UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _______)*
OSMONICS, INC.
(Name of Issuer)
COMMON STOCK
(Title of Class of Securities)
688 350 107 000
(CUSIP Number)
DONALD T. BRAY, 4281 WEISE RD., CARSON CITY, NEVADA 89702-0405
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
JULY 24, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. ___
Check the following box if a fee is being paid with the statement ___. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP NO. 68835010700
1. NAME OF REP0RTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Donald T. Bray, Trustee of the Donald T. Bray Trust dated April 8, 1992
Social Security Number: ###-##-####
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) ____
(b) ____
3. SEC USE ONLY
4. SOURCE OF FUNDS*
PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e): _____
6. CITIZENSHIP OR PLACE OF ORGANIZATION
United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER
860,946
8. SHARED VOTING POWER
157,107
9. SOLE DISPOSITIVE POWER
860,946
10. SHARED DISPOSITIVE POWER
157,107
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,018,053
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
_____
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
14. TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILING OUT*
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
Item 1. Security and Issuer:
Title and class of equity securities to which the statement relates:
Common Stock
Name and Address of the Principal Executive Offices of the Issuer:
Osmonics, Inc.
5951 Clearwater Drive
Minnetonka, MN 55343
Item 2. Identity and Background
(a) Name:
Donald T. Bray
(b) Address:
4281 Weise Rd.
Carson City,
Nevada 89702-0405
(c) Occupation and Principal Business Address:
Business Consultant
DTB Consulting Services, Inc.
4281 Weise Road
Carson City, Nevada 89702-0405
(d) Whether or not, during the last five years, Mr. Bray has been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) and, if so, the dates, nature of conviction,
name and location of court, and penalty imposed, or other disposition
of the case:
Mr. Bray has not, during the last 5 years, been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors).
<PAGE>
(e) Whether nor not, during the last five years, Mr. Bray was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws;
and, if so, identify and describe such proceedings and summarize the
terms of such judgment, decree or final order:
Mr. Bray has not, during the last 5 years, been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction which, as a result of such proceeding, was or is subject
to a judgment, decree or final order enjoining future violations of or
prohibiting or mandating activities subject to, federal or state
securities laws or found any violation with respect to such laws.
(f) Citizenship:
United States
Item 3. Source and Amount of Funds or Other Consideration:
Mr. Bray received his shares as a result of a merger between
Desalination Systems, Inc. and Osmonics, Inc. Prior to the merger, Mr.
Bray was the principal Stockholder of Desalination Systems, Inc.
Item 4. Purpose of Transaction:
The transaction requiring this report was the merger of Desalination
Systems, Inc. and Osmonics, Inc. in which Mr. Bray received shares of
Common Stock of Osmonics, Inc. in exchange for his ownership interest
in Desalination Systems, Inc. Mr. Bray does not have any present plans
to: (a) acquire any additional securities; or (b) engage in any
extraordinary corporate transactions such as mergers, reorganizations
or liquidations of the issuer; (c) sell or transfer any assets of the
issuer; (d) effect a change in the present Board of Directors or
management of the issuer, including changing the number or term of
directors or to fill existing vacancies on the Board; (e) materially
change the present capitalization or dividend policy of the issuer;
<PAGE>
(f) materially change the issuer's business or corporate structure;
(g) change the issuer's Articles of Incorporation, Bylaws or related
instruments or conduct other actions to impede the acquisition or
control of the issuer by any persons; (h) cause a class of securities
of the issuer to be delisted from the New York Stock Exchange;
(i) effect a change which would result in a class of equity securities
of the issuer to become eligible for termination of registration under
Section 12(g) of the Securities Exchange Act of 1934; or (j) conduct
any action similar to those discussed above.
All of the shares received by Mr. Bray are and are expected to be for
some time the subject of an effective S- 3 Registration Statement.
Mr. Bray may from time to time sell shares pursuant to that
Registration Statement.
