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
COMDIAL CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
COMDIAL CORPORATION
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 1996
TO THE STOCKHOLDERS OF
COMDIAL CORPORATION:
The Annual Meeting of Stockholders of Comdial Corporation, a Delaware
corporation (the "Company"), will be held on April 30, 1996, at 9:00 a.m.
Eastern Time, in Ednam Hall at The Boar's Head Inn, Route 250 West,
Charlottesville, Virginia 22905, for the following purposes:
1. To elect to the Board of Directors two (2) directors to serve for
three-year terms expiring at the Annual Meeting of Stockholders to be held in
1999;
2. To consider and vote upon a proposal to amend the Company's 1992
Stock Incentive Plan to increase the number of shares of Common Stock authorized
for issuance under the plan from 800,000 to 1,550,000;
3. To ratify the selection of the firm of Deloitte & Touche LLP as the
Company's independent auditors for the current year; and
4. To transact such other business as may properly come before the
meeting or any continuation or adjournment thereof.
Only stockholders of record at the close of business on March 12, 1996,
will be entitled to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. The transfer books will not be closed.
PLEASE FILL IN, DATE, AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH DOES NOT REQUIRE ANY POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU RECEIVE MORE THAN ONE PROXY BECAUSE YOU OWN
SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE
COMPLETED AND RETURNED.
By Order of the Board of Directors
April 2, 1996 Wayne R. Wilver, Secretary
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
COMDIAL CORPORATION
APRIL 30, 1996
---------------------------
PROXY STATEMENT
---------------------------
GENERAL INFORMATION
The Annual Meeting of Stockholders of COMDIAL CORPORATION, a Delaware
corporation (the "Company"), will be held on April 30, 1996, at the time and
place and for the purposes set forth in the Notice of Annual Meeting of
Stockholders accompanying this Proxy Statement. The enclosed form of proxy is
solicited on behalf of the Board of Directors of the Company in connection with
such meeting and any continuation or adjournment thereof. This Proxy Statement
and the enclosed form of proxy are first being sent or given to the stockholders
on or about April 2, 1996. The executive offices of the Company are located at
1180 Seminole Trail, Charlottesville, Virginia 22901; and the mailing address
for such offices is Post Office Box 7266, Charlottesville, Virginia 22906-7266.
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the election of two nominees for director ("Proposal No.
1"). The stockholders will also be asked to consider and vote upon a proposal
("Proposal No. 2") to amend the Company's 1992 Stock Incentive Plan to increase
the number of shares of Common Stock authorized for issuance under the plan from
800,000 to 1,550,000. In addition, the stockholders of the Company will be asked
to ratify the Company's selection of the firm of Deloitte & Touche LLP ("D&T")
as the Company's independent auditors for the current year ("Proposal No. 3").
If a proxy in the enclosed form is duly executed and returned, the
shares of the Company's Common Stock, par value $0.01 per share (the "Common
Stock"), represented thereby will be voted, where specification is made by the
stockholder on the form of proxy, in accordance with such specification. IF NO
DIRECTIONS TO THE CONTRARY ARE INDICATED, THE PERSONS NAMED IN THE ENCLOSED
PROXY WILL VOTE THE SHARES REPRESENTED THEREBY "FOR" THE ELECTION OF EACH OF THE
NAMED NOMINEES FOR DIRECTOR AND "FOR" EACH OF THE OTHER PROPOSALS LISTED ON THE
PROXY CARD. If necessary, and unless the shares represented by the proxy are
voted against the proposals herein, the persons named in the enclosed proxy may
also vote in favor of a proposal to recess the Annual Meeting and to reconvene
it on a subsequent date or dates without further notice, in order to solicit and
obtain sufficient votes to approve the matters being considered at the Annual
Meeting. Any stockholder may revoke his proxy by delivery of a new later dated
proxy or by providing written notice of revocation to the Secretary of the
Company at any time before it is voted. A proxy will not be voted if the
stockholder attends the meeting and elects to vote in person.
- 1 -
<PAGE>
Only stockholders of record at the close of business on March 12, 1996
have the right to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. As of that date, [8,136,615] shares of Common Stock were
outstanding. Each holder of record of Common Stock is entitled to one vote for
each share held on all matters voted upon.
Presence in person or by proxy of the holders of [4,068,308] shares of
Common Stock will constitute a quorum at the Annual Meeting. Assuming the
applicable quorum is present, the affirmative vote of a plurality of the shares
of Common Stock represented at the Annual Meeting and entitled to vote will be
required to act upon the election of a nominee for director, and the affirmative
vote by the holders of a majority of the shares of Common Stock represented at
the Annual Meeting and entitled to vote will be required to act on all other
matters to come before the Annual Meeting, including Proposal No. 2 and Proposal
No. 3.
With regard to Proposal No. 1, stockholders may vote in favor of all
nominees, withhold their votes as to all nominees or withhold their votes as to
specific nominees. With respect to the other proposals, stockholders may vote in
favor of or against such proposal or ratification, or they may abstain from
voting. In accordance with applicable law, the treatment and effect of
abstentions and broker non-votes are as follows. If a stockholder registers an
abstention vote by checking the "ABSTAIN" box on the proxy card, no favorable
vote is cast and therefore the abstention vote has the effect of a vote against
the proposal. Thus, an abstention from voting on a matter has the same legal
effect as a vote against the matter, even though the stockholder may interpret
such action differently. If a broker or other nominee holding shares of Common
Stock for beneficial owners has voted on one or more matters pursuant to
discretionary authority or instructions from beneficial owners, but does not
vote on other matters because the broker or nominee has not received
instructions from beneficial owners and does not have the right to exercise
discretionary voting power, such broker non-votes have no effect on the vote
with respect to such other matters. That is, broker non-votes are not counted as
votes for the proposal or as votes against the proposal and are not counted in
determining the number of votes needed in order for a proposal to be approved.
The enclosed form of proxy confers discretionary authority to vote with
respect to any and all of the following matters that may come before the Annual
Meeting: (a) matters which may be presented at the Annual Meeting at the request
of public stockholders and with respect to which the Company has not received
notice at the date hereof; (b) approval of the minutes of a prior meeting of
stockholders, if such approval does not amount to ratification of the action
taken at the meeting; (c) the election of any person to any office for which a
bona fide nominee is unable to serve or for good cause will not serve; (d) any
proposal omitted from the Proxy Statement and the form of proxy pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended; and (e) matters
incident to the conduct of the Annual Meeting. The Board of Directors currently
is not aware of any matters (other than procedural matters) which will be
brought before the Annual Meeting and which are not referred to in the enclosed
Notice of Annual Meeting. If any such matters are properly brought before the
Annual Meeting, the persons named in the enclosed form of proxy will vote in
accordance with their best judgment.
The costs of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, certain directors, officers, and employees of
the Company may solicit proxies in person or by telephone, telegraph, or mail.
Further, the Company will also request record holders of Common Stock who are
brokerage firms, custodians, and fiduciaries to forward proxy material to the
beneficial owners of such shares and upon request will reimburse such record
holders for the costs of forwarding the material in accordance with customary
charges.
- 2 -
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 8, 1996, as
to shares of Common Stock owned by (i) each person who is known by the Company
to own beneficially more than five percent of the Company's Common Stock, (ii)
each director and nominee for director of the Company, (iii) each executive
officer named in the Summary Compensation Table, and (iv) all directors and
officers as a group, together with their respective percentages.
<TABLE>
<CAPTION>
AMOUNT AND NATURE % OF CLASS
NAME OF PERSON OR OF BENEFICIAL (IF MORE
NUMBER OF PERSONS IN GROUP OWNERSHIP (1) THAN 1%) (2)
- ------------------------------------------------------------- -------------------------------------- ----------------
<S> <C> <C>
PacifiCorp Credit, Inc.
825 N. E. Multnomah Street
Suite 775
Portland, Oregon 97232-2152 ........................... 907,169 (3), (4) 11.2%
J. P. Morgan & Co., Incorporated
60 Wall Street
New York, New York 10260 ............................. 1,138,500 (3), (5) 14.0%
Kalmar Investments, Inc.
