<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
QUALMARK CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
-----------------------------------------------------------------------
(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):
N/A
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
-----------------------------------------------------------------------
(5) Total fee paid:
N/A
-----------------------------------------------------------------------
[ ] 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:
N/A
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
-----------------------------------------------------------------------
(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF QUALMARK CORPORATION
TO BE HELD MAY 15, 2000
To the Shareholders of QualMark Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of QualMark
Corporation, a Colorado corporation (the "Company"), will be held on May 15,
2000 at 2:00 p.m. M.D.T., at the Hotel Boulderado, 2115 13th Street, Boulder,
Colorado for the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders or until their respective successors are elected and
qualified.
2. To consider and vote upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent public accountants
for the fiscal year ending December 31, 2000.
3. To transact any other business as may properly come before the
Annual Meeting or any adjournment thereof.
The close of business on March 30, 2000, has been fixed as the record date
for the determination of holders of QualMark Corporation voting stock entitled
to notice of, and to vote at, the Annual Meeting, and only shareholders of
record at such time will be so entitled to vote.
In order for the proposals listed above to be approved, each proposal must
be approved by the affirmative vote of holders of a majority of shares, voting
as a group, present in person or by proxy at the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, holders of QualMark
Corporation voting stock should complete, date, and sign the enclosed form of
proxy card and mail it promptly in the enclosed envelope.
By Order of the Board of Directors
/s/ PHILIP A. GORDON
------------------------------------
Philip A. Gordon
Secretary of the Corporation
Date: April 14, 2000
PLEASE SIGN AND RETURN THE ENCLOSED FORM OF PROXY PROMPTLY WHETHER OR NOT
YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING. THE GIVING OF A PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE> 3
QUALMARK CORPORATION
1329 WEST 121ST AVENUE
DENVER, CO 80234
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2000
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of QualMark Corporation, a Colorado
corporation ("QualMark" or the "Company"), for use at the Annual Meeting of
Shareholders of the Company to be held on May 15, 2000 at 2:00 p.m. M.D.T. at
the Hotel Boulderado, 2115 13th Street, Boulder, Colorado, and at any and all
adjournments of such meeting.
If the enclosed Proxy Card is properly executed and returned in time to be
voted at the meeting, the shares of common stock represented will be voted in
accordance with the instructions contained therein. Executed proxies that
contain no instructions will be voted FOR each of the proposals described
herein. Abstentions (proxies not returned) and broker non-votes will be treated
as shareholders absent from the Annual Meeting. The proxies will be tabulated
and votes counted by American Securities Transfer & Trust, Inc. It is
anticipated that this Proxy Statement and the accompanying Proxy Card will be
mailed to the Company's shareholders on or about April 14, 2000.
SHAREHOLDERS WHO EXECUTE PROXIES FOR THE ANNUAL MEETING MAY REVOKE THEIR
PROXIES AT ANY TIME PRIOR TO THEIR EXERCISE BY DELIVERING WRITTEN NOTICE OF
REVOCATION TO THE COMPANY, BY DELIVERING A DULY EXECUTED PROXY CARD BEARING A
LATER DATE, OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
The costs of the meeting, including the costs of preparing and mailing the
Proxy Statement and Proxy, will be borne by the Company. Additionally, the
Company may use the services of its directors, officers and employees to solicit
proxies, personally or by telephone, but at no additional salary or
compensation. The Company will also request banks, brokers, and others who hold
shares of common stock of the Company in nominee names to distribute proxy
soliciting materials to beneficial owners, and will reimburse such banks and
brokers for reasonable out-of-pocket expenses which they may incur in so doing.
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to vote at the Annual Meeting is
March 30, 2000. At the close of business on that day, there were 3,555,499
shares of no par value common stock (the "Common Stock") of the Company
outstanding. The Company has also issued 465,116 shares of Preferred Stock that
were outstanding as of the record date.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding Common Stock is necessary to constitute a quorum for each matter
voted upon at the Annual Meeting. In deciding all questions, a holder of Common
Stock is entitled to one vote, in person or by proxy, for each share held in his
or her name on the record date. A holder of preferred stock is entitled to one
vote, in person or by proxy, for each share of common stock into which its
preferred stock is convertible on the record date. As of March 30, 2000, each
share of preferred stock is convertible into one share of common stock.
Abstentions and broker non-votes, if any, will not be included in vote totals
and, as such, will have no effect on any proposal.
