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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
FLAG TELECOM HOLDINGS LIMITED
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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</TABLE>
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<TABLE>
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[LOGO]
FLAG Telecom Holdings Limited
Cedar House
41 Cedar Avenue
Hamilton HM12
Bermuda
</TABLE>
January 10, 2001
Dear Shareholder:
Attached is a Notice of 2000 Annual General Meeting and Proxy Statement for
our 2000 Annual General Meeting of Shareholders, which we will hold at 9 a.m.,
local time, on January 31, 2001, at the Le Meridien Grosvenor House Hotel, Park
Lane, London W1K 7TN, England. The meeting is being held to comply with
statutory requirements of Bermuda law, and the Company will not be making a
presentation of its financial results at this meeting. The Notice and Proxy
Statement describe the business to be acted upon at the meeting. The Annual
Report on Form 10-K for the year ended December 31, 1999 is also enclosed.
The Company currently anticipates holding its 2001 Annual General Meeting
during the second quarter of fiscal 2001.
It is important that your Shares be represented at the 2000 Annual General
Meeting, whether or not you plan to attend the meeting in person. Please
complete, sign and date the enclosed proxy card and return it in the
accompanying prepaid envelope to ensure that your Shares will be represented at
the meeting.
Thank you for your continued support.
/s/ Andres Bande
Andres Bande
CHAIRMAN OF THE BOARD OF DIRECTORS
<PAGE>
[LOGO]
------------------------
NOTICE OF 2000 ANNUAL GENERAL MEETING OF SHAREHOLDERS
------------------------
We will hold the 2000 Annual General Meeting of Shareholders (the "meeting")
of FLAG Telecom Holdings Limited ("FLAG Telecom" or the "Company") at the Le
Meridien Grosvenor House Hotel, Park Lane, London W1K 7TN, England, on
January 31, 2001, at 9 a.m., local time, for the following purposes:
To receive the report of the independent auditors and the financial
statements for the year ended December 31, 1999 and to take the following
actions:
1. To set the number of directors at, and elect, nine (9) directors;
2. To appoint Arthur Andersen & Co. as independent auditors of FLAG Telecom
for the year ending December 31, 2000 and authorize the Board of
Directors to determine their remuneration; and
3. To transact any other business that may properly come before the meeting
and any adjournment or postponement of the meeting.
These proxy materials are being mailed on or about January 10, 2001 to all
holders of record of the Company's shares of common stock ("Shares") at the
close of business on January 5, 2001. These materials will also be mailed to
shareholders who become holders of record of Shares through January 25, 2001.
All holders of record of the Company's Shares on the date of the meeting will be
entitled to attend and vote at the meeting. Any shareholder who does not receive
a copy of the proxy statement and accompanying proxy card may obtain a copy at
the meeting or by contacting MacKenzie Partners, Inc., the proxy solicitor for
the meeting, at 156 Fifth Avenue, 13th Floor, New York, New York 10010, USA, via
telephone at (212) 929-5500 or toll free at (800) 322-2885 or via e-mail at:
[email protected].
Shareholders are cordially invited to attend the meeting in person. It is
important that your Shares be represented at the meeting. Whether or not you
plan to attend the meeting, please sign, date and return the enclosed proxy card
to ensure that your Shares are represented at the meeting. Registered
shareholders that attend the meeting may vote their Shares personally, even
though they have sent in proxies.
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By order of the Board of Directors,
/s/ Stuart Rubin
Stuart Rubin
GENERAL COUNSEL AND SECRETARY
</TABLE>
January 10, 2001
<PAGE>
PROXY STATEMENT
---------------------
GENERAL INFORMATION
The Board of Directors (the "Board") of FLAG Telecom Holdings Limited ("FLAG
Telecom" or the "Company") is soliciting your proxy for use at the 2000 Annual
General Meeting of Shareholders to be held on January 31, 2001 (the "meeting").
These proxy materials are being mailed on or about January 10, 2001 to
shareholders of record on January 5, 2001. The principal executive office of the
Company is located at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda. Our
telephone number is +1-441-295-2244.
DATE, TIME AND PLACE
We will hold the meeting at the Le Meridien Grosvenor House Hotel, Park
Lane, London W1K 7TN, England on January 31, 2001 at 9 a.m., local time, subject
to any adjournments or postponements.
WHO CAN VOTE; VOTES PER SHARE
Notice of the meeting has been sent to all holders of record of the
Company's shares of common stock ("Shares") at the close of business on
January 5, 2001. On that date, there were outstanding and entitled to vote
134,061,920 Shares. Notice will also be mailed to shareholders who become
holders of record of Shares through January 25, 2001. Any shareholder who does
not receive a copy of the proxy statement and accompanying proxy card may obtain
a copy at the meeting or by contacting MacKenzie Partners, Inc., the proxy
solicitor for the meeting, at 156 Fifth Avenue, 13th Floor, New York, New York
10010, USA, via telephone at (212) 929-5500 or toll free at (800) 322-2885 or
via e-mail at: [email protected].
All holders of record of the Company's Shares on the date of the meeting
will be entitled to attend and vote at the meeting. A poll will be taken on each
proposal to be put to the meeting and every holder of a Share will be entitled
to one vote per share on each proposal.
For admission to the meeting, registered shareholders (those who own Shares
in their own names) should come to the Registered Shareholders check-in area,
where their ownership will be verified. Those who have beneficial ownership of
Shares held by a bank or broker (often referred to as "holding in street name")
should come to the Beneficial Owners check-in area. To be admitted, beneficial
owners must bring account statements or letters from their banks or brokers
showing that they own FLAG Telecom Shares, but they will not be able to vote at
the meeting. Only holders of record may vote at the meeting. Beneficial owners
should instruct their broker or bank how to vote on their behalf. Registration
will begin at 8:30 a.m., local time, and the meeting will begin at 9 a.m., local
time.
QUORUM AND VOTING REQUIREMENTS
Two holders of Shares present in person or by proxy and entitled to vote
representing the holders of more than 50.1% of the issued Shares shall form a
quorum for all purposes.
The affirmative vote of a majority of Shares represented and voting at the
meeting is required for the election of directors and the approval of the other
proposals. Pursuant to Bermuda law, (i) Shares represented at the meeting whose
votes are withheld on any matter, (ii) Shares which are represented by "broker
non-votes" (i.e., Shares held by brokers or nominees which are represented at
the meeting but with respect to which the broker or nominee is not empowered to
vote on a particular proposal) and (iii) Shares which abstain from voting on any
matter are not included in the determination of the Shares voting on such matter
but are counted for quorum purposes. As a result, abstentions and broker "non
votes" will not affect the voting results, although they will have the practical
effect of reducing the number of affirmative votes required to achieve a
majority by reducing the total number of Shares
1
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from which the majority is calculated. Brokers and nominees can exercise their
voting discretion only with respect to the election of directors and the
appointment of auditors.
HOW TO VOTE
Shares represented by a properly executed proxy will be voted as directed on
the proxy card. Those who hold their Shares in street name should instruct their
broker or bank how to vote on their behalf. In the absence of contrary direction
from a shareholder, proxies held by the chairman of the meeting will be voted
FOR the election of nine (9) directors and FOR the re-appointment of the
independent auditors of the Company and authorization for the Board to fix the
auditors' remuneration.
