STARMET CORP, DEF 14A, 1999-04-21

STARMET CORP
DEF 14A, 1999-04-21
ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant / /
Filed by a party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

- --------------------------------------------------------------------------------
(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:

------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

------------------------------------------------------------------------
(5) Total fee paid:

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

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:

------------------------------------------------------------------------
(3) Filing Party:

------------------------------------------------------------------------
(4) Date Filed:

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

<PAGE>
STARMET CORPORATION
2229 MAIN STREET
CONCORD, MA 01742

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 10, 1999

TO THE STOCKHOLDERS OF STARMET CORPORATION:

Notice is hereby given that a special Meeting of the Stockholders of Starmet
Corporation (the "Company"), a Massachusetts corporation, will be held on May
10, 1999 at 10:00 a.m. at State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts for the following purposes:

1. To elect Board of Directors for the ensuing year.

2. To consider and act upon a proposal to increase the number of shares of
Common Stock available for grant under the Company's 1998 Stock Plan from
300,000 to 500,000.

3. To consider and act upon a proposal to ratify the selection of the firm
of Arthur Andersen LLP as independent auditors for the Company for the fiscal
year ending September 30, 1999.

4. To transact other business as may properly come before the Meeting.

Only stockholders of record at the close of business on April 8, 1999 are
entitled to receive notice of and to vote at the Meeting.

All stockholders are cordially invited to attend the Meeting in person. To
ensure your representation at the Meeting, however, you are urged to sign and
return the enclosed proxy card as promptly as possible in the enclosed
postage-prepaid envelope. You may revoke your proxy in the manner described in
the accompanying Proxy Statement at any time before it has been voted at the
Meeting. Any stockholder attending the Meeting may vote in person even if he or
she has returned a proxy.

By order of the Board of Directors,

[LOGO]

Thomas A. Wooters, CLERK

Concord, Massachusetts
April 14, 1999

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING, WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING. PLEASE SIGN THE ENCLOSED PROXY CARD AND RETURN
IT PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL TO:

BOSTON EQUISERVE
P.O. BOX 8200
BOSTON, MA 02266-5523
ATTENTION: MS. TINA GOON
<PAGE>
Starmet Corporation
2229 Main Street
Concord, MA 01742

PROXY STATEMENT

April 14, 1999

Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors (the "Board") of Starmet Corporation (the "Company") for use
at the Special Meeting of Stockholders to be held on Monday, May 10, 1998, at
10:00 a.m. (the "Meeting"), at State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts.

When a proxy is returned properly signed, the persons named as attorneys in
the proxies will vote shares in accordance with the stockholder's instructions.
Any stockholder submitting a proxy has the right to withhold votes for any
individual nominee to the Board of Directors by writing that nominee's name on
the space provided on the proxy. In the absence of contrary instructions, the
proxyholders will vote the shares in favor of the three proposals set forth in
this Proxy Statement.

Sending in a proxy will not affect a stockholder's right to attend the
Meeting and vote in person. A proxy may be revoked by a notice in writing
delivered to the Clerk of the Company at any time prior to the commencement of
the Meeting or by voting in person at the Meeting. A later proxy revokes an
earlier proxy. Any written notice of revocation or subsequent proxy should be
sent so as to be delivered to Starmet Corporation, 2229 Main Street, Concord,
Massachusetts.

The Company will pay expenses in connection with the solicitation of the
enclosed proxy, including the charges of brokerage houses and other
intermediaries for forwarding documents to stockholders. In addition to this
solicitation by mail, Company employees may solicit proxies by telephone, fax or
in person. They will not receive additional compensation for those services. The
Company may retain a proxy solicitation firm to solicit proxies.

STOCK AND VOTING

This Proxy Statement is being mailed on or about April 16, 1999 to those
persons who are holders of record of the Common Stock of the Company on April 8,
1999. As of that date, 4,790,674 number of shares of Common Stock were issued
and outstanding, of which 3,041,076 number are entitled to one vote per share.
The remaining 1,749,598 outstanding shares of Common Stock are subject to the
Massachusetts Control Share Acquisition Act and, as a result, presently have no
voting rights. See "Massachusetts Control Share Acquisition Act" on page 19.

The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to establish a quorum for the transaction of business. A quorum consists of
shares representing at least 51% of the votes that are entitled to be cast at
the Meeting. Votes withheld from any nominee, abstentions and broker non-votes
are counted as present or represented for purposes of determining the presence
or absence of a quorum. A "non-vote" occurs when a broker holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because the broker has not received instructions from the beneficial owner.

An automated system administered by the Company's transfer agent tabulates
the votes. The vote on each matter submitted to shareholders is tabulated
separately. Abstentions are included in the number of shares present or
represented and voting on each matter and, therefore, with respect to votes on
specific proposals, will have the effect of negative votes. Broker "non-votes"
are not so included. If you hold shares
<PAGE>
in "street name" through a broker or other nominee, your broker or nominee may
not be permitted to exercise voting discretion with resect to certain matters to
be voted upon. If you do not give your broker or nominee specific instructions,
your shares may not be voted on those matters and will not be considered as
present and entitled to vote with respect to those matters.

The election of directors is by plurality of the votes cast at the Meeting
either in person or by proxy. The approval of a majority of the votes properly
cast at the Meeting, either in person or by proxy, is required to approve
proposals 2 and 3 and any other business which may properly be brought before
the Meeting or any adjournment thereof.

With regard to the election of directors, votes may be left blank, cast in
favor or withheld; votes that are left blank will be counted in favor of the
election of the directors named on the proxy. Votes that are withheld will have
the effect of a negative vote. Abstentions may be specified on all proposals
other than the election of directors and will be counted as present for purposes
of the proposal on which the abstention is noted. Abstentions and broker
non-votes will have no effect on proposals 2 and 3.

The Board of Directors and management of the Company deem the proposals
described in this Proxy Statement to be in the best interest of the Company and
recommend that the stockholders approve them. Management intends to vote their
shares of Common Stock in favor of each proposal. See "Principal and Management
Stockholders." For these purposes, management includes all directors and
executive officers.

The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter is properly presented at the Meeting shares
represented by all proxies received by the Company will be voted on such matters
in accordance with judgment of the persons named as attorneys in the proxies.

The Company's Annual Report on Form 10K and Quarterly Report on Form 10Q,
containing financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the fiscal year ended
September 30, 1998 and December 31, 1998, respectfully, are being mailed with
the Proxy Statement to all stockholders entitled to vote. This Proxy Statement
and the form of proxy were first mailed to Stockholders on or about the date
hereof.