Item 5. Interest in Securities of the Issuer:
(a) The aggregate number of shares of Common Stock beneficially owned
by Mr. Bray is 1,018,053 which represents 7% of the total
outstanding shares of Common Stock of the issuer. The number
1,018,153 includes 314,214 options to purchase Osmonics, Inc.
Common Stock and 157,107 shares owned by Julianne LaFrankie Bray,
wife of Donald T. Bray, as her separate property and in which Mr.
Bray disclaims any beneficial interest.
Mr. Bray is a party to a Registration Rights Agreement with
Osmonics, Inc. whereby Osmonics, Inc. is obligated to maintain an
effective registration statement for the shares owned by Mr. Bray
for a period of three years. Mr. Bray also has certain piggyback
rights under the Registration Rights Agreement.
(b) Mr. Bray has the sole power to vote or direct the vote, and the
sole power to dispose or direct the disposition of the shares of
Common Stock held by him.
(c) Other than the receipt of the shares of Common Stock in the
merger, no transactions in the Common Stock of the issuer have
been effected during the past 60 days by Mr. Bray.
(d) Mr. Bray has the right to receive and the right to direct the
receipt of the benefits of dividends from the Company and the
proceeds from any sale of the Company's Common Stock.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to the Securities of the Issuer:
Registration Rights Agreement between Osmonics, Inc. and Mr. Bray.
Item 7. Material to be Filed as Exhibits.
Registration Rights Agreement
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
September 30, 1996
/s/ Donald T. Bray
Donald T. Bray
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of July 24, 1996
is entered into by and among OSMONICS, INC., a Minnesota corporation ("Parent"),
and each of the individuals whose names appear on the signature page of this
Agreement (collectively the "Shareholders").
RECITALS
A. Parent, DSI ACQUISITION CORP., a wholly-owned subsidiary of Parent ("Merger
Subsidiary), the Shareholders and DESALINATION SYSTEMS, INC. (the
"Company") have entered into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), pursuant to which the Company,
will be merged with and into Merger Subsidiary (the "Merger") upon the
terms and subject to the conditions set forth in the Merger Agreement;
B. At the effective time of the Merger, pursuant to Section 1.3 1 of the
Merger Agreement, all of the outstanding shares of common stock, no par
value per share, of the Company, shall be converted into an aggregate of
1,312,827 shares of common stock, par value $0.01 per share, of Parent (the
"Registrable Stock");
C. The liquidity of the Registrable Stock, and hence its registration pursuant
to this Agreement, is a material part of the consideration being paid to
the Shareholders of the Company under the Merger Agreement;
D. As set forth in Section 8.5 of the Merger Agreement, the obligations of the
Company and the Shareholders to effect the Merger are subject, among other
things, to the execution, delivery, and performance of this Agreement;
NOW, THEREFORE, in consideration of the respective covenants and obligations of
the parties set forth herein and in the Merger Agreement, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
<PAGE>
1. Registration of Registrable Stock.
1.1 Filing of Registration Statement. Parent has prepared and filed a
registration statement on Form S-3 (the "Registration Statement") with
the Securities and Exchange Commission (the "Securities Act") under
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (collectively the "Securities Act") covering
the resale of the Registrable Stock.
1.2 Effectiveness Amendments. Parent will use its best efforts to cause
the Registration Statement to be declared effective as soon as
possible after filing. If the Securities and Exchange Commission
("SEC") has notified Parent that it will respond favorably to any
request for acceleration of the Registration Statement, then, Parent
will, as soon as practicable after the execution of this Agreement and
the issuance of the Registerable Stock, file a request with the SEC
for acceleration of the Registration Statement. Except as set forth
below, Parent will use its best efforts to cause the Registration
Statement to remain effective under the Securities Act, and will
prepare and file with the SEC any amendments or post-effective
amendments as may be necessary to keep the Registration Statement
effective under the Securities Act. Parent will promptly notify the
Shareholders in writing of the date on which the Registration
Statement is declared effective. Notwithstanding the foregoing,
1.2.1 Parent shall not be required to keep the Registration
Statement effective for purposes of the sale of Registrable
Stock thereunder at any time after the earlier of the date:
1.2.1.1 on which all shares of Registrable Stock have been
sold or are no longer outstanding, and
1.2.1.2 which is three years after the date on which the
Effective Time (as defined in the Merger
Agreement) occurs, and
1.2.2 Parent shall not be obligated to keep the Registration
Statement or the prospectus included therein current during
any period of up to sixty (60) days per calendar year if
Parent's chief executive officer advises the Shareholders
that he has determined in good faith that valid business
reasons concerning a potential corporate transaction make
doing so inadvisable, or (B) during any period during which
the Registrable Stock is eligible for resale under Rule 144
as provided by the SEC.
