Exhibit 10.7

SEPARATION AGREEMENT

This Separation Agreement (“Agreement”) is entered into by Thomas R. Kloster
(“Executive”) and Primus Telecommunications, Inc., a Delaware corporation (the
“Company”), in order to resolve all matters between Executive and the Company
relating to Executive’s employment.

WHEREAS, Executive is employed by the Company;

WHEREAS, Executive is not party to an employment agreement with the Company but
is party to a Release and Separation Agreement with the Company dated as of
March 10, 2009 (the “Prior Agreement”);

WHEREAS, the Prior Agreement shall terminate upon the execution of this
Agreement; and

WHEREAS, Executive and the Company desire to memorialize an understanding with
respect to certain matters between them, including without limitation any issues
that would arise out of termination of Executive’s employment with the Company.

NOW, THEREFORE, in consideration of the mutual agreements and understandings set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound, the
parties hereto hereby agree as follows:

 

1. Definition of Terms. The following terms referred to in this Agreement shall
have the following meanings:

 

  (a) “Cause” shall mean engaging by Executive in intentional fraud or
intentional breach of the Company’s ethics guidelines, as may be established by
the Company from time to time.

 

  (b) “Change of Control” means (i) a sale of more than 50% of the outstanding
capital stock of the Company in a single or related series of transactions,
(ii) the merger or consolidation of the Company with or into any other
corporation or entity, other than a wholly-owned subsidiary of the Company,
where the Company is not the surviving entity, or (iii) a sale of all or
substantially all of the assets of the Company to an unrelated entity.

 

  (c)

“Constructive Termination” shall mean termination of employment following:
(i) without Executive’s express written consent, a material reduction of
Executive’s

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status, position, duties or responsibilities relative to Executive’s duties or
responsibilities in effect immediately prior to such reduction; (ii) without
Executive’s express written consent, a reduction by the Company of Executive’s
base salary or material welfare benefits (other than a reduction in welfare
benefits that similarly applies to all employees or other individuals that are
covered under the applicable welfare benefit plan) or potential to achieve total
compensation (including, without limitation, a decrease in Executive’s total
eligible bonus opportunity as a percentage of salary; provided, however, that
the targets, thresholds, achievements or other criteria that must be satisfied
or met as a condition to earning and/or receiving any such bonus may be changed
or altered from time to time, or otherwise set, by the Board of Directors of the
Company in its sole discretion) as in effect immediately prior to such
reduction; (iii) without Executive’s express written consent, the Relocation of
Executive to a facility or a location which increases Executive’s one-way
commute from Executive’s residence at the time of, and following, Relocation by
more than fifty (50) miles; or (iv) the failure of the Company to obtain the
assumption of this Agreement by any successor in interest to the Company through
sale of capital stock, merger, or otherwise, or if a sale of all or
substantially all of the assets of the Company is made to an unrelated entity.
Notwithstanding the foregoing, a Constructive Termination shall not be deemed to
have occurred for purposes of this Agreement unless (x) within a period not to
exceed ninety (90) days following the initial existence of any condition or
event set forth in clauses (i) through (iv) of this section 1(c), Executive
provides written notice to the Company of the existence of such condition or
event, which written notice shall set forth in reasonable detail why Executive
believes such condition or event has occurred, and (y) upon receipt by the
Company of such notice by Executive, the Company is given thirty (30) days to
remedy such condition or event and fails to so remedy such condition or event
within such thirty-day period.

