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 27, 1999
TO THE STOCKHOLDERS OF
COMDIAL CORPORATION:
The Annual Meeting of Stockholders of Comdial Corporation, a Delaware
corporation (the "Company"), will be held on April 27, 1999, 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 three (3) persons to serve on the Board of Directors for
three-year terms expiring at the Annual Meeting of Stockholders to be held in
2002;
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 9, 1999,
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 COMPLETE, 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
March 25, 1999 Linda P. Falconer, Assistant Secretary
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
COMDIAL CORPORATION
APRIL 27, 1999
PROXY STATEMENT
GENERAL INFORMATION
The Annual Meeting of Stockholders of COMDIAL CORPORATION, a Delaware
corporation (the "Company"), will be held on April 27, 1999, 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. This Proxy Statement and the form of proxy are first being sent or
given to stockholders on or about March 25, 1999. The executive offices of the
Company are located at 1180 Seminole Trail, Charlottesville, Virginia 22901. The
mailing address for such offices is Post Office Box 7266, Charlottesville,
Virginia 22906-7266.
At the Annual Meeting, the stockholders will be asked to vote upon the
election of three nominees for director ("Proposal No. 1"). In addition, the
stockholders will be asked to ratify the Company's selection of the firm of
Deloitte & Touche LLP ("D&T") as 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 represented thereby will be voted in
accordance with the stockholder's specifications. If no directions to the
contrary are indicated, the persons named in the proxy will vote the shares
represented thereby "FOR" the election of each of the 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, the
persons named in the proxy may also vote in favor of a proposal to recess the
Annual Meeting and to reconvene it on a subsequent date 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 9, 1999
have the right to receive notice of and to vote at the Annual Meeting. As of
that date, 8,860,383 shares of Common Stock were outstanding. Each holder of
record of Common Stock is entitled to one vote per share on all matters voted
upon.
Presence in person or by proxy of the holders of 4,430,192 shares of
Common Stock will constitute a quorum at the Annual Meeting. Assuming a quorum
is present, the affirmative vote of a plurality of the shares of Common Stock
represented at the Annual Meeting will be required to elect a nominee for
director. The affirmative vote by the holders of a majority of the shares of
Common Stock represented at the Annual Meeting will be required to act on all
other matters to come before the Annual Meeting, including Proposal No. 2.
<PAGE>
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 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 marks the
"ABSTAIN" box on the proxy card, no favorable vote is cast and therefore the
abstention vote has the same as a vote against the proposal. 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 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.
In other words, 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 stockholders of which the Company has not received notice as of 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 Rules 14a-8 or 14a-9 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); 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 that are not set forth in the 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.
The Company will also request 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 the reasonable costs of forwarding
such material.
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<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 16, 1999, 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>
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004................................... 923,233 (3), (4) 10.4%
Merrill Lynch Special Value Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536.............................. 808,800 (3), (5) 9.1%
PacifiCorp Foundation
825 N. E. Multnomah Street, Suite 2000
Portland, Oregon 97232 ................................... 603,868 (6) 6.8%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401............................ 533,332 (3), (7) 6.0%
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, Wisconsin 53202................................. 500,000 (3), (8) 5.6%
Benson Associates, LLC
111 S.W. Fifth Avenue, Suite 2130
Portland, Oregon 97204..................................... 454,384 (3), (9) 5.2%
Robert P. Collins.......................................... 10,833 (10) *
Barbara Perrier Dreyer..................................... 10,833 (10) *
A. M. Gleason.............................................. 28,566 (11) *
Michael C. Henderson....................................... 12,500 (12) *
John W. Rosenblum.......................................... 22,500 (13) *
Dianne C. Walker........................................... 22,533 (14) *
Robert E. Spekman.......................................... 200 *
William G. Mustain......................................... 171,933 (15) 1.9%
Christian L. Becken....................................... 26,666 (16) *
William E. Porter.......................................... 12,557 (17) *
William C. Grover.......................................... 56,347 (18) *
Ove Villadsen.............................................. 59,642 (19) *
All directors and named executive officers
as a group (16 persons)................................. 509,330 (18) 4.6%
</TABLE>
* Less than one percent of the issued and outstanding shares of Common Stock.
