MILASTAR CORPORATION
NO. 9 VIA PARIGI
PALM BEACH, FLORIDA 33480
NOTICE OF ELECTION OF DIRECTORS AND STOCK OPTION
PLAN CHANGES
To the Stockholders of MILASTAR CORPORATION:
Notice is hereby given that, in lieu of an annual meeting of the
stockholders of Milastar Corporation (the "Company"), J. Russell Duncan,
Chairman of the Board and a director of the Company, and Mimi G. Duncan,
Mr. Duncan's wife, the record owners of approximately 63.5 percent of the
outstanding Class A Common Stock of the Company, which represents
approximately 62.4 percent of the total combined voting power of the
Company, have executed a written consent pursuant to Section 228 of the
General Corporation Law of the State of Delaware, approving the election of
L. Michael McGurk to the Board of Directors of the Company, to serve for
a three year term until the annual meeting of stockholders of the Company to
be held in 1999 or until his successor shall have been duly elected and
qualified. In addition, the written consent approves an amendment to the
Milastar Corporation Stock Option Plan (the "Option Plan"), providing for
the granting of options to purchase an additional 200,000 shares bringing the
total aggregate amount of options available to 400,000 shares of Class A
Stock to directors, key employees and key consultants of the Company and
its corporate subsidiaries.
The foregoing consent was executed on July 8, 1996, but provides that it
shall not become effective until the twentieth (20th) day after the date this
Information Statement is first mailed by the Company to its stockholders of
record on July 12, 1996, the record date fixed by the Board of Directors for
the determination of stockholders entitled to receive notice of the taking of
such action.
By order of the Board
of Directors,
LANCE H. DUNCAN
Secretary
August 9, 1996
MILASTAR CORPORATION
NO. 9 VIA PARIGI
PALM BEACH, FLORIDA 33480
INFORMATION STATEMENT
NOTIFICATION OF ACTION TAKEN BY THE WRITTEN CONSENT
OF THE HOLDERS OF A
MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF
COMMON STOCK OF THE
COMPANY ACCOMPANIES THIS INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
GENERAL
This Information Statement has been prepared and is being distributed to
the stockholders of Milastar Corporation, a Delaware corporation (the
"Company"), on or about August 9, 1996, by the management of the
Company pursuant to the authority of its Board of Directors. The Board of
Directors has fixed July 12, 1996 as the record date (the "Record Date") for
the determination of stockholders entitled to receive notice of action taken by
the written consent of J. Russell Duncan, Chairman of the Board and a
director of the Company, and Mimi G. Duncan, Mr. Duncan's wife, together
the beneficial and record owners of 62.4% of the Company's total combined
voting power, approving the matter described in the notice accompanying this
Information Statement. As of the Record Date, the Company had outstanding
2,738,264, shares of Class A Common Stock ("Class A Stock"), the holders
of which are entitled to one vote per share. The Written Consent provides
that it shall not become effective until the twentieth day after the date on
which this Information Statement was first mailed to stockholders of the
Company. The Class A Stock is the only class of the Company's authorized
securities. There is no right of cumulative voting.
Copies of the Company's Annual Report for the fiscal year ended April
30, 1996 are enclosed herewith but are not considered part of the Information
Statement material. The Annual Report describes the financial condition of
the Company as of April 30, 1996.
All costs incurred in connection with the preparation and mailing of this
Information Statement and the accompanying notice to stockholders will be
borne by the Company.
PRINCIPAL STOCKHOLDERS
The table below sets forth the shares beneficially owned by the officers
and directors of the Company and the persons who, to the knowledge of the
Company, owned beneficially 5% or more of the outstanding shares of
Common Stock on the Record Date:
