SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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) No fee required
( ) 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 29, 1997
TO THE STOCKHOLDERS OF
COMDIAL CORPORATION:
The Annual Meeting of Stockholders of Comdial Corporation, a Delaware
corporation (the "Company"), will be held on April 29, 1997, at 9:00 a.m.
Eastern Time, in the Customer Conference Center at Comdial Corporation, 1180
Seminole Trail, Charlottesville, Virginia 22901, 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
2000;
2. To ratify the selection of the firm of Deloitte & Touche LLP as the
Company's independent auditors for the current year; and
3. 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 11, 1997,
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
/s/ Wayne R. Wilver
April 1, 1997 Wayne R. Wilver, Secretary
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
COMDIAL CORPORATION
APRIL 29, 1997
---------------------------
PROXY STATEMENT
---------------------------
GENERAL INFORMATION
The Annual Meeting of Stockholders of COMDIAL CORPORATION, a Delaware
corporation (the "Company"), will be held on April 29, 1997, 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 stockholders on
or about April 1, 1997. 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"). 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. 2").
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.
Only stockholders of record at the close of business on March 11, 1997
have the right to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. As of that date, 8,592,866 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.
- 1 -
<PAGE>
Presence in person or by proxy of the holders of 4,296,434 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.
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 Proposal No. 2, 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, facsimile, 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.
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<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 7, 1997, 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>
<S> <C>
AMOUNT AND NATURE % OF CLASS
NAME OF PERSON OR OF BENEFICIAL (IF MORE
NUMBER OF PERSONS IN GROUP OWNERSHIP (1) THAN 1%) (2)
- ------------------------------------------------------------ ------------------------------------ ---------------------
PacifiCorp Credit, Inc.
825 N. E. Multnomah Street
Suite 775
Portland, Oregon 97232-2152 ............................... 907,169 (3), (4) 10.6%
Merrill Lynch Asset Management
800 Scudders Mill Road
Plainsboro, New Jersey 08536............................... 835,000 (5) 9.7%
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202.................................. 722,500 (3), (6) 7.0%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401............................. 508,732 (3), (7) 5.9%
A. M. Gleason............................................... 23,566 (8), (13) *
Michael C. Henderson........................................ 914,669 (9), (13) 10.7%
William E. Porter........................................... 10,833 (10), (13) *
John W. Rosenblum........................................... 17,500 (11), (13) *
Dianne C. Walker............................................ 20,866 (12), (13) *
William G. Mustain.......................................... 110,064 (14) 1.3%
Wayne R. Wilver............................................. 47,962 (15) *
William C. Grover........................................... 27,727 (16) *
Keith J. Johnstone.......................................... 17,323 (17) *
Ove Villadsen............................................... 35,471 (18) *
All directors and officers
as a group (12 persons).................................. 1,263,476 (19) 14.4%
- ----------------
* Less than one percent of the issued and outstanding shares of Common Stock.
</TABLE>
- 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 7, 1997. 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 which the individual has the right to acquire within 60
days after February 7, 1997, 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 Holdings, Inc., an affiliate of
PacifiCorp Credit, Inc. ("PCI") (also see notes 8 and 9). Mr. Henderson
disclaims beneficial ownership of the shares of Common Stock owned by
PCI.
(5) Merrill Lynch Asset Management, L.P. d/b/a Merrill Lynch Asset
Management ("MLAM") and Fund Asset Management, L.P. d/b/a Fund Asset
Management ("FAM"), each an investment advisor registered under the
Investment Advisors Act of 1940 and a wholly-owned subsidiary of
Merrill Lynch & Co., Inc., have advised the Company that they have
shared power to vote and dispose of all 835,000 shares. MLAM and FAM
act as discretionary investment advisors to several investment
companies registered under the Investment Company Act of 1940 as well
as private client accounts. Merrill Lynch Special Value Fund, Inc., a
FAM advised fund, holds 787,100 shares of the Company's Common Stock.
Merrill Lynch Global SmallCap Fund and Merrill Lynch Global SmallCap
Portfolio, a MLAM advised fund and a MLAM managed private offshore
entity, respectively, hold 38,300 shares and 9,600 shares,
respectively, of the Company's Common Stock.
