SCHEDULE 14A
INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by
the Registrant x
Filed by
a Party other than the Registrant o
Check the
appropriate box:
£
|
Preliminary
Proxy Statement
|
£
|
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
x
|
Definitive
Proxy Statement
|
£
|
Definitive
Additional Materials
|
£
|
Soliciting
Material under
Section 240.14a-12
|
QUALSTAR
CORPORATION
(Name
of Registrant as Specified in Its Charter)
N/A
(Name
of Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x No
fee required.
£ Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title
of each class of securities to which transaction applies:
|
(2)
|
Aggregate
number of securities to which transaction
applies:
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
|
|
(4)
|
Proposed
maximum aggregate value of
transaction:
|
£
|
Fee
paid previously with preliminary
materials.
|
£
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
(1)
|
Amount
Previously Paid:
|
|
(2)
|
Form,
Schedule or Registration Statement
No.:
|
February
18, 2008
Dear
Shareholder:
You are
cordially invited to attend the Annual Meeting of Shareholders of Qualstar
Corporation to be held on Tuesday, March 25, 2008, at Qualstar’s corporate
headquarters located at 3990-B Heritage Oak Court, Simi Valley, California
93063, beginning at 9:30 a.m. Pacific Time.
At this
meeting you will be asked to elect six directors to serve a term of one year and
to approve the appointment of Ernst & Young LLP to audit our financial
statements for fiscal 2008. We urge you to read the attached Notice
of Annual Meeting and Proxy Statement, which contains detailed information about
management’s nominees and other matters related to the Annual
Meeting. In addition to the formal business to be conducted,
management will report on developments of the past year and respond to questions
and comments of general interest to shareholders.
It is
important that your shares be represented. Therefore, even if you
presently plan to attend the Annual Meeting, please complete, sign and date and
promptly return the enclosed proxy card in the envelope provided. If
you do attend the Annual Meeting and wish to vote in person, you may withdraw
your proxy at that time.
I look
forward to seeing you at the Annual Meeting.
|
Sincerely,
|
|
|
|
|
|
William
J. Gervais
|
|
Chief
Executive Officer and President
|
QUALSTAR
CORPORATION
3990-B
Heritage Oak Court
Simi
Valley, California 93063
___________________________________
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
be held on March 25, 2008
__________________________________
NOTICE IS
HEREBY GIVEN that Qualstar’s Annual Meeting of Shareholders (the “Annual
Meeting”) will be held at Qualstar’s corporate headquarters located at 3990-B
Heritage Oak Court, Simi Valley, California 93063, on Tuesday, March 25, 2008,
at 9:30 a.m. Pacific Time, for the following purposes:
|
1.
|
To
elect six directors to serve one year terms expiring at the next Annual
Meeting of Shareholders, or until their successors have been duly elected
and qualified;
|
|
2.
|
To
approve the appointment of Ernst & Young LLP as the independent
registered public accounting firm to audit our financial statements for
the fiscal year ending June 30, 2008;
and
|
|
3.
|
To
transact any other business as may properly come before the Annual Meeting
and any adjournment thereof.
|
Shareholders
of record at the close of business on February 11, 2008, are entitled to notice
of, and to vote at, the Annual Meeting and any adjournment
thereof. All shareholders are cordially invited to attend the Annual
Meeting in person.
|
By
Order of the Board of Directors
|
|
|
|
|
|
Richard
A. Nelson
|
|
Secretary
|
Simi
Valley, California
February
18, 2008
YOUR VOTE IS
IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING YOU SHOULD COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD, AND
RETURN IT IN THE PREADDRESSED ENVELOPE PROVIDED. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED
STATES. |
QUALSTAR
CORPORATION
3990-B
Heritage Oak Court
Simi
Valley, California 93063
¾¾¾¾¾¾¾¾¾¾¾
PROXY
STATEMENT
¾¾¾¾¾¾¾¾¾¾¾
ANNUAL
MEETING OF SHAREHOLDERS
To
be held on March 25, 2008
General
Information
This
Proxy Statement is furnished in connection with the solicitation of proxies by
the Board of Directors of Qualstar Corporation, a California corporation, for
use at the Annual Meeting of Shareholders of the Company to be held on Tuesday,
March 25, 2008, at 9:30 a.m. Pacific Time. The Annual Meeting will be
held at our corporate headquarters located at 3990-B Heritage Oak Court, Simi
Valley, California 93063. This Proxy Statement and the accompanying
proxy are first being mailed to shareholders on or about February 18,
2008.
Voting
and Solicitation of Proxies
On
February 11, 2008, the record date with respect to this solicitation, 12,253,117
shares of our common stock were outstanding. No other securities are
entitled to vote at the Annual Meeting. Only shareholders of record
on such date are entitled to notice of and to vote at the Annual Meeting and at
any adjournment thereof. Each shareholder of record is entitled to
one vote for each share held as of the record date on all matters to come before
the Annual Meeting and at any adjournment thereof.
Quorum. The
holders of a majority of the outstanding shares of our common stock, present in
person or by proxy and entitled to vote, will constitute a quorum at the Annual
Meeting. We count proxies marked “withhold authority” as to any
director nominee or “abstain” as to a particular proposal as well as broker
non-votes for purposes of determining the presence or absence of a quorum at the
Annual Meeting for the transaction of business.
Vote
Required. The six director nominees receiving the highest
number of affirmative votes of the shares present or represented by proxy and
entitled to vote will be elected as directors. Accordingly, proxies
marked “withhold authority” and broker non-votes will have no effect in
determining which directors receive the highest number of votes. The
approval of any other matter that properly comes before the Annual Meeting will
require the affirmative votes of a majority of the shares present or represented
and entitled to be voted at the Annual Meeting.
The
shares represented by all valid proxies received will be voted in accordance
with the instructions specified therein. Unless otherwise directed in
the proxy, the persons named therein will vote FOR the election of each of
the director nominees named below, and FOR proposal 2. As
to any other business that may properly come before the Annual Meeting, the
persons named in the enclosed proxy will vote in accordance with their best
judgment. We presently do not know of any other business which will
be presented for consideration at the Annual Meeting.
Solicitation. Proxies
for use at the Annual Meeting are being solicited by our Board of
Directors. Proxies will be solicited principally by
mail. If desirable, to ensure a quorum at the Annual Meeting, our
officers, directors, agents and employees may contact shareholders, banks,
brokerage houses and others, by telephone, facsimile or in person to request
that proxies be furnished. Qualstar will bear all expenses incurred
in connection with this solicitation. These costs include
reimbursements to banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding proxy materials to
beneficial owners of our common stock. However, officers, directors
and employees will not receive additional compensation for these
services.
