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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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:
.......................................................
PRELIMINARY
TOTAL-TEL USA COMMUNICATIONS, INC.
150 Clove Road
Little Falls, New Jersey 07424
NOTICE OF 1999
ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
TOTAL-TEL USA COMMUNICATIONS, INC.:
You are cordially invited to attend the 1999 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
February 23, 2000, for the following purposes:
(1) To elect five directors;
(2) To approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of
Common Stock, par value, $.05 per share, from 20,000,000 to
50,000,000;
(3) To approve the 1999 Equity Incentive Plan; and
(4) 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 January 27,
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
January 27, 2000
Little Falls, New Jersey
TOTAL-TEL USA COMMUNICATIONS, INC.
----------------------------
PROXY STATEMENT
------------
1999 ANNUAL MEETING OF SHAREHOLDERS
February 23, 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 1999
Annual Meeting of Shareholders (the "Meeting"), to be held on Wednesday,
February 23, 2000, 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 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
January 31, 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 increase the number of authorized
shares of Common Stock, par value, $.05 per share, from
20,000,000 to 50,000,000.
3. To consider and act upon the adoption of the 1999 Equity
Incentive Plan.
4. 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 January 27, 2000 will be
entitled to vote at the Meeting. On that date 7,972,904 shares of Common Stock
were issued and outstanding. Each outstanding share of Common Stock is entitled
to one vote at the Meeting.
2
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 January 14, 2000.
Name and Address Number of Shares Percentage
of Beneficial Owner Owned (1) of Class
- ------------------- ---------- ---------
Walt Anderson 3,596,074(2)(3)(4) 45.1%
c/o 1023 31st Street, NW
Suite 300
Washington, D.C. 20007
Revision LLC 3,595,874(2)(3)(4) 45.1%
c/o 1023 31st Street, NW
Suite 300
Washington, D.C. 20007
Total-Tel USA Communications, Inc. 600,000(5) 7.5%
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(6) 6.3%
7716 Carlton Place
McLean, VA 22102
(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) 3,595,874 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 384,711 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) Mr. Walt Anderson and Revision LLC are parties to Put Agreement with Warren
Feldman and his father, Solomon Feldman, which currently entitles such
persons and certain of their related parties to sell to Revision LLC
315,796 shares of Common Stock. Mr. Anderson and Revision LLC also are
parties to Put Agreement with Leon Genet that entitles Mr. Genet to sell to
Revision LLC 104,320 shares of Common Stock. The rights of Mr. Feldman and
Mr. Genet under their respective Put Agreements must be exercised prior to
February 10, 2000. Neither Mr. Anderson nor Revision LLC has any right to
require any party to sell Common Stock to it pursuant to such Put
Agreements, and Mr. Anderson and Revision LLC therefore do not beneficially
own the Common Stock subject to sale pursuant to either of the Put
Agreements.
(5) See the discussion of the Employee Stock Ownership Plan set forth below.
3
(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 January 14, 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:
Name of Beneficial Number of Shares Percentage
Owner Owned (1) of Class
----- --------- ---------
Walt Anderson 3,596,074(2)(3)(4) 44.8%
Revision LLC 3,595,874(2)(3)(4) 44.8%
Leon Genet 91,120(4) 1.1%
Henry Luken 174,553 2.2%
Jay J. Miller 400 (6)
Dennis Spina 146,005(5) 1.8%
All directors and officers
as a group (6 in number) 4,058,932 50.6%
(1) All shares are beneficially owned and sole investment and voting power is
held by the persons named above.
(2) 3,595,874 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 384,711 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) Mr. Walt Anderson and Revision LLC are parties to Put Agreement with Warren
Feldman and his father, Solomon Feldman, which currently entitles such
persons and certain of their related parties to sell to Revision LLC
315,796 shares of Common Stock. Mr. Anderson and Revision LLC also are
parties to Put Agreement with Leon Genet that entitles Mr. Genet to sell to
Revision LLC 104,320 shares of Common Stock. The rights of Mr. Feldman and
Mr. Genet under their respective Put Agreements must be exercised prior to
February 10, 2000. Neither Mr. Anderson nor Revision LLC has any right to
require any party to sell Common Stock to it pursuant to such Put
Agreements, and Mr. Anderson and Revision LLC therefore do not beneficially
own the Common Stock subject to sale pursuant to either of the Put
Agreements.
(5) Includes options to purchase 144,000 shares of the Common Stock which are
exercisable currently or within 60 days hereof, the issuance of one-half of
which is subject to the approval of the 1999 Equity Incentive Plan at the
Meeting.
(6) Less than 1%.
4
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.
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, 2000, 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.
Name Company Office Since Age
- ---- --------------- ----- ---
Walt Anderson Chairman of the 1999 45
Board
Leon Genet Director 1996 69
Henry Luken Director 1999 39
Jay J. Miller Director 1983 67
Dennis Spina President, Chief 1999 53
Executive 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, 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 World Exchange
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."
5
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") 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. 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 and Chief Executive Officer. In July,
1999, Mr. Spina was appointed Chief Executive Officer of the Company, 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 Corp.); 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 five persons,
one of whom is a member of management and four of whom are non-management
directors. During the fiscal year ended January 31, 1999, 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 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. Mr.
Dennis Spina is an ex-officio member of the Compensation Committee.
Compensatin 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, 1999, was determined primarily
based upon the following factors:
1. Increased revenue of the Company.
2. Compensation level of chief executive officers of companies engaged in
businesses like the Company's with similar growth and earning
characteristics.
6
3. Responsibilities and tasks to be achieved within the Company.
Respectfully submitted,
Henry Luken
Jay J. Miller
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
EXECUTIVE COMPENSATION
The following table sets forth the compensation which the Company paid
during the fiscal years ended January 31, 1999, 1998 and 1997 to the Chief
Executive Officer and to each executive officer of the Company or person
performing similar functions whose aggregate remuneration exceeded $100,000.
Summary Compensation Table
--------------------------
Name and Fiscal Year Annual Compensation Other Compensation
Principal Ended ------------------- Annual Awards All Other
Position January 31 Salary ($) Bonus(s) Compensation($) Options (7) Compensation(s)(8)
- -------- ---------- ---------- -------- --------------- ----------- ------------------
Warren H. 1999(2) $221,154(1) $266,785 $ 8,735
Feldman 1998 $287,115(1) $350,000 $15,325
Chairman and 1997 $315,000(1) $295,000 $ 7,025
Chief Executive
Officer (2)
Kevin Alward 1999(3)(4) $347,528 $ 0 $ 0
President and 1998 $268,817 $270,499 $12,877
Chief Operating 1997 $315,000 (2) $280,000 $ 9,769
Officer
Bennett Goldberg 1999 $ 86,538 $233,141 $ 8,535
Senior Vice 1998 $ 90,000 $216,129
President of 1997 $ 90,000 $168,572
Total-Tel, Inc.
