UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Primus Telecommunications Group, Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
1700 Old Meadow Road
McLean, Virginia 22102
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 14, 2000
------------------
To the Stockholders of Primus Telecommunications Group, Incorporated:
The Annual Meeting of Stockholders of Primus Telecommunications Group,
Incorporated, a Delaware corporation (the "Company"), will be held at 11:00
a.m., local time, on June 14, 2000 at the Sheraton Premiere at Tysons Corner,
8661 Leesburg Pike, Vienna, VA 22182, for the following purposes:
1. To elect two directors of the Company;
2. To approve an amendment to the Company's Employee Option Plan
to increase the number of shares reserved for issuance upon
exercise of options granted thereunder;
3. To approve an amendment to the Company's Director Option Plan
to increase the number of shares reserved for issuance upon
exercise of options granted thereunder and to allow for
certain automatic option grants to directors;
4. To amend the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's
common stock from 80,000,000 to 150,000,000; and
5. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Only holders of the Common Stock at the close of business on May 12,
2000 are entitled to notice of, and to vote at, the Annual Meeting and any
adjournments or postponements thereof. Such stockholders may vote in person or
by proxy. The stock transfer books of the Company will not be closed. The
accompanying form of proxy is solicited by the Board of Directors of the
Company.
By Order of the Board of Directors
K. Paul Singh
Chairman of the Board of
Directors, President, and Chief
Executive Officer
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO
ATTEND IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE SELF-ADDRESSED ENVELOPE, ENCLOSED FOR YOUR CONVENIENCE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DECIDE TO ATTEND THE
MEETING AND WISH TO VOTE IN PERSON, YOU MAY REVOKE YOUR PROXY BY WRITTEN NOTICE
AT THAT TIME.
May 15, 2000
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
1700 Old Meadow Road
McLean, Virginia 22102
--------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
June 14, 2000
--------------------
This Proxy Statement, which is first being mailed to stockholders on
approximately May 15, 2000, is furnished in connection with the solicitation by
the Board of Directors of Primus Telecommunications Group, Incorporated (the
"Company") of proxies to be used at the Annual Meeting of Stockholders of the
Company (the "Annual Meeting"), to be held at 11:00 a.m. on June 14, 2000 at the
Sheraton Premiere at Tysons Corner, 8661 Leesburg Pike, Vienna, VA 22182, and at
any adjournments or postponements thereof. If proxies in the accompanying form
are properly executed and returned prior to voting at the Annual Meeting, the
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), represented thereby will be voted as instructed on the proxy. If no
instructions are given on a properly executed and returned proxy, the shares of
the Common Stock represented thereby will be voted IN FAVOR OF the election of
the nominees for directors named below, IN FAVOR OF approval of an amendment to
the Primus Telecommunications Group, Incorporated Stock Option Plan, as amended
(the "Employee Option Plan") to increase the number of shares reserved for
issuance upon exercise of options granted thereunder, IN FAVOR OF approval of an
amendment to the Director Stock Option Plan of Primus Telecommunications Group,
Incorporated (the "Director Option Plan") to increase the number of shares
reserved for issuance upon exercise of options granted thereunder and to allow
for certain automatic option grants to non-employee directors, IN FAVOR OF
approval of an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 80,000,000 to
150,000,000, and in support of management on such other business as may properly
come before the Annual Meeting or any adjournments thereof. Any proxy may be
revoked by a stockholder prior to its exercise upon written notice to the
Secretary of the Company, by delivering a duly executed proxy bearing a later
date, or by the vote of a stockholder cast in person at the Annual Meeting.
VOTING
Holders of record of the Common Stock on May 12, 2000 will be entitled
to vote at the Annual Meeting or any adjournments or postponements thereof. As
of that date, there were [40,035,765] shares of Common Stock outstanding and
entitled to vote. The presence, in person or represented by proxy, of at least a
majority of the shares entitled to vote will constitute a quorum for purposes of
the transaction of business. Each share of Common Stock entitles the holder
thereof to one vote on the election of each nominee for director and on any
other matter that may properly come before the Annual Meeting. Stockholders are
not entitled to cumulative voting in the election of directors. Directors are
elected by the affirmative vote of a plurality of the votes of the shares
entitled to vote, present in person or represented by proxy, and votes may be
cast in favor of or withheld from each director nominee. An
<PAGE>
affirmative vote of a majority of the shares present in person or represented by
proxy at the Meeting, and entitled to vote on the subject matter, is required
for approval of all other matters presented. Abstentions, votes withheld and
broker non-votes are counted in determining whether a quorum is present.
Abstentions with respect to any proposal other than the election of directors
will have the same effect as votes against the proposal, because approval
requires a vote in favor of the proposal by a majority of the votes entitled to
be cast by stockholders present in person or by proxy at the Meeting. If no
instructions are given on a properly executed and returned proxy, the shares of
Common Stock represented thereby will be voted IN FAVOR OF the election of
Messrs. Fialkov and Hershberg as directors, IN FAVOR OF an amendment to the
Employee Option Plan to increase the number of shares reserved for issuance upon
exercise of options granted thereunder and IN FAVOR OF an amendment to the
Director Option Plan to increase the number of shares reserved for issuance upon
exercise of options granted thereunder and to allow for certain automatic option
grants to non-employee directors.
The cost of solicitation of proxies by the Board of Directors will be
borne by the Company. Proxies may be solicited by mail, personal interview,
telephone, facsimile or telegraph and, in addition, directors, officers and
regular employees of the Company may solicit proxies by such methods without
additional remuneration. Banks, brokerage houses and other institutions,
nominees or fiduciaries will be requested to forward the proxy materials to
beneficial owners in order to solicit authorizations for the execution of
proxies. The Company will, upon request, reimburse such banks, brokerage houses
and other institutions, nominees and fiduciaries for their expenses in
forwarding such proxy materials to the beneficial owners of the Common Stock.
ELECTION OF DIRECTORS
(Proposal 1)
The Company's Board of Directors is divided into three classes, with
staggered three-year terms. Currently, the Board of Directors has six members.
Unless otherwise specified in the accompanying proxy, the shares voted pursuant
thereto will be cast for Herman Fialkov and David E. Hershberg, for terms
expiring at the Annual Meeting of Stockholders to be held following the year
ending December 31, 2002 (the "2003 Annual Meeting"). If, for any reason, at the
time of election, any of the nominees named should decline or be unable to
accept his or her nomination or election, it is intended that such proxy will be
voted in favor of the election, in the nominee's place, of a substituted
nominee, who would be recommended by the Board of Directors. The Board of
Directors, however, has no reason to believe that any of the nominees will be
unable or unwilling to serve as a director. If Proposal 3 (set forth below) is
approved, the Director Option Plan will provide that Messrs. Fialkov and
Hershberg each be granted options to purchase 45,000 shares of Common Stock upon
their re-election to the Board of Directors this year.
Set forth below is biographical information furnished as to each
nominee for election as a director and as to each of the current directors.
There are no family relationships among any of the directors of the Company.
-2-
<PAGE>
Nominees for Election to the Board of Directors
For a Three Year Term Expiring at 2003 Annual Meeting
Herman Fialkov became a director of the Company in 1995. He is a
consultant to Newlight Management LLC and PolyVentures Associates, L.P., a
venture capital firm, and has been associated with various venture capital firms
since 1968. Previously, he was an officer and director of General Instrument
Corporation which he joined in 1960 as a result of its acquisition of General
Transistor Corporation, a company Mr. Fialkov founded. Mr. Fialkov is also a
director of GlobeComm Systems, Inc.
David E. Hershberg became a director of the Company in 1995. Mr.
Hershberg is the founder, and has, since 1994, been Chairman, President and CEO,
of GlobeComm Systems, Inc., a system integrator of satellite earth stations.