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<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. Such amounts 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 16, 1999. 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 16, 1999, 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) Goldman, Sachs & Co. ("Goldman") is a broker-dealer registered under
Section 15 of the Securities Exchange Act of 1934, as amended (the
"Exhange Act") and an investment advisor registered under the
Investment Advisors Act of 1940, as amended (the "Investment Advisors
Act"). The Goldman Sachs Group, L.P. ("GS Group") is a parent holding
company of Goldman under the Exchange Act. Goldman and GS Group have
advised the company that they have shared dispositive power with
respect to 923,233 shares of the Company's Common Stock and shared
voting power with respect to 623,533 shares of the Company's Common
Stock. GS Group and Goldman each disclaim beneficial ownership of the
securities beneficially owned by (i) any client accounts with respect
to which Goldman or employees of Goldman have voting or investment
discretion, or both and (ii) certain investment entities, of which a
subsidiary of GS Group or Goldman is the general partner, managing
general partner or other manager, to the extent interests in such
entities are held by persons other than GS Group, Goldman or their
affiliates.
(5) Merrill Lynch & Co., Inc. ("MLC"), a parent holding company under the
Exchange Act, and Merrill Lynch Special Value Fund, Inc. ("ML Fund"),
an investment company registered under the Investment Company Act of
1940, have advised the Company that they have shared power to vote and
dispose of an aggregate 808,800 shares of the Company's Common Stock.
MLC and ML Fund disclaim beneficial ownership of such shares.
(6) PacifiCorp Foundation ("PCF") is an Oregon nonprofit corporation that
was incorporated on November 4, 1988. PCF was organized and is required
to be operated exclusively for charitable, religious, educational and
scientific purposes, and is exempt from federal income taxation under
Section 501(c)(3) of the Internal Revenue Code of 1986, as the same may
be amended from time to time. PCF is classified as a public benefit
corporation under Oregon law and has no members. Directors are elected
annually by the outgoing board of directors. At present, all of the
directors of PCF are officers of PacifiCorp or its affiliates.
PacifiCorp Credit, Inc. ("PCI"), a wholly-owned subsidiary of
PacifiCorp, owns 131,576 shares of common stock of the Company or 1.5%
of the outstanding Common Stock. Because PCI and PCF do not act as a
partnership, limited partnership, syndicate, or other group for the
purpose of acquiring, holding or disposing of securities of an issuer,
they are not a "group" within the meaning of Section 13(d)(3) of the
Exchange Act and, therefore, their ownership interests in the Company
have not been aggregated.
4
<PAGE>
(7) Dimensional Fund Advisors Inc. ("Dimensional") is an investment advisor
registered under the Investment Advisors Act. Dimensional furnishes
investment advice to four investment companies registered under the
Investment Company Act of 1940 and serves as investment manager to
certain other investment vehicles including commingled group trusts
(collectively, the "Portfolios"). In its role as investment advisor and
investment manager, Dimensional possesses both voting and dispostive
power over the shares of the Company's Common Stock that are owned by
the Portfolios. Dimensional disclaims beneficial ownership of all such
shares.
(8) Heartland Advisors, Inc. ("Heartland"), an investment advisor
registered under the Investment Advisors Act, has advised the Company
that it has sole power to vote and dispose of all 500,000 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, or 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.
(9) Benson Associates LLC ("Benson"), an investment advisor registered
under the Investment Advisors Act, has advised the Company that it has
sole power to vote and dispose of all 454,384 shares. Benson disclaims
ownership with respect to the shares held by it in a fiduciary
capacity.
(10) Includes 3,333 shares issuable upon the exercise of stock options. Also
includes 2,500 shares issued in February 1999 under the Company's 1992
Non-Employee Directors Stock Incentive Plan (the "Directors Plan") as a
result of the Company's net income for the fiscal year ended December
31, 1998.
(11) Includes 2,500 shares issued in February 1999 under the Directors Plan
as a result of the Company's net income for the fiscal year ended
December 31, 1998.
(12) Includes 3,334 shares of Common Stock issuable upon the exercise of
stock options. Also includes 5,000 shares issuable under the Directors
Plan which Mr. Henderson has deferred payment of by the Company. Mr.
