As filed with the Securities and Exchange Commission on April 8, 1999
Registration No. 333-72309
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT
NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VIATEL, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 685 THIRD AVENUE 13-3787366
(State or Other Jurisdiction NEW YORK, NEW YORK 10017 (I.R.S. Employer
of Incorporation or (212) 350-9200 Identification Number)
Organization)
(Address, Including Zip Code, and
Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
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SHELDON M. GOLDMAN, ESQ.
SENIOR VICE PRESIDENT,
BUSINESS AFFAIRS AND GENERAL COUNSEL
VIATEL, INC.
685 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 350-9200
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code, of
Agent For Service)
Copies of all communications to:
JAMES P. PRENETTA, ESQ.
KELLEY DRYE & WARREN LLP
101 PARK AVENUE
NEW YORK, NEW YORK 10178
(212) 808-7800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time following the effectiveness of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
|-|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE
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6,824,249 SHARES
VIATEL, INC.
COMMON STOCK, $.01 PAR VALUE
This prospectus may be used by us for the issuance, from time to time,
of up to 6,824,249 shares of our common stock, upon the conversion of our
outstanding subordinated debentures or shares of Series A preferred stock. We
will not receive any proceeds from the issuance of the shares of common stock
covered by this prospectus.
Our common stock is traded on the Nasdaq National Market under the
symbol "VYTL." On April 7, 1999, our common stock closed at $28-1/4 per share.
------------------------------
See "Risk Factors" beginning on page 2 to read about certain factors
you should consider before converting your subordinated debentures or shares of
Series A preferred stock into shares of our common stock.
------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is April 8, 1999.
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RISK FACTORS
This prospectus includes and incorporates "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. We can give no assurance that our plans,
intentions and expectations reflected in or suggested by these forward looking
statements will be achieved. Important factors that could cause actual results
to differ materially from these forward-looking statements are discussed below.
OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR ABILITY TO RUN OUR BUSINESS
We have now and will continue to have a significant amount of
indebtedness. Our substantial indebtedness could have important consequences to
you. For example, it could:
o limit our ability to obtain additional financing in the future
for working capital, capital expenditures, acquisitions and
general corporate purposes;
o require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby reducing
the funds available to us for other purposes, including working
capital, capital expenditures, acquisitions and general corporate
purposes;
o make us more vulnerable to economic downturns, limiting our
ability to withstand competitive pressures and reduce our
flexibility in responding to changing business and economic
conditions; o limit our flexibility in planning for, or reacting
to, changes in our business and the industry in which we operate;
o place us at a competitive disadvantage compared to our
competitors that have less debt; and o limit, along with the
financial and other restrictive covenants, our ability to borrow
additional funds.
OUR CASH FLOW MAY NOT BE SUFFICIENT TO PERMIT REPAYMENT OF OUR INDEBTEDNESS WHEN
DUE
Our ability to make payments on and to refinance our indebtedness will
depend on our ability to generate cash in the future. We cannot assure you that
our business will generate sufficient cash flow from operations to meet our debt
service requirements. We may need to refinance all or a portion of our
indebtedness. Based on our current level of operation, we anticipate that cash
flows from operations may be insufficient to repay our indebtedness at scheduled
maturity and that some or all of such indebtedness may need to be refinanced. If
we are unable to refinance our debt or if additional financing is not available,
we could be forced to dispose of assets under circumstances that might not be
favorable to realizing the highest price for the assets or to default on our
obligations with respect to our indebtedness.
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DUE TO RESTRICTIONS IN OUR INDENTURES, WE MAY NOT BE ABLE TO OPERATE OUR
BUSINESS AS WE DESIRE
The indentures under which our long-term debt was issued contain a
number of conditions and/or limitations on the way in which we can operate our
business. These limitations may force Viatel to pursue less than optimal
business strategies or forego business arrangements which could have been
financially advantageous to Viatel and its stockholders. The indentures
restrict, and in some cases significantly limit or prohibit, among other things,
our ability and the ability of our subsidiaries to:
o incur additional indebtedness,
o make prepayments of certain indebtedness,
o pay dividends,
o make investments,
o engage in transactions with stockholders and affiliates,
o issue capital stock,
o create liens,
o sell assets, and
o engage in mergers and consolidations.
TO DATE, WE HAVE INCURRED SUBSTANTIAL NET LOSSES AND NEGATIVE CASH FLOW FROM
OPERATIONS, AND IF THIS CONTINUES WE WOULD BE UNABLE TO MEET OUR WORKING CAPITAL
AND FUTURE DEBT SERVICE REQUIREMENTS
Our operating loss, negative EBITDA and net loss have increased for
each of the last four years. In 1998, we had an operating loss of $48.1 million,
negative EBITDA of $31.8 million and a net loss of $127.3 million. We also had
interest expense of $79.2 million and capitalized interest of $3.3 million.
Interest expense will increase substantially as a result of the offering which
we completed in March 1999. These losses and interest expense present a
significant risk for investors. We need to begin placing traffic on our network
to reduce our costs and reverse these trends.
Our negative cash flows are likely to continue beyond the year 2000 if:
o we extend our expansion plans,
o prices charged to end users decline faster than we anticipate,
o interconnection rates and wholesale prices paid by us do not
decline as quickly as we anticipate, and
o any of the other risks described in this prospectus materialize.
Accordingly, we cannot assure you that we will achieve or sustain
profitability or positive cash flows from operating activities in the future.
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OUR FUTURE GROWTH WILL REQUIRE SUBSTANTIAL ADDITIONAL CAPITAL WHICH COULD EXCEED
BUDGETED AMOUNTS AND CAUSE US TO DELAY OR ABANDON EXPANSION PROJECTS
Our future growth will require substantial additional capital which may
exceed budgeted amounts. If we do not have sufficient cash to fund our growth as
planned, we may be required to delay or abandon some or all of our development
and expansion plans or we may have to seek additional money earlier than we
currently anticipate. We cannot assure you that additional financing
arrangements will be available to us on acceptable terms or at all. Moreover,
the amount of our outstanding indebtedness may adversely affect our ability to
raise additional financing.
FAILURE TO IMPLEMENT OUR STRATEGY OF OWNING FACILITIES COULD SIGNIFICANTLY
IMPACT OUR FINANCIAL PERFORMANCE
If we are unable to successfully implement our strategy of owning,
rather than leasing, telecommunications facilities, we could experience a
significant decrease in the profit which we make on international calls. This
decrease, absent a significant increase in the number of billable minutes which
we carry or the amount we can charge for additional services, would have a
material adverse effect on our business, financial condition and results of
operations.
WE MAY NOT BE ABLE TO PROVIDE DATA TRANSMISSION SERVICES EFFECTIVELY OR AT ALL
We have no direct experience in providing data transmission services
and, consequently, we can provide no assurance that we will be successful in the
data transmission business. Our ability to successfully enter the data
transmission business will depend upon, among other things:
o our ability to select new equipment and software and integrate these
into our network,
o hire and train qualified personnel, and
o enhance our billing, back-office and information systems to
accommodate data transmission services and customer acceptance of our
service offerings.
If we are not successful, there may be a material adverse effect on our
business, financial condition and results of operations.
The data transmission business is extremely competitive and prices have
declined substantially in recent years and are expected to continue to decline.