From 1976 to 1994, Mr. Hershberg was the President and Chief Executive Officer
of Satellite Transmission Systems, Inc., a global provider of satellite
telecommunications equipment, and became a Group President of California
Microwave, Inc., a company that acquired Satellite Transmission Systems, Inc.
The Board of Directors recommends a vote IN FAVOR OF Proposal 1 to
Elect the Two Nominees. If no instructions are given on a properly executed and
returned proxy, the shares of Common Stock represented thereby will be voted IN
FAVOR OF Messrs. Fialkov and Hershberg.
Members of The Board of Directors Continuing in Office
Term Expiring at 2001 Annual Meeting
John G. Puente became a director of the Company in 1995. From 1987 to
1995, he was Chairman of the Board and CEO of Orion Network Systems, a satellite
telecommunications company. Mr. Puente was Chairman of the Board of Telogy
Networks, Inc., a privately-held company, and is a director of MICROS Systems,
Inc. Prior to joining Orion, Mr. Puente was Vice Chairman of M/A-Com Inc., now
known as Hughes Network Systems, Inc., a diversified telecommunications and
manufacturing company, which he joined in 1978 when M/A-Com acquired Digital
Communications Corporation, a satellite terminal and packet switching
manufacturer of which Mr. Puente was a founder and Chief Executive Officer.
Douglas M. Karp became a director of the Company in June 1998. Mr. Karp
has been a Managing Director of E.M. Warburg, Pincus & Co., LLC (or its
predecessor, E.M. Warburg, Pincus & Co., Inc.) since May 1991. Prior to joining
E.M. Warburg, Pincus & Co., LLC, Mr. Karp held several positions with Salomon
Inc. including Managing Director from January 1990 to May 1991, Director from
January 1989 to December 1989 and Vice President from October 1986 to December
1988. Mr. Karp is a director of Qwest Communications Inc., TV Filme, Inc.,
Journal Register Company, PageNet do Brasil, S.A., StarMedia Network Inc.,
Golden Books Family Entertainment and several privately held companies. Mr. Karp
was nominated by Warburg, Pincus Investors, L.P. ("Warburg, Pincus") for
election as a director of the Company. In connection with the Company's merger
with TresCom International, Inc. in June 1998, Warburg, Pincus was granted the
right, for so long as it beneficially owns at least 10% of the outstanding
Common Stock, to nominate one director to the Company's Board of Directors.
-3-
<PAGE>
Members of The Board of Directors Continuing in Office
Term Expiring at 2002 Annual Meeting
K. Paul Singh co-founded the Company in 1994 with Mr. DePodesta and
serves as its Chairman, President and Chief Executive Officer. From 1991 until
he co-founded the Company, he served as the Vice President of Global Product
Marketing for MCI. Prior to joining MCI, Mr. Singh was the Chairman and Chief
Executive Officer of Overseas Telecommunications, Inc. ("OTI"), a provider of
private digital communications in over 26 countries which he founded in 1984 and
which was purchased by MCI in 1991.
John F. DePodesta co-founded the Company in 1994 with Mr. Singh, and
serves as a director and its Executive Vice President. In addition to his
position with the Company, Mr. DePodesta also currently serves as the Chairman
of the Board of Iron Road Railways Incorporated, which he co-founded in 1994,
and served as Senior Vice President, Law and Public Policy, of Genesis Health
Ventures, Inc. from January 1996 through March 1998. Additionally, from 1994 to
1999, he served as "of counsel" to the law firm of Pepper Hamilton LLP, where he
was previously a partner since 1979. Before joining Pepper Hamilton LLP, Mr.
DePodesta served as the General Counsel of Consolidated Rail Corporation.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors consists of
Messrs. Fialkov and Hershberg, who were not at any time officers or employees of
the Company. No executive officer of the Company serves as a member of the board
of directors or compensation committee of another entity which has one or more
executive officers that will serve as a member of the Board of Directors or the
Company's Compensation Committee.
Committees and Meetings of the Board of Directors
During the year ended December 31, 1999, the Board of Directors held
five meetings and acted by written consent on five occasions. Each director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and committees of the Board of Directors on which he served.
During the year ended December 31, 1999, the Audit Committee, which
currently consists of Messrs. Fialkov and Puente, held three meetings. The Audit
Committee has the authority and responsibility to hire one or more independent
public accountants to audit the Company's books, records and financial
statements and to review the Company's systems of accounting (including its
systems of internal control), to discuss with such independent public
accountants the results of such audit and review, to conduct periodic
independent reviews of the systems of accounting (including systems of internal
control), and to make reports periodically to the Board of Directors with
respect to its findings.
During the year ended December 31, 1999, the Compensation Committee,
which consists of Messrs. Fialkov (Chairman) and Hershberg, held two meetings
and acted by written consent on five occasions. The Compensation Committee is
responsible for fixing the compensation of the Chief Executive Officer and the
other executive officers, deciding other compensation matters such as those
relating to the operation of the Employee Option Plan and Director Option Plan,
including the award of options under the Employee Option Plan, and approving
certain aspects of the Company's management bonus plan.
-4-
<PAGE>
Compensation of Directors
The Company pays non-employee directors an annual fee of $20,000 and
will reimburse their expenses for attending meetings. In addition, the Company
grants each person who becomes a non-employee Director options to purchase
15,000 shares of the Common Stock pursuant to the Director Option Plan which
vest one-third upon the grant date, and one-third on each of the first and
second anniversary of the grant dates. The Company did not grant any such
options in 1998 or 1999. If Proposal 3 (set forth below) is approved, the
Director Option Plan will provide that each Eligible Director be granted options
to purchase 45,000 shares of Common Stock, 15,000 of which are immediately
exercisable and 15,000 of which are exercisable on each of the next two
anniversary dates of the date of grant date. Such grants would be made upon each
such Eligible Director's initial election to the Board of Directors, and upon
each such Eligible Director's re-election to the Board of Directors.
Directors and Executive Officers
The following table and biographies set forth information concerning
the individuals who serve as directors and executive officers of the Company.
<TABLE>
<CAPTION>
Year of Expiration
Name Age Position of Term as Director
- ---- --- -------- -------------------
<S> <C> <C> <C>
K. Paul Singh (1). . . . . . . 48 Chairman of the Board of Directors, 2002
President, and Chief Executive Officer
Neil L. Hazard . . . . . . . . 47 Executive Vice President and Chief Financial N/A
Officer
John F. DePodesta (1). . . . . 55 Executive Vice President and Director 2002
Ravi Bhatia. . . . . . . . . . 51 Chief Operating Officer, Primus Australia N/A
Yousef Javadi. . . . . . . . . 44 Chief Operating Officer, Primus North N/A
America
John Melick. . . . . . . . . . 41 Vice President of International Business N/A
Development
Jay Rosenblatt . . . . . . . . 34 Vice President, Global Carrier Services N/A
Herman Fialkov (1)(2)(3) . . . 78 Director 2000
David E. Hershberg (1)(2) . . 62 Director 2000
Douglas M. Karp (1). . . . . . 44 Director 2001
John Puente (1)(3) . . . . . . 69 Director 2001
</TABLE>
- -------------------------------
(1) Background presented above. See "Election of Directors."
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
Neil L. Hazard joined the Company in 1996 as its Executive Vice
President and Chief Financial Officer. Prior to joining the Company, Mr. Hazard
was employed by MCI in several executive positions, most recently as its
Director of Corporate Accounting and Financial Reporting, responsible for
consolidation of MCI's financial results, external reporting to stockholders and
securities compliance reporting. Mr. Hazard served as acting Controller of MCI
for six months and as Director of Global
-5-
<PAGE>
Product Marketing. Prior to joining MCI in 1991, Mr. Hazard served as the Chief
Financial Officer of OTI.
