SCHEDULE 14A
INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by
the Registrant T
Filed by
a Party other than the Registrant o
Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material under
Section 240.14a-12
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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):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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Aggregate
number of securities to which transaction applies:
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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Filing
Party:
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Date
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February
12, 2010
Dear
Shareholder:
You are
cordially invited to attend the Annual Meeting of Shareholders of Qualstar
Corporation to be held on Thursday, March 25, 2010, 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 SingerLewak LLP to audit our financial statements
for fiscal 2010. 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.
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Sincerely,
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William
J. Gervais
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Chief
Executive Officer and President
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QUALSTAR
CORPORATION
3990-B
Heritage Oak Court
Simi
Valley, California 93063
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
be held on March 25, 2010
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 Thursday, March 25, 2010,
at 9:30 a.m. Pacific Time, for the following purposes:
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1.
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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;
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2.
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To
approve the appointment of SingerLewak LLP as the independent registered
public accounting firm to audit our financial statements for the fiscal
year ending June 30, 2010; and
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3.
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To
transact any other business as may properly come before the Annual Meeting
and any adjournment thereof.
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Shareholders
of record at the close of business on February 11, 2010, 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.
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By
Order of the Board of Directors
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Richard
A. Nelson
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Secretary
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Simi
Valley, California
February
12, 2010
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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.
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IMPORTANT
NOTICE regarding the availability of proxy materials for the Annual Meeting of
Shareholders to be held on March 25, 2010: This Proxy Statement and
our annual report on Form 10-K for the fiscal year ended June 30, 2009 are
available on Qualstar’s website at
www.qualstar.com
QUALSTAR
CORPORATION
3990-B
Heritage Oak Court
Simi
Valley, California 93063
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
To
be held on March 25, 2010
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 Thursday,
March 25, 2010, 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. Distribution of this Proxy Statement and
the accompanying proxy to our shareholders will begin on or about
February 12, 2010.
Voting
and Solicitation of Proxies
On
February 11, 2010, 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. Under Qualstar’s bylaws, the approval of proposal 2 will
require the affirmative votes of a majority of the shares present or represented
and entitled to be voted at the Annual Meeting. Proxies marked
“abstain” as to proposal 2 will be counted in the tabulation of the shares
entitled to vote and, therefore, will have the same effect as a vote “against”
the proposal. Broker non-votes will not be counted in determining the
total number of shares entitled to vote on proposal 2 and, therefore, will have
no effect on whether proposal 2 is approved.
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.
1
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:
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Business
Experience During Last
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Name and Age
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Five Years and Other
Directorships
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William
J. Gervais (67)
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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.
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Richard
A. Nelson (66)
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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.
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2
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Stanley
W. Corker (58)
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Stanley W. Corker has
served as a director of Qualstar since January 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.
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Carl
W. Gromada (68)
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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.
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Robert
A. Meyer (65)
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Robert A. Meyer has
served as a director of Qualstar since March 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.
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Robert
E. Rich (59)
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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.
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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.
3
Board
of Directors and Committee Meetings
During
the fiscal year ended June 30, 2009, our Board of Directors met 8 times and the
committees of our Board held a total of 8 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 2009.
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 2009
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 7 meetings during fiscal 2009. 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 1 meeting
during fiscal 2009.
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, approximately 40% 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.
4
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, 2009, our officers, directors and greater
than ten percent beneficial owners complied with all Section 16(a) filing
requirements except as follows: Nidhi H. Andalon was appointed our
Chief Financial Officer on January 19, 2009, and her initial statement of
beneficial ownership on Form 3 was not filed until February 11, 2009, which was
thirteen days after it was due.
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, 2010 for:
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each
person (or group of affiliated persons) who we know beneficially owns more
than 5% of our common stock;
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each
of our directors and nominees for election to the
Board;
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each
of the named executive officers;
and
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all
of our directors and executive officers as a
group.
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5
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,
2010. Shares of common stock subject to options currently exercisable
or exercisable within 60 days of February 11, 2010, 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.
