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, 1998

                                        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 9, 1999, was approximately $58,600,000 (See Item 5). The
number of shares of Common Stock outstanding as of MARCH 9, 1999, was 8,860,383.

                      DOCUMENTS INCORPORATED BY REFERENCE:
    Comdial's 1998 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, 1998, are
incorporated by reference under Part III of this Form 10K.


<PAGE>



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TABLE OF CONTENTS
----------------------------------------------------------------

PART I

Item 1.      Business                                               4
           (a) General Development of Business                      4
               Safe Harbor Statement                                5
               Industry Background                                  5
               Strategy                                            10
           (b) Financial Information About Industry Segment        12
               Product Sales Information                           12
           (c) Narrative Description of Business                   12
               Products                                            12
               Business Segment Products                           13
                 Digital Systems                                   13
                 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
----------------------------------------------------------------

PART II

 Item 5.     Market for Registrant's Common Equity and Related
             Stockholder Matters                                   24

 Item 6.     Selected Financial Data                               24

 Item 7.     Management's Discussion and Analysis of Financial
             Condition and Results of Operations                   24

 Item 8.     Financial Statements and Supplementary Data           25

 Item 9.     Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure                   25


<PAGE>



----------------------------------------------------------------

TABLE OF CONTENTS (Cont'd.)
----------------------------------------------------------------

PART III

Item 10.     Directors and Executive Officers
             of the Registrant                                     25

Item 11.     Executive Compensation                                25

Item 12.     Security Ownership of Certain Beneficial
             Owners and Management                                 25

Item 13.     Certain Relationships and Related Transactions        25
----------------------------------------------------------------

PART IV

Item 14.     Exhibits, Financial Statement Schedules,
             and Reports on Form 8-K                               26


<PAGE>



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 digital 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, on-site wireless communications, voice-over
the Internet, and computer-telephone integration ("CTI").

      Building on its base business of advanced digital switching systems for
small to mid-sized businesses, Comdial is actively engaged in creating
integrated voice/data solutions for businesses with special needs. The Company
plans to grow by continuing to ably serve its traditional customer base while
capitalizing on growth opportunities for integrated products for specific
vertical market applications.

      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
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.

<PAGE>

      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 believes that it is a leading supplier to this market,
with an installed base of approximately 300,000 telephone systems and 3.3
million telephones. Comdial's growth has been principally as a result of sales
of digital telephone systems introduced by Comdial since 1992 and solutions and
software products introduced since 1993. 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, reliance on key strategic
alliances, fluctuations in operating results, delays in development of highly
complex products, and other risks and uncertainties detailed from time to time
in Comdial's filings. These risks could cause Comdial's actual results for 1999
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 100 employees, while
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.

<PAGE>

      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 of some type.
Examples of terminal devices include telephone instruments, 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 (key service unit or "KSU"), (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 eight percent from 1998
to 1999. Comdial ranks among the top 25 percent of industry participants in this
marketing segment. Significant trends in this marketing segment are (1) the
continuing growth of digital systems compared with the older analog 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.

      Before the development of digital telephone systems, electronic telephone
systems were originally "analog." Voice was transmitted in a continuous wave
form that is "analogous" to the original voice signal. Analog voice and data
transmission is often impaired by transmission degradation and susceptibility to
ambient noises.

      In 1992, Comdial began a transition from proprietary analog systems to
larger systems employing digital transmission and offering computer integration
capability via an open applications interface ("OAI"). That year, Comdial
introduced the Digital Expandable ("DXP") switch. With a capacity of 224 ports,
this was the largest switching product Comdial had ever produced. 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").

<PAGE>

      Responding to growing market interest in CTI, in 1996 and 1997 Comdial
introduced connectivity software that could integrate with a broader range of
network operating systems. In 1997, Comdial introduced Impact FX, a 96 port
switch that allowed software applications like voice processing to be enabled
electronically, rather than the conventional industry approach of installing
costly peripheral equipment on site. In 1998, the Impact FX was substantially
enhanced to address a broader range of applications (40 to 560 ports) and the
design architecture provided a more cost-effective approach to expansion needs.
New software applications were added to provide even greater functionality.