Number of Shares Percent of Total
Name and Address of Common Stock Class of Percent Combined
of Beneficial Owner Beneficially Owned Stock of Series Voting Power
J. Russell Duncan. . . .1,484,314 (1) Class A 45.5% 47.0%
No. 9 Via Parigi
Palm Beach, Florida 33480
Mimi G. Duncan . . . . . .587,032 (2) Class A 18.0% 15.4%
No. 9 Via Parigi
Palm Beach, Florida 33480
L. Michael McGurk. . . . .163,379 (3) Class A 5.0% .5%
6646 Harbor Drive N.W.
Canton, Ohio 44718
Lance H. Duncan. . . . . .114,166 (4) Class A 3.5% .2%
1260 Boylston Street/Suite 204
Boston, Massachusetts 02215
C. Paul Johnson. . . . . . 22,233 (5) Class A .7% .1%
30 N. Michigan Avenue
Chicago, Illinois 60602
Dennis J. Stevermer. . . . .7,000 Class A .2% .3%
7317 W. Lake Street
St. Louis Park, Minnesota 55426
All executive officers and
directors as a group . .1,791,092 Class A 54.9% 48.1%
(5 persons)
(1) Includes 198,333 shares of Class A Stock issuable upon exercise of
outstanding options. The amounts shown in the foregoing table do not
include 587,032 shares of Class A Stock, including 166,666 shares of
Class A Stock issuable upon the exercise of outstanding options,
owned beneficially and of record by Mimi G. Duncan, Mr. Duncan's
wife, or shares of Class A Stock owned by other members of his
immediate family, as to all of which he disclaims beneficial
ownership.
(2) Includes 166,666 shares of Class A Stock issuable upon exercise of
outstanding options. The amounts shown in the foregoing table do not
include 1,484,314 shares of Class A Stock including 198,333 shares of
Class A Stock issuable upon exercise of outstanding options, owned
beneficially and of record by J. Russell Duncan, Mrs. Duncan's
husband, or shares of Class A Stock owned by other members of her
immediate family, as to all of which she disclaims beneficial
ownership.
(3) Includes 148,333 shares of Class A Stock issuable upon exercise of
options (see "Certain Transactions-Stock Options").
(4) Includes 107,500 shares of Class A Stock issuable upon exercise of
options (see "Certain Transactions-Stock Options"). Does not include
1,484,314 and 587,032 shares (including 198,333 and 166,666 shares
of Class A Stock issuable upon exercise of outstanding options) of
Class A Stock owned beneficially and of record by Mr. Duncan's
parents, J. Russell and Mimi G. Duncan, respectively, or shares of
Class A Stock owned by other members of his immediate family, as to
all of which he disclaims any beneficial interest.
(5) Includes 19,500 shares of Class A Stock issuable upon exercise of
options (see "Certain Transactions-Stock Options").
ELECTION OF DIRECTORS
The number of directors of the Company is currently fixed at four,
each of whom serves a term of three years as a member of one of the
Company's three classes of directors. By virtue of action taken by written
consent executed pursuant to Section 228 of the Delaware General
Corporation Law on July 8, 1996 (the "Written Consent"), J. Russell
Duncan, Chairman of the Board and a director of the Company, and Mimi
G. Duncan, Mr. Duncan's wife, together the record owners of 1,706,347
shares of Class A Stock, which represents approximately 63.5% of the
Company's issued and outstanding Class A Stock as of the Record Date
and 62.4% of the total combined voting power of the Company, as of the
Record Date, have elected L Michael McGurk as a directors of the
Company, to hold such office until the 1999 annual meeting of
stockholders or until his successor shall have been elected and qualified.
The Written Consent provides that it shall not become effective, and the
term of office of the director elected thereby shall not commence, until the
twentieth day after the date on which this Information Statement was first
mailed to stockholders of the Company.
The terms of office of the remaining directors expire as indicated in
the following table, and such directors or their successors will be elected
either by written consent or at the annual meetings of stockholders of the
Company to be held in 1997. The nominee and the directors named below
have previously been elected to office by the Company's stockholders. J.
Russell Duncan, Chairman of the Board and a director of the Company, is
the father of Lance H. Duncan, Secretary and a director of the Company.
With the foregoing exception, no family relationship exists among the
directors and the executive officers of the Company.
Name, Position with the Company Term to Expire Year in Which
and Principal Occupation at Annual Service as a
during Last Five Years(1) Age Meeting In Director Began
NOMINEE:
L. Michael McGurk. 45 1999 1988
President and Chief Operating Officer of the Company
since March 4, 1991; Executive Vice President and Secretary of the
Company from April 29, 1988 to March 4, 1991; President of Flame
Metals Processing Corporation, a wholly owned subsidiary of the
Company, since April 29, 1988.