A proxy card has been enclosed with this document. Shareholders should
complete and return the proxy card as soon as possible. To be valid, the proxy
card must be completed in accordance with the instructions on it and received at
any one of the addresses set forth below by the time (being local time) and date
specified:
IN BERMUDA:
by 5 p.m., on January 30, 2001 by hand or mail at:
FLAG Telecom Holdings Limited
Cedar House
41 Cedar Avenue
Hamilton HM12
Bermuda
IN THE UNITED KINGDOM:
by 5 p.m., on January 30, 2001 by hand or mail at:
FLAG Telecom Holdings Limited
c/o FLAG Telecom Limited
9 South Street
London W1K 2XA
United Kingdom
IN THE UNITED STATES:
by 5 p.m., on January 30, 2001 by hand or mail at:
FLAG Telecom Holdings Limited
c/o MacKenzie Partners, Inc.
156 Fifth Avenue
13th Floor
New York, New York 10010
United States of America
REVOCATION OF PROXIES
You may revoke your proxy at any time before it is voted (1) by so notifying
the Assistant Secretary of the Company in writing at the address of the
Company's principal executive office, Cedar House, 41 Cedar Avenue, Hamilton
HM12, Bermuda, not later than 5 p.m., local time, on January 30, 2001, (2) by
signing, dating and submitting a new and different proxy card or (3) by voting
your Shares in person or by an appointed proxy or representative at the meeting.
You cannot revoke your proxy by merely attending the meeting.
2
<PAGE>
PROXY SOLICITATION
The Company will bear the costs of soliciting proxies from the holders of
our Shares. Proxies will initially be solicited by us by mail, but directors,
officers and selected other employees of the Company may also solicit proxies by
personal interview, telephone, telegraph or e-mail. Directors, executive
officers and any other employees of the Company who solicit proxies will not be
specially compensated for those services, but may be reimbursed for
out-of-pocket expenses incurred in connection with the solicitation. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable out-of-pocket expenses incurred in sending proxy materials to
beneficial owners. We have engaged MacKenzie Partners, Inc. as the proxy
solicitor for the meeting for an approximate fee of $7,500. (All references to
"$" in this proxy statement are to United States dollars.)
1999 AUDITED FINANCIAL STATEMENTS
Under the Company's Bye-laws and Bermuda law, audited financial statements
must be presented to shareholders at an annual general meeting of shareholders.
To fulfill this requirement, we will present at the meeting audited consolidated
financial statements for fiscal 1999. Copies of those financial statements are
included in our Annual Report on Form 10-K, which is being mailed to
shareholders together with this Proxy Statement. Representatives of Arthur
Andersen & Co. ("Arthur Andersen"), FLAG Telecom's independent auditors, will be
present at the meeting and available to respond to appropriate questions.
PROPOSAL NO. 1.
ELECTION OF DIRECTORS
As this is the first annual general meeting after the initial public
offering (the "IPO") of Shares of the Company, in accordance with the Company's
Bye-laws all of the current directors are required to retire from office and
stand for re-election.
The Board proposes that the size of the Board shall be nine (9) directors,
with the following nine (9) persons being elected, to hold office in accordance
with the Company's Bye-laws:
Andres Bande
Thomas Bartlett
Soopakij Chearavanont
Michael Fitzpatrick
Alfred Giammarino
Edward McCormack
Adnan Omar
David A. Riffelmacher
Umberto Silvestri
All of the nominees named above currently serve as directors of the Company. The
management of FLAG Telecom believes that each of the nominees for director is
prepared to serve as a director.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE TO SET THE BOARD AT NINE AND FOR THE
ELECTION AS DIRECTORS OF THE NINE NOMINEES LISTED ABOVE.
Except where otherwise instructed, proxies will be voted for election of all
the nominees. Should any nominee be unwilling or unable to serve as a director,
which is not anticipated, it is intended that the persons acting under the proxy
will vote for the election of another person recommended by the Board, unless
the Board chooses to recommend a reduction in the number of directors
constituting the full Board.
3
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Pursuant to the Company's Bye-laws, each shareholder holding at least 9% of
the issued and outstanding Shares has the right to designate one director for
each 9% of the issued and outstanding Shares held by such shareholder.
Notwithstanding the above, even if they are not entitled to designate any
directors under the arrangement described above, for so long as either Bell
Atlantic Network Systems Company and/or Rathburn Limited owns any Shares, that
shareholder shall have the right to appoint one director. As a result, Bell
Atlantic Network Systems Company, which beneficially owns approximately 29.8% of
the issued and outstanding Shares, has the right to designate three directors,
and each of Rathburn Limited, which beneficially owns approximately 15.5% of the
issued and outstanding Shares, and K.I.N. (Thailand) Co., Ltd., which
beneficially owns approximately 9.8% of the issued and outstanding Shares, has
the right to designate one director. Pursuant to such rights, Bell Atlantic
Network Systems Company has named Messrs. Bartlett, Giammarino and Riffelmacher
as their designees, Rathburn Limited has named Mr. Omar as its designee and
K.I.N. (Thailand) Co., Ltd. has named Mr. Chearavanont as its designee.
Otherwise, only a director retiring by rotation may be appointed as a director
unless a person is either recommended by the Board or is nominated in accordance
with procedures set out in the Companies Act 1981 of Bermuda.
The Bye-laws provide that at every annual general meeting subsequent to this
meeting, one third of the directors who are subject to retirement by rotation
(or if the number is not 3 or a multiple of 3, the nearest number to one third)
shall retire from office. If there is only one director subject to retirement by
rotation, he shall retire. Under Bermuda Law the shareholders must determine the
minimum and maximum number of directors at each annual general meeting.
At the annual general meetings for the calendar years 2001 and 2002, the
directors to retire by rotation will be determined by agreement amongst the
directors to be elected at this meeting or by lot. For the annual general
meeting for the year 2003 onwards, the directors to retire by rotation will be
those who have been longest in office since their last election or re-election.
The determination of which directors are to retire at all future annual general
meetings will be based on the composition of the Board on the date of the notice
convening each such meeting.
DIRECTORS AND EXECUTIVE OFFICERS OF FLAG TELECOM
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company. Additional biographical
information concerning these individuals is provided in the text following the
table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- -----------------------------------------------------
<S> <C> <C>
Andres Bande........................... 56 Chairman and Chief Executive Officer
Edward McCormack....................... 45 Deputy Chairman and Chief Operating Officer
Larry Bautista......................... 37 Chief Financial Officer
Stuart Rubin........................... 53 General Counsel and Secretary
Michael Fitzpatrick.................... 52 Director
Thomas Bartlett........................ 42 Director
Soopakij Chearavanont.................. 36 Director
Adnan Omar............................. 48 Director
Alfred Giammarino...................... 45 Director
Dr. David A. Riffelmacher.............. 49 Director
Umberto Silvestri...................... 68 Director
</TABLE>
4
<PAGE>
ANDRES BANDE
Mr. Bande has served as Chairman of the Board and Chief Executive Officer
("CEO") since January 1998. Before joining us, Mr. Bande was the President of
Sprint International from 1996 to the beginning of 1998. Prior to that, he was
President of Ameritech International Corporation from 1990 to 1996.
