NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                                  MAY 17, 1995


To The Shareholders of Osmonics, Inc.


     NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Osmonics,
Inc.  ("Osmonics") will be held at the Minneapolis  Hilton Hotel & Towers,  1001
Marquette Avenue, Minneapolis,  Minnesota, Third Floor, Salon E, on May 17, 1995
at 3:30 p.m.,  and at any  adjournments  thereof,  to consider  and act upon the
following matters:

 1.     To elect two directors to serve a term of three years.

 2.     To approve the Osmonics, Inc. 1995 Employee Stock Purchase Plan.

 3.     To approve the Osmonics, Inc. 1995 Director Stock Option Plan.

 4.     To transact such other  business as may properly come before the meeting
        or any adjournments thereof.

     The Board of Directors has fixed the close of business on March 20, 1995 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the meeting or any  adjournments  thereof.  The  accompanying  Proxy
Statement forms a part of this Notice.

     YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. EVEN IF YOU PLAN TO ATTEND
THE MEETING,  WE URGE YOU TO SIGN, DATE AND RETURN THE PROXY, WHICH IS SOLICITED
BY THE BOARD OF DIRECTORS, AT ONCE IN THE ENCLOSED ENVELOPE.


                                         By Order of the Board of Directors

                                         Ruth Carol Spatz, Secretary

March 27, 1995


                              PROXY STATEMENT FOR
                         ANNUAL MEETING OF SHAREHOLDERS
                                  MAY 17, 1995

                                GENERAL MATTERS


     This Proxy Statement is furnished to  shareholders in conjunction  with the
solicitation  by the Board of Directors of Osmonics,  Inc. of proxies for use at
the Annual Meeting of Shareholders to be held on May 17, 1995.

     The record date for the determination of shareholders entitled to notice of
and to vote at the meeting is the close of business on March 20,  1995.  On that
date there were 12,734,099 common shares outstanding.  Each share is entitled to
one vote.

     If a proxy in the  accompanying  form is duly  executed and  returned,  the
shares  represented  thereby will be voted. Where a specification is made on the
proxy, the shares will be voted in accordance with such  specification.  When no
specification  is made on the proxy, the proxy will be voted for the election as
directors of the nominees named herein, and for proposals two and three. A proxy
may be revoked by the shareholder at any time prior to its being voted by giving
written  notice of revocation to the Secretary of the Company,  in open meeting,
or by casting a written  ballot at the meeting.  Attendance  at the meeting by a
shareholder  will not by itself be considered  revocation  of the  shareholder's
proxy.

     The cost of soliciting proxies will be borne by the Company. In addition to
solicitation  by mail,  officers and regular  employees  may solicit  proxies by
telephone, telegraph or in person. On request, the Company will reimburse banks,
brokerage  firms and other  custodians,  nominees and fiduciaries for reasonable
expenses  incurred by them in sending  soliciting  material to the owners of the
shares.

     This Proxy Statement and the accompanying materials are first being sent to
shareholders on or about March 31, 1995.

                             ELECTION OF DIRECTORS

     The present  Board of  Directors  of  Osmonics is composed of six  members.
Directors are elected for a term of three years with positions staggered so that
approximately  one-third of the directors are elected at each annual  meeting of
shareholders.  It is intended that the proxies  received  will be voted,  unless
authority is withheld,  FOR the election of the nominees  listed  below,  namely
Michael  L.  Snow  and Ruth  Carol  Spatz to serve  until  the 1998  Meeting  of
Shareholders.  The  affirmative  vote of the  holders  of the  greater  of (a) a
majority of the  outstanding  shares of Common Stock of the Company  present and
entitled to vote on the  election of  directors  or (b) a majority of the voting
power of the minimum number of shares  entitled to vote that would  constitute a
quorum for  transaction of business at the meeting,  is required for election to
the Board of each of the three nominees named below. A shareholder  who abstains
with  respect to the  election  of  directors  is  considered  to be present and
entitled to vote on the election of  directors at the meeting,  and is in effect
casting a negative  vote,  but a  shareholder  (including a broker) who does not
give  authority  to a Proxy to vote,  or  withholds  authority  to vote,  on the
election of directors  shall not be  considered  present and entitled to vote on
the election of directors.  The nominees are currently  serving as directors and
have consented, if elected, to serve for a new term.

     The following table sets forth information with respect to each nominee for
election as director  and each other  person  whose term of office as a director
will continue after the meeting.

NOMINEES FOR ELECTION FOR A TERM OF THREE YEARS:

     MICHAEL  L.  SNOW,  age 44, of  Counsel  in the law firm of Maslon  Edelman
Borman  &  Brand,  a  Professional  Limited  Liability  Partnership,  has been a
director of Osmonics  since 1989.  Maslon Edelman Borman & Brand, a Professional
Limited  Liability  Partnership,  has rendered legal services to Osmonics during
the last  fiscal  year.  Mr.  Snow  received a Bachelor of Arts degree and Juris
Doctor from the University of Michigan.

     RUTH CAROL SPATZ, age 50, Secretary and Director of Osmonics, was a founder
of Osmonics in 1969 and has held her current  position since its inception.  She
is a graduate of the University of Vermont with a degree in Chemistry.

DIRECTORS WHOSE TERMS EXPIRE IN 1996:

     RALPH E. CRUMP,  age 71, was an initial  investor  in Osmonics in 1969.  He
founded  Frigitronics,  Inc., a  manufacturer  of  ophthalmic  goods and medical
instruments,  in 1963 and was its  President  and  Chairman  of the Board  until
December 1986. He is a graduate of the United States Merchant Marine Academy and
has a  degree  in  Engineering  from  UCLA.  Mr.  Crump  is also a  director  of
Structural  Instrumentation  Inc. and Imtec,  Inc.,  both of which are traded on
NASDAQ.

     CHARLES  W.  PALMER,  age 58,  had been the  Chairman  and Chief  Executive
Officer of Autotrol  Corporation  from 1989  through  October  1993,  and is the
Chairman and Chief Executive Officer of The Palmer Group Ltd., a Midwestern real
estate  development  firm. Mr. Palmer is a graduate of Yale  University  with an
A.B. in American studies and earned an M.B.A. at Northwestern University.

DIRECTORS WHOSE TERMS EXPIRE IN 1997:

     VERITY C. SMITH, age 72, President,  Vaponics Ltd. (UK) President,  Veritec
Consultants,  was a founder of  Vaponics,  Inc.  and held the  position of Chief
Executive  Officer from its  inception in 1967 until it was acquired by Osmonics
in July 1987.  He was elected a director of  Osmonics in August  1987.  He has a
B.S. in Chemical Engineering from Massachusetts Institute of Technology and is a
fellow of the American Institute of Chemical Engineers.


     D. DEAN SPATZ,  age 51, President and Chairman of the Board of Directors of
Osmonics,  has held his current position since founding Osmonics in 1969. He has
a B.A. from Dartmouth College and a Master of Engineering degree from the Thayer
School of  Engineering,  Dartmouth  College.  Mr.  Spatz is also a  director  of
Structural  Instrumentation  Inc.  and Sigma  Aldrich  Corp.,  both of which are
traded on NASDAQ. Mr. Spatz and Ruth Carol Spatz are husband and wife.

BOARD OF DIRECTORS AND COMMITTEES

     The Board of Directors of Osmonics held four meetings during 1994. Osmonics
has an Audit Committee, a Compensation Committee,  and a Stock Option Committee,
but does not have a Nominating Committee.

     Osmonics'  Audit  Committee,  which consists of Messrs.  Ralph E. Crump and
Michael L. Snow,  met once during 1994.  The Audit  Committee  recommends to the
full Board the engagement of the independent accountants, reviews the audit plan
and results of the audit  engagement,  reviews the independence of the auditors,
and reviews the adequacy of Osmonics' system of internal accounting controls.

     Osmonics' Compensation Committee,  which consists of Messrs. Ralph E. Crump
and Michael L. Snow, met once during 1994. The  Compensation  Committee  reviews
and recommends to the full Board executive compensation.

     Osmonics' Stock Option Committee, which consists of Messrs. Ralph E. Crump,
D. Dean Spatz and Mrs.  Ruth Carol Spatz,  met once during 1994.  The  committee
proposes and  recommends to the full Board stock option grants to executives and
other key personnel under the existing Stock Option Plan.

                      PROPOSAL TO ADOPT THE OSMONICS, INC.
                       1995 EMPLOYEE STOCK PURCHASE PLAN

     The Board of Directors has adopted,  subject to shareholder  approval,  the
Osmonics, Inc. 1995 Employee Stock Purchase Plan (the "1995 Employee Plan"). The
Board of Directors  believes  that the grant of stock  options to employees is a
desirable and useful means to strengthen  further the interests of the employees
and the future success of the Company.