Henderson has notified the Company that he does not desire to be
nominated for re-election to the Board of Directors.
(13) Includes 3,334 shares issuable upon the exercise of stock options. Also
includes 5,000 shares issuable to Mr. Rosenblum under the Directors
Plan which Mr. Rosenblum has deferred payment of by the Company.
(14) Includes 6,667 shares issuable upon the exercise of stock options. Also
includes 5,000 shares issuable to Ms. Walker under the Directors Plan
which Ms. Walker has deferred payment of by the Company.
(15) Includes 96,555 shares issuable upon the exercise of stock options and
9,000 shares purchased in open market transactions on August 27 and 31,
1998.
(16) Includes 16,666 shares issuable upon the exercise of stock options. Mr.
Becken resigned from the Company effective February 10, 1999.
(17) Mr. Porter resigned from the Company effective January 4, 1999.
(18) Includes 48,094 shares issuable upon the exercise of stock options and
4,200 shares purchased in open market transactions on August 28 and 31,
1998.
(19) Includes 53,442 shares issuable upon the exercise of stock options.
(20) Includes 274,937 shares issuable upon the exercise of stock options.
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 seven directors
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 three directors whose terms are expiring in 1999 are
Dianne C. Walker, Barbara Perrier Dreyer and Michael C. Henderson. Ms. Walker
and Ms. Dreyer have each been nominated for re-election as a director at the
Annual Meeting. Mr. Henderson notified the Company that he did not wish to be
nominated for re-election. Accordingly, Robert E. Spekman has been nominated for
election as a director at the annual meeting. If elected, each nominee shall
serve for a three-year term expiring at the Annual Meeting in 2002.
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 Ms. Walker, Ms. Dreyer and Mr.
Spekman. 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 2002:
DIANNE C. WALKER
Ms. Walker, age 42, 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 MicroAge, 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 Nominating
Committees.
BARBARA PERRIER DREYER
Ms. Dreyer, age 44, is the Senior Vice President and Chief Financial Officer of
Communications Systems Technology, Inc., a company which develops wide-area
audio and data conferencing systems and software, as well as audio/data
switching, classified signals analysis and remote radio control systems. From
1992 to 1996, she served as the President and founder of VideoGrafects, a
developer of multimedia software. From 1985 to 1993, she was the Chief Financial
Officer and special partner of New Enterprise Associates, a leading venture
capital firm. Ms. Dreyer presently serves as Treasurer of the International
Teleconferencing Association and is a director of Hayes Corporation. Ms. Dreyer
has served as a director since 1998 and is a member of the Compensation
Committee.
6
<PAGE>
ROBERT E. SPEKMAN
Mr. Spekman, age 51, is a Tayloe Murphy Professor of Business Administration at
the Darden Graduate School of Business Administration at the University of
Virginia. Mr. Spekman has taught at the Darden School since 1992 and has held
positions at the University of Southern California, where he was co-director of
the Center of Telecommunications Management, and the University of Maryland. His
expertise is in business-to-business marketing and organizational behavior. He
is also an active consultant to many Fortune 500 companies.
Members of the Board of Directors Continuing in Office
Terms Expiring in 2000:
A. M. GLEASON
Mr. Gleason, age 69, 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.
ROBERT P. COLLINS
Mr. Collins, age 60, is the former President and Chief Executive Officer of GE
Fanuc Automation, a joint venture between General Electric Co. and FANUC LTD of
Japan specializing in the development and manufacture of automation equipment.
Mr. Collins served in that position from 1987 until May 1998. During his tenure
with GE Fanuc Automation, Mr. Collins also served as Co-Chairman of the Board of
Directors of GE Fanuc Automation-Europe and Chairman of the Board of Directors
of GE Fanuc Eberle Automation and AFE Technologies-UK. Mr. Collins is also
chairman of the Board of Directors of Scott Technologies, Inc. which
manufactures aerospace electronics and oxygen products for health, safety and
aircraft application. Mr. Collins has served as a director of the Company since
1998 and is a member of the Audit Committee.