David Hess 1999 (5) $245,769 $249,167 $18,156
President and 1998 $264,615 $176,773 $115,008(6) $ 8,655
Chief Operating
Officer of
Total Tel, Inc.
Jeff Slater 1999 $ 96,250 $ 0
Senior Vice 1998 $235,846 $235,433 $ 3,461
President of
Total Tel, Inc.
Thomas P. 1999 $124,230 $ 2,000 $10,331
Gunning 1998 $116,000 $ 4,000 $ 8,265
Vice President, 1997 $ 95,231 $ 6,000 $ 6,560
Treasurer
and Secretary
(1) Does not include annual Director's fee of $15,000
(2) Resigned as an officer of the Company on October 7, l999.
(3) Resigned as an officer of the Company on January 23, l998.
(4) Does not include director's fee of $2,500.
(5) Resigned as an officer of the Company on January 5, 1999.
(6) 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.
(7) See page 10 for a description of compensation awards, options and grants.
(8) Includes employer's contribution to employees 401K plan, personal use of a
Company car and life insurance payments.
8
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, and
in October, 1996 the Company adopted its 1996 Stock Option 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 and 300,000 shares of Common Stock under the
1996 Option 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.
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 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.
For information concerning the proposed adoption of the 1999 Equity
Incetive Plan, see 1999 Equity Incentive Plan on page 15 herein.
9
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%
- ---- ------------- -------------- ----- ---- -- ---
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 $371,280
(1) Stock options granted under the 1996 Option Plan. One fifth of the new
options are exercisable on each of the first, second, third, fourth and
fifth anniversary dates of the original grant.
(2) Kevin Alward exercised options to acquire 10,000 shares on January 16,
1998. The balance of his options was canceled following the termination of
his employment with the Company.
(3) Of the options granted to Mr. Hess, options to purchase 60,000 shares,
representing the unvested portion thereof, were cancelled following
termination of his employment with the Company in January, 1999.
(4) The options granted to Jeffrey Slater were cancelled following termination
of his employment with the Company.
(5) All per share amounts have been restated to reflect the 2-for-1 stock split
effective on July 1, 1998.
(6) The table above does not reflect restricted shares or options to purchase
additional shares of the Company's Common Stock which were granted to the
Company's executives and directors during the fiscal year ended January 31,
l999 as follows (all shares reflect the 2-for-1 stock split effectuated on
July 1, 1998):
Shares Options
Granted Granted
-------- --------
David Hess 50,000(*) 30,000(*)
Bennett Goldberg 5,000 2,000
Thomas Gunning 4,000 2,000
(*) The foregoing shares granted to Mr. Hess were reacquired by the Company for
a nominal consideration and the options granted to him were cancelled upon
termination of his employment with the Company in January, 1999.
10
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR (1)
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
Fiscal-End(#) Fiscal Year-End(#)
Shares Acquired
Name on Exercise(#) Value Realized($) Exercisable Unexercisable Exercisable Unexercisable
--------------- ------------- ------------------ ---------- ------------- ----------- --------------
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 (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 is currently seeking to terminate of the ESOP, inasmuch as
no shares have yet been allocated to the account of any participant. As noted
under the 1999 Equity Incentive Plan herein, Management is proposing the
adoption of another incentive plan for the Company's personnel.
11
Certain Relationships and Related Transactions
On December 1, 1993, the Company entered into a five-year lease of
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,
were directors and major shareholders of the Company. During the fiscal year
ended January 31, 1999, the Company paid rent of $65,482 to the partnership. The
lease is currently on a month-to-month basis at a base rental of $40,778 per
annum. The foregoing transaction was negotiated upon terms considered by
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. As of January 31, 1999, the Company had invoices
payable to Mr. Miller totaling $158,755 for legal services rendered. Management
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 sales agent
services for Total-Tel through his wholly owned company, LPJ, Inc. During Fiscal
1999, LPJ, Inc. was paid commissions of $117,136. The fees paid to LPJ, Inc.
were paid on the same basis as for other agents retained by the Company and,
management 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 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, l999, 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.
THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK
12
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]
TOTALTEL STOCK
- --------------
1/31/94 100.000
1/31/95 116.152
1/31/96 120.372
1/31/97 235.690
1/31/98 393.939
1/31/99 484.848
NASDAQ-US COMPOSITES
- --------------------
1/31/94 100.000
1/31/95 95.4142
1/31/96 134.8433
1/31/97 176.7114
1/31/98 208.5817
1/31/98 326.2741
PEER GROUP
(TELECOMMUNICATIONS STOCK)
- -------------------------
1/31/94 100.000
1/31/95 83.4599
1/31/96 112.1182
1/31/97 114.6223
1/31/98 175.1320
1/31/99 312.7169
*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
ADOPTION OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation, as heretofore amended,
authorizes the issuance of 20,000,000 shares of Common Stock, $.05 par value, of
which 7,972,904 shares are currently issued and outstanding. The Company has
reserved 600,000 shares of Common Stock for issuance pursuant to the 1996 Stock
Option Plan, and has reserved 750,000 shares for issuance pursuant to its 1999
Equity Incentive Plan, if approved by shareholders at their meeting. (See
Approval of 1999 Equity Incentive Plan, elsewhere in this Proxy Statement). The
proposed amendment to the Company's Certificate of Incorporation, which was
unanimously approved by the Company's Board of Directors, would increase the
number of authorized shares of Common Stock to 50,000,000 shares. If the
proposed amendment were approved, the Company would have approximately
40,229,166 shares available for future issuance by the Board of Directors from
time-to-time for any proper corporate purpose, including future public or
private financings, acquisitions of other firms or assets and stock options or
other incentive programs. Such future issuances would not require shareholder
approval, subject to any restrictions imposed by NASDAQ. The Board of Directors
has no present plans for the issuance of additional shares of Common Stock and
there are no agreements of undertakings with respect thereto, other than with
respect to shares heretofore reserved for issuance upon exercise of options
under the Company's 1996 Stock Option Plan and the 1999 Equity Incentive Plan,
if such plan were approved by the shareholders. Management believes it is
advisable, for general corporate purposes, that such additional shares be
authorized to be available for prompt issuance should the occasion arise.
At present, neither the Certificate of Incorporation nor the By-Laws of
the Company contains any provisions having an anti-takeover effect; however,
should the proposed amendment be approved, in the event of an effort to acquire
control of the Company by a group as opposed by incumbent management, the
overall effect of the Company's ability to issue a significant number of
additional shares of Common Stock, without shareholder approval, may render more
difficult or discourage a merger, tender offer or proxy contest, the assumption
of control by a holder of a large block of the Company's securities and a change
of management.
Under the New Jersey Business Corporation Act, approval of the proposed
amendment to the Company's Certificate of Incorporation requires the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
entitled to vote at the Meeting. A shareholder voting against the proposal shall
have no dissenters' rights or similar rights of appraisal.
Management recommends a vote for the adoption of the proposed amendment.
THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK
14
APPROVAL OF 1999 EQUITY INCENTIVE PLAN
Shareholders are being asked to approve the 1999 Equity Incentive Plan
(the "Plan"), which would reserve 750,000 shares of the Company's Common Stock
for grants of options and other equity incentives to eligible persons as
described under "Administration and Eligibility" below. The purpose of the 1999
Plan is to advance the interests of the Company and its shareholders by
strengthening the Company's ability to attract and retain key employees,
directors and consultants and to provide a means to encourage stock ownership in
the Company by such persons.
GENERAL
The purpose of the Plan is to promote the best interests of the Company
and its shareholders by providing key employees and consultants of the Company
and its affiliates, and members of the Company's Board of Directors who are not
employees of the Company or its affiliates, with an opportunity to acquire, or
increase their, proprietary interest in the Company. The Plan is intended to
promote continuity of management and to provide increased incentive and personal
interest in the welfare of the Company by those key employees and consultants
who are primarily responsible for shaping and carrying out the long-range plans
of the Company and securing the Company's continued growth and financial
success. Also, by encouraging stock ownership by directors, the Company seeks to
attract and retain on its Board persons of exceptional competence and to provide
and to furnish an added incentive for them to continue their association with
the Company.
The Company currently has in effect 1987 and 1996 Stock Option Plans
("Prior Plans") and various stock option agreements with employees pursuant to
which options have been granted. As of January 14, 2000, shares of Common Stock
were subject to outstanding options under the Prior Plans and there were only
47,950 shares available for the granting of additional options under the 1999
Plan. To allow for additional equity-based compensation awards to be made by the
Company, the Plan was adopted by the Board on May 5, 1999. The Plan became
effective on that date, subject to approval of the Plan by the Company's
shareholders within twelve months following the Board's adoption of the Plan.
The following summary description of the Plan is qualified in its
entirety by reference to the full text of the Plan, annexed to this Proxy
Statement as Appendix A.
ADMINISTRATION AND ELIGIBILITY
The Plan is to be administered by a committee of the Board (the
"Committee") consisting of not less than two directors, each of whom shall
qualify as a "non-employee director" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as an
"outside director" within the meaning of Section 162(m)(4)(c) of the Internal
Revenue Code of 1986, as amended ("Code"). In the event that the Committee is
not appointed, the functions of the Committee will be exercised by the Board.
The Board may delegate to another committee of the Board or to one or more
senior officers of the Company, any or all of the authority and responsibility
of the Committee with respect to the Plan, other than with respect to
participants who are subject to Section 16 of the Exchange Act. The Committee
has been designated as the current administrator of the Plan. Among other
functions, the Committee has authority to establish rules for the administration
of the Plan; to designate the participants to whom awards will be granted; to
determine the types of awards to be granted to participants and the number of
shares covered by such awards; and to determine the terms and conditions of such
awards. The Committee may also determine whether the payment of any proceeds of
any award shall or may be deferred automatically or at the election of the
participant participating in the Plan. Subject to the express terms of the Plan,
any designation, determination or interpretation with respect thereto will be in
the sole discretion of the Committee, whose determination and interpretation
will be binding on all parties.
15
Any officer or other key employee of the Company or of any affiliate or
consultant who is responsible for or contributes to the management, growth or
profitability of the business of the Company or any affiliate, or any director
who is not an employee of the Company or any affiliate is eligible to be granted
awards by the Committee under the Plan. Initially, approximately 250 employees
and directors would be eligible to participate in the Plan. The number of
eligible employees, consultants and directors may increase over time based upon
future growth of the Company.
AWARDS UNDER THE PLAN - AVAILABLE SHARES
The Plan authorizes the granting to key employees, consultants and
directors of: (a) stock options, which may be incentive stock options meeting
the requirements of Section 422 of the Code ("ISOs"); (b) non-statutory stock
options ("NSOs"); (c) stock appreciation rights ("SARs"); (d) restricted stock;
or (e) performance shares. The Plan provides that up to a total of 750,000
shares of Common Stock (subject to adjustment as described below) will be
available for the granting of awards thereunder. The Board of Directors, subject
to shareholder approval, has granted options to purchase an aggregate of 655,000
shares under the Plan to 80 employees, including three of its principal
executive officers. All such options are initially exercisable at a price from
$16.00 to $19.00 per share, increasing in 6% increments as various installments
vest. Of the options granted, 167,000 were cancelled due to termination of
employment of the optionees. There are 262,000 shares currently available for
the grant of options under the 1999 Plan and 47,950 shares under the 1996 Plan.
-------------------------------------------------------------------------------------
Options Granted to Principal Executives
-------------------------------------------------------------------------------------
Shares Price Date of Grant
-------------------------------------------------------------------------------------
Dennis J. Spina 144,000 $19.00 02/03/99
-------------------------------------------------------------------------------------
Salvatore M. Quadrino 50,000 $16.00 01/12/00
-------------------------------------------------------------------------------------
Thomas P. Gunning 10,000 $19.00 03/16/99
-------------------------------------------------------------------------------------
If any shares subject to awards granted under the Plan, or to which any
award relates, are forfeited or, if an award otherwise terminates, expires or is
cancelled prior to the delivery of all of the shares or other consideration
issuable or payable pursuant to the award such shares would be available for the
granting of new awards under the Plan. Any shares delivered pursuant to an award
may consist, in whole or in part, of authorized and unissued shares of Common
Stock and/or treasury shares.
TERMS OF AWARDS
Option Awards. Options granted under the Plan to key employees may be
either ISOs or NSOs. Consultants and non-employee directors may not be granted
ISOs.
The exercise price per share of Common Stock, subject to options
granted to participants under the Plan, will be determined by the Committee,
provided that the exercise price may not be less than 100% of the fair market
value of a share of Common Stock on the date of grant (75% as to NSOS). The term
of any option granted to a participant under the Plan will be as determined by
the Committee, provided that the term of an ISO may not exceed ten years from
the date of its grant. Options granted to participants under the Plan will
become exercisable in such a manner and within such a period or periods and in
such installments or otherwise as determined by the Committee. Options may be
exercised by payment in full of the exercise price, either (at the discretion of
the Committee) in cash or in whole or in part by tendering shares or other
consideration having a fair market value on the date of exercise equal to the
option exercise price. All ISOs granted under the Plan will also be required to
comply with all other terms of Section 422 of the Code.
SARs. A SAR granted under the Plan will confer on the participant
holder a right to receive, upon exercise thereof, the excess of (a) the fair
market value of one share of Common Stock on the date of exercise over (b) the
grant price of the SAR as specified by the Committee. The grant price of an SAR
under the Plan will not be less than 100% of the fair market value of a share of
Common Stock on the date of grant. The grant price, term, methods of exercise,
methods of settlement (including whether the holder of an SAR will be paid in
cash, shares of Common Stock or other consideration), and any other terms and
conditions of any SAR granted under the Plan will be determined by the Committee
at the time of grant.