PRESENT DIRECTORS:
Lance H. Duncan. . 40 1997 1983
Secretary of the Company since March 4, 1991; President
of the Company from April 29, 1988 to March 4, 1991; Secretary of
the Company from August 24, 1983 to April 29, 1988; President and
Chief Operating Officer of Sound Techniques, Inc.
J. Russell Duncan. 79 1998 1969
Chairman of the Board of the Company; Chairman of the
Board of Sound Techniques, Inc., and Chairman of the Board and
President of Steego Corporation, West Palm Beach, Florida (a
diversified manufacturer and distributor of automotive replacement
parts, metal working machinery and other products) from 1962 to
1989.
C. Paul Johnson. . 64 1998 1982
Director of Firstar Corporation since 1995; Chairman of
First Colonial Bankshares Corporation from 1988 to 1995.
(1) Mr. Johnson is a director of Firstar Corporation, J. Russell Duncan is
a director of XTRA Corporation (a trailer leasing company), Lance
H. Duncan is President and Chief Operating Officer of Sound
Techniques, Inc., (recording studios). Except as described herein,
none of the Company's directors are directors of issuers with a class
of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of
Section 15(d) of that Act, nor are they directors of issuers registered
as investment companies under the Investment Company Act of
1940.
EXECUTIVE COMPENSATION
Stock Option Plan
On August 2, 1991, the Company's stockholders approved the Milastar
Corporation Stock Option Plan (the "Option Plan"), providing for the
granting of incentive stock options ("Incentive Options") and nonstatutory
stock options ("Nonstatutory Options") to purchase up to an original
aggregate amount of 200,000 shares of Class A Stock to directors, key
employees and key consultants of the Company and its corporate
subsidiaries. On February 28, 1996, the Board of Directors amended the
Option Plan, contingent upon stockholder approval, to provide for the
granting of Incentive and Nonstatutory Options to purchase an additional
200,000 shares bringing the total aggregate amount of options available to
grant to 400,000. The Option Plan terminates on March 3, 2001, unless
sooner terminated by the Board of Directors. The following description of
the terms of the Option Plan is qualified in its entirety by reference to the
Option Plan which governs in the event of any conflict.
The Option Plan is administered by the Stock Option Committee (the
"Committee"), the current members are J. Russell Duncan, L. Michael
McGurk and Mimi G. Duncan, the wife of J. Russell Duncan, Chairman of
the Board and a director of the Company.
Nonstatutory Options granted pursuant to the Option Plan have a per
share exercise price of not less than 85% of the "fair market value" of a
share of Class A Stock on the effective date of grant. Incentive Options
granted pursuant to the Option Plan have a per share exercise price of not
less than 100% of the "fair market value" of a share of Class A stock on
the effective date of grant. However, if a participant owns (including
constructive ownership pursuant to Section 424(d) of the Internal Revenue
Code of 1986, as amended (the "Code")), more than 10% of the total
combined voting power of all classes of outstanding shares of stock of the
Company, then an Incentive Option granted under the Option Plan to such
participant shall be at least 110% of the "fair market value" of the shares
of Class A Stock on the date of grant and such Incentive Option shall
terminate and become non-exercisable upon the expiration of five years
from the date of grant. Subject to the foregoing, the option price is
determined by the Committee and is required to be approved by the Board
of Directors. The market value of the Class A Stock at July 12, 1996 was
$0.81 per share. All options granted under the Option Plan are exercisable
by the holders thereof, in such installments and during such periods as
may be fixed by the Committee at the time of grant; provided, however,
that all such options generally expire ten years from the date of grant
thereof, except that such term may be reduced in the event of termination
of an option holder's death, disability, retirement or other termination of
employment.
Options granted pursuant to the Option Plan may not be sold, pledged,
assigned, hypothecated or transferred, except by will, then applicable laws
of descent or distribution, or pursuant to a qualified domestic relations
order.
The table set forth below shows, as of July 26, 1996, the number of
options granted pursuant to the Option Plan, the number of options granted
to all executive officers as a group and the number of options granted to all
employees as a group. As of such date, none of such options have been
exercised nor were there any options exercised in the current fiscal year.
