TOTAL-TEL USA COMMUNICATIONS, INC.
150 Clove Road
Little Falls, New Jersey 07424
NOTICE OF POSTPONED 1998
ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
TOTAL-TEL USA COMMUNICATIONS, INC.:
You are cordially invited to attend the Postponed 1998 Annual
Meeting of Shareholders of Total-Tel USA Communications, Inc. which will
be held at 150 Clove Road, 8th Floor, Little Falls, New Jersey 07424 at
10:00 AM, EST on Tuesday, March 16, 1999, for the following purposes:
(1) To elect directors; and
(2) To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February
25, 1999, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting. The share transfer
books will not be closed.
YOU ARE EARNESTLY REQUESTED, WHETHER OR NOT YOU PLAN TO BE PRESENT
AT THE MEETING, TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING
PROXY, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW THE PROXY
AND VOTE YOUR OWN SHARES.
By order of the Board of Directors.
Thomas P. Gunning
Secretary
February 25, 1999
Little Falls, New Jersey
TOTAL-TEL USA COMMUNICATIONS, INC.
---------------------------------
PROXY STATEMENT
---------------
POSTPONED 1998 ANNUAL MEETING OF SHAREHOLDERS
March 16, l999
The proxy accompanying this Proxy Statement is solicited by the
Board of Directors of TOTAL-TEL USA COMMUNICATIONS, INC. (the "Company").
All proxies in the accompanying form which are properly executed and duly
returned will be voted in accordance with the shareholders' instructions
thereon at the Postponed 1998 Annual Meeting of Shareholders (the
"Meeting"), to be held on Tuesday, March 16, 1999 at 10:00 A.M., EST, at
the principal executive offices of the Company 150 Clove Road, 8th Floor,
Little Falls, New Jersey, 07424 for the purposes set forth in the
accompanying Notice of Postponed Annual Meeting of Shareholders.
The 1998 Annual Shareholders Meeting was originally scheduled to be
held on December 10, l998, but was postponed to permit the settlement of
certain pending litigation between the Company, on the one part, and
Revision LLC, Gold & Appel Transfer, S.A. and Walt Anderson, on the
other. See "Settlement of Litigation" elsewhere in this Proxy Statement.
A proxy may be revoked at any time before it is voted at the meeting
by filing with the Secretary of the Company notice to such effect or a
duly executed proxy bearing a later date. If no instructions are
indicated, the proxies will be voted in accordance with management's
recommendations set forth herein. The persons named as proxies intend to
vote in accordance with their discretion on any matter which may properly
come before the Meeting or any adjournment thereof. Shareholders who are
present at the Meeting may revoke their proxies and vote in person if
they so desire.
This Proxy Statement is first being mailed to shareholders on or
about February 26, 1999.
MATTERS TO BE ACTED UPON
-------------------------
The following matters are to be considered and acted upon at the
Meeting:
1. The election of six directors to hold office until the next
Annual Meeting of Shareholders and until their respective successors are
duly elected and qualified.
2. The transaction of such other business as may properly come
before the Meeting or any adjournment thereof.
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND
------------------------------------------
CERTAIN BENEFICIAL OWNERS
-------------------------
Only holders of record of the Company's Common Stock at the close of
business on February 25, 1999 will be entitled to vote at the Meeting.
On that date, there were issued and outstanding 7,623,104 Common shares
of the Company. Each outstanding share of Common Stock is entitled to
one vote at the Meeting.
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
Set forth below is certain information concerning persons who were
known by the Company to own beneficially or of record more than 5% of the
issued and outstanding shares of Common Stock of the Company as of
February 25, 1999.
Name and Address Number of Shares Percentage
of Beneficial Owner Owned (1) of Class
- ------------------- ---------------- -----------
Warren H. Feldman, Esq. 789,938 (2)(3) 10.1%
150 Clove Road
Little Falls, NJ 07424
Walt Anderson 3,057,634 (4)(5) 40.1%
c/o Swidler Berlin
Shereff Friedman, LLC
3000 K Street, NW, Suite 300
Washington, D.C. 20007
Revision LLC 3,057,434 40.1%
c/o Swidler Berlin
Shereff Friedman, LLC
3000 K Street, NW, Suite 300
Washington, D.C. 20007
Total-Tel USA Communications, Inc. 600,000 7.9%
Employee Stock Ownership Plan
150 Clove Road
Little Falls, NJ 07424
Michael A. Karp 424,954 5.6%
3416 Sansom Street
Philadelphia, PA 19104
Thomas Cirrito 504,694 (6) 6.6%
6429 Georgetown Pike
Mc Lean, VA 22101
(1) Except as otherwise set forth in the footnotes to this table, all
shares are beneficially owned and sole investment and voting power
is held by the persons named, to the best of the Company's
knowledge.
(2) Includes options to purchase 261,000 shares of the Company's
Common Stock which are exercisable currently or within 60 days of
the date hereof
(3) Does not include 4,000 shares of Common Stock owned by Mr.
Feldman's children, as to which he disclaims beneficial ownership.
(4) 3,057,434 of such shares are beneficially owned by Revision LLC.