In providing these services, we will be dependent upon vendors for assistance in
the planning and deployment of our data product offerings, as well as ongoing
training and support. Our provider for asynchronous transfer mode equipment is
Lucent Technologies. We believe that Lucent Technologies does not have extensive
experience providing this equipment, or configuring data networks, in Europe. In
addition, this Lucent Technologies equipment will need to be integrated with our
existing Nortel Telecom-based platforms. In Europe, there are a number of
different protocols for data transmission. Our network will need to be able to
handle all these protocols, which will pose technical difficulties.
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OUR OPERATING RESULTS MAY BE SUBJECT TO SUBSTANTIAL FLUCTUATIONS
Any significant shortfall in demand for our services in relation to
expectations, or the occurrence of any other factors which causes revenue to
fall significantly short of expectations, would have a material adverse effect
on our business, financial condition and results of operations and on our stock
price. Additional factors which may cause our stock price to fluctuate in the
future, include:
o pricing changes in the industry;
o changes in the mix of services which we sell or channels through
which those services are sold;
o timing of capacity sales;
o changes in user demand, customer terminations of service, capital
expenditures and other costs relating to the expansion of our
network;
o the start-up and ready-for service dates of each phase of our
network expansion;
o the timing and costs of any acquisitions of customer bases,
businesses, services or technologies;
o the timing and costs of marketing and advertising efforts;
o the effects of government regulation and regulatory changes; and
o specific economic conditions in the telecommunications industry.
OUR ABILITY TO USE NET OPERATING LOSS CARRY FORWARDS MAY BE LIMITED IN THE
FUTURE
As of December 31, 1998, we had federal income tax net operating loss
carryforwards of $218.8 million which begin to expire in 2007. Our ability to
use net operating loss carryforwards to reduce our future tax payments would be
limited if there were to occur a more than fifty percent ownership change over a
three-year period. It is possible that this offering, when combined with prior
or subsequent direct or indirect changes in the ownership of our common stock
within the relevant three-year period could trigger this limitation.
OUR INDUSTRY IS HIGHLY COMPETITIVE WITH PARTICIPANTS THAT HAVE GREATER RESOURCES
THAN WE DO, AND WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH THESE AND OTHER
COMPETITORS
Our success depends upon our ability to compete with other
telecommunications providers in each of our markets, many of which have
substantially greater financial, marketing and other resources than we do. If
our competitors devote significant additional resources to the provision of
international or national long distance telecommunications services to our
target customer base, this action could have a material adverse effect on our
business, financial condition and results of operations and we cannot assure you
that we will be able to compete successfully.
Our competitors include the incumbent telecommunications operator in
each country in which we operate, global alliances among some of the world's
largest telecommunications carriers, such as Global One (Sprint, France Telecom
and Deutsche Telekom) and an alliance between MCI Worldcom and Telefonica de
Espana, and new entrants, such as alternative carriers, Internet backbone
networks and other service providers. Other potential competitors include:
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o cable communications companies,
o wireless telephone companies,
o electric and other utilities with rights-of-way,
o railways,
o microwave carriers and
o large end-users which have private networks.
The intensity of competition and price declines have increased over the past
several years and we believe that competition and price declines will continue
to intensify, particularly in Western Europe, as other providers obtain
operative connectivity.
FAILURE TO IDENTIFY SUITABLE ACQUISITION TARGETS, OR THE COSTS AND DIFFICULTIES
OF ACQUIRING AND INTEGRATING BUSINESSES COULD IMPEDE OUR FUTURE GROWTH AND
ADVERSELY AFFECT OUR COMPETITIVENESS
We may seek to acquire customer bases and businesses from, make
investments in, or enter into strategic alliances with, other companies, which
may expose us to the following risks:
o the difficulty of identifying appropriate acquisition candidates
in the countries in which we do business;
o the difficulty of assimilating the operations and personnel of
the acquired entities;
o the potential disruption to our ongoing business caused by senior
management's focus on the acquisition transactions;
o our failure to successfully incorporate licensed or acquired
technology into our network and service offerings;
o the failure to maintain uniform standards, controls, procedures
and policies; and
o the impairment of relationships with employees as a result of
changes in management and ownership.
Additionally, in connection with an acquisition, we may experience
rates of customer attrition that are significantly higher than the rate of
customer attrition which we generally experience. Further, to the extent that
any transaction involves customer bases or businesses located outside the United
States, the transaction would involve the risks associated with international
operations. We cannot assure you that we would be successful in overcoming these
risks.
NETWORK CONSTRUCTION DELAYS AND SYSTEM DISRUPTIONS OR FAILURES COULD ADVERSELY
AFFECT OUR BUSINESS
Construction delays could adversely affect our ability to route traffic
over our owned facilities and to sell capacity to other carriers. These events
could result in a substantial loss of potential revenue.
In addition, systems failures and disruptions caused by fire, power
loss or natural disasters or our failure to successfully integrate technologies
and equipment into our network, could seriously damage our reputation and result
in customer attrition, reduced margins and financial losses. Additionally, any
damage to our switching centers in New York, New York, Somerset, New Jersey or
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London, England (of which there are two) could have a material adverse effect on
our ability to monitor and manage the network operations and generate accurate
call detail reports.
FOREIGN CURRENCY EXCHANGE RATES COULD HAVE ADVERSE EFFECTS ON OUR BUSINESS
Our payment obligations with respect to our outstanding indebtedness
are denominated in U.S. Dollars and the euro, but certain of our revenues are
denominated in Pound Sterling. Any appreciation in the value of the U.S. Dollar
or the Euro relative to the Pound Sterling could have a material adverse effect
on our ability to make payments on such obligations.
In the future we may elect to manage exchange rate exposure presented
by our euro denominated obligations through the use of hedging transactions. We
cannot provide any assurance that exchange rate fluctuations will not have a
material adverse effect on our ability to make payments on our outstanding
indebtedness.
In addition, we cannot assure you that the laws or administrative
practices relating to taxation, foreign exchange or other matters in countries
within which we operate will not change. Any such change could have a material
adverse effect on our business, financial condition and results of operations.
WE COULD EXPERIENCE SYSTEM FAILURES AND SERVICE DISRUPTIONS AS A RESULT OF THE
YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs, microprocessors
and embedded date reliant systems using two digits rather than four to define
the applicable year. If such programs are not corrected, such date sensitive
computer programs, microprocessors and embedded systems may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculation causing disruptions in operations.
In an effort to assess our year 2000 state of readiness, during 1997 we
began performing a complete inventory assessment of all of our information
technology and non-information technology systems, the vast majority of which
have either been developed or purchased by us within the past four years. Based
on our review to date, we believe that the vast majority of our existing systems
are year 2000 compliant. However, we cannot provide any assurance until the year
2000 occurs that such is the case. With regard to systems which are not
currently year 2000 compliant, we are actively replacing such systems to ensure
our ability to continue to meet our internal needs and the requirements of our
customers.
We currently anticipate that the upgrade or modification of
non-compliant systems will be completed during the first half of 1999. We have
also initiated formal communications with the key carriers and other vendors on
which our operations and infrastructure are dependent to determine the extent to
which we are susceptible to a failure resulting from such third parties'
inability to remediate their own year 2000 issues.