     A copy of the 1995 Employee Plan is attached as Exhibit A, and reference is
made thereto for a complete statement of the terms and provisions  thereof.  The
1995 Employee Plan will replace the 1985 Employee Stock Purchase Plan.

     Subject to certain  exceptions  set forth in the 1995 Employee  Plan,  each
regular,  full-time employee  (including officers but not including Directors or
holders of five percent or more of the total combined  voting power or volume of
all  classes of stock of the  Company),  of the  Company  and its  participating
subsidiaries  who has been  continuously  employed  for at least three months is
eligible to  participate  in the 1995 Employee  Plan. In order to participate in
the 1995  Employee  Plan,  an eligible  employee must execute and deliver to the
Company certain authorization forms directing a payroll deduction of a specified
whole  percentage of his or her gross earnings.  Such percentage may not be less
than two percent nor more than ten percent of such gross  earnings.  The maximum
number of shares that a  participating  employee may purchase per year under the
Plan is 1000 shares.  If approved by the  shareholders,  the 1995  Employee Plan
shall commence on June 1, 1995.

     Payroll  deductions  will be  credited  to an  individual  account for each
participating  employee. No interest will be payable with respect to any amounts
credited to such accounts. During each offering period (as described in the 1995
Employee  Plan) each  participating  employee may be granted a  non-transferable
right to  purchase  a number  of full  shares  of  Common  Stock.  The per share
purchase price for the Common Stock purchased pursuant to the 1995 Employee Plan
will equal eighty-five  percent of the fair market value (being the mean between
the highest and lowest  selling prices on the New York Stock Exchange or, if not
quoted  thereon,  any other national  securities  exchange) of a share of Common
Stock on the last business day of each month in which there are sufficient funds
in a  Participant's  account to  purchase  one or more full  shares (or, if such
stock is not traded on that day, the next  preceding day on which such stock was
traded).  The fair market value of a share of the Company's  Common Stock on the
New York Stock Exchange on March 15, 1995, was $14.81.

     Purchase rights granted to a participating employee for any offering period
shall be  automatically  exercised on the last business day of each month during
any  offering  period  (or,  if such  day is not a  business  day,  on the  next
preceding  day on which  Common Stock was traded),  unless such  employee  gives
written  notice  prior to such time  that  (s)he  elects  not to  exercise  such
purchase  rights.  In the  event  of any  such  election,  the  amount  in  such
employee's purchase account at the end of such offering period shall be returned
to such  employee.  An  employee's  participation  under the 1995  Employee Plan
terminates  on the death or  termination  of employment of such employee and any
amount in  employee's  deduction  account at such time shall be returned to such
employee. An employee may also voluntarily  terminate  participation in the 1995
Employee Plan in accordance with the applicable provisions thereof.

     The  1995  Employee  Plan  will  be   administered   by  a  committee  (the
"Committee")  appointed  by the Board of  Directors  and an agent (the  "Agent")
designated by the Committee.  Members of the Committee are subject to removal by
the Board of Directors.  The  Committee  may adopt,  amend and rescind rules and
regulations not  inconsistent  with the 1995 Employee Plan and they construe the
1995  Employee  Plan.  The Agent will provide each  Participant  with a periodic
statement  showing the cash withheld and invested,  purchase price per share and
shares purchased.

     The Board of Directors  may  terminate  the 1995 Employee Plan at any time.
Any such termination will not impair any purchase rights which are to be granted
prior to such termination. Unless sooner terminated, the 1995 Employee Plan will
terminate  when the maximum  number of shares  covered by the 1995 Employee Plan
has been purchased. The Board may also amend the 1995 Employee Plan from time to
time in any respect in order to meet changes and legal  requirements  or for any
other reasons.

     The total  number of shares of Common  Stock that may be subject to options
issued pursuant to the 1995 Employee Plan is 400,000.  This number and the terms
of  outstanding  options  are subject to  adjustment  as  described  in the 1995
Employee Plan.

FEDERAL TAX CONSEQUENCES

     If  shares  of Common  Stock  purchased  by a  Participant  pursuant  to an
exercise  of  purchase  rights  granted  under  the 1995  Employee  Plan are not
disposed of within two years after the date of the grant of such purchase rights
or one year  after  the  transfer  of shares to the  Participant  (the  "holding
period"),  such  exercise  will result in no  immediate  taxable  income to such
Participant.  Upon  later  disposition  of  such  shares,  however,  or if  such
Participant  should die while owning such shares,  there will be  recognized  to
such Participant compensation taxable as ordinary income for the taxable year in
which such disposition or death occurs,  in an amount equal to the lesser of (a)
15  percent  of the fair  market  value of the  shares at the time the  purchase
rights were granted or exercised,  whichever is less, or (b) the amount by which
the fair market value of the shares at the time of disposition or death exceeded
the purchase price.  Any further gain (or any loss) would be considered gain (or
loss) from the sale of a capital asset.  If the holding  requirements  described
above are met,  neither  the Company nor any  participating  subsidiary  will be
entitled to any deduction for Federal income tax purposes with respect to shares
transferred to a Participant pursuant to the exercise of purchase rights.

     If shares  acquired  pursuant to the  exercise of purchase  rights  granted
under the 1995  Employee  Plan are disposed of by a  Participant  (other than by
reason of death) before expiration of the holding period,  then such Participant
will be treated as having  received  compensation  by reason of the  exercise of
such  purchase  rights in  respect  of such  shares  in an  amount  equal to the
difference between the purchase price of such shares and their fair market value
on the date of such  exercise.  Such  amount  must be taken into  account by the
Participant as ordinary income in computing  taxable income for the taxable year
in  which  such  disqualifying   disposition   occurs.  Any  amount  treated  as
compensation  by reason of such a  disqualifying  disposition  will increase the
Participant's  income tax basis for computing gain or loss on the disposition of
such shares.  Any further gain or loss on such  disposition  (after  taking into
account  such  basis  adjustment)  will be  capital  gain or  loss  and  will be
long-term  if the  Participant's  holding  period for the stock is more than one
year.

     If  a  disqualifying   disposition   should  occur,   the  Company  or  the
participating  subsidiary by which the  Participant is employed will be entitled
to a deduction  for its taxable year in which such  disposition  occurs,  in the
same amount as the amount  includable as compensation in the gross income of the
Participant making such disposition.

     The discussion  set forth above does not purport to be a complete  analysis
of the  potential  tax  consequences  relevant to the  Participants  in the 1995
Employee  Plan  or  the  Company,  or to  describe  tax  consequences  based  on
particular   circumstances.   It  is  based  on  Federal   income  tax  law  and
interpretational  authorities as of the date of this Proxy Statement,  which are
subject to change at any time.

PROXIES AND VOTING

     The affirmative vote of the holders of the greater of (a) a majority of the
outstanding  shares of Common Stock of the Company  present and entitled to vote
or (b) a majority of the voting power of the minimum  number of shares  entitled
to vote that  would  constitute  a quorum for  transaction  of  business  at the
meeting,  is required for approval of the Plan.  A  shareholder  who abstains is
considered  to be present and entitled to vote at the meeting,  and is in effect
casting a negative  vote,  but a  shareholder  (including a broker) who does not
give  authority to a Proxy to vote shall not be considered  present and entitled
to vote.

     THE BOARD OF DIRECTORS  RECOMMENDS THAT THE SHAREHOLDERS  VOTE FOR APPROVAL
OF THE OSMONICS, INC. 1995 EMPLOYEE STOCK PURCHASE PLAN.

                      PROPOSAL TO ADOPT THE OSMONICS, INC.
                        1995 DIRECTOR STOCK OPTION PLAN

     The Board of Directors has adopted,  subject to shareholder  approval,  the
Osmonics,  Inc. 1995 Director Stock Option Plan (the "1995 Director Plan").  The
Board of Directors  believes  that the grant of stock options is a desirable and
useful means to  strengthen  further the  directors'  linkage  with  shareholder
interests.

     A copy of the 1995 Director Plan is attached as Exhibit B, and reference is
made thereto for a complete statement of the terms and provisions thereof.

     The 1995  Director  Plan  provides  that each  director  of the  Company (a
"Director") shall  automatically  receive, as of the date of each Annual Meeting
of Shareholders,  beginning with this Annual Meeting, a non-qualified  option to
purchase 3,000 shares of the Company's Common Stock.  Each such option will have
a ten-year term and will generally become  exercisable on the first  anniversary
of the grant date at an option  exercise price equal to the fair market value of
the shares on the grant date.  The options  will not be  transferable  except by
will or the laws of descent and  distribution  and may be  exercised  during the
option  holder's  lifetime only by him or her.  Shares of Common Stock  issuable
upon exercise of an option will not be registered  under the  Securities  Act of
1933, as amended.  Accordingly,  in general,  holders will be unable to publicly
resell their shares  until after the second  anniversary  of the date the option
was exercised.