As the sole manager and holder of 100% of the voting membership
interests in Revision LLC, Mr. Anderson has the sole power to vote
and dispose of such shares. Accordingly, Mr. Anderson may be
deemed the beneficial owner of such shares.
(5) Does not include 94,930 shares of Common Stock owned by the
Foundation for International Non-Governmental Development of
Space, of which Mr. Anderson is the President and a director.
Mr. Anderson disclaims beneficial ownership of such shares.
Mr. Anderson and Revision LLC are subject to certain restrictions
on the purchase of additional shares. See "Settlement of
Litigation."
(6) Atocha LP of which Mr. Cerrito is general partner owns 484,694 of
these shares.
Security Ownership of Management
- --------------------------------
The following table sets forth as of February 25, 1999 information
concerning the beneficial ownership of outstanding shares of Common Stock
of the Company by each director of the Company, each nominee for
election as a director and all directors and officers of the Company as a
group:
Name of Beneficial Number of Shares Percentage
Owner Owned (1) of Class
------ --------- --------
Walt Anderson 3,057,634 (2)(3) 40.1%
Revision LLC 3,057,434 40.1%
Warren H. Feldman 789,938 (4) 10.0%
Leon Genet 91,120 1.2%
Henry Luken 164,653 2.2%
Jay J. Miller 400 (5)
Dennis Spina 5 (5)
All directors and officers
as a group (7 in number) 4,154,550 (2) (3) 52.4%
(1) All shares are beneficially owned and sole investment and voting
power is held by the persons named above.
(2) 3,057,434 of such shares are beneficially owned by Revision LLC.
As the sole manager and holder of 100% of the voting membership
interests in Revision LLC, Mr. Anderson has the sole power to vote
and dispose of such shares. Accordingly, Mr. Anderson may be
deemed the beneficial owner of such shares.
(3) Does not include 94,930 shares of Common Stock owned by the
Foundation for International Non-Governmental Development of Space,
of which Mr. Anderson is the President and a director. Mr.
Anderson disclaims beneficial ownership of such shares. Mr.
Anderson and Revision, LLC are subject to certain restrictions on
the purchase of additional shares. See "Settlement of
Litigation."
(4) Includes options to purchase 261,000 shares of the Company's Common
Stock which are exercisable currently or within 60 days hereof.
(5) Less than 1%.
Changes in Control
- ------------------
Except as set forth under "Settlement of Litigation" elsewhere in
this Proxy Statement, the Company knows of no contractual
arrangement which may, at a subsequent date, result in a change of
control of the Company.
ELECTION OF DIRECTORS
----------------------
The Board of Directors has fixed the number of directors to be
elected at the Annual Meeting of Shareholders at six. The shares
represented by the proxies will be voted in favor of the election as
directors of the persons named below unless authority to do so is
withheld. The directors elected will hold office until the next Annual
Meeting of Shareholders and their respective successors are duly elected
and qualified.
The nominees named below were nominated for election to the Board of
Directors of the Company by the Management. The name, age, business
experience and public directorships of each nominee are as set forth in
the table (and accompanying nominee descriptions) below.
Name Company Office Since Age
- ---- --------------- ------ ---
Walt Anderson Director 1999 45
Warren H. Feldman Chairman of the 1987 43
Board and Chief
Executive Officer
Leon Genet Director 1996 67
Henry Luken Director 1999 39
Jay J. Miller Director 1983 66
Dennis Spina President, Chief 1999 53
Operating Officer
and Director
The Company's directors all serve for one year terms or until their
successors are elected and qualified.
Mr. Walt Anderson was elected a director of the Company in February
1999. He has been Manager of Revision LLC from June 1998 to the
present; President and Chairman of Entree International Ltd. (Financial
Consulting Services) from July 1997 to the present; Chairman of Teleport
UK Ltd. (Satellite Communications) from May 1996 to the present;
Chairman of Espirit Telecom Group plc. (Telecom Services) from October
1992 to September 1998 and President and Chairman, Mid Atlantic Telecom
(Telecom Services), from May 1984 to December 1993. 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).
Mr. Warren H. Feldman has served as a director of the Company since
April 1987 and Chairman of the Board since September 1993. He has served
as President and Chief Executive Officer of the Company since September
1992. From January 1986 until September 1992, he served as Vice
President - Regulatory Affairs of the Company, and from 1984 until
January 1986, as the General Manager of its Total-Tel USA division and
General Counsel of the Company. He was elected President of the Total-
Tel USA Division in October 1988.
Mr. Leon Genet has served as a director since October 1996. For in
excess of the past five years, he has been a partner in Genet Realty, a
commercial and industrial real estate brokerage firm. He serves as a
member of the National Commerce and Industry Board for the State of
Israel Bonds Organization and is a shareholder, director, and officer of
LPJ Communications, Inc., which has earned commissions from the Company
on the same basis as other independent representatives. See "Certain
Relationships and Related Transactions."
Mr. Henry G. Luken, III was elected a director of the Company in
February, 1999. Currently he is President of Mont Lake Properties, Inc.,
a real estate development company; a director of ACNTV, a home shopping
company selling through TV; Managing Agent of Henry IV LLC, an aircraft
sales company. A co-founder of Telco-EIC he served as Chief Executive
Officer and Treasurer from July 1993 to April 1996, and Chairman from
July 1993 to October 1997. Mr. Luken has also served as chairman of Tel-
Labs, Inc. a telecommunications billing company ("Tel-Labs") since 1991,
and as chairman of Telco Development Group, Inc., a computer systems
company owned by Mr. Luken, since 1987, both of which entities he
founded.