Revocability
of Proxies
An
executed proxy may be revoked at any time before its exercise by delivering to
the Secretary of Qualstar a written notice of revocation or a duly executed
proxy bearing a later date. Prior to the date of the Annual Meeting,
any notice of revocation or subsequent proxy must be delivered to our Secretary
at 3990-B Heritage Oak Court, Simi Valley, California 93063, the principal
executive office of Qualstar. On the date of the Annual Meeting, such
notice or subsequent proxy should be delivered in person at the Annual Meeting
prior to the time of the vote. Accordingly, the execution of the
enclosed proxy will not affect a shareholder’s right to vote in person should
such shareholder find it convenient to attend the Annual Meeting and desire to
vote in person, so long as the shareholder has revoked his or her proxy prior to
its exercise in accordance with these instructions.
ELECTION
OF DIRECTORS
(Proposal
1)
In
accordance with Qualstar’s bylaws, the number of directors constituting the
Board of Directors is currently fixed at six. All six directors are
to be elected at the Annual Meeting and will hold office until the next Annual
Meeting of Shareholders and until their respective successors are elected and
have qualified. It is intended that the persons named in the enclosed
proxy will, unless such authority is withheld, vote for the election of the six
nominees proposed by the Board. In the event that any of them should
become unavailable prior to the Annual Meeting, the proxy will be voted for a
substitute nominee or nominees designated by the Board, or the number of
directors may be reduced accordingly. All of the nominees named below
have consented to being named herein and to serve if elected. The
Board has no reason to believe that any of the nominees will be unable to
serve.
The
following table provides information regarding the nominees, their ages, the
year in which each first became a director of Qualstar, their principal
occupations or employment during the past five years, directorships held with
other public companies, and other biographical data:
Name and
Age
|
|
Business
Experience During Last Five
Years and Other Directorships
|
William
J. Gervais (65)
|
William J. Gervais is a
founder of Qualstar, has been our President and a director since our
inception in 1984, and was elected Chief Executive Officer in January
2000. From 1984 until January 2000, Mr. Gervais also served as
our Chief Financial Officer. From 1981 until 1984, Mr. Gervais
was President of Northridge Design Associates, Inc., an engineering
consulting firm. Mr. Gervais was a co-founder, and served as
Engineering Manager from 1976 until 1981, of Micropolis Corporation, a
former manufacturer of hard disk drives. Mr. Gervais earned a
B.S. degree in Mechanical Engineering from California State Polytechnic
University in 1967.
|
Richard
A. Nelson (64)
|
Richard A. Nelson is a
founder of Qualstar and has been our Vice President of Engineering,
Secretary and a director since our inception in 1984. From 1974
to 1984, Mr. Nelson was self employed as an engineering consultant
specializing in microprocessor technology. Mr. Nelson earned a
B.S. in Electronic Engineering from California State Polytechnic
University in 1966.
|
Stanley
W. Corker (56)
|
Stanley W. Corker has
served as a director of Qualstar since January 26, 2006. Since
1996, Mr. Corker has been the Director of Technology Research and a
partner of Emerald Asset Management, a diversified investment management
firm. Prior to joining Emerald Asset Management, Mr. Corker
obtained over 20 years experience in the computer storage industry from
key roles in engineering and marketing at several manufacturers of tape
drives, and as an industry analyst with International Data Corporation
(IDC). Mr. Corker received a B.S. degree in Computer Science
from the University of Essex, England in 1972, where he later conducted
five years of postgraduate research in computer networking
systems.
|
Carl
W. Gromada (66)
|
Carl W. Gromada has
served as a director of Qualstar since March 2005. From 2000 to
the present, Mr. Gromada has been a consultant and a private investor.
From 1996 to 2000, Mr. Gromada served as Chief Executive Officer, and
a member of the board of directors of Computer Resources Unlimited, Inc.,
a company involved in the design, manufacture and sale of a broad line of
products for the computer storage industry. Mr. Gromada
received a B.S. degree in Business Administration from Temple University
in 1965.
|
Robert
A. Meyer (63)
|
Robert A. Meyer has
served as a director of Qualstar since March 16, 2006. Mr.
Meyer is currently retired. From 1994 until June 2005, Mr.
Meyer was employed in various management positions by United States Filter
Corporation, a company engaged in the water treatment industry serving
industrial, commercial and residential customers. His positions
at United States Filter Corporation included Director of Finance, Business
Development from 2000 to 2002, and Vice President of Internal Audit from
2003 until he retired in June 2005. Mr. Meyer received a B.S.
degree in Accounting from C.W. Post College in 1972, and he is a Certified
Public Accountant.
|
Robert
E. Rich (57)
|
Robert E. Rich has
served as a director of Qualstar since January 2000. Mr. Rich
has been engaged in the private practice of law since 1975 and has been a
shareholder of Stradling Yocca Carlson & Rauth, legal counsel to
Qualstar, since 1984. Mr. Rich received a B.A. degree in
Economics from the University of California, Los Angeles in 1972 and his
J.D. degree from the University of California, Los Angeles in
1975.
|
CORPORATE
GOVERNANCE
Director
Independence
Our Board
has determined that all of our directors satisfy the current “independent
director” standards established by rules of The Nasdaq Stock Market, Inc.
(“Nasdaq”), except for William J. Gervais, who is Chief Executive Officer and
President of Qualstar, and Richard A. Nelson, who is Vice President Engineering
and Secretary of Qualstar. Each director serving on the Audit
Committee of our Board also meets the more stringent independence requirements
established by Securities and Exchange Commission rules applicable to audit
committees. Mr. Robert E. Rich, a member of our Board of Directors
since January 2000, is a shareholder in the law firm of Stradling Yocca Carlson
& Rauth, which has provided legal services to Qualstar since
1984. Our Board has determined that no director has a relationship
that would interfere with the exercise of independent judgment in carrying out
his responsibilities as a director. There are no family relationships
among any of the directors or executive officers of the Company.
Board
of Directors and Committee Meetings
During
the fiscal year ended June 30, 2007, our Board of Directors met 4 times and the
committees of our Board held a total of 7 meetings. Each incumbent
director attended at least 75% of the aggregate of all meetings of the Board of
Directors and the committees of the Board, if any, on which he served during
fiscal 2007.
The
independent directors meet in executive session on a regular basis without any
management directors or employees present.
Although
we have no formal policy requiring director attendance at annual meetings of
shareholders, we schedule the annual meeting for a date that is convenient for
all directors to attend. All directors who were elected at the 2007
annual meeting of shareholders attended that meeting.
Committees
of the Board
Our Board
has two standing committees: the Audit Committee and the Compensation
Committee.
