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PENTAIR, INC.
OMNIBUS STOCK INCENTIVE PLAN
AS AMENDED AND RESTATED
SECTION 1. BACKGROUND AND PURPOSE
1.1 BACKGROUND. Pentair, Inc. ("Pentair") maintains a comprehensive equity
compensation incentive plan to award long-term equity incentives which tie the
compensation of executives and key managerial employees to Pentair operating
results. In particular, this Plan is designed to attract and retain top quality
executives and key employees, encourage innovation and growth, reward executives
for attainment of short-term performance objectives and long-term shareholder
value, recognize outstanding performance, encourage executive stock ownership
and, in general, to align management and shareholder interests. Pentair
established the Plan in 1990 by combining its then separate equity compensation
plans into one plan to achieve administrative consistency and greater
flexibility in structuring equity compensation awards.
1.2 RESTATEMENT OF PLAN. Pentair amended and restated this Plan to
authorize additional shares of Stock and ICUs with which to make grants under
the Plan, clarify certain administrative practices and bring the Plan into
compliance with Code requirements enacted since the Plan's adoption. The amended
and restated Plan was adopted on February 14, 1996, subject to shareholder
approval, and applies to all equity compensation grants made after that date.
This amended and restated plan extends until February 14, 2006.
1.3 2001 AMENDMENTS. Pentair is amending the Plan, effective February
14, 2001, to authorize additional shares of Stock with which to make grants
under the Plan, implement a cap on the amount of authorized shares of Stock
available for various types of Stock awards, other than Options, and clarify the
authority of the Committee to amend outstanding grants.
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SECTION 2. DEFINITIONS
Unless the context requires otherwise, when capitalized the terms
listed below shall have the following meanings when used in this or any other
section of the Plan:
2.1 "AFFILIATE" is any corporation, business trust, division,
partnership or joint venture in which Pentair owns (either directly or
indirectly) fifty percent (50%) or more of the voting stock, or rights analogous
to voting stock, but only for the duration of such ownership.
2.2 "BOARD" is the Board of Directors of Pentair, Inc., as elected from
time to time.
2.3 "BOOK VALUE PER SHARE" or "BOOK VALUE" is the total consolidated
shareholders' equity of Pentair at the close of a Fiscal Year, less the equity
attributable to preferred shares, divided by the number of shares of Stock
outstanding at the end of that Fiscal Year.
2.4 "CODE" is the Internal Revenue Code of 1986, as amended.
2.5 "COMMITTEE" is the Compensation and Personnel Committee of the
Board, as appointed from time to time.
2.6 "DISABLED" or "DISABILITY" is a physical or mental incapacity which
qualifies an individual to collect a benefit under the long-term disability plan
of Pentair or an Affiliate, or such other condition which the Committee may
determine to be a Disability.
2.7 "ELIGIBLE EMPLOYEE" is any key managerial, administrative or
professional employee of Pentair or an Affiliate, generally in salary grade 25
or higher, who is in a position to make a material contribution to the continued
profitable growth and long term success of Pentair or an Affiliate.
2.8 "FAIR MARKET VALUE" is the closing price of a share of Stock on the
relevant date as reported on either the NASDAQ National Market System or the New
York Stock Exchange, depending on which exchange then lists Pentair stock, or as
otherwise determined using procedures established by the Committee.
2.9 "FISCAL YEAR" is the twelve (12) consecutive month period beginning
January 1 and ending December 31.
2.10 "INCENTIVE COMPENSATION UNIT" or "ICU" is a unit representing the
right to receive an amount determined by attainment of corporate performance
objectives over an applicable Incentive Period.
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2.11 "INCENTIVE PERIOD" is a period of continuous employment fixed by
the Committee at the time of grant of an ICU after which such ICU may become
payable, provided all relevant performance objectives have been met.
2.12 "INCENTIVE STOCK OPTION" or "ISO" is an Option which is designated
as such by the Committee and intended to so qualify under Code section 422.
2.13 "NONQUALIFIED STOCK OPTION" or "NQSO" is any Option which is not
an ISO.
2.14 "OPTION" is a right granted pursuant to the Plan to purchase Stock
subject to such terms and conditions as may be specified by the Committee at the
time of grant.
2.15 "PARTICIPANT" is an Eligible Employee approved by the Committee to
receive a grant or award under the Plan.
2.16 "PENTAIR" is Pentair, Inc., a Minnesota corporation.
2.17 "PERFORMANCE PERIOD" is the period of time over which a
Participant must meet the relevant performance criteria established by the
Committee at the time of an award of Performance Shares or Performance Units.
2.18 "PERFORMANCE SHARE" is a share of Stock, Restricted Stock, or a
Right to Restricted Stock, awarded by the Committee, subject to such performance
targets or other restrictions as are established by the Committee at the time of
award.
2.19 "PERFORMANCE UNIT" is an amount equal to the value of an ICU
determined on the date of award.
2.20 "PLAN" is the Pentair, Inc. Omnibus Stock Incentive Plan, as
amended from time to time.