1300 Market Street, Suite 500
Wilmington, Delaware 19801 ............................. 451,000 (3), (6) 5.5%
A. M. Gleason 21,066 (7), (13) *
Michael C. Henderson ................................... 912,169 (8), (13) 11.2%
William E. Porter ...................................... 8,333 (9), (13) *
John W. Rosenblum ...................................... 15,000 (10), (13) *
Dianne C. Walker .......................................... 18,366 (11), (13) *
William G. Mustain...................................... 80,785 (12) 1.0%
Wayne R. Wilver......................................... 36,112 (14) *
William C. Grover ..................................... 9,978 (15) *
Stephen C. Ayers ...................................... 16,000 (16) *
Keith J. Johnstone ..................................... 14,913 (17) *
Ove Villadsen 24,470 (18) *
All directors and officers
as a group (13 persons).............................. 1,188,173 (19) 14.4%
</TABLE>
- ----------------
* Less than one percent of the issued and outstanding shares of Common
Stock.
- 3 -
<PAGE>
(1) The amount and percentage of securities beneficially owned by an
individual are determined in accordance with the definition of
beneficial ownership set forth in the regulations of the Securities and
Exchange Commission and, accordingly, may include securities owned by
or for, among others, the spouse and/or minor children of the
individual and any other relative who has the same home as such
individual, as well as other securities as to which the individual has
or shares voting or investment power or has the right to acquire within
60 days after February 8, 1996. Beneficial ownership may be disclaimed
as to certain of the securities. Unless otherwise indicated, the
persons and entities named have sole voting and dispositive power over
their shares.
(2) Individual percentages have been rounded. Shares subject to outstanding
stock options or warrants which the individual has the right to acquire
within 60 days after February 8, 1996, are deemed to be outstanding for
the purpose of computing the percentage of outstanding securities of
the class owned by such individual, or any group including such
individual, but are not deemed outstanding for the purpose of computing
the percentage of the class owned by any other individual.
(3) Based on information filed with the Securities and Exchange Commission
by the reporting person.
(4) Mr. Henderson, a director of the Company, is President and Chief
Executive Officer of PacifiCorp Financial Services, Inc., an affiliate
of PacifiCorp Credit, Inc. ("PCI") (also see note 8). Mr. Henderson
disclaims beneficial ownership of the shares of Common Stock owned by
PCI.
(5) J.P. Morgan & Co., Incorporated ("J.P. Morgan") has advised the Company
as to the shares owned by it as follows. With respect to disposition,
J.P. Morgan has the sole power as to all 1,138,500 shares. In respect
of the power to vote, J.P. Morgan has shared power as to 748,100
shares. Voting power as to the remaining 390,400 shares, which are held
in various investment accounts, is retained by the beneficial owners.
(6) Kalmar Investments Inc. ("Kalmar") is an investment advisor registered
under the Investment Advisors Act of 1940, as amended. Kalmar has the
sole power to dispose or to direct the disposition of the shares.
Voting power with respect to the shares, which are held in various
investment accounts, is retained by the beneficial owners. No
individual client of Kalmar is known to the Company to be the holder of
more than five percent of the Company's Common Stock.
(7) In May 1995, Mr. Gleason retired as Vice Chairman and a director of
PacifiCorp, an affiliate of PCI. Until April 1995, Mr. Gleason served
as PCI's nominee on the Board of Directors of the Company. PCI named
Mr. Henderson (see note 8) to replace Mr. Gleason as PCI's nominee on
the Board of Directors, effective as of the Annual Meeting held on
April 27, 1995. Although Mr. Gleason will no longer be PCI's nominee,
he has agreed to remain a member of the Board. His term expires in
1997.
(8) Includes 907,169 shares of Common Stock beneficially owned by PCI (see
note 4) and 3,334 shares of Common Stock issuable upon the exercise of
stock options. Pursuant to an agreement between PCI and the Company
dated October 31, 1991, so long as PCI or any of its affiliates owns at
least 10% of the Company's outstanding Common Stock, the Company will
nominate and use its best efforts to cause a nominee of PCI to become a
member of the Board of Directors of the Company. Mr. Henderson
currently serves as PCI's nominee, having replaced Mr. Gleason (see
note 7). Mr. Henderson is President and Chief Executive Officer of
PacifiCorp Holdings, Inc., a holding company which owns 87% of Pacific
Telecom, Inc., and 100% of Pacific Generation Company and PacifiCorp
Financial Services, Inc. (see note 4).
- 4 -
<PAGE>
(9) Includes 3,334 shares issuable upon the exercise of stock options.
(10) Includes 3,334 shares issuable upon the exercise of stock options.
(11) Includes 6,667 shares issuable upon the exercise of stock options.
(12) Includes 38,890 shares issuable upon the exercise of stock options.
(13) Includes 1,666 shares issuable in February 1996 under the terms of the
Company's 1992 Non-Employee Directors Stock Incentive Plan as a result
of net income reported by the Company for the fiscal year ended
December 31, 1995.
(14) Includes 9,445 shares issuable upon the exercise of stock options.
(15) All of the shares are issuable upon the exercise of stock options.
(16) Mr. Ayers served as Vice President, Sales and Marketing until his
resignation in September 1995.
(17) Includes 1,222 shares issuable upon the exercise of stock options.
(18) All of the shares are issuable upon the exercise of stock options.
(19) Includes 114,925 shares issuable upon the exercise of stock options and
907,169 shares beneficially owned by PCI (see note 4).
PROPOSAL NO. 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
NOMINEES FOR DIRECTOR
The Board of Directors is currently comprised of six members, divided
into three classes. One class of directors is elected each year to hold office
for a three-year term and until successors of such directors are chosen and have
qualified. The two directors whose terms are expiring in 1996 are Michael C.
Henderson and Dianne C. Walker. Mr. Henderson and Ms. Walker each has been
nominated for re-election as a director at the Annual Meeting.
The remaining four directors will continue to serve as set forth below.
In the absence of instructions to the contrary, the proxy holders will vote the
proxies received by them for the election of Mr. Henderson and Ms. Walker.
Discretionary authority is reserved to cast votes for the election of a
substitute should any of the nominees be unable or unwilling to serve as a
director. Each of the nominees has agreed to serve as a director if elected and
the Company believes that each of them will be available to serve.
The names and ages of the directors continuing in office and the
nominees, their principal occupations or employment during the past five years,
and other data regarding them is set forth below.
- 5 -
<PAGE>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
TERMS EXPIRING IN 1999
MICHAEL C. HENDERSON
Mr. Henderson, age 49, is President and Chief Executive Officer of PacifiCorp
Holdings, Inc., a Pacificorp subsidiary which owns Pacific Telecom, Inc.,
PacifiCorp Generation Company ("PGC"), Powercor, and PacifiCorp Financial
Services, Inc. ("PFS"). He is also President and Chief Executive Officer of PFS,
a diversified financial services company, and has served as Chairman of PGC, a
developer and operator of independent power projects. Prior to April 1993, Mr.
Henderson was Vice President-Community and Energy Services of PacifiCorp.
Between April 1991 and April 1992, Mr. Henderson served as Senior Vice President
- - Portfolio Management of PFS and in that capacity held various management
positions in companies in which PFS held equity interests. From 1986 to 1990,
Mr. Henderson served as Chief Executive Officer of Crescent Foods, Inc. and was
President and sole proprietor of Sound Strategies, a consulting firm from 1990
to 1991. Mr. Henderson serves as Chairman of the Board of Albina Community
Bancorp. Mr. Henderson has served as a director of the Company since 1995 and is
a member of the Audit Committee.
DIANNE C. WALKER
Ms. Walker, age 39, is an independent consultant. Prior to January 1995, she was
a consultant to Bear Stearns & Co. Inc., an investment banking firm. Prior to
August 1992, she was a consultant to (between April 1990 and July 1991, Vice
President of) Kidder Peabody & Co., Inc., an investment banking firm. Between
1988 and 1990, Ms. Walker was a consultant to Pacific Telecom, Inc., a
telecommunications company. She is also a director of Satellite Technology
Management, Inc., Arizona Public Service Company, and Microtest, Inc. Ms. Walker
has served as a director of the Company since 1986 and is a member of the Audit
Committee of the Board of Directors.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 1998:
WILLIAM G. MUSTAIN
Mr. Mustain, age 54, is Chairman, President, and Chief Executive Officer of the
Company. He joined the Company as Vice President in June 1987 and assumed his
current position in May 1989. Mr. Mustain was Vice President of Operations
(Engineering and Manufacturing) for Norand Corporation from 1983 to 1987. From
1964 to 1983, he held various engineering, marketing, and manufacturing
positions with General Electric Company. He has served as a director of the
Company since 1989 and is a member of the Nominating Committee of the Board of
Directors.