<PAGE> 4
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in the proxy,
will be voted (i) FOR the election of each of the five nominees named herein for
the office of director of the Company, (ii) FOR the selection of
PricewaterhouseCoopers LLP, independent public accountants, as the auditors of
the Company for the fiscal year ending December 31, 2000; and (iii) at the
discretion of the proxy holders, on any other matter that may properly come
before the meeting or any adjournment thereof.
Where shareholders appropriately specify how their proxies are to be voted,
they will be voted accordingly. If any other matter of business is properly
brought before the meeting or any adjournment thereof, the proxy holders may
vote the proxies at their discretion on such matters. The directors do not know
of any such other matter or business which may come before the meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Company's Common Stock and Preferred Stock as of
March 30, 2000, by each person known by the Company to own beneficially more
than five percent (5%) of the outstanding stock of the Company, on an
as-converted to Common Stock basis, certain executive officers, each director
and director nominee of the Company, and all directors and executive officers as
a group. The Company believes that each of such persons has the sole voting and
dispositive power over the shares held by him except as otherwise indicated in
the footnotes and subject to applicable community property laws. The shares
presented in this table are reported on an as-converted to Common Stock basis
and assume the accrual of a payment-in-kind dividend payable on the Preferred
Stock of 21,510 shares of Preferred Stock as of March 30, 2000.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
<S> <C> <C>
The Roser Partnership III, SBIC, LP........................ 626,161(1) 15.0%
1105 Spruce Street
Boulder, CO 80302
CVM Equity Fund IV, Ltd.................................... 246,667 6.1%
4845 Pearl East Circle, Suite 300
Boulder, CO 80301
W. Preston Wilson.......................................... 127,434(2) 3.1%
1329 W. 121st Avenue
Denver, CO 80234
Philip A. Gordon........................................... 66,214(3) 1.6%
1329 W. 121st Avenue
Denver, CO 80234
Vernon W. Settle........................................... 55,145(4) 1.4%
1329 W. 121st Street
Denver, CO 80234
Ann Marie Doolittle........................................ 46,351(5) 1.1%
1329 W. 121st Avenue
Denver, CO 80234
H. Robert Gill............................................. 32,488(6) *
1329 W. 121st Avenue
Denver, CO 80234
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
<S> <C> <C>
Norman J. Mottram.......................................... 35,500(7) *
1329 W. 121st Avenue
Denver, CO 80234
James L.D. Roser........................................... 825,229(8) 19.70%
1329 W. 121st Avenue
Denver, CO 80234
William Sanko.............................................. 13,200(9) *
1329 W. 121st Avenue
Denver, CO 80234
All Directors and Executive Officers as a group (8
persons)................................................. 1,201,561(10) 27.2%
</TABLE>
- ---------------
* Less than one percent.
(1) Includes warrants to purchase 139,535 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days and shares of
Preferred Stock convertible into 465,116 shares of Common Stock and accrued
dividends through March 30, 2000, convertible into 21,510 shares common
stock.
(2) Includes options to purchase 72,750 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days.
(3) Includes options to purchase 19,600 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days.
(4) Includes options to purchase 53,645 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days.
(5) Includes options to purchase 46,351 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days.
(6) Includes options to purchase 29,600 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days.
(7) Includes options to purchase 35,500 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days.
(8) Includes 172,635 shares of Common Stock beneficially owned by The Roser
Partnership II Ltd. and 626,161 shares of Convertible Preferred Stock
beneficially owned by The Roser Partnership III, SBIC, LP. Mr. Roser
co-manages The Roser Partnership II Ltd. and III, SBIC, LP investment funds
which are shareholders of the Company.
(9) Includes options to purchase 13,200 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days.
(10) Includes options to purchase 270,646 shares of the Common Stock which are
currently exercisable or become exercisable within 60 days, and includes
172,635 shares of Common Stock beneficially owned by The Roser Partnership
II Ltd. and 626,161 shares of Convertible Preferred Stock beneficially
owned by The Roser Partnership III, SBIC, LP.