Jay J. Miller, Esq. has served as a director since 1983. He has
been a practicing attorney for more than 35 years in New York. Mr.
Miller is a director of Edison Control Corporation, a manufacturer of
pipe, fittings, and accessories for concrete pumping equipment. He is
Chairman of the Board of AmTrust Pacific Ltd., a New Zealand real estate
company. Mr. Miller has performed legal services on behalf of the
Company. See "Certain Relationships and Related Transactions."
Mr. Dennis Spina was elected a director, President and Chief
Operating Officer of the Company in February, 1999. He is also a
founder and President of Simex SA, a Mexican company engaged in office
cleaning services. He had been Vice Chairman and President of Internet
Services, RCN (telecommunications) from February 1998 to December 1998;
Chief Executive Officer, Erols Internet, Inc. (Internet Service Provider)
from August 1996 to February 1998 (Erols was acquired by RCN);
Independent Consultant 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.
Board of Directors
- ------------------
The Company's Board of Directors currently consists of six persons,
two of whom are members of management and four of whom are non-management
directors. During the fiscal year ended January 31, 1998, the Board held
six meetings which were attended by all of the directors therein serving.
The Company's Board of Directors has Audit and Compensation
Committees, but does not have a Nominating Committee or a committee
performing a similar function. The Audit Committee currently consists of
two non-management directors, Messrs. Walt Anderson and Leon Genet. The
Committee reviews, analyzes and may make recommendations to the Board of
Directors with respect to the Company's financial statements and
controls. The Committee has met and intends to meet from time to time
with the Company's independent public accountants to monitor their
activities. The Compensation Committee consists of Messrs. Henry Luken
and Jay J. Miller and is charged with reviewing and recommending the
compensation and benefits payable to the Company's senior executives.
Messrs. Warren Feldman and Dennis Spina are ex-officio members of the
Compensation Committee.
Required Shareholders' Vote
- ---------------------------
Assuming the presence of a quorum (a majority of the total issued
and outstanding shares of Common Stock of the Company) the favorable
vote of the holders of a majority of the shares present and voting at the
Meeting for the election of each nominee is required for his election.
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION
----------------------
The following table sets forth the compensation which the Company paid during the fiscal years ended
January 31, 1998, 1997 and 1996 to the Chief Executive Officer and to each executive officer of the Company
or person performing similar functions whose aggregate remuneration exceeded $100,000, as well as to one of
the Company's key employees:
Summary Compensation Table
---------------------------
Name and Fiscal Year Annual Compensation Other Compensation
Principal Ended Annual Awards All Other
Position January 31 Salary ($) Bonus(s) Compensation($) Options (6) Compensation(s)(7)
- -------- ---------- ---------- -------- --------------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Warren H. 1998 $287,115 (1) $350,000 $15,325
Feldman 1997 $315,000 (1) $295,000 $ 7,025
Chairman and 1996 $195,103 (1) $274,241 $ 4,667
Chief Executive
Officer
Kevin Alward 1998 (2)(3) $268,817 $270,499 $12,877
President and 1997 $315,000 (2) $280,000 $ 9,769
Chief Operating 1996 $195,000 $274,241 $ 6,010
Officer
Bennett Goldberg 1998 $ 90,000 $216,129
Senior Vice 1997 $ 90,000 $168,572
President of 1996 $ 90,000 $123,175
Total-Tel, Inc.
David Hess 1998 (4) $264,615 $176,773 $115,008 (5) $ 8,655
President and
Chief Operating
Officer of
Total Tel, Inc.
Jeff Slater 1998 $235,846 $235,433 $ 3,461
Senior Vice
President of
Total Tel, Inc.
Thomas P. 1998 $116,000 $ 4,000 $ 8,265
Gunning 1997 $ 95,231 $ 6,000 $ 6,560
Vice President,
Chief Financial
Officer, Treasurer
and Secretary
(1) Does not include annual Director's fee of $15,000
(2) Resigned as an officer of the Company on January 23, l998.
(3) Does not include director's fee of $2,500.
(4) Resigned as an officer of the Company on January 5, 1999.
(5) The amount shown represents commissions paid to Mr. Hess in his capacity as Vice President of Total-Tel Carrier
Services, Inc., a subsidiary of the Company.
(6) See page 9 for a description of compensation awards, options and grants.
(7) Includes employers contribution to employees 401K plan, personal use of company car and group term life insurance
payments.
</TABLE>
401 (K) Savings and Investment Plan
- ------------------------------------
On February 3, 1992, the Company adopted a 401 (K) plan for eligible
hourly and salaried employees, including officers, who may elect to
contribute, subject to Internal Revenue Code limitations, from 1% to 15%
of their wages and salaries. The contributions are currently invested in
any one of six investments funds, each of which has a different
investment objective.
An employee may contribute up to $10,000 per year, and the Company
will match 50% of the first 6% of the employee's contribution.