 

  (d) “Termination Date” shall mean:

(i) if Executive’s employment is terminated by the Company for Cause, the date
of Executive’s receipt from the Company of written notice of termination for
Cause, or any later date specified therein, as the case may be;

(ii) if Executive’s employment is terminated as a result of (A) Executive’s
voluntary resignation, the fourteenth (14th) day following the Company’s receipt
from Executive of written notice of a voluntary termination, or (B) a
Constructive Termination, the expiration of the thirty-day period set forth in
clause (y) of the last sentence of section 1(c) above if the applicable
condition or event is not remedied within such thirty-day period;

 

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(iii) if Executive’s employment is terminated by the Company other than for
Cause or Disability, the date on which the Company notifies Executive of such
termination or any other later date so specified;

(iv) if Executive’s employment is terminated by reason of death or Disability,
the date of death of Executive or the thirtieth (30th) day after Executive
receives written notice from the Company of its intention to terminate
Executive’s employment due to a Disability; provided, however, within the thirty
(30) day period after such receipt, Executive shall not have returned to
full-time performance of Executive’s duties.

 

  (e) “Disability” shall mean Executive’s inability to perform the essential
duties, responsibilities and functions incident to his employment with the
Company as a result of any mental or physical disability or incapacity for a
period of five (5) consecutive months. Executive shall cooperate in all respects
with the Company if a question arises as to whether he has become disabled
(including, without limitation, submitting to an examination by a medical doctor
or other health care specialists selected by the Company and reasonably
acceptable to Executive and authorizing such medical doctor or such other health
care specialist to discuss Executive’s condition with the Company).

 

  (f) “Relocation” shall mean Executive’s relocation of his principal place of
business from McLean, Virginia or the immediately surrounding area.

 

2. Separation Arrangements.

 

  (a) Executive shall be entitled to payment through the Termination Date of his
base salary in effect prior to the Termination Date. Any accrued vacation amount
shall also be paid on the Termination Date. Executive agrees to submit to the
Company any and all expenses, which are business-related and reimbursable to
Executive by the Company, on or before thirty (30) days after the Termination
Date.

 

  (b) Upon any Constructive Termination or termination by the Company without
Cause (other than upon death or Disability), in addition to the payments in
section 2(a) above, the Executive shall, subject to the provisions of section
2(f) and compliance with section 3(a), be entitled to the following:

(i) The Company shall pay to Executive an amount equal to the greater of
(A) Executive’s annual base salary in effect as of December 31, 2008, and
(B) his annual base salary as of the Termination Date (the “Severance Salary”),
which Severance Salary shall be made in periodic payments to Executive in
accordance with the Company’s regular

 

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payroll practices with respect to the twelve-month period beginning on the
Termination Date; provided, however, that the first such payment shall be made
on the first regular payroll payment date following the Release Effective Date
(as defined below) and shall include all amounts that otherwise would have been
paid to Executive in accordance with the Company’s regular payroll practices
during the period beginning on the Termination Date and ending on such date.
Executive shall not have the right to make contributions to the Company’s 401(k)
savings plan from the Severance Salary payments made under this section 2(b)(i).

(ii) The Company shall pay to Executive an amount equal to the greater of
(A) the annual bonus target in effect on December 31, 2008, and (B) the annual
bonus target in effect as of the Termination Date (the “Bonus Payment”). Such
Bonus Payment shall be made in installments, with each such installment being
equal to a fraction, the numerator of which is the Bonus Payment and the
denominator of which is twelve (12) (each, an “Installment Amount”), and each
such Installment Amount shall be paid on the last business day of each calendar
month (each, a “Payment Date”) with respect to the period beginning on the
Termination Date and ending on the last day of the twelfth (12th) month
following the Termination Date; provided, however, that the first installment
shall (x) be paid to Executive on the first Payment Date following the Release
Effective Date and (y) shall include any Installment Amounts that otherwise
would have been paid to Executive on any Payment Date which occurred during the
period beginning on the Termination Date and ending on the Release Effective
Date. Notwithstanding the foregoing, the combined total of Severance Salary and
Bonus Payment paid to Executive after the Termination Date shall not exceed Six
Hundred Fifty Thousand Dollars ($650,000.00) and all payments under sections
2(b)(i) and 2(b)(ii) shall terminate once such limit is reached.