2.21 "RESTRICTED STOCK" is Stock issued or transferred to a Participant
by means of an award subject to such restrictions as may be imposed at the time
of grant by the Committee, and which will remain subject to said restrictions
until such time as the restrictions lapse.
2.22 "RETIREMENT" is the time a Participant who is eligible to receive
retirement income benefits from the Pentair tax qualified pension plan separates
from employment.
2.23 "RIGHT TO RESTRICTED STOCK" is a right awarded to a Participant to
receive Stock or Restricted Stock which will vest at some future time and which
is subject to such restrictions
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as may be imposed at the time of grant by the Committee, and which will remain
subject to such restrictions until the restrictions lapse.
2.24 "SIGNIFICANT SHAREHOLDER" is an employee who owns more than ten
percent (10%) of the total combined voting power of all classes of stock issued
by Pentair as of the date such employee is granted an Option. For this purpose,
the provisions of Code sections 422 and 424, as amended, shall apply.
2.25 "STOCK" is Pentair common stock.
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SECTION 3. SHARES SUBJECT TO THE PLAN
3.1 SHARES.
(a) Number of Shares. The maximum number of shares of Stock which may be issued
for any type of award or grant under the Plan shall be 5,600,000, subject to
adjustment as provided in Sections 3.1(b) and 3.3. Not more than twenty percent
(20%) of such shares shall be available for various types of grants, other than
Options, which may be made under the Plan.
(b) Unused Shares. Any shares of Stock subject to an Option which is
canceled, expires or otherwise terminates without having been exercised in full
(unless such cancellation is due to the exercise of a related SAR), or any
shares of Restricted Stock, Rights to Restricted Stock or Performance Shares
which are forfeited, shall again be available for grants or awards under the
Plan.
3.2 INCENTIVE COMPENSATION UNITS. The maximum number of Incentive
Compensation Units which may be awarded under the Plan is 4,000,000, subject to
adjustment as provided in this Section 3.2 and in Section 3.3. If an ICU is
awarded, but is forfeited or otherwise terminates without payment having been
made to the Participant, then such ICU shall again be available for awards under
the Plan.
3.3 ANTIDILUTION. In the event of a change in the number or class of
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, merger, consolidation, or other similar
corporate change, the number of shares of Stock as to which grants of Options or
other awards under the Plan may be made, and the number of ICUs available for
award under the Plan, shall be adjusted proportionately to the nearest whole
share or unit. Any such action shall be within the discretion of the Committee,
whose determination shall be conclusive.
If such an adjustment is made with respect to shares then subject to an
Option, the number of shares and the Option price per share shall be adjusted
proportionately so the aggregate exercise price of such Option shall not change.
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SECTION 4. STOCK OPTIONS
4.1 GRANTING OPTIONS. Participants may be granted ISOs, SARs or NQSOs.
No one Participant shall be granted, in the aggregate, Options or SARs on more
than 150,000 shares in any calendar year. Solely for purposes of determining the
number of Options or SARs available for grant to an individual in any calendar
year, Options which are canceled or repriced shall be counted against this
annual maximum to the extent required by applicable regulations.
4.2 OPTION TERMS AND CONDITIONS. (a) Grant of Option. Except as
otherwise limited by the Plan, the Committee shall have the discretion to grant
to a Participant any number or type of Options at any time, and subject to such
terms and conditions as the Committee may determine.
(b) Exercise Limit. With respect to Options designated as ISOs at the
time of grant, to the extent the aggregate Fair Market Value of Stock,
determined as of the date of grant, with respect to which ISOs are first
exercisable during any single calendar year exceeds $100,000, or such other
limit as shall be allowed under the Code, such Options shall be treated as
NQSOs. In applying this limit Options shall be taken into account in the order
granted.
(c) Option Price. The Option price of an ISO or NQSO shall be not less
than Fair Market Value as of the date of grant. If an ISO is granted to a
Significant Shareholder, the Option price shall be not less than 110% of Fair
Market Value on the date of grant.
(d) Term of Option. Each Option shall expire at the time specified by
the Committee when granting the Option. The Committee may not fix a term which
is shorter than required under any applicable state or federal law, nor longer
than ten (10) years from the date of grant. With respect to a Significant
Shareholder, the Committee may not fix a term which is longer than five (5)
years from the date of grant. An Option term may extend beyond the Plan's
termination date.
(e) Manner of Exercise. To exercise an Option, whether partially or
completely, the Participant shall give written notice to Pentair in such form
and manner as the Committee may prescribe. Payment for Stock to be acquired by
the exercise of an Option must accompany the written notice of exercise.
(f) Payment.
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(1) General. Full payment for all Stock to be acquired upon the
exercise of an Option, together with an amount sufficient to satisfy applicable
federal, state or local withholding taxes, shall be made at the time such
Option, or any part thereof, is exercised, and no Stock certificate shall be
issued until such payment has been made. Payment may be made in cash or in such
other form as is acceptable to the Committee, provided that in the case of an
ISO, no form of payment shall be allowed which would prevent the Option from
qualifying as such within the meaning of Code section 422.