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Shares
Owned
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Options
Exercisable
Within
60 Days (1)
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Beneficial Ownership
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| Name | Number | Percent | ||||||||||||||
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William
J. Gervais
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3,098,950 | — | 3,098,950 | 25.3 | % | |||||||||||
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Richard
A. Nelson
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1,845,261 | — | 1,845,261 | 15.1 | % | |||||||||||
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Dimensional
Fund Advisors LP (2)
Palisades
West, Building One
6300
Be Cave Road
Austin,
TX 78746
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964,087 | — | 964,087 | 7.9 | % | |||||||||||
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Porter
Orlin LLC (3)
665
Fifth Avenue, 34th
Floor
New
York, NY 10103
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958,551 | — | 958,551 | 7.8 | % | |||||||||||
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Stanley
W. Corker
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18,940 | 18,000 | 36,940 | * | ||||||||||||
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Carl
Gromada
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48,271 | 18,000 | 66,271 | * | ||||||||||||
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Robert
A. Meyer
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— | 18,000 | 18,000 | * | ||||||||||||
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Robert
E. Rich
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131,400 | 18,000 | 149,400 | 1.2 | % | |||||||||||
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Robert
K. Covey
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48,280 | 20,000 | 68,280 | * | ||||||||||||
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Andrew
A. Farina
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— | — | — | * | ||||||||||||
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Nidhi
H. Andalon
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— | 12,000 | 12,000 | * | ||||||||||||
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All
directors and officers as a group (9 persons)
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5,191,102 | 104,000 | 5,295,102 | 42.9 | % | |||||||||||
________________
*Less
than 1.0%
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(1)
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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,
2010.
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(2)
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Based
on information contained in reports filed with the Securities and Exchange
Commission, Dimensional Fund Advisors LP, an investment adviser,
beneficially owns 964,087 shares as of September 30,
2009.
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(3)
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Based
on information contained in reports filed with the Securities and Exchange
Commission, Orlin Porter LLC, an investment adviser, beneficially owns
958,551 shares as of September 30,
2009.
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6
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 executive officers who were serving as
executive officers of Qualstar at June 30, 2009. 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 2009 and 2010, and the percentage change compared to the prior
fiscal year. Salary adjustments typically do not coincide with the
beginning of the fiscal year, so the amounts shown below may not be exactly the
same as those shown in the Fiscal 2009 Summary Compensation Table.
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Name
and Principal Position
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Fiscal
2009
Base
Salary
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Percent
Change Versus Fiscal 2008
Base
Salary
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Fiscal
2010
Base
Salary
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Percent
Change Versus Fiscal 2009
Base
Salary
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William
J. Gervais
Chief
Executive Officer and President
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$ | 175,000 | (1) | (10.3 | %) | $ | 157,500 | (2) | (10.0 | %) | ||||||
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Nidhi
H. Andalon
Chief
Financial Officer
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$ | 140,000 | (3) | 12.0 | % | $ | 150,000 | (3) | 7.1 | % | ||||||
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Richard
A. Nelson
Vice
President of Engineering
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$ | 170,000 |
─
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$ | 153,000 | (2) | (10.0 | %) | ||||||||
|
Robert
K. Covey
Vice
President of Marketing
|
$ | 184,000 | 7.0 | % | $ | 165,600 | (2) | (10.0 | %) | |||||||
__________
|
|
(1)
|
Mr.
Gervais voluntarily reduced his base salary from a rate of $195,000 to a
rate of $175,000 per year, effective August 25,
2008.
|
|
|
(2)
|
As
a cost-saving measure, the base salaries of Mr. Gervais, Mr. Nelson and
Mr. Covey were reduced by 10% for an indefinite period, effective as of
July 2009.
|
|
(3)
|
Ms.
