SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only(as permitted by Rule
14a-6(e)(2))
OSMONICS, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1999
To The Shareholders of Osmonics, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Osmonics, Inc. ("the Company") will be held at
the Minneapolis Club, 729 Second Avenue South, Minneapolis,
Minnesota 55402 on May 12, 1999 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 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 22, 1999 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
April 15, 1999
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1999
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 12, 1999.
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 22, 1999. On that date there were
14,012,784 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.
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 April 15, 1999.
ELECTION OF DIRECTORS
The present Board of Directors of Osmonics is composed of
seven 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 Ralph E. Crump and
Charles W. Palmer to serve until the 2002 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
two 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 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:
RALPH E. CRUMP, age 75, was an initial investor in
Osmonics in 1969. He founded Frigitronics, Inc., a
manufacturer of ophthalmic 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 SI Technologies, Inc.,
Mity-Lite, Inc., Imtec, Inc., and Stratasys, Inc., all of
which are traded on NASDAQ.
CHARLES W. PALMER, age 62, is currently a private
investor. He had been the Chairman and Chief Executive
Officer of Autotrol Corporation from 1989 through
October 1993, when Autotrol was merged into the Company. He
was the Chairman and Chief Executive Officer of The Palmer
Group Ltd., a Midwestern real estate development firm from
1980 through 1996. 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 2000:
VERITY C. SMITH, age 76, Director, 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 55, 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 SI Technologies, Inc. and
Sigma Aldrich Corp., both of which are traded on NASDAQ.
Mr. Spatz and Ruth Carol Spatz are husband and wife.
DIRECTORS WHOSE TERMS EXPIRE IN 2001:
WILLIAM EYKAMP, age 62, was appointed to the Board of
Directors in October 1997. He is currently a management
consultant and an adjunct professor of Chemical Engineering
at Tufts University. He served as president and director of
Koch Membrane Systems Inc., formerly Abcor Inc., from 1981 to
1988. Mr. Eykamp holds a Ph.D. in Chemical Engineering from
Massachusetts Institute of Technology and a Bachelor of
Science degree from Purdue University.
MICHAEL L. SNOW, age 48, of Counsel in the law firm of
Maslon Edelman Borman & Brand, a Limited Liability
Partnership, has been a director of Osmonics since 1989.
Maslon Edelman Borman & Brand, a 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 54, 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.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of Osmonics held five meetings
during 1998. 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 1998.
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
1998. 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 two times during 1998. The Stock Option Committee
proposes and recommends to the full Board stock option grants
to executives and other key personnel under the existing
Osmonics 1993 Stock Option and Compensation 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 22, 1999, 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
1998 and (iv) the directors and executive officers as a group
(16 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 Including Amount and Nature of
Address of Owners Beneficial Ownership Percent of
for More than 5% of Common Stock Common Stock
------------------ -------------------- ------------
State Farm Mutual
Automobile
Insurance Company
One State Farm Place
Bloomington, IL 61701 1,388,812 (1) 9.8
Heartland Advisors Inc.
790 North Milwaukee
Street 1,346,600 (2) 9.5
Milwaukee, WI 53202
Ralph E. Crump 612,900 (3) 4.3
William Eykamp 14,501 (4) *
Bjarne N. Nicolaisen 61,631 (5) *
Charles W. Palmer(7) 1,336,780 (6) 9.4
Andrew T. Rensink 10,000 (8) *
L. Lee Runzheimer 47,188 (9) *
Verity C. Smith 17,196 (11) *
Michael L. Snow 181,900 (12) 1.3
D. Dean Spatz(7) 1,085,494 (13) 7.6
Ruth Carol Spatz(7) 1,062,794 (13) 7.5
Kenton C. Toomey 10,000 (10) *
All directors and 4,032,929 (14) 28.4
executive officers as
a group (16 persons)
* Less than 1%
(1) Beneficial ownership is based upon a Schedule 13G on file
dated February 1, 1999. 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) Beneficial ownership is based upon a Schedule 13G filed
February 5, 1999.
(3) Includes 300,450 shares held by his spouse. Mr. Crump
disclaims beneficial ownership of these shares. Includes
12,000 shares not outstanding but issuable upon options
exercisable within 60 days of the above date.
(4) Includes 6,000 shares not outstanding but issuable upon
options exercisable within 60 days of the above date.
(5) Includes 59,087 shares not outstanding but issuable upon
options exercisable within 60 days of the above date and
683 shares held by his spouse.
(6) Includes 12,000 shares not outstanding but issuable upon
options exercisable within 60 days of the above date.
(7) The address is 5951 Clearwater Drive, Minnetonka,
Minnesota 55343.
(8) Includes 2,500 shares not outstanding but issuable upon
options exercisable within 60 days of the above date.
(9) Includes 2,500 shares not outstanding but issuable upon
options exercisable within 60 days of the above date.
