UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 27, 2012
PRIMUS TELECOMMUNICATIONS GROUP, INCORPORATED
(Exact name of registrant as specified in its charter)
| Delaware | 001-35210 | 54-1708481 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS. Employer Identification No.) |
7901 Jones Branch Drive, Suite 900
McLean, VA 22102
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (703) 902-2800
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
This Current Report on Form 8-K contains forward-looking statements. Actual events or results may differ materially from those contained in the forward-looking statements. Forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors and are not guarantees of future performance. Actual results, performance or outcomes may differ materially from those expressed in or implied by those forward-looking statements. For a discussion of the specific factors that may cause the actual results of Primus Telecommunications Group, Incorporated (the “Company”) to differ materially from those projected in any forward-looking statements, please refer to the documents that the Company files with the Securities and Exchange Commission (“SEC”), including without limitation the Company’s Form 10-K, as may be updated in Forms 10-Q and 8-K and other filings made with the SEC by the Company. The Company disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.
Item 2.05 Costs Associated with Exit or Disposal Activities.
Item 2.06 Material Impairments.
As previously disclosed, a special committee (the “Special Committee”) of the Board of Directors (the “Board”) of the Company is exploring and evaluating the Company’s strategic alternatives to enhance shareholder value. In connection with this strategic review process, on June 28, 2012, the Board made a general determination to pursue a sale or other disposition or disposal of the Company’s international carrier services business unit (“ICS”). The Company does not intend to provide updates or make any further comments regarding the possible sale or other disposition or disposal of ICS, unless the Board has approved a specific course of action or transaction or otherwise deems disclosure appropriate.
In connection with its decision to pursue a sale or other disposition or disposal of ICS, the Company’s management is assessing the potential charges and expenses for such sale or other disposition or disposal under generally accepted accounting principles. As part of this assessment, the Company is evaluating major categories of costs potentially associated with the Board’s determination to pursue a sale or other disposition or disposal of ICS. However, at this time the Company has not identified any material categories of costs or impairments nor finally determined the total amount or range of amounts expected to be incurred in connection with the sale or other disposition or disposal of ICS. To the extent that the Company identifies any material categories of costs or impairments; determines the total amount or range of amounts expected to be incurred in connection with the sale or other disposition or disposal of ICS; or determines the amount or range of amounts of the impairment charges that would result in future cash expenditures, the Company will amend this Form 8-K to include the appropriate disclosure.
In addition to the possible sale or other disposition or disposal of ICS, the Special Committee continues to explore and evaluate other strategic alternatives to enhance shareholder value, which may include (but may not be limited to) a sale, merger or other business
combination involving the Company, a recapitalization of the Company, a joint venture arrangement, the sale or spinoff of other Company assets or one or more of its other business units, or the continued execution of the Company’s business plans. The Company has not set a timetable for completion of the Special Committee’s evaluation process or, except as described above, made a decision to pursue any particular course of action or transaction, and there can be no assurance that any transaction will be pursued or completed. The Company does not intend to provide updates or make any further comments regarding the evaluation of strategic alternatives, unless the Board has approved a specific course of action or transaction or otherwise deems disclosure appropriate.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
Separation Agreement with Kenneth D. Schwarz and Appointment of James C. Keeley
On July 1, 2012, in connection with corporate staffing needs following the Company’s sale of its Australia operations, Primus Telecommunications, Inc. (“PTI”), a wholly owned subsidiary of the Company, entered into a Separation and Release Agreement (the “Separation Agreement”) with Kenneth D. Schwarz, presently the Chief Financial Officer and Senior Vice President, Information Technology of the Company. The Separation Agreement provides that Mr. Schwarz is separated from any positions held with PTI and its affiliates (including the Company), effective as of July 1, 2012 (the “Effective Date”). No disagreement with the Company or PTI on any matter relating to the operations, policies or practices of the Company or PTI led to Mr. Schwarz’s separation.
Pursuant to the Separation Agreement, Mr. Schwarz will be entitled to the following severance payments and benefits: (i) $297,917.00, less all required tax withholdings, which represents six months of Mr. Schwarz’s current salary, bonus and prorated annual bonus, payable in a lump sum; and (ii) if Mr. Schwarz elects to continue his health insurance under COBRA, the Company will pay the COBRA premiums until the earlier of (a) January 31, 2013 and (b) the date Mr. Schwarz is eligible for health care coverage under a subsequent employer’s plan.
