Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Form 10-K 32 106K
2: EX-10.17 Third Amendment to the Comdial Corp 401(K) 1 7K
3: EX-10.19 Retirement Benefit Restoration Plan 10± 39K
4: EX-11 Computation of Earnings Per Common Share 1 8K
5: EX-13 Annual Report 33 175K
6: EX-23 Independent Auditors' Consent 1 6K
7: EX-24 Power of Attorney 6 17K
8: EX-27 Financial Data Schedule 1 7K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission file number: 0-9023
COMDIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 94-2443673
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
P. O. Box 7266
1180 Seminole Trail; Charlottesville, Virginia 22906-7266
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 978-2200
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
COMMON STOCK (Par Value $0.01 each)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 13, 2000, was approximately $150,859,000 (See Item 5).
The number of shares of Common Stock outstanding as of March 13, 2000, was
9,193,116.
DOCUMENTS INCORPORATED BY REFERENCE:
Comdial's 1999 Annual Report to the Stockholders is incorporated by
reference under Part II and portions of Comdial's Definitive Proxy Statement for
its 1999 Annual Meeting of Stockholders, which will be filed with the Securities
and Exchange Commission within 120 days after December 31, 1999, are
incorporated by reference under Part III of this Form 10K.
1
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TABLE OF CONTENTS
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Part I
Item 1. Business 4
(a) General Development of Business 4
Safe Harbor Statement 5
Industry Background 5
Strategy 9
(b) Financial Information About Industry Segment 11
Product Sales Information 12
(c) Narrative Description of Business 12
Products 12
Business Segment Products 12
Digital Systems 12
Solutions and Software 14
Analog and Other 17
Sales and Marketing 17
Engineering, Research and Development 19
Manufacturing and Quality Control 20
Competition 21
Intellectual Property 21
Year 2000 Issue 22
Employees 23
Item 2. Properties 23
Item 3. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of
Security Holders 24
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Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 25
Item 6. Selected Financial Data 25
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 25
Item 8. Financial Statements and Supplementary Data 25
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 25
2
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TABLE OF CONTENTS (Cont'd.)
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Part III
Item 10. Directors and Executive Officers
of the Registrant 26
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial
Owners and Management 26
Item 13. Certain Relationships and Related Transactions 26
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Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 27
3
PART I
ITEM 1. Business
(a) GENERAL DEVELOPMENT OF BUSINESS
Comdial Corporation (together with its subsidiaries, "Comdial") is a
Delaware corporation based in Charlottesville, Virginia. Comdial was originally
incorporated in Oregon in 1977 and was reincorporated in Delaware in 1982 when
it acquired General Dynamics Telephone Systems Center, Inc. (formerly known as
Stromberg-Carlson Telephone Systems, Inc.) a wholly-owned subsidiary of General
Dynamics Corporation. Comdial's Common Stock is traded in the National Market(R)
of the National Association of Security Dealers Automated Quotation System
("Nasdaq(R)") under Comdial's symbol, CMDL.
Comdial creates integrated communications solutions that incorporate
convergent voice and data technologies. These technologies include Comdial's
traditional strength in voice switching augmented by acquisitions and
partnerships in voice processing, voice-over the Internet, computer-telephone
integration ("CTI"), and on-site wireless communications .
Building on its base business of advanced digital switching systems for
small to mid-sized businesses, Comdial is actively engaged in creating specialty
applications which integrate voice/data solutions for specific vertical markets.
The Company plans to grow by continuing to ably serve its traditional customer
base while capitalizing on growth opportunities for integrated products within
these vertical markets.
In 1996, Comdial acquired Aurora Systems, Inc. ("Aurora") and Key Voice
Technologies, Inc. ("KVT"), two companies involved in computer software
applications and solutions which became wholly-owned subsidiaries of Comdial.
Based in Sarasota, Florida, KVT develops, assembles, markets, and sells voice
processing systems and related products for business applications. Aurora,
originally based in Acton, Massachusetts, was a leading provider of
off-the-shelf computer software products. In 1997, Aurora sold its right, title
and interest in the FastCall product, Aurora's primary asset, to Spanlink
Communications, Inc. (see Note 2 to the Consolidated Financial Statements). In
1998, Comdial acquired Array Telecom Inc. ("Array"). The principal asset
purchased was the intellectual property associated with VoIPgate software, an
Internet Protocol ("IP") based telephony software platform. With its
4
acquisitions for the past several years, Comdial has become a leading provider
of personal computer ("PC")-based voice processing systems and telephony
gateways for routing voice and fax communications over the private intranet and
the public internet.
Comdial's products accommodate businesses that require up to
approximately 500 ports. A port could be occupied by a telephone, facsimile
machine, modem, or similar device. Comdial has an installed base of
approximately 350,000 telephone systems and 3.7 million telephones. Comdial's
growth has been principally as a result of increased sales of digital telephone
systems and solutions and software products. Comdial's application software
encompasses a wide range of products that enable end-users to perform telephony
functions from desktop PCs or PCs served by a local area network ("LAN").
"Safe Harbor" Statement
Under the Private Securities Litigation Reform Act of 1995
Some of the statements included or incorporated by reference into
Comdial's Securities and Exchange Commission filings and shareholder
communications are forward-looking statements that are subject to risks and
uncertainties, including, but not limited to, the impact of competitive
products, product demand and market acceptance risks, reliance on key strategic
alliances, fluctuations in operating results, delays in development of highly
complex products, and other risks detailed from time to time in Comdial's
filings with the Securities and Exchange Commission. These risks could cause
Comdial's actual results for 2000 and beyond to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, Comdial.
Industry Background
Comdial's primary business and product offerings fall into three
categories: (1) voice switching systems for small to mid-size businesses, (2)
voice processing systems, and (3) integrated voice/data solutions that
incorporate voice switching and processing products with advanced computer
technologies and/or internet applications. All of these businesses are highly
competitive and are influenced by trends and events in technology, regulation,
and the general economy.
Voice Switching Systems
Comdial produces digital voice switching systems that are key/hybrid
systems and are the foundation of Comdial's Digital System business segment.
Historically, voice switching systems have been divided between key/hybrid
systems and Private Branch Exchanges ("PBXs"). Key/hybrid systems are typically
purchased by small to medium-sized businesses of three to 500 employees, while
5
larger businesses typically purchase PBXs. However, advances in the designs of
key/hybrid systems and PBXs in recent years has blurred the distinctions between
them. As key/hybrid systems continue to grow to accommodate more users with
increasing functionality, they have begun to encroach on the domain of the
traditional PBXs.
