NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 1995
To The Shareholders of Osmonics, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Osmonics,
Inc. ("Osmonics") will be held at the Minneapolis Hilton Hotel & Towers, 1001
Marquette Avenue, Minneapolis, Minnesota, Third Floor, Salon E, on May 17, 1995
at 3:30 p.m., and at any adjournments thereof, to consider and act upon the
following matters:
1. To elect two directors to serve a term of three years.
2. To approve the Osmonics, Inc. 1995 Employee Stock Purchase Plan.
3. To approve the Osmonics, Inc. 1995 Director Stock Option Plan.
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on March 20, 1995 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the meeting or any adjournments thereof. The accompanying Proxy
Statement forms a part of this Notice.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. EVEN IF YOU PLAN TO ATTEND
THE MEETING, WE URGE YOU TO SIGN, DATE AND RETURN THE PROXY, WHICH IS SOLICITED
BY THE BOARD OF DIRECTORS, AT ONCE IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Ruth Carol Spatz, Secretary
March 27, 1995
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 1995
GENERAL MATTERS
This Proxy Statement is furnished to shareholders in conjunction with the
solicitation by the Board of Directors of Osmonics, Inc. of proxies for use at
the Annual Meeting of Shareholders to be held on May 17, 1995.
The record date for the determination of shareholders entitled to notice of
and to vote at the meeting is the close of business on March 20, 1995. On that
date there were 12,734,099 common shares outstanding. Each share is entitled to
one vote.
If a proxy in the accompanying form is duly executed and returned, the
shares represented thereby will be voted. Where a specification is made on the
proxy, the shares will be voted in accordance with such specification. When no
specification is made on the proxy, the proxy will be voted for the election as
directors of the nominees named herein, and for proposals two and three. A proxy
may be revoked by the shareholder at any time prior to its being voted by giving
written notice of revocation to the Secretary of the Company, in open meeting,
or by casting a written ballot at the meeting. Attendance at the meeting by a
shareholder will not by itself be considered revocation of the shareholder's
proxy.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, officers and regular employees may solicit proxies by
telephone, telegraph or in person. On request, the Company will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending soliciting material to the owners of the
shares.
This Proxy Statement and the accompanying materials are first being sent to
shareholders on or about March 31, 1995.
ELECTION OF DIRECTORS
The present Board of Directors of Osmonics is composed of six members.
Directors are elected for a term of three years with positions staggered so that
approximately one-third of the directors are elected at each annual meeting of
shareholders. It is intended that the proxies received will be voted, unless
authority is withheld, FOR the election of the nominees listed below, namely
Michael L. Snow and Ruth Carol Spatz to serve until the 1998 Meeting of
Shareholders. The affirmative vote of the holders of the greater of (a) a
majority of the outstanding shares of Common Stock of the Company present and
entitled to vote on the election of directors or (b) a majority of the voting
power of the minimum number of shares entitled to vote that would constitute a
quorum for transaction of business at the meeting, is required for election to
the Board of each of the three nominees named below. A shareholder who abstains
with respect to the election of directors is considered to be present and
entitled to vote on the election of directors at the meeting, and is in effect
casting a negative vote, but a shareholder (including a broker) who does not
give authority to a Proxy to vote, or withholds authority to vote, on the
election of directors shall not be considered present and entitled to vote on
the election of directors. The nominees are currently serving as directors and
have consented, if elected, to serve for a new term.
The following table sets forth information with respect to each nominee for
election as director and each other person whose term of office as a director
will continue after the meeting.
NOMINEES FOR ELECTION FOR A TERM OF THREE YEARS:
MICHAEL L. SNOW, age 44, of Counsel in the law firm of Maslon Edelman
Borman & Brand, a Professional Limited Liability Partnership, has been a
director of Osmonics since 1989. Maslon Edelman Borman & Brand, a Professional
Limited Liability Partnership, has rendered legal services to Osmonics during
the last fiscal year. Mr. Snow received a Bachelor of Arts degree and Juris
Doctor from the University of Michigan.
RUTH CAROL SPATZ, age 50, Secretary and Director of Osmonics, was a founder
of Osmonics in 1969 and has held her current position since its inception. She
is a graduate of the University of Vermont with a degree in Chemistry.
DIRECTORS WHOSE TERMS EXPIRE IN 1996:
RALPH E. CRUMP, age 71, was an initial investor in Osmonics in 1969. He
founded Frigitronics, Inc., a manufacturer of ophthalmic goods and medical
instruments, in 1963 and was its President and Chairman of the Board until
December 1986. He is a graduate of the United States Merchant Marine Academy and
has a degree in Engineering from UCLA. Mr. Crump is also a director of
Structural Instrumentation Inc. and Imtec, Inc., both of which are traded on
NASDAQ.
CHARLES W. PALMER, age 58, had been the Chairman and Chief Executive
Officer of Autotrol Corporation from 1989 through October 1993, and is the
Chairman and Chief Executive Officer of The Palmer Group Ltd., a Midwestern real
estate development firm. Mr. Palmer is a graduate of Yale University with an
A.B. in American studies and earned an M.B.A. at Northwestern University.
DIRECTORS WHOSE TERMS EXPIRE IN 1997:
VERITY C. SMITH, age 72, President, Vaponics Ltd. (UK) President, Veritec
Consultants, was a founder of Vaponics, Inc. and held the position of Chief
Executive Officer from its inception in 1967 until it was acquired by Osmonics
in July 1987. He was elected a director of Osmonics in August 1987. He has a
B.S. in Chemical Engineering from Massachusetts Institute of Technology and is a
fellow of the American Institute of Chemical Engineers.
D. DEAN SPATZ, age 51, President and Chairman of the Board of Directors of
Osmonics, has held his current position since founding Osmonics in 1969. He has
a B.A. from Dartmouth College and a Master of Engineering degree from the Thayer
School of Engineering, Dartmouth College. Mr. Spatz is also a director of
Structural Instrumentation Inc. and Sigma Aldrich Corp., both of which are
traded on NASDAQ. Mr. Spatz and Ruth Carol Spatz are husband and wife.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of Osmonics held four meetings during 1994. Osmonics
has an Audit Committee, a Compensation Committee, and a Stock Option Committee,
but does not have a Nominating Committee.
Osmonics' Audit Committee, which consists of Messrs. Ralph E. Crump and
Michael L. Snow, met once during 1994. The Audit Committee recommends to the
full Board the engagement of the independent accountants, reviews the audit plan
and results of the audit engagement, reviews the independence of the auditors,
and reviews the adequacy of Osmonics' system of internal accounting controls.
Osmonics' Compensation Committee, which consists of Messrs. Ralph E. Crump
and Michael L. Snow, met once during 1994. The Compensation Committee reviews
and recommends to the full Board executive compensation.
Osmonics' Stock Option Committee, which consists of Messrs. Ralph E. Crump,
D. Dean Spatz and Mrs. Ruth Carol Spatz, met once during 1994. The committee
proposes and recommends to the full Board stock option grants to executives and
other key personnel under the existing Stock Option Plan.
PROPOSAL TO ADOPT THE OSMONICS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has adopted, subject to shareholder approval, the
Osmonics, Inc. 1995 Employee Stock Purchase Plan (the "1995 Employee Plan"). The
Board of Directors believes that the grant of stock options to employees is a
desirable and useful means to strengthen further the interests of the employees
and the future success of the Company.