2
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS

The following table sets forth certain information as of March 31, 1999,
with respect to beneficial ownership of the Common Stock of the Company (i) by
each stockholder known to the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) by each director of the Company, (iii) by each of
the executive officers named in the Summary Compensation Table, elsewhere
herein, and (iv) by all directors and executive officers of the Company and its
subsidiaries as a group. In accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, a person is deemed to be the beneficial owner,
for purposes of this table, of any shares of Common Stock of the Company if he
or she has or shares voting power or investment power with respect to such
security or has the right to acquire beneficial ownership of such security at
any time within 60 days of March 31, 1999. As used herein "voting power" is the
power to vote or direct the voting of shares, and "investment power" is the
power to dispose of or direct the disposition of shares. Except as indicated in
the notes following the table below, each person named has sole voting and
investment power with respect to the shares listed as being beneficially owned
by such person.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OWNED
- ------------------------------------------------------------------ ------------------------------ ---------------
<S> <C> <C>

Charles Alpert (1)(2)............................................. 2,609,999 50.50%
Joseph Alpert
WIAF Investors C
466 Arbuckle Avenue
Cedarhurst, NY 11516

and

Melvin B. Chrein, J.R.
Cheryl J. Chrein
Marshall J. Chrein
Michael Chrein
21 Copper Beech Lane
Lawrence, NY 11559

George J. Matthews (3)............................................ 410,754 7.95%
Chairman of the Board of Directors
Director & Consultant
c/o Matthews Associates Limited
100 Corporate Place
Peabody, MA 01960

Wilson B. Tuffin (4).............................................. 388,316 7.51%
Vice Chairman and Director
23 Arlington Street
Acton, MA 01720

Dimensional Fund Advisors, Inc. (5)............................... 331,600 6.49%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
</TABLE>

3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OWNED
- ------------------------------------------------------------------ ------------------------------ ---------------
<S> <C> <C>
Robert E. Quinn (6)............................................... 118,812 2.30%
President, CEO, Treasurer and Director

William Loftus.................................................... -- *
Vice President, Finance and
Administration

William T. Nachtrab (7)........................................... 28,833 *
Vice President, Technology

Kenneth A. Smith, Director (8).................................... 17,500 *

Frank H. Brenton, Director (8).................................... 17,500 *

Douglas F. Grotheer (9)........................................... 16,074 *
President of Starmet CMI Corporation

All directors and executive officers as a group (13) persons
(10)............................................................ 1,084,956 20.99%
</TABLE>

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

(1) Does not reflect the effect on voting rights of the Massachusetts Control
Share Acquisition Act. The Company is subject to Chapter 110D of the
Massachusetts General Laws which governs "control share acquisitions," which
are acquisitions of beneficial ownership of shares which would raise the
voting power of the acquiring person above any one of three thresholds:
one-fifth, one-third or one-half of the total voting power. All shares
acquired by the person making the control share acquisition within 90 days
before or after any such threshold is crossed obtain voting rights only upon
the authorization from a majority of the stockholders other than the person
acquiring such shares, officers of the Company and those directors of the
Company who also are employees. Based on certain filings made with the
Securities and Exchange Commission ("SEC"), the Company believes that
certain control share acquisitions have occurred and that the members of the
group which affected such control share acquisitions, namely WIAF Investors
Co., Charles Alpert, Joseph Alpert, Melvin B. Chrein, Meryl J. Chrein, and
Marshall J. Chrein (collectively the "Investor Group") are the holders of
1,759,255 shares (the "Affected Shares") which were acquired in control
share acquisitions (within the meaning of Chapter 110D) and accordingly will
have no voting rights unless or until such voting rights are authorized. See
"Massachusetts Control Share Acquisition Act" on page 19.

(2) Derived from Schedule 13DA, dated March 28, 1997, Forms 5 and stockholder
questionnaires to the Company. The six persons named are described as a
group in such Schedules 13DA. The persons named reported ownership of the
following shares: WIAF Investors Co. 1,759,756; Melvin B. Chrein 202,300;
Meryl J. Chrein 246,600; Charles Alpert 50,000; Joseph Alpert 50,000; and
Marshall J. Chrein 46,200. Each person reported sole voting and dispositive
power with respect to the shares owned by such person. Also includes 21,021,
79,435 and 2,325 shares which Melvin B. Chrein, WIAF Investors Co. and
Marshall Chrein, respectively, have the right to acquire upon conversion of
outstanding 10% Convertible Subordinated Debentures and 27,000, 12,000 and
3,000 shares which Charles Alpert or nominee, Melvin B. Chrein and Marshall
J. Chrein, respectively have the right to acquire under outstanding
warrants.

(3) Includes (i) 22,500 shares which may be purchased upon the exercise of
currently exercisable options, (ii) 2,325 shares which may be acquired upon
the conversion of an outstanding 10% Convertible Subordinated Debenture,
(iii) 13,961 shares which Mr. Matthews' wife has the right to acquire upon

4
<PAGE>
the conversion of an outstanding 10% Convertible Subordinated Debenture, and
(iv) 1,980 shares owned by Mr. Matthews' wife. Mr. Matthews disclaims
beneficial ownership of the debenture and shares held by Mrs. Matthews.

(4) Includes 12,500 shares which may be purchased upon the exercise of currently
exercisable options.

(5) Derived from Schedule 13G dated February 11, 1999. Dimensional Fund Advisors
Inc. ("Dimensional"), an investment advisor registered under the Investment
Advisors Act of 1940, furnishes investment advice to four investment
companies registered under the Investment Company Act of 1940, and serves as
investment manager to certain other investment vehicles, including
commingled group trusts. (These investment companies and investment vehicles
are the "Portfolios"). In its role as investment advisor and investment
manager, Dimensional possesses both voting and investment power over the
securities of the Issuer described in this table that are owned by the
Portfolios. All securities reported in this table are owned by the
Portfolios, and Dimensional disclaims beneficial ownership of such
securities.

(6) Includes 96,667 shares which may be purchased upon the exercise of currently
exercisable options.

(7) Includes 26,833 shares which may be purchased upon the exercise of currently
exercisable options.

(8) Includes 11,500 shares which may be purchased upon the exercise of currently
exercisable options.

(9) Includes 14,000 shares which may be purchased upon the exercise of currently
exercisable options.

(10) See notes (4), (5), (7), (8) and (9) above. Also includes an additional
49,666 shares which may be purchased upon the exercise of currently
exercisable options.

* Less than 1% ownership individually.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

The Board of Directors currently consists of five Directors. The number of
Directors is currently fixed at five. Directors will be elected at the Meeting
to serve until the next Annual Meeting of Stockholders and until their
successors take office or until such Director's resignation, death or removal.
In the absence of instructions to the contrary, the proxyholders will vote
shares represented by proxies in favor of the election of all of the nominees
described below to the Board of Directors. The Board of Directors has no reason
to believe that any of these nominees will be unable to serve. If any nominee
should, for any reason, be unavailable to serve, the proxyholders will vote in
favor of the election of such other person as the Board of Directors may
recommend in place of the original nominee. Mr. Matthews, Mr. Quinn, Mr. Smith,
Mr. Tuffin and Mr. Brenton are each current directors of the Company. Mr.
Matthews, Mr. Quinn, Mr. Smith and Mr. Brenton are nominated for re-election.
Mr. Tuffin has voluntarily declined to be nominated for re-election. Mr. William
J. Shea resigned from the Board of Directors effective March 4, 1999 and is not
a nominee for election.