Voice switching systems are measured in terms of "ports." A port is an
access point on the switch to an outside line or terminal device. Examples of
terminal devices include telephones, facsimile machines, modems, and voice mail
ports. Examples of lines include standard business lines as well as higher speed
integrated services digital network (ISDN), digital transmission link (T-1), and
others. With the proliferation of modems, facsimile machines, and voice mail
devices, the demand for greater port capacity for key/hybrid systems has been
growing. A basic business telephone system consists of (a) a central telephone
switching unit, (b) telephone instruments, (c) associated wiring and connections
hardware, (d) system software, and (e) adjunct devices such as facsimile
machines and voice processing systems.
The domestic market for key/hybrid switching systems, as projected by a
leading industry consulting firm, is expected to grow by six percent from 1999
to 2000. Comdial ranks among the top six of industry participants. Significant
trends in this market are (1) the continuing growth of digital systems, (2) the
growing importance of larger systems (over 40 occupied station ports) relative
to smaller systems, and (3) the trend toward "open" systems that comply with
industry hardware and software standards. Open systems is a term used to
describe the ability to attach third party devices and software to an existing
system.
In 1992, Comdial began a transition from proprietary analog systems to
larger digital systems. That year, Comdial introduced the Digital Expandable
("DXP") switch. In 1994, the capacity of the DXP was expanded to 560 ports,
making it competitive with smaller PBXs and providing access to larger
businesses and organizations and the resellers that serve these larger
businesses. CTI connectivity was provided via proprietary software and
development tools that complied with the de facto industry standard of the time,
Telephony Server Application Programming Interface ("TSAPI").
In 1996, responding to growing market interest in CTI, Comdial introduced
connectivity software that integrated with a broader range of network operating
systems. In 1997, Comdial introduced Impact FX, a 96 port switch that allowed
software applications, such as voice processing, to be enabled electronically.
In 1998, the Impact FX was substantially enhanced to address a broader range of
6
applications (40 to 560 ports) and the design architecture modified to provide a
more cost-effective approach to expansion needs. New software applications were
created to provide even greater functionality.
In 1992, approximately 20 percent of Comdial's sales were attributable to
digital systems. In 1999, digital systems comprised 60 percent of Comdial's
sales and analog systems accounted for less than eight percent of sales.
In 1994, Comdial introduced its first wireless device, the Tracker, an
on-site paging system, followed by two-way wireless telephones, Scout and Air
Impact. The cost differential between wired and wireless telephones is declining
and the functionality of the wireless devices closely mimics full-featured desk
phones.
Voice switching systems is a mature business. The size of the market in
any given year is dependent on many factors, including employment growth, the
rate of new business formations and expansions, obsolescence, and new entrants.
During the 1990s, business conditions for switching systems have been generally
good, characterized by annual growth in excess of the general economy, few new
entrants, and moderate price decreases driven by lower material costs and
advances in technology.
Voice Processing
The ability to digitize analog voice signals gave rise to the voice
processing business in the 1980s. In the 1990s, the introduction of powerful
personal computers provided a platform to make voice processing affordable for
even small businesses.
Originally, the primary voice processing feature was "voice mail."
Callers could be automatically routed to the desired party and record detailed
messages if the called party was not immediately available. This alleviated
organizations from the cost of extensive operator and secretarial staff to
answer calls and take messages. Now, voice processing is much more robust.
Advances such as integrated voice response, voice/speech recognition,
notification via wireless devices, PC-based administration, "follow me"
features, and unified messaging have raised the popularity of voice processing.
Voice processing is almost ubiquitous in larger organizations. But even now,
less than half of smaller businesses have a modern voice processing system,
which presents an opportunity for continued sales growth.
7
Comdial's voice processing products are part of its Solutions and
Software business segment. Comdial entered the voice processing business in 1990
via an original equipment manufacturing ("OEM") agreement with a leading
producer of these products. Seeking more design control and increased
profitability, in 1996 Comdial acquired KVT, a small private producer of small
to mid-sized voice processing products. The association has worked well for
Comdial. Sales have grown sharply and overall gross margins have improved.
Products are sold to both resellers of Comdial switching products and to
resellers of competitive switching products. Special integration features have
been designed for a variety of popular switching systems.
After a very rapid growth spurt in the early 1990s, the voice processing
industry is entering a mature phase. The domestic market for voice processing
products, as projected by a leading industry consulting firm, is expected to
continue to grow by approximately 25 percent from 1999 to 2000. Voice processing
systems are also measured by "ports" but the term refers to the number of voice
processing calls that can be handled simultaneously. A 12-port system can
process 12 simultaneous calls, while a four port system can handle only four
calls at one time.
KVT products can provide up to 64 ports of voice processing capacity.
Most Comdial generated sales are in the two to eight port range, which
corresponds with the small to mid-size businesses which are Comdial's primary
markets. Industry shipments are measured both in terms of systems and ports.
Among PC-based systems, Comdial believes that KVT is an industry leader, ranking
second in terms of systems shipped.
In the third quarter of 1999, Comdial introduced a unified messaging system
combining voice mail, fax, and e-mail, called iNTerchange(TM). The system allows
the user to manage information by choosing the best way to respond to messages.
The system is scalable to 128 ports and integrates with over 100 different
telephone systems. The system is produced by Comdial's subsidiary, KVT.
Integrated Voice/Data Solutions
One of Comdial's Solutions and Software segment strengths is its design
control over four core technologies - voice switching, voice messaging, unified
messaging, and IP telephony. Comdial seeks to accelerate its sales and profit
growth by marketing integrated "solutions" which incorporate two or more of
these technologies via computer integrated software. The integration can be
completed by resellers, who have the technical skills to accomplish voice/data
8
integration at the user level, or by Comdial itself. A typical solution product
is an intelligent call center. With outbound call centers, predictive dialing
devices automatically generate outbound calls from the user's database. Answered
calls are instantly connected to an available agent (based on pre-determined
criteria), a data screen is "popped" providing a script, contract, or other
appropriate record, and the call is promptly processed with virtually no idle
time due to wrong numbers, unanswered calls, or misplaced paper files.
With inbound calls, Comdial's QuickQ ACD software intelligently answers
and routes the call to the appropriate agent, based on user-defined criteria,
such as availability and language skills. Appropriate records are automatically
produced on workstations, based on the identified calling number or user keypad
entries.
