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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 12)*
Total-Tel USA Communications, Inc.
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(Name of Issuer)
Common Stock, par value $.05 per share
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(Title of Class of Securities)
89151T 10-6
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(CUSIP Number)
Walt Anderson
c/o Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022
Attn: Richard A. Goldberg (212) 758-9500
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
November 17, 1998
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(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
statement because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box: [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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AMENDMENT NO. 12 TO SCHEDULE 13D
This Amendment No. 12 to Schedule 13D filed by Revision LLC, a
Delaware limited liability company ("Revision"), and Walt Anderson, a natural
person and a U.S. citizen ("Mr. Anderson"), as joint filers, with respect to
the common stock, par value $0.05 per share (the "Common Shares"), of Total-Tel
USA Communications, Inc., a New Jersey corporation (the "Issuer"), supplements
and amends the Schedule 13D previously filed with the Securities and Exchange
Commission (the "SEC") by Gold & Appel, a British Virgin Islands corporation
("Gold & Appel"), and Mr. Anderson as joint filers on January 16, 1998 (the
"Schedule 13D"), as amended by Amendment No. 1 thereto filed with the SEC on
January 30, 1998 ("Amendment No. 1"), Amendment No. 2 thereto filed with the
SEC on February 13, 1998 ("Amendment No. 2"), Amendment No. 3 thereto filed
with the SEC on March 4, 1998 ("Amendment No. 3"), Amendment No. 4 thereto
filed with the SEC on March 13, 1998 ("Amendment No. 4"), Amendment No. 5
thereto filed with the SEC on March 30, 1998 ("Amendment No. 5"), Amendment No.
6 thereto filed with the SEC on April 6, 1998 ("Amendment No. 6"), Amendment
No. 7 thereto filed with the SEC on June 12, 1998 ("Amendment No. 7"),
Amendment No. 8 thereto filed with the SEC on July 29, 1998 ("Amendment No.
8"), Amendment No. 9 thereto filed with the SEC on August 19, 1998 ("Amendment
No. 9"), Amendment No. 10 thereto filed with the SEC on September 29, 1998
("Amendment No. 10") and Amendment No. 11 thereto filed with the SEC on October
27, 1998 ("Amendment No. 11"). All capitalized terms used and not defined
herein shall have the meanings ascribed to them in the Schedule 13D, as amended
by Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4,
Amendment No. 5, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment
No. 9, Amendment No. 10 and Amendment No. 11. Unless otherwise noted, all data
included in this Amendment No. 12 reflects a 2 for 1 stock split of the Common
Shares which was effected on July 15, 1998.
ITEM 4. PURPOSE OF THE TRANSACTION.
The response set forth in Item 4 of the Schedule 13D is hereby
supplemented as follows:
On November 17, 1998, Revision and Mr. Anderson (collectively, the
"Committee") filed with the SEC preliminary proxy materials prepared in
connection with the Annual Meeting of Shareholders of the Company to be held on
December 10, 1998. At the Annual Meeting, six Directors of the Company are to
be elected to hold office until their respective successors are duly elected
and qualified. The purpose of the Proxy Statement is to solicit from Company
shareholders their proxy in support of the election of four nominees to the
Board of Directors of the Company (the "Board") named therein (the "Revision
Nominees"). The Revision Nominees are Mr. Walt Anderson, Mr. Joseph Stern, Mr.
Dennis Spina and Mr. Thomas Cirrito. The Revision Nominees beneficially own, in
the aggregate, 2,362,433 Common Shares, representing approximately 30.6% of the
outstanding Common Shares. The Revision Nominees have advised the Committee
that they intend to vote such Common Shares (other than the 477,694 Common
Shares which Revision is
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enjoined from voting as disclosed previously in the Schedule 13D filings) in
favor of the election of the Revision Nominees.
Reference is made to the sections entitled "Business Plan of the
Revision Nominees" (pages 7 through 10), "Regulatory Matters" (page 11),
"Nominees For Election of Directors" (pages 12 through 15), "Information about
Participants" (pages 17 through 18) and Schedules I and II (pages 19 through
29) of the Preliminary Proxy Statement, dated November 16, 1998, of Revision,
LLC and Walt Anderson (the "Preliminary Proxy Statement") relating to the
Annual Meeting of Shareholders of Total-Tel USA Communications, Inc., a copy of
which is attached hereto as an exhibit and which sections are incorporated
herein by reference. Other than as described in such incorporated sections of
the Preliminary Proxy Statement and in the Schedule 13D as previously amended,
the Reporting Persons have no plans or proposals which relate or would result
in any of the events described in clauses (a) through (j) of Item 4 of Schedule
13D.
ITEM 7. MATERIALS TO BE FILED AS EXHIBIT.
Exhibit 7.1 Preliminary Proxy Statement of Revision, LLC and
Walt Anderson, dated November 16, 1998, relating to
the Annual Meeting of Shareholders of Total- Tel USA
Communications, Inc.
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SIGNATURE
After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set forth
in this statement is true, complete and correct.
Dated: November 17, 1998
REVISION LLC
By: /s/ Walt Anderson
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Walt Anderson, Manager
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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(Name of Registrant as Specified In Its Charter)
TOTAL-TEL USA COMMUNICATIONS, INC.
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(Name of Person(s) Filing Proxy Statement)
REVISION LLC
WALT ANDERSON
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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-ll(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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PRELIMINARY COPY, MATERIALS DATED NOVEMBER 16, 1998
REVISION LLC
and
WALT ANDERSON
---------------------------
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
TOTAL-TEL USA COMMUNICATIONS, INC.
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PROXY STATEMENT
IN OPPOSITION OF THE BOARD OF DIRECTORS
OF
TOTAL-TEL USA COMMUNICATIONS, INC.
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PLEASE SIGN, DATE AND RETURN THE ENCLOSED [WHITE] PROXY CARD
This proxy statement (the "Proxy Statement") and the enclosed
[WHITE] proxy card are being furnished to the holders of the common stock (the
"Shareholders"), par value $.05 per share (the "Shares"), of Total-Tel USA
Communications, Inc., a New Jersey corporation (the "Company"), by Revision LLC
("Revision"), a Delaware limited liability company, a company controlled by
Walt Anderson ("Anderson"), in connection with the solicitation of proxies from
the Shareholders to be used at the 1998 Annual Meeting of Shareholders of the
Company, scheduled to be held on Thursday, December 10, 1998 at 10:00 a.m. and
any adjournments or postponements thereof and any special meeting called in
lieu thereof (the "Annual Meeting"). Revision and Anderson are referred to
herein as the "Committee for Revision of Total-Tel" or the "Committee."
At the Annual Meeting, six Directors of the Company are to be
elected to hold office until their respective successors are duly elected and
qualified. The Committee is soliciting your proxy in support of the election of
its four nominees to the Board of Directors of the Company (the "Board") named
below (the "Revision Nominees").
If you wish to vote for the four Revision Nominees, you must
submit the enclosed [WHITE] proxy card and should not submit the Company's
proxy card. If the Revision Nominees are elected, the Board will consist of
Revision's four members and the two nominees of the Company who receive the
next highest vote totals, assuming they receive a majority of the votes cast at
the Annual Meeting. Shareholders who vote their Shares with the Committee's
enclosed [WHITE]
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proxy card will be voting for only four of the six positions on the Board.
The Committee is not aware of any other proposals to be
brought before the Annual Meeting. However, should other proposals be brought
before the Annual Meeting, the persons named as proxies in the enclosed [WHITE]
proxy card will vote on such matters in their discretion.