5
<PAGE>
The following are summaries of the background and business experience and
descriptions of the principal occupations of the nominees for election:

<TABLE>
<CAPTION>
PRESENT PRINCIPAL EMPLOYMENT
NAME AGE AND PRIOR BUSINESS EXPERIENCE DIRECTOR SINCE
- ------------------------------ --- ------------------------------------------------------------ ---------------
<S> <C> <C> <C>
George J. Matthews............ 68 Chairman of the Board of Directors since 1972. Chairman of 1972
Matthews Associates Limited, which is engaged in the
business of investing in and providing management consulting
and assistance to small and medium sized businesses,
including the Company.
Robert E. Quinn............... 45 President of the Company since December 1, 1994 and 1994
Treasurer and Chief Executive Officer since January 20,
1998. Prior to becoming President, served as Vice President,
Sales for over five years. Elected as a Director on November
17, 1994 to fill a vacancy created by the enlargement of the
Board of Directors by vote of the Directors.
Kenneth A. Smith.............. 62 Professor of Chemical Engineering at Massachusetts Institute 1985
of Technology since 1971.
Frank H. Brenton.............. 73 Principal of Frank H. Brenton Associates, a business 1986
consulting firm. From 1984 to 1986, Chairman of the Board of
Directors of Marshall's Incorporated, an off-price retailer
and division of Melville, Inc.
</TABLE>

The Board of Directors has also nominated Mr. Randel E. Vataha for election
to the Board of Directors. Mr. Vataha, 50 years of age, is President of Game
Plan LLC, a Boston investment banking firm partially owned by BankBoston.
Previously, he was President of Global View Associates, an investment banking
and consulting firm. A graduate of Stanford University, Mr. Vataha has been
active in senior management and consulting positions in small to medium size
businesses for the past twenty-two years.

The Board of Directors recommends that the stockholder vote FOR the election
of each of the five nominees.

INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES

The Board of Directors met six times during the fiscal year ended September
30, 1998 and it acted by unanimous written consent on one occasion. There was no
Director who attended fewer than 75 percent of the aggregate of all board
meetings and all meetings of committees on which he served during the fiscal
year.

The Board of Directors has an Audit Committee of non-employee Directors
selected annually at the first the Meeting of Board following the Annual Meeting
of Stockholders. The Audit Committee, which met one time during fiscal 1998,
meets with the Company's independent auditors and principal financial personnel
to review the scope and results of the annual audit and the Company's financial
reports. The Audit Committee also reviews the scope of audit and non-audit
services performed by the independent public accountants, and reviews the
adequacy and effectiveness of internal accounting controls. The present members
of the Audit Committee are Messrs. Brenton and Smith.

The Board of Directors has a Stock Option Committee which was formed during
fiscal year 1997. The Stock Option Committee, which met during fiscal year 1998,
recommends to the Board of Directors for its

6
<PAGE>
approval the terms, amounts and recipients of stock options under the Company's
stock option plans. The present members of the Stock Option Committee are
Messrs. Matthews, Tuffin and Quinn.

The Board of Directors does not have standing committees on compensation or
nominations.

DIRECTOR COMPENSATION

The Company pays each non-employee director an annual fee of $15,000.
Non-employee directors are eligible to receive options under the Company's
Directors' Stock Option Plan. Messrs. Brenton, Matthews, Shea and Smith, the
Company's non-employee directors, were each granted options to purchase 7,500
shares of Common Stock at an exercise price of $23.67 per share in fiscal year
1998. As a result of Mr. Shea's resignation from the Board of Directors on March
4, 1999 options granted to him in fiscal year 1998 will not vest and will be
cancelled.

The Company pays consulting fees to Matthews Associates Limited, a
Massachusetts corporation ("MAL"), of which George J. Matthews, Director and
Chairman of the Board of Directors of the Company, is sole owner, pursuant to a
Management Agreement with the Company. The Management Agreement is described in
the section titled "Executive Agreements."

The Company paid consulting fees to Mr. Tuffin pursuant to an employment and
consulting agreement which expired in February 1999. During the term of that
agreement, Mr. Tuffin received annual compensation of $105,000 for his services
as a consultant to the Company. Mr. Tuffin's duties included his service as a
Director and Vice Chairman of the Board of Directors of the Company. Following
termination of the agreement, Mr. Tuffin may not compete directly or indirectly
with the Company within the continental United States for a period of two (2)
years.

Matthews Associates Limited and Mr. Tuffin have deferred consulting fees in
the approximate aggregate amount of $160,000 for the period October 1, 1998
through March 31, 1999.

7
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities to the Company during fiscal years 1996,
1997 and 1998 to (i) the Company's Chief Executive Officer, and (ii) the
Company's four other most highly compensated executive officers who were serving
as executive officers at the end of fiscal year 1998 (the "Named Executive
Officers"). This information includes the dollar values of base salaries and
bonus awards, the number of shares subject to stock options granted and certain
other compensation, if any, whether paid or deferred. The Company does not grant
stock appreciation rights and has no long-term compensation benefits other than
stock options.

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------------------- RESTRICTED UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL STOCK OPTIONS/SARS LTP ALL OTHER
POSITION YEAR(1) SALARY($) BONUS($) COMPENSATION($)(2) AWARD(S)$ (#)(6) PAYOUTS$ COMPENSATION($)
- -------------------- ------- --------- -------- ------------------ ----------- ------------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

George J. Matthews 1998 350,000 -- -- -- 7,500 -- --
(4) (5)........... 1997 350,000 -- -- -- -- -- --
Chairman of Board 1996 350,000 -- -- -- -- -- --
of Directors, CEO
and Treasurer(5)

Robert E. Quinn..... 1998 200,000 17,312 -- -- 15,000 -- --
President (3)(5) 1997 200,000 15,000 -- -- 25,000 -- --
CEO and Treasurer 1996 173,769 -- -- -- 20,000 -- --

James M. Spiezio 1998 142,000 11,982 -- -- 7,500 -- --
(7)............... 1997 131,616 13,250 -- -- 8,000 -- --
Vice President, 1996 121,058 -- -- -- 10,000 -- --
Finance &
Administration

William T. 1998 142,000 11,792 -- -- 17,500 -- --
Nachtrab.......... 1997 131,616 9,050 -- -- 8,000 -- --
Vice President, 1996 114,847 -- -- -- -- -- --
Technology

Douglas F. 1998 135,000 10,261 -- -- 5,000 -- --
Grotheer.......... 1997 121,934 6,700 -- -- 5,000 -- --
President, Starmet 1996 100,252 -- -- -- -- -- --
CMI Corporation
</TABLE>

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

(1) The Company's fiscal year ends on September 30th of each year.

(2) Excludes perquisites in amounts less than the threshold level required for
reporting.

(3) Mr. Quinn's compensation for the fiscal year ended September 30, 1998 was
determined pursuant to his Employment Agreement. See "Executive Agreements."

(4) Mr. Matthews is assigned as a consultant to the Company pursuant to a
management agreement between Matthews Associates Limited and the Company.
All compensation under the agreement is paid by the Company to Matthews
Associates Limited. See "Executive Agreements."

(5) On January 20, 1998, Mr. Matthews resigned as Chief Executive Officer and
Treasurer of the Company and the Company elected Mr. Quinn as Chief
Executive Officer and Treasurer.

(6) Options have been adjusted to reflect the Company's two for one stock
dividend paid on April 7, 1997.

(7) On November 13, 1998, the Board of Directors notified Mr. Spiezio that his
employment agreement would not extend beyond November 15, 1999 and that he
would no longer serve in the capacity of Chief Financial Officer of the
Company.