(6) Heartland Advisors, Inc. ("Heartland"), an investment advisor
registered under the Investment Advisors Act of 1940, has advised the
Company that it had sole power to vote and dispose of all 722,500
shares. Heartland holds its shares in investment advisory accounts. As
a result, various persons have the right to receive or the power to
direct the receipt of dividends from, of the proceeds from the sale of,
the securities. The interests of one such account, Heartland Value
Fund, a series of Heartland Group, Inc., a registered investment
company, relate to more than five percent of the issued and outstanding
shares of the Company's Common Stock.
(7) Dimensional Fund Advisors Inc. ("Dimensional") is an investment advisor
registered under the Investment Advisors Act of 1940, as amended.
Dimensional is deemed to have beneficial ownership of 508,732 shares of
the Company's Common Stock as of December 31, 1996, all of which shares
are held in portfolios of DFA Investment Dimensions Group Inc. ("DFA
Fund"), a registered open-end investment company, or in series of The
DFA Investment Trust Company ("DFA Trust"), a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares. Dimensional has the sole power to dispose
or direct the disposition of all 508,732 shares. Dimensional has sole
voting power with respect to 291,999 shares. Persons who are officers
of Dimensional also serve as officers of DFA Fund and DFA Trust. These
persons vote 151,433 additional shares which are owned by DFA Fund and
65,300 shares which are owned by DFA Trust. No individual client of
Dimensional is known
- 4 -
<PAGE>
by the Company to be the holder of more than five percent of the issued
and outstanding shares of the Company's Common Stock.
(8) 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 9) to replace Mr. Gleason as its nominee on the
Board of Directors, effective as of the Annual Meeting held on April
27, 1995. Although he is no longer PCI's nominee, Mr. Gleason agreed to
remain a member of the Board of Directors. His term expires in 1997.
(9) 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 8). Mr. Henderson is President and Chief Executive Officer of
PacifiCorp Holdings, Inc., a holding company which owns Pacific
Telecom, Inc., Pacific Generation Company, Powercor, and PacifiCorp
Financial Services, Inc.
(10) Includes 3,334 shares issuable upon the exercise of stock options.
(11) Includes 3,334 shares issuable upon the exercise of stock options.
(12) Includes 6,667 shares issuable upon the exercise of stock options.
(13) Includes 2,500 shares issuable in February 1997 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, 1996.
(14) Includes 48,794 shares issuable upon the exercise of stock options.
(15) Includes 21,295 shares issuable upon the exercise of stock options.
(16) Includes 26,027 shares issuable upon the exercise of stock options.
(17) Includes 3,632 shares issuable upon the exercise of stock options.
(18) Includes 33,971 shares issuable upon the exercise of stock options.
(19) Includes 170,643 shares issuable upon the exercise of stock options and
907,169 shares beneficially owned by PCI (see note 5).
- 5 -
<PAGE>
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 1997 are A. M. Gleason
and William E. Porter. Messrs. Gleason and Porter have each 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 Messrs. Gleason and Porter.
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.
Nominees for Election to the Board of Directors
Terms Expiring in 2000
A. M. GLEASON
Mr. Gleason, age 67, 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. 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 51, is President of Interactive Consumer Incorporated, a
consulting firm specializing in customer-focused information strategies and
information planning. Between May 1994 and January 1997, Mr. Porter held several
positions at Trigon Blue Cross Blue Shield (formerly Blue Cross Blue Shield of
Virginia) including Senior Vice President, Strategic Planning and Vice President
- - Project Future. Between March 1992 and May 1994, Mr. Porter was a Vice
President of the Systems Integration 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.
- 6 -
<PAGE>
Members of the Board of Directors Continuing in Office
Terms Expiring in 1999:
MICHAEL C. HENDERSON
Mr. Henderson, age 50, is President and Chief Executive Officer of PacifiCorp
Holdings, Inc., a PacifiCorp subsidiary which owns Pacific Telecom, Inc.,
PacifiCorp Generation Company ("P.G."), 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 P.G., 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 40, 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
and Pension Committees of the Board of Directors.
Members of the Board of Directors Continuing in Office
Terms Expiring in 1998:
WILLIAM G. MUSTAIN
Mr. Mustain, age 55, 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 53, is the Dean of the Jepson School of Leadership Studies at
the University of Richmond. From 1993 to 1996, he was 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 Audit, Compensation and Pension
Committees of the Board of Directors.