A copy of the 1995 Employee Plan is attached as Exhibit A, and reference is
made thereto for a complete statement of the terms and provisions thereof. The
1995 Employee Plan will replace the 1985 Employee Stock Purchase Plan.
Subject to certain exceptions set forth in the 1995 Employee Plan, each
regular, full-time employee (including officers but not including Directors or
holders of five percent or more of the total combined voting power or volume of
all classes of stock of the Company), of the Company and its participating
subsidiaries who has been continuously employed for at least three months is
eligible to participate in the 1995 Employee Plan. In order to participate in
the 1995 Employee Plan, an eligible employee must execute and deliver to the
Company certain authorization forms directing a payroll deduction of a specified
whole percentage of his or her gross earnings. Such percentage may not be less
than two percent nor more than ten percent of such gross earnings. The maximum
number of shares that a participating employee may purchase per year under the
Plan is 1000 shares. If approved by the shareholders, the 1995 Employee Plan
shall commence on June 1, 1995.
Payroll deductions will be credited to an individual account for each
participating employee. No interest will be payable with respect to any amounts
credited to such accounts. During each offering period (as described in the 1995
Employee Plan) each participating employee may be granted a non-transferable
right to purchase a number of full shares of Common Stock. The per share
purchase price for the Common Stock purchased pursuant to the 1995 Employee Plan
will equal eighty-five percent of the fair market value (being the mean between
the highest and lowest selling prices on the New York Stock Exchange or, if not
quoted thereon, any other national securities exchange) of a share of Common
Stock on the last business day of each month in which there are sufficient funds
in a Participant's account to purchase one or more full shares (or, if such
stock is not traded on that day, the next preceding day on which such stock was
traded). The fair market value of a share of the Company's Common Stock on the
New York Stock Exchange on March 15, 1995, was $14.81.
Purchase rights granted to a participating employee for any offering period
shall be automatically exercised on the last business day of each month during
any offering period (or, if such day is not a business day, on the next
preceding day on which Common Stock was traded), unless such employee gives
written notice prior to such time that (s)he elects not to exercise such
purchase rights. In the event of any such election, the amount in such
employee's purchase account at the end of such offering period shall be returned
to such employee. An employee's participation under the 1995 Employee Plan
terminates on the death or termination of employment of such employee and any
amount in employee's deduction account at such time shall be returned to such
employee. An employee may also voluntarily terminate participation in the 1995
Employee Plan in accordance with the applicable provisions thereof.
The 1995 Employee Plan will be administered by a committee (the
"Committee") appointed by the Board of Directors and an agent (the "Agent")
designated by the Committee. Members of the Committee are subject to removal by
the Board of Directors. The Committee may adopt, amend and rescind rules and
regulations not inconsistent with the 1995 Employee Plan and they construe the
1995 Employee Plan. The Agent will provide each Participant with a periodic
statement showing the cash withheld and invested, purchase price per share and
shares purchased.
The Board of Directors may terminate the 1995 Employee Plan at any time.
Any such termination will not impair any purchase rights which are to be granted
prior to such termination. Unless sooner terminated, the 1995 Employee Plan will
terminate when the maximum number of shares covered by the 1995 Employee Plan
has been purchased. The Board may also amend the 1995 Employee Plan from time to
time in any respect in order to meet changes and legal requirements or for any
other reasons.
The total number of shares of Common Stock that may be subject to options
issued pursuant to the 1995 Employee Plan is 400,000. This number and the terms
of outstanding options are subject to adjustment as described in the 1995
Employee Plan.
FEDERAL TAX CONSEQUENCES
If shares of Common Stock purchased by a Participant pursuant to an
exercise of purchase rights granted under the 1995 Employee Plan are not
disposed of within two years after the date of the grant of such purchase rights
or one year after the transfer of shares to the Participant (the "holding
period"), such exercise will result in no immediate taxable income to such
Participant. Upon later disposition of such shares, however, or if such
Participant should die while owning such shares, there will be recognized to
such Participant compensation taxable as ordinary income for the taxable year in
which such disposition or death occurs, in an amount equal to the lesser of (a)
15 percent of the fair market value of the shares at the time the purchase
rights were granted or exercised, whichever is less, or (b) the amount by which
the fair market value of the shares at the time of disposition or death exceeded
the purchase price. Any further gain (or any loss) would be considered gain (or
loss) from the sale of a capital asset. If the holding requirements described
above are met, neither the Company nor any participating subsidiary will be
entitled to any deduction for Federal income tax purposes with respect to shares
transferred to a Participant pursuant to the exercise of purchase rights.
If shares acquired pursuant to the exercise of purchase rights granted
under the 1995 Employee Plan are disposed of by a Participant (other than by
reason of death) before expiration of the holding period, then such Participant
will be treated as having received compensation by reason of the exercise of
such purchase rights in respect of such shares in an amount equal to the
difference between the purchase price of such shares and their fair market value
on the date of such exercise. Such amount must be taken into account by the
Participant as ordinary income in computing taxable income for the taxable year
in which such disqualifying disposition occurs. Any amount treated as
compensation by reason of such a disqualifying disposition will increase the
Participant's income tax basis for computing gain or loss on the disposition of
such shares. Any further gain or loss on such disposition (after taking into
account such basis adjustment) will be capital gain or loss and will be
long-term if the Participant's holding period for the stock is more than one
year.
If a disqualifying disposition should occur, the Company or the
participating subsidiary by which the Participant is employed will be entitled
to a deduction for its taxable year in which such disposition occurs, in the
same amount as the amount includable as compensation in the gross income of the
Participant making such disposition.
The discussion set forth above does not purport to be a complete analysis
of the potential tax consequences relevant to the Participants in the 1995
Employee Plan or the Company, or to describe tax consequences based on
particular circumstances. It is based on Federal income tax law and
interpretational authorities as of the date of this Proxy Statement, which are
subject to change at any time.
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of the
outstanding shares of Common Stock of the Company present and entitled to vote
or (b) a majority of the voting power of the minimum number of shares entitled
to vote that would constitute a quorum for transaction of business at the
meeting, is required for approval of the Plan. A shareholder who abstains is
considered to be present and entitled to vote at the meeting, and is in effect
casting a negative vote, but a shareholder (including a broker) who does not
give authority to a Proxy to vote shall not be considered present and entitled
to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
OF THE OSMONICS, INC. 1995 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL TO ADOPT THE OSMONICS, INC.
1995 DIRECTOR STOCK OPTION PLAN
The Board of Directors has adopted, subject to shareholder approval, the
Osmonics, Inc. 1995 Director Stock Option Plan (the "1995 Director Plan"). The
Board of Directors believes that the grant of stock options is a desirable and
useful means to strengthen further the directors' linkage with shareholder
interests.
A copy of the 1995 Director Plan is attached as Exhibit B, and reference is
made thereto for a complete statement of the terms and provisions thereof.