The Company has announced that the Annual Meeting, will be
held on Thursday, December 10, 1998, at 10:00 a.m. at 150 Clove Road, Little
Falls, New Jersey 07424. The Committee is soliciting proxies for use at the
Annual Meeting. The Company has announced that the record date for determining
shareholders entitled to notice of and to vote at the Annual Meeting has been
set by the Company as November 11, 1998 (the "Record Date"). Shareholders of
record at the close of business on the Record Date will be entitled to one vote
at the Annual Meeting for each Share held on the Record Date. Anderson is the
beneficial owner of 1,857,634 Shares (including 1,857,434 Shares beneficially
owned by Revision), and Revision is the beneficial owner of 1,857,434 Shares,
which collectively represent approximately 24.1% of the Shares outstanding
(Outstanding Share percentages herein have been based on 7,721,004 Shares
outstanding as of November 11, 1998, as reported in the Company's proxy
statement, dated November 11, 1998.) As of the date of this Proxy Statement,
Revision is enjoined from voting 477,694 Shares included in the foregoing. In
addition, the Company's Employee Stock Ownership Plan is enjoined from voting
600,000 Shares. See "Litigation with the Company." Accordingly, Revision and
Anderson, collectively, will be able to vote 1,379,940 Shares (representing
17.9% of the outstanding Shares) at the Annual Meeting. Anderson is the sole
manager of Revision (the "Manager") and the holder of 100% of the voting
membership interests in Revision. All powers of Revision are exercised
exclusively by Anderson and the business and affairs of Revision are managed
exclusively by Anderson. Revision and Anderson intend to vote such Shares
(other than 477,694 Shares of Revision with respect to which Revision is
enjoined from voting) for the election of the Revision Nominees. The Revision
Nominees, beneficially own, in the aggregate, as of the date hereof 2,362,433
Shares representing approximately 30.6% of the outstanding Shares. The Revision
Nominees have advised the Committee that they intend to vote such Shares (other
than the 477,694 Shares which Revision is enjoined from voting) for the
election of the Revision Nominees.
The principal executive offices of the Company are located at
150 Clove Road, Little Falls, New Jersey 07424. This Proxy Statement and the
[WHITE] proxy card are first being furnished to the Company's Shareholders on
or about November __, 1998.
THIS SOLICITATION IS BEING MADE BY REVISION AND ANDERSON AND
NOT ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
In reliance upon Rule 14a-5(c) of the Securities Exchange Act
of 1934, reference is made to the Company's proxy statement, dated November 11,
1998, which has been sent to each of you by the Company, for a full description
of management's proposals, the securities ownership of
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the Company, information about the Company's officers and directors and the
date by which Shareholders must submit proposals for inclusion in the next
Annual Meeting.
Your vote is important, no matter how many or how few Shares
you hold. The Committee is not willing to accept mediocrity any longer. We hope
you will agree with the Committee that it is time for a change in leadership of
the Company. The Committee believes that the Company is in need of
revitalization through the election of seasoned individuals with experience in
the telecommunications industry. If you agree, sign, date and return the
[WHITE] proxy card in the envelope provided herein or contact the person
responsible for your account and give instructions for such shares to be voted.
Remember: Your last dated proxy is the only one which counts,
so return the [WHITE] card even if you delivered a prior proxy. We urge you not
to return any proxy card sent to you by the Company.
A Shareholder who has given a proxy may revoke it at any time
before such proxy is voted either by a later dated proxy, by giving notice to
the Secretary of the Company or by voting in person while at the Annual
Meeting. Attendance at the Annual Meeting will not in and of itself constitute
a revocation.
IMPORTANT NOTE: If you hold your Shares in the name of one or
more brokerage firms, banks or nominees, only they can exercise voting rights
with respect to your Shares and only upon receipt of your specific
instructions. Accordingly, it is critical that you promptly contact the person
responsible for your account and give instructions to sign, date and mail the
[WHITE] proxy card representing your Shares.
If you have any questions regarding your proxy, or need
assistance in voting your Shares, please call:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 843-8500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 755-5001
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REASONS FOR THIS SOLICITATION
Over the past few years you have elected management's slate
for the Board of Directors and they have delivered the following:
o Poor financial performance relative to the Company's peers
o Overcompensation of management
o Excessive related party transactions
o Failure to pursue opportunities to maximize shareholder value
The Committee has undertaken the time consuming and expensive
process of seeking to unseat management's nominees for the Board because the
Committee is unwilling to accept the status quo. Management's slate consists of
Mr. Warren Feldman, Chief Executive Officer of the Company, and five
individuals who are friends and business acquaintances of Mr. Feldman. Five of
the Company's directors, according to the Company's proxy statement, have no
experience in the telecommunications industry outside of their position with
the Company. The Committee believes that the Company is run like a "mom and
pop" store. The Board of Directors of a public company has a responsibility to
the shareholders. The Committee has nominated a slate of four directors with
long standing experience in the telecommunications industry. Collectively, they
have more than 45 years of industry experience and have overseen the growth of
companies such as MCI, Mid Atlantic Telecom, Atlantic Telecom, Telco
Communications Group, Inc., U.S. Sprint, Esprit Telecom, and Long Distance
Wholesale Club.
Poor Financial Performance
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The Company's financial performance has deteriorated over the
last several years due to a confused business strategy. See "Business Plan of
the Revision Nominees". For the six-months ended July 1998, net income fell by
38% from the comparable period in 1997, from approximately $880,000 to
$540,000. See Exhibit 1. Sales also declined in the three-month period ended
July 1998 from the comparable period in 1997, as increased selling efforts to
retail customers did not make up for a reduction in carrier sales.
Earnings have been stagnant over the longer term as well,
with net income lower in fiscal year 1998 than fiscal year 1995. See Exhibit 1.
For fiscal 1998, the Company's return on assets was less than 3%. See Exhibit
3. The Company was able to increase total minutes of use (MOU) from 365.9
million in 1996 to 862.5 million in 1998 only through sacrificing margins and
by expanding its service offerings to less profitable wholesale customers. See
Exhibit 4. The Company's operating margin fell 67% to $.002 per MOU in 1998
from $.006 per MOU in 1996.
The Company's stock price has been stagnant since late 1996.
See Exhibit 5. The only strength it has shown appears to be related to takeover
speculation triggered by Revision's
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sizable stock acquisitions rather than the Company's underlying operating
performance. In fact, before Mr. Anderson's first sizable acquisitions of
Shares in November 1997, the Company's stock price stood at approximately $11
per share, far below the $16 per share as of November 12, 1998 that the
Committee believes reflect takeover speculation triggered by Revision's
acquisitions of Shares. The Company still trails many of its peers in terms of
valuation. In fact, the Company is currently trading at an enterprise value to
sales multiple that is 60% lower than the average of a peer group of 12
comparably sized companies that resell long-distance service to commercial
customers. See Exhibit 6. The Company is currently trading at 1.0 times sales,
while the average peer company is trading at 2.5 times sales. See Exhibit 6.
Moreover, 10 of the 12 companies in the Company's peer group trade at higher
enterprise value to sales multiples. Before Revision acted on the opportunity
to acquire the Company's undervalued shares, the Company's enterprise value to
sales relative to its peers was even worse.
Excessive Compensation
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Despite mediocre operating performance, Mr. Feldman's hand
picked directors have authorized increases in his compensation package of over
three-fold from approximately $289 thousand in 1995 to $937 thousand in 1998
(inclusive of the value of stock options awarded to him). Mr. Feldman's fiscal
year 1998 total compensation package equaled approximately 86% of fiscal year
1998 net income. See Exhibit 7.
Revision pledges to you that in the event that the Revision
Nominees are elected, Revision will discontinue the practices of the past
concerning related party transactions. Moreover, Mr. Anderson will serve
without any compensation whatsoever and will even waive standard Board fees.
Excessive Related Party Transactions
------------------------------------
Although the Company is a public company, Revision believes
that Warren Feldman, the Chief Executive Officer of the Company, and his family
have run the Company as a family-owned business. The Company's practices
prompted Judge Saunders to comment in pending New Jersey State Court litigation
involving the Company: "I mean this is really almost like a private closed
corporation as opposed to a public [company]. It's being run like a private
closed corporation."
Among the related party transactions and other actions
indicative of private company governance Revision has learned of, through the
Company's public filings and through depositions, are the following:
o Warren Feldman's total compensation package increased over
300% in the last 3 years--from approximately $289,000 in 1995
to $937,000 in 1998. His 1998 compensation package is equal to
approximately 86% of all of the Company's fiscal year net
income. Mr. Miller, a
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director, in a classic understatement testified under oath
that Warren Feldman's compensation is "somewhat high." In
addition to salary bonuses and options, Warren Feldman also
receives a country club membership and a $90,000 BMW.
o In 1993, the Company entered into a lease for warehouse that
is owned by a partnership consisting of Solomon Feldman, a
Director of the Company, and his sons, Warren, Cary and
Gerald. The annual payment under the warehouse lease are
$58,560 for the first three years and $62,885 for years four
and five. No Board of Directors vote was ever taken to approve
the warehouse lease and no study was commissioned to determine
whether the terms of the warehouse lease are equivalent to
market terms.
o Warren Feldman's thirteen year old son has received
commissions as an agent of the Company since he was eleven.