We cannot assure you that the carriers and other vendors on which our
operations and infrastructure rely are or will be year 2000 compliant in a
timely manner. Interruptions in the services provided to us by these third
parties could result in disruptions in our services. Depending upon the extent
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and duration of any disruptions and the specific services affected, these
disruptions could have a material adverse affect on our business, financial
condition and results of operations.
In addition, disruptions in the economy generally resulting from year
2000 issues could also have a material adverse affect on us. We could be subject
to litigation resulting from any disruption in our services. The amount and
potential liability or lost revenue cannot be reasonably estimated at this time.
OUR DEPENDENCE UPON THIRD PARTIES FOR LEASED CAPACITY AND INTERCONNECTION
ARRANGEMENTS MAY RESULT IN LESS THAN MAXIMUM UTILIZATION OF OUR NETWORK
We currently lease capacity for point-to-point circuits with fixed
monthly payments and buy minutes of use under agreements with maximum
twelve-month terms and are vulnerable to changes in our lease arrangements,
capacity limitations and service cancellations. These lease arrangements present
us with high fixed costs, while revenues generated by the utilization of these
leases will vary based on traffic volume and pricing. Accordingly, if we are
unable to generate sufficient traffic volume over particular routes or are
unable to charge appropriate rates, we could fail to generate revenue sufficient
to meet the fixed costs associated with the lease and may incur negative gross
margins with respect to those routes. A deterioration of our relationship with
one or more carriers could have a material adverse effect on our cost structure,
service quality, network coverage, financial condition and results of
operations.
Our ability to access customers and to effectively utilize our network
is dependent upon our ability to secure operative interconnection agreements,
providing access to and an exit from the public switched telephone network, with
the respective incumbent telecommunications operator in each market in which we
operate. Difficulties or delays in obtaining necessary operative
interconnections in a satisfactory or timely manner may significantly delay or
prevent the maximum utilization of our network which could have a material
adverse effect on us.
LOSS OF MORE THAN ONE SIGNIFICANT CARRIER CUSTOMER WOULD RESULT IN A SIGNIFICANT
LOSS OF REVENUES
We currently derive a significant portion of our revenues from a
relatively small number of carrier customers. Accordingly, the loss of revenue
from more than one significant carrier customer would have a material adverse
effect upon our business, financial condition and results of operations.
OUR BUSINESS WILL SUFFER IF WE LOSE CERTAIN KEY PERSONNEL OR FAIL TO ATTRACT
AND RETAIN OTHER QUALIFIED PERSONNEL
The success of our business is dependent, to a significant extent, upon
the abilities and continued efforts of our senior management, and particularly
upon the abilities and efforts of Michael J. Mahoney, our Chairman, Chief
Executive Officer and President. We do not currently have employment agreements
with any executive officer other than Mr. Mahoney, Allan L. Shaw, our Senior
Vice President of Finance and Chief Financial Officer, and Sheldon M. Goldman,
our Senior Vice President, Business Affairs and General Counsel. Except for a
$3.0 million key-man life insurance policy which we obtained on the life of Mr.
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Mahoney, we do not maintain and do not contemplate obtaining such life insurance
policies on any of our employees.
The success of our business also depends on our ability to attract,
retain and motivate qualified management, marketing, technical and sales
executives and other personnel who are in high demand and who often have
multiple employment options. In addition, the labor market for software
engineers and central office technicians has been extremely competitive recently
and we may lose key employees or be forced to increase their compensation. The
loss of the services of key personnel, or the inability to attract additional
qualified personnel, could have a material adverse effect on our business,
financial condition and results of operations. We cannot assure you that we will
be successful in attracting, retaining and motivating personnel.
CERTAIN PROVISIONS OF OUR CORPORATE DOCUMENTS MAY MAKE A TAKEOVER MORE DIFFICULT
EVEN IF THE TAKEOVER WOULD BENEFIT STOCKHOLDERS
Our certificate of incorporation and by-laws include certain provisions
that are intended to enhance the likelihood of continuity and stability in the
composition of our board of directors. In addition, these provisions may render
the removal of directors and management more difficult. These provisions may
have the effect of delaying, deterring or preventing a future takeover or change
in control of Viatel, unless such takeover or change in control is approved by
our board of directors, even though such a transaction might offer holders of
our common stock an opportunity to sell their shares at a price above the
current market price.
WE MAY BE NOT HAVE ACCESS TO SUFFICIENT FUNDS TO REPURCHASE OUR OUTSTANDING DEBT
UPON THE OCCURRENCE OF A CHANGE IN CONTROL OR TO MAKE OTHER REQUIRED PAYMENTS
UNDER THE TERMS OF EMPLOYMENT ARRANGEMENTS
The indentures under which the vast majority of our outstanding
indebtedness was issued provide that, upon the occurrence of certain specified
events, we are required to make an offer to purchase all of the indebtedness
outstanding under the indentures at a stated purchase price. However, our
ability to repurchase our indebtedness upon the occurrence of specified events
may be limited by the terms of other existing contractual obligations. In
addition, we cannot assure you that, in the event of a triggering event, we will
have, or will have access to, sufficient funds to repurchase our indebtedness.
If we fail to repurchase all of the indebtedness tendered for purchase upon the
occurrence of a triggering event, such failure will constitute an event of
default under the indentures.
In addition, the employment agreements between Viatel and each of
Messrs. Mahoney, Shaw and Goldman contain provisions which require us to make
certain payments to those officers in certain instances if employment is
terminated following certain specified events.
WE ARE SUBJECT TO SUBSTANTIAL GOVERNMENT REGULATION WHICH MAY AFFECT OUR ABILITY
TO OFFER CERTAIN SERVICES AND WHICH MAY BE CHANGED IN A MANNER ADVERSE TO VIATEL
Overview. National and local laws and regulations governing the
provision of telecommunications services differ significantly among the
countries in which we currently operate and intend to operate. The
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interpretation and enforcement of such laws and regulations varies and could
limit our ability to provide certain communications services in certain markets.
We cannot assure you that:
o future regulatory, judicial and legislative changes will not have
a material adverse effect on us;
o domestic or international regulators or third parties will not
raise material issues with regard to our compliance with
applicable laws and regulations; or
o other regulatory activities will not have a material adverse
effect on our business, financial condition and results of
operations.
International Traffic. Under the World Trade Organization Basic Telecom
Agreement, concluded on February 15, 1997, 69 countries comprising 95% of the
global market for basic telecommunications services agreed to permit competition
from foreign carriers. In addition, 59 of these countries have subscribed to
specific procompetitive regulatory principles. The WTO Agreement became
effective on February 5, 1998 and has been implemented, to varying degrees, by
the signatory countries. We believe that the WTO Agreement will increase
opportunities for us and our competitors. However, we cannot assure you that the
WTO Agreement will result in beneficial regulatory liberalization in all
signatory countries.
On November 26, 1997, the FCC adopted the Foreign Participation Order
to implement the U.S. obligations under the WTO Agreement. In this order, the
FCC adopted an open entry standard for carriers from World Trade Organization
member countries, generally facilitating market entry for such applicants by
eliminating certain existing tests. These tests remain in effect, however, for
carriers from non-World Trade Organization member countries. Requests for
reconsideration of the Foreign Participation Order are pending at the FCC.