16
Restricted Stock. Shares of restricted Common Stock granted to
participants under the Plan will be subject to such restrictions as the
Committee may impose, in its discretion, including any limitation on the right
to vote such shares. The restrictions imposed on the Shares may lapse separately
or in combination at such time or times, or in such installments or otherwise,
as the Committee may deem appropriate. Except as otherwise determined by the
Committee, upon termination of employment or consulting of a participant for any
reason during the applicable restriction period, all shares of restricted stock
still subject to restriction will be subject to forfeiture by the participant.
The Plan limits the total number of shares of restricted stock that may
be awarded thereunder to 75,000 shares. The foregoing numerical limitations on
the issuance of shares of restricted stock are subject to adjustment as
described below.
Performance Shares. The Plan also provides for the granting of
performance shares to key employees, consultants and independent directors.
Performance goals established by the Committee may be based on one or more
measures such as return on shareholders' equity, earnings or any other standard
or standards deemed relevant by the Committee, measured internally or relative
to other organizations and before and after extraordinary items. The Committee
will determine and/or select the applicable performance period, the performance
goal or goals to be achieved during any performance period, the proportion of
payments, if any, to be made for performance between the minimum and full
performance levels for any performance goal and, if applicable, the restrictions
applicable to shares of restricted stock received upon payment of performance
shares if payment is made in such manner, and any other items, conditions and
rights relating to the grant of performance shares. The Committee may, in its
discretion, at any time or from time to time adjust performance goals (up or
down) and minimum or full performance levels (and any intermediate levels and
proportion of payments related thereto), adjust the manner in which performance
goals are measured, or shorten any performance period or way, in whole or in
part, any or all remaining restrictions with respect to Shares of restricted
stock issued in payments of performance shares, if the Committee determines that
conditions so warrant. Following completion of the applicable performance
period, payment on performance shares granted to and earned by participants will
be made in shares of Common Stock equal to the number of performance shares
issuable.
CHANGE IN CONTROL
Upon the occurrence of a Change in Control (as defined in the Plan) of
the Company (a) all outstanding options and SARs will immediately become
exercisable, (b) any restriction periods and related restrictions on restricted
stock will lapse and (c) each performance share would become issuable in full.
ADJUSTMENTS
If any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of shares of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
shares of Common Stock or other securities of the Company, or other similar
corporate transaction or event affects the shares of Common Stock so that an
adjustment is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee will generally have the authority to, in such manner as its
deems equitable, adjust (a) the number and type of shares subject to the Plan
and which thereafter may be made the subject of awards, (b) the number and type
of Shares subject to outstanding awards and (c) the grant, purchase or exercise
price with respect to any award, or may make provision for a cash payment to the
holder of an outstanding award.
LIMITS ON TRANSFERABILITY
No award granted under the Plan (other than an award of restricted
stock on which the restrictions have lapsed) may be assigned, sold, transferred
or encumbered by any participant, otherwise than by will, by designation of a
beneficiary, or by the laws of descent and distribution; provided, however, that
a participant at the discretion of the Committee, may be entitled, in the manner
established by the Committee, to transfer any award.
17
AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate the Plan at any time, except
that no such action may adversely affect any award granted and then outstanding
thereunder without the approval of the respective participant. The Plan provides
that shareholder approval of any amendment thereto must also be obtained if
required by (a) the Code or any rules promulgated thereunder (in order to allow
for ISOs to be granted thereunder) or (b) the quotation or listing requirements
of the NASDAQ National Market or any other exchange or market on which the
Common Stock is then traded (in order to maintain the quotation or the listing
of the Common Stock thereon). To the extent permitted by applicable law and
subject to such shareholder approval as may be required, the Committee may also
amend the Plan, provided that any such amendments are reported to the Board.
WITHHOLDING
Not later than the date as of which an amount first becomes includible
in the gross income of a participant for federal income tax purposes with
respect to any award under the Plan, the participant will be required to pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign tax of any kind required by law
to be withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations arising with respect to awards under the Plan
may be settled with shares of Common Stock previously owned by the participant;
provided, however, that the participant may not settle such obligations with
shares of Common Stock that are part of, or are received upon exercise of, the
award that gives rise to the withholding requirement. The obligations of the
Company under the Plan are conditional on such payment or arrangements, and the
Company and any affiliate will, to the extent permitted by law, have the right
to deduct any such tax from any payment otherwise due to the participant. The
Committee may establish such procedures as it deems appropriate for the settling
of withholding obligations with shares of Common Stock.
TERM OF PLAN
No award shall be granted under the Plan following the tenth
anniversary of its effective date. However, unless otherwise expressly provided
in the Plan or in an applicable award agreement, any award theretofore granted
extends beyond such date and, to the extent set forth in the Plan, the authority
of the Committee to amend, alter, adjust, suspend, discontinue or terminate any
such award, or to waive any conditions or restrictions with respect to such
award, and the authority of the Board to amend the Plan shall extend beyond such
date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Stock Options. The grant of an ISO under the Plan will create no income
tax consequence to the participant or the Company. A participant who is granted
a NSO will generally recognize ordinary income at the time of exercise in an
amount equal to the excess of the fair market value of the Common Stock at such
time over the exercise price. The Company will be entitled to a deduction in the
same amount and at the same time as ordinary income is recognized by the
participant. A subsequent disposition of the Common Stock will give rise to
capital gain or loss to the extent the amount realized from the sale differs
from the tax basis, i.e., the fair market value of the Common Stock on the date
of exercise. This capital gain or loss will be a long-term or short-term capital
gain or loss depending upon the length of time the Common Stock was held.
In general, if a participant holds the shares of Common Stock acquired
pursuant to the exercise of an ISO for at least two years from the date of grant
and one year from the date of exercise, the participant will recognize no income
or gain as a result of exercise (except that the alternative minimum tax may
apply). Any gain or loss realized by the participant on the disposition of the
Common Stock will be treated as a long-term capital gain or loss. No deduction
will be allowed to the Company. If either of these holding period requirements
is not satisfied, the participant will recognize ordinary income at the time of
the disposition equal to the lesser of (a) the gain realized on the disposition
or (b) the difference between the exercise price and the fair market value of
the shares of Common Stock on the date of exercise. The Company will be entitled
to a deduction in the same amount and at the same time as ordinary income is
recognized by the participant. Any additional gain realized by the participant
over the fair
18
market value at the time of exercise will be treated as a capital gain. This
capital gain will be a long-term or short-term capital gain depending upon the
length of time the Common Stock was held.
Stock Appreciation Rights. The grant of a SAR will create no income tax
consequence for the participant or the Company. Upon exercise of a SAR, the
participant will recognize ordinary income equal to the amount of any cash and
the fair market value of any shares of Common Stock or other property received,
except that if the participant receives an option or shares of Common Stock or
restricted stock upon exercise of a SAR, recognition of income may be deferred
in accordance with the rules applicable to such other awards. The Company will
be entitled to a deduction in the same amount and at the same time as income is
recognized by the participant.