Jay Miller, a Company director, testified under oath that he
would not pay his son as an agent.
o For two years, Mrs. Feldman, who is not a Company employee,
was provided with a new minivan leased and paid for by the
Company.
o Solomon Feldman who spends 25% of his time at the Company as a
"consultant," is provided with a 1998 Cadillac and a $40,000
"supplemental retirement benefit."
o Warren Feldman's brother, Gerald, receives annual compensation
of approximately $50,000 to run the Company's Los Angeles
"sales and agency relationship development office."
o A Company mail room employee, also acts as Warren Feldman's
personal chauffeur and does errands for Warren Feldman. On
occasion, he has picked up Warren Feldman's children and has
driven them from place to place. The Feldman's have never
reimbursed the Company for these personal expenses.
o Jay Miller, a director of the Company, serves as outside
corporate counsel to the company. In 1998, the Company paid
Mr. Miller in excess of $135,000 for legal services rendered
in 1997. In addition, Warren Feldman recently hired James
Carney as special counsel to the Company. Mr. Carney has been
a partner at the law firm that employed Warren Feldman prior
to his joining the Company. Mr.
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Carney, who does not devote 100% of his time to the Company,
is paid $11,800 per month.
o Leon Genet, a director of the Company, is also a shareholder,
officer and director of LPJ Communications, which has received
more than $100,000 in commissions from the Company.
Failure to Pursue Opportunities to Maximize Shareholder Value
- -------------------------------------------------------------
Warren Feldman has failed to share several merger and
acquisition opportunities with the Board of Directors. Mr. Feldman testified
under oath that in the past nine years, he has had many discussions with
companies seeking to acquire or merge with the Company. The Board of Directors
minutes barely reflect any discussions regarding overtures made to the Company
for potential merger or acquisition opportunities and do not reflect any Board
votes regarding these issues. According to Mr. Feldman's testimony, potential
partners or acquirors have included Cable and Wireless, Midatlantic Telecom,
LCI, USLD, ACC, Qwest, Fonorola, Telco Communications and RSL. Revision does
not believe that any of these opportunities were given due consideration by the
Board of Directors. In fact, Leon Genet, a director, has testified under oath
that he was unaware of any such offers.
BUSINESS PLAN OF THE REVISION NOMINEES
FOCUS ON REGIONAL OPPORTUNITY RATHER THAN NATIONAL EXPANSION
While the Company has a good reputation and a solid customer
base in the New York City/Northern New Jersey areas, the Committee believes
that the Company is not large enough at this stage to pursue a nationwide
strategy. Instead, the Committee believes that the regulatory changes and
technological advances have opened new opportunities for regional carriers and
that the Company's management has failed to take advantage of opportunities to
provide a wider range of services through the network.
The Committee believes that the Company's recent proposal to
locate public sales offices all over the United States is misguided.
Management's prior attempts to set-up remote selling offices have been
unsuccessful. The Committee would instead concentrate on nearby areas. The
Company has only a small fraction of the available business in the New York
City/Northern New Jersey area. The high population density of the area makes it
easy to connect and service customers at a very low cost. The Committee
believes that a targeted marketing approach with strategically placed local
offices would be more beneficial and cost efficient than an ill-timed attempt
to expand nationally.
For example, the Committee fails to see any added value to
the overall network of current management's purchase of a small switching
system in the Miami area. The Committee does not believe that this is a large
enough capacity switch to provide coverage of a substantial portion
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of the Southern United States. The Committee is fearful that this diversion
will drain human resources from more important areas.
NETWORK SERVICES
Currently, the Company provides a range of long distance
voice services. By concentrating network resources in a small region (like the
Northern New Jersey/New York City region) it will be possible to provide the
following additional services:
o Internet Access & Web Hosting
o Dedicated leased lines
o Frame relay
o ATM data transmission
o Local phone service and access
CUSTOMER SERVICES AND BILLING AND MANAGEMENT SYSTEMS
The Committee believes that current Company network billing
and management systems are incapable of serving the needs of the Company in the
future and that decisions need to be made now to correct these deficiencies.
For example, by making the Internet an integral part of the Company's systems,
it will be possible to send bills on line to customers that prefer this option.
The Committee believes that on line billing will: lower the cost of billing to
the Company; reduce the amount of paper needed to provide a detailed bill;
allow business customers to prepare customized reports on calls; and speed up
the billing and collection process.
Even customers that prefer to receive the traditional paper
bills would be able to receive a single detailed bill for all services that
they purchase from the Company. This would reduce bookkeeping costs for both
the Company and the customers and would be more user-friendly to customers.
WHOLESALE REVENUE
During the last 18 months, the Company has increased its
wholesale revenue substantially. This revenue is derived from other (sometimes
competing) carriers. The Committee believes that this type of business is
highly competitive and yields low margins. It does not build long term business
or customer loyalty. It is sometimes described as an arbitrage business since
rates can change overnight and millions of minutes of traffic can disappear
from a network due to a price change of less than one tenth of one cent.
The Company has increased its overall revenue by adding
substantial traffic of this kind to the network. The Committee believes that
wholesale revenue is an artificial way of boosting revenues on a temporary
basis. While the Committee recognizes that some carriers use wholesale revenue
to cover overcapacities in parts of their networks, the Company's recent
quarterly
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performance demonstrates that the Company has not derived any benefit from the
large growth of wholesale revenue.
The Committee believes that wholesale revenue, with its tiny
margins, should not be the driver of the business. Rather, the Company should
use wholesale business strategically and only when it adds value to the overall
business.
FUND RAISING AND RESOURCES
The Committee believes that the Company missed the
opportunity to raise substantial capital at very reasonable rates through a
public debt offering in the last year. The public debt market virtually closed
in August of 1998. New startups with no revenue were able to tap this market
earlier this year and the Committee believes that the Company should have been
able to raise capital on more favorable rates than these new players. The
raising of capital in such fashion would not have resulted in any dilution to
the present shareholders.
The Committee believes that the current management of the
Company would prefer to raise capital through the sale of equity since this
would tend to dilute Revision's holdings and entrench management. Equity may or
not be the best option for the Company at this time. The debt market may be
strengthening again in the near future. The Committee believes it would be
inappropriate for a decision of this magnitude to be influenced by the
self-interest of Mr. Feldman. If elected, the Revision Nominees would not take
desperate measures to maintain control of the Company at the expense of
shareholder value. Instead, the Committee would look for opportunities to raise
additional capital which would be used for the focused network and marketing
plan outlined above and to upgrade the network of the Company.
SHAREHOLDER VALUE
The Committee believes that in a public company there should
be an active board of directors, and that in this Company only one person makes
the decisions. The Committee believes that these decisions are not focused on
shareholder value. Moreover, it believes that the current Board of Directors
barely functions and merely rubber stamps every decision. It also believes that
the Board is not well informed about Company matters.
Revision has attempted to work with the Company's management
to increase the value of the Company but has been rebuffed. The Committee
believes that the current board has had its opportunity and has failed by any
possible measure. The Committee believes that it is time for a change.
If elected, the Revision Nominees will review and consider
whether to retain each member of existing management. With the exception of Mr.
Feldman, who would be asked to step down, the Committee has made no decisions
as to other members of management.
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If the Revision Nominees are elected, they will propose that
the Company retain the services of an investment banking firm to assist in
evaluating strategic alternatives available to the Company, including
acquisition opportunities, sale opportunities and opportunities to tap the
market for debt securities. According to his own testimony, during the past
nine years, Warren Feldman was approached by several successful companies
seeking to acquire or merge with the Company. These offers, in some cases, were
not even brought to the Board's attention and in other cases were barely
discussed by the Board. The Revision Nominees intend to actively pursue any
such opportunities.
