<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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COMDIAL CORPORATION
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 2000
To The Stockholders of
Comdial Corporation:
The Annual Meeting of Stockholders of Comdial Corporation, a Delaware
corporation (the "Company"), will be held on May 4, 2000, 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 one (1) person to serve on the Board of Directors for a three-
year term expiring at the Annual Meeting of Stockholders to be held in 2003;
2. To consider and vote upon a proposal to amend the Company's 1992 Stock
Incentive Plan to increase the number of shares of Common Stock authorized for
issuance under the plan from 1,550,000 to 2,050,000;
3. To ratify the selection of the firm of Deloitte & Touche LLP as the
Company's independent auditors for the current year; and
4. To transact such other business as may properly come before the meeting
or any continuation or adjournment thereof.
Only stockholders of record at the close of business on March 13, 2000,
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
April 10, 2000 Linda P. Falconer, Secretary
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
COMDIAL CORPORATION
MAY 4, 2000
---------------
PROXY STATEMENT
---------------
GENERAL INFORMATION
The Annual Meeting of Stockholders of COMDIAL CORPORATION, a Delaware
corporation (the "Company"), will be held on May 4, 2000, 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 April 10, 2000. 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 one nominee for director ("Proposal No. 1"). The stockholders will
also be asked to consider and vote upon a proposal to amend the Company's 1992
Stock Incentive Plan to increase the number of shares of Common Stock authorized
for issuance under the plan from 1,550,000 to 2,050,000 ("Proposal No. 2"). 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. 3").
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 the nominee 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 13, 2000 have
the right to receive notice of and to vote at the Annual Meeting. As of that
date, 9,193,116 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.
The presence in person or by proxy of the holders of fifty percent (50%)
plus one (1) 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
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elect the 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 Proposals No. 2 and No. 3.
With regard to Proposal No. 1, stockholders may vote in favor of the
nominee or withhold their votes as to the nominee. With respect to Proposals
No. 2 and No. 3, 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 marks the "ABSTAIN" box
on the proxy card, no favorable vote is cast and therefore the abstention vote
has the same effect 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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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 18, 2000, 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>
Benson Associates, LLC
111 SW Fifth Avenue, Suite 2130 739,642(3), (4) 8.05%
Portland, Oregon 97204
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor 656,383(3), (5) 7.14%
Santa Monica, California 90401
Goldman, Sachs Asset Management
32 Old Slip, 23rd Floor
New York, New York 10005 723,200(3), (6) 7.87%
Heartland Advisors, Inc.
789 North Water Street 664,000(3), (7) 7.22%
Milwaukee, Wisconsin 53202
Merrill Lynch Special Value Fund, Inc.
800 Scudders Mill Road 808,800(3), (8) 8.80%
Plainsboro, New Jersey 08536
Robert P. Collins 13,333(9) *
Barbara J. Dreyer 13,333(9) *
A. M. Gleason 31,066(10) *
William G. Mustain 209,066(11) 2.21%
John W. Rosenblum 25,000(12) *
Robert E. Spekman 6,733(9) *
Dianne C. Walker 25,032(13) *
Leigh Alexander 15,500(14) *
William C. Grover 61,797(15) *
Keith J. Johnstone 27,655(16) *
Ove Villadsen - *
All directors and named executive officers *
as a group (14 persons) 483,474(17) 5.11%
</TABLE>
* Less than one percent of the issued and outstanding shares of Common
Stock.
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(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 18, 2000. 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 18, 2000, 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) 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 739,642 shares. Benson disclaims ownership with
respect to the shares held by it in a fiduciary capacity.
(5) 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 dispositive power over the
shares of the Company's Common Stock that are owned by the Portfolios.
Dimensional disclaims beneficial ownership of all such shares.
(6) Goldman Sachs Asset Management, a separate operating division of Goldman,
Sachs & Co. (the "Asset Management Division") is an investment advisor
registered under the Investment Advisors Act of 1940, as amended (the
"Investment Advisors Act"). The Asset Management Group has advised the
Company that it has sole dispositive power of all 723,200 shares of the
Company's Common Stock and sole voting power with respect to 488,200 shares
of the Company's Common Stock. This does not reflect securities
beneficially owned by any other division of Goldman, Sachs & Co. The Asset
Management Division disclaims beneficial ownership of the securities
beneficially owned by (i) any client accounts with respect to which it or
its employees have voting or investment discretion, or both, and (ii)
certain investment entities, of which its affiliate is the general partner,
managing general partner or other manager, to the extent interests in such
entities are held by persons other than the Asset Management Division.
