Document:

exv10w13

 

Exhibit 10.13

PENTAIR, INC.

COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

As Amended and Restated

Effective January 1, 2008

 

 

SECTION 1

BACKGROUND AND PURPOSE

     1.1 Background. Effective as of January 17, 1986, Pentair, Inc. adopted a
Compensation Plan for Non-Employee Directors. This Plan permits such directors to elect to
receive, at some future time as they may designate, payment in shares of Pentair common stock of
the fees which would otherwise be paid to them currently in cash for services performed as a
director. The Plan has been amended and restated several times since its adoption, with the last
such restatement made effective May 1, 2004.

     The 2004 restatement was done to comply with rules issued by the New York Stock Exchange
regarding equity compensation plans, to clarify certain administrative procedures, to incorporate
amendments adopted since the Plan’s last restatement, and to limit the Plan to a term of ten (10)
years.

     Pentair is again amending the Plan, by way of restatement, to comply with applicable
provisions of Section 409A of the Internal Revenue Code of 1986, as amended, and Treasury
Regulations thereunder.

     1.2 Purpose. Pentair has created this Plan to permit its non-employee directors to
receive retainer and meeting fees currently in cash or elect to defer such compensation for future
payment in shares of Pentair common stock, together with earnings on such deferred compensation as
measured by changes in the value of said stock.

SECTION 2

DEFINITIONS

     Unless the context clearly requires otherwise, when capitalized the terms listed below shall
have the following meanings when used in this Section or other parts of the Plan:

     (a) “Account” is an account maintained under the Plan by the Plan Agent to record a Director’s
Share Units.

     (b) “Administrator” is Pentair.

     (c) “Board” is the Board of Directors of Pentair, as elected from time to time.

     (d) “Change in Control” is any one of the following:

	 	(i)	 	When a Person, or more than one Person acting as a group,
acquires more than fifty percent (50%) of the total fair market value or total
voting power of Pentair’s stock;
	 
	 	(ii)	 	When a Person, or more than one Person acting as a group,
acquires within a twelve (12) month consecutive period, ending with the date of
the most recent stock acquisition, stock of Pentair possessing at least thirty
percent (30%) of the total voting power of Pentair’s stock;

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	 	(iii)	 	When a majority of the members of Pentair’s Board is replaced
within a twelve (12) month period by directors whose appointment or election is
not endorsed by a majority of the members of such Board as constituted before
such appointment or election; or
	 
	 	(iv)	 	When a Person, or more than one Person acting as a group,
acquires within a twelve (12) month consecutive period assets from Pentair or
an entity controlled by Pentair that have a total gross fair market value equal
to seventy-five percent (75%) of the total fair market value of the assets of
Pentair and all such entities.

Once a Person or group acquires stock meeting the thresholds set forth in paragraphs (i) and (ii)
immediately preceding, additional acquisitions of such stock by that Person or group shall be
ignored in determining whether another Change in Control has occurred. Asset transfers between or
among controlled entities as determined before such transfers shall not be considered in applying
paragraph (iv) immediately preceding.

     (e) “Code” is the Internal Revenue Code of 1986, as amended.

     (f) “Deferred Compensation” is an amount of Fees or meeting attendance fees, the payment of
which a Director has elected to receive at some future time pursuant to the terms of the Plan,
together with any matching contributions made by Pentair with respect to Fees deferred.

     (g) “Director” is a member of the Board who is neither simultaneously also an employee of
Pentair or a related company, nor an individual rendering other services to Pentair or a related
company as an independent contractor.

     (h) “Fees” are a Director’s annual Board and committee retainer and committee chair and lead
director fees and other similar amounts, excluding meeting attendance fees, paid periodically by
Pentair.

     (i) “Pentair” is Pentair, Inc., a Minnesota corporation.

     (j) “Person” is any individual, firm, partnership, corporation or other entity, including any
successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in
concert.

     (k) “Plan” is the Pentair, Inc. Compensation Plan for Non-Employee Directors as described in
this plan document effective January 1, 2008, and as it may be amended from time to time
thereafter.

     (l) “Plan Agent” is the entity duly appointed by Pentair to (i) receive funds resulting from a
Director’s deferral of Fees, from Pentair matching contributions and from dividends declared on
Stock; (ii) purchase shares of Stock with such funds and (iii) maintain Plan Accounts.

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     (m) “Share Units” are the units used to credit Deferred Compensation to an Account, which
units are valued by reference to the market value per share of Stock on the date the Share Units
are allocated to Accounts by the Plan Agent.

     (n) “Stock” is Pentair common stock, par value $0.16-2/3 per share.

     (o) “Year” is the twelve (12) consecutive month period beginning January 1 and ending December
31.

SECTION 3

DEFERRAL OF FEES

     3.1 Eligibility. Upon becoming a member of the Board, a Director may elect to defer
receipt of payment of some or all of the Fees paid on account of service as a Director until such
future time as the Director shall designate. A Director may also make a deferral election with
respect to meeting attendance fees. If a Director does not make a timely deferral election with
respect to the Fees or meeting attendance fees payable for a Year, then all such amounts shall be
paid in cash to the Director.

     3.2 Deferral Election. (a) General Rule. Each Year a Director may elect to
defer receipt of a designated dollar amount or percentage of Fees and meeting attendance fees, with
any percentage designation being made in ten percent (10%) increments up to one hundred percent
(100%) of such amounts, and to receive such amount as Deferred Compensation. No election to
receive Deferred Compensation shall be valid unless entered into prior to the time a Director
becomes entitled to receipt of Fees or meeting attendance fees. Generally, a deferral election
must be made prior to the first day of the Year in which the amounts to be deferred are earned; but
for individuals who first become Directors during a Year, the deferral election for such first Year
must be made no later than thirty (30) days following the date such individual’s Board service
begins. A deferral election is irrevocable with respect to the Year for which such election is
made. Once the time for making a timely election has passed, a Director who did not timely make a
deferral election for a Year shall be deemed to have elected to not participate in the Plan.

     (b) Former Director. A Director who was eligible to participate in the Plan, who
loses such eligibility by reason of ceasing to serve on the Board or otherwise, and who again
becomes eligible to participate in the Plan, shall be able to again make an election to defer
payment of Fees and meeting attendance fees as provided in Code section 409A. If the individual
can instead qualify as a newly elected Director, then the election rule for such Directors will
apply.

     3.3 Matching Contribution. Pentair shall make a matching contribution each month on
behalf of each Director who has elected to defer payment of some or all of the Fees otherwise
payable in cash to the Director. Said matching contribution shall be equal to fifteen percent
(15%) of such amount of the Fees as the Director shall have elected to defer hereunder.

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     3.4 Accounting for Deferred Compensation. The Administrator shall cause the Plan
Agent to establish an Account for each Director who elects to participate in the Plan. All Deferred
Compensation shall be allocated to Accounts as Share Units.

     3.5 Purchase of Stock. The Plan Agent shall purchase Stock on the open market with
the Deferred Compensation funds received from Pentair. The Plan Agent shall make all such
purchases over one (1) or more business days each month, as agreed to by the Plan Agent and
Pentair. All Stock so purchased shall be allocated to Accounts based on the average purchase price
obtained over said monthly purchase period and held in a street name or a nominee name; no Director
shall have voting or other ownership rights with respect to any Stock acquired for purposes of the
Plan. Stock purchased under the Plan by the Plan Agent shall be held by Pentair as an investment
to assist Pentair in meeting its obligation to pay Deferred Compensation to Directors.

     Share Units allocated to Accounts shall be adjusted to reflect Stock dividends or splits or
other similar adjustments. Cash dividends paid with respect to Stock purchased for purposes of the
Plan shall be used to purchase Stock and allocated to Accounts as Share Units.

     3.6 Time of Distribution of Deferred Compensation. (a) General. Except as
otherwise provided for in the Plan, or as designated by the Director at the time a deferral
election is made, the Director shall receive his or her entire Account balance allocable to a Year
within ninety (90) days of the first to occur of the Director’s (i) ceasing to be a member of the
Board for any reason other than death, (ii) death, or (iii) a Change in Control.