International carriers serving the United States, including us, remain
subject to the FCC's international settlement policies, including rules adopted
by the FCC regarding international settlement rates which became effective on
January 1, 1998. The international accounting rate system allows a U.S.
facilities-based carrier to negotiate an accounting rate with a foreign carrier
for handling each minute of international telephone service. Each carrier's
portion of the accounting rate, usually one-half, is referred to as the
settlement rate. The International Settlement Rates Order generally requires
U.S. facilities-based carriers to negotiate settlement rates with their foreign
correspondent at no greater than FCC-established benchmark prices.
Historically, international settlement rates have vastly exceeded the
cost of terminating telecommunications traffic. In addition, the International
Settlement Rates Order imposed new conditions upon certain carriers, including
us. First, the FCC conditioned facilities-based authorizations for service on a
route on which a carrier has a foreign affiliate upon the foreign affiliate
offering all other U.S. carriers a settlement rate at or below the relevant
benchmark. Our foreign affiliates satisfy this condition. Second, the FCC
conditioned any authorization to provide switched services over either
facilities-based or resold international private lines upon the condition that
at least half of the facilities based international message telephone service
traffic on the subject route is settled at or below the relevant benchmark rate.
This condition applies whether or not the licensee has a foreign affiliate on
the route in question.
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In the Foreign Participation Order described above, if the subject
route does not comply with the benchmark requirement, a carrier can demonstrate
that the foreign country provides equivalent resale opportunities. Accordingly,
since the February 9, 1998 effective date of the Foreign Participation Order, we
have been permitted to resell private lines for the provision of switched
services to any country that either has been found by the FCC to comply with the
benchmarks or has been determined to be equivalent. We, however, remain subject
to prior FCC approval in order to provide resold private lines to any country in
which we have an affiliated carrier that has not been found by the FCC to lack
market power. Many parties appealed the International Settlement Rates Order to
the U.S. Court of Appeals for the D.C. Circuit or have filed requests for
reconsideration with the FCC. On January 12, 1999, the U.S. Court of Appeals for
the D.C. Circuit issued an order resolving this appeal, upholding the
International Settlement Rates Order in all respects. The appealing parties now
have the option of requesting that the case be heard by the U.S. Supreme Court.
The petition for reconsideration is still pending at the FCC. We cannot predict
the outcome of these proceedings and their possible impact on us.
Increasing regulatory liberalization in many countries'
telecommunications markets now permits more flexibility in the way we can route
calls. Certain FCC rules limit the way in which some international calls can be
routed. Accordingly, it is possible that the FCC could find that our network
configuration violates these rules. If we were found to be in violation of these
routing restrictions, and if the violation was sufficiently severe, it is
possible that the FCC could impose sanctions and penalties upon us.
Call Reorigination. In addition, outside the European Union we provide
a small number of customers with access to services through the use of call
reorigination. A substantial number of countries have prohibited certain forms
of call reorigination. We cannot assure you that certain of our services and
transmission methods will not be or not become prohibited in certain
jurisdictions and, depending on the jurisdictions, services and transmission
methods affected, there could be a material adverse effect on our business,
financial condition and results of operations.
Unsettled Nature of Regulatory Environment. We have pursued and expect
to continue to pursue a strategy of providing our services to the maximum extent
we believe permissible under applicable laws and regulations. Our provision of
services in Western Europe may also be affected if any European Union member
state imposes greater restrictions on non-European Union international service
than on such service within the European Union. We cannot assure you that the
United States or foreign jurisdictions will not adopt laws or regulatory
requirements that will adversely affect us.
Additionally, we cannot assure you that future United States or
foreign regulatory, judicial or legislative changes will not have a material
adverse effect on us or that regulators or third parties will not raise material
issues with regard to our compliance with applicable laws or regulations. If we
are unable to provide the services we are presently providing or intend to
provide or to use our existing or contemplated transmission methods, due to:
o our inability to receive or retain formal or informal approvals
for such services or transmission methods, or
o for any other reason related to regulatory compliance or the lack
of such compliance,
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such events could have a material adverse effect on our business, financial
condition and results of operations.
Since January 1, 1998, we, as well as our U.S. competitors, have been
required by the FCC to make contributions to a universal service fund to
subsidize telecommunications services for low-income persons, schools and
libraries, and rural health care providers. These contributions are based upon
our gross revenues. There can be no assurance that we will be able fully to pass
the cost of these contributions on to our customers or that doing so will not
result in a loss of customers.
European Implementation. The national governments of the European Union
member states were required to pass legislation to liberalize the
telecommunications markets within their countries to implement European
Commission directives. Most of the member states have now implemented the
required legislation. In certain cases this has been done on an inconsistent,
and sometimes unclear, basis.
In addition, the legislation and/or its implementation have, in
certain circumstances, imposed significant obstacles on the ability of carriers
to proceed with the necessary licensing process. Such barriers include:
o requirements that carriers post significant bonds, make
significant capital commitments to build infrastructure,
o complete extensive application documentation,
o and pay significant license fees.
Implementation has also been slow in certain member states as a result
of such member state's failure to dedicate the resources necessary to have a
functioning regulatory body in place. The above factors and other obstacles
which could develop in connection with deregulation of telecommunications
services could have a material adverse effect on our operations by slowing down
the rate of our intended expansion, as well as a material adverse effect on our
business, financial condition and results of operations.
THE VALUE OF OUR COMMON STOCK MAY VARY DUE TO SUBSTANTIAL FLUCTUATIONS IN PRICE
Since our common stock has been publicly traded, its market price has
fluctuated over a wide range and may continue to do so in the future. The market
price of our common stock could be subject to significant fluctuations in
response to various factors and events, including, among other things, the depth
and liquidity of the trading market of our common stock, variations in our
operating results and the difference between actual results and the results
expected by investors and securities analysts. As a result, the value of the
common stock may vary from time to time.
12
<PAGE>
VIATEL
GENERAL. We are a rapidly growing, facilities-based, global provider of
telecommunications services, primarily to small and medium-sized businesses,
carriers and resellers. We currently operate one of the largest alternative
Pan-European networks, with international gateway switching centers in New York,
New York, Somerset, New Jersey and London, England, network points of presence
in 37 cities, direct sales forces in nine Western European cities and indirect
sales offices in more than 100 additional locations in Western Europe. We offer
a broad array of competitively priced, value-added services and voice telephony
to more than 230 countries and territories worldwide.
SERIES A PREFERRED STOCK AND SUBORDINATED CONVERTIBLE DEBENTURES. On
April 8, 1998, we issued and sold in an exempt transaction:
o units consisting of one of our 12.50% senior discount notes due 2008
and .490 of a share of our 10% redeemable convertible Series A preferred
stock;
o units consisting of one of our 11.25% senior notes due 2008 and .483
of a share of our Series A preferred stock;
o units consisting of one of our DM denominated 12.40% senior discount
notes due 2008 and 2.77 of our 10% subordinated convertible debentures due
2011; and
o units consisting of one of our DM denominated 11.15% senior notes
due 2008 and 2.69 subordinated debentures.
As required by the terms of our April 8, 1998 offering, in August 1998
we offered to exchange registered notes, with substantially identical terms, for
each series of our outstanding unregistered notes issued in the 1998 offering.
