SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
PENTAIR, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
PENTAIR, INC.
1500 County Road B2 West
Saint Paul, Minnesota 55113
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 2001
To our Shareholders:
The Annual Meeting of Shareholders of Pentair, Inc. (the "Company") will be
held at the Lutheran Brotherhood Auditorium, 625 4th Avenue South, Minneapolis,
Minnesota, on Wednesday, April 25, 2001, at 10:00 a.m., for the following
purposes:
1. To elect two directors.
2. To approve an increase in the number of shares available for issuance
under the Omnibus Stock Incentive Plan.
3. To approve the Executive Officer Performance Plan, as amended and
restated, to comply with the requirements of Section 162(m).
4. To vote on a proposal to ratify the selection of Deloitte & Touche LLP
as independent auditors of the Company for 2001.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 26, 2001
as the record date for determining the shareholders entitled to vote at the
Annual Meeting. Accordingly, only shareholders of record at the close of
business on that date will be entitled to vote. The Company's transfer books
will not be closed.
By Order of the Board of Directors
Roy T. Rueb, Secretary
Saint Paul, Minnesota
March 19, 2001
IMPORTANT: For the Annual Meeting to be legally held, there must be a quorum
(50% plus 1 vote). Accordingly, you are urged to vote your proxy promptly by
internet or telephone as described in the voting instructions on the proxy; or
date, sign and return the proxy in the enclosed envelope. This will not prevent
you from voting in person if you so desire.
TABLE OF CONTENTS FOR PROXY STATEMENT
PAGE
----
Solicitation...................................................................1
Revocation and Voting of Proxy.................................................1
Outstanding Shares and Voting Rights...........................................1
Security Ownership of Management and Beneficial Ownership......................1
Section 16(a) Beneficial Ownership Reporting Compliance........................3
Proposals to be Acted Upon at the Annual Meeting
Election of Directors.....................................................3
Approval of an Increase in the Number of Shares Available for Issuance
Under the Omnibus Stock Incentive Plan....................................7
Approval of the Executive Officer Performance Plan, as Amended and
Restated, to comply with the requirements of Section 162(m)...............7
Approval of Auditors..................................................... 8
Executive Compensation.........................................................9
Report of the Audit and Finance Committee of the Board of Directors...........18
Future Proposals..............................................................19
Other Business................................................................20
Charter of Responsibilities for Audit Committee.......................APPENDIX 1
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PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 2001
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PENTAIR, INC.
1500 County Road B2 West
Saint Paul, Minnesota 55113
March 19, 2001
The following statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Pentair, Inc. (the "Company") to be voted
at the Annual Meeting of Shareholders of the Company to be held on Wednesday,
April 25, 2001, or at any adjournment or adjournments of such meeting.
Distribution of this proxy statement and proxy to shareholders began on or about
March 19, 2001.
SOLICITATION
The cost of soliciting proxies and the notices of the meeting, including
the preparation, assembly and mailing of proxies and this statement, will be
borne by the Company. In addition to this mailing, proxies may be solicited
personally or by telephone by regular employees of the Company. Assistance in
the solicitation of proxies is also being rendered by Morrow & Co., 445 Park
Avenue, New York, New York, at a cost to the Company of $7,000 plus expenses.
Furthermore, arrangements may be made with brokers, banks and similar
organizations to send proxies and proxy materials to beneficial owners for
voting instructions, for which the Company will reimburse such organizations for
their expense in so doing and will pay all costs of soliciting the proxies.
REVOCATION AND VOTING OF PROXY
Any shareholder giving a proxy may revoke it prior to its use at the
meeting by (1) delivering a written notice expressly revoking the proxy to the
Secretary at the Company's offices, (2) signing and forwarding to the Company at
its offices a later dated proxy, or (3) attending the Annual Meeting and casting
his or her votes personally.
A majority of the outstanding shares will constitute a quorum at the Annual
Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Pursuant to Minnesota law and the Company's Articles of Incorporation,
abstentions are counted in determining the total number of the votes cast on
proposals presented to shareholders, but will not be treated as votes in favor
of the proposals. Broker non-votes are not counted for purposes of determining
the total number of votes cast on proposals presented to shareholders.
Unless otherwise directed in the accompanying proxy, the persons named
therein will vote FOR the directors and the other proposals set forth in this
Notice of Annual Meeting of Shareholders. As to any other business which may
properly come before the meeting, they will vote in accordance with their best
judgment. The Company does not presently know of any other business.
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on February 26, 2001, the record date, there were
49,004,429 shares of the Company's Common Stock, par value $.162/3 per share
(the "Common Stock") outstanding. Each share of Common Stock entitles the holder
to one vote. There is no cumulative voting for directors.
SECURITY OWNERSHIP OF MANAGEMENT AND BENEFICIAL OWNERSHIP
The following table contains information concerning the beneficial
ownership of the Company's Common Stock as of February 26, 2001 by each
director, by each executive officer listed in the Summary Compensation Table, by
all directors and executive officers as a group and, as of December 31, 2000, by
each person known to the Company to "beneficially own" more than 5% of its
Common Stock.