(2) Payment with Options. The Participant, in lieu of or in combination
with a payment in cash, may transfer to Pentair a sufficient number of
outstanding Options as will pay all applicable withholding tax liability
incurred on exercise of the Option. For this purpose, the Participant may use
only Options having an exercise price less than Fair Market Value on the date
such Options are transferred or exercised, and the value of such any Option so
transferred shall be the difference between its then exercise price and Fair
Market Value. Transfer of an Option for payment of taxes shall be considered
exercise of the Option.
(3) Payment with Stock. Subject to such Code requirements as are
relevant to ISOs, a Participant, in lieu of or in combination with a payment in
cash, may transfer to Pentair a sufficient number of shares of Stock to satisfy
all or any part of the Option price and applicable withholding taxes. Such Stock
may be Stock already owned by the Participant or, in the case of an NQSO, Stock
to be acquired by exercise of the Option. For this purpose, the value of the
Stock shall be Fair Market Value as of the date of exercise. Where payment is
made in whole or in part by Stock, the Participant may not transfer fractional
shares of Stock or shares of Stock with an aggregate Fair Market Value in excess
of the Option price plus applicable withholding taxes.
(4) Interim Broker Loan. The Committee may arrange through a stock
brokerage or other similar agent, a loan to a Participant of some or all of the
funds needed to exercise an Option. Upon application for such loan and receipt
of written notice of exercise of an Option from a Participant, the broker will
pay to Pentair the amount requested by the Participant to pay the Option
exercise price and applicable withholding taxes. Pentair will promptly deliver
to such
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broker a certificate representing the total number of shares of Stock to
be acquired by exercise of said Option. The broker will then sell part or all of
these shares and pay to the Participant the proceeds from the sale, less the
loan principal and any interest charged thereon from the date the broker
received the notice of exercise until the date the broker is repaid.
(5) Other Payment Methods. The Committee may, in its discretion,
authorize payment by other methods or forms within the limitations imposed by
the Plan and applicable state or federal law.
(g) No Tandem Options. No ISO granted under this Plan shall contain
terms which would limit or otherwise affect a Participant's right to exercise
any other Option, nor shall any NQSO contain terms which will limit or otherwise
affect the Participant's right to exercise any other Option in such a manner
that an Option intended to be an ISO would be deemed a tandem option.
4.3 STOCK APPRECIATION RIGHTS. (a) Grant of Stock Appreciation Rights.
The Committee may grant Stock Appreciation Rights ("SARs") to Participants who
have been granted ISOs. These SARs may relate to any number of shares, up to the
total number of shares the Participant could acquire by exercise of the
underlying ISOs. An SAR shall expire no later than the expiration date of the
underlying ISO, and the amount paid shall not be more than 100% of the
difference between the Option price and Fair Market Value of the Stock subject
to the Option, determined on the date the SAR is exercised.
(b) Exercise. Stock Appreciation Rights may be exercised at the same
time, to the same extent and subject to the same conditions as the related ISO,
and only when the Fair Market Value of the Stock subject to the ISO exceeds the
Option price. The exercise of an SAR shall cancel the related ISO; the exercise
of an ISO shall cancel a related SAR.
(c) Payment of Stock Appreciation Rights. Upon exercise of an SAR, the
Participant shall be paid in cash, Stock, Rights to Restricted Stock, Restricted
Stock, or a combination thereof, as the Committee shall determine at the time of
grant. If payment is made in Stock, Rights to Restricted Stock or Restricted
Stock, the shares shall be valued at Fair Market Value on the date the SAR is
exercised.
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4.4 ISSUANCE OF CERTIFICATES. (a) Delivery. As soon as practicable
after either the exercise of an Option and the delivery of payment therefor, or
the exercise of an SAR which is to be paid in Stock, Rights to Restricted Stock
or Restricted Stock, Pentair shall:
(i) if Stock is to be issued due to the exercise of an Option,
record in the name of the Participant a number of certificated
or uncertificated shares equal to the number of shares
acquired by the Participant through exercise of the Option;
(ii) if payment is to be made in Restricted Stock, record in the
name of the Participant a number of nonnegotiable certificated
or uncertificated shares equal to the number of shares of
Restricted Stock acquired; and
(iii) if payment is to be made in Rights to Restricted Stock,
establish and maintain a separate written account for each
Participant and record in such account the number of Rights to
Restricted Stock so acquired.
Consistent with applicable state or federal law, the Committee may fix
a minimum or maximum period of time during which a Participant may not sell any
such Stock or Restricted Stock, or obtain Restricted Stock in lieu of a Right to
Restricted Stock.
(b) Designation. Shares acquired pursuant to the exercise of an ISO
shall be designated as such on the stock transfer records of Pentair, to the
extent the value of such shares does not exceed the exercise limit contained in
Section 4.2(b). Shares acquired by exercise of an Option which exceed this
exercise limit shall be designated on Pentair's stock transfer records as shares
acquired pursuant to the exercise of an NQSO. For purposes of this exercise
limit, the designation of shares as acquired pursuant to the exercise of an ISO
or NQSO shall be subject to change as permitted by applicable Code provisions.