The Audit Committee is comprised
solely of non-employee directors who satisfy current Nasdaq standards with
respect to independence, financial expertise and experience. The
Audit Committee is currently comprised of Messrs. Corker, Gromada and Meyer,
with Mr. Gromada serving as Chairman. Our Board of Directors has
determined that both Mr. Gromada and Mr. Meyer meet the Securities and Exchange
Commission’s definition of “audit committee financial expert.” The
Audit Committee has a written charter that specifies its responsibilities, which
include oversight of the financial reporting process and system of internal
accounting controls of the Company, and appointment and oversight of the
independent public accountants engaged to audit the Company’s financial
statements. A copy of our Audit Committee Charter is available in the
investors section of the Company’s website at www.Qualstar.com.
The Audit
Committee held 6 meetings during fiscal 2007. To ensure independence,
the Audit Committee also meets separately with our independent public
accountants and members of management.
The Compensation Committee is
comprised solely of independent directors. The Compensation Committee
is currently comprised of Messrs. Corker, Gromada and Meyer, with Mr. Corker
serving as Chairman. The Compensation Committee reviews and
recommends the salaries and bonuses of our executive officers, establishes
compensation and incentive plans for our executive officers, and determines
other fringe benefits. The Compensation Committee held one meeting
during fiscal 2007.
Processes and Procedures of the
Compensation Committee. Our chief executive officer, William
J. Gervais, plays an important role in formulating the compensation program for
our executive officers. Mr. Gervais co-founded Qualstar in 1984, is
the largest individual shareholder, and continues to serve full time as the
Company’s Chief Executive Officer and President. The Compensation
Committee considers Mr. Gervais to be one of the most important employees of
Qualstar, and highly values his insight and views on compensation
matters. Mr. Gervais makes recommendations to the Compensation
Committee regarding base salary, cash bonuses, and awards of equity-based
long-term compensation of the executive officers. The Compensation
Committee takes Mr. Gervais’ recommendations into account in determining the
Committee’s own recommendations regarding cash compensation, which are then
presented to the full Board for approval.
We do not
have a nominating committee. Instead, the Board, as a whole,
identifies and screens candidates for membership on the Board. A
majority of our Board consists of independent directors. Our Board
also includes the two founders of Qualstar, William J. Gervais and Richard A.
Nelson, who are still actively involved in the management of the Company and
own, in the aggregate, more than 39% of the outstanding shares of our common
stock. Accordingly, we believe that it is important that the two
founders participate in the selection of nominees to the Board and, therefore,
we do not have a separate nominating committee. All six nominees for
election to the Board at the Annual meeting are incumbent
directors.
We do not
have a formal written charter regarding the nomination process, and no specific
minimum qualifications for director nominees have been
established. In general, however, persons considered for nomination
to the Board must have demonstrated outstanding achievement, integrity and
judgment and such other skills and experience as will enhance the Board’s
ability to serve the long-term interests of the Company and our shareholders,
and must be willing and able to devote the necessary time for Board
service. To comply with regulatory requirements, a majority of Board
members must qualify as independent directors under Nasdaq rules, and at least
one Board member must qualify as an “audit committee financial expert” under SEC
rules. The Board considers potential candidates recommended by
current directors, company officers, employees and others, although no procedure
has been established for shareholders to recommend candidates to be considered
as director nominees.
Shareholder
Communications with the Board
Shareholders
wishing to communicate with the Board of Directors or with an individual Board
member concerning the Company may do so by writing to the Board or to the
particular Board member, and mailing the correspondence
to: Attention: Corporate Secretary, Qualstar Corporation, 3990-B
Heritage Oak Court, Simi Valley, California 93063. The envelope
should indicate that it contains a shareholder communication. All
such shareholder communications will be forwarded to the director or directors
to whom the communications are addressed.
Code
of Business Conduct and Ethics
The Board
has adopted a Code of Business Conduct and Ethics that applies to our chief
executive officer, chief financial officer, controller and persons performing
similar functions. A copy of the Code of Business Conduct and Ethics
is available in the investors section of the Company’s website at
www.Qualstar.com, and a copy also may be obtained at no charge by written
request to the attention of the Corporate Secretary at 3990-B Heritage Oak
Court, Simi Valley, California 93063.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires Qualstar’s directors and
executive officers, and persons who own more than ten percent of Qualstar’s
common stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of our common
stock. Officers, directors and greater than ten percent shareholders
are required by SEC regulations to furnish Qualstar with copies of all Section
16(a) forms they file.
To our
knowledge, based solely on a review of the copies of Section 16(a) reports
furnished to us and written representations that no other reports were required
during the fiscal year ended June 30, 2007, our officers, directors and greater
than ten percent beneficial owners complied with all Section 16(a) filing
requirements.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership
of our common stock as of February 11, 2008 for:
|
·
|
each
person (or group of affiliated persons) who we know beneficially owns more
than 5% of our common stock;
|
|
·
|
each
of our directors and nominees for election to the
Board;
|
|
·
|
each
of the named executive officers;
and
|
|
·
|
all
of our directors and executive officers as a
group.
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect to
shares. Except as indicated by footnote, the persons named in the
table have sole voting and sole investment control with respect to all shares
beneficially owned, subject to community property laws where
applicable. The percentage of shares beneficially owned is based on
12,253,117 shares of common stock outstanding as of February 11,
2008. Shares of common stock subject to options currently exercisable
or exercisable within 60 days of February 11, 2008, are deemed outstanding for
computing the percentage of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person. The
address for those individuals for which an address is not otherwise indicated
is: c/o Qualstar Corporation, 3990-B Heritage Oak Court, Simi Valley, California
93063.
|
|
|
|
|
Options
Exercisable
Within
60
|
|
|
Beneficial Ownership
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
J. Gervais
|
|
|
2,938,550 |
|
|
|
— |
|
|
|
2,938,550 |
|
|
|
24.0 |
% |
Richard
A. Nelson
|
|
|
1,906,560 |
|
|
|
— |
|
|
|
1,906,560 |
|
|
|
15.6 |
% |
Wells
Capital Management Inc.(2)
525
Market Street, 10th
Floor
San
Francisco, CA 94105
|
|
|
1,496,698 |
|
|
|
— |
|
|
|
1,496,698 |
|
|
|
12.2 |
% |
Microcapital
LLC (3)
623
Fifth Avenue, Suite 2502
New
York, NY 10022
|
|
|
1,069,754 |
|
|
|
— |
|
|
|
1,069,754 |
|
|
|
8.7 |
% |
Stanley
W. Corker
|
|
|
3,940 |
|
|
|
6,000 |
|
|
|
9,940 |
|
|
|
* |
|
Carl
Gromada
|
|
|
48,271 |
|
|
|
6,000 |
|
|
|
54,271 |
|
|
|
* |
|
Robert
A. Meyer
|
|
|
— |
|
|
|
6,000 |
|
|
|
6,000 |
|
|
|
* |
|
Robert
E. Rich
|
|
|
131,400 |
|
|
|
6,000 |
|
|
|
137,400 |
|
|
|
1.1 |
% |
Robert
K. Covey
|
|
|
48,280 |
|
|
|
20,000 |
|
|
|
68,280 |
|
|
|
* |
|
Andrew
A. Farina
|
|
|
— |
|
|
|
12,500 |
|
|
|
12,500 |
|
|
|
* |
|
David
L. Griffith
|
|
|
— |
|
|
|
80,000 |
|
|
|
80,000 |
|
|
|
* |
|
Robert
C. King
|
|
|
— |
|
|
|
37,500 |
|
|
|
37,500 |
|
|
|
* |
|
Frederic
T. Boyer (4)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
* |
|
All
directors and officers as a group (11 persons)
|
|
|
5,077,001 |
|
|
|
174,000 |
|
|
|
5,251,001 |
|
|
|
42.3 |
% |
(1)
|
Represents
shares that may be acquired upon exercise of stock options which are
either currently vested or will vest within 60 days of February 11,
2008.