- 7 -
<PAGE>
Board Meetings
The Board of Directors held four regularly scheduled meetings and four
special meetings in 1996. During 1996 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, Nominating,
and Pension Committees as well as certain other committees.
The Audit Committee held two meetings in 1996. Its principal functions
are to recommend to the Board of Directors the firm of independent auditors to
serve the Company each fiscal year and to review the plan and results of the
audit by the independent auditors as well as 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 1996, the members of the Audit Committee included Ms. Walker (Chair), Mr.
Henderson, and Mr. Rosenblum.
The Compensation Committee held three meetings in 1996. 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 13 of this
Proxy Statement. During 1996, the members of the Compensation Committee included
Messrs. Gleason (Chair), Porter, and Rosenblum.
The Nominating Committee held one meeting in 1996. During 1996, 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 date on
which the Company's Proxy Statement was 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 common stock of the Company that will be voted for each
proposed nominee and the number of shares of common 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,
- 8 -
<PAGE>
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 1998 should notify
the Company in the manner described above on or before December 2, 1997.
The Pension Committee held one meeting in 1996. During 1996, the
members of the Pension Committee included Mr. Rosenblum (Chair) , Ms. Walker,
Wayne R. Wilver, and Lawrence K. Tate. The principal function of the Pension
Committee is to oversee the Company's pension and retirement plans.
Compensation of Directors
Non-employee directors of the Company received a monthly director's fee
of $1,250 in 1996.
In addition, the Board of Directors, with the approval of the
stockholders, adopted the 1992 NonEmployee 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 has net income, each then director will receive an
automatic award of 3,333 shares of Common Stock in the following year .
At its regular meeting held on April 30, 1996, 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 3,333 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 833 of
the 3,333 shares automatically awarded to non-employee directors for fiscal
years in which the Company has net income, effective January 1, 1996.
Accordingly, directors Gleason, Porter, Henderson, Rosenblum, and Walker each
received an automatic award of 2,500 shares of Common Stock in February 1997, as
a result of net income reported by the Company for the fiscal year ended
December 31, 1996.
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>
William G. Mustain (55) Chairman, President, and Chief *
Executive Officer
Wayne R. Wilver (63) Senior Vice President, Mr. Wilver joined the Company in July
Chief Financial Officer, 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 (58) 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.
- 10 -
<PAGE>
<CAPTION>
POSITION BUSINESS EXPERIENCE
NAME AND AGE WITH THE COMPANY DURING PAST FIVE YEARS
- ----------------------------------- ------------------------------------ --------------------------------------------
Joe D. Ford (49) 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 (50) 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 the Company or
its predecessor since 1980, including
Director of Customer Service, Director
of Materials and Director of Manufac
turing Systems.
Lawrence K. Tate (54) 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 (56) 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.
- --------------
* See "Election of Directors - Members of the Board of Directors Continuing in Office Terms Expiring
in 1998."
</TABLE>
- 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.
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, 1991
through December 31, 1996, 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
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Comdial $100 $100 $742.86 $671.43 $695.24 $476.19
Peer $100 $228.12 $646.52 $449.69 $736.20 $747.08
Broad $100 $100.98 $121.13 $127.17 $164.96 $204.98
- 12 -
<PAGE>
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 (the "Nasdaq National
Market"). The Company's Common Stock is traded on the Nasdaq National Market.
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 Lucent Technologies, Inc. (formerly a division of AT&T) and Northern
Telecom Limited 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.
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 indexes, 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 business telephone systems and integrated computer and telephone systems
markets. 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
- 13 -
<PAGE>
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.
Effective as of February 10, 1997, the Committee set the annual salary
of Mr. Mustain (the Company's President and Chief Executive Officer) at
$255,000, representing a 4.1% increase over Mr. Mustain's previous salary. This
increase was based upon the remuneration analysis described above in light of
the Company's performance.
Annual Incentives. The Committee has established a formal plan for
awarding incentive compensation to officers. The plan consists of two equally
weighted and clearly defined objectives: cash flow and pretax 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. Early each year, the Committee sets the required levels for
each performance objective. The Company's actual performance for a year is then
measured against the predetermined levels to calculate annual incentive
payments, if any.
In line with this defined plan and the Company's performance in 1996,
the Committee did not award an annual incentive to Mr. Mustain or any other of
the Company's executive officers with respect to 1996.
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 with the input of the
independent consulting company.