SECTION 5. RESTRICTED STOCK AND INCENTIVE
COMPENSATION UNITS
5.1 RESTRICTED STOCK AWARDS (a) Written Agreement. Each award of
Restricted Stock or Rights to Restricted Stock shall be evidenced by a written
agreement, executed by the Participant and Pentair. Such agreement shall specify
the number of shares of Restricted Stock or the number of Rights to Restricted
Stock awarded and any terms and conditions the Committee may require on such
award.
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(b) Restriction Period. At the time of an award of Restricted Stock or
Rights to Restricted Stock, the Committee shall fix a period of time
("Restriction Period") during which such restrictions as are imposed by the
Committee shall remain in effect; provided that the number of shares of Stock
with respect to which the Committee may make an award which fixes a Restriction
Period of less than three (3) years shall not exceed five percent (5%) of the
maximum number of shares available under the Plan. Such restrictions shall lapse
upon expiration of the Restriction Period, or sooner if otherwise provided in
the Plan.
(c) Restrictions. In addition to such other restrictions as the
Committee may impose at grant, each share of Restricted Stock or Right to
Restricted Stock shall be subject to the following restrictions:
(i) Neither Restricted Stock nor Rights to Restricted Stock may be
sold, assigned, transferred, pledged, hypothecated, or
otherwise disposed of during a Restriction Period.
(ii) Except as otherwise herein provided, unless the Participant
remains continuously employed by Pentair or an Affiliate until
the conditions for the removal of such restrictions as the
Committee may impose have been satisfied, Restricted Stock and
Rights to Restricted Stock shall be forfeited and returned to
Pentair, and all rights of a Participant to receive Restricted
Stock or vest in Rights to Restricted Stock shall terminate
without any payment or consideration by Pentair.
(d) Recordkeeping. As soon as practicable after the execution of the
written agreement required by Section 5.2(a), Pentair shall:
(i) for awards of Restricted Stock, record in the name of the
Participant a number of nonnegotiable, certificated or
uncertificated shares equal to the number of shares of
Restricted Stock awarded; and
(ii) for awards of Rights to Restricted Stock, establish and
maintain a separate written account for each Participant and
record in such account the number of Rights to Restricted
Stock awarded.
(e) Dividends. Dividends declared with respect to shares of Restricted
Stock shall be paid in cash to the Participant as and when declared, or as
otherwise determined by the Committee. Where Rights to Restricted Stock are
awarded, the Committee shall determine whether amounts equivalent to dividends
declared on Stock subject to an award of Rights to Restricted Stock shall be
paid when the dividends are declared, or as otherwise determined by the
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Committee. Dividends, regardless of when paid, shall be subject to all
applicable withholding taxes.
5.2 INCENTIVE COMPENSATION UNITS. (a) Award Agreements. Each ICU award
shall be evidenced by a written agreement, executed by the Participant and
Pentair, which shall specify the number of ICUs awarded and contain such other
terms and conditions as the Committee may require.
(b) ICU Account. Pentair shall establish and maintain a separate
account ("ICU Account") for each Participant and record in such accounts the
number of ICUs awarded to each Participant. The number of ICUs which may be
realized by each Participant may be adjusted by any conditions specified by the
Committee in the award agreement. The maintenance of an ICU Account is
principally a bookkeeping function and does not entitle a Participant to realize
on an ICU award.
(c) Earning an ICU Award. (1) General. The ability of a Participant to
realize on an ICU award shall be determined by achievement of specific corporate
performance factors over the designated Incentive Period. The maximum amount of
compensation per ICU payable to a Participant in any calendar year by reason of
an ICU award shall not exceed twice the growth in Book Value, determined
pursuant to Section 5.2(d), over the applicable Incentive Period.
(2) Incentive Period. At the time of award, the Committee shall fix the
Incentive Period during which the Participant must remain continuously employed
by Pentair or an Affiliate. The Incentive Period shall generally be three (3)
years, unless another expiration date is specified by the Committee or the Plan
provides otherwise.
(3) Corporate Performance Factors. The amount of compensation payable
to a Participant on account of an ICU award shall be determined by application
of the following factors:
(i) the change in Book Value per share of Stock over the
designated Incentive Period;
(ii) the growth in earning per share of Stock over the designated
Incentive Period;
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(iii) the average return on equity of Stock over the designated
Incentive Period; or
(iv) such other factors as the Committee shall specify at the time
of grant.
(d) Valuation of Incentive Compensation Unit. (1) Valuation at
Expiration of Incentive Period. As soon as practicable after the Incentive
Period expires, Pentair's audited financial statements for the preceding Fiscal
Year shall be provided in final form to the Committee, which shall determine the
value of each ICU. Such value shall be based on the net increase in Book Value
over the Incentive Period, calculated by subtracting the beginning Book Value (
determined as of the December 31 immediately preceding the date the ICUs were
awarded) from the ending Book Value (determined on the December 31 immediately
following the end of the Incentive Period). The resulting number shall then be
subject to adjustment by a multiplier which takes into account average return on
equity, compounded growth in earnings per share, or any other corporate
performance factors established with respect to the award being valued.
