chief Executive Officer and
Chairman of the Board of Directors
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this Amendment to the Registrant's Annual
Report on Form 10-K/A has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Vincent C. Bisceglia Chief Executive Officer and May 1, 2000
- ----------------------------- Chairman of the Board of Directors
Vincent C. Bisceglia (Principal Executive Officer)
President and Vice Chairman May 1, 2000
- ----------------------------- of the Board of Directors
Victor Colantonio
* Vice President, Finance, May 1, 2000
- ----------------------------- Chief Financial Officer and Treasurer
William F. Fennell (Principal Financial and Accounting
Officer)
- ----------------------------- Director May 1, 2000
Katherine D. Courage
*
- ----------------------------- Director May 1, 2000
John W. Forsgren
*
- ----------------------------- Director May 1, 2000
Gary D. Simon
*
- ----------------------------- Director May 1, 2000
F. Michael McClain
*
- ----------------------------- Director May 1, 2000
Arthur Adelberg
</TABLE>
*By: /s/ Vincent C. Bisceglia
-------------------------------
Vincent C. Bisceglia
Attorney-in-fact
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