Ravi Bhatia joined the Company in October 1995 as the Managing Director
of Primus Telecommunications Pty., Ltd. (Australia). In March 1996 Mr. Bhatia
became the Chief Operating Officer of Primus Australia and as such is
responsible for implementing the Company's business strategy in Australia. Mr.
Bhatia has more than 25 years of international experience in the
telecommunications industry, which includes nine years of employment with MCI in
various sales and marketing positions. Most recently, he served as the Director
of Sales and Marketing for MCI in the South Pacific Region, based in Sydney.
Yousef Javadi joined the Company in March 1997 as Chief Operating
Officer of Primus North America. Prior to joining the Company, Mr. Javadi was
Vice President of Business Development at GE Americom (a GE Capital company)
from 1995-1997. From 1991-1995 Mr. Javadi was the Director of Global Services
for MCI. From 1985-1991 he was the Vice President of Sales and Marketing for
OTI. Prior to OTI, Mr. Javadi worked at Hughes Network Systems.
John Melick joined the Company in 1994 as its Vice President of Sales
and Marketing and since 1996, has served as Vice President of International
Business Development of the Company. Prior to joining the Company, he was a
Senior Manager with MCI responsible for the day-to-day management of its global
product portfolio in Latin America and the Caribbean region. He joined MCI in
1991 at the time of the acquisition of OTI where he managed the development of
OTI's service expansion into Mexico and Latin America.
Jay Rosenblatt has served as the Company's Vice President of Global
Carrier Services since January 1996 and previously was Director of Marketing and
Sales responsible for the Company's commercial programs from September 1994 to
January 1996. Prior to joining the Company in 1994, Mr. Rosenblatt was with MCI
as the marketing manager responsible for private network services in the
Americas and Caribbean.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities (collectively,
"Reporting Persons"), to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the Common
Stock and other equity securities of the Company. Reporting Persons are
additionally required to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company or written representations of Reporting
Persons that no reports were required to be filed, all Section 16(a) filing
requirements applicable to the Reporting Persons were complied with.
-6-
<PAGE>
EXECUTIVE COMPENSATION
Report on Executive Compensation
The Compensation Committee has furnished the following report on
executive compensation:
General. During 1999, the compensation of the executive officers was
administered and determined by the Compensation Committee of the Board of
Directors. The Company's executive compensation programs are designed to
attract, motivate and retain the executive talent needed to optimize stockholder
value in a competitive environment. The programs are intended to support the
goal of increasing stockholder value while facilitating the business strategies
and long-range plans of the Company.
The following is the Compensation Committee's report addressing the
compensation of the Company's executive officers for 1999.
Compensation Policy and Philosophy. The Company's executive
compensation policy (i) is designed to establish an appropriate relationship
between executive pay and the Company's annual performance, its long term growth
objectives and its ability to attract and retain qualified executive officers,
and (ii) is based on the belief that the interests of the executives should be
closely aligned with the Company's stockholders. The Compensation Committee
attempts to achieve these goals by integrating competitive annual base salaries
with (i) annual incentive bonuses based on corporate performance and on the
achievement of specified performance objectives set forth in the Company's
financial plan for such fiscal year and (ii) stock options through the Employee
Option Plan. In support of this philosophy, a meaningful portion of each
executive's compensation is placed at-risk and linked to the accomplishment of
specific results that are expected to lead to the creation of value for the
Company's stockholders from both the short-term and long-term perspectives. The
Compensation Committee believes that cash compensation in the form of salary and
performance-based incentive bonuses provides company executives with short term
rewards for success in operations, and that long term compensation through the
award of stock options encourages growth in management stock ownership which
leads to expansion of management's stake in the long term performance and
success of the Company. The Compensation Committee considers all elements of
compensation and the compensation policy when determining individual components
of pay.
The Compensation Committee believes that leadership and motivation of
the Company's employees are critical to achieving the objectives of the Company.
The Compensation Committee is responsible for ensuring that its executive
officers are compensated in a way that furthers the Company's business
strategies and which aligns their interests with those of the stockholders. To
support this philosophy, the following principles provide a framework for
executive compensation: (i) offer compensation opportunities that attract the
best talent to the Company; (ii) motivate individuals to perform at their
highest levels; (iii) reward outstanding achievement; (iv) retain those with
leadership abilities and skills necessary for building long-term stockholder
value; (v) maintain a significant portion of executives' total compensation at
risk, tied to both the annual and long-term financial performance of the Company
and the creation of incremental stockholder value; and (vi) encourage executives
to manage from the perspective of owners with an equity stake in the Company.
Executive Compensation Components. As discussed below, the Company's
executive compensation package is primarily comprised of three components: base
salary, annual incentive bonuses and stock options.
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<PAGE>
Base Salary. For 1999, the Compensation Committee approved the
base salaries of the executive officers based on (i) salaries paid to
executive officers with comparable responsibilities employed by
companies with comparable businesses, (ii) performance and
accomplishment of the Company in 1999, which is the most important
factor, and (iii) individual performance reviews for 1999 for most
executive officers. The Compensation Committee reviews executive
officer salaries annually and exercises its judgment based on all the
factors described above in making its determination, subject to the
terms of such officer's employment agreement. No specific formula is
applied to determine the weight of each criteria.
Annual Incentive Bonuses. Annual incentive bonuses for the
Chief Executive Officer and the other named executive officers are
based upon the following criteria: (i) the Company's financial
performance for the current year; (ii) the furthering of the Company's
strategic position in the marketplace; and (iii) individual merit.
Long Term Incentive Compensation. Stock options encourage and
reward effective management which results in long-term corporate
financial success, as measured by stock price appreciation. The number
of options granted during 1999 to each executive officer or employee
was based primarily on the executive's or employee's ability to
influence the Company's long term growth and profitability. The
Compensation Committee believes that option grants afford a desirable
long term compensation method because they closely ally the interests
of management with stockholder value and that grants of stock options
are the best way to motivate executive officers to improve long-term
stock market performance. The vesting provisions of options granted
under the Employee Option Plan are designed to encourage longevity of
employment with the Company and generally extend over a three-year
period.
Compensation of Chief Executive Officer. The Compensation Committee
believes that K. Paul Singh, the Company's Chief Executive Officer, provides
valuable services to the Company and that his compensation should therefore be
competitive with that paid to executives at comparable companies. In addition,
the Compensation Committee believes that an important portion of his
compensation should be based on performance. Mr. Singh's annual base salary for
1999 was approximately $267,407. The factors which the Compensation Committee
considered in setting his annual base salary were his individual performance and
pay practices of peer companies relating to executives of similar
responsibility. The annual incentive bonus paid to Mr. Singh for 1999 was
$250,000. Such bonus was paid to Mr. Singh for his performance and role in
implementing the Company's strategy relating to acquisitions, financing and
operations, including overseeing the implementation of the Company's
data/Internet strategy and continued build-out of the Company's global network.
Internal Revenue Code Section 162. Under Section 162 of the Internal
Revenue Code, the amount of compensation paid to certain executives that is
deductible with respect to the Company's corporate taxes is limited to
$1,000,000 annually. It is the current policy of the Compensation Committee to
maximize, to the extent reasonably possible, the Company's ability to obtain a
corporate tax deduction for compensation paid to executive officers of the
Company to the extent consistent with the best interests of the Company and its
stockholders.