LITIGATION WITH THE COMPANY
In early March, 1998, Gold & Appel Transfer, S.A., a British
Virgin Islands corporation ("Gold & Appel") and the owner of 100% of the
non-voting interests of Revision, which was then the beneficial owner of
approximately 29% of the Company's Shares requested the Company's records of
Shareholders, as permitted by statute. On March 31, 1998, the Board adopted a
shareholders rights plan (the "Poison Pill") and on April 7, 1998 it amended
the Company's By-Laws (the "Amended By-Laws") to eliminate the right of
Shareholders holding 25% of the outstanding Shares to call a special
Shareholders meeting. Such By-Law amendments also included the addition of
advance reporting requirements for nominating a director. On April 8, 1998,
Gold & Appel filed suit in New Jersey state court seeking an order compelling
delivery of the Shareholder records and a declaratory judgment that the Board's
actions with respect to the Poison Pill and the Amended By-Laws are invalid and
seeking injunctive relief. On April 13, 1998, the court issued an order
requiring the Company to provide Gold & Appel with immediate access to the
records of Shareholders and entered a temporary restraining order, enjoining
any action by the Company in connection with the Poison Pill and precluding the
Company from implementing the changes to its By-Laws contained in the Amended
By-Laws. The order also required, among other things, that until further order
of the court, Gold & Appel and Anderson are prohibited from purchasing
additional Shares. On June 2, 1998, the court entered a preliminary injunction,
pending further order of the court, which enjoins any action by the Company in
connection with the Poison Pill, and enjoins the Company from implementing the
Amended By-Laws until an adjudication on the merits. The preliminary injunction
also enjoins Warren Feldman and Solomon Feldman, on the one hand, and Gold &
Appel and Anderson, on the other hand, from purchasing any stock of the
Company, other than, in each case, through the exercise of options held on
April 1, 1998. On May 28, 1998, Gold & Appel filed an amended complaint.
On July 27, 1998, counsel to Revision, on behalf of Revision,
sent a letter dated July 27, 1998 to counsel to the Company, alleging various
improprieties by the Board of Directors and officers of the Company, including
breach of their fiduciary duties to the shareholders of the Company and
corporate waste. The letter cites specific examples of questionable conduct by
the Board and officers and demands that an independent investigation be
conducted to examine such conduct and to determine whether legal recourse
should be taken by the Company. Although the Company's counsel responded
promptly by letter that it would investigate these allegations, Revision has
received no response to its inquiry.
-10-
<PAGE>
On August 14, 1998, counsel to Revision, on behalf of
Revision, sent a letter dated August 14, 1998 (the "Letter") to counsel to the
Company among other things requesting an audit of the Company's books and
records by Revision's accountants. The Company refused to authorize such audit.
On September 11, 1998, Revision sent a letter to the Board of
Directors of the Company alleging, among other things, that the adoption of an
unfunded employee stock ownership plan (the "ESOP") by the Board and the
related issuance of 600,000 Shares (the "Issuance") to the ESOP trust violates
the outstanding preliminary injunction issued against the Company by the
Superior Court of New Jersey (the "Court") on June 2, 1998 (the "Injunction").
Revision states in the letter that it believes that the purpose of the adoption
of the ESOP and the Issuance was to entrench the Board. Revision also alleges
that two additional directors, one of whom is Warren Feldman's childhood
friend, were recently appointed by the Board for the sole purpose of making it
more difficult for Revision to pursue a proxy contest and that such action
constitutes a breach of the Board's fiduciary duty and violates the by-laws of
the Company.
At a hearing on September 28, 1998, the Court found that the
purchase of 477,694 Common Shares by a third party, Thomas Cirrito, violated
the Injunction against the indirect acquisition by Revision of additional
Shares. As remedy for the violation, the Court has enjoined Revision from
voting an equal number shares owned by Revision as were purchased by Mr.
Cirrito.
At a hearing on October 9, 1998, the Court granted Revision's
motion and ordered that 600,000 Common Shares issued to the ESOP trust be
enjoined from voting pending the outcome of the litigation.
Earlier in November 1998, the Company moved for summary
judgment in the pending New Jersey action referred to above and requested a
hearing for December 4, 1998. Revision intends to file an opposition to such
motion.
REGULATORY MATTERS
Revision is limited by the New Jersey Interested Shareholder
Protection Statute (the "NJISPS") which provides that a New Jersey corporation
may not engage in any business combination with any Shareholder that owns
greater than 10% of the voting power of the outstanding voting stock of such
corporation (an "Interested Shareholder") for a period of five years following
the date such Shareholder became an Interested Shareholder of such corporation.
Because Revision and Anderson beneficially acquired more than 10% of the
outstanding voting stock of the Company in June 1998, Revision and Anderson
would be prohibited under the NJISPS from engaging in a business combination
with the Company, including but not limited to a merger or consolidation
between Revision, Anderson and any of their affiliates and the Company, a sale
of all of the assets of the Company to Revision, Anderson or any of their
affiliates, or the liquidation or dissolution of the Company proposed by or on
behalf of Revision or Anderson, until 2003.
The Company and its subsidiary, Total Tel USA, Inc., hold
Federal Communications Commissions ("FCC") Section 214 authorizations to
provide international telecommunications services. This proxy solicitation, and
if successful, the ultimate replacement of the Board with the
-11-
<PAGE>
Revision Nominees, may result in a pro forma transfer of control of such
licenses for which prior FCC approval is required. As of the date of this proxy
statement, Revision has applied for FCC authority necessary to proceed with the
proposed solicitation and replacement of the Board. Revision anticipates that
such authority will be received prior to the Annual Meeting.
NOMINEES FOR ELECTION AS DIRECTORS
In opposition to the incumbent Board, the Committee is
proposing that the Shareholders elect four Revision Nominees to the Board at
the Annual Meeting. The Directors so elected will serve in such capacity until
their respective successors are duly elected and qualified.
The following table sets forth the name, age, present
principal occupation, business (or residence) address and business experience
for the past five years, and certain other information, with respect to each of
the Revision Nominees. This information has been furnished to Revision and
Anderson by the respective Revision Nominees. Each of the Revision Nominees has
consented to serve as a Director and, if elected, would hold office until the
1999 Annual Meeting of Shareholders of the Company and until his or her
successor has been elected and qualified or until earlier death, retirement,
resignation or removal.
- -------------------------------------------------------------------------------
NAME, AGE AND BUSINESS (OR PRINCIPAL OCCUPATION OR
RESIDENCE) ADDRESS EMPLOYMENT DURING THE LAST FIVE
YEARS; CURRENT DIRECTORSHIPS
- -------------------------------------------------------------------------------
Walt Anderson,(45) President and Chairman, Mid Atlantic Telecom
3050 K Street, NW (Telecom Services), from May 1984 to
Suite 250 December 1993; Chairman of Esprit Telecom
Washington, DC 20007. Group plc. (Telecom Services) from October
1992 to September 1998; Chairman of Teleport
UK Ltd. (Satellite Communications) from May
1996 to the Present; President and Chairman
of Entree International Ltd. (Financial
Consulting Services) from July 1997 to the
Present; Sole Administrator of Revision LLC
from June 1998 to the Present. Mr. Anderson
is also a director of American Technology
Labs (Network Equipment), Aquarius Holdings
Ltd. (Water Transport Systems), Cis-Lunar
Development (Diving Equipment), Rotary
Rocket Corp. (Space Transportation Systems),
Net-Tel Holdings (Telecom Services) and US
WATS (Telecom Services).
-12-
<PAGE>
- -------------------------------------------------------------------------------
NAME, AGE AND BUSINESS (OR PRINCIPAL OCCUPATION OR
RESIDENCE) ADDRESS EMPLOYMENT DURING THE LAST FIVE
YEARS; CURRENT DIRECTORSHIPS
- -------------------------------------------------------------------------------
Joseph L. Stern (75) President of Stern Telecommunications Corp.
c/o Stern Telecommunications Corp. from 1975 to the Present. Stern
584 Broadway, Suite 706 Telecommunications Corp. is an engineering,
New York, New York 10012-3254 consulting and product development
organization dealing with telecommunications.