(10) Includes 10,000 shares not outstanding but issuable upon
options exercisable within 60 days of the above date.
(11) Includes 12,000 shares not outstanding but issuable upon
options exercisable within 60 days of the above date.
(12) Includes 57,000 shares not outstanding but issuable upon
options exercisable within 60 days of the above date.
Includes 15,000 shares held as custodian for minor
children.
(13) Mr. and Mrs. Spatz possess sole voting and investment
power with respect to 583,464 and 560,683, respectively,
of such shares and they possess shared voting and
investment power with respect to 498,640 of which 265,464
are held by The Spatz Limited Partnership. Includes
options to purchase 12,000 shares not outstanding but
issuable upon options exercisable within 60 days of the
above date for each person.
(14) Includes 208,087 shares not outstanding but issuable
upon options exercisable within 60 days of the above
date. Includes 300,450 shares owned by Marjorie L.
Crump, spouse of Ralph E. Crump, a director; and 683
owned by Sue Nicolaisen, spouse of Bjarne N. Nicolaisen.
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash
compensation for each of the last three fiscal years awarded
to or earned by the Chief Executive Officer of the Company
and each of the four other most highly compensated executive
officers of the Company whose salary and bonus exceeded
$100,000 during the 1998 fiscal year.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
------------------------------------
Securities All Other
Name and Salary Underlying Compensation
Principal Position Year (1) Bonus Options(#) (2)
------------------ ---- -------- ------- ---------- ------------
D. Dean Spatz 1998 $304,807 $10,000 18,000 $ 6,937
Chairman 1997 292,767 94,000 3,000 7,893
Chief Executive 1996 270,140 280,000 3,000 10,269
Officer
Kenton C. Toomey 1998 $142,230 $15,000 10,000 $ 1,136
Vice President 1997 94,064 15,000 20,000 3,775
Operations 1996 - - - -
Bjarne N. Nicolaisen 1998 $142,155 $10,000 7,000 $17,824
Vice President 1997 136,555 20,000 - 12,770
International 1996 118,485 20,000 - -
L. Lee Runzheimer 1998 $140,129 $ 3,000 7,000 $ 3,248
Chief Financial 1997 129,134 8,000 5,000 7,493
Officer 1996 129,057 26,000 - 11,674
Andrew T. Rensink 1998 $120,450 $ 5,000 10,000 $ 2,721
Vice President 1997 108,283 8,000 5,000 6,403
Quality and 1996 104,031 30,000 - 10,385
Regulatory Affairs
(1) Includes cash compensation deferred at the election of
the executive under the terms of Osmonics' 401(k) Plan.
(2) Includes matching funds from Osmonics in the 401(k)
Savings Plan paid in the form of Osmonics Common Stock,
valued at the closing price on December 31, 1998, which
was $8.4375 per share, and contributions by Osmonics to
the Profit Sharing Retirement Plan of $3,646 for Mr.
Spatz, $1,136 for Mr. Toomey, $8,484 for Mr. Nicolaisen,
$3,248 for Mr. Runzheimer and $2,721 for Mr. Rensink for
1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the
grant of stock options to the Chief Executive Officer and the
other four highest-paid executive officers in 1998.
Percent
of Total
Number of Options
Securities Granted Exercise Grant
Underlying to or Date
Options Employees Base Expira Present
Granted in Fiscal Price tion Value
Name (1) Year (1) Date (2)
---------------- ---------- --------- -------- ------- -------
D. Dean Spatz 15,000 4.4 $10.125 9/20/08 $70,158
3,000(3) 15.875 5/12/08 22,000
Kenton C. Toomey 10,000 3.0 10.125 9/20/08 46,772
Bjarne N. Nicolaisen 7,000 2.1 10.125 9/20/08 32,740
L. Lee Runzheimer 7,000 2.1 10.125 9/20/08 32,740
Andrew T. Rensink 10,000 3.0 10.125 9/20/08 46,772
(1) The indicated options were granted pursuant to the 1993
Osmonics Stock Option and Compensation Plan. The options
were granted at the fair market value of Osmonics on
September 21, 1998, have 10-year terms and become
exercisable in equal annual increments over a 4-year
period beginning on the first anniversary. Vested
options must be exercised within 90 days of termination
of employment.
(2) The Grant Date Present Value was calculated using the
Black-Scholes valuation model, assuming a volatility rate
of 42.5 percent, a risk-free rate of return of
6.0 percent, a dividend yield of 0 percent, and a
projected time of exercise of five years. The actual
amount, if any, realized upon the exercise of stock
options will depend upon the market price of Osmonics
Common Shares relative to the exercise price per share of
the stock option at the time of exercise. There is no
assurance that the hypothetical grant date present values
of the stock options reflected in this table will
actually be realized.
(3) Granted pursuant to Osmonics 1995 Director Stock Option
Plan, whereby an option for 3,000 shares is granted to
each continuing director on the date of the Annual
Meeting at the Fair Market Price on that date. The
option vests fully on the first anniversary of the grant.
STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END
OPTION VALUES
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 1998.
Number of Value of
Securities Unexercised
Underlying In-The-Money
Unexercised Options at
Options at Fiscal Year-End
Shares Fiscal Year-End (2) (3)
Acquired Value --------------- ---------------
on Realized Exer- Unexer- Exer- Unexer-
Name Exercise (1) cisable cisable cisable cisable
---------- -------- -------- ------- ------- ------- -------
D. Dean - - 9,000 18,000 - -
Spatz
Kenton C. - - 5,000 25,000 - -
Toomey
Bjarne N. - - 59,087 7,000 $148,547 -
Nicolaisen
L. Lee - - 1,250 10,750 - -
Runzheimer
Andrew T. - - 1,250 13,750 - -
Rensink
(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, 1998, which
was $8.4375 per share) and the aggregate exercise price
for such shares.
(3) All options granted to the named Officers were at a price
greater than the closing price on December 31, 1998, with
the exception of exercisable options granted to
Mr. Nicolaisen by Desalination Systems, Inc. prior to its
merger with Osmonics in 1996. These options were
converted to options to purchase Osmonics 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 Limited
Liability Partnership, which rendered legal services to
Osmonics during the last fiscal year.
DIRECTOR COMPENSATION
Since 1995, the Company has maintained a Director Stock
Option Plan (the "Director Plan"). A total of 250,000 shares
of Common Stock are reserved for issuance under the Director
Plan. Each director of the Company is eligible to
participate in the Director Plan, including directors who are
employees of the Company. Under the Director Plan, each
director automatically is granted an option to purchase 3,000
shares at the time of each annual meeting of the Company's
shareholders. All options granted under the Director Plan
have an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and become
exercisable one year after the date of grant. 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. All 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 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. 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, 1998 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.
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 1998 cash compensation paid to Mr. Spatz was
$314,807 which represents a 19% decrease from his 1997 cash
compensation. Although his base compensation increased 4%
from 1997 to reflect the growth of the Company and the extra
effort involved in recent acquisitions, the Committee advised
a decrease of $84,000 in his bonus in response to the sales
performance and the lower earnings per share in 1998.
In August 1998, the Stock Option Committee granted
options under the Employee Plan to purchase 15,000 shares of
Common Stock to Mr. Spatz, 10,000 options to each of
Kenton C. Toomey, Vice President Operations, Bjarne N.
Nicolaisen, Vice President International, and Andrew T.
Rensink, Vice President Quality and Regulatory Affairs, and
7,000 options to L. Lee Runzheimer, Chief Financial Officer,
respectively. The Stock Option Committee believed it is in
the best long-term interests of the Company's shareholders to
provide incentives to these executives.
Ralph E. Crump
Michael L. Snow
STOCK PERFORMANCE GRAPH
The following 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, 1993 to
December 31, 1998, 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, Cuno, Inc., Hach Co., Ionics, Inc.,
Millipore Corp., Pall Corp., Sybron Chemical, U.S. Filter
Corp., and Waterlink, Inc. All peer group 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, 1993, and that any
dividend paid (none have been paid by Osmonics) were re-
invested in the same security.
End of Fiscal: 1993 1994 1995 1996 1997 1998
-------------- ---- ------- ------- ------- ------- -------
Osmonics, Inc. $100 $ 99.72 $136.59 $147.48 $106.00 $ 56.57
S&P 500 $100 $101.32 $139.40 $171.40 $228.59 $293.91
Peer Group $100 $104.97 $156.56 $170.01 $152.44 $138.72
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1998, 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.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder to be presented at the
Annual Meeting of Shareholders must be received at Osmonics'
principal executive offices, 5951 Clearwater Drive,
Minnetonka, Minnesota 55343-8995, no later than December 1,
1999, and otherwise have complied with the requirements of
Rule 14a-8.
On May 21, 1998, the Securities and Exchange Commission
amended Rule 14a-4 of the Securities Exchange Act of 1934.
The amendment governs the Company's use of its discretionary
proxy voting authority with respect to a shareholder proposal
which the shareholder has not sought to include in the
Company's Proxy Statement. The new amendment provides that
if a proponent of a proposal fails to notify the Company at
least 45 days prior to the month and day of mailing of the
prior year's Proxy Statement of a shareholder proposal, then
the management proxies will be allowed to use their
discretionary voting authority when the proposal is raised at
the meeting, without any discussion of the matter in the
Proxy Statement.
With respect to the Company's 2000 Annual Meeting of
Shareholders, if the Company is not provided notice of a
stockholder proposal which the stockholder has not previously
sought to include in the Company's Proxy Statement by
February 15, 2000, the management proxies will be allowed to
use their discretionary authority as outlined above.
By Order of the Board of
Directors of Osmonics, Inc.
D. Dean Spatz
Chairman of the Board and
Chief Executive Officer