Andalon’s base salary was increased to a rate of $140,000 per year upon
her appointment as Chief Financial Officer on January 19,
2009. Her base salary was further increased to a rate of
$150,000 per year, effective as of July
2009.
|
7
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. However, in recent years Qualstar has not achieved the
levels of revenues or pre-tax profits required to earn even the minimum bonus
amounts under prior bonus plans. Consequently, the Board of Directors
did not establish a bonus plan for executive officers for fiscal 2009, and has
not established a bonus plan for executive officers for fiscal
2010.
Our Board
of Directors reserves the right, however, to pay discretionary cash bonuses, if
deemed appropriate.
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. We did not grant any stock options to
our executive officers in fiscal 2009.
Our 2008
Stock Incentive Plan authorizes us to grant stock options to purchase, in the
aggregate, up to 500,000 shares of our common stock. This plan was
adopted by our Board of Directors in November 2008 and approved by our
shareholders in March 2009, and replaces our 1998 Stock Incentive Plan, which
expired in 2008. Under both plans, 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.
William
J. Gervais and Richard A. 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 historically 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. Moreover, Mr. Gervais voluntarily reduced his salary
from a rate of $195,000 per year to a rate of $175,000 per year effective August
25, 2008 in order to reduce costs. In order to further reduce costs,
our Board of Directors, upon the recommendation of Mr. Gervais, reduced the base
salaries of Mr. Gervais and Mr. Nelson, as well as of Mr. Covey, by 10% for an
indefinite period, effective as of July 2009. Mr. Gervais and Mr.
Nelson also have never requested nor accepted stock option awards.
Nidhi H.
Andalon was appointed our Chief Financial Officer by our Board of Directors on
January 19, 2009. Ms. Andalon joined Qualstar’s finance department in January
2003 as a senior accountant, and was promoted to Assistant Controller in June
2004 and to Controller in October 2005. Upon being appointed Chief
Financial Officer, our Board approved an increase in her base salary from
$125,000 to $140,000 to reflect her increased responsibilities. In
recognition of her performance as Chief Financial Officer during her first six
months in that position, our Board approved a further increase in her base
salary to a rate of $150,000 per year, effective as of July
2009.
8
Mr. Covey
has been our Vice President of Marketing since 1994. On November 5,
2008, the Board approved an increase in Mr. Covey’s base salary to $184,000 per
year, effective retroactively to July 1, 2008, to bring his compensation more in
line with market rates for persons with similar duties and responsibilities at
other companies. However, in order to reduce costs, our Board of
Directors, upon the recommendation of Mr. Gervais, reduced the base salary of
Mr. Covey, as well as the base salaries of Mr. Gervais and Mr. Nelson, by 10%
for an indefinite period, effective as of July 2009.
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 $1.0 million and, consequently, the limitations imposed by
Section 162(m) have not been a factor.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has reviewed the foregoing Compensation Discussion and
Analysis and has discussed its contents with Qualstar’s management and the Board
of Directors. Based on the review and discussions, the Compensation Committee
has recommended to the Board that the Compensation Discussion and Analysis be
included in this report.
|
Submitted
by the members of the Compensation Committee
|
|
|
Stanley
W. Corker (Chairman)
|
|
|
Carl
W. Gromada
|
|
|
Robert
A. Meyer
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Board
of Directors has a standing Compensation Committee. The members of
this committee during the fiscal year ended June 30, 2009 and presently are
Stanley W. Corker, Carl W. Gromada and Robert A. Meyer. No executive
officer of Qualstar serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
Board of Directors. No member of the Compensation Committee is, or
ever has been, an employee or officer of Qualstar.
9
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following tables show information about the compensation earned by our principal
executive officer, our principal financial officer, and our other executive
officers who were serving as executive officers at June 30,
2009. These officers are referred to in this report as the “named
executive officers.”