Options Exercise Price
Name Granted Per Share
J. Russell Duncan 198,333 (2) .6160 (3)
L. Michael McGurk 33,333 (1) .9609 (4)
15,000 (2) .5625 (4)
C. Paul Johnson 10,000 (1) .9609 (5)
9,500 (2) .5625 (4)
Lance H. Duncan 7,500 (2) .5625 (4)
All current executive officers
as a group (4 persons) 273,666
All employees as a group 273,666
(1) Each of such options was granted as of March 4, 1991.
(2) Each of such options was granted as of Feburary 28, 1996.
(3) Exercise price per share of each Incentive Option is 110% of the
"fair market value" per share on grant date.
(4) Exercise price per share of each Incentive Option is 100% of the
"fair market value" per share on grant date.
(5) Exercise price per share of each Nonstatutory Option is 100% of
the "fair market value" per share on grant date.
See "Certain Transactions Stock Options" for information concerning
options heretofore granted to directors of the Company.
Compensation Tables
Summary Compensation Table
The following table sets forth the cash and noncash compensation
awarded to or earned by the Chief Executive Officer of the Company and
other executive officers with compensation in excess of $100,000 in each
of the last three fiscal years:
Summary Compensation Table
Annual Long-Term
Compensation Compensation
Awards
Securities
Fiscal All Other Underlying
Name and Principal Position Year Salary Bonus (1) Compensation Options
J. Russell Duncan 1996 $74,000 198,333
Chairman of the Board 1995 $60,000
and CEO 1994 $60,000
Michael M. Gumma 1996 $95,000 $14,000 $9,000 (2)
Executive Vice President 1995 $95,000 $9,000 (2)
1994 $95,000 $11,000 (2)
(1) Reflects bonus earned during the fiscal year.
(2) All other compensation consisted of a car allowance (1996, 1995 &
1994) and moving expenses (1994).
Option Grants in Last Fiscal Year
The following table sets forth information concerning individual
grants of stock options made during the fiscal year ended April 30, 1996,
to each of the executive officers of the Company named in its Summary
Compensation Table above:
Option Grants in Last Fiscal Year
Name J. Russell Duncan Michael M. Gumma
Number of Securities 198,333
Underlying Options
Granted (#)
% of Total Options %86.1
Granted to Employees
in Fiscal Year
Exercise Price ($/Share) $0.616 (1) n/a
Expiration Date 03/01/01 n/a
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
for Option Term
5% ($) $20,212
10% ($) $57,499
(1) Pursuant to the Milastar Corporation Stock Option Plan under which
these options were granted, the exercise price for J. Russell Duncan,
an owner of more than 10% of all classes of outstanding shares of
stock, was 110% of the "fair market value" of the option share at the
date of grant.
Aggregate Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth the information concerning each
exercise of stock options during the fiscal year ended April 30, 1996, by
each of the executive officers named in the Summary Compensation Table
above and the value of unexercised options held by such persons as of
April 30, 1996.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Name J. Russell Duncan Michael M. Gumma
Shares Acquired on Exercise (#)
Value Realized ($)
Number of Securities Underlying 198,333/ 0
Unexercised Options at FY-Year
End (#) Exercisable/Unexercisable
Value of Unexercised
In-the-Money Options at
FY-End ($) Exercisable/
Unexercisable
Employment Contracts
Mr. J. Russell Duncan, Chairman of the Board and CEO of the
Company, has an employment agreement with the Company, dated March
1, 1996, providing for a miminun annual base salary of $85,000. The
stated expiration date is March 1, 2001 unless renewed in writing.
If at any time during the term of the employment agreement, Mr.
Duncan becomes unable to perform his duties due to a disabling condition,
this agreement will continue in full force for eighteen months immediately
following the date of incapacity. If such disability should continue for a
period in excess of said eighteen month period, the Company shall have
the right at reduce the minimum base salary to 85% of the stipulated
amount.
Upon his retirement, Mr. Duncan may elect to serve the Company in
the capacity as a consultant, subject to the approval of the Company's
Board of Directors, for which he will receive his full base compensation.
If in the event of Mr. Duncan's death while employed by the
Company, the Company is required to pay such person or persons, as
designated by Mr. Duncan, the compensation which would otherwise be
payable to Mr. Duncan through the final date of the employment
agreement.