Additionally, Comdial has designed specialized solutions for certain
vertical markets. The Senior Housing systems offer integration with third party
alarm devices, such that elderly residents experiencing an emergency condition
can activate the device in their residence or on their person, sending a message
to wireless devices worn by on-site caregivers.
The size of the market for integrated solutions is unknown, but is
believed to be large because such solutions result in greatly improved customer
service and/or lower operating costs.
Array, a subsidiary of Comdial, is a producer of special software that
converts analog voice signals to IP data packets and routes the call over the
public Internet or private networks. The advantages of IP telephony are much
lower transmission costs and better utilization of network bandwidth. Array's
products are sold to new generation carriers, such as prepaid calling card
companies, and to private enterprises for off-loading intracompany voice and fax
transmissions to reduce costs. In 1999, Array released the Array Series 3000
line carrier class voice over IP gateway products. The Series 3000 provides
voice quality by incorporating the latest in jitter buffer management
technology. The system supports centralized deployment of IP telephony services
and offers built-in global routing software.
Strategy
Comdial seeks to expand sales and profits at acceptable risk levels by
implementing the following:
(1) leveraging expertise in core communications technology to develop and
introduce advanced solutions,
9
(2) pursuing development of the next generation communications platforms
and applications by leveraging expertise in Microsoft Windows(R),
(3) developing integrated solutions for fast-growing vertical markets,
(4) expanding its channels of distribution and methods of product delivery
to both markets, and
(5) increasing direct sales through national account programs with large
end-users and vertical market accounts.
Product Offerings
Comdial currently offers digital and analog business telephone systems,
wired and wireless terminals, computer and telephony software applications,
voice processing systems, IP gateways, and other products along with a variety
of product enhancements. Comdial believes that it offers a wider range of
products than most of its competitors and that this variety allows dealers to
meet differing price and feature requirements. Comdial strives to introduce new
products to meet the needs of a changing market.
Product Development
Comdial's recent sales and profit growth are largely attributable to
customer acceptance of its Digital Systems and Solutions and Software products.
Comdial's system products are sold under the Impact and Impression brands that
serve customer applications from 24 to 560 ports. In 1999, Comdial introduced
important enhancements such as IP telephony and a Unified Messaging System that
combines voice mail, fax, and e-mail. Comdial intends to continue to add value
to its core digital switching products such as the Concierge hospitality
product. Comdial introduced various new features that the Concierge system now
offers such as wireless telephones and call costing.
Comdial believes that in order to maximize profitability in the emerging
markets for integrated solutions, it must continue to develop and market
higher-value applications for software and switching platforms. Comdial's Impact
and Impact FXS Series digital switching platforms will form the basis for these
solutions, augmented by software developed by Comdial's subsidiaries, (Array,
Comdial Enterprises Systems, Inc., and KVT), and applications software from
third parties.
Comdial also intends to continue to leverage the engineering and
marketing skills of KVT to produce powerful, easy-to-use voice processing
products that are tightly integrated with its switching products.
10
Product Distribution
Comdial focuses its distribution of products primarily through
independent dealers that resell Comdial's products to end users. These dealers
enable Comdial to achieve broad geographic coverage in a cost effective manner.
Comdial's primary means of distribution is through a key group of wholesale
supply houses, which stock Comdial's products and resell to independent dealers.
Comdial's strategy of selling through wholesale supply houses enables it to
minimize receivables exposure, reduce sales administration expenses and reduce
inventory costs. Most importantly, the use of supply houses allows Comdial to
extend product distribution to virtually any market in the United States
("U.S.") and Canada. Wholesale supply houses benefit from their relationship
with Comdial by earning a margin on the sale of Comdial's products and on the
sale of related products such as cable, connectors, and installation tools.
Dealers have the benefits of competitive sourcing and reduced inventory carrying
costs.
In addition to supply house distribution, Comdial also markets its
products directly to national accounts, third party system developers, OEM
customers, and the federal government via its Government Services Administration
("GSA") schedule contract. National accounts are Comdial's direct sales through
vertical markets such as senior housing, hospitality, and new real estate.
Products produced by KVT are sold both through the supply house channel and
direct to dealers. Array products are sold to private carriers, both in the U.S.
and abroad.
Strategic Alliances
Comdial has developed strategic alliances with other companies in order
to build on the strengths of these companies and bring the best possible
products to the market at a lower cost. Examples include the Scout wireless key
system telephone (Uniden America Corporation), and the VVP and Small Office
voice processing systems (Rhetorex and Dialogic).
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENT
During the fiscal years ended December 31, 1999, 1998 and 1997,
substantially all of Comdial's sales, net income, and identifiable net assets
were attributable to the telecommunications industry. Additional information is
incorporated by reference to Comdial's 1999 Annual Report to Stockholders.
11
Product Sales Information
The following table presents certain relevant information concerning
Comdial's business segments for the periods indicated:
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Years Ended December 31,
(In thousands) 1999 1998 1997
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Business Segment Sales:
Digital Systems $88,479 $80,452 $70,181
Solutions and Software 48,713 36,194 31,625
Analog and Other 10,768 12,331 16,755
-------- -------- --------
Net Sales $147,960 $128,977 $118,561
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(c) NARRATIVE DESCRIPTION OF BUSINESS
Products
Comdial offers a variety of telephone systems, including Digital
Systems, Solutions and Software applications, and Analog and Other products. For
further clarification of Comdial's business segments see Note 12 to the
Consolidated Financial Statements.
Comdial's telecommunications products meet the requirements of three
agencies: (1) the Federal Communications Commission ("FCC"), (2) an independent
laboratory approved by the Occupational Safety and Health Act Commission
("OSHA") to produce safety standards, and (3) a nationally recognized test
laboratory that performs product evaluations. Selected products are also
registered with the Canadian government's Industry Canadian and are Canadian
safety certified. Comdial has or is in the process of homologating certain of
its products for use in certain other countries.
Business Segment Products
Digital Systems
Impact FX Computer Telephony Applications Server ("FX") is Comdial's
most recent switching platform and was introduced in 1997. The FX is expandable
to 560 ports. The FX differs from Comdial's other switching platforms in that it
is more "open" and more software-intensive. Voice processing, for example, is
available in the core software, whereas it is a hardware option with other
company systems. The FX is designed to popular industry standards, which makes
the FX amenable to customization by Comdial and by third party integrators.