Fiscal
Year 2009 Summary Compensation Table
|
Name
and Principal Position
|
Year
|
Salary (1)
($)
|
Bonus (1)
($)
|
Option
Awards (2)
($)
|
All
Other Compensation (3)
($)
|
Total
($)
|
||||||||||||||||
|
William
J. Gervais
|
2009
|
$ | 178,838 | $ | — | $ | — | $ | 2,254 | $ | 181,092 | |||||||||||
|
Chief
Executive Officer and President
|
2008
|
195,000 | — | — | 3,867 | 198,867 | ||||||||||||||||
|
2007
|
193,000 | — | — | 3,868 | 196,868 | |||||||||||||||||
|
Nidhi
H. Andalon (4)
Chief
Financial Officer
|
2009
|
130,276 | — | 3,840 | 1,275 | 135,391 | ||||||||||||||||
|
Andrew
A. Farina (5)
|
2009
|
114,026 | — | 6,423 | 15,334 | 135,783 | ||||||||||||||||
|
Vice
President and Chief Financial Officer
|
2008
|
169,055 | — | 15,636 | 573 | 185,264 | ||||||||||||||||
|
2007
|
92,000 | — | 6,017 | 286 | 98,303 | |||||||||||||||||
|
Richard
A. Nelson
|
2009
|
171,273 | — | — | 5,730 | 177,003 | ||||||||||||||||
|
Vice
President of Engineering
|
2008
|
169,998 | — | — | 6,274 | 176,272 | ||||||||||||||||
|
2007
|
164,000 | — | — | 6,545 | 170,545 | |||||||||||||||||
|
Robert
K. Covey
|
2009
|
183,467 | — | — | 5,123 | 188,590 | ||||||||||||||||
|
Vice
President of Marketing
|
2008
|
175,303 | — | — | 4,445 | 179,748 | ||||||||||||||||
|
2007
|
171,000 | — | — | 3,962 | 174,962 | |||||||||||||||||
|
|
(1)
|
The
amounts shown in these columns reflect salary and bonuses earned by the
named executive officers for each of the fiscal years indicated 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 each of the fiscal years indicated for financial statement
reporting purposes with respect to the fair value of stock options granted
during fiscal 2009 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. 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. As a result of Mr. Farina’s termination as of January
16, 2009, he forfeited stock options for 50,000 shares. The
compensation expense with respect to Mr. Farina’s options that vested in
fiscal 2009, less the reversal of amounts previously accrued relating to
his forfeited options, resulted in net compensation expense of $6,423
recognized by Qualstar in fiscal 2009. This amount is included
in the table above. For additional information regarding the
calculation of the fair value of stock options, refer to note 9 of the
Qualstar financial statements included in Item 8 of our annual report on
Form 10-K for the fiscal year ended June 30, 3008, as filed with the
SEC.
|
10
|
|
(3)
|
The
amounts shown above under “All Other Compensation” represent matching
contributions under our 401(k) plan, and premiums for disability and life
insurance. For Mr. Farina, the amount shown for fiscal 2009
also includes a $15,000 severance paid upon his termination of
employment.
|
|
|
(4)
|
Ms.
Andalon was appointed our Chief Financial Officer effective January 19,
2009.
|
|
|
(5)
|
Mr.
Farina’s employment terminated as of January 16,
2009.
|
Grants
of Plan-Based Awards
The
following table sets forth information regarding grants of awards to each named
executive officer during the year ended June 30, 2009 under our equity incentive
plan.
Grants
of Plan-Based Awards in Fiscal Year 2009
|
Name
|
Grant
Date
|
All Other
Option Awards: Number of Securities Underlying Options (1)
(#)
|
Exercise or
Base Price of Option Awards ($ / Sh)
|
Grant
Date Fair
Value
of Stock and Option Awards (2)
($)
|
||||||||||||
|
William
J. Gervais
|
— | — | — | — | ||||||||||||
|
Nidhi
H. Andalon
|
— | — | — | — | ||||||||||||
|
Andrew
A. Farina
|
— | — | — | — | ||||||||||||
|
Richard
A. Nelson
|
— | — | — | — | ||||||||||||
|
Robert
K. Covey
|
— | — | — | — | ||||||||||||
|
|
(1)
|
The
amounts shown in this column represent the number of shares of common
stock underlying stock options granted in fiscal year 2009 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 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 2009, 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 2009 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 9 of the Qualstar financial statements
included in Item 8 of our annual report on Form 10-K for the fiscal year
ended June 30, 2009, as filed with the
SEC.