The 1995 Director Plan provides that each director of the Company (a
"Director") shall automatically receive, as of the date of each Annual Meeting
of Shareholders, beginning with this Annual Meeting, a non-qualified option to
purchase 3,000 shares of the Company's Common Stock. Each such option will have
a ten-year term and will generally become exercisable on the first anniversary
of the grant date at an option exercise price equal to the fair market value of
the shares on the grant date. The options will not be transferable except by
will or the laws of descent and distribution and may be exercised during the
option holder's lifetime only by him or her. Shares of Common Stock issuable
upon exercise of an option will not be registered under the Securities Act of
1933, as amended. Accordingly, in general, holders will be unable to publicly
resell their shares until after the second anniversary of the date the option
was exercised.
The Company will receive no consideration upon the grant of options under
the 1995 Director Plan. The exercise price of an option must be paid in full
upon exercise. Payment may be made in cash, check or, in whole or in part, in
Common Stock of the Company owned by the person exercising the option, valued at
fair market value.
FEDERAL TAX CONSEQUENCES
Under current law, the federal income tax consequences to Directors and the
Company under the proposed 1995 Director Plan should generally be as follows: A
director to whom a non-qualified stock option is granted will not recognize
income at the time of grant of such option. When a director exercises the stock
option, the director will recognize ordinary compensation income equal to the
difference, if any, between the exercise price paid and the fair market value,
as of the date of option exercise, of the shares the director receives. The tax
basis of such shares to the director will equal the exercise price paid plus the
amount includable in the director's gross income as compensation, and the
director's holding period for such shares will commence on the day on which the
director recognizes taxable income in respect of such shares. Subject to
applicable provisions of the Internal Revenue Code of 1986, as amended, and
regulations thereunder, the Company will generally be entitled to a federal
income tax deduction in respect of non-qualified stock options in an amount
equal to the ordinary compensation income recognized by the director as
described above.
The discussion set forth above does not purport to be complete analysis of
the potential tax consequences relevant to recipients of options or to the
Company or to describe tax consequences based on particular circumstances. It is
based on federal income tax law and interpretational authorities as of the date
of this Proxy Statement, which are subject to change at any time.
The total number of shares of Common Stock that may be subject to options
issued pursuant to 1995 Director Plan is 250,000. This number and the terms of
outstanding options are subject to the automatic adjustment in the event of
reorganization, merger, consolidation, recapitalization, stock splits,
combination or exchange of shares, stock dividends or other similar events. The
1995 Director Plan will have a ten-year term and will be administered by the
Board of Directors. The last sale price of a share of the Company's Common Stock
on the New York Stock Exchange on March 15, 1995 was $15.25.
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of the
outstanding shares of Common Stock of the Company present and entitled to vote
or (b) a majority of the voting power of the minimum number of shares entitled
to vote that would constitute a quorum for transaction of business at the
meeting, is required for approval of the Plan. A shareholder who abstains is
considered to be present and entitled to vote at the meeting, and is in effect
casting a negative vote, but a shareholder (including a broker) who does not
give authority to a Proxy to vote shall not be considered present and entitled
to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL
OF THE OSMONICS, INC. 1995 DIRECTOR STOCK OPTION PLAN.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table provides information as to the beneficial ownership of
the Company's Common Stock, as of March 20, 1995, by (i) each person known by
the Company to be the beneficial owner of more than 5% of such Common Stock,
(ii) each nominee and continuing director of the Company, (iii) the Company's
Chief Executive Officer and four other most highly compensated executive
officers for fiscal year 1994 and (iv) the directors and executive officers as a
group (12 persons). Beneficial ownership has been determined for this purpose in
accordance with Rule 13d-3 of the Securities and Exchange Commission under which
a person is deemed to be the beneficial owner of securities if he or she has or
shares voting power or dispositive power with respect to such securities or has
the right to acquire beneficial ownership of such securities within 60 days by
exercise of an option or otherwise. The persons named in the table have sole
voting and dispositive powers with respect to all shares of Common Stock unless
otherwise noted in the notes following the table.
Name of Beneficial Owner Amount and Nature of
Including Address of Beneficial Ownership Percent of
Owners of More than 5% of Common Stock Common Stock
State Farm Mutual Automobile
Insurance Company
One State Farm Place
Bloomington, Illinois 61701 1,388,812(1) 10.9
Ralph E. Crump(2) 916,834(3) 7.2
James J. Carbonari 19,749(4) *
James W. Detert 52,875(5) *
Charles W. Palmer(6) 1,129,780 8.9
Andrew T. Rensink 5,625(7) *
L. Lee Runzheimer 45,938(8) *
Verity C. Smith 2,196 *
Michael L. Snow 21,150(9) *
D. Dean Spatz(2) 1,219,068(10) 9.6
Ruth Carol Spatz(2) 1,196,287(10) 9.4
All directors and executive
officers as a group (12 persons) 4,083,562(11) 32.1
* Less than 1%
(1) Beneficial ownership is as of March 20, 1995. Based upon the most recent
schedule 13G on file with the Securities and Exchange Commission, State
Farm Mutual Automobile Insurance Company's affiliated corporations have
sole voting and investment power with respect to 421,875 shares, 438,750
shares and 528,187 shares, respectively.
(2) The address of such person is 5951 Clearwater Drive, Minnetonka,
Minnesota 55343.
(3) Includes 458,417 shares held by his wife. Mr. Crump disclaims beneficial
ownership of these shares.
(4) Includes options to purchase 3,375 shares exercisable within 60 days of
the above date.
(5) Includes options to purchase 22,500 shares exercisable within 60 days of
the above date.
(6) Mr. Palmer's address is 100 W. Randolph St. #210, Chicago, Illinois
60601.
(7) Includes options to purchase 5,625 shares exercisable within 60 days of
the above date.
(8) Includes options to purchase 3,750 shares exercisable within 60 days of
the above date.
(9) Includes options to purchase 11,250 shares exercisable within 60 days of
the above date.
(10) Mr. and Mrs. Spatz possess sole voting and investment power with respect
to 614,118 and 591,337, respectively, of such shares and they possess
shared voting and investment power with respect to 604,950 of such
shares.
(11) Includes options to purchase 54,000 shares of Osmonics Common Stock
exercisable within 60 days of the above date. Includes 458,417 shares
owned by Marjorie L. Crump, spouse of Ralph E. Crump, a director.
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of Osmonics and the four executive officers of Osmonics whose salary and
bonus in fiscal 1994 exceeded $100,000.
<TABLE>
<CAPTION>
Name and Annual Compensation All Other
Principal Position Year Salary(1) Bonus Compensation(2)
<S> <C> <C> <C> <C>
D. Dean Spatz 1994 $225,215 $185,000 $11,819
Chairman, 1993 223,358 150,000 20,396
Chief Executive Officer 1992 210,878 130,000 20,836
L. Lee Runzheimer 1994 $105,545 $ 26,200 $ 9,759
Chief Financial Officer 1993 101,462 28,000 9,894
1992 98,188 18,000 9,137
James W. Detert 1994 $ 99,501 $ 30,000 $ 9,805
Vice President Operations 1993 92,024 20,000 8,223
1992 88,514 8,500 7,199
James J. Carbonari 1994 $ 98,061 $ 24,000 $ 9,019
Vice President Sales 1993 91,518 15,000 7,644
& Marketing 1992 80,412 14,000 6,897
Andrew T. Rensink 1994 $ 85,636 $ 21,000 $ 7,429
Vice President Technology 1993 81,064 10,000 6,113
1992 89,724 - 4,195
</TABLE>
(1) Includes cash compensation deferred at the election of the executive
under the terms of Osmonics' 401(k) Plan.
