<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A NO. 1
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER : 000-21261
VIATEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3787366
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
800 THIRD AVENUE, NEW YORK, NEW YORK 10022
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 350-9200
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 PER SHARE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 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. [X] YES [ ] NO
INDICATE BY 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 THIS
FORM 10-K [ ].
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT AS OF APRIL 16, 1998 WAS APPROXIMATELY $135,514,594. AS OF APRIL
16, 1998, 23,078,614 SHARES OF THE REGISTRANT'S COMMON STOCK, $0.01 PAR VALUE,
WERE OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE. NONE.
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<PAGE>
The information required by Part III (Items 10, 11, 12 and 13) of the
undersigned Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (the "Annual Report"), filed pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), was to
be incorporated by reference to the definitive Proxy Statement for the 1998
Annual Meeting of Stockholders of the Company, which Proxy Statement was to be
filed pursuant to Regulation 14A under the Exchange Act within 120 days
following the end of the Company's fiscal year as permitted under General
Instruction G of Form 10-K ("Instruction G"). However, the definitive Proxy
Statement will not have been filed within such period. Accordingly, pursuant to
Instruction G, the Company hereby amends Items 10, 11, 12 and 13 of the Annual
Report as follows:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to executive officers of the Company is
presented in Item 4 of this Report under the caption "Executive Officers of the
Company."
MICHAEL J. MAHONEY. Mr. Mahoney has served as Chief Executive Officer
of the Company since September 1997, as President of the Company since September
1996 and as a director of the Company since 1995. Mr. Mahoney was also Chief
Operating Officer of the Company from September 1996 to September 1997,
Executive Vice President, Operations and Technology of the Company from July
1994 to September 1996 and Managing Director, Intercontinental of the Company
from January 1996 to September 1996. From August 1990 to June 1994, Mr. Mahoney
was employed by SITEL Corporation, a teleservices company, most recently as
President, Information Services Group. From August 1987 to August 1990, Mr.
Mahoney was employed by URIX Corporation, a manufacturer of telecommunications
hardware and software, in a variety of sales and marketing positions. Mr.
Mahoney is 38 years old.
ALLAN L. SHAW. Mr. Shaw has served as Senior Vice President, Finance
of the Company since December 1997, as Chief Financial Officer of the Company
since January 1996 and Treasurer of the Company since September 1996. Mr. Shaw
has served as a director of the Company since June 1996. Mr. Shaw was Vice
President, Finance of the Company from January 1996 to December 1997. Prior to
becoming the Company's Vice President, Finance and Chief Financial Officer, Mr.
Shaw served as Corporate Controller of the Company from November 1994 to
December 1995. From August 1987 to November 1994, Mr. Shaw was employed by
Deloitte & Touche LLP, most recently as a Manager. Mr. Shaw is a Certified
Public Accountant and a member of the American Institute, United Kingdom Society
and New York State Society of Certified Public Accountants. Mr. Shaw is 34 years
old.
W. JAMES PEET. Mr. Peet has served as a director of the Company since
November 1995. He is Vice President of The Chatterjee Group, an affiliate of S-C
V-Tel Investments, L.P. ("S-C V-Tel") a stockholder of the Company, and has been
associated with The Chatterjee Group since August 1991. From June 1985 to July
1991, Mr. Peet was a management consultant employed by McKinsey & Company. Mr.
Peet is 43 years old.
PAUL G. PIZZANI. Mr. Pizzani has served as a director of the Company
since April 1996. Mr. Pizzani is currently a Managing Director of Wasserstein
Perella Emerging Markets L.P. where he has been employed since November 1997.
Prior to November 1997, Mr. Pizzani was associated with COMSAT Corporation in
various capacities from November 1985 to October 1997, most recently as
Treasurer. COMSAT International, Inc. ("COMSAT"), an affiliate of COMSAT
Corporation, is a stockholder of the Company. Mr. Pizzani is 38 years old.