(2) Valuation if Incentive Period Shortened. If for any reason an
Incentive Period is shortened, the Committee shall determine the value of an
affected Participant's ICUs as soon as practicable after the date such Period
prematurely ends, and for this purpose, the ending Book Value shall be
determined as of the December 31 immediately preceding the date the Incentive
Period ends, or as otherwise determined by the Committee.
(3) Adjustments to Valuation Formula. The Committee shall retain the
discretion to modify the factors or formula used to value an ICU award;
provided, however, that any such change shall be defined in the written
agreement executed pursuant to Section 5.2(a) at the time of grant. No such
modification shall in any event cause the value of an ICU award made to any one
Participant to exceed the maximum possible award as defined in Section
5.2(c)(1).
(e) Payment of ICU Account. Payment of the value of each ICU shall be
made to the Participant, or, if applicable, a designated beneficiary, as soon as
practicable after valuation. Such payment may be made in cash, Stock, Rights to
Restricted Stock, Restricted Stock or any combination thereof, as the Committee
shall determine at the time of grant. If payment is made
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in Stock, Rights to Restricted Stock or Restricted Stock, the shares shall be
valued at Fair Market Value (as adjusted for any restrictions) on the date the
Incentive Period expires.
SECTION 6. PERFORMANCE SHARES AND PERFORMANCE UNITS
6.1 PERFORMANCE AWARDS. (a) Performance Agreement. Each award of
Performance Shares and Performance Units shall be evidenced by a written
agreement, executed by the Participant and Pentair. Such agreement shall
establish all terms and conditions applicable to the payment of a Performance
Share or Performance Unit as the Committee may determine, including the
achievement of relevant performance objectives. These performance objectives
shall include such financial measures as return on shareholders equity, growth
in earnings per share, return on sales, growth in income, growth in sales and
various techniques which compare actual returns with required returns based on
cost of capital criteria.
(b) Performance Accounts. At such time as a performance award is made,
Pentair shall establish an account ("Performance Account") for each Participant
and credit the Performance Units and Performance Shares awarded to such account.
Performance Shares shall be credited in the form of Restricted Stock or Rights
to Restricted Stock. The maintenance of Performance Accounts is principally a
bookkeeping function, and does not entitle a Participant to payment of any
awards hereunder.
(c) Dividends. Dividends or the equivalent paid with respect to
Restricted Stock shall be paid in cash to the Participant as and when declared,
or as other determined by the Committee. The Committee shall determine whether
dividends or the equivalent declared on Stock subject to Rights to Restricted
Stock shall be paid when declared, or as otherwise determined by the Committee.
Dividends, regardless of when paid, shall be subject to all applicable
withholding taxes.
6.2 PERFORMANCE PERIOD AND TARGETS. (a) Performance Period. The
Performance Period shall be established by the Committee at the time of the
award. This period may differ for each award granted to any one Participant.
(b) Performance Targets. At the time a performance award is
established, the Committee shall establish such performance targets as it
determines to be relevant. Successful
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completion of performance targets within the designated Performance Period shall
be certified by the Committee, using such measures of performance during the
Performance Period as are specified in the performance agreement.
6.3 EARNING A PERFORMANCE AWARD. The Committee shall pay a performance
award to a Participant based on the degree of attainment of the relevant
performance targets during the Performance Period, and in accordance with the
provisions of the performance agreement. The maximum amount of compensation a
Participant may be granted by reason of a performance award in any one calendar
year shall be $100,000, calculated by reference to Fair Market Value of the
award on date of grant.
6.4 PAYMENT OF PERFORMANCE AWARDS. (a) Time for Payment. No performance
award shall be payable until after earned in accordance with the terms and
conditions of the performance agreement, unless otherwise provided in the Plan
or in the sole discretion of the Committee. Any Performance Shares, Performance
Units or other amounts credited to a Performance Account shall be paid to the
Participant only when, and to the extent, the Committee so determines. All such
determinations shall be made during the four (4) month period immediately
following the end of the Performance Period as established in the performance
agreement.
(b) Form of Payment. Payment of Performance Shares or Performance Units
shall be in the form of cash, Stock, Rights to Restricted Stock or Restricted
Stock, or a combination thereof as determined by the Committee at the time of
grant. If payment is made in Stock, Rights to Restricted Stock or Restricted
Stock, the shares shall be valued at Fair Market Value (as adjusted for any
restrictions) on the date the Performance Period expires.
6.5 BONUS PLANS. (a) Executive Bonus Award. On February 14, 1996,
Pentair adopted the Executive Officer Performance Plan ("EOPP"), an annual bonus
plan designed to compensate participating executive officers for performance as
measured against the key financial measurements defined in the EOPP plan. Cash
awards under the EOPP are limited to an amount equal to an EOPP participant's
annual base salary, even though a total bonus award under the EOPP may exceed
that amount. To the extent an annual bonus award exceeds the
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amount which can be paid in cash pursuant to the EOPP, the balance shall be
considered an award of Performance Shares payable in the form of Restricted
Stock under the Plan. The performance targets applicable to such Performance
Shares shall be the same as the criteria established under the EOPP for purposes
of earning the award. The Performance Shares so granted shall be subject to any
vesting conditions the Committee may impose as of the date the Performance
Shares are issued. The maximum amount of compensation a Participant may be
granted by reason of a Performance Share award under the EOPP in any one
calendar year is equal to the maximum award available to such Participant under
the EOPP, reduced by the amount of such award payable to the Participant in
cash.