     (b) Specific Dates of Distribution. A Director may timely elect to receive
distribution of his or her entire Account balance allocable to a Year as of one specific future
date or one objectively determinable future event date (e.g., a Director’s sixty-fifth (65th)
birthday). Such an election, once finally effective, cannot be changed by the Director. In the
event of a Change in Control, a Director who has elected a specific future date or an objectively
determinable future event date shall remain entitled to payment on such date, regardless of whether
a Change in Control shall first occur. In the event of the death of a Director prior to the date
elected hereunder for a distribution, the entire Account balance shall be paid within ninety (90)
days of the date of such Director’s death.

     (c) Distribution in Event of Death. In the event of a Director’s death, the Deferred
Compensation allocated to such Director’s Account will be distributed to the beneficiary designated
by the Director, or (if there shall be no such beneficiary designated) to the person who would have
a right to receive such distribution by will or (if there shall be no will) by the laws of descent
and distribution of the state in which the Director was domiciled at death. Such distribution
shall be made in a single payment and, except as otherwise described herein, in Stock. The Plan
Agent shall deliver to the beneficiary the whole shares of Stock into which the Share Units
allocated to such Director’s Account can be converted at the then current market price of the
Stock. Any fractional shares allocated to such Director’s Account shall be sold at the Stock’s
then current market price and the cash proceeds of such sale delivered to the beneficiary.

A beneficiary designation made by a Director shall remain in effect until such time as a Director
files a new beneficiary designation with the Administrator. Prior to distribution, the

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Administrator will verify the identity of the Director’s named beneficiary and such beneficiary
will establish the right to receive distribution of any unpaid Deferred Compensation.

     3.7 Form of Distribution of Deferred Compensation. A Director’s Account shall be
distributed in a single payment and, except as otherwise described herein, in Stock. The Stock so
distributed shall be either (i) deposited into the Director’s dividend reinvestment account, if
any, in which case any fractional shares shall also be allocated to such account, or (ii) delivered
directly to said Director, in which case the Plan Agent shall deliver the whole shares of Stock
into which the Share Units allocated to such Director’s Account can be converted at the then
current market price of the Stock. Any fractional shares allocated to such Account shall be sold
at the Stock’s then current market price and the cash proceeds of such sale delivered to the
Director.

SECTION 4

PLAN ADMINISTRATION

     4.1 Reporting. The Plan Agent shall periodically report the following information to
Pentair:

	 	(a)	 	the total number of Share Units allocated to Accounts;
	 
	 	(b)	 	the total shares of Stock purchased by the Plan Agent since its last report; and
	 
	 	(c)	 	the number of shares of Stock into which Share Units then allocated to Accounts
may be converted.

     4.2 Accounting. The Administrator and the Plan Agent shall assure that the following
records are kept under the Plan for each Year for each Director:

	 	(a)	 	whether the Director made an election to defer Fees and meeting attendance fees for the
Year;
	 
	 	(b)	 	the amount or percentage of Fees and meeting attendance fees deferred;
	 
	 	(c)	 	the matching contribution made with respect to the Fees deferred;
	 
	 	(d)	 	the distribution election, if any, made by the Director; and
	 
	 	(e)	 	the Year in which the Fees and meeting attendance fees deferred were earned.

     4.3 Costs. Pentair shall pay all commissions, service charges or other costs incurred
with respect to the purchase of Stock for purposes of the Plan. When any such Stock is sold, the
Director is responsible for payment of any commissions, service charges or other costs incurred on
account of such sale.

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SECTION 5

MISCELLANEOUS

     5.1 Term of Plan. This Plan shall be effective January 1, 2008, and shall remain in
effect until April 30, 2014, which represents the end of the ten (10) year term approved by
shareholders effective as of May 1, 2004, unless earlier terminated by the Board.

     5.2 Board Tenure. The fact that a Director has elected to participate in the Plan
shall not affect or qualify the right of the Board or of Pentair shareholders to remove such
individual from the Board, consistent with the provisions of the Pentair Articles of Incorporation
or By-Laws, or applicable provisions of Minnesota law.

     5.3 Code Section 409A. The Plan shall be administered in a manner consistent with
Code section 409A and Treasury Regulations thereunder. Any permissible discretion to accelerate or
defer a Plan distribution under such Regulations, the power to exercise which is not otherwise
described expressly in the Plan, shall be exercised solely by the Administrator. The distribution
provisions of Section 3.6 are subject to exceptions or overrides in the discretion of the
Administrator or its delegate, but not in the discretion of the Director concerned, as otherwise
provided in the Plan or as allowed under Code section 409A and Treasury Regulations thereunder.

     5.4 Delegation. To the extent permitted under Minnesota law, the Administrator or the
Board may delegate to officers of Pentair any or all of their duties, power and authority under the
Plan, subject to such conditions or limitations as the Administrator or the Board, as applicable,
may establish. Notwithstanding the prior sentence, the Board may not delegate the power to amend
or terminate the Plan.

     5.5 Funding. The Plan is a non-qualified, unfunded and unsecured deferred
compensation arrangement. Pentair shall not establish, nor is it required to establish, a trust to
fund benefits provided to Directors hereunder, or to earmark or segregate assets to provide for
such benefits. In the event of default of payment hereunder by Pentair, the Directors shall have
no greater entitlements or security than does an unsecured general creditor of Pentair.

     5.6 Nonalienability. Except as otherwise expressly provided herein or as otherwise
required by law, no right or interest of any Director or the beneficiary named by a Director under
the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, attachment, garnishment, execution, levy, bankruptcy or any other
disposition of any kind, either voluntarily or involuntarily, prior to actual receipt of payment by
the person entitled to such right or interest under the provisions hereof, and any such disposition
or attempted disposition shall be void.

     5.7 Facility of Payment. If the Administrator shall determine a Director or a
Director’s named beneficiary entitled to a distribution hereunder is incapable of caring for his or
her own affairs because of illness or otherwise, it may direct any distribution from such
Director’s Account be made, in such amounts as it shall determine, to the spouse, child, parent or
other blood relative of such Director or beneficiary, or any of them, or to such other person or
persons as the Administrator may determine, until such date as the Administrator shall determine

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such incapacity no longer exists; provided, however, the exercise of this discretion shall not
cause an acceleration or delay in the time of distribution of Plan benefits except to the extent,
and only for the duration of, the time reasonably necessary to resolve such matters or otherwise
protect the interests of the Plan. The Administrator shall be under no obligation to see to the
proper application of the distributions so made to such person or persons and any such distribution
shall be a complete discharge of any liability under the Plan to such Director or beneficiary, to
the extent of such distribution.

     5.8 Default. In the event Pentair shall fail to pay when due any Deferred
Compensation, and such failure to pay continues for a period of thirty (30) days from receipt of
written notice of nonpayment from the affected Director, Pentair shall be in default hereunder and
shall reimburse the Director for expenses incurred in the collection of such amount, including
reasonable attorneys’ fees. Pursuant to applicable provisions of Code section 409A, any such
reimbursement must be paid to the affected Director not later than the end of the year following
the year in which such expenses are incurred. Failure to timely submit a claim for reimbursement
of any such expenses shall result in the forfeiture of the claim.

     5.9 Amendment or Termination. The Plan may be amended or terminated at any time by
the Board; provided that the rights of Directors or former Directors accrued under the Plan through
the date of such amendment or termination shall not be affected by such action without the express
written consent of those individuals. Nothing herein shall be construed to prevent any
modification, alteration or amendment of the Plan which is required to comply with the provision of
any applicable law or regulations relating to the establishment or maintenance of this Plan.

     5.10 Federal Securities and Other Laws. Notwithstanding anything in the Plan to the
contrary, and to the extent and for the time reasonably necessary to comply with federal securities
laws (or other applicable laws or regulations), distribution dates under the Plan may be suspended,
changed or delayed as necessary to comply with such laws or regulations; provided, however, any
distributions so delayed shall be paid to the Director, or a beneficiary named by a Director, as of
the earliest date the Administrator determines such distribution will not cause a violation of any
laws or regulations.

     5.11 Applicable Law. To the extent not preempted by applicable federal law, the Plan
shall be interpreted and construed in accordance with the substantive laws of the State of
Minnesota, but without regard to any choice or conflict of laws provisions thereof.