EDWARD MCCORMACK
Mr. McCormack has been a member of the Board since October 1999 and has
served as Deputy Chairman of the Board since March 2000. He served as the Chief
Financial Officer from February 1996 to November 2000 and was appointed Chief
Operating Officer in March 2000. Prior to that time, Mr. McCormack spent
17 years with Bechtel, an engineering and construction company. His final
position with Bechtel was Chief Financial Officer of Bechtel Europe, Africa,
Middle East and South West Asia.
LARRY BAUTISTA
Mr. Bautista was appointed Chief Financial Officer in November 2000. He was
appointed Deputy Chief Financial Officer in March 2000 and has served as Vice
President--Finance and Treasurer of the Company since December 1995.
STUART RUBIN
Mr. Rubin has served as the General Counsel of the Company since
January 1996. Prior to joining us, Mr. Rubin spent over twenty years with the
law firm of Coudert Brothers, as a partner for the last twelve years,
specializing in cross border financial transactions, joint ventures and other
commercial transactions.
MICHAEL FITZPATRICK
Mr. Fitzpatrick has been a member of our Board since January 2000.
Mr. Fitzpatrick has been General Partner of Seabury Venture Partners since
October 2000. He was previously Chairman of the Board, President and Chief
Executive Officer of E-TEK Dynamics, Inc., a fiber optic manufacturer from
October 1997 to October 2000. Prior thereto, Mr. Fitzpatrick was President and
Chief Executive Officer of Pacific Telesis Enterprises from 1993 to October
1997. Mr. Fitzpatrick currently serves as a director of NorthPoint
Communications Group, Inc., a national provider of local data network services
and Adva Optical Networking, a worldwide optical networking solutions provider
located in Germany.
THOMAS BARTLETT
Mr. Bartlett has been a member of our Board since October 2000.
Mr. Bartlett has been President of Verizon Global Solutions Inc., Verizon's
provider of worldwide end-to-end communications solutions since July 2000. From
1995 to July 2000 he was President and Chief Executive Officer of Bell Atlantic
International Wireless.
ADNAN OMAR
Mr. Omar was a director of FLAG Limited from April 1994 until the corporate
restructuring in February 1999 and has since been a member of our Board.
Mr. Omar has been the Executive Director of Al-Jazirah Transport Holding
Company, which invests in diversified businesses through its subsidiaries and is
fully owned by Dallah Albaraka Group, since March 1998. From 1990 to March 1998
he was Technical Director of Al-Jazirah Transport Holding Company. Mr. Omar also
serves on the
5
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board of directors of BASAFOJAGU CO., Al-Sham Shipping Co. Syria, Dallah
Transport Co. Saudi Arabia and Dallah Lebanon Tourism & Transport Co.
ALFRED GIAMMARINO
Mr. Giammarino was appointed a director in October 2000. Mr. Giammarino has
been Senior Vice President and Chief Financial Officer (CFO) for the
international group of Verizon Communications Inc. since January 2000. From July
1998 to December 1999 he was Senior Vice President--International Finance,
Planning and Business Development for GTE, where he was Vice
President--International Finance and Planning from 1997 to July 1998 and Vice
President--Finance from 1995 to 1997.
DR. DAVID A. RIFFELMACHER
Dr. Riffelmacher was appointed to the Board in October 2000. He is Group
Vice President--Marketing, Product Development and Strategic Planning for
Verizon Global Solutions Inc. From January 1996 to June 2000 he was Vice
President of Professional Services for Bell Atlantic International Wireless.
UMBERTO SILVESTRI
Mr. Silvestri has been a member of the Board of the Company since
October 1999. Mr. Silvestri was the Chairman of STET International Netherlands
from 1997 until December 1999 and he was the Chairman of Telecom Italia from
1994 until June 1997.
SOOPAKIJ CHEARAVANONT
Mr. Chearavanont was appointed to the Board in September 2000.
Mr. Chearavanont has been President of Telecom Holding Co., Ltd. since 1999,
President of UBC Group, which operates a pay television business, since 1998 and
Chairman and Chief Executive Officer of Hong Kong Fortune Limited, a real estate
and property investment company since 2000. He has also been a director of
Telecom Asia Corporation Public Co. Ltd. since 1994.
There is no family relationship among any of the above-named officers or any
director of the Company.
BOARD MEETINGS AND COMMITTEES
The Board formally met eight (8) times in 1999 and eight (8) times in 2000.
Each director (or his designated alternate as allowed by Bermuda law) attended
at least 75% of such meetings of the Board in each year and of the committees of
the Board on which he served during the shorter of the last two years and the
period he has been a director, except Soopakij Chearavanont, who has attended
one of two meetings held since his appointment to the Board. The two standing
committees of the Board are the Audit Committee and the Compensation Committee.
These committees are described in the following paragraphs. The Company does not
have a nominating committee. New directors are considered and nominated by the
Board.
AUDIT COMMITTEE
The Audit Committee consists of Messrs. Silvestri (Chairman) and
Fitzpatrick.
The Audit Committee was established in January 2000 and formally met twice
during 2000. The primary purpose of the Audit Committee is to assist the Board
in monitoring the integrity of the Company's and its subsidiaries' (the "Group")
financial reporting process and internal controls of the Group and the
independence and performance of external auditors.
6
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In accordance with the rules and regulations of the Securities and Exchange
Commission ("SEC"), the following report of the Company's Audit Committee, the
performance graph appearing on page 8 and the report of the Company's
Compensation Committee on page 13 shall not be deemed to be soliciting material
or to be filed with the SEC or subject to Regulation 14A or 14C of the
Securities Exchange Act of 1934 (the "Exchange Act"), or to the liabilities of
Section 18 of the Exchange Act and shall not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the
Exchange Act, notwithstanding any general incorporation by reference of these
proxy materials into any other filed document.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is appointed by the Board to assist the Board in
monitoring the integrity of the Group's financial reporting process and internal
controls of the Group and the independence and performance of the external
auditors. The Audit Committee initially was comprised of three directors, each
independent under the NASDAQ Stock Market, Inc.'s listing standards. One member,
Jonathan Solomon, passed away in May 2000, and currently the Audit Committee is
comprised of the remaining two independent directors. The Company is actively
looking for a third independent director to propose for election at the 2001
Annual General Meeting. As a foreign issuer, the Company, which is traded on the
NASDAQ National Market, has until June 2001 to comply with the NASDAQ's rule
requiring an Audit Committee of three independent directors. The Audit Committee
acts under a written charter adopted by the Board of Directors, a copy of which
is attached to this proxy statement as Appendix A.
The 1999 financial statements, which were prepared under U.S. generally
accepted accounting principles, have been approved by the Board. The Audit
Committee now reviews the quarterly and annual financial results with management
and FLAG Telecom's auditors. The Audit Committee has discussed with the auditors
and received confirmation from the auditors of their independence as required
under applicable standards for auditors of public companies and has discussed
the matters required to be discussed by Statement on Auditing Standards No. 61.
THE AUDIT COMMITTEE
Umberto Silvestri
Michael Fitzpatrick
COMPENSATION COMMITTEE
The Compensation Committee was established in May 1999 and consists of
Messrs. Bande (Chairman), Omar and Bartlett. Mr. Barlett was appointed to the
Committee in November 2000 to replace Mr. Daniel Petri who resigned from the
Board.