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Impact DXP system, originally introduced in 1992, has had several major
upgrades since then. There are various Impact DXP Systems: Impact 224 and Impact
560. The numeric suffix denotes the maximum number of ports served by the base
switch, without need for any product displacement. The switching platform for
the Impact 224, when unassociated with terminals, is identified as the DXP. The
switching platform for the Impact 560, when unassociated with terminals, is
identified as the DXP Plus.
Impact Telephones were introduced in 1992. These terminals offer a
variety of features, including an interactive liquid crystal display ("LCD"),
programmable feature keys, three color lighted status indicators, and subdued
off-hook voice announce for receiving intercom calls while on a telephone call.
The phones are offered in a variety of models, distinguished by the number of
programmable buttons, the presence or absence of a display, and the presence or
absence of a speakerphone.
Impact SCS was introduced in 1997. Impact SCS retains many of the
current features of the original Impact telephone models but with a different
physical design and distinguishing features such as a full-duplex speakerphone
model, simultaneous voice and data, large screen display and adjustable viewing
angle.
Impression, introduced in 1996, is a brand name denoting certain digital
telephone instruments and digital systems when the systems are installed with
digital switches. The Impression telephones are similar to the original Impact
telephones in terms of functionality and number of models offered. However, the
physical design is quite different. Four Impression systems are offered:
Impression 24, Impression 48, Impression 72, and Impression 224.
Air Impact, introduced in 1997, is a multi-cell wireless communications
product for use with Comdial's (and other manufacturers') switching systems. It
is designed for use within large buildings where employees are often away from
their desk phones. Air Impact operates over a 1.9 Gigahertz personal
communications services ("PCS") band.
Scout, introduced in 1995, is Comdial's 900 megahertz single cell
wireless, multi-line feature phone. Scout extends the advantage of mobility to
users of Impact systems. Like Air Impact, Scout is designed for in-building
applications.
Tracker, introduced in 1994, is an on-site integrated paging system
developed in cooperation with Motorola. The purpose of this product is to help
ensure that calls are quickly and efficiently completed to individuals who are
at work, but not always near their telephones. Tracker, which operates on
Comdial's digital telephone systems, includes a Tracker base station and
personal pagers equipped with a LCD. The personal pagers sound an alert or
vibrate to notify users of incoming calls or important messages. A user can
13
retrieve calls by going to the nearest system phone and dialing a special code
that is displayed on the LCD. A valuable feature of Tracker is its compatibility
with other products manufactured by Comdial. In 1997, Comdial enhanced the basic
Tracker product with an applications software package called QuikTrak. QuikTrak
extends text-messaging capability to PC users on a local area network. Brief
messages can be originated by selecting the Tracker pager user from a Windows
screen, typing the message, and clicking on the "Track" command.
Solutions and Software
Concierge, introduced in 1996, is a digital telephone system designed
for hospitality applications. The system consists of an Impact 224 or Impact 560
digital switch, multi-line administration telephones, and special hospitality
software. The single-line guest telephones used with the Concierge are not sold
by Comdial. The system is linked to a personal computer via Comdial's Enterprise
software, and allows hotel personnel to administer guest check-in/check-out and
other hotel activities from the PC or specially programmed Impact LCD
telephones. Concierge serves hotel properties up to approximately 400 rooms.
Avalon, introduced in 1998, is the first communications systems designed
specifically for assisted living communities. Avalon integrates a Comdial DXP
digital switch system and telephones, wireless communications devices, wired and
wireless alerting devices, and custom software. Avalon provides basic
telecommunications service to residents and staff, but its most important
advantage is to allow elderly residents to alert on-site caregivers of the name
and location of an alarm condition. Should a resident activate a compatible
in-room alerting device (such as a pull cord), dial "911," or take certain other
actions indicating an alarm condition, messages are transmitted from the Avalon
system to the displays of pagers or wireless phones carried by caregivers.
Computer records of the emergency alert and response are also generated. Avalon
is an example of Comdial's focus on integrated solutions for vertical markets.
VVP (Versatile Voice Processing), introduced in 1996, is the trade name
of a PC-based voice processing system produced by KVT and sold by Comdial. The
same product is sold as Corporate Office by KVT to its own dealer network. Both
products provide all standard voice processing features such as auto attendant,
voice store and forward, multiple greetings, and individual voice mail boxes.
Advanced features such as fax tone detection, audio text (interactive response
to user touch-tone commands), and visual call management (the ability to view
14
voice messages from a PC) are also available. VVP can be integrated with
Comdial's digital telephone systems so that display messages on LCD terminals
prompt user operations. KVT offers similar integration packages for telephone
systems made by other companies. VVP and Corporate Office are offered in 4 to 16
port configurations. Voice storage capacity is virtually unlimited - an
advantage of PC-based design.
Small Office, introduced in 1996, is a smaller and more economical
version of VVP/Corporate Office, which is also produced by KVT and sold through
both Comdial's and KVT's dealer networks. Small Office offers basically the same
features as the larger model, but is designed for smaller enterprises. Maximum
capacity is four ports (four simultaneous calls) and 100 mailboxes.
Small Office Lite was introduced in 1997. Small Office Lite voice
processing system features the latest advances in communications technology
specially streamlined to fit the needs of small businesses. With Comdial's Small
Office Lite, even small businesses can take advantage of a voice-processing
feature set that is state-of-the-art, but also affordable. In addition to
automated attendant functionality, Small Office Lite allows users to personalize
their individual mailboxes with custom greetings.
VVP-NT and Small Office-NT were introduced in 1998. They are
user-friendly voice mail systems, with a proven design, that are easy to
establish and maintain. Each system accommodates a different number of users and
is built on a Windows NT(R) operating system platform. In addition, enhanced
graphical screens let system supervisors quickly adjust user information and
retrieve vital call processing data.
Debut was introduced in 1998 to meet the needs of small businesses
seeking basic voice processing capabilities at an attractive price.
INTerchange(TM) is a unified messaging system which was introduced in
the third quarter of 1999. This system was specifically designed to meet small
and large company's needs. It is a new Windows NT(TM) based unified messaging
system that fits into any office LAN and combines voice mail, fax and e-mail
capabilities. The system provides a way to better prioritize messages with more
efficient alternatives for receiving and responding to each type of electronic
messaging.
15
Ctvoice was introduced in 1998. Ctvoice gives organizations an IP
telephony gateway that provides high-quality, real-time voice and fax
communications over any IP network, including the public Internet and private
intranets. Ctvoice is provided by Comdial's subsidiary Array which was acquired
in 1998.