Members of the Board of Directors Continuing in Office
Terms Expiring in 2001:
WILLIAM G. MUSTAIN
Mr. Mustain, age 57, 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.
JOHN W. ROSENBLUM
Mr. Rosenblum, age 55, 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
7
<PAGE>
Chesapeake Corporation, Cadmus Communications Corporation, Cone Mills
Corporation and Grantham, Mayo, Van Otterloo & Company, LLC. Mr. Rosenblum has
served as a director of the Company since 1992 and is a member of the Audit and
Nominating Committees.
Board Meetings
The Board of Directors held five regularly scheduled meetings and two
special meetings in 1998. During 1998, 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 established Audit, Compensation and
Nominating Committees as well as certain other committees.
The Audit Committee held five meetings in 1998. 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 1998, the members of the Audit Committee included Ms. Walker (Chair), Mr.
Collins and Mr. Rosenblum.
The Compensation Committee held six meetings in 1998. 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 1998, the members of the Compensation Committee included
Mr. Gleason (Chair), Mr. Henderson and Ms. Dreyer.
The Nominating Committee held one meeting in 1998. During 1998, the
members of the Nominating Committee included Mr. Rosenblum (Chair), Mr. Gleason
and Ms. Walker. 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.
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<PAGE>
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 2000 should notify
the Company in the manner described above on or before December 2, 1999.
Compensation of Directors
During 1998, non-employee directors of the Company received a monthly
director's fee of $1,500.
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 3,333 shares of Common
Stock. The Directors Plan, as amended, further provides that, for each fiscal
year in which the Company has net income, each director then in office will
receive an automatic award of 3,333 shares of Common Stock in the following
year, unless the Board suspends all or any part of such award. In accordance
with the Directors Plan, effective January 1, 1996, 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.
At a meeting of the Board of Directors held on November 6, 1997, the
Board adopted an amendment to the Directors Plan which entitles any participant
in the Directors Plan to defer payment of all or any portion of (i) the shares
of the Company's Common Stock otherwise payable under the Directors Plan and
(ii) the cash amounts payable to any participant for his or her services
rendered as a director.
Because the Company had net income for fiscal 1998, each of Ms. Walker,
Ms. Dreyer and Messrs. Collins, Rosenblum, Gleason and Henderson were entitled
to an automatic award of 2,500 shares of the Company's Common Stock as of
February 16, 1999. Ms. Dreyer and Messrs. Collins and Gleason were each awarded
2,500 shares on February 16, 1999. Ms. Walker and Messrs. Rosenblum and
Henderson deferred payment of all 2,500 shares of the Company's Common Stock to
which they were entitled in accordance with the Directors Plan.
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.
9
<PAGE>
Mr. Mustain is the only Company employee who is a member of the Board
of Directors. He receives no additional compensation for serving as a director.
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 (57) Chairman, President, and *
Chief Executive Officer
William E. Porter (53) Executive Vice Mr. Porter became Executive Vice President in May
President 1997 and was responsible for long term business
development and strategic planning. Prior to his
appointment, he served as a director of the Company
beginning in July 1994. From January 1997 to May
1997, Mr. Porter was President of Interactive
Consumer Incorporated and held several executive
level positions at Trigon Corporation from May
1994 to January 1997. Mr. Porter resigned his
position with the Company effective January 4, 1999.
Christian L. Becken (45) Senior Vice President, Chief Mr. Becken became Senior Vice President and Chief
Financial Officer, Treasurer Financial Officer on December 1, 1997 and Treasurer
and Secretary and Secretary on April 28, 1998. Prior to his
appointment, from 1986 to 1996, Mr. Becken was Vice
President and Treasurer of Turner Broadcasting
System, Inc., a diversified media and entertainment
concern. Mr. Becken resigned his positions with
the Company effective February 10, 1999.
10
<PAGE>
<CAPTION>
POSITION BUSINESS EXPERIENCE
NAME AND AGE WITH THE COMPANY DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
Leigh Alexander (41) Senior Vice President Ms. Alexander became Senior Vice President on
December 7, 1998 and is responsible for Marketing.
Prior to her appointment, from 1996 to 1997, Ms.