<PAGE>
The number of directors of the Company, as determined by the Board of
Directors, is currently seven, three directorships of which are currently
vacant. The Board of Directors consists of three classes: Class A, Class B and
Class C. One of the three classes, comprising one-third of the directors, is
elected each year to succeed the directors whose terms are expiring. Directors
hold office until the annual meeting for the year in which their terms expire
and until their successors are elected and qualified unless, prior to that date,
they have resigned, retired or otherwise left office. In accordance with the
Company's Amended and Restated Certificate of Incorporation, Class B directors
are to be elected at the 1998 Annual Meeting of Stockholders, Class C directors
are to be elected at the 1999 Annual Meeting of Stockholders and Class A
directors are to be elected at the 2000 Annual Meeting of Stockholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
certain officers and persons holding more than 10% of a registered class of the
Company's equity securities to file reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission (the "Commission") and
the Nasdaq National Market. Directors, certain officers and greater than 10%
stockholders are also required by Commission regulations to furnish the Company
with copies of all such reports that they file. Based on the Company's review of
copies of such forms provided to it, the Company believes that all filing
requirements were complied with during the fiscal year ended December 31, 1997,
except for several filings which the Company believes should have been made by
Martin Varsavsky, the former Chairman of the Board and Chief Executive Officer
of the Company, and one late filing by Francis J. Mount, Senior Vice President,
Engineering and Network Operations.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by or paid to, the Company's Chief
Executive Officer and the other most highly compensated executive officers of
the Company, whose aggregate cash and cash equivalent compensation exceeded
$100,000 (the "Named Executives"), with respect to the last three fiscal years.
2
<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------- --------------------------
OTHER
ANNUAL RESTRICTED SECURITIES
COMPENSATION STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) AWARDS ($) OPTIONS(#) COMPENSATION
- --------------------------- ---- --------- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Mahoney(2),.......... 1997 $212,500 $125,000 -- -- -- $9,500(4)
President and Chief Executive 1996 166,458 183,129 $102,825 $299,977(3) 253,333 --
Officer 1995 123,000 117,607 52,715 -- 23,333 --
Allan L. Shaw(5),............... 1997 140,000 60,000 -- -- 60,666 8,400(4)
Senior Vice President, Finance 1996 108,333 115,000 -- -- 43,333 --
Chief Financial
Officer and Treasurer
Lawrence G. Malone(5),.......... 1997 141,750 35,588 -- -- 73,533 8,505(4)
Senior Vice President Global 1996 98,333 88,147 -- -- 33,333 --
Sales and Marketing
Sheldon M. Goldman(6),.......... 1997 143,750 60,000 -- -- 40,200 9,000(4)
Senior Vice President, Business 1996 86,354 100,000 -- -- 20,000 --
Affairs and General Counsel
Martin Varsavsky(2),............. 1997 271,875 -- 73,482 -- -- --
Chairman and Chief Executive 1996 350,000 200,000 76,476 -- -- --
Officer 1995 329,673 100,000 99,813 -- -- --
</TABLE>
- -----------
(1) The amount reflected for Mr. Mahoney (i) for 1996, includes $32,416 of
tax equalization payments, $28,227 of relocation expense reimbursement
associated with Mr. Mahoney's repatriation from London to New York and
$9,263 of tax gross ups and (ii) for 1995, includes $23,834 of housing
allowance expense. The amount reflected of Mr. Varsavsky (i) for 1997,
includes $43,279 of housing allowance expense, $16,395 for housing
related expenses and $9,069 of tuition reimbursement for his children's
schooling, (ii) for 1996, includes $67,375 of housing allowance expense
and $8,180 of tuition reimbursement for his children's schooling and
(iii) for 1995, includes $35,880 of housing allowance expense and
$47,500 of relocation expense reimbursement.
(2) Mr. Mahoney was appointed as Chief Executive Officer in September 1997
following Mr. Varsavsky's resignation.
(3) Calculated based on a value of $9.00 per share, the fair market value
of the Common Stock on December 31, 1996.
(4) Represents matching contributions under the Company's 401(k) plan.
(5) The executive was not an executive officer of the Company during 1995.
(6) Mr. Goldman began his employment with the Company in March 1996.
STOCK OPTION GRANTS
The following table sets forth information regarding grants of options
to purchase Common Stock made by the Company during the fiscal year ended
December 31, 1997 to each of the Named Executives. No stock appreciation rights
("SARs") were granted during 1997.