(7) Heartland Advisors, Inc. ("Heartland"), an investment advisor registered
under the Investment Advisors Act, has advised the Company that it has sole
voting power with respect to 80,700 share of the Company's Common Stock and
sole dispositive power of all 664,000 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.
(8) 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.
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(9) Includes 3,333 shares issuable upon the exercise of stock options. Also
includes 2,500 shares issued in February 2000 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, 1999.
(10) Includes 2,500 shares issued in February 2000 under the Directors Plan as a
result of the Company's net income for the fiscal year ended December 31,
1999.
(11) Includes 129,788 shares issuable upon the exercise of stock options.
(12) Includes 3,334 shares issuable upon the exercise of stock options. Also
includes 7,500 shares issuable to Mr. Rosenblum under the Directors Plan
which Mr. Rosenblum has deferred payment of by the Company.
(13) Includes 6,667 shares issuable upon the exercise of stock options. Also
includes 7,500 shares issuable to Ms. Walker under the Directors Plan which
Ms. Walker has deferred payment of by the Company.
(14) Includes 12,500 shares issuable upon the exercise of stock options.
(15) Includes 53,428 shares issuable upon the exercise of stock options.
(16) Includes 13,964 shares issuable upon the exercise of stock options.
(17) Includes 269,325 shares issuable upon the exercise of stock options.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
Nominee 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 two directors whose terms are expiring in 2000 are A. M. Gleason
and Robert P. Collins. Mr. Gleason will be retiring from the Board as of the
Annual Meeting. Pursuant to the Company's bylaws, the Board of Directors has
reduced the number of Directors from seven to six, to be effective upon the
conclusion of Mr. Gleason's term of office as a Director. Accordingly, the
number of vacancies in the class of directors whose term of office expires in
2003 will be one. Mr. Collins has been nominated for re-election as a director
at the Annual Meeting. If elected, the nominee shall serve for a three-year term
expiring at the Annual Meeting in 2003.
The remaining five directors will continue to serve as set forth below. In
the absence of instructions to the contrary, the proxy holders will vote the
proxies received by them for the election of Mr. Collins. Discretionary
authority is reserved to cast votes for the election of a substitute should the
nominee be unable or unwilling to serve as a director. The nominee has agreed
to serve as a director if elected and the Company believes that the nominee will
be available to serve.
The names and ages of the directors continuing in office and the nominee,
his principal occupation or employment during the past five years, and other
data regarding him is set forth below.
Nominee for Election to the Board of Directors
Term Expiring in 2003:
Robert P. Collins
Mr. Collins, age 61, 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
designs and manufactures air breathing and oxygen systems and instrument
products for health, safety and aircraft applications. 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 58, 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
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1964 to 1983, he held various engineering, marketing, and manufacturing
positions with General Electric Company. He is also a director of Martha
Jefferson Hospital. He has served as a director of the Company since 1989.
John W. Rosenblum
Mr. Rosenblum, age 56, 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 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.
Members of the Board of Directors Continuing in Office
Terms Expiring in 2002:
Dianne C. Walker
Ms. Walker, age 43, 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 J. Dreyer
Ms. Dreyer, age 45, is the Chief Operating Officer of SpeakOut.com, a web-site
for Internet activism providing news and feedback tools on the hot issues of the
day. From 1996 to 1999, she was 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 has served as a director since 1998
and is a member of the Compensation Committee.
Robert E. Spekman
Mr. Spekman, age 52, 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 and Management, and the University of Maryland.
His expertise is in business-to-business marketing, alliances and partnerships,
and organizational behavior. He is also an active consultant to many Fortune
500 companies. Mr. Spekman has served as a director since 1999 and is a member
of the Compensation Committee.
Board Meetings
The Board of Directors held four regularly scheduled meetings and eight
special meetings in 1999. During 1999, all directors attended at least 75% of
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the aggregate number of meetings of the Board of Directors and standing
Committees on which they served except for Mr. Spekman, who attended 73.3% of
such meetings.
Committees
The Board of Directors has established Audit, Compensation and Nominating
Committees as well as certain other committees.