The Compensation Committee
Herman Fialkov (Chairman)
David E. Hershberg
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<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth, for the years ended December 31, 1999,
1998 and 1997 certain compensation information with respect to the Company's
Chief Executive Officer and the four highest paid other Company officers (the
"Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------- -----------------------
Awards
-------------
Securities
Under-
lying
Options/
Year Salary Bonus SARs
Name and Principal Position ($) ($) (#)
- ------------------------------------ -------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
K. Paul Singh-- Chairman of the 1999 267,407 250,000 100,000
Board of Directors, President and 1998 258,013 180,000 --
Chief Executive Officer 1997 247,692 160,000 100,000
Neil L. Hazard-- Executive Vice 1999 179,375 160,000 25,000
President and Chief Financial 1998 184,006 105,000 --
Officer 1997 159,231 100,000 40,000
Yousef B. Javadi-- Chief 1999 160,404 200,000 20,000
Operating Officer, Primus North 1998 154,808 80,000 --
America 1997 121,154 60,000 170,000
John F. DePodesta-- Executive 1999 210,087 200,000 50,000
Vice President 1998 178,718 135,000 --
1997 100,000 -- 180,000
Jay Rosenblatt-- Vice President, 1999 151,744 40,000 25,000
Global Carrier Services 1998 122,923 72,500 --
1997 89,327 40,000 30,000
</TABLE>
Employment Agreement
The Company has entered into an employment agreement with Mr. Singh
(the "Singh Agreement"). The Singh Agreement is a five-year contract, with a
term beginning on June 1, 1994 and continuing until May 30, 1999, and from year
to year thereafter unless terminated. Under the terms of the Singh Agreement,
Mr. Singh is required to devote his full time efforts to the Company as Chairman
of the Board, President and CEO. The Company is required to compensate Mr. Singh
at an annual rate of $250,000 effective January 1, 1997 (which amount is
reviewed annually by the Board of Directors and is subject to increase at their
discretion). Mr. Singh, however, agreed to defer payment of his base salary from
June 1, 1994 through May 31, 1995, which was subsequently paid to him on July
31, 1996. The Company is also obligated to (i) allow Mr. Singh to participate in
any bonus or incentive compensation plan approved for senior management of the
Company, (ii) provide life insurance in an amount equal to three times Mr.
Singh's base salary and disability insurance which provides monthly payments in
an
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<PAGE>
amount equal to one-twelfth of his then applicable base salary, (iii) provide
medical insurance and (iv) pay up to $2,500 annually for Mr. Singh's personal
tax and financial planning services.
The Company may terminate the Singh Agreement at any time in the event
of his disability or for cause, each as defined in the Singh Agreement. Mr.
Singh may resign from the Company at any time without penalty (other than the
non-competition obligations discussed below). If the Company terminates the
Singh Agreement for disability or cause, the Company will have no further
obligations to Mr. Singh. If, however, the Company terminates the Singh
Agreement other than for disability or cause, the Company will have the
following obligations: (i) if the termination is after May 30, 1999, the Company
must pay Mr. Singh one-twelfth of his then applicable base salary as severance
pay; and (ii) if the termination is before June 1, 1999, the Company must pay to
Mr. Singh, as they become due, all amounts otherwise payable if he had remained
employed by the Company until June 1, 1999. If Mr. Singh resigns, he may not
directly or indirectly compete with the Company's business until six months
after his resignation. If the Company terminates Mr. Singh's employment for any
reason, Mr. Singh may not directly or indirectly compete with the Company's
business until six months after the final payment of any amounts owed to him
under the Singh Agreement become due.
Stock Options Granted to Certain Executive Officers During Last Fiscal Year
Under the Employee Option Plan, options to purchase Common Stock are
available for grant to all employees of the Company. Options are also available
for grant to eligible non-employee directors under the Director Option Plan. The
following table summarizes certain information regarding stock options to
purchase Common Stock granted to the named executive officers during the year
ended December 31, 1999.
Options Granted in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to over Option Term
Options Employees Exercise Base Expiration ---------------------------
Granted in Fiscal Year Price ($/Share) Date 5% 10%
------- -------------- --------------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
K. Paul Singh 100,000 6.06% $13.25 2/13/09 2,158,285 3,436,709
John F. DePodesta 50,000 3.03% $13.25 2/13/09 1,079,143 1,718,354
Neil L. Hazard 25,000 1.51% $13.25 2/13/09 539,571 859,177
Yousef B. Javadi 20,000 1.21% $13.25 2/13/09 431,657 687,342
Jay Rosenblatt 25,000 1.51% $13.25 2/13/09 539,571 859,177
</TABLE>
-10-
<PAGE>
Aggregated Option Exercises and Fiscal Year-End Option Values
The following table provides certain information about stock options
exercised by the named executive officers in the year ended December 31, 1999
and the year-end values of stock options held by the named executive officers on
March 31, 2000. All information relates to shares of Common Stock.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
Shares At Fiscal Year End At Fiscal Year End
Acquired Value ---------------------------- ------------------------------
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
K. Paul Singh - $ - 404,766 133,334 $ 15,482,399 $ 5,100,026
John F. DePodesta - $ - 221,430 110,000 $ 8,469,698 $ 4,207,500
Neil L. Hazard - $ - 330,956 38,334 $ 12,659,067 $ 1,466,276
Yousef B. Javadi - $ - 113,333 76,667 $ 4,334,987 $ 2,932,513
Jay Rosenblatt 10,143 $ 288,442 50,429 35,001 $ 1,928,909 $ 1,338,788
</TABLE>
During the next twelve months, certain 5-year options held by executive
officers and directors issued in 1995 and 1996 are due to expire. Options to
purchase an aggregate of 851,395 shares of common stock held by certain
executive officers and directors of the Company will expire between the date of
this proxy statement and April 2001 if such options are not exercised prior to
their expiration.
Stock Price Performance Graph
The graph below compares the Company's cumulative total stockholder
return on the Common Stock for the period from the date the Company's Common
Stock commenced trading on the Nasdaq National Market System (November 7, 1996)
through December 31, 1999, with the cumulative total return of the Standard &
Poor's Midcap 400 Index and the Standard & Poor's Telecommunications (Long
Distance) Index. The comparison assumes $100 was invested on November 7, 1996 in
the Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
-11-
<PAGE>
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
COMPANY / INDEX NOV-7-96 DEC-31-96 DEC-31-97 DEC-31-98 DEC-31-99
<S> <C> <C> <C> <C> <C>
Primus Telecommunications Group, Incorporated 100.00 115.91 146.59 150.00 247.73
Standard & Poor's Midcap 400 Index 100.00 102.79 135.95 161.92 179.09
Standard & Poor's Telecommunications (Long 100.00 114.98 162.82 263.77 298.28
Distance) -- 500
</TABLE>
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 31, 2000,
with respect to the beneficial ownership of shares of the Common Stock by each
person or group who is known to the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock, by each director or nominee
for director, by each of the officers named on the Summary Compensation Table,
and by all directors and executive officers as a group. Unless otherwise
indicated, each person has sole voting power and sole investment power.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership(1) of Class (2)
- ------------------------------------ ----------------------- -------------
<S> <C> <C>
K. Paul Singh (3)............................................ 4,826,472 12.6%
1700 Old Meadow Road
McLean, VA 22102
Warburg, Pincus Investors, L.P. (4).......................... 3,875,689 10.2%
466 Lexington Avenue
New York, NY 10017
Franklin Resources, Inc. (5)................................. 2,532,740 6.7%
777 Mariners Island Boulevard
San Mateo, CA 94404
Wellington Management Company, LLP (6)....................... 1,934,300 5.1%
75 State Street
Boston, Massachusetts 02109
John F. DePodesta (7)........................................ 460,402 1.2%
Herman Fialkov............................................... 30,000 *
David E. Hershberg (8)....................................... 51,667 *
Douglas M. Karp (9).......................................... 3,875,689 10.2%
John G. Puente............................................... 132,715 *
Neil L. Hazard (10).......................................... 265,695 *
Yousef B. Javadi (11)........................................ 175,787 *
Jay Rosenblatt (12).......................................... 72,039 *
Ravi Bhatia (13)............................................. 130,596 *
All executive officers and directors as a group (14)......... 10,116,653 25.9%
</TABLE>
- -----------------
* Less than 1% of the outstanding Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting or investment
power with respect to the shares beneficially owned. Shares of Common
Stock subject to options or warrants currently exercisable or which
become exercisable on or prior to 60 days from March 31, 2000 are
deemed outstanding for computing the percentage ownership of the person
holding such options or warrants, but are not deemed outstanding for
computing the percentage ownership of any other person.