Restricted Stock. A participant will not recognize income at the time
an award of restricted stock is made under the Plan, unless the election
described below is made. A participant who has not made such an election will
recognize ordinary income at the time the restrictions on the stock lapse in an
amount equal to the fair market value of the restricted stock at such time. The
Company will be entitled to a corresponding deduction in the same amount and at
the same time as the participant recognizes income. Any otherwise taxable
disposition of the restricted stock after the time the restrictions lapse will
result in capital gain or loss (long-term or short-term depending on the length
of time the restricted stock is held after the time the restrictions lapse).
Dividends paid in cash and received by a participant prior to the time the
restrictions lapse will constitute ordinary income to the participant in the
year paid. The Company will be entitled to a corresponding deduction for such
dividends. Any dividends paid in stock will be treated as an award of additional
restricted stock, subject to the tax treatment described herein.
A participant may, within 30 days after the date of the award of
restricted stock, elect to recognize ordinary income as of the date of the award
in an amount equal to the fair market value of such restricted stock on the date
of the award. The Company will be entitled to a corresponding deduction in the
same amount and at the same time as the participant recognizes income. If the
election is made, any cash dividends received with respect to the restricted
stock will be treated as dividend income to the participant in the year of
payment and will not be deductible by the Company. Any otherwise taxable
disposition of the restricted stock (other than by forfeiture) will result in
capital gain or loss (long-term or short-term depending on the holding period).
If the participant who has made an election subsequently forfeits the restricted
stock, the participant will not be entitled to deduct any loss. In addition, the
Company would then be required to include as ordinary income the amount of the
deduction it originally claimed with respect to such shares.
Performance Shares. The grant of performance shares will create no
income tax consequence for the participant or the Company. Upon the receipt of
shares of Common Stock at the end of the applicable performance period, the
participant generally will recognize ordinary income equal to the fair market
value of the shares of Common Stock received. The Company will be entitled to a
deduction in the same amount and at the same time as income is recognized by the
participant.
On January 14, 2000, the last reported sale price per share of the
Company's Common Stock on the NASDAQ National Market was $14.25.
Vote Required
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 Plan.
Any shares not voted at the Annual Meeting with respect to the Plan (whether as
a result of broker non-votes or otherwise) will have no impact on the vote.
MANAGEMENT RECOMMENDS A VOTE "FOR" THE PLAN. SHARES OF COMMON STOCK REPRESENTED
AT THE ANNUAL MEETING BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" THE
PLAN AND FOR THE INCREASE IN THE AUTHORIZED SHARES OF COMMON STOCK.
19
PROPOSALS OF
SHAREHOLDERS FOR 2000 ANNUAL MEETING
Proposals of shareholders intended to be presented for action at the
2000 Annual Meeting of Shareholders must be received at the Company's offices
not later than May 15, 2000 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,
1999, 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, 2000. 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,
January 27, 2000 Secretary
20
APPENDIX A
TOTAL-TEL USA COMMUNICATIONS, INC.
1999 EQUITY INCENTIVE PLAN
SECTION I. PURPOSE
The purpose of the Total-Tel USA Communications, Inc. 1999 Equity
Incentive Plan (the "Plan") is to promote the best interests of Total-Tel USA
Communications, Inc. (together with any successor thereto, the "Company") and
its shareholders by providing key employees and consultants of the Company and
its Affiliates (as defined below), and members of the Company's Board of
Directors who are not employees of the Company, with an opportunity to acquire
a, or increase their, proprietary interest in the Company. It is intended that
the Plan will promote continuity of management and increased incentive and
personal interest in the welfare of the Company by those key employees and
consultants who are primarily responsible for shaping and carrying out the
long-range plans of the Company and securing the Company's continued growth and
financial success. Also, by encouraging stock ownership by directors, the
Company seeks to attract and retain on its Board of Directors persons of
exceptional competence and to furnish an added incentive for them to continue
their association with the Company.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the respective
meanings set forth below:
(a) "Affiliate" shall mean any entity that, directly or through one or
more intermediaries, is controlled by, controls, or is under common control
with, the Company.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock or Performance Share or other award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(d) "Change in Control" will be deemed to have occurred if: (i) any
entity not affiliated with the Company or any Affiliate is or becomes the
beneficial owner of securities of the Company representing at least 20% of the
combined voting power of the Company's then outstanding voting securities; (ii)
there is consummated any business combination of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's capital stock would be converted into cash, securities
or other property, other than a merger of the Company in which the holders of
the Company's capital stock immediately prior to the merger have the same
proportionate ownership of capital stock of the surviving corporation
immediately after the merger, or any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, of the consolidated assets of the Company; or (iii) the shareholders of the
Company approve any plan for the liquidation or dissolution of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Commission" shall mean the Securities and Exchange Commission.
(g) "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company (or any other committee thereof designated by such
Board to administer the Plan) consisting of not less than two Independent
Directors, each of whom shall qualify as a "non-employee director" within the
meaning of Rule 16b-3 and as an "outside director" under Section 162(m)(4)(C) of
the Code or any successor provisions thereto.
(h) "Consultant" shall mean any consultant or advisor to the Company,
any Subsidiary or any Affiliate who is not otherwise an employee of the Company
or any Affiliate who is responsible for or contributes
21
to the management, growth or profitability of the business of the Company or any
Affiliate, as determined by the Committee in its discretion.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
(k) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code (or any successor provision thereto).
(l) "Independent Director" shall mean any member of the Company's Board
of Directors who is not an employee of the Company or of any Affiliate.
(m) "Key Employee" shall mean any officer or other key employee of the
Company or of any Affiliate who is responsible for or contributes to the
management, growth or profitability of the business of the Company or any
Affiliate, as determined by the Committee in its discretion.
(n) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(o) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(p) "Participant" shall mean a Key Employee, Consultant or Independent
Director designated to be granted an Award under the Plan.
(q) "Performance Period" shall mean, in relation to Performance Shares,
any period for which a performance goal or goals have been established.
(r) "Performance Share" shall mean any right granted under Section 6(d)
of the Plan that will be paid out as a Share (which, in specified circumstances,
may be a Share of Restricted Stock).
(s) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or political subdivision thereof.
(t) "Released Securities" shall mean Shares of Restricted Stock with
respect to which all applicable restrictions have expired, lapsed or been
waived.
(u) "Restricted Securities" shall mean Awards of Restricted Stock or
other Awards under which issued and outstanding Shares are held subject to
certain restrictions pursuant to the Plan or an Award Agreement.
(v) "Restricted Stock" shall mean any Share granted under Section 6(c)
of the Plan or, in specified circumstances, a Share paid in connection with a
Performance Share under Section 6(d) of the Plan.
(w) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission
under the Exchange Act, or any successor rule or regulation thereto.
(x) "Shares" shall mean shares of Common Stock of the Company, $.05 par
value, and such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(b) of the Plan.