During 1996, 198 eligible employees were awarded stock options to
acquire a total of 277,062 shares of the Company's Common Stock. All of the
Company's executive officers were awarded stock options in 1996, totaling
100,999 shares. In accordance with the formula, Mr. Mustain received stock
options to acquire 46,388 shares of the Company's Common Stock.
A. M. Gleason (Chair) William E. Porter John W. Rosenblum
- 14 -
<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
and (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 $100,000 (collectively, the "Named Executive
Officers").
Summary Compensation Table:
<TABLE>
<CAPTION>
LONG-
TERM
COMPEN-
ANNUAL COMPENSATION(1) SATION
--------------------------- ----------
ALL OTHER
NAME AND OPTIONS COMPEN-
PRINCIPAL SALARY(2) BONUS GRANTED SATION (4)
POSITION YEAR ($) ($) (#) (3) ($)
- --------------------------------- ------- ---------- ----------- ---------- -------------
<S> <C>
William G. Mustain 1996 240,385 - 46,388 2,375
President and Chief 1995 209,231 151,000 50,000 2,310
Executive Officer 1994 185,000 69,375 - 2,310
Wayne R. Wilver 1996 143,923 - 13,884 2,375
Senior Vice President and 1995 135,500 48,000 15,000 2,310
Chief Financial Officer 1994 124,231 18,850 6,667 2,174
William C. Grover 1996 295,972 (5) - 16,545 2,375
Senior Vice President 1995 161,000 24,000 18,267 2,310
1994 156,000 - - 2,310
Keith J. Johnstone 1996 105,000 - 3,564 2,292
Vice President 1995 104,038 37,000 3,667 1,962
1994 98,461 22,500 - 1,723
Ove Villadsen 1996 138,461 - 14,339 2,375
Vice President 1995 126,153 65,000 15,334 2,310
1994 108,461 28,875 3,334 1,898
</TABLE>
(1) While the Named Executive Officers 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 1996 have been
in effect since February 1996.
(3) Options granted prior to August 7, 1995 have been adjusted to reflect a
one-for-three reverse stock split.
- 15 -
<PAGE>
(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) Salary includes $118,126 in relocation expense reimbursement.
Stock Options
The Company has adopted the Comdial Corporation 1992 Stock Incentive
Plan (the "Stock Incentive Plan"). The Stock Incentive Plan is intended to
further the long-term stability and financial success of the Company by
attracting and retaining key employees through the use of stock incentives,
including stock options. The Company does not award stock appreciation rights
under the Stock Incentive Plan. The Company has reserved a total of 1,550,000
shares of Common Stock for issuance pursuant to incentive awards made under the
Stock Incentive Plan.
The following table sets forth additional information concerning
individual grants of stock options made under the Stock Incentive Plan during
the last completed fiscal year to each of the Named Executive Officers:
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
- ----------------------------------------------------------------------------------- ----------------------------
% OF
TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED(2) IN FISCAL PRICE EXPIRATION 5% 10%
NAME (#) YEAR ($/SH) DATE ($) ($)
- ------------------------- -------------- --------------- ----------- -------------- ------------- ---------------
<S> <C>
William G. Mustain 46,388 16.7% $9.38 2/6/06 $708,764 $1,128,588
Wayne R. Wilver 13,884 5.0% $9.38 2/6/06 $212,134 $337,788
William C. Grover 16,545 6.0% $9.38 2/6/06 $253,061 $402,957
Keith J. Johnstone 3,564 1.3% $9.38 2/6/06 $54,454 $86,710
Ove Villadsen 14,339 5.2% $9.38 2/6/06 $220,003 $350,318
</TABLE>
(1) The potential realized values in the table assume that the market price
of the Company's Common Stock appreciates in value from the date of
grant to the end of the option term at the annualized rates of five
percent and ten percent, respectively. The actual value, if any, an
executive may realize will depend on the excess, if any, of the stock
price over the exercise price on the date the option is exercised.
There is no assurance that the value realized by an executive will be
at or near the value estimated in the table.
(2) All options granted to the named officers were granted on February 6,
1996. One third of the options become exercisable on the first
anniversary of the grant date, another third become exercisable on the
second anniversary of the grant date, and the balance become
exercisable on the third anniversary of the
- 16 -
<PAGE>
grant date. All of these options were granted with an exercise price
equal to the market price of the Company's Common Stock on the grant
date.