     5.12 Construction. The Administrator shall have full power and authority to interpret
and construe any provision of the Plan, to adopt rules and regulations not inconsistent with the
Plan for purposes of administering the Plan with respect to matters not specifically covered in the
Plan document and to amend and revoke any rules and regulations so adopted. Except as otherwise
provided in the Plan, any interpretation of the Plan and any decision on any matter within the
discretion of the Administrator which is made in good faith by the Administrator shall be final and
binding.

     5.13 Indemnification. To the extent permitted by law, members of the Board shall be
indemnified and held harmless by Pentair with respect to any loss, cost, liability or expense that

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may reasonably be incurred in connection with any claim, action, suit or proceeding which may arise
by reason of any act or omission under the Plan which is taken within the scope of the Plan. Such
indemnification shall cover any and all reasonable attorneys’ fees and expenses, judgments, fines
and amounts paid on settlement, but only to the extent such amounts are (i) actually and reasonably
incurred, (ii) not otherwise paid or reimbursable under an applicable Pentair paid insurance
policy, and (iii) not duplicative of other payments made or reimbursements due under other
indemnity agreements. In no event shall this Section 5.13 be construed to require Pentair to
indemnify third parties with whom it may contract to perform administrative duties with respect to
the Plan.

     5.14 Tax Withholdings and Consequences. (a) Tax Withholdings. Benefits
earned under the Plan and payment of such benefits shall be subject to tax reporting and
withholding as required by law. The amount of such withholding may be determined by treating such
benefits as being paid in the nature of supplemental wages.

     (b) Tax Consequences. Pentair does not represent or guarantee that any particular
federal, foreign, state or local income, payroll or other tax consequence will result from
participation in this Plan or payment of benefits under the Plan.

     5.15 Savings Clause. If any term, covenant or condition of this Plan, or the
application thereof to any person or circumstance, shall to any extent be held to be invalid or
unenforceable, the remainder of this Plan, or the application of any such term, covenant or
condition to persons or circumstances other than those as to which it has been held to be invalid
or unenforceable, shall not be affected thereby, and, except to the extent of any such invalidity
or unenforceability, this Plan and each term, covenant and condition hereof shall be valid and
shall be enforced to the fullest extent permitted by law.

     5.16 Interpretation. Section and subsection headings are for convenience of reference
and not part of this Plan, and shall not influence its interpretation. Whenever any words are used
in the Plan in the singular, masculine, feminine or neuter form, they shall be construed as though
they were also used in the plural, feminine, masculine or non-neuter form, respectively, in all
cases where such interpretation is reasonable.

     5.17 Communications. Pentair or the Plan Agent may, unless otherwise prescribed by
any applicable state or federal law or regulation, provide the Plan’s prospectus, and any notices,
forms or reports by using either paper or electronic means.

SECTION 6

TRANSITIONAL RULES

     6.1 Introduction. This Plan document is effective on January 1, 2008 (i.e., the
“effective date”) and, except as otherwise provided herein, shall apply to only those Directors who
are eligible to actively participate in the Plan on or after the effective date and to only such
Fees and meeting attendance fees as are earned on or after the effective date. The provisions of
the Plan document as in effect prior to the effective date shall continue to govern the rights and
entitlements of persons and Fees and meeting attendance fees not described in the immediately

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preceding sentence except to the extent application of this Plan document does not materially
diminish or enlarge such rights and entitlements.

     6.2 Grandfathered Deferred Compensation. (a) Equity Grants. The Plan as in
effect prior to January 1, 2008 (i.e., the “prior plan”) provided for grants of Equity
Compensation, as such term was defined in the prior plan. No such grants have been made to
Directors since 2002, meaning all Equity Compensation which was payable under applicable provisions
of the prior plan are grandfathered amounts and are not subject to the provisions of Code section
409A.

     (b) Deferred Compensation. All Fees and meeting attendance fees earned prior to
January 1, 2005 and subject to an election to defer payment made by a Director under applicable
provisions of the prior plan are grandfathered amounts and are not subject to the provisions of
Code section 409A. Any Fees and meeting attendance fees earned on or after January 1, 2005 with
respect to which an election to defer payment has been made shall be subject to applicable
provisions of Code section 409A, even though such Fees and meeting attendance fees may have been
earned and the election to defer payment made prior to the effective date of the Plan. Since
January 1, 2005, the prior plan was operated in accordance with applicable provisions of Code
section 409A, which provisions are reflected in the Plan. Therefore, the Plan shall govern
elections to defer Fees and meeting attendance fees made on or after January 1, 2005, even though
the Plan does not so retroactively amend the prior plan.

     6.3 Separate Accounting. For purposes of tracking Deferred Compensation which is
treated as grandfathered for purposes of Code section 409A, the Administrator and the Plan Agent
shall assure that records as defined in Section 4.2 are kept in a manner as will clearly
differentiate between Fees and meeting attendance fees earned and deferred prior to January 1, 2005
and Fees and meeting attendance fees earned and deferred on or after January 1, 2005.

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Exhibit 10.14

PENTAIR, INC.

OMNIBUS STOCK INCENTIVE PLAN

As Amended

Effective December 12, 2007

 

 

SECTION 1 -

BACKGROUND AND PURPOSE

     1.1 Background. Effective January 12, 1990, Pentair, Inc. (“Pentair”) combined its
various equity compensation plans into one plan, the Pentair, Inc. 1990 Omnibus Stock Incentive
Plan, to facilitate structuring of equity compensation awards and to permit administration of its
equity compensation program under a consistent set of rules. Since its adoption, the plan has been
amended several times, with the last such amendment made effective as of May 1, 2004.

     Pentair is restating the plan effective as of December 12, 2007. Pentair is restating the
plan to conform the terms of the Plan with the requirements of section 409A of the Code and to make
clarifying administrative changes.

     1.2 Purpose. Pentair maintains this comprehensive equity compensation and incentive
plan for the following purposes:

     (a) To promote the growth and success of Pentair by linking a significant portion of
participant compensation to the increase in value of Pentair common stock;

     (b) To attract and retain top quality, experienced executives and key employees by offering a
competitive incentive compensation program;

     (c) To reward innovation and outstanding performance as important contributing factors to
Pentair’s growth and progress;

     (d) To align the interests of executives and key employees with those of shareholders by
reinforcing the relationship between participant rewards and shareholder gains obtained through the
achievement by plan participants of short-term objectives and long-term goals; and

     (e) To encourage executives and key employees to obtain and maintain an equity interest in
Pentair.

SECTION 2 -

DEFINITIONS

     Unless the context requires otherwise, when capitalized the terms listed below shall have the
following meanings when used in this or other sections of the Plan:

     (1) “Affiliate” is any corporation, business trust, division, partnership, joint venture,
limited liability company or other legal entity which is not a Subsidiary, but in which Pentair
holds (directly or indirectly) a significant ownership interest, the employees of which the
Committee has determined may be eligible for Awards, but only during periods of such ownership as
the Committee shall prescribe.

     (2) “Award” is an Option, SAR, Restricted Stock, Right to Restricted Stock, Restricted Unit,
Performance Award or other cash or Stock incentive granted to a Participant,

 

 

subject to the terms, conditions and restrictions of the Plan and to such other terms,
conditions and restrictions as may be established with respect to an Award.

     (3) “Board” is the Board of Directors of Pentair, Inc., as elected from time to time.

     (4) “Change in Control” is a change in control of Pentair, as that term is defined in the
KEESA. Notwithstanding the foregoing, with respect to an Award that is considered deferred
compensation subject to Code section 409A, the definition of “Change in Control” (if a Change in
Control results in the payment of such Award) shall be amended and interpreted in a manner that
allows the definition to satisfy the requirements of a change of control under Code section 409A.

     (5) “Code” is the Internal Revenue Code of 1986, as amended.

     (6) “Committee” is the Compensation Committee of the Board, as appointed from time to time.

     (7) “Consultant” is a person or entity rendering services to a member of the Pentair Group who
is not an employee of any such member and who is not otherwise eligible to participate under this
Plan or another similar type of equity compensation plan sponsored by Pentair, but who has
contributed, or can be expected to contribute, to the growth and success of the Pentair Group or
any member thereof.

     (8) “Disabled” or “Disability” is a physical or mental incapacity which qualifies an
individual to collect a benefit under a long term disability plan maintained by Pentair, or such
similar mental or physical condition which the Committee may determine to be a Disability,
regardless of whether either the individual or the condition is covered by any such long term
disability plan.