-13-
<PAGE>
(2) Based upon 37,819,046 shares of Common Stock outstanding as of March
31, 2000.
(3) Includes 377,786 shares of Common Stock owned by Mr. Singh's wife and
children. 484,900 shares of Common Stock held by a private foundation
of which Mr. Singh is the president and a director, 396,828 shares of
Common Stock held of record by a series of revocable trusts of which
Mr. Singh is the trustee and pursuant to which Mr. Singh has sole
voting power and shared dispositive power, and 1,148 shares held in a
401(k) plan of which Mr. Singh is a beneficiary. Also includes 438,099
shares of Common Stock issuable upon the exercise of options granted to
Mr. Singh.
(4) E.M. Warburg, Pincus & Co., LLC, a New York limited liability company
("E.M. Warburg"), manages Warburg, Pincus. Warburg, Pincus & Co., a New
York general partnership ("WP"), the sole general partner of Warburg,
Pincus, has a 20% interest in the profits of Warburg, Pincus as the
general partner. Lionel I. Pincus is the managing partner of WP and the
managing member of E.M. Warburg and may be deemed to control both WP
and E.M. Warburg.
(5) Based on a Schedule 13G/A dated January 28, 2000, Franklin Resources,
Inc. ("Franklin") has reported that it may be deemed to be the
beneficial owner of 2,532,740 shares of Common Stock. According to the
Schedule 13G/A, such shares are also beneficially owned by Franklin
Advisers, Inc., an investment advisory subsidiary (the "Adviser") of
Franklin, which has all investment and/or voting power over the shares
pursuant to an advisory contract. In addition, Charles B. Johnson and
Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding
common stock of Franklin and are the principal shareholders of Franklin
and may, therefore, be deemed to be the beneficial owner of the shares
of Common Stock held by Franklin. Franklin, the Adviser, and Messrs.
Charles and Rupert Johnson disclaim any economic interest or beneficial
ownership in such shares.
(6) Based on a Schedule 13G dated February 11, 2000, Wellington Management
Company, LLP ("Wellington") has reported that it may be deemed to be
the beneficial owner of 1,934,300 shares of Common Stock.
(7) Includes 238,096 shares of Common Stock issuable upon the exercise of
options granted to Mr. DePodesta.
(8) Includes 50,715 shares of Common Stock issuable upon the exercise of
options granted to Mr. Hershberg and 952 shares of Common Stock owned
by a partnership of which Mr. Hershberg is a general partner.
(9) All shares shown as being beneficially owned by Mr. Karp are owned
directly by Warburg, Pincus and are included because of Mr. Karp's
affiliation with Warburg, Pincus. Mr. Karp disclaims "beneficial
ownership" of these shares within the meaning of Rule 13d-3 of the
Exchange Act. See Note 4 above.
(10) Includes 264,289 shares of Common Stock issuable upon the exercise of
options granted to Mr. Hazard.
(11) Includes 169,999 shares of Common Stock issuable upon the exercise of
options granted to Mr. Javadi.
(12) Includes 58,762 shares of Common Stock issuable upon the exercise of
options granted to Mr. Rosenblatt and 3,381 shares owned jointly with
his spouse.
(13) Includes 26,666 shares of Common Stock issuable upon the exercise of
options granted to Mr. Bhatia. Certain of Mr. Bhatia's options and
shares are pledged to secure payment of certain loans. See "Certain
Transactions - Executive Officer Loan."
(14) Consists of 11 persons and includes 1,337,578 shares of Common Stock
issuable upon the exercise of options granted to directors and
executive officers. Includes 3,875,689 shares deemed to be beneficially
owned by Mr. Karp which are owned directly by Warburg, Pincus and are
included because of Mr. Karp's affiliation with Warburg, Pincus. Mr.
Karp disclaims "beneficial ownership" of these shares within the
meaning of Rule 13d-3 of the Exchange Act. See Notes 4 and 8 above.
CERTAIN TRANSACTIONS
Hotkey Investment
In March 1998, the Company purchased a controlling interest in Hotkey,
a Melbourne, Australia- based Internet service provider. The Company's 60%
ownership of Hotkey was purchased for approximately $1.3 million in cash. Prior
to the Hotkey Investment, the Company's chairman, K. Paul
-14-
<PAGE>
Singh, owned approximately 14% of Hotkey. As a result of the March transaction,
Mr. Singh owned approximately 4% of Hotkey. In February of 1999, the Company
purchased the remaining 40% of Hotkey from its stockholders for approximately
$1.1 million comprised of $0.3 million in cash and 57,025 shares of Common
Stock. In connection with the February transaction, K. Paul Singh received 6,148
shares of Common Stock and $34,252 in cash.
Executive Officer Loan
On September 3, 1998, the Company loaned Ravi and Madhu Bhatia the
principal amount of $164,000. As of March 31, 1999, the Bhatias paid down the
principal amount of the loan to $112,681 and the Company extended the maturity
of the loan. This loan, which was due on the earlier of the termination of Mr.
Bhatia's employment with the Company or August 31, 1999, was repaid in full by
the Bhatias. Interest was calculated daily at a rate of 10% per annum. Repayment
of the loan was secured by options to purchase Common Stock held by Mr. Bhatia
and a pledge of 50,000 shares of Common Stock. The Common Stock which was
pledged was subject to a prior pledge in favor of Schroder & Co. to secure
payment of certain loans.
TresCom Merger
In June 1998, pursuant to an Agreement and Plan of Merger dated
February 3, 1998, as amended (the "Merger Agreement"), Taurus Acquisition
Corporation ("TAC"), a Florida corporation and wholly-owned subsidiary of the
Company, merged with and into TresCom International, Inc. ("TresCom"), a Florida
corporation (the "Merger"). Under the terms of the Merger Agreement, TresCom
Shareholders received 0.6147 shares of the Company's Common Stock in exchange
for each share of TresCom common stock outstanding at the effective time of the
Merger, other than shares beneficially owned by the Company or its affiliates.
The exchange ratio was determined pursuant to the Merger Agreement by dividing
$12.00 by $19.5223, which was the weighted average sales price of the Company's
stock during the 20-trading day period ending on June 4, 1998. As a result of
the consummation of the Merger, TresCom became a wholly-owed subsidiary of the
Company. Based upon approximately 12.7 million shares of TresCom common stock
outstanding as of the closing date, the Company issued approximately 7.8 million
shares of its Common Stock in connection with the Merger.
As a result of the Merger, Warburg, Pincus Investors, L.P. ("Warburg,
Pincus"), which beneficially owned approximately 52% of TresCom's common stock,
received shares of Common Stock of the Company valued at approximately
$71,458,016. Warburg, Pincus beneficially owns 13.6% of the Company's Common
Stock. Pursuant to a Stockholder Agreement dated February 3, 1998, by and among
Mr. Singh, Warburg, Pincus and the Company, Warburg, Pincus was granted certain
demand and piggyback registrations rights relating to shares of the Company's
Common Stock, which if exercised, would permit Warburg, Pincus to transfer such
shares free of Rule 144 volume limitations (the same as non-affiliates of
TresCom), and the right, so long as Warburg, Pincus beneficially owns 10% or
more of the outstanding Common Stock of the Company, to nominate an individual,
reasonably acceptable to the non-employee directors of the Company, to serve as
a director on the Company's Board of Directors.
