SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant 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 Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Osmonics, Inc.
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 transactions 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 14, 1997
To The Shareholders of Osmonics, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Osmonics, Inc. ("Osmonics") will be held at Osmonics Corporate
Headquarters, 5951 Clearwater Drive, Minnetonka, Minnesota 55343 on
May 14, 1997 at 1:00 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 20, 1997 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
<P1>
March 28, 1997 Proxy Statement for
Annual Meeting of Shareholders
May 14, 1997
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 14, 1997.
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, 1997. On that date there were 14,210,140 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 March 28, 1997.
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 Verity C. Smith and D. Dean Spatz,
to serve until the 2000 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
<P2>
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:
Verity C. Smith, age 74, 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 53, 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 1998:
Michael L. Snow, age 46, 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 52, 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 1999:
Ralph E. Crump, age 73, 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.
<P3>
Charles W. Palmer, age 60, is currently a private investor. He had
been the Chairman and Chief Executive Officer of Autotrol Corporation
from 1989 through October 1993, and 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.
Board of Directors and Committees
The Board of Directors of Osmonics held four meetings during 1996.
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 1996. 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 1996. 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
1996. The committee proposes and recommends to the full Board stock
option grants to executives and other key personnel under the existing
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, 1997, 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 1996
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.
<P4>
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) 9.5
Donald T. Bray, Trustee of the
Donald T. Bray Trust
dated April 8, 1992
4281 Weise Road
Carson City, Nevada 89702 796,077(2) 5.5
Ralph E. Crump(3) 696,100(4) 4.8
James J. Carbonari 20,874 *
James W. Detert 52,875 *
Charles W. Palmer(6) 918,662(5) 6.3
Andrew T. Rensink 7,500 *
L. Lee Runzheimer 44,688 *
Verity C. Smith 8,196(7) *
Michael L. Snow 49,650(8) *
D. Dean Spatz(3) 1,073,104(9) 7.4
Ruth Carol Spatz(3) 1,050,323(9) 7.2
All directors and executive
officers as a group (12 persons) 3,507,465(10) 24.0
_____________
* Less than 1%
(1) Beneficial ownership is as of March 20, 1997. 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) Based upon the most recent Schedule 13D on file with the Securities
and Exchange Commission, Donald T. Bray, Trustee of the
Donald T. Bray Trust dated April 8, 1992 has sole voting and
investment power with respect to 658,970 shares, which includes
314,214 shares exercisable within 60 days of the above date. He
has shared voting and investment power with respect to 126,633
shares.
(3) The address of such person is 5951 Clearwater Drive, Minnetonka,
Minnesota 55343.
(4) Includes 345,050 shares held by his spouse. Mr. Crump disclaims
beneficial ownership of these shares. Includes 6,000 shares
exercisable within 60 days of the above date.
(5) Includes 6,000 shares exercisable within 60 days of the above date
and 7,882 shares held by his spouse.
<P5>
(6) Mr. Palmer's address is 5951 Clearwater Drive., Minnetonka,
Minnesota 55343.
(7) Includes options to purchase 6,000 shares exercisable within
60 days of the above date.
(8) Includes options to purchase 39,750 shares within 60 days of the
above date.
(9) Mr. and Mrs. Spatz possess sole voting and investment power with
respect to 580,464 and 557,683, respectively, of such shares and
they possess shared voting and investment power with respect to
492,640 of such shares. Includes options to purchase 6,000 shares
exercisable within 60 days of the above date for each person.
(10) Includes options to purchase 69,750 shares of Osmonics Common
Stock exercisable within 60 days of the above date. Includes
345,050 shares owned by Marjorie L. Crump, spouse of
Ralph E. Crump, a director and 7,882 owned by Alice Palmer,
spouse of Charles W. Palmer, a director.
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 1996 fiscal year.
Name and Annual Compensation All Other
Principal Position Year Salary(1) Bonus Compensation(2)
D. Dean Spatz 1996 $270,140 $260,000 $10,269
Chairman, 1995 281,767 200,000 10,061
Chief Executive Officer 1994 225,215 185,000 11,819
L. Lee Runzheimer 1996 $129,057 $ 40,000 $11,674
Chief Financial Officer 1995 135,868 35,000 11,594
1994 105,545 26,200 9,759
James W. Detert(3) 1996 $ 98,889 $ 37,000 $10,277
Vice President Operations 1995 96,211 35,000 8,204
1994 99,501 30,000 9,805
James J. Carbonari 1996 $118,825 $ 54,000 $11,674
Vice President Sales 1995 104,693 40,000 11,184
& Marketing 1994 98,061 24,000 9,019
Andrew T. Rensink 1996 $104,031 $ 35,000 $10,385
Vice President Technology 1995 94,831 35,000 9,672
1994 85,636 21,000 7,429
(1) Includes cash compensation deferred at the election of the
executive under the terms of Osmonics' 401(k) Plan.
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(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 $10,119 for Mr. Spatz, $11,524 for
Mr. Runzheimer, $10,127 for Mr. Detert, $11,524 for Mr. Carbonari,
and $10,385 for Mr. Rensink for 1996.
(3) Mr. Detert resigned effective February 25, 1997.
Stock Option Exercises in 1996 and Value at End of 1996
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 1996. The named executive
officers did not receive stock option grants in fiscal year 1996.
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
Number of securities Value of unexercised
Shares underlying unexercised in-the-money options
acquired Value options at fiscal year-end at fiscal year-end (F2)
Name on exercise(#) realized(F1) Exercisable Unexercisable ExercisableUnexercisable
D. Dean Spatz - - 3,000 3,000 $14,625 $ 6,375
L. Lee Runzheimer 4,500 $ 53,438 0 0 - -
James J. Carbonari 4,500 49,313 0 0 - -
James W. Detert 22,500 302,188 0 0 - -
Andrew T. Rensink 7,500 53,438 0 0 - -
<FN>
<F1>
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.
<F2>
Value of unexercised options is the difference between the
aggregate market value of the underlying shares (based on the
closing price on December 31, 1996, which was $22.00 per share) and
the aggregate exercise price for such shares.
</FN>
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.
<P7>
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
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 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, 1996 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.
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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 1996, 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.
<P9>
The 1996 cash compensation of Mr. Spatz was $530,140, which
represents a 10% increase from his 1995 cash compensation, which was
based in part on the 1994 performance of the Company. In 1995, revenues
increased 16% and earnings per share increased 14% over 1994. Included
in cash compensation for 1996 is a bonus of $260,000, an increase of 30%
over the $200,000 bonus paid in 1995, 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
<P10>
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, 1991 to December 31, 1996, 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, 1991, and that any
dividend paid (none have been paid by Osmonics) were re-invested in the
same security.
End of fiscal: 1991 1992 1993 1994 1995 1996
Osmonics, Inc. $100.00 $118.84 $129.71 $129.35 $177.17 $191.30
S&P 500 $100.00 $107.62 $118.46 $120.03 $165.13 $203.05
Peer Group $100.00 $101.50 $ 96.66 $102.81 $148.88 $159.78
<P11>
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, 1996, 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 55343-8995, no later than
November 28, 1997, 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