      Since 1992, Comdial has discontinued many of its vintage analog systems -
a trend that will continue in 1999. In 1992, approximately 20 percent of
Comdial's sales were attributable to digital systems. In 1998, digital systems
comprised 62 percent of Comdial's sales and analog systems accounted for less
than seven percent of sales.

      Another innovation is on-site wireless communications. These can be single
cell or multi-cell and vary widely in terms of the technology used,
architecture, and range provided. In 1994, Comdial introduced its first wireless
device, the Tracker, an on-site call completion system, followed by two-way
wireless devices, 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.


<PAGE>

  VOICE PROCESSING

      The ability to digitize analog voice signals gave rise to the voice
processing business in the 1980s. Early systems were mainframe-based, very
expensive to purchase, difficult to use, and limited in their capabilities.
Early adopters were primarily very large companies and organizations. In the
1990s, costs dropped sharply, storage capacity and scalability improved, and the
products became more user friendly and versatile. The advent of powerful
personal computers provided an alternative platform to mainframe computers and
made 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.

      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
grow by approximately 25 percent from 1998 to 1999. Voice processing systems are
also measured by "ports" but the term has a different meaning than with
telephone systems. Basically, it 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.

<PAGE>

      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.

  INTEGRATED VOICE/DATA SOLUTIONS

      One of Comdial's Solutions and Software segment strengths is its design
control over three core technologies - voice switching, voice processing, 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 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, and 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 Avalon assisted living system offers 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 lower operating costs
and/or greatly improved customer service.

<PAGE>

      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. New products, beginning with unified messaging
(PC access to multimedia messages) will be introduced in 1999, with further
integration opportunities to come.

STRATEGY

      Comdial seeks to expand sales and profits at acceptable risk levels by:

    (1) maintaining or improving its market position in horizontal markets,
    (2) developing integrated solutions for fast-growing vertical markets,
    (3) expanding its channels of distribution and methods of product delivery
        to both markets, and
    (4) developing marketing solutions through channels best suited to maximize
        sales and customer satisfaction.

   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 1998, Comdial introduced
important enhancements such as IP telephony, which is an advanced call routing
technology that automatically directs long distance voice and data traffic over
the IP network. Also in 1998, Comdial introduced the Avalon-communications and
security system for assisted living communities, Windows NT-based voice
messaging products and the Impact FX that is scalable up to 544 ports. Comdial
intends to continue to add value to its core digital switching products.

<PAGE>

      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.

      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. 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), the VVP and Small Office voice
processing systems (Rhetorex and Dialogic), and the production of a particular
family of products for Harris Corporation ("Harris").

<PAGE>


  (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENT

      During the fiscal years ended December 31, 1998, 1997 and 1996,
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 1998 Annual Report to Stockholders.

      PRODUCT SALES INFORMATION

      The following table presents certain relevant information concerning
Comdial's business segments for the periods indicated:

                                              Years Ended December 31,
(In millions)                            1998          1997           1996

   BUSINESS SEGMENT SALES:
      Digital Systems                  $80,452       $70,181        $56,725
      Solutions and Software            36,194        31,625         23,453
      Analog and Other                  12,331        16,755         22,004
                                        ------        ------         ------
          Net Sales                   $128,977      $118,561       $102,182
                                      ========      ========       ========

  (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.

<PAGE>

   BUSINESS SEGMENT PRODUCTS

      Digital Systems

      IMPACT DXP SYSTEM, originally introduced in 1992, has had several major
upgrades since then. There are various IMPACT DXP Systems: IMPACT 24, IMPACT 48,
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. For
example, the IMPACT 24 begins at 12 ports and can be expanded to 24 ports. To go
beyond 24 ports, the base unit must be replaced with the IMPACT 48 base unit.
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 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.

      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.

<PAGE>

      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
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

      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.

<PAGE>

      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.

      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.

      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
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

<PAGE>

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.

      DEBUT was introduced in 1998 to meet the needs of small businesses seeking
basic voice processing capabilities at an attractive price.

      VVP-NT and SMALL OFFICE-NT were introduced in the third quarter of 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.

       AVALON, introduced in the third quarter of 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.

      CTVOICE was introduced in the first quarter of 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.

<PAGE>

       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.