(iii) To the extent permitted by law and the terms of the applicable welfare
benefit plan, and subject to the occurrence of the Release Effective Date,
Executive shall continue to participate in such medical benefits, dental
benefits, life insurance, and long-term disability plans in which he is enrolled
for twelve (12) months following the Termination Date, as if he were still
employed by the Company; provided, however, that if the terms of the applicable
welfare benefit plan or plans do not permit such continued participation by
Executive, the Company shall, at its option, (A) provide Executive with welfare
benefits that are substantially equivalent (on an after-tax basis) to those
provided to Executive under the Company’s welfare benefit plans as of the
Termination Date, which benefits shall be provided at the Company’s expense
(less the amount of any applicable premiums that would have been paid by
Executive under the Company’s applicable welfare benefit plan had Executive
continued participation thereunder), or (B) reimburse Executive (on an after-tax
basis) for the cost of welfare benefits that are substantially equivalent to
those provided to Executive under the Company’s welfare benefit plans as of the
Termination Date (provided that Executive shall not be reimbursed for the amount
of any applicable premiums that would have been paid by Executive under the
Company’s applicable welfare benefit plans had Executive continued participation
thereunder). At the expiration of such twelve (12) month period, Executive shall
be entitled to COBRA coverage.

 

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  (c) If, within twenty-four (24) months after a Change of Control, Executive’s
employment is terminated due to a Constructive Termination or is terminated by
the Company without Cause (other than upon death or Disability), all outstanding
stock options, and other equity grants (including, without limitation,
restricted stock, restricted stock units, and warrants) granted to Executive
shall become 100% vested as of the Termination Date and shall be exercisable and
otherwise payable in accordance with their terms. Notwithstanding anything
herein or in an applicable restricted stock unit award agreement to the
contrary, with respect to any restricted stock units held by Executive, a
Constructive Termination shall only be deemed to have occurred if such
termination constitutes an “involuntary separation from service” for purposes of
Section 409A of the Internal Revenue Code of 1986, as amended, and the
regulations and other guidance issued thereunder (the “Code”).

 

  (d) All payments to Executive shall be less all amounts required or authorized
to be withheld by applicable federal, state, or local law.

 

  (e) Notwithstanding anything herein to the contrary, in the event that
Executive is determined to be a specified employee in accordance with
Section 409A of the Code for purposes of any severance payment under this
Agreement, such severance payments shall be made or begin, as applicable, on the
first payroll date which is more than six (6) months following the date of
separation from service, to the extent required to avoid the adverse tax
consequences to Executive under Section 409A of the Code. Each amount to be paid
or benefit to be provided under this Agreement shall be construed as a separate
identified payment for purposes of Section 409A of the Code. Notwithstanding
anything contained herein to the contrary, to the extent required to avoid the
adverse tax consequences under Section 409A of the Code, Executive shall not be
considered to have terminated employment with the Company for purposes of this
Agreement and no payments shall be due to him under this Agreement which are
payable upon his termination of employment until he would be considered to have
incurred a “separation from service” from the Company within the meaning of
Section 409A of the Code. To the extent required to avoid an accelerated or
additional tax under Section 409A of the Code, amounts reimbursable to Executive
under this Agreement shall be paid to Executive on or before the last day of the
year following the year in which the expense was incurred and the amount of
expenses eligible for reimbursement (and in-kind benefits provided to Executive)
during any one year may not affect amounts reimbursable or provided in any
subsequent year. In addition, any right to reimbursement or in-kind benefit
granted hereunder shall not be subject to liquidation or exchange for another
benefit.

 

  (f)

Executive agrees that Executive shall be entitled to the severance pay and
benefits as set forth in this Agreement only if Executive does not materially
breach the

 

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provisions of this Agreement at any time during the period for which such
payments or benefits are to be made or provided. The Company’s obligation to
make such payments and provide such benefits will terminate upon the occurrence
of any such material breach during the severance period.