- -------------------------------------------------------------------------------
Dennis J. Spina (53) Vice Chairman and President of Internet
8 Stone House Road Services, RCN (telecommunications) from
Califon, New Jersey 07830 February 1998 to Present; Chief Executive
Officer, Erols Internet, Inc. (Internet
Service Provider) from August 1996 to
February 1998 (Erols was acquired by RCN);
Independent Consulting in the service and
distribution industry from January 1996 to
July 1996; President and Chief Executive
Officer, International Service Systems
(janitorial and energy management) from
November 1994 to December 1995; President
and Chief Executive Officer of Suburban
Propane, Inc. (division of Hanson PLC) from
August 1990 to October 1994. Hired in a
turnaround capacity and also served as
President and Chief Executive Officer of
Petrolane, Inc. (propane distribution) from
August 1990 to July 1993. Petrolane was
reorganized in a "prepackaged" proceeding in
July 1993 under the U.S. Bankruptcy Code.
- -------------------------------------------------------------------------------
Thomas J. Cirrito (50) General Partner of Atocha, L.P. (Investment
6429 Georgetown Pike Capital Management) from August 1995 to
McLean, Virginia 22101 present; Director, Net-Tel (long distance)
from June 1998 to present; Chairman of the
Board, Digital Commerce (electronic
commercial) from December 1997 to present;
President of Consumer Division, Telco (long
distance) from April 1996 to June 1997;
Chief Executive Officer, Long Distance
Wholesale Club (long distance) from June
1993 to April 1995.
-13-
<PAGE>
Revision has agreed to indemnify all of the Revision Nominees
against any costs, expenses and other liabilities associated with their
nomination and the election contest. Revision has also agreed to reimburse the
Revision Nominees for counsel fees that they may have incurred in reviewing the
materials sent to them by Revision in connection with their consideration of
service as a Revision Nominee. Each of the Revision Nominees has executed a
written consent agreeing to be a Revision Nominee for election as a Director of
the Company and to serve as a Director if so elected. Within the past ten
years, none of the Revision Nominees has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors).
According to the Company's public filings, if elected as
Directors of the Company, the Revision Nominees who are not employees of the
Company would receive $15,000 per year for service in such capacity. However,
Anderson intends to waive his entitlement to receive any monetary compensation
from the Company, including any annual Director's fees. All Directors of the
Company would be reimbursed by the Company for expenses incurred in connection
with their services as Directors of the Company. According to the Company's
proxy statement, dated November 11, 1998, Directors of the Company are eligible
for grants of options under the Company's 1987 Stock Option Plan and 1996 Stock
Option Plan. The Revision Nominees, if elected, will be indemnified by the
Company for service as a Director of the Company to the extent indemnification
is provided to Directors of the Company under the Certificate of Incorporation
of the Company, as amended (the "Articles") and the By-Laws. In addition,
Revision and Anderson believe that upon election, the Revision Nominees will be
covered by the Company's officer and director liability insurance. Revision and
Anderson disclaim any responsibility for the accuracy of the foregoing
information, which has been extracted from the Company's public filings.
Except as disclosed herein, none of the Revision Nominees is
adverse to the Company or any of its subsidiaries in any material pending legal
proceedings, other than ordinary routine litigation incidental to the business
to which the Company or any of its subsidiaries is a party or of which any of
their property is the subject. See "Litigation with the Company."
The Committee does not expect that any of the Revision
Nominees will be unable to stand for election, but, in the event that any
vacancy in the Revision Nominees should occur, the Shares represented by the
enclosed [WHITE] proxy card will be voted in each such case for a substitute
nominee selected by the Committee. In addition, the Committee reserves the
right to nominate substitute or additional persons if the Company makes or
announces any changes to its By-Laws or takes or announces any other action
that has, or if consummated would have, the effect of disqualifying any or all
of the Revision Nominees. In any such case, Shares represented by the enclosed
[WHITE] proxy card will be voted for all such substitute or additional nominees
selected by the Committee.
Assuming a quorum is present, pursuant to Article III,
Section 2, of the By-Laws, at the annual meeting of Shareholders, the persons
receiving the majority of the votes cast shall
-14-
<PAGE>
be the Directors and shall constitute the Board of Directors for the ensuing
year. The Company's proxy statement, dated November 11, 1998, states that a
quorum for purposes of the Annual Meeting is "a majority of the total issued
and outstanding shares of Common Stock of the Company exclusive of the
undistributed shares in the Company's Employee Stock Ownership Plan and shares
which may not be voted by Revision LLC". The Committee believes that the
correct quorum requirement is a majority of the total issued and outstanding
Shares (inclusive of the undistributed Shares in the Company's Employee Stock
Ownership Plan and the Shares which Revision is enjoined from voting).
Vacancies in the Board occurring between annual meetings shall be filled for
the unexpired portion of the term by a majority of the remaining Directors. In
accordance with applicable regulations of the Securities and Exchange
Commission, the [WHITE] proxy card affords each Shareholder the opportunity to
designate the names of any of the Revision Nominees whom he or she does not
desire to elect to the Board. Notwithstanding the foregoing, the Committee
urges Shareholders to vote for all of the Revision Nominees on the enclosed
[WHITE] proxy card. The persons named as proxies in the enclosed [WHITE] proxy
card will vote, in their discretion, for each of the Revision Nominees who is
nominated for election and for whom authority has not been withheld.
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE REVISION
NOMINEES ON THE ENCLOSED [WHITE] PROXY CARD.
OTHER PROPOSALS
The Committee is not aware of any other proposals to be
brought before the Annual Meeting. However, should other proposals be brought
before the Annual Meeting, the persons named as proxies in the enclosed [WHITE]
proxy card will vote on such matters in their discretion.
VOTING AND PROXY PROCEDURES
Only Shareholders of record on the Record Date will be
entitled to notice of and to vote at the Annual Meeting. Each Share is entitled
to one vote. Shareholders who sell Shares before the Record Date (or acquire
them without voting rights after the Record Date) may not vote such Shares.
Based on publicly available information, the Committee believes that the only
outstanding class of securities of the Company entitled to vote at the Annual
Meeting are the Shares. According to the Company's proxy statement, dated
November 11, 1998, there were 7,721,004 Shares issued and outstanding as of
such date.
Shares represented by properly executed [WHITE] proxy cards
will be voted at the Annual Meeting as marked and, in the absence of specific
instructions, will be voted FOR the election of Revision Nominees to the Board,
and in the discretion of the persons named as proxies on all other matters as
may properly come before the Annual Meeting. Election of the Revision Nominees
require the affirmative vote of a majority of Shares represented and entitled
to vote at the Annual Meeting. Abstentions and broker non-votes will each be
included in
-15-
<PAGE>
determining the number of Shares present for purposes of determining the
presence of a quorum. There are six positions comprising the Board and there
are four Revision Nominees. Accordingly, Shareholders who vote their Shares
with the Committee's [WHITE] proxy card will be voting for only four members
of the six member Board. If the Revision Nominees are elected, the Board will
consist of Revision's four nominees and the two nominees of the Company who
receive the next highest totals, assuming they receive a majority of the votes
cast at the Annual Meeting.
Shareholders of the Company may revoke their proxies at any
time prior to its exercise by attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy) or by delivering a written notice of revocation. The
delivery of a subsequently dated proxy which is properly completed will
constitute a revocation of any earlier proxy. The revocation may be delivered
either to the Committee in care of Beacon Hill Partners, Inc. at the address
set forth on the back cover of this Proxy Statement or to the Company at 150
Clove Road, Little Falls, New Jersey 07424 or any other address provided by the
Company. Although a revocation is effective if delivered to the Company, the
Committee requests that either the original or photostatic copies of all
revocations be mailed to Beacon Hill Partners, Inc. at the address set forth on
the back cover of this Proxy Statement so that Revision will be aware of all
revocations and can more accurately determine if and when proxies have been
received from the holders of record on the Record Date of a majority of the
outstanding Shares.
IF YOU WISH TO VOTE FOR THE ELECTION OF THE REVISION NOMINEES
TO THE BOARD, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED [WHITE] PROXY
CARD IN THE POSTAGE-PAID ENVELOPE.
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement
is being made by the Committee. Proxies may be solicited by mail, facsimile,
telephone, telegraph, in person and by advertisements.
