<PAGE>
Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TOTAL-TEL USA COMMUNICATIONS, INC.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(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):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(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:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
<PAGE>
TOTAL-TEL USA COMMUNICATIONS, INC.
150 Clove Road
Little Falls, New Jersey 07424
NOTICE OF 2000
ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
TOTAL-TEL USA COMMUNICATIONS, INC.:
You are cordially invited to attend the 2000 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 11:00 AM, EDT, on
September 12, 2000, for the following purposes:
(1) To elect five directors;
(2) To approve an amendment to the Company's Certificate of
Incorporation to change the name of the Company to Covista
Communications, Inc.; and
(3) 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 July 28,
2000, 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
July 28, 2000
Little Falls, New Jersey
1
<PAGE>
TOTAL-TEL USA COMMUNICATIONS, INC.
----------------------------
PROXY STATEMENT
------------
2000 ANNUAL MEETING OF SHAREHOLDERS
September 12, 2000
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 2000
Annual Meeting of Shareholders (the "Meeting"), to be held on Tuesday, September
12, 2000, at 11:00 A.M., EDT, 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 Annual Meeting of Shareholders.
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
August 8, 2000.
MATTERS TO BE ACTED UPON
------------------------
The following matters are to be considered and acted upon at the
Meeting:
1. The election of five directors to hold office until the next
Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified.
2. To consider and act upon a proposed Amendment to the Company's
Certificate of Incorporation to change the name of the Company to
Covista Communications, Inc.
3. 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 par value $.05 per
share (the "Common Stock") at the close of business on July 28, 2000 will be
entitled to vote at the Meeting. On that date, 7,944,091 shares of Common Stock
were issued and outstanding. Each outstanding share of Common Stock is entitled
to one vote at the Meeting.
2
<PAGE>
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 July 28, 2000.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage
of Beneficial Owner Owned (1) of Class
------------------- --------- --------
<S> <C> <C>
Walt Anderson 3,603,104 (2)(3) 45.4%
c/o 1023 31st Street, NW
Suite 300
Washington, D.C. 20007
Revision LLC 3,595,874 (2)(3) 45.3%
c/o 1023 31st Street, NW
Suite 300
Washington, D.C. 20007
Total-Tel USA Communications, Inc. 600,000 (4) 7.6%
Employee Stock Ownership Plan
150 Clove Road
Little Falls, NJ 07424
Michael A. Karp 424,954 5.3%
3416 Sansom Street
Philadelphia, PA 19104
Thomas Cirrito 504,694 (5) 6.3%
7716 Carlton Place
Mc Lean, VA 22102
</TABLE>
(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) 3,595,804 of such shares are owned of record 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 686,629 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 no longer
subject to certain restrictions on the purchase of additional shares.
(4) See the discussion of the Employee Stock Ownership Plan on page 11.
(5) Atocha LP, of which Mr. Cerrito is general partner, owns 484,694 of these
shares.
3
<PAGE>
Security Ownership of Management
--------------------------------
The following table sets forth as of July 28, 2000, information
concerning the beneficial ownership of Common Stock by each director of the
Company, each nominee for election as a director and all directors and officers
of the Company as a group:
<TABLE>
<CAPTION>
Name of Beneficial Number of Shares Percentage
Owner Owned (1) of Class
----- --------- --------
<S> <C> <C>
Walt Anderson 3,603,104 (2)(3) 44.6%
Revision LLC 3,595,804 (2)(3) 44.5%
Leon Genet 41,120 0.5%
A. John Leach 1,000 (4)
Henry Luken 217,235 2.7%
Jay J. Miller 400 (4)
All directors and officers
as a group (7 in number) 3,916,659 49.1%
</TABLE>
(1) All shares are beneficially owned and sole investment and voting power is
held by the persons named above.
(2) 3,595,804 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 686,629 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.
(4) Less than 1%.
Changes in Control
------------------
The Company knows of no contractual arrangement which may, at a
subsequent date, result in a change of control of the Company.
4
<PAGE>
ELECTION OF DIRECTORS
---------------------
The Board of Directors has fixed the number of directors to be elected
at the Meeting at five. 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 currently expected to be held in June, 2001, 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 management. The name, age, business experience and
public directorships of each nominee are as set forth in the table (and
accompanying nominee descriptions) below.