Option Plans
- ------------
In October 1987, the Company adopted its 1987 Stock Option Plan and
in October 1996, adopted its 1996 Stock Option Plan (the "Option
Plans"). The Option Plans provide that certain options granted
thereunder are intended to qualify as "incentive stock options" within
the meaning of Section 422A of the United States Internal Revenue Code,
while non-qualified options may also be granted under the Option Plans.
Incentive stock options may be granted only to employees of the Company,
while non-qualified options may be granted to non-executive directors,
consultants and others as well as employees.
The Option Plans may be administered by the Compensation Committee
of the Company's Board of Directors. The Company has reserved 664,900
shares of Common Stock under the 1987 Option Plan and 300,000 shares of
Common Stock under the 1996 Option Plan for issuance to employees,
officers, directors and consultants of the Company. The shares
underlying the options granted prior to July 15, 1994 have been adjusted
for a 10% stock dividend. The shares underlying the options granted
prior to July 1, 1996 have been adjusted to reflect a 2-for-1 stock
split, and options granted prior to July 1, 1998 have been adjusted to
reflect a 2-for-1 stock split.
No option may be transferred by an optionee other than by will or
the laws of descent and distribution, and during the lifetime of an
optionee, an option may be exercised only by him. In the event of
termination of employment other than by death or disability, the
optionee will have one month (subject to extension not to exceed an
additional two months) after such termination during which he may
exercise his option. Upon termination of employment of an optionee by
reason of death or permanent total disability, his option remains
exercisable for one year thereafter to the extent it was exercisable on
the date of such termination. No similar limitation applies to non-
qualified options.
Options under the Option Plans must be granted within 10 years from
the effective date of the respective Option Plan. Incentive stock
options granted under the Option Plans cannot be exercised later than 10
years from the date of grant. Options granted under the Option Plans
permit payment of the exercise price in cash or by delivery to the
Company of shares of Common Stock already owned by the optionee having a
fair market value equal to the exercise price of the options being
exercised, or by a combination of such methods of payment. Therefore,
an optionee may be able to tender shares of Common Stock to purchase
additional shares of Common Stock and may theoretically exercise all of
his stock options with no additional investment other than his original
shares.
Any option which expires unexercised or that terminates upon an
employee's ceasing to be employed by the Company become available once
again for issuance under the Option Plans.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
Individual Grants
-----------------
Number of
Securities
Underlying % of Total Potential Realized Value
Options /SARs Options/SARs Exercise or At Assumed Annual Rate
Appreciation Granted to Base Price of Increase in Stock Price
Granted Employees ($/Sh) Expiration For Option Term
Name (#)(1)(4)(5) in Fiscal Year Price Date 5% 10%
- ---- ------------- -------------- ----- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Warren Feldman 80,000 17.24% $ 7.25 January 15, 2001 $124,994 $269,178
Kevin Alward (2) 80,000 17.24% $ 7.25 January 15, 2001 $124,994 $269,178
David Hess (3) 40,000 8.62% $ 7.25 January 15, 2001 $ 62,497 $134,589
David Hess (3) 100,000 21.55% $ 10.00 September 29, 2001 $215,506 $464,100
Jeffrey Slater (4) 40,000 8.62% $ 7.25 January 15, 2001 $ 62,497 $134,589
Jeffrey Slater (4) 80,000 17.24% $ 10.00 January 2, 2001 $172,405 $371,280
(1) Stock options granted under the 1996 Option Plan. One fifth of the new options are exercisable on each of
the first, second, third, fourth, and fifth anniversary dates of the original grant.
(2) Kevin Alward exercised options to acquire 10,000 shares on January 16, 1998. The balance of his options
were canceled following the termination of his employment with the Company.
(3) Of the options granted to Mr. Hess, options to purchase 60,000 shares, representing the unvested portion
thereof, were cancelled following termination of his employment with the Company in January, 1999.
(4) The options granted to Jeffrey Slater were canceled following termination of his employment with the Company.
(5) All per share amounts have been restated to reflect the 2-for-1 stock split effective on July 1, 1998.
(6) The table above does not reflect restricted shares or options to purchase additional shares of the Company's
Common Stock which were granted to the Company's executives and directors during the fiscal year ended
January 31, l999 as follows (all shares reflect the 2-for-1 stock split effectuated on July 1, 1998):
<CAPTION>
Shares Options
Granted Granted
------- -------
<S> <C> <C>
David Hess 50,000 (*) 30,000 (*)
Bennett Goldberg 5,000 2,000
Thomas Gunning 4,000 2,000
(*) The foregoing shares granted to Mr. Hess were reacquired by the Company for a nominal consideration and the
options granted to him were canceled upon termination of his employment with the Company in January, 1999.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR (1)
AND FISCAL YEAR-END OPTION/SAR VALUES
-------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End (#) Fiscal Year-End (#)
Shares Acquired
Name on Exercise(#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Warren Feldman 138,400 $ 155,892 268,000 60,000 $3,465,125 $442,500
Kevin Alward 520,000 988,263 -- -- -- --
David Hess -- -- 25,000 165,000 $224,063 $1,114,063
Jeffrey Slater 9,544 11,543 71,800 118,000 $776,695 $676,290
Thomas Gunning -- -- 43,000 2,000 $572,513 $20,500
(1) All per share amounts have been restated to reflect the 2-for-1 stock split effective on July 1, 1998.