 

3. Release of Claims.

 

  (a) Executive’s right to receive the severance payments and benefits described
in sections 2(b)(i), 2(b)(ii) and 2(b)(iii) hereof, and the obligation of the
Company to pay and provide such severance payments and benefits, is subject to
(x) the execution and delivery by Executive of a written release (“Release”)
containing the language set forth below in this section 3(a) within a period of
sixty (60) days following the Termination Date, and (y) the expiration of seven
(7) days after Executive’s executing such Release and such Release becoming
effective (such date, the “Release Effective Date”):

Executive, for himself and his heirs, executors and administrators, voluntarily,
knowingly and willingly agrees to release the Company, together with its direct
and indirect parents, subsidiaries, affiliates, predecessors and successors and
assigns, past and present directors, managers, officers, employees, agents,
clients, accountants, attorneys, and servants (collectively, the “Company
Releasees”) from any and all claims, charges, complaints, promises, agreements,
controversies, liens, demands, causes of action, obligations, damages, expenses
(including attorneys’ fees and costs) and liabilities of any nature whatsoever
(“Claims”), known or unknown, suspected or unsuspected, which Executive, or his
heirs, executors or administrators ever had, now have, or may hereafter claim to
have against any of the Company Releasees arising out of or relating to: (i) any
matter, cause or thing whatsoever arising from the beginning of time to the date
of this Release, (ii) Executive’s employment relationship with the Company or
any of the Company Releasees or the separations thereof including, but not
limited to, any such rights or claims arising under any statute or regulation
including the Age Discrimination in Employment Act of 1967, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with
Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Employee
Retirement Income Security Act of 1974, or the Delaware Equal Accommodations
Law, each as amended, or any other federal, state or local law, regulation,
ordinance or common law, or (iii) any policy, agreement, understanding or
promise, written or oral, formal or informal, between Executive on the one hand
and the Company or any of the Company Releasees on the other hand. Executive
acknowledges that the amounts referred to in section 2 of the Agreement are in
lieu of and in full satisfaction of any amounts that might otherwise be payable
under any contract, agreement (oral or written), plan, policy or practice, past
or present, of the Company or any of the Company Releasees; provided, however,
that notwithstanding the foregoing, nothing contained in this Release shall in
any way diminish or impair any rights Executive may have, from and after the
date the Release is executed, under the Agreement (collectively, the “Excluded
Claims”).

 

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  (b) The Release shall contain the following representations and
acknowledgements from Executive:

(i) Executive understands and agrees that, except for the Excluded Claims, he
has knowingly relinquished, waived and forever released any and all rights to
any personal recovery in any action or proceeding that may be commenced on
Executive’s behalf arising out of Claims that are released under the Release,
including, without limitation, Claims for backpay, front pay, liquidated
damages, compensatory damages, general damages, special damages, punitive
damages, exemplary damages, costs, expenses and attorneys’ fees.

(ii) Executive represents that he has no claims, complaints, charges or lawsuits
pending against the Company or any of the Company Releasees.

(iii) Executive acknowledges and agrees that he has had a sufficient period of
time of up to 21 days within which to review the Release, including, without
limitation, with Executive’s attorney, and that Executive has done so to the
extent desired.

(iv) Executive understands and agrees that the severance and welfare benefits
continuation set forth in section 2 of the Agreement are the only consideration
for the Executive’s signing the Release and no promise or inducement has been
offered or made to induce the Executive to sign the Release, except as expressly
set forth therein.

(v) Executive understands and agrees that the Release shall not become effective
until the 8th day after the Executive signs it and the Executive may at any time
before the effective date revoke the Release by hand delivering or sending via
overnight mail a written notice of revocation to the Company: Primus
Telecommunications Group, Incorporated, 7901 Jones Branch Drive, Suite 900,
McLean, VA 22102, Attention: Chief Executive Officer and General Counsel.

 

4.