<TABLE>
<CAPTION>
Name Company Office Since Age
---- -------------- ----- ---
<S> <C> <C> <C>
Walt Anderson Chairman of the 1999 45
Board
Leon Genet Director 1996 69
A. John Leach President, Chief 2000 38
Executive Officer
Henry Luken Director 1999 39
Jay J. Miller Director 1983 67
</TABLE>
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, and as Chairman of the Board in November, 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 November 1998, and President and Chairman, Mid Atlantic Telecom
(Telecom Services), from May 1984, to October 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), US WATS (Telecom Services) and Chairman of the Board of Directors of
WorldxChange Corp. (Telecom Services).
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., a privately held company, which has earned commissions from the Company on
the same basis as other independent representatives. See "Certain Relationships
and Related Transactions."
Mr. A. John Leach, Jr. was appointed President and Chief Executive
Officer of the Company on May 18, 2000. He had been Sr. Vice President of Sales
at BTI Telecomm, Inc., from December 1999 to May 2000; Sr. Vice President of
Teleglobe, Inc. from June 1996 to December 1999, where he assumed
responsibilities for US and Canadian commercial sales markets. He was promoted
to this position from Sr. Vice President of Wholesale and Agent Markets, Telco
Communications (a subsidiary of Teleglobe, Inc.) June 1996 to February 1999.
Prior to that, Mr. Leach was Vice President of Agent Services at BTI Telecomm,
from December 1989 to June 1996. Regional Sales Manager of Mobilecomm (a Bell
South Company) where he started in sales and rose to a Regional Sales Manager
position May 1985 to December 1989.
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; and 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")
5
<PAGE>
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. He is Chairman of the
Board of AmTrust Pacific Ltd., a New Zealand real estate company. He was
recently elected Chairman of the Board of Directors of The FINX Group, Inc. a
diversified technology firm and is a director of AmTrust Financial Group, Inc.,
an insurance holding company. Mr. Miller has performed legal services on behalf
of the Company. See "Certain Relationships and Related Transactions."
Board of Directors
------------------
The Company's Board of Directors currently consists of four persons,
none of whom is a member of management. During the fiscal year ended January 31,
2000, the Board held nine meetings, each of which was attended by all of the
directors then 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 three non-management
directors, Messrs. Walt Anderson, Henry Luken and Leon Genet. Mr. Genet is not
considered to be an independent director. The committee has adopted a formal
written audit committee charter which is attached to this Proxy Statement as
Appendix A. The Audit Committee's primary duties include (1) recommending the
appointment of independent accountants and determining the appropriateness of
their fees, (2) reviewing the scope and results of the audit plans of the
independent accountants, (3) overseeing the scope and adequacy of internal
accounting control and record-keeping systems and (4) conferring with the
independent accountants on numerous matters including, but not limited to, a
discussion of the Company's annual report on form 10-K and the quarterly reports
on form 10-Q prior to their filing. The Committee has met two times in this
fiscal year and intends to meet on at least a quarterly basis 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.
Compensation Committee Report on Executive Compensation
-------------------------------------------------------
Total-Tel USA Communications, Inc. has grown substantially over the
past five years. The Board of Directors has retained the Company's executive
officers based, 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 salaries
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.
The salary and other compensation paid to the Chief Executive Officer
of the Company in the fiscal year ended January 31, 2000, was determined
primarily based upon the following factors:
1. Revenue of the Company.
2. Compensation level of chief executive officers of companies engaged in
businesses like the Company's with similar operating characteristics.
3. Responsibilities and tasks to be achieved within the Company.
Respectfully submitted,
Henry Luken
Jay J. Miller
6
<PAGE>
Required Shareholders' Vote
---------------------------
Assuming the presence of a quorum (a majority of the total issued and
outstanding shares of Common Stock) the five nominees receiving the highest
number of affirmative votes of the shares present in person or represented by
proxy and entitled to vote for them, shall be elected as directors.
THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK
7
<PAGE>
EXECUTIVE COMPENSATION
----------------------
The following table sets forth the compensation which the Company paid
during the fiscal years ended January 31, 2000, 1999 and 1998 to the Chief
Executive Officer and to each executive officer of the Company or person
performing similar functions whose aggregate remuneration exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Name and Fiscal Year Annual Compensation Other Compensation
Principal Ended Annual Awards All Other
Position January 31 Salary ($) Bonus(s) Compensation($) Options(14) Compensation(s)(8)
-------- ---------- ---------- -------- --------------- ----------- ------------------
<S> <C> <C> <C> <C>
Warren H. 2000 $168,269 (2) $900,000 (3) $16,191 (4)
Feldman 1999 $221,154 (2) $260,785 $ 8,735 (5)
Chairman and 1998 $287,115 (2) $350,000 $15,325 (6)
Chief Executive
Officer (1)
Dennis Spina 2000 $305,769 $ 2,857 (7)
President and
Chief Operating
Officer (8)
Sal Quadrino 2000 $137,307
Vice President
and Chief Financial
Officer (9)(10)
Thomas P. 2000 $140,000 $11,179 (11)
Gunning 1999 $124,230 $ 2,000 $10,161 (12)
Vice President, 1998 $116,600 $ 4,000 $ 8,265 (13)
Treasurer
and Secretary
</TABLE>
(1) Resigned from his position on October 7, 1999.