Alexander was Senior Vice President, Marketing and
Strategic Planning for Paging Network, Inc., a
wireless messaging and paging company. From 1995 to
1996, she was Senior Vice President, Marketing, Sales
and Business Development for Philips Media, a
division of Philips Electronics, NV and a software
publisher and developer. From 1988 to 1995, Ms.
Alexander was Vice President of Marketing for Norelco
Consumer Products Company, a market leader in the
small electric appliance and personal care business.
Ove Villadsen (57) Senior Vice President Mr. Villadsen became Senior Vice President in May
1997. He has served as a Vice President of the
Company since May 1989. He was elected Vice
President of Comdial Business Communications
Corporation, a subsidiary of the Company, in
November 1982 and has been responsible for
Engineering for the Company or its predecessor
since 1980.
William C. Grover (59) Vice President Mr. Grover became a Vice President in September
1995 and is responsible for Sales. He has served
as President of Comdial Enterprise Systems, Inc., a
subsidiary of the Company, since 1993. 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 database and management
information systems and President of Sequoia
Systems, Inc., a manufacturer and distributor of
fault tolerant computer systems.
11
<PAGE>
<CAPTION>
POSITION BUSINESS EXPERIENCE
NAME AND AGE WITH THE COMPANY DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
Joe D. Ford (50) Vice President Mr. Ford became a 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. and General Dynamics Corporation.
Keith J. Johnstone (51) Vice President Mr. Johnstone became a 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 Manufacturing Systems.
Lawrence K. Tate (56) Vice President Mr. Tate became a 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.
</TABLE>
- --------------
* See "Election of Directors - Members of the Board of Directors
Continuing in Office Terms Expiring in 2001."
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, 1993
through December 31, 1998, 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
<TABLE>
<CAPTION>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Comdial Corporation 100.00 90.38 93.59 64.10 94.87 90.38
Customer Selected Stock List 100.00 69.73 113.36 114.85 157.27 159.40
NASDAQ Market Index 100.00 104.99 136.18 169.23 207.00 291.96
</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 (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. and Nortel Networks are also major
competitors of the Company, these two companies have been excluded from the peer
13
<PAGE>
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.
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.
Effective as of February 8, 1999, the Committee set the annual salary
of Mr. Mustain (the Company's President and Chief Executive Officer) at
$295,000, representing a 7.3% increase over Mr. Mustain's previous salary. This
increase was based upon the remuneration analysis described above in light of
the Company's performance.
14
<PAGE>
Annual Incentives. The Committee has established a formal plan for
awarding incentive compensation to officers. The plan accounts for the cost of
invested capital and is designed to focus the attention of the executive
officers on both income statement and balance sheet performance. The Committee
believes that the plan is 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 in recognition of achievement of the
Company's performance objectives in 1998, the Committee awarded an incentive
amount of $132,800 or 48.3% of his salary to Mr. Mustain. The Committee also
awarded incentive amounts to the Company's other executive officers which
equaled 35% of their respective aggregate base salary.
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 1998, 210 eligible employees were awarded stock options to
acquire a total of 398,650 shares of the Company's Common Stock. Except for Mr.
Becken who received 100,000 options when he joined the Company in December 1997,
all of the Company's executive officers were awarded stock options in 1998,
totaling 178,000 shares. In accordance with the formula, Mr. Mustain received
stock options to acquire 40,500 shares of the Company's Common Stock.
A. M. Gleason (Chair) Michael C. Henderson Barbara Perrier Dreyer
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
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 $100,000 (collectively, the "Named Executive
Officers").
<TABLE>
Summary Compensation Table:
<CAPTION>
LONG-TERM
COMPEN-
ANNUAL COMPENSATION(1) SATION
--------------------------- ---------
ALL OTHER
NAME AND OPTIONS COMPEN-
PRINCIPAL SALARY(2) BONUS GRANTED SATION(3)
POSITION YEAR ($) ($) (#) ($)
- --------------------------- ---- --------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
William G. Mustain 1998 282,502 132,800 40,500 2,500
President and Chief 1997 253,461 146,400 20,000 2,375
Executive Officer 1996 240,385 - 46,388 2,375
William E. Porter 1998 172,861 65,700 6,000 2,500
Executive Vice President 1997 100,038 (4) 48,100 25,000 981
Christian L. Becken 1998 174,931 79,700 - 2,500
Senior Vice President 1997 6,346 (5) - 100,000 -
Ove Villadsen 1998 164,615 61,800 8,500 2,500
Senior Vice President 1997 148,462 68,800 10,000 2,223
1996 138,461 - 14,339 2,375
William C. Grover 1998 174,231 65,700 - 2,500
Vice President 1997 161,054 (6) 71,200 10,000 2,268
1996 295,972 (7) - 16,545 2,375
</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 1998 have
been in effect since February 1998.
