<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN THE PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VIATEL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement no.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
[LOGO]
July 26, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Viatel, Inc., which will be held on Tuesday, September 14, 1999, in the
Whitney Room at the Hotel Inter-Continental, 111 East 48th Street, New York, New
York 10017, at 10:00 a.m., local time. Doors to the meeting will open at 9:30
a.m.
The business to be considered and voted upon at the meeting is explained in
the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
Whether or not you plan to attend the Annual Meeting in person, it is
important that your shares of common stock be represented and voted at the
Annual Meeting. Accordingly, after reading the enclosed Notice of Annual Meeting
of Stockholders and Proxy Statement, please sign, date and return the enclosed
proxy card in the postage-paid envelope provided.
Thank you for your support of our Company.
Sincerely,
/s/ Michael J. Mahoney
Michael J. Mahoney
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
VIATEL, INC.
685 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 14, 1999
------------------------
To the Stockholders of Viatel, Inc.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of the stockholders of
Viatel, Inc., a Delaware corporation (the "Company"), will be held on Tuesday,
September 14, 1999, in the Whitney Room at the Hotel Inter-Continental, 111 East
48th Street, New York, New York 10017, at 10:00 a.m., local time, for the
following purposes:
1. To elect two Class C directors to hold office until the 2002 Annual
Meeting of Stockholders;
2. To approve an amendment to the Company's Amended Stock Incentive Plan to
increase the number of shares of the Company's common stock available for
future grants and to permit the issuance of certain other forms of stock
benefits;
3. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation, as amended, to increase the number of
authorized shares of common stock available for issuance by the Company;
4. To ratify the appointment of KPMG LLP as independent auditors for the
Company for fiscal year 1999; and
5. To transact such other business as may properly be presented at the 1999
Annual Meeting and at any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on July 21, 1999 as
the record date for the purpose of determining stockholders who are entitled to
notice of and to vote at the 1999 Annual Meeting and any adjournments or
postponements thereof. A list of such stockholders will be available during
regular business hours at the Company's office, 685 Third Avenue, New York, New
York 10017 for the ten days before the meeting, for inspection by any
stockholder for any purpose germane to the meeting.
By Order of the Board of Directors,
/s/ Sheldon M. Goldman
Sheldon M. Goldman
SECRETARY
New York, New York
July 26, 1999
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE 1999 ANNUAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON IF YOU
WISH, EVEN IF YOU PREVIOUSLY RETURNED YOUR PROXY.
<PAGE>
VIATEL, INC.
685 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is being furnished to stockholders of Viatel, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Company's Board of Directors (the "Board") from holders of the
outstanding shares of the Company's common stock, $0.01 par value per share (the
"Common Stock"), for use at the 1999 Annual Meeting of Stockholders of the
Company to be held on Tuesday, September 14, 1999, in the Whitney Room at the
Hotel Inter-Continental, 111 East 48th Street, New York, New York 10017, at
10:00 a.m., local time, and at any adjournments or postponements thereof (the
"Annual Meeting"), for the purpose of considering and acting upon the matters
set forth herein.
Only holders of record of Common Stock as of the close of business on July
21, 1999 (the "Record Date") are entitled to notice of, and to vote at, the
Annual Meeting and any adjournments or postponements thereof. At the close of
business on such date, the Company had 32,585,621 shares of Common Stock issued
and outstanding. Holders of Common Stock are entitled to one vote on each matter
considered and voted upon at the Annual Meeting for each share of Common Stock
held of record as of the Record Date. Holders of Common Stock may not cumulate
their votes for the election of directors. Shares of Common Stock represented by
a properly executed proxy, if such proxy is received in time and not revoked,
will be voted at the Annual Meeting in accordance with the instructions
indicated in such proxy. IF NO INSTRUCTIONS ARE INDICATED, SHARES REPRESENTED BY
PROXY WILL BE VOTED "FOR" THE ELECTION, AS DIRECTORS OF THE COMPANY, OF THE TWO
NOMINEES NAMED IN THE PROXY TO SERVE UNTIL THE 2002 ANNUAL MEETING OF
STOCKHOLDERS, "FOR" THE AMENDMENT TO THE COMPANY'S AMENDED STOCK INCENTIVE PLAN,
"FOR" THE AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION, "FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS
INDEPENDENT AUDITORS FOR THE COMPANY FOR FISCAL YEAR 1999 AND IN THE DISCRETION
OF THE PROXY HOLDERS AS TO ANY OTHER MATTER WHICH MAY PROPERLY BE PRESENTED AT
THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
The Proxy Statement and the accompanying proxy card are being mailed to
Company stockholders on or about July 26, 1999.
Any holder of Common Stock giving a proxy in the form accompanying this
Proxy Statement has the power to revoke the proxy prior to its use. A proxy can
be revoked (i) by an instrument of revocation delivered prior to the Annual
Meeting to the Secretary of the Company, (ii) by a duly executed proxy bearing a
later date or time than the date or time of the proxy being revoked, or (iii) at
the Annual Meeting if the stockholder is present and elects to vote in person.
Mere attendance at the Annual Meeting will not serve to revoke the proxy. All
written notices of revocation of proxies should be addressed as follows: Viatel,
Inc., 685 Third Avenue, New York, New York 10017, Attention: Sheldon M. Goldman,
Secretary.
In determining the presence of a quorum at the Annual Meeting, abstentions
and broker non-votes (votes withheld by brokers in the absence of instructions
from street-name holders) will be included. The Company's Second Amended and
Restated By-laws (the "By-laws") provide that directors are elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the matter and all other matters are
approved if the votes cast in favor of the action exceed the votes cast against
the action (unless the matter is one for which the Delaware General Corporation
Law, the Company's Amended and Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation") or the By-laws require a greater vote).
Therefore, with respect to any matter requiring approval of a majority of the
votes cast, abstentions will be excluded when calculating the number of votes
required for stockholder action but, with respect to the election of directors,
abstentions will have the same effect as a vote against the matter. In all
instances, broker non-votes will be excluded from the calculation.
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
The number of directors of the Company, as determined by the Board, is
seven. The Board currently has two vacancies. The Board 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 Certificate of Incorporation, Class C directors
are to be elected at the Annual Meeting, Class A directors are to be elected at
the 2000 Annual Meeting of Stockholders and Class B directors are to be elected
at the 2001 Annual Meeting of Stockholders.
At the Annual Meeting, two Class C directors are to be elected to the Board,
each to serve until the Annual Meeting of Stockholders to be held in 2002. The
nominees for election at the Annual Meeting are Michael J. Mahoney and John G.
Graham. Each nominee is presently a director of the Company. If either nominee
is unable or unwilling to serve as a director, proxies may be voted for a
substitute nominee designated by the present Board. The Board has no reason to
believe that either of the nominees will be unable or unwilling to serve as a
director.
The following table sets forth the name and age (as of the date of the
Annual Meeting) of the directors, the class to which each director has been
nominated for election or elected, their principal occupations at present, the
positions and offices, if any, held by each director with the Company in
addition to the position as a director, and the period during which each has
served as a director of the Company.
<TABLE>
<CAPTION>
SERVED AS A
NAME AGE PRINCIPAL OCCUPATION -- POSITION HELD DIRECTOR SINCE
- --------------------------------------------- --- --------------------------------------------- ---------------
<S> <C> <C> <C>
CLASS A -- 2000
Allan L. Shaw................................ 35 Senior Vice President, Finance and Chief 1996
Financial Officer of the Company
CLASS B -- 2001
Francis J. Mount............................. 57 Senior Vice President, Engineering and 1998
Network Operations
Paul G. Pizzani.............................. 39 Partner, eVentures LLC 1996
CLASS C -- 1999
Michael J. Mahoney........................... 40 President and Chief Executive Officer of the 1995
Company
John G. Graham............................... 61 President and Chief Operating Officer of 1998
Utilities Mutual Insurance Company
</TABLE>
CLASS A DIRECTOR
ALLAN L. SHAW. Mr. Shaw has served as a director of the Company since June
1996. Mr. Shaw has served as Senior Vice President, Finance of the Company since
December 1997 and as Chief Financial Officer of the Company since January 1996.
Mr. Shaw was Vice President, Finance of the Company from January 1996 to
December 1997 and Treasurer of the Company from September 1996 to April 1998.
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.