(2) Includes $150 per year of matching funds from Osmonics in the 401(k)
Savings Plan and contributions by Osmonics to the Profit Sharing
Retirement Plan of $11,669 for Mr. Spatz, $9,609 for Mr. Runzheimer,
$9,655 for Mr. Detert, $8,869 for Mr. Carbonari, and $7,429 for Mr.
Rensink for 1994.
STOCK OPTION EXERCISES IN 1994 AND VALUE AT END OF 1994
The following table summarizes information with respect to options held by
the Chief Executive Officer and the executive officers named in the Summary
Compensation Table, and the value of the options held by such persons at the end
of fiscal year 1994. Neither the Chief Executive Officer nor the named executive
officers received stock option grants in fiscal year 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (2)
NAME ON EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
D. DEAN SPATZ - - - - - -
L. LEE RUNZHEIMER - - 3,375 1,125 $ 15,879 $ 5,293
JAMES J. CARBONARI 13,162 $139,722 3,375 1,125 15,879 5,293
JAMES W. DETERT - - 33,750 5,625 170,269 47,391
ANDREW T. RENSINK - - 5,625 1,875 16,172 5,391
</TABLE>
(1) Value realized is the aggregate market value, on the date of exercise,
of the shares acquired less the aggregate exercise price paid for such
shares.
(2) Value of unexercised options is the difference between the aggregate
market value of the underlying shares (based on the closing price on
December 31, 1994, which was $14.875 per share) and the aggregate
exercise price for such shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Osmonics' Compensation Committee consists of Messrs. Ralph E. Crump and
Michael L. Snow. Mr. Snow is of Counsel in the law firm of Maslon Edelman Borman
& Brand, a Professional Limited Liability Partnership, which rendered legal
services to Osmonics during the last fiscal year.
DIRECTOR COMPENSATION
Non-employee directors of Osmonics are reimbursed for expenses of attending
meetings of the Board of Directors.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Osmonics' Compensation Committee consists of Messrs. Ralph E. Crump and
Michael L. Snow. Mr. Snow is of Counsel in the law firm of Maslon Edelman Borman
& Brand, a Professional Limited Liability Partnership, which rendered legal
services to the Osmonics during the last fiscal year.
Decisions on compensation of Osmonics' executives generally have been made
by the Compensation Committee (the "Compensation Committee") of the Board,
except that decisions regarding the granting of stock options have been and will
be made by the Stock Option Committee. Each member of the Compensation Committee
is a non-employee director. Members of the Stock Option Committee are not
eligible to receive stock options under the Osmonics' stock option plans. All
decisions by the Compensation Committee relating to the compensation of
Osmonics' executive officers are reviewed by the full Board. Pursuant to
recently adopted rules designed to enhance disclosure of Osmonics' policies
toward executive compensation, set forth below is a report prepared by the Board
of Directors addressing Osmonics', and its subsidiaries', compensation policies
for the year ended December 31, 1994 as they affected Osmonics' executive
officers.
The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with Osmonics'
annual objectives and long-term goals, reward above average corporate
performance, recognize individual initiative and achievements, and assist
Osmonics in attracting and retaining qualified executives. Targeted levels of
executive compensation are set at levels that the Compensation Committee
believes to be consistent with others in Osmonics' industry and other
manufacturing companies in the Twin Cities metropolitan area.
There are three elements in Osmonics' executive compensation program, all
determined by individual and corporate performance.
* Base salary compensation
* Annual incentive compensation
* Stock options
Total compensation opportunities are competitive with those offered by
employers of comparable size, growth and profitability in our industry.
Base salary compensation is determined by the potential impact the
individual has on Osmonics, the skills and experiences required by the job, and
the performance and potential of the incumbent in the job.
Annual incentive compensation for executives of Osmonics and its
subsidiaries is based primarily on corporate operating earnings and sales growth
but also includes an overall assessment by the Board of Directors of executive
management's performance, as well as market conditions.
Awards of stock options under the Stock Option Plan are designed to promote
the identity of long-term interests between Osmonics' executives and its
shareholders and assist in the retention of executives. The Stock Option Plan
also permits the Committee to grant stock options to key personnel. The
Compensation Committee makes recommendations to the Stock Option Committee
regarding the granting of stock options to executives and key personnel. These
recommendations may result in the granting of such options. Options become
exercisable based upon criteria established by Osmonics. In 1994, the
Compensation Committee did not recommend stock options to executives because it
felt all executives were appropriately compensated, and none were granted.
The Compensation Committee surveys employee stock option programs of
companies with similar capitalization to Osmonics prior to recommending to grant
options to the executives. While the value realizable from exercisable options
is dependent upon the extent of which Osmonics' performance is reflected in the
market price of Osmonics' common stock at any particular point in time, the
decision as to whether such value will be realized in any particular year is
primarily determined by each individual executive and not by the Compensation
Committee. Accordingly, when the Committee recommends that an option be granted
to an executive, that recommendation does not take into account any gains
realized that year by that executive as a result of his or her individual
decision to exercise an option granted in a previous year.
The 1994 cash compensation of Mr. Spatz was $410,215, which represents a
10% increase from his 1993 cash compensation. In 1993, revenues increased 6% and
earnings per share increased 525% over 1992. Included in cash compensation for
1994 is a bonus of $185,000, an increase of 23% over the $150,000 bonus paid in
1993, in recognition of the effort involved over the past few years in the
growth of the Company, both internally and by acquisition.
Ralph E. Crump
Michael L. Snow
STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission requires that Osmonics include in
this Proxy Statement a line-graph presentation comparing cumulative, five-year
return to Osmonics' shareholders (based on appreciation of the market price of
Osmonics' Common Stock) on an indexed basis with (i) a broad equity market index
and (ii) an appropriate published industry or line-of-business index, or peer
group index constructed by Osmonics. The following presentation compares
Osmonics' Common Stock price in the five-year period from December 31, 1989 to
December 31, 1994, to the S&P 500 Stock Index and to a "peer group" index
created by Osmonics over the same period. The "peer group" index consists of the
common stock of Calgon Carbon Corporation, Ionics, Inc., Gelman Sciences Inc.,
Goulds Pumps Inc., Millipore Corp., Pall Corp., Sybron Chemical, Commercial
Intertech Corp. and United States Filter Corp. These corporations are involved
in various aspects of the water treatment or liquid separations businesses and
associated product lines. The presentation assumes that the value of an
investment in each of Osmonics' Common Stock, the S&P 500 Index, and the peer
group index was $100 on December 31, 1989, and that any dividend paid (none have
been paid by Osmonics) were re-invested in the same security.
[GRAPH]
End of fiscal: 1989 1990 1991 1992 1993 1994
Osmonics, Inc. $ 100.00 $ 153.64 $ 252.41 $ 299.98 $ 327.41 $ 326.49
S&P 500 $ 100.00 $ 96.89 $ 126.42 $ 136.05 $ 149.76 $ 151.74
Peer Group $ 100.00 $ 106.99 $ 142.85 $ 145.00 $ 138.07 $ 146.86
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Osmonics'
officers and directors, and persons who own more than ten percent of a
registered class of Osmonics' equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Officers, directors and greater-than-ten-percent
shareholders are required by SEC regulation to furnish Osmonics with copies of
all Section 16(a) forms they file. Based solely on review of the copies of such
forms furnished to Osmonics, or written representations that no Forms 5 were
required, Osmonics believes that during the year ended December 31, 1994, all
Section 16(a) filing requirements applicable to its officers, directors and
greater-than-ten-percent beneficial owners were complied with.