The Compensation Committee formally met four (4) times during fiscal 1999
and two (2) times during fiscal 2000. The primary purpose of the Compensation
Committee is to review and approve all compensation agreements for our officers
and administer our long-term incentive plan. In fulfilling this purpose, the
Committee performs the following functions:
1. Determines the annual bonus of the CEO;
2. Acts in an advisory capacity regarding compensation guidelines for key
employees other than the CEO; and
3. Consults with the CEO (who is on the Committee) on compensation for
senior executives.
7
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COMPARISON OF CUMULATIVE TOTAL RETURNS
The graph below compares the cumulative total shareholder return on the
Company's Shares for the period commencing February 11, 2000, the initial date
of trading of the Company's Shares, to December 29, 2000 with the cumulative
total return of the Standard & Poor's 500 Stock Index and the NASDAQ Telecom
Index over the same period. The graph assumes $100 invested on February 11, 2000
in the Company's Shares and $100 invested on such date in each of the
Standard & Poor's 500 Stock Index and the NASDAQ Telecom Index, with dividends
reinvested. We have used the NASDAQ Telecom Index for this comparison because we
believe this index to be readily accessible to our shareholders and to be
representative of the industry in which we compete.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
2/11/00 3/31/00 6/30/00 9/29/00 12/29/00
<S> <C> <C> <C> <C> <C>
FTHL 100 69.62 45.77 33.85 19.23
S&P 500 Stock Index 100 108.04 104.86 103.56 95.18
NASDAQ Telecom Index 100 101.46 80.16 67.2 42.67
</TABLE>
<TABLE>
<CAPTION>
S&P 500 NASDAQ
DATE FTHL(1) STOCK INDEX(2) TELECOM INDEX(2)
--------------------- -------- -------------- ----------------
<S> <C> <C> <C>
11-Feb-00...... 100.00 100.00 100.00
31-Mar-00...... 69.62 108.04 101.46
30-Jun-00...... 45.77 104.86 80.16
29-Sep-00...... 33.85 103.56 67.20
29-Dec-00...... 19.23 95.18 42.67
</TABLE>
--------------------------
(1) Based on the last traded price at the close of business.
(2) Based on prices at the close of business.
8
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SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth the beneficial ownership of FLAG Telecom
Shares by:
- those persons known by the Company to own beneficially more than 5% of
FLAG Telecom's outstanding Shares;
- each of the executive officers and directors named elsewhere in this
document and the Company's four (4) most highly compensated executives
other than the CEO; and
- all directors, executive officers and named executives of the Company as a
group.
<TABLE>
<CAPTION>
% OF
OUTSTANDING
NUMBER OF COMMON COMMON SHARES
SHARES OWNED OWNED
BENEFICIAL OWNER BENEFICIALLY(1) BENEFICIALLY
---------------- ---------------- -------------
<S> <C> <C>
Verizon Communications Inc. (formerly Bell Atlantic
Corporation)(2).................................... 39,922,276 29.8%
Dallah Albaraka Holding Company(3)................... 20,790,157 15.5%
Telecom Asia Corporation Public Co. Ltd.(4).......... 13,130,114 9.8%
Marubeni Corporation(5).............................. 9,297,330 6.9%
The Asian Infrastructure Fund(6)..................... 7,600,515 5.7%
Andres Bande......................................... 1,071,707 *
Edward McCormack..................................... 268,000 *
Stuart Rubin......................................... 268,000 *
Samih Kawar.......................................... 166,667 *
Andy Evans........................................... 166,667 *
Larry Bautista....................................... 66,667 *
Adnan Omar........................................... 41,667 *
Michael Fitzpatrick.................................. 25,001 *
Umberto Silvestri.................................... 25,001 *
Thomas Bartlett...................................... -- *
Soopakij Chearavanont................................ -- *
Alfred Giammarino.................................... -- *
David A. Riffelmacher................................ -- *
All Current Directors, Executive Officers and Named
Executives as a Group (13 persons)(7).............. 2,099,377 1.5%
</TABLE>
------------------------
* Less than 1%
(1) The amounts and percentages shown are amounts and percentages owned
beneficially as of December 31, 2000, based on information furnished or
publicly disclosed by the persons named. A person is deemed to be the
beneficial owner of Shares if such person, either alone or with others, has
the power to vote or to dispose of such Shares. Shares beneficially owned by
a person include Shares that the person has the right to acquire under stock
options that were exercisable on December 31, 2000 or that become
exercisable within 60 days after December 31, 2000. All Shares beneficially
owned by the individuals Andres Bande, Edward McCormack, Stuart Rubin, Samih
Kawar, Andy Evans, Larry Bautista, Adnan Omar, Michael Fitzpatrick and
Umberto Silvestri are Shares that the person has the right to acquire upon
the exercise of options.
(2) Verizon Communications Inc. is the ultimate parent of a wholly-owned
subsidiary, Bell Atlantic Network Systems Company, which directly owns our
Shares. The business address of the direct owner is Bell Atlantic Network
Systems Company, 4 West Red Oak Lane, White Plains, NY 10604, USA.
9
<PAGE>
(3) Dallah Albaraka Holding Company is the parent of a wholly-owned subsidiary,
Rathburn Limited, which directly owns our Shares. The business address of
the direct owner is Rathburn Limited, Abbott Building, Main Street,
P.O. Box 3186, Road Town, Tortola, BVI. Based on information in a
Schedule 13G filed with the SEC on March 8, 2000, Rathburn Limited has
pledged 15,000,000 Shares to Barclays Bank PLC under a security agreement
relating to the obligations of Dallah Albaraka Holding Company E.C.
(4) Telecom Asia Corporation Public Co. Ltd. is the ultimate parent of a
wholly-owned subsidiary, K.I.N. (Thailand) Co., Ltd., which directly owns
our Shares. The business address of the direct owner is K.I.N. (Thailand)
Co., Ltd., c/o Telecom Holding Co., Ltd., 30th Floor, Telecom Tower, 18
Ratchadaphisak Road, Huai Khwang, Bangkok 10310, Thailiand. Verizon
Communications Inc. holds approximately 19% of the shares of Telecom Asia
Corporation Public Co. Ltd.
(5) Marubeni Corporation is the ultimate parent of a wholly-owned subsidiary,
Vectant, Inc., which directly owns our Shares. The business address of the
direct owner is Vectant, Inc., 111 West 57th Street, New York, New York
10019, USA.
(6) The business address of The Asian Infrastructure Fund is: c/o Caledonian
Bank & Trust Limited, Caledonian House, Mary Street, Georgetown, Grand
Cayman, Cayman Islands.
(7) All Shares are subject to options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There exist various agreements between our subsidiaries and our shareholders
(or their affiliates) for the development, construction, operation, financing
and marketing of the FLAG Europe-Asia cable system and the FLAG Atlantic-1
system. The following paragraphs are a summary of the material provisions of
certain of these agreements.