JOHN W. ROSENBLUM
Mr. Rosenblum, age 52, is a Tayloe Murphy Professor of Business Administration
at the Darden Graduate School of Business Administration at the University of
Virginia. He is also a director of Chesapeake Corporation, Cadmus Communications
Corp., T. Rowe Price Associates, and Cone Mills Corporation. Mr. Rosenblum has
served as a director of the Company since 1992 and is a member of the
Compensation Committee of the Board of Directors.
- 6 -
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 1997:
A. M. GLEASON
Mr. Gleason, age 66, retired in May 1995 as Vice Chairman and a director of
PacifiCorp, a diversified public utility. He currently serves as President of
the Port of Portland. Prior to January 1994, Mr. Gleason was President and Chief
Executive Officer of PacifiCorp. He is also a director of Tektronix, Inc.,
Blount, Inc., and Fred Meyer, Inc. Mr. Gleason has served as a director of the
Company since 1981 and as Vice Chairman of the Board of Directors since April
1995 and is a member of the Compensation and Nominating Committees of the Board
of Directors.
WILLIAM E. PORTER
Mr. Porter, age 50, is Senior Vice President, Strategic Planning of Trigon Blue
Cross Blue Shield (formerly Blue Cross Blue Shield of Virginia). Between May
1994 and December 1995, Mr. Porter was Vice President-Project Future of Trigon
Blue Cross Blue Shield. Between 1992 and May 1994, Mr. Porter was a Vice
President of the Integrated Systems Division of Century Technologies
Corporation, a systems integration company. Between 1990 and 1992, Mr. Porter
served as Deputy Chief of Staff for the Governor of the Commonwealth of Virginia
and as Deputy Secretary of Commerce and Trade. He served as a director of the
Metropolitan Washington Airports Authority between 1992 and 1994 and as a
director of Virginia's Center for Innovative Technology in 1993. Mr. Porter has
served as a director of the Company since July, 1994 and is a member of the
Compensation and Nominating Committees of the Board of Directors.
BOARD MEETINGS
The Board of Directors held four regularly scheduled meetings and four
special meetings in 1995. During 1995 all directors attended at least 75% of the
aggregate number of meetings of the Board of Directors and standing Committees
on which they served.
COMMITTEES
The Board of Directors has standing Audit, Compensation, and Nominating
Committees as well as certain other Committees.
The Audit Committee held two meetings in 1995. Its principal functions
are to recommend to the Board of Directors the firm of independent auditors to
serve the Company each fiscal year, to review the plan and results of the audit
by the independent auditors, and the scope, results, and adequacy of the
Company's systems of internal accounting controls and procedures. In addition,
the Audit Committee reviews the independence of such auditors and reviews their
fees for audit and non-audit services rendered to the Company. During 1995, the
members of the Audit Committee included Ms. Walker (Chair) and Mr. Henderson.
- 7 -
<PAGE>
The Compensation Committee held four meetings in 1995. Its principal
functions are to approve remuneration of the officers of the Company, review
certain benefit programs, and approve and administer remuneration plans,
including the stock incentive plans of the Company. The Report of the
Compensation Committee on executive compensation is set forth on page 14 of this
Proxy Statement. During 1995, the members of the Compensation Committee included
Messrs. Gleason (Chair), Porter, and Rosenblum.
The Nominating Committee held one meeting in 1995. During 1995, the
members of the Nominating Committee included Messrs. Porter (Chair), Gleason,
and Mustain. The principal functions of the Nominating Committee are to review
candidates and recommend to the Board of Directors nominees for membership on
the Board of Directors. In fulfilling this responsibility, the Nominating
Committee will consider recommendations received from stockholders and other
qualified sources. Stockholder recommendations must be in writing and addressed
to the Chairman of the Nominating Committee, c/o Corporate Secretary, Comdial
Corporation, 1180 Seminole Trail, P. O. Box 7266, Charlottesville, Virginia
22906-7266. If a stockholder intends to make a nomination at any Annual Meeting,
the Bylaws of the Company require that the stockholder deliver a notice to the
Company not less than 120 days in advance of the anniversary date of the
Company's Proxy Statement released to its stockholders in connection with the
previous year's annual meeting of stockholders, setting forth (i) the name and
address of the stockholder who intends to make the nomination; (ii) the name,
address, and principal occupation of such proposed nominee; (iii) a
representation that the stockholder is entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (iv) the consent of each proposed nominee to
serve as a director of the Company if so elected; and (v) the total number of
shares of capital stock of the Company that will be voted for each proposed
nominee and the number of shares of capital stock of the Company owned by the
notifying stockholder. The Chairman of the meeting, in his discretion, may
refuse to acknowledge the nomination or disregard the nomination of any person
not made in compliance with the foregoing procedure.
By requiring advance notice of stockholder nominations, the Bylaws
afford the Board of Directors the opportunity to consider the qualifications of
the proposed nominees and, to the extent deemed necessary or desirable by the
Board, to inform stockholders about such qualifications. The Bylaws do not give
the Board of Directors any power to approve or disapprove of stockholder
nominations for election of directors. However, they may have the effect of
precluding a contest for the election of directors if their procedures are not
followed, and therefore may discourage or deter a stockholder from conducting a
solicitation of proxies to elect his or her own slate of directors.
A stockholder interested in nominating a person for election as a
director at the Annual Meeting of Stockholders to be held in 1997 should notify
the Company in the manner described above on or before December 3, 1996.
The Board has also designated as a standing committee a Pension
Committee and may establish other committees from time to time.
- 8 -
<PAGE>
COMPENSATION OF DIRECTORS
Non-employee directors of the Company received a monthly director's fee
of $1,250 in 1995.
In addition, the Board of Directors, with the approval of the
stockholders, adopted the 1992 Non-Employee Directors Stock Incentive Plan (the
"Directors Plan") in 1992. Under the Directors Plan, as amended, a director of
the Company who is not otherwise an employee of the Company or any of its
subsidiaries and has not been an employee for a period of at least one year is
eligible to receive automatic grants of options and awards of shares of Common
Stock. An aggregate of 200,000 shares of Common Stock is reserved for issuance
under the Directors Plan. The Directors Plan provides that each newly-elected
director who is eligible to participate in the plan on the date of his or her
first election to the Board automatically receive an option to purchase 3,334
shares of Common Stock. The Directors Plan also provides that, for each fiscal
year in which the Company had net income, each then director would receive in
the following year an automatic award of 3,334 shares of Common Stock.
At its regular meeting held on February 16, 1995, the Board of
Directors adopted an amendment to the Directors Plan permitting the Board to
suspend all or any part of the automatic award of 3,334 shares of Common Stock
attributable to the Company's having net income in any fiscal year (any such
suspension to continue for all future years until specific action is taken by
the Board to increase, reduce or eliminate the amount of such suspension). In
accordance with the Directors Plan, as amended, the Board adopted a resolution
suspending 1,668 of the 3,334 shares automatically awarded to non-employee
directors for fiscal years in which the Company has net income after 1994.
Accordingly, directors Gleason, Porter, Rosenblum, and Walker each received an
automatic award of 1,666 shares of Common Stock in February 1996, as a result of
net income reported by the Company for the fiscal year ended December 31, 1995.
All stock options granted under the Directors Plan are non-statutory
options. The option exercise price is the fair market value of the shares of
Common Stock at the time the option is granted. All of the options are
immediately exercisable; provided, however, that they may be exercised only
while the holder is a director or within 36 months of the date he or she ceases
to be a director and in no event may any such option be exercised more than ten
years after the date of grant.
Mr. Mustain, the only employee of the Company who is a member of the
Board of Directors, receives no additional compensation for serving as a
director.