The Audit Committee held three meetings in 1999. 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 1999, the members of the Audit Committee included Ms. Walker (Chair), Mr.
Collins and Mr. Rosenblum.
The Compensation Committee held six meetings in 1999. 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 1999, the members of the Compensation Committee
included Ms. Dreyer (Chair), Mr. Gleason, and Mr. Spekman.
The Nominating Committee held two meetings in 1999. During 1999, 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.
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.
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A stockholder interested in nominating a person for election as a director
at the Annual Meeting of Stockholders to be held in 2001 should notify the
Company in the manner described above on or before December 12, 2000.
Compensation of Directors
During 1999, 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 year 1999, each of Ms.
Walker, Ms. Dreyer and Messrs. Collins, Rosenblum, Gleason and Spekman were
entitled to an automatic award of 2,500 shares of the Company's Common Stock as
of February 15, 2000. Ms. Dreyer and Messrs. Collins, Gleason, and Spekman were
each awarded 2,500 shares on February 15, 2000. Ms. Walker and Mr. Rosenblum
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.
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.
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<TABLE>
<CAPTION>
Position Business Experience
Name and Age with the Company During Past Five Years
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
William G. Mustain (58) Chairman, President, and *
Chief Executive Officer
Leigh Alexander (42) Senior Vice President Ms. Alexander joined the Company as Senior
Vice President of Marketing in December 1998.
In January 2000, Ms. Alexander was appointed
President, Comdial Enterprise Solutions, Inc.
Prior to joining the Company, Ms. Alexander
was Senior Vice President, Marketing and
Strategic Planning for Paging Network, Inc., a
wireless messaging and paging company, from
1996 to 1998. From 1995 to 1996, she was
Senior Vice President, Marketing, Sales and
Business Development for Philips Media, a
division of Philips Electronics, and a
software developer and publisher. From 1988
to 1995, Ms. Alexander was Vice President of
Marketing for Norelco Consumer Products
Company, a division of Philips Electronics.
William C. Grover (60) Senior Vice President Mr. Grover became a Vice President in
September 1995. In January, 2000, Mr. Grover
was appointed President of Comdial Convergent
Communications. From 1993 to 1999, 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 database
and management information systems and
President of Sequoia Systems, Inc., a
manufacturer and distributor of fault tolerant
computer systems.
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C> <C>
Ove Villadsen (58) 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 was
responsible for Engineering for the Company or
its predecessor since 1980. Mr. Villadsen
retired from the Company on January 3, 2000.
John M. Baird (38) Vice President Mr. Baird became Vice President and Chief
Technology Officer on November 30, 1999 and is
responsible for Research. Prior to his
appointment, he served as Director of Business
Planning from February 1999 and as Managing
Director of Comdial Enterprise Systems, Inc.,
a subsidiary of the Company, from 1995 to
1999. From 1992 to 1995, Mr. Baird held
various engineering positions within Comdial
and Comdial Enterprise Systems, Inc.
Joe D. Ford (51) 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 (52) 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 (57) 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>
-12-
<PAGE>
- --------------
* 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.
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, 1994
through December 31, 1999, 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
[GRAPH]
12/30/94 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
Comdial 100 103.55 70.92 104.96 100 112.77
Peer Group 100 160.51 162.78 222.63 222.61 374.47
NASDAQ 100 129.71 161.18 197.16 278.08 490.46
ASSUMES $100 INVESTED ON JAN. 01, 1995
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1999
The Nasdaq Market Index tracks the aggregate price performance of equity
securities of companies traded on the National Association of Securities Dealers
-13-
<PAGE>
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
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.
-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 1999, the Committee awarded an incentive
amount of $52,510 or 17.8% of his salary to Mr. Mustain. The Committee also
awarded incentive amounts to the Company's other executive officers which
equaled 27.1% 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 1999, 207 eligible employees were awarded stock options to acquire a
total of 217,100 shares of the Company's Common Stock. Except for Ms. Alexander
who received 100,000 options when she joined the Company in December 1998, all
of the Company's executive officers were awarded stock options in 1999, totaling
67,300 shares. In accordance with the formula, Mr. Mustain received stock
options to acquire 39,200 shares of the Company's Common Stock.
Barbara J. Dreyer (Chair) A.M. Gleason Robert E. Spekman
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 $100,000 (collectively, the "Named Executive
Officers").