(3) 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.
(4) Mr. Porter joined the Company in May 1997.
16
<PAGE>
(5) Mr. Becken joined the Company in December 1997.
(6) Salary includes $36,824 in relocation expense reimbursement.
(7) Salary includes $118,126 in relocation expense reimbursement.
Stock Options
The Company has adopted the Comdial Corporation 1992 Stock Incentive
Plan (the "Stock Incentive Plan"). The Stock Incentive Plan is intended to
further the long-term stability and financial success of the Company by
attracting and retaining key employees through the use of stock incentives,
including stock options. The Company does not award stock appreciation rights
under the Stock Incentive Plan. The Company has reserved a total of 1,550,000
shares of Common Stock for issuance pursuant to incentive awards made under the
Stock Incentive Plan.
The following table sets forth additional information concerning
individual grants of stock options made under the Stock Incentive Plan during
the last completed fiscal year to each of the Named Executive Officers:
<TABLE>
Option Grants In Last Fiscal Year
<CAPTION>
POTENTIAL
REALIZED VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
- ------------------------------------------------------------------------------ -----------------------
% OF
TOTAL
OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED(2) IN FISCAL PRICE EXPIRATION 5% 10%
NAME (#) YEAR ($/SH) DATE ($) ($)
- ------------------------------------------------------------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
William G. Mustain 40,500 10.0% $10.94 2/2/08 $278,512 $705,929
William E. Porter 6,000 1.5% $10.94 2/2/08 $41,261 $104,582
Christian L. Becken - 0.0% - - - -
Ove Villadsen 8,500 2.1% $10.94 2/2/08 $58,453 $148,158
William C. Grover - 0.0% - - - -
</TABLE>
(1) The potential realized values in the table assume that the market price
of the Company's Common Stock appreciates in value from the date of
grant to the end of the option term at the annualized rates of five
percent and ten percent, respectively. The actual value, if any, an
executive may realize will depend on the excess, if any, of the stock
price over the exercise price on the date the option is exercised.
There is no assurance that the value realized by an executive will be
at or near the value estimated in the table.
(2) All options granted to the named officers were granted on February 2,
1998. One third of the options become exercisable on the first
anniversary of the grant date, another third become exercisable on the
17
<PAGE>
second anniversary of the grant date, and the balance become
exercisable on the third anniversary of the grant date. All of these
options were granted with an exercise price equal to the market price
of the Company's Common Stock on the grant date.
The following table sets forth information concerning each exercise of
stock options during the 1998 fiscal year by each of the named executive
officers and the fiscal year-end value of unexercised options, provided on an
aggregated basis:
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Unexercised Option Values
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY(2)
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED VALUE(1) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William G. Mustain 26,666 $883,512 60,925 / 69,297 $32,324 / $3,374
William E. Porter 3,558 $8,675 8,109 / 22,667 $15,792 / $38,551
Christian L. Becken - - 26,666 / 73,334 $28,130 / $112,520
Ove Villadsen 2,500 $162,952 42,496 / 19,947 $101,936 / $1,687
William C. Grover 1,000 $29,839 39,246 / 12,182 $22,553 / $1,687
</TABLE>
(1) The dollar values referred to in columns (C) and (E) are calculated by
determining the difference between the fair market value of the
securities underlying the options and the exercise price of the options
at exercise or fiscal year-end, respectively.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option.