     (9) “Eligible Employee” is a key managerial, administrative or professional employee of a
member of the Pentair Group whose position is generally evaluated at salary grade 25 or higher and
who is in a position to make a material contribution to the continued profitable growth and long
term success of the Pentair Group or any member thereof. In the case of employees of an Affiliate,
this term shall not include individuals who are otherwise eligible to participate under the Plan or
another similar plan sponsored by Pentair.

     (10) “Fair Market Value” is the closing price of a share of Stock on the relevant date as
reported on the New York Stock Exchange, or such other exchange as may then list Pentair Stock, or,
in the event the Stock ceases to be so listed, as otherwise determined using procedures established
by the Committee.

     (11) “Fiscal Year” is the twelve (12) consecutive month period beginning January 1 and ending
December 31.

     (12) “Incentive Stock Option” or “ISO” is an Option which is designated as such and is
intended to so qualify under Code section 422.

 

 

     (13) “KEESA” is the Key Executive Employment and Severance Agreement between Pentair and key
executives, as approved by the Board and in effect from time to time.

     (14) “Nonqualified Stock Option” or “NQSO” is any Option which is not, or cannot be treated
as, an ISO.

     (15) “Option” is a right to purchase Stock subject to such terms and conditions as are
established relative to the grant, or as otherwise provided under the Plan.

     (16) “Participant” is an Eligible Employee or a Consultant approved by the Committee to
receive an Award.

     (17) “Pentair” is Pentair, Inc., a Minnesota corporation.

     (18) “Pentair Group” is, as of any relevant date, Pentair and all Subsidiaries and Affiliates.

     (19) “Performance Award” is an Award the payment of which is based solely on the degree of
attainment of Performance Goals over a Performance Cycle, both as established relative to such
Award.

     (20) “Performance Cycle” is the period established relative to a Performance Award during
which the performance of an individual with respect to the Performance Goals for the Pentair Group,
or any subgroup thereof, any member of the Pentair Group or any unit, branch or division of such
member, as relevant to the Award, is measured for the purpose of determining the extent to which a
Performance Award has been earned.

     (21) “Performance Goals” are the business or financial objectives, or both, established
relative to a Performance Award and which are to be achieved over a Performance Cycle. The
Performance Goals for Awards intended to qualify for the performance-based compensation exception
under Code section 162(m) shall be related to one or more of the following business criteria: net
income; stockholder return; stock price appreciation; earnings per share; revenue growth; return on
investment; return on invested capital; earnings before interest, taxes, depreciation and
amortization; operating income; market share; return on sales; asset reduction; cost reduction;
return on equity; cash flow; and new product releases.

     (22) “Performance Share” is a share of Stock, Restricted Stock or a Right to Restricted Stock,
the payment of which is determined by the Participant’s degree of attainment of Performance Goals
over a Performance Cycle, or upon the lapse of any other restrictions, all as established relative
to the Award.

     (23) “Performance Unit” is a unit representing the right to receive an amount of cash or
Stock, which amount is determined by the Participant’s degree of attainment of Performance Goals
over a Performance Cycle, both as established relative to the Award.

     (24) “Plan” is the Pentair, Inc. Omnibus Stock Incentive Plan, as described in this plan
document effective December 12, 2007, and as it may be amended from time to time.

 

 

     (25) “Reload Option” is an Option granted to a Participant who, within five (5) years of the
date an Option with a reload feature is granted, exercises such Option by making payment for all or
part of the Option exercise price in shares of Stock.

     (26) “Restricted Stock” is Stock issued to a Participant subject to such restrictions as are
established relative to such Award, and which will remain subject to said restrictions until such
time as the restrictions lapse.

     (27) “Restricted Unit” is a unit representing the right to receive an amount of cash or Stock
at such time as the restrictions established relative to the Award are satisfied.

     (28) “Restriction Period” is the length of time established relative to an Award, during which
the Participant receiving the Award cannot sell, assign, transfer, pledge or otherwise encumber any
Stock so awarded and at the end of which the Participant obtains an unrestricted right to such
Stock.

     (29) “Retirement” is the ending of employment with the Pentair Group by a Participant who has
attained age fifty-five (55) and completed ten (10) years of service with the Pentair Group.

     (30) “Right to Restricted Stock” is a right awarded to a Participant to receive Stock or
Restricted Stock at some future time, which Award is subject to such restrictions as may be
established relative to the Award and which shall remain subject to such restrictions until said
restrictions lapse and Stock or Restricted Stock can be issued to the Participant.

     (31) “Significant Shareholder” is an Eligible Employee who, as of the date an ISO is granted
to such individual, owns more than ten percent (10%) of the total combined voting power of all
classes of Stock then issued by Pentair or a Subsidiary corporation.

     (32) “Stock” is Pentair common stock, par value $0.16 2/3 per share.

     (33) “Stock Appreciation Right” or “SAR” is an Award which entitles a Participant to receive,
subject to such terms and conditions as may be established relative to the Award, an amount of cash
or shares of Stock, Restricted Stock or Rights to Restricted Stock measured by the increase in Fair
Market Value of Stock from the date of grant to the date of exercise.

     (34) “Subsidiary” is any corporation, business trust, division, partnership, joint venture,
limited liability company or other legal entity in which Pentair owns (directly or indirectly)
fifty percent (50%) or more of the voting stock, or rights analogous to voting stock, but only
during the period such ownership interest exists.

     (35) “Units” are Awards which entitle a Participant to receive, subject to such terms and
conditions as are relevant to the Award, including the attainment of Performance Goals over a
Performance Cycle, an amount measured by the change in the Fair Market Value of Stock, or such
other amount as may be established relative to the Unit Award, which amount may be paid to the
Participant in cash, Stock, Restricted Stock, Rights to Restricted Stock or any combination
thereof.

 

 

SECTION 3 -

SHARES AVAILABLE FOR AWARDS

     3.1 Number of Shares. The number of shares of Stock that may be issued or transferred
to Participants on account of Awards which may be made during the term of the Plan is 5,000,000,
plus the number of shares of Stock authorized for such purposes under prior versions of the plan
which as of May 1, 2004 are not subject to awards under any such prior plan, subject to adjustment
as provided in Section 3.2. Such shares of Stock shall be made available, at the discretion of the
Committee, from authorized but unissued shares, treasury shares or shares acquired in the open
market.

     3.2 Adjustments to Maximum Number of Shares of Stock. (a) Reuse of Shares of
Stock. For purposes of determining the number of shares of Stock available for issuance or
delivery under the Plan at any given point in time, no Stock shall be deemed issued or delivered in
connection with an Option until such Option is exercised and Stock is delivered to the Participant.
If any Award, whether issued under the Plan or any prior version of the plan, is surrendered,
exercised, cashed out, lapses, expires, or otherwise terminates without either Restricted or
unrestricted Stock having been issued to the Participant, the number of shares subject to such
Award, if any, shall be again available for issuance as Awards. Such number of shares of
unrestricted Stock as are tendered by a Participant as full or partial payment of withholding or
other taxes, the number of shares of Restricted Stock surrendered for tax payment purposes, and the
number of shares used to pay an Option exercise price will again be available for issuance as
Awards. Upon the exercise of an SAR issued in tandem with an Option or a Unit issued in tandem
with an Award of Restricted Stock, Rights to Restricted Stock or Performance Shares, the exercise
of the SAR or the Unit which does not settle in shares of Stock, Restricted Stock or Rights to
Restricted Stock shall cancel the tandem Option or applicable Stock Award, making such number of
shares of Stock again available for issuance as Awards.

     (b) Antidilution. In the event of any merger, reorganization, consolidation,
recapitalization, share exchange, Stock dividend, Stock split, spin-off or other change in Pentair
corporate structure affecting the Stock, the Committee shall make substitutions or adjustments in
the aggregate number and kinds of shares reserved for issuance under the Plan, in the number, kind
and price of shares subject to outstanding Awards, and in the Award limits detailed in Section 3.3,
provided that any such substitutions or adjustments will be, to the extent deemed appropriate by
the Committee, consistent with the treatment of Stock not subject to the Plan, and that the number
of shares subject to any Award will always be a whole number.