     The Company will receive no  consideration  upon the grant of options under
the 1995  Director  Plan.  The exercise  price of an option must be paid in full
upon  exercise.  Payment may be made in cash,  check or, in whole or in part, in
Common Stock of the Company owned by the person exercising the option, valued at
fair market value.

FEDERAL TAX CONSEQUENCES

     Under current law, the federal income tax consequences to Directors and the
Company under the proposed 1995 Director Plan should generally be as follows:  A
director to whom a  non-qualified  stock  option is granted  will not  recognize
income at the time of grant of such option.  When a director exercises the stock
option,  the director will recognize ordinary  compensation  income equal to the
difference,  if any,  between the exercise price paid and the fair market value,
as of the date of option exercise, of the shares the director receives.  The tax
basis of such shares to the director will equal the exercise price paid plus the
amount  includable  in the  director's  gross  income as  compensation,  and the
director's  holding period for such shares will commence on the day on which the
director  recognizes  taxable  income in  respect  of such  shares.  Subject  to
applicable  provisions  of the Internal  Revenue Code of 1986,  as amended,  and
regulations  thereunder,  the Company  will  generally  be entitled to a federal
income tax  deduction  in respect of  non-qualified  stock  options in an amount
equal  to  the  ordinary  compensation  income  recognized  by the  director  as
described above.

     The discussion set forth above does not purport to be complete  analysis of
the  potential  tax  consequences  relevant to  recipients  of options or to the
Company or to describe tax consequences based on particular circumstances. It is
based on federal income tax law and interpretational  authorities as of the date
of this Proxy Statement, which are subject to change at any time.

     The total  number of shares of Common  Stock that may be subject to options
issued  pursuant to 1995 Director Plan is 250,000.  This number and the terms of
outstanding  options are  subject to the  automatic  adjustment  in the event of
reorganization,   merger,   consolidation,   recapitalization,   stock   splits,
combination or exchange of shares,  stock dividends or other similar events. The
1995  Director Plan will have a ten-year  term and will be  administered  by the
Board of Directors. The last sale price of a share of the Company's Common Stock
on the New York Stock Exchange on March 15, 1995 was $15.25.

PROXIES AND VOTING

     The affirmative vote of the holders of the greater of (a) a majority of the
outstanding  shares of Common Stock of the Company  present and entitled to vote
or (b) a majority of the voting power of the minimum  number of shares  entitled
to vote that  would  constitute  a quorum for  transaction  of  business  at the
meeting,  is required for approval of the Plan.  A  shareholder  who abstains is
considered  to be present and entitled to vote at the meeting,  and is in effect
casting a negative  vote,  but a  shareholder  (including a broker) who does not
give  authority to a Proxy to vote shall not be considered  present and entitled
to vote.

     THE BOARD OF DIRECTORS  RECOMMENDS THAT THE SHAREHOLDERS  VOTE FOR APPROVAL
OF THE OSMONICS, INC. 1995 DIRECTOR STOCK OPTION PLAN.



COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT

     The following table provides  information as to the beneficial ownership of
the Company's  Common  Stock,  as of March 20, 1995, by (i) each person known by
the Company to be the  beneficial  owner of more than 5% of such  Common  Stock,
(ii) each nominee and  continuing  director of the Company,  (iii) the Company's
Chief  Executive  Officer  and four  other  most  highly  compensated  executive
officers for fiscal year 1994 and (iv) the directors and executive officers as a
group (12 persons). Beneficial ownership has been determined for this purpose in
accordance with Rule 13d-3 of the Securities and Exchange Commission under which
a person is deemed to be the beneficial  owner of securities if he or she has or
shares voting power or dispositive  power with respect to such securities or has
the right to acquire  beneficial  ownership of such securities within 60 days by
exercise of an option or  otherwise.  The  persons  named in the table have sole
voting and dispositive  powers with respect to all shares of Common Stock unless
otherwise noted in the notes following the table.

  Name of Beneficial Owner        Amount and Nature of
    Including Address of          Beneficial Ownership    Percent of
   Owners of More than 5%           of Common Stock       Common Stock

State Farm Mutual Automobile
  Insurance Company
  One State Farm Place
  Bloomington, Illinois 61701         1,388,812(1)            10.9

Ralph E. Crump(2)                       916,834(3)             7.2
James J. Carbonari                       19,749(4)              *
James W. Detert                          52,875(5)              *
Charles W. Palmer(6)                  1,129,780                8.9
Andrew T. Rensink                         5,625(7)              *
L. Lee Runzheimer                        45,938(8)              *
Verity C. Smith                           2,196                 *
Michael L. Snow                          21,150(9)              *
D. Dean Spatz(2)                      1,219,068(10)            9.6
Ruth Carol Spatz(2)                   1,196,287(10)            9.4

All directors and executive
officers as a group (12 persons)      4,083,562(11)           32.1

*  Less than 1%

(1)     Beneficial ownership is as of March 20, 1995. Based upon the most recent
        schedule 13G on file with the Securities and Exchange Commission,  State
        Farm Mutual Automobile Insurance Company's affiliated  corporations have
        sole voting and investment power with respect to 421,875 shares, 438,750
        shares and 528,187 shares, respectively.

(2)     The  address  of such  person  is  5951  Clearwater  Drive,  Minnetonka,
        Minnesota 55343.

(3)     Includes 458,417 shares held by his wife. Mr. Crump disclaims beneficial
        ownership of these shares.

(4)     Includes options to purchase 3,375 shares  exercisable within 60 days of
        the above date.

(5)     Includes options to purchase 22,500 shares exercisable within 60 days of
        the above date.

(6)     Mr.  Palmer's  address is 100 W.  Randolph St. #210,  Chicago,  Illinois
        60601.

(7)     Includes options to purchase 5,625 shares  exercisable within 60 days of
        the above date.

(8)     Includes options to purchase 3,750 shares  exercisable within 60 days of
        the above date.

(9)     Includes options to purchase 11,250 shares exercisable within 60 days of
        the above date.

(10)    Mr. and Mrs. Spatz possess sole voting and investment power with respect
        to 614,118 and  591,337,  respectively,  of such shares and they possess
        shared  voting  and  investment  power  with  respect to 604,950 of such
        shares.

(11)    Includes  options to purchase  54,000  shares of Osmonics  Common  Stock
        exercisable  within 60 days of the above date.  Includes  458,417 shares
        owned by Marjorie L. Crump, spouse of Ralph E. Crump, a director.

                             EXECUTIVE COMPENSATION

     The following table sets forth the cash and noncash  compensation  for each
of the last  three  fiscal  years  awarded  to or earned by the Chief  Executive
Officer of Osmonics and the four executive officers of Osmonics whose salary and
bonus in fiscal 1994 exceeded $100,000.




    Name and                                   Annual Compensation                    All Other
Principal Position                       Year       Salary(1)         Bonus         Compensation(2)

                                                                               
D. Dean Spatz                            1994       $225,215        $185,000           $11,819
Chairman,                                1993        223,358         150,000            20,396
Chief Executive Officer                  1992        210,878         130,000            20,836

L. Lee Runzheimer                        1994       $105,545        $ 26,200           $ 9,759
Chief Financial Officer                  1993        101,462          28,000             9,894
                                         1992         98,188          18,000             9,137

James W. Detert                          1994       $ 99,501        $ 30,000           $ 9,805
Vice President Operations                1993         92,024          20,000             8,223
                                         1992         88,514           8,500             7,199

James J. Carbonari                       1994       $ 98,061        $ 24,000           $ 9,019
Vice President Sales                     1993         91,518          15,000             7,644
& Marketing                              1992         80,412          14,000             6,897

Andrew T. Rensink                        1994       $ 85,636        $ 21,000           $ 7,429
Vice President Technology                1993         81,064          10,000             6,113
                                         1992         89,724               -             4,195



(1)     Includes  cash  compensation  deferred at the election of the  executive
        under the terms of Osmonics' 401(k) Plan.

(2)     Includes  $150 per year of  matching  funds from  Osmonics in the 401(k)
        Savings  Plan  and  contributions  by  Osmonics  to the  Profit  Sharing
        Retirement  Plan of $11,669 for Mr.  Spatz,  $9,609 for Mr.  Runzheimer,
        $9,655  for Mr.  Detert,  $8,869 for Mr.  Carbonari,  and $7,429 for Mr.
        Rensink for 1994.

            STOCK OPTION EXERCISES IN 1994 AND VALUE AT END OF 1994

     The following table summarizes  information with respect to options held by
the Chief  Executive  Officer and the  executive  officers  named in the Summary
Compensation Table, and the value of the options held by such persons at the end
of fiscal year 1994. Neither the Chief Executive Officer nor the named executive
officers received stock option grants in fiscal year 1994.