<PAGE>
1.3 Copies of Documents. During the period that Parent has agreed to use
its best efforts to cause the Registration Statement to remain
effective (the "Effectiveness Period"), Parent shall furnish to each
Shareholder such number of copies) of the Registration Statement, the
prospectus, if any, which is a part of the Registration Statement (the
"Prospectus") and any amendments and supplements thereto and any
exhibits to, or documents incorporated by reference in, the
Registration Statement as the Shareholder shall reasonably request.
1.4 Blue Sky Compliance. Parent shall register or qualify or cooperate
with the Shareholders in connection with the notification,
coordination, registration or qualification (or obtain exemption from
such registration or qualification) the Registrable Stock under the
securities or Blue Sky laws of such other jurisdictions in the United
States as the Shareholders reasonably shall request and do any and all
other acts and things which may be reasonably necessary to enable the
Shareholders to consummate the disposition of the Registrable Stock by
them under the Registration Statement in such jurisdictions during the
Effectiveness Period; provided, however, that in no event shall Parent
be required to qualify to do business as a foreign corporation in any
jurisdiction where it is not so qualified, to subject itself to
taxation in any jurisdiction where it has not theretofore done so or
to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject.
1.5 Notification. During the Effectiveness Period, Parent shall notify the
Shareholders promptly, and (if requested by any Shareholder) confirm
such notice in writing,
1.5.1 of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for
additional information relating thereto,
1.5.2 of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose,
1.5.3 of the receipt by Parent of any notification with respect to
the suspension of the registration, qualification or
exemption from registration or qualification of any of the
shares of Registrable Stock covered by the Registration
Statement for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and
1.5.4 of the happening of any event which makes any statement made
in such Registration Statement or in the Prospectus or any
document incorporated or deemed to be incorporated therein
by reference untrue in any material respect or which
requires the making of any changes in such Registration
Statement or Prospectus so that such documents will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
<PAGE>
1.6 Settlements and Post-Effective Amendments. Subject to the provisions
of the second sentence of Section 1.2.2 above, during the
Effectiveness Period, upon the occurrence of any event contemplated by
Sections 1.5.1 or 1.5.4 above, Parent will promptly prepare and file a
supplement or post-effective amendment to the Registration Statement
or a supplement to the Prospectus or any document incorporated therein
by reference or file any other document (i) required by the SEC to
entitle such supplement or amendment to be declared effective and
(ii) necessary so that, as thereafter delivered to the purchasers of
the Registrable Stock being sold thereunder, the Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
1.7 Listing. Parent shall cause all of its common shares covered by the
Registration Statement to be listed on each securities exchange, if
any, on which similar securities issued by Parent are then listed.
1.8 Correspondence with the SEC. Parent shall, upon request from any
Shareholder, deliver promptly to such Shareholder copies of all
correspondence between the SEC and Parent, its counsel or auditors.
1.9 Stock Certificates. Parent will cooperate with the Shareholders to
facilitate the timely preparation and delivery of certificates
representing Registrable Stock sold under the Registration Statement,
which certificates shall not have any restrictive legends.