The Committee has retained Beacon Hill Partners, Inc. for
solicitation and advisory services in connection with this solicitation, for
which Beacon Hill Partners, Inc. will receive $35,000 together with
reimbursement for its reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses, including certain liabilities under
the federal securities laws. Beacon Hill Partners, Inc. will solicit proxies
from individuals, brokers, banks, bank nominees and other institutional
holders. Banks, brokerage houses and other custodians, nominees and fiduciaries
will be requested to forward all solicitation materials to the beneficial
owners of the Shares they hold of record, and Revision will reimburse these
record holders for their reasonable out-of-pocket expenses in so doing. It is
anticipated that Beacon Hill
-16-
<PAGE>
Partners, Inc. will employ approximately 20 persons to solicit the Company's
shareholders for the Annual Meeting.
The entire expense of soliciting proxies is being borne by
Revision. Revision currently intends to seek reimbursement of the costs of this
solicitation from the Company if the Revision Nominees are elected to the
Board. Although no precise estimate can be made at the present time, the
Committee currently estimates that the total expenditures relating to this
proxy solicitation incurred by Revision and Anderson will be approximately
$200,000 of which approximately $25,000 has been incurred to date.
INFORMATION ABOUT PARTICIPANTS
REVISION. Revision is a newly formed Delaware limited
liability company. Revision was organized to acquire, invest in, trade in, sell
or otherwise dispose of the Shares of the Company and to engage in any other
lawful business activity related thereto. The business address of Revision is
1313 North Market Street, Wilmington, Delaware 19801.
WALT ANDERSON. Anderson is the sole manager of Revision (the
"Manager") and the holder of 100% of the voting membership interests in
Revision. All powers of Revision are exercised exclusively by Anderson and the
business and affairs of Revision are managed exclusively by Anderson. Revision
and Anderson intend to vote their Shares for the election of the Revision
Nominees.
Anderson's business address is 3050 K Street, NW, Suite 250,
Washington, DC 20007. Anderson's principal occupation is the management of a
private investment fund. Mr. Anderson is also the Secretary of Gold & Appel,
for which he is attorney-in-fact.
JOSEPH L. STERN. Joseph L. Stern is the President of Stern
Telecommunications Corp., an engineering, consulting and product development
organization with broad expertise in telecommunications. His business address
is c/o Stern Telecommunications Corp, 584 Broadway, New York, New York 10012.
DENNIS J. SPINA. Dennis J. Spina is Vice Chairman and
President of Internet Services of RCN, a telecommunications company. Mr.
Spina's business address is c/o 8 Stone House Road, Califon, New Jersey 07830.
THOMAS J. CIRRITO. Thomas J. Cirrito is general partner of
Atocha, L.P., a Texas limited partnership whose principal business is
investment capital management for growth. His business address is 6429
Georgetown Pike, McLean, Virginia 22101.
As of the date of this Proxy Statement, Revision and the
Revision Nominees collectively beneficially own 2,362,433 Shares. For more
detailed information regarding the Revision Nominees, the members and managers
of Revision and transactions involving Shares
-17-
<PAGE>
over the past two years by the Revision Nominees or Revision , see Schedules I
and II of this Proxy Statement. See "Nominees for Election of Directors--The
Revision Nominees."
OTHER MATTERS AND ADDITIONAL INFORMATION
Revision and Anderson are unaware of any other matters to be
considered at the Annual Meeting. However, Revision and Anderson have notified
the Company of their intention to bring before the Annual Meeting such
proposals as it believes to be appropriate. Should other proposals be brought
before the Annual Meeting, the persons named as proxies on the enclosed [WHITE]
proxy card will vote on such matters in their discretion.
Reference is made to the Company's proxy statement, dated
November 11, 1998, for information concerning the Shares, beneficial ownership
of the shares by, and other information concerning the Company's management,
the principal holders of the Shares and procedures for submitting proposals for
consideration in the 1999 Annual Meeting.
Shareholders will have no appraisal or similar right of
dissenters with respect to any of the Proposals.
REVISION LLC
WALT ANDERSON
November 16, 1998
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<PAGE>
SCHEDULE I
INFORMATION CONCERNING PARTICIPANTS IN THE PROXY SOLICITATION
The following sets forth the name, business address, and the
number of shares of common stock of the Company beneficially owned by Revision,
Anderson and the Revision Nominees as of November 11, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Number of Shares
of Common Stock
Beneficially
Name Business Address Owned Percent of Class
---- ---------------- ----- ----------------
<S> <C> <C> <C>
Revision LLC 1313 North Market Street 1,857,434(1) 24.1%
Wilmington, Delaware 19801
Walt Anderson 3050 K Street, NW 1,857,634(1)(2) 24.1%
Suite 250
Washington, DC 20007
Joseph L. Stern c/o Stern 100 (3)
Telecommunications Corp.
584 Broadway, Suite 706
New York, New York 10012-
3254
Dennis J. Spina 8 Stonehouse Road 5 (3)
Califon, New Jersey 07830
Thomas J. Cirrito 6429 Georgetown Pike 504,694 6.5%
McLean, Virginia 22101
- ------------------------------------------------------------------------------------------
</TABLE>
- -----------
(1) Revision and Anderson, collectively, beneficially own 1,857,634 Shares or
2412% of the outstanding Shares. Anderson directly owns 200 Shares or less
than .01% of the outstanding Shares. Revision directly owns 1,857,434
Shares or 24.1% of the outstanding Shares. As the Manager and holder of
100% of the voting membership interests in Revision, Anderson has the sole
power to vote or direct the voting of the 1,857,434 Shares owned by
Revision, and the power, in the name and on behalf of Revision, to dispose
of such Shares. Accordingly, Anderson may be deemed to be the beneficial
owner of the Revision Shares. As of the date of this Proxy Statement,
Revision is enjoined from voting 477,694 Shares included in the foregoing.
Accordingly, Revision and Anderson, collectively, will be able to vote
1,379,940 Shares (representing 17.9% of the outstanding Shares) at the
Annual Meeting.
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<PAGE>
(2) Anderson is the President and a Director of the Foundation for
International Non-Governmental Development of Space, a non-profit
organization ("FINDS") which owns 94,930 Shares. Anderson does not have a
controlling interest in FINDS and thus disclaims beneficial ownership of
the Shares held by FINDS.
(3) Less than 1% of the outstanding Shares.
(4) Mr. Cirrito beneficially owns 504,694 Shares representing approximately
6.5% of the outstanding Shares. Of the 504,694 Shares beneficially owned
by Mr. Cirrito, 20,000 Shares are owned directly by him and 484,694 Shares
are beneficially owned by Atocha, L.P., a Texas limited partnership of
which Mr. Cirrito is general partner.
-20-
<PAGE>
SCHEDULE II
TRANSACTIONS IN SHARES HELD BY PARTICIPANTS IN THE PROXY
SOLICITATION
REVISION AND WALT ANDERSON
Mr. Anderson is the beneficial owner of 1,857,634 Shares
(including 1,857,434 Shares beneficially owned by Revision), and Revision is
the beneficial owner of 1,857,434 Shares. As of the date of this Proxy
Statement, Revision is enjoined from voting 477,694 Shares included in the
foregoing. Accordingly, Revision and Anderson, collectively, will be able to
vote 1,379,940 Shares (representing 17.9% of the outstanding Shares) at the
Annual Meeting. Anderson is the sole manager of Revision and the holder of 100%
of the voting membership interests in Revision. All powers of Revision are
exercised exclusively by Anderson and the business and affairs of Revision are
managed exclusively by Anderson. The above-referenced 1,857,634 Shares were
acquired by Anderson and Revision as follows:
On June 10, 1998, Gold & Appel transferred, as a capital
contribution to Revision, 859,717 Shares, the right to purchase 69,000 Shares
which may be acquired on October 1, 1998 but not later than October 5, 1998
pursuant to the Agreement and the right to vote the Option Shares pursuant to a
Proxy Agreement dated February 24, 1998 between Mr. Alward and Gold & Appel. In
consideration for its capital contribution, Gold & Appel received 100% of the
non-voting membership interests in Revision.
On June 10, 1998, Gold & Appel transferred 100 Shares to
Anderson for no consideration.
On September 26, 1998, Revision acquired 138,000 Shares
through the exercise of an option (the "Option") granted pursuant to the
Agreement (the "Option Shares"). The source of the funds for such exercise were
a capital contribution to Revision by Gold & Appel. The purchase price for the
Option Shares was $19.75 per share or an aggregate of $2,746,200.