3
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN 1997
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------ AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (#) 1997 (1) ($/SHARE)(2) DATE (5%) (10%)
- ---- ----------- ---------- ----------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Mahoney................ -- -- -- -- -- --
Allan L. Shaw..................... 60,666(4)(5) 14.2% $9.00 01/01/07 $343,373 $870,174
Lawrence G. Malone................ 40,200(4)(5) 9.4 9.00 01/01/07 227,534 576,616
33,333(4)(6) 7.8 6.50 05/27/07 136,259 345,307
Sheldon M. Goldman................ 40,200(4)(5) 9.4 9.00 01/01/07 227,534 576,616
Martin Varsavsky.................. -- -- -- -- -- --
</TABLE>
- -----------
(1) The Company granted options to purchase a total of 428,194 shares of
Common Stock during 1997.
(2) The exercise price was equal to the fair market value of the shares of
Common Stock underlying the options on the grant date.
(3) Amounts reported in these columns represent amounts that may be
realized upon exercise of options immediately prior to the expiration
of their term assuming the specified compounded rates of appreciation
(5% and 10%) on the Common Stock over the term of the options. These
assumptions are based on rules promulgated by the Commission and do not
reflect the Company's estimate of future stock price appreciation.
Actual gains, if any, on the stock option exercises and Common Stock
holdings are dependent on the timing of such exercise and the future
performance of the Common Stock. There can be no assurance that the
rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the option holder.
(4) In the event of certain Corporate Transactions (as defined) involving
the Company, all unvested stock options become fully vested. See "--
Stock Incentive Plan." The options granted to Messrs. Shaw and Goldman
also vest upon a Change of Control (as defined). See "-- Employment
Agreements."
(5) Options vest and became exercisable as to 33.34% on January 1, 1998 and
will vest and become exercisable as to an additional 33.33% on each
anniversary thereafter.
(6) Options vest and become exercisable as to 33.34% on May 27, 1998 and as
to an additional 33.33% on each anniversary thereafter.
Effective January 1, 1998, the Company has granted stock options to
executive officers as follows: Michael J. Mahoney, 90,000 options at an exercise
price of $5.00 per share and 90,000 options at an exercise price of $5.50 per
share; Allan L. Shaw, 60,000 options at an exercise price of $5.00 per share and
60,000 options at an exercise price of $5.50 per share; Lawrence G. Malone,
27,000 options at an exercise price of $5.00 per share and 60,000 options at an
exercise price of $5.50 per share; Sheldon M. Goldman, 60,000 options at an
exercise price of $5.00 per share and 60,000 options at an exercise price of
$5.50 per share; and Francis J. Mount, 40,000 options at an exercise price of
$5.00 per share and 60,000 options at an exercise price of $5.50 per share.
The Company's Compensation Committee has determined that it would be in
the best interest of the Company and its stockholders to increase the number of
shares available for grant under the Stock Incentive Plan in order to enable the
Company to grant additional stock options to the Company's senior executive
officers. If the proposed increase is approved by the Company's stockholders at
the 1998 Annual Meeting of Stockholders, the Compensation Committee intends to
grant to senior management additional stock options equal to approximately 12%
of the outstanding Common Stock.
YEAR-END OPTION VALUES
The following table sets forth information regarding the number and
year end value of unexercised options held at December 31, 1997 by each of the
Named Executives. No SARs were exercised by the Named Executives during fiscal
1997.
4
<PAGE>
<TABLE>
<CAPTION>
FISCAL 1997 YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED "IN-THE-MONEY"
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END (#) YEAR-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- ---- ------------------------- -----------------------------
<S> <C> <C>
Michael J. Mahoney........................ 181,980/118,019 $29,400/$0
Allan L. Shaw............................. 62,443/54,889 0/0
Lawrence G. Malone........................ 45,622/71,244 0/0
Sheldon M. Goldman........................ 26,734/33,466 0/0
Martin Varsavsky.......................... 0/0 0/0
- ------------
</TABLE>
(1) Options are "in-the-money" if the fair market value of the underlying
securities exceeds the exercise price of the options. The amounts set
forth represent the difference between $5.00 per share, the fair market
value of the Common Stock issuable upon exercise of options at December
31, 1997 and the exercise price of the option, multiplied by the
applicable number of options.
EMPLOYMENT AGREEMENTS
The Company has executed new employment agreements with Messrs.