The following table sets forth information concerning each exercise of
stock options during the 1996 fiscal year by each of the named executive
officers and the fiscal year-end value of unexercised options, provided on an
aggregated basis:
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Unexercised Option Values
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY(2)
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED VALUE(1) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------- ------------------ ------------------ ------------------------- -------------------------
<S> <C>
William G. Mustain 22,223 $213,119 16,666 / 79,722 $0 / $0
Wayne R. Wilver 4,445 $31,515 9,445 / 26,106 $0 / $0
William C. Grover - - 19,423 / 28,273 $933 / $0
Keith J. Johnstone - - 1,222 / 6,009 $0 / $0
Ove Villadsen 1,500 $7,545 22,969 / 25,674 $75,678 / $0
</TABLE>
(1) The dollar values referred to in columns (C) and (E) are calculated by
determining the difference between the fair market value of the
securities underlying the options and the exercise price of the options
at exercise or fiscal year-end, respectively.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option.
- 17 -
<PAGE>
Pension Plan
The Company has a pension plan covering hourly and salaried employees,
including the executive officers. The plan requires Company contributions for
tax-deferred pension accruals, with the amount of contribution actuarially
determined in order to fund for each participating employee a benefit based on
the two factors of career average compensation and years of service. For highly
compensated employees, such as the executive officers, the amount of benefit
under the pension plan is limited in order to qualify under Federal tax laws.
The following pension plan table shows estimated annual benefits payable upon
retirement at age 65 in specified compensation and years of service
classifications:
Pension Plan Table:
<TABLE>
<CAPTION>
<S> <C>
ESTIMATED ANNUAL BENEFITS PAYABLE BY THE
PLAN AT RETIREMENT WITH YEARS OF SERVICE INDICATED
REMUNERATION
($)
15 20 25 30 35
($) ($) ($) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------
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, 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, 1996, Messrs. Mustain,
Wilver, Grover, Johnstone, and Villadsen have nine, ten, three, fourteen, and
fourteen 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
- 18 -
<PAGE>
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.
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 willful failure of the Covered Executive
materially to perform his or her duties and responsibilities 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 harassment.
- 19 -
<PAGE>
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 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 $60,000,
the largest aggregate amount of such indebtedness during fiscal year 1996 and
the balance due the Company as of February 20, 1997. Each such loan is evidenced
by a non-interest bearing promissory note secured by a pledge of the officer's
shares of Company Common Stock and an assignment of the death benefit under his
Company group life insurance policy. All of the loans described herein are
accelerated and become immediately due and payable on termination of employment.
Indebtedness of Management
<TABLE>
<CAPTION>
<S> <C>
LARGEST AGGREGATE
AMOUNT OUTSTANDING DURING AMOUNT OUTSTANDING
NAME AND PRINCIPAL FISCAL YEAR 1996 AS OF FEBRUARY 20, 1997
POSITION ($) ($)
- ------------------------------------------------- -------------------------------- ---------------------------------
Lawrence K. Tate
Vice President $169,622 $164,967
</TABLE>
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
- 20 -
<PAGE>
Preferred Stock") to PCI in exchange for the cancellation of $8.5 million of the
Company's 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,
1996, 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
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, 1997 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, 1996, 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.
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<PAGE>
If 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 1997 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 1997. 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.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy materials for the 1998 Annual Meeting of Stockholders must be
received by the Company no later than December 2, 1997.
For the Board of Directors
/s/ Wayne R. Wilver
Wayne R. Wilver, Secretary
Charlottesville, Virginia
April 1, 1997
THE COMPANY WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A COPY OF THE
1996 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 29, 1997
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 1, 1997, 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 11, 1997, at the Annual Meeting of Stockholders to be
held on April 29, 1997, and at any adjournment thereof.
The Board of Directors Recommends a Vote FOR Proposals 1 and 2
appearing on the Reverse Side Hereof
<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 and FOR Proposal 2.
--------------------------- ----------------
ACCOUNT NUMBER COMMON
1. ELECTION OF DIRECTORS: A. M. Gleason, William E. Porter
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<S> <C>
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. RATIFICATION OF SELECTION OF DELOITTE & TOUCHE LLP as the Company's independent auditors for the current year:
FOR ( ) AGAINST ( ) ABSTAIN ( )
3. 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
----------------------------------------- , 1997
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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.
</TABLE>