- 9 -
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table lists the executive officers of the Company. All
executive officers are appointed annually by, and serve at the discretion of,
the Board of Directors of the Company.
<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE
NAME AND AGE WITH THE COMPANY DURING PAST FIVE YEARS
- ----------------------------------- ------------------------------------ --------------------------------------------
<S> <C> <C>
William G. Mustain (54) Chairman, President, and *
Chief Executive Officer
Wayne R. Wilver (62) Senior Vice President, Mr. Wilver joined the Company in
Chief Financial Officer, July 1986 as Vice President, Chief
Treasurer, and Secretary Financial Officer, Treasurer, and
Secretary and assumed his present
position in May 1989. Between
1983 and 1986, Mr. Wilver served
as Vice President-Finance and
Business Management and Treasurer
to the U.S. Committee for Energy
Awareness. Prior to 1983, he held
various management positions with
General Electric Company, including
Chief Financial Executive of its
Mobile Communications Business
division.
William C. Grover (57) Senior Vice President Mr. Grover was elected Senior Vice
President in September 1995 and is
responsible for Sales and Marketing.
Since 1993, he served as President
of Comdial Enterprise Systems, Inc.,
a subsidiary of the Company. Prior
to 1993, Mr. Grover held various
executive level positions with
software development and computer
manufacturing companies, including
President and CEO of PICKTEL
Computer Systems, Inc., a developer
and distributor of multi-user database
and management information
systems and President of Sequoia
Systems, Inc., a manufacturer and
distributor of fault tolerant computer
systems targeted to the online
transaction market.
</TABLE>
- 10 -
<PAGE>
<TABLE>
<S> <C> <C>
Joe D. Ford (48) Vice President Mr. Ford was elected Vice President
in May 1995 and is responsible for
Human Resources. Between 1982
and May 1995, he served as the
Company's Director of Human
Resources. Prior to that time, he
held various human resources
positions with the Company's
predecessor, Stromberg-Carlson
Telephone Systems, Inc., which
operated the Charlottesville
manufacturing facility before the
Company acquired the facility in
October 1982.
Keith J. Johnstone (49) Vice President Mr. Johnstone was elected Vice
President in May 1990 and is
responsible for Manufacturing
Operations. He has been employed
in various positions with Comdial or
its predecessor since 1980, including
Director of Customer Service,
Director of Materials and Director of
Manufacturing Systems.
Lawrence K. Tate (53) Vice President Mr. Tate was elected Vice President
in November 1982 and is responsible
for Quality. Between 1969 and
1982, he held various management
positions, including Vice President-
Manufacturing Operations, for
Stromberg-Carlson Telephone
Systems, Inc., which operated the
Charlottesville manufacturing facility
before the Company acquired the
facility in October 1982.
Ove Villadsen (55) Vice President Mr. Villadsen was elected Vice
President of Comdial Business
Communications Corporation, a
subsidiary of the Company, in
November 1982, and was elected
Vice President of the Company in
May 1989. He has been responsible
for Engineering for the Company or
its predecessor since 1980.
</TABLE>
- --------------
* See "Election of Directors-Members of the Board of Directors
Continuing in Office: Terms Expiring in 1998."
- 11 -
<PAGE>
FAMILY RELATIONSHIPS
There is no family relationship between any director, executive
officer, or person nominated or chosen by the Company to become a director or
executive officer.
EXECUTIVE COMPENSATION
The following sections disclose detailed information about cash and
equity-based executive compensation paid by the Company to certain of its
executive employees. The information is comprised of a five-year stock
performance graph, a Report of the Company's Compensation Committee of the Board
of Directors, a Summary Compensation Table, and additional tables which provide
further details on stock options and pension benefits.
- 12 -
<PAGE>
FIVE YEAR TOTAL STOCKHOLDER RETURN
The following performance table compares the cumulative total return,
assuming the reinvestment of dividends, for the period from December 31, 1990
through December 31, 1995, from an investment of $100 in (i) the Company's
Common Stock, (ii) the Nasdaq Market Index, and (iii) a peer group index
constructed by the Company (the "Peer Group Index").
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
COMDIAL CORPORATION COMMON STOCK, THE NASDAQ MARKET INDEX,
AND THE PEER GROUP INDEX
[performance graph omitted]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Comdial Corporation $100.00 $70.00 $70.00 $520.00 $470.00 $486.67
The Nasdaq Index $100.00 $128.38 $129.64 $155.50 $163.26 $211.77
Peer Group Index $100.00 $92.31 $210.59 $597.39 $415.21 $680.49
</TABLE>
The Nasdaq Market Index tracks the aggregate price performance of
equity securities of companies traded on the National Association of Securities
Dealers Automated Quotation-National Market System ("Nasdaq-NMS"). The
Company's Common Stock is traded on the Nasdaq-NMS.
Media General Financial Services supplied the necessary information to
construct the table, including the Peer Group Index. The Peer Group Index
consists of the following companies: ExecuTone Information Systems, Inc.,
Inter-Tel, Inc., and Mitel Corporation. The Company selected these three
companies as the peer group because their lines of business most closely match
the lines of business in which the Company is currently primarily engaged.
Although AT&T and Northern Telecom are also major competitors of the Company,
these two companies have been excluded from the peer group because they are much
larger than the Company and derive most of their revenues from other lines of
business. The returns of each peer group issuer have been weighted according to
the respective issuer's stock market capitalization at the beginning of each
period for which a return is indicated.
- 13 -
<PAGE>
The performance of any individual company's common stock is influenced
not only by its own performance and future prospects, but also by a number of
external factors over which the company and its management have indirect or no
control, including general economic conditions, expectations for the company's
future performance, and conditions affecting or expected to affect the company's
industry. In addition, stock performance can be affected by factors such as
trading volume, analytical research coverage by the investment community, and
the propensity of stockholders to hold the stock for investment purposes. The
relative weight of these factors also changes over time. Consequently, stock
performance, including measurement against indices, may not be representative of
a company's financial performance for given periods of time.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Company's executive compensation package for its executive officers
consists of three elements: base salary, annual performance-based incentive, and
stock option grants.
Compensation Principles. The Committee believes that the executive
compensation package should provide incentives to achieve both current and
longer-term strategic management goals of the Company, with the ultimate
objective of enhancing stockholder value. The three elements of the compensation
plan are designed to achieve this objective. The base salaries are set at levels
believed by the Committee to be sufficient to attract and retain qualified
officers, with a significant portion of the cash compensation being in the form
of performance-based incentives dependent upon meeting specified Company annual
financial goals. Stock option grants are intended to serve as an incentive to
achieve the overall longer-term objective of enhancing stockholder value.
Prior to 1985, the Company was primarily focused on the residential
telephone business. Since that time, the Company has redirected its efforts to
the telephone systems and integrated computer and telephone systems market. In
this endeavor, the Company was first profitable in 1990 and, with the exception
of a modest loss in 1991, the Company has been profitable each year thereafter.
The Company will continue its efforts to further improve financial
stability while striving to increase sales and improve profits with the ultimate
objective of enhancing stockholder value.
Salaries. In general, base salary levels are set at levels believed by
the Committee to be sufficient to attract and retain qualified executives, when
considered with the other components of the executive compensation package.
Annually, the Committee reviews the compensation of the executive officers. In
addition, the Committee retains an independent consulting company and considers
its report of the compensation paid by companies in the same or similar
industries. The Committee considers the remuneration analysis in conjunction
with the Company's overall performance as measured by achievement of the
Company's objectives and the development and succession of sound management
practices and skilled personnel.
The Company's primary objective, as noted above, has been the
implementation of financial stability, the development of new products, and
growth. In order to attract and retain qualified executive personnel, base
salary levels have reflected a necessary balance between (i) the competitive
level set by the industry and (ii) the Company's overall financial performance.
- 14 -
<PAGE>
Effective as of February 12, 1996, the Committee set the annual salary
of Mr. Mustain (the Company's President and Chief Executive Officer) at
$245,000, representing a 13.9% increase over Mr. Mustain's previous salary. The
Committee believes that Mr. Mustain is performing an extremely valuable function
in leading the Company in its successful efforts in its current markets and its
entry into the new areas of international and computer telephony.