8
<PAGE>
OPTION GRANTS DURING FISCAL YEAR

The following table sets forth certain information regarding options granted
during the fiscal year ended September 30, 1998 by the Company to the Named
Executive Officers:

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
PERCENT OF TOTAL APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED TO OPTION TERM(3)
UNDERLYING EMPLOYEES IN EXERCISE OR EXPIRATION ------------------
NAME OPTIONS GRANTED FISCAL YEAR BASE PRICE(2) DATE 10% 5%
- ------------------------ -------------------- ------------------------ ---------------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
George J. Matthews...... 7,500(1) N/A $23.67 3/18/2008 $282,929 $111,645
Robert E. Quinn......... 15,000(1) 7.5% $23.67 3/18/2008 $565,858 $223,089
William T. Nachtrab..... 17,500(1) 8.8% $23.67 3/18/2008 $660,168 $260,504
James M. Spiezio........ 7,500(1) 3.8% $23.67 3/18/2008 $282,929 $111,645
Douglas F. Grotheer..... 5,000(1) 2.5% $23.67 3/18/2008 $188,619 $ 74,430
</TABLE>

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

(1) These options are first exercisable on March 18, 1999 at which time the
options will be one-third vested with options vesting in additional
one-third increments in two annual installments commencing on March 18,
2000.

(2) The exercise price per share is the market price of the underlying Common
Stock on the date of grant.

(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed rates of share price appreciation set by the
Securities and Exchange Commission of five percent and ten percent
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes of the options exercise price or
other expenses associated with the exercise. Actual gains, if any, are
dependent on the performance of the Common Stock and the date on which the
option is exercised. There can be no assurance that the amounts reflected
will be achieved.

9
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES

The following table sets forth certain information concerning options
exercised during the fiscal year ended September 30, 1998 by the Named Executive
Officers, as well as the aggregate value of unexercised options held by such
executive officers on September 30, 1998. The Company has no outstanding stock
appreciation rights, either freestanding or in tandem with options.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END YEAR-END(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ---------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George J. Matthews...................... 0 $0 13,334 6,666 $148,274 $74,126
Robert E. Quinn......................... 0 $0 81,667 38,333 $201,131 $28,269
James M. Spiezio........................ 0 $0 26,333 16,167 $ 80,727 $13,053
William T. Nachtrab..................... 0 $0 19,667 22,833 $ 63,259 $19,682
Douglas Grotheer........................ 0 $0 11,667 8,333 $ 20,431 $ 2,159
</TABLE>

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

(1) Value realized equals fair market value on the date of exercise, less the
exercise price, times the number of shares acquired, without deducting taxes
or commissions paid by employee.

(2) Value of unexercised options equals fair market value of the shares
underlying in-the-money options on September 30, 1998 ($9.00 per share),
less the exercise price, times the number of options outstanding.

PENSION PLAN TABLE

The following table sets forth the aggregate annual benefit payable upon
retirement at normal retirement age for each level of remuneration specified at
the listed years of service.

<TABLE>
<CAPTION>
15 YEARS OF 20 YEARS OF 25 YEARS OF 30 OR MORE YEARS OF
RENUMERATION SERVICE SERVICE SERVICE SERVICE
- ------------- ----------------- ----------------- ----------------- -------------------------
<S> <C> <C> <C> <C>
1$00,000..... $ 23,520 $ 31,360 $ 39,220 $ 47,040
1$50,000..... $ 38,520 $ 51,360 $ 64,200 $ 77,040
2$00,000..... $ 53,520 $ 71,360 $ 89,200 $ 107,040
3$00,000..... $ 83,520 $ 111,360 $ 139,200 $ 167,040
4$00,000..... $ 113,520 $ 151,360 $ 189,200 $ 227,040
5$00,000..... $ 143,520 $ 191,360 $ 239,200 $ 287,040
</TABLE>

The Company has a defined benefit plan (the "Pension Plan") designed to
provide retirement benefits for employees and ancillary benefits to their
beneficiaries, joint annuitants and spouses. All employees of the Company become
participants in the Pension Plan after attaining the later of age 21 or a year
of service with the Company. The Pension Plan provides retirement benefits based
on years of service and compensation. An employee's benefits under the Pension
Plan generally become fully vested after five years of service. At normal
retirement (the later of age 65 and five years of Plan participation),
participants are entitled to a monthly benefit for the remainder of their life
in an amount equal to one-twelfth of the sum of their "Annual Credits" for their
last 30 years or lesser period of employment with the Company and its
predecessors. An employee's "Annual Credit" is 1.25% of the portion of his
annual compensation that is subject to Social Security tax and two percent (2%)
of the balance of his annual compensation. Participants with five years of
service are entitled to retirement at age 55, but the monthly benefit payable
under the

10
<PAGE>
Pension Plan is reduced by 0.5% for each month that early retirement precedes
normal retirement but not less than $100 per month if the Participant has ten or
more years of service. The surviving spouse of a retiree under the Plan is
entitled to receive benefits equal to one-half the amount the retiree had been
receiving. Alternative benefit payments that are equivalent to the benefit
described above are also available to participants. Benefits payable under the
plan are not reduced by Social Security payments to the retiree. Amounts shown
assume benefits commence at age 65. Benefit amounts shown are straight-life
annuities. The executive officers named in the Summary Compensation Table have
the following years of credited service for pension plan purposes: Robert E.
Quinn-23 years; James M. Spiezio-13 years; William T. Nachtrab-9 years; and
Douglas Grotheer-18 years. Mr. Matthews does not participate in the Pension
Plan.

DIRECTORS' COMPENSATION AND STOCK OPTION PLAN

Each outside director of the Company receives an annual fee of $15,000 and
is eligible to receive options under the Company's 1995 Directors Option Plan
(the "1995 Directors Plan"). During fiscal 1998, the Company granted to each of
Messrs. Matthews, Tuffin, Smith, Brenton and Shea options to purchase 7,500
shares of Common Stock at an exercise price of $23.67 per share, based on the
market price of the Common Stock at that time. At the same time, the Company
also granted Mr. Quinn (in his capacity as President of the Company) an
incentive stock option to purchase 15,000 shares of Common Stock at the same
exercise price under the Company's 1998 Stock Option Plan.

The Company has entered into a management agreement with Matthews Associates
Limited, a Massachusetts corporation ("MAL"), of which George J. Matthews,
Director and Chairman of the Board of Directors of the Company, is sole owner.
The Management agreement is described in the section titled "Employment
Agreements with Certain Officers."

The Company entered into an employment and consulting agreement with Mr.
Tuffin in November 1994, which terminated on February 28, 1999. Pursuant to such
agreement, Mr. Tuffin received annual compensation of $105,000 for his services
as a consultant to the Company. Mr. Tuffin's duties included his service as a
director and Vice Chairman of the Board of Directors of the Company. Following
termination of the agreement, Mr. Tuffin may not compete directly or indirectly
with the Company within the continental United States for a period of two (2)
years.

EXECUTIVE ARRANGEMENTS

EMPLOYMENT AGREEMENT WITH MR. QUINN

In October 1997, the Company entered into an amended employment agreement
with Mr. Quinn. Pursuant to the agreement, Mr. Quinn will receive initial
compensation at the annual rate of $200,000, subject to such annual increases
and bonuses as the Board of Directors may from time to time determine. The
agreement shall continue in force until February 28, 2002, unless terminated by
either party in accordance with its terms, and is subject to annual renewals as
described in the agreement. During the term of the agreement and for a period of
two years after its expiration, or after the termination of Mr. Quinn's
employment with the Company, whichever occurs later, Mr. Quinn may not compete
directly or indirectly with the Company within the continental United States.
The Company shall require any successor to a majority of its business activities
to assume its obligations under this agreement.