MARKETING SERVICES AGREEMENT
FLAG Limited and Bell Atlantic Network Systems Company entered into a
Marketing Services Agreement pursuant to which Bell Atlantic Network Systems
Company was responsible for marketing the assignable capacity of the FLAG
Europe-Asia cable system. Bell Atlantic Network Systems Company was appointed
the exclusive sales agent for FLAG Limited throughout the world and bore all
marketing expenses and costs it incurred in connection with these marketing
services. FLAG Limited agreed to pay commissions at the rate of 4% of
commitments obtained prior to July 3, 1995 and 3% of the commitments obtained
thereafter. From inception through September 1999, FLAG Limited incurred
commissions and other costs in the amount of $18.4 million. In May 1998, under a
Marketing Transition Agreement, FLAG Limited and Bell Atlantic Network Systems
Company agreed to terminate the Marketing Services Agreement. Under the
Marketing Transition Agreement, FLAG Limited agreed to pay certain closing down
expenses, certain commissions in connection with their pre-termination
activities, and up to $3.0 million in commissions resulting from certain
post-termination sales. In this regard, FLAG Limited incurred $0.5 million in
closing down expenses, $15.9 million related to commissions in connection with
pre-termination sales activity and $2.0 million in connection with
post-termination sales activity. No further commissions are due in relation to
post-termination sales activity. As at September 30, 1999, $1.7 million of the
above remained unpaid and fully accrued by FLAG Limited. Also, under the
Marketing Transition Agreement, FLAG Limited agreed to pay a 50% commission in
the event that Bell Atlantic Network Systems Company or an affiliate secures the
sale of four whole DS3s (each DS3 consisting of 45 Mbs of capacity) on the FLAG
Europe-Asia cable system. While our obligations under this agreement continue,
no such sales of DS3s have occurred to date.
10
<PAGE>
EMPLOYEE SERVICES AGREEMENT
In May 1998 FLAG Limited entered into an Employee Services Agreement with
Bell Atlantic Global Systems Company under which Bell Atlantic Global Systems
Company seconded certain employees to FLAG Limited. During 1999, two Bell
Atlantic Global Systems Company employees were seconded to FLAG Limited and FLAG
Limited incurred total costs of $217,000 for this service. No persons have been
seconded since 1999.
CAPACITY PURCHASE AGREEMENTS
Bell Atlantic and its affiliates have agreed to purchase $22.5 million of
capacity on the FLAG Atlantic-1 cable system under various Capacity Purchase
Agreements.
PRIMARY SUPPLIER AGREEMENT
In January 2000, we entered into a Primary Supplier Agreement with Bell
Atlantic Global Systems Company under which Bell Atlantic Global Systems Company
has agreed to purchase from us 50% of the undersea facilities based
communications capacity in any fiber optic cable needed by Bell Atlantic Global
Systems Company or certain of its affiliates in each of the four calendar years
beginning on January 1, 2000. The purchase of capacity may be on the FLAG
Europe-Asia cable system, the FLAG Atlantic-1 cable system or any additional
system constructed or acquired in the future and may be effected by executing
Capacity Purchase Agreements with us or any of our affiliates.
EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION; TAX AGREEMENT
On February 26, 1999, FLAG Limited's shareholders other than Bell Atlantic
Network Systems Company exchanged all their shares of common stock in FLAG
Limited for Shares in FLAG Telecom. Bell Atlantic Network Systems Company,
however, exchanged only a limited portion of its shares of common stock in FLAG
Limited for 3,666,155 Shares in FLAG Telecom. At the same time, Bell Atlantic
Network Systems Company and FLAG Telecom entered into an Exchange Agreement and
Plan of Reorganization providing that Bell Atlantic Network Systems Company's
remaining shares of common stock in FLAG Limited would be exchanged for Shares
in FLAG Telecom in the event that, prior to February 26, 2002, Bell Atlantic
received certain regulatory approvals from the Federal Communications Commission
allowing Bell Atlantic to offer long distance service. Effective January 4,
2000, Bell Atlantic Network Systems Company exchanged the remaining 36,256,121
shares of common stock it held in FLAG Limited for an equivalent number of
Shares in FLAG Telecom.
The initial transfer by Bell Atlantic Network Systems Company of some of its
shares of common stock in FLAG Limited and the subsequent transfer by Bell
Atlantic Network Systems Company of its remaining shares in FLAG Limited are
intended to be treated as tax-free transactions for United States federal income
tax purposes. Under a tax agreement between FLAG Telecom and Bell Atlantic
Network Systems Company, FLAG Telecom agreed to make customary representations
that are designed to ensure that each exchange is treated as a tax-free
transaction and not to dispose of any shares in FLAG Limited or to permit FLAG
Limited to dispose of substantially all of its assets for a five-year period
following the initial or any subsequent exchange of shares in FLAG Limited. Any
breach of this agreement would require FLAG Telecom to indemnify Bell Atlantic
and Bell Atlantic Network Systems Company against any resulting United States
federal, state or local tax consequences.
11
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth information concerning compensation paid to the
CEO and the Company's four (4) most highly compensated executives other than the
CEO for each of fiscal years 1997, 1998, 1999 and (estimated) 2000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------------------
OTHER ANNUAL
YEAR SALARY BONUS COMPENSATION(1)
-------- -------- ---------- ----------------
<S> <C> <C> <C> <C>
Andres Bande(3)............... 2000(4) $450,000 $ -- $156,000
Chairman and CEO 1999 450,000 848,700 156,000
1998 438,362 1,505,556(5) 156,000
Edward McCormack.............. 2000(4) 273,000 -- 81,000
Deputy Chairman and 1999 217,666 399,499 --
Chief Operating Officer 1998 177,935 699,000(6) --
1997 160,000 160,000 96,625
Stuart Rubin.................. 2000(4) 270,000 -- 185,000
General Counsel and 1999 214,166 259,250 183,997
Secretary 1998 176,667 571,000(7) 78,953
1997 160,000 160,000 --
Samih Kawar(8)................ 2000(4) 204,006 -- 81,139
Executive Vice-President 1999 188,750 183,000 83,339
Operation and Maintenance 1998 120,000 90,000 133,639
Andy Evans(9)................. 2000(4) 187,500 -- --
Executive Vice-President 1999 179,500 152,600 --
Strategy and Marketing 1998 112,000 141,600(10) --
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
AWARD(S) OPTIONS/SARS COMPENSATION(2)
----------------- ------------- ----------------
<S> <C> <C> <C>
Andres Bande(3)............... -- -- $135,000
Chairman and CEO -- -- 168,492
-- 1,071,707 250,970
Edward McCormack.............. -- 180,000 --
Deputy Chairman and -- 50,000 --
Chief Operating Officer -- 268,000 --
-- -- 17,746
Stuart Rubin.................. -- 165,000 140,000
General Counsel and -- 25,000 125,279
Secretary -- 268,000 24,810
-- -- --
Samih Kawar(8)................ -- 105,000 30,058
Executive Vice-President -- 16,667 38,940
Operation and Maintenance -- 166,667 17,857
Andy Evans(9)................. -- 105,000 --
Executive Vice-President -- 16,667 --
Strategy and Marketing -- 166,667 --
</TABLE>
------------------------------
(1) Other Annual Compensation means perquisites and other personal benefits
received, if over $50,000 such as education, housing and car allowances.
(2) All Other Compensation means perquisites and other compensation for the
covered fiscal year such as tax equalization, insurance premiums paid on
behalf of the registrant during the covered fiscal year with respect to term
life insurance and other professional fees.
(3) Mr. Bande joined the Company on January 12, 1998.
(4) Numbers for fiscal 2000 are estimated.