3
<PAGE> 6
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and holders of more than ten percent
(10%) of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock of the Company. Except as stated below in this paragraph, based
solely upon a review of Forms 3 and 4 and amendments thereto furnished to the
Company during the fiscal year ended December 31, 1999 and Form 5 and amendments
thereto furnished to the Company with respect to the fiscal year ended December
31, 1999, to the best of the Company's knowledge, the Company's directors,
officers and holders of more than ten percent (10%) of its Common Stock complied
with all Section 16(a) filing requirements. Officers Preston Wilson, Vernon
Settle, Norman Mottram and Ann Marie Doolittle as well as Directors H. Robert
Gill, Philip Gordon and William Sanko each filed one late initial statement of
beneficial ownership on Form 5 in connection with a grant of stock options to
them in April and October 1999.
4
<PAGE> 7
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES
Pursuant to the Bylaws, the authorized number of directors of the Company
is five. Five directors are to be elected at the Annual Meeting. Each nominee
will be elected to hold office until the next annual meeting of shareholders or
until his successor is elected and qualified. Proxy holders will not be able to
vote the proxies held by them for more than five persons. If a quorum is
present, the five nominees having the highest number of votes cast in favor of
their election will be elected. Should any nominee become unable or unwilling to
accept nomination or election, the proxy holders may vote the proxies for the
election, in his stead, of any other person the Board of Directors may
recommend. Each nominee has expressed his intention to serve the entire term for
which election is sought.
THE BOARD OF DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE FOR EACH OF ITS
NOMINEES FOR THE BOARD OF DIRECTORS.
The Board of Directors' nominees for the office of director are as follows:
<TABLE>
<CAPTION>
YEAR FIRST BECAME
NAME AGE A DIRECTOR
- ---- --- -----------------
<S> <C> <C>
W. Preston Wilson, Ph.D..................................... 50 1992
James L.D. Roser(A)......................................... 73 1999
H. Robert Gill(A)........................................... 62 1994
Philip A. Gordon(C)......................................... 52 1993
William Sanko(C)............................................ 59 1997
</TABLE>
- ---------------
(A) Member of the Audit Committee.
(C) Member of the Compensation Committee.
W. Preston Wilson. Mr. Wilson has served as the President and Chief
Executive Officer of the Company since March 1993, and as a director since March
1992. From February 1992 through February 1993, Mr. Wilson was President and
Chief Executive Officer of Vital Choice, Inc., a Portland, Oregon home
intravenous therapy services company which was acquired. From August 1987
through February 1992, Mr. Wilson was a management consultant and partner at BPI
and Associates, a Dana Point, California management consulting firm. Mr. Wilson
is a director of ENSCO, Inc., an engineering services provider based in
Springfield, Virginia.
H. Robert Gill. Mr. Gill has served as a director of the Company since July
1994 and was elected Chairman in April 1996. Since May 1997, Mr. Gill has been
chairman and chief executive officer of Mobile Force Technologies, Inc., a
systems and software company. Since April 1996, Mr. Gill has been a principal of
The Topaz Group, a management consulting firm. From March 1995 to March 1996,
Mr. Gill was Senior Vice-President of Frontier Corporation, a telecommunications
company. From 1989 to March 1995, Mr. Gill was President and Chief Executive
Officer of ConferTech International, Inc., a teleconferencing services and
equipment provider. ConferTech International, Inc., became a subsidiary of
Frontier Corporation in 1995. Mr. Gill is a director of Newgen Results
Corporation, a provider of CRM services to automobile dealers and Spatial
Technologies, Inc., an Internet Hosted Application Services company.
Philip A. Gordon. Mr. Gordon has served as a director of the Company since
July 1993. Since 1985, Mr. Gordon has been an attorney in private practice. From
1991 through 1994, he was of counsel to Chrisman, Bynum & Johnson, P.C., counsel
to the Company. From 1992 through 1996, Mr. Gordon was a business consultant and
managing director of Alliance Network, Inc.; in 1997 he became manager of
Dealworks, LLC, offering similar services. From 1994 to 1997, Mr. Gordon served
as general counsel for International Language Engineering Corp., a software
localization company. Mr. Gordon provides legal and international business
consulting services to the Company on an independent contractor basis.
James L.D. Roser. Mr. Roser has been a director of the Company since
December 1999. He received a bachelor's degree in economics from Bucknell
University and an MBA from Harvard University. His early career
5
<PAGE> 8
was in investment banking and portfolio management in New York City from 1952 to
1973. He was a member of the investment-banking department at Smith, Barney &
Co. from 1952 to 1962. In 1962 he transferred to Brown Brothers Harriman where
he managed private funds. From 1967 to 1973 he was the partner in charge of the
investment management department of Cyrus J. Lawrence & Co. Mr. Roser has lived
in Boulder, Colorado since 1978, where he has actively participated in small
business investments. In 1993 Mr. Roser co-founded the Roser Partnership II and
became an early investor in QualMark Corporation through this fund in 1994.