Mahoney, Shaw and Goldman, pursuant to which Mr. Mahoney has agreed to continue
to serve as President and Chief Executive Officer of the Company, Mr. Shaw has
agreed to continue to serve as Senior Vice President, Chief Financial Officer
and Treasurer of the Company and Mr. Goldman has agreed to continue to serve as
Senior Vice President, Business Affairs and General Counsel for the Company
(collectively, the "Employment Agreements"). The term of the Mahoney Employment
Agreement extends for a period of three years and the term of the Shaw and
Goldman Employment Agreements extend for a period of two years, in each case
unless earlier terminated in accordance with the terms thereof. Pursuant to the
respective Employment Agreement, Mr. Mahoney is entitled to receive an annual
base salary of $300,000 (subject to inflationary adjustments), Mr. Shaw is
entitled to receive an annual base salary of $175,000 and Mr. Goldman is
entitled to receive an annual base salary of $185,000, subject, in each case, to
increases approved from time to time by the Board. In addition, Mr. Mahoney's
Employment Agreement provides for an annual cash bonus payment equal to 70% of
his base salary multiplied by a bonus multiple ranging from 0.6 to 2.0
determined based upon a comparison of actual versus projected EBITDA and revenue
figures and each of Messrs. Shaw's and Goldman's Employment Agreement provides
for an annual cash bonus payment equal to 50% of their base salary multiplied by
a bonus multiple ranging from 0.6 to 2.0 determined based upon a comparison of
actual versus projected EBITDA and revenue figures. Each of the Employment
Agreements also provides that the executive will be entitled to receive annual
grants of stock options or restricted stock in amounts to be determined by the
Board of Directors in its sole and absolute discretion and provides that
following a Change of Control (as defined therein), the Company will be
obligated to pay the executive an amount equal to the Severance Amount (as
defined therein) if the executive chooses to terminate his employment and
include a non-competition covenant. Each of the Employment Agreements also
contains a prohibition on the solicitation of Company employees.
For purposes of the Employment Agreement, "Change of Control" is
defined to mean such time as (i) a "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act), becomes the ultimate
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) of more than
50% of the total voting power of the then outstanding voting stock of the
Company on a fully diluted basis or (ii) individuals who at the beginning of any
period of two consecutive calendar years constituted the Board (together with
any new directors whose election by the Board or whose nomination for election
by the Company's stockholders was approved by a vote of at least two-thirds of
the members of the Board then still in office who either were members of the
Board at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board then in office.
5
<PAGE>
In October 1996, the Company entered into an employment agreement with
Martin Varsavsky with respect to his continued services to the Company as
Chairman and Chief Executive Officer. As a result of his resignation as Chief
Executive Officer in September 1997, Mr. Varsavsky's employment agreement is no
longer effective, except to the extent of certain prohibitions on solicitation
of employees and non-competition covenant.
STOCK INCENTIVE PLAN
The Company has adopted the Amended Stock Incentive Plan (the "Stock
Incentive Plan") under which "non-qualified" stock options ("NQSOs") to acquire
shares of Common Stock may be granted to employees, directors and consultants of
the Company and "incentive" stock options ("ISOs") to acquire shares of Common
Stock may be granted to employees, including employee-directors. The Stock
Incentive Plan also provides for the grant of SARs and shares of restricted
Common Stock to the Company's employees, directors and consultants.
The Stock Incentive Plan provides for the issuance of up to a maximum
of 2,566,666 shares of Common Stock and is currently administered by the
Compensation Committee of the Board. Under the Stock Incentive Plan, the option
price of any ISO may not be less than the fair market value of a share of Common
Stock on the date on which the option is granted. The option price of an NQSO
may be less than the fair market value on the date the NQSO is granted if the
Board of Directors so determines. An ISO may not be granted to a "ten percent
stockholder" (as such term is defined in Section 422A of the Code) unless the
exercise price is at least 110.0% of the fair market value of the Common Stock
and the term of the option may not exceed five years from the date of grant.
Each option granted pursuant to the Stock Incentive Plan is evidenced by a
written agreement executed by the Company and the grantee, which contains the
terms, provisions and conditions of the grant. Stock options may not be assigned
or transferred during the lifetime of the holder except as may be required by
law or pursuant to a qualified domestic relations order. Common Stock subject to
a restricted stock purchase or bonus agreement is transferable only as provided
in such agreement. The maximum term of each stock option granted to persons
other than ten percent stockholders is ten years from the date of grant.