INDEPENDENT AUDITORS
Deloitte & Touche LLP has served as independent auditors for the Company
since August 27, 1987. A representative of Deloitte & Touche LLP is expected to
attend this year's Annual Meeting of Shareholders and have an opportunity to
make a statement and/or respond to appropriate questions from shareholders.
Shareholder approval is not required for the appointment of independent
auditors, since the Board of Directors has the responsibility for selecting
auditors.
PROCEDURE FOR SUBMITTING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, shareholders may present
proper proposals for inclusion in Osmonics' proxy statement and for
consideration at the next annual meeting of its shareholders by submitting their
proposals to Osmonics in a timely manner. Any proposal by a shareholder to be
presented at the next Annual Meeting of Osmonics must be received at Osmonics'
principal executive offices, 5951 Clearwater Drive, Minnetonka, Minnesota
55343-8990, no later than December 4, 1995, and otherwise have complied with the
requirements of Rule 14a-8.
The Board of Directors does not intend to present to the meeting any other
matters not referred to above and does not presently know of any matters that
may be presented to the meeting by others. However, if other matters come before
the meeting, it is the intention of the persons named in the enclosed form of
proxy to vote the proxy in accordance with their best judgment.
By Order of the Board of
Directors of Osmonics, Inc.
D. Dean Spatz
Chairman of the Board and
Chief Executive Officer
Exhibit A
OSMONICS, INC.
1995 EMPLOYEE STOCK
PURCHASE PLAN
1.0 WHAT IS THE PURPOSE OF THE PLAN?
The purpose of this 1995 Employee Stock Purchase Plan (the "Plan") is to
provide employees of Osmonics Inc. ("Osmonics" or the "Company") and its
subsidiaries (as defined in Section 424(f) of the Internal Revenue Code
of 1986, as amended (the "Code")) an opportunity to share in Osmonics'
financial growth through ownership of Common Stock of the Company (the
"Common Stock") made available to employees at preferential prices. The
Company and its subsidiaries are referred to herein collectively as
"Participating Companies."
The Plan provides a convenient method for employees to purchase the
Common Stock at a cost below the market price and without payment of
brokerage commissions or fees. Purchases under the Plan are intended to
qualify as exercises of options (the "Purchase Rights") granted under an
employee stock purchase plan, as defined by Section 423 of the Code. The
Plan is intended as an incentive for continuing employment with the
Company and to encourage employees to take an ownership interest in the
Company's future.
2.0 WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
All regular, full-time employees of the Participating Companies who have
been so employed for more than 90 days (the "Eligible Employees") are
eligible to participate in the Plan.
Any employee who is also a Director of the Company, or who beneficially
owns 5% or more of the total voting power or value of the stock of the
Company, is not eligible to participate in the Plan.
No purchase rights shall be granted under the Plan to any person who is
not an Eligible Employee, and no Eligible Employee shall be granted
purchase rights under the Plan (a) if such Eligible Employee,
immediately after receiving the grant of such purchase rights under the
Plan owns (under the rules of Section 423(b)(3) and 425(d) of the Code)
stock possessing five percent or more of the total combined voting power
or value of all classes of stock of the Company or any of its subsidiary
corporations (as defined by Section 425(f) of the Code); or (b) which
permits such Eligible Employee's rights to purchase stock under all
employee stock purchase plans of the Participating Companies to accrue
at a rate which exceeds $10,000 of fair market value of stock
(determined at the time such purchase rights are granted) for each
calendar year in which such purchase rights are outstanding at any time.
For purposes of the preceding sentence, the determination of when the
right to purchase stock pursuant to purchase rights granted under the
Plan accrues, and the rate at which such rights accrue, shall be made in
the manner provided by Section 423(b)(8) of the Code.
3.0 HOW MAY I ENROLL IN THE PLAN?
Each Eligible Employee who completes and delivers the payroll deduction
authorization forms to the Human Resources Department shall become a
"Participant." These forms authorize a regular payroll deduction from
employee compensation and must state the date on which the deductions
should begin. This may not be retroactive.
4.0 HOW OFTEN WILL THE PURCHASE OF STOCK BE OFFERED?
The Plan shall become effective on June 1, 1995, provided that the Plan
has then been adopted by the Board of Directors (hereinafter called the
"Board") of the Company, and approved at a duly called meeting (or any
adjournment thereof) of the shareholders of the Company, by the holders
of a majority of the then outstanding shares of stock of the Company
voting at such meeting.
Osmonics will make one or more annual offerings to employees to purchase
stock under this Plan. Each offering period will be of 12 months'
duration effective on 1 Jan and ending on 31 Dec. During this period, or
the portion that an employee chooses to enroll, the amounts received by
such employee as compensation will determine their participation in the
offering to the extent that participation is based on compensation.
5.0 WHAT AMOUNT MAY I HAVE DEDUCTED?
The Company will maintain payroll deduction accounts for all
Participants. No amounts other than such payroll deductions may be
credited to such deduction amounts. No interest shall be payable to
Participants on account of any amounts held in the deduction accounts.
With respect to any offering made under this plan, each Eligible
Employee may authorize a payroll deduction of whole number percentages
of a minimum of 2% up to a maximum of 10% of the gross compensation of
such Eligible Employee received during the offering period (or during
such portion thereof as elects to participate).
6.0 WHAT KIND OF SHARES MAY I PURCHASE?
The shares of Common Stock of the Company to be issued under this Plan
are "authorized but unissued shares" or treasury shares of Common Stock.
7.0 HOW MANY SHARES MAY I PURCHASE?
Participants participating in any offering of this Plan (upon the
effective date of such offering), will be granted an option to purchase
as many full shares of Common Stock of the Company as such Participant
chooses to purchase using the following amounts:
7.1 up to 10% of compensation received during the specified offering
period (or during the portion such Participant chooses to
participate), to be paid by payroll deductions during such period;
and
7.2 the balance of fractional shares (if any) carried forward from the
payroll deduction account of such Participant for the preceding
offering period.
Notwithstanding the foregoing, in no event may the number of shares
purchased by a Participant during an annual offering period exceed 1,000
shares.
8.0 WHAT PRICE WILL I PAY?
The purchase price for each share purchased will be 85% of the fair
market value on the last business day of each month in which there are
sufficient funds in a Participant's account to purchase one or more full
shares.
The fair market value of a share of Common Stock shall be deemed to be
the mean between the highest and lowest per share selling prices at
which such Stock is traded on that day as listed on the New York Stock
Exchange, or any successor national securities exchange on which the
Common Stock is listed or, if such Common Stock is not traded on that
day, then on the next preceding day on which such Common Stock was
traded.