|
11
Outstanding
Equity Awards
The
following table provides information regarding outstanding equity awards held by
each named executive officer as of June 30, 2009, 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 2009 Fiscal Year End
|
Option
Awards
|
||||||||||||||||
|
Number
of Securities
Underlying
Unexercised
Options
(#)
|
Option
Exercise
Price
($)
|
|||||||||||||||
|
Option
Expiration
Date
|
||||||||||||||||
|
Name
|
Exercisable
|
Unexercisable (1)
|
||||||||||||||
|
William
J. Gervais
|
— | — | — | — | ||||||||||||
|
Nidhi
H. Andalon
|
12,000 | 4,000 | $ | 3.02 |
06/14/2016
|
|||||||||||
|
Andrew
A. Farina (2)
|
— | — | — | — | ||||||||||||
|
Richard
A. Nelson
|
— | — | — | — | ||||||||||||
|
Robert
K. Covey
|
20,000 | — | 5.94 |
01/03/2012
|
||||||||||||
______________
|
|
(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)
|
Mr.
Farina’s employment terminated effective January 16,
2009.
|
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, 2009, including the aggregate value realized upon
exercise before payment of any applicable withholding taxes.
Option
Exercises in Fiscal Year 2009
|
Option
Awards
|
||||||||
|
Name
|
Number of Shares
Acquired on Exercise
(#)
|
Value Realized
on
Exercise (1)
($)
|
||||||
|
William
J. Gervais
|
— | — | ||||||
|
Nidhi
H. Andalon
|
— | — | ||||||
|
Andrew
A. Farina
|
— | — | ||||||
|
Richard
A. Nelson
|
— | — | ||||||
|
Robert
K. Covey
|
— | — | ||||||
________________
|
|
(1)
|
The
value realized on exercise of option awards represents the market price
per share of common stock on the date of exercise, less the stock option
exercise price per share, multiplied by the number of stock options
exercised.
|
12
Director
Compensation
Each of
our non-employee directors receives cash fees and equity-based awards as
compensation for his service on the Board of Directors and the committees of the
Board on which he is a member. The table below sets forth cash
compensation earned by each non-employee director, and share-based compensation
expense recognized by us for each non-employee director, during the fiscal year
ended June 30, 2009. All compensation earned by Mr. Gervais and
Mr. Nelson is reported in the Summary Compensation Table above and has been
excluded from the table below.
Fiscal
Year 2009 Director Compensation Table
|
Name
|
Fees Earned or
Paid in Cash (1)
($)
|
Option
Awards (2)(3)
($)
|
Total
($)
|
|||||||||
|
Stanley
W. Corker
|
$ | 20,000 | $ | 5,760 | $ | 25,760 | ||||||
|
Carl
W. Gromada
|
20,000 | 5,760 | 25,760 | |||||||||
|
Robert
A. Meyer
|
20,000 | 5,760 | 25,760 | |||||||||
|
Robert
E. Rich
|
13,000 | 5,760 | 18,760 | |||||||||
_____________
|
|
(1)
|
The
amounts shown in this column represent the amount of cash compensation
earned in fiscal year 2009 for service on the Board of Directors and any
committees of the Board on which the director was a member in fiscal
2009.
|
|
|
(2)
|
The
amounts shown in this column represent the compensation expense recognized
by Qualstar in fiscal year 2009 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 2009. 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 9 of the Qualstar financial
statements included in Item 8 of our annual report on Form 10-K for the
fiscal year ended June 30, 2009, as filed with the
SEC.
|
|
|
(3)
|
As
of June 30, 2009, 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 2008 Stock Incentive
Plan. No stock options were granted to our non-employee directors
during the fiscal year ended June 30, 2009.
13
Potential
Benefits Upon or Following a Change in Control
Stock
options granted under our 2008 Stock Incentive Plan and 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 30, 2009.