Annual Incentives. The Committee has established a formal plan for the
awarding of incentive compensation to officers. The plan consists of two equally
weighted and clearly defined objectives: cash flow and net income. The Committee
believes that these objectives are supportive of the Company's continued focus
on improved financial results and positioning the Company for continued growth.
In line with this defined plan and in recognition of the achievement of
the Company's performance objectives in 1995, the Committee awarded Mr. Mustain
an incentive amount of $151,000 or 70.2% of his base salary. The Committee also
awarded incentive amounts to the Company's other executive officers totaling
38.2% of their aggregate base salaries.
Stock Options. Stock options comprise one part of the executive
compensation package. This component is intended to encourage key employees to
remain in the employ of the Company by offering them an opportunity for
ownership in the Company, and to provide them with a long-term interest in the
Company's overall performance as reflected by the performance in the market of
the Company's Common Stock. The Committee has established levels of stock option
grants for various positions within the Company.
During 1995, 153 eligible employees were awarded stock options to
acquire a total of 251,284 shares of the Company's Common Stock. All of the
Company's executive officers were awarded stock options in 1995, totaling
124,203 shares.
Pension Plan. The Company has a pension plan covering hourly and
salaried employees, including the executive officers. The plan requires Company
contributions for tax-deferred pension accruals, with the amount of contribution
actuarially determined in order to fund for each participating employee a
benefit based on the two factors of career average compensation and years of
service. For highly compensated employees, such as the executive officers, the
amount of benefit under the pension plan is limited in order to qualify under
Federal tax laws. Following this report is a more detailed discussion of each of
the components of the executive compensation package, including additional
information regarding the pension plan.
A. M. Gleason (Chair) William E. Porter
- 15 -
<PAGE>
SUMMARY COMPENSATION TABLE
The following summary compensation table presents information about the
compensation paid by the Company during its three most recent fiscal years to
those individuals who were (i) the Company's Chief Executive Officer (the "CEO")
at the end of the last completed fiscal year, regardless of compensation level,
(ii) the Company's four most highly compensated executive officers other than
the CEO who were serving as executive officers at the end of the last completed
fiscal year and whose total annual salary and bonus for the last completed
fiscal year exceeded $100,000, and (iii) one additional individual for whom
disclosure would have been provided pursuant to clause (ii) above but for the
fact that such individual was not serving as an executive officer of the Company
at the end of the last completed fiscal year (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE:
<TABLE>
<CAPTION>
LONG-
TERM
ANNUAL COMPENSATION(1) COMPEN-
SATION
----------
ALL OTHER
NAME AND OPTIONS COMPEN
PRINCIPAL SALARY(2) BONUS GRANTED SATION (4)
POSITION YEAR ($) ($) (#) (3) ($)
- --------------------------------- ------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
William G. Mustain 1995 209,231 151,000 50,000 2,310
President and Chief 1994 185,000 69,375 - 2,310
Executive Officer 1993 185,000 84,000 - 2,249
Wayne R. Wilver 1995 135,500 48,000 15,000 2,310
Senior Vice President and 1994 124,231 18,850 6,667 2,174
Chief Financial Officer 1993 120,000 22,000 - 2,235
William C. Grover 1995 161,000 24,000 18,267 2,310
Senior Vice President 1994 156,000 - - 2,310
1993 61,153 - 13,334 (5) 476
Stephen C. Ayers (6) 1995 123,865 48,000 15,334 2,310
Vice President 1994 120,599 34,500 - 2,005
1993 115,900 34,000 - 1,811
Keith J. Johnstone 1995 104,038 37,000 3,667 1,962
Vice President 1994 98,461 22,500 - 1,723
1993 90,000 21,000 - 1,719
Ove Villadsen 1995 126,153 65,000 15,334 2,310
Vice President 1994 108,461 28,875 3,334 1,898
1993 100,000 23,000 - 1,942
</TABLE>
(1) While the six named individuals received perquisites or other personal
benefits in the years shown, in accordance with Securities and Exchange
Commission regulations, the value of these benefits are not indicated
since they did not exceed the lesser of $50,000 or 10% of the
individual's salary and bonus in any year.
(2) The salaries shown in the Summary Compensation Table for 1995 have been
in effect since February 1995.
(3) Options granted prior to August 7, 1995 have been adjusted to reflect a
one-for-three reverse stock split.
(4) Amounts set forth in the Summary Compensation Table under the heading
"All Other Compensation" represent the matching contributions made by
the Company to its 401(k) plan for the benefit of the named officer in
the year indicated.
(5) Mr. Grover became an employee of the Company in August 1993.
(6) Mr. Ayers served as Vice President, Sales and Marketing until his
resignation in September 1995.
STOCK OPTIONS
The Company has adopted the Comdial Corporation 1992 Stock Incentive
Plan (the "Stock Incentive Plan"). The Stock Incentive Plan is intended to
further the long-term stability and financial success of the Company by
attracting and retaining key employees through the use of stock incentives,
including stock options. The Company does not award stock appreciation rights
under the Stock Incentive Plan. The Company has reserved a total of 800,000
shares of Common Stock for issuance pursuant to incentive awards made under the
Stock Incentive Plan. At its regular meeting on February 6, 1996, the Board
approved an amendment to the Stock Incentive Plan, subject to stockholder
approval, increasing the total number of shares reserved for issuance pursuant
to incentive awards made under the Stock Incentive Plan from 800,000 to
1,550,000. See "PROPOSAL NO. 2: Approval of Amendment to 1992 Stock Incentive
Plan."
- 16 -
<PAGE>
The following table sets forth additional information concerning
individual grants of stock options made under the Stock Incentive Plan during
the last completed fiscal year to each of the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
% OF
TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED(2) IN FISCAL PRICE EXPIRATION 5% 10%
NAME (#) YEAR ($/SH) DATE ($) ($)
- ------------------------- -------------- --------------- ----------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
William G. Mustain 50,000 20.0% $7.50 3/28/05 $610,835 $972,653
Wayne R. Wilver 15,000 6.0% $7.50 3/28/05 $183,251 $291,796
William C. Grover 3,267 1.3% $7.50 3/28/05 $39,912 $63,553
15,000 6.0% $11.25 8/31/05 $274,876 $437,694
Stephen C. Ayers 15,334 6.1% $7.50 3/28/05 - (3) - (3)
Keith J. Johnstone 3,667 1.5% $7.50 3/28/05 $44,709 $71,334
Ove Villadsen 15,334 6.1% $7.50 3/28/05 $187,331 $298,293
</TABLE>
(1) The potential realized values in the table assume that the market price
of the Company's Common Stock appreciates in value from the date of
grant to the end of the option term at the annualized rates of five
percent and ten percent, respectively. The actual value, if any, an
executive may realize will depend on the excess, if any, of the stock
price over the exercise price on the date the option is exercised.
There is no assurance that the value realized by an executive will be
at or near the value estimated in the table.
(2) All options granted to the named officers were granted on March 28,
1995, except for 15,000 options granted to Mr. Grover on August 31,
1995. One third of the options become exercisable on the first
anniversary of the grant date, another third become exercisable on the
second anniversary of the grant date, and the balance become
exercisable on the third anniversary of the grant date. All of these
options were granted with an exercise price equal to the market price
of the Company's Common Stock on the grant date.
(3) Mr. Ayers served as Vice President, Sales and Marketing until his
resignation in September 1995. The options granted to Mr. Ayers
terminated unexercised on December 1, 1995.
- 17 -
<PAGE>
The following table sets forth information concerning each exercise of
stock options during the 1995 fiscal year by each of the named executive
officers and the fiscal year-end value of unexercised options, provided on an
aggregated basis:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END UNEXERCISED OPTION VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY(2)
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED VALUE(1) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------- ------------------ ------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
William G. Mustain 41,110 $308,392 22,223 / 50,000 $177,006 / $93,750
Wayne R. Wilver 22,221 $147,458 6,667 / 19,445 $35,404 / $28,125
William C. Grover - - 8,889 / 22,712 $28,400 / $20,327
Stephen C. Ayers 8,334 $84,090 Note 3 Note 3
Keith J. Johnstone 13,691 $102,272 0 / 3,667 $0 / $6,876
Ove Villadsen - - 18,247 / 17,557 $126,488 / $28,751
</TABLE>
(1) The dollar values referred to in columns (C) and (E) are calculated by
determining the difference between the fair market value of the
securities underlying the options and the exercise price of the options
at exercise or fiscal year-end, respectively.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option.