22
(y) "Stock Appreciation Right" shall mean any right granted under
Section 5(c) of the Plan.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee; provided, however,
that if at any time the Committee shall not be in existence, the functions of
the Committee as specified in the Plan shall be exercised by the Board of
Directors of the Company (the "Board") and all references to the Committee
herein shall include the Board. To the extent permitted by applicable law, the
Board may delegate to another committee of the Board or to one or more senior
officers of the Company any or all of the authority and responsibility of the
Committee with respect to the Plan, other than with respect to Participants who
are subject to Section 16 of the Exchange Act. To the extent that the Board has
delegated to such other committee or one or more officers the authority and
responsibility of the Committee, all references to the Committee herein shall
include such other committee or one or more officers.
Subject to the terms of the Plan and applicable laws and without
limitation by reason of enumeration, the Committee shall have full discretionary
power and authority to: (i) designate Participants; (ii) determine the type or
types of Awards to be granted to each Participant under the Plan; (iii)
determine the number of Shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with)
Awards granted to Participants; (iv) determine the terms and conditions of any
Award granted to a Participant; (v) determine whether, to what extent and under
what circumstances Awards granted to Participants may be settled or exercised in
cash, Shares, other securities, other Awards or other property, and the method
or methods by which Awards may be settled, exercised, cancelled, forfeited or
suspended; (vi) determine whether, to what extent and under what circumstances
cash, Shares, other Awards and other amounts payable with respect to an Award
granted to Participants under the Plan shall be deferred either automatically or
at the election of the holder thereof or of the Committee; (vii) interpret and
administer the Plan and any instrument or agreement relating to, or Award made
under, the Plan (including, without limitation, any Award Agreement); (viii)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time or from time to time, and shall be final, conclusive and
binding upon all Persons, including the Company, any Affiliate, any Participant,
any holder or beneficiary of any Award, any shareholder and any employee of the
Company or of any Affiliate.
SECTION 4. SHARES AVAILABLE FOR AWARD
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section
4(b):
(i) NUMBER OF SHARES AVAILABLE. The number of Shares with
respect to which Awards may be granted under the Plan shall be
750,000, subject to the limitations set forth in Section 6(c)(i)
and subject to the other provisions of this Section 4. If, after
the effective date of the Plan, any Shares covered by an Award
granted under the Plan, or to which any Award relates, are
forfeited or if an option otherwise terminates, expires or is
cancelled prior to the delivery of all of the Shares or of other
consideration issuable or payable pursuant to such Award, then
the number of Shares counted against the number of Shares
available under the Plan in connection with the grant of such
Award, to the extent of any such forfeiture, termination,
expiration or cancellation, shall again be available for granting
of additional Awards under the Plan.
(ii) ACCOUNTING FOR AWARDS. The number of Shares covered by
an Award under the Plan, or to which such Award relates, shall be
counted on the date of grant of such Award against the number of
Shares available for granting Awards under the Plan.
(iii) SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any Shares
delivered pursuant to an Award may consist, in whole or in part,
of authorized and unissued Shares and/or treasury Shares.
23
(b) ADJUSTMENTS. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company,
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee may, in such manner as it may
deem equitable, adjust any or all of (i) the number and type of Shares subject
to the Plan and which thereafter may be made the subject of Awards under the
Plan; (ii) the number and type of Shares subject to outstanding Awards; and
(iii) the grant, purchase or exercise price with respect to any Award, or, if
deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award; provided, however, in each case, that with respect to Awards
of Incentive Stock Options no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422(b) of the Code
(or any successor provision thereto); and provided further that the number of
Shares subject to any Award payable or denominated in Shares shall always be a
whole number.
SECTION 5. ELIGIBILITY
Any Key Employee, including any executive officer or employee-director
of the Company or of any Affiliate, and any Consultant or Independent Director,
shall be eligible to be designated a Participant.
SECTION 6. AWARDS
(a) OPTION AWARDS. The Committee is hereby authorized to grant Options
to Key Employees, Consultants and Independent Directors upon the terms and
conditions set forth below and such additional terms and conditions, in either
case not inconsistent with the provisions of the Plan, as the Committee shall
determine in its discretion; provided, however, that Consultants and Independent
Directors may not be granted Incentive Stock Options.
(i) EXERCISE PRICE. The exercise price per share of an Option
granted pursuant to this Section 6(a) shall be determined by the
Committee; provided, however, that such exercise price shall not be
less than 100% of the Fair Market Value of a Share on the date of
grant of an Incentive Stock Option and 75% of such fair market value
of a Non-Qualified Stock Option.
(ii) OPTION TERM. The term of each Option shall be fixed by the
Committee; provided, however, that in no event shall the term of any
Option exceed a period of ten years from the date of its grant.
(iii) EXERCISABILITY AND METHOD OF EXERCISE. An Option shall
become exercisable in such manner and within such period or periods
and in such installments or otherwise as shall be determined by the
Committee; provided, however, that regardless of any other exercise or
vesting period specified in any Award Agreement with respect to any
Option, each Option granted under the Plan shall become immediately
exercisable in full for the remainder of the Option term automatically
upon the occurrence of a Change in Control. The Committee also shall
determine the method or methods by which, and the form or forms,
including, without limitation, cash, Shares, other securities, other
Awards, other property or any combination thereof, having a Fair
Market Value on the exercise date equal to the relevant exercise
price, in which payment of the exercise price with respect to any
Option may be made or deemed to have been made.
(iv) INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code (or any successor provision
thereto) and any regulations promulgated thereunder. Notwithstanding
any provision in the Plan to the contrary, no Incentive Stock Option
may be granted hereunder after the tenth anniversary of the adoption
of the Plan by the Board.
(b) STOCK APPRECIATION RIGHTS. The Committee is hereby authorized to
grant Stock Appreciation Rights to Key Employees, Consultants and Independent
Directors. Subject to the terms of the Plan and any
24
applicable Award Agreement, a Stock Appreciation Right granted under the Plan
shall confer on the holder thereof a right to receive, upon exercise thereof,
the excess of (i) the Fair Market Value of one Share on the date of exercise
over (ii) the grant price of the Stock Appreciation Right as specified by the
Committee, which shall not be less than 100% of the Fair Market Value of one
Share on the date of grant of the Stock Appreciation Right. Subject to the terms
of the Plan, the grant price, term, methods of exercise, methods of settlement
(including whether the Participant will be paid in cash, Shares, other
securities, other Awards, or other property or any combination thereof), and any
other terms and conditions of any Stock Appreciation Right shall be as
determined by the Committee in its discretion; provided, however, that
regardless of any other exercise or vesting period specified in any Award
Agreement with respect to any Stock Appreciation Right, each Stock Appreciation
Right granted under the Plan shall become immediately exercisable in full for
the remainder of the Stock Appreciation Right term automatically upon the
occurrence of a Change in Control. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it may deem
appropriate.
(c) RESTRICTED STOCK AWARDS.
(i) ISSUANCE. The Committee is hereby authorized to grant Awards
of Restricted Stock to Key Employees, Consultants and Independent
Directors; provided, however, that the aggregate number of Shares of
Restricted Stock granted under the Plan to all Participants as a group
shall not exceed 75,000 Shares of the total number of Shares available
for Awards under Section 4(a)(i), subject to Section 4(a)(ii) and the
other provisions of Section 4.