2
<PAGE>
CLASS B DIRECTORS
FRANCIS J. MOUNT. Mr. Mount has served as director of the Company since
June 1998. Mr. Mount has served as Senior Vice President, Engineering and
Network Operations of the Company since December 1997. Prior to joining the
Company, Mr. Mount was Senior Vice President, Business Initiatives of Primus
Telecommunications Group from October 1997 to December 1997, responsible for
Internet telephony, European operations and network quality. From June 1997 to
October 1997, Mr. Mount was Executive Vice President and Chief Operating Officer
of Telepassport, Inc. and was Vice President and Chief Operating Officer of
Telepassport, Inc. from January 1996 to June 1997. From 1990 to January 1996,
Mr. Mount was employed by MCI, most recently as Director, Global Technical
Services, responsible for international development, alliance management and all
technical operations and services outside the United States, including the
construction and maintenance of large networks such as Hyperstream, "Concert"
and private networks for large accounts such as J.P. Morgan, Proctor and Gamble
and I.B.M. From March 1967 to December 1989, Mr. Mount was employed by AT&T in
various positions.
PAUL G. PIZZANI. Mr. Pizzani has served as a director of the Company since
April 1996. Mr. Pizzani is currently a partner at eVentures LLC. From November
1997 to March 1999, Mr. Pizzani served as a Managing Director of Wasserstein
Perella Emerging Markets L.P. Prior to November 1997, Mr. Pizzani was associated
with COMSAT Corporation and its subsidiaries in various capacities from November
1985 to October 1997, most recently as Treasurer.
CLASS C DIRECTORS
MICHAEL J. MAHONEY. Mr. Mahoney has served as a director of the Company
since 1995. Mr. Mahoney has served as Chairman of the Board of the Company since
September 1998, as Chief Executive Officer of the Company since September 1997
and as President of the Company since September 1996. 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.
JOHN G. GRAHAM. Mr. Graham has served as a director of the Company since
June 1998. Mr. Graham has been the President and Chief Operating Officer of
Utilities Mutual Insurance Company since May 1, 1999, a position he assumed
following his retirement from GPU Service, Inc., a domestic and international
electric utility and independent power generation company. From December 1998 to
May 1999, Mr. Graham was an Executive Vice President of GPU Service, Inc. and
from 1987 to December 1998, was Senior Vice President and Chief Financial
Officer of GPU, Inc. Mr. Graham has been employed by GPU in various other
capacities from 1976 to 1987. From 1970 to 1976, Mr. Graham was a Partner in the
law firm of Ruprecht and Graham, Newark, New Jersey. From 1993 to 1997, Mr.
Graham served as a Director and Chairman of the Audit Committee of Edisto
Resources, Inc., which was engaged in the exploration, production and marketing
of natural gas and oil.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION OF MICHAEL J.
MAHONEY AND JOHN G. GRAHAM AS CLASS C DIRECTORS.
3
<PAGE>
GENERAL INFORMATION RELATING TO THE BOARD
THE BOARD
The business and affairs of the Company are managed by the Board. To assist
it in carrying out its duties, the Board has delegated certain authority to
three committees. The Board held four meetings in 1998. Each member of the Board
attended at least 75% of the aggregate meetings of the Board and the committees
thereof of which he was a member during 1998.
COMMITTEES OF THE BOARD
During 1998, the standing committees of the Board consisted of an Audit
Committee, a Compensation Committee and a Directors Committee. The Company's
By-laws provide, in general, that if a stockholder intends to propose business
or make a nomination for the election of directors at an annual meeting, the
Company must receive notice of such intention at least 120 days prior to the
first anniversary of the preceding year's annual meeting. If the date of the
meeting is changed more than 30 days from the prior anniversary date, notice
must be delivered ten days following the day on which notice of the annual
meeting is first mailed to stockholders. The notice must include all information
relating to the proposed nominee required by the Securities and Exchange
Commission (the "Commission") to be disclosed in solicitations of proxies for
election of directors or, in the case of a proposal, a brief description of the
proposal, and any material interest of the stockholder in the proposal. The
notice must also include (i) the name and address of the stockholder giving the
notice and any other stockholders known by such stockholder to be supporting the
nominees or proposal and (ii) the class and number of shares of the Company that
are owned beneficially by such stockholder and by any other stockholders known
by such stockholder to be supporting such nominee or proposal. The foregoing is
only a summary of detailed provisions of the By-laws and is qualified by
reference to the text thereof.
During 1998, the Audit Committee, which consisted of Messrs. James Peet
(from January 1998 to June 1998), Graham (from August 1998), Pizzani and Shaw
(from January 1998 to August 1998), held one meeting. The Audit Committee
recommends to the Board the firm of independent public accountants to audit the
Company's financial statements, reviews with management and the independent
accountants the Company's interim and year-end operating results, considers the
adequacy of internal controls and audit procedures of the Company and reviews
the nonaudit services to be performed by the independent accountants.
During 1998, the Compensation Committee, which consisted of Messrs. Peet
(from January 1998 to June 1998), Graham (from August 1998), Pizzani and
Mahoney, held two meetings. The Compensation Committee reviews general policy
matters relating to compensation and benefits of employees and officers of the
Company and administers the Stock Incentive Plan (as hereinafter defined).
During 1998, the Directors Committee, which consisted of Messrs. Martin
Varsavsky (from January 1998 to March 1998), Graham (from August 1998), Mahoney,
Peet (from January 1998 to June 1998), Pizzani and Shaw (from August 1998) held
no meetings. The Directors Committee searches for and interviews prospective
directors, makes recommendations to the Board regarding the size of the Board
and candidates to fill vacancies on the Board, including vacancies created by
reason of an increase in the size of the Board and nominates candidates for
election to the Board. Any recommendations by stockholders should be submitted
in writing to the Secretary of the Company in compliance with the notice
requirements described above. Such recommendations should be sent to the Company
at 685 Third Avenue, New York, New York 10017, Attention: Secretary.
COMPENSATION OF DIRECTORS
The Company pays an annual fee to non-employee directors of $30,000 (paid
$15,000 in cash, in quarterly installments, and $15,000 in shares of restricted
common stock), $1,200 for every board meeting
4
<PAGE>
attended and held separately and $600 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. All directors
are reimbursed for out-of-pocket expenses incurred in attending Board and
committee meetings.
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, any person acting
as the Company's Chief Executive Officer during 1998, regardless of the amount
of compensation paid, and the other most highly compensated executive officers
of the Company during 1998 whose aggregate cash and cash equivalent compensation
exceeded $100,000 (collectively, the "Named Executives").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER
ANNUAL RESTRICTED SECURITIES
COMPENSATION STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) AWARDS ($) OPTIONS(#) COMPENSATION(2)
- ----------------------------- --------- ---------- ---------- ------------- ---------- ----------- ----------------
Michael J. Mahoney(3),....... 1998 $ 289,583 $ 260,000 $ -- $ -- 360,771 $ 10,000
President and Chief 1997 212,500 125,000 -- -- -- 9,500
Executive Officer 1996 166,458 183,129 102,825 299,977(4) 253,333 --
Allan L. Shaw,............... 1998 172,817 107,500 -- -- 195,019 10,000
Senior Vice President, 1997 140,000 60,000 -- -- 60,666 8,400
Finance; Chief Financial 1996 108,333 115,000 -- -- 43,333 --
Officer and Treasurer
Lawrence G. Malone,.......... 1998 155,833 110,000 -- -- 138,140 9,350
Senior Vice President, 1997 141,750 35,588 -- -- 73,533 8,505
Global Sales and Marketing 1996 98,333 88,147 -- -- 33,333 --
Sheldon M. Goldman(5),....... 1998 182,917 112,000 -- -- 162,500 10,000
Senior Vice President, 1997 143,750 60,000 -- -- 40,200 9,000
Business Affairs and 1996 86,354 100,000 -- -- 20,000 --
General Counsel
Francis J. Mount(6),......... 1998 175,000 107,500 -- -- 122,500 10,000
Senior Vice President,
Engineering and Network
Operations
</TABLE>
- ------------------------
(1) The amount reflected for Mr. Mahoney 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.
(2) Represents matching contributions under the Company's 401(K) plan.
(3) Mr. Mahoney was appointed as Chief Executive Officer in September 1997.
(4) Calculated based on a value of $9.00 per share, the fair market value of the
Common Stock on December 31, 1996.
(5) Mr. Goldman began his employment with the Company in March 1996.
(6) Mr. Mount began his employment with the Company in December 1997.