Anderson may be deemed to be the beneficial owner of the
shares owned by Gold and Appel prior to transfer to Revision. Gold & Appel's
purchase transactions in the Shares are described below. Unless otherwise
indicated, all purchases were made on the NASDAQ National Market. The
information set forth below does not reflect the stock split of the Company
which was effected on July 15, 1998.
DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
11/6/97 3,500 27.000
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<PAGE>
DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
11/7/97 7,620 27.500
11/7/97 7,100 27.750
11/10/97 3,000 27.250
11/10/97 7,500 27.625
11/10/97 500 27.750
11/12/97 5,000 27.750
11/13/97 2,500 28.000
11/14/97 3,000 28.500
11/14/97 2,500 28.750
11/17/97 5,000 28.500
11/18/97 3,500 28.875
11/20/97 37,500 28.750
11/21/97 2,000 28.000
11/21/97 2,500 28.875
11/28/97 2,000 29.000
12/1/97 5,000 29.250
12/1/97 2,500 29.500
12/2/97 45,000 29.500
12/8/97 2,500 28.875
12/19/97 3,000 29.000
1/6/98 4,000 29.500
1/10/98 30,000* 39.800*
1/13/98 6,000 28.250
01/12/98 1,500 28.00
01/15/98 2,500 28.50
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<PAGE>
DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
01/15/98 2,000 27.75
01/16/98 17,500 28.50
01/16/98 1,000 29.25
01/16/98 500 27.75
01/20/98 5,000 30.00
01/20/98 1,000 29.00
01/21/98 1,500 30.25
01/22/98 1,000 30.00
01/23/98 3,000 30.00
01/26/98 1,000 30.00
01/26/98 2,025 29.75
01/27/98 10,000 30.00
01/27/98 2,500 30.125
01/28/98 1,500 30.50
01/29/98 5,000 30.50
01/29/98 1,700 30.375
01/30/98 5,500 29.5000
02/02/98 33,000 30.3750
02/02/98 3,000 30.5625
02/02/98 22,000 30.6250
02/03/98 5,000 31.0000
02/05/98 2,500 31.2500
02/05/98 5,000 31.0000
02/06/98 400 31.1250
02/09/98 1,000 31.000
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DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
02/11/98 7,000 32.000
02/12/98 2,100 32.000
02/13/98 1,600 32.000
02/18/98 400 32.000
02/18/98 2,000 31.125
02/18/98 1,000 32.375
02/20/98 300 32.000
02/23/98 3,000 32.500
02/23/98 6,500 32.625
02/24/98 10,100 33.750
02/25/98 14,800 36.875
02/26/98 23,000 37.625
02/27/98 1,800 36.625
03/02/98 2,500 36.1250
03/05/98 4,200 38.500
03/09/98 3,000 37.3750
03/10/98 3,000 37.6875
03/10/98 3,500 37.9107**
03/11/98 1,600 38.0000
03/12/98 1,000 38.00
03/13/98 3,500 38.0357
03/16/98 700 38.00
03/16/98 1,000 38.1250
03/18/98 1,600 38.5715
03/19/98 3,350 39.20
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<PAGE>
DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
03/19/98 5,000 39.00
03/20/98 168,400 39.00
03/23/98 1,000 39.00
03/24/98 11,000 39.50
03/25/98 5,350 39.9375
* Purchase in a private transaction
** Represents average price per share
In addition, Gold & Appel entered into three agreements
(each, an "Agreement") dated as of January 6, 1998, providing for the purchase
from Mr. Kevin A. Alward ("Mr. Alward") of an aggregate of 290,000 Shares. The
purchase of 30,000 of these 290,000 Shares was made pursuant to one Agreement
and was previously referenced above.
Under another Agreement, 191,000 Common Shares were delivered
to Gold & Appel on January 22, 1998 for a total purchase price of $5,338,000.
Under the third Agreement, Mr. Alward was obligated to deliver 69,000 Common
Shares to Gold & Appel at the time Gold & Appel delivered the purchase price of
$2,746,200 therefor on October 1, 1998, but not later than October 5, 1998.
Gold & Appel had paid Mr. Alward a non-refundable deposit of $621,000 toward
the $2,746,200 purchase price. Under the third Agreement, Mr. Alward had agreed
to grant to Gold & Appel a proxy to vote said 69,000 Common Shares on any
matters upon which said shares may be voted until such time as the earlier of
the delivery of the purchase price or the termination of the third Agreement
(the "Proxy"). The Proxy with respect to such Shares expired upon the purchase
of such Shares by Revision on September 26, 1998.
JOSEPH L. STERN
On June 4, 1998, Mr. Stern acquired 100 Shares on the open
market at a price of $41 per share.
DENNIS J. SPINA
Dennis J. Spina is Vice Chairman and President of Internet
Services of RCN, a telecommunications company.
-25-
<PAGE>
THOMAS J. CIRRITO AND ATOCHA, L.P.
Thomas J. Cirrito is general partner of Atocha, L.P., a Texas
limited partnership whose principal business is investment capital management
for growth.
Atocha purchased a total of 484,694 Shares between April 7,
1998 and July 12, 1998 as set forth below (the information set forth below does
not reflect the stock split of the Company which was effected on July 15,
1998):
DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
04/07/98 3,500 35.09
04/23/98 1,000 42.09
04/23/98 1,000 42.09
04/23/98 137 42.09
04/23/98 220 42.09
04/23/98 200 42.09
04/24/98 200 42.09
04/24/98 640 42.09
04/24/98 300 42.09
04/24/98 303 42.09
04/24/98 425 42.09
04/24/98 1,000 42.09
04/27/98 500 42.09
04/27/98 1,000 42.09
04/27/98 100 41.59
04/28/98 400 42.09
04/28/98 500 42.09
04/28/98 200 42.09
04/29/98 2,875 42.09
04/29/98 500 41.34
04/30/98 400 41.34
04/30/98 100 41.34
04/30/98 100 41.34
-26-
<PAGE>
DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
04/30/98 100 41.34
05/04/98 100 41.34
05/04/98 195 41.34
05/04/98 1,000 41.34
05/05/98 1,000 41.34
05/05/98 1,000 41.34
05/06/98 505 41.34
05/07/98 1,000 40.96
05/11/98 3,200 40.84
05/12/98 400 40.84
05/12/98 400 40.84
05/14/98 100 40.09
05/14/98 100 40.59
05/19/98 300 40.59
05/21/98 1,000 40.59
05/21/98 250 40.59
05/22/98 200 40.59
05/27/98 100 40.59
05/27/98 200 40.59
05/27/98 500 40.59
05/28/98 350 40.59
05/28/98 1,000 40.59
05/28/98 450 40.59
05/28/98 300 40.59
05/29/98 250 40.59
06/01/98 100 40.59
06/01/98 800 40.59
06/02/98 200 39.34
06/02/98 250 40.59
-27-
<PAGE>
DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
06/02/98 150 40.59
06/03/98 300 40.59
06/03/98 200 40.59
06/03/98 200 39.09
06/03/98 300 40.09
06/04/98 175 40.59
06/04/98 300 40.59
06/05/98 500 40.59
06/05/98 800 50.59
06/05/98 1,000 40.59
06/08/98 1,625 40.59
06/09/98 1,000 39.09
06/09/98 120 39.09
06/09/98 800 39.09
06/11/98 1,000 40.84
06/11/98 1,300 40.84
06/12/98 100 41.34
06/12/98 200 41.34
06/12/98 625 41.34
06/12/98 1,155 41.34
06/12/98 1,000 40.34
06/12/98 1,900 40.84
06/17/98 500 40.59
06/17/98 5,500 40.59
06/17/98 190,000 40.12
06/25/98 300 40.96
07/01/98 187 40.875
07/02/98 160 40.875
-28-
<PAGE>
Mr. Cirrito purchased a total of 10,000 Company Shares
between August 27, 1997 and September 3, 1997 as set forth below (the number of
shares set forth below does not reflect the stock split of the Company which
was effected on June 15, 1998):
DATE ACQUIRED NUMBER OF SHARES PRICE PER COMMON SHARE
08/27/97 4,000 21.71
09/23/97 1,000 22.34
09/03/97 4,000 22.34
Except as disclosed in this Schedule, none of Anderson,
Revision, any of Revision's members or manager or the Revision Nominees owns
any securities of the Company or any subsidiary of the Company, beneficially or
of record, has purchased or sold any of such securities within the past two
years or was within the past year a party to any contract, arrangement or
understanding with any person with respect to any such securities. Except as
disclosed in this Schedule and Schedule I, to the knowledge of Revision, no
associate of Anderson, Revision or any of its members or managers, or of the
Revision Nominees beneficially owns, directly or indirectly, any securities of
the Company.