9.0 WHAT ACCOUNTING OF MY CONTRIBUTIONS AND STOCK PURCHASES IS MAINTAINED?
The Plan will be administered by a committee (the "Committee")
designated by the Board of Directors of the Company. Members of the
Committee may be appointed from time to time by the Board and shall be
subject to removal by the Board. The decision of a majority in number of
the members of the Committee in office at the time shall be deemed to be
the decision of the Committee.
The Committee, together with an agent (the "Agent") appointed by the
Committee, shall administer the Plan so as to ensure that all
Participants granted purchase rights under the Plan have the same rights
and privileges as provided by Section 423(b)(5) of the Code. The
Committee may, from time to time, approve the forms of any documents or
writings provided for in the Plan, may adopt, amend and rescind rules
and regulations not inconsistent with the Plan for carrying out the Plan
and may construe the Plan. As of the last business day of each month
during any offering period, the Agent will total each deduction account.
To the extent a Participant's deduction account contains sufficient
funds to purchase one or more full shares as of that date, such
Participant will be deemed to have exercised an option to purchase a
full share or shares and his or her deduction account will be charged
for the amount of purchase. Subsequent full shares would be purchased in
the same manner.
Any balance of fractional shares remaining in any Participant's
deduction account at the end of an offering period will be carried
forward into his or her deduction account for the following offering
period. In no event will the balance carried forward be equal to or
greater than the purchase price of one share on the last business day of
the last month of the offering period.
For example:
If in the month of February, $17 is withheld from a Participant's
paycheck, that Participant's deduction account will be credited with
that amount. Then the Committee will allocate shares of Common Stock to
the account of such Participant based on the market price on the last
business day of February. Assuming the market price on that day is $20,
the account of the Participant would be charged for the $17 ($20 x 85%),
one full share of Common Stock would be credited to the account of such
Participant.
If $24.50 had been withheld from the paycheck of the Participant in
February, his or her deduction account would be credited with 1.441
shares of Common Stock ($24.50 divided by the $17 share price).
10.0 HOW DO I RECEIVE SHARES?
Notwithstanding any other provision of the Plan, the Company shall have
no obligation to issue any shares of Common Stock under the Plan unless
such issuance would comply with all applicable laws and the applicable
regulations or requirements of any securities exchanges or similar
entities. If, at any time, the Company, in its sole discretion,
determines that the listing, registration or qualification (or any
updating of any such document) of the shares of Common Stock issuable
pursuant thereto is necessary on any securities exchange or under any
federal or state securities or blue sky law, or that the consent or
approval of any governmental regulatory body is necessary or desirable
as a condition of, or in connection with, the issuance of shares of
Common Stock pursuant to the exercise of purchase rights, shares shall
not be issued pursuant to such exercise, in whole or in part, unless
such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to
the Company.
With respect to any person who is subject to section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Committee may, at any time, add such conditions and limitations to any
purchase rights under the Plan that it deems necessary or desirable to
comply with the requirements of Rule 16b-3 promulgated under the
Exchange Act; provided, however, that any rights or privileges that are
extended to such persons shall be extended uniformly to all eligible
employees.
The Company will periodically (but not less often than annually) deliver
to each Participant certificates for full common shares purchased under
the Plan. Otherwise, the certificates will be delivered only if:
a) a Participant withdraws from the Plan, or
b) a Participant or his or her legal Representative requests
them.
An Eligible Employee or Participant shall not by reason of the Plan or
any purchase rights granted under the Plan, have any rights of a
shareholder until and to the extent (s)he shall, from time to time,
exercise his or her purchase rights, but, upon each such exercise, (s)he
shall have all the rights of a shareholder of record on the day on which
such exercise occurs with respect to the shares of Common Stock as to
which such purchase rights are exercised, and the Company may defer
delivery of certificates evidencing such shares for a reasonable time.
11.0 HOW DO I RECEIVE REPORTS OF MY ACCOUNT?
The Committee or the Agent will provide each Participant with a periodic
statement showing the cash withheld and invested, purchase price per
share, shares purchased and shares held for such Participant by the
Committee or the Agent.
12.0 CAN I CHANGE THE AMOUNT OF MY DEDUCTION?
A payroll deduction may be increased only once and reduced only once
during any offering period (see 4.0). Each Participant may increase or
decrease his or her payroll deduction at any time by filling out new
authorization forms. The change may not become effective sooner than the
next pay period after receipt of the form.
13.0 MAY I WITHDRAW FROM THE PLAN ANY TIME?
Each Participant may at any time and for any reason permanently withdraw
the balance accumulated in his or her deduction account and thereby
withdraw from participation in the Plan. Such Participants may
thereafter begin participation again only at or after the commencement
of a new offering period. Partial withdrawals may be permitted at the
discretion of the Committee.
14.0 IN WHOSE NAME MAY STOCK CERTIFICATES BE ISSUED?
Certificates may be registered in the name of the Participant only, or,
if such Participant indicates on his or her authorization form, in the
name of such Participant jointly with a member of his or her family with
right of survivorship. If the Participant is a resident of a
jurisdiction which does not recognize such a joint tenancy, such
Participant may have certificates registered in the name of such
Participant as tenant in common with a member of his or her family,
without right of survivorship.
15.0 ARE MY RIGHTS UNDER THIS PLAN TRANSFERABLE?
Rights under this Plan are not transferable other than by will or the
laws of descent and distribution, and are exercisable by the Participant
only, during the lifetime of such Participant.
16.0 DO I RECEIVE INTEREST ON CASH WITHHELD FROM MY PAYCHECK?
In view of the discounted purchase price, no interest will be paid on
cash withheld prior to purchase of shares.
17.0 WHAT HAPPENS DURING MY ABSENCE FROM WORK?
Payroll deductions continue during any time off with pay, but stop
during approved time off without pay, though such Participant is still
enrolled in the Plan. Deductions automatically resume upon each
Participant's return to work.
18.0 WHAT IF MY EMPLOYMENT ENDS?
In the event retirement or termination of employment with Osmonics, the
balance of shares and cash in the deduction account of such Participant
will be issued to such Participant, or in the event of the death of a
Participant, to the estate of such Participant.
19.0 WHAT IS THE MAXIMUM NUMBER OF SHARES IN THE PLAN AND WHAT ARE THE
EFFECTS OF A STOCK SPLIT OR DIVIDEND?
The maximum number of shares of Common Stock which may be purchased
under the Plan is 400,000, subject to adjustment as hereinafter set
forth.
In the event of a subdivision of outstanding shares, or the payment of a
stock dividend, the number of shares approved for this Plan shall be
increased proportionately, and such other adjustment shall be made as
may be deemed equitable by the Board of Directors. In the event of any
other change affecting the Company's shares of Common Stock, such
adjustment shall be made as may be deemed equitable by the Board of
Directors to give proper effect to such event.
20.0 WHAT ARE THE TAX CONSEQUENCES?
All amounts withheld pursuant to the Plan, shares issued pursuant to the
exercise of any purchase rights and any payments pursuant to the Plan
are subject to withholding of all applicable taxes and the Participating
Companies shall have the right to withhold from any payment or
distribution of shares or to collect as a condition of any payment or
distribution under the Plan, as applicable, any taxes required by law to
be withheld. To the extent provided by the Committee, an employee may
elect to have any distribution of shares otherwise required to be made
pursuant to the Plan to be withheld or to surrender to the Company or
Participating Companies shares of Common Stock already owned by the
employee to fulfill any tax withholding obligation.