5
<PAGE>
STOCK OPTION GRANTS
The following table sets forth information regarding grants of options to
purchase Common Stock made by the Company during the fiscal year ended December
31, 1998 to each of the Named Executives. No stock appreciation rights ("SARs")
were granted during 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED (#) 1998 (1) ($/SHARE)(2) DATE (5%) (10%)
- ----------------------------------- ----------- ------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Mahoney................. 90,000(4)(5) 5.0% $ 5.00 01/01/2008 $ 282,600 $ 717,300
90,000(4)(6) 5.0 5.50 01/01/2008 311,400 789,300
180,771(4)(7) 10.1 10.25 09/18/2008 1,165,973 2,953,798
Allan L. Shaw...................... 60,000(4)(5) 3.3 5.00 01/01/2008 188,400 478,200
60,000(4)(6) 3.3 5.50 01/01/2008 207,600 526,200
75,019(4)(7) 4.2 10.25 09/18/2008 483,873 1,225,815
Lawrence G. Malone................. 27,000(4)(5) 1.5 5.00 01/01/2008 84,780 215,190
60,000(4)(6) 3.3 5.50 01/01/2008 207,600 526,200
51,140(4)(7) 2.9 10.25 09/18/2008 329,853 835,628
Sheldon M. Goldman................. 60,000(4)(5) 3.3 5.00 01/01/2008 188,400 478,200
60,000(4)(6) 3.3 5.50 01/01/2008 207,600 526,200
42,500(4)(7) 2.4 10.25 09/18/2008 274,125 694,450
Francis J. Mount................... 40,000(4)(5) 2.2 5.00 01/01/2008 125,600 318,800
60,000(4)(6) 3.3 5.50 01/01/2008 207,600 526,200
22,500(4)(7) 1.3 10.25 09/18/2008 145,125 367,650
</TABLE>
- ------------------------
(1) The Company granted options to purchase a total of 1,793,736 shares of
Common Stock during 1998.
(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 options become fully vested. See "-- Stock Incentive
Plan." The options granted to the Named Executives also vest upon a Change
of Control (as defined).
(5) Options to purchase shares of Common Stock vested and became exercisable as
to 33.34% of these options on January 1, 1999 and the remainder will vest
and become exercisable on each successive anniversary date thereafter to the
extent of 33.33% of these options.
6
<PAGE>
(6) Options to purchase shares of Common Stock vested and became exercisable as
to 25% of these options on January 1, 1999 and the remainder will vest and
become exercisable on each successive anniversary date thereafter to the
extent of 25% of these options.
(7) Options to purchase shares of Common Stock will vest and become exercisable
as to 33.34% of these options on September 18, 1999 and the remainder will
vest and become exercisable on each successive anniversary date thereafter
to the extent of 33.33% of these options.
On January 1, 1999, the Company granted the following stock options, with an
exercise price of $22.875 per share: Michael J. Mahoney, 52,278 options; Allan
L. Shaw, 38,519 options; Lawrence G. Malone, 38,519 options; Sheldon M. Goldman,
38,519 options; and Francis J. Mount, 38,519 options.
On June 1, 1999, the Company granted the following stock options, with an
exercise price of $43.00 per share, and shares of restricted stock: Michael J.
Mahoney, 38,196 options and 43,859 shares; Allan L. Shaw, 4,123 options and
16,123 shares; Lawrence G. Malone, 4,123 options and 16,123 shares; Sheldon M.
Goldman, 4,123 options and 16,123 shares; and Francis J. Mount, 4,123 options
and 16,123 shares.
YEAR-END OPTION VALUES
The following table sets forth information regarding the number and year end
value of unexercised options held at December 31, 1998 by each of the Named
Executives. No SARs were exercised by the Named Executives during fiscal 1998.
FISCAL 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES "IN-THE-MONEY"
SHARES UNDERLYING UNEXERCISED OPTIONS AT FISCAL
ACQUIRED OPTIONS AT FISCAL YEAR-END ($)
ON VALUE YEAR-END(#) EXERCISABLE/UNEXERCISABLE
NAME EXERCISE (#) REALIZED (5) EXERCISABLE/UNEXERCISABLE (1)
- --------------------------- ------------ ------------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Michael J. Mahoney......... 46,666 $662,891(2) 217,820/368,265 $3,372,766/$5,179,939
Allan L. Shaw.............. -- -- 132,116/180,235 2,144,123/2,724,471
Lawrence G. Malone......... -- -- 105,249/149,757 1,713,119/2,298,995
Sheldon M. Goldman......... -- -- 81,805/179,414 1,330,560/2,219,277
Francis J. Mount........... -- -- 28,360/94,140 499,435/1,542,128
</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 $22.875 per share, the fair market value of
the Common Stock issuable upon exercise of options at December 31, 1998 and
the exercise price of the option, multiplied by the applicable number of
options.
(2) The amounts set forth represent the difference between $19.00 per share, the
fair market value of the Common Stock issuable upon exercise of options at
July 27, 1998, and the exercise price of the option, multiplied by the
applicable number of options.
EMPLOYMENT AGREEMENTS
The Company intends to execute new employment agreements with Messrs.
Mahoney, Shaw and Goldman, pursuant to which Mr. Mahoney will continue to serve
as President and Chief Executive Officer of the Company, Mr. Shaw will continue
to serve as Senior Vice President, Finance and Chief Financial Officer and Mr.
Goldman will serve as Senior Vice President, Business and Legal Affairs for the
Company. In addition, the Company intends to execute employment agreements with
Messrs. Malone and Mount, pursuant to which Mr. Malone will continue to serve as
Senior Vice President, Global Sales and Marketing and Mr. Mount will continue to
serve as Senior Vice President, Engineering and Network Operations. The term of
the Mahoney employment agreement will extend for a period of three years, and
the term of the
7
<PAGE>
employment agreement of each of Messrs. Shaw, Goldman, Malone and Mount will
extend for a period of two years, in each case unless earlier terminated in
accordance with the terms thereof. Each employment agreement will be effective
as of June 1, 1999. Pursuant to the respective employment agreements, Mr.
Mahoney will be entitled to receive an annual base salary of $386,000 (subject
to adjustments), Mr. Shaw will be entitled to receive an annual base salary of
$246,000, Mr. Goldman will be entitled to receive an annual base salary of
$257,000, Mr. Malone will be entitled to receive an annual base salary of
$250,000 and Mr. Mount will be entitled to receive an annual base salary of
$246,000, subject, in each case, to increases approved from time to time by the
Board. In addition, Mr. Mahoney's employment agreement will provide for an
annual cash bonus payment equal to 100% 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,
Goldman's, Malone's and Mount's employment agreements will provide for an annual
cash bonus payment equal to 80% 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
will also (1) provide 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, (2) provide that
following a change of control (as to be defined therein), the Company will be
obligated to pay the executive an amount equal to the Severance Amount (as to be
defined therein), together with any applicable excise tax gross up on such
amount, if the executive chooses to terminate his employment, (3) will include a
non-competition covenant and (4) will contain a prohibition on the solicitation
of the Company employees.
For purposes of each of the foregoing employment agreements, "change of
control" will be defined to mean such time as (1) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (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 (2) 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 this 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.
STOCK INCENTIVE PLAN
The Company has adopted the Amended Stock Incentive Plan (the "Stock
Incentive Plan") under which "nonqualified" stock options to acquire shares of
Common Stock may be granted to employees, directors and consultants of the
Company and "incentive" stock options 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 currently provides for the issuance of up to a
maximum of 3.4 million shares of Common Stock, of which approximately 200,000
shares remain available for grants as of July 1999. The Stock Incentive Plan is
administered by the Compensation Committee which determines which employees,
officers, directors, independent contractors and consultants of the Company will
receive grants, the amount of any grant and the terms and conditions (including
any restrictions) of such grant.
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 shares of restricted Common 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:
8
<PAGE>
- 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;
- 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
- 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
such transaction) securities of the Company representing more than 50.0%
of the total voting power of the Company immediately after such
transaction.
For a description of the terms of the proposed amended Stock Incentive Plan,
see Proposal No. 2.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the members of the Compensation Committee were Messrs. Pizzani,
Mahoney, Graham (from August 1998) and James W. Peet (from January 1998 to June
1998). 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 Board or its Compensation Committee
and the board of directors or compensation committee of any other company.
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During 1998, the members of the Compensation Committee were Messrs. Pizzani,
Mahoney, Graham (from August 1998) and James W. Peet (from January 1998 to June
1998).
EXECUTIVE COMPENSATION POLICY
The Company's compensation program is designed to attract, motivate, reward
and retain executive personnel capable of making significant contributions to
the long-term success of the Company. During 1998, the Company's compensation
program consisted of base salary, annual incentive bonuses and stock option
grants. Base salary provides the foundation for the Company's executive pay, its
purpose is to compensate the executive for performing his or her basic duties.
The purpose of annual incentive bonuses is to provide rewards for favorable
performance and achievement of intermediate-term objectives while the purpose of
stock option grants is to provide incentives and rewards for long-term
performance and to motivate long-term strategic planning.