Satellite Earth Station
In June of 1998, the Company's U.K. subsidiary entered into a $2.1
million agreement for the design, manufacture, installation and provision of
training with respect to a satellite earth station in London, England. David
Hershberg, one of the Company's directors, is the chairman, president and a
-15-
<PAGE>
stockholder of the company providing such services. During 1998, $1.2 million
was paid by the Company for the above services. Pursuant to this agreement, in
June 1999 the Company also contracted with this company to provide two satellite
earth stations in Australia and to provide, operate and maintain a satellite
link between the Company's router in Los Angeles, California and the two earth
stations. An approximately $200,000 one-time charge is to be paid by the Company
in addition to a monthly charge of $144,000.
APPROVAL OF AMENDED
EMPLOYEE OPTION PLAN
(Proposal 2)
At the 2000 Annual Meeting, the stockholders will be asked to approve
an amendment to the Employee Option Plan increasing the number of shares of
Common Stock available for issuance upon the exercise of options granted under
the Employee Option Plan from 5,500,000 to 7,800,000. Such approval will require
the affirmative vote of a majority of the voting power of all outstanding shares
of the Company's Common Stock present or represented and entitled to vote at the
2000 Annual Meeting. The Board of Directors believes that the amendment to the
Employee Option Plan is necessary in order to fulfill the Company's needs of
attracting and retaining talented employees, especially with the Company's
growth of its data/Internet businesses, both internally and through acquisition.
The material features of the Employee Option Plan and information regarding
options granted thereunder are summarized below.
Summary of the Employee Option Plan
The Company established the Employee Option Plan for its employees and
consultants on January 2, 1995. The Employee Option Plan provides for the grant
to selected full and part-time employees and consultants of the Company and its
Subsidiaries who contribute to the development and success of the Company and
its Subsidiaries of both "incentive stock options" within the meaning of Section
422 of the Code ("ISOs") and options that are non-qualified for federal income
tax purposes ("NQSOs"); provided, however, that consultants are eligible for the
grant of NQSOs only. The total number of shares of Common Stock for which
options may be granted pursuant to the Employee Option Plan is 7,800,000
(5,500,000 shares of Common Stock were available prior to the proposed amendment
), of which 2,583,154 (283,154 shares of Common Stock were available prior to
the proposed amendment) are available for future grants, subject to certain
adjustments reflecting changes in the Company's capitalization. No individual
may receive, over the term of the Employee Option Plan, Options for more than an
aggregate of 25 percent of the shares authorized for grant under the Employee
Option Plan. The Employee Option Plan currently is administered by the
Compensation Committee of the Board of Directors which is comprised of directors
who are not also employees of the Company. The Compensation Committee
determines, among other things, which employees and consultants will receive
options under the Employee Option Plan; the time when options will be granted;
the type of option (ISO or NQSO, or both) to be granted; the number of shares
subject to each option; the time or times when the options will become
exercisable and expire; and, subject to certain conditions discussed below, the
option price and duration of the option. Because the employees and consultants
of the Company who may participate and the amount of their options are
determined by the Compensation Committee in its discretion, it is not possible
to state the names or positions of, or the number of options that may be granted
to, the Company's employees and consultants. As of March 31, 2000, there are
approximately 2,540 employees eligible to participate in the Employee Option
Plan. Compensation Committee members administering the Employee Option Plan may
vote on any matters affecting the administration of the Employee Option Plan,
except that no member may act upon the granting of an option to himself or
herself.
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<PAGE>
The exercise price of the options granted under the Employee Option
Plan is determined by the Compensation Committee, but may not be less than the
fair market value per share of the Common Stock on the date the option is
granted. If, however, an ISO is granted to any person who, at the time of the
grant, owns capital stock possessing more than 10% of the total combined voting
power of all classes of the Company's capital stock, then the exercise price for
such ISO may not be less than 110% of the fair market value per share of the
Common Stock on the date the option is granted. The Compensation Committee also
determines the method of payment for the exercise of options under the Employee
Option Plan. Payment may consist entirely of cash, check, promissory notes or
Common Stock having a fair market value on the date of surrender equal to the
aggregate exercise price. The Compensation Committee, in its sole discretion,
may cooperate with an optionee to complete a cashless exercise transaction.
Options are not assignable or transferrable other than by will or the
laws of descent and distribution. In general, if an employee's employment or a
consultant's engagement is terminated for any reason, such employee's or
consultant's options exercisable on the date of termination are exercisable for
three months following the date of termination. If the Compensation Committee
makes a determination that a terminated employee or consultant engaged in
disloyalty to the Company, disclosed proprietary information, is convicted of a
felony, or breached the terms of a written confidentiality agreement or
non-competition agreement, all unexercised options held by such employee or
consultant terminate upon the earlier of the date of such determination or the
date of termination. If the employment or service of an employee or consultant
terminates because of disability or death, such employee's or consultant's
options that are exercisable on the date of disability or death will remain
exercisable for 12 months following the date of disability or death; provided,
however, that if a disabled employee or consultant commences employment or
service with a competitor of the Company during that 12-month period, all
options held by the employee or consultant terminate immediately.
Options issued pursuant to the Employee Option Plan outstanding on the
date of a "change in control" of the Company become immediately exercisable on
such date. A change in control for purposes of the Employee Option Plan includes
the acquisition by any person or entity of the beneficial ownership of 50% or
more of the voting power of the Company's Common Stock, the approval by the
Company's stockholders of a merger, reorganization or consolidation of the
Company in which the Company's stockholders do not own 50% or more of the voting
power of the stock of the entity surviving such a transaction, the approval of
the Company's stockholders of an agreement of sale of all or substantially all
of the Company's assets, and the acceptance by the Company's stockholders of a
share exchange in which the Company's stockholders do not own 50% or more of the
voting power of the stock of the entity surviving such exchange.
There are no federal income tax consequences to the Company on the
grant or exercise of an ISO. If an employee disposes of stock acquired through
the exercise of an ISO within one year after the date such stock is acquired or
within two years after the grant of the ISO (a "Disqualifying Disposition"), the
Company will be entitled to a deduction in an amount equal to the difference
between the fair market value of such stock on the date it is acquired and the
exercise price of the ISO. There are no tax consequences to the Company if an
ISO lapses before exercise or is forfeited. The grant of a NQSO has no immediate
tax consequences to the Company. Upon the exercise of a NQSO by an employee or
consultant, the Company is entitled to a deduction in an amount equal to the
difference between the fair market value of the share acquired through exercise
of the NQSO and the exercise price of the NQSO. There are no tax consequences to
the Company if a NQSO lapses before exercise or is forfeited.
An employee who receives an ISO is not subject to federal income tax on
the grant or exercise of the ISO; however, the difference between the option
price and the fair market value of the Common Stock
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<PAGE>
received on the exercise of the ISO ("ISO Stock") is an adjustment for purposes
of the alternative minimum tax. Upon the exercise of an ISO, an employee will
have a basis in the ISO Stock received equal to the amount paid. An employee
will be subject to capital gain or loss upon the sale of ISO Stock, unless such
sale constitutes a Disqualifying Disposition, equal to the difference between
the amount received for the stock and the employee's basis in such. The gain or
loss will be long- or short-term, depending on the length of time the ISO Stock
was held prior to disposition. There are no tax consequences to an employee if
an ISO lapses before exercise or is forfeited.
In the event of a Disqualifying Disposition, an employee will be
required to recognize (1) taxable ordinary income in an amount equal to the
difference between the fair market value of the ISO Stock on the date of
exercise of the ISO and the exercise price; and (2) capital gain or loss (long-
or short-term, as the case may be) in an amount equal to the difference between
(a) the amount realized by the employee upon the Disqualifying Disposition and
(b) the exercise price paid by the employee for the stock, increased by the
amount of ordinary income recognized by the employee, if any. If the disposition
generates an allowable loss (e.g., a sale to an unrelated party not within 30
days of purchase of Common Stock), then the amount required to be recognized by
the employee as ordinary income will be limited to the excess, if any, of the
amount realized on the sale over the basis of the stock.