     In the event of a corporate merger, consolidation, acquisition of assets or stock, separation,
reorganization or liquidation, the Committee shall be authorized to cause Pentair to issue Options
or assume other stock options, whether or not in a transaction to which Code section 424(a)
applies, by means of substitution of new Options for previously issued stock options or an
assumption of previously issued stock options. In such event the aggregate number of shares of
Stock available for issuance as Awards will be increased to reflect such substitution or
assumption, and such shares as are substituted or assumed shall not be counted against the limit
set forth in Section 3.1.

 

 

     3.3 Restrictions on Awards. The Awards granted to any one Participant in a Fiscal
Year shall not exceed Options to purchase 750,000 shares of Stock, which number shall include any
SARs granted in tandem with an Option; 500,000 shares of Restricted Stock or Rights to Restricted
Stock, which number shall include any Restricted Units issued in tandem with such an Award; or
Performance Shares with a Fair Market Value in excess of $3,000,000 for each year in a Performance
Cycle, which number shall include any Performance Units issued in tandem with an Award of
Performance Shares. Furthermore, not more than twenty percent (20%) of the maximum number of
shares of Stock available under the Plan may be used for Awards settled in Stock, Restricted Stock
or Rights to Restricted Stock. To the extent a Unit or SAR is granted in tandem with another Award
and settles in Stock, Restricted Stock or Rights to Restricted Stock so as to cancel an Award of
Units or SARs, such Unit or SAR shall be counted against the above limits; Units or SARs which will
settle in cash shall not be so counted. For purposes of applying the dollar limit stated herein,
all Awards shall be valued using the Fair Market Value of Stock on the date the Award is made,
without regard to any vesting or other restrictions which may then apply.

     3.4 Vesting of Awards. Except as otherwise provided in Section 6 or Section 8, and
subject to the discretion of the Committee as described in Section 9.1, Awards shall vest as herein
described.

     (a) Options. Awards of ISOs and NQSOs shall vest, or become exercisable, over a term
which shall not be less than three (3) years, with not more than one-third of an Award of Options
vesting on the first anniversary of the grant date, not more than one-third on the second
anniversary of the grant date, and not more than one-third on the third anniversary of the grant
date. To the extent Options treated as ISOs cannot be treated as such due to the application of
the exercise limits contained in Section 4.2(b), such Options shall be exercisable as NQSOs, and
shall vest in accordance with the vesting provisions applicable to such ISOs at the time of grant;
such Options shall not be treated as a new grant of NQSOs for vesting purposes. Unless another
vesting term is established by the Committee, Reload Options are vested and exercisable as of the
grant date.

     (b) Stock Appreciation Rights. Stock Appreciation Rights shall vest and become
exercisable at such time as is established as a term or condition of the Award. To the extent SARs
are issued in tandem with Options, such SARs shall vest at the same times and over the same period
as the related Options.

     (c) Restricted Stock, Rights to Restricted Stock and Restricted Units. Awards of
Restricted Stock, Rights to Restricted Stock and Restricted Units shall vest following completion
of the Restriction Period established relative to the Award. No portion of such an Award shall
vest sooner than the third anniversary of the grant date. Restricted Units shall vest at such time
as is established as a term or condition of the Award. Restricted Units awarded in tandem with
Restricted Stock or Rights to Restricted Stock, shall vest at the same times and over the same
period as the related Restricted Stock or Rights to Restricted Stock.

     (d) Performance Awards. An Award of Performance Shares or Performance Units shall
establish a Performance Cycle which shall be not less than one (1) year, but may be of any other
length as the Committee may determine. At the end of a Performance Cycle, Performance

 

 

Shares or Performance Units, to the extent earned, shall be vested. Performance Units shall
vest at such time as is established as a term or condition of the Award. To the extent Performance
Units are awarded in tandem with Performance Shares, such Units shall vest at the same times and
over the same period as the Performance Shares.

     (e) Other Awards. To the extent the Committee makes an Award other than one of the
types of Awards described herein, such Award shall vest at the time or times and over the period
established relative to such Award.

     (f) Exceptions to Vesting Rules. The Committee shall have the discretion to make an
Award with any vesting condition, including making such Award vested at grant, to the extent it
deems such action is necessary in relation to business circumstances then existing. As an example,
to align the interests of a newly hired Participant with those of Pentair, the Committee may
determine it is necessary to make an Award that will provide such individual with immediate
ownership of Stock.

SECTION 4 -

TYPES AND TERMS OF AWARDS

     4.1 General. The Committee shall determine the type or types of Awards to be granted
to each Participant, which Awards shall be evidenced by such written or electronic documents as the
Committee shall authorize. The types of Awards described herein may be granted under the Plan. If
an Option (other than an ISO) or SAR is granted to a Participant who does not provide services to
Pentair or any other member of the Pentair Group that is considered an “eligible issuer of service
recipient stock” within the meaning of the regulations promulgated under Code section 409A, then
such Option or SAR is considered deferred compensation that must comply with the requirements of
Code section 409A.

     4.2 Incentive Stock Options. (a) Grant of ISOs. Incentive Stock Options
shall have an exercise price equal to not less than one hundred percent (100%) of the Fair Market
Value of Stock on the date of grant. If an ISO is granted to a Significant Shareholder, the
exercise price shall not be less than 110% of the Fair Market Value of Stock on the date of grant.
Unless earlier terminated, ISOs shall expire not later than ten (10) years from the date of grant.
ISOs awarded to a Significant Shareholder shall expire not later than five (5) years from the date
of grant. The term of an ISO may extend beyond the Plan termination date. No ISO shall contain
terms which would limit or otherwise affect a Participant’s right to exercise any other Option, nor
shall any NQSO contain any 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.

     (b) ISO Exercise Limit. The aggregate Fair Market Value of Stock, determined as of
the date of grant, subject to an Award of ISOs which may become exercisable for the first time in
any calendar year, shall not exceed $100,000 and, to the extent such limit is exceeded, any Options
which exceed the limit shall be treated as NQSOs. In determining whether this exercisability limit
has been met or exceeded, ISOs are taken into account in the order granted, and any acceleration of
an ISO exercise date shall change the date the ISO is first exercisable for

 

 

purposes of applying this limit. Notwithstanding this limit, Options granted with an
aggregate Fair Market Value not in excess of $100,000 need not be designated as ISOs. In the event
this exercise limit shall be adjusted by law, this Section 4.2(b) shall be applied so as to take
into account such limit as adjusted.

     4.3 Nonqualified Stock Options. Nonqualified Stock Options granted under the Plan
shall have an exercise price equal to not less than one hundred percent (100%) of the Fair Market
Value of Stock on the date of grant. NQSOs shall expire at such time or times as specified in
documents evidencing the grant, although all such Options shall expire not later than ten (10)
years from the date of grant. The term of a NQSO may extend beyond the Plan termination date.

     4.4 Reload Options. If the Committee, in its discretion, grants an Option with a
reload feature, a Participant who, within five (5) years of the grant date, exercises such an
Option by tendering Stock as payment for the exercise price shall receive a grant of Reload
Options. The number of Reload Options granted shall be equal to the number of shares of Stock
utilized by the Participant to pay the exercise price. Each Reload Option shall have an exercise
price equal to one hundred percent (100%) of the Fair Market Value of Stock on the date the Reload
Option is granted, and shall expire at the same time as the Option exercised would have expired by
its terms. The Reload Options may be granted as either ISOs or NQSOs and, to the extent allowable
under applicable law, will be the same type of Option as was exercised to trigger the grant of the
Reload Option. Reload Options shall be subject to the same terms and conditions as the Option
exercised, except that the use of Stock to pay the exercise price of a Reload Option will not
entitle the Participant to another grant of Reload Options. Any Options exercised after a
Participant ends employment or otherwise ceases to provide services to the Pentair Group shall not
be eligible for a grant of Reload Options, regardless of whether such Option was originally granted
with a reload feature, and regardless of the manner in which the exercise price is paid.

     4.5 Stock Appreciation Rights. Stock Appreciation Rights may be granted in tandem
with Options and may relate to any number of shares of Stock a Participant could acquire by
exercise of an underlying ISO or NQSO. SARs also may be granted in any number without relation to
an Option Award. An Award of SARs not related to Options shall specify the terms and conditions
applicable to the Award, provided that no SAR shall contain any terms which will limit or otherwise
affect the ability of an ISO to qualify as such.