BASE SALARY. Base salaries for the Company's executive officers are set
annually subject, in certain cases, to certain minimum requirements established
under the executives' employment agreement. During 1998, the Company increased
the salaries paid to its executive officers based upon (i) the results of a
formal survey conducted for the Company by a national compensation consulting
firm and (ii) a number of subjective factors, including the individual's
responsibilities, performance, contribution and experience and (iii) the
Company's performance as compared with the prior year and general economic
factors. As a result of the foregoing, Mr. Mahoney's base salary was increased
to $289,583 during 1998, a 36% increase over the prior year.
INCENTIVE BONUSES. The Company's executive officers and certain other
officers are eligible to receive annual incentive bonuses which are linked to
the financial and operating performance of the Company and the individual's
performance. Certain executive officers are assigned an individual incentive
target, which represents the amount that would be payable to the executive if
performance goals were met. The incentive targets range from 20% to 100% of base
salary. Mr. Mahoney received a $260,000 bonus in 1998. The incentive bonus paid
to Mr. Mahoney was determined based on a number of factors including the
successful completion of the Company's April 1998 high yield offering and the
strategic guidance provided by Mr. Mahoney in connection with the development
and deployment of the Company's fiber optic project known as "Circe."
STOCK OPTIONS. The Company's compensation program also utilizes stock
options which are intended to provide additional incentive to increase
stockholder value. All stock option awards are granted with an exercise price at
least equal to 100% of fair market value of the Common Stock on the date of
grant and generally vest in increments of one-third. Currently, no specific
formula is used to determine option awards to employees but instead awards are
based on guidelines suggested by the Company's outside compensation consulting
firm and a subjective evaluation of each individual's overall past and expected
future contribution to the Company. Mr. Mahoney received three separate grants
during 1998 totaling 360,771.
10
<PAGE>
SECTION 162(M) OF THE INTERNAL REVENUE CODE
In connection with making decisions with respect to executive compensation,
the Compensation Committee has taken into account, as one of the factors which
it considers, the provisions of Section 162(m) of the Internal Revenue Code,
which limits the deductibility by the Company of certain categories of
compensation in excess of $1.0 million paid to certain executive officers.
Respectfully Submitted,
Paul G. Pizzani
Michael J. Mahoney
John G. Graham (from August 1998)
11
<PAGE>
CERTAIN TRANSACTIONS
On June 3, 1998, the Company entered into a Mutual Cooperation Agreement
with Martin Varsavsky and Jazz Telecom S.A. pursuant to which the parties made
certain agreements including the following: (1) subject to Jazz Telecom S.A.
completing a high yield offering with net proceeds to Jazz Telecom S.A. of at
least $100 million (the "Offering Condition"), the Company and Jazz Telecom S.A.
agreed to use commercially reasonable efforts to execute and deliver a
construction agreement no later than January 1, 1999 to construct a fiber optic
submarine cable system between Spain and the United Kingdom, (2) subject to the
Offering Condition, the Company agreed to purchase $6.0 million of Jazz Telecom
S.A. common stock, (3) the Company and Jazz Telecom S.A. agreed to the purchase
from the other international switched minutes and the Company agreed to transmit
at least one-third of the Company's Spanish domestic switched minute traffic
over Jazz Telecom S.A.'s network, assuming the prices charged by Jazz Telecom
S.A. are competitive, (4) the Company and Jazz Telecom S.A. agreed to sell
capacity to each other for fixed prices, (5) Mr. Varsavsky agreed to lock-up his
Company shares for a specified period, (6) the Company agreed to release any
past claims which it had against either Jazz Telecom S.A. and Mr. Varsavsky in
exchange for their respective release of any claims against the Company, and (7)
Mr. Varsavsky agreed to pay the Company liquidated damages in the event that he
violates certain provisions of the agreement. The Company and Jazz Telecom S.A.
are in discussions concerning certain modifications to the terms of the Mutual
Cooperation Agreement. There can be no assurance, however, that the parties will
reach an agreement concerning any such modifications.
On June 4, 1999, Mr. Varsavsky entered into an agreement with the Company
pursuant to which he agreed that he would not, subject to certain exclusions,
(1) offer, pledge, sell or grant, any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares of
the Company's Common Stock or any securities which are exercisable, or
convertible into or exchangeable for such Common Stock, or (2) enter into any
swap or other arrangement that transfers to another any of the economic
consequences of ownership of his common stock, from June 23, 1999 through
December 31, 1999; provided, however, that Mr. Varsavsky may, under certain
circumstances pledge all, but not less than all, of his shares of Common Stock
to secure a loan of up to $15 million. In exchange for Mr. Varsavsky's agreement
to lockup his shares, the Company included an aggregate of 1,293,000 shares of
his Common Stock in the registration statement for its recently completed June
offering.
12
<PAGE>
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of July 21, 1999, 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
OF BENEFICIAL PERCENTAGE
NAME AND ADDRESS OWNERSHIP (1) OF CLASS
- ---------------------------------------------------------------------------------- ------------------ -------------
<S> <C> <C>
Capital Group International, Inc. and
The Capital Guardian Trust Company
11100 Santa Monica Boulevard
Los Angeles, CA 90025-3384(2)................................................... 2,695,700 8.3%
Martin Varsavsky
Parque Empresarial Edificio 2,
c/o Beatriz De Bobadilla
14,5 Ofic. B
Madrid, Spain................................................................... 2,303,666 7.3
Michael J. Mahoney(3)............................................................. 346,947 1.1
Allan L. Shaw(3).................................................................. 183,250 *
Lawrence G. Malone(3)............................................................. 149,532 *
Sheldon M. Goldman(3)(4).......................................................... 119,098 *
Francis J. Mount(3)............................................................... 44,961 *
John G. Graham (3)................................................................ 3,463 *
Paul G. Pizzani (3)............................................................... 2,463 *
All directors and executive officers as a group (7 persons)....................... 849,714 2.6%
</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 Stock subject
to options and warrants held by that person that are currently exercisable
or exercisable within 60 days of July 21, 1999 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 Capital Group International, Inc. is the parent holding company of a
group of investment management companies, including The Capital Guardian
Trust Company. The amount reported reflects shares held by The Capital
Guardian Trust Company solely as the investment manager of various
institutional accounts. Capital Group International, Inc. does not have
investment power or voting power over any of these shares.
(3) Includes shares of Common Stock which these individuals have the right to
acquire through the exercise of options within 60 days of July 21, 1999, as
follows: Michael J. Mahoney 278,089; Allan L. Shaw 131,127; Lawrence G.
Malone 113,409; Sheldon M. Goldman 75,976; Francis J. Mount 12,838; John G.
Graham 1,463; and Paul G. Pizzani, 1,463.
(4) 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.
13
<PAGE>
CUMULATIVE TOTAL STOCKHOLDERS RETURN
The following graph shows a comparison of cumulative total returns on the
Common Stock against the cumulative total return for The Nasdaq Stock
Market--U.S. Index and The Nasdaq Telecommunications Index. The graph assumes an
investment of $100 on October 18, 1996 (the date the Common Stock began trading
on The Nasdaq National Market) in the Common Stock, The Nasdaq Stock
Market--U.S. Index and The Nasdaq Telecommunications Index. Cumulative total
return assumes reinvestment of dividends. The performance shown is not
necessarily indicative of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE COMPANY THE NASDAQ STOCK MARKET-U.S. INDEX THE NASDAQ TELECOMMUNICATIONS INDEX
<S> <C> <C> <C>
10/18/96 100.00 100.00 100.00
12/1/96 75.00 104.00 103.00
3/1/97 55.00 98.00 96.00
6/1/97 56.00 116.00 121.00
9/1/97 39.00 136.00 140.00
12/1/97 42.00 127.00 153.00
3/1/98 115.00 149.00 194.00
6/1/98 142.00 153.00 207.00
9/1/98 89.00 138.00 184.00
Dec-98 191.00 179.00 250.00
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY CUMULATIVE TOTAL VALUES*($)
---------------------------------------------------------------------
THE NASDAQ STOCK THE NASDAQ
QUARTER-END THE COMPANY MARKET--U.S. INDEX TELECOMMUNICATIONS INDEX
- ----------------------------------------------------- ----------------- --------------------- ---------------------------
<S> <C> <C> <C>
December 31, 1996.................................... 75 104 103
March 31, 1997....................................... 55 98 96
June 30, 1997........................................ 56 116 121
September 30, 1997................................... 39 136 140
December 31, 1997.................................... 42 127 153
March 31, 1998....................................... 115 149 194
June 30, 1998........................................ 142 153 207
September 30, 1998................................... 89 138 184
December 31, 1998.................................... 191 179 250
</TABLE>
PROPOSAL 2 -- PROPOSED AMENDMENT TO STOCK INCENTIVE PLAN
The Board has amended the Stock Incentive Plan, subject to approval of the
stockholders, to provide for (i) an additional 1,900,000 shares of Common Stock
which may be issued thereunder and (ii) to expand the plan to provide for the
issuance of stock benefits or stock-related benefits. Prior to this amendment,
the Stock Incentive Plan provided for the issuance of a maximum of 3.4 million
shares to participants, of which approximately 200,000 remain available for
grants as of July 1999. The Board deems it advisable to increase the number of
available shares of Common Stock and to expand the types of awards which may be
made under the plan.