(2) Does not include an annual director's fee of $15,000.
(3) See page 12 -" Certain Relationships and Related Transactions"
(4) The amounts shown represent the Company's contribution under its 401 (K)
Deferred Compensation and Retirement Savings Plan of $5,048 and $3,143 for
the use of a Company vehicle for non-business purposes and $8,000 term life
insurance premiums.
(5) The amounts shown represent the Company's contribution under its 401 (K)
Deferred Compensation and Retirement Savings Plan of $5,026 and $3,429 for
the use of a Company vehicle for non-business purposes and $280 term life
insurance premiums.
(6) The amount shown represent the Company's contribution under its 401 (K)
Deferred Compensation and Retirement Savings Plan of $4,688 and $2,357 for
the use of a Company vehicle for non-business purposes and $8,280 term life
insurance premiums.
(7) The amount shown represents $2,857 for the use of a Company vehicle for
non-business purposes.
(8) Resigned from his position on March 17, 2000.
(9) Mr. Quadrino joined the Company on April 20, 1999.
(10) Mr. Quadrino resigned from his position on June 16, 2000.
8
<PAGE>
(11) The amount shown represents the Company's contribution under its 401 (K)
Deferred compensation and Retirement Savings Plan of $4,200 and $2,179 for
the use of a Company's vehicle for non-business purposes and $4,800 term
life insurance premiums.
(12) The amount shown represents the Company's contribution under its 401 (K)
Deferred compensation and Retirement Savings Plan of $3,837 and $1,524 for
the use of a Company's vehicle for non-business purposes and $4,800 term
life insurance premiums.
(13) The amount shown represents the Company's contribution under its 401 (K)
Deferred compensation and Retirement Savings Plan of $3,468 and $1,393 for
the use of a Company's vehicle for non-business purposes and $3,404 term
life insurance premiums.
(14) See Grant Table on page 10.
401(K) Savings and Investment Plan
----------------------------------
On February 3, 1992, the Company adopted a 401 (K) savings and
investment 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, in
October, 1996 the Company adopted its 1996 Stock Option Plan, and in February
2000 the Company adopted the 1999 Equity Incentive Plan, collectively (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, and also
permit the granting of non-qualified options. 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 reserved 664,900 shares of Common
Stock under the 1987 Option Plan, 300,000 shares of Common Stock under the
1996 Option Plan and 750,000 shares of Common Stock under the 1999 Equity
Incentive Plan for issuance to eligible participants. 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 second 2-for-1 stock split. As of
July 15, 2000, there are 205,950 shares available to be granted under the 1996
Plan and 197,600 shares available to be granted under the 1999 Plan. The 1987
Plan has been terminated, however there are still options to purchase 99,000
shares that have not been exercised and are outstanding.
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 granted 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
9
<PAGE>
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.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
<TABLE>
<CAPTION>
Options/SAR Grants in last Fiscal Year Potential realizable Value at
Assumed Annual Rates of Stock
Appreciation for Option Term
Individual Grants
-----------------------------------------------------------------------------------
Number of
Securities
Underlying % of Total
Options /SARs Options/SARs
Granted to
Employees in
Granted Exercise Base Expiration
Name (#)(1) Fiscal Year Price Date 5% 10%
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Spina 144,000 15.22% $ 19.00 February 3, 2002 $431,262 $905,616 (1)
Dennis Spina 144,000 15.22% $ 19.00 February 3, 2002 $431,262 $905,616 (2)
Salvatore Quadrino 50,000 5.29% $ 19.00 May 5, 2004 $204,731 $440,895 (3)
Salvatore Quadrino 50,000 5.29% $ 16.00 January 12, 2005 $172,405 $371,280 (4)
Thomas P. Gunning 10,000 1.06% $ 19.00 March 16, 2004 $ 40,946 $ 88,179 (5)
</TABLE>
(1) Stock options granted under the 1999 Plan. Vesting in six equal
installments, commencing six months from date of grant, with the exercise price
increasing 6% as to each installment.