(3) Mr. Ayers served as Vice President, Sales and Marketing until his
resignation in September 1995. All unexercised options granted to Mr.
Ayers terminated on December 1, 1995.
PENSION PLAN
The Company has a pension plan covering both salaried and hourly
employees. Under the pension plan, actuarially computed contributions are made
annually by the Company and benefits are determined primarily by average career
compensation and years of service. The following pension plan table shows
estimated annual benefits payable upon retirement at age 65 in specified
compensation and years of service classifications:
- 18 -
<PAGE>
<TABLE>
<CAPTION>
PENSION PLAN TABLE:
ESTIMATED ANNUAL BENEFITS PAYABLE BY THE
PLAN AT RETIREMENT WITH YEARS OF SERVICE INDICATED
REMUNERATION
($)
15 20 25 30 35
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
100,000 27,184 36,245 45,306 54,368 63,429
125,000 34,309 45,745 57,181 68,618 80,054
150,000 41,434 55,245 69,056 82,868 96,679
175,000 41,434 55,245 69,056 82,868 96,679
200,000 41,434 55,245 69,056 82,868 96,679
225,000 41,434 55,245 69,056 82,868 96,679
250,000 41,434 55,245 69,056 82,868 96,679
</TABLE>
Effective as of January 1, 1994, the plan covers a participant's
compensation including bonuses and incentive pay for hourly employees and
excluding deferred or supplemental compensation or other forms of compensation,
if any, paid by the Company; provided, however, that the amount of a
participant's annual compensation taken into account under the plan for any year
may be subject to certain limitations under the plan or in accordance with
applicable law. As to Messrs. Mustain, Wilver, Grover, Ayers, Johnstone, and
Villadsen, the amounts set forth in the Summary Compensation Table under the
heading "Salary" are covered by the plan. As of December 31, 1995, Messrs.
Mustain, Wilver, Grover, Ayers, Johnstone, and Villadsen have eight, nine, two,
seven, thirteen, and thirteen years of credited service, respectively.
There are several different forms of benefit options available under
the Company's pension plan, including Straight Life Annuity, 5 Years Certain &
Life Annuity, 10 Years Certain & Life Annuity, Level Income Life Annuity (age 62
and 65), Contingent Annuitant Option, and Joint and Survivor Option. The Level
Income Life Annuity balances retirement income from the pension plan and social
security benefits so that income remains more or less constant regardless of
when social security benefits begin.
EXECUTIVE SEVERANCE PLAN
Effective as of September 5, 1995, the Board of Directors adopted a
severance plan for the Company's executive officers (the "Executive Severance
Plan"). The Executive Severance Plan is designed to provide for the payment of
severance benefits if an executive officer is terminated without cause, or if
the executive terminates with good reason within two years after a change of
control. The Executive Severance Plan covers the Company's Chief Executive
Officer, President, Senior Vice Presidents, Chief Financial Officer, and Vice
Presidents. In addition, the Compensation Committee of the Board of Directors
can specifically designate other employees to participate. The persons covered
by the Executive Severance Plan are hereinafter referred to as the "Covered
Executives". The severance period over which payments are made varies with the
job classification of the Covered Executive as follows: (i) 24 months for the
President or Chief Executive Officer, (ii) 18 months for a Senior Vice
President, Chief Financial Officer or Vice President of Engineering, and (iii)
12 months for other Vice Presidents. Other designated participants would have
individual periods established, not longer than 24 months.
- 19 -
<PAGE>
Under the Executive Severance Plan, if a Covered Executive is
terminated by the Company without Good Cause (as defined below) or if he or she
terminates employment with Good Reason (as defined below) within 24 months
following a Change of Control (as defined below), the Covered Executive is
entitled to receive monthly payments of his or her final salary (or the Covered
Executive's salary at a Change of Control, if larger) and his or her average
bonus. The Covered Executive's average bonus is the average of the Covered
Executive's bonus for the previous two years or the Covered Executive's term of
employment, if less. The Covered Executive would receive these payments even if
he or she is employed by another company during the severance period. The
Company may pay the severance benefit in a lump sum at its option. The Covered
Executive's spouse or other named beneficiary is entitled to any unpaid benefit
after death.
In addition, the Covered Executive would receive health, life and
disability insurance coverage for the severance period. The Covered Executive
would have to contribute toward the premiums for any insurance to the same
extent as when employed. Insurance benefits would cease if the Covered Executive
is employed by another company and is covered by similar benefits.
As a condition to receiving benefits, the Covered Executive would be
required to execute a complete release of the Company from all claims, including
all claims relating to the Covered Executive's employment and his or her
termination of employment.
The Covered Executive's benefit would be reduced to avoid application
of the "excess parachute payment" restrictions after a Change of Control. An
excess parachute payment is subject to an additional 20% excise tax payable by
the employee and is not deductible by the employer. In general, an excess
parachute payment is a payment made due to a Change of Control that exceeds
three times the employee's average compensation for the prior five years.
The Board of Directors can amend or terminate the Executive Severance
Plan in the future, except in two circumstances. First, after a Change of
Control, the Plan cannot be amended or terminated for 24 months. Second, an
amendment or termination cannot affect the benefits of a terminated Covered
Executive then receiving benefits.
With respect to the termination of any Covered Executive by the
Company, the term "Good Cause" means the (a) fraud or material misappropriation
by the Covered Executive with respect to the business or assets of the Company;
(b) the persistent refusal or wilful failure of the Covered Executive materially
to perform his or her duties and responsiblities to the Company, which continues
after the Covered Executive receives notice of such refusal or failure; (c)
conduct by the Covered Executive that constitutes disloyalty to the Company and
that materially harms or has the potential to cause material harm to the
Company; (d) the Covered Executive's conviction of a felony or crime involving
moral turpitude; (e) the use of drugs or alcohol that interferes materially with
the performance of the Covered Executive's performance of his or her duties; or
(f) the violation of any significant Company policy or practice, including but
not limited to the Company policy prohibiting sexual harrassment.
With respect to a termination by a Covered Executive after a Change of
Control, "Good Reason" would exist if, without the Covered Executive's express
written consent, (a) there is a significant adverse change in such Covered
Executive's authority or in his or her overall working environment; (b) such
officer is assigned duties materially inconsistent with his duties,
responsibilities and status at the time of a Change of Control; (c) there is a
reduction, which is not agreed to by the Covered Executive, in the
- 20 -
<PAGE>
Covered Executive's rate of base salary or bonus percentage; or (d) the Company
changes by 50 miles or more the principal location at which such officer is
employed.
Under the plan, a "Change of Control" is defined as the occurrence of
any of the following events: (a) the acquisition by any unrelated person of
beneficial ownership of 40% or more of the then outstanding shares of common
stock of the Company (or the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors); (b) as a result of, or in connection with, any tender or exchange
offer, merger or other business combination, sale of stock or assets or
contested election, or any combination of the foregoing transactions, the
persons who were directors of the Company before such transaction shall cease to
constitute a majority of the Board of Directors of the Company or any successor
to the Company; (c) approval by the stockholders of the Company of a
reorganization, merger or consolidation with respect to which the persons who
were shareholders of the Company immediately before the transaction do not,
immediately after the transaction, beneficially own more than 50% of the then
outstanding shares of common stock of the Company or the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors, or (d) a sale or other disposition of
all or substantially all the assets of the Company, other than in the ordinary
course of business.
INDEBTEDNESS OF MANAGEMENT
Prior to 1985, the Company made loans to certain executive officers of
the Company to assist such officers in the exercise of Company stock options
and/or the payment of personal income taxes resulting from such exercise. The
following table shows, as to each officer whose indebtedness exceeded $60,000,
the largest aggregate amount of such indebtedness during fiscal year 1995 and
the balance due the Company as of February 8, 1996. Each such loan is evidenced
by a non-interest bearing promissory note secured by a pledge of the officer's
shares of Company Common Stock and an assignment of the death benefit under his
Company group life insurance policy. All of the loans described herein are
accelerated and become immediately due and payable on termination of employment.