11
<PAGE>
EMPLOYMENT AGREEMENTS WITH MESSRS. SPIEZIO, NACHTRAB, GROTHEER, AND RAFTERY

In October 1997, the Company entered into employment agreements with Messrs.
Spiezio, Nachtrab, Grotheer, and Raftery (each an "Executive"). Under the terms
of their respective agreements, Messrs. Spiezio, Nachtrab, Grotheer, and Raftery
are entitled to an annual base salary of $142,000, $142,000, $135,000 and
$125,000 respectively, subject to such annual increases and bonuses as the Board
of Directors may from time to time determine. Each of the agreements shall
continue in force for an initial period of three (3) years, unless such
agreement is terminated by the Company or the Executive in accordance with its
terms. Annually, the Board of Directors, in its discretion, may extend the term
of each agreement for an additional year. During the term of each Agreement and
for a period of 18 months after any termination of employment, each Executive
may neither i) compete directly or indirectly with the Company within the
continental United States nor ii) solicit any of the Company's customers or
employees. Each of the agreements may be terminated by the Company prior to a
change in control (as defined in the agreements) and upon twelve months written
notice. On November 13, 1998, the Board of Directors notified Mr. Spiezio that
his employment agreement would not extend beyond November 15, 1999 and that he
would no longer serve in the capacity of Chief Financial Officer of the Company.

DEFERRAL AND PAYMENT IN COMMON STOCK

Messrs. Quinn, Nachtrab, Raftery and other executives of the Company have
deferred a portion of their salaries and agreed to accept payment of the
deferred amount in Common Stock of the Company valued at market value on the
date of the deferral. Through March 31, 1999, the approximate aggregate amount
deferred was $18,000. Shares representing the deferral have not yet been issued.

MANAGEMENT AGREEMENT WITH MATTHEWS ASSOCIATES LIMITED

Mr. Matthews served as the Company's Chief Executive Officer during fiscal
year 1997 and resigned from such position on January 20, 1998. The Company has
entered into a management agreement with Matthews Associates Limited, a
Massachusetts corporation ("MAL"), of which George J. Matthews, Director and
Chairman of the Board of Directors of the Company, is sole owner. The agreement
provides MAL with a minimum compensation of $350,000 per annum for services
performed under the agreement, including financial management advice,
representation of the Company before government regulatory bodies, a MAL
representative's (Mr. Matthews) service on the Board and such other duties as
assigned by the Board of Directors. For the period October 1, 1998 to March 31,
1999, MAL has agreed to defer indefinitely payment of a total of $125,000 due
under the Management Agreement pending an improvement in the Company's cash
position. The agreement expires on February 28, 2002, subject to annual renewals
as described in the agreement. On March 25, 1999 the Board of Directors approved
amendments to the agreement proposed by MAL reducing the minimum annual
compensation to $225,000 per year and amending the expiration date to be
February 28, 2004. In the event of termination of the management agreement by
the Company, the Company is obligated to pay to MAL all of the amounts due under
the agreement for the remaining term.

MANAGEMENT ADVISORY SERVICES AGREEMENTS

The Company entered into a management advisory services agreement with
Hurley, Vaughn & Associates, P.C. in August 1998. The agreement provides for
compensation based on hourly rates ranging from $60 to $185 per hour dependent
on the staff level assigned. In November 1998, the Board of

12
<PAGE>
Directors appointed Mr. Kenneth Hurley of Hurley, Vaughn & Associates, P.C. to
Interim Chief Financial Officer of the Company. In February 1999, this agreement
was terminated.

In February 1999, the Company entered into a management advisory services
agreement with Claymore Partners. The agreement provides for compensation at an
hourly rate of $275. On March 1, 1999, the Board of Directors appointed Mr.
William Loftus of Claymore Partners as Chief Financial Officer of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended September 30, 1998, the Board of Directors of
the Company was responsible for establishing executive compensation (other than
stock option compensation). Messrs. Quinn and Matthews participated in
deliberations of the Company's Board of Directors concerning executive officer
compensation. Neither participated in setting his own compensation. The Stock
Option Committee, which recommends to the Board of Directors for its approval
the terms, amounts and recipients of stock options under the Company's stock
option plans, consisted of Messrs. Matthews, Tuffin and Quinn during the fiscal
year ended September 30, 1998. No executive officer of the Company served as a
director or member of a compensation committee, or its equivalent, of another
entity, one of whose executive officers served as director of the Company.

Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the following report on
compensation and the Stock Performance Graph contained elsewhere herein shall
not be incorporated by reference into any such filings nor shall be deemed to be
soliciting material or deemed filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, or under the Securities Exchange
Act of 1934, as amended.

REPORT OF THE BOARD OF DIRECTORS AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION

During the fiscal year ended September 30, 1998, the Board of Directors of
the Company was responsible for establishing and administering the policies
which govern annual compensation (other than stock option compensation) for the
Company's executive officers. The Stock Option Committee was responsible for
considering stock option compensation for the Company's executive officers.

OVERVIEW

The Board of Directors has historically established levels of executive
compensation that provide for a base salary intended to allow the Company to
hire, motivate and retain qualified executive officers. From time to time, the
Board has also, on occasion, approved annual cash incentive bonuses based on the
Company's performance or on the performance of the executive in question. In
fiscal 1998, the Board approved cash incentive bonuses to certain executive
officers based on their performance. From time to time, the Stock Option
Committee recommends to the Board of Directors for its approval grants of stock
options to executive officers and key employees in order to bring the
stockholders' interests more sharply into the focus of such officers and
employees. In fiscal 1998, the Stock Option Committee recommended, and the Board
of Directors approved, the grant of stock options to certain of the Company's
employees and directors.

13
<PAGE>
The Board of Directors establishes the annual salary and bonus of each of
the executive officers other than the Chief Executive Officer, based on the
recommendations made by the Chief Executive Officer. In determining the
recommendations for salary and bonus for each of the other executive officers,
the Chief Executive Officer considers each officer's individual performance,
attainment of individual goals and the contribution to the overall attainment of
the Company's goals.

STOCK OPTIONS AND OTHER COMPENSATION

Long-term incentive compensation for executive officers consists of stock
options granted under the Company's Stock Option Plans (the "Plans"). Executive
officers as well as other key employees of the Company participate in the Plans.
The 1998 Stock Plan provides for the granting of additional options in the
future. The Company also believes that its Pension Plan is an attractive feature
for all employees.

BASIS FOR THE COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

The compensation of Mr. Matthews, the Company's former Chief Executive
Officer during fiscal 1998, was determined pursuant to a management agreement
between Matthews Associates Limited and the Company. All compensation under the
agreement was paid by the Company to Matthews Associates Limited. See "Executive
Arrangements-Management Agreement with Matthews Associates Limited." Mr.
Matthews ceased to serve as Chief Executive Officer of the Company as of January
19, 1998.

Mr. Quinn assumed the position of Chief Executive Officer of the Company on
January 20, 1998 and is compensated by the Company at an annual base salary of
$200,000. Mr Quinn is entitled to participate in the Company's Stock Option
Plans and to receive bonuses at the discretion of the Board of Directors, in
accordance with the terms of his Employment Agreement with the Company. See
"Executive Arrangements-Employment Agreement with Mr. Quinn."