The Separation Agreement provides further that 12,602 unvested restricted stock units (“RSUs”) that the Company previously granted to Mr. Schwarz will vest as of the Effective Date, which accelerated vesting was approved by the compensation committee (the “Compensation Committee”) of the Board on June 27, 2012. All other unvested RSUs will be forfeited as of the Effective Date.
The Separation Agreement also contains customary release, non-disparagement, and confidentiality provisions. The Separation Agreement terminates and supersedes that certain Offer Letter, dated June 17, 2011, between Mr. Schwarz and the Company, on behalf of PTI, except for any provision therein that contemplates performance by Mr. Schwarz after the Effective Date.
The foregoing description of the Separation Agreement is qualified in its entirety by reference to the full text of such agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Also as of the Effective Date, the Board appointed James C. Keeley, the Company’s Vice President, Corporate Controller & Treasurer, to serve as the Company’s Acting Chief Financial Officer and increased his annual salary to $285,000. Information regarding Mr. Keeley’s age, business experience, employment history and related matters are included in the Company’s definitive proxy statement for the annual meeting of shareholders held on June 12, 2012, which was filed with the SEC on April 30, 2012 (the “Proxy Statement”).
Named Executive Officer Compensation Matters
On June 27, 2012, the Compensation Committee, in recognition of the leadership and contributions of certain Named Executive Officers (as defined in the Proxy Statement) of the Company in connection with the Company’s previously announced sale of its Australia operations, (i) awarded cash bonuses to such Named Executive Officers and (ii) approved the accelerated vesting of certain RSUs held by such Named Executive Officers to June 27, 2012, in each case under the Company’s Management Compensation Plan, as amended, as set forth in the following table:
| Named Executive Officer |
Number of RSUs Accelerated |
Cash Bonus | Method of Payment of Cash Bonus | |||||||
| Peter D. Aquino | N/A | $ | 750,000 | $750,000 to be paid on July 13, 2012 | ||||||
| Richard Ramlall | 15,263 | $ | 83,333 | $83,333 to be paid on July 13, 2012 | ||||||
| James C. Keeley | 6,386 | $ | 62,500 | $31,250 to be paid on July 13, 2012, and $31,250 to be paid on or about April 1, 2013 | ||||||
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
| 10.1 | Separation and Release Agreement, dated July 1, 2012, by and between Kenneth Schwarz and Primus Telecommunications, Inc. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Primus Telecommunications Group, Incorporated (Registrant) | ||||
| Date: July 3, 2012 | By: | /s/ Peter D. Aquino | ||
| Name: | Peter D. Aquino | |||
| Title: | Chairman, President & Chief Executive Officer | |||
INDEX TO EXHIBITS
| Exhibit |
Description | |
| 10.1 | Separation and Release Agreement, dated July 1, 2012, by and between Kenneth Schwarz and Primus Telecommunications, Inc. | |
Exhibit 10.1
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION AND RELEASE AGREEMENT (the “Agreement”) is made and entered into by and between Kenneth Schwarz (the “Employee”) and Primus Telecommunications, Inc. (the “Employer”).
WHEREAS, the Employer and the Employee entered into an employment offer letter dated June 17, 2011 (the “Employment Letter”);
WHEREAS, effective July 1, 2012, the Employee’s employment with the Employer was terminated by the Employer “without cause” (as defined in the Employment Letter); and
NOW THEREFORE, in consideration of the mutual promises contained herein, it is agreed as follows:
| 1. | The parties acknowledge and agree that the Employee’s employment with the Employer has been terminated effective July 1, 2012 (the “Termination Date”). The Employee acknowledges and agrees that the Employer has no obligation to re-employ the Employee at any time in the future and, if the Employee should seek employment with the Employer at some future date, that the Employer may choose to decline the Employee’s request for future employment, without consequence to the Employer. The Employer agrees that it will not contest the Employee’s eligibility for unemployment compensation benefits. Notwithstanding the foregoing, nothing in this Section 1 shall prohibit the Employer from responding truthfully to inquiries from any governmental agency or regulatory authority concerning the Employee’s employment with the Employer or the termination thereof. |
| 2. | Once this Agreement becomes effective as described in Section 13 below (the “Effective Date”), the Employer shall pay (i) the Employee the amount of $297,917.00, less applicable deductions and withholdings, which represents six (6) months of the Employee’s current salary, the transaction bonus, and a prorated annual performance bonus, payable in lump sum and commencing on the Employer’s next regular scheduled pay date after the Effective Date; (ii) provided the Employee timely elects to convert the current Basic Life Insurance policy to an individual policy, the premiums on the Employee’s behalf, for a period of up to six (6) calendar months, which period shall end on January 31, 2013, and (iii) provided the Employee timely elects to continue health insurance coverage in accordance with the federal Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the COBRA premiums, on the Employee’s