                   AGGREGATED OPTION EXERCISES IN LAST FISCAL
                     YEAR AND FISCAL YEAR-END OPTION VALUES




                                                     NUMBER OF SECURITIES        VALUE OF UNEXERCISED
                        SHARES                      UNDERLYING UNEXERCISED       IN-THE-MONEY OPTIONS
                       ACQUIRED        VALUE      OPTIONS AT FISCAL YEAR-END    AT FISCAL YEAR-END (2)
NAME                ON EXERCISE(#)   REALIZED(1)   EXERCISABLE UNEXERCISABLE   EXERCISABLE UNEXERCISABLE

                                                                            
D. DEAN SPATZ                 -              -            -            -               -            -

L. LEE RUNZHEIMER             -              -        3,375        1,125        $ 15,879      $ 5,293

JAMES J. CARBONARI       13,162       $139,722        3,375        1,125          15,879        5,293

JAMES W. DETERT               -              -       33,750        5,625         170,269       47,391

ANDREW T. RENSINK             -              -        5,625        1,875          16,172        5,391



(1)     Value realized is the aggregate  market value,  on the date of exercise,
        of the shares  acquired less the aggregate  exercise price paid for such
        shares.

(2)     Value of  unexercised  options is the  difference  between the aggregate
        market value of the  underlying  shares  (based on the closing  price on
        December  31,  1994,  which was  $14.875  per share)  and the  aggregate
        exercise price for such shares.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Osmonics'  Compensation  Committee  consists of Messrs.  Ralph E. Crump and
Michael L. Snow. Mr. Snow is of Counsel in the law firm of Maslon Edelman Borman
& Brand,  a Professional  Limited  Liability  Partnership,  which rendered legal
services to Osmonics during the last fiscal year.

DIRECTOR COMPENSATION

     Non-employee directors of Osmonics are reimbursed for expenses of attending
meetings of the Board of Directors.

REPORT OF THE  COMPENSATION  COMMITTEE  OF THE BOARD OF  DIRECTORS  ON EXECUTIVE
COMPENSATION

     Osmonics'  Compensation  Committee  consists of Messrs.  Ralph E. Crump and
Michael L. Snow. Mr. Snow is of Counsel in the law firm of Maslon Edelman Borman
& Brand,  a Professional  Limited  Liability  Partnership,  which rendered legal
services to the Osmonics during the last fiscal year.

     Decisions on compensation of Osmonics'  executives generally have been made
by the  Compensation  Committee  (the  "Compensation  Committee")  of the Board,
except that decisions regarding the granting of stock options have been and will
be made by the Stock Option Committee. Each member of the Compensation Committee
is a  non-employee  director.  Members  of the Stock  Option  Committee  are not
eligible to receive stock options  under the Osmonics'  stock option plans.  All
decisions  by  the  Compensation  Committee  relating  to  the  compensation  of
Osmonics'  executive  officers  are  reviewed  by the full  Board.  Pursuant  to
recently  adopted rules  designed to enhance  disclosure  of Osmonics'  policies
toward executive compensation, set forth below is a report prepared by the Board
of Directors addressing Osmonics', and its subsidiaries',  compensation policies
for the year  ended  December  31,  1994 as they  affected  Osmonics'  executive
officers.

     The Compensation  Committee's executive  compensation policies are designed
to provide  competitive levels of compensation that integrate pay with Osmonics'
annual   objectives  and  long-term  goals,   reward  above  average   corporate
performance,  recognize  individual  initiative  and  achievements,  and  assist
Osmonics in attracting and retaining  qualified  executives.  Targeted levels of
executive  compensation  are  set at  levels  that  the  Compensation  Committee
believes  to  be  consistent  with  others  in  Osmonics'   industry  and  other
manufacturing  companies in the Twin Cities  metropolitan  area. 

     There are three elements in Osmonics' executive  compensation  program, all
determined by individual and corporate performance.

          * Base salary compensation

          * Annual incentive compensation

          * Stock options

     Total  compensation  opportunities  are  competitive  with those offered by
employers of comparable size, growth and profitability in our industry.

     Base  salary  compensation  is  determined  by  the  potential  impact  the
individual has on Osmonics,  the skills and experiences required by the job, and
the performance and potential of the incumbent in the job.

     Annual   incentive   compensation   for  executives  of  Osmonics  and  its
subsidiaries is based primarily on corporate operating earnings and sales growth
but also  includes an overall  assessment by the Board of Directors of executive
management's performance, as well as market conditions.

     Awards of stock options under the Stock Option Plan are designed to promote
the  identity  of  long-term  interests  between  Osmonics'  executives  and its
shareholders  and assist in the retention of  executives.  The Stock Option Plan
also  permits  the  Committee  to grant  stock  options  to key  personnel.  The
Compensation  Committee  makes  recommendations  to the Stock  Option  Committee
regarding the granting of stock options to executives and key  personnel.  These
recommendations  may result in the  granting  of such  options.  Options  become
exercisable  based  upon  criteria   established  by  Osmonics.   In  1994,  the
Compensation  Committee did not recommend stock options to executives because it
felt all executives were appropriately compensated, and none were granted.

     The  Compensation  Committee  surveys  employee  stock  option  programs of
companies with similar capitalization to Osmonics prior to recommending to grant
options to the executives.  While the value realizable from exercisable  options
is dependent upon the extent of which Osmonics'  performance is reflected in the
market price of  Osmonics'  common stock at any  particular  point in time,  the
decision as to whether  such value will be realized  in any  particular  year is
primarily  determined by each individual  executive and not by the  Compensation
Committee.  Accordingly, when the Committee recommends that an option be granted
to an  executive,  that  recommendation  does not take  into  account  any gains
realized  that  year by that  executive  as a  result  of his or her  individual
decision to exercise an option granted in a previous year.

     The 1994 cash  compensation of Mr. Spatz was $410,215,  which  represents a
10% increase from his 1993 cash compensation. In 1993, revenues increased 6% and
earnings per share increased 525% over 1992.  Included in cash  compensation for
1994 is a bonus of $185,000,  an increase of 23% over the $150,000 bonus paid in
1993,  in  recognition  of the  effort  involved  over the past few years in the
growth of the Company, both internally and by acquisition.

                                                            Ralph E. Crump
                                                            Michael L. Snow

STOCK PERFORMANCE GRAPH

     The Securities and Exchange  Commission  requires that Osmonics  include in
this Proxy Statement a line-graph  presentation comparing cumulative,  five-year
return to Osmonics'  shareholders  (based on appreciation of the market price of
Osmonics' Common Stock) on an indexed basis with (i) a broad equity market index
and (ii) an appropriate  published industry or  line-of-business  index, or peer
group  index  constructed  by  Osmonics.  The  following  presentation  compares
Osmonics'  Common Stock price in the five-year  period from December 31, 1989 to
December  31,  1994,  to the S&P 500  Stock  Index and to a "peer  group"  index
created by Osmonics over the same period. The "peer group" index consists of the
common stock of Calgon Carbon Corporation,  Ionics,  Inc., Gelman Sciences Inc.,
Goulds Pumps Inc.,  Millipore Corp.,  Pall Corp.,  Sybron  Chemical,  Commercial
Intertech Corp. and United States Filter Corp.  These  corporations are involved
in various aspects of the water treatment or liquid  separations  businesses and
associated  product  lines.  The  presentation  assumes  that  the  value  of an
investment in each of Osmonics'  Common Stock,  the S&P 500 Index,  and the peer
group index was $100 on December 31, 1989, and that any dividend paid (none have
been paid by Osmonics) were re-invested in the same security.

[GRAPH]

End of fiscal:      1989      1990     1991      1992      1993      1994

Osmonics, Inc.   $ 100.00  $ 153.64  $ 252.41  $ 299.98  $ 327.41  $ 326.49

S&P 500          $ 100.00  $  96.89  $ 126.42  $ 136.05  $ 149.76  $ 151.74

Peer Group       $ 100.00  $ 106.99  $ 142.85  $ 145.00  $ 138.07  $ 146.86


COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

     Section 16(a) of the  Securities  Exchange Act of 1934  requires  Osmonics'
officers  and  directors,  and  persons  who own  more  than  ten  percent  of a
registered  class of Osmonics' equity  securities,  to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the New
York  Stock   Exchange.   Officers,   directors   and   greater-than-ten-percent
shareholders  are required by SEC regulation to furnish  Osmonics with copies of
all Section 16(a) forms they file.  Based solely on review of the copies of such
forms  furnished to Osmonics,  or written  representations  that no Forms 5 were
required,  Osmonics  believes that during the year ended  December 31, 1994, all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater-than-ten-percent beneficial owners were complied with.