This description of federal income tax consequences is merely to help
Participants understand them and is in no way complete. Participants
having questions on how the Plan affects their individual tax situation,
should seek competent professional advice.
21.0 WHAT ARE MY CONTRIBUTIONS TO THE PLAN USED FOR?
All funds received or held by the Company under this Plan may be used
for any corporate purpose.
22.0 HOW IS THE PLAN ADMINISTERED?
The Plan is administered by the Board of Directors of the Company or by
a committee of directors who are not eligible to participate in the
Plan.
The Directors are responsible for general administration of the Plan,
proper execution of its provisions, construction of the Plan and
determination of all questions arising thereunder. It has power to
establish, interpret and enforce rules and regulations for
administration, provided such rules and regulations are uniformly
applicable to all persons similarly situated.
23.0 WHEN DOES THE PLAN END?
This Plan and all rights of Participants under any offering hereunder
shall terminate:
23.1 on the date that Participants become entitled to purchase a number
of shares equal to or greater than the number of shares remaining
available for purchase. If the number of shares so purchasable is
greater than the shares remaining available, the available shares
shall be allocated by the Committee among such participating
employees in such manner as it deems fair; or
23.2 at any time, at the discretion of the Board of Directors.
Upon termination of this Plan, all amounts in the accounts of
Participants shall be carried forward into such Participant's deduction
account under a successor Plan, if any, or promptly refunded.
AUTHORIZATION FOR ENROLLMENT IN
1995 EMPLOYEE STOCK PURCHASE PLAN
I hereby authorize Osmonics, Inc. to establish an account in my name and make
payroll deductions to purchase shares of common stock of Osmonics, Inc.
This authorization is given with the understanding that I may withdraw from the
Plan at any time by notifying the Human Resources Coordinator of Osmonics, Inc.
EMPLOYEE'S NAME
SOCIAL SECURITY NO.
ACCOUNT REGISTRATION [ ] Individual [ ] Joint
NAME(S):
EMPLOYEE:
First Middle Last
JOINT OWNER:
(if any) First Middle Last
ADDRESS:
Number Street Apt./Suite No.
City State Zip
Telephone:
DATE ____________________
EMPLOYEE SIGNATURE
JOINT OWNER SIGNATURE
(if any)
1995 EMPLOYEE STOCK PURCHASE PLAN
AUTHORIZATION FOR PAYROLL DEDUCTION
Name Date
First Middle Last
Social Security No. Employee No.
Department
In accordance with the 1995 Employee Stock Purchase Plan of Osmonics, Inc., I
hereby authorize the Company to:
[ ] Deduct % of my gross payroll earnings during each pay period.
[ ] Change my payroll deduction to % per pay period.
[ ] Withdraw my enrollment to the plan.
I understand the terms of the Employee Stock Purchase Plan as outlined in the
Prospectus, and can withdraw my voluntary participation at any time.
Signature of Employee
Exhibit B
OSMONICS, INC.
1995 DIRECTOR STOCK OPTION PLAN
1.0 PURPOSE
The purpose of the Osmonics, Inc. 1995 Director Stock Option Plan (the
"Plan") is to advance the interests of Osmonics, Inc. (the "Company")
and its shareholders by encouraging increased share ownership by members
of the Board of Directors of the Company (the "Board"), in order to
promote long-term shareholder value through continuing ownership of the
Company's common stock.
2.0 ADMINISTRATION
The plan shall be administered by the Board. The Board shall have all
the powers vested in it by the terms of the Plan, such powers to include
authority (within the limitations described herein) to prescribe the
form of the agreement embodying awards of non-qualified stock options
made under the Plan ("Options"). The Board shall, subject to the
provisions of the Plan, grant Options under the Plan and shall have the
power to construe the Plan, to determine all questions arising
thereunder and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. Any decisions of
the Board in the administration of the Plan, as described herein, shall
be final and conclusive. The Board may act only by a majority of its
members in office, except that the members thereof may authorize any one
or more of their number or any other officer of the Company to execute
and deliver documents on behalf of the Board. No member of the Board
shall be liable for anything done or omitted to be done by him or by any
other member of the Board in connection with the Plan, except for his
own willful misconduct or as expressly provided by statute.
3.0 PARTICIPATION
Each member of the Board of the Company (a "Director") shall be eligible
to receive an Option in accordance with Paragraph 5 below.
4.0 AWARDS UNDER THE PLAN
4.1 Awards under the Plan shall include only Options, which are rights
to purchase common stock of the Company having a par value of
$0.01 per share (the "Common Stock"). Such Options are subject to
the terms, conditions and restrictions specified in Paragraph 5
below.
4.2 There may be issued under the Plan pursuant to the exercise of
Options an aggregate of not more than 250,000 shares of Common
Stock, subject to adjustment as provided in Paragraph 6 below. If
any Option is canceled, terminates or expires unexercised, in
whole or in part, any shares of Common Stock that would otherwise
have been issuable pursuant thereto will be available for issuance
under new Options.
4.3 A Director to whom an Option is granted (and any person succeeding
to such a Director's rights pursuant to the Plan) shall have no
rights as a shareholder with respect to any Common Stock issuable
pursuant to any such Option until the date of the issuance of a
stock certificate to him for such shares. Except as provided in
Paragraph 6 below, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary,
and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued.
5.0 NON-QUALIFIED STOCK OPTIONS
Each Option granted under the Plan shall be evidenced by an agreement in
such form as the Board shall prescribe from time to time in accordance
with the Plan and shall comply with the following terms and conditions:
5.1 The Option exercise price shall be the "Fair Market Value" (as
herein defined) of the Common Stock subject to such Option on the
date the Option is granted. Fair Market Value shall be the closing
sales price of a share of Common Stock on the date of grant as
reported on the New York Stock Exchange Composite Transactions
Tape or, if the New York Stock Exchange is closed on that date, on
the last preceding date on which the New York Stock Exchange was
open for trading, but in no event will such Option exercise price
be less than the par value of the Common Stock.
5.2 For each year beginning in 1995, on the date of the annual meeting
of shareholders of the Company, each Director shall automatically
receive an Option for 3,000 shares of Common Stock (the "Annual
Option").
5.3 The Option shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution, and shall be
exercisable during his lifetime only by him.
5.4 Options shall not be exercisable:
5.4.1 before the expiration of one year from the date it is
granted and after the expiration of ten years from the
date it is granted. Notwithstanding anything to the
contrary herein, an Option shall automatically become
immediately exercisable in full upon the death of a
Director;
5.4.2 unless payment in full is made for the shares of Common
Stock being acquired thereunder at the time of exercise;
such payment shall be made in United States dollars by
cash or check, or in lieu thereof, by tendering to the
Company Common Stock owned by the person exercising the
Option (including shares issuable upon exercise of an
Option) and having a Fair Market Value equal to the cash
exercise price applicable to such Option, or by a
combination of United States dollars and Common Stock as
aforesaid; and
5.4.3 unless the person exercising the Option has been at all
times during the period beginning with the date of grant
of the Option and ending on the date of such exercise, a
Director of the Company, except that
5.4.3.1 if such person shall cease to be such a Director
for reasons other than death, while holding an
Option that has not expired and has not been
fully exercised, such person may, at any time
within three years of the date he ceased to be a
Director (but in no event after the Option has
expired under the provisions of subparagraph
5.4.1 above), exercise the Option with respect
to any Common Stock as to which he could have
exercised on the date he ceased to be such a
Director; or
5.4.3.2 if any person to whom an Option has been granted
shall die holding an Option that has not expired
and has not been fully exercised, his executors,
administrators, heirs or distributees, as the
case may be, may, at any time within one year
after the date of such death (but in no event
after the Option has expired under the
provisions of subparagraph 5.4.1 above),
exercise the Option with respect to any shares
subject to the Option.