1
OBTAINABLE
COMMON SHARE WITHIN RESTRICTED ESOP PERCENT OF
NAME OF BENEFICIAL OWNER STOCK(a) UNITS(b) 60 DAYS(c) STOCK(d) STOCK(e) TOTAL CLASS(f)
- --------------------------------------------------------------------------------------------------------------------------------
Winslow H. Buxton ....................... 245,496 0 263,730 26,397 5,357 540,980 1.1%
William J. Cadogan ...................... 4,700 7,405 4,758 0 0 16,863
Richard J. Cathcart ..................... 27,598 0 74,256 26,817 1,446 130,117
Joseph R. Collins ....................... 94,267 0 116,956 2,348 3,771 217,342
Barbara B. Grogan ....................... 2,400 10,650 4,758 0 0 17,808
Charles A. Haggerty ..................... 17,000 15,297 4,758 0 0 37,055
David D. Harrison ....................... 12,299 0 13,000 20,000 0 45,299
Randall J. Hogan ........................ 45,447 0 50,998 104,104 70 200,619
Stuart Maitland ......................... 1,000 3,981 433 0 0 5,414
Augusto Meozzi .......................... 200 4,139 433 0 0 4,722
William T. Monahan ...................... 0 0 0 0 0 0
Karen E. Welke .......................... 400 12,664 4,758 0 0 17,822
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Directors and executive officers as a
group (18 persons) ...................... 553,772 54,136 676,943 219,350 23,713 1,527,914 3.1%
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FMR Corp.(g) 3,871,030 7.8%
82 Devonshire Street
Boston, MA 02109
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T. Rowe Price Associates, Inc.(h) 2,704,800 5.4%
100 East Pratt Street
Baltimore, MD 21202
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Mellon Financial Corporation(i) 2,658,335 5.4%
One Mellon Center
Pittsburgh, PA 15258
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(a) Unless otherwise noted, all shares are held either directly or indirectly
by individuals possessing sole voting and investment power with respect to
such shares. Beneficial ownership has been disclaimed of certain shares
held by spouses and children which are not material. Amounts listed do not
include 891,570 shares held by the Pentair, Inc. Master Trust for various
pension plans of the Company and it subsidiaries. The Trust Investment
Committee of such Master Trust includes Randall J. Hogan, David D.
Harrison, and two other officers. Although these individuals could be
deemed under applicable Securities and Exchange Commission rules to
"beneficially own" all of the shares held by these Plans because of their
shared voting and investment power with respect to those shares, they
disclaim beneficial ownership of such shares.
(b) Represents share units paid under the Fourth Amended and Restated
Compensation Plan for Non-Employee Directors as to which the beneficial
owner has no voting or investment power.
(c) Represents stock options exercisable within 60 days from February 26, 2001.
(d) Restricted shares issued pursuant to incentive plans as to which the
beneficial owner has sole voting power but no investment power.
(e) Represents common shares owned as a participant in the Pentair Employee
Stock Ownership Plan (Pentair ESOP) and, for one officer, common shares
owned as a participant in the Federal-Hoffman Employee Stock Ownership Plan
(F-H ESOP). As of February 26, 2001, Fidelity Management Trust Company
("Fidelity"), the Trustee of the Pentair ESOP, held 2,653,074 common shares
(5.3%) and Wells Fargo ("Wells Fargo"), the Trustee of the F-H ESOP, held
557,329 common shares (1.1%). Fidelity and Wells Fargo disclaim beneficial
ownership of all shares. The Pentair ESOP and F-H ESOP participants have
the right to direct the Trustee to vote their shares although participants
have no investment power over such shares. The Trustees, except as
otherwise required by law, vote the shares for which they have received no
direction from participants, in the same proportion on each issue as they
vote those shares for which they have received voting directions from
participants.
(f) Less than 1% unless otherwise indicated.
(g) In a Schedule 13G filed February 14, 2001, as of December 31, 2000,
Fidelity Management & Research Company, a wholly owned subsidiary of FMR
Corp. and a registered investment adviser, reported beneficial ownership of
3,161,430 shares as a result of activities as an investment adviser. FMR
Corp and its Chairman, Edward C. Johnson III, reported sole dispositive
power of such shares, but had no voting power over such shares, which is
directed by the Funds' Board of Trustees. Fidelity Management Trust
Company, a wholly owned subsidiary of FMR Corp. and a bank, reported
beneficial
2
ownership of 709,600 shares as a result of serving as investment manager of
institutional account(s). FMR Corp. and its Chairman, Edward C. Johnson
III, reported sole dispositive power of all such shares and sole voting
power of 453,400 shares. They reported no voting control of 256,200 shares
owned by institutional accounts. The members of the Edward C. Johnson III
family have entered into a voting agreement and consequently may be a
controlling group of FMR Corp under the Investment Company Act of 1940, as
amended.
(h) In a Schedule 13G filed February 12, 2001, as of December 31, 2000, T. Rowe
Price Associates, Inc.("Price Associates", an investment adviser, reported
sole dispositive power of 2,704,800 shares and sole voting power of 632,500
shares, all of which are owned by various individuals and institutions and
as to which Price Associates expressly disclaims beneficial ownership.
(i) In a Schedule 13G filed January 22, 2001, as of December 31, 2000, Mellon
Financial Corporation reported beneficial ownership of 2,658,335 shares,
with sole voting power over 2,265,712 shares, shared voting power over
115,300 shares, sole dispositive power over 2,601,550 shares and shared
dispositive power over 7,996 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.
Officers, directors, and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the Company's officers and directors,
the Company believes all persons subject to these reporting requirements filed
the required reports on a timely basis except for the following: Charles
Haggerty filed a late Form 4 for a gift made in November 1999, Frank Feraco was
late filing his initial report on Form 3 upon becoming an executive officer of
the Company, and Stuart Maitland filed a late Form 4 for a purchase made by his
spouse in October 2000.
PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING
ITEM 1
ELECTION OF DIRECTORS
The Company's By-Laws provide for a Board of Directors (sometimes referred
to herein as the "Board") of not fewer than three members and not more than
fifteen members. The Board is divided into three classes with directors serving
three-year terms but with the beginning date for each term staggered so that the
term of only one class expires in any particular year. Vacancies may be filled
by the Board of Directors or by election at a special meeting of shareholders.
Any director elected to fill a vacancy by the remaining directors is required to
stand for election at the next meeting of shareholders.
At the forthcoming Annual Meeting, two persons have been nominated to be
elected to the Company's Board of Directors. Karen E. Welke, an incumbent
director, and William T. Monahan, who was appointed to the Board effective
January 11, 2001, have been nominated for three-year terms, expiring at the 2004
Annual Meeting. Seven other directors have terms of office that do not expire at
this time and who will be continuing to serve his or her full term. Proxies
cannot be voted for a greater number of directors than the number nominated.
Unless you direct otherwise, proxies will be voted FOR the election of all
nominees listed below. Should any nominee decline or be unable to accept such
nomination or to serve as director (an event management does not now expect to
occur), proxies will be voted FOR a substitute nominee or nominees in accordance
with the best judgment of the person or persons acting under them.