behalf, until the date that is the earlier of (a) six (6) calendar months of insurance coverage, which period shall end on January 31, 2013, and (b) the date the Employee is eligible for health care coverage under a subsequent employer’s plan ((i), (ii), and (iii) collectively, the “Severance Pay”). The Employee may continue coverage beyond January 31, 2013, at the Employee’s own cost, in accordance with all applicable COBRA requirements. In the event the Employee commences employment with a subsequent employer during the six (6) month COBRA period, the Employee shall promptly notify the Employer in writing of the date the Employee commences such employment and shall respond promptly to any reasonable inquiries concerning the Employee’s eligibility for health care coverage under such subsequent employer’s plan. The Employer shall become obligated to pay the Severance Pay only if the Employee has not revoked this Agreement during the seven-day revocation period referenced in Section 13 below. |
| 3. | A certain portion of the Employee’s unvested Restricted Stock Units (“RSUs”) under the Primus Telecommunications Group, Incorporated Management Compensation Plan (“Plan”), as amended, will have vested, as of the Termination Date; specifically, 7,602 STIP RSUs as well as the 5,000 LTIP RSUs. You understand and acknowledge that all other unvested RSUs will be terminated as of the Effective Date. |
| 4. | As a material inducement to the Employer to enter into this Agreement and in consideration of the Employer’s promise to provide the Severance Pay pursuant to Section 2 above, the Employee, on behalf of the Employee, the Employee’s heirs, legal representatives, executors, administrators and assigns, hereby irrevocably and unconditionally releases the Employer and all its parent companies, subsidiaries, affiliates and related entities, together with all of its and their current, former and future employees, directors, partners, members, shareholders, officers, agents, attorneys, representatives, insurers, predecessors, successors, assigns, and the like, and all persons acting by, through, under or in concert with any of them (collectively, the “Releasees”) from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages or causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs incurred) of any nature whatsoever, known or unknown, suspected or unsuspected, arising on or before the date the Employee signs this Agreement, including, but not limited to, any claims arising out of or related to (i) the Employment Letter, (ii) the Employee’s employment with the Employer and the ending of that employment, (iii) any contract, express or implied, in writing or oral, or (iv) any rights or claims under any federal, state or local statute prohibiting any form of discrimination, including, without limitation, the National Labor Relations Act, Title VII of the 1964 Civil Rights Act, the Age Discrimination in Employment Act, the Older Workers’ Benefit Protection Act, the Virginia Human Rights Act, the Rehabilitation Act of 1973, including Section 504 thereof, the Americans with Disabilities Act, the Americans with Disabilities Amendments Act of 2008, the Civil Rights Act of 1966 (42 U.S.C. § 1981), the Civil Rights Act of 1991, the Equal Pay Act, the Lilly Ledbetter Fair Pay Act, the Genetic Information Nondiscrimination Act of 2008, the Family and Medical Leave Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Immigration Reform and Control Act, the Worker Adjustment and Retraining Notification Act, and the Occupational Safety and Health Act, all as amended. This release specifically includes, but is not limited to, any claims based upon race, color, age, religion, sexual orientation, creed, sex, national origin, ancestry, alienage, citizenship, nationality, mental or physical disability, marital status, harassment or any other basis prohibited by law. The Employee further agrees to waive irrevocably any right to recover under any claim that may be filed on the Employee’s behalf by the U.S. Equal Employment Opportunity Commission (“EEOC”) or any other federal, state or local government entity, relating to the Employee’s employment with the Employer or the ending of that employment. Notwithstanding the foregoing, this Agreement does not: (i) prohibit or restrict Employee from communicating, providing relevant information to or otherwise cooperating with the EEOC or any other governmental authority with responsibility for the administration of fair employment practices laws regarding a possible violation of such laws or responding to any inquiry from such authority, including an inquiry about the existence of this Agreement or its underlying facts, or (ii) require Employee to notify the Employer of such communications or inquiry. |
| 5. | The Employee represents and warrants that the Employee has not (i) filed or otherwise initiated any complaints or charges or lawsuits against the Employer or any other Releasee with any governmental agency or court, or (ii) assigned or transferred, or purported to assign or transfer, to any person or entity, any claim or any portion thereof or interest therein the Employee has against the Employer or any other Releasee. |