-15-
<PAGE>
Summary Compensation Table:
<TABLE>
<CAPTION>
Annual Long-Term
Compensation(1) Compensation
------------------------------------- ---------------
Name and 1999 Base Options All Other
Principal Salary(2) Bonus Granted Compensation(3)
Position Year ($) ($) (#) ($)
- --------------------------- -------- ----------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
William G. Mustain 1999 292,693 52,510 39,200 2,808
President and Chief 1998 282,502 132,800 40,500 2,500
Executive Officer 1997 253,461 146,400 20,000 2,375
Leigh Alexander 1999 215,207(4) 75,000 - -
Senior Vice President 1998 44,872(5) - 100,000 -
(hired December 7, 1998)
William C. Grover 1999 170,000 74,901 6,000 3,634
Senior Vice President 1998 174,231 65,700 - 2,500
1997 161,054(6) 71,200 10,000 2,268
Keith J. Johnstone 1999 133,269 43,365 4,200 4,157
Vice President 1998 123,077 34,800 5,000 2,415
1997 109,231 37,900 2,000 1,637
Ove Villadsen 1999 177,692 13,554 8,600 3,604
Senior Vice President 1998 164,615 61,800 8,500 2,500
1997 148,462 68,800 10,000 2,223
</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 1999 have been in
effect since February 1999.
(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) Salary includes $15,207 in relocation expense reimbursement.
(5) Salary includes $33,333 in relocation expense reimbursement.
(6) Salary includes $36,824 in relocation expense reimbursement.
-16-
<PAGE>
Stock Options
The Company has adopted the Comdial Corporation 1992 Stock Incentive Plan
(the "Stock Incentive Plan"). The Stock Incentive Plan is intended to further
the long-term stability and financial success of the Company by attracting and
retaining key employees through the use of stock incentives, including stock
options. The Company does not award stock appreciation rights under the Stock
Incentive Plan. The Company has reserved a total of 1,550,000 shares of Common
Stock for issuance pursuant to incentive awards made under the Stock Incentive
Plan. At its regular meeting on February 2, 2000, the Board approved an
amendment to the Stock Incentive Plan, subject to stockholder approval,
increasing the total number of shares reserved for issuance pursuant to
incentive awards made under the Stock Incentive Plan from 1,550,000 to
2,050,000. See "Proposal No. 2: Approval of Amendment to 1992 Stock Incentive
Plan."
The following table sets forth additional information concerning individual
grants of stock options made under the Stock Incentive Plan during the last
completed fiscal year to each of the Named Executive Officers:
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realized
Value at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option Term(1)
- ------------------------------------------------------------------------------------- --------------------------------
% of
Total
Options
Granted to Exercise
Options Employees or Base
Granted(2) in Fiscal Price Expiration 5% 10%
Name (#) Year ($/Sh) Date ($) ($)
- -------------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
William G. Mustain 39,200 17.78% $7.625 2/8/09 $187,977 $476,370
Leigh Alexander - 0% - - - -
William C. Grover 6,000 2.7% $7.625 2/8/09 $ 28,772 $ 72,914
Keith J. Johnstone 4,200 1.9% $7.625 2/8/09 $ 20,140 $ 51,040
Ove Villadsen 8,600 3.9% $7.625 2/8/09 $ 3,279 $ 6,588
</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 8, 1999.
One third of the options become exercisable on the first anniversary of the
grant date, another third become exercisable on the second anniversary of
the grant date, and the balance become exercisable on the third anniversary
of the grant date. All of these options were granted with an exercise
price equal to the market price of the Company's Common Stock on the grant
date.
-17-
<PAGE>
The following table sets forth information concerning each exercise of
stock options during the 1999 fiscal year by each of the named executive
officers and the fiscal year-end value of unexercised options, provided on an
aggregated basis:
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Unexercised Option Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money(2)
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value(1) Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William G. Mustain - $ 0.00 96,555/72,867 $101,146/$99,857
Leigh Alexander - $ 0.00 12,500/87,500 $19,538/$136,763
William C. Grover - $ 0.00 48,094/9,334 $ 51,246/$18,472
Keith J. Johnstone - $ 0.00 10,230/8,201 $ 12,766/$10,634
Ove Villadsen 2,800 $16,002 50,642/17,601 $123,955/$24,486
</TABLE>
(1) The dollar values referred to in columns (c) and (e) are calculated by
determining the difference between the fair market value of the securities
underlying the options and the exercise price of the options at exercise or
fiscal year-end, respectively.