Pension Plan
The Company has a pension plan covering hourly and salaried employees,
including the executive officers. The plan requires Company contributions for
tax-deferred pension accruals, with the amount of contribution actuarially
determined in order to fund for each participating employee a benefit based on
the two factors of career average compensation and years of service. For highly
compensated employees, such as the executive officers, the amount of benefit
under the pension plan is limited in order to qualify under Federal tax laws.
The following pension plan table shows estimated annual benefits payable upon
retirement at age 65 in specified compensation and years of service
classifications:
18
<PAGE>
<TABLE>
Pension Plan Table:
<CAPTION>
ESTIMATED ANNUAL BENEFITS PAYABLE BY THE
PLAN AT RETIREMENT WITH YEARS OF SERVICE INDICATED
REMUNERATION
($)
15 20 25 30 35
($) ($) ($) ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
100,000 26,983 35,977 44,971 53,965 62,959
125,000 34,108 45,477 56,846 68,215 79,584
150,000 41,233 54,977 68,721 82,465 96,209
175,000 42,373 56,497 70,621 84,745 98,869
200,000 42,373 56,497 70,621 84,745 98,869
225,000 42,373 56,497 70,621 84,745 98,869
250,000 42,373 56,497 70,621 84,745 98,869
</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, Porter, Becken, Grover and Villadsen, the
amounts set forth in the Summary Compensation Table under the headings "Salary"
and "Bonus" are covered by the plan. As of December 31, 1998, Messrs. Mustain,
Porter, Becken, Grover and Villadsen have eleven, one, one, five and eighteen
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 (as the same may be amended
from time to time, 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.
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)
19
<PAGE>
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.
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.
20
<PAGE>
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.
Certain Relationships and Related Transactions
Transactions with Management
During fiscal 1998, the Company paid Motivaction $314,053 for travel
and marketing services. Motivaction is a private company in which William Bryson
is the President and Chief Operating Officer and has a twenty-five percent
ownership interest. Mr. Bryson is the brother-in-law of William C. Grover, the
Company's Vice President of Sales.
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 $60,000,
the largest aggregate amount of such indebtedness during fiscal year 1998 and
the balance due the Company as of February 16, 1999. Each such loan is evidenced
by a non-interest bearing promissory note secured by a pledge of the officer's
shares of Company Common Stock and an assignment of the death benefit under his
Company group life insurance policy. All of the loans described herein are
accelerated and become immediately due and payable on termination of employment.
Indebtedness of Management
LARGEST AGGREGATE
AMOUNT OUTSTANDING DURING AMOUNT OUTSTANDING
NAME AND PRINCIPAL FISCAL YEAR 1998 AS OF FEBRUARY 16, 1999
POSITION ($) ($)
- --------------------------------------------------------------------------------
Lawrence K. Tate
Vice President $160,755 $155,642
21
<PAGE>
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,
1998, 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, 1999 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, 1998, 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.
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 1999 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 1999. 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.
22
<PAGE>
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion
in the proxy materials for the 2000 Annual Meeting of Stockholders must be
received by the Company no later than December 2, 1999. Any stockholder proposal
that is received later than February 7, 2000 will be deemed to be untimely.
For the Board of Directors
Linda P. Falconer, Assistant Secretary
Charlottesville, Virginia
March 25, 1999
THE COMPANY WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A COPY OF THE 1998
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND A
LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO INVESTOR RELATIONS, COMDIAL
CORPORATION, 1180 SEMINOLE TRAIL, P. O. BOX 7266, CHARLOTTESVILLE, VIRGINIA,
22906-7266.
23
<PAGE>
[FRONT OF PROXY CARD]
COMDIAL CORPORATION
Proxy for Annual Meeting of Stockholders
April 27, 1999
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 March 25, 1999, and appoints
William G. Mustain and Manfred Funke, 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 9, 1999, at the Annual Meeting of
Stockholders to be held on April 27, 1999, 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]
PLEASE MARK YOUR CHOICE
LIKE THIS |X| IN BLUE OR BLACK INK.
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.
1. ELECTION OF DIRECTORS: Dianne C. Walker, Barbara Perrier Dreyer and
Robert E. Spekman
FOR the nominees listed to the right [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the contrary to vote for all nominees listed
to the right
(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.
Date__________________________, 1999
------------------------------------
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.