(b) Management Incentive Plan. Pentair also maintains an annual bonus
plan (the "MIP") which provides incentive compensation for management employees
other than executive officers. Like the EOPP, cash awards under the MIP are
limited to an amount equal to a MIP participant's annual base salary, even
though a total bonus award under the MIP may exceed that amount. To the extent
such an annual bonus award exceeds the amount which can be paid in cash under
the MIP, the balance shall be considered an award of Performance Shares payable
in the form of Restricted Stock under the Plan. The Performance Shares so
granted shall be subject to any vesting conditions the Committee may impose as
of the date the Performance Shares are issued. The maximum amount of
compensation a Participant may be granted by reason of a Performance Share award
under the MIP in any one calendar year is equal to the maximum award available
to such Participant under the MIP reduced by the amount of such award payable to
the Participant in cash.
SECTION 7. TERMINATION OF EMPLOYMENT
7.1 GENERAL RULE. Except as otherwise provided herein, Options and SARs
may be exercised and Restricted Stock, Rights to Restricted Stock, ICUs,
Performance Share or Performance Unit awards paid to a Participant only in
accordance with the terms and conditions specified by the Committee at the time
of grant.
7.2 EXCEPTIONS FOR DEATH, DISABILITY OR RETIREMENT. (a) Death of
Participant. If a Participant's employment terminates due to death, any benefits
under the Plan may be transferred
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to the beneficiary designated by the Participant. If no beneficiary has been
duly designated, said benefits shall transfer pursuant to the provisions of such
Participant's will, or if there is no will, by the laws of intestate succession
in the state in which the Participant is domiciled on the date of death. The
individual who succeeds to the Participant's benefits under the Plan may:
(i) exercise any outstanding Options to the same extent the
Participant was entitled to exercise such Options, together
with any Options the Committee may accelerate, at any time
prior to the earlier of six (6) months from the date of the
Participant's death, or the date the Options would otherwise
expire by their terms;
(ii) receive payment of any shares of Restricted Stock or Rights to
Restricted Stock based on a deemed lapse of the restrictions,
or of any ICUs based on a deemed expiration of the Incentive
Period and attainment of the relevant performance goals,
provided that any such payment may be either prorated or
otherwise paid as determined by the Committee;
(iii) receive payment of a Performance Share or Performance Unit
award, as determined by the Committee, based on the degree to
which established performance targets had been attained as of
the Participant's death.
(b) Disability of Participant. A Participant who becomes Disabled may:
(i) exercise outstanding Options that are otherwise exercisable,
together with any Options the Committee may accelerate, at any
time prior to the earlier of twelve (12) months after the date
of Disability or the date the Options would otherwise expire
by their terms;
(ii) be paid a prorated amount of an award of Restricted Stock or
Rights to Restricted Stock or ICUs, determined by application
of the payment provisions in Section 7.2(a)(ii), based on a
deemed lapse of restrictions or a deemed expiration of an
Incentive Period and attainment of the relevant performance
goals;
(iii) be paid a Performance Share or Performance Unit award prior to
expiration of a Performance Period, as the Committee shall
determine by considering the degree of attainment of
established performance targets.
(c) Retirement. At the time of Retirement, a Participant may:
(i) exercise outstanding Options which are otherwise exercisable,
together with any Options the Committee may accelerate, at any
time prior to the earlier of thirty (30) days following
Retirement, or the date the Options would otherwise expire by
their terms;
(ii) receive a prorated payment of an award of Restricted Stock,
Rights to Restricted Stock or ICUs, determined by application
of the payment provisions in Section 7.2(a)(ii), based on a
deemed lapse of restrictions or a deemed expiration of an
Incentive Period and, if applicable, attainment of relevant
performance goals;
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(iii) receive a payment of Performance Shares or Performance Units
as the Committee shall determine by considering the degree to
which performance targets have been attained.
(d) Other Termination of Employment. (1) Termination Not for Cause. If
a Participant's employment ends for reasons other than those listed in Sections
7.2 or 7.3, outstanding Options may be exercised no later than the earlier of
thirty (30) days following such termination, or the date the Options would, by
their terms, expire. Any other outstanding awards under the Plan, to the extent
not then earned and paid to the Participant, shall terminate unless accelerated
by the Committee, subject to the provisions of Section 8.1.
(2) Termination for Cause. If a Participant's services are terminated
for cause, as determined by the Committee, all Options or other benefits granted
under the Plan, to the extent not already exercised or otherwise earned or paid,
shall terminate.