(ii) RESTRICTIONS. Shares of Restricted Stock granted to
Participants shall be subject to such restrictions as the Committee
may impose in its discretion (including, without limitation, any
limitation on the right to vote a Share of Restricted Stock or the
right to receive any dividend or other right or property), which
restrictions may lapse separately or in combination at such time or
times, in such installments or otherwise, as the Committee may deem
appropriate in its discretion; provided, however, that regardless of
any other vesting or restriction period specified in any Award
Agreement with respect to any Restricted Stock, each Share of
Restricted Stock granted under the Plan shall become a Released
Security automatically upon the occurrence of a Change in Control.
(iii) REGISTRATION. Any Restricted Stock granted under the Plan
to a Participant may be evidenced in such manner as the Committee may
deem appropriate in its discretion, including, without limitation,
book-entry registration or issuance of a stock certificate or
certificates. In the event any stock certificate is issued in respect
of Shares of Restricted Stock granted under the Plan to a Participant,
such certificate shall be registered in the name of the Participant
and shall bear an appropriate legend (as determined by the Committee)
referring to the terms, conditions and restrictions applicable to such
Restricted Stock.
(iv) PAYMENT OF RESTRICTED STOCK. At the end of the applicable
restriction period relating to Restricted Stock granted to a
Participant, one or more stock certificates for the appropriate number
of Shares of Released Securities, free of restrictions imposed under
the Plan and the Award Agreement, shall be delivered to the
Participant or, if the Participant received stock certificates
representing the Restricted Stock at the time of grant, the legends
placed on such certificates shall be removed.
(v) FORFEITURE. Except as otherwise determined by the Committee
in its discretion, upon termination of employment or consultancy of a
Participant (as determined under criteria established by the Committee
in its discretion) for any reason during the applicable restriction
period, all Shares of Restricted Stock still subject to restriction
under the Plan or an Award Agreement shall be forfeited by the
Participant; provided, however, that the Committee may, when it finds
that a waiver would be in the best interests of the Company, waive in
whole or in part any or all remaining restrictions with respect to
Shares of Restricted Stock held by a Participant.
25
(d) PERFORMANCE SHARE AWARDS.
(i) ISSUANCE. The Committee is hereby authorized to grant Awards
of Performance Shares to Key Employees, Consultants and Independent
Directors.
(ii) PERFORMANCE GOALS AND OTHER TERMS. The Committee shall
determine in its discretion the Performance Period, the performance
goal or goals to be achieved during any Performance Period, the
proportion of payments, if any, to be made for performance between the
minimum and full performance levels, the restrictions applicable to
Shares of Restricted Stock received upon payment of Performance Shares
(if Performance Shares are paid in such manner), and any other terms,
conditions and rights relating to a grant of Performance Shares;
provided, however, that regardless of any other requirements or
restrictions specified in any Award Agreement with respect to any
Performance Share, each Performance Share granted under the Plan shall
become immediately payable in full (assuming the maximum performance
goal and any other requirements have been fully satisfied)
automatically upon the occurrence of a Change in Control. Performance
goals established by the Committee may be based on one or more
measures such as return on shareholders' equity, earnings or any other
standard or standards deemed relevant by the Committee, measured
internally or relative to other organizations and before or after
extraordinary items.
(iii) RIGHTS AND BENEFITS DURING THE PERFORMANCE PERIOD. The
Committee may provide that, during a Performance Period, a Participant
shall be paid cash amounts, with respect to each Performance Share
held by such Participant, in the same manner, at the same time, and in
the same amount paid, as a cash dividend on a Share. Participants
shall have no voting rights with respect to Performance Shares held by
them.
(iv) ADJUSTMENTS WITH RESPECT TO PERFORMANCE SHARES. Any other
provision of the Plan to the contrary notwithstanding, the Committee
may in its discretion at any time or from time to time adjust
performance goals (up or down) and minimum or full performance levels
(and any intermediate levels and proportion of payments related
thereto), adjust the manner in which performance goals are measured,
or shorten any Performance Period or waive in whole or in part any or
all remaining restrictions with respect to Shares of Restricted Stock
issued in payment of Performance Shares, if the Committee determines
that conditions, including but not limited to, changes in the economy,
changes in competitive conditions, changes in laws or governmental
regulations, changes in generally accepted accounting principles,
changes in the Company's accounting policies, acquisitions or
dispositions by the Company or its Affiliates, or the occurrence of
other unusual, unforeseen or extraordinary events, so warrant.
(v) PAYMENT OF PERFORMANCE SHARES. As soon as is reasonably
practicable following the end of the applicable Performance Period,
one or more certificates representing the number of Shares equal to
the number of Performance Shares payable shall be registered in the
name of and delivered to the Participant; provided, however, that any
Shares of Restricted Stock payable in connection with Performance
Shares shall, pending the expiration, lapse, or waiver of the
applicable restrictions, be evidenced in the manner as set forth in
Section 6(c)(iii) hereof.
(e) OTHER AWARDS.
(i) OTHER STOCK-BASED AWARDS. Other awards, valued in whole or in
part by reference to, or otherwise based on, Shares may be granted
either alone or in addition to or in conjunction with other Awards for
such consideration, if any, and in such amounts and having such terms
and conditions as the Committee may determine.
(ii) OTHER BENEFITS. The Committee shall have the right to
provide types of benefits under the Plan in addition to those
specifically listed if the committee believes that such benefits would
further the purposes for which the Plan was established.
26
(f) GENERAL.
(i) NO CONSIDERATION FOR AWARDS. Awards shall be granted to
Participants for no cash consideration unless otherwise determined by
the Committee.
(ii) AWARD AGREEMENTS. Each Award granted under the Plan shall be
evidenced by an Award Agreement in such form or forms (consistent with
the terms of the Plan) as shall have been approved by the Committee.
(iii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards to
Participants under the Plan may be granted either alone or in addition
to, in tandem with, or in substitution for, any other Award or any
award granted under any other plan of the Company or any Affiliate.
Awards granted in addition to, or in tandem with, other Awards, or in
addition to, or in tandem with, awards granted under any other plan of
the Company or any Affiliate, may be granted either at the same time
as or at a different time from the grant of such other Awards or
awards.
(iv) FORMS OF PAYMENT UNDER AWARDS. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to
be made by the Company or an Affiliate upon the grant, exercise or
payment of an Award to a Participant may be made in such form or forms
as the Committee shall determine, and may be made in a single payment
or transfer, in installments, or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee in
its discretion. Such rules and procedures may include, without
limitation, provision for the payment or crediting of interest on
installment or deferred payments.