William Sanko. Mr. Sanko has been a director of the Company since October
1997. From 1984 to 1996, Mr. Sanko was President and CEO of XEL Communications,
Inc., a manufacturer of voice and data products used by telephone companies to
provide private line services to businesses. In 1995, XEL was purchased by
Gilbert Associates, Inc., now Salient 3 Communications, Inc., and Mr. Sanko
continues to advise the President and CEO of Salient 3 Communications, Inc. on
matters concerning long term business planning and acquisitions.
BOARD OF DIRECTORS
The current members of the Board of Directors are: W. Preston Wilson, H.
Robert Gill, Phillip A. Gordon, James L.D. Roser, and William Sanko. Information
concerning the members of the Board is provided above under the Section entitled
"Election of Directors."
During the fiscal year ended December 31, 1999, there were seven meetings
of the Board of Directors. All directors attended at least 75% of the meetings
of the Board and committees of the Board on which they were members.
There is no family relationship between any current or prospective director
of the Company and any other current or prospective executive officer of the
Company. Except as disclosed above in the Section entitled "Election of
Directors," none of the directors hold directorships on other Boards of
Directors of other companies required to report under the Securities Exchange
Act of 1934.
DIRECTOR COMPENSATION
Directors of the Company who are not also employees of the Company are
reimbursed for all out-of-pocket expenses incurred in attending each meeting or
committee meeting of the Board of Directors. In consideration of their service
as directors, each non-employee director, with the exception of Mr. Roser, has
been granted non-qualified stock options to purchase shares of Common Stock
under the 1996 Stock Option Plan. In April 1999, non-employee directors, Robert
Gill, Philip Gordon, and William Sanko were each granted non-qualified stock
options to purchase 5,000 shares each of Common Stock at $2.94 per share. In
October 1999, Messrs. Gill, Gordon and Sanko were each granted non-qualified
stock options to purchase 5,000 shares each of Common Stock at $2.03 per share.
The exercise price of all such options was equal to the fair market value of the
Common Stock on the date of grant. The options become exercisable at a rate of
33% of such shares on each anniversary of the grant date, so that the options
are fully exercisable on the third anniversary of the grant date, conditioned
upon continued board service. All director options have a ten-year term from
their grant date. The Company paid Robert Gill $18,187 as remuneration for his
services as Chairman of the Board in 1999.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee and a Compensation Committee. The Audit
Committee is responsible for (i) reviewing the scope of, and the fees for, the
annual audit, (ii) reviewing with the independent auditors the corporate
accounting practices and policies, (iii) reviewing with the independent auditors
their final report, and (iv) being available to the independent auditors during
the year for consultation purposes. The Audit Committee met one time in the
fiscal year ended December 31, 1999. The Compensation Committee determines the
compensation of the officers of the Company and performs other similar
functions. The Compensation Committee met one time in the fiscal year ended
December 31, 1999. All directors attended at least 75% of the meetings held by
committees of the Board on which each director served.
6
<PAGE> 9
EXECUTIVE OFFICERS
The following persons are the executive officers of the Company:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
W. Preston Wilson, Ph.D.................. Chief Executive Officer and President
Vernon W. Settle......................... Vice President -- Finance and
Administration
Ann Marie Doolittle...................... Vice President -- Manufacturing and
Customer Service
Norman J. Mottram........................ Vice President -- Technology Group and
Test Services
</TABLE>
Information concerning the business experience of Mr. Wilson is provided
under the section entitled "Proposal I -- Election of Directors."
Vernon W. Settle, 39. Mr. Settle has been Vice President -- Finance and
Administration of the Company since February 1997. Mr. Settle was Director of
Finance and Administration of the Company from 1995 to February 1997, and
Controller of the Company from 1994 until 1995. From 1987 through 1994, Mr.
Settle was Controller of Medical Materials Corporation, a materials
manufacturing company in Camarillo, California.
Ann Marie Doolittle, 36. In December 1998, Ms. Doolittle was promoted to
Vice President of Corporate Development. Previously, Ms. Doolittle had been Vice
President -- Accelerated Reliability Test Center Services since October 1996.