| 6. | The Employee has returned all Employer property, including without limitation, all equipment, computers/laptops, supplies, documents, files, records, reports, memoranda, software, credit cards, cardkey passes, identification badges, door and file keys, computer access codes, disks, employee or instructional manuals, and all other physical or personal property the Employee received, prepared or helped to prepare in connection with the Employee’s employment with the Employer, and all copies, duplicates, reproductions or excerpts thereof, whether such material is in paper form or electronic or recorded format. Employee will keep the Company provided iPhone providing he pay the Company $200.00 within five (5) business days of execution of this Agreement. Upon receipt of payment, the Company will release the iPhone telephone number to the Employee. |
| 7. | The Employee agrees that the Employee will not make, or cause to be made, any disparaging or defamatory comments about the Employer or about any other Releasee, nor will the Employee authorize, encourage or participate with anyone on the Employee’s behalf to make such statements. The Employer agrees that it will not make, or cause to be made, any disparaging or defamatory comments about the Employee or authorize, encourage or participate with anyone on the Employer’s behalf to make such statements. |
| 8. | The Employee agrees to keep the terms, amount and fact of this Agreement completely confidential, except as may be required by law or legal process (except to the extent publicly disclosed by the Employer), and except that the Employee may reveal the terms of this Agreement to the Employee’s immediate family and the Employee’s legal, financial and tax advisors, provided that each such individual agrees not to reveal such information further. |
| 9. | The Employee acknowledges and agrees that the Severance Pay to be provided to the Employee under Section 2 above shall be in lieu of and discharge any obligations of the Employer to the Employee for any further compensation, severance benefits, or any other expectations of remuneration or benefit on the part of the Employee, except: (i) for the payment of any salary earned but not paid through the Termination Date, less applicable deductions and withholdings; (ii) for the payment of any accrued but unused paid-time-off as of the Termination Date, less applicable deductions and withholdings; (iii) for the reimbursement of reasonable business expenses incurred by the Employee prior to the Termination Date, to be paid in accordance with the Employer’s policy for reimbursement of employee business expenses; and (iv) to the extent that the Employee qualifies for benefits under the terms of any employee benefit or equity incentive plan (the “Equity Plan”) following the Termination Date, which in this case, Employee does not qualify for such benefit. If applicable, the Employee shall continue to be entitled to any vested benefits that accrued as of the Termination Date pursuant to the Equity Plan, but the Employee shall accrue no further benefits after the Termination Date. |
| 10. | The Employee represents and acknowledges that the Employee (i) has been given a period of forty-five (45) calendar days to consider this Agreement; (ii) has read and understands the terms of this Agreement; (iii) has been given an opportunity to ask questions of the Employer’s representatives; (iv) understands that this Agreement includes a waiver of all rights and claims the Employee may have under the Age Discrimination In Employment Act of 1967 (29 U.S.C. §621 et seq.); and (v) has been advised to consult with an attorney prior to signing this Agreement. |
| 11. | The Employee further represents that in signing this Agreement the Employee does not rely, and has not relied, on any representation or statement not set forth in this Agreement made by any representative of the Employer or any other Releasee with regard to the subject matter, basis or effect of this Agreement or otherwise. |
| 12. | This Agreement is knowingly and voluntarily entered into by all parties. |
| 13. | For a period of seven (7) calendar days after the date the Employee signs this Agreement (which shall not be prior to the Termination Date), the Employee has the right to revoke this Agreement by delivering written notice of revocation to John D. Filipowicz, General Counsel & CAO, 7901 Jones Branch Drive, Suite 900, McLean, VA 22102 prior to midnight on the seventh (7th) calendar day following the date on which the Employee signs this Agreement. The Agreement shall not be effective or enforceable, and the Employee shall not be entitled to any Severance Pay, unless and until seven (7) calendar days have elapsed from the date the Employee signs this Agreement, and the Employee has not revoked the Agreement during that seven (7) calendar day period. |
| 14. | The Employee covenants and agrees that during the one (1) year period following the Termination Date, the Employee will not knowingly, directly or indirectly, as principal, agent, or otherwise, anywhere in the world, act in any way to solicit, divert, or take away any customer of the Employer. |
| 15. | This Agreement sets forth the entire agreement between the parties and supersedes any and all prior agreements, understandings or arrangements between the parties as to the subject matter of this Agreement, except that the following shall survive this Agreement and remain in full force and effect in accordance with their terms: (i) any provision of the Employment Letter that contemplates performance by the Employee after the Termination Date. |
