MILASTAR CORPORATION
NO. 9 VIA PARIGI
PALM BEACH, FLORIDA 33480
NOTICE OF ELECTION OF DIRECTORS
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 J. Russell
Duncan and C. Paul Johnson to the Board of Directors of the
Company, to serve for three year terms until the annual meeting of
stockholders of the Company to be held in 2001 or until their
successors shall have been duly elected and qualified.
The foregoing consent was executed on July 8, 1998, 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 10, 1998, 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 7, 1998
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 7, 1998, by the
management of the Company pursuant to the authority of its Board of
Directors. The Board of Directors has fixed July 10, 1998 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, 1998 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, 1998.
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, 1998 (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 J. Russell Duncan and C. Paul Johnson as
directors of the Company, to hold such office until the 2001 annual
meeting of stockholders or until their successors shall have been
elected and qualified. The Written Consent provides that it shall
not become effective, and the term of office of the directors 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 1999. The
nominees 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:
J. Russell Duncan. . . . . . . . . 81 2001 1969
Chairman of the Board of the
Company; Chairman of the
Board of Sound Techniques, Inc.
C. Paul Johnson. . . . . . . . . . 66 2001 1982
Director of Firstar Corporation
since 1995; Chairman of First
Colonial Bankshares Corporation
from 1988 to 1995.
PRESENT DIRECTORS:
L. Michael McGurk. . . . . . . . . 47 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.
Lance H. Duncan. . . . . . . . . . 42 2000 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.
(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 10, 1998 was $0.87 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 24, 1998, 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
Name and Principal Position Fiscal Securities
Year Underlying
Ended Salary Bonus (1) Options (#)
J. Russell Duncan 1998 $93,500 $25,000
Chairman of the Board 1997 $85,000 $27,500
and CEO 1996 $74,000 198,333
L. Michael McGurk 1998 $95,000 $30,000
President and Chief 1997 $95,000 $15,750
Operating Officer 1996 $95,000 15,000
(1) Reflects bonuses earned during the fiscal year.
Aggregate Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth the information concerning
each exercise of stock options during the fiscal year ended April
30, 1998, by each of the executive officers named in the Summary
Compensation Table above and the value of unexercised options
held by such persons as of April 30, 1998.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares FY-End (#) FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
J. Russell Duncan 0 0 198,333/0 $82,358/0
L. Michael McGurk 0 0 148,333/0 $9,376/0
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. 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 1998, 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, 1998 had a balance of $0, including accrued interest,
payable to J. Russell Duncan. The notes, which provided
additional working capital for the Company, bore an interest rate of
8% and were payable on demand. During fiscal 1996 the Company
entered into a note payable transaction which at April 30, 1998 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
six fiscal years with the total cumulative total return on the
Standards & Poors (S & P) Manufacturing (Diversified) 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, 1993 and that all dividends were
reinvested.
1993 1994 1995 1996 1997 1998
Milastar Corporation. . . . . . . $100 $111 $43 $54 $52 $105
S & P Manufacturing
(Diversified) Index. . . . . . . $100 $115 $137 $190 $237 $294
NASDAQ Composite Index. . . . . . $100 $111 $129 $184 $195 $292
AUDITORS
KPMG Peat Marwick served as the Company's independent
auditors for the fiscal year ended April 30, 1998 and it is the Board
of Directors' present intention to reappoint such accounting firm as
auditors for the fiscal year ending April 30, 1999.
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 1999 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 26, 1999.
By Order of the Board of Directors,
LANCE H. DUNCAN
Secretary
August 7, 1998