5.5 If, on any date on which Options are automatically granted, the
number of shares of Common Stock remaining available under the
Plan is insufficient for the grant to each Director of Options to
purchase 3,000 shares of Common Stock, then Options to purchase a
proportionate amount of such available number of shares of Common
Stock (rounded to the nearest whole share) shall be granted to
each Director.
6.0 DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding Common Stock of the
Company by reason of any stock split, stock dividend, split-up,
split-off, spin-off, recapitalization, merger, consolidation, rights
offering, reorganization, combination or exchange of shares, a sale by
the Company of all or part of its assets, any distribution to
shareholders other than a normal cash dividend, or other extraordinary
or unusual event, the number or kind of shares that may be issued under
the Plan pursuant to subparagraph 4.2 above, and the number or kind of
shares subject to, and the Option price per share under, all outstanding
Options shall be automatically adjusted so that the proportionate
interest of the participant shall be maintained as before the occurrence
of such event; such adjustment in outstanding Options shall be made
without change in the total Option exercise price applicable to the
unexercised portion of such Options and with a corresponding adjustment
in the Option exercise price per share, and such adjustment shall be
conclusive and binding for all purposes of the Plan.
7.0 MISCELLANEOUS PROVISIONS
7.1 Except as expressly provided for in the Plan, no Director or other
person shall have any claim or right to be granted an Option under
the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Director any right to be retained in the
service of the Company.
7.2 A participant's rights and interest under the Plan may not be
assigned or transferred, hypothecated or encumbered in whole or in
part either directly or by operation of law or otherwise (except
in the event of a participant's death, by will or the laws of
descent and distribution), including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner, and no such right or interest
of any participant in the Plan shall be subject to any obligation
or liability of such participant.
7.3 Common Stock shall not be issued hereunder unless counsel for the
Company shall be satisfied that such issuance will be in
compliance with applicable federal, state, local and foreign
securities, securities exchange and other applicable laws and
requirements. Notwithstanding anything in this Plan to the
contrary: (a) the Company may, if it shall determine it necessary
or desirable for any reason, at the time of award of any Option or
the issuance of any shares of Common Stock pursuant to any Option,
require the recipient of the Option, as a condition to the receipt
thereof or to the receipt of shares of Common Stock issued
pursuant thereto, to deliver to the Company a written
representation of present intention to acquire the Option or the
shares of Common Stock issued pursuant thereto for his or her own
account for investment and not for distribution; and (b) if at any
time the Company further determines, in its sole discretion, that
the listing, registration or qualification (or any updating of any
such document) of any Option or the shares of Common Stock
issuable pursuant thereto is necessary on any securities exchange
or under any federal or state securities or blue sky law, or that
the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with
the award of any Option, the issuance of shares of Common Stock
pursuant thereto, or the removal of any restrictions imposed on
such shares, such Option shall not be awarded or such shares of
Common Stock shall not be issued or such restrictions shall not be
removed, as the case may be, in whole or in part, unless such
listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not
acceptable to the Company.
7.4 It shall be a condition to the obligation of the Company to issue
Common Stock upon exercise of an Option, that the participant (or
any beneficiary or person entitled to act under subparagraph
5.4.3.2 above) pay to the Company, upon its demand, such amount as
may be requested by the Company for the purpose of satisfying any
liability to withhold federal, state, local or foreign income or
other taxes. If the amount requested is not paid, the Company may
refuse to issue such Common Stock.
7.5 The expenses of the Plan shall be borne by the Company.
7.6 By accepting any Option or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
by the Company or the Board.
7.7 The appropriate officers of the Company shall cause to be filed
any reports, returns or other information regarding Options
hereunder or any Common Stock issued pursuant hereto as may be
required by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, or any other applicable statute, rule or
regulation.
8.0 AMENDMENT OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board
as the Board shall deem advisable; provided, however, that:
8.1 no amendment shall become effective without shareholder approval
if such shareholder approval is required by law, rule or
regulation;
8.2 no amendment shall materially and adversely affect any right of
any participant with respect to any Option theretofore granted,
without such participant's written consent; and
8.3 the following Plan provisions shall not be amended more than once
every six (6) months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act
or the rules thereunder: (a) those designating the categories of
individuals eligible to participate; (b) those stating the amount
and price of securities to be awarded; and (c) those specifying
the time of awards.
9.0 TERMINATION
This Plan shall terminate upon the earlier of the following dates or
events to occur: upon the adoption of a resolution of the Board
terminating the Plan or ten years from the date the Plan is initially
approved and adopted by the shareholders of the Company. No termination
of the Plan shall materially and adversely affect any of the rights or
obligations of any person, without his consent, under any Option
theretofore granted under the Plan.
10.0 EFFECTIVE DATE OF PLAN
The Plan will become effective on the date that it is approved by the
affirmative vote of the holders of a majority of the shares of Common
Stock entitled to notice of and to vote at the Company's 1995 Annual
Meeting of Shareholders.
(Continued from the other side)
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Annual Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. It will be
voted on the matters set forth on the reverse side of this form as directed by
the shareholder, but if no direction is made in the space provided, it will be
voted FOR all of the nominees and FOR proposals two and three.
Dated:______________________________________, 1995
__________________________________________________
__________________________________________________
(Shareholder must sign exactly as the name appears
at left. When signed as a corporate officer,
executor, administrator, trustee, guardian, etc.,
please give full title as such. Both joint tenants
must sign.)
OSMONICS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - MAY 17, 1995
The undersigned, a shareholder of Osmonics, Inc., hereby appoints D. Dean
Spatz and Ruth Carol Spatz, and each of them as proxies, with full power of
substitution, to vote on behalf of the undersigned the number of shares which
the undersigned is then entitled to vote, at the Annual Meeting of the
Shareholders of Osmonics, Inc. to be held at The Minneapolis Hilton Hotel &
Towers, 1001 Marquette Avenue, Minneapolis, Minnesota, on May 17, 1995, at 3:30
P.M., and at any adjournments or postponements thereof, upon matters set forth
below, with all the powers which the undersigned would possess if personally
present:
(1) ELECTION OF DIRECTORS
[ ]FOR nominees listed below
[ ]WITHHOLD AUTHORITY to vote for nominees listed below
Three Year Term: Michael L. Snow, Ruth Carol Spatz
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED _______________________________.
(2) To approve the Osmonics, Inc. 1995 Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To approve the Osmonics, Inc. 1995 Director Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Upon such other business as may properly come before the meeting and any
adjournments or postponements thereof, including the authority to adjourn
the meeting to solicit additional proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE PROPOSALS
- TO BE SIGNED ON REVERSE SIDE -