Confidentiality. Executive agrees that Executive shall not, directly or
indirectly, use, make available, sell, disclose or otherwise communicate to any
person, other than in the course of Executive’s assigned duties and for the
benefit of the Company, either during the period of Executive’s employment or at
any time thereafter, any nonpublic, proprietary or confidential information,
knowledge or data, including without limitation, designs, drawings, market share
or financial data, or information relating to supplier agreements; inventions,
trade secrets, or processes, relating or belonging to the Company, any of its
predecessors, parents, subsidiaries, affiliated companies or businesses, which
shall have been obtained by Executive during Executive’s employment by the
Company

 

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and/or its predecessors, parents, subsidiaries or affiliates. If Executive is
required to disclose any such information by applicable law, regulation or legal
process, the Executive may make such disclosure without breaching his
obligations under this section 4; provided that Executive provides the Company
with prior notice of the contemplated disclosure and reasonably cooperates with
the Company at its expense in seeking a protective order or other appropriate
protection of such information. The restrictions set forth in this section 4
shall not apply to information that (i) was known to the public prior to its
disclosure to Executive; or (ii) becomes known to the public subsequent to
disclosure to Executive through no wrongful act of Executive or any
representative of Executive. Notwithstanding clauses (i) and (ii) of the
preceding sentence, Executive’s obligation to maintain such disclosed
information in confidence shall not terminate where only portions of the
information are in the public domain.

 

5. Non-solicitation. During Executive’s employment with the Company and for the
two (2) year period following the Termination Date, Executive agrees that
Executive will not, directly or indirectly, individually or on behalf of any
other person, firm, corporation or other entity, knowingly solicit, aid or
induce: (i) any employee of the Company or any of its parents, subsidiaries or
affiliates (as defined by the Company) to leave such employment in order to
accept employment with or render services to or with any other person, firm,
corporation or other entity unaffiliated with the Company or knowingly take any
action to materially assist or aid any other person, firm, corporation or other
entity in identifying or hiring any such employee; or (ii) any customer of the
Company or any of its predecessors, parents, subsidiaries or affiliates with
whom Executive had contact during Executive’s employment, to purchase goods or
services then sold by the Company or any of its parents, subsidiaries or
affiliates from another person, firm, corporation or other entity or assist or
aid any other persons or entity in identifying or soliciting any such customer.

 

6.

Non-competition. Executive acknowledges that during the course of Executive’s
employment with the Company and/or its predecessors, parents, subsidiaries or
affiliates, Executive has had access to and knowledge of confidential and
proprietary information belonging to the Company and/or its predecessors,
parents, subsidiaries or affiliates, and that Executive’s services are of a
unique nature and are irreplaceable, and that Executive’s performance of such
services to a competing business will result in irreparable harm to the Company
and/or its parents, subsidiaries or affiliates. Accordingly, during Executive’s
employment and for the one (1) year period following the Termination Date,
Executive agrees that Executive will not, directly or indirectly, own, manage,
operate, control, be employed by (whether as an employee, consultant,
independent contractor or otherwise, and whether or not for compensation) or
render services to any person, firm, corporation or other entity, in whatever
form, engaged in any business of the telecommunications service industry as any
business in which the Company or any of its parents, subsidiaries or affiliates
is engaged on the Termination Date or in which they have proposed, on or prior
to such date, to be engaged in on or after such date, and in which Executive has
been involved to any extent (other than de minimis) at any time during the one
(1) year period ending with the Termination Date, in any locale of any

 

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country in which the Company or any of its parents, subsidiaries or affiliates
conducts business. This section 6 shall not prevent Executive from owning not
more than one percent of the total shares of all classes of stock outstanding of
any publicly held entity engaged in such business, nor will it restrict
Executive from rendering services to charitable organizations, as such term is
defined in section 501(c) of the Internal Revenue Code.

 

7. Continued Cooperation. Executive acknowledges that the Company may need to
consult with Executive from time to time on a reasonable basis after the
Termination Date on matters relating to the business of the Company or that
Executive had worked on prior to the Termination Date. Executive agrees to
continue to cooperate with the Company and to provide any such information or
consultation as is reasonably requested and compensated by the Company.