      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 are
scheduled to be 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 1998, net sales
to ALLTEL, Graybar, and North Supply amounted to approximately $19.3 million
(15%), $30.4 million (24%), and $24.9 million (19%), 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

<PAGE>

Preferred Dealers, including exclusive access to certain products, cash rebates
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, permitting factory returns 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.

<PAGE>

This program is also a key delivery vehicle for sophisticated computer telephony
solutions sales that often require advanced custom integration and superior
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 1998, 1997, and 1996 comprise the majority of
engineering, research, and development costs, which were $6.8 million, $6.5
million, and $5.8 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 1998,
1997, and 1996 were $2.8 million, $2.0 million, and $1.6 million, respectively.
The amounts amortized for software development cost in 1998, 1997, and 1996 were
approximately $1.4 million, $1.0 million, and $0.9 million, respectively.
Comdial is committed to improving its existing products and developing new
telecommunications equipment in order to maintain or increase its market share.

<PAGE>

      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.

<PAGE>

       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

<PAGE>

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 expire upon
expiration of the underlying patents.

      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 will require
remediation or replacement because of potential Year 2000 issues. The Year 2000
Team has concluded that nearly all of Comdial's products are already Year 2000
compliant. Comdial expects that any non-compliant products that Comdial
continues to sell will be compliant before the third quarter of 1999.
Furthermore, Comdial is providing upgrades or taking other remedial steps to
correct any non-compliant products that remain under warranty. Comdial does not
expect to make any significant expenditures solely to address Year 2000 issues.

<PAGE>

      Management believes that Comdial is properly addressing the Year 2000
issues in order to mitigate any adverse operational or financial impacts.
Furthermore, Comdial has implemented a requirement that its suppliers certify
that all products and services provided to Comdial are Year 2000 compliant (see
Note 14 to the Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations).

      EMPLOYEES

      As of December 31, 1998, Comdial, including subsidiaries, had 919
full-time employees, of whom 564 were engaged in manufacturing, 101 in
engineering, 174 in sales and support, and 80 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
approved by the Virginia Department of Environmental Quality, after which
Comdial commenced the remediation efforts required thereunder.

<PAGE>

      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. As of December 31, 1998, Comdial has incurred total costs of
approximately $25,000 and expects the pumping process to be completed by late
1999.

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 1998 to a vote of
Comdial's security holders.


PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Information is incorporated by reference on page 42 of Comdial's 1998
Annual Report to stockholders under the caption "Related Stockholders Matters."
As of March 9, 1999 there were 1,475 record holders of Comdial's Common Stock.

ITEM 6.  SELECTED FINANCIAL DATA

     Information is incorporated by reference on page 42 of Comdial's 1998
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 on pages 21 through 25 of
Comdial's 1998 Annual Report to stockholders under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Information is incorporated by reference on pages 27 through 44 of
Comdial's 1998 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.


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 6 through 8 and 10 through 12 of
Comdial's definitive proxy statement for the annual meeting of stockholders to
be held on April 27, 1999.

ITEM 11.  EXECUTIVE COMPENSATION

     Executive compensation and management transactions information is
incorporated by reference under the caption "Executive Compensation" on pages 12
through 21 of Comdial's definitive proxy statement for the annual meeting of
stockholders to be held on April 27, 1999.

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 3 through 5 of
Comdial's definitive proxy statement for the annual meeting of stockholders to
be held on April 27, 1999.

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 12
and 21 of Comdial's definitive proxy statement for the annual meeting of
stockholders to be held on April 27, 1999.


<PAGE>



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 1998 Annual Report to stockholders
              (page references are to page numbers in Comdial's Annual Report):

                                                                   Page Number
                                                                   -----------
              Independent Auditors' Report                              26
              Report of Management                                      26

      FINANCIAL STATEMENTS:
      Consolidated Balance Sheets -
         December 31, 1998 and 1997                                     27
      Consolidated Statements of Operations -
         Years ended December 31, 1998, 1997, and 1996                  28
      Consolidated Statements of Stockholders' Equity -
         Years ended December 31, 1998, 1997, and 1996                  29
      Consolidated Statements of Cash Flows -
         Years ended December 31, 1998, 1997, and 1996                  30
      Notes to Consolidated Financial Statements -
         Years ended December 31, 1998, 1997, and 1996               31-41