EMPLOYEE STOCK OWNERSHIP PLAN
On September 1, 1998, the Company established the Total Tel USA Communications, Inc. Employee Stock Ownership Plan
(ESOP). The purpose of the ESOP is to permit participating employees to share in the growth and prosperity of the Company
through commitment and dedication to the Company. Concurrently with the establishment of the ESOP, the Company contributed
600,000 shares of its Common Stock to the Plan, which is administered through a trust (the "Trust") by Summit Bank, as
trustee (the "Trustee"). The Trustee was designated by the Board of Directors.
Subsequent contributions to the ESOP will be determined in the sole and absolute discretion of the Board of
Directors based upon, among other things, the financial performance of the Company. The Trust will hold all investments
for the ESOP as directed by a committee appointed by the Board of Directors (the "ESOP Committee"). The initial members
of the ESOP Committee are the members of the Company's Board of Directors.
Each employee of the Company who completes 1,000 or more hours of service within a 12-month period of employment
with the Company, and is 21 years of age or greater, is eligible to participate in the ESOP. On the last day of each
ESOP plan year, the contributions for such year will be allocated, subject to the limitations on allocations contained
in the ESOP and under applicable law, among the eligible participants in the proportion that each participant's
compensation for that year bears to the compensation of all eligible participants, with each individual participant's
allocation credited to his individual account.
The Trustee generally shall vote shares of Common Stock held under the ESOP in accordance with the written
instructions of the ESOP Committee, but subject to its fiduciary duties. To the extent that shares of Common Stock
under the ESOP have been allocated to individual participants' accounts, the Trustee will vote such shares in accordance
with the participants' written instructions. The Trustee will vote any unallocated shares of Common Stock in the
Trust, or any allocated Common Stock as to which instructions have not been received, in such manner as shall be
directed by the ESOP Committee.
The Company is currently exploring the termination of the ESOP inasmuch as no shares have been allocated to date.
Management is considering other equity and/or cash incentive plans for the Company's personnel.
</TABLE>
Compensation of Directors
- -------------------------
Each director of the Company receives $15,000 per year for service
in such capacity.
Settlement of Anderson Litigation
- ---------------------------------
On March 31, l998, the Board of Directors of the Company adopted a
Shareholder Rights Plan (the "Rights Plan"). This measure was taken
shortly after one of the Company's officers and directors declined a
private offer from Walt Anderson to purchase from him and his family
sufficient shares to give Mr. Anderson control of the Company. Through
Gold & Appel Transfer, S.A. ("G&A"), Mr. Anderson had already acquired
almost 30% of the outstanding shares of Common Stock as of March 1998.
In response to the adoption of the Rights Plan, and certain By Law
amendments adopted on April 7, l998, G&A filed a lawsuit seeking to
enjoin the effectiveness of the Rights Plan and the By Law amendments.
On April 13, l998, the Superior Court of New Jersey, Chancery Division,
entered an order preserving the status quo of the ownership of the
Company's Common Stock by Mr. Anderson and G&A and Solomon Feldman and
Warren Feldman pending completion of expedited discovery and additional
briefing on G&A's motion for a preliminary injunction. After a hearing
on May 20, l998, the Court on June 2, l998 continued the earlier status
quo order and specifically ordered Mr. Anderson, G&A, Warren Feldman and
Solomon Feldman not to "purchase or acquire, directly or indirectly, any
stock of Total-Tel" pending a trial on the merits.
Shortly after entry of the Court's June 2, l998 Order, G&A
transferred all but 100 shares of the Common Stock owned by it to a
newly-created entity, Revision LLC, in return for which G&A received 100%
of the non-voting membership interests in Revision LLC. G&A reported
that it had transferred its remaining 100 shares of the Company's Common
Stock to Mr. Anderson for no consideration. Mr. Anderson is the sole
manager and has 100% of the voting membership interests in Revision LLC.
At a hearing on July 24, 1998, the Court ordered that Revision LLC be
added as a plaintiff and made Revision LLC subject to the status quo
order referred to above.
On September 28, l998, the Superior Court of New Jersey found Mr.
Anderson and G&A to have contravened the Court order which prohibited
Mr. Anderson and G&A from purchasing or acquiring, directly or
indirectly, any additional shares of the Company's stock pending
resolution of the Anderson litigation. The Court precluded Mr. Anderson
from voting 477,694 shares of the Company's stock, a number equivalent to
those purchased by Mr. Thomas J. Cirrito, a business associate of Mr.
Anderson, following the date of the Court's orders and directed Mr.
Anderson, Revision, and G&A to pay legal fees and expenses incurred by
the Company in bringing the matter before the Court.
Further, on October 9, l998, the Court upheld the validity of the
Company's recently-adopted ESOP, and found that its adoption was not in
violation of Mr. Anderson's rights. The Court determined that adoption
of the ESOP was an appropriate business judgment, designed to attract and
retain employees. The Court ordered, however, that the shares
contributed to the ESOP by the Company which have not been allocated
could not be voted until further order of the Court.