(v) LIMITS ON TRANSFER OF AWARDS. No Award (other than Released
Securities), and no right under any such Award, shall be assignable,
alienable, saleable or transferable by a Participant otherwise than by
will or by the laws of descent and distribution (or, in the case of an
Award of Restricted Securities, to the Company); provided, however,
that a Participant at the discretion of the Committee may be entitled,
in the manner established by the Committee, (A) to designate a
beneficiary or beneficiaries to exercise his or her rights, and to
receive any property distributable, with respect to any Award upon the
death of the Participant or (B) to transfer any Award. No Award (other
than Released Securities), and no right under any such Award, may be
pledged, alienated, attached or otherwise encumbered, and any
purported pledge, alienation, attachment or encumbrance thereof shall
be void and unenforceable against the Company or any Affiliate.
(vi) TERM OF AWARDS. Except as otherwise provided in the Plan,
the term of each Award shall be for such period as may be determined
by the Committee.
(vii) SHARE CERTIFICATES; REPRESENTATION. In addition to the
restrictions imposed pursuant to Section 6(c) and Section 6(d) hereof,
all certificates for Shares delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations and other requirements of the
Commission, the NASDAQ National Market or any stock exchange or other
market upon which such Shares are then listed or traded, and any
applicable federal or state securities laws, rules and regulations and
the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. The
Committee may require each Participant or other Person who acquires
Shares under the Plan by means of an Award originally made to a
Participant to represent to the Company in writing that such
Participant or other Person is acquiring the Shares without a view to
the distribution thereof.
(viii) WAIVER OF CONDITIONS. The Committee may in whole or in
part, waive any conditions or other restrictions with respect to any
award.
27
SECTION 7. AMENDMENT AND TERMINATION OF THE PLAN; CORRECTION OF DEFECTS AND
OMISSIONS
(a) AMENDMENTS TO AND TERMINATION OF THE PLAN. The Board may at any
time amend, alter, suspend, discontinue or terminate the Plan; provided,
however, that shareholder approval of any amendment of the Plan shall also be
obtained if otherwise required by: (i) the Code or any rules promulgated
thereunder (in order to allow for Incentive Stock Options to be granted under
the Plan); (ii) the quotation or listing requirements of the NASDAQ National
Market or any securities exchange or market on which the Shares are then traded
or listed (in order to maintain the quotation or the listing of the Shares
thereon); or (iii) the amendment proposes to increase the number of shares
available under the Plan. To the extent permitted by applicable law and subject
to such shareholder approval as may be required above, the Committee may also
amend the Plan, provided that any such amendments shall be reported to the
Board. Termination of the Plan shall not affect the rights of Participants with
respect to Awards previously granted to them, and all unexpired Awards shall
continue in force and effect after termination of the Plan except as they may
lapse or be terminated by their own terms and conditions.
(b) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The Committee
may in its discretion correct any defect, supply any omission or reconcile any
inconsistency in any Award or Award Agreement in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
SECTION 8. GENERAL PROVISIONS
(a) NO RIGHTS TO AWARDS. No Key Employee, Consultant, Independent
Director, Participant or other Person shall have any claim to be granted any
Award under the Plan, and there is no obligation for uniformity of treatment of
Key Employees, Consultants, Independent Directors, Participants or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards need
not be the same with respect to each Participant.
(b) WITHHOLDING. No later than the date as of which an amount first
becomes includable in the gross income of a Participant for federal income tax
purposes with respect to any Award under the Plan, the Participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Committee, withholding obligations arising with respect to Awards to
Participants under the Plan may be settled with Shares previously owned by the
Participant; provided, however, that the Participant may not settle such
obligations with Shares that are part of, or are received upon exercise of, the
Award that gives rise to the withholding requirement. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements, and
the Company and any Affiliate shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the
Participant. The Committee may establish such procedures as it deems appropriate
for the settling of withholding obligations with Shares.
(c) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other or additional compensation arrangements, and such arrangements
may be either generally applicable or applicable only in specific cases.
(d) RIGHTS AND STATUS OF RECIPIENTS OF AWARDS. The grant of an Award
shall not be construed as giving a Participant the right to be retained in the
employ of or as a consultant to the Company or any Affiliate. Further, the
Company or any Affiliate may at any time dismiss a Participant from employment
or consultancy, free from any liability, or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement. Except for
rights accorded under the Plan and under any applicable Award Agreement,
Participants shall have no rights as holders of Shares as a result of the
granting of Awards hereunder.
(e) UNFUNDED STATUS OF THE PLAN. Unless otherwise determined by the
Committee, the Plan shall be unfunded and shall not create (or be construed to
create) a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company or the Committee and any Participant
or other Person. To the extent Person holds any right by virtue of a grant under
the Plan, such right (unless otherwise determined by the Committee) shall be no
greater than the right of an unsecured general creditor of the Company.
28
(f) GOVERNING LAW. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the internal laws of the State of New Jersey and applicable
federal law.
(g) SEVERABILITY. If any provision of the Plan or any Award Agreement
or any Award is or becomes or is deemed to be invalid, illegal or unenforceable
in any jurisdiction, or as to any Person or Award, or would disqualify the Plan,
any Award Agreement or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the intent of the Plan,
any Award Agreement or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award, and the remainder of the Plan, any such Award
Agreement and any such Award shall remain in full force and effect.
(h) NO FRACTIONAL SHARES. No fractional Shares or other securities
shall be issued or delivered pursuant to the Plan, any Award Agreement or any
Award, and the Committee shall determine (except as otherwise provided in the
Plan) whether cash, other securities or other property shall be paid or
transferred in lieu of any fractional Shares or other securities, or whether
such fractional Shares or other securities or any rights thereto shall be
cancelled, terminated or otherwise eliminated.
(i) HEADINGS. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective on the date the Plan is adopted by the
Board, subject, however, to the approval of the Plan by the Company's
shareholders within (12) months following the date of adoption of the Plan by
the Board.
SECTION 10. TERM OF THE PLAN
No Award shall be granted under the Plan following the tenth
anniversary of its effective date. However, unless otherwise expressly provided
in the Plan or in an applicable Award Agreement, any Award theretofore granted
may extend beyond such date and, to the extent set forth in the Plan, the
authority of the Committee to amend, alter, adjust, suspend, discontinue or
terminate any such Award, or to waive any conditions or restrictions with
respect to any such Award, and the authority of the Board to amend the Plan,
shall extend beyond such date.
THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK
29
APPENDIX 1
PRELIMINARY
TOTAL-TEL USA COMMUNICATIONS, INC.
PROXY CARD FOR 1999
ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints DENNIS J. SPINA 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 1999
Annual Meeting of Shareholders, to be held on February 23, 2000 at 10:00 A.M.,
EST 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:
(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
Henry Luken Jay J. Miller
Dennis Spina
(2) Amendment of Certificate of Incorporation to increase the number
of authorized shares of Common Stock, par value $.05 per share,
from 20,000,000 to 50,000,000.
( ) FOR ( ) AGAINST
(3) Adoption of 1999 Equity Incentive Plan.
( ) FOR ( ) AGAINST
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 AND ADOPTION OF THE 1999 EQUITY INCENTIVE PLAN, 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