(2) Stock options granted under the 1999 Plan. Vesting in four equal
installments, commencing six months from date of grant, with the exercise price
increasing 6% as to each installment.
(3) Stock options granted under the 1999 Plan. Vesting in four equal
installments, commencing one year from date of grant, with the exercise price
increasing 6% as to each installment.
(4) Stock options granted under the 1999 Plan. Vesting in four equal
installments, commencing one year from date of grant, with the exercise price
increasing 6% as to each installment.
(5) Stock option granted under the 1999 Plan. Vesting in four equal
installments, commencing one year from date of grant, with the exercise price
increasing 6% as to each installment.
On February 23, 2000, the Board of Directors approved the repricing of
all options with an exercise price varying between $14.625 and $21.50 to $14.25.
All of Dennis Spina's options were terminated due to his resignation on
March 17, 2000.
The unvested portion of Salvatore Quadrino's options terminated with
his resignation on June 16, 2000. If Mr. Quadrino does not exercise the vested
portion by September 16, 2000, those options will also terminate.
10
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
-------------------------------------
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End (#) Fiscal Year-End (#)
Shares Acquired
Name on Exercise(#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Warren Feldman 261,000 $2,334,051 - - - -
Dennis Spina (1) - 48,000 240,000 - - -
Salvatore Quadrino (1) - - 100,000 - - -
Thomas Gunning (2) 12,000 $ 123,000 33,000 12,000 $461,887 -
</TABLE>
(1) The unexercisable options held by Messrs. Spina and Quadrino are at
exercise prices ranging from $16.00 to $21.50, which are greater than the
fair market value of $14.75 at January 31, 2000.
(2) The unexercisable options to purchase 12,000 shares were at exercise prices
greater than fair market value of $14.75 at January 31, 2000.
EMPLOYEE STOCK OWNERSHIP PLAN
On September 1, 1998, the Company established the Total-Tel USA
Communications, Inc. Employee Stock Ownership Plan (the "ESOP"). The purpose of
the ESOP was 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, if any, to the ESOP are to 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 would 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 are to 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 votes 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 are allocated to individual participants' accounts, the Trustee votes such
shares in accordance with the participants' written instructions. The Trustee
would 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
directed by the ESOP Committee.
The Company has sought to terminate the ESOP inasmuch as no shares have
yet been allocated to the account of any participant. On November 26, 1999, the
Company filed a request for a determination letter with the Internal Revenue
Service ("IRS"). The Company has received approval from the IRS to terminate the
ESOP, and is in the process of doing so.
11
<PAGE>
Certain Relationships and Related Transactions
----------------------------------------------
On December 1, 1993, the Company leased warehouse space in Belleville,
New Jersey from a partnership in which two former directors and major
shareholders were partners. During the fiscal year ended January 31, 2000, the
Company paid rent of $62,848 to the partnership. The lease expired on November
30, 1998 and has been renewed on a month-to-month basis at an annual rate of
$47,980, subject to 120-day prior written termination notice requirement.
Company believes such premises are leased on terms not less favorable to Company
than in an arm's length transaction.
Jay J. Miller, a director of the Company, has provided various legal
services for the Company during Fiscal 2000. In Fiscal 2000, the Company has
paid $158,755 to Mr. Miller for services rendered and accrued for during Fiscal
1999. As of January 31, 2000 the Company had invoices payable to Mr. Miller
totaling $284,295. 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 Company, has provided agent services for
Total-Tel through his wholly owned firm, LPJ, Inc. During Fiscal 2000, LPJ, Inc.
was paid commissions of $123,418. The commissions paid to LPJ, Inc. were
computed on the same basis as for other agents retained by Company.
Walt Anderson, a Director of the Company, serves on the Board of
Directors of several other long distance telephone service carriers with which
the Company does business. The Company both purchases and sells services from US
Wats and CTS/WorldxChange. Sales to US Wats and CTS/WorldxChange in Fiscal 2000
were approximately $681,000 and $4,360,000, respectively. Purchases from US Wats
and CTS/WorldxChange were approximately $291,000 and $2,646,000, respectively.
All transactions were based on competitive terms negotiated at arm's length.