Upon effectiveness of the registration statement for the exchange offer, the
notes automatically separated from the other security originally sold as part of
the unit.
This prospectus has been prepared by us to satisfy certain agreements
which we made in connection with our April 1998 high yield offering, which
require that we have this prospectus available for use on or prior to April 8,
1999. Subject to certain limitations, we are required to keep this prospectus
current and available for use for a period of up to two years. Our obligation to
keep this prospectus current and available for use will terminate prior to April
8, 2001 if all shares of Series A preferred stock and convertible debentures
covered by this prospectus have been converted into shares of our common stock.
Subject to certain conditions, the Series A preferred stock and the
subordinated debentures will be automatically converted into shares of our
common stock if the per share closing price of our common stock for any 20
consecutive trading days reaches certain prices. In addition, the Series A
preferred stock and the subordinated debentures may be converted at the option
of the holder, at any time after April 8, 1999, at specified prices. See
"Description of Capital Stock."
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of (i) 50.0 million shares of
common stock, and (ii) 2.0 million shares of preferred stock. As of April 2,
1999, there were 23,185,765 shares of common stock and 472,793 shares of
preferred stock are issued and outstanding.
The statements under this caption are brief summaries of certain
material provisions of our certificate of incorporation and by-laws. These
summaries do not purport to be complete, and are subject to, and are qualified
in their entirety by reference to, such documents.
COMMON STOCK
Holders of our common stock are entitled to one vote per share on all
matters on which the holders of common stock are entitled to vote and do not
have any cumulative voting rights. This means that the holders of more than
50.0% of our common stock voting for the election of directors can elect all of
the directors up for election if they choose to do so; if this event occurs, the
holders of the remaining shares of our common stock will not be able to elect
any person to our board of directors. Subject to the rights of the holders of
shares of our preferred stock, holders of our common stock are entitled to
receive ratably such dividends as may be from time to time declared by our board
of directors out of funds legally available for this purpose. Holders of our
common stock are not entitled to any preemptive, conversion, redemption,
subscription or similar rights. In the event of a liquidation, dissolution or
winding up of Viatel, whether voluntary or involuntary, holders of our common
stock are entitled to share proportionately in any assets which remain after we
have paid all of our debts and other liabilities and reserved any amounts due to
holders of our outstanding preferred stock.
PREFERRED STOCK
Our certificate of incorporation authorizes our board of directors to
issue, from time to time, up to two million shares of preferred stock in one or
more series. The board is authorized to fix or alter the specific rights of each
series, including :
o dividend rights,
o dividend rates,
o conversion rights,
o voting rights,
o terms of redemption,
o redemption prices,
o liquidation preferences, and
o the number of shares of each series.
The issuance of preferred stock could delay, deter or prevent a change
in control of Viatel.
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<PAGE>
SERIES A PREFERRED STOCK
We have designated 718,042 shares of our authorized shares of preferred
stock as the Series A redeemable convertible preferred stock. The following
description of our Series A preferred stock is qualified by reference to our
certificate of incorporation and the certificate of designations, preferences
and rights establishing the Series A preferred stock.
We are required to repurchase all outstanding shares of the Series A
preferred stock on April 15, 2010 at $100 per share, plus any dividends which
may be due. In addition, we may repurchase all or some of our Series A preferred
stock at any time on or after April 15, 2003, after giving the required notice,
at the following repurchase prices, plus any dividends which may be due, if
repurchased during the 12-month period beginning April 15 of the years indicated
below:
<TABLE>
<CAPTION>
REPURCHASE PRICE AS A
PERCENTAGE OF
YEAR LIQUIDATION PREFERENCE
---- ----------------------
<S> <C>
2003....................................... 105.000%
2004....................................... 103.333%
2005....................................... 101.667%
2006 and thereafter........................ 100.000%
</TABLE>
As of April 8, 1999, our Series A preferred stock is convertible, at
the option of the holders, into shares of our common stock at a conversion price
of $13.20 per share. In addition, if the closing price of our common stock for
any 20 consecutive trading days during the twelve months ending April 15, 1999,
April 15, 2000, April 15, 2001, April 15, 2002 or April 15, 2003, exceeds
$26.40, $32.30, $38.20, $44.10 or $50.00, then our Series A preferred stock will
automatically convert into shares of common stock at the conversion price.
We are required to pay cumulative dividends on our Series A preferred
stock, to the extent legally permissible, on each January 15, April 15, July 15
and October 15, at the rate of 10% per year. Dividends are payable:
o through April 15, 2003 in additional shares of our Series A
preferred stock, in cash or any in a combination of additional
shares and cash, at our option, subject to restrictions contained
in our indentures that prohibit our payment of cash dividends
until April 15, 2003, and
o after April 15, 2003, in cash.
Under the terms of the Series A preferred stock, if the average closing
price of our common stock during the 20 trading days preceding April 15, 1999,
is within one of the price ranges specified in the left column below, we are
required to issue, as a special dividend. This dividend is payable in additional
shares of Series A preferred stock, having an aggregate liquidation preference
equal to the amount indicated on the corresponding line of the right column
below:
15
<PAGE>
<TABLE>
<CAPTION>
SPECIAL PER
COMMON STOCK PRICE SHARE DIVIDEND AMOUNT
------------------ ---------------------
<S> <C>
$11.25 - 11.75 $ 2.13
$10.75 - 11.24 $ 6.76
$10.25 - 10.74 $11.73
$ 9.75 - 10.24 $17.19
$ 9.25 - 9.74 $23.20
$ 8.75 - 9.24 $29.87
$ 8.25 - 8.74 $37.30
$ 7.75 - 8.24 $45.63
$ 7.25 - 7.74 $55.04
$ 7.00 - 7.24 $65.75
Below $7.00 $71.43
</TABLE>
Any shares of Series A preferred stock issued as a special dividend
would have the same conversion price as the outstanding shares of Series A
preferred stock.
The holders of our Series A preferred stock are not entitled to any
voting rights except as provided by law or as indicated below.
Whenever we do not pay dividends on our Series A preferred stock within
15 days of the required payment date, the holders of our Series A preferred
stock, voting together with certain other holders of our securities, are
entitled to elect, at the next annual meeting or at a special meeting, two
additional directors to our board. This right continues until we have paid in
full all past due dividends. Subject to certain exceptions, the affirmative vote
or consent of the holders of at least two-thirds of our outstanding shares of
the Series A preferred stock, voting as a class, is required to:
o authorize, create or issue, or increase the authorized or issued
amount of shares of, any class or series of stock ranking senior
to the Series A preferred stock, either as to dividends or upon
liquidation, or
o amend, alter or repeal, whether by merger, consolidation or
otherwise, any provision of our certificate of incorporation or
of the certificate of designations in a manner which materially
and adversely affects the preferences, special rights or powers
of the Series A preferred stock.
In the event of any liquidation, dissolution or winding-up of Viatel,
whether voluntary or involuntary, the holders of our Series A preferred stock
are entitled to receive a liquidation preference of $100 per share before we
pay, distribute or reserve any amounts for holders of any class or series of our
stock ranking junior to the Series A preferred stock. If upon any liquidation,
dissolution or winding-up of Viatel, we do not have sufficient assets or
proceeds from the sale of assets to pay the liquidation value of the Series A
preferred stock and any class of stock ranking equal to the Series A preferred
stock, then we must distribute the assets or the proceeds at a rate which is
proportionate to the relevant liquidation preferences.