2. Additional Rights.
2.1 Piggyback Registration Rights. If at any time or from time to time
when the Registration Statement is not effective, Parent shall
determine to register any of its securities, for its own account or
the account of any of its shareholders (other than a registration
relating to employee stock option or purchase plans, or a registration
on SEC Form S-4 relating to an SEC Rule 145 transaction, or a
registration on any form other than SEC Forms S-1, S-2, S-3, SB-1 or
SB-2, or their successor forms) Parent will: (i) promptly give to each
Shareholder written notice thereof, and (ii) include in such
registration (and any related qualification under state securities or
Blue Sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Stock specified in a written request or
requests, made within fifteen (15) days after receipt of such written
notice from Parent, by any Shareholder or Shareholders.
<PAGE>
2.2 Underwriting. If the registration of which Parent gives notice is for
a registered public offering involving an underwriting, Parent shall
so advise the Shareholders as a part of the written notice given
pursuant to Section 2.1. In such event the right of any Shareholder to
registration pursuant to Section 2 shall be conditioned upon such
Shareholder's participation in such underwriting and the inclusion of
such Shareholder's Registrable Stock in the underwriting to the extent
provided herein and the payment by the Shareholder of a pro rata
portion of the fees incurred in connection with the registration.
All Shareholders proposing to distribute their securities through such
underwriting shall (together with Parent and the other Shareholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by Parent. Notwithstanding
any other provision of this Section 2 the underwriter may limit the
number of shares of Registrable Stock to be included in the
registration and underwriting, or may exclude Registrable Stock
entirely from such registration and underwriting. Parent shall so
advise all Shareholders of Registrable Stock which would otherwise be
registered and underwritten pursuant hereto, and the number of shares
of Registrable Stock that may be included in the registration and
underwriting shall be allocated among Shareholders requesting
registration in Proportion, as nearly as practicable, to the
respective amounts of Registrable Stock held by each of such
Shareholders as of the date of the notice pursuant to Section 2.1
above. If any Shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to
Parent and the underwriter. Any Registrable Stock excluded or
withdrawn from such underwriting shall be withdrawn from such
registration.
<PAGE>
2.3 Rule 144 Reporting. With a view to making available to Shareholders
the benefits of certain rule and regulations of the SEC which may
permit the sale of the shares of Registrable Stock to the public
without registration, Parent agrees that, at all times after the
obligation to keep the Registration Statement effective expires, it
will: (i) keep available adequate current public information
available, as those terms are understood and defined in SEC Rule 144;
(ii) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of Parent under the Act and the
Securities Exchange Act of 1934 as amended (the "Exchange Act"); and
(iii) so long as a Shareholder owns any Registrable Stock, to furnish
to such Shareholder forthwith upon request a written statement by
Parent as to its compliance with the reporting requirements of said
Rule 144, and of the Securities Act and the Exchange Act, a copy of
the most recent annual or quarterly report of Parent, and such other
reports and documents so filed by Parent as the Shareholder may
reasonably request in complying with any rule or regulation of the SEC
allowing the Shareholder to sell any such securities without
registration.
3. Obligations of Shareholders. Following the filing of the Registration
Statement and during any period that the Registration Statement is
effective, each Shareholder shall:
3.1 not effect any stabilization transactions or engage in any
stabilization activity in connection with Parent's common shares in
contravention of Rule l0b-7 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act");
3.2 furnish each broker through whom any Shareholder offers Registrable
Stock such number of copies of the Prospectus as the broker may
require and otherwise comply with prospectus delivery requirements
under the Securities Act,
3.3 report to Parent each month all sales, pledges and other dispositions
of Registrable Stock made by the Shareholder;
3.4 not (and shall not permit any Affiliated Purchaser [as defined in Rule
10b-6 under the Exchange Act]) to bid for or purchase for any account
in which any Shareholder has a beneficial interest, or attempt to
induce any other person to purchase any Parent common shares in
contravention of Rule 10b-6 under the Exchange Act;
3.5 cooperate with Parent as Parent fulfills its obligations under Section
1.4 hereof;
<PAGE>
3.6 furnish such information concerning the Shareholder as Parent may from
time to time reasonably request;
3.7 not sell under the Registration Statement during any period after
Parent has provided notice to the Shareholder pursuant to Section
1.5.4 above and until Parent provides to the Shareholder notice that
the Registration Statement no longer fails to state a material fact
required to be stated therein, misstates a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements made not misleading (in such event, the delay
caused shall be aggregated with any periods in which the Registration
Statement is not effective for purposes of Section 1.2.2 of this
Agreement); and
3.8 not sell Registrable Stock during any period beginning seven (7) days
before the anticipated effective date of any registration statement
(other than a registration statement on Form S-3 or S-4 or any
successor forms) registering the sale of equity securities for
Parent's account (as Parent advises) and ending ninety (90) days
thereafter without Parent's consent (provided that this restriction
shall not apply with respect to more than one such registration
statement during any calendar year).