14
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN

Set forth below is a line graph comparing the five-year cumulative total
return of the Company's Common Stock against the cumulative total return of the
NASDAQ Stock Market (U.S.) Index and the Dow Jones Aerospace and Defense Index.
Cumulative total return is measured assuming an initial investment of $100 and
reinvestment of dividends.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG STARMET CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE DOW JONES AEROSPACE & DEFENSE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
STARMET NASDAQ STOCK DOW JONES

<S> <C> <C> <C> <C> <C> <C> <C> <C>
CORPORATION MARKET (U.S.) AEROSPACE & DEFENSE
Sep-93 $100.00 $100.00 $100.00
Sep-94 $316.67 $100.83 $117.75
Sep-95 $183.33 $139.28 $187.79
Sep-96 $266.67 $165.24 $262.08
Sep-97 $575.00 $226.81 $329.49
Sep-98 $300.00 $231.84 $257.98

<CAPTION>
575
<S> <C> <C> <C> <C> <C> <C>
Sep-93 575
Sep-94 100
Sep-95
Sep-96
Sep-97
Sep-98
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN (%)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
9/93 9/94 9/95 9/96 9/97
Starmet Corporation.................................................... 100.00 316.67 183.33 266.67 575.00
Nasdaq Stock Market (U.S.)............................................. 100.00 100.83 139.28 165.24 226.81
Dow Jones Aerospace & Defense.......................................... 100.00 117.75 187.79 262.08 329.49

<S> <C>
9/98
Starmet Corporation.................................................... 300.00
Nasdaq Stock Market (U.S.)............................................. 231.84
Dow Jones Aerospace & Defense.......................................... 257.98
</TABLE>

<TABLE>
<C> <S> <C>
* Assumes $100 was invested on September 30, 1993 in Starmet Corporation
Common Stock and in each of the noted indices, and assuming the
reinvestment of dividends, if any.
</TABLE>

15
<PAGE>
PROPOSAL NO. 2
AMENDMENT THE COMPANY'S 1998 STOCK PLAN

DESCRIPTION OF THE 1998 STOCK PLAN

The 1998 Stock Plan (the "1998 Plan") was adopted by the Board of Directors
of the Company on February 20, 1998 and received shareholder approval on March
18, 1998. It is currently proposed to increase the number of shares of Common
Stock authorized for issuance pursuant to the 1998 Plan from 300,000 shares to
500,000 shares. Management of the Company believes that this increase is
important to permit the Board of Directors to provide incentives to present and
future key employees. Under the 1998 Plan, employees may be awarded incentive
stock options ("ISO" or "ISOs"), as defined in Section 422(b) of the Internal
Revenue Code, and directors, officers, employees, and consultants of the Company
may be granted (i) options which do not qualify as ISOs ("Non-qualified Option"
or "Non-qualified Options:); (ii) awards of stock in the Company ("Awards"); and
(iii) opportunities to make direct purchases of stock in the Company
("Purchases"). ISOs, Non-qualified Options, Awards, and Purchases are
collectively referred to as "Stock Rights." ISOs and Non-qualified Options are
collectively referred to as "Stock Rights." ISOs and Non-Qualified Options are
collectively referred to as "Options."

ADMINISTRATION OF THE PLAN. The Plan will be administered by the Board of
Directors. The Board of Directors may delegate any or all of its powers under
the Plan to a Committee appointed by the Board of Directors. Subject to the
terms of the Plan, the Board of Directors determines the recipients to whom
options will be granted, the number of shares to be covered by such options and
the terms of such options.

STOCK OPTION FEATURES. The Board of Directors may, at its discretion,
select any eligible person to participate in the Plan. Non-Qualified Options and
Purchase Rights may be granted, and Awards may be made, to any director,
officer, employee or consultant of the Company. Only employees of the Company
are eligible to receive ISOs. As of March 31, 1999, there were approximately 200
persons eligible to receive options issued pursuant to the Plan. The number of
options granted to any eligible person is within the discretion of the Board of
Directors, subject to certain conditions concerning ISOs.

The aggregate fair market value (determined at the time of grant) of shares
issuable pursuant to ISOs which first become exercisable in any calendar year by
an employee may not exceed $100,000. ISOs may not be granted at less than the
fair market value of the Common Stock on the date of grant or 110% of fair
market value in the case of ISOs granted to any optionee holding 10% or more of
the total combined voting power of all classes of stock of the Company. In
addition, no ISO is exercisable after 10 years from the date on which it is
granted, and in the case of ISOs granted to an employee holding 10% or more of
the total combined voting power of all classes of stock of the Company, the term
shall not exceed 5 years from the date of grant.

Options issued under the Plan are exercisable only by the optionee during
the life of the optionee and, generally, are not transferable, except by will or
the laws of descent and distribution or as determined by the Board of Directors.
The Board of Directors shall determine the period of time during which an
optionee may exercise an option following the termination of employment or
service to the Company subject to certain restrictions set forth below with
respect to ISOs. ISOs are generally only exercisable while an optionee is
employed by the Company, except that the Board of Directors may determine to
permit exercise within up to three months after termination of employment to the
extent such option has vested at the time of such termination. If an optionee
dies while employed by the Company or within three months of the termination of
his or her employment by the Company, such optionee's ISOs may be exercised up
to twelve months after his or her death. If an optionee is permanently disabled
during his or

16
<PAGE>
her employment by the Company, such optionee's may be exercised up to one year
following termination of his or her employment due to such disability.

The exercise price of options granted under the Plan is determined by the
Board of Directors on the date of grant, subject to the limitation that the
exercise price may not be less than per value. However, there are certain
pricing restrictions for ISOs as set forth above. The exercise price of options
granted under the Plan must be paid in full upon exercise in cash, by delivery
of shares of Common Stock already owned by the optionee, through the delivery of
an assignment to the Company of a sufficient amount of the proceeds from the
sale of the Common Stock acquired upon exercise of the option, by any other
means the Board of Directors deems acceptable, or a combination thereof.

In the event of a consolidation or merger or sale of all or substantially
all of the assets of the Company in which outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity or in the event of a liquidation of the Company, the Board of
Directors of the Company, or the board of directors of any corporation assuming
the obligations of the Company may, in its discretion, take any one or more of
the following actions as to outstanding options: (i) provide that such options
shall be assumed, or equivalent options shall be substituted, by the acquiring
or succeeding corporation (or an affiliate thereof); (ii) upon written notice to
the optionees, provide that all unexercised options will terminate immediately
prior to the consummation of such transaction unless exercised by the optionee
within a specified period following the date of such notice; (iii) terminate all
options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to such options (to the extent that exercisable)
over the exercise price thereof; (iv) terminate all options in exchange for the
right to participate in any stock option or other employee benefit plan of any
successor corporation (giving proper credit to an optionee for that portion of
an option which has otherwise vested or become exercisable); (v) in the event of
a merger under the terms of which holders of the Common Stock of the Company
will receive upon consummation thereof a cash payment for each share surrendered
in the merger (the "Merger Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Merger Price times the number
of shares of common Stock subject to such outstanding options (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding options in exchange for the
termination of such options; and (vi) provide that all or any outstanding
options shall become exercisable in full immediately prior to such event. The
foregoing actions are subject in all instances to the approval of the Board of
Directors and any accounting considerations for any acquisitions which is
required to be treated as a "pooling of interests" transaction pursuant to the
Accounting Principles Board ("APB") Opinion No. 16, if any discretionary actions
by the Board of Directors would otherwise preclude the Company from accounting
for any such transaction as a "pooling of interests" under APB Opinion No. 16.
In addition, the Board of Directors may, in an instrument evidencing an option,
Purchase Right or Award, provide for a result that is different from, or is more
advantageous to the grantee than, the actions permitted to be taken by the Board
of Directors, as described above upon the occurrence of one of the events
described above or upon a change of control of the Company.