In the event there is a change of control of Viatel, we are required to
make an offer to purchase all of the outstanding shares of Series A preferred
16
<PAGE>
stock at a price equal to 101% of the liquidation preference of such shares.
Instead of making an offer to purchase, we have the option of reducing, under
specified terms, the price at which the Series A preferred stock is convertible
into shares of our common stock.
CERTIFICATE OF INCORPORATION AND BY-LAWS
Our certificate of incorporation provides that no director shall be
liable to Viatel or its stockholders for monetary damages for breach of his or
her fiduciary duty as a director, except for liability:
o for any breach of the director's duty of loyalty to Viatel or its
stockholders,
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
o in respect of certain unlawful dividend payments or stock
redemptions or repurchases, or
o for any transaction from which the director derived an improper
personal benefit.
These provisions effectively eliminate our right and the right of our
stockholders, through stockholders' derivative suits on behalf of Viatel, to
recover monetary damages against a director for breach of fiduciary duty as a
director, including breaches resulting from grossly negligent behavior, except
in the situations described above.
Our by-laws require that we indemnify any of our legal representatives,
directors and officers and any person who is or was serving at our request as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, to the fullest extent authorized by the Delaware General
Corporation Law.
We have obtained officers' and directors' liability insurance in the
amount of $15 million for members of our board of directors and executive
officers. We have entered into agreements to indemnify our directors and
officers from and against any expenses incurred by them in connection with
certain legal matters arising from their service to, or at request of, Viatel.
The indemnity agreements contain provisions designed to protect against the loss
of the contemplated benefits in the event of a change in control.
Our certificate of incorporation and by-laws include provisions which
may delay, deter or prevent a future takeover or change in control of Viatel
unless the transaction is approved by our board of directors. These provisions
may also render the removal of directors and management more difficult.
Our certificate of incorporation divides our board of directors into
three classes, as equal in number as possible, serving staggered, three-year
terms. Our by-laws contain provisions which require that stockholders give
Viatel prior notice of their intent to either nominate a director or submit a
proposal for consideration at the annual meeting. In general, we must receive
notice no less than 120 days prior to the meeting. This notice must contain
17
<PAGE>
specified information regarding (1) the person to be nominated or the matter to
be brought before the meeting and (2) the stockholder submitting the proposal.
DELAWARE ANTI-TAKEOVER LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, or the DGCL. The DGCL generally prohibits a publicly-held
company from engaging in a business combination with an interested stockholder
for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless the interested stockholder
attained that status with the approval of the board or unless the business
combination is approved in a prescribed manner. A business combination includes
mergers, asset sales, and other transactions resulting in a financial benefit to
the interested stockholder. Subject to certain exceptions, an interested
stockholder is a person who, together with affiliates and associates, owns, or
within three years did own, fifteen percent or more of a corporation's voting
stock. This statute could prohibit or delay the accomplishment of mergers or
other takeover or change in control attempts with respect to us and,
accordingly, may discourage attempts to acquire us.
REGISTRATION RIGHTS
In connection with our 1998 high yield offering, we agreed to register,
no later than April 8, 1999, the shares of our common stock which will be issued
upon conversion of our outstanding preferred stock and subordinated convertible
debentures. Subject to limited exceptions, we are required to keep the
registration statement current and available for use for a period of two years
or until all the unregistered notes have been sold under the registration
statement, if earlier. The registration statement of which this prospectus is a
part has been filed to satisfy this registration obligation.
In connection with our 1999 high yield offering, we agreed to use our
best efforts to complete, at our expense, by September 19, 1999, a registered
exchange offer for each of the two series of notes which were issued. Under the
terms of our agreement, we are required to offer to exchange registered notes
which have terms substantially identical to those of the notes originally sold
by us on a private placement basis in our March 1999 offering. In the event we
are unable to complete the exchange offer due to a change in SEC policy, we are
required to use our best efforts to put in place a shelf registration statement
for the sale of the unregistered notes by the respective holders. We are
required to keep any shelf registration which we file current and available for
use for up to two years or until all the unregistered notes have been sold under
the registration statement, if earlier. If we do not complete the registered
exchange offer or have the shelf registration statement in place within the
required time frames, we will be required to pay specified penalties.
18
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the conversion of the
subordinated debentures or the Series A preferred stock by the holders of such
securities. The expenses incurred in registering the shares of common stock
covered by this prospectus will be paid by us.
PLAN OF DISTRIBUTION
This prospectus registers 6,824,249 shares of our common stock to be
issued upon the conversion of the subordinated debentures and the Series A
preferred stock by the holders of such securities.
Upon conversion of the subordinated debentures and the Series A
preferred stock, the holders will receive registered shares. These shares may be
sold on the Nasdaq Stock Market, or on any exchange on which our common stock
may then be listed, or in the over-the-counter market. These shares may also be
sold in privately negotiated transactions. Sales may be at prevailing market or
at negotiated prices.
LEGAL MATTERS
Certain legal matters relating to the validity of the shares of our
common stock covered by this prospectus will be passed upon for us by Kelley
Drye & Warren LLP, New York, New York.
EXPERTS
The consolidated financial statements and schedule of Viatel, Inc. and
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1998, have been incorporated by reference
in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference in this
prospectus, and upon the authority of said firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, and, in accordance therewith, files reports, proxy
statements and other information with the SEC. Such reports, proxy and
information statements and other information may be read and copied at the
Public Reference Room maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the SEC: 7
World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison
19
<PAGE>
Street, Suite 1300, Chicago, Illinois 60661-2511. Copies of such material also
may be obtained from the Public Reference Section of the SEC, at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Information regarding
the operation of the SEC's Public Reference Room may be obtained by calling the
SEC at 1-800-SEC-0330. The SEC also maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. The address of the SEC's Web site is
http://www.sec.gov. Our common stock is traded on Nasdaq, and our periodic
reports, proxy and information statements and other information can be inspected
at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C.
20006. Information regarding us may also be obtained from its Web site at
http://www.viatel.com.
This prospectus constitutes a part of a registration statement on Form
S-3 filed by us with the SEC under the Securities Act of 1933. This prospectus
does not contain all of the information contained in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. Reference is made to the registration statement and exhibits thereto
for further information. Exhibits to the registration statement that are omitted
from this prospectus may also be obtained at the SEC's Web site described above.
Statements contained or incorporated by reference in this prospectus concerning
the provisions of any agreement or other document filed as an exhibit to the
registration statement or otherwise filed with the SEC are not necessarily
complete, and you are referred to the copy so filed for more detailed
information, each such statement being qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by us with the SEC under the
Securities Exchange Act of 1934 are incorporated by reference in this
prospectus:
(i) Our annual report on Form 10-K for the fiscal year ended
December 31, 1998, as filed with the Commission on March 31,
1999; and
(ii) The description of our common stock, $0.01 par value,
contained in our registration statement on Form 8-A
(Registration No. 000-21261) filed with the Commission on
August 27, 1996 under Section 12 of the Securities Exchange
Act of 1934.