4. Expenses.
4.1 S-3 Registration Statement. In connection with the S-3 Registration
Statement referred to in Section 1.1,
4.1.1 the Parent shall be responsible for the payment of
4.1.1.1 all registration and filing fees relating to the
S-3 Registration Statement, including, without
limitation, registration and filing fees
4.1.1.2 with respect to filings required to be made with
the SEC or the NASD in connection with such S-3
Registration Statement and
4.1.1.3 with respect to registrations and filings made
under state securities or Blue Sky laws in
connection with such S-3 Registration Statement
and
4.1.1.4 any expenses incurred by Parent in connection with
the preparation of the Registration Statement and
any Prospectus prepared in connection therewith.
4.1.2 The Shareholders shall be responsible for the payment of
fees and disbursements of counsel to the Shareholders in
connection with the preparation of the Registration
Statement and the prospectus, if any, and fees paid to
brokers in connection with the sale of any of the
Registrable Stock.
<PAGE>
4.2 Piggy-back Rights. The Parent shall pay the fees under the
Registration Statements referred to under Section 2 which it would pay
under Section 1.1 except that each Shareholder shall pay its pro rata
portion of the fees incurred in connection with such Registration
Statement. For purposes of this Section, the term "fees" means all
underwriting, filing and all audit, accounting, and legal fees
attributable to the offering. A Shareholder's pro rata share shall be
based on the number of shares of the Shareholder included in the
offering compared to the total number of shares included in the
offering. In addition, the Shareholders shall be responsible for the
payment of fees and disbursements of counsel to the Shareholders in
connection with the preparation of the Registration Statement and the
prospectus, if any, and fees paid to brokers in connection with the
sale of any of the Registrable Stock pursuant to Section 2.1.
5. Indemnification.
5.1 Indemnity by Parent. Parent shall
5.1.1 indemnify and hold harmless each Shareholder against any
losses, claims, damages or liabilities ("Losses"), to which
each such indemnified party may become subject, under the
Securities Act or otherwise, insofar as such losses (or
actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or
Prospectus, as amended or supplemented if Parent has
furnished any supplements or amendments thereto (if used
during the period Parent is required to keep the
Registration Statement current), or any other document filed
or delivered in connection therewith under a state
securities or Blue Sky law (collectively, "Registration
Documents") or insofar as any losses (or actions in respect
thereof) arise out of or are based upon the omission or
alleged omission to state in any Registration Document, as
amended or supplemented if Parent has furnished any
supplements or amendments thereto (if used during the period
Parent is required to keep the Registration Statement and
Prospectus current) a material fact required to be stated
therein or necessary to make the statements made therein (in
the case of a prospectus, in the light of the circumstances
under which they were made), not misleading, or any
violation of any securities law by Parent, its officers or
employees in connection with the Registration Documents, and
5.1.2 reimburse each indemnified party for all legal or other
expenses reasonably incurred by it in connection with
investigating or defending any Loss, including any amounts
paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the prior
written consent of Parent, which shall not be unreasonably
withheld or delayed; provided, however, that Parent shall
not be liable for any Losses arising out of or based upon
any untrue statement or omission made in any Registration
Document in reliance upon and in conformity with written
information furnished to Parent by or on behalf of any
Shareholder for use in the preparation of the Registration
Document; and provided further, that Parent shall not be
liable to a particular indemnified party under the indemnity
agreement in this Section 5.1 with respect to the
Prospectus, as amended or supplemented, to the extent that
the Loss arises from the sale of any shares of Registrable
Stock by such indemnified party to the person asserting Loss
and to which there was not sent or given, within the time
required by the Securities Act, a copy of the Prospectus as
then amended or supplemented, if Parent has previously and
timely furnished copies thereof to such indemnified party
and such Prospectus as then amended or supplemented has
corrected the misstatement or omission at issue.