| 16. | Employee acknowledges that Employee has a legal obligation to refrain from trading in the Employer’s securities while in possession of material non-public information regarding the Employer will continue after leaving the Employer and that after the Termination Date any transactions by Employee in the Employer’s securities will be effected by Employee independently of the Employer. |
| 17. | Employee acknowledges that, even though effective as of the Termination Date, Employee will no longer be an executive officer of the Employer, any transaction by Employee in the Employer’s securities executed within a period of less than six months of an opposite-way transaction that occurred while Employee was an executive officer of the Employer will continue to be subject to the reporting and liability provisions of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, and that Employee will remain responsible for complying with such provisions. Employee further acknowledges that, within 45 days after the end of the Employer’s fiscal year, all former executive officers who conducted unreported transactions in the Employer’s securities during the fiscal year may be required to file a year-end report with the Securities and Exchange Commission, and that Employee’s failure to respond on a timely basis to a request from the Employer for a written representation that no such filing is due may result in disclosure in the Employer’s Proxy Statement and Annual Report on Form 10-K that Employee is delinquent with respect to a required report. |
| 18. | You acknowledge that during your employment with the Employer, you had access to trade secrets and other confidential and/or proprietary information (“Confidential Information”). You agree that you will use your best efforts and utmost diligence to preserve, protect, and prevent the disclosure of such Confidential Information, and that you shall not, either directly or indirectly, use, misappropriate, disclose or aid any other person in disclosing such Confidential Information. You acknowledge that as used in this Agreement, “Confidential Information” includes, but is not limited to, all methods, processes, techniques, practices, product designs, trade secrets, pricing information, billing histories, customer requirements, customer lists, employee lists, salary information, personnel matters, financial data, operating results, plans, contractual relationships, projections for new business opportunities for new or developing business for the Employer, its parent, subsidiaries or affiliates, and technological innovations in any stage of development. “Confidential Information” also includes, but is not limited to, all notes, records, software, drawings, handbooks, manuals, policies, contracts, memoranda, sales files, or any other documents generated or compiled by any employee of the Employer, its parent, subsidiaries or affiliates. Such information is, and shall remain, the exclusive property of the Employer, its parent, subsidiaries or affiliates, and you hereby covenant and agree that you shall promptly return all such information to the Employer. |
| 19. | This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without reference to rules regarding conflicts of law. The Employee irrevocably submits to and recognizes the jurisdiction of Virginia’s state courts or, if appropriate, a federal court located in the Commonwealth of Virginia (which courts, for purposes of this Agreement, are the only courts of competent jurisdiction), over any suit, action or other proceeding arising out of, under or in connection with this Agreement of any subject addressed in this Agreement. |
| 20. | The provisions of this Agreement are severable, and if any part or provision of it is found to be unenforceable, the other parts and provisions shall remain fully valid and enforceable, provided, however, that if the release provided for in Section 4 above (or any part thereof) is found to be invalid, the parties shall negotiate a modification to such release to ensure the maximum enforceability permitted by law. |
| 21. | This Agreement may be executed in any number of counterparts, each of which shall, when executed, be deemed to be an original and all of which shall be deemed to be one and the same instrument. |
| 22. | Neither this Agreement nor any part of it may be modified, amended, changed or terminated orally, and any modification, amendment, or termination must be in writing signed by the parties hereto. Any waiver of any term or provision of this Agreement must be in writing and signed by the party granting the waiver. |
| 23. | This Agreement shall be binding on the Employee and the Employee’s heirs, administrators, representatives, executors and assigns and shall inure to the benefit of the Employer, its parent companies, subsidiaries and affiliates and to all of their successors and assigns. |
| 24. | Each party shall bear its or his own attorneys’ fees and costs incurred in connection with this Agreement. |
| 25. | Any provision of this Agreement that contemplates performance after any termination or expiration of this Agreement shall survive any termination or expiration of this Agreement and continue in full force and effect. |
IN WITNESS WHEREOF, each of the parties has executed this Agreement on the date(s) indicated below.
| PRIMUS TELECOMMUNICATIONS, INC. | EMPLOYEE | |||||||
| By: | /s/ Peter Aquino |
/s/ Kenneth Schwarz | ||||||
| Peter Aquino | Kenneth Schwarz | |||||||
| Chairman, President, and CEO | ||||||||
| Date: | July 2, 2012 |
Date: | July 2, 2012 | |||||