Information concerning the persons nominated for election as directors, as
well as those continuing in office, is set forth on the following pages.
3
DIRECTORS STANDING FOR ELECTION
(FOR A THREE-YEAR TERM EXPIRING AT THE 2004 ANNUAL MEETING OF SHAREHOLDERS)
WILLIAM T. MONAHAN, nominee, age 53
Since November 1995, Mr. Monahan has been Chairman of the Board of
Directors and Chief Executive Officer of Imation. Prior to that, since 1972, he
held various positions with Minnesota Mining and Manufacturing Company (3M),
including Group Vice President of 3M's Electro and Communications Systems Group
from December 1993 to November 1995; Group Vice President, Electronics,
Electrical and Telecommunications Group from June 1993 to December 1993 and
Senior Managing Director, 3M Italy from May 1992 to June 1993. Mr. Monahan is
also a director of Hutchinson Technology, Inc.
KAREN E. WELKE, director since 1995, age 56
In January 2000, Ms. Welke began a 2-year Loaned Executive commitment to
Project Hope, a non-government, non-profit organization dedicated to achieving
sustainable advances in health care around the world. From February 1995 to
December 1999, Ms. Welke was Group Vice President, Medical Markets Group for
Minnesota Mining and Manufacturing Company (3M). Prior to that, she held various
positions with 3M including Managing Director, 3M France (July 1991 to February
1995); and Division Vice President, Medical-Surgical Division (March 1989 to
July 1991).
DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRES AT THE 2002 ANNUAL MEETING OF SHAREHOLDERS)
WINSLOW H. BUXTON, director since 1990, age 61
Since January 1993, Mr. Buxton has been the Chairman of the Board of
Directors of Pentair, Inc. Mr. Buxton was Chief Executive Officer and President
of the Company from August 1992 through December 2000. Mr. Buxton was Chief
Operating Officer of the Company from August 1990 to August 1992. Mr. Buxton was
also Vice President - Paper Group of the Company from January 1989 through
August 1990. Mr. Buxton is also a director of Bemis Company, Inc., The Toro
Company and Willamette Industries, Inc.
BARBARA B. GROGAN, director since 1996, age 53
Ms. Grogan is Chairman and President of Western Industrial Contractors,
Inc., a company specializing in machinery erection and installation. Ms. Grogan
founded Western Industrial Contractors, Inc. in September, 1982. She was
Chairman of the Board of Directors of the Federal Reserve Bank of Kansas City,
Denver Branch, from 1989 to 1994, and at present is a member of the Board of
Directors of Deluxe Corporation, Apogee, Inc., Committee for Economic
Development, New York City and Volunteers of America, Colorado.
STUART MAITLAND, director since 1999, age 55
Mr. Maitland has been Director of Manufacturing Operations for the Vehicle
Operations organization at Ford Motor Company, Dearborn, Michigan since 1996. He
joined Ford Motor Company in 1988 and during the period up to his present
position, he has been Plant Manager at Ford's Kansas City Assembly Plant, Twin
Cities Assembly Plant in St. Paul, Minnesota and Dearborn Assembly Plant in
Dearborn, Michigan. From 1963 to 1988, Mr. Maitland held various domestic and
international positions for General Motors Corporation.
AUGUSTO MEOZZI, director since 1999, age 61
Since January 1, 1998, Mr. Meozzi has been the Chief Operating Officer of
the German ISOLA Group, a world-wide producer of base materials. From November
1992 to January 1998, Mr. Meozzi was Corporate Executive Vice President of the
German ISOLA Group.
(TERM EXPIRES AT THE 2003 ANNUAL MEETING OF SHAREHOLDERS)
WILLIAM J. CADOGAN, director since 1996, age 52
Mr. Cadogan was the Chairman of the Board of Directors of ADC
Telecommunications, Inc., a designer and manufacturer of products and systems
for broadband telecommunications networks, from February 1994 through February
2001. Mr. Cadogan was Chief Executive Officer of ADC Telecommunications from
July 1991 through
4
February 2001 and was President and Chief Operating Officer from May 1990 to
July 1991. Prior to joining ADC, Mr. Cadogan was General Manager of Business
Development of the International Telecommunications Satellite Organization and
also spent 15 years at AT&T. He also serves as a director of Ceridian, Applied
Epi, Agiliti, the Metropolitan Economic Development Association, the Minnesota
Orchestral Association, Chairman of the Telecommunications Industry Association,
and a member of the Board of Governors of the Electronics Industry Association
and the Board of Overseers of the Carlson School of Management at the University
of Minnesota.
CHARLES A. HAGGERTY, director since 1994, age 59
Mr. Haggerty is currently CEO of LeConte Associates, LLC, a consulting and
investment firm. Mr. Haggerty was Chief Executive Officer and Chairman of the
Board of Western Digital Corporation, a maker of hard disc drives, from July
1993 until he retired as Chief Executive Officer in January 2000 and as Chairman
in June 2000. He was President of Western Digital from June 1992 to July 1993.
Prior to that, for 28 years he held various positions with IBM Corporation
including Vice President-General Manager, Worldwide OEM Storage Marketing and
Vice President-General Manager, Low-end Storage Products. Mr. Haggerty is also
a director of Beckman Coulter, Inc., Vixel Inc., and Deluxe Corp.
RANDALL J. HOGAN, director since 1999, age 45
Since January 1, 2001, Mr. Hogan has been the Chief Executive Officer of
Pentair, Inc. From December 1999 through December 2000, Mr. Hogan was President
and Chief Operating Officer of Pentair, Inc. From March 1998 to December 1999,
he was Executive Vice President and President of Pentair's Electrical and
Electronic Enclosures Group. From February 1995 to August 1997, he was President
of United Technologies' Carrier Transicold Division, and from March 1994 to
February 1995 he was Vice President and General Manager of the Pratt & Whitney
Turbo Power & Marine Division. From 1988 to 1994 he held various positions with
General Electric Company, and from 1981 to 1987 he was a consultant with
McKinsey & Company.