(2) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise price of the option.
Pension Plan / Benefit Restoration Plan
The Company has a pension plan covering hourly and salaried employees,
including the executive officers. The plan requires Company contributions for
tax-deferred pension accruals, with the amount of contributions actuarially
determined in order to fund for each participating employee a benefit based on
the two factors of career average compensation and years of service. For highly
compensated employees, such as the executive officers, the amount of benefits
under the pension plan is limited in order to qualify under Federal tax laws.
To maintain compensation competitiveness and to restore retirement benefits for
executives who are affected by tax law limits on benefits under the pension
plan, the Company has a benefit restoration plan. Together the benefit
restoration plan and the pension plan provide benefits to employees affected by
tax law limits at approximately the same percentage of compensation as other
employees. The following pension plan table shows estimated annual benefits
payable from the pension plan and the benefit restoration plan upon retirement
at age 65 in specified compensation and years of service classifications:
-18-
<PAGE>
Pension Plan Table:
<TABLE>
<CAPTION>
Estimated Annual Benefits Payable by the
Plan at Retirement with Years of Service Indicated
----------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
($) ($) ($) ($) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
100,000 26,888 35,851 44,814 53,777 62,739
125,000 34,013 45,351 56,689 68,027 79,364
150,000 41,138 54,851 68,564 82,277 95,989
175,000 48,263 64,351 80,439 96,527 112,614
200,000 55,388 73,851 92,314 110,777 129,239
225,000 62,513 83,351 104,189 125,027 145,864
250,000 69,638 92,851 116,064 139,277 162,489
275,000 76,763 102,351 127,939 153,527 179,114
300,000 83,888 111,851 139,814 167,777 195,739
325,000 91,013 121,351 151,689 182,027 212,364
350,000 98,138 130,851 163,564 196,277 228,989
375,000 105,263 140,351 175,439 210,527 245,614
400,000 112,388 149,851 187,314 224,777 262,239
425,000 119,513 159,351 199,189 239,027 278,864
450,000 126,638 168,851 211,064 253,277 295,489
</TABLE>
Effective as of January 1, 1994, the pension 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 pension plan or in accordance
with applicable law. As to Messrs. Mustain, Grover, Villadsen and Johnstone and
Ms. Alexander, the amounts set forth in the Summary Compensation Table under the
headings "Salary" and "Bonus" are covered by the pension plan and benefit
restoration plan. As of December 31, 1999, Messrs. Mustain, Grover, Villadsen
and Johnstone and Ms. Alexander have twelve, six, nineteen, nineteen and one
year(s) 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.
Alternative Pension Plan Disclosure
Each executive named in the summary compensation table, except for Ms.
Alexander, is also eligible to receive supplemental retirement benefits under
the benefit restoration plan. The supplemental retirement benefit is equal to
40% (56% for Mr. Mustain) of the executive's average compensation reduced by the
sum of the executive's (1) pension plan benefit, (2) benefit restoration plan
amount, and (3) estimated social security benefit. Average compensation is the
average earnings (including elective deferrals) during the last 24 months of
employment decreased by any retention bonus paid on a change in control and any
income from restricted stock or stock options. The supplemental retirement
benefit is reduced by 0.25% for each month that the payment date precedes the
date the executive attains age 62.
-19-
<PAGE>
The estimated annual supplemental retirement benefits payable at age 62
are Mr. Mustain ($137,088); Mr. Villadsen ($31,188); Mr. Grover ($53,344); Mr.
Johnstone ($0); and Ms. Alexander ($0).
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) 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
-20-
<PAGE>
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.
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.
1999 Retention Bonus Program
If there is a "Change of Control" prior to July 1, 2000, the Company's
Senior Vice Presidents and Vice Presidents may be eligible for a retention bonus
under the 1999 Retention Bonus Program adopted by the Board of Directors as part
of the Executive Severance Plan. A covered executive will receive a retention
bonus if the covered executive (i) is employed by the Company for a period of
twelve months following the change of control, (ii) is terminated by the Company
other than for "Good Cause," or (iii) terminates employment for "Good Reason."
The retention bonus is a lump sum payment equal to 100% of the covered
executive's salary if the executive is a Senior Vice President before the change
of control or 75% of salary if the executive is a Vice President before the
change of control.