From November 1993 to October 1996, Ms. Doolittle was Manager of the Accelerated
Reliability Test Centers.
Norman J. Mottram, 40. Mr. Mottram has been Vice President -- Research and
Development since December 1998. From October 1996 to December 1998, Mr. Mottram
was Vice President -- Technology. Mr. Mottram was Director of Manufacturing of
the Company from May 1993 to October 1996.
All executive officers are appointed by the Board of Directors and serve at
the Board's discretion.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid for the fiscal years
ended December 31, 1999, 1998 and 1997 to the Chief Executive Officer of the
Company and its three executive officers who were paid more than $100,000 in
salary and bonus during the year ended December 31, 1999 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
----------------------
ANNUAL COMPENSATION RESTRICTED
--------------------------- STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) SARS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. Preston Wilson, Ph.D.,........ 1999 194,000 -- -- 40,000 --
Chief Executive Officer 1998 168,000 65,629 -- -- --
and President 1997 166,849 51,069 -- 40,000 --
Norman J. Mottram,............... 1999 110,000 -- -- 18,000 --
Vice President -- Research and 1998 90,000 28,884 -- 3,000 --
Development and Engineering 1997 89,381 17,626 -- 16,000 --
Services
Ann Marie Doolittle,............. 1999 110,000 -- -- 16,500 --
Vice President -- Manufacturing
and 1998 84,525 32,278 -- 3,000 --
Customer Service 1997 84,525 16,874 -- 15,000 --
Vernon W. Settle,................ 1999 110,000 -- -- 17,000 --
Vice President -- Finance and 1998 82,023 24,425 -- 3,000 --
Administration(1) 1997 82,023 16,903 -- 20,000 --
</TABLE>
- ---------------
(1) Mr. Settle has been a Vice President for the Company since February 1997.
The following table presents information concerning individual grants of
options to purchase Common Stock of the Company made during the fiscal year
ended December 31, 1999 to each of the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE
NAME GRANTED(#) FISCAL YEAR ($/SH.) EXPIRATION DATE
- ---- ------------ ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
W. Preston Wilson, Ph.D............... 15,000(1) 5.0% $2.94 April 29, 2006
25,000(2) 8.3% $2.03 October 22, 2006
Norman J. Mottram..................... 3,000(3) 1.0% $4.56 January 5, 2006
5,000(4) 1.7% $2.94 April 29, 2006
10,000(5) 3.3% $2.03 October 22, 2006
Ann Marie Doolittle................... 1,500(6) .5% $4.56 January 5, 2006
5,000(7) 1.7% $2.94 April 29, 2006
10,000(8) 3.3% $2.03 October 22, 2006
Vernon W. Settle...................... 2,000(9) .7% $4.56 January 5, 2006
5,000(10) 1.7% $2.94 April 29, 2006
10,000(11) 3.3% $2.03 October 22, 2006
</TABLE>
- ---------------
(1) Options become exercisable at a rate of 25% per year beginning April 29,
1999.
(2) Options become exercisable at a rate of 25% per year beginning October 22,
1999.
(3) Options become exercisable at a rate of 25% per year beginning January 5,
1999.
8
<PAGE> 11
(4) Options become exercisable at a rate of 25% per year beginning April 29,
1999.
(5) Options become exercisable at a rate of 25% per year beginning October 22,
1999
(6) Options become exercisable at a rate of 25% per year beginning January 5,
1999.
(7) Options become exercisable at a rate of 25% per year beginning April 29,
1999.
(8) Options become exercisable at a rate of 25% per year beginning October 22,
1999
(9) Options become exercisable at a rate of 25% per year beginning January 5,
1999.
(10) Options become exercisable at a rate of 25% per year beginning April 29,
1999.
(11) Options become exercisable at a rate of 25% per year beginning October 22,
1999
The following table sets forth the stock options exercised by each of the
Named Executive Officers and the year-end value of unexercised options to
purchase Common Stock of the Company for each of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Preston Wilson, Ph.D...... -- -- 156,088 60,000 130,113 25,150
Norman J. Mottram............ -- -- 29,500 29,500 11,220 10,000
Ann Marie Doolittle.......... -- -- 44,726 27,500 25,191 10,000
Vernon W. Settle............. -- -- 50,645 30,500 27,096 10,000
</TABLE>
- ---------------
(1) Based upon the difference between the fair market value of the Common Stock
on December 31, 1999 and the exercise price. The fair market value of the
Common Stock on December 31, 1999, measured as the mean of the closing bid
and asked prices of the Common Stock on such date, was $3.00 per share.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
AGREEMENTS
In March 1993 the Company entered into an employment agreement with W.