|
(2)
|
Based
on information contained in reports filed with the Securities and Exchange
Commission, Wells Fargo & Company, as the parent holding company
of Wells Capital Management Incorporated, an investment adviser,
beneficially owns 1,496,698 shares as of December 31,
2007.
|
(3)
|
Based
on information contained in reports filed with the Securities and Exchange
Commission, Microcapital LLC beneficially owns 1,1,069,754 shares as of
September 30, 2007.
|
(4)
|
Frederic
T. Boyer resigned as Chief Financial Officer and as an employee effective
as of August 18, 2006.
|
COMPENSATION
DISCUSSION AND ANALYSIS
This
section contains a discussion of the material elements of compensation awarded
to, earned by, or paid to our principal executive officer, our principal
financial officer, and our other three most highly compensated executive
officers who were serving as executive officers of Qualstar at June 30,
2007. These individuals are identified in the Summary Compensation
Table and other compensation tables that follow this section, and are referred
to throughout this report as our “named executive officers.”
Executive
Compensation Program Objectives
Our
executive compensation program is intended to fulfill three primary
objectives: first, to attract and retain qualified executives
required for the success of our business; second, to reward these executives for
financial and operating performance; and third, to align their interests with
those of our stockholders to create long-term stockholder value. The
principal elements of the compensation program for our named executives include
base salary, cash bonus, and long-term incentives in the form of stock
options.
Executive
Officer Compensation Elements
Base
Salaries
Our Board
of Directors, upon the recommendation of the Compensation Committee, establishes
base salaries for our executive officers. The Compensation Committee
considers compensation paid by companies comparable in size to Qualstar, the
experience level and past performance of the individual executives, as well as
the revenues and profitability of Qualstar. Our goal is to provide
base salaries that are fair and competitive, but not excessive.
The table below shows the base salary
established for each of our named executive officers for fiscal years 2007 and
2008, and the percentage increase compared to the prior fiscal
year. Salary adjustments generally take effect in October of each
year, so the amounts shown below may not be exactly the same as those shown in
the Fiscal 2007 Summary Compensation Table.
Name
and Principal Position
|
|
|
|
|
Percent Increase
versus Fiscal
2006
Base Salary
|
|
|
|
|
|
Percent Increase
versus Fiscal
2007
Base Salary
|
|
William
J. Gervais
Chief
Executive Officer and President
|
|
$ |
195,000 |
|
|
|
5.4 |
% |
|
$ |
195,000 |
|
|
─
|
|
Andrew
A. Farina (1)
Vice
President and Chief Financial
Officer
|
|
$ |
165,000 |
|
|
|
(1 |
) |
|
$ |
170,000 |
|
|
|
3.0 |
% |
Richard
A. Nelson
Vice
President of Engineering
|
|
$ |
170,000 |
|
|
|
16.4 |
% |
|
$ |
170,000 |
|
|
─
|
|
Robert
K. Covey
Vice
President of Marketing
|
|
$ |
172,000 |
|
|
|
3.0 |
% |
|
$ |
172,000 |
|
|
─
|
|
Robert
C. King
Vice
President of Sales
|
|
$ |
171,000 |
(2) |
|
|
3.0 |
% |
|
$ |
171,000 |
(2) |
|
─
|
|
__________
|
(1)
|
Mr.
Farina’s employment commenced on November 27,
2006.
|
|
(2)
|
The
amounts shown for Mr. King includes an allowance of $6,000 per year for
automobile expenses.
|
Cash
Bonuses
Historically,
each year the Board of Directors, upon the recommendation of the Compensation
Committee, has established a cash bonus plan for executive officers based on
Qualstar achieving stated levels of consolidated revenue and pre-tax profits for
the fiscal year, excluding the effects of acquisitions, if any, made during the
fiscal year. Under the bonus plan established for the fiscal year
ended June 30, 2007, the potential cash bonuses for all executive officers other
than the Vice President of Sales were as follows: (1) from 0% of base
salary if consolidated revenue for the fiscal year ending June 30, 2007 was less
than $22 million, to a maximum of 20% of base salary if consolidated revenue was
more than $38 million; plus (2) an additional amount ranging from 0% of base
salary if the Company was not profitable for the fiscal year ending June 30,
2007, to a maximum of 20% of base salary if consolidated pre-tax profits were
more than 19% of consolidated revenue for the fiscal year. For the
Vice President of Sales, the potential cash bonus for the fiscal year ended June
30, 2007 was as follows: (1) from $3,000 if consolidated revenue,
excluding revenue from sales of power supplies, was $20 million, up to $75,000
if consolidated revenue, excluding revenue from sales of power supplies, was $35
million; plus (2) an additional amount ranging from 0% of base salary if
consolidated pre-tax profits, including profits from sales of power supplies,
were less than 5% of consolidated revenue for the fiscal year ending June 30,
2007, to a maximum of 15% of base salary if consolidated pre-tax profits,
including profits from sales of power supplies, were more than 19% of
consolidated revenue for the fiscal year.
The
Company’s Board of Directors reserves the right to modify the bonus plan from
time to time, and to pay discretionary cash bonuses, if deemed
appropriate. Because Qualstar achieved revenues of only $21.7 million
(including revenues from power supplies) and a net loss of $1.4 million in
fiscal 2007, no executive officer earned a cash bonus under the plan described
above. However, based on the individual performance of our Vice
President of Sales, the Board awarded him a discretionary cash bonus of $14,000
for fiscal 2007.
The Board
of Directors has not yet defined a bonus plan for executive officers for fiscal
2008.
Equity-Based
Compensation
We use
stock option grants as a form of long-term compensation. For the past
several years, however, our stock generally has not been actively traded and the
price per share has declined or stayed within a relatively narrow
range. Consequently, stock options have not provided significant
compensation in recent years.
Under our
1998 Stock Incentive Plan, the exercise price of stock options must be no less
than the closing price of our common stock on the date of grant. It
is our policy to grant stock options only at duly held meetings of our Board of
Directors, with an exercise price equal to the closing price of our common stock
on the date of the Board meeting.