                              INDEPENDENT AUDITORS

     Deloitte & Touche LLP has served as  independent  auditors  for the Company
since August 27, 1987. A representative  of Deloitte & Touche LLP is expected to
attend this year's Annual  Meeting of  Shareholders  and have an  opportunity to
make a statement  and/or  respond to appropriate  questions  from  shareholders.
Shareholder  approval  is  not  required  for  the  appointment  of  independent
auditors,  since the Board of Directors  has the  responsibility  for  selecting
auditors.

                 PROCEDURE FOR SUBMITTING SHAREHOLDER PROPOSALS

     Pursuant to Rule 14a-8 under the  Exchange  Act,  shareholders  may present
proper   proposals   for  inclusion  in  Osmonics'   proxy   statement  and  for
consideration at the next annual meeting of its shareholders by submitting their
proposals to Osmonics in a timely  manner.  Any proposal by a shareholder  to be
presented at the next Annual  Meeting of Osmonics  must be received at Osmonics'
principal  executive  offices,  5951  Clearwater  Drive,  Minnetonka,  Minnesota
55343-8990, no later than December 4, 1995, and otherwise have complied with the
requirements of Rule 14a-8.

     The Board of Directors  does not intend to present to the meeting any other
matters not  referred to above and does not  presently  know of any matters that
may be presented to the meeting by others. However, if other matters come before
the meeting,  it is the  intention of the persons  named in the enclosed form of
proxy to vote the proxy in accordance with their best judgment.



By Order of the Board of
Directors of Osmonics, Inc.



D. Dean Spatz
Chairman of the Board and
Chief Executive Officer


                                                                       Exhibit A


                                 OSMONICS, INC.

                              1995 EMPLOYEE STOCK
                                 PURCHASE PLAN


1.0     WHAT IS THE PURPOSE OF THE PLAN?

        The purpose of this 1995 Employee Stock Purchase Plan (the "Plan") is to
        provide employees of Osmonics Inc. ("Osmonics" or the "Company") and its
        subsidiaries  (as defined in Section 424(f) of the Internal Revenue Code
        of 1986, as amended (the "Code")) an  opportunity  to share in Osmonics'
        financial  growth through  ownership of Common Stock of the Company (the
        "Common Stock") made available to employees at preferential  prices. The
        Company and its  subsidiaries  are  referred to herein  collectively  as
        "Participating Companies."

        The Plan  provides a  convenient  method for  employees  to purchase the
        Common  Stock at a cost below the market  price and  without  payment of
        brokerage  commissions or fees. Purchases under the Plan are intended to
        qualify as exercises of options (the "Purchase Rights") granted under an
        employee stock purchase plan, as defined by Section 423 of the Code. The
        Plan is intended as an  incentive  for  continuing  employment  with the
        Company and to encourage  employees to take an ownership interest in the
        Company's future.

2.0     WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?

        All regular, full-time employees of the Participating Companies who have
        been so employed for more than 90 days (the  "Eligible  Employees")  are
        eligible to participate in the Plan.

        Any employee who is also a Director of the Company,  or who beneficially
        owns 5% or more of the total  voting  power or value of the stock of the
        Company, is not eligible to participate in the Plan.

        No purchase  rights shall be granted under the Plan to any person who is
        not an  Eligible  Employee,  and no Eligible  Employee  shall be granted
        purchase   rights  under  the  Plan  (a)  if  such  Eligible   Employee,
        immediately  after receiving the grant of such purchase rights under the
        Plan owns (under the rules of Section  423(b)(3) and 425(d) of the Code)
        stock possessing five percent or more of the total combined voting power
        or value of all classes of stock of the Company or any of its subsidiary
        corporations  (as defined by Section  425(f) of the Code);  or (b) which
        permits  such  Eligible  Employee's  rights to purchase  stock under all
        employee stock purchase plans of the  Participating  Companies to accrue
        at  a  rate  which  exceeds  $10,000  of  fair  market  value  of  stock
        (determined  at the time such  purchase  rights  are  granted)  for each
        calendar year in which such purchase rights are outstanding at any time.
        For purposes of the preceding  sentence,  the  determination of when the
        right to purchase  stock  pursuant to purchase  rights granted under the
        Plan accrues, and the rate at which such rights accrue, shall be made in
        the manner provided by Section 423(b)(8) of the Code.

3.0     HOW MAY I ENROLL IN THE PLAN?

        Each Eligible  Employee who completes and delivers the payroll deduction
        authorization  forms to the Human  Resources  Department  shall become a
        "Participant."  These forms authorize a regular  payroll  deduction from
        employee  compensation  and must state the date on which the  deductions
        should begin. This may not be retroactive.

4.0     HOW OFTEN WILL THE PURCHASE OF STOCK BE OFFERED?

        The Plan shall become effective on June 1, 1995,  provided that the Plan
        has then been adopted by the Board of Directors  (hereinafter called the
        "Board") of the Company,  and approved at a duly called  meeting (or any
        adjournment  thereof) of the shareholders of the Company, by the holders
        of a majority  of the then  outstanding  shares of stock of the  Company
        voting at such meeting.

        Osmonics will make one or more annual offerings to employees to purchase
        stock  under  this  Plan.  Each  offering  period  will be of 12 months'
        duration effective on 1 Jan and ending on 31 Dec. During this period, or
        the portion that an employee chooses to enroll,  the amounts received by
        such employee as compensation will determine their  participation in the
        offering to the extent that participation is based on compensation.

5.0     WHAT AMOUNT MAY I HAVE DEDUCTED?

        The  Company  will   maintain   payroll   deduction   accounts  for  all
        Participants.  No amounts  other  than such  payroll  deductions  may be
        credited to such  deduction  amounts.  No  interest  shall be payable to
        Participants  on account of any amounts held in the deduction  accounts.
        With  respect  to any  offering  made under  this  plan,  each  Eligible
        Employee may authorize a payroll  deduction of whole number  percentages
        of a minimum of 2% up to a maximum of 10% of the gross  compensation  of
        such Eligible  Employee  received  during the offering period (or during
        such portion thereof as elects to participate).

6.0     WHAT KIND OF SHARES MAY I PURCHASE?

        The shares of Common  Stock of the Company to be issued  under this Plan
        are "authorized but unissued shares" or treasury shares of Common Stock.

7.0     HOW MANY SHARES MAY I PURCHASE?

        Participants  participating  in any  offering  of this  Plan  (upon  the
        effective date of such offering),  will be granted an option to purchase
        as many full shares of Common  Stock of the Company as such  Participant
        chooses to purchase using the following amounts:

        7.1   up to 10% of compensation  received during the specified  offering
              period  (or  during  the  portion  such  Participant   chooses  to
              participate), to be paid by payroll deductions during such period;
              and

        7.2   the balance of fractional shares (if any) carried forward from the
              payroll  deduction  account of such  Participant for the preceding
              offering period.

        Notwithstanding  the  foregoing,  in no event  may the  number of shares
        purchased by a Participant during an annual offering period exceed 1,000
        shares.

8.0     WHAT PRICE WILL I PAY?

        The  purchase  price for each  share  purchased  will be 85% of the fair
        market  value on the last  business day of each month in which there are
        sufficient funds in a Participant's account to purchase one or more full
        shares.

        The fair market  value of a share of Common  Stock shall be deemed to be
        the mean  between  the highest  and lowest per share  selling  prices at
        which  such  Stock is traded on that day as listed on the New York Stock
        Exchange,  or any successor  national  securities  exchange on which the
        Common  Stock is listed or, if such  Common  Stock is not traded on that
        day,  then on the next  preceding  day on which  such  Common  Stock was
        traded.

9.0     WHAT ACCOUNTING OF MY CONTRIBUTIONS AND STOCK PURCHASES IS MAINTAINED?

        The  Plan  will  be  administered  by  a  committee  (the   "Committee")
        designated  by the Board of  Directors  of the  Company.  Members of the
        Committee  may be appointed  from time to time by the Board and shall be
        subject to removal by the Board. The decision of a majority in number of
        the members of the Committee in office at the time shall be deemed to be
        the decision of the Committee.

        The  Committee,  together with an agent (the  "Agent")  appointed by the
        Committee,   shall  administer  the  Plan  so  as  to  ensure  that  all
        Participants granted purchase rights under the Plan have the same rights
        and  privileges  as  provided  by  Section  423(b)(5)  of the Code.  The
        Committee may, from time to time,  approve the forms of any documents or
        writings  provided for in the Plan,  may adopt,  amend and rescind rules
        and regulations not inconsistent with the Plan for carrying out the Plan
        and may  construe  the Plan.  As of the last  business day of each month
        during any offering period, the Agent will total each deduction account.
        To the extent a  Participant's  deduction  account  contains  sufficient
        funds  to  purchase  one or  more  full  shares  as of that  date,  such
        Participant  will be deemed to have  exercised  an option to  purchase a
        full share or shares and his or her  deduction  account  will be charged
        for the amount of purchase. Subsequent full shares would be purchased in
        the same manner.