 

8. Reasonableness. Executive acknowledges that the restrictions contained in
sections 4, 5, 6, and 7 are reasonable and necessary to protect the legitimate
interests of the Company, its parent, subsidiaries and its affiliates, that the
Company would not have executed this Agreement in the absence of such
restrictions, and that any violation of any provision of this paragraph will
result in irreparable injury to the Company. By executing this Agreement,
Executive represents that Executive’s experience and capabilities are such that
the restrictions contained in sections 4, 5, 6, and 7 will not prevent Executive
from obtaining employment or otherwise earning a living at the same general
level of economic benefit as is currently the case. Executive further represents
and acknowledges that (i) Executive has been advised by the Company to consult
with legal counsel of Executive’s choosing in respect of this Agreement, and
(ii) that Executive has had full opportunity, prior to executing this Agreement,
to review thoroughly this Agreement with counsel. In the event the provisions of
sections 4, 5, 6 and/or 7 shall ever be deemed to exceed the time, scope or
geographic limitations permitted by applicable laws, then such provisions shall
be reformed to the maximum time, scope or geographic limitations, as the case
may be, permitted by applicable laws.

 

9.

Term. This Agreement shall commence on July 1, 2009 (the “Effective Date”) and
shall end on the third (3rd) anniversary of the Effective Date (the “Agreement
Term”); provided, however, that on the second (2nd) anniversary of the Effective
Date and each anniversary thereafter (the “Extension Date”), the Agreement Term
shall be automatically extended for successive one-year periods (the “Extended
Agreement Term”), unless no later than ninety (90) days prior to the applicable
Extension Date, the Company or Executive provides written notice of intent not
to so extend the Agreement Term. To the extent Executive continues employment
with the Company following the expiration of the Agreement Term (or the Extended
Agreement Term), the Company’s severance policy then in effect for executives
shall apply to Executive.

 

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10. No Admission of Wrongdoing. This Agreement is not an admission that the
Company has any liability to Executive, or of any wrongdoing by the Company. The
Company denies any liability of any kind to Executive.

 

11. Entire Agreement. This Agreement constitutes the entire agreement, and
supersedes any and all prior agreements, and understandings, both written and
oral, between the parties hereto with respect to the subject matter hereof
except as otherwise provided herein.

 

12. Choice of Law. The parties agree that Delaware law shall govern in the
interpretation of this Agreement, and that in the event of any suit or any other
action arising out of or relating to this Agreement, the court shall apply the
internal laws of the State of Delaware, without giving effect to the principles
of conflicts of law.

 

13. Modification Only By Written Agreement. This Agreement may not be changed in
any way except in a written agreement signed by both Executive and an authorized
representative of the Company.

 

14. Knowing and Voluntary. Executive has carefully read and fully understands
all of the provisions of this Agreement; knows and understands the rights
Executive is giving up by signing this Agreement; and has entered into this
Agreement knowingly and voluntarily. Executive further represents and warrants
that, except as set forth herein, no promises or inducements for this Agreement
have been made, and Executive is entering into this Agreement without reliance
upon any statement or representation by any of the Company Releasees or any
other person, concerning any fact material hereto.

 

15. Severability. It is the desire and intent of Executive and the Company that
the provisions of this Agreement shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. In the event that any one or more of the provisions
of this Agreement, except for the provisions of section 2, shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remainder of this Agreement shall not in any way be affected or impaired
thereby.

 

16. Binding Agreement. Executive and the Company represent that this Agreement
shall be a binding and valid obligation of each party. This Agreement shall be
binding on and inure to the benefit of the Company and its successors and
assigns and to Executive and his heirs.

 

17. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. In addition, a scanned or faxed signature page shall be
deemed equivalent to an original signature page.

 

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18. Prior Agreement. On the Effective Date, the Prior Agreement is, and shall be
deemed to be, terminated and of no further force and effect.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year set forth below.

 

/s/ Thomas R. Kloster

    June 30, 2009 Thomas R. Kloster     Date

/s/ K. Paul Singh

   

June 30, 2009

K. Paul Singh,     Date For Primus Telecommunications, Inc.    

 

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