All reports and other documents filed by us under Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and prior to termination of this offering will be considered part of
this prospectus from the date these documents are filed with the SEC. Any
statement contained in an incorporated document will be deemed modified or
superseded by an updated statement contained in a document subsequently filed by
us. Only the updated statement will be considered part of this prospectus.
Upon request, we will provide at no charge to each person receiving a
copy of this prospectus, a copy of any documents incorporated by reference in
this prospectus, excluding any exhibits to such documents not specifically
incorporated by reference therein. Written requests for such documents should be
directed to our Director of Investor Relations at our principal executive
offices located at 685 Third Avenue, New York, New York 10017 or by telephone at
(212) 350-9200.
20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will
be paid by the Registrant in connection with the sale and distribution of the
securities being registered. All of the amounts shown are estimates except the
SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee...................................... $35,859.30
Legal Fees and Expenses................................... $15,000.00
Accounting Fees and Expenses.............................. $ 2,500.00
Miscellaneous expenses.................................... $ 913.97
---------
Total.................................................. $54,273.27
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporations Law of the State of Delaware
(the "DGCL") provides that a Delaware corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "proceeding") (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. A Delaware corporation may indemnify any person under such
Section in connection with a proceeding by or in the right of the corporation to
procure judgment in its favor, as provided in the preceding sentence, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action, except that no
indemnification shall be made with respect thereto unless, and then only to the
extent that, a court of competent jurisdiction shall determine upon application
that such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. A Delaware corporation must indemnify
present or former directors and officers who are successful on the merits or
otherwise in defense of any action, suit or proceeding or in defense of any
21
<PAGE>
claim, issue or matter in any proceeding, by reason of the fact that he is or
was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith. A Delaware corporation may pay for the expenses (including attorneys'
fees) incurred by an officer or director in defending a proceeding in advance of
the final disposition upon receipt of an undertaking by or on behalf of such
officer or director to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation. Article Tenth of
the Registrant's Amended and Restated Certificate of Incorporation and Article X
of the Registrant's Amended and Restated Bylaws provide for indemnification of
directors and officers to the fullest extent permitted by Section 145 of the
DGCL.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director shall not be personally liable to
the corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for any
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) with respect to certain unlawful dividend
payments or stock redemptions or repurchases or (iv) for any transaction from
which the director derived an improper personal benefit. Article Ninth of the
Registrant's Amended and Restated Certificate of Incorporation eliminates the
liability of directors to the fullest extent permitted by Section 102(b)(7) of
the DGCL.
Section 145 of the DGCL permits a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other employee against any liability asserted against
such person and incurred by such person in such capacity, or arising out of
their status as such, whether or not the corporation would have the power to
indemnify directors and officers against such liability. The Registrant has
obtained officers' and directors' liability insurance of $15 million for members
of its Board of Directors and executive officers. In addition, the Registrant
has entered into agreements to indemnify its directors and officers from and
against any Expenses (as defined in the indemnity agreement) incurred by such
person in connection with investigating, defending, serving as a witness in,
participating in (including on appeal) or preparing for any of the foregoing in
any threatened, pending or contemplated action, suit or proceeding (including an
action by or in the right of the Registrant), or any inquiry, hearing or
investigation, to the fullest extent permitted by law, as such law may be
amended or interpreted (but only to the extent that such amendment or
interpretation provides for broader indemnification rights). The indemnity
agreement contains certain provisions to ensure that the indemnitee receives the
benefits contemplated by the agreement in the event of a "change in control" (as
defined in the indemnity agreement) such as the establishment and funding of a
trust in an amount sufficient to satisfy any and all expenses reasonably
anticipated to be incurred by the indemnitee in connection with investigating,
preparing for, participating in and/or defending a proceeding.
At present, there is no pending litigation or other proceeding
involving a director or officer of the Registrant as to which indemnification is
being sought, nor is the Registrant aware of any threatened litigation that may
result in claims for indemnification by any officer or director.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
4.1* Indenture, dated as of April 8, 1998, between Viatel, Inc. and
The Bank of New York, as Trustee, relating to Viatel, Inc.'s
12.50% Senior Discount Notes Due 2008 (including form of 12.50%
Senior Discount Note) (incorporated herein by reference to
Exhibit 4.1 to Viatel, Inc.'s Registration Statement on Form
S-4, filed on July 10, 1998, Registration No. 333-58921
("Viatel's 1998 Form S-4")).
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<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- -----------------------
4.2* Indenture, dated as of April 8, 1998, between Viatel, Inc. and The
Bank of New York, as Trustee, relating to Viatel, Inc.'s 11.25% Senior
Notes Due 2008 (including form of 11.25% Senior Note) (incorporated
herein by reference to Exhibit 4.2 to Viatel's 1998 Form S-4).
4.3* Indenture, dated as of April 8, 1998, among Viatel, Inc., The Bank of
New York, as Trustee, and Deutsche Bank, Aktiengesellschaft, as German
Paying Agent and Co-Registrar, relating to Viatel, Inc.'s 12.40%
Senior Discount Notes Due 2008 (including form of 12.40% Senior
Discount Note) (incorporated herein by reference to Exhibit 4.3 to
Viatel's 1998 Form S-4
4.4* Indenture, dated as of April 8, 1998, among Viatel, Inc., The Bank of
New York, as Trustee, and Deutsche Bank, Aktiengesellschaft, as German
Paying Agent and Co-Registrar, relating to Viatel, Inc.'s 11.15%
Senior Notes Due 2008 (including form of 11.15% Senior Note)
(incorporated herein by reference to Exhibit 4.4 to Viatel's 1998 Form
S-4).
4.5* Indenture, dated as of April 8, 1998, among Viatel, Inc., The Bank of
New York, as Trustee, and Deutsche Bank, Aktiengesellschaft, as German
Paying Agent and Co-Registrar, relating to Viatel, Inc.'s 10%
Subordinated Convertible Debentures Due 2011 (including form of 10%
Subordinated Convertible Debenture) (incorporated herein by reference
to Exhibit 4.5 to Viatel's 1998 Form S-4).
4.6* Conversion Shares Registration Rights Agreement, dated April 3, 1998,
among Viatel, Inc., Morgan Stanley & Co. Incorporated, Morgan Stanley
Bank AG, Salomon Brothers Inc, ING Baring (U.S.) Securities, Inc. and
NationsBanc Montgomery Securities LLC (incorporated herein by
reference to Exhibit 4.7 to Viatel's 1998 Form S-4).
4.7* Amended and Restated Certificate of Incorporation of Viatel, Inc.
(incorporated herein by reference to Exhibit 3.1(i)(a) to Viatel,
Inc.'s Registration Statement on Form S-1, Registration No. 333-09699,
filed on August 7, 1996; Certificate of Designations, Preferences and
Rights of 10% Series A Redeemable Convertible Preferred Stock, $.01
par value (incorporated herein by reference to Exhibit 3(i)(b) to
Viatel's 1998 Form S-4); Certificate of Amendment to Viatel, Inc.'s
Amended and Restated Certificate of Incorporation (incorporated herein
by reference to Exhibit 4.9 to Viatel, Inc.'s quarterly report on Form
10-Q for the quarter ended September 30, 1998, File No. 000-21261).