VoIPgate is the brand name for carrier-class IP gateways produced by
Comdial's subsidiary Array. VoIPgate interfaces with standard analog lines,
ISDN, and T-1. VoIPgate provides a broad range of network management features
and is compliant with popular industry standards.
Series 3000, introduced by Comdial's subsidiary Array, was released for
production in the third quarter of 1999. The Series 3000 IP gateway product is a
completely modular system that offers scalability from two to thousands of
ports. Its built in multi-lingual voice response (IVR) supports an infinite
number of multi-language voice prompts customizable by the end user.
Enterprise, introduced in 1993, is Comdial's open applications interface
("OAI") software developer's tool kit. Enterprise allows independent software
developers to access the Impact, DXP, DXP Plus, or FX system software using more
than 190 commands. These tools allow Comdial to create unique applications for
specific vertical markets, such as telemarketing groups, emergency services,
call centers, taxi services, and multi-media centers.
PCIU (PC Interface Unit), introduced in 1997, is an affordable
hardware/software solution that extends computer integration across all of
Comdial's digital switches, via the broadly accepted Telephone Application
Programming Interface ("TAPI") standard. The hardware component is a black box
with multiple connectors for a digital port off the switch, Comdial's digital
display telephone, a PC serial port, and electric power.
QuickQ ACD, introduced in 1994, is an automatic call distributor
("ACD"), designed for call center use. The system consists of an Impact 224,
Impact 560, or Impact FX digital switch, voice announcing equipment, special
automatic call distribution software, and a PC. The QuickQ answers and
distributes incoming calls rapidly and efficiently, helping to assure maximum
call center productivity and superior customer response levels.
16
Analog and Other
Unisyn, introduced in 1994, is a telephone system designed to offer
advanced features to small organizations. Two models are offered. One model
supports up to three lines and eight telephones, and the other supports up to
six lines and 16 telephones. Display model telephones offer interactive function
keys to simplify feature access. Another capability of Unisyn is its optional
compatibility with standard analog devices, such as single-line telephones, fax
machines, and modems.
ExecuTech XE Key Systems, introduced in 1989, can support up to 10 lines
and 24 telephones. All systems support the same family of full-featured
telephones. The switch is a unitized self-contained unit, making the ExecuTech
XE Key System economical to manufacture, easy to install, and beneficial to end
users who do not have to buy additional components to add features. This product
was discontinued in the fourth quarter of 1999.
Other products included in the Analog and Other business segment are ATC
Terminals, Maxplus, Solo II, Voice Express, and Custom Manufacturing. In 1998,
the Maxplus product was discontinued, and in 1999, Solo II and Voice Express
were discontinued. Comdial will continue to provide support for these products
pertaining to warranty claims and replacements.
Sales and Marketing
Comdial markets its products through both direct and indirect channels.
Indirect channels include both two-tiered and three-tiered distribution.
Comdial's primary channel of distribution to U.S. and Canadian markets is
through nine major wholesale supply houses, which in turn, resell to hundreds of
independent dealers. International sales are accomplished through a network of
international dealers. International dealers buy directly from Comdial, normally
by letters of credit, and resell to end users or other dealers.
Three supply houses each account for more than 10% of Comdial's net
sales. These are ALLTEL Supply, Inc. ("ALLTEL"), Graybar Electric Company, Inc.
("Graybar"), and Sprint/North Supply, Inc. ("North Supply"). In 1999, net sales
to ALLTEL, Graybar, and North Supply amounted to approximately $24.4 million
(16%), $34.8 million (24%), and $25.3 million (17%), respectively.
Comdial has established four classes of dealers that purchase Comdial's
products from supply houses and resell to end users. These are Platinum
Preferred, Preferred Gold, Preferred, and Associate Dealers. Comdial offers an
attractive incentive package for Platinum Preferred, Preferred Gold, and
Preferred Dealers, including exclusive access to certain products, cash rebates
17
related to dealer purchase levels, cooperative advertising allowances, a measure
of territorial protection, toll free assistance, and training. Platinum
Preferred, Preferred Gold, and Preferred Dealers have sales quotas, and
Comdial's sales department monitors their performance against these targets.
Associate Dealers purchase Comdial's products on an as-needed basis, and are
rewarded through product rebates. Associate Dealers do not have quotas but do
receive benefits such as toll-free assistance, training, and other services that
are offered by Comdial.
Comdial supports its existing dealers and seeks to attract new dealers
through national advertising in popular trade magazines, special promotional
programs, sales and technical training, and participation in major industry
trade shows.
Each area sales manager is responsible for recruiting new dealers and
training and motivating existing dealers. Dealers are supported through
telephone contact with Inside Sales Representatives, direct mail, and local
product seminars often organized by distributors. To stimulate demand, Field
Sales Representatives make joint sales calls with dealers to end users and train
dealer sales personnel in product benefits. Product specialists at Comdial are
available to help engineer complex configurations and solve technical problems.
All direct sales personnel earn incentive income based on sales results.
Comdial's dealers are primarily responsible for selling Comdial's
products to end users as well as providing support. Comdial maintains a
technical support staff devoted to dealer support. Comdial also generally
provides a limited warranty on elements of its products up to maximum of 24
months. Products manufactured by Comdial can be returned within 24 months of the
production date.
Other indirect channels include OEM relationships, international sales,
and dealer direct sales. Selected dealers are authorized to purchase Impact
Concierge systems direct from Comdial and resell to hotels and motels. Dedicated
personnel support OEM and international sales. Sales of voice processing
products produced by KVT are through two channels: supply houses to dealers and
direct to dealers.
In recent years, Comdial initiated a National Accounts Program to market
its products to large multi-location end users. The program allows end users to
contract with one entity (Comdial) for sales and support, while achieving local
installations and maintenance from Comdial's network of independent dealers.
This program is also a key delivery vehicle for sophisticated computer telephony
solutions sales that often require advanced custom integration and superior
18
knowledge and understanding of end user communications and business objectives.
The National Accounts Program allows Comdial to work directly with end users to
assure that the best combination of Comdial and, if necessary, third party
products, are incorporated into the final solution. Comdial employs dedicated
personnel to sell and support national accounts.
Because Comdial's sales are made under short-term sales orders issued by
customers on a month-to-month basis, rather than under long-term supply
contracts, backlog is not considered material to Comdial's business.
Engineering, Research and Development
Comdial believes that it must continue to introduce new products and
enhance existing products to maintain a competitive position in the marketplace.