On September 21, 1999 the Company entered into an agreement with Warren
Feldman, Chairman of the Board of Directors and a principal shareholder of the
Company. As part of this agreement, a lump sum in the amount of $900,000 was
paid to Mr. Feldman in settlement of his employment agreement. The Company paid
$650,000 and Mr. Walt Anderson, a major shareholder, paid $250,000. Mr.
Feldman's Employment Agreement would have been in effect until December 31,
2001. The Company expensed the $900,000 in Fiscal 2000 with $250,000 being
accounted for as a capital contribution.
Simultaneously Revision LLC and Mr. Walt Anderson ("Revision/Anderson")
and the Company entered into put option agreements with Warren Feldman, Sol
Feldman ("the Feldmans") and Leon Genet, ("Genet") a director of the Company.
These Put Option agreements granted the Feldmans and Genet the right to sell
their shares of the Company to Revision/Anderson at a price of $16.00 per share
and obligated Revision/Anderson to purchase the shares during an exercise period
beginning on December 11, 1999 and ending on February 10, 2000. The Company has
no obligation to purchase any shares from the Feldmans or Genet. The closing
market price of the Company's shares on September 21, 1999, the date of the
agreements, was $12.25, and the total number of shares covered by the agreements
was 1,208,137. Using a binomial valuation model with an interest rate of 5% and
a volatility rate of 50%, the fair value of the Put agreements was determined to
be $4.03 per share or $4,870,554. The Company accounted for this non-cash
transaction as a charge to expense and a credit to paid-in capital during the
third quarter of Fiscal 2000.
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 Securities and Exchange Commission (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, 2000, the
executive officers, directors and Ten Percent Owners complied with all
applicable Section 16 (a) filing requirements
12
<PAGE>
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 chart assumes $100 was invested at the close of trading on the
last trading day preceding the first day of the fifth preceding fiscal year in
Total-Tel Common Stock, the NASDAQ Stock Market (U.S.) Index and the peer group.
The peer group index used is the NASDAQ Telecommunications Stock Index (the
"Peer Group").
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
TOTAL-TEL USA STOCK
[PERFORMANCE GRAPH]
<TABLE>
<S> <C>
NASDAQ
1/31/95 100.000
1/31/96 141.911
1/31/97 186.061
1/31/98 219.616
1/31/99 343.533
1/31/00 526.953
PEER GROUP
(TELECOMMUNICATIONS STORES)
1/31/95 100.000
1/31/96 134.624
1/31/97 137.631
1/31/98 209.589
1/31/99 373.643
1/31/00 559.414
TOTAL-TEL
1/31/95 100.000
1/31/96 103.624
1/31/97 202.899
1/31/98 339.130
1/31/99 417.391
1/31/00 342.029
</TABLE>
*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, as amended, or the Securities Exchange Act of 1934,
except to the extent the Company specifically incorporates the graph by
reference.
13
<PAGE>
APPROVE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY TO COVISTA COMMUNICATIONS, INC.
Management believes that a new identity to better reflect the changing focus of
the Company from long distance telecommunications to a full service business
communications provider including local, long distance, data and Internet
services would be appropriate. The proposed amendment to the Company's
Certificate of Incorporation, which was unanimously approved by the Company's
Board of Directors, would change the name of the Company from Total-Tel USA
Communications, Inc. to Covista Communications, Inc.
The affirmative vote of the holders of a majority of the issued and outstanding
shares of the Company Common Stock is required to approve the Amendment.
MANAGEMENT RECOMMENDS A VOTE "FOR" THE AMENDMENT. SHARES OF COMMON STOCK
REPRESENTED AT THE ANNUAL MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED
FOR THE CHANGE OF THE NAME OF THE COMPANY TO COVISTA COMMUNICATIONS, INC.
THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK
14
<PAGE>
PROPOSALS OF
SHAREHOLDERS FOR 2001 ANNUAL MEETING
------------------------------------
Proposals of shareholders intended to be presented for action at the
2001 Annual Meeting of Shareholders must be received at the Company's offices
not later than March 15, 2001 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,
2000, 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, 2001. 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,
July 28, 2000 Secretary
15
<PAGE>
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
OF
TOTAL-TEL USA COMMUNICATIONS, INC.
I. AUDIT COMMITTEE PURPOSE
The Audit Committee of the Board of Directors of Total-Tel USA Communications,
Inc. (the "Company") is appointed by the Board of Directors to assist the Board
of Directors in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
Monitor the independence and performance of the Company's independent
auditors.
Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the National Association
of Securities Dealers. The Audit Committee shall be comprised of three or more
directors as determined by the Board of Directors, each of whom shall be
independent nonexecutive directors, free from any relationship that would
interfere with the exercise of his or her independent judgment. All members of
the Audit Committee shall have a basic understanding of finance and accounting
and be able to read and understand fundamental financial statements, and at
least one member of the Audit Committee shall have accounting or related
financial management expertise.
Audit Committee members shall be appointed by the Board of Directors on
recommendation of a nominating committee. If an audit committee Chair is not
designated or present, the members of the Audit Committee may designate a Chair
by majority vote of the Audit Committee membership.
The Audit Committee shall meet at least three times annually, or more frequently
as circumstances dictate. The Audit Committee Chair shall prepare and/or approve
an agenda in advance of each meeting. The Audit Committee should meet privately
in executive session at least annually with management, the independent auditors
and as a committee to discuss any matters that the Audit Committee or each of
these groups believe should be discussed.
16
<PAGE>
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
Review Procedures
-----------------
1. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with the
Securities and Exchange Commission regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices and judgments.
3. In consultation with the management and the independent auditors,
consider the integrity of the Company's financial reporting processes
and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control and report such
exposures. Review significant findings prepared by the independent
auditors together with management's responses including the status of
previous recommendations.
Independent Auditors
--------------------
4. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence, and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.
5. Approve the fees and other significant compensation to be paid to the
independent auditors.
6. On an annual basis, the Audit Committee should review and discuss with
the independent auditors all significant relationships they have with
the Company that could impair the auditors' independence.
7. Review the independent auditors audit plan - discuss scope, staffing,
locations, reliance upon management and internal audit and general
audit approach.
8. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to audit committees in accordance with the American
Institute of Certified Public Accountants A Statement of Auditing
Standards No. 61.
9. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as
applied in its financial reporting.
Legal Compliance
----------------
10. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, inquiries received from regulators or
governmental agencies.
Other Audit Committee Responsibilities
--------------------------------------
11. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's
annual proxy statement.
12. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Audit Committee or the
Board of Directors deems necessary or appropriate.
13. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
17
<PAGE>
Other Optional Charter Provisions:
---------------------------------
14. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code.
15. Periodically perform self-assessment of audit committee performance.
16. Review financial and accounting personnel succession planning within
the company.
17. Annually review policies and procedures as well as audit results
associated with directors' and officers expense accounts and
perquisites. Annually review a summary of director and officers'
related party transactions and potential conflicts of interest.
18
<PAGE>
APPENDIX 1
TOTAL-TEL USA COMMUNICATIONS, INC.
PROXY CARD FOR 2000
ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints A. JOHN LEACH and THOMAS P. GUNNING, or
either of them, attorneys and proxies with full power of substitution and with
all the powers the undersigned would possess if personally present, to vote all
stock of the undersigned in TOTAL-TEL USA COMMUNICATIONS, INC. at the 2000
Annual Meeting of Shareholders, to be held on September 12, 2000 at 11:00 A.M,
EDT at 150 Clove Road, Little Falls, New Jersey, 07424 or at any adjourned
session thereof. Said proxies are directed to vote the shares the undersigned
would be entitled to vote upon the following matters, more fully described in
the accompanying Proxy Statement:
<TABLE>
<S> <C>
(1) Election of Directors
( ) FOR all nominees (except ( ) WITHHOLD AUTHORITY
as authority is withheld to vote for all nominees
by striking a line through
the nominee's name)
Walt Anderson Leon Genet
A. John Leach Henry Luken
Jay J. Miller
(2) Amendment of Certificate of Incorporation to change the name
of the Company to Covista Communications, Inc.
( ) FOR ( ) AGAINST
</TABLE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS SET FORTH ABOVE. IF NO INSTRUCTIONS ARE GIVEN, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS, IN FAVOR
OF THE PROPOSED AMENDMENT TO CHANGE THE NAME OF THE COMPANY TO COVISTA
COMMUNICATIONS, INC., AND, IN THEIR DISCRETION, AS TO ANY OTHER MATTER PROPERLY
BROUGHT BEFORE THE MEETING, THE UNDERSIGNED HEREBY REVOKES ANY PREVIOUS PROXIES
WITH RESPECT TO THE MATTERS COVERED IN THIS PROXY.
Dated: ________, 2000
---------------------
---------------------
Signature(s) of Shareholder(s)
Please sign exactly as name or names appear hereon. Kindly sign and return this
proxy immediately. No postage required if mailed in the United States in the
accompanying envelope.
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