(5) Mr. Bande received a signing bonus of $905,500 paid in January 1998 and a
cash bonus of $600,000.
(6) Mr. McCormack received a moving bonus of $444,000 in addition to his annual
bonus of $255,000. The moving bonus was in lieu of a completion bonus which
would have been payable approximately six (6) months later and in
consideration for Mr. McComack not exercising a right to terminate his
contract because he was being required to change his place of employment.
(7) Mr. Rubin received a moving bonus of $316,000 in addition to his annual
bonus of $255,000. The moving bonus was in lieu of a completion bonus which
would have been payable approximately six (6) months later and in
consideration for Mr. Rubin not exercising a right to terminate his contract
because he was being required to change his place of employment.
(8) Mr. Kawar joined the Company as an employee on May 1, 1998.
(9) Mr. Evans joined the Company on May 1, 1998.
(10) Mr. Evans received a signing bonus of $24,000 in addition to his annual
bonus of $117,600.
12
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Company's compensation philosophy is to relate the compensation of
executive officers to measures of company performance to ensure that
compensation policies are appropriately aligned with the value the Company
creates for shareholders. Our compensation philosophy for executive officers
takes into account various corporate goals that enhance shareholder value:
- to sustain a competitive and performance-oriented environment that
motivates executive officers to achieve a high level of individual and
corporate results in the business environment in which they operate;
- to relate incentive based compensation to the performance of each
executive officer, as measured by financial and strategic performance
goals; and
- to enable the Company to attract and retain top quality management.
The Compensation Committee of the Board of Directors (the "Committee")
periodically reviews the components of compensation for the Company's executive
officers on the basis of this philosophy. The major components of compensation
for executive officers are base salary, annual bonuses and stock option grants.
Each component of the total executive officer compensation package emphasizes a
different aspect of the Company's compensation philosophy.
Base salaries for executive officers are initially set based on recruiting
requirements (i.e., market demand), competitive pay practices, individual
experience and breadth of knowledge, internal equity considerations and other
objective and subjective factors. Increases to base salaries are determined
after an evaluation of competitive data, the individual's performance and his or
her contribution to the Company's overall performance. Base salaries are
reviewed annually and adjusted as deemed appropriate.
The Company relies to a large degree on annual bonus compensation to
attract, retain and reward executives of outstanding abilities and to motivate
them to perform to the full extent of their abilities. Target bonuses for
executive officers are determined on the basis of competitive bonus levels,
level of responsibility, ability to influence results on a corporate or business
unit level and, on occasion, subjective factors. The Committee reviews annual
performance goals for the executive officers as recommended by the Chairman/CEO
and reviews achievement against these targets.
The Company's Long-Term Incentive Plan was established in 1998 for the
purpose of providing incentives in the form of Stock Options to executives and
employees. In contrast to bonuses, which are paid for prior year
accomplishments, stock option grants represent incentives tied to future stock
appreciation. They are intended to provide executive officers with a direct
incentive to enhance shareholder value. Options generally vest over a two-year
period up to a maximum term of ten years. Option grants are awarded based on an
evaluation of competitive data and the anticipated contribution that the
executive officer will make to the Company. The administration of the Plan is
carried out by management in accordance with the policies and procedures
approved by the Committee. Periodic updates on options granted are provided to
the Committee.
The Committee conducts annually a full review of the performance of the
Company and its executive officers in assessing compensation levels. The
Committee considers various qualitative and quantitative indicators of both
Company and the individual performance of its executive officers. This review
evaluates the Company's performance both on a short- and long-term basis. The
Committee may consider such quantitative measures as revenue growth, growth in
Adjusted EBITDA (defined as operating income (loss) plus the following non-cash
items: depreciation/cost of capacity sold, non-cash stock compensation and
changes in deferred revenues) and other measures of profitability. The Committee
may also consider qualitative measures such as leadership, experience, strategic
direction and overall contribution to the Company.
13
<PAGE>
In addition the Committee meets periodically to review and, if appropriate,
approve grading structures, salary ranges, benefit plans (including the
aggregate amount of stock options that management may grant on an individual
basis), employment offers to candidates for key positions in the Company and the
grant of stock options under the Long-Term Incentive Plan.
The compensation of the Chairman/CEO is pursuant to his employment
agreement, which was approved by the Board. The Committee reviews the total
compensation of the CEO annually. The Committee sets annual performance targets
and reviews achievements against these targets. The Committee makes such
adjustments to bonuses and targets as it deems appropriate. For 1999, Mr. Bande
received a base salary of $450,000 and a bonus of $848,700. The amount of that
bonus was based upon the achievement of several significant milestones in the
Company's development, which ultimately culminated in the successful IPO of the
Company's Shares in early 2000.
THE COMPENSATION COMMITTEE
Andres Bande
Adnan Omar
Thomas Bartlett
OPTION GRANTS
The table below sets forth information concerning options granted in 1999
and 2000 to the CEO and the Company's four (4) most highly compensated
executives other than the CEO in 1999 and 2000.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------------------------------------------- ---------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS MARKET PRICE
UNDERLYING GRANTED TO OF COMMON
OPTIONS EMPLOYEES IN EXERCISE OR STOCK ON EXPIRATION
NAME GRANTED FISCAL YEAR BASE PRICE GRANT DATE DATE 0% 5% 10%
---- ---------- ------------ ----------- ------------ -------------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FISCAL YEAR 2000
Andres Bande......... -- -- -- -- -- -- -- --
Ed McCormack......... 120,000 1.774% $22.50 $22.50 April 10, 2010 -- $78,966 $161,784
60,000 0.887% $12.00 $12.00 Sept 14, 2010 -- $39,483 $ 80,892
Stuart Rubin......... 110,000 1.626% $22.50 $22.50 April 10, 2010 -- $72,386 $148,302
55,000 0.813% $12.00 $12.00 Sept 14, 2010 -- $36,193 $ 74,151
Samih Kawar.......... 70,000 1.035% $22.50 $22.50 April 10, 2010 -- $46,064 $ 94,374
35,000 0.517% $12.00 $12.00 Sept 14, 2010 -- $23,032 $ 47,187
Andy Evans........... 70,000 1.035% $22.50 $22.50 April 10, 2010 -- $46,064 $ 94,374
35,000 0.517% $12.00 $12.00 Sept 14, 2010 -- $23,032 $ 47,187
FISCAL YEAR 1999
Andres Bande......... -- -- -- -- -- -- -- --
Ed McCormack......... 50,000 0.739% $ 6.42 $ 6.42 Sept 9, 2009 -- $32,903 $ 67,410
Stuart Rubin......... 25,000 0.370% $ 6.42 $ 6.42 Sept 9, 2009 -- $16,451 $ 33,705
Samih Kawar.......... 16,667 0.246% $ 6.42 $ 6.42 Sept 9, 2009 -- $10,968 $ 22,470
Andy Evans........... 16,667 0.246% $ 6.42 $ 6.42 Sept 9, 2009 -- $10,968 $ 22,470
</TABLE>
--------------------------
(1) The dollar amounts under these columns are the results of calculations
assuming that the market price of the Shares appreciates in value from the
date of grant to the end of the option term at the 5% and 10% annual
appreciation rates set by the SEC for illustrative purposes and are not
intended to forecast future financial performance or possible future
appreciation, if any, in the price of the Shares.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The table below sets forth information concerning exercises of stock options
by the CEO and the Company's four (4) most highly compensated executives other
than the CEO during the last fiscal year, and the fiscal year-end value of such
executives' unexercised options. Amounts in the table are given as of
December 31, 2000. There were no options exercised during the fiscal year ended
December 31, 1999 or during the fiscal year ended December 31, 2000.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
AT FY-END (#)(1)(2)(3) AT FY-END ($)(1)(4)
SHARES --------------------------- ---------------------------
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andres Bande...................... -- -- 1,071,707 -- 3,860,626 --
Ed McCormack...................... -- -- 268,000 230,000 965,421 2,099,107
Stuart Rubin...................... -- -- 268,000 190,000 965,421 1,849,133
Samih Kawar....................... -- -- 166,667 121,667 600,387 1,179,451
Andy Evans........................ -- -- 166,667 121,667 600,387 1,179,451
</TABLE>
------------------------
(1) All Share information has been adjusted to reflect the Company's 6-for-1
stock split in February 2000.