On December 10, l998, the Company entered into a Settlement
Agreement with Revision, LLC, G&A and Mr. Anderson (the "Settlement
Agreement") terminating the litigation initiated in April 1998 by G&A
and Mr. Anderson against the Company. The Settlement Agreement also
included the resolution of a proxy contest initiated by Revision and Mr.
Anderson in November 1998 to displace certain members of the Company's
Board of Directors. The Board of Directors of the Company, with Messrs.
Solomon and Warren Feldman not voting, approved the Settlement Agreement
on December 10, l998.
Also on December 10, l998, Warren Feldman and Solomon Feldman
entered into a Stock Purchase Agreement with Revision and Mr. Anderson
providing, among other things, for (i) the purchase by Revision from the
Feldmans of up to 1,200,000 shares of the Company's Common Stock (the
"Common Stock") for $24 per share ("the Stock Purchase"), (ii) an
agreement by the Feldmans and Mr. Anderson to vote their shares in favor
of a reconstituted Board of Directors, and (iii) an agreement to attempt
to negotiate a one-year employment agreement for Warren Feldman under
which he would continue to serve as Chairman of the Board and Chief
Executive Officer of the Company (the "Stock Purchase Agreement").
The Settlement Agreement
The Settlement Agreement provides in pertinent part as follows:
Settlement of Litigation: Under the terms of the Settlement
Agreement, Revision, G & A and the Company were required to prepare and
jointly file, as soon as practicable, a stipulation with the Superior
Court, Chancery Division, Passaic County, New Jersey (the "Court"),
seeking to dismiss the Litigation with prejudice. The Court approved
the request for dismissal in January 1999. In connection therewith, the
Company, Revision and G & A requested the Court to dismiss all orders it
previously entered which prohibit Revision, G & A, Mr. Anderson, Warren
Feldman or Solomon Feldman from purchasing or acquiring directly or
indirectly, any additional stock of the Company. The Court dismissed
such orders.
Postponed Annual Meeting of Shareholders: On December 9, 1998, the
Company postponed its 1998 Annual Meeting, which was originally
scheduled for December 10, l998, because the parties to the litigation
were engaged in settlement negotiations. Under the Settlement
Agreement, the Company has rescheduled the 1998 Annual Meeting to be
held on March 16, l999 as herein provided
Proxy Statements: The Settlement Agreement provided that the
Company would submit to its shareholders a proxy statement which would
contain the recommendations of the Board with respect to the election of
a new Board at the postponed 1998 Annual Meeting. Under the Settlement
Agreement the new nominees to the Board consist of six individuals whose
names herein under "Election of Directors", three of whom, including
Warren Feldman, are his designees and three of whom, including Mr.
Anderson, are his designees
By-Law Amendments: On April 7, l998, the Board of Directors amended
the Company's By-Laws in several respects with respect to the conduct of
shareholder's and director's meetings. As previously noted, in April
1998, G & A initiated the Litigation by filing suit to invalidate the By-
Law amendments and subsequently the Court ordered the Company not to
implement the By-Law amendments or the Rights Plan pending a trial on the
merits. Pursuant to the Settlement Agreement, the Board has reinstated
the By-Laws which were in effect prior to the adoption of the amendments,
and agreed that such By-Laws would remain in effect and would not be
amended or modified in any manner until the election of the new Board, at
which time such Board may consider and determine appropriate By-Law
provisions for the Company.
Agreement With Respect to Future Common Stock Purchases: Mr.
Anderson and Revision have agreed in the Settlement Agreement that for
the one-year period beginning December 10, l998, neither he nor it, as
the case may be, or any of their respective affiliates would purchase,
directly or indirectly, any shares of the Company's Common Stock for a
purchase price of less than $24.00 per share.
Future Financing: The Company's Board believes that ready access to
capital is increasingly important to companies in the telecommunications
business. The Settlement Agreement provides that, during the period in
which Mr. Anderson serves as a director of the Company he and Revision
shall use commercially reasonable efforts to assist the Company in
obtaining any financing needed by it to the extent the Company requests
such assistance.
Board Approval of Settlement Agreement: At its meeting on December
10, l998, the Board concluded that the Settlement Agreement was in the
best interests of the Company because, among other things, it would end
the expense and disruption of litigation and disputes with the Company's
largest shareholder, bring additional telecommunications expertise and
experience into the Company, may enhance the Company's access to
financing, promote management continuity by allowing Warren Feldman to
remain as Chief Executive Officer for at least a one-year term, and
protect shareholders by precluding Anderson, Revision and their
affiliates from purchasing Company shares for less than $24 per share for
a period of one year. In connection with this approval of the Settlement
Agreement, the Board rescinded the Rights Plan, which otherwise would
have prevented consummation of the Stock Purchase.
Regulatory Matters: the Stock Purchase required compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") which was satisfied in January, 1999.