DIRECTORS' ATTENDANCE
The Board of Directors held eight meetings in 2000. All directors attended
at least 75% of the aggregate of all the meetings of the Board and its
committees on which they served, with the exception of Augusto Meozzi, who
attended 64%. The incumbent directors in the aggregate attended 92% of the
meetings of the Board, including the meetings of the committees on which they
serve.
COMMITTEES OF THE BOARD
The Audit and Finance Committee is responsible, among other things, for
selecting auditors, ensuring the fiscal integrity of the Company, and
establishing and reviewing internal controls. The Audit and Finance Committee
held five meetings in 2000. For the balance of 2001, the members of the Audit
and Finance Committee will be Karen E. Welke (Chair), Stuart Maitland, and
Augusto Meozzi.
The Compensation and Human Resource Committee is responsible for developing
a broad plan of compensation for the Company that is competitive and rewarding
to the degree that it will attract, hold, and inspire performance of executive,
managerial, and other key personnel. The Compensation and Human Resource
Committee held six meetings during 2000. For the balance of 2001, the members of
the Compensation and Human Resources Committee will be Charles A. Haggerty
(Chair), Barbara B. Grogan, Stuart Maitland, and William T. Monahan
The Nominating, Governance, Public Policy and Share Rights Committee is
responsible, among other things, for nominating candidates for vacancies on the
Board. The Nominating, Governance, Public Policy and Share Rights Committee
considers nominees recommended by shareholders under the procedures set forth in
the Company's By-Laws. The Nominating, Governance, Public Policy and Share
Rights Committee held three meetings in 2000. For the balance of 2001, the
members of the Nominating, Governance, Public Policy and Share Rights Committee
will be William J. Cadogan (Chair), Winslow H. Buxton, Barbara B. Grogan,
Charles A. Haggerty, and Randall J. Hogan.
DIRECTORS' COMPENSATION
It is the Company's philosophy that a significant portion of directors'
compensation should be tied to long-term growth in shareholder value. In 2000,
non-employee directors were paid an annual retainer of $24,000 ($29,000 for the
Chair of the Compensation and Human Resource Committee), $48,550 of deferred
compensation in the form of share units under the Fourth Amended and Restated
Compensation Plan for Non-Employee Directors, $1,500 for attendance at each
Board meeting, $1,000 ($2,000 for committee chairs) for attendance at each
committee meeting, and $500 for participation in a telephone conference in lieu
of a meeting. Under the Fourth Amended and Restated Compensation Plan for
Non-Employee Directors, non-employee directors of the Company may elect to defer
payment of all or a portion of their annual retainer and meeting fees in the
form of share units. The Plan provides for a
5
Company match of 25% on the first $750 per month deferred in the form of share
units. The value of a share unit is equal to the market value of a share of
Common Stock. Share units carry no voting or investment power. Participants and
amounts deferred under the Plan are shown below:
$ Amount Deferred
------------------------------------ Share Units
Name 1998 1999 2000 12/31/00
- -------------------- -----------------------------------------------------
William J. Cadogan $39,400 $53,000 $94,300 7,085
Barbara B. Grogan 68,400 84,500 95,800 10,250
Charles A. Haggerty 69,400 91,000 95,800 14,870
Harold V. Haverty 28,150 41,750 0 0
Quentin J. Hietpas 39,400 53,000 59,800 16,690
Stuart Maitland -- 73,250 72,550 3,782
Augusto Meozzi -- 58,187 87,800 3,781
Richard M. Schulze 64,900 94,000 89,800 12,649
Karen E. Welke 62,900 89,500 101,300 12,210
The Outside Directors Nonqualified Stock Option Plan provides for the
granting of options to purchase Common Stock to directors who are not employees
of the Company. The Plan provides for automatic annual grants to the directors
and offers alternative forms of payment of the exercise price including
surrender of Common Stock. The persons to receive options, the number of options
granted, and the terms of the options are determined by the Plan. No option
granted under the Plan, however, may extend for a period of more than ten years
from the date of the grant and no option exercise price may be less than the
current market price of Common Stock on the date of award of such option.
Beginning with stock options granted in 1998, if the option holder exercises the
stock option during the first five years of the option term by tendering to the
Company common shares owned by that person, the Company can grant to such
person, an option ("Reload Option") to purchase common shares equal to the
number of shares tendered. The Reload Option may be exercised during the
remaining term of the original stock option period. The Reload Option exercise
price is equal to the market price per share on the date the shares are
tendered.
Options Granted
--------------------------------------
Name 1998 1999 2000
- -------------------- ---- ---- ----
William J. Cadogan 1,275 1,275 1,300
Barbara B. Grogan 1,275 1,275 1,300
Charles A. Haggerty 1,275 1,275 1,300
Harold V. Haverty 1,275 1,275 1,300
Quentin J. Hietpas 1,275 1,275 1,300
Stuart Maitland -- -- 1,300
Augusto Meozzi -- -- 1,300
Richard M. Schulze 1,275 1,275 1,300
Karen E. Welke 1,275 1,275 1,300
The exercise price and expiration dates for the above options are: 2000,
$36.1875 per share, expiration date January 3, 2010; 1999, $39.625 per share,
expiration date January 14, 2009; 1998, $40.4375 per share, expiration date
February 25, 2008.
One-third of the options granted to each recipient become exercisable on
each of the first three anniversaries of the date of grant. The options expire
ten years after the date of grant. Three current directors exercised options
during 1998-2000; the net value of shares (market value less exercise price)
realized from these exercises was $147,250.
6
ITEM 2
APPROVAL OF AN INCREASE IN THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE
UNDER THE OMNIBUS STOCK INCENTIVE PLAN
The Omnibus Stock Incentive Plan (the "Plan") allows for the granting
of nonqualified stock options, incentive stock options, stock appreciation
rights, restricted stock and other stock based awards. The Plan is administered
by the Company's Compensation and Human Resources Committee (the "Committee"),
which is made up of members of the Company's Board of Directors who are not
employees of the Company and therefore not eligible to receive awards under the
Plan. Employees eligible to receive awards under the Plan are managerial,
administrative, or other key employees of the Company or its subsidiaries who
are in a position to make a material contribution to the continued profitable
growth and long-term success of the Company. The Committee has the authority to
select the recipients of awards, determine the type and size of the awards,
establish certain terms and conditions of award grants, and take certain other
actions as permitted under the Plan.