(2) All options granted during 1999 were granted at an exercise price of $6.42
per share. Options granted during 2000 were granted at an exercise price of
$22.50 and $12.00 on April 10, 2000 and September 14, 2000, respectively.
(3) An ISO award vests in two equal annual installments over two years, 50%
vesting upon the first anniversary of the date of its grant and 50% vesting
upon the second anniversary of the date of its grant. The ISO awards provide
for acceleration of vesting and the lifting of the two year prohibition on
exercise in the event of a change of control, as defined in the FLAG Telecom
Long-Term Incentive Plan.
(4) The fair value of each option grant mentioned above is estimated on the date
of grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 1998 and 1999: risk-free interest rates
ranging from 5.1% to 5.8%; expected lives of 5 years; expected dividend
yield of zero percent; and expected volatility of 59%.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the FLAG Telecom Board consists of
Messrs. Bande, Omar and Bartlett. Both Mr. Bande and Mr. Omar hold options of
the Company, and Mr. Bande is Chairman and CEO of the Company.
CERTAIN COMPENSATION ARRANGEMENTS
The Company, directly and through one of its subsidiaries, is party to
employment agreements with Andres Bande, Ed McCormack and Stuart Rubin. Each
agreement with the Company provides that employment shall continue until
terminated. Compensation paid under these agreements and awards under the
Company's Long-Term Incentive Plan are set forth in the foregoing tables. The
agreements provide that if (i) the Company terminates the employee without Cause
or (ii) the employee terminates his employment for Good Reason (as each term is
defined in the respective agreements), the Company
15
<PAGE>
will pay Mr. Bande $1,440,000, Mr. McCormack one year's worth of salary and
guaranteed bonus and Mr. Rubin one year's worth of salary and guaranteed bonus.
In addition, the unvested stock options of Messrs. McCormack and Rubin would
vest if such termination occurred within three years of a Change of Control (as
such term is defined in the option grant certificates).
COMPENSATION OF OUTSIDE DIRECTORS
Each director who is not an employee of the Company is paid his reasonable
travel, hotel and incidental expenses in attending and returning from meetings
of the Board on committees or general meetings. In addition, each such director
is paid all expenses properly and reasonably incurred by him in the conduct of
the Company's business or in the discharge of his duties as a director.
During 1999 and 2000, two independent directors, Mr. Umberto Silvestri and
Mr. Jonathan Solomon (deceased in May 2000) each received an annual retainer of
$30,000, in addition to the reimbursement of travel expenses for attendance at
Board meetings. Mr. Michael Fitzpatrick, a third independent director appointed
in January 2000, also received the same amount of annual retainer.
In 1999, each of the non-employee directors at the time, other than
independent directors, was granted options over 41,667 Shares that vested wholly
upon the IPO. Of those directors, only Mr. Omar is still on the Board.
Independent directors Mr. Silvestri, Mr. Solomon and Mr. Fitzpatrick were
also granted the same amount of options at their respective appointments, but
only 20% vested upon the IPO. The remaining 80% vest in two equal installments
on each of the first and second anniversary dates of their respective grants
provided the relevant individual is still a director. The estate of Mr. Solomon
has until May 21, 2001 to exercise his options that vested upon the IPO.
PROPOSAL NO. 2.
APPOINTMENT OF INDEPENDENT AUDITORS
Under the Companies Act, 1981 of Bermuda (the "Companies Act"), FLAG Telecom
shareholders have the authority to appoint the independent auditors of FLAG
Telecom and to authorize the FLAG Telecom Board of Directors to determine the
auditors' remuneration. Upon the recommendation of the Audit Committee, the
Board has proposed Arthur Andersen as independent auditors to audit our
consolidated financial statements for the fiscal year ending December 31, 2000.
The Board is asking shareholders to approve such appointment and the authority
of the Board to determine their remuneration.
Arthur Andersen acted as independent auditors for the year 1999. In
connection with its audit of the consolidated financial statements of the
Company, Arthur Andersen also reviewed certain filings with the SEC. In
addition, Arthur Andersen performed certain non-audit services for the Company
and its subsidiaries in 1999. A representative of Arthur Andersen will be
present at the meeting. Such representative will have the opportunity to make a
statement, if he or she so desires, and will be available to respond to
questions.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
ARTHUR ANDERSEN AND OF THE AUTHORITY OF THE BOARD TO DETERMINE THEIR
REMUNERATION.
16
<PAGE>
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS
All proposals submitted by shareholders for inclusion in our proxy statement
for our 2001 Annual General Meeting of shareholders pursuant to Rule 14a-8 under
the Exchange Act must be received by us at our registered office at Cedar House,
41 Cedar Avenue, Hamilton HM12, Bermuda, not later than September 14, 2001,
assuming that such meeting is held on or about the anniversary of this meeting.
However, the Company anticipates holding its 2001 Annual General Meeting during
the second quarter of fiscal 2001 and will announce the date of the meeting in
our Annual Report on Form 10K for fiscal 2000 or in an earlier press release. If
the meeting is held in the second quarter of fiscal 2001, proposals for
inclusion in the proxy statement must be received a reasonable time before we
begin to print and mail proxy materials for the meeting. Upon timely receipt of
any such proposal, we will determine whether or not to include such proposal in
the proxy statement and proxy in accordance with applicable regulations and
provisions governing the solicitation of proxies.
Under the Companies Act, any shareholders who represent not less than 5% of
the total voting power of shareholders having the right to vote at the meeting
or who are 100 or more in number may requisition any resolution which may
properly be and is intended to be moved at an annual shareholders' meeting. A
shareholder or shareholders wishing to move a resolution at FLAG Telecom's 2001
Annual General Meeting of shareholders is required to give us notice of the
resolution at our registered office at Cedar House, 41 Cedar Avenue, Hamilton
HM12, Bermuda, at least six weeks before the meeting and deposit a sum
reasonably sufficient to meet the Company's expenses in giving effect to the
requisition.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to informational requirements of some U.S. federal securities
laws and, therefore are required or have agreed to file periodic reports and
other information with the SEC, except as described below. Although, as a
foreign private issuer, FLAG Telecom is exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements, and we are not
required to publish financial statements as frequently, as promptly or
containing the same information as those filed by United States companies, we
have agreed to provide our shareholders with reports on Form 10-Q and 10-K and
to comply with the United States proxy rules. In addition, we will furnish to
holders of common shares annual reports in English containing consolidated
financial statements, prepared in accordance with U.S. generally accepted
accounting principles ("U.S. GAAP"), examined by our independent public auditors
and including their report thereon. We also make available quarterly reports
containing condensed unaudited financial information for the first three fiscal
quarters of each year, prepared in accordance with U.S. GAAP. We will generally
furnish annual reports within 90 days after the end of each fiscal year, and
make available quarterly reports within 45 days after the end of the first three
fiscal quarters of each year. You may read and copy any reports, statements or
other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov." You
may also visit FLAG Telecom at "http://www.flagtelecom.com." Any Internet
addresses provided in this proxy statement are for information purposes only and
are not intended to be hyperlinks. Accordingly, no information in any of these
Internet addresses is included herein.
