November 30, 1998
Dear Shareholder:
You may have recently received correspondence from a dissident group headed by
Walter Anderson. Mr. Anderson is seeking to control your Board of Directors by
electing his own hand-picked slate of candidates at the December 10th Annual
Meeting. We caution you not to sign any proxy card you may receive from the
dissidents before you consider all the pertinent information.
As shareholders, you are probably already aware that since 1993 the Company's
annual revenues have grown tenfold from a little under $12 million in 1993 to
more than $125 million in 1998. Our accomplishments have not gone unnoticed.
In August 1998, Money Magazine recognized Total-Tel as the 18th best
stock to have owned since the bull market began in 1982.
Total-Tel was named "Communications Company of the Year" for 1998 by
The New Jersey Technology Council.
The Board of Directors is writing this letter to correct some of the numerous
mistakes and omissions from Mr. Anderson's proxy materials and to provide you
with information which should be considered before you decide how to vote your
shares.
The Dissidents complain about the Company's recent financial performance, citing
to Total-Tel's most recent quarterly SEC filings. They claim that Total-Tel's
net income fell by 38 percent for the six months ended July 1998 when compared
to the same period in 1997. This decline in net income is directly attributable
to exceptional charges the Company experienced because of the very litigation
being pursued by Mr. Anderson, Gold & Appel, and Revision. Without these
extraordinary charges, operating income for the quarter ended July 1998 would
have more than doubled from the comparable quarter in 1997, and operating income
for the six months ended July 1998 would have also increased in comparison to
the prior year's results.
The Dissidents Proxy Materials Contain Numerous Omissions and Mistakes,
including the following:
What Mr. Anderson Says What Mr. Anderson Doesn't Say
- ---------------------- -----------------------------
Mr. Anderson is a member of US Wats is a direct competitor of
the Board of Directors of US Wats. Total-Tel.
Mr. Anderson purchased Mr. Anderson arranged to purchase
Total-Tel shares on the open shares from Mr. Slater, a Total-Tel
market at the same time he consultant, for a pre-split price of
arranged to purchase shares in up to $68.44 per share, and from
private transactions. Mr. Alward, a former Total-Tel
officer and director, for up to $39.80
per share. In these private
transactions, Messrs. Slater and Alward
were paid premiums to the prevailing
market price of up to 80 percent and 33
percent, respectively.
<PAGE>
Mr. Anderson is a founder and Esprit's Board, in October 1998,
Board member of Esprit Telecom. removed Mr. Anderson as Chairman of
the Board. The Esprit Board determined
that Mr. Anderson's continued presence
on the Board was disruptive, and
prevented the company from focusing on
its business plan. Just a few days ago,
Mr. Anderson's attempt to remove the
Board of Esprit was resoundingly
rebuffed by the Esprit shareholders,
including Warburg Pincus and Fidelity
Asset Management.
Mr. Anderson is the largest After the Superior Court of New
shareholder of Total-Tel Jersey, Chancery Division, ordered
(1,857,634 shares-pg. 3 of Mr. Anderson and G&A not to "purchase
Management's Proxy Statement) or acquire, directly or indirectly
any stock of Total-Tel" Mr. Anderson
informed Mr. Cirrito that a large
block of stock was becoming available
so that Mr. Cirrito could purchase
that block. After Total-Tel filed a
motion for contempt against Mr.
Anderson, the Court found this
purchase to be in violation of its
original order, and enjoined
Revision, L.L.C. from voting 477,694
shares at Total-Tel's annual meeting.
OTHER INFORMATION YOU MAY NOT KNOW ABOUT MR. ANDERSON AND HIS ASSOCIATES
------------------------------------------------------------------------
The Dissidents' proxy materials indicate that Revision is a recently created
Delaware Limited Liability Company. They don't tell you that Revision is part of
a chain of "mysterious" foreign entities. Prior to Revision's creation in June
1998, Gold & Appel Transfer, S.A owned virtually all of the Total-Tel stock now
owned by Revision. Gold & Appel is a British Virgin Islands Company, for which
Mr. Anderson acts as attorney-in-fact. Gold & Appel has only one director,
Servco Limited Corporate Management, a company whose purpose is to act as a
"board member for hire." Gold & Appel is a wholly owned subsidiary of Iceberg
Transport, S.A., a corporation organized under the laws of the Republic of
Panama. Mr. Anderson claims not to know the source of Iceberg's initial capital,
has not met any of Iceberg's directors, and has no regular communications with
them. Nor does he know whether Iceberg itself is owned or controlled by another
person or entity. Are you confused yet?...If so, you're not the only one. Mr.
