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 59.6 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 Lance H. Duncan 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 2000 or until his
successor shall have been duly elected and qualified.
The foregoing consent was executed on July 8, 1997, 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 11, 1997, 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 8, 1997
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 8, 1997, by the management of the Company
pursuant to the authority of its Board of Directors. The Board of Directors has
fixed July 11, 1997 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,
1997 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, 1997.
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 Percent
Shares of of Total
Common Stock Name of Percent Combined
Name and Address Beneficially Class of of Voting
of Beneficial Owner Owned Stock Series Power
J. Russell Duncan. . . . 1,484,314(1) Class A 42.7% 47.0%
No. 9 Via Parigi Common Stock
Palm Beach, Florida 33480
Mimi G. Duncan . . . . . . . 587,032(2) Class A 16.9% 15.4%
No. 9 Via Parigi Common Stock
Palm Beach, Florida 33480
L. Michael McGurk. . . . . . 163,379(3) Class A 4.7% .5%
6646 Harbor Drive N.W. Common Stock
Canton, Ohio 44718
Lance H. Duncan. . . . . . . 114,166(4) Class A 3.3% .2%
1260 Boylston Street/Suite 204 Common Stock
Boston, Massachusetts 02215
C. Paul Johnson. . . . . . . 22,233(5) Class A .6% .1%
30 N. Michigan Avenue Common Stock
Chicago, Illinois 60602
Dennis J. Stevermer. . . . . 37,000(6) Class A 1.1% .3%
7317 W. Lake Street Common Stock
St. Louis Park, Minnesota 55426
All executive officers and
directors as a group . . . 1,821,092 Class A 52.4% 48.1%
(5 persons) Common Stock
(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").
(6) Includes 30,000 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, 1997 (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 59.6% 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
Lance H. Duncan as a director of the Company, to hold such office until the
2000 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 1998. 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:
Lance H. Duncan. . . . . . . . . . 41 2000 1983
Secretary of the Company since
March 4, 1991; Presidentof 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.
PRESENT DIRECTORS:
J. Russell Duncan. . . . . . . . . 80 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. . . . . . . . . . 65 1998 1982
Director of Firstar Corporation since
1995; Chairman of First Colonial
Bankshares Corporation from 1988 to 1995.
L. Michael McGurk. . . . . . . . . 46 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.
(1) Mr. Johnson is a director of Firstar Corporation, 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 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.
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 11, 1997 was $0.72 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 25, 1997, 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 Date Exercise Price
Name Granted Granted Per Share
J. Russell Duncan 198,333 2/28/96 $.6160(1)
L. Michael McGurk 33,333 3/4/91 .9609(2)
15,000 2/28/96 .5625(2)
C. Paul Johnson 10,000 3/4/91 .9609(3)
9,000 2/28/96 .5625(2)
Lance H. Duncan 7,500 2/28/96 .5625(2)
Dennis J. Stevermer 30,000 7/1/97 .5625(2)
All executive officers and 303,666
directors as a group
(5 persons)
All employees as a group 368,666
(1) Exercise price per share of each Incentive Option is 110% of the
"fair market value" per share on grant date.
(2) Exercise price per share of each Incentive Option is 100% of the
"fair market value" per share on grant date.
(3) 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 $100,000 in each of
the last three fiscal years:
Summary Compensation Table
Long-Term
Annual Compensation
Compensation Awards
Fiscal Securities
Name and Principal Year All Other Underlying
Position Ended Salary Bonus(1) Compensation($) Options(#)
J. Russell Duncan 1997 $85,000 $27,500
Chairman of the 1996 $74,000 198,333
Board and CEO 1995 $60,000
L. Michael McGurk 1997 $95,000 $15,750
President and Chief 1996 $95,000 15,000
Operating Officer 1995 $85,000
(1)Reflects bonus earned during the fiscal year.
Aggregate Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth the information concerning each
exercise of stock options during the fiscal year ended April 30, 1997, by
each of the executive officers named in the Summary Compensation Table
above and the value of unexercised options held by such persons as of April
30, 1997.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
J. Russell L. Michael
Name Duncan McGurk
Shares Acquired on Exercise (#) - -
Value Realized ($) -/- -/-
Number of Securities Underlying
Unexercised Options at FY-End
(#)Unexercisable/Exercisable 198,333/- 148,333/-
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 April 30,
1997, providing for a minimum annual base salary of $93,500. The stated
expiration date is April 30, 2002 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.
Mr. L. Michael McGurk, President and Chief Operating Officer of
the Company, has an employment agreement with the Company, dated April
30, 1997, providing for a minimum annual base salary of $95,000. The
stated expiration date is April 30, 2002 unless renewed in writing.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND THE AUDIT COMMITTEE
The Audit Committee is one of the committees 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 1997, 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, 1997 had a
balance of $70,000, 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, 1997 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 nine 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.
Milastar Standard & Poors NASDAQ
Year Corporation Composite Index Composite Index
1988 $100 $100 $100
1989 184 116 117
1990 212 124 116
1991 226 141 138
1992 245 156 168
1993 235 166 193
1994 261 170 215
1995 101 194 249
1996 128 246 356
1997 123 301 376
AUDITORS
KPMG Peat Marwick served as the Company's independent auditors for
the fiscal year ended April 30, 1997 and it is the Board of Directors' present
intention to reappoint such accounting firm as auditors for the fiscal year
ending April 30, 1998.
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 1998 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 27, 1998.
By Order of the
Board of Directors,
LANCE H.DUNCAN
Secretary
August 8, 1997
