UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Viatel, Inc.
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(Name of Issuer)
Common Stock, $.01 par value per share
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(Title of Class of Securities)
925529 20 8
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(CUSIP Number)
Talbert Navia, Esq.
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, NY 10112
(212) 408-5100
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
November 13, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
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CUSIP No. 925529 20 8 Page 2 of 8 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Martin Varsavsky
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |_|
(b) |X|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
N/A
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER OF 7 SOLE VOTING POWER
SHARES 3,569,666 shares (see Item 6)
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BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 3,569,666 shares (see Item 6)
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PERSON 10 SHARED DISPOSITIVE POWER
WITH -0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,569,666 shares
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |X|
Excludes an aggregate of 2,140,539 shares of Common Stock owned by
COMSAT International Inc. as to which Mr. Varsavsky disclaims
beneficial ownership.
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.4%
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14 TYPE OF REPORTING PERSON*
IN
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SCHEDULE 13D
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CUSIP No. 925529 20 8 Page 3 of 8 Pages
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To the extent set forth below, Mr. Martin Varsavsky (the "Reporting
Person" or "Varsavsky") hereby amends his Statement on Schedule 13D originally
filed on December 4, 1996 (the "Original Schedule 13D") as amended on November
9, 1998 ("Amendment No. 1" and together with the Original Schedule 13D, the
"Schedule 13 D") relating to his beneficial ownership of shares of common stock,
$0.01 par value per share (the "Common Stock"), of Viatel, Inc., a Delaware
corporation (the "Company" or "Viatel").
Item 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby amended by replacing it in its
entirety with the following:
Varsavsky and five executive officers of the Company entered into an
agreement providing for the payment of certain fees to those executive officers
in connection with the sale by Varsavsky of his shares of Common Stock. In lieu
of payment of any fee or commission by Varsavsky to such executive officers in
connection with the sale by Varsavsky of any of such shares, on October 2, 1998
Varsavsky transferred 16,000 shares to each of the executive officers (80,000
shares in the aggregate) as provided for in a settlement agreement dated August
30, 1998.
On November 13, 1998, the Reporting Person disposed of 1,800,000
shares of Common Stock in a private placement to "Qualified Institutional
Buyers," as such term is defined in Rule 144A promulgated under the Securities
Act of 1933, as amended (the "Securities Act") and certain individuals who have
sufficient net worth and sophistication to allow a purchase of Common Stock in a
transaction exempt from registration under the Securities Act. A portion of the
net proceeds from the sale were used to repay all amounts outstanding under the
Margin Loan referenced in Item 6 below.
The Reporting Person is holding his shares of Common Stock for
investment purposes. In addition to the transfer of the 80,000 shares referred
to in the first paragraph of this Item 4 and the 1,800,000 shares referred to
in the second paragraph of this Item 4, the Reporting Person disposed of 618,500
of his shares of Common Stock in market transactions from the time of the filing
of the Original Schedule 13D until May 14, 1998. Subject to the restrictions of
the MC Agreement and the Lock-up Letter discussed in Item 6 herein, the
Reporting Person will continue to acquire or dispose of the Common Stock from
time to time based upon factors including, among others he may deem relevant,
the Company's business, prospects and financial condition, the market for the
Common Stock, general economic conditions and his need for funds. The Reporting
Person expressly reserves the right to increase or decrease his holdings in the
Common Stock on such terms or at such times as he may determine. Any purchase or
sale may be executed in the open market or in privately negotiated transactions.
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SCHEDULE 13D
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CUSIP No. 925529 20 8 Page 4 of 8 Pages
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Item 5. Interest in Securities of the Issuer.
Item 5 of the Schedule 13D is hereby amended by supplementing it with
the following:
(a-b) As of the close of business on November 23, 1998, the Reporting
Person owned and had sole voting and dispositive power with respect to 3,569,666
shares of Common Stock, or approximately 15.4% of the Common Stock (based on the
number of shares (23,171,305) reported by the Company to be outstanding as of
November 12, 1998). The foregoing excludes an aggregate of 2,140,539 shares of
Common Stock owned by COMSAT International, Inc. ("COMSAT") as to which
Varsavsky disclaims beneficial ownership. See Item 6 below.
(c) Except as set forth in Item 4 above, no transactions in the
Issuer's securities by the Reporting Person has been effected since November 9,
1998.
(d) No other person is known to have the right to receive or the power
to direct the receipt of dividends from, or any proceeds from the sale of shares
of Common Stock owned by, the Reporting Person.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of
the Issuer.