Estimated
Benefits at 2009 Fiscal Year End in the Event of a Change in
Control
|
Name
|
Option
Awards (1)
|
|
|
William
J. Gervais
|
—
|
|
|
Nidhi
H. Andalon
|
—
|
|
|
Andrew
A. Farina
|
—
|
|
|
Richard
A. Nelson
|
—
|
|
|
Robert
K. Covey
|
—
|
_____________
|
|
(1)
|
The
amounts in this column represent the aggregate gain each named executive
officer would have realized if all unvested stock options that were held
by him on June 30, 2009 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 $2.19 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).
14
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, 2009.
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 Board
of Directors has the ultimate authority for effective corporate governance,
including oversight of the management of Qualstar. The Audit
Committee’s purpose is to assist the Board of Directors in fulfilling its
responsibilities by overseeing the accounting and financial reporting processes
of Qualstar, the audit of Qualstar’s consolidated financial statements, the
qualifications and performance of the independent registered public accounting
firm engaged as Qualstar’s independent auditor, and Qualstar’s internal control
over financial reporting.
The
Committee relies on the expertise and knowledge of management and the
independent auditor in carrying out its oversight
responsibilities. Management is responsible for the preparation,
presentation, and integrity of our consolidated financial statements, accounting
and financial reporting principles, internal control over financial reporting,
and disclosure controls and procedures designed to ensure compliance with
accounting standards, applicable laws and regulations. Management is
responsible for objectively reviewing and evaluating the adequacy, effectiveness
and quality of our system of internal control. Qualstar’s independent
auditor is responsible for performing an independent audit of the consolidated
financial statements and expressing an opinion on the conformity of those
financial statements with accounting principles generally accepted in the United
States.
The Audit
Committee fulfilled its duties and responsibilities during fiscal 2009 and with
respect to the financial statements for the fiscal year ended June 30, 2009, as
outlined in the Committee’s charter. Among other actions, the
Committee:
|
|
•
|
reviewed
and discussed our quarterly consolidated financial statements and related
periodic reports filed with the SEC, with management and the independent
auditor,
|
|
•
|
reviewed
with management and the independent auditor the audit scope and
plans,
|
|
•
|
inquired
about the adequacy of the Company’s internal
controls,
|
|
|
•
|
inquired
about significant risks, reviewed our policies for risk assessment and
risk management and assessed the steps management is taking to control
these risks, and
|
|
•
|
met
in periodic executive sessions with the independent
auditor
|
The Audit
Committee has reviewed and discussed with management and SingerLewak LLP, the
Company’s independent auditor for fiscal 2009, the audited financial statements
and related footnotes and independent auditor’s report on those financial
statements for the fiscal year ended June 30, 2009. Management
represented to the Audit Committee that our financial statements were prepared
in accordance with generally accepted accounting principles. The
Audit Committee discussed with management and the independent auditor the
quality of our accounting principles, the reasonableness of significant
estimates and judgments and the disclosures in our financial statements,
including the disclosures relating to critical accounting
policies.
15
The Audit
Committee recognizes the importance of maintaining the independence of
Qualstar’s independent auditor, both in fact and
appearance. Consistent with its charter, the Audit Committee has
evaluated SingerLewak LLP’s qualifications, performance and
independence. The Audit Committee has received from the independent
auditors the written disclosures and the letter required by applicable
requirements of the Public Company Oversight Board regarding the independent
accountant’s communications concerning independence, and has discussed with them
their independence from the Company and its management and has considered
whether the independent auditors’ provision of non-audit services is compatible
with maintaining their 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, 2009, 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)
On
September 25, 2008, our Audit Committee dismissed Ernst & Young LLP as
Qualstar’s independent registered public accounting firm, and engaged
SingerLewak LLP as the independent registered public accounting firm to audit
our financial statements for the fiscal year ended June 30, 2009. The
change in independent registered public accounting firms became effective on
September 25, 2008. This change followed the Audit Committee’s
decision to seek proposals from independent registered public accounting firms
to audit Qualstar’s financial statements, and was approved by both the Audit
Committee and by the full Board of Directors.
