MILASTAR CORPORATION
7317 WEST LAKE STREET
MINNEAPOLIS, MINNESOTA 55426
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 52.1 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 to the Board of Directors of the Company, to
serve for a three year until the annual meeting of stockholders of
the Company to be held in 2004 or until his successor shall have
been duly elected and qualified.
The foregoing consent was executed on July 5, 2001, 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 6,
2001, 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 6, 2001
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 6, 2001,
by the management of the Company pursuant to the authority of its
Board of Directors. The Board of Directors has fixed July 6, 2001
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 2,723,264,
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, 2001 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, 2001.
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. . . . . . . . 1,285,981 (1) Class A 39.3% 47.0%
No. 9 Via Parigi Common Stock
Palm Beach, Florida 33480
Mimi G. Duncan . . . . . . . . . 420,366 (2) Class A 12.8% 15.4%
No. 9 Via Parigi Common Stock
Palm Beach, Florida 33480
L. Michael McGurk. . . . . . . . 115,046 (3) Class A 3.5% .0%
6646 Harbor Drive N.W. Common Stock
Canton, Ohio 44718
Dennis J. Stevermer. . . . . . . 137,000 (4) Class A 4.2% .3%
7317 W. Lake Street Common Stock
St. Louis Park, Minnesota 55426
Lance H. Duncan. . . . . . . . . 106,666 (5) Class A 3.3% .2%
1260 Boylston Street/Suite 204 Common Stock
Boston, Massachusetts 02215
Robert G. Duncan . . . . . . . . 25,000 (5) Class A .8% .0%
78 Wrenden Avenue Common Stock
Fairfax, California 94930
All executive officers and
directors as a group . . . . . . 2,090,059 Class A 63.9% 62.9%
(6 persons) Common Stock
(1) The amounts shown in the foregoing table do not include 420,366
shares of Class A Stock 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) The amounts shown in the foregoing table do not include
1,285,981 shares of Class A Stock 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 115,000 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 100,000 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 1,285,981 and 420,366 shares 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.
ELECTION OF DIRECTORS
The number of directors of the Company is currently
fixed at five, 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 5,
2001 (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 52.1% 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
to the Board of Directors of the Company, to serve for a three
year until the annual meeting of stockholders of the Company to
be held in 2004 or until his successor shall have been duly
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
2002. 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:
J. Russell Duncan. . . . . . . . . 84 2004 1969
Chairman of the Board of the
Company; Chairman of the
Board of Sound Techniques, Inc.
PRESENT DIRECTORS:
L. Michael McGurk. . . . . . . . . 50 2002 1988
President and Chief Operating
Officer.
Robert G. Duncan . . . . . . . . . 48 2002 2000
President of Duncan-Channon
Advertising.
Lance H. Duncan. . . . . . . . . . 45 2003 1983
Secretary; President and Chief
Operating Officer of Sound
Techniques, Inc.
Mimi G. Duncan . . . . . . . . . . 79 2003 2000
Private Investor.
(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, 2006, 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 6, 2001 was $0.43 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, 2001,
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
Dennis J. Stevermer 30,000 7/1/97 .5625
100,000 4/28/00 .4375
Robert G. Duncan 25,000 4/28/00 .4375
L. Michael McGurk 15,000 3/01/01 .5625
All executive officers and 170,000
directors as a group (3 persons)
All employees as a group 335,000
Exercise price per share of each Incentive 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 2001 $120,000 $25,000
Chairman of the Board 2000 $105,000
and CEO 1999 $93,500 $30,000
L. Michael McGurk 2001 $95,000 $45,000 15,000
President and Chief 2000 $95,000 $10,000 100,000
Operating Officer 1999 $95,000 $35,000
(1) Reflects bonuses earned during the fiscal year.
The compensation of non-employee directors consists of
a fee of $1,000 for each board meeting attended.
Aggregate Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth the information
concerning each exercise of stock options during the fiscal year
ended April 30, 2001, by each of the executive officers named in
the Summary Compensation Table above and the value of
unexercised options held by such persons as of April 30, 2001.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares FY-End (#) FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
J. Russell Duncan 0 0 0/0 0/0
L. Michael McGurk 0 0 115,000/0 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 J. Russell Duncan 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 2001, the Board of Directors held four
meetings, while the Audit Committee did not meet.
CERTAIN TRANSACTIONS
The Company entered into a note during fiscal 1993 with
L. Michael McGurk, President, Chief Operating Officer and a
director of the Company who, with the encouragement of the
Company, bought 15,000 shares of Milastar Class A Common Stock
and entered into a note with the Company. The note of $20,000
was dated August 15, 1992 and bore interest at 50 basis points
over NYC Prime adjustable upward or downward at the end of each
six-month period, which interest rate was subject to an 8% "cap"
during the life of the loan. Interest on the principal was
payable each year on the anniversary date of the note. The
principal portion of the note that was originally due on August
15, 1995 had been extended until August 15, 2002. On February
19, 2001 the Milastar Board of Directors and Mr. McGurk agreed
to surrender the 15,000 shares of common stock in satisfaction
of the officer note receivable. The interest due on the note of
$19,000 was expensed.
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, 1996 and that all dividends were
reinvested.
1996 1997 1998 1999 2000 2001
Milastar Corporation. . . . . . . $100 $95 $189 $74 $74 $114
S & P Manufacturing
(Diversified) Index. . . . . . . $100 $125 $155 $189 $200 $216
NASDAQ U.S. Composite Index . . . $100 $106 $158 $217 $329 $180
AUDITORS
KPMG Peat Marwick served as the Company's independent
auditors for the fiscal year ended April 30, 2001 and it is the
Board of Directors' present intention to reappoint such
accounting firm as auditors for the fiscal year ending April 30,
2002.
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 2002
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
22, 2002.
By Order of the Board of Directors,
LANCE H. DUNCAN
Secretary
August 6, 2001