<PAGE>
5.2 Indemnity by Shareholders. Each Shareholder shall, severally and not
jointly,
5.2.1 indemnify and hold harmless Parent, any officer, director,
employee or agent of Parent, and each other person, if any,
who controls Parent within the meaning of Section 15 of the
Securities Act against any Losses to which each such
indemnified party may become subject under the Securities
Act or otherwise, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in any Registration Document, or arise out of or
are based upon the omission or alleged omission to state in
any Registration Document a material fact required to be
stated therein or necessary to make the- statements made
therein (in the case of a prospectus, in the light of the
circumstances under which they were made), not misleading,
or any violation of any securities law by Shareholder in
connection with the sale or transfer of any shares included
in the Registration Statement, and
<PAGE>
5.2.2 reimburse each indemnified party for all legal or other
expenses reasonably incurred by it in connection with
investigating or defending any such Losses or action,
including any amounts paid in settlement of any litigation
commenced or threatened, if such settlement is effected with
the prior written consent of such Shareholder; provided,
however, that such indemnification or reimbursement shall be
payable only if, and to the extent that, any Losses arise
out of or are based upon an untrue statement or omission
made in any Registration Document in reliance upon and in
conformity with written information furnished to Parent by
such Shareholder for use in the preparation thereof.
5.3 Procedure for Indemnification. Promptly after receipt by an
indemnified party, under Section 5.1 or 5.2, of notice of the
commencement of any action, the indemnified party shall notify the
indemnifying party in writing of the commencement thereof, if a claim
in respect thereof is to be made against an indemnifying party under
any of these Sections; but the omission of such notice shall not
relieve the indemnifying party from liability which it may have to the
indemnified party under this Section 5, except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice, and shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than
under this Section 5. In case any action is brought against the
indemnified party, it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate in, and to the extent that it chooses, to assume the
defense thereof with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party that it chooses to assume the defense, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that
5.3.1 if the indemnifying party fails to take reasonable steps
necessary to defend diligently the claim within twenty (20)
days after receiving notice from the indemnified party that
the indemnified party believes the indemnifying part) has
failed to take such reasonable steps, or
5.3.2 if the indemnified party who is a defendant in any action or
proceeding which is also brought against the indemnifying
party reasonably shall have concluded that there are legal
defenses available to the indemnified party which are not
available to the indemnifying party, or
5.3.3 if representation, of both parties by the same counsel is
otherwise inappropriate under applicable standards of
professional conduct, then the indemnified party shall have
the right to assume or continue its own defense as set forth
above. In no event shall the indemnifying party be
responsible, for more than one firm of counsel for all
indemnified parties unless it is inappropriate under
applicable standards of professional conduct for one firm of
counsel to represent all indemnified parties.
<PAGE>
5.4 Non-Exclusive Indemnity. Any indemnity agreements contained herein
shall be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or
contract and shall remain operative and in full force and effect
regardless of any investigation made or omitted by or on behalf of any
indemnified party.
5.5 Contribution. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harness an indemnified party,
then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims,
damages, liabilities or expenses
5.5.1 in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and the
indemnified party on the other (determined by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged
omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
untrue statement or omission), or
5.5.2 if the allocation provided by Section 5.5.1 above is not
permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in
such proportion as is appropriate to reflect not only the
relative fault of the indemnifying party and the indemnified
party, but also the relative benefits received by the
indemnifying party on the one hand (taking into
consideration the fact that the provision of the
registration rights hereunder served as an inducement to the
Shareholders to enter into the Purchase Agreement) and the
indemnified party on the other, as well as any other
relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
<PAGE>
6. Miscellaneous.
6.1 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed and interpreted
in accordance with, the laws of the State of California without giving
effect to the choice of law principles thereof.