Compensation
of our Named Executive Officers
The
amount of each component of compensation established for the named executive
officers is based on a number of factors. These factors include
company performance, individual performance, compensation paid by companies
comparable in size to Qualstar, the recommendations of our Chief Executive
Officer, William J. Gervais, and a review of the prior compensation history of
each executive officer. Some of these factors are discussed
above. Other factors applicable to each named executive officer are
discussed below.
Mr.
Gervais and Mr. Nelson co-founded Qualstar in 1984 and they continue to serve
Qualstar full time as executive officers. The Compensation Committee
considers both Mr. Gervais and Mr. Nelson to be largely responsible for the
success the Company has achieved, and to be two of our most important
employees. However, Mr. Gervais and Mr. Nelson have requested that
their base salaries be maintained at levels the Compensation Committee considers
to be relatively low. The reasons for this include their belief that
in the long term their individual equity ownership of Qualstar potentially will
provide greater financial returns than current compensation. For the same
reason, they have never requested nor accepted stock option awards.
Mr.
Farina has been an employee of Qualstar since November 27, 2006 and our Chief
Financial Officer since December 14, 2006. His starting base salary
was $165,000 per year, and upon appointment as an officer, the Board awarded him
a stock option for 50,000 shares of our common stock. On August 30,
2007, the Board approved an increase in his base salary to $170,000 to bring his
compensation more in line with amounts paid to chief financial officers at
public companies of a size similar to Qualstar.
Mr. Covey
and Mr. King each received a modest 3.0% increase in his base salary for fiscal
year 2007. Mr. King also received a stock option grant for 50,000
shares in fiscal 2007 in recognition of his efforts in launching our new XLS
family of enterprise class tape libraries.
Other
than as described above for Mr. Farina, no executive officer received a raise
for fiscal 2008 due to the below-plan financial performance of Qualstar during
fiscal 2007.
Tax
Considerations
Under
Section 162(m) of the Internal Revenue Code, we generally receive a federal
income tax deduction for compensation paid to any of our named executive
officers only to the extent total compensation does not exceed $1.0 million
during any fiscal year or if it is “performance-based” under Section
162(m). The total compensation earned by our executive officers has
always been less than $1.0 million and, consequently, the limitations imposed by
Section 162(m) have not been a factor.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has reviewed the foregoing Compensation Discussion and
Analysis and has discussed its contents with Qualstar’s management and the Board
of Directors. Based on the review and discussions, the Compensation Committee
has recommended to the Board that the Compensation Discussion and Analysis be
included in this report.
|
Submitted
by the members of the Compensation Committee
|
|
|
Stanley
W. Corker (Chairman)
|
|
|
Carl
W. Gromada
|
|
|
Robert
A. Meyer
|
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Board
of Directors has a standing Compensation Committee. The members of
this committee during the fiscal year ended June 30, 2007 and presently are
Stanley W. Corker, Carl W. Gromada and Robert A. Meyer. No executive
officer of Qualstar serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
Board of Directors. No member of the Compensation Committee is, or
ever has been, an employee or officer of Qualstar.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table shows the compensation earned during the fiscal year ended June
30, 2007 by our principal executive officer, each person who served as our
principal financial officer during the fiscal year, and our three other most
highly compensated executive officers who were serving as executive officers at
June 30, 2007. These officers are referred to in this report as the
“named executive officers.”
Fiscal
2007 Summary Compensation Table
Name
and Principal Position
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other Compensation (3)
($)
|
|
|
|
|
William
J.
Gervais
Chief
Executive Officer and President
|
|
2007
|
|
$ |
193,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
3,868 |
|
|
$ |
196,868 |
|
Andrew
A. Farina (4)
Vice
President and Chief Financial Officer
|
|
2007
|
|
|
92,000 |
|
|
|
— |
|
|
|
6,017 |
|
|
|
286 |
|
|
|
98,303 |
|
Richard
A.
Nelson
Vice
President of Engineering
|
|
2007
|
|
|
164,000 |
|
|
|
— |
|
|
|
— |
|
|
|
6,545 |
|
|
|
170,545 |
|
Robert
K.
Covey
Vice
President of Marketing
|
|
2007
|
|
|
171,000 |
|
|
|
— |
|
|
|
— |
|
|
|
3,962 |
|
|
|
174,962 |
|
Robert
C.
King
Vice
President of Sales
|
|
2007
|
|
|
169,000 |
|
|
|
14,000 |
|
|
|
21,894 |
|
|
|
5,724 |
|
|
|
210,618 |
|
Frederic
T. Boyer (5)
Vice
President and Chief Financial Officer
|
|
2007
|
|
|
42,000 |
|
|
|
— |
|
|
|
(30,146 |
) |
|
|
2,866 |
|
|
|
14,720 |
|
(1)
|
The
amounts shown in these columns reflect salary and bonuses earned by the
named executive officers during fiscal year 2007 and include amounts which
the executives elected to defer, on a discretionary basis, pursuant to
Qualstar’s 401(k) savings plan.
|
(2)
|
The
amounts shown in this column represent the compensation expense recognized
by Qualstar in fiscal year 2007 for financial statement reporting purposes
with respect to the fair value of stock options granted during fiscal 2007
and in prior fiscal years. The compensation expense is computed
in accordance with SFAS 123R, and does not necessarily correspond to the
actual value that will be realized by the named executive
officers. Stock options granted to the named executive officers
vest over four years at the rate of 25% of the shares as of each
anniversary of the date of grant. As a result of Mr. Boyer’s
resignation as of August 18, 2006, he forfeited stock options for 100,000
shares. The compensation expense with respect to Mr. Boyer’s
options that vested in fiscal 2007, less the reversal of amounts
previously accrued relating to his forfeited options, resulted in a net
credit of $30,146 recognized by Qualstar in fiscal 2007. This
amount is included in the table above. Pursuant to SEC rules,
the dollar amounts shown in the table exclude the impact of estimated
forfeitures related to service-based vesting conditions. Under
SFAS 123R, the fair value of stock options is calculated using the closing
price of Qualstar common stock on the date of grant. For additional
information regarding the calculation of the fair value of stock options,
refer to note 7 of the Qualstar financial statements included in Item 8 of
this report.
|
(3)
|
The
amounts shown above under “All Other Compensation” represent matching
contributions under our 401(k) plan, and premiums for disability and life
insurance.
|
(4)
|
Mr.
Farina’s employment commenced as of November 27,
2006
|
(5)
|
Mr.
Boyer resigned effective as of August 18,
2006.
|
Grants
of Plan-Based Awards
The
following table sets forth information regarding grants of awards to each named
executive officer during the year ended June 30, 2007 under our equity incentive
plan.