Certain Relationships and Related Transactions
Transactions with Management
During fiscal year 1999, the Company paid Motivaction $438,398 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, a Senior Vice President of the Company.
-21-
<PAGE>
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 $60,000,
the largest aggregate amount of such indebtedness during fiscal year 1999 and
the balance due the Company as of February 18, 2000. Each such loan is
evidenced by a non-interest bearing promissory note secured by a pledge of the
officer's shares of Company Common Stock and an assignment of the death benefit
under his Company group life insurance policy. All of the loans described
herein are accelerated and become immediately due and payable on termination of
employment.
Indebtedness of Management
<TABLE>
<CAPTION>
Largest Aggregate
Amount Outstanding During Amount Outstanding
Name and Principal Fiscal Year 1999 As of February 18, 2000
Position ($) ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lawrence K. Tate $155,922 -0-
Vice President (Note paid in full on
February 10, 2000)
</TABLE>
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.
During 1999, Robert E. Spekman failed to file on a timely basis one report
required by Section 16(a). The Form 5, "Annual Statement of Changes In
Beneficial Ownership," was actually sent to the Securities and Exchange
Commission on February 11, 2000 and was received by the National Association for
Securities Dealers, Inc. on February 13, 2000. The Form 5 provided that a
previously filed Form 3 failed to report 700 of the 900 shares owned when Mr.
Spekman became a director of the Company.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO 1992 STOCK INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
At the Annual Meeting, the stockholders are being asked to approve an
amendment to the Company's 1992 Stock Incentive Plan (the "1992 Plan"), to
increase the number of shares of Common Stock reserved for issuance thereunder
from 1,550,000 to 2,050,000. The adoption of the 1992 Plan was approved by the
Board of Directors in March 1992 and by the stockholders in April 1992. The
1992 Plan was amended in 1996 to increase the number of shares of Common Stock
reserved for issuance thereunder from 800,000 to 1,550,000. As of February 18,
2000, options to purchase an aggregate of 725,868 shares were outstanding and
148,237 shares (exclusive of the shares subject to stockholder approval at this
Annual Meeting) were available for future grant. In addition, as of such date
675,895 shares had been purchased pursuant to the exercise of stock options
granted under the 1992 Plan.
The 1992 Plan authorizes the Committee, appointed by the Board of
Directors to administer the 1992 Plan (the "Committee"), to grant stock options,
restricted stock awards, and other incentive stock awards to eligible employees
and consultants of the Company. The 1992 Plan is structured to allow the
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Committee broad discretion in creating equity incentives in order to assist the
Company in attracting, retaining and motivating the best available personnel for
the successful conduct of the Company's business. The Board of Directors
believes that the remaining shares available for grant under the 1992 Plan, as
amended in 1996, are insufficient to accomplish these purposes.
The Committee awards stock options to employees under the 1992 Plan as
a part of an employees' overall compensation package. Annual awards are
determined with reference to an independent consulting company's report of the
compensation paid by companies in the same or similar industries. Based upon
past experience, the Board of Directors currently expects that the 500,000
additional shares of Common Stock subject to stockholder approval at this Annual
Meeting will be sufficient to provide for option grants for approximately the
next three fiscal years.
The essential features of the 1992 Plan are outlined below.
Purpose. The 1992 Plan is intended to provide a means for selected
key professional and management employees of, and consultants providing service
for, the Company to increase their personal financial interest in the Company,
thereby stimulating their efforts on behalf of the Company and its stockholders
(references to the "Company" in this section will include any parent and
subsidiary corporations).
Administration. The 1992 Plan must be administered by a Committee
comprised of at least three directors of the Company who are not eligible to
participate in the 1992 Plan or any similar plan of the Company. The
Compensation Committee currently administers the 1992 Plan and will continue to
do so unless another committee is appointed by the Board. The Committee has the
power and complete discretion to determine when to grant incentive awards, which
eligible employees will receive incentive awards, whether the award will be an
option, restricted stock or incentive stock, and the number of shares to be
allocated to each incentive award. The Committee may impose conditions on the
exercise of options and upon the transfer of restricted stock received under the
Plan, and upon the right to receive incentive stock under the Plan, and may
impose such other restrictions and requirements as it may deem appropriate.
Eligibility. All present and future employees of the Company who hold
positions with management responsibilities are eligible to receive incentive
awards under the 1992 Plan. The Company estimates that it has approximately 180
such employees (seven of whom are officers). Consultants providing services for
the Company are also eligible to receive an incentive award.