The Committee continues to believe that the success of the Company
depends in large measure on the Company's ability to attract, retain and
motivate executives and key employees. Consequently, it has concluded that an
increase in the number of shares available for issuance under the Plan is
desirable to make certain there are sufficient shares available to meet future
grant needs.
Currently, there are 2,524,437 shares which are subject to outstanding
awards under the Plan, including unexercised stock options and share awards
still subject to restrictions. In January 2001, the Committee approved awards of
769,425 stock options and 298,971 restricted shares. Only 68,000 shares remain
for future awards. The Committee has approved an increase of an additional
2,400,000 shares of common stock to be reserved for issuance under the Plan,
subject to shareholder approval. The shares and awards authorized under the Plan
are subject to certain antidilution adjustments, and if any awards under the
Plan lapse, the number of shares pertaining to such forfeited awards become
available for subsequent grant under the Plan. In addition, the Committee has
amended the Plan to provide that no more than 20% of the total shares available
for issuance under the Plan may be used to make awards other than stock options
and to limit its authority to reprice awards or to cancel and reissue awards at
lower prices. The Commitee may grant nonperformance based restricted share
awards with a restriction period of less than three years for no more than 5% of
the total shares available for issuance under the Plan.
The Board of Directors requests shareholder approval of the increase in
the number of shares available for issuance under the Omnibus Stock Incentive
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 2 TO APPROVE AN INCREASE IN
THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE OMNIBUS STOCK INCENTIVE
PLAN
ITEM 3
APPROVAL OF EXECUTIVE OFFICER PERFORMANCE PLAN, AS AMENDED AND RESTATED
TO COMPLY WITH SECTION 162(m)
In 1996, the shareholders of the Company approved adoption of the
Executive Officer Performance Plan ("EOPP"). The EOPP is intended to cover
officers who are approaching the Internal Revenue Code Section 162(m) deduction
limits and bonuses under the Plan are intended to qualify as performance-based
compensation under Section 162(m). Currently the Chairman and the Chief
Executive Officer are the only executive officers that are eligible for awards
under the EOPP. The EOPP is essentially the same as the Management Incentive
Plan (MIP), except as described below, and participants in the EOPP are
generally not eligible for awards under the MIP. The MIP is discussed in more
detail beginning on page 10. The EOPP requires shareholder approval every five
years to comply with the requirements of Section 162(m) and certain changes the
Committee is proposing to make to the performance factors for awards beginning
in 2001, as more fully described below, also require shareholder approval under
Section 162(m).
The Plan is administered by the Committee, whose members qualify as
"outside directors" under Section 162(m). In administering the Plan and in
establishing bonus awards thereunder, the Committee does not have the discretion
to pay participants more than the bonus award amount indicated by the
preestablished goals. The Committee has the discretion and flexibility, however,
based upon its business judgement, to reduce this amount.
7
For 2000, awards under the Plan are determined based on the participant's
bonus opportunity and the performance of the Company. The individual performance
factor under the MIP does not apply under the Plan. The business criteria to
determine the company performance factor is limited to preestablished financial
measurements. The EOPP company performance factor is the result of the
multiplication of factors for Earnings Per Share (EPS) growth, Return On Sales
(ROS) and Return On Invested Capital (ROIC). The use of three multiplicative
factors reinforces the importance of balancing financial oriented goals in terms
of growth, quality of earnings, and an acceptable return on investment. Under
the EOPP, achievement of EPS growth of 12%, ROS of 10%, and ROIC of 20%, results
in a performance factor of 1.00. The maximum company performance factor is 2.81
and the minimum company performance factor is 0.32; however, there is no EOPP
bonus if the Company has an operating loss. Performance between the stated
factors is interpolated.
The Company has revised both the EOPP and the MIP for 2001 to shift the
emphasis to economically profitable growth and free cash flow. This change is
consistent with the principles guiding the Company's executive compensation
philosophy to ensure linkage between executive compensation and the creation of
shareholder value. The company performance factor going forward will be
determined by multiplying factors for Simple Pentair Value Added (SPVA) and Free
Cash Flow (FCF). The use of these two factors reinforces the importance of
balancing economically profitable growth and cash generation. SPVA is calculated
as follows: earnings before interest and taxes less a 15% surcharge against
receivables, inventory, payables. FCF is equal to net cash provided by operating
activities, excluding the net tax affected interest expense, less capital
expenditures. Under the EOPP, as under the MIP, the achievement of FCF equal to
6.5% of sales and SPVA generated that equates to a 15% total business return,
results in a company performance factor of 1.00. The maximum company performance
factor is 4.50 and the minimum company performance factor is 0.21; however,
there is no EOPP bonus if the Company has an operating loss. If the Company's
performance ever results in a negative SPVA the maximum performance factor is
capped at 2.00. Performance between the stated factors is interpolated.
In addition, while the maximum percentage for an individual annual bonus is
still 200% of the participant's annual base salary, the Committee has increased
the dollar maximum to $3,500,000. As with the MIP, the cash portion of a bonus
award is limited to 100% of the participant's most recent annual base salary.
Subject to the overall percentage and dollar maximums described above, the bonus
award for a year in excess of the cash portion is payable as a performance share
award under the Omnibus Stock Incentive Plan. As a performance share award, the
participant will receive restricted shares of Common Stock, subject to any
vesting condition the Committee may impose. The formula to determine the number
of restricted shares which may be awarded, up to the overall percentage and
dollar maximums, is determined in the year the performance goal is established
and in accordance with the formula used for other restricted stock awards under
the Omnibus Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 3 TO APPROVE THE ADOPTION OF
THE EXECUTIVE OFFICER PERFORMANCE PLAN TO COMPLY WITH SECTION 162(m)
ITEM 4
APPROVAL OF AUDITORS
Deloitte & Touche LLP, independent certified public accountants have been
the auditors for the Company since 1977. They have been retained by the Board of
Directors as the Company's auditors for the current fiscal year, and shareholder
approval of such retention is requested.