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.)*

<PAGE>

<TABLE>
<CAPTION>

         (10)  MATERIAL CONTRACTS
          <S>               <C>

             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       Development Agreement dated December 2, 1993 among Registrant and
                        Motorola Inc. (Exhibit 10.16 to Registrant's Form 10-K for the year
                        ended December 31, 1993.)*

             10.9       Loan and Security Agreement dated February 1, 1994 among Registrant and
                        Fleet Capital Corporation formerly Barclays Business Credit, Inc. (Exhibit
                        10.13 to Registrant's Form 10-K for the year ended December 31, 1993.)*
<PAGE>


             10.10      Amendment  No. 1 to the Loan and  Security  Agreement  dated March 13,
                        1996 among the  Registrant  and Fleet  Capital  Corporation.  (Exhibit
                        10.1 to Registrant's Form 10-Q for the quarter ended March 31, 1996.)*

             10.11      Amendment  No. 2 to the Loan and  Security  Agreement  dated  June 28,
                        1996 among the  Registrant  and Fleet  Capital  Corporation.  (Exhibit
                        10.1 to Registrant's Form 10-Q for the quarter ended June 30, 1996.)*

             10.12      Amendment  No. 3 to the Loan and Security  Agreement  dated  September
                        27, 1996 among the Registrant and Fleet Capital Corporation.  (Exhibit
                        10.1 to  Registrant's  Form 10-Q for the quarter  ended  September 29,
                        1996.)*

             10.13      Amendment  No. 4 to the Loan and Security  Agreement  dated  September
                        27,  1996  among  the  Registrant   and  Fleet  Capital   Corporation.
                        (Exhibit  10.2 to  Registrant's  Form 10-Q for the quarter ended March
                        30, 1997.)*

             10.14      Amendment  No. 5 to the Loan and  Security  Agreement  dated March 15,
                        1998 among the  Registrant  and Fleet  Capital  Corporation.  (Exhibit
                        10.1 to  Registrant's  Form  10-Q  for the  quarter  ended  March  29,
                        1998.)*

             10.15      Amendment  No. 6 to the Loan and  Security  Agreement  dated  June 24,
                        1998 among the  Registrant  and Fleet  Capital  Corporation.  (Exhibit
                        10.1  to  Registrant's  Form  10-Q  for the  quarter  ended  June  28,
                        1998.)*

             10.16      Note dated February 5, 1997 among the Registrant and Fleet Capital
                        Corporation. (Exhibit 10.1 to Registrant's Form 10-Q for the quarter
                        ended March 30, 1997.)*

             10.17      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.)*
<PAGE>


             10.18      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.)*

             10.19      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.)*

             10.20      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.)*

             10.21      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.)*

             10.22      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.)*

             10.23      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.)*

             10.24      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.)*

             10.25      Second Amendment to Comdial's 401(k) Plan dated November 29, 1998.

             10.26      Credit   Agreement  dated  October  22,  1998  among   Registrant  and
                        NationsBank, N.A.
</TABLE>

*  Incorporated by reference herein.


<PAGE>




         (11)  SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON
               SHARE

         (13)  REGISTRANT'S 1998 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 29, 1999, appearing in this Annual Report on
               Form 10-K of Comdial Corporation for the year ended December 31,
               1998, 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 1998.



<PAGE>

                                   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 24th day of
March, 1999.

                                           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 24, 1999
 -----------------
 ROBERT P. COLLINS

        *                    Director                 March 24, 1999
-----------------------
 BARBARA PERRIER DREYER

        *                    Vice Chairman            March 24, 1999
---------------------
 A. M. GLEASON

        *                    Director                 March 24, 1999
---------------------
 MICHAEL C. HENDERSON

        *                    Director                 March 24, 1999
---------------------
 JOHN W. ROSENBLUM

        *                    Director                 March 24, 1999
---------------------
 DIANNE C. WALKER

/s/ William G. Mustain       Chairman of the Board,   March 24, 1999
----------------------       President, and
 WILLIAM G. MUSTAIN          Chief Executive Officer


/s/ M. Funke                 Controller               March 24, 1999
----------------------
 MANFRED FUNKE

* By:/s/ William G. Mustain
-------------------------------------
  WILLIAM G. MUSTAIN, ATTORNEY-IN-FACT