The following summary of the plan, as proposed to be amended, is subject to
the complete terms of the Plan, a copy of which is attached to this Proxy
Statement as Annex A.
1. ADMINISTRATION. The plan is administered by the Compensation Committee,
which must consist of not less than two non-employee director members. Subject
to the provisions of the plan, the Compensation Committee has sole authority to
select eligible participants, determine (subject to the terms of the plan) the
terms and timing of grants and to generally interpret and administer the plan.
2. PARTICIPANTS. Subject to the terms of the plan, employees, officers,
directors, independent contractors and consultants of the Company or an
affiliate of the Company selected by the Compensation Committee, in its
discretion, are eligible to receive grants under the plan. Currently, there are
approximately 100 participants in the plan.
3. TYPES OF AWARDS. The plan authorizes the granting of stock options
(both Incentive Stock Options and Nonqualified Stock Options), shares of
restricted Common Stock, shares of bonus stock, SARs and any other form of stock
benefit or stock-related benefit. The terms and features of these various forms
of awards are set forth below and are described more fully in Annex A attached
hereto.
STOCK OPTIONS. Options granted under the plan may be either Incentive Stock
Options or Nonqualified Stock Options. Options may be granted to participants in
such number, at such times, and subject to such terms and conditions as the
Compensation Committee may determine, except that: (i) the option price of an
Incentive Stock Option may not be less than the fair market value of the Common
Stock on the date of grant; (ii) the option price of a Nonqualified Stock Option
may be as determined by the Compensation Committee; (iii) no Incentive Stock
Option may 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 on the date of grant and the term of the
option may not exceed five years from the date of grant; (iv) no Incentive Stock
Option may be exercised more than ten years after the date of grant; and (v) the
aggregate fair market value of the stock with respect to which Incentive Stock
Options are exercisable by a participant for the first time by the grantee
during any calendar year may not
15
<PAGE>
exceed $100,000. With respect to each option granted under the plan, the
Compensation Committee may determine and reflect in the option agreement such
other terms, provisions and conditions consistent with the plan as may be
determined by the Compensation Committee.
Payment for the shares of Common Stock purchased upon exercise of an option
must be made in full upon exercise of the option, by cash (including the
following cash equivalents: certified check, bank draft or postal or express
money order payable to the order of the Company in lawful money of the United
States); provided, however, that the Compensation Committee, in its sole
discretion, may permit a participant to pay the option price, in whole or in
part (i) with shares of Common Stock owned by the participant, (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 Compensation Committee determines
appropriate, or (iv) in any combination of the foregoing. In addition, the
Compensation Committee, in its sole discretion, may authorize the surrender by a
participant of all or part of an unexercised 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 option and the
aggregate option price of such shares of Common Stock. In the Compensation
Committee's discretion, such payment may be made in cash, shares of Common Stock
with a fair value on the date of surrender equal to the payment amount, or some
combination thereof.
Each option issued to a participant will be exercisable in accordance with
its terms so long as the participant is an employee of the Company or an
affiliate of the Company. In addition, to the extent then exercisable options
will be exercisable by a participant for a period of thirty (30) days after
termination of employment or consulting relationship or such longer period of
time as may be permitted by the Code (but in no event later than the expiration
date of the option). Options will vest in accordance with the schedule
established by the Compensation Committee at the time of grant and will not be
exercisable until vested. In the event of a Corporate Transaction, however,
outstanding options will, to the extent not then vested, vest in their entirety
and become exercisable unless assumed by the successor corporation or its parent
company pursuant to options providing substantially equal value and having
substantially equivalent provisions as the options granted pursuant to the plan.
SHARES OF RESTRICTED COMMON STOCK. Shares of restricted Common Stock may be
sold or granted under the plan in such numbers and at such times during the term
of the plan as the Compensation Committee shall determine. Each participant who
receives a grant of shares of restricted Common Stock or who purchases shares
subject to restrictions will have all the rights of a stockholder with respect
to such shares of restricted Common Stock (subject to certain restrictions that
may be imposed on transferability), including the rights to vote, receive
dividends (including stock dividends), participate in stock splits or other
capitalizations and exchange such shares in a merger, consolidation or other
reorganization.
Each sale or grant of restricted Common Stock pursuant to the plan will be
evidenced by a written restricted stock purchase agreement or restricted stock
bonus agreement, which agreement may contain such other terms, provisions and
conditions consistent with the plan as may be determined by the Compensation
Committee, including restrictions on transfer and forfeiture and vesting
provisions.
In the event of a Corporate Transaction, any shares of restricted Common
Stock will be released from restrictions on transfer and repurchase rights
unless assumed by the successor corporation or its parent company pursuant to
restricted stock agreements providing substantially equal value and having
substantially equivalent provisions as the shares of restricted Common Stock
granted pursuant to the plan.
SARS. SARs may be granted under the plan either separately or in tandem
with options and will be subject to such terms and conditions as the
Compensation Committee may deem appropriate. Each SAR will entitle the holder to
surrender the SAR, and to receive from the Company in exchange therefor, cash
compensation equal to any appreciation in value of the Common Stock underlying
such SAR. In the event of a Corporate Transaction, outstanding SARs will vest in
their entirety and become exercisable unless
16
<PAGE>
assumed by the successor corporation or its parent company pursuant to SARs
providing substantially equal value and having substantially equivalent
provisions as the SARs granted pursuant to the plan.
OTHER AWARDS. The Compensation Committee may also grant any other stock or
stock-related awards to participants that the Compensation Committee deems
appropriate, including, but not limited to, bonuses of shares and grants of
shares based on performance or upon the satisfaction of other conditions.
4. TERMINATION AND AMENDMENTS. The plan terminates with respect to
Incentive Stock Options on September 29, 2003. However, the Board may at any
time amend, suspend or terminate the plan as it deems advisable, provided that
such amendment, suspension or termination complies with all applicable
requirements of state and federal law, including any applicable requirement that
the plan, or any amendment to the plan, be approved by the Company's
stockholders. Notwithstanding the foregoing, the Board may not amend the plan
without the approval of the stockholders of the Company to: (i) increase the
maximum number of shares subject to Incentive Stock Options issued under the
plan; or (ii) change the designation or class of persons eligible to receive
Incentive Stock Options under the plan.
5. TRANSFERABILITY. Neither options granted pursuant to the plan, nor any
right thereunder, will be transferable by the participant by operation of law or
otherwise other than by will or the laws of descent and distribution. During the
participant's lifetime, options may be exercised only by the participant. Stock
subject to a restricted stock purchase agreement, restricted stock bonus
agreement or other agreements relating to a stock benefit or stock-related
benefit will be transferable only as provided in such agreement.
6. CONSIDERATION. The consideration to be received by the Company for the
granting of options, SARs, shares of restricted Common Stock and certain other
forms of stock benefits or stock-related benefits is the continued employment of
participants. Consideration for the issuance of shares under the plan will
consist of the payment of the option price upon exercise of an option, surrender
of a related option upon exercise of a SAR and payment of the established
purchase price with respect to the purchase of shares of restricted Common Stock
and certain forms of stock benefits or stock-related benefits.
7. TAX CONSEQUENCES. The grant of an option or SAR will have no immediate
tax consequences for the participant or the Company. The participant will have
no taxable income upon exercising an Incentive Stock Option (except that an
alternative minimum tax may apply), and the Company will not receive a deduction
when an Incentive Stock Option is exercised. If the participant does not dispose
of the shares of Common Stock acquired on exercise of an Incentive Stock Option
within the two-year period beginning on the day after the grant of the Incentive
Stock Option or within one year after the transfer of such shares to the
participant, the gain or loss on a subsequent sale will be a capital gain or
loss to the participant. The Company would not be entitled to any deduction in
such event. If the participant disposes of the shares within the two-year or
one-year period described above, the participant generally will realize ordinary
income and the Company will be entitled to a corresponding deduction. Upon
exercising a SAR or a Nonqualified Stock Option, the participant must recognize
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of the Common Stock on the date of exercise, unless
the shares of Common Stock received are subject to certain restrictions. The
Company is entitled to a deduction for the same amount as of the exercise date
(or the date the restrictions lapse).