Anderson's 13D fillings with the SEC are misleading and hide the true owners of
Gold & Appel. If this man has violated Court orders and has filed misleading
documents with the SEC, how can you trust him to run Total-Tel in your best
interests?
THE DISSIDENTS HAVE ALSO LEVELED NUMEROUS CHARGES AGAINST THE CURRENT BOARD,
SOME OF WHICH ARE SIMILAR TO THOSE THAT MR. ANDERSON LEVELED AGAINST ESPRIT. ON
NOVEMBER 23, 1998, MORE THAN 90 PERCENT OF THE VOTES CAST BY ESPRIT
SHAREHOLDERS, OTHER THAN MR. ANDERSON AND GOLD & APPEL, VOTED AGAINST MR.
ANDERSON AND IN FAVOR OF ESPRIT'S BOARD.
2
<PAGE>
THE DISSIDENTS' COMPLAINTS AGAINST TOTAL-TEL
--------------------------------------------
Mr. Anderson also took some "cheap shots" against Total-Tel's current
management. For example, they complain that Warren Feldman's 13 year old son,
Ross, has received commissions as a Company agent since he was 11.
Ross Feldman signed an agent's agreement which is identical to that
signed by hundreds of Total-Tel agents and is paid for business
actually generated according to the same commission schedule as any
other Total-Tel agent.
The commissions are trivial in amount, about $600 over more than two
years for sales made to friends and neighbors.
When Mr. Anderson's attorneys argued that the Board's recently
adopted Shareholder Rights Plan and By-Law amendments should be
nullified based, in part, on the commissions paid to Ross, Judge
Saunders said, "I'll laugh you out of court," when cautioning them
against using this as a basis for their argument
The Dissidents claim that compensation paid to Warren Feldman is excessive. An
independent report by Deloitte & Touche concluded that Mr. Feldman's
compensation was actually less than the compensation paid to his industry peers.
The Dissidents also insinuate that the compensation paid to Warren Feldman's
brother, Gerald, is somehow improper. They disclose that Gerald Feldman receives
approximately $50,000 a year to run Total-Tel's Los Angeles operations. But the
dissidents misstate the salary paid to Gerald Feldman; he receives approximately
$20,000 a year plus commissions. He and an assistant operate a sales and agency
development office, the purpose which is to introduce Total-Tel to the
California market. Under Gerald's direction, that office has generated more than
$225,000 in revenue.
We assure you that the Board will continue to uphold the best interests of all
shareholders and to enhance the value of your investment. We ask for your
support in reelecting the Current Board nominees so that we may continue working
on your behalf. Please sign, date and return Management's WHITE proxy card in
the return envelope provided.
On behalf of the Board of Directors,
Sincerely,
Warren H. Feldman
Chairman and
Chief Executive Officer
3
<PAGE>
IMPORTANT VOTING INFORMATION
1. TO SUPPORT MANAGEMENT'S SLATE OF DIRECTORS PLEASE SIGN, DATE AND RETURN THE
WHITE PROXY CARD TODAY IN THE ENCLOSED RETURN ENVELOPE.
2. If your shares are held in your own name, please sign, date and return the
enclosed WHITE proxy card in the postage paid envelope provided with this
letter. If your shares are held in the name of a brokerage firm, bank or
other institution, please sign, date and return the WHITE proxy card to such
brokerage firm, bank or other institution in the envelope provided by that
firm.
If you have any questions or require any assistance in voting your shares,
please call toll free:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
1-800-223-2064
In response to Mr. Anderson's proxy contest, Total-Tel has retained Georgeson &
Company Inc. as its proxy solicitor. In connection with the services it is
rendering to Total-Tel , Georgeson will receive $25,000, together with
reimbursement for its out-of-pocket expenses. Georgeson will also be indemnified
for certain liabilities and expenses including any liabilities under the federal
securities laws. Georgeson will solicit proxies from individuals, brokers,
banks, bank nominees, and other institutional holders. It is anticipated that
Georgeson will employ approximately twenty five persons to solicit the Company's
shareholders for the annual meeting. Although no precise estimate can be made at
the present time, Total-Tel currently estimates that the Total-Tel expenditures
relating to this proxy solicitation incurred by Total-Tel will be approximately
$ 60,000, of which approximately $40,000 has been incurred to date.
4
<PAGE>