The Stock Purchase Agreement
The Stock Purchase Agreement provides in pertinent part as follows:
Purchase of Shares from Warren and Solomon Feldman: Under the Stock
Purchase Agreement, Revision agreed to purchase between 1,100,000 and
1,200,000 of the Company's Common Stock from Warren and Solomon Feldman
and/or their designees at a purchase price of $24.00 per share. On
December 10, l998 and January 21, 1999, the date on which 1,200,000
shares held by the Feldmans were purchased by Revision, the closing sale
prices for such stock in the over-the-counter market were $18.25 and
$17.125 per share, respectively. The closing of the Stock Purchase
Agreement was contingent upon (i) the expiration of all waiting periods
provided under the HSR Act and (ii) the Court having rescinded all
outstanding orders in connection with the Litigation which precluded the
purchase of the Company's Common Stock, by Mr. Anderson or Revision. On
January 21, l998 after satisfaction of such conditions, Revision
purchased 1,200,000 shares of the Company's Common Stock from the
Feldmans and certain family members and trusts.
The Reconstituted Board: Under the Stock Purchase Agreement, Warren
and Solomon Feldman each has agreed to use his respective best efforts to
cause the resignations of three members of the Board of Directors, one
of whom is Solomon Feldman, and to fill the vacancies created thereby
with Mr. Anderson, Dennis Spina and another designee of Mr. Anderson's
who had no affiliation with the Company. Mr. Anderson designated Mr.
Henry Luken. Messrs. Anderson, Spina and Luken were elected to the
Company's Board of Directors on February 3, l999 to fill vacancies
resulting from the resignations of Solomon Feldman, Brad Berger and
Joseph Kelly, (the "Reconstituted Board").
Voting Agreement: For the period commencing 12 months from the date
of the Stock Purchase Agreement and ending 24 months later, Mr. Anderson
and Revision agreed to vote the Company's shares owned by them in favor
of the election to the Board of two nominees designated by Warren Feldman
(one of whom may be Warren Feldman). During the same period, Warren and
Solomon Feldman agreed to vote the Company's shares owned by them in
favor of the election to the Board of Directors of nominees
designated by Mr. Anderson. These voting arrangements would become
void if the aggregate ownership of the Company's outstanding Common Stock
by Warren and Solomon Feldman , on the one hand, or Mr. Anderson or
Revision, on the other hand, falls below five percent of the then
outstanding shares of Common Stock. By reason of such voting
arrangements may be deemed to have resulted in a change in control of the
Company.
Employment: Under the Stock Purchase Agreement, Mr. Anderson and
Revision agreed to use their best efforts to cause the Company as soon
after the Reconstituted Board is elected to enter into a one-year
employment contract with Warren Feldman, pursuant to which he would
continue to be employed as Chairman of the Board and Chief Executive
Officer of the Company at a base salary of $250,000 per year, and with
incentive compensation up to $250,000 as may be determined by the Board
based upon performance targets set by the Board for executive officers
generally. See "Executive Compensation" herein for information regarding
Mr. Feldman's compensation for the 1998 fiscal year. Such agreement
would supercede any prior agreement between Warren Feldman and the
Company with respect to Mr. Feldman's employment by the Company. The
Company's Board of Directors also agreed to waive any buy-back provisions
attached to non-statutory stock options held by Warren Feldman.
Indemnification: On December 10, l998, Revision, Warren Feldman,
and Solomon Feldman entered into a letter agreement pursuant to which
Revision agreed to indemnify, defend and hold harmless Warren and Solomon
Feldman, (and their respective designees who sell shares of the Company's
Common Stock to Revision pursuant to the Stock Purchase Agreement)
against any loss, claim, damage, cost, expense, liability, judgement or
amount (including reasonable attorney's fees) which are suffered or
incurred by either of them in connection with any claim, action, suit,
proceeding or investigation resulting from the purchase from them of the
Company's Common Stock by Revision under the Stock Purchase Agreement.
Compensation Committee Report on Executive Compensation
- -------------------------------------------------------
The Company has grown substantially over the past five years. The
Board of Directors has remunerated the Company's executive officers based
on not only upon the size and needs of the Company at the present time,
but with due consideration of their ability to lead a substantially
larger organization in the future.
The Compensation Committee believes that the Company provides
compensation to the Company's executive officers in amounts comparable to
companies in the industry and geographical area in which the Company
operates having similar operating and growth characteristics. A
substantial portion of the compensation is tied to achievement of budgets
and other management goals.
The salary and other compensation paid to the Chief Executive
Officer of the Company in the fiscal year ended January 31, 1998 were
determined primarily based upon the following factors:
1. Increased revenue and earnings of the Company.
2. Compensation level of executive officers of companies engaged in
businesses like the Company's with similar growth and earning
characteristics.
3. Responsibilities and tasks to be achieved within the Company.
Respectfully submitted,
Leon Genet
Jay J. Miller
STOCK PERFORMANCE CHART
- -----------------------
The following chart graphs the performance of the cumulative total
return to shareholders (stock price appreciation) during the previous
five years in comparison to returns of the NASDAQ Stock Market (U.S.)
Index and a peer group index. The peer group index used in the NASDAQ
Telecommunications Stock Index.
[GRAPHIC OMITTED: mountain chart COMPARATIVE FIVE-YEAR TOTAL RETURNS
TOTAL TEL USA STOCK]
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
TOTAL TEL USA STOCK
Plot Points
NASDAQ -- U.S.