4.8* Second Amended and Restated Bylaws of Viatel, Inc. (incorporated
herein by reference to Exhibit 3(ii) of Viatel, Inc.'s quarterly
report on Form 10-Q for the quarter ended September 30, 1997, File No.
000-21261).
4.9** Indenture, dated as of March 19, 1999, between Viatel, Inc. and The
Bank of New York, as Trustee, relating to Viatel, Inc.'s US dollar
denominated 11.50% Senior Notes Due 2009 (including form of 11.50%
Senior Note).
4.10** Indenture, dated as of March 19, 1999, between Viatel, Inc. and The
Bank of New York, as Trustee, relating to Viatel, Inc.'s Euro
denominated 11.50% Senior Notes Due 2009 (including form of 11.50%
Senior Note).
23
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- -----------------------
4.11** Registration Rights Agreement, dated as of March 12, 1999, among
Viatel, Inc. and the Initial Purchasers.
5.1** Opinion of Kelley Drye & Warren LLP (included in their opinion filed
as Exhibit 5.1).
23.1** Consent of Kelley Drye & Warren LLP (included in their opinion filed
as Exhibit 5.1).
23.2*** Consent of KPMG LLP.
24** Powers of Attorney (included on original S-3 signature page).
- --------------------
* Incorporated herein by reference.
** Previously filed.
*** Filed herewith.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price, represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
24
<PAGE>
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
25
<PAGE>
SIGNATURES
Under the requirements of the Securities Act, the Registrant, Viatel,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York on this 8th day of April, 1999.
VIATEL, INC.
By: Michael J. Mahoney*
------------------------------
Chairman of the Board, President and
Chief Executive Officer
Under the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons in the
capacities indicated on April 8, 1999.
Signature Title
- --------- -----
Michael J. Mahoney * Chairman of the Board, President and
- -------------------- Chief Executive Officer (Principal
Michael J. Mahoney Executive Officer)
/s/Allan L. Shaw Senior Vice President, Finance,
- -------------------- Chief Financial Officer and Director
Allan L. Shaw (Principal Financial and Accounting
Officer)
Paul G. Pizzani * Director
- --------------------
Paul G. Pizzani
Francis J. Mount * Director
- --------------------
Francis J. Mount
John G. Graham * Director
- --------------------
John G. Graham
* By: /s/ Allan L. Shaw
--------------------
Allan L. Shaw
by Power of Attorney
- --------------------
26
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
4.1* Indenture, dated as of April 8, 1998, between Viatel, Inc. and The
Bank of New York, as Trustee, relating to Viatel, Inc.'s 12.50% Senior
Discount Notes Due 2008 (including form of 12.50% Senior Discount
Note) (incorporated herein by reference to Exhibit 4.1 to Viatel,
Inc.'s Registration Statement on Form S-4, filed on July 10, 1998,
Registration No. 333-58921 ("Viatel's 1998 Form S-4")).
4.2* Indenture, dated as of April 8, 1998, between Viatel, Inc. and The
Bank of New York, as Trustee, relating to Viatel, Inc.'s 11.25% Senior
Notes Due 2008 (including form of 11.25% Senior Note) (incorporated
herein by reference to Exhibit 4.2 to Viatel's 1998 Form S-4).
4.3* Indenture, dated as of April 8, 1998, among Viatel, Inc., The Bank of
New York, as Trustee, and Deutsche Bank, Aktiengesellschaft, as German
Paying Agent and Co-Registrar, relating to Viatel, Inc.'s 12.40%
Senior Discount Notes Due 2008 (including form of 12.40% Senior
Discount Note) (incorporated herein by reference to Exhibit 4.3 to
Viatel's 1998 Form S-4).
4.4* Indenture, dated as of April 8, 1998, among Viatel, Inc., The Bank of
New York, as Trustee, and Deutsche Bank, Aktiengesellschaft, as German
Paying Agent and Co-Registrar, relating to Viatel, Inc.'s 11.15%
Senior Notes Due 2008 (including form of 11.15% Senior Note)
(incorporated herein by reference to Exhibit 4.4 to Viatel's 1998 Form
S-4).
4.5* Indenture, dated as of April 8, 1998, among Viatel, The Bank of New
York, as Trustee, and Deutsche Bank, Aktiengesellschaft, as German
Paying Agent and Co-Registrar, relating to Viatel, Inc.'s 10%
Subordinated Convertible Debentures Due 2011 (including form of 10%
Subordinated Convertible Debenture) (incorporated herein by reference
to Exhibit 4.5 to Viatel's 1998 Form S-4).
4.6* Conversion Shares Registration Rights Agreement, dated April 3, 1998,
among Viatel, Inc., Morgan Stanley & Co. Incorporated, Morgan Stanley
Bank AG, Salomon Brothers Inc, ING Baring (U.S.) Securities, Inc. and
NationsBanc Montgomery Securities LLC (incorporated herein by
reference to Exhibit 4.7 to Viatel's 1998 Form S-4).
4.7* Amended and Restated Certificate of Incorporation of Viatel, Inc.
(incorporated herein by reference to Exhibit 3.1(i)(a) to Viatel,
Inc.'s Registration Statement on Form S-1, Registration No. 333-09699,
filed on August 7, 1996; Certificate of Designations, Preferences and
Rights of 10% Series A Redeemable Convertible Preferred Stock, $.01
par value (incorporated herein by reference to Exhibit 3(i)(b) to
Viatel's 1998 Form S-4); Certificate of Amendment to Viatel, Inc.'s
Amended and Restated Certificate of Incorporation (incorporated herein
by reference to Exhibit 4.9 to Viatel, Inc.'s quarterly report on Form
10-Q for the quarter ended September 30, 1998, File No. 000-21261).
4.8* Second Amended and Restated Bylaws of Viatel, Inc. (incorporated
herein by reference to Exhibit 3(ii) of Viatel, Inc.'s Form 10-Q for
the quarter ended September 30, 1997, File No. 000-21261).
27
<PAGE>
4.9** Indenture, dated as of March 19, 1999, between Viatel, Inc. and The
Bank of New York, as Trustee, relating to Viatel, Inc.'s US dollar
denominated 11.50% Senior Notes Due 2009 (including form of 11.50%
Senior Note).
4.10** Indenture, dated as of March 19, 1999, between Viatel, Inc. and The
Bank of New York, as Trustee, relating to Viatel, Inc.'s Euro
denominated 11.50% Senior Notes Due 2009 (including form of 11.50%
Senior Note).
4.11** Registration Rights Agreement, dated as of March 12, 1999, among
Viatel, Inc. and the Initial Purchasers.
5.1** Opinion of Kelley Drye & Warren LLP as to the validity of the
securities being registered.
23.1** Consent of Kelley Drye & Warren LLP (included in their opinion filed
as Exhibit 5.1).
23.2*** Consent of KPMG LLP.
24** Powers of Attorney (included on original S-3 signature page).
- --------------------
* Incorporated herein by reference
** Previously filed.
*** Filed herewith.
28
EXHIBIT 23.2
Independent Auditors' Consent
The Board of Directors and Stockholders
Viatel, Inc.:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the registration statement.
/s/KPMG LLP
New York, New York
April 5, 1999