Stock Options. Options to purchase shares of Common Stock granted
under the 1992 Plan may be "incentive stock options" or nonstatutory stock
options. Incentive stock options qualify for favorable income tax treatment
under Code Section 422, while nonstatutory stock options do not. The option
price of Common Stock covered by an incentive stock option may not be less than
100% (or, in the case of an incentive stock option granted to a 10% shareholder,
110%) of the fair market value of the Common Stock on the date of the option
grant. The option price of Common Stock covered by a nonstatutory option may
not be less than 85% of the fair market value of the Common Stock on the date of
the grant.
The value of incentive stock options, based on the exercise price,
that can be exercisable by a participant for the first time in any calendar year
under the 1992 Plan or any other similar plan maintained by the Company is
limited to $100,000.
Options may only be exercised at such time as may be specified by the
Committee, provided, however, that incentive stock options may not be exercised
after the first to occur of (1) ten years (or, in the case of an incentive stock
option granted to a 10% shareholder, five years) from the date on which the
incentive stock option was granted, (2) three months from the optionee's
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termination of employment with the Company for reasons other than death or
disability, or (3) one year from the optionee's termination of employment on
account of death or disability. The Committee may make options fully
exercisable upon a change in control as defined in the 1992 Plan.
An optionee exercising an option may pay the purchase price in cash
or, if the option so provides, by delivery or causing to be withheld from the
option shares, shares of Common Stock or by delivering an exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds form the option shares to pay the
exercise price.
Restricted Stock. Restricted stock issued pursuant to the Plan is
subject to the following general restrictions: (1) none of such shares may be
sold, assigned, transferred, pledged, or otherwise encumbered or disposed of
until the restrictions on such shares shall have lapsed or been removed under
the provisions of the Plan and (2) if a holder of restricted stock ceases to be
employed by the Company, he will forfeit any shares of restricted stock on which
the restrictions have not lapsed or been otherwise removed.
The Committee is authorized to establish as to each share of
restricted stock issued under the 1992 Plan the terms and conditions upon which
the restrictions on such shares shall lapse. Such terms and conditions may
include, without limitation, the lapsing of such restrictions at the end of a
specified period of time, as a result of the disability, death or retirement of
the participant. In addition, the committee may at any time, in its sole
discretion, accelerate the time at which any or all restrictions will lapse or
remove any and all such restrictions.
Incentive Stock. The Committee may establish performance programs
with fixed goals and designate key employees as eligible to receive incentive
stock if the goals are achieved. Incentive shares will only be issued in
accordance with the program established by the committee. More than one
performance program may be established by the Committee and they may operate
concurrently or for varied periods of time and a participant may participate in
more than one program at the same time. A participant who is eligible to
receive incentive stock has no rights as a shareholder until incentive shares
are received.
Transferability of Incentive Awards. No options, or the right to
receive incentive stock granted under the 1992 Plan, and during the applicable
period of restriction, no shares of restricted stock, may be sold, assigned,
transferred, pledged, or otherwise disposed of, other than by will or by the
laws of descent and distribution. All rights granted to a participant under the
1992 Plan are exercisable during the participant's lifetime only by such
participant, his guardians, or his legal representatives. Upon the death of a
participant, his or her personal representative or beneficiary may exercise the
participant's rights under the 1992 Plan.
Amendment of the 1992 Plan and Incentive Awards. The Board of
Directors is authorized to amend the 1992 Plan in such respects as it deems
advisable, provided that the stockholders of the Company must approve any
amendment that would (1) materially increase the benefits accruing to
participants under the 1992 Plan, (2) materially increase the number of shares
of Common Stock that may be issued under the 1992 Plan, or (3) materially modify
the requirements of eligibility for participation in the 1992 Plan. Incentive
awards granted under the 1992 Plan may be amended with the consent of the
recipient so long as the amended award is consistent with the terms of the Plan.
Federal Income Tax Consequences. An employee will not incur federal
income tax when he is granted a nonstatutory stock option, an incentive stock
option, or, in most cases and depending on the restrictions imposed, restricted
stock.
