MILASTAR CORPORATION
7317 WEST LAKE STREET
MINNEAPOLIS, MINNESOTA 55426
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 56.0 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, Mimi G. Duncan and Robert G. Duncan to the
Board of Directors of the Company, to serve for a three, three and
two year term, respectively, until the annual meeting of
stockholders of the Company to be held in 2003, 2003 and 2002,
respectively, or until their successors 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 400,000 shares bringing the total aggregate amount
of options available to 800,000 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 5, 2000, 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 7,
2000, 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 4, 2000
MILASTAR CORPORATION
7317 WEST LAKE STREET
MINNEAPOLIS, MINNESOTA 55426
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 4, 2000,
by the management of the Company pursuant to the authority of its
Board of Directors. The Board of Directors has fixed July 7, 2000
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, 2000 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, 2000.
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 40.1% 47.0%
No. 9 Via Parigi Common Stock
Palm Beach, Florida 33480
Mimi G. Duncan . . . . . . . . . 587,032 (2) Class A 15.9% 15.4%
No. 9 Via Parigi Common Stock
Palm Beach, Florida 33480
L. Michael McGurk. . . . . . . . 163,379 (3) Class A 4.4% .5%
6646 Harbor Drive N.W. Common Stock
Canton, Ohio 44718
Dennis J. Stevermer. . . . . . . 137,000 (4) Class A 3.7% .3%
7317 W. Lake Street Common Stock
St. Louis Park, Minnesota 55426
Lance H. Duncan. . . . . . . . . 114,166 (5) Class A 3.1% .2%
1260 Boylston Street/Suite 204 Common Stock
Boston, Massachusetts 02215
Robert G. Duncan . . . . . . . . 25,000 (5) Class A .7% .0%
78 Wrenden Avenue Common Stock
Fairfax, California 94930
C. Paul Johnson. . . . . . . . . 22,233 (6) Class A .6% .1%
233 South Wacker Drive Common Stock
Chicago, Illinois 60606
All executive officers and
directors as a group . . . . . . 2,533,124 Class A 68.5% 63.5%
(7 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 130,000 shares of Class A Stock issuable upon exercise
of options (see "Certain Transactions-Stock Options").
(5) Includes 107,500 shares for Lance H. Duncan and 25,000 shares
for Robert G. Duncan 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 their parents, J. Russell and Mimi G. Duncan,
respectively, or shares of Class A Stock owned by other members
of their immediate family, as to all of which they disclaim any
beneficial interest.
(6) 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 six, 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 7,
1999 (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 56.0% 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,
Robert G. Duncan and Mimi G. Duncan as directors of the Company,
to hold such office until the 2003 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
2001. J. Russell Duncan, Chairman of the Board and a director
of the Company, is the husband of Mimi G. Duncan a director of
the Company. J. Russell Duncan and Mimi G. Duncan are the
parents of Lance H. Duncan, Secretary and a director of the
Company and Robert G. Duncan a director of the Company. With
the foregoing exceptions, 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. . . . . . . . . . 44 2003 1983
Secretary; President and Chief
Operating Officer of Sound
Techniques, Inc.
Mimi G. Duncan . . . . . . . . . . 78 2003 2000
Private Investor.
Robert G. Duncan . . . . . . . . . 47 2002 2000
President of Duncan-Channon
Advertising.
PRESENT DIRECTORS:
J. Russell Duncan. . . . . . . . . 83 2001 1969
Chairman of the Board of the
Company; Chairman of the
Board of Sound Techniques, Inc.
C. Paul Johnson. . . . . . . . . . 68 2001 1982
Director of Firstar Corporation
from 1995 to 1999
L. Michael McGurk. . . . . . . . . 49 2002 1988
President and Chief Operating
Officer.
(1) 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 and April 28, 2000, the
Board of Directors amended the Option Plan to provide for the
granting of Incentive and Nonstatutory Options to purchase an
additional 600,000 shares bringing the total aggregate amount of
options available to grant to 800,000. 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 7, 2000 was $0.38 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 31, 2000,
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)
9,500 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)
100,000 4/28/00 .4375 (2)
Robert G. Duncan 25,000 4/28/00 .4375 (2)
All executive officers and 428,666
directors as a group (6 persons)
All employees as a group 593,666
(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 2000 $105,000
Chairman of the Board 1999 $93,500 $30,000
and CEO 1998 $93,500 $25,000
L. Michael McGurk 2000 $95,000 $10,000 100,000
President and Chief 1999 $95,000 $35,000
Operating Officer 1998 $95,000 $30,000
(1) Reflects bonuses earned during the fiscal year.
The compensation of non-employee directors consists of
a fee of $1,000 for each board meeting attended.
Aggregate Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth the information
concerning each exercise of stock options during the fiscal year
ended April 30, 2000, by each of the executive officers named in
the Summary Compensation Table above and the value of
unexercised options held by such persons as of April 30, 2000.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares FY-End (#) FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
J. Russell Duncan 0 0 198,333/0 0/0
L. Michael McGurk 0 0 148,333/0 0/0
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 2000, the Board of Directors held two
meetings, while the Audit Committee did not meet.
CERTAIN TRANSACTIONS
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, 1999. On April 30, 1999 the Board of Directors
elected to extend Mrs. Duncan's options to April 26, 2001 at a
price of $0.6738 per share.
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
five fiscal years with the total cumulative total return on the
Standards & Poors (S & P) Manufacturing (Diversified) Index and
the NASDAQ U.S. 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, 1995 and that all dividends were
reinvested.
1995 1996 1997 1998 1999 2000
Milastar Corporation. . . . . . . $100 $136 $129 $257 $100 $100
S & P Manufacturing
(Diversified) Index. . . . . . . $100 $139 $173 $215 $261 $278
NASDAQ U.S. Composite Index . . . $100 $143 $151 $226 $309 $471
AUDITORS
KPMG Peat Marwick served as the Company's independent
auditors for the fiscal year ended April 30, 2000 and it is the
Board of Directors' present intention to reappoint such
accounting firm as auditors for the fiscal year ending April 30,
2001.
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 2001
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
24, 2001.
By Order of the Board of Directors,
LANCE H. DUNCAN
Secretary
August 4, 2000