INDEBTEDNESS OF MANAGEMENT
LARGEST AGGREGATE
AMOUNT OUTSTANDING DURING AMOUNT OUTSTANDING
NAME AND PRINCIPAL FISCAL YEAR 1995 AS OF FEBRUARY 8, 1996
POSITION ($) ($)
- ---------------------------- --------------------------- ---------------------
Lawrence K. Tate
Vice President $172,923 $169,482
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Redemption of Series A Preferred Stock. In February 1994, the Company
issued 850,000 shares of Series A 7-1/2% Cumulative Convertible Redeemable
Preferred Stock, par value $10.00 per share ("Series A Preferred Stock") to PCI
in exchange for the cancellation of $8.5 million of the Company's
- 21 -
<PAGE>
existing indebtedness to PCI (the "Exchange"). The terms and conditions of the
Exchange were approved by the stockholders of the Company at a special meeting
held on February 1, 1994.
In December 1994, the Company redeemed 100,000 shares of the Series A
Preferred Stock held by PCI for $1.0 million in cash (an amount equal to the
aggregate par value of such shares), using proceeds from an installment note
received in connection with the sale of the Company's electromechanical product
line in 1992. In August 1995, the Company completed an underwritten registered
public offering (the "1995 Equity Offering") of 3,000,000 shares of Common
Stock, including 1,000,000 shares offered for sale by the Company and 2,000,000
shares included for the benefit of PCI pursuant to its exercise of piggyback
registration rights. See "Certain Relationships and Related Transactions: PCI
Piggyback Registration Rights" below. The 1995 Equity Offering was made at an
offering price, net of underwriting discounts and commissions, of $11.21 per
share. The Company used approximately $7.5 million of its proceeds from the 1995
Equity Offering to redeem all of the 750,000 shares of Series A Preferred Stock
then outstanding and held by PCI. PCI's share of the proceeds from the 1995
Equity Offering, net of underwriting discounts and commissions and offering
expenses, was approximately $21.9 million.
PCI Piggyback Registration Rights. PCI has piggyback registration
rights with respect to the Common Stock which it currently owns. As a result, if
the Company desires to effect a public offering of its Common Stock, PCI has the
right to include its shares in such offering, provided that the quantity of PCI
shares so included would not, in the opinion of the underwriters, adversely
affect the proposed offering by the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the Company's Common Stock and to provide copies of the reports to the Company.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required to be filed, during the fiscal year ended December 31,
1995, the Company's directors, executive officers, and stockholders beneficially
owning more than ten percent of the Company's Common Stock complied with their
respective Section 16(a) reporting requirements.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO 1992 STOCK INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
At the Annual Meeting, the stockholders are being asked to approve an
amendment to the Company's 1992 Stock Incentive Plan (the "1992 Plan"), to
increase the number of shares of Common
Stock reserved for issuance thereunder from 800,000 to 1,550,000. The adoption
of the 1992 Plan was approved by the Board of Directors in March 1992 and by the
stockholders in April 1992. As of February 8, 1996, options to purchase an
aggregate of 449,081 shares were outstanding and 46,459 shares (exclusive of the
750,000 shares subject to stockholder approval at this Annual Meeting) were
available for future grant. In addition, as of such date 304,460 shares had been
purchased pursuant to the exercise of stock options granted under the 1992 Plan.
At its regular meeting in February 1996, the Board awarded stock options to
employees in an aggregate amount exceeding the 46,459 shares available for
grant, conditioned upon stockholder approval of the amendment described in this
proposal.
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<PAGE>
The 1992 Plan authorizes the Board of Directors to grant stock options
and other incentive awards to eligible employees and consultants of the Company.
The 1992 Plan is structured to allow the Board of Directors broad discretion in
creating equity incentives in order to assist the Company in attracting,
retaining and motivating the best available personnel for the successful conduct
of the Company's business. The Board of Directors believes that the remaining
shares available for grant under the 1992 Plan are insufficient to accomplish
these purposes.
The Board awards stock options to employees under the 1992 Plan as a
part of its employees' overall compensation package. Annual awards are
determined with reference to an independent consulting company's report of the
compensation paid by companies in the same or similar industries. Based upon
past experience, the Board of Directors currently expects that the 750,000
additional shares of Common Stock subject to stockholder approval at this Annual
Meeting will be sufficient to provide for option grants for approximately the
next three fiscal years.
The essential features of the 1992 Plan are outlined below.
Purpose. The 1992 Plan is intended to provide a means for selected key
professional and management employees of, and consultants providing service for,
the Company to increase their personal financial interest in the Company,
thereby stimulating their efforts on behalf of the Company and its stockholders
(references to the "Company" in this section will include any parent and
subsidiary corporations).
Administration. The 1992 Plan must be administered by a committee
comprised of at least three directors of the Company who are not eligible to
participate in the 1992 Plan or any similar plan of the Company. The
Compensation Committee currently administers the 1992 Plan and will continue to
do so unless another committee is appointed by the Board. The committee has the
power and complete discretion to determine when to grant incentive awards, which
eligible employees will receive incentive awards, whether the award will be an
option, restricted stock or incentive stock, and the number of shares to be
allocated to each incentive award. The committee may impose conditions on the
exercise of options and upon the transfer of restricted stock received under the
Plan, and upon the right to receive incentive stock under the Plan, and may
impose such other restrictions and requirements as it may deem appropriate,
including reserving the right for the Company to reacquire shares issued
pursuant to an incentive award.
Eligibility. All present and future employees of the Company who hold
positions with management responsibilities are eligible to receive incentive
awards under the 1992 Plan. The Company estimates that it has approximately 165
such employees (seven of whom are officers). Consultants providing services for
the Company are also be eligible to receive an incentive award.
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<PAGE>
Stock Options. Options to purchase shares of Common Stock granted under
the 1992 Plan may be "incentive stock options" or nonstatutory stock options.
Incentive stock options qualify for favorable income tax treatment under Code
Section 422, while nonstatutory stock options do not. The option price of Common
Stock covered by an incentive stock option may not be less than 100% (or, in the
case of an incentive stock option granted to a 10% shareholder, 110%) of the
fair market value of the Common Stock on the date of the option grant. The
option price of Common Stock covered by a nonstatutory option may not be less
than 85% of the fair market value of the Common Stock on the date of grant.
The value of incentive stock options, based on the exercise price, that
can be exercisable by a participant for the first time in any calendar year
under the 1992 Plan or any other similar plan maintained by the Company is
limited to $100,000.
Options may only be exercised at such times as may be specified by the
committee, provided, however, that incentive stock options may not be exercised
after the first to occur of (i) ten years (or, in the case of an incentive stock
option granted to a 10% shareholder, five years) from the date on which the
incentive stock option was granted, (ii) three months from the optionee's
termination of employment with the Company for reasons other than death or
disability, or (iii) one year from the optionee's termination of employment on
account of death or disability.
If the option so provides, an optionee exercising an option may pay the
purchase price in cash; by delivering or causing to be withheld from the option
shares, shares of Common Stock; or by delivering an exercise notice together
with irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds from the option shares to pay the exercise
price.
Restricted Stock. Restricted stock issued pursuant to the Plan is
subject to the following general restrictions: (i) none of such shares may be
sold, transferred, pledged, or otherwise encumbered or disposed of until the
restrictions on such shares shall have lapsed or been removed under the
provisions of the Plan, and (ii) if a holder of restricted stock ceases to be
employed by the Company, he will forfeit any shares of restricted stock on which
the restrictions have not lapsed or been otherwise removed.
The committee is authorized to establish as to each share of restricted
stock issued under the 1992 Plan the terms and conditions upon which the
restrictions on such shares shall lapse. Such terms and conditions may include,
without limitation, the lapsing of such restrictions at the end of a specified
period of time, as a result of the disability, death or retirement of the
participant. In addition, the committee may at any time, in its sole discretion,
accelerate the time at which any or all restrictions will lapse or remove any
and all such restrictions.