Componants Factor
.44610
Date
1/31/93 224.165 100.000
1/31/94 257.805 115.007
1/31/95 245.953 109.720
1/31/96 347.606 155.067
1/31/97 455.685 203.281
1/31/98 538.988 240.443
Peer Group
(Telecommunications Stocks) Factor
.291262
Date
1/31/93 343.333 100.000
1/31/94 518.169 150.923
1/31/95 432.491 125.968
1/31/96 581.216 169.287
1/31/97 594.035 173.020
1/31/98 912.746 265.848
Total-Tel Stock Factor
52.2876
Date
1/31/93 1.9125 100.000
1/31/94 7.4250 388.235
1/31/95 8.6250 450.981
1/31/96 8.9375 467.320
1/31/97 17.500 915.033
1/31/98 29.250 1,529.412
Footnote reads:
Assumes $100 invested at the close of trading on the last trading day of
the fifth preceding fiscal year in Total-Tel Common Stock, NASDAQ Stock
Market (U.S.) Index, and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
The stock price performance depicted in the above graph is not
necessarily indicative of future price performance. This graph will not
be deemed incorporated by reference in any filing by the Company under
the Securities Act of 1933 or the Exchange Act, except to the extent the
Company specifically incorporates the graph by reference.
Certain Relationships and Related Transactions
- ----------------------------------------------
On December 1, 1993, the Company leased approximately 21,300 square
feet of warehouse space in Belleville, New Jersey from a partnership in
which two of the partners, Warren Feldman and Sol Feldman, are directors
and major shareholders of the Company. During the fiscal year ended
January 31, 1998, the Company paid rent of $59,760 to the partnership.
The annual rent for this facility is $58,560 for the first three years
and $63,885 for years four and five plus a proportionate share of real
estate taxes. A renewal of the lease is currently being negotiated on a
month-to-month basis at a base rental of $73,468 per annum. The
foregoing transaction was negotiated upon terms considered by the
Management to be not less favorable to the Company than like transactions
negotiated at arm's length.
Jay J. Miller, a director of the Company, has provided various legal
services for the Company. During Fiscal 1998, Mr. Miller was paid an
aggregate of approximately $172,000 for legal services rendered on the
Company's behalf. The Company believes that Mr. Miller's fees were
reasonable for the services performed and were no less favorable to the
Company than could have been obtained from an unrelated third party.
Leon Genet, a director of the Company, has provided agent services
for Total-Tel through his wholly-owned company, LPJ, Inc. During Fiscal
1998, LPJ, Inc. was paid commissions of $76,580. The fees paid to LPJ,
Inc. were paid on the same basis as for other agents retained by the
Company and the Company believes they were reasonable for the services.
Section 16 (a) Beneficial Ownership Reporting Compliance
- --------------------------------------------------------
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities
("Ten Percent Owners"), to file with the SEC initial reports of ownership
and reports of changes in ownership of Common Stock and other equity
securities of the Company. Such officers, directors and Ten Percent
Owners are required by SEC regulations to furnish the Company with copies
of all Section 16 (a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, during the fiscal year ended January 31,
l998, the executive officers, directors and Ten Percent Owners complied
with all applicable Section 16 (a) filing requirements, except that a
report covering a sale of shares of Common Stock was inadvertently filed
late by Mr. Leon Genet.
PROPOSALS OF
------------
SHAREHOLDERS FOR 1999 ANNUAL MEETING
------------------------------------
Proposals of shareholders intended to be presented for action at the
1999 Annual Meeting of Shareholders must be received at the Company's
offices not later than May 15, 1999 to be considered for inclusion in the
Company's proxy statement and form of proxy relating to that meeting.
The provisions under Rule 14a-8 of the Securities Exchange Act of 1934
shall apply to any such submission.
ANNUAL REPORT
-------------
The Annual Report of the Company for the fiscal year ended January
31, 1998, including financial statements, is being mailed to shareholders
together with this Proxy Statement. No part of such Annual Report shall
be regarded as proxy soliciting material or as a communication by means
of which any solicitation is being or is to be made.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
----------------------------------------
Deloitte & Touche LLP or a predecessor, has served as the
independent certified public accountants of the Company since 1962. The
Company has appointed Deloitte & Touche LLP as its independent certified
public accountants for the fiscal year ending January 31, 1999. Deloitte
& Touche has indicated that it expects to have a representative at the
Meeting. The representative will be afforded an opportunity to make a
statement, if he desires, and will be available to respond to appropriate
shareholder questions.
VOTING AND SOLICITATION OF PROXIES
----------------------------------
The solicitation of proxies in the accompanying form is made by the
Company's Board of Directors, and the cost thereof will be borne by the
Company. The Company may solicit proxies by mail, telephone, or
telegraph. Brokerage firms, custodians, banks, trustees, nominees or
other persons holding shares in their names, will be reimbursed for their
reasonable expenses in forwarding proxy materials to their principals.
As of the date of this Proxy Statement, the Board of Directors is
not aware of any other matter to be presented before the Meeting. In the
event any other matter is properly brought before the Meeting, it is
intended that the persons voting the accompanying proxy will vote the
shares represented thereby in accordance with their best judgment.
It is important that proxies be returned promptly. Therefore,
whether or not you plan to attend in person, you are asked to execute and
return your proxy in the enclosed, postage prepaid, envelope.
By Order of the Board of Directors.
Thomas P. Gunning
February 25, 1999 Secretary