        Any  balance  of  fractional   shares  remaining  in  any  Participant's
        deduction  account  at the end of an  offering  period  will be  carried
        forward into his or her  deduction  account for the  following  offering
        period.  In no event  will the  balance  carried  forward be equal to or
        greater than the purchase price of one share on the last business day of
        the last month of the offering period.

        For example:

        If in the  month  of  February,  $17 is  withheld  from a  Participant's
        paycheck,  that  Participant's  deduction  account will be credited with
        that amount.  Then the Committee will allocate shares of Common Stock to
        the account of such  Participant  based on the market  price on the last
        business day of February.  Assuming the market price on that day is $20,
        the account of the Participant would be charged for the $17 ($20 x 85%),
        one full share of Common  Stock would be credited to the account of such
        Participant.

        If $24.50 had been  withheld  from the  paycheck of the  Participant  in
        February,  his or her  deduction  account  would be credited  with 1.441
        shares of Common Stock ($24.50 divided by the $17 share price).

10.0    HOW DO I RECEIVE SHARES?

        Notwithstanding  any other provision of the Plan, the Company shall have
        no  obligation to issue any shares of Common Stock under the Plan unless
        such issuance would comply with all  applicable  laws and the applicable
        regulations  or  requirements  of any  securities  exchanges  or similar
        entities.  If,  at  any  time,  the  Company,  in its  sole  discretion,
        determines  that the  listing,  registration  or  qualification  (or any
        updating of any such  document) of the shares of Common  Stock  issuable
        pursuant  thereto is necessary on any  securities  exchange or under any
        federal  or state  securities  or blue sky law,  or that the  consent or
        approval of any  governmental  regulatory body is necessary or desirable
        as a condition  of, or in  connection  with,  the  issuance of shares of
        Common Stock pursuant to the exercise of purchase  rights,  shares shall
        not be issued  pursuant to such  exercise,  in whole or in part,  unless
        such listing,  registration,  qualification,  consent or approval  shall
        have been effected or obtained free of any  conditions not acceptable to
        the Company.

        With  respect to any  person  who is  subject  to  section  16(a) of the
        Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),  the
        Committee may, at any time, add such  conditions and  limitations to any
        purchase  rights under the Plan that it deems  necessary or desirable to
        comply  with  the  requirements  of Rule  16b-3  promulgated  under  the
        Exchange Act; provided,  however, that any rights or privileges that are
        extended to such  persons  shall be extended  uniformly  to all eligible
        employees.

        The Company will periodically (but not less often than annually) deliver
        to each Participant  certificates for full common shares purchased under
        the Plan. Otherwise, the certificates will be delivered only if:

              a)    a Participant withdraws from the Plan, or

              b)    a Participant  or his or her legal  Representative  requests
                    them.

        An Eligible  Employee or Participant  shall not by reason of the Plan or
        any  purchase  rights  granted  under  the  Plan,  have any  rights of a
        shareholder  until and to the  extent  (s)he  shall,  from time to time,
        exercise his or her purchase rights, but, upon each such exercise, (s)he
        shall have all the rights of a shareholder of record on the day on which
        such  exercise  occurs with  respect to the shares of Common Stock as to
        which such  purchase  rights are  exercised,  and the  Company may defer
        delivery of certificates  evidencing such shares for a reasonable  time.

11.0    HOW DO I RECEIVE REPORTS OF MY ACCOUNT?

        The Committee or the Agent will provide each Participant with a periodic
        statement  showing the cash  withheld and invested,  purchase  price per
        share,  shares  purchased  and shares held for such  Participant  by the
        Committee or the Agent.

12.0    CAN I CHANGE THE AMOUNT OF MY DEDUCTION?

        A payroll  deduction  may be  increased  only once and reduced only once
        during any offering period (see 4.0).  Each  Participant may increase or
        decrease  his or her  payroll  deduction  at any time by filling out new
        authorization forms. The change may not become effective sooner than the
        next pay period after receipt of the form.

13.0    MAY I WITHDRAW FROM THE PLAN ANY TIME?

        Each Participant may at any time and for any reason permanently withdraw
        the  balance  accumulated  in his or her  deduction  account and thereby
        withdraw  from   participation  in  the  Plan.  Such   Participants  may
        thereafter begin  participation  again only at or after the commencement
        of a new offering  period.  Partial  withdrawals may be permitted at the
        discretion of the Committee.

14.0    IN WHOSE NAME MAY STOCK CERTIFICATES BE ISSUED?

        Certificates may be registered in the name of the Participant  only, or,
        if such Participant  indicates on his or her authorization  form, in the
        name of such Participant jointly with a member of his or her family with
        right  of   survivorship.   If  the  Participant  is  a  resident  of  a
        jurisdiction  which  does  not  recognize  such a  joint  tenancy,  such
        Participant  may  have  certificates  registered  in the  name  of  such
        Participant  as  tenant in  common  with a member of his or her  family,
        without right of survivorship.

15.0    ARE MY RIGHTS UNDER THIS PLAN TRANSFERABLE?

        Rights  under this Plan are not  transferable  other than by will or the
        laws of descent and distribution, and are exercisable by the Participant
        only, during the lifetime of such Participant.

16.0    DO I RECEIVE INTEREST ON CASH WITHHELD FROM MY PAYCHECK?
        
        In view of the discounted  purchase  price,  no interest will be paid on
        cash withheld prior to purchase of shares.

17.0    WHAT HAPPENS DURING MY ABSENCE FROM WORK?

        Payroll  deductions  continue  during  any time off with  pay,  but stop
        during approved time off without pay,  though such  Participant is still
        enrolled  in  the  Plan.  Deductions   automatically  resume  upon  each
        Participant's return to work.

18.0    WHAT IF MY EMPLOYMENT ENDS?

        In the event retirement or termination of employment with Osmonics,  the
        balance of shares and cash in the deduction  account of such Participant
        will be  issued to such  Participant,  or in the event of the death of a
        Participant, to the estate of such Participant.

19.0    WHAT IS THE  MAXIMUM  NUMBER  OF  SHARES  IN THE  PLAN  AND WHAT ARE THE
        EFFECTS OF A STOCK SPLIT OR DIVIDEND?

        The  maximum  number of shares of Common  Stock  which may be  purchased
        under the Plan is 400,000,  subject to  adjustment  as  hereinafter  set
        forth.

        In the event of a subdivision of outstanding shares, or the payment of a
        stock  dividend,  the number of shares  approved  for this Plan shall be
        increased  proportionately,  and such other  adjustment shall be made as
        may be deemed  equitable by the Board of Directors.  In the event of any
        other  change  affecting  the  Company's  shares of Common  Stock,  such
        adjustment  shall be made as may be  deemed  equitable  by the  Board of
        Directors to give proper effect to such event.

20.0    WHAT ARE THE TAX CONSEQUENCES?

        All amounts withheld pursuant to the Plan, shares issued pursuant to the
        exercise of any purchase  rights and any  payments  pursuant to the Plan
        are subject to withholding of all applicable taxes and the Participating
        Companies  shall  have  the  right  to  withhold  from  any  payment  or
        distribution  of shares or to collect as a  condition  of any payment or
        distribution under the Plan, as applicable, any taxes required by law to
        be withheld.  To the extent  provided by the Committee,  an employee may
        elect to have any distribution of shares  otherwise  required to be made
        pursuant to the Plan to be withheld  or to  surrender  to the Company or
        Participating  Companies  shares of Common  Stock  already  owned by the
        employee to fulfill any tax withholding obligation.

        This  description of federal income tax  consequences  is merely to help
        Participants  understand  them and is in no way  complete.  Participants
        having questions on how the Plan affects their individual tax situation,
        should seek competent professional advice.

21.0    WHAT ARE MY CONTRIBUTIONS TO THE PLAN USED FOR?

        All funds  received or held by the  Company  under this Plan may be used
        for any corporate purpose.

22.0    HOW IS THE PLAN ADMINISTERED?

        The Plan is  administered by the Board of Directors of the Company or by
        a committee of  directors  who are not  eligible to  participate  in the
        Plan.

        The Directors are  responsible for general  administration  of the Plan,
        proper  execution  of  its  provisions,  construction  of the  Plan  and
        determination  of all  questions  arising  thereunder.  It has  power to
        establish,   interpret   and   enforce   rules   and   regulations   for
        administration,  provided  such  rules  and  regulations  are  uniformly
        applicable to all persons similarly situated.