     4.6 Restricted Stock and Performance Shares. (a) Awards of Restricted Stock. An
Award of Restricted Stock shall specify the number of shares of Stock so awarded, the Restriction
Period applicable to the Award and any other restrictions which shall apply to the Award. In
addition to such other restrictions as may be specified at the time a Restricted Stock Award is
made, each share of Restricted Stock shall also be subject to the following restrictions:

	 	(i)	 	No share of Restricted Stock may be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of while subject to any restrictions.
	 
	 	(ii)	 	Except as otherwise provided in the Plan, unless the Participant remains
continuously employed by a member of the Pentair Group until all restrictions

 

 

lapse or are otherwise removed by the Committee, all Restricted Stock awarded to
such Participant shall be forfeited and returned to Pentair.

     During the time Restricted Stock remains subject to the relevant restrictions, the Participant
shall have all of the rights of a shareholder with respect to the Restricted Stock, including the
right to vote such Stock and, unless the Committee shall provide otherwise, the right to receive
dividends paid with respect to such Stock.

     (b) Awards of Performance Shares. The Performance Goals which shall apply to a
Performance Award shall be established by the Committee before the Performance Cycle commences or,
if after such Performance Cycle has commenced, while achievement of the Performance Goal is
substantially uncertain. In awarding Performance Shares, the Committee shall have the discretion
to use such performance measures as it deems appropriate with respect to Participants who are not
reasonably likely to be covered employees, within the meaning of Code section 162(m), at the time
all or any part of a Restricted Stock or Performance Share Award is otherwise deductible by the
Participant’s employer for federal income tax purposes.

     4.7 Rights to Restricted Stock. Rights to Restricted Stock shall be subject to the
same terms and conditions as Restricted Stock, as described in Section 4.6, except that
Participants receiving an Award of Rights to Restricted Stock shall not have any of the rights of a
shareholder until such time as the Rights to Restricted Stock vest, all restrictions are removed
and the Stock is issued to the Participant. In the discretion of the Committee, however, a
Participant may receive payment of, or have credited to a bookkeeping account established for this
purpose the equivalent of, the amounts that would otherwise be payable as dividends on the number
of shares of Stock into which the Rights to Restricted Stock may be converted.

     4.8 Unit Awards. (a) Restricted Units. Restricted Units may be granted in
tandem with Awards of Restricted Stock or Rights to Restricted Stock, and may relate to any number
of such shares. Restricted Units also may be granted without relation to an Award of Restricted
Stock or Rights to Restricted Stock. An Award of Restricted Units shall specify the Restriction
Period and other restrictions which may relate to such Units. Restricted Units awarded in tandem
with an Award of Restricted Stock or Rights to Restricted Stock shall be subject to the same terms
and conditions as the Award of Restricted Stock or Rights to Restricted Stock to which such Units
relate.

     (b) Performance Units. Performance Units may be granted in tandem with Performance
Shares and may relate to any number of such shares. Performance Units may also be granted without
relation to an Award of Performance Shares. An Award of Performance Units shall also specify the
Performance Goals and Performance Cycle applicable to the Award. Performance Units issued in
tandem with an Award of Performance Shares shall have the same Performance Goals and Performance
Cycle as the Performance Shares to which they relate. The value, if any, of Performance Units
shall be paid to the Participant based upon the degree to which the Performance Goals were
attained, with such results determined as soon as practicable after the Performance Cycle ends.

     4.9 Other Stock or Cash Awards. The Committee may, in its sole discretion, grant
other types of Awards, which Awards may be payable in cash, Stock, Restricted Stock or Rights

 

 

to Restricted Stock. Such Awards may be granted singly, in combination with, in replacement
of or as alternatives to the grants or Awards described in this Section 4, subject to such terms
and conditions as may be established in the documents evidencing the Award. Any such Award shall
be consistent with the other types of Awards described herein, subject to the limits stated in
Section 3.3 and consistent with the goals and objectives of the Plan.

SECTION 5 -

SETTLEMENT OF AWARDS

     5.1 Forms of Payment. Awards shall settle in accordance with the terms and conditions
relevant to such Award, and in accordance with the procedures herein described.

     5.2 Exercising Options. Subject to the terms and conditions of the Award, vested
Options may be exercised, in whole or in part, by giving notice of exercise to Pentair in such
manner as may be prescribed. This notice must be accompanied by payment in full of the exercise
price in cash or by use of such other instrument as the Committee may agree to accept.

     Payment in full may be made in the form of Stock already owned by the Participant, which Stock
shall be valued at Fair Market Value on the date the Option is exercised. A Participant who elects
to make payment in Stock may not transfer fractional shares or shares of Stock with an aggregate
Fair Market Value in excess of the Option exercise price plus applicable withholding taxes. A
Participant need not present Stock certificates when making payment in Stock, so long as other
satisfactory proof of ownership of the Stock tendered is provided (e.g., attestation of ownership
of a sufficient number of shares of Stock to pay the exercise price). The Committee shall have the
discretion to authorize or accept payment by other forms or methods or to establish a cashless
exercise program, all within such limitations as may be imposed by the Plan or any applicable law.

     5.3 Exercise of SARs. Stock Appreciation Rights may be exercised at the time, to the
extent and subject to the conditions applicable to the Award. If the SARs were issued in tandem
with an Option, the SAR is exercisable only when the Fair Market Value of the Stock subject to the
Award exceeds the Stock’s Fair Market Value on the date of grant. Stock Appreciation Rights issued
without relation to an Option Award shall be exercisable, and the value of the SARs determined, in
accordance with the terms and conditions relevant to the Award. To the extent an SAR is granted in
tandem with an Option, the exercise of the SAR shall cancel the related Option, and the exercise of
such Option shall cancel any related SAR. The amount paid to the Participant upon the exercise of
an SAR shall be the amount established at the time the Award was made and shall be not more than
one hundred percent (100%) of the difference between the Fair Market Value of the Stock as
determined on the date the SAR is granted and the Fair Market Value of the Stock on the date of
exercise.

     5.4 Restricted Stock, Rights to Restricted Stock and Restricted Units. Except as
otherwise provided in the Plan, at such time as all restrictions applicable to an Award of
Restricted Stock, Rights to Restricted Stock or Restricted Units are met and the Restriction Period
expires, ownership of the Stock awarded subject to such restrictions shall be transferred to the
Participant free of all restrictions except those that may be imposed by applicable law;

 

 

provided that if Restricted Units are paid in cash, said payment shall be made to the
Participant after all applicable restrictions lapse and the Restriction Period expires. To the
extent a Restricted Unit was granted in tandem with an Award of Restricted Stock or Rights to
Restricted Stock, payment of the Unit in cash shall cancel the related Award of Restricted Stock or
Rights to Restricted Stock, and transfer of the Stock free of restrictions shall cancel the related
Restricted Unit.

          5.5 Performance Shares and Performance Units. Except as otherwise provided in the
Plan, a Performance Award shall be paid to the Participant after earned in accordance with the
terms and conditions applicable to the Award. All determinations with respect to the degree to
which the Performance Goals were met during the Performance Cycle shall be made as soon as
practicable after the end of the Performance Cycle. Performance Awards may be paid in cash, Stock,
Restricted Stock, Rights to Restricted Stock, or any combination thereof as the Committee may
determine. To the extent Performance Units were awarded in tandem with Performance Shares, payment
of the Units in cash shall cancel the related Award of Performance Shares, and payment of the
Performance Share Award in Stock shall cancel the related Performance Unit.

          5.6 Delivery of Stock. As soon as practicable after the exercise of an Option, the
satisfaction of restrictions applicable to Restricted Stock or Rights to Restricted Stock or the
satisfactory attainment of Performance Goals over a Performance Cycle, Pentair shall cause to be
delivered to the Participant evidence of the Participant’s unconditional ownership of such Stock,
whether through use of certificated or uncertificated shares. Shares acquired pursuant to the
exercise of an ISO shall be designated as such on the records maintained by Pentair for this
purpose.

          5.7 Deferral of Recognition of Awards. To the extent allowed by the Committee,
Participants may elect to defer the income recognized due to the exercise of an NQSO or SAR, the
lapse of restrictions applicable to Restricted Stock or Restricted Units, the earning of a
Performance Award, or the payment of any other type of Award (other than an ISO). Any such
election must be made in the form and manner as specified by the Committee.