In the event of a stock dividend, stock split or other change in corporate
structure or capitalization affecting the Common Stock, the number and kind of
shares of stock or securities of the Company to be subject to the Plan and the
options then outstanding or to be granted thereunder, and the option price, will
be appropriately and proportionately adjusted by the Board of Directors, whose
determination will be binding on all persons.

17
<PAGE>
TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors may
terminate, modify or amend the Plan except that no amendment or modification for
which stockholder approval is required under Section 422 of the Code is
permissible without the approval of the stockholders of the Company. With
respect to ISOs, the Plan shall terminate on the earlier of (i) ten years from
the date of the Board of Directors' approval of the Plan or (ii) the date on
which all shares available for issuance under the Plan have been issued pursuant
to the exercise or cancellation of options granted under the Plan.

ACCOUNTING EFFECTS. Under current accounting rules, neither the grant nor
exercise of options under the Plan is expected to result in any charge to the
earnings of the Company. Options with variable exercise prices or at an exercise
price less the fair market value on the date of grant may result in charges to
earnings under certain circumstances.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary
of certain Federal income tax consequences of options grants and exercises under
the Plan based upon the Federal income tax laws in effect on the date hereof.

INCENTIVE STOCK OPTIONS. An employee receiving an ISO will not realize
taxable income upon the grant of the ISO or upon its timely exercise (but
exercise may subject an employee to alternative minimum tax as discussed below).
Exercise of an ISO will be timely if made during its term and if the employee
remains an employee of the Company or a subsidiary corporation at all times
during the period beginning on the date of the grant of the ISO and ending on
the date of exercise or, pursuant to the terms of the employee's option
agreement, such option may be exercised upon to three months after the option
holder ceases to be an employee of the Company (or one year before the date of
exercise in the case of a disabled employee). Exercise of an ISO will also be
timely if made within twelve months of the date of death (provided it is
exercisable by its terms) by the legal representatives of an employee who dies
while in the employ of the Company or a subsidiary corporation. However, the
Plan limits the right of legal representation of any participant to exercise an
option to one year following death. Upon a sale of the stock received upon
exercise, except as noted below, the employee will generally recognize long-term
capital gain or loss equal to the difference between the amount realized upon
such sale and the exercise price. The Company, under these circumstances, will
not be entitled to any Federal income tax deduction in connection with the
exercise of the ISO or the sale of such stock.

If the stock acquired pursuant to an exercise of any ISO is disposed of by
the employee prior to the expiration of two years from the date of grant or
within one year from the date such stock is issued to him or her upon exercising
(a "disqualifying disposition"), any gain realized by the employee generally
will be taxable at the time of such disqualifying disposition, as follows: (i)
at ordinary income rates to the extent of the difference between the exercise
price and the lesser of the fair market value of the stock on the date the ISO
is exercised (the value on a later date is likely to govern in case of an
employee whose sale of the stock at a profit could subject him or her to suit
under Section 16(b) of the Exchange Act) or the amount realized on such
disqualifying disposition, and (ii) if the stock is a capital asset of the
employee, as short-term or long-term capital gain to the extent of any excess of
the amount realized on such disqualifying disposition over the fair market value
of the stock on the date which governs the determination of the employee's
ordinary income. In such case, the Company may claim a Federal income tax
deduction at the time of such disqualifying disposition for the amount taxable
to the employee as ordinary income. Any capital gain realized by the employee
will be long-term capital gain if the employee's holding period for the stock at
the time of disposition meets applicable holding period requirements for
long-term capital gains under the Code; otherwise, it will be short-term. The
amount by which the fair market value

18
<PAGE>
of the stock on the exercise date of an ISO exceeds the exercise price will be
an item of tax preference for purposes of the alternative minimum tax imposed by
the Code.

NON-QUALIFIED OPTIONS. In the case of Non-Qualified Options (and in the
case of an untimely exercise of an ISO), the employee will not be taxed upon
grant of any such option, but rather, at the time of exercise of such
Non-Qualified Options, the employee, except as noted below, will realize
ordinary income for Federal income tax purposes in an amount equal to the excess
of the fair market value of the shares purchased over the exercise price. The
Company will generally be entitled to a tax deduction at such time and in the
same amount that the employee realizes ordinary income. If stock so acquired is
later sold or exchanged, then the difference between the sales price and the
fair market value of such stock on the date of exercise of the option is
generally taxable as long-term or short-term capital gain or loss depending upon
whether the stock has been held for more than the applicable holding period for
long-term capital gains under the Code.

As stated above, generally income is realized by an employee upon exercise
upon a Non-Qualified Option (or untimely exercise of an ISO). However, in the
case of such exercise of an option by an employee whose sale of shares at a
profit could subject the employee to suit under Section 16(b) of the Exchange
Act, realization of income is postponed so long as a sale of the shares would
expose the employee to such suit, unless the employee elects within 30 days
after the exercise to be taxed as of the exercise date in the manner described
above. Absent such election, such an employee will realize ordinary income at
the time a sale would no longer expose him or her to such suit in an amount
equal to the excess of the fair market value of the shares at that time over the
exercise price. That fair market value will also govern for purposes of the
Company's deduction and for determining the employee's gain or loss upon
subsequent disposition of the shares.

EXERCISE WITH SHARES. An employee who pays the exercise price of a
Non-Qualified Option, in whole or in part, by delivering shares of the Company's
Common Stock already owned by him or her will realize no gain or loss for
Federal income tax purposes on the shares surrendered, but otherwise will be
taxed accordingly to the rules described above for Non-Qualified Options. (See
"Certain Federal Income Tax Consequences--Non-Qualified Options.") With respect
to shares acquired upon exercise which are equal in number to the shares
surrendered, the basis of such shares will be equal to the fair market value of
such shares on the date of exercise, and the holding period for such additional
shares will commence on the date the option is exercised.

When shares of the Company's Common Stock are surrendered upon exercise of
an ISO, (i) no gain or loss will be recognized as a result of the exchange, (ii)
a number of shares received which is equal to the number of shares surrendered
will have a basis equal to that of the shares surrendered, and (except for
purposes of determining whether a disposition will be a disqualifying
disposition) will have a holding period which includes the holding period of the
shares exchanged and (iii) the remaining shares received will have a zero basis
and will have a holding period which begins on the date of the exchange. If any
of the shares received are disposed of within two years of the date of grant of
the ISO or within one year after exercise, the shares with the lowest basis
(i.e., a zero basis) will be deemed to be disposed of first, and such
disposition will be a disqualifying disposition giving rise to ordinary income
as discussed above.

The foregoing summary is not a complete description of the Federal income
tax aspects of the Plan. Moreover, the foregoing summary relates only to Federal
income tax; there may also be Federal estate and gift tax consequences
associated with the Plan, as well as foreign, state and local tax consequences.