Grants
of Plan-Based Awards in Fiscal Year 2007
|
|
|
|
|
All Other
Option Awards:
Number
of
Securities
Underlying
Options (1)
(#)
|
|
|
Exercise or Base
Price of Option
Awards ($ / Sh)
|
|
|
Grant Date Fair
Value of Stock and
Option Awards (2)
($)
|
|
William
J. Gervais
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Andrew
A. Farina
|
|
12/14/2006
|
|
|
|
50,000 |
|
|
$ |
2.88 |
|
|
$ |
56,152 |
|
Richard
A. Nelson
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Robert
K.
Covey
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Robert
C.
King
|
|
12/14/2006
|
|
|
|
50,000 |
|
|
|
2.88 |
|
|
|
56,152 |
|
Frederic
T.
Boyer
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
(1)
|
The
amounts shown in this column represent the number of shares of common
stock underlying stock options granted in fiscal year 2007 to each named
executive officer. Stock options granted to the named executive
officers vest over four years at the rate of 25% of the number of shares
as of each anniversary of the date of grant, provided that the executive
is still employed by Qualstar on the vesting
date.
|
(2)
|
The
amounts shown in this column represent the full grant date fair value of
stock options granted in fiscal year 2007, computed in accordance with
SFAS 123R, and does not necessarily correspond to the actual value that
will be realized by the named executive officers. Under SFAS
123R, the grant date fair value of stock options is calculated using the
closing price of Qualstar common stock on the date of
grant. This amount is then recognized by the Company as
compensation expense for financial statement reporting purposes ratably
over the vesting period. The amount recognized as compensation
expense in fiscal 2007 is included in the Summary Compensation Table above
in the column headed “Option Awards.” For additional
information regarding the calculation of the grant date fair value of
stock options, refer to note 7 of the Qualstar financial statements
included in Item 8 of its annual report on Form 10-K for the fiscal year
ended June 30, 2007, as filed with the Securities and Exchange
Commission.
|
Outstanding
Equity Awards
The
following table provides information regarding outstanding equity awards held by
each named executive officer as of June 30, 2007, including the number of
unexercised vested and unvested stock options. The vesting schedule for each
grant is shown following this table.
Outstanding
Equity Awards at 2007 Fiscal Year End
|
|
|
|
|
|
Number
of Securities
Underlying
Unexercised
|
|
|
Option
Exercise
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
($)
|
|
|
Date
|
|
William
J.
Gervais
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Andrew
A.
Farina
|
|
|
— |
|
|
|
50,000 |
|
|
$ |
2.88 |
|
|
12/14/2016
|
|
Richard
A.
Nelson
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Robert
K.
Covey
|
|
|
20,000 |
|
|
|
— |
|
|
|
5.94 |
|
|
01/03/2012
|
|
Robert
C.
King
|
|
|
25,000 |
|
|
|
25,000 |
|
|
|
3.71 |
|
|
06/15/2015
|
|
|
|
|
— |
|
|
|
50,000 |
|
|
|
2.88 |
|
|
12/14/2016
|
|
Frederic
T. Boyer (2)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
(1)
|
Stock
options granted to the named executive officers vest over four years at
the rate of 25% of the options as of each anniversary of the date of
grant, provided that the executive is still employed by Qualstar on the
vesting date. The amounts shown in this column represent the
remaining unvested portion of each option
grant.
|
|
(2)
|
Frederic
T. Boyer resigned effective as of August 18,
2006.
|
Option
Exercises
The table below sets forth information
for each named executive officer regarding the exercise of stock options during
the fiscal year ended June 30, 2007, including the aggregate value realized upon
exercise before payment of any applicable withholding taxes.
Option
Exercises in Fiscal Year 2007
|
|
|
|
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
on
Exercise (1)
($)
|
|
William
J.
Gervais
|
|
|
— |
|
|
|
— |
|
Andrew
A.
Farina
|
|
|
— |
|
|
|
— |
|
Richard
A.
Nelson
|
|
|
— |
|
|
|
— |
|
Robert
K.
Covey
|
|
|
— |
|
|
|
— |
|
Robert
C.
King
|
|
|
— |
|
|
|
— |
|
Frederic
T.
Boyer
|
|
|
— |
|
|
|
— |
|
|
(1)
|
The
value realized on exercise of option awards represents the market price
per share of common stock on the date of exercise, less the stock option
exercise price per share, multiplied by the number of stock options
exercised.
|
Director
Compensation
Each of
our non-employee directors receives cash fees and equity-based awards as
compensation for his service on the Board of Directors and the committees of the
Board on which he is a member. The table below sets forth cash
compensation earned by each non-employee director, and share-based compensation
expense recognized by us for each non-employee director, during the fiscal year
ended June 30, 2007. All compensation earned by Mr. Gervais and Mr.
Nelson is reported in the Summary Compensation Table above and has been excluded
from the table below.
Fiscal
Year 2007 Director Compensation Table
|
|
Fees Earned or
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stanley
W. Corker
|
|
$ |
19,250 |
|
|
$ |
5,760 |
|
|
$ |
25,010 |
|
Carl
W. Gromada
|
|
|
19,250 |
|
|
|
5,760 |
|
|
|
25,010 |
|
Robert
A. Meyer
|
|
|
17,500 |
|
|
|
5,760 |
|
|
|
23,260 |
|
Robert
E. Rich
|
|
|
11,250 |
|
|
|
5,760 |
|
|
|
17,010 |
|
|
(1)
|
The
amounts shown in this column represent the amount of cash compensation
earned in fiscal year 2007 for service on the Board of Directors and any
committees of the Board on which the director was a member in fiscal
2007.
|
|
(2)
|
The
amounts shown in this column represent the compensation expense recognized
by Qualstar in fiscal year 2007 for financial statement reporting purposes
with respect to the fair value of stock options granted in prior fiscal
years. No stock options were granted to our directors during
fiscal 2007. The compensation expense is computed in accordance
with SFAS 123R, and does not necessarily correspond to the actual value
that will be realized by the directors. Stock options granted
to our directors vest over four years at the rate of 25% of the shares as
of each anniversary of the date of grant. Pursuant to SEC
rules, the dollar amounts shown in the table exclude the impact of
estimated forfeitures related to service-based vesting
conditions. Under SFAS 123R, the fair value of stock options is
calculated using the closing price of Qualstar common stock on the date of
grant. For additional information regarding the calculation of the fair
value of stock options, refer to note 7 of the Qualstar financial
statements included in Item 8 of this
report.
|
|
(3)
|
As
of June 30, 2007, each of our non-employee directors named in the above
table held unexercised stock options for 24,000 shares of our common
stock.
|
Each of
our non-employee directors receives $2,000 per quarter plus $1,000 for each
Board meeting attended as compensation for his service on the Board, and is
reimbursed for expenses incurred in connection with attendance at meetings of
the Board and any committees on which he serves. Directors who serve on the
Audit Committee of our Board receive an additional fee of $1,000 per quarter
plus an attendance fee of $500 per meeting if the Audit Committee meeting is
held in conjunction with a meeting of the full Board, and $1,000 per meeting if
held on a day when the full Board does not meet. Directors who serve on the
Compensation Committee of our Board receive an additional fee of $500 for
attending meetings of that committee that are held on a day when the full Board
does not meet. An attendance fee of $250 per meeting is paid for telephonic
meetings of the full Board or of a committee on which a director is a member. No
fees are paid for service on the Board to directors who are employees of
Qualstar.