January 10, 2001
GENERAL
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. Unless otherwise directed, proxies held by the chairman of the
meeting will be voted to elect the directors named on the proxy card and FOR the
other resolution proposed by the Board of Directors. If any matter other than
those described in this proxy statement properly comes before the meeting, the
chairman will vote the Shares represented by such proxies in accordance with his
best judgment.
17
<PAGE>
APPENDIX A
FLAG TELECOM HOLDINGS LIMITED
AUDIT COMMITTEE CHARTER
I. PURPOSE AND AUTHORITY
The Audit Committee is appointed by the Board to assist the Board in
monitoring the integrity of the Group's financial reporting process and internal
controls of the Group and the independence and performance of the external
auditors.
II. COMPOSITION OF COMMITTEE
The Audit Committee shall have a minimum of 2 members or such other minimum
number that meets the requirements of The Nasdaq Stock Market. The members of
the Audit Committee shall be appointed by the Board on the recommendation of the
Chairman and shall all be non-executive directors of the Company.
III. RESPONSIBILITIES AND POWERS
The Audit Committee shall:
1. Submit this charter to the Board for approval and review and reassess
the adequacy of this charter annually.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Group's financial statements.
3. Review a report prepared by management and the independent auditor of
significant financial reporting issues and judgements made in connection
with the preparation of the Group's annual financial statements.
4. Meet periodically with management to review the Company's major
financial risk exposures and the steps management is taking to monitor and
control such exposures.
5. Review the significant reports to management prepared by the internal
auditor and management's responses.
6. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the Board.
7. Receive annual reports from the external auditor regarding the
auditor's independence, discuss such reports with the auditor and, if so
determined by the Audit Committee, recommend that the Board take appropriate
action to ensure the independence of the auditor.
8. Evaluate the performance of the independent auditor and, if so
determined by the Audit Committee, recommend that the Board replace the
independent auditor.
9. Review with the independent auditor any problems or difficulties the
auditor may have encountered relating to the conduct of the audit and any
management letter provided by the auditor and management's response to that
letter.
10. Review with the Group's General Counsel legal matters that may have
a material impact on the financial statements, the Group's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.
A-1
<PAGE>
11. Meet at least annually with the independent auditor.
12. Make regular reports to the Board.
13. Take such other actions deemed appropriate by the members of the
Audit Committee to carry out the purpose set out in Article I.
While the Audit Committee has the responsibilities and powers set forth in
this charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Group's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations or to assure
compliance with laws and regulations and the Group's internal policies and
procedures.
A-2
<PAGE>
A PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy Card for use at the 2000 Annual General Meeting (the "meeting")
of Shareholders of FLAG Telecom Holdings Limited, a company organized under the
laws of Bermuda (the "Company"), to be held on January 31, 2001 at 9 a.m., local
time, at the Le Meridien Grosvenor House Hotel, Park Lane, London W1K 7TN
England.
The undersigned, being a holder of shares of common stock ("Shares") of
the Company, hereby appoints as his or her proxy at the meeting the Chairman of
the meeting and directs such proxy to vote (or abstain from voting) at the
meeting as indicated on the reverse of this card or, to the extent that no such
indication is given, as set forth herein.
Please indicate on the reverse of this card how your Shares are to be
voted. If this card is returned duly signed but without any indication as to how
your Shares are to be voted in respect of any of the resolutions described on
the reverse, you will be deemed to have directed the proxy to vote FOR Company
Proposals 1 and 2.
In order to be effective, completed proxy cards should be received at
one of the addresses and by the time (being local time) specified below:
IN BERMUDA: FLAG Telecom Holdings Limited, Cedar House,
41 Cedar Avenue, Hamilton HM12, Bermuda, by 5 p.m. on
January 30, 2001;
IN THE UNITED KINGDOM: FLAG Telecom Holdings Limited, c/o FLAG
Telecom Limited, 9 South Street, London W1K 2XA, United
Kingdom, by 5 p.m. on January 30, 2001;
IN THE UNITED STATES: FLAG Telecom Holdings Limited, c/o
MacKenzie Partners, Inc., 156 Fifth Avenue, 13th Floor, New
York, New York 10010, United States of America, by 5 p.m. on
January 30, 2001.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
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Please mark
your votes as / X /
indicated in
this example
Please indicate with an "X" in the appropriate space how you wish your votes to
be cast. If no indication is given, proxies held by the Chairman of the meeting
will be voted in favor of Company Proposals 1 and 2.
The Board of Directors recommends a vote "FOR" the following Proposals:
1. Setting the number of directors at nine (9) and election of the nine
(9) nominees listed below to the Board of Directors
FOR all WITHHOLD FOR ALL
nominees AUTHORITY EXCEPT*
to vote for all
nominees
/ / / / / /
Andres Bande, Thomas Bartlett, Soopakij Chearavanont, Michael
Fitzpatrick, Alfred Giammarino, Edward McCormack, Adnan Omar, Dr. David
A. Riffelmacher and Umberto Silvestri
To vote for all nominees, mark the "For" box. To withhold voting for all
nominees, mark the "Withhold Authority" box. To withhold voting for a particular
nominee (or nominees), mark the "For All Except" box and enter the name(s) of
the exception(s) in the space provided.
*Exceptions:____________________________________________________________________
2. Re-appointment of Arthur Andersen & Co. as the independent auditors of
the Company and authorization for the Board of Directors to fix the
auditors' remuneration
FOR AGAINST ABSTAIN
/ / / / / /
1.IN THE CASE OF A CORPORATION, THIS PROXY MUST BE UNDER ITS COMMON SEAL OR
SIGNED BY A DULY AUTHORIZED OFFICER OR DIRECTOR WHOSE DESIGNATION MUST BE
STATED.
2.IN THE CASE OF JOINT HOLDERS, ANY HOLDER MAY SIGN, BUT THE VOTE OF THE SENIOR
WHO TENDERS A VOTE, WHETHER IN PERSON OR BY PROXY, WILL BE ACCEPTED TO THE
EXCLUSION OF THE VOTES OF THE OTHER JOINT HOLDERS AND FOR THIS PURPOSE SENIORITY
WILL BE DETERMINED BY THE ORDER IN WHICH THE NAMES STAND IN THE REGISTER OF
SHAREHOLDERS.
3.PLEASE SIGN AS NAME APPEARS HEREON. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
Signature(s) ______________ Signature/Title _____________ Dated __________, 2001
NOTE: Please sign as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
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