Preston Wilson, Chief Executive Officer and President of the Company. Mr. Wilson
is currently paid a salary under the agreement of $194,000 per year. The
agreement has no fixed term and may be terminated by either party at any time.
If termination is by the Company and is for any reason other than cause, or if
Mr. Wilson resigns subsequent to a material reduction in his compensation or a
material change in his duties, the agreement provides for a severance payment
equal to twelve months' salary. The agreement provides that Mr. Wilson will not
engage in activities competitive with the Company during his employment and for
a period of two years after his employment with the Company terminates, whether
voluntarily or involuntarily. Pursuant to the agreement, the Company granted to
Mr. Wilson a non-statutory stock option to purchase up to 116,088 shares of
Common Stock, at an exercise price of $2.00 per share. The option vested on a
monthly basis over a four year period beginning on the date of the agreement,
and expired seven years from such date. On February 28, 2000, the Board granted
Mr. Wilson a non-statutory stock option to purchase up to 116,000 shares of
Common Stock at an exercise price of $2.64 per share which expires seven years
from the date of grant. In the event of the sale or merger of the Company, all
shares subject to such option will become fully exercisable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company pays director Philip Gordon a monthly retainer for legal and
international business consulting services in the base amount of $9,000 per
month.
On June 5, 1998, the Board of Directors approved a loan from the Company to
Preston Wilson of $110,000, plus interest at a rate of 10% per year, which will
be payable annually on each anniversary date of the loan until June 5, 2003, at
which time the entire unpaid principal and accrued interest will be due and
payable. Mr. Wilson also executed a security agreement in favor of the Company
to secure his obligations under the loan with
9
<PAGE> 12
collateral having a value in excess of the principal amount of the loan. On
January 13, 2000, the Company redeemed 4,016 shares of Common Stock from Mr.
Wilson at a market price of $4.06 per share in connection with the repayment of
Mr. Wilson's loan from the Company.
On September 1, 1999, The Roser Partnership III, SBIC, LP ("Roser III")
purchased 465,116 shares of Series A Preferred Stock at a purchase price of
$2.15 per share and a warrant to purchase 139,535 shares of Common Stock at an
exercise price of $2.50 per share. Dividends on the Preferred Stock accrue at a
rate of 8% per annum based on the initial purchase price. Dividends are payable
by the Company in shares of Preferred Stock in the first year and thereafter, at
the Company's option in cash or in additional shares of Preferred Stock. The
Preferred Stock is convertible into shares of Common Stock at the option of the
holder at a rate of one share of Common Stock for each share of Preferred Stock
held on the date of conversion, subject to certain adjustments. After September
1, 2004, the holder of the Preferred Stock has the option to require the Company
to redeem its Preferred Stock out of funds legally available for such
redemption. Each share of Preferred Stock is entitled to vote on all matters
presented to the shareholders of the Company in the number of votes equal to the
number of shares of Common Stock into which the Preferred Stock is convertible.
Roser III is also entitled to require the Company to register its shares under
an investor rights agreement with the Company.
PROPOSAL 2 -- APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of PricewaterhouseCoopers
LLP, independent public accountants, as the auditors of the Company for the
fiscal year ending December 31, 2000, subject to the approval of such
appointment by shareholders at the Annual Meeting. PricewaterhouseCoopers LLP
has audited the Company's financial statements since the Company's 1993 fiscal
year.
The ratification of the appointment of PricewaterhouseCoopers LLP will be
determined by the vote of the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting.
If the foregoing appointment of PricewaterhouseCoopers LLP is not ratified
by shareholders, the Board of Directors will appoint other independent
accountants whose appointment for any period subsequent to the 1999 Annual
Meeting of Shareholders will be subject to the approval of shareholders at that
meeting. A representative of PricewaterhouseCoopers LLP is expected to be
present at the Annual Meeting and will have an opportunity to make a statement
should he so desire and to respond to appropriate questions.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF
THE APPOINTMENT OF THE FIRM OF PRICEWATERHOUSECOOPERS LLP.