Representatives of Deloitte & Touche LLP are expected to attend the Annual
Meeting with the opportunity to make a statement if they so desire, and they
will be available to respond to appropriate questions.
Upon recommendation of the Audit and Finance Committee, and subject to
ratification by the shareholders at the 2001 Annual Meeting, the Board of
Directors has appointed Deloitte & Touche LLP as independent auditors to examine
the consolidated financial statements of the Company for 2001.
The enclosed proxy will be voted "For" the proposal to approve retention of
Deloitte & Touche LLP unless a contrary vote or abstention is indicated. If
retention of Deloitte & Touche LLP is not approved by the shareholders, the
Board of Directors will make another appointment effective at the earliest
practicable date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 4 TO APPROVE RETENTION OF
DELOITTE & TOUCHE LLP.
8
EXECUTIVE COMPENSATION
COMPENSATION AND HUMAN RESOURCE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, the Compensation and Human Resource Committee of the Board of
Directors was comprised of Quentin J. Hietpas (Chair), William J. Cadogan,
Barbara B. Grogan, Charles A. Haggerty, Harold V. Haverty (retired effective
April 2000), and Stuart Maitland. During 2000, none of the members of the
Committee were officers or employees of the Company and there were no interlock
relationships.
COMPENSATION AND HUMAN RESOURCE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation and Human Resource Committee of the Board of Directors
(the "Committee") is responsible for supervising the development of, and making
recommendations to the Board with respect to, the Company's executive
compensation policies. In addition, the Committee makes annual recommendations
to the Board concerning compensation to be paid to the Chief Executive Officer
("CEO") and each of the other executive officers of the Company.
The Committee also oversees all aspects of the Company's executive
compensation program, including many of the Company's employee benefit plans.
The Company currently maintains a variety of compensation and benefit plans in
which its executive officers may participate including the Omnibus Stock
Incentive Plan, the Employee Stock Purchase and Bonus Plan, the Retirement
Savings and Stock Incentive Plan, the RSIP Sidekick Plan, the Supplemental
Executive Retirement Plan, the Executive Officer Performance Plan, and the
Management Incentive Plan. The Company also maintains a defined benefit pension
plan in which substantially all non-bargaining employees, including the
Company's executive officers, participate.
PENTAIR'S COMPENSATION PHILOSOPHY
The principles guiding the executive compensation program are designed to
ensure a proper linkage between executive compensation and creation of
shareholder value. Goals of the program are:
(a) to encourage innovation and growth;
(b) to reward executives for short-term top performance and long-term
shareholder value;
(c) to recognize outstanding performance;
(d) to attract and retain top quality executives and key employees;
(e) to encourage executive stock ownership; and thereby
(f) to align management and shareholder interests.
The Company has maintained the philosophy that compensation of the
executive officers should be directly and materially linked to operating results
and stock price performance. To achieve this, compensation is heavily leveraged
through the annual bonuses and long-term equity incentives. The mix of base
salary, bonuses and other benefits reflects the Company's goal of providing
average compensation for average performance and above average compensation for
above average performance.
In order to make its recommendations to the Board concerning executive
officer compensation, the Committee annually reviews and evaluates the Company's
corporate performance and the compensation and equity ownership of its executive
officers. This is done by reviewing salary practices for comparable positions at
other major industrial organizations as disclosed in the Towers Perrin
compensation database, as well as a review of other nationally recognized pay
surveys. These major organizations include companies that the Corporation
competes with for business or executive talent. Many of the companies which are
included in the Towers Perrin compensation database and national pay surveys are
also listed in the S&P 500 Index and the S&P 400 MidCap Index included in the
Comparative Stock Performance Graph. The Committee typically retains Towers
Perrin, an independent compensation consulting firm, to assist in the review of
executive compensation every other year.
9
EXECUTIVE COMPENSATION PROGRAM
The components of the Company's executive compensation program, which
are subject to the discretion of the Committee on an individual basis, include
(a) base salaries, (b) annual cash performance-based bonuses, (c) long-term
performance-based equity incentives, and (d) miscellaneous fringe benefits. All
components are comparable to those of similar companies.
BASE SALARY
The CEO submits a performance appraisal and recommendation to the
Committee with respect to annual salaries of the executive officers. The
Committee discusses and evaluates the salaries and makes its recommendation to
the Board. Base salary targets for executive positions are set at the 50th
percentile of competitive compensation. An individual performance and experience
factor is applied to the target midpoint to determine each executive's actual
base salary, within a range of +/- 20% of midpoint. For 2000, the salaries of
the named executive officers identified in the Summary Compensation Table are
within the salary targets for each position.
BONUS
Generally, bonuses are considered for payment to executives and key
employees following the end of each year under the Executive Officer Performance
Plan (see page 12 for discussion of the Executive Officer Performance Plan) and
the Management Incentive Plan (MIP). MIP awards are determined by applying the
following factors to base salary: a bonus opportunity category (45% for the Vice
Chairman; 40% for Executive Vice Presidents; 30-35% for other officers), a
company performance factor and an individual performance factor.
For 2000, the company performance factor is the result of the
multiplication of factors for Earnings Per Share (EPS) growth, Return On Sales
(ROS) and Pentair Value Added (PVA). Pentair's value added measurement is
calculated as follows: Net Operating Profit After Taxes less a 10% surcharge
against Average Invested Capital. Under the MIP, achievement of EPS Growth of
12%, ROS of 11% and PVA generated that equates to a 15% total business return
(over prior year actuals), results in a company performance fact or 1.00. The
maximum company performance factor is 3.9 and the minimum company performance
factor is 0.20; however, there is no MIP bonus if the Company has an operating
loss. Performance between the state factors is interpolated. For 2000, EPS
declined 58%, ROS was 6.0% and PVA generated was negative $97.5 million (in each
case including a portion of the restructuring charge), resulting in a company
performance factor of 0.20.