23.0    WHEN DOES THE PLAN END?

        This Plan and all rights of  Participants  under any offering  hereunder
        shall terminate:

        23.1  on the date that Participants become entitled to purchase a number
              of shares equal to or greater than the number of shares  remaining
              available for purchase.  If the number of shares so purchasable is
              greater than the shares remaining available,  the available shares
              shall be  allocated  by the  Committee  among  such  participating
              employees in such manner as it deems fair; or

        23.2  at any time, at the discretion of the Board of Directors.

        Upon   termination  of  this  Plan,  all  amounts  in  the  accounts  of
        Participants shall be carried forward into such Participant's  deduction
        account under a successor Plan, if any, or promptly refunded.


                        AUTHORIZATION FOR ENROLLMENT IN

                       1995 EMPLOYEE STOCK PURCHASE PLAN



I hereby  authorize  Osmonics,  Inc. to establish an account in my name and make
payroll deductions to purchase shares of common stock of Osmonics, Inc.

This  authorization is given with the understanding that I may withdraw from the
Plan at any time by notifying the Human Resources Coordinator of Osmonics, Inc.


EMPLOYEE'S NAME

SOCIAL SECURITY NO.


ACCOUNT REGISTRATION         [ ] Individual            [ ] Joint

NAME(S):

EMPLOYEE:
                   First               Middle                 Last

JOINT OWNER:
(if any)           First               Middle                 Last

ADDRESS:
                 Number            Street           Apt./Suite No.


                 City                  State                  Zip


                                   Telephone:

DATE ____________________


EMPLOYEE SIGNATURE

JOINT OWNER SIGNATURE
     (if any)


                       1995 EMPLOYEE STOCK PURCHASE PLAN

                      AUTHORIZATION FOR PAYROLL DEDUCTION


Name                                                      Date
           First              Middle            Last

Social Security No.                     Employee No.

                                        Department


In accordance  with the 1995 Employee Stock  Purchase Plan of Osmonics,  Inc., I
hereby authorize the Company to:


 [ ]    Deduct % of my gross payroll earnings during each pay period.


 [ ]    Change my payroll deduction to            % per pay period.


 [ ]    Withdraw my enrollment to the plan.


I understand  the terms of the Employee  Stock  Purchase Plan as outlined in the
Prospectus, and can withdraw my voluntary participation at any time.


Signature of Employee


                                                                       Exhibit B


                                 OSMONICS, INC.
                        1995 DIRECTOR STOCK OPTION PLAN

1.0     PURPOSE

        The purpose of the Osmonics,  Inc. 1995 Director  Stock Option Plan (the
        "Plan") is to advance the interests of Osmonics,  Inc.  (the  "Company")
        and its shareholders by encouraging increased share ownership by members
        of the Board of  Directors  of the Company  (the  "Board"),  in order to
        promote long-term  shareholder value through continuing ownership of the
        Company's common stock.

2.0     ADMINISTRATION

        The plan shall be  administered  by the Board.  The Board shall have all
        the powers vested in it by the terms of the Plan, such powers to include
        authority  (within the  limitations  described  herein) to prescribe the
        form of the agreement  embodying awards of  non-qualified  stock options
        made  under  the Plan  ("Options").  The  Board  shall,  subject  to the
        provisions of the Plan,  grant Options under the Plan and shall have the
        power  to  construe  the  Plan,  to  determine  all  questions   arising
        thereunder  and to adopt and amend  such rules and  regulations  for the
        administration  of the Plan as it may deem  desirable.  Any decisions of
        the Board in the administration of the Plan, as described herein,  shall
        be final and  conclusive.  The Board may act only by a  majority  of its
        members in office, except that the members thereof may authorize any one
        or more of their  number or any other  officer of the Company to execute
        and  deliver  documents  on behalf of the Board.  No member of the Board
        shall be liable for anything done or omitted to be done by him or by any
        other member of the Board in  connection  with the Plan,  except for his
        own willful misconduct or as expressly provided by statute.

3.0     PARTICIPATION

        Each member of the Board of the Company (a "Director") shall be eligible
        to receive an Option in accordance with Paragraph 5 below.

4.0     AWARDS UNDER THE PLAN

        4.1   Awards under the Plan shall include only Options, which are rights
              to  purchase  common  stock of the  Company  having a par value of
              $0.01 per share (the "Common Stock").  Such Options are subject to
              the terms,  conditions and  restrictions  specified in Paragraph 5
              below.

        4.2   There may be issued  under the Plan  pursuant  to the  exercise of
              Options an  aggregate  of not more than  250,000  shares of Common
              Stock,  subject to adjustment as provided in Paragraph 6 below. If
              any Option is  canceled,  terminates  or expires  unexercised,  in
              whole or in part, any shares of Common Stock that would  otherwise
              have been issuable pursuant thereto will be available for issuance
              under new Options.

        4.3   A Director to whom an Option is granted (and any person succeeding
              to such a  Director's  rights  pursuant to the Plan) shall have no
              rights as a shareholder  with respect to any Common Stock issuable
              pursuant  to any such Option  until the date of the  issuance of a
              stock  certificate  to him for such shares.  Except as provided in
              Paragraph  6 below,  no  adjustment  shall be made for  dividends,
              distributions or other rights (whether  ordinary or extraordinary,
              and whether in cash,  securities or other  property) for which the
              record date is prior to the date such stock certificate is issued.

5.0     NON-QUALIFIED STOCK OPTIONS

        Each Option granted under the Plan shall be evidenced by an agreement in
        such form as the Board shall  prescribe  from time to time in accordance
        with the Plan and shall comply with the following terms and conditions:

        5.1   The Option  exercise  price shall be the "Fair  Market  Value" (as
              herein  defined) of the Common Stock subject to such Option on the
              date the Option is granted. Fair Market Value shall be the closing
              sales  price  of a share of  Common  Stock on the date of grant as
              reported  on the New York Stock  Exchange  Composite  Transactions
              Tape or, if the New York Stock Exchange is closed on that date, on
              the last  preceding  date on which the New York Stock Exchange was
              open for trading,  but in no event will such Option exercise price
              be less than the par value of the Common Stock.

        5.2   For each year beginning in 1995, on the date of the annual meeting
              of shareholders of the Company,  each Director shall automatically
              receive an Option for 3,000  shares of Common  Stock (the  "Annual
              Option").

        5.3   The Option shall not be  transferable  by the  optionee  otherwise
              than by will or the laws of descent and distribution, and shall be
              exercisable during his lifetime only by him.

        5.4   Options shall not be exercisable:

              5.4.1   before  the  expiration  of one  year  from the date it is
                      granted  and after the  expiration  of ten years  from the
                      date  it  is  granted.  Notwithstanding  anything  to  the
                      contrary  herein,  an Option  shall  automatically  become
                      immediately  exercisable  in  full  upon  the  death  of a
                      Director;

              5.4.2   unless  payment  in full is made for the  shares of Common
                      Stock being  acquired  thereunder at the time of exercise;
                      such  payment  shall be made in United  States  dollars by
                      cash or check,  or in lieu  thereof,  by  tendering to the
                      Company  Common Stock owned by the person  exercising  the
                      Option  (including  shares  issuable  upon  exercise of an
                      Option) and having a Fair  Market  Value equal to the cash
                      exercise  price  applicable  to  such  Option,   or  by  a
                      combination  of United States  dollars and Common Stock as
                      aforesaid; and

              5.4.3   unless  the person  exercising  the Option has been at all
                      times during the period  beginning  with the date of grant
                      of the Option and ending on the date of such  exercise,  a
                      Director of the Company, except that

                      5.4.3.1   if such person shall cease to be such a Director
                                for reasons  other than death,  while holding an
                                Option  that  has not  expired  and has not been
                                fully  exercised,  such  person may, at any time
                                within three years of the date he ceased to be a
                                Director  (but in no event  after the Option has
                                expired  under the  provisions  of  subparagraph
                                5.4.1  above),  exercise the Option with respect
                                to any  Common  Stock as to which he could  have
                                exercised  on the  date he  ceased  to be such a
                                Director; or

                      5.4.3.2   if any person to whom an Option has been granted
                                shall die holding an Option that has not expired
                                and has not been fully exercised, his executors,
                                administrators,  heirs or  distributees,  as the
                                case may be,  may,  at any time  within one year
                                after  the date of such  death  (but in no event
                                after  the   Option   has   expired   under  the
                                provisions   of   subparagraph   5.4.1   above),
                                exercise  the Option with  respect to any shares
                                subject to the Option.

        5.5   If, on any date on which Options are  automatically  granted,  the
              number of shares of Common  Stock  remaining  available  under the
              Plan is insufficient  for the grant to each Director of Options to
              purchase 3,000 shares of Common Stock,  then Options to purchase a
              proportionate  amount of such available number of shares of Common
              Stock  (rounded to the nearest  whole  share)  shall be granted to
              each Director.