Item 6 of the Schedule 13D is hereby amended by replacing it in its
entirety with the following:
Shareholders' Agreement dated as of September 30, 1993
On September 30, 1993, the Reporting Person and S-C V-Tel Investments,
L.P. ("S-C V-Tel") entered into a shareholders' agreement, which, as amended,
provides that, in certain instances, if either or both of the Reporting Person
and Juan Manuel Aisemberg ("Aisemberg") propose to sell 20.0% or more of the
Common Stock owned by them, they shall cause S-C V-Tel and certain other of the
Company's stockholders to have the right to sell their shares of Common Stock in
such a transaction on a pro rata basis, for the same consideration per share and
on the same terms as Varsavsky and Aisemberg.
Shareholders' Agreement dated as of April 5, 1994.
On April 5, 1994, the Reporting Person, Aisemberg and COMSAT entered
into a shareholders' agreement, which, as amended, provides that, so long as
COMSAT owns at least 10.0% of the issued and outstanding shares of Common Stock
on a fully diluted basis (subject to certain adjustments)(the "Minimum Equity"),
COMSAT is entitled to representation on the Company's Board of Directors in
proportion to its ownership interest of Common Stock, subject to a minimum of
one seat, and to designate one member of the Board of Directors' Executive
Committee, if any such committee is established. The Reporting Person and
Aisemberg also agreed to vote, so
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SCHEDULE 13D
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CUSIP No. 925529 20 8 Page 5 of 8 Pages
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long as COMSAT owns the Minimum Equity, the shares of Common Stock beneficially
owned by them so as to elect to the Board the number of individuals nominated by
COMSAT and to cause one of the COMSAT nominees to serve on the Executive
Committee of the Company's Board of Directors, if established. In addition, in
certain instances, if either or both of the Reporting Person and Aisemberg
propose to sell 20.0% or more of the Common Stock owned by them, they shall
cause COMSAT and certain other of the Company's shareholders to have the right
to sell their shares of Common Stock in such a transaction on a pro rata basis,
for the same consideration per share and on the same terms as the Reporting
Person and Aisemberg.
Margin Loan
On April 24, 1998, the Reporting Person entered into a secured margin
loan agreement (the "Margin Loan") with Credit Suisse First Boston ("CSFB"),
pursuant to which the Reporting Person pledged as a security interest to CSFB
5,200,000 shares of Common Stock. On November 13, 1998, the Reporting Person
used a portion of the net proceeds from the sale of 1,800,000 shares referred to
in Item 4 above to repay in full all amounts outstanding under the Margin Loan,
and in connection therewith, CSFB released its lien on the shares of Common
Stock pledged to secure the Margin Loan.
Mutual Cooperation Agreement
On June 3, 1998, the Reporting Person and the Company entered into a
mutual cooperation agreement (the "MC Agreement") which, among other things,
contains a lock-up provision (the "Lock-up") restricting the Reporting Person's
ability to sell his shares of Common Stock. The following describes the terms of
the relevant sections of the MC Agreement:
Subject to certain exceptions, Varsavsky agreed with Viatel that
he will not offer, sell, transfer or otherwise dispose or
contract to offer, sell, transfer or otherwise dispose of,
directly or indirectly, or pledge or encumber (except to the
extent existing at the time of the MC Agreement) or announce an
offering of, any of the Reporting Person's shares of Common Stock
for a period of twelve (12) months after the date of execution of
the MC Agreement. In order to enforce the foregoing covenant,
Viatel may impose stop-transfer instructions with respect to the
Reporting Person's shares of Common Stock and may require that
such shares bear an appropriate legend. In addition, Viatel shall
have the right to seek injunctive relief to prevent a sale of the
Reporting Person's shares of Common Stock which is in violation
of the MC Agreement. Varsavsky shall provide Viatel with written
notice of any contemplated sale of such shares, whether or not
prohibited by the terms of the MC Agreement.
Notwithstanding the above restrictions, (i) Varsavsky is
permitted to sell his shares in a private placement to any
financial institution that is a "qualified institutional buyer,"
as such term is defined in Rule
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SCHEDULE 13D
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CUSIP No. 925529 20 8 Page 6 of 8 Pages
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144A promulgated under the Securities Act of 1933, as amended
(the "Act"), or certain individuals who have sufficient net worth
and sophistication to allow a purchase of the Reporting Person's
shares of Common Stock in a transaction exempt from registration
under the Act and (ii) Credit Suisse First Boston shall be
entitled to foreclose upon such shares pledged as security for
the Margin Loan between it and Varsavsky after an event of
default by Varsavsky, but solely after applicable notice and
grace periods.
