Comdial and Bank of America Reach Agreement On Restructuring.

Business Editors/Technology Writers

SARASOTA, Fla.--(BUSINESS WIRE)--Feb. 18, 2002

Comdial Corporation (Nasdaq:CMDL), a leading developer and provider of enterprise telecommunications solutions, announced today that the Company has signed a letter-of-intent with Bank of America to restructure its existing senior debt facility. This agreement represents the capstone of the Company's successful restructuring program, which began in late 2000.

Under the letter-of-intent, Comdial will have an $8 million working capital facility and a $4.9 million term note. Both the working capital facility and term note mature on March 31, 2003 and carry variable interest of prime-plus 4 percent. The term note will start amortizing in September at a 36-month amortization period.

Bank of America will also convert $10 million of existing debt into Convertible Preferred Stock. The Convertible Preferred Stock can convert at any time into a maximum of 1.5 million common shares. This conversion ratio will be reduced to as low as 500,000 shares, in the event the Company is able to pay down the term note by up to $3 million. The Company will have a call option allowing it to buy out Bank of America's Convertible Preferred Stock at par. The Convertible Preferred Stock carries a 5 percent dividend coupon if paid with cash or 10 percent if paid in Common Shares at the election of the Company.

Paul Suijk, Comdial chief financial officer stated, "Upon closing the restructuring agreement, Comdial will have reached a major milestone in its restructuring program. In addition to restructuring our debt with Bank of America, we have negotiated over $5 million in reductions in lease payments, vendor payments, outstanding note payments and other liabilities. The total combined restructuring allows us to reduce the total debt outstanding to around $15 million by the end of the first quarter of 2002. That is down from $41 million at the end of the third quarter of 2000, representing a 63 percent debt reduction. This restructuring was necessary to size the balance sheet to the new Comdial and provide the Company with the flexibility to attract additional investment. The Company plans to seek the additional investment in 2002. Now that we have substantially improved the Company's balance sheet, we will intensify our focus on the top line with the goal of bringing the fruits of our restructuring efforts to the bottom line."

Nick Branica, Comdial president and chief executive officer said, "I am very pleased with this restructuring agreement. This agreement with Bank of America combined with our other debt reduction activities will position the Company well for the future as we work ourselves through a very difficult market. Comdial will now focus our energy on growth rather than restructuring. During our restructuring, Comdial never abandoned our strong R & D activities. Comdial is now poised with a substantially improved balance sheet and a great product portfolio. Our newly released family of products has seen tremendous acceptance in spite of our financial difficulties. We believe these developments will have a positive impact on the sales of our products. Our IP telephones and IP networking solutions are in the marketplace and are receiving great reviews from our customers. Our R & D team is deploying our next generation SIP-based communication and messaging system in house to begin alpha testing. We are looking forward with the confidence and pride that our balance sheet is significantly improved, our product portfolio is strong and our product pipeline is filled with promise for the future.

"We could not have come this far without the on-going support of our stakeholders. My gratitude goes out to our customers, distribution partners and dealers, suppliers, employees, shareholders and board members, for demonstrating their loyalty and unwavering confidence in Comdial."

About Comdial

Comdial Corporation, headquartered in Sarasota, Florida, develops and markets sophisticated communications solutions for small to mid-sized offices, government, and other organizations. Comdial offers a broad range of solutions to enhance the productivity of businesses, including voice switching systems, voice over IP (VoIP), voice processing and computer telephony integration solutions. For more information about Comdial and its communications solutions, please visit our web site at http://www.comdial.com.

Forward-Looking Statements 

This press release contains statements that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Investors and prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, including Comdial Corporation's ability to maintain its listing with Nasdaq, its ability to maintain market share in a very competitive industry, finalization of restructuring program and compliance therewith, success of restructuring program, ability to increase sales, future performance, success of R&D program, ability to successfully raise investment capital at acceptable terms, general economic uncertainty prevailing in the economy as a whole, and the various other factors set forth from time to time in Comdial's previous filings with the SEC, including Comdial's most recent Form 10-Q. Comdial Corporation undertakes no obligation to publicly update or revise the forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.