The Company has revised the annual bonus plan for key executives for
2001 to shift the emphasis to economically profitable growth and free cash flow.
This change is consistent with the principles guiding Pentair's executive
compensation philosophy to ensure linkage between executive compensation and the
creation of shareholder value. The company performance factor going forward will
be determined by multiplying factors for Simple Pentair Value Added (SPVA) and
Free Cash Flow (FCF). The use of these two factors reinforces the importance of
balancing economically profitable growth and cash generation. SPVA is calculated
as follows: earnings before interest and taxes less a 15% surcharge against
receivables, inventory, payables. FCF is equal to net cash provided by operating
activities, excluding net tax affected interest expense, less capital
expenditures. Under the MIP, the achievement of FCF equal to 6.5% of sales and
SPVA generated that equates to a 15% total business return, results in a company
performance factor of 1.00. The maximum company performance factor is 4.50 and
the minimum company performance factor is 0.21; however, there is no MIP bonus
if the Company has an operating loss. If the Company's performance ever results
in a negative SPVA the maximum performance factor is capped at 2.00. Performance
between the stated factors is interpolated. In addition to the company
performance factor, for executives in charge of operating segments, a segment
performance factor will be used and weighted at 75% against 25% for the company
performance factor, to recognize contributions made at the segment level.
In the first quarter of 1999, the Company recorded a special
restructuring charge of $38.0 million ($24.1 million after-tax or $0.56 per
share). For purposes of the MIP calculation, costs related to these
restructuring activities are being amortized against the first 24 months of
benefits, on a project by project basis. This is a timing difference only for
MIP purposes in order to match the costs with the associated benefits. The bonus
calculations for 2000 include a portion of this restructuring charge. In the
fourth quarter of 2000, the Company recorded a restructuring charge of $24.8
million ($15.9 million after-tax or $0.33 per share), which will be taken into
account for MIP purposes beginning in 2001.
The individual performance factor is determined by the assignment of a
numerical factor based on a supervisor's judgement on attainment of expectations
relative to the employee's function. The CEO submits a performance appraisal and
recommendation to the Committee for executive officers with respect to the
individual performance
10
factor. The Committee approves all MIP awards and has the right to increase or
decrease awards to better accomplish the objectives of the MIP Plan.
Bonus awards that exceed an amount equal to base salary are paid as a
performance share award under the Omnibus Stock Incentive Plan. The performance
share award is paid in restricted stock, subject to any vesting condition the
Committee may impose.
The Committee has the discretion to make special awards to retain key
executives or to recognize extraordinary contributions to the welfare,
reputation and earnings of the Company. For 2000, the Company made three such
awards, each to a named executive officer other than the CEO, and each such
bonus was made in addition to the MIP or EOPP award earned by such individual.
LONG-TERM EQUITY INCENTIVES
GRANTS
Long-term incentive compensation is awarded in the form of restricted shares,
incentive compensation units (ICUs), performance shares and stock options under
the Omnibus Stock Incentive Plan (Omnibus Plan). All awards are proposed by the
CEO and approved by the Committee. Long-term incentives are determined by using
the average of the 50th and 60th percentile of comparable grant practices as
compiled by the Towers Perrin compensation database. Annual awards are granted
in the form of ICUs (10% for the CEO and 20% for executive officers) and stock
options (90% for the CEO and 80% for executive officers).
Restricted stock may be awarded to such individuals as described in the
section entitled "stock ownership guidelines"; as an award to a new executive
officer; as the form of payment of performance shares; or in payment of the
Management Incentive Plan or Executive Officer Performance Plan bonus in excess
of annual base salary.
The Committee is authorized to grant stock options and performance share
awards upon attainment of certain performance criteria which are based on the
Company's long-term objectives. The Black-Scholes Model is used to determine
stock option grant values.
Stock options can be granted for terms up to 10 years. Beginning with stock
options granted in 1998, if the option holder exercises the stock option during
the first five years of the option term by tendering to the Company common
shares owned by that person, the Committee can grant to such person, an option
("Reload Option") to purchase common shares equal to the number of shares
tendered. The Reload Option may be exercised during the remaining term of the
original stock option period. The Reload Option exercise price is equal to the
market price per share on the date the shares are tendered.
The total Omnibus Plan awards for 2000 for all executive officers as a group,
including the CEO and named executive officers, amounted to 1,927,200 incentive
compensation units (ICUs), 543,000 stock options, and 55,360 restricted shares,
of which 4,349 restricted shares were awarded for achievement of stock ownership
guidelines, 3,011 restricted shares were awarded under the Management Incentive
Plan, and 48,000 restricted shares were awarded to two named executive officers.
Grants for the named executive officers are shown in the Summary Compensation
Table (page 15) and the Option/SAR grant table (page 16).
PAYOUTS
Payouts on ICUs in 2000 which related to ICU grants in 1997 were based upon
growth in the Company's net book value over the life of the ICUs, as leveraged
upward or downward depending on the Company's return on equity and growth in
earnings per share over that period. Payouts in 2000 for the named executive
officers are shown in the LTIP Payout column on the Summary Compensation Table
(page 15).
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The base salary, annual bonus and long-term equity incentives paid to Mr.
Buxton in 2000 were generally determined in accordance with the guidelines
described above, and his compensation is comprised of the same elements as for
all executive officers.
The Committee has a formal rating process for evaluating the performance of
the Chief Executive Officer. The rating process includes a self evaluation
rating by the CEO, after which each Board member completes an evaluation and
rating with commentary. The Chairman of the Committee provides a consolidated
rating report and chairs a
11
discussion with the Board members without the CEO present. From that discussion,
the performance rating is finalized and the Committee Chairman is instructed to
review the final rating results and commentary with the CEO. This then
translates into a personal development plan for the following year. Since Mr.
Buxton retired as CEO at the end of 2000, this process was not needed to develop
a plan for 2001.
Mr. Buxton's base salary was $825,700 in accordance with the Committee's
guideline of establishing the base salary at the market compensation rate for
the CEO at the 50th percentile for companies at a comparable size as projected
based on the 1999 performance, including the major acquisitions completed that
year. This resulted in a 15% increase in Mr. Buxton's base salary over 1999.