SHAREHOLDER PROPOSALS
Any proposals from shareholders to be presented for consideration for
inclusion in the proxy material in connection with the 2001 annual meeting of
shareholders of the Company must be submitted in accordance with the rules of
the Securities and Exchange Commission and received by the Secretary of the
Company at the Company's principal executive offices no later than the close of
business on December 15, 2000.
Under the rules promulgated by the Securities and Exchange Commission,
stockholder proposals not included in the Company's proxy materials for its 2001
Annual Meeting of Stockholders in accordance with Rule 14a-8 of the Exchange Act
of 1934, as amended, will be considered untimely if notice thereof is received
by the Company after April 16, 2001. Management will be authorized to exercise
discretionary voting authority with respect to any stockholder proposal not
included in the Company's proxy materials for the 2001 Annual Meeting of
Stockholders unless the Company receives notice thereof by April 16, 2001 and
the conditions set forth in Rule 14a-4(c)(2)(i) - (iii) under the Exchange Act
of 1934 are met.
10
<PAGE> 13
OTHER MATTERS
All information contained in this Proxy Statement relating to the
occupations, affiliations and securities holdings of directors and officers of
the Company and their relationship and transactions with the Company is based
upon information received from the individual directors and officers. All
information relating to any beneficial owner of more than five percent (5%) of
the Stock of the Company, on an as-converted to Common Stock basis, is based
upon information contained in reports filed by such owner with the Securities
and Exchange Commission.
The Company's independent public accountants for the fiscal year 1999 are
PricewaterhouseCoopers LLP. Representatives of such firm are expected to be
present at the annual meeting, will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
The Annual Report to Shareholders of the Company for the fiscal year ended
December 31, 1999, which includes financial statements and accompanies this
Proxy Statement, does not form any part of the material for the solicitation of
proxies.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-KSB, INCLUDING THE FINANCIAL STATEMENTS, FOR THE FISCAL YEAR ENDED DECEMBER
31, 1999, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 TO ANY SHAREHOLDER (INCLUDING
ANY BENEFICIAL OWNER) UPON WRITTEN REQUEST TO VERNON W. SETTLE, VICE
PRESIDENT -- FINANCE AND ADMINISTRATION, 1329 WEST 121ST AVENUE, DENVER,
COLORADO 80234. A COPY OF THE EXHIBITS TO SUCH REPORT WILL BE FURNISHED TO ANY
SHAREHOLDER UPON WRITTEN REQUEST THEREFOR AND PAYMENT OF A NOMINAL FEE.
11
<PAGE> 14
QUALMARK CORPORATION PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD MAY 15, 2000
The undersigned hereby constitutes, appoints, and authorizes W. Preston
Wilson and Vernon W. Settle, and each of them, as the true and lawful attorney
and Proxy of the undersigned, with full power of substitution and appointment,
for and in the name, place and stead of the undersigned to act for and vote as
designated below, all of the undersigned's shares of the voting stock of
QualMark Corporation, a Colorado corporation, at the Annual Meeting of the
Shareholders to be held May 15, 2000, at the Hotel Boulderado, 2115 13th Street,
Boulder Colorado, at 2:00 p.m. M.D.T., and at any and all adjournments thereof,
with respect to the matters set forth below and described in the Notice of
Annual Meeting dated April 14, 2000, receipt of which is hereby acknowledged.
1. Approval of the election of each of the five nominees named herein for the
office of director to serve until the next Annual Meeting of Shareholders or
until their respective successors are elected and qualified.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.)
W. Preston Wilson, James L.D. Roser, Philip A. Gordon, H. Robert Gill, and
William Sanko
2. Ratification of the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST
3. The Proxy is authorized to vote upon any other business as may properly come
before the Annual Meeting or any adjournments thereof.
The undersigned hereby revokes any Proxies as to said shares heretofore
given by the undersigned, and ratifies and confirms all that said attorney and
Proxy may lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2. THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN
RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
DATED:
--------------------,
2000
---------------------------
Signature(s) of
Shareholder(s)
---------------------------
Signature(s) of
Shareholder(s)
Signature(s) should agree
with the name(s) shown
hereon. Executors,
administrators, trustees,
guardians and attorneys
should indicate their
capacity when signing.
Attorneys should submit
powers of attorney. When
shares are held by joint
tenants, both should sign.
If a corporation, please
sign in full corporate name
by President or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF QUALMARK
CORPORATION
PLEASE SIGN AND RETURN THIS PROXY USING THE ENCLOSED PRE-PAID ENVELOPE.
THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING.