19
<PAGE>
OUTSTANDING STOCK OPTIONS GRANTS UNDER THE 1998 PLAN

The following table sets forth all options granted pursuant to the 1998 Plan
during the period commencing with its adoption on March 18, 1998 until September
30, 1998 to (i) each of the Named Executive Officers, (ii) all of the executive
officers of the Company as a group, (iii) all current directors of the Company
who are not executive officers, as a group, (iv) each nominee for election as a
director, (v) each associate of such directors, executive officers or nominees,
(vi) each person who received or is entitled to receive five percent of such
options, and (vii) all employees, including all current officers who are not
executive officers, as a group. Option grants are reflected for the period
ending on September 30, 1998 because the number and value of options to be
granted under the Plan in the future are not determinable.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME AND POSITION UNDERLYING OPTIONS GRANTED
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>

George J. Matthews.................................................................... 7,500
Chairman of the Board of Directors

Robert E. Quinn....................................................................... 15,000
President, Chief Executive Officer and Treasurer

William Loftus........................................................................ -0-
Vice President, Finance and Administration

William T. Nachtrab................................................................... 17,500
Vice President Technology

Douglas F. Grotheer................................................................... 5,000
President Starmet & CMI Corporation

Kenneth A. Smith...................................................................... 7,500
Director

Frank H. Brenton...................................................................... 7,500
Director

Wilson B. Tuffin...................................................................... 7,500
Director

All executive officers as a group..................................................... 27,000

All current directors who are not executive officers, as a group...................... 22,500

All employees, including all current officers who are not executive officers, as a
group............................................................................... 135,500
</TABLE>

Approval of amendment to the 1998 Plan increasing the number of shares of
Common Stock authorized for issuance thereunder from 300,000 to 500,000 will
require the affirmative vote of a majority of the outstanding shares of Common
Stock of the Company represented in person or by proxy at the Meeting.

The Board of Directors recommends a vote FOR the approval of the amendment
to the 1998 Plan.

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PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF AUDITORS

The Board of Directors of the Company has selected the firm of Arthur
Andersen LLP, independent certified public accountants, to serve as auditors of
the Company for the fiscal year ending September 30, 1999. Arthur Andersen LLP
has acted as the Company's independent auditors for the fiscal year ended
September 30, 1998.

Representatives of Arthur Andersen LLP are expected to be present at the
Meeting, with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.

This proposal has been unanimously approved by the Board of Directors, which
recommends that stockholders vote FOR its adoption.

MASSACHUSETTS CONTROL SHARE ACQUISITION ACT

The Company is subject to Chapter 110D of the Massachusetts General Laws
which governs "control share acquisitions," which are acquisitions of beneficial
ownership of shares which would raise the voting power of the acquiring person
(1) above any one of three thresholds: one-fifth, one-third or one-half of the
total voting power. Each time one of these thresholds is crossed, all shares
acquired by the person making the control share acquisition within 90 days
before or after such time, obtain voting rights only upon the authorization from
a majority of the stockholders other than the person acquiring such shares,
officers of the Company and those directors of the Company who also are
employees.

The Company believes that certain control share acquisitions have occurred
and that the members of the group which effected such control share
acquisitions, namely WIAF Investors Co., Charles Alpert, Joseph Alpert, Melvin
B. Chrein, Meryl J. Chrein, Michael Chrein, and Marshall J. Chrein (collectively
the "Investor Group") are the holders of 1,749,598 shares which were acquired in
control share acquisitions and, accordingly, will have no voting rights unless
or until such voting rights are authorized as described above. The Company's
belief is based upon filings made by stockholders with the Securities and
Exchange Commission ("SEC") on Schedule 13D and certain amendments thereto. The
members of the Investor Group may deliver to the Company a control share
acquisition statement in accordance with the provisions of Section 3 of Chapter
110D and demand that the Board of Directors of the Company call a special
meeting for the purpose of considering whether voting rights shall be authorized
for the Affected Shares. No control share acquisition statement has been
delivered to the Company and no such demand has been made. The question of
authorization of voting rights for the Affected Shares will not be considered at
the Special Meeting.

The Control Share Acquisition Act further provides that if voting rights
subsequently are authorized for the Affected Shares and such authorization, when
added to all other shares of the Company beneficially owned by the holder,
entitles the holder to own or control the voting of shares of the Company having
a majority or more of all voting power in the election of directors, then each
other stockholder of record of the Company who does not vote in favor of
authorizing voting rights for the shares acquired in such control share
acquisition may demand payment for the appraised value of his stock. At this
time, because no control share acquisition statement has been delivered to the
Company, the Company has not determined whether a control share acquisition has
occurred which might result in such appraisal rights being available as
described above; however, the members of the Investor Group have made filings
with the SEC which indicate collective beneficial ownership of 50.50% of the
Company's outstanding shares.

21
<PAGE>
The Company's stockholders, at a duly-constituted meeting, may also, by
amendment to the by-laws or the Articles of Organization, provide that the
provisions of Chapter 110D shall not apply to future control share acquisitions
of the Company. Management currently has no plans to propose such an amendment.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and stockholders who own more than 10% of the
outstanding common stock of the Company to file with the Securities and Exchange
Commission reports of ownership and changes in ownership of voting securities of
the Company and to furnish copies of such reports to the Company. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company or written representations from certain persons that no
reports were required for those persons, all Section 16(a) filing requirements
were complied with during the fiscal year ended September 30, 1998.

FINANCIAL STATEMENTS

Stockholders as of the record date of April 7, 1999 will receive with this
Proxy Statement a copy of the Company's 1998 Annual Report on Form 10-K,
including audited financial statements for the fiscal year ended September 30,
1998 and the Company's Quarterly Report on Form 10-Q, including unaudited
financial statements for the period ending December 31, 1998, but in each case
excluding exhibits. The financial statements of the Company contained in Form
10-K and Form 10-Q are incorporated herein by reference.

STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING

Any stockholder desiring to present a proposal for consideration at the
Company's 2000 Annual Meeting of Stockholders, scheduled to be held on or about
March 15, 2000, in the included in the Company's Proxy Statement to be mailed to
the Company's stockholders in connection with such Annual Meeting, must submit
the proposal to the Company so that it is received at the executive offices of
the Company not later November 15, 1999. Any stockholder desiring to submit a
proposal should consult applicable regulations of the Securities and Exchange
Commission. In order to curtail controversy as to the date on which proposal was
received by the Company, it is suggested that proponents submit their proposals
by Certified Mail Return Receipt Requested to Starmet Corporation; 1229 Main
Street, Concord, Massachusetts 01742.

OTHER MATTERS

As of the date of this Proxy Statement, management of the Company knows of
no matter not specifically referred to above as to which any action is expected
to be taken at the Meeting of stockholders. Persons named as proxies will vote
the proxies, insofar as they are not instructed to the contrary, in regard to
such other matters and the transaction of such other business, if any, as may
properly be brought before the Meeting, as seems to them to be in the best
interests of the Company and its stockholders.

EXPENSES AND SOLICITATION

The cost of solicitation of proxies will be borne by the Company, and in
addition to directly soliciting shareholders by mail, the Company may request
banks and brokers to solicit their customers who have stock of the Company
registered in the name of nominee and, if so, will reimburse such banks and
brokers

22
<PAGE>
for their reasonable out-of-pocket costs. Solicitation by officers and employees
of the Company may also be made of some stockholders in person or by mail or
telephone, following the original solicitation. The Company may, if appropriate,
retain an independent proxy solicitation firm to assist the Company in
soliciting proxies. If the Company does retain a proxy solicitation firm to
assist the Company in soliciting proxies, the Company would pay such firm
customary fees and expenses.