To the knowledge of Revision, other than as disclosed in this
Schedule and Schedule I, none of Anderson, Revision or any of its members or
managers, or the Revision Nominees has any substantial interest, direct or
indirect, by security holdings or otherwise, in any matter to be acted upon at
the Annual Meeting.
Walt Anderson and Thomas J. Cirrito have agreed to serve as
proxies on the [WHITE] proxy card for the Annual Meeting.
None of the Revision Nominees has, during the last ten years,
been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
-29-
<PAGE>
IMPORTANT
Tell your Board what you think! Your vote is important. No
matter how many Shares you own, please give Revision and Anderson your proxy
FOR the election of the Revision Nominees by taking three steps:
1. SIGNING the enclosed [WHITE] proxy card,
2. DATING the enclosed [WHITE] proxy card, and
3. MAILING the enclosed [WHITE] proxy card TODAY in the
envelope provided (no postage is required if mailed
in the United States).
If any of your Shares are held in the name of a brokerage
firm, bank, bank nominee or other institution, only it can vote such Shares and
only upon receipt of your specific instructions. Accordingly, please contact
the person responsible for your account and instruct that person to execute the
[WHITE] proxy card representing your Shares.
If you have any questions or require any additional
information concerning this Proxy Statement, please contact, Beacon Partners,
Inc. at the address set forth below.
BEACON PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 843-8500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 755-5001
-30-
<PAGE>
Exhibit 1
TOTAL-TEL USA COMMUNICATIONS, INC.
Inability to Achieve Bottom-Line Income Growth
[Bar graph showing the Company's net income for fiscal years
1995 through 1998 and the six month periods ended July 31, 1997 and July 31,
1998.]
-31-
<PAGE>
Exhibit 2
TOTAL-TEL USA COMMUNICATIONS, INC.
Inability to Achieve Growth in Earnings Per Share
[Bar graph showing the Company's earnings per share for the
each quarter of fiscal 1998 and the first two quarters of fiscal 1999.]
-32-
<PAGE>
Exhibit 3
TOTAL-TEL USA COMMUNICATIONS, INC.
Higher Expenditures and Lower Returns
[Bar graph showing the Company's net income/assets for fiscal
years 1995 through 1998 and the six month periods ended July 31, 1997 and July
31, 1998.]
-33-
<PAGE>
Exhibit 4
TOTAL-TEL USA COMMUNICATIONS, INC.
Deteriorating Sales Margins
[Bar graph showing the Company's net income/sales for fiscal
years 1995 through 1998 and the six month periods ended July 31, 1997 and July
31, 1998.]
-34-
<PAGE>
Exhibit 5
TOTAL-TEL USA COMMUNICATIONS, INC.
Weekly Closing Stock Price
[Graph of the Company's weekly closing stock price from
September 5, 1996 to November 4, 1998.]
-35-
<PAGE>
Exhibit 6
TOTAL-TEL USA COMMUNICATIONS, INC.
Enterprise Value to Sales Multiple
($ in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(A) (B) (A)+(B)=(C) (D) (C)/(D)
Net Debt Enterprise
Company Market Cap & Pfd. (1) Value (EV) TTM Sales EV / Sales
------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Advanced Comm Group $112,792 $21,756 $134,548 $113,825(2) 1.2x
CFW Comm Group 281,428 502 281,930 63,827 4.4x
CT Comm, Inc. 304,570 18,098 322,668 84,589 3.8x
D&E Comm, Inc. 107,967 11,666 119,633 50,121 2.4x
General Comm 211,268 333,349 544,617 240,645 2.3x
IDT Corp. 603,617 (56,672) 546,945 335,372 1.6x
Primus Telecomm 325,709 182,028 507,737 373,671 1.4x
Telegroup, Inc 76,486 80,496 156,982 370,207 0.4x
Telescape International 40,868 7,244 48,112 116,325 0.4x
US LEC Corp. 366,743 (38,017) 328,726 58,966 5.6x
USN Comm, Inc. 8,807 137,838 146,645 117,532 1.2x
Viatel, Inc. 370,736 155,958 526,694 89,007 5.9x
Average 234,249 71,187 305,436 173,772 2.5x
Total-Tel USA Comm 126,605 (890) 125,715 126,240 1.0x
</TABLE>
(1) Total debt and preferred stock net of cash and cash equivalents.
(2) Last nine months annualized.
TTM= Trailing-Twelve Months
-36-
<PAGE>
Exhibit 7
TOTAL-TEL USA COMMUNICATIONS, INC.
Warren Feldman's Total Compensation Increases Over Three-fold While Total-Tel's
Net Income Stagnates
[Bar graph showing Warren Feldman's compensation from the
Company for fiscal years 1995 through 1998.]
-37-
<PAGE>
PRELIMINARY COPY, MATERIALS DATED NOVEMBER 16, 1998
FORM OF PROXY
FRONT SIDE OF PROXY
TOTAL-TEL USA COMMUNICATIONS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 10, 1998
THIS PROXY IS SOLICITED ON BEHALF OF REVISION LLC
AND WALT ANDERSON
The undersigned appoints Walt Anderson and Thomas J. Cirrito
and each of them, attorneys and agents with full power of substitution to vote
all shares of common stock of TOTAL-TEL USA COMMUNICATIONS, INC. ("TOTAL-TEL")
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders of TOTAL-TEL, to be held at 150 Clove Road,
Little Falls, New Jersey on Thursday, December 10, 1998, and including any
adjournments or postponements thereof, and at any special meeting called in
lieu thereof, as follows:
REVISION LLC AND WALT ANDERSON RECOMMEND A VOTE FOR THE ELECTION
OF ALL REVISION NOMINEES NAMED BELOW
1. ELECTION OF DIRECTORS: To elect to the Board of Directors of
the Company (the "Board") the following Revision Nominees:
Walt Anderson, Joseph L. Stern, Dennis J. Spina and Thomas J.
Cirrito. Such individuals will be voted FOR election to
succeed the current Directors (or any Director named to fill
any vacancy created by the death, retirement, resignation or
removal of any of such Directors) of the Company. Shareholders
who vote their Shares with this proxy card will be voting for
only four members of the Company's six member Board.
FOR ALL REVISION WITHHOLD AUTHORITY FOR ALL
NOMINEES [ ] REVISION NOMINEES [ ]
INSTRUCTION: To withhold authority to vote for one or more
individual Revision Nominees, mark FOR ALL Revision Nominees
above and write the name(s) of the Revision Nominee with
respect to which you wish to withhold authority here:
-------------------------------------------------------------
2. In their discretion with respect to any other matters as may
properly come before the Annual Meeting.
The undersigned hereby revokes any other proxy or proxies
heretofore given to vote or act with respect to the shares of common stock of
the Company held by the undersigned, and hereby ratifies and confirms all
action the herein named attorneys and proxies, their substitutes, or any of
them may lawfully take by virtue hereof. If properly executed, this proxy
<PAGE>
will be voted as directed above. If no direction is indicated with respect to
the above proposals, this proxy will be voted FOR the election of all Revision
Nominees.
This proxy will be valid until the sooner of one year from
the date indicated below and the completion of the Annual Meeting.
DATED: _________________________, 1998.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
------------------------------------------------------------
(Signature)
------------------------------------------------------------
(Signature, if held jointly)
------------------------------------------------------------
(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD
EACH SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC.,
SHOULD INDICATE THE CAPACITY IN WHICH SIGNING.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN
THE ENCLOSED ENVELOPE.
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL BEACON HILL PARTNERS,
INC. TOLL-FREE AT (800) 755-5001 OR CALL COLLECT AT (212) 843-8500.