The audit
reports of Ernst & Young LLP on Qualstar’s financial statements for the two
fiscal years ended June 30, 2007 and June 30, 2008 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
During
the two fiscal years ended June 30, 2007 and June 30, 2008, and the subsequent
interim period through September 25, 2008, there were no disagreements between
Qualstar and Ernst & Young LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Ernst & Young LLP, would have
caused it to make reference to the subject matter of the disagreements in
connection with its reports.
None of
the reportable events described under Item 304(a)(1)(v) of Regulation S-K
occurred within either of the two fiscal years ended June 30, 2007 and June 30,
2008, or within the interim period through September 25, 2008.
During
the two fiscal years ended June 30, 2007 and June 30, 2008, and the subsequent
interim period through September 25, 2008, we did not consult with SingerLewak
LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and
(ii) of Regulation S-K.
SingerLewak
LLP audited our financial statements for the fiscal year ended June 30,
2009. Representatives of SingerLewak 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.
16
Proxies
solicited by the Board of Directors will, unless otherwise directed, be voted to
approve the appointment by the Audit Committee of SingerLewak LLP as the
independent registered public accounting firm to audit Qualstar’s financial
statements for the fiscal year ending June 30, 2010. If the
shareholders do not approve this appointment, the Audit Committee will consider
other independent registered public accounting firms.
Fees Paid to
Independent Registered Public Accounting Firm. The aggregate
fees billed by SingerLewak LLP, our independent registered public accounting
firm for fiscal year 2009, and by Ernst & Young LLP, our independent
registered public accounting firm for fiscal year 2008, for professional
services rendered to Qualstar during the fiscal years ended June 30, 2009
and fiscal 2008, respectively, were comprised of the following:
|
Fiscal
2009
|
Fiscal
2008
|
|||||||
|
Audit
Fees
|
$ | 121,091 | $ | 257,040 | ||||
|
Audit-related
fees
|
— | 7,350 | ||||||
|
Tax
fees
|
— | 83,938 | ||||||
|
All
other fees
|
— | — | ||||||
|
Total
fees
|
$ | 121,091 | $ | 348,328 | ||||
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 2008 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.
Ernst
& Young LLP was our principal accountant for tax compliance, tax advice and
tax planning during both fiscal years 2009 and 2008. 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 2008 also
include professional services related to government audits of our federal and
state tax returns. Tax fees billed to us by Ernst & Young LLP
during fiscal year 2009 were $79,540.
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, and all services
performed by SingerLewak LLP subsequent to its appointment on September 25,
2008, 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 registered
public accountants and management periodically report to the Audit Committee
regarding the extent of services provided by the independent registered public
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
15, 2010.
17
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, 2010 and January 24,
2011.
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
12, 2010
|
By
Order of the Board of Directors
|
|
|
Richard
A. Nelson
|
||
|
Secretary
|
18
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, 2010, at 9:30 a.m. Pacific Time, and at any and all
adjournments or postponements thereof, as follows:
|
1.
|
Election
of Directors:
|
|
¨
|
FOR
|
¨
|
WITHHOLD
AUTHORITY
|
|
|
all
nominees listed below (except as indicated to the contrary
below)
|
to
vote for all nominees listed below
|
William
J. Gervais, Richard A. Nelson, Stanley W. Corker, Carl W. Gromada, Robert A.
Meyer and Robert E. Rich
(INSTRUCTIONS: To
withhold authority to vote for any nominee, print that nominee's name in the
space provided below.)
|
2.
|
To
approve the appointment of SingerLewak LLP as the independent registered
public accounting firm to audit Qualstar’s financial statements for the
fiscal year ending June 30, 2010.
|
|
¨
|
FOR
|
¨
|
AGAINST
|
¨
|
ABSTAIN
|
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 12,
2010.
|
Dated:
|
|
|
|
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.