For options to quality as ISOs, the aggregate fair market value,
determined on the date of grant, of the shares with respect to which the ISOs
are exercisable for the first time by the grantee during any calendar year may
not exceed $100,000. Payment by option holders upon exercise of an option may be
made in cash or, with the consent of the Board of Directors, in whole or in
part, (i) with shares of Common Stock, (ii) by irrevocable direction to an
approved securities broker to sell shares and deliver all or a portion of the
proceeds to the Company, (iii) by delivery of a promissory note with such
provisions as the Board of Directors determines appropriate or (iv) in any
combination of the foregoing. In addition, the Board of Directors, in its sole
discretion, may authorize the surrender by an optionee of all or part of an
unexercised stock option and authorize a payment in consideration thereof of an
amount equal to the difference between the aggregate fair market value of the
shares of Common Stock subject to such stock option and the aggregate option
price per share of such Common Stock. In the Board of Directors' discretion,
such payment may be made in cash, shares of Common Stock with a fair market
value on the date of surrender equal to the payment amount or some combination
thereof.
The Stock Incentive Plan provides that outstanding options, restricted
shares of Common Stock or SARs vest in their entirety and become exercisable, or
with respect to restricted stock, are released from restrictions on transfer and
repurchase rights, in the event of a "Corporate Transaction." For purposes of
the Stock Incentive Plan, a Corporate Transaction includes any of the following
stockholder-approved transactions to which the Company is a party: (i) a merger
or consolidation in which the Company is not the surviving entity, other than a
transaction the principal purpose of which is to change the state of the
Company's incorporation, or a transaction in which the Company's stockholders
immediately prior to such merger or consolidation hold (by virtue of securities
received in exchange for their shares in the Company) securities of the
surviving entity representing more than 50.0% of the total voting power of such
entity immediately after such transaction; (ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company unless the
Company's stockholders immediately prior to such sale, transfer or other
disposition hold (by virtue of securities received in exchange for their shares
in the Company) securities of the purchaser or other transferee representing
more than 50.0% of the total voting power of such entity immediately after such
transaction; or (iii) any reverse merger in which the Company is the surviving
entity but in which the Company's stockholders immediately prior to such merger
do not hold (by virtue of their shares in the Company held immediately prior to
6
<PAGE>
such transaction) securities of the Company representing more than 50.0% of the
total voting power of the Company immediately after such transaction.
The Company has filed with the Commission a Registration Statement on
Form S-8 covering the shares of Common Stock underlying options granted under
the Stock Incentive Plan.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual fee of $12,000, a meeting fee
of $1,000 for every board meeting attended and each committee meeting held
separately and a $500 fee for each board meeting or committee meeting
participated in by telephone. Directors who are also employees of the Company
are not separately compensated for serving on the Board of Directors. All
directors are reimbursed for out-of-pocket expenses. Under the Stock Incentive
Plan, the Company may, from time to time and in the discretion of the
Compensation Committee, grant options to directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors did not have a Compensation Committee prior to
the establishment of one in January 1996. As a result, prior to such time the
entire Board of Directors, including Mr. Mahoney, made all determinations
concerning compensation of executive officers. The current members of the
Compensation Committee are Messrs. Peet, Pizzani and Mahoney. Mr. Mahoney is the
Company's President and Chief Executive Officer. None of the executive officers
of the Company currently serves on the compensation committee of another entity
or any other committee of the board of directors of another entity performing
functions similar to the Compensation Committee. No interlocking relationships
exist between the Company's Board of Directors or its Compensation Committee and
the board of directors or compensation committee of any other company.
SHAREHOLDERS AGREEMENTS. S-C V-Tel and Martin Varsavsky are parties to
a shareholders' agreement (the "S-C V-Tel Shareholders Agreement") which
provides that, in certain instances, if Mr. Varsavsky and Juan Manuel Aisemberg
propose to sell 20.0% or more of the aggregate number of shares of Common Stock
beneficially owned by them to any person or "group" (within the meaning of
Section 13(d) or 14(d)(2) of the Exchange Act), they shall cause S-C V-Tel,
COMSAT and certain other stockholders to have the right to sell its shares of
Common Stock in such a transaction on a pro rata basis with Messrs. Varsavsky
and Aisemberg for the same consideration per share and on the same terms as Mr.
Varsavsky.