Directors
are eligible to receive stock options under our 1998 Stock Incentive
Plan. However, no stock options were granted to our non-employee
directors during the fiscal year ended June 30, 2007.
Potential
Benefits Upon or Following a Change in Control
Stock
options granted under our 1998 Stock Incentive Plan provide that upon certain
circumstances in the event of or following a change in control of Qualstar, the
unvested portion of such stock options will accelerate and become immediately
vested in full. In general, a change in control is deemed to occur if
we were to sell substantially all of our assets or if Qualstar were to merge
into, consolidate with or enter into a reorganization with another entity in a
transaction in which Qualstar is not the surviving corporation.
If a
change in control occurs and the acquiring entity does not assume and continue
the employee’s rights under the unvested stock options, then all unvested stock
options will accelerate and vest in full upon the occurrence of the change in
control. If the acquiring entity does assume the employee’s rights
under the unvested stock options, but the employee’s employment subsequently is
terminated without cause, or if the employee resigns for good reason after the
change in control, then all unvested stock options held by the employee would
accelerate and vest in full as of the date of termination.
The
reasons for which an employee may voluntarily resign and trigger acceleration of
vesting include a change in the employee’s position which materially reduces his
or her duties and responsibilities or the level of management to which the
employee reports, a reduction in the employee’s level of compensation and
benefits by more than 15 percent, or a relocation of employee’s principal place
of employment by more than 30 miles without his or her consent.
The table
below sets forth information regarding the estimated amounts that each named
executive officer would have realized in the event that a change in control of
Qualstar had occurred and all of his unvested stock options had accelerated and
become immediately vested in full as of June 29, 2007.
Estimated
Benefits at 2007 Fiscal Year End in the Event of a Change in
Control
|
|
|
|
William
J. Gervais
|
|
|
— |
|
Andrew
A. Farina
|
|
$ |
38,500 |
|
Richard
A. Nelson
|
|
|
— |
|
Robert
K. Covey
|
|
|
— |
|
Robert
C. King
|
|
$ |
38,500 |
|
Frederic
T. Boyer
|
|
|
— |
|
|
(1)
|
The
amounts in this column represent the aggregate gain each named executive
officer would have realized if all unvested stock options granted under
the 1998 Stock Incentive Plan that were held by him on June 29, 2007
accelerated and became immediately vested in full on that
date. The amount of gain was calculated based on the difference
between the exercise price of each unvested option and the closing price
of our common stock on that date, which was $3.65 per
share.
|
Transactions
with Related Persons
There are
no relationships or transactions involving any of our directors or executive
officers for which disclosure is required under the rules of the Securities and
Exchange Commission.
In
accordance with the charter of the Audit Committee of our Board of Directors,
the Audit Committee is responsible for reviewing any proposed transaction with
any related person which involves a potential conflict of interest or for which
approval is required under applicable Securities and Exchange Commission and
Nasdaq rules. Currently, this review and approval requirement applies
to any transaction to which Qualstar will be a party, in which the amount
involved exceeds $120,000, and in which any of the following persons will have a
direct or indirect material interest: (a) any of our directors or executive
officers, (b) any nominee for election as a director, (c) any security holder
who is known to us to own of record or beneficially more than five percent of
our common stock, or (d) any member of the immediate family of any of the
persons described in the foregoing clauses (a) through (c).
In the
event that management becomes aware of any related person transaction,
management will present information regarding the proposed transaction to the
Audit Committee for review. Approval of a transaction with a related
person requires the affirmative vote of a majority of the members of the Audit
Committee or of a majority of the members of the full Board of
Directors. If the related person transaction involves a member or
members of the Board, approval requires a majority vote of the directors who do
not have a financial interest in the transaction.
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
This
report is submitted by the current Audit Committee members who served on the
committee during the fiscal year ended June 30, 2007.
The Audit
Committee of the Board of Directors is composed solely of non-employee directors
who satisfy the current Nasdaq requirements with respect to independence,
financial expertise and experience. The Audit Committee operates
pursuant to a written charter adopted by the Board of Directors, a copy of which
is available in the investors section of the Company’s website at
www.Qualstar.com.
The role
of the Audit Committee is to oversee the Company’s financial reporting processes
on behalf of the Board of Directors. Management of the Company has
the primary responsibility for the Company’s financial statements as well as the
Company’s financial reporting processes, principles and internal
controls. The independent auditors are responsible for performing an
audit of the Company’s financial statements and expressing an opinion as to the
conformity of such financial statements with generally accepted accounting
principles.
In this
context, the Audit Committee: (a) has reviewed and discussed with
management and Ernst & Young LLP, the Company’s independent auditors, the
audited financial statements for the fiscal year ended June 30, 2007; (b) has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees);
(c) has received from the independent auditors the written disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions With
Audit Committees) and has discussed with them their independence from the
Company and its management; (d) has considered whether the independent auditors’
provision of non-audit services is compatible with maintaining their
independence; and (e) has discussed with management and the independent auditors
the adequacy of the Company’s internal controls.
The
members of the Audit Committee are not engaged in the accounting or auditing
profession and, consequently, are not experts in matters involving accounting or
auditing. In the performance of their oversight function, the members
of the Audit Committee necessarily relied upon the information, opinions,
reports and statements presented to them by management of the Company and by the
independent auditors. As a result, the Audit Committee’s oversight
and the review and discussions referred to above do not assure that management
has maintained adequate financial reporting processes, principles and internal
controls, that the Company’s financial statements are accurate, that the audit
of such financial statements has been conducted in accordance with generally
accepted auditing standards, or that the Company’s auditors meet the applicable
standards for auditor independence.
Based on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors, and the Board approved, that the audited financial
statements be included in the Company’s Annual Report on SEC Form 10-K for the
fiscal year ended June 30, 2007, for filing with the Securities and Exchange
Commission.
Members
of the Audit Committee
Carl W.
Gromada (Chairman)
Stanley
W. Corker
Robert A.