Upon exercise of a nonstatutory stock option, an employee generally
will recognize ordinary income, which is subject to income tax withholding by
the Company, equal to the difference between the fair market value of the Common
Stock on the date of the exercise and the option price. The Committee has
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authority under the 1992 Plan to include provisions allowing the employee to
elect to have a portion of the shares he would otherwise acquire upon exercise
of an option or stock appreciation right withheld to cover his tax liabilities.
The election will be effective only if approved by the Committee and made in
compliance with other requirements set forth in the Plan. When an employee
exercises an incentive stock option, he generally will not recognize income,
unless he is subject to the alternative minimum tax.
An employee may deliver shares of Common Stock instead of cash to
acquire shares under an incentive stock option or nonstatutory stock option,
without having to recognize taxable gain (except in some cases with respect to
statutory option stock) on any appreciation in value of the shares delivered.
Statutory option stock is stock acquired upon the exercise of incentive stock
options. If an employee delivers shares of statutory option stock in
satisfaction of all, or any part, of the exercise price under an incentive stock
option, and if the applicable holding periods of the statutory option stock have
not been met, he will be considered to have made a taxable disposition of the
statutory option stock.
In general, an employee who has received shares of restricted stock
will include in his gross income as compensation income an amount equal to the
fair market value of the shares of restricted stock at the time the restrictions
lapse or are removed. An employee who receives shares of incentive stock will
include in his gross income as compensation income an amount equal to the fair
market value of the shares of incentive stock on the date of the transfer to the
employee. Such amounts will be included in income in the tax year in which such
events occur. The income recognized may be subject to income tax withholding by
the Company.
The Company usually will be entitled to a business expense deduction
at the time and in the amount that the recipient of an incentive award
recognizes as ordinary compensation income in connection therewith. As stated
above, this usually occurs upon exercise of nonstatutory options when the
restrictions lapse or are removed from restricted stock and when incentive stock
is issued. Generally, the Company's deduction is contingent upon the Company's
meeting withholding tax requirements. No deduction is allowed in connection
with an incentive stock option, unless the employee disposes of Common Stock
received upon exercise in violation of the holdings period requirements.
This summary of Federal income tax consequences of nonstatutory stock
options, incentive stock options, restricted stock, and incentive stock does not
purport to be complete. There may also be state and local income taxes
applicable to these transactions.
PROPOSAL NO. 3
RATIFICATION OF THE SELECTION OF AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL
The Board of Directors, upon the recommendation of its Audit Committee, has
selected the firm of Deloitte & Touche LLP ("D&T") certified public accountants
and independent auditors, to serve the Company in those capacities for the year
ending December 31, 2000 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, 1999, 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
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difficulty in changing independent auditors after the beginning of a year, the
Board of Directors intends to allow the appointment for 2000 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 2000. 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 2001 ANNUAL MEETING
Any stockholder proposals to be considered by the Company for inclusion in
the proxy materials for the 2001 Annual Meeting of Stockholders must be received
by the Company no later than December 12, 2000. Any stockholder proposal that
is received later than February 25, 2001 will be deemed to be untimely.
For the Board of Directors
Linda P. Falconer, Secretary
Charlottesville, Virginia
April 10, 2000
THE COMPANY WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A COPY OF THE 1999
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.
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[FRONT OF PROXY CARD]
COMDIAL CORPORATION
Proxy for Annual Meeting of Stockholders
May 4, 2000
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 10, 2000, and appoints
William G. Mustain and Tara Y. Harrison, 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 13, 2000, at the Annual Meeting of
Stockholders to be held on May 4, 2000, and at any adjournment thereof.
The Board of Directors Recommends a Vote FOR Proposals 1, 2, and 3
appearing on the Reverse Side Hereof
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[REVERSE SIDE OF PROXY CARD]
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no directions to the contrary are
indicated, this proxy will be voted FOR Proposal 1, FOR Proposal 2, and FOR
Proposal 3.
___________________________ ________________
ACCOUNT NUMBER COMMON
1. ELECTION OF DIRECTOR: Robert P. Collins
FOR the nominee listed above [ ] WITHHOLD AUTHORITY [ ]
to vote for the nominee listed above
2. APPROVAL OF AMENDMENT TO 1992 STOCK INCENTIVE PLAN:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF SELECTION OF DELOITTE & TOUCHE LLP as the Company's
independent auditors for the current year:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE MARK YOUR CHOICE
LIKE THIS [ ] IN BLUE OR BLACK INK.
Date , 2000
Signature
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.