On April 5, 1994, Messrs. Varsavsky and Aisemberg and COMSAT entered
into a shareholders' agreement (as subsequently amended, the "COMSAT
Shareholders Agreement"). Pursuant to the terms of the COMSAT Shareholders
Agreement, so long as COMSAT beneficially owns at least 10.0% (subject to
certain adjustments) of the issued and outstanding shares of Common Stock on a
fully diluted basis, COMSAT is entitled to representation on the Company's Board
of Directors in proportion to its percentage ownership of Common Stock, subject
to a minimum of one seat, and to designate one member of an Executive Committee
of the Board of Directors, if any such committee is established. COMSAT
currently holds less than 10.0% of the outstanding Common Stock.
VOTING AGREEMENT. S-C V-Tel and COMSAT are parties to a voting
agreement (the "Voting Agreement"), pursuant to which, at all times that either
S-C V-Tel or COMSAT is entitled to nominate directors to the Company's Board of
Directors, the other party is required to vote its respective shares of Common
Stock in favor of the first party's nominees. The Voting Agreement remains in
effect until the earlier of the dissolution of the Company or the date on which
either S-C V-Tel or COMSAT no longer owns any shares of Common Stock. See "Item
13. Certain Relationships and Related Transactions -- S-C V-Tel Investments,
L.P.," and "Item 13. Certain Relationships and Related Transactions -- COMSAT
Investments, Inc." for a description of the registration rights held by each of
S-C V-Tel and COMSAT.
7
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock, as of April 16, 1998, by (i) each
person known to the Company to own beneficially more than 5% of the Company's
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the Named Executives, and (iv) all executive officers and directors of
the Company, as a group. All information with respect to beneficial ownership
has been furnished to the Company by the respective stockholders of the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
OF BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP (1) CLASS
- ---------------- ----------------- ----------
<S> <C> <C>
Martin Varsavsky
Parque Empresarial Edificio 2,
c/o Beatriz De Bobadilla
14,5 Ofic. B
Madrid, Spain......................................................... 5,859,666 25.4%
The Capital Group Companies
333 South Hope Street
Los Angeles, CA 90071(2)............................................. 2,882,700 12.5
COMSAT Investments, Inc.
6560 Rock Spring Drive
Bethesda, MD 20817(3)................................................ 2,140,539 9.3
S-C V-Tel Investments, L.P.
888 Seventh Avenue
New York, NY 10106(3)................................................ 1,698,272 7.4
FMR Corp.
82 Devonshire Street
Boston, MA 02109..................................................... 1,644,200 7.1
Morgan Stanley, Dean Witter, Discover & Co.
1585 Broadway
New York, NY 10036................................................... 1,244,246 5.4
Michael J. Mahoney(4)................................................. 230,313 1.0
Allan L. Shaw(4)...................................................... 67,443 *
Lawrence G. Malone(4)................................................. 56,733 *
Sheldon M. Goldman(4)(5).............................................. 34,733 *
W. James Peet......................................................... - -
Paul G. Pizzani....................................................... - -
All directors and executive
officers as a group (7 persons)(6)............................... 389,222 1.7%
</TABLE>
- -----------
* Represents beneficial ownership of less than 1% of the outstanding
shares of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common
8
<PAGE>
Stock subject to options and warrants held by that person that
are currently exercisable or exercisable within 60 days of April 16,
1998 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of
any other person. Except as indicated in the footnotes to this table,
the stockholder named in the table has sole voting and investment power
with respect to the shares set forth opposite such stockholder's name.
(2) The amount reported reflects shares held by a subsidiary of The Capital
Group Companies solely as the investment manager of various
institutional accounts. The Capital Group Companies do not have
investment power or voting power over any of these shares.
(3) Does not include 7,557,939 shares of Common Stock which COMSAT may be
deemed to beneficially own as a result of certain voting arrangements
contained in the COMSAT Shareholders Agreement.
(4) Includes shares of Common Stock which these individuals have the right
to acquire through the exercise of options within 60 days of April 16,
1998, as follows: Michael J. Mahoney 181,980; Allan L. Shaw 62,443;
Lawrence G. Malone 56,733; and Sheldon M. Goldman 26,733.
(5) Includes 1,000 shares owned by Mr. Goldman's wife. Mr. Goldman
disclaims "beneficial ownership" of such shares within the meaning of
Rule 13d-3 under the Exchange Act.