7.3 CHANGE IN CONTROL. (a) Definitions. Unless the context requires
otherwise, when capitalized the terms listed below shall have the following
meanings when used in this or any other section of the Plan:
(1) "CHANGE IN CONTROL" is a change in control of Pentair, as that
term is defined in the KEESA.
(2) "KEESA" is the Key Executive Employment and Severance
Agreement between Pentair and key executives, as approved by
the Board effective August 23, 2000.
(b) Treatment of Options. Upon the occurrence of a Change in Control,
all Options granted to a Participant who is then employed by Pentair or an
Affiliate shall, to the extent not then vested or exercised, become fully vested
and immediately exercisable without regard to the terms and conditions attached
to such Options at the time of grant. To the extent such Options are then
exercised under circumstances which would otherwise result in a grant of Reload
Options to the Participant, no such Reload Options will be granted.
(c) Treatment of Restricted Stock. Upon the occurrence of a Change in
Control the restrictions then applicable to all outstanding shares of Restricted
Stock awarded under the Plan shall automatically lapse. If on the Change in
Control date any dividends declared with respect
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to such Restricted Stock have not been paid to the Participant, then all such
amounts shall be paid within ten (10) days of the Change in Control date.
(d) Treatment of Rights to Restricted Stock. Upon the occurrence of a
Change in Control, all Rights to Restricted Stock shall be fully and immediately
vested and the participant shall be paid within ten (10) days the cash value of
the shares of Stock which otherwise would have been issued based on the Fair
Market Value of the Stock on the Change in Control date, together with any then
unpaid dividends which have been declared on the Stock subject to the award of
Rights to Restricted Stock.
(e) ICUs. Outstanding ICUs shall be valued by assuming the corporate
performance goals for the applicable Incentive Period have been met and shall be
paid in cash within ten (10) days of the Change in Control date, as follows:
(i) one-third of the ICUs awarded less than one (1) year prior to
the Change in Control date shall be paid;
(ii) two-thirds of the ICUs awarded one (1), but less than two (2)
years prior to the Change in Control date shall be paid;
(iii) all of the ICUs awarded two (2) or more years prior to the
Change in Control date shall be paid.
(f) Performance Shares. Upon the occurrence of a Change in Control the
restrictions then applicable to all outstanding Performance Shares shall lapse
and any dividends declared with respect to such shares which have not been paid
shall be paid within ten (10) days of the Change in Control date.
(g) Performance Units. Outstanding Performance Units shall be valued by
assuming all performance targets for the applicable Performance Period have been
fully met and shall be paid as cash within ten (10) days of the Change in
Control date, as follows:
(i) one-third of the Performance Units granted less than one (1)
year prior to the Change in Control date shall be paid;
(ii) two-thirds of the Performance Units granted one (1) but less
than two (2) years prior to the Change in Control date shall
be paid;
(iii) all of the Performance Units granted two (2) or more years
prior to the Change in Control date shall be paid.
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(h) Participants Covered under a KEESA. The provisions of this Section
7.3 shall also apply to a Participant who terminates employment before a Change
in Control if the Participant has entered into a KEESA and is entitled to
benefits thereunder pursuant to Section 2(b) of the KEESA.
(i) Governing Documents. In the case of any conflict between the
provisions of this Section 7.3 and any other provision of the Plan, this Section
7.3 will control. In the case of any conflict between the terms of this Plan and
the terms and provisions of a Participant's KEESA, the terms of such KEESA shall
control to the extent more beneficial to such Participant, and the obligations
of Pentair under such KEESA shall be in addition to any of its obligations under
the Plan.
SECTION 8. CHANGES TO AWARDS
8.1 ACCELERATION OF BENEFITS. The Committee shall have the discretion
to accelerate the exercise date of an Option or SAR or the time at which
restrictions on Stock or Rights thereto lapse, to remove any Stock restrictions
or to accelerate the expiration of an Incentive Period or Performance Period due
to changes in applicable tax or other laws, or such other changes of
circumstances as may arise after the date of an award under the Plan, or to take
any such similar action it may decide, in its absolute discretion, is in the
best interests of Pentair and equitable to a Participant (or such Participant's
heirs or beneficiaries). Notwithstanding the above, however, the Committee shall
have no discretion to increase the amount of compensation a Participant could
earn by application of the preestablished performance goals and financial
measurements relevant to the award, although the Committee shall retain the
discretion to decrease any such award. Any action by the Committee to accelerate
a grant or award for reasons other than death, disability or change in control
of Pentair shall include application of a commercially reasonable discount to
the compensation payable to reflect the value of accelerated payment.
8.2 ACCOUNTING STANDARDS. Calculation of changes to any performance
goal established for purposes of making awards under the Plan shall be without
regard to changes in accounting methods used by Pentair or in accounting
standards that may be required by the
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Financial Accounting Standards Board after the goal is established and prior to
the time compensation earned on account of achievement of the relevant
performance goal is paid to the Participant.