Varsavsky agreed with Viatel that during the Lock-up period he
shall not borrow more then an additional U.S. $5.0 million under
the Margin Loan (the "Permissible Borrowing") until such time as
the market price of the Common Stock is at least equal to the
market price of such stock at the date the Margin Loan was
incurred, at which point, the Permissible Borrowing shall be the
amount available for borrowing under the Margin Loan, provided
however, that Varsavsky may borrow only additional amounts under
the Margin Loan or increase or refinance the Margin Loan subject
to the approval of Viatel, which approval shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing,
(i) in the event the price per share of the Common Stock equals
or exceeds U.S. $10.00 per share, the Permissible Borrowing shall
be increased to U.S. $7.0 million (ii) the Permissible Borrowing
shall be reduced by an amount equal to the net cash proceeds
received from the sale of any of Varsavsky's shares of Common
Stock to executive officers of Viatel for a price per share equal
to the average closing price of the Common Stock for the ten (10)
business days prior to the date of the MC Agreement.
The Company agreed that if (i) within twelve (12) months from the
date of the MC Agreement, the closing stock price of the Common
Stock is at least equal to $12.00 per share on the Nasdaq/NMS for
at least twenty (20) consecutive business days and (ii) Viatel's
investment bank, currently Morgan Stanley, determines in its
reasonable discretion, that a secondary offering of the Reporting
Person's shares of Common Stock is feasible, then Viatel shall be
required to register such shares for sale in a registered
offering (the "Registration"). The MC Agreement provides that
Viatel and Varsavsky shall reach an understanding relating any
other investment bank with respect to the underwriting for the
Reporting Person's shares of Common Stock.
Varsavsky agreed that he would sell at least 3.5 million of his
shares of Common Stock in the Registration, or such lesser amount
as may be required by the lead underwriter.
If the Company files a registration statement in respect of
Common Stock (other than a registration statement on
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SCHEDULE 13D
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CUSIP No. 925529 20 8 Page 7 of 8 Pages
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Form S-4 or Form S-8 or under the Registration) whether on behalf
of the Company or other stockholders of the Company, then
Varsavsky will be entitled to "piggy back" rights with respect to
such registration statement, subject to standard pro rata
"cutback" requirements in the sole discretion of the lead
underwriter for such offering.
Varsavsky agreed to pay all expenses incurred in connection with
the Registration, including without limitation, all registration,
filing and qualification fees, printers' and accounting fees,
fees and disbursements of counsel for the Company, to the extent
that such expenses are allocable to the Reporting Person's shares
determined on a pro rata basis.
Except as permitted pursuant to the Lock-up or as part of his
registration rights, Varsavsky agreed that he shall not, for at
least 12 months after the effective date of a registration
statement, to the extent requested by Viatel, directly or
indirectly, offer, sell, transfer or otherwise dispose or
contract to offer, sell, transfer or otherwise dispose of,
directly or indirectly, or further pledge or encumber or announce
an offering of, any of his shares of Common Stock.
Lock-up Letter
On November 13, 1998, the Reporting Person entered into a letter
agreement (the "Lock-up Letter"), addressed to the Company, pursuant to which
the Reporting Person agreed not to (a) offer, sell, contract to sell, announce
his intention to sell, pledge or otherwise dispose of, directly or indirectly,
any of his 3,569,666 shares of Common Stock owned beneficially by the Reporting
Person or securities convertible or exchangeable into or exercisable for any
such shares without the prior written consent of Viatel, or (b) make any
announcement relating thereto until August 12, 1999.
Item 7. Material to be filed as Exhibits.
Item 7 of the Schedule 13D is hereby amended by adding the following
thereto:
Exhibit A Lock-up Letter, dated as of November 13, 1998, by and
between the Reporting Person and the Company.
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SCHEDULE 13D
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CUSIP No. 925529 20 8 Page 8 of 8 Pages
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 25, 1998
By: /s/ Martin Varsavsky
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Name: Martin Varsavsky
Exhibit A
VIATEL, Inc.
800 Third Avenue
New York, NY 10022
13 November 1998
Dear Sirs:
As an inducement to VIATEL Inc. entering into the letter dated today
from VIATEL Inc. to the undersigned and Credit Suisse First Boston (a copy of
which is attached hereto), the undersigned hereby agrees not to (a) offer, sell,
contract to sell, announce its intention to sell, pledge or otherwise dispose
of, directly or indirectly, any of his 3,569,666 remaining shares of VIATEL Inc.
common stock ("the Shares") owned beneficially by the undersigned or securities
convertible or exchangeable into or exercisable for any such shares without the
prior written consent of VIATEL Inc., or (b) make an announcement relating
thereto. The foregoing shall terminate on August 12, 1999.
Very truly yours,
/s/Martin Varsavsky
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Martin Varsavsky