(6) Includes vested and exercisable options to purchase 327,889 shares of
Common Stock which were granted pursuant to the Stock Incentive Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
S-C V-TEL INVESTMENTS, L.P.
Pursuant to the terms of a stock purchase agreement, dated September
30, 1993 (as subsequently amended, the "S-C V-Tel Stock Purchase Agreement"),
S-C V-Tel purchased 1,695,532 shares of Common Stock on October 1, 1993 and
2,739 shares of Common Stock on December 15, 1993 for an aggregate purchase
price of $5.0 million (the "S-C V-Tel Shares"). The terms of the S-C V-Tel Stock
Purchase Agreement provide that, among other things, beginning on April 16,
1997, S-C V-Tel has the right to demand registration under the Securities Act of
1933, as amended (the "Securities Act") of the S-C V-Tel Shares. Such demand
right must be exercised for at least 30.0%, and no more than 70.0% of the S-C
V-Tel Shares then owned by S-C V-Tel. No earlier than six months after the
effective date of its first demand registration, S-C V-Tel may request a second
demand registration for any remaining S-C V-Tel Shares. The expenses of such
demand registrations, excluding any underwriter's commissions and discounts
relating to the sale of the S-C V-Tel Shares, will be paid by the Company. In
addition, if the Company proposes to register any of its securities under the
Securities Act, S-C V-Tel has the right, on up to four occasions, to include in
such registration a maximum of 33-1/3% of the S-C V-Tel Shares it then owns. The
expenses of any such "piggy-back" registration, excluding any underwriter's
commissions and discounts relating to the sale of the S-C V-Tel Shares and the
fees and disbursements of S-C V-Tel's legal counsel, will be paid by the
Company. S-C V-Tel is entitled to sell or transfer any of the S-C V-Tel Shares,
without the consent of the Company, provided that the transferee is not in
competition with, or does not otherwise have interests adverse to, the Company.
See "Item 10. Executive Compensation -- Compensation Committee Interlocks and
Insider Participation -- Shareholders Agreements" for a description of certain
tag-along rights of S-C V-Tel.
COMSAT INVESTMENTS, INC.
Pursuant to the terms of a stock purchase agreement, dated April 5,
1994 (as subsequently amended, the "COMSAT Purchase Agreement"), COMSAT
purchased 2,140,539 shares of Common Stock for a purchase price of $8.0 million
(the "COMSAT Shares"). Pursuant to the terms of the COMSAT Purchase Agreement,
COMSAT has been granted the same demand and piggyback registration rights as S-C
V-Tel. The COMSAT Purchase Agreement further provides that COMSAT may not
transfer any COMSAT Shares to any transferee without first offering such shares
to the Company if, following such transfer, such transferee would own 20.0% or
more of the then outstanding shares of Common Stock. In addition, COMSAT has
agreed that it will not acquire more than 30.0% of the shares of Common Stock
outstanding at any time except in certain circumstances relating to changes in
the percentage of the outstanding Common Stock owned by Mr. Varsavsky. Prior to
the sale of all or substantially all of the assets of the Company or the
consolidation or merger of the Company with any person in
9
<PAGE>
which the Company is not the surviving entity, COMSAT has certain rights to
invest in any joint venture proposed by the Company. See "Item 10. Executive
Compensation -- Compensation Committee Interlocks and Insider Participation --
Shareholders Agreements" for a description of certain voting rights held by
COMSAT.
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<PAGE>
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 the
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City and State of New York, on the 28th day of April, 1998.
VIATEL, INC.
By: MICHAEL J. MAHONEY*
-------------------------------------------
Michael J. Mahoney
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 28th day of April, 1998.
SIGNATURE TITLE(S)
--------- --------
MICHAEL J. MAHONEY* President, Chief Executive Officer
- ---------------------------------- and Director (Principal Executive Officer)
Michael J. Mahoney
ALLAN L. SHAW* Senior Vice President, Finance; Chief
- ---------------------------------- Financial Officer; Treasurer (Principal
Allan L. Shaw Financial and Accounting Officer) and
Director
PAUL G. PIZZANI* Director
- ----------------------------------
Paul G. Pizzani
W. JAMES PEET* Director
- ----------------------------------
W. James Peet
*By: /s/ SHELDON M. GOLDMAN
------------------------------
Sheldon M. Goldman
Attorney-in-fact
11