Incentive Stock. The committee may establish performance programs with
fixed goals and designate key employees as eligible to receive incentive stock
if the goals are achieved. Incentive shares will only be issued in accordance
with the program established by the committee. More than one performance program
may be established by the committee and they may operate concurrently or for
varied periods of time and a participant may participate in more than one
program at the same time. A participant who is eligible to receive incentive
stock has no rights as a shareholder until incentive shares are received.
Transferability of Incentive Awards. No options, or the right to
receive incentive stock granted under the 1992 Plan, and during the applicable
period of restriction, no shares of restricted stock, may be sold, transferred,
pledged, or otherwise disposed of, other than by will or by the laws of descent
and distribution. All rights granted to a participant under the 1992 Plan are
exercisable during the participant's
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<PAGE>
lifetime only by such participant, or his guardians or legal representatives.
Upon the death of a participant, his or her personal representative or
beneficiary may exercise the participant's rights under the 1992 Plan.
Amendment of the 1992 Plan and Incentive Awards. The Board of Directors
is authorized to amend the 1992 Plan in such respects as it deems advisable;
provided that the stockholders of the Company must approve any amendment that
would (i) materially increase the benefits accruing to participants under the
1992 Plan, (ii) materially increase the number of shares of Common Stock that
may be issued under the 1992 Plan, or (iii) materially modify the requirements
of eligibility for participation in the 1992 Plan. Incentive awards granted
under the 1992 Plan may be amended with the consent of the recipient so long as
the amended award is consistent with the terms of the Plan.
Federal Income Tax Consequences. An employee will not incur federal
income tax when he is granted a nonstatutory stock option, an incentive stock
option, or, in most cases and depending on the restrictions imposed, restricted
stock.
Upon exercise of a nonstatutory stock option, an employee generally
will recognize ordinary income, which is subject to income tax withholding by
the Company, equal to the difference between the fair market value of the common
Stock on the date of the exercise and the option price. The committee has
authority under the 1992 Plan to include provisions allowing the employee to
elect to have a portion of the shares he would otherwise acquire upon exercise
of an option or stock appreciation right withheld to cover his tax liabilities
if permissible under Rule 16b-3. The election will be effective only if approved
by the committee and made in compliance with other requirements set forth in the
Plan. When an employee exercises an incentive stock option, he generally will
not recognize income, unless he is subject to the alternative minimum tax.
An employee may deliver shares of Common Stock instead of cash to
acquire shares under an incentive stock option or nonstatutory stock option,
without having to recognize taxable gain (except in some cases with respect to
statutory option stock) on any appreciation in value of the shares delivered.
Statutory option stock is stock acquired upon the exercise of incentive stock
options. However, if an employee delivers shares of statutory option stock in
satisfaction of all, or any part, of the exercise price under an incentive stock
option, and if the applicable holding periods of the statutory option stock have
not been met, he will be considered to have made a taxable disposition of the
statutory option stock.
In general, an employee who has received shares of restricted stock
will include in his gross income as compensation income an amount equal to the
fair market value of the shares of restricted stock at the time the restrictions
lapse or are removed. An employee who receives shares of incentive stock will
include in his gross income as compensation income an amount equal to the fair
market value of the shares of incentive stock on the date of transfer to the
employee. Such amounts will be included in income in the tax year in which such
events occur. The income recognized may be subject to income tax withholding by
the Company.
The Company usually will be entitled to a business expense deduction at
the time and in the amount that the recipient of an incentive award recognizes
ordinary compensation income in connection therewith. As stated above, this
usually occurs upon exercise of nonstatutory options when the restrictions lapse
or are removed from restricted stock and when incentive stock is issued.
Generally, the Company's deduction is contingent upon the Company's meeting
withholding tax requirements. No deduction is allowed in connection with an
incentive stock option, unless the employee disposes of Common Stock received
upon exercise in violation of the holding period requirements.
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<PAGE>
This summary of Federal income tax consequences of nonstatutory stock
options, incentive stock options, restricted stock, and incentive stock does not
purport to be complete. There may also be state and local income taxes
applicable to these transactions. Holders of incentive awards should consult
their own advisors with respect to the application of the laws to them and to
understand other tax consequences of the awards including possible income
deferral for Insiders, alternative minimum tax rules, taxes on parachute
payments, and the tax consequences of the sale of shares acquired under the
Plan.
Vote Required. Approval of the amendment to the 1992 Plan to increase
the number of shares of Common Stock authorized for issuance under the plan from
800,000 to 1,550,000 requires the affirmative vote of the holders of a majority
of the shares of Common Stock voting at the Annual Meeting.
PROPOSAL NO. 3
RATIFICATION OF THE SELECTION OF AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
The Board of Directors, upon the recommendation of its Audit Committee,
has selected the firm of Deloitte & Touche, LLP ("D&T"), certified public
accountants and independent auditors, to serve the Company in those capacities
for the year ending December 31, 1996 and recommends ratification of such
selection by the stockholders. D&T has served as independent auditors for the
Company since 1985. In addition to auditing the consolidated financial
statements of the Company for the year ended December 31, 1995, D&T provided an
audit of the Company's pension and 401(k) plans. Its representatives will be
present at the Annual Meeting and will have the opportunity to make a statement
if they desire to do so and to respond to appropriate questions asked by
stockholders.
In the event the proposal to ratify the selection of D&T is defeated,
the adverse vote will be considered as a direction to the Board of Directors to
select other independent auditors for the next year. However, because of the
expense and difficulty in changing independent auditors after the beginning of a
year, the Board of Directors intends to allow the appointment for 1996 to stand
unless the Board of Directors finds other reasons for making a change.
The Board of Directors considers D&T to be well qualified to serve as
the independent auditors for the Company.
The Board of Directors recommends a vote "FOR" the proposal to ratify
the selection of D&T as independent auditors for 1996. Proxies solicited by the
Board of Directors will be so voted unless stockholders otherwise specify in
their proxies.
OTHER MATTERS
Management is not aware of other matters which will come before the
meeting, but if any such matters are properly presented, proxies solicited
hereby will be voted in accordance with the best judgment of the persons holding
the proxies. All shares represented by duly executed proxies will be voted at
the meeting.
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<PAGE>
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy materials for the 1997 Annual Meeting of Stockholders must be
received by the Company no later than December 3, 1996.
For the Board of Directors
Wayne R. Wilver, Secretary
Charlottesville, Virginia
April 2, 1996
THE COMPANY WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A COPY OF
THE 1995 ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO SECRETARY,
COMDIAL CORPORATION, 1180 SEMINOLE TRAIL, P. O. BOX 7266, CHARLOTTESVILLE,
VIRGINIA, 22906-7266.
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<PAGE>
[FRONT OF PROXY CARD]
COMDIAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COMDIAL CORPORATION
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 2, 1996, and appoints William
G. Mustain and Wayne R. Wilver, or either of them, as proxies, each with the
power to appoint his or her substitute and to act alone, and authorizes them, or
either of them, to represent and to vote, as designated on the reverse side of
this card, all shares of Common Stock of Comdial Corporation held of record by
the undersigned on March 12, 1996, at the Annual Meeting of Stockholders to be
held on April 30, 1996, and at any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3
APPEARING ON THE REVERSE SIDE HEREOF
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<PAGE>
[REVERSE SIDE OF PROXY CARD]
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no directions to the contrary are indicated,
this proxy will be voted FOR Proposal 1, FOR Proposal 2, and FOR Proposal 3.
--------------------------- ----------------
ACCOUNT NUMBER COMMON
1. ELECTION OF DIRECTORS: Michael C. Henderson, Dianne C. Walker
FOR the nominees listed above [ ] WITHHOLD AUTHORITY [ ]
to vote for all nominees listed above
(Instruction: To withhold authority to vote for any individual nominee,
draw a line through that individual's name above)
2. APPROVAL OF AMENDMENT TO 1992 STOCK INCENTIVE PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF SELECTION OF DELOITTE & TOUCHE LLP as the Company's
independent auditors for the current year:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE MARK YOUR CHOICE
LIKE THIS [ ] IN BLUE OR BLACK INK.
Date -------------------------------------, 1996
--------------------------------------------------
Signature
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Signature, if held jointly
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate
name by President or other authorized officer. If
a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
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