6.0     DILUTION AND OTHER ADJUSTMENTS

        In the  event  of any  change  in the  outstanding  Common  Stock of the
        Company  by  reason  of  any  stock  split,  stock  dividend,  split-up,
        split-off,  spin-off,  recapitalization,  merger, consolidation,  rights
        offering,  reorganization,  combination or exchange of shares, a sale by
        the  Company  of  all  or  part  of  its  assets,  any  distribution  to
        shareholders other than a normal cash dividend,  or other  extraordinary
        or unusual event,  the number or kind of shares that may be issued under
        the Plan pursuant to subparagraph  4.2 above,  and the number or kind of
        shares subject to, and the Option price per share under, all outstanding
        Options  shall  be  automatically  adjusted  so that  the  proportionate
        interest of the participant shall be maintained as before the occurrence
        of such event;  such  adjustment  in  outstanding  Options shall be made
        without  change in the total Option  exercise  price  applicable  to the
        unexercised portion of such Options and with a corresponding  adjustment
        in the Option  exercise price per share,  and such  adjustment  shall be
        conclusive and binding for all purposes of the Plan.

7.0     MISCELLANEOUS PROVISIONS

        7.1   Except as expressly provided for in the Plan, no Director or other
              person shall have any claim or right to be granted an Option under
              the Plan. Neither the Plan nor any action taken hereunder shall be
              construed  as giving any  Director any right to be retained in the
              service of the Company.

        7.2   A  participant's  rights  and  interest  under the Plan may not be
              assigned or transferred, hypothecated or encumbered in whole or in
              part either  directly or by operation of law or otherwise  (except
              in the  event  of a  participant's  death,  by will or the laws of
              descent  and   distribution),   including,   but  not  by  way  of
              limitation,  execution,  levy,  garnishment,  attachment,  pledge,
              bankruptcy or in any other  manner,  and no such right or interest
              of any  participant in the Plan shall be subject to any obligation
              or liability of such participant.

        7.3   Common Stock shall not be issued  hereunder unless counsel for the
              Company  shall  be  satisfied   that  such  issuance  will  be  in
              compliance  with  applicable  federal,  state,  local and  foreign
              securities,  securities  exchange  and other  applicable  laws and
              requirements.   Notwithstanding  anything  in  this  Plan  to  the
              contrary:  (a) the Company may, if it shall determine it necessary
              or desirable for any reason, at the time of award of any Option or
              the issuance of any shares of Common Stock pursuant to any Option,
              require the recipient of the Option, as a condition to the receipt
              thereof  or to the  receipt  of  shares  of  Common  Stock  issued
              pursuant   thereto,   to   deliver   to  the   Company  a  written
              representation  of present  intention to acquire the Option or the
              shares of Common Stock issued pursuant  thereto for his or her own
              account for investment and not for distribution; and (b) if at any
              time the Company further determines, in its sole discretion,  that
              the listing, registration or qualification (or any updating of any
              such  document)  of any  Option  or the  shares  of  Common  Stock
              issuable pursuant thereto is necessary on any securities  exchange
              or under any federal or state  securities or blue sky law, or that
              the  consent or approval of any  governmental  regulatory  body is
              necessary or desirable as a condition  of, or in  connection  with
              the award of any Option,  the  issuance of shares of Common  Stock
              pursuant  thereto,  or the removal of any restrictions  imposed on
              such  shares,  such Option  shall not be awarded or such shares of
              Common Stock shall not be issued or such restrictions shall not be
              removed,  as the case may be,  in  whole or in part,  unless  such
              listing,  registration,  qualification,  consent or approval shall
              have  been  effected  or  obtained  free  of  any  conditions  not
              acceptable to the Company.

        7.4   It shall be a condition to the  obligation of the Company to issue
              Common Stock upon exercise of an Option,  that the participant (or
              any  beneficiary  or person  entitled  to act  under  subparagraph
              5.4.3.2 above) pay to the Company, upon its demand, such amount as
              may be requested by the Company for the purpose of satisfying  any
              liability to withhold federal,  state,  local or foreign income or
              other taxes. If the amount  requested is not paid, the Company may
              refuse to issue such Common Stock.

        7.5   The expenses of the Plan shall be borne by the Company.

        7.6   By  accepting  any Option or other  benefit  under the Plan,  each
              participant and each person claiming under or through him shall be
              conclusively   deemed  to  have   indicated  his   acceptance  and
              ratification  of, and consent to, any action  taken under the Plan
              by the Company or the Board.

        7.7   The  appropriate  officers of the Company  shall cause to be filed
              any  reports,  returns  or  other  information  regarding  Options
              hereunder  or any Common Stock  issued  pursuant  hereto as may be
              required by Section 13 or 15(d) of the Securities  Exchange Act of
              1934,  as  amended,  or any  other  applicable  statute,  rule  or
              regulation.

8.0     AMENDMENT OR DISCONTINUANCE

        The Plan may be  amended  at any time and from time to time by the Board
        as the Board shall deem advisable; provided, however, that:

        8.1   no amendment shall become effective without  shareholder  approval
              if  such  shareholder   approval  is  required  by  law,  rule  or
              regulation;

        8.2   no amendment  shall  materially and adversely  affect any right of
              any participant  with respect to any Option  theretofore  granted,
              without such participant's written consent; and

        8.3   the following Plan provisions  shall not be amended more than once
              every six (6) months,  other than to comport  with  changes in the
              Internal Revenue Code, the Employee Retirement Income Security Act
              or the rules  thereunder:  (a) those designating the categories of
              individuals eligible to participate;  (b) those stating the amount
              and price of  securities to be awarded;  and (c) those  specifying
              the time of awards.

9.0     TERMINATION

        This Plan shall  terminate  upon the earlier of the  following  dates or
        events  to  occur:  upon  the  adoption  of a  resolution  of the  Board
        terminating  the Plan or ten years  from the date the Plan is  initially
        approved and adopted by the shareholders of the Company.  No termination
        of the Plan shall  materially and adversely  affect any of the rights or
        obligations  of any  person,  without  his  consent,  under  any  Option
        theretofore granted under the Plan.

10.0    EFFECTIVE DATE OF PLAN

        The Plan will  become  effective  on the date that it is approved by the
        affirmative  vote of the  holders of a majority  of the shares of Common
        Stock  entitled  to notice of and to vote at the  Company's  1995 Annual
        Meeting of Shareholders.



                        (Continued from the other side)

     The undersigned  hereby revokes all previous proxies relating to the shares
covered  hereby and  acknowledges  receipt  of the  Notice  and Proxy  Statement
relating to the Annual Meeting.

     THIS PROXY IS  SOLICITED  ON BEHALF OF THE BOARD OF  DIRECTORS.  It will be
voted on the matters  set forth on the reverse  side of this form as directed by
the shareholder,  but if no direction is made in the space provided,  it will be
voted FOR all of the nominees and FOR proposals two and three.

                              Dated:______________________________________, 1995
                              __________________________________________________
                              __________________________________________________

                              (Shareholder must sign exactly as the name appears
                              at  left.  When  signed  as a  corporate  officer,
                              executor, administrator,  trustee, guardian, etc.,
                              please give full title as such. Both joint tenants
                              must sign.)


                                 OSMONICS, INC.

            PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - MAY 17, 1995

     The undersigned,  a shareholder of Osmonics,  Inc., hereby appoints D. Dean
Spatz and Ruth  Carol  Spatz,  and each of them as  proxies,  with full power of
substitution,  to vote on behalf of the  undersigned  the number of shares which
the  undersigned  is  then  entitled  to  vote,  at the  Annual  Meeting  of the
Shareholders  of  Osmonics,  Inc. to be held at The  Minneapolis  Hilton Hotel &
Towers, 1001 Marquette Avenue, Minneapolis,  Minnesota, on May 17, 1995, at 3:30
P.M., and at any adjournments or postponements  thereof,  upon matters set forth
below,  with all the powers which the  undersigned  would  possess if personally
present:

(1)  ELECTION OF DIRECTORS   

         [ ]FOR nominees listed below   
         
         [ ]WITHHOLD AUTHORITY to vote for nominees listed below
    
     Three Year Term: Michael L. Snow, Ruth Carol Spatz

     INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
     THAT NOMINEE'S NAME ON THE SPACE PROVIDED _______________________________.

(2)  To approve the Osmonics, Inc. 1995 Employee Stock Purchase Plan.

              [ ] FOR      [ ] AGAINST      [ ] ABSTAIN

(3)  To approve the Osmonics, Inc. 1995 Director Stock Option Plan.

              [ ] FOR      [ ] AGAINST      [ ] ABSTAIN

(4)  Upon such other  business as may  properly  come before the meeting and any
     adjournments or postponements  thereof,  including the authority to adjourn
     the meeting to solicit additional proxies.

       THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE PROPOSALS

                        - TO BE SIGNED ON REVERSE SIDE -