8.3 AMENDMENT OF AWARDS. The Committee shall have the discretion to
amend the terms of any grant or award made under the Plan. Any such amendment
may be made either prospectively or retroactively, as necessary, provided that
no such amendment shall either impair the rights of an affected Participant
without the consent of such Participant or amend the terms of an Option so as to
reduce the Option price. Absent shareholder approval, the Committee may not
cancel any outstanding Option and replace it with a new Option which has a lower
Option price, if such action would have the same economic effect as reducing the
Option price of such a canceled Option.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 STOCKHOLDER PRIVILEGES. (a) Options. Until such time as a Stock
certificate is issued, a Participant, or other person entitled to exercise an
Option under the Plan, shall have none of the privileges of a stockholder with
respect to Stock covered by an Option granted under this Plan.
(b) Other Awards. Upon delivery of Restricted Stock to a Participant
(or to an escrow holder, if applicable) such Participant shall have all of the
rights of a shareholder with respect to the Restricted Stock, subject to the
restrictions imposed, including the right to receive dividends and vote the
shares of Restricted Stock. Participants for whom an account is established to
record an award of Rights to Restricted Stock shall not have the rights of a
shareholder until such time as the Rights to Restricted Stock vest, but may, in
the discretion of the Committee, receive payment of or credit for the equivalent
of dividends otherwise payable with respect to the number of shares of Stock to
which such Rights to Restricted Stock relate.
In the event of forfeiture, the certificate or certificates, if any,
representing such Restricted Stock shall be delivered to Pentair, accompanied by
executed instruments of transfer. If the Restricted Stock is held in escrow,
Pentair shall be entitled to have the certificates representing the Restricted
Stock redelivered to it out of escrow.
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(c) Interest. The Committee may provide for the crediting of earnings
interest with respect to Performance Units or ICUs credited to a Participant's
account. Any rate of earnings credited hereunder shall be determined by the
Committee.
(d) Sale of Stock or Restricted Stock. The Committee may fix a period
during which any Stock, Right to Restricted Stock or Restricted Stock acquired
under the Plan may not be sold, provided that the Committee may not fix any
period which is less than or which exceeds such requirements as may be imposed
by applicable state or federal law.
9.2 AMENDMENT, SUSPENSION, MODIFICATION AND TERMINATION OF PLAN. The
Committee, subject to approval by the Board, may amend or modify the Plan at any
time to conform to changes in applicable laws or in any other respect deemed to
be in the best interests of Pentair. Pursuant to Code section 422, however, no
such amendment shall, without shareholder approval (i) materially increase the
number of shares of Stock as to which ISOs may be granted under the Plan, (ii)
materially modify the requirements as to eligibility to receive Options under
the Plan, (iii) materially increase the benefits accruing to Participants
receiving ISOs under the Plan, (iv) reduce an ISO Option price below Fair Market
Value on the day the Option is granted, (v) permit the award of SARs other than
in tandem with an ISO, (vi) extend the period during which an Option may be
granted or exercised, or (vii) extend the termination date of the provisions of
the Plan which permit the granting of ISOs. No amendment or modification of the
Plan shall adversely affect any Participant under the Plan, or any section
thereof, without such Participant's consent.
9.3 ADMINISTRATION. The Plan shall be administered by the Committee.
Pursuant to this delegation, the Committee is authorized to (i) interpret and
construe the Plan, (ii) adopt, amend, or rescind rules and regulations relating
to the Plan, and (iii) make all other determinations necessary or advisable for
the administration of the Plan, to the extent not contrary to the express
provisions of the Plan. Any actions, determinations or other interpretations
made by the Committee within the scope of its authority shall be final, binding
and conclusive for all purposes.
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9.4 INDEMNIFICATION. To the extent permitted by law, members of the
Committee and the Board shall be indemnified and held harmless by Pentair with
respect to any loss, cost, liability or expense that may reasonably be incurred
in connection with any claim, action, suit or proceeding which arises by reason
of any act or omission under the Plan, taken within the scope of the authority
delegated herein.
9.5 EXPENSES. The expenses of maintaining and administering this Plan
shall be borne by Pentair.
9.6 RIGHTS OF PARTICIPANTS. Nothing in this Plan shall interfere with
or limit in any way the right of Pentair or an Affiliate to terminate any
individual's employment at any time, with or without notice or cause. This Plan
does not, nor is it intended to, confer upon any employee the right to continue
in the employment of Pentair or an Affiliate.
9.7 TRANSFERABILITY. (a) Nontransferability. Except as otherwise
specified in the Plan, Options, SARs, Restricted Stock, Rights to Restricted
Stock, ICUs, Performance Shares and Performance Units granted or awarded under
the Plan shall not be transferrable.
(b) Designation of Beneficiary(ies). A Participant may designate a
person or persons to receive his or her Plan benefits in the event of death.
Such designation shall be on forms as prescribed by the Committee and may be
modified or revoked only in writing.
9.8 GOVERNING LAW. To the extent not preempted by applicable federal
law, this Plan shall be construed and interpreted in accordance with the
substantive laws of the State of Minnesota.
IN WITNESS WHEREOF, this amended and restated Plan has been executed
this ____ day of ___________, 2001.
PENTAIR, INC.
By
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Chief Executive Officer
By
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Roy T. Rueb
Secretary
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