The Employee Option Plan allows an employee or consultant to pay an
exercise price in cash or shares of the Company's Common Stock. If the employee
pays with shares of the Company's Common Stock that already are owned, the basis
of the newly acquired ISO Stock will depend on the tax character and number of
shares of the previously owned stock used as payment. If an employee pays with
shares acquired upon other than the exercise of an ISO ("non-ISO Stock"), the
transaction will be tax-free to the extent that the number of shares received
does not exceed the number of shares of non-ISO Stock paid. The basis of the
number of shares of newly acquired ISO Stock which does not exceed the number of
shares of non-ISO Stock paid will be equal to the basis of the shares paid. The
employee's holding period with respect to such shares will include the holding
period of the shares of non-ISO Stock paid. To the extent that the employee
receives more new shares than shares surrendered, the "excess" shares of ISO
Stock will take a zero basis. If an employee exercises an ISO by using stock
that is previously acquired ISO Stock, however, certain special rules apply. If
the employee has not held the previously acquired ISO Stock for at least two
years from the date of grant of the related ISO and one year from the date the
employee acquired the previously acquired ISO Stock, the use of such ISO Stock
to pay the exercise price will constitute a Disqualifying Disposition and
subject the employee to income tax with respect to the ISO Stock as described
above. In such circumstances, the basis of the newly acquired ISO Stock will be
equal to the fair market value of the previously acquired ISO Stock used as
payment.
The grant of a NQSO has no immediate tax consequences to an employee or
consultant. The exercise of a NQSO requires an employee or consultant to include
in gross income the amount by which the fair market value of the acquired shares
exceeds the exercise price on the exercise date. The Company is required to
withhold income and employment taxes from an employee's wages on account of this
income. The employee's or consultant's basis in the acquired shares will be
their fair market value on the date of exercise. Upon a subsequent sale of such
shares, the employee or consultant will recognize capital gain or loss equal to
the difference between the sales price and the basis in the stock. The capital
gain or loss will be long- or short-term, depending on whether the employee or
consultant has held the shares for more than one year. There are no tax
consequences to an employee or consultant if a NQSO lapses before exercise or is
forfeited. If an employee or consultant uses previously owned Common Stock as
payment for the exercise price of a NQSO, to the extent the employee or
consultant surrenders the same number of shares received, the exchange is
tax-free and the new shares will have a basis equal to that of the shares
surrendered. The holding period for the new shares will include the period the
employee or consultant held
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<PAGE>
the surrendered shares. To the extent the employee or consultant receives more
new shares than shares surrendered, the excess shares are treated as having been
acquired for no consideration and the fair market value of such excess shares is
includible in the employee's or consultant's income as compensation. The basis
of the excess shares is their fair market value at the time of receipt. If the
previously owned shares consist of ISO Stock for which the holding requirements
were not met such that their use as payment of the exercise price constituted a
Disqualifying Disposition, the employee will have the income tax consequences
described above.
The Company's Board of Director's has authority to suspend, terminate
or discontinue the Employee Option Plan or revise or amend it in any manner with
respect to options granted after the date of revision. No such revision,
however, can change the aggregate number of shares subject to the Employee
Option Plan, change the designation of employees eligible thereunder, or
decrease the price at which options may be granted. The Compensation Committee
may not grant any options under the Employee Option Plan after January 2, 2005.
The Board of Directors recommends a vote IN FAVOR OF Proposal 2 to
approve the amendment to the Company's Employee Option Plan to increase the
number of shares reserved for issuance upon exercise of options granted
thereunder. If no instructions are given on a properly executed and returned
proxy, the shares of Common Stock represented thereby will be voted IN FAVOR OF
such amendment to the Company's Employee Option Plan.
APPROVAL OF AMENDED
DIRECTOR OPTION PLAN
(Proposal 3)
At the 2000 Annual Meeting, the stockholders will be asked to approve
an amendment to the Director Option Plan (i) increasing the number of shares of
Common Stock available for issuance upon the exercise of options granted under
the Director Option Plan from 338,100 to 600,000 and (ii) providing for options
to purchase 45,000 shares of Common Stock, exercisable for 15,000 shares
immediately, and 15,000 on each of the next two anniversary dates of the grant
date to be granted to each Eligible Director (as defined below) upon each such
Eligible Director's initial election to the Board of Directors, and upon each
such Eligible Director's re-election to the Board of Directors. Such approval
will require the affirmative vote of a majority of the voting power of all
outstanding shares of the Company's Common Stock present or represented and
entitled to vote at the 2000 Annual Meeting. If this Proposal 3 is approved, the
Director Option Plan will provide that Messrs. Fialkov and Hershberg each be
granted options to purchase 45,000 shares of Common Stock upon their re-election
to the Board of Directors this year. The Board of Directors believes that the
amendment to the Director Option Plan is necessary in order to encourage
ownership in the Company by outside directors (present or future incumbent
directors who are not affiliated with or employees of the Company or any
subsidiary and who have not been nominated to serve as directors pursuant to an
agreement with the Company) whose services are considered essential to the
Company's continued progress. The material features of the Director Option Plan
and information regarding options granted thereunder are summarized below.
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<PAGE>
Summary of the Director Option Plan
The Company established the Director Option Plan on July 27, 1995, as
amended. The purpose of the Director Option Plan is to encourage ownership in
Primus by outside directors (present or future incumbent directors who are not
affiliated with or employees of Primus or any subsidiary and who have not been
nominated to serve as directors pursuant to an agreement with Primus) (each, an
"Eligible Director") whose services are considered essential to our continued
progress. Options granted under the Director Option Plan are NQSOs. The Director
Option Plan is administered by a committee of the board of directors consisting
of those directors who are not eligible to receive grants thereunder. The total
number of shares of the Company's Common Stock for which options may be granted
pursuant to the Director Option Plan is 600,000 (338,100 were available prior to
the proposed amendment). On the effective date of the Director Option Plan or
the first date thereafter that any Eligible Director becomes eligible to receive
an award under the Director Option Plan, each Eligible Director will
automatically receive an option to purchase 15,000 shares of Common Stock,
exercisable for 5,000 shares immediately, and 5,000 on each of the next two
anniversary dates of the grant date. In addition, if Proposal 3 is approved, the
Director Option Plan will provide that options to purchase 45,000 shares of
Common Stock exercisable for 15,000 shares immediately, and 15,000 on each of
the next two anniversary dates of the grant date be granted to each Eligible
Director upon each such Eligible Director's initial election to the Board of
Directors, and upon each such Eligible Director's re-election to the Board of
Directors. All options become immediately exercisable, however, upon the
retirement of a director in accordance with any mandatory retirement policy of
the Board of Directors, upon the death or permanent disability of a director, or
if the Company merges with another company and the Company is not the surviving
corporation, the Company enters into an agreement to sell or otherwise dispose
of all or substantially all of the Company's assets, or any person or group
acquires more than 20% of the Company's outstanding voting stock.
The option price is the fair market value at the date on which an
option is granted. Payment for the exercise of options may consist of cash or
the Company's Common Stock. Options issued under the Director Option Plan are
not transferable other than by will or the laws of descent and distribution.
Options expire upon the earlier of five years from the date they were granted or
three years following either the retirement or resignation of the director, the
failure of the director to be re-elected, or the permanent disability or death
of the director. No options may be granted under the Director Option Plan after
December 31, 2005.
The grant of the NQSO has no immediate tax consequences to the Company.
Upon the exercise of a NQSO by a director, the Company is entitled to a
deduction in an amount equal to the difference between the fair market value of
the share acquired through exercise of the NQSO and the exercise price of the
NQSO. There are no tax consequences to the Company if a NQSO lapses before
exercise or is forfeited.