Comdial's engineering department, working in collaboration with the marketing
and manufacturing departments, is responsible for design of new products and
enhancements. A significant amount of engineering expenditures are dedicated to
new product development, with the balance used for cost reductions and
performance enhancements to existing products. Research and development costs
for the fiscal years ended 1999, 1998, and 1996 comprise the majority of
engineering, research, and development costs, which were $9.7 million, $7.3
million, and $6.5 million, respectively. Comdial is unable to segregate and
quantify the amount of research and development costs from other engineering
costs for such fiscal years.
Some of the research and development costs associated with the
development of product software have been capitalized as incurred. The
accounting for such software capitalization is in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 86. The amounts
capitalized in 1999, 1998, and 1997 were $2.9 million, $2.8 million, and $2.0
million, respectively. The amounts of software development cost that were
amortized in 1999, 1998, and 1997 were approximately $1.8 million, $1.4 million,
and $1.0 million, respectively. Comdial is committed to improving its existing
products and developing new telecommunications equipment in order to maintain or
increase its market share.
19
Manufacturing and Quality Control
Comdial's manufacturing operations organization is responsible for all
activities related to production, testing, shipping, and repair of Comdial's
products. Other functions that fall under manufacturing operations include
maintenance of plant facilities and specialty (contract) manufacturing.
One of Comdial's core competencies, along with its distribution network,
is its manufacturing efficiency. With recent improvements in production
equipment such as surface mount technology ("SMT") and information systems,
Comdial can now turn around customer orders in days, compared to weeks or even
months that may be taken by other competitors. Manufacturing is able to schedule
production runs on a daily basis which provides Comdial with maximum flexibility
in responding to order levels, improved product margins, and lower
work-in-process and finished goods inventories.
Improvements in the manufacturing function include the use of advanced
Manufacturing Resource Planning ("MRP") information systems, continuous flow
assembly lines, just-in-time philosophies, and continual upgrades to the two SMT
lines. Comdial has been able to reduce finished goods inventory levels, as
common components in various products have allowed manufacturing to stock
components and subassemblies rather than finished products. Manufacturing also
contributes to revenues through the sale of repair services and obsolete
equipment through Comdial's wholly-owned subsidiary American Phone Centers, Inc.
("APC"), and by contracting for selective custom manufacturing assignments.
Comdial monitors the quality of its manufacturing process. Individual
assemblers and machine operators are trained to inspect subassemblies as the
work passes through their respective areas. In addition, some automated
production machines perform quality tests concurrently with assembly operations.
Comdial believes that this high level of automation and vertical integration
improves quality, cost, and customer satisfaction. Comdial also manufactures
injection molded plastic parts, fabricated metal parts, and other components.
In 1994, Comdial was certified and has maintained its certification by
the International Organization for Standardization ("ISO") at the most rigorous
ISO 9001 level, which provides standards for systems and procedures for
manufacturing, engineering, product design, and customer service.
20
Competition
The market for Comdial's products is highly competitive. Comdial
competes with over 25 suppliers of small business telephone systems, many of
which have significantly greater resources. Examples are Inter-Tel, Inc., Lucent
Technologies, Inc., Nortel Networks, and Toshiba Corporation. Key competitive
factors in the sale of telephone systems and related applications include
performance, features, reliability, service and support, name recognition,
distribution capability, and price. Comdial believes that it competes favorably
in its market with respect to the performance, features, reliability,
distribution capability, and price of its systems, as well as the level of
service and support that Comdial provides. In marketing its telephone systems,
Comdial also emphasizes quality, as evidenced by its ISO 9001 certification, and
high technology features including CTI capability across its entire Impact line
of digital switching systems.
The market for voice processing systems is also competitive. Comdial
believes that it is a leading supplier of PC-based voice processing systems, and
that the products produced by KVT are very competitive with regard to the key
factors important to end-users. These factors include reliability, memory
capacity, features, ease-of-use, compliance with common industry standards, and
price.
Comdial expects that competition will continue to be intense in the
markets it serves, and there can be no assurance that Comdial will be able to
continue to compete successfully in the marketplace or that Comdial will be able
to maintain its current dealer network.
Intellectual Property
From time to time, Comdial is subject to proceedings alleging
infringement by Comdial of intellectual property rights of others. Such
proceedings could require Comdial to expend significant sums in litigation, pay
significant damages, develop non-infringing technology, or acquire licenses to
the technology that is the subject of the asserted infringement, any of which
could have a material adverse effect on Comdial's business. Moreover, Comdial
relies upon copyright, trademark, and trade secret protection to protect
Comdial's proprietary rights in its products. There can be no assurance that
these protections will be adequate to deter misappropriation of Comdial's
technologies or independent third-party development of similar technologies.
The business telecommunications industry is characterized by rapid
technological change. Industry participants often find it necessary to develop
products and features similar to those introduced by others, with incomplete
knowledge of whether patent protection may have been applied for or may
21
ultimately be obtained by competitors or others. The telecommunications
manufacturing industry has historically witnessed numerous allegations of patent
infringement and considerable related litigation among competitors. Comdial
itself has received claims of patent infringement from several parties which
sometimes seek substantial sums. In response to prior infringement claims,
Comdial has pursued and obtained nonexclusive licenses entitling Comdial to
utilize certain fundamental patented functions that are widely licensed and used
in the telecommunications manufacturing industry. These licenses will either
expire at the end of the patent license or the end an agreed-to period.
In order to assure that it currently owns or has adequate rights to
utilize all material technologies relating to its products, Comdial attempts to
diligently review all claims of infringement. Often Comdial's investigation of
these claims is limited by claims' lack of specificity, the limited availability
of factual information and documentation related to the claims and the expense
of pursuing exhaustive patent reviews. As Comdial continues to develop new
products and features in the future, it anticipates that it may receive
additional claims of patent infringement. There can be no assurance that a
license for any such infringed technology would be available to Comdial or, even
if available, that the terms of any such license would be satisfactory.
Year 2000 Issue
In early 1997, Comdial established a team of people (the "Year 2000
Team") to evaluate whether, and to what extent, Comdial's business and products
may be affected by the Year 2000 and potential problems caused by the inability
of certain computers and microprocessors to distinguish between the year 2000
and the year 1900. Through a series of industry-recognized tests, the Year 2000
Team believes that it has identified which of Comdial's products, devices, and
computerized systems contain embedded microprocessors that required remediation
or replacement because of potential Year 2000 issues. Comdial has provided
upgrades or taken other remedial steps to correct any non-compliant products
that remain under warranty. Comdial did not make any significant expenditures
solely to address Year 2000 issues.