SECTION 6 -

TERMINATION OF AWARDS

          6.1 General Rule. Except as otherwise provided herein, and subject to the discretion
of the Committee as described in Section 9.1, Options and SARs may be exercised and Awards of
Restricted Stock, Rights to Restricted Stock, Restricted Units, Performance Shares or Performance
Units paid only in accordance with the terms and conditions specified relative to the grant or, in
the case of a Change in Control, as provided in Section 8.

          6.2 Termination of Employment or Service. If a Participant’s employment with the
Pentair Group ends for any reason other than (i) a termination for cause, (ii) Retirement, (iii)
death or (iv) Disability, any outstanding Options or SARs, to the extent otherwise exercisable on
the date the Participant’s employment ends, may be exercised no later than ninety (90) days
following the Participant’s termination date or, if earlier, the expiration date of the Option or
SAR. At the conclusion of such ninety (90) day period, all such Options and SARs then

 

 

unexercised shall be forfeited. All other Awards made to the Participant, to the extent not
then earned or paid to the Participant, shall terminate no later than the Participant’s last day of
employment.

          6.3 Retirement. (a) Retirement of Corporate Officer. Upon Retirement of a
Participant who is then a Board appointed corporate officer any outstanding Options or SARs shall
remain outstanding (and shall continue to vest in accordance with the terms of the Award as if the
Participant had continued in employment) until the earlier of the expiration date specified at the
time the Award was made and the fifth anniversary of such Participant’s Retirement date; provided,
however, such extension shall result in the conversion of an ISO to a NQSO to the extent provided
under the Code. The Restriction Period applicable to Awards of Restricted Stock, Rights to
Restricted Stock or Restricted Units outstanding on the Participant’s Retirement date, as well as
any other terms and conditions applicable to such Awards shall be deemed to have lapsed or
otherwise been satisfied. Payment for all such Awards shall be made to the Participant in either
unrestricted shares of Stock or cash, depending on the payment terms applicable to such Award. All
Performance Awards outstanding on the Participant’s Retirement Date shall be paid in either
unrestricted shares of Stock or cash, as the case may be, based on the degree to which the
Participant had attained the applicable Performance Goals as of such Participant’s Retirement date.

          (b) Other Participants. Upon Retirement of a Participant not covered by Section
6.3(a), any Options and SARs exercisable on such a Participant’s Retirement date may be exercised
no later than ninety (90) days following such date or, if earlier, the expiration date of the
Option or SAR. At the end of such ninety (90) day period, all Options and SARs then unexercised
shall be forfeited. The Restriction Period applicable to an outstanding Award of Restricted Stock,
Rights to Restricted Stock or Restricted Units shall be deemed to have lapsed on a prorated basis,
based on the portion of the Restriction Period which the Participant has completed at the time of
Retirement. The amount earned and payable on account of an outstanding Performance Award shall
also be prorated based on the degree to which the Participant has attained the relevant Performance
Goals and the portion of the Performance Cycle completed as of the date of Retirement.

          6.4 Death of Participant. If a Participant dies during employment with a member of
the Pentair Group, all outstanding Options and SARS shall be exercisable by, or paid to, the
Participant’s estate or the person who has acquired the right to exercise Options or SARs by
bequest or inheritance. The Participant’s estate, or any person who succeeds to the Participant’s
benefits under the Plan, shall have up to twelve (12) months to exercise any outstanding Options or
SARs to the same extent the Participant would have been entitled to exercise said Options or SARs
on the date of death. At the end of said twelve (12) month period, all Options and SARs then
unexercised shall be forfeited. The Restriction Period applicable to an outstanding Award of
Restricted Stock, Rights to Restricted Stock or Restricted Units shall be deemed to have lapsed on
a prorated basis, using the portion of the Restriction Period which the Participant had completed
on the date of death. The amount earned and payable on account of an outstanding Performance Award
shall also be prorated based on the degree to which the Participant had attained the relevant
Performance Goals and the portion of the Performance Cycle completed as of the date of death.

 

 

          6.5 Disability of Participant. If a Participant’s employment with all members of the
Pentair Group ends due to a Disability, the Participant shall have up to twelve (12) months to
exercise any outstanding Options or SARs to the same extent the Participant would have been
entitled to exercise said Options or SARs as of the date the Disability determination is effective.
At the end of said twelve (12) month period all Options or SARs then unexercised shall be
forfeited. The Restriction Period applicable to an outstanding Award of Restricted Stock, Rights
to Restricted Stock or Restricted Units shall be deemed to have lapsed on a prorated basis, based
on the portion of the Restriction Period the Participant had completed as of the date of
Disability. The amount earned and payable on account of an outstanding Performance Award shall
also be prorated based on the degree to which the Participant had attained the relevant Performance
Goals and the portion of the Performance Cycle completed as of the date of Disability. The
Committee shall have such discretion as is necessary to determine whether and when a Participant is
considered Disabled for purposes of the Plan.

          6.6 Termination for Cause. If a Participant’s employment with all members of the
Pentair Group is terminated for cause, all Awards and grants of every type, whether or not then
vested, shall terminate no later than the Participant’s last day of employment. The Committee
shall have discretion to determine whether this Section 6.6 shall apply, whether the event or
conduct at issue constitutes cause for termination of employment and the date on which Awards to a
Participant shall terminate. For purposes of the Plan, termination for cause shall include, but is
not limited to: (i) a material violation of any Pentair policy, including any policy contained in
the Pentair Code of Business Conduct, (ii) embezzlement from, or theft of property belonging to a
member of the Pentair Group, (iii) willful failure to perform or gross negligence in the
performance of or failure to perform assigned duties or (iv) other intentional misconduct, whether
related to employment or otherwise, which has, or has the potential to have, a material adverse
effect on the business conducted by the Pentair Group or a member thereof.

          6.7 Consultants. The Committee shall have the discretion to determine whether and how
the provisions of Sections 6.3 through 6.6 shall apply to a Consultant, and when a Consultant shall
be considered to have ceased providing services to the Pentair Group for purposes of applying
Section 6.2.

SECTION 7 -

TRANSFERABILITY
 

          7.1 General. Except as otherwise provided in this Section 7, Awards cannot be
assigned, transferred (other than by will or the laws of descent and distribution), pledged, or
otherwise encumbered (whether by operation of law or otherwise).

          7.2 Limited Purpose Transfers. (a) Allowable Transfers. If allowed by the
Committee, a Participant may transfer the ownership of some or all of the vested or earned Awards
granted to such Participant, other than ISOs, to (i) the spouse, children or grandchildren of such
Participant (the “Family Members”), (ii) a trust or trust established for the exclusive benefit of
such Family Members, or (iii) a partnership in which such Family Members are the only partners.
Any such transfer shall be without consideration and shall be irrevocable. No Award so transferred
may be subsequently transferred, except by will or applicable laws of

 

 

descent and distribution. The Committee may create additional conditions and requirements
applicable to the transfer of Awards.

          (b) Treatment of Options After Transfer. Following the allowable transfer of a vested
NQSO, such Option shall continue to be subject to the same terms and conditions as were applicable
to the NQSOs immediately prior to the transfer. For purposes of settlement of the Award, delivery
of Stock upon exercise of an Option and the Plan’s Change in Control provisions, however, any
reference to a Participant shall be deemed to refer to the transferee. With respect to a Change in
Control, however, such event as may cause the termination of Awards shall continue to apply with
respect to the Participant, following which event the transferred NQSOs shall be exercisable by the
transferee only to the extent and for the periods specified in Section 8. If the transferred NQSOs
are exercised at such time and in such manner as to result in a grant of Reload Options, the Reload
Options shall be granted to the Participant.

SECTION 8 -

CHANGE IN CONTROL

          8.1 Treatment of Options. Upon the occurrence of a Change in Control, all Options
granted to a Participant who is then employed by Pentair or a Subsidiary 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. 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.

          8.2 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 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.

          8.3 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 number of shares of Stock into which
an Award of Rights to Restricted Stock can then be converted.

          8.4 Treatment of Performance Shares. Upon the occurrence of a Change in Control, the
Performance Goals then applicable to all outstanding Performance Shares shall be deemed satisfied.
The Committee shall have the discretion to pay to the Participant, in cash or Stock, such amount of
the Award, if any, as it shall determine within ten (10) days of the Change in Control date,
together with any dividends declared with respect to such shares which have not yet been paid.