The tax consequences to a director upon the grant and exercise of a
NQSO, and the sale of the Company's Common Stock acquired upon exercise thereof,
are identical to those described for NQSOs under "--Summary of the Employee
Option Plan" in Proposal 2 above, except that the Company has no withholding
obligations upon the exercise of a NQSO by a director.
-20-
<PAGE>
The Board of Directors recommends a vote IN FAVOR OF Proposal 3 to
approve the amendment to the Company's Director Option Plan to increase the
number of shares reserved for issuance upon exercise of options granted
thereunder and to allow for certain automatic option grants to directors. If no
instructions are given on a properly executed and returned proxy, the shares of
Common Stock represented thereby will be voted IN FAVOR OF such amendment to the
Company's Director Option Plan.
APPROVAL OF AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION
(Proposal 4)
At the 2000 Annual Meeting, the stockholders will be asked to approve
an amendment to the Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock available for issuance. Such
approval will require the affirmative vote of a majority of the voting power of
all outstanding shares of the Company's Common Stock present or represented and
entitled to vote at the 2000 Annual Meeting. The Board of Directors believes
that the amendment to the Certificate of Incorporation is necessary in order to
have shares available for such corporate purposes as future equity financings,
acquisitions, stock splits and stock options. Authorizing additional shares
avoids the delay and expense of a special stockholders' meeting if opportunities
arise which would require the issuance of shares in excess of the present limit
since the Board of Directors will have the authority to issue such shares
without stockholder approval, subject to the requirements of the Nasdaq National
Market. The Company does not have any definitive plans to issue additional
shares of Common Stock. The additional shares of Common Stock for which
authorization is sought would have rights equivalent to the shares of Common
Stock now authorized. The Board of Directors recommends a vote IN FAVOR OF
Proposal 4 to approve the amendment to the Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 80,000,000 to
150,000,000. If no instructions are given on a properly executed and returned
proxy, the shares of Common Stock represented thereby will be voted IN FAVOR OF
such amendment to the Certificate of Incorporation.
OTHER BUSINESS
The Board of Directors knows of no other matters that will be presented
at the Annual Meeting other than as set forth in this Proxy Statement. However,
if any other matter properly comes before the meeting, or any adjournment or
postponement thereof, it is intended that proxies in the accompanying form will
be voted, to the extent permitted by applicable law, in accordance with the
judgment of the persons named therein.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 filed with the Securities and Exchange Commission accompanies
this Proxy Statement.
-21-
<PAGE>
STOCKHOLDER PROPOSALS
To be eligible for inclusion in the Company's proxy materials for the
2001 Annual Meeting of Stockholders, a proposal intended to be presented by a
stockholder for action at that meeting must, in addition to meeting the
stockholder eligibility and other requirements of the Securities and Exchange
Commission's rules governing such proposals, be received not later than January
15, 2001 by the Secretary of the Company at the Company's principal executive
offices, 1700 Old Meadow Road, McLean, Virginia 22102. In the event the Company
receives notice not later than April 2, 2001 of a shareholder proposal intended
to be presented at the 2001 Annual Meeting of Stockholders and which is not
included in the Company's proxy materials, then so long as the Company includes
in its proxy statement for such Annual Meeting advice on the nature of the
matter and how the named proxyholders intend to vote the shares for which they
have received discretionary authority, such proxyholders may exercise
discretionary authority with respect to such proposal, except to the
extent limited by the Securities and Exchange Commission's rules governing
stockholder proposals.
----------------
THE COMPANY WILL PROVIDE TO EACH PERSON SOLICITED, WITHOUT CHARGE
EXCEPT FOR EXHIBITS, UPON REQUEST IN WRITING, A COPY OF ITS ANNUAL REPORT ON
FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999. REQUESTS SHOULD BE DIRECTED TO INVESTOR RELATIONS, PRIMUS
TELECOMMUNICATIONS GROUP, INCORPORATED, 1700 OLD MEADOW ROAD, MCLEAN, VIRGINIA
22102.
By Order of the Board of Directors
K. Paul Singh
Chairman of the Board of
Directors, President, and Chief
Executive Officer
Date: May 15, 2000
McLean, Virginia
-22-
<PAGE>
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
Proxy Solicited On Behalf Of The Board of Directors
The undersigned, revoking all previous proxies, hereby appoints K. Paul
Singh and John F. DePodesta, and each of them acting individually, as the
attorney and proxy of the undersigned, with full power of substitution, to vote,
as indicated below and in their discretion upon such other matters as may
properly come before the meeting, all shares which the undersigned would be
entitled to vote at the Annual Meeting of the Stockholders of the Company to be
held on June 14, 2000, and at any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF
MESSRS. FIALKOV AND HERSHBERG AS DIRECTORS, IN FAVOR OF THE AMENDMENT TO THE
COMPANY'S EMPLOYEE OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR
ISSUANCE UPON EXERCISE OF THE OPTIONS GRANTED THEREUNDER, IN FAVOR OF THE
AMENDMENT TO THE COMPANY'S DIRECTOR OPTION PLAN TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE UPON EXERCISE OF THE OPTIONS GRANTED THEREUNDER AND TO
ALLOW FOR CERTAIN AUTOMATIC OPTION GRANTS TO DIRECTORS AND IN FAVOR OF THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMPANY COMMON STOCK FROM 80,000,000 TO 150,000,000.
1. Election of Directors:
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY to vote for
the nominees listed below
Nominees: For a three-year term expiring at the 2003 Annual Meeting --
Herman Fialkov and David E. Hershberg
(Instruction: To withhold authority to vote for any nominee(s), write
the name(s) of such nominee(s) on the line below.)
------------------------------------------------------------------
2. Approval of an amendment to the Employee Option Plan to increase the
number of shares reserved for issuance upon exercise of options granted
thereunder:
/ / For / / Against / / Abstain
3. Approval of an amendment to the Director Option Plan to (i) increase
the number of shares reserved for issuance upon exercise of options
granted thereunder and (ii) allow for certain automatic option grants
to directors:
/ / For / / Against / / Abstain
4. Approval of an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Company Common Stock
from 80,000,000 to 150,000,000:
/ / For / / Against / / Abstain
Please date and sign your Proxy on the reverse side and
return it promptly.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED (1) "FOR" THE ELECTION OF THE
NOMINEES FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF, (2) "FOR" APPROVAL OF
AN AMENDMENT TO THE COMPANY'S EMPLOYEE OPTION PLAN TO INCREASE THE NUMBER OF
SHARES RESERVED FOR ISSUANCE UPON EXERCISE OF OPTIONS GRANTED THEREUNDER, (3)
"FOR" APPROVAL OF AN AMENDMENT TO THE COMPANY'S DIRECTOR OPTION PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE UPON EXERCISE OF OPTIONS GRANTED
THEREUNDER AND TO ALLOW FOR CERTAIN AUTOMATIC OPTION GRANTS TO DIRECTORS AND (4)
"FOR" APPROVAL OF THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMPANY COMMON
STOCK. THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT.
--------------------------------------------------
Signature of Stockholder
--------------------------------------------------
Signature of Stockholder
Date:_____________________________, 2000
NOTE: PLEASE SIGN THIS PROXY EXACTLY
AS NAME(S) APPEAR ON YOUR STOCK
CERTIFICATE. WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE ADD YOUR TITLE AS SUCH, AND
IF SIGNER IS A CORPORATION, PLEASE
SIGN WITH FULL CORPORATE NAME BY A
DULY AUTHORIZED OFFICER OR OFFICERS
AND AFFIX THE CORPORATE SEAL. WHERE
STOCK IS ISSUED IN THE NAME OF TWO
(2) OR MORE PERSONS, ALL SUCH
PERSONS SHOULD SIGN.