Management believes that Comdial has properly addressed the Year 2000
issues in order to mitigate any adverse operational or financial impacts.
Furthermore, Comdial has implemented a requirement that its suppliers certify
22
that all products and services provided to Comdial are Year 2000 compliant (see
Note 13 to the Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations).
Employees
As of December 31, 1999, Comdial, including subsidiaries, had 922
full-time employees, of whom 553 were engaged in manufacturing, 124 in
engineering, 188 in sales and support, and 57 in general management and
administration. Comdial has never experienced a work stoppage and no employees
are represented by labor unions. Comdial believes that its employee relations
are good.
ITEM 2. Properties
Comdial designs, manufactures, and markets the majority of its products
from a fully-integrated, approximately 500,000 square-foot manufacturing
facility on a 25 acre site located in Charlottesville, Virginia. The majority of
Comdial's operations and development are located at this facility, which Comdial
owns. Comdial believes that its facilities are adequate both for the operation
of its business as presently conducted and for expansion in the foreseeable
future.
KVT operates out of an approximately 6,200 square foot building, located
in Sarasota, Florida. All other additional space used by Comdial and its
subsidiaries is either leased or rental property.
Comdial's facilities are subject to a variety of federal, state, and
local environmental protection laws and regulations, including provisions
relating to the discharge of materials into the environment. The cost of
compliance with such laws and regulations has not had a material adverse effect
upon Comdial's capital expenditures, earnings, or competitive position, and it
is not anticipated to have a material adverse effect in the future.
In 1988, Comdial voluntarily discontinued use of a concrete underground
hydraulic oil and chlorinated solvent storage tank at its Charlottesville plant.
In conjunction therewith, nearby soil and groundwater contamination was noted.
As a result, Comdial developed a plan of remediation that was approved by the
Virginia Water Control Board on January 31, 1989. The plan was later amended and
23
approved by the Virginia Department of Environmental Quality ("DEQ"), the
successor administrative agency to the Sate Water Control Board, after which
Comdial commenced the remediation efforts required thereunder.
In October 1994, Comdial installed all required equipment in accordance with
the remediation plan and started the process of pumping hydraulic oil residue
from the underground water. The oil is deposited into approved containers and
taken to a hazardous waste site in accordance with the corrective action plan.
DEQ also required some assessment work of the chlorinated solvents under the
Underground Storage Tank Petroleum Program, however Comdial determined in the
late 1990s that it could expedite matters by entering Virginia's Voluntary
Remediation Program (the "VRP").
In 1999, Comdial was accepted into the VRP to start the final closure
process for the assessment and clean up, if necessary, of leakage of the
petroleum and chlorinated solvents. The petroleum leakage was subsequently added
to the VRP with the chlorinated solvents in 2000. A Voluntary Remediation Report
("VRR") required under DEQ's regulations consists of a site characterization of
the horizontal and vertical extent of the contamination, a risk assessment and a
remedial action plan. The completion of the site characterization portion of the
VRR will require several new wells to determine the extent of the contamination
and some additional sampling.
Comdial has hired outside consultants to do all the necessary testing as
well as all the work required to clean up, if necessary, the contamination.
Comdial is planning on completing this process by the end of year 2000, subject
to the necessary review and approval of DEQ.
ITEM 3. Legal Proceedings
Comdial is from time to time involved in routine litigation. Comdial
believes that none of the litigation in which it is currently involved is
material to its financial condition or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of 1999 to a vote of
Comdial's security holders.
24
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Information is incorporated by reference in Comdial's 1999 Annual Report
to stockholders under the caption "Related Stockholders Matters." As of March
13, 2000 there were 1,965 record holders of Comdial's Common Stock.
ITEM 6. Selected Financial Data
Information is incorporated by reference in Comdial's 1999 Annual Report
to stockholders under the caption "Five Year Financial Data."
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Information is incorporated by reference in Comdial's 1999 Annual Report to
stockholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
ITEM 8. Financial Statements and Supplementary Data.
Information is incorporated by reference in Comdial's 1999 Annual Report
to stockholders or filed with this Report as listed in Item 14 hereof.
ITEM 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
No information is required to be reported pursuant to this item.
25
Part III
ITEM 10. Directors and Executive Officers of the Registrant
Information concerning Directors and Executive Officers of the Registrant
is incorporated by reference under the caption "Election of Directors" and
"Executive Officers of Comdial" on pages 7 through 9 and 10 through 13 of
Comdial's definitive proxy statement for the annual meeting of stockholders to
be held on May 4, 2000.
ITEM 11. Executive Compensation
Executive compensation and management transactions information is
incorporated by reference under the caption "Executive Compensation" on pages 13
through 22 of Comdial's definitive proxy statement for the annual meeting of
stockholders to be held on May 4, 2000.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Information is incorporated by reference under the captions "Securities
Ownership of Certain Beneficial Owners and Management" on pages 4 through 6 of
Comdial's definitive proxy statement for the annual meeting of stockholders to
be held on May 4, 2000.
ITEM 13. Certain Relationships and Related Transactions
Information is incorporated by reference under the caption "Family
Relationships" and "Certain Relationships and Related Transactions" on pages 13
and 21 of Comdial's definitive proxy statement for the annual meeting of
stockholders to be held on May 4, 2000.
26
Part IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
(a) (1) The following Consolidated Financial Statements of Comdial
Corporation and its Subsidiaries are incorporated in Part II,
Item 8 by reference to Comdial's 1999 Annual Report to
stockholders (page references are to page numbers in Comdial's
Annual Report):
Page Number
-----------
Independent Auditors' Report 22
Report of Management 22
Financial Statements:
Consolidated Balance Sheets -
December 31, 1999 and 1998 23
Consolidated Statements of Operations -
Years ended December 31, 1999, 1998, and 1997 24
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1999, 1998, and 1997 25
Consolidated Statements of Cash Flows -
Years ended December 31, 1999, 1998, and 1997 26
Notes to Consolidated Financial Statements -
Years ended December 31, 1999, 1998, and 1997 27-41
2. Financial Statements - Supplemental Schedules:
All of the schedules are omitted because they are not applicable, not
required, or because the required information is included in the
consolidated financial statements or notes.