          8.5 Treatment of Units. Outstanding Awards of Units shall be valued by assuming that
all Performance Goals have been satisfied and any other restrictions applicable to such

 

 

Award have been met or have otherwise lapsed. The Committee shall have the discretion to pay
to the Participant such amount of the Award, if any, as it shall determine within ten (10) days of
the Change in Control date. If such Units were issued in tandem with another Award, payment for
such Units shall be made in Stock or cash, depending on the payment terms relevant to the Award.

          8.6 Participants Covered Under a KEESA. The provisions of this Section 8 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 3(b) of the KEESA.

          8.7 Governing Documents. In the case of any conflict between the provisions of this
Section 8 and any other provisions of the Plan, this Section 8 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 9 -

ADMINISTRATION

          9.1 Committee as Administrator. (a) General. The Plan shall be administered
by the Committee, which shall have full power and authority to select Participants, interpret the
Plan, grant Awards, continue, accelerate, or suspend the exercisability or vesting of an Award, and
adopt such rules and procedures for operating the Plan as it may deem necessary or appropriate.
Notwithstanding the above statement, once established the Committee shall have no discretion to
increase the amount of compensation a Participant whose Awards are, or are reasonably thought to
be, subject to Code section 162(m) may earn by application of any Performance Goals relevant to an
Award, although the Committee shall retain the discretion to decrease the amount of compensation a
Participant may earn under the terms of an Award. Any action by the Committee to accelerate or
otherwise amend an Award for reasons other than Retirement, death, Disability or a Change in
Control shall be made only in response to business circumstances then existing and, if appropriate,
shall include application of a commercially reasonable discount to the compensation otherwise
payable to reflect the value of accelerated payment.

          (b) Compliance with Applicable Law. The power and authority of the Committee shall
include, but not be limited to, making such amendments or modifications to the Plan or to an Award
as may be necessary or desirable to make available to Participants tax or other benefits of, or to
comply with, the laws, regulations or accounting rules of the United States, any state, any other
domestic jurisdiction or any foreign jurisdiction in which any member of the Pentair Groups
operates or in which Participants who are subject to such laws reside or work.

          (c) Code Section 409A. The provisions of Code section 409A are incorporated herein by
reference to the extent necessary for any Award that is subject to Code section 409A to comply
therewith.

 

 

          9.2 Delegation of Authority. To the extent permitted under Minnesota law, the
Committee may delegate to officers of Pentair any or all of its duties, power and authority under
the Plan subject to such conditions or limitations as the Committee may establish. Notwithstanding
the preceding sentence, the Committee may not delegate the power to amend or terminate the Plan nor
the authority to award performance-based compensation or determine the degree to which such
compensation has been earned with respect to an Award for a Participant who is, or is reasonably
thought to be, subject to Code section 162(m). In no event, however, shall an officer of Pentair
have or obtain the authority to grant Awards to himself or herself or to any person who is subject
to Section 16 of the Securities Exchange Act of 1934.

          9.3 Accounting Standards. Calculation of changes to any Performance Goal established
for purposes of an Award shall be made without regard to changes in accounting methods used by
Pentair or in accounting standards that may be required by the Financial Accounting Standards Board
after a Performance Goal relative to an Award is established and prior to the time the compensation
earned by reason of the achievement of the relevant Performance Goal is paid to the Participant.

          9.4 Amendment of Awards. Except as otherwise provided in the Plan, the Committee
shall have the discretion to amend the terms of any Award. 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 or an SAR so as to reduce the Option price or SAR grant price. Absent shareholder
approval, the Committee may not cancel any outstanding Option or SAR and replace it with a new
Option or SAR with a lower Option price or SAR grant price, if such action would have the same
economic effect as reducing the Option price or SAR grant price of such a cancelled Option or SAR.
Notwithstanding the foregoing, in no event may the exercise price of an Option or the grant price
of an SAR be reduced, even with the approval of the Company’s shareholders, unless such reduction
is made pursuant to the adjustment provisions contained in Section 3.2 of the Plan and in
accordance with section 1.409A-1(b)(5)(v)(D) of the Treasury Regulations, or in connection with a
transaction which is considered the grant of a new Option or SAR for purposes of section 409A of
the Code, provided that the new exercise price or grant price is not less than the Fair Market
Value of a share of Stock on the new grant date.

          9.5 Term of Plan. Contingent upon receipt of shareholder approval, this Plan shall be
effective May 1, 2004, or such other date as the shareholders may provide at the time of approval,
and shall remain in effect for a period of ten (10) years after such effective date, unless earlier
terminated by the Board.

SECTION 10 -

PLAN AMENDMENT AND TERMINATION

          10.1 Plan Amendment. Pentair may, by written resolution of its Board or through
action of the Committee, at any time and from time to time, amend the Plan in whole or in part.
Notwithstanding this authority, no such amendment shall, without shareholder approval, have the
effect of repricing an Option, increasing the number of shares of Stock available for purposes of

 

 

making Awards, increasing the limits described in Section 3.3 applicable to various types of
Awards, materially enhancing the benefits available to Participants, materially expanding the class
of individuals who are eligible to receive Awards, or making such other change as would, under
applicable law or regulation, or standards issued by a self-regulating organization, require
shareholder approval.

          10.2 Plan Termination. Pentair may, by written resolution of its Board, terminate the
Plan at any time.

SECTION 11 -

MISCELLANEOUS

          11.1 Participant Rights. The right of a member of the Pentair Group to discipline or
discharge a Participant, or to exercise any rights related to the tenure of any individual’s
employment or other service shall not be affected in any manner by the existence of the Plan or any
action taken pursuant to the Plan. The selection of an individual to receive an Award in any given
Fiscal Year shall not require that such individual receive an Award in any subsequent Fiscal Year.
Furthermore, the grant to a Participant of a specific type of Award does not require that such
individual be selected to receive any other type of Award. The Committee has the discretion to
consider such factors as it deems pertinent when selecting Participants and determining the type
and amount of Awards to be made to a Participant.

          11.2 Participant Responsibilities. If a Participant shall dispose of Stock acquired
through exercise of an ISO within either (i) two (2) years after the date the Option is granted or
(ii) one (1) year after the date the Option is exercised (i.e., in a disqualifying disposition),
such Participant shall notify Pentair within seven (7) days of the date of such disqualifying
disposition. In addition, if a Participant elects, under Code section 83, to be taxed at the time
an Award of Restricted Stock (or other property subject to such Code section) is made, rather than
at the time the Award vests, such Participant shall notify Pentair within seven (7) days of the
date the Restricted Stock subject to the election is awarded.

          11.3 Funding. The Plan is an unfunded plan, and Pentair has no obligation to create
any trust or separate fund or to otherwise set aside funds or segregate assets to ensure payment of
any Award. The Plan does not create a fiduciary relationship between Pentair and any Participant
or other person. To the extent any Participant or other person holds any rights by virtue of an
Award under the Plan, such right shall, except as may otherwise be provided in a KEESA, be no
greater than the right of an unsecured general creditor of Pentair.

          11.4 Expenses. The expenses of maintaining and administering the Plan shall be borne
by Pentair.

          11.5 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 may arise by reason of any act or omission under the Plan taken within the scope
of the authority delegated hereunder.

 

 

          11.6 Communications. Pentair may, unless otherwise prescribed by any applicable state
or federal law or regulation, provide to Participants any notices, grants, Awards, forms, reports
or shares of Stock by using either paper or electronic means.

          11.7 Interpretation. Section and subsection headings are for convenience of reference
and not part of this Plan, and shall not influence its interpretation. Wherever any words are used
in the Plan in the singular, masculine, feminine or neuter form, they shall be construed as though
they were also used in the plural, feminine, masculine or non-neuter form, respectively, in all
cases where such interpretation is reasonable.

          11.8 Governing Law. To the extent not preempted by applicable federal law, the
construction and interpretation of the Plan shall be made in accordance with the substantive laws
of the State of Minnesota, but without regard to any choice or conflict of laws provisions thereof.

          11.9 Severability. If any provision of the Plan shall be ruled or declared invalid
for any reason, said illegality or invalidity shall not affect the remaining provisions of the
Plan, and such remaining provisions shall be construed and enforced as if such illegal or invalid
provision had never been included in the Plan.

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