INFORMATION CONCERNING THE BOARD
OF DIRECTORS AND THE AUDIT COMMITTEE
The only committee created by the Board of Directors is the Audit
Committee. The current members of the Audit Committee are C. Paul
Johnson and L. Michael McGurk. The functions of the Audit Committee
include reviewing the independence of the independent auditors,
recommending to the Board of Directors the engagement and discharge of
independent auditors, reviewing with the independent auditors the plan
and results of audit engagements, approving or ratifying each professional
service provided by independent auditors, considering the range of audit
and non-audit fees, and reviewing the scope and result of the Company's
procedures for internal auditing and the adequacy of internal controls (see
"Auditors").
During fiscal 1996, the Board of Directors held one meeting, while the
Audit Committee did not meet.
CERTAIN TRANSACTIONS
Lease of Corporate Offices. The Company leases space for its
executive offices in a building owned by J. Russell Duncan, Chairman of
the Board and a director of the Company, at No. 9 Via Parigi, Palm Beach,
Florida. The lease is on a month to month basis, covers space totaling
1,200 square feet and provides for a rental of $250 per month.
Management of the Company regards the lease between Mr. Duncan and
the Company as being favorable and in the best interests of the Company
and its stockholders.
Stock Options. Pursuant to the terms of two Promissory Notes each
dated April 26, 1988, issued by the Company to Mimi G. Duncan, the wife
of J. Russell Duncan, Chairman of the Board and a director of the
Company, which Promissory Notes have been repaid in full, the Company
granted Mrs. Duncan options to purchase an aggregate of 233,333 shares
of the Company's Class A Stock at $0.6738 per share, 115% of the average
of the closing "bid" and "ask" quotations for a share of such Common
Stock on the date of grant. On June 19, 1989, Mrs. Duncan, exercised
options to purchase 66,666 shares of the Company's Class A Stock and
acquired the same for a purchase price of $45,000. The unexercised
options granted to Mrs. Duncan were to expire on April 26, 1995. On
April 19, 1995 the Board of Directors elected to extend Mrs. Duncan's
options to April 26, 1999 at a price of $0.6738 per share.
Related Party Transactions. During fiscal 1995 the Company entered
into a series of note payable transactions which at April 30, 1996 had a
balance of $218,000, including accrued interest, payable to J. Russell
Duncan. The notes, which provided additional working capital for the
Company, bear an interest rate of 8% and are payable on demand. During
fiscal 1996 the Company entered into a note payable transaction which at
April 30, 1996 had a balance of $101,000, including accrued interest,
payable to L. Michael McGurk. The note, which facilitated the asset
purchase of New England Metal Treating, Inc., bears an interest rate of
8.7% and is payable on demand.
See "Executive Compensation - Stock Option Plan" for options
granted to directors and officers pursuant to the Option Plan.
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
on the Company's Common Stock for the last eight fiscal years with the
total cumulative total return on the Standards & Poors Composite Index
and the NASDAQ Composite Index. The comparison assumes that $100
was invested in the Company's Class A Stock and each of the two indices
on April 30, 1988 and that all dividends were reinvested.
Year Milastar S&P NASDAQ
Corp Composite Composite
4/30/88 100.00 100.00 100.00
4/30/89 184.01 116.47 116.53
4/30/90 211.97 124.43 116.40
4/30/91 225.75 141.19 138.33
4/30/92 245.39 156.08 167.70
4/30/93 234.59 165.58 192.83
4/30/94 261.25 169.61 214.52
4/30/95 101.30 193.61 249.49
AUDITORS
KPMG Peat Marwick served as the Company's independent auditors
for the fiscal year ended April 30, 1996 and it is the Board of Directors'
present intention to reappoint such accounting firm as auditors for the
fiscal year ending April 30, 1997.
SHAREHOLDER PROPOSALS
Under the rules promulgated by the Securities and Exchange
Commission, holders of Common Stock who desire to submit proposals
for inclusion in the Proxy Statement of the Board of Directors to be
utilized in connection with the 1997 Annual Meeting of Stockholders, or
any Information Statement submitted in lieu thereof, as the case may be,
must submit such proposals to the Secretary of the Company no later than
March 28, 1997.
By Order of the Board of Directors,
LANCE H. DUNCAN
Secretary
August 8, 1996