Awards granted under the plan that are settled in cash or shares of Common
Stock that are either transferable or not subject to a substantial risk of
forfeiture are taxable as ordinary income in an amount equal to the cash or the
fair market value of the shares received. Awards granted under the plan that are
settled in shares of Common Stock that are subject to restrictions as to
transferability or subject to a substantial risk of forfeiture are taxable as
ordinary income in an amount equal to the fair market value of the shares
received at the first time such shares become transferable or not subject to a
substantial risk of forfeiture, whichever occurs earlier. Awards of restricted
Common Stock granted under the plan are taxable as ordinary income, as of the
earlier of the date that the shares become transferable or are no longer subject
to a substantial risk of forfeiture, in an amount equal to the fair market value
of the shares on such date, unless the participant makes an election under
Section 83(b) of the Code. If a Section
17
<PAGE>
83(b) election is made, the participant must include in income the value of the
shares as of the date of grant.
The Company will receive a deduction for the amount recognized as income by
the participant, subject to the provisions of Section 162(m) of the Code, which
provides for a possible denial of a tax deduction to the Company for
compensation paid by it to certain key executive officers in excess of $1.0
million in any year.
The tax treatment upon disposition of shares of Common Stock acquired under
the plan will depend on how long the shares have been held. In the case of
shares of Common Stock acquired through exercise of an option, the tax treatment
will also depend on whether or not the shares were acquired by exercising an
Incentive Stock Option. There will be no tax consequences to the Company upon
disposition of shares of Common Stock acquired under the plan, except that the
Company may receive a deduction in the case of disposition of shares acquired
under an Incentive Stock Option before the applicable holding period has been
satisfied.
8. OTHER INFORMATION. The closing price of the Common Stock on July 23,
1999 was $44.875.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE STOCK INCENTIVE PLAN.
PROPOSAL 3 -- AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
REGARDING INCREASE IN AUTHORIZED COMMON STOCK
By resolution adopted on July 9, 1999, the Board of the Company proposed the
adoption by the stockholders of an amendment to the Certificate of Incoporation
of the Company pursuant to which the number of authorized shares of Common Stock
of the Company would be increased from 50,000,000 to 150,000,000 and the Board
directed that the proposed amendment be submitted to a vote by the stockholders
at the Annual Meeting.
If the stockholders approve the amendment, the Certificate of Incorporation
of the Company will be amended as proposed by the Board and the number of
authorized shares of Common Stock will be increased to 150,000,000. See Annex B
hereto.
Of the 52,000,000 currently authorized shares of Common Stock, as of July
21, 1999, 32,585,621 shares of Common Stock were outstanding.
The Board believes the increase in the number of authorized shares of the
Company will provide flexibility in connection with future activities including:
- financings;
- investment opportunities;
- acquisitions of other companies;
- stock dividends or splits;
- employee benefit plans; and
- for other corporate purposes that the Board deems advisable.
If the proposed amendment is approved, all or any of the authorized shares
of Common Stock may be issued from time to time as determined by the Board
without further action by the stockholders, subject to any restrictions imposed
by The Nasdaq National Market and unless issued in transactions, such as certain
mergers, which require stockholder approval. Accordingly, the Company would be
in a position to use its capital stock to take advantage of market conditions
and opportunities without the delay and expense associated with the holding of a
special meeting of stockholders. Although the Company may, based on its
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review of prevailing market conditions, issue and sell shares of Common Stock in
the public markets, currently there is no agreement, arrangement or
understanding relating to the issuance and sale of Common Stock. No preemptive
rights exist with respect to any outstanding shares of Common Stock. The
issuance of additional shares of Common Stock may cause dilution to present
stockholders.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION AUTHORIZING AN INCREASE IN THE NUMBER OF
SHARES OF COMMON STOCK AVAILABLE FOR FUTURE ISSUANCE.
PROPOSAL 4 -- RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Board desires to obtain stockholder ratification of the resolution
appointing KPMG LLP, New York, New York, as independent auditors for the Company
for fiscal year 1999. KPMG LLP served as the Company's auditors for the fiscal
year ended December 31, 1998.
If the appointment of KPMG LLP is not ratified, the adverse vote will be
considered as an indication to the Board that it should select other independent
auditors for the following fiscal year. Given the difficulty and expense of
making any substitution of auditors after the beginning of the current fiscal
year, it is contemplated that the appointment for fiscal year 1999 will be
permitted to stand unless the Board finds other good reason for making a change.
A representative of KPMG LLP will attend the Annual Meeting, will have an
opportunity to make a statement if he or she desires to do so, and will be
available to respond to appropriate questions.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR FISCAL YEAR
1999.
COSTS OF SOLICITATION
The cost of preparing, printing and mailing this Proxy Statement and the
accompanying proxy card, and the cost of solicitation of proxies on behalf of
the Board will be borne by the Company. The Company has retained Corporate
Investor Communications, Inc. to assist in the solicitation of proxies from
stockholders at an estimated fee of $6,000.00, plus reimbursement of
out-of-pocket expenses. In addition to the use of the mail, proxies may be
solicited personally or by telephone by regular employees of the Company without
additional compensation as well as by Corporate Investor Communications, Inc.
Banks, brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the proxy materials to the beneficial owners of the Common
Stock held of record by such persons and entities and will be reimbursed for
their reasonable expenses incurred in connection with forwarding such material.
OTHER MATTERS
As of the date of this Proxy Statement, the Board knows of no other matters
which will be brought before the Annual Meeting. In the event that any other
business is properly presented at the Annual Meeting, it is intended that the
persons named in the enclosed proxy will have authority to vote such proxy in
accordance with their judgment on such business.
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 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
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such forms provided to it, the Company believes that all filing requirements
were complied with during the fiscal year ended December 31, 1998.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholder proposals submitted for inclusion in the Proxy Statement to be
issued in connection with the Company's 2000 Annual Meeting of Stockholders must
be mailed to the Secretary, Viatel, Inc., 685 Third Avenue, 24th Floor, New
York, New York 10017, and must be received by the Secretary on or before March
24, 2000. In addition, stockholder proposals for presentation at the 2000 Annual
Meeting must also be received on or before March 24, 2000. See "General
Information Relating to the Board -- Committees of the Board."
ANNUAL REPORT
A copy of the Company's 1998 Annual Report to Stockholders is being mailed
with this Proxy Statement to each stockholder entitled to vote at the Annual
Meeting. Stockholders not receiving a copy of such Annual Report may obtain one,
without charge, by writing or calling Cindy B. Glynn, Director, Investor
Relations, Viatel, Inc., 685 Third Avenue, New York, New York 10017, telephone
(212) 350-9200.
By Order of the Board of
Directors,
/s/ Sheldon M. Goldman
Sheldon M. Goldman
SECRETARY
New York, New York
July 26, 1999
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ANNEX A
VIATEL, INC.
AMENDED STOCK INCENTIVE PLAN
1. ESTABLISHMENT, PURPOSE, AND DEFINITIONS.
(a) There is hereby adopted the Amended Stock Incentive Plan (the "Plan") of
VIATEL, INC. (the "Company").
(b) The purpose of the Plan is to provide a means whereby Eligible
Individuals (as defined in paragraph 4, below) can acquire Common Stock, $.01
par value, of the Company (the "Stock"). The Plan provides employees (including
officers and directors who are employees) of the Company and of its Affiliates
(as defined in subparagraph (c) below) an opportunity to purchase shares of
Stock pursuant to options which may qualify as incentive stock options (referred
to as "Incentive Stock Options") under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and employees, officers, directors,
independent contractors, and consultants of the Company and of its Affiliates an
opportunity to purchase shares of Stock pursuant to options which are not
described in Sections 422 or 423 of the Code (referred to as "Nonqualified Stock
Options"). The Plan also provides for the sale or bonus of Stock to Eligible
Individuals in connection with the performance of services for the Company or
its Affiliates. Further, the Plan authorizes the grant of stock appreciation
rights ("SARs"), either separately or in tandem with options, entitling holders
to cash compensation measured by appreciation in the value of the Stock.
Finally, the Plan authorizes the grant of any other stock benefit or
stock-related benefit that the Committee (as defined in paragraph 2(a) below)
deems appropriate.