Meyer
APPROVAL
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal
2)
Proxies
solicited by the Board of Directors will, unless otherwise directed, be voted to
approve the appointment by the Audit Committee of Ernst & Young LLP as the
independent registered public accounting firm to audit Qualstar’s financial
statements for the fiscal year ending June 30, 2008. We have employed
Ernst & Young LLP in this capacity since 1985. If the
shareholders do not approve this appointment, the Audit Committee will consider
other independent registered public accounting firms.
Representatives
of Ernst & Young LLP will be present at the Annual Meeting to respond to
appropriate questions and will be given an opportunity to make a statement if
they so desire.
Fees Paid to
Independent Accounts. The aggregate fees billed by Ernst &
Young LLP, independent accountants, for professional services rendered to
Qualstar during the fiscal years ended June 30, 2006 and fiscal 2007 were
comprised of the following:
|
|
|
|
|
|
|
Audit
Fees
|
|
$ |
156,653 |
|
|
$ |
189,400 |
|
Audit-related
fees
|
|
|
9,457 |
|
|
|
2,784 |
|
Tax
fees
|
|
|
78,235 |
|
|
|
87,637 |
|
All
other fees
|
|
|
— |
|
|
|
— |
|
Total
fees
|
|
$ |
244,345 |
|
|
$ |
279,821 |
|
Audit
fees include fees for professional services rendered in connection with the
audit of our consolidated financial statements for each year and reviews of our
unaudited consolidated quarterly financial statements, as well as fees related
to consents and reports in connection with regulatory filings for those fiscal
years.
Audit-related
fees in fiscal 2006 and 2007 were primarily for general assistance in connection
with the implementation of procedures required to comply with rules and
regulations promulgated pursuant to the Sarbanes-Oxley Act of 2002.
Tax fees
related primarily to tax compliance and advisory services, and the preparation
of federal and state tax returns for each year. Tax fees for fiscal
2006 and 2007 also include professional services related to government audits of
our federal and state tax returns.
Audit Committee
Pre-Approval Policies and Procedures. Our Audit Committee’s
policy is to pre-approve all audit and permissible non-audit services provided
by our independent accountants in accordance with applicable Securities and
Exchange Commission rules. The Audit Committee adopted a written pre-approval
policy on June 25, 2003, and all services performed by Ernst & Young in
connection with engagements subsequent to June 25, 2003 were pre-approved
in accordance with the Audit Committee’s pre-approval policy. The Audit
Committee generally pre-approves particular services or categories of services
on a case-by-case basis. The independent accountants and management periodically
report to the Audit Committee regarding the extent of services provided by the
independent accountants in accordance with these pre-approvals, and the fees for
the services performed to date.
SHAREHOLDER
PROPOSALS
Proposals
to be Included in Our Proxy Statement
A
shareholder who wishes to have a proposal considered for inclusion in our proxy
statement for action at the next Annual Meeting of Shareholders must comply with
the requirements of Rule 14a-8 under the Securities Exchange Act of
1934. The proposal must be in writing and be received by the
Secretary of Qualstar at our principal place of business no later than October
21, 2008.
Advance
Notice Procedures
If a
shareholder desires to have a proposal acted upon at the next Annual Meeting of
Shareholders that is not included in our proxy statement in accordance with SEC
Rule 14a-8, or if a shareholder desires to nominate someone for election to our
Board of Directors, the shareholder must follow the procedures outlined in our
bylaws. Our bylaws provide that in order for a shareholder proposal
to be considered at an annual meeting of shareholders, written notice of the
proposal must be received by the Secretary of Qualstar generally not less than
60 days nor more than 90 days prior to the anniversary of the preceding year’s
annual meeting of shareholders. The notice must contain information
required by our bylaws, including a description of the proposal and any material
interest of the shareholder relating to such proposal.
In order
to nominate someone for election to our Board of Directors at an annual meeting
of shareholders, written notice of the proposed nomination must be received by
the Secretary of Qualstar not less than 60 days nor more than 90 days prior to
the anniversary of the preceding year’s annual meeting of
shareholders. The notice must contain information required by our
bylaws regarding the shareholder and the nominee, as well as information
required to be included in a proxy statement by SEC rules and
regulations.
Accordingly,
in order for a shareholder proposal or nomination to be considered at the next
Annual Meeting of Shareholders, a written notice of the proposal or the
nomination, which includes the information required by our bylaws, must be
received by the Secretary of Qualstar between December 25, 2008 and January 24,
2009.
A copy of
the full text of the bylaw provisions containing the advance notice procedures
described above may be obtained upon written request to the Secretary of
Qualstar at our principal place of business.
February
18, 2008
|
By
Order of the Board of Directors
|
|
|
|
Richard
A. Nelson
|
|
Secretary
|
PROXY
QUALSTAR
CORPORATION
3990-B
Heritage Oak Court
Simi
Valley, California 93063
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF QUALSTAR
CORPORATION.
The undersigned hereby appoints William
J. Gervais and Richard A. Nelson, and each of them individually, the attorney,
agent and proxy of the undersigned, with full power of substitution, to vote all
the shares of QUALSTAR CORPORATION which the undersigned is entitled to vote at
the Annual Meeting of Shareholders to be held at Qualstar’s corporate
headquarters located at 3990-B Heritage Oak Court, Simi Valley, California
93063, on March 25, 2008, at 9:30 a.m. Pacific Time, and at any and all
adjournments or postponements thereof, as follows:
1.
|
Election
of Directors:
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¨
|
FOR
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¨
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WITHHOLD
AUTHORITY
|
|
all
nominees listed below (except
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|
|
to
vote for all nominees listed below
|
|
as
indicated to the contrary below)
|
|
|
|
William
J. Gervais, Richard A. Nelson, Stanley W. Corker, Carl W. Gromada, Robert A.
Meyer and Robert E. Rich
2. To
approve the appointment of Ernst & Young LLP as the independent registered
public accounting firm to audit Qualstar’s financial statements for the fiscal
year ending June 30, 2008.
(INSTRUCTIONS: To
withhold authority to vote for any nominee, print that nominee's name in the
space provided below.)
This Proxy when properly executed will
be voted in the manner directed above. If no direction is given, this
Proxy will be voted FOR
the election of the nominees listed above and FOR proposal 2.
IMPORTANT—PLEASE
SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
(continued
from reverse side)
This Proxy confers discretionary
authority to vote on any other matters as may properly come before the
meeting. The undersigned acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement dated February 18,
2008.
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|
Signature
|
|
|
|
Signature
if held jointly
|
|
Please date this Proxy and sign
it exactly as your name or names appear hereon. When shares are
held by two or more persons, both should sign. When signing as
an attorney, executor, administrator, trustee or guardian, please give
full title as such. If shares are held by a corporation, please
sign in full corporate name by the President or other authorized
officer. If shares are held by a partnership, please sign in
partnership name by an authorized
person.
|
Please
mark, sign, date and return this Proxy promptly using the enclosed
envelope. If your address is incorrectly shown, please print
changes.