6.2 Entire Agreement: Amendment: Waiver. This Agreement:
6.2.1 contains the entire agreement among the parties hereto, with
respect to the subject matter hereof,
6.2.2 supersedes all prior written agreements and negotiations and
oral understandings, if any, with respect thereto, and
6.2.3 may not be amended or supplemented except by an instrument
or counterparts thereof in writing signed by Parent and each
of the shareholders. No waiver of any term or provision of
this Agreement shall be effective unless in writing signed
by the party to be charged. The waiver by any party of a
breach of any term or provision of this Agreement shall not
be construed as a waiver of any subsequent breach.
6.3 Binding Effect. This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective legal
representatives, successors and assigns; provided, however, that no
party hereto may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the prior written
consent of the other parties hereto, except as provided in Section
6.3.1.
6.3.1 Transfer of Registration Rights. Shareholders' rights to
cause Parent to register their securities and keep
information available, granted to them by Parent under this
Agreement, may be assigned to a transferee or assignee of
shares of a Shareholder's Registrable Stock not sold to the
public, provided that Parent is given written notice by such
Shareholder at the time of or within a reasonable time after
said transfer, stating the name and address of said
transferee or assignee and Identifying the securities with
respect to which such registration rights are being
assigned, and such transferee has agreed to be bound by the
obligations of the Shareholders set forth in this Agreement.
6.4 Invalidity of Provision. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any other jurisdiction.
6.5 Notices. All notices, requests, consents and other communications to
any party hereunder shall be in writing and shall be given either by
personal service, certified mail, return receipt requested, overnight
courier or telecopy, addressed as follows:
if to Parent, to:
OSMONICS, INC.
5951 Clearwater Drive
Minnetonka, Minnesota 55343
Attn: D. Dean Spatz
Telecopy: (612) 933-0141
with a copy to:
Maslon Edelman Borman & Brand
A Professional Limited Liability Partnership
3300 Norwest Center
90 South 7th Street
Minneapolis, Minnesota 55402-4140
Attn: Larry A. Koch, Esq.
Telecopy: (6l2) 672-8397
if to the Shareholders, to:
Donald T. Bray
4281 Weise Road
Carson City, Nevada 89702-8940
Telephone No.: (702) 883-9556
Facsimile No.: (702) 883-9630
<PAGE>
with a copy to:
Luce, Forward, Hamilton & Scripps
600 West Broadway, Suite 2600
San Diego, California 92101
Attn: G. Edward Arledge
Telecopy: (611) 232-8311
or to such other address as any party may hereafter specify to the other
parties hereto by notice sent in accordance with this Section
6.5. Each such notice, request or other communication shall be effective when
delivered at the address specified in this Section 6.5. 6.6 Headings: Execution
in Counterparts. The headings and captions contained herein are for convenience
of reference only and shall not control or affect the meaning or construction of
any provision hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of each of
the parties hereto as of the date first above written.
OSMONICS, INC.
By: /s/ D. Dean Spatz
Name: D. Dean Spatz
Title: Chief Executive Officer
SHAREHOLDERS:
/s/ Donald T. Bray
Donald T. Bray, Trustee of the Donald
T. Bray Trust dated April 8, 1992
/s/ Julianne LaFrankie Bray
Julianne LaFrankie Bray, Trustee of the
Julianne LaFrankie Bray Trust dated
September 22, 1995
/s/ Marie H. Putnam
Marie H. Putnam, personal representative
of the Estate of Glen E. Putnam, deceased
/s/ Kenneth Hub
Kenneth Hub, Trustee of Trust of Kenneth
Hub dated October 10, 1991
/s/ Mary Hub, Trustee of Trust of Mary
Hub dated October 10, 1991
/s/ Martha F. Bray
Martha F. Bray, Trustee of Martha F.
Bray Trust dated May 4, 1989
<PAGE>
/s/ Nancy A. Bray
Nancy A. Bray
/s/ David H. Hopkins
David H. Hopkins