3. Exhibits Included herein:
(3) Articles of Incorporation and Bylaws:
3.1 Certificate of Incorporation of Comdial Corporation.
(Exhibits (a) Item 3.1 to Item 6 of Registrant's Form 10-Q
for the period ended July 2, 1995.)*
3.2 Certificate of Amendment of the Certificate of
Incorporation of Comdial Corporation as filed with the
Secretary of State of the State of Delaware on February 1,
1994. (Exhibit 3.2 to Registrant's Form 10-Q for the period
ended July 2, 1995.)*
3.3 Bylaws of Comdial Corporation. (Exhibit 3.3 to Registrant's
Form 10-K for the year ended December 31, 1993.)*
27
(10) Material Contracts:
10.1 Registrant's 1992 Stock Incentive Plan and 1992
Non-employee Directors Stock Incentive Plan. (Exhibits 28.1
and 28.2 of Registrant's Form S-8 dated October 21, 1992.)*
10.2 Amendment No. 1 to the Registrant's 1992 Stock Incentive
Plan and 1992 Non-employee Directors Stock Incentive Plan.
(Exhibit 10.1 and 10.2 of Registrant's Form 10-Q dated
September 28, 1997.)*
10.3 Amendment No. 2 to the Registrant's 1992 Stock Incentive
Plan and 1992 Non-employee Directors Stock Incentive Plan.
(Exhibit 10.2 of Registrant's Form 10-Q dated June 30,
1996.)*
10.4 Amendment No. 3 to the Registrant's 1992 Stock Incentive
Plan and 1992 Non-employee Directors Stock Incentive Plan.
(Exhibit 10.3 of Registrant's Form 10-Q dated June 30,
1996.)*
10.5 Amendment to Amendment No. 3 to the Registrant's 1992
Non-employee Directors Stock Incentive Plan. (Exhibit 10.5
to Registrant's Form 10-K for the year ended December 31,
1997.)*
10.6 Amendment No. 4 to the Registrant's 1992 Stock Incentive
Plan. (Exhibit 10.6 to Registrant's Form 10-K for the year
ended December 31, 1997.)*
10.7 Amendment No. 4 to the Registrant's 1992 Non-employee
Directors Stock Incentive Plan. (Exhibit 10.7 to
Registrant's Form 10-K for the year ended December 31,
1997.)*
10.8 The Registrant's Executive Stock Ownership Plan effective
January 1, 1996. (Exhibit 10.10 to Registrant's Form 10-K
for the year ended December 31, 1995.)*
10.9 Amendment No. 1 to the Registrant's Executive Stock
Ownership Plan dated July 31, 1997. (Exhibit 10.17 to
Registrant's Form 10-K for the year ended December 31,
1997.)*
28
10.10 Amendment No. 2 to the Registrant's Executive Stock
Ownership Plan dated January 1, 1998. (Exhibit 10.18 to
Registrant's Form 10-K for the year ended December 31,
1997.)*
10.11 The Registrant's Executive Severance Plan dated August 31,
1995. (Exhibit 10.11 to Registrant's Form 10-K for the year
ended December 31, 1995.)*
10.12 Amendment No. 1 to the Registrant's Executive Severance
Plan dated July 31, 1997. (Exhibit 10.19 to Registrant's
Form 10-K for the year ended December 31, 1997.)*
10.13 Development and Purchase Agreement dated February 21, 1997
among Registrant and Harris Corporation. (Exhibit 10.20 to
Registrant's Form 10-K for the year ended December 31,
1997.)*
10.14 FastCall Purchase Agreement dated December 31, 1997 among
Aurora Systems, Inc. and Spanlink Communications, Inc.
(Exhibit 10.21 to Registrant's Form 10-K for the year ended
December 31, 1997.)*
10.15 Asset Purchase Agreement dated July 14, 1998 among the
Registrant and Array Telecom Inc. and Array Systems
Computing Inc. (Exhibit 10.2 to Registrant's Form 10-Q for
the quarter ended June 28, 1998.)*
10.16 Second Amendment to Comdial's 401(k) Plan dated November
29, 1998. (Exhibit 10.25 to Registrant's Form 10-K for the
year ended December 31, 1998.)*
10.17 Third Amendment to Comdial's 401(k) Plan dated February 8,
1999.
10.18 Credit Agreement dated October 22, 1998 among Registrant
and NationsBank, N.A. (Exhibit 10.26 to Registrant's Form
10-K for the year ended December 31, 1998.)*
29
10.19 Comdial's Retirement Benefit Restoration Plan dated July 5,
1999.
* Incorporated by reference herein.
30
(11) Schedule of Computation of Earnings Per Common
Share
(13) Registrant's 1999 Annual Report to Stockholders
(21) Subsidiaries of the Registrant
The following are the subsidiaries of the Registrant and all are
incorporated in the state of Delaware.
American Phone Centers, Inc.
American Telecommunications Corporation
Array Telecom Corporation
Aurora Systems, Inc.
Comdial Business Communications Corporation
Comdial Consumer Communications Corporation
Comdial Custom Manufacturing, Inc.
Comdial Enterprise Systems, Inc.
Comdial Technology Corporation
Comdial Telecommunications, Inc.
Comdial Telecommunications International, Inc.
Comdial Video Telephony, Inc.
Key Voice Technologies, Inc.
Telecom Technologies Inc. (formerly known as Scott
Technologies Corporation)
(23) Independent Auditors' Consent
Accountants consent to the incorporation by reference of their
report dated January 28, 2000, appearing in the Annual Report on
Form 10-K of Comdial Corporation for the year ended December 31,
1999, in certain Registration Statements.
(24) Power of Attorney
(27) Financial Data Schedule
(b) Reports on Form 8-K:
The Registrant has not filed any reports on Form 8-K during the last quarter of
1999.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 29th day of
March, 2000.
COMDIAL CORPORATION
By: /s/ William G. Mustain
------------------------------
William G. Mustain
Chairman of the Board,
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Director March 29, 2000
--------------------
Robert P. Collins
* Director March 29, 2000
--------------------
Barbara J. Dreyer
* Director March 29, 2000
--------------------
A. M. Gleason
* Director March 29, 2000
--------------------
John W. Rosenblum
* Director March 29, 2000
--------------------
Robert E. Spekman
* Director March 29, 2000
--------------------
Dianne C. Walker
/s/ William G. Mustain Chairman of the Board, March 29, 2000
---------------------- President and Chief
William G. Mustain Executive Officer
/s/ Tara Y. Harrison Controller March 29, 2000
--------------------
Tara Y. Harrison
* By:/s/ William G. Mustain
--------------------------
William G. Mustain, Attorney-In-Fact
32
Dates Referenced Herein and Documents Incorporated by Reference
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