(c) The term "Affiliates" as used in the Plan means parent or subsidiary
corporations, as defined in Sections 424(e) and (f) of the Code (but
substituting "the Company" for "employer corporation"), including parents or
subsidiaries which become such after adoption of the Plan.
2. ADMINISTRATION OF THE PLAN.
(a) The Plan shall, unless otherwise determined by the Board of Directors,
be administered by the Compensation Committee of the Board (the "Committee").
The Committee shall consist of not less than two non-employee director members
within the meaning of the rules promulgated under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Members of the
Committee shall serve at the pleasure of the Board. The Committee shall select
one of its members as chairman, and shall hold meetings at such times and places
as it may determine. A majority of the Committee shall constitute a quorum and
acts of the Committee at which a quorum is present, or acts reduced to or
approved in writing by all the members of the Committee, shall be the valid acts
of the Committee. If the Board does not delegate administration of the Plan to
the Committee, then each reference in this Plan to "the Committee" shall be
construed to refer to the Board.
(b) The Committee shall determine which Eligible Individuals shall be
granted options under the Plan, the timing of such grants, the terms thereof
(including any restrictions on the Stock), and the number of shares subject to
such options.
(c) The Committee may amend the terms of any outstanding option granted
under this Plan, but any amendment which would adversely affect the optionee's
rights under an outstanding option shall not be made without the optionee's
written consent. The Committee may, with the optionee's written consent, cancel
any outstanding option or accept any outstanding option in exchange for a new
option.
(d) The Committee shall also determine which Eligible Individuals shall be
issued Stock, SARs or other stock benefits or stock-related benefits under the
Plan, the timing of such grants, the terms thereof (including any restrictions),
and the number of shares of Stock, SARs or stock benefits or stock-related
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benefits to be granted. The Stock, stock benefits or stock-related benefits
shall be issued for such consideration (if any) as the Committee deems
appropriate. Stock issued subject to restrictions shall be evidenced by a
written agreement (the "Restricted Stock Purchase Agreement" or the "Restricted
Stock Bonus Agreement") and stock benefits or stock-related benefits shall be
evidenced by written agreement (the "Stock Benefit Agreement"). The Committee
may amend any Restricted Stock Purchase Agreement, Restricted Stock Bonus
Agreement or Stock Benefit Agreement, but any amendment which would adversely
affect the stockholder's rights to the Stock, stock benefits or stock-related
benefits shall not be made without his or her written consent.
(e) The Committee shall have the sole authority, in its absolute discretion,
to adopt, amend, and rescind such rules and regulations as, in its opinion, may
be advisable for the administration of the Plan, to construe and interpret the
Plan, the rules and the regulations, and the instruments evidencing options,
Stock, SARs or stock benefits or stock-related benefits granted under the Plan
and to make all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations, and interpretations
of the Committee shall be binding on all participants.
3. STOCK SUBJECT TO THE PLAN.
(a) An aggregate of not more than 5.3 million shares of Stock shall be
available for the grant of options, the issuance of Stock or the issuance of
stock benefits or stock-related benefits under the Plan. If an option is
surrendered (except surrender for shares of Stock) or for any other reason
ceases to be exercisable in whole or in part, the shares which were subject to
such option but as to which the option had not been exercised shall continue to
be available under the Plan. Any Stock which is retained by the Company upon
exercise of an option in order to satisfy the exercise price for such option or
any withholding taxes due with respect to such option exercise shall be treated
as issued to the optionee and will thereafter not be available under the Plan.
(b) If there is any change in the Stock subject to either the Plan, an
Option Agreement (as defined below), a Restricted Stock Purchase Agreement, a
Restricted Stock Bonus Agreement, a SAR Agreement (as defined in paragraph 8) or
Stock Benefit Agreement through merger, consolidation, reorganization,
recapitalization, reincorporation, stock split, stock dividend, or other change
in the capital structure of the Company, appropriate adjustments shall be made
by the Committee in order to preserve but not to increase the benefits to the
individual, including adjustments to the aggregate number, kind of shares, and
price per share subject to either the Plan, an Option Agreement, a Restricted
Stock Purchase Agreement, a Restricted Stock Bonus Agreement, a SAR Agreement or
a Stock Benefit Agreement.
4. ELIGIBLE INDIVIDUALS. Individuals who shall be eligible to have granted
to them the options, Stock, SARs or other stock benefits or stock-related
benefits provided for by the Plan shall be such employees, officers, directors,
independent contractors, and consultants of the Company or an Affiliate as the
Committee in its discretion, shall designate from time to time ("Eligible
Individuals"). Notwithstanding the foregoing, only employees of the Company or
an Affiliate (including officers and directors who are bona fide employees)
shall be eligible to receive Incentive Stock Options.
5. THE OPTION PRICE. The exercise price of the Stock covered by each
Incentive Stock Option shall be not less than the per share fair market value of
such Stock on the date the option is granted. The exercise price of the Stock
covered by each Nonqualified Stock Option shall be as determined by the
Committee. Notwithstanding the foregoing, in the case of an Incentive Stock
Option granted to a person possessing more than ten percent of the combined
voting power of the Company or an Affiliate, the exercise price shall be not
less than 110 percent of the fair market value of the Stock on the date the
option is granted. The exercise price of an option shall be subject to
adjustment to the extent provided in paragraph 3(b), above.
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6. TERMS AND CONDITIONS OF OPTIONS.
(a) Each option granted pursuant to the Plan will be evidenced by a written
agreement (the "Option Agreement") executed by the Company and the person to
whom such option is granted.
(b) The Committee shall determine the term of each option granted under the
Plan; PROVIDED, HOWEVER, that the term of an Incentive Stock Option shall not be
for more than 10 years and that, in the case of an Incentive Stock Option
granted to a person possessing more than ten percent of the combined voting
power of the Company or an Affiliate, the term shall be for no more than five
years.
(c) In the case of Incentive Stock Options, the aggregate fair market value
(determined as of the time such option is granted) of the Stock with respect to
which Incentive Stock Options are exercisable for the first time by an Eligible
Individual in any calendar year (under this Plan and any other plans of the
Company or its Affiliates) shall not exceed $100,000.
(d) The Stock Option Agreement may contain such other terms, provisions and
conditions consistent with this Plan as may be determined by the Committee. If
an option, or any part thereof, is intended to qualify as an Incentive Stock
Option, the Option Agreement shall contain those terms and conditions which are
necessary to so qualify it.
7. TERMS AND CONDITIONS OF STOCK PURCHASES AND BONUSES.
(a) Each sale or grant of Stock pursuant to the Plan will be evidenced by a
written Restricted Stock Purchase Agreement or Restricted Stock Bonus Agreement
executed by the Company and the person to whom such Stock is sold or granted.
(b) The Restricted Stock Purchase Agreement or Restricted Stock Bonus
Agreement may contain such other terms, provisions and conditions consistent
with this Plan as may be determined by the Committee, including not by way of
limitation, restrictions on transfer, forfeiture provisions, repurchase
provisions and vesting provisions.
8. TERMS AND CONDITIONS OF SARS. The Committee may, under such terms and
conditions as it deems appropriate, authorize the issuance of SARs evidenced by
a written SAR agreement (which, in the case of tandem options, may be part of
the Option Agreement to which the SAR relates) executed by the Company and the
person to whom such SAR is granted (the "SAR Agreement"). The SAR Agreement may
contain such terms, provisions and conditions consistent with this Plan as may
be determined by the Committee.
9. TERMS AND CONDITIONS OF STOCK BENEFITS AND STOCK-RELATED BENEFITS. The
Committee may, under such terms and conditions as it deems appropriate,
authorize the issuance of other forms of stock benefits and stock-related
benefits evidenced by a Stock Benefit Agreement executed by the Company and the
person to whom such stock benefit or stock-related benefit is granted. The Stock
Benefit Agreement may contain such terms, provisions and conditions consistent
with the Plan as may be determined by the Committee.
10. USE OF PROCEEDS. Cash proceeds realized from the issuance of Stock
under the Plan shall constitute general funds of the Company.
11. AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN.
(a) The Board may at any time amend, suspend or terminate the Plan as it
deems advisable; provided that such amendment, suspension or termination
complies with all applicable requirements of state and federal law, including
any applicable requirement that the Plan or an amendment to the Plan be approved
by the Company's stockholders, and provided further that, except as provided in
paragraph 3(b) above, the
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Board shall in no event amend the Plan in the following respects without the
consent of stockholders then sufficient to approve the Plan in the first
instance:
(i) To increase the maximum number of shares subject to Incentive Stock
Options issued under the Plan; or
(ii) To change the designation or class of persons eligible to receive
Incentive Stock Options under the Plan.
(b) No option, stock benefit or stock-related benefit may be granted nor any
Stock issued under the Plan during any suspension or after the termination of
the Plan, and no amendment, suspension, or termination of the Plan shall,
without the affected individual's consent, alter or impair any rights or
obligations under any option, stock benefit or stock-related benefit previously
granted under the Plan. The Plan shall terminate with respect to the grant of
Incentive Stock Options on September 29, 2003, unless previously terminated by
the Board pursuant to this paragraph 11.
12. ASSIGNABILITY. Each option granted pursuant to this Plan shall, during
the optionee's lifetime, be exercisable only by him, and neither the option nor
any right hereunder shall be transferable by the optionee by operation of law or
otherwise other than by will or the laws of descent and distribution. Stock
subject to a Restricted Stock Purchase Agreement, a Restricted Stock Bonus
Agreement or a Stock Benefit Agreement shall be transferable only as provided in
such Agreement.
13. PAYMENT UPON EXERCISE OF OPTIONS.
(a) Payment of the purchase price upon exercise of any option granted under
this Plan shall be made in cash (including for purposes of this Plan the
following cash equivalents: certified check, bank draft, postal or express money
order payable to the order of the Company in lawful money of the United States);
PROVIDED, HOWEVER, that the Committee, in its sole discretion, may permit an
optionee to pay the option price in whole or in part (i) with shares of Stock
owned by the optionee; (ii) by delivery on a form prescribed by the Committee of
an irrevocable direction to a securities broker approved by the Committee to
sell shares and deliver all or a portion of the proceeds to the Company in
payment for the Stock; (iii) by delivery of the optionee's promissory note with
such recourse, interest, security, and redemption provisions as the Committee in
its discretion determines appropriate; or (iv) in any combination of the
foregoing. Any Stock used to exercise options shall be valued at its fair market
value on the date of the exercise of the option. In addition, the Committee, in
its sole discretion, may authorize the surrender by an optionee of all or part
of an unexercised option and authorize a payment in consideration thereof of an
amount equal to the difference between the aggregate fair market value of the
Stock subject to such option and the aggregate option price of such Stock. In
the Committee's discretion, such payment may be made in cash, shares of Stock
with a fair market value on the date of surrender equal to the payment amount,
or some combination thereof.
(b) In the event that the exercise price is satisfied by the Committee
retaining from the shares of Stock otherwise to be issued to the optionee shares
of Stock having a value equal to the exercise price, the Committee may issue the
optionee an additional option, with terms identical to the Option Agreement
under which the option was received, entitling the optionee to purchase
additional Stock in an amount equal to the number of shares so retained.
14. WITHHOLDING TAXES.
(a) No Stock shall be granted or sold under the Plan to any participant, and
no SAR or other stock benefit or stock-related benefit may be exercised, until
the participant has made arrangements acceptable to the Committee for the
satisfaction of federal, state, and local income and employment tax withholding
obligations, including without limitation obligations incident to the receipt of
Stock under the Plan, the lapsing of restrictions applicable to such Stock, the
failure to satisfy the conditions for treatment as
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Incentive Stock Options under applicable tax law, or the receipt of cash
payments. Upon exercise of a stock option or lapsing of restrictions on Stock
issued under the Plan, the Company may satisfy its withholding obligations by
withholding from the optionee or requiring the stockholder to surrender shares
of Stock sufficient to satisfy federal, state and local income and employment
tax withholding obligations.
(b) In the event that such withholding is satisfied by the Company or the
optionee's employer retaining from the shares of Stock otherwise to be issued to
the optionee shares of Stock having a value equal to such withholding tax, the
Committee may issue the optionee an additional option, with terms identical to
the Option Agreement under which the option was received, entitling the optionee
to purchase additional Stock in an amount equal to the number of shares so
retained.
15. RESTRICTIONS ON TRANSFER OF SHARES. The Stock acquired pursuant to the
Plan shall be subject to such restrictions and agreements regarding sale,
assignment, encumbrances or other transfer as are in effect among the
stockholders of the Company at the time such Stock is acquired, as well as to
such other restrictions as the Committee shall deem advisable.
16. CORPORATE TRANSACTION.
(a) For purposes of this paragraph 16, a "Corporate Transaction" shall
include 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, except (1) for a transaction the principal purpose of which is to
change the state of the Company's incorporation, or (2) 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 fifty percent (50%) 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 fifty (50%) 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
such transaction) securities of the Company representing more than fifty
percent (50%) of the total voting power of the Company immediately after
such transaction.
(b) In the event of any Corporate Transaction, any option, restricted Stock,
SAR, stock benefit or stock-related benefit shall vest in its entirety and
become exercisable, or with respect to restricted Stock, be released from
restrictions on transfer and repurchase rights, immediately prior to the
specified effective date of the Corporate Transaction unless assumed by the
successor corporation or its parent company, pursuant to options, restricted
Stock, SARs or stock benefits or stock-related benefits providing substantially
equal value and having substantially equivalent provisions as the options,
restricted Stock, SARs or stock benefits or stock-related benefits granted
pursuant to this Plan.
17. STOCKHOLDER APPROVAL. This Plan shall only become effective with regard
to the issuance of additional Incentive Stock Options upon its approval by a
majority of the stockholders voting (in person or by proxy) at a stockholders'
meeting held within 12 months of the Board's adoption of the Plan. The Committee
may grant additional Incentive Stock Options under the Plan prior to the
stockholders' meeting, but until stockholder approval of the Plan is obtained,
no such additional Incentive Stock Option shall be exercisable.
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ANNEX B
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
The first paragraph of Article IV of the Amended and Restated Certificate of
Incorporation, as amended, of the Company will be amended to read a follows:
"The total authorized capital stock of the Corporation shall be One Hundred
and Fifty Two million (152,000,000) shares consisting of One Hundred Fifty
Million (150,000,000) shares of Common Stock, par value $.01 per share (the
"Common Stock"), and Two Million (2,000,000) shares of Preferred Stock."
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VIATEL, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 14, 1999
Solicited on Behalf of the Board of Directors
The undersigned hereby authorizes Allan L. Shaw and Sheldon M. Goldman,
and each of them individually, with power of substitution, to vote and otherwise
represent all of the shares of Common Stock of Viatel, Inc. (the "Company"),
held of record by the undersigned, at the Annual Meeting of Stockholders of the
Company to be held in the Whitney Room at the Hotel InteroContinental, 111 East
48th Street, New York, New York, on Tuesday, September 14, 1999 at 10:00 a.m.,
local time, and at any adjournments or postponements thereof, as indicated on
the reverse side hereof.
The undersigned acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement dated, in each case, July 26, 1999. All other proxies
heretofore given by the undersigned to vote shares of the Company's Common Stock
are expressly revoked.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DESCRIBED ON THE
REVERSE HEREOF BY THE STOCKHOLDER. IF NOT OTHERWISE DIRECTED, THIS PROXY WILL BE
VOTED "FOR" THE ELECTION AS DIRECTORS OF THE COMPANY ALL NOMINEES NOMINATED IN
ITEM 1 AND "FOR" THE PROPOSALS REFERRED TO ITEMS 2, 3 AND 4.
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
<PAGE>
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<S> <C> <C> <C>
WITHHOLD
AUTHORITY
For all to vote for (The Board of Directors recommends a vote "FOR")
nominees listed all nominees
below listed below Exceptions
/X/ /X/ /X/ 1. To elect two (2) Class C directors to the Board of
Directors of the Company to hold office until the
2002 Annual Meeting of Stockholders.
Nominees: Michael J. Mahoney and John G. Graham.
[INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the "Exceptions" box and write
that nominee's name in the space provided below.]
Exceptions
--------------
For Against Abstain 2. To approve an amendment to the Company's Amended
/X/ /X/ /X/ Stock Incentive Plan to increase the number of
shares of the Company's Common Stock available for
future grants.
For Against Abstain 3. To approve an amendment to the Company's Amended
/X/ /X/ /X/ and Restated Certificate of Incorporation to
increase the number of authorized shares of the
Company's common stock available for future
issuance.
For Against Abstain 4. The ratification of the appointment of KPMG LLP,
/X/ /X/ /X/ New York, New York, as independent auditors for Change of Address
the Company for fiscal year 1999. and/or Comments Mark Here /X/
Please sign exactly as name or names
appear(s) hereon. When signing in a
discretionary capacity, print your full
title.
Date: 1999
----------------------------
Signature
--------------------------
VOTES MUST BE INDICATED
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. (x) IN BLACK OR BLUE INK. /X/
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