Mr. Buxton's bonus was determined under the Executive Officer Performance Plan
("EOPP"). Mr. Buxton was one of two participants in the EOPP in 2000. Currently,
the Chairman and the Chief Executive Officer are the only eligible officers.
EOPP awards are determined based on the participant's bonus opportunity and a
company performance factor. For 2000, the bonus opportunity categories were 80%
for President and Chief Operating Officer and 100% for the Chairman and the
Chief Executive Officer.
The EOPP company performance factor is the result of the multiplication of
factors for Earnings Per Share (EPS) growth, Return On Sales (ROS) and Return On
Invested Capital (ROIC). The use of three multiplicative factors reinforces the
importance of balancing financial oriented goals in terms of growth, quality of
earnings, and an acceptable return on investment. Under the EOPP, achievement of
EPS growth of 12%, ROS of 10%, and ROIC of 20%, results in a performance factor
of 1.00. The maximum company performance factor is 2.81 and the minimum company
performance factor is 0.32; however, there is no EOPP bonus if the Company has
an operating loss. Performance between the stated factors is interpolated. For
2000, the maximum individual bonus is 200% of the participant's annual base
salary, but in no event more than $1,500,000. Beginning in 2001, the maximum
award will be $3,500,000, subject to shareholder approval. In administering the
EOPP and in establishing bonus awards thereunder, the Committee does not have
the discretion to pay participants more than the bonus amount indicated by the
preestablished goals. The Committee has the discretion and flexibility, however,
based on its business judgment, to reduce this amount.
Mr. Buxton's bonus was calculated using the formula described above. For 2000,
EPS declined by 50.6%, ROS was 5.8% and ROIC was 8.3% (all three measures
including the full impact of the 2000 restructuring charge of $4.8 million
($0.33 per share)), resulting in a company performance factor of 0.32. The
Committee used his base salary of $825,700, his bonus opportunity category of
100%, and the company performance factor of 0.32 to obtain his bonus amount. In
accordance with the terms of the EOPP, the bonus amount of $264,224 was paid in
cash. Mr. Buxton's Omnibus Plan grants were computed based on the average of the
50th and 60th percentile of the Towers Perrin compensation database for
comparable grant practices. He was granted 284,400 ICUs and 150,000 stock
options in 2000.
STOCK OWNERSHIP GUIDELINES
Stock ownership guidelines for top management have been established to
motivate individual achievement and increase ownership of Pentair Common Stock.
The Committee determined that over a period of five years, its top management
should accumulate and hold Company stock equal to the following values: Chief
Executive Officer -- three to five times base salary; Senior Corporate Officers
- -- two to three times base salary; and other corporate officers and subsidiary
presidents -- one to two times base salary. In the opinion of the Committee, the
achievement of ownership levels set forth will result in executive management
being significant shareholders and will further encourage long-term performance
and Company growth.
The Committee will consider making incentive grants of restricted stock based
on the increase in ownership during the preceding year. These restricted stock
grants (made under the Omnibus Plan) vest in equal increments on the third,
fourth, and fifth anniversaries of the grant. The size of the grant is equal to
10% of the increase in common stock during the year if the annual ownership
target is met, limited to 10% of the targeted ownership level if the targeted
ownership level has been achieved. In 2000, restricted stock awards of 5,286
were granted under these guidelines to all key employees.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction
to public companies for compensation over $1 million paid to each of the
corporation's Chief Executive Officer and the four other most highly compensated
officers. Qualifying performance-based compensation is not subject to the
deduction limit if certain
12
requirements are met. The Company's policy is to maximize the deductibility of
executive compensation so long as the deductibility is compatible with the more
important objectives of retaining executives and maintaining competitive and
motivational performance-based compensation. In 1996, the shareholders approved
the adoption of the EOPP and approved amendments to the Omnibus Plan and this
year are being asked to reapprove the EOPP, all to comply with Internal Revenue
Code Section 162(m). Under current interpretations of Section 162(m), EOPP bonus
awards and Omnibus Plan awards of stock options, SARs, ICUs, performance shares
and performance units will not be subject to the $1,000,000 deduction limit
assuming compliance with all other aspects of Section 162(m).
Quentin J. Hietpas, Chair William J. Cadogan Barbara B. Grogan
Charles A. Haggerty Stuart Maitland
Compensation and Human Resource Committee of Pentair, Inc. Board of Directors
13
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return on
the Company's Common Stock for the last five fiscal years, assuming the
investment of $100 on December 31, 1995 and the reinvestment of all dividends
since that date to December 31, 2000. The graph also contains for comparison
purposes the S&P 500 Index and the S&P MidCap 400 Index.
By virtue of its market capitalization, Pentair is a component of the S&P
MidCap 400 Index. On the basis of the Company's size and diversification of
businesses, a readily identifiable peer group has not been found. It is our
opinion the S&P MidCap 400 Index is an appropriate comparison. The Company has
evaluated other published indices, but the results are skewed by one or two
large companies included in the indices. We believe such a comparison would not
be meaningful.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
FISCAL YEAR ENDED DECEMBER 31
[PLOT POINTS CHART]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- -------- --------
Pentair, Inc. 100 132.13 149.61 168.34 165.33 105.99
S&P 500 100 122.96 163.98 210.85 255.21 231.98
S&P MidCap 400 100 119.20 157.65 187.77 215.41 253.12
14
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation awarded to
or earned by the Chief Executive Officer of the Company and the four other
highest paid executive officers of the Company whose salary and bonus earned in
2000 exceeded $100,000.
Annual Compensation Long-Term Compensation
-------------------------------- -----------------------------------
Awards Payouts
----------------------- -------
Other Restricted Securities All Other
Annual Stock Underlying LTIP Compen-
Name and Salary Bonus(a) Compen- Awards(c) Options/ Payouts sation
Principal Position Year ($) ($) sation(b) ($) SARs(d) ($)(e) ($)(f)
- ----------------------- ---- ------ -------- --------- --------- ---------- -------- ---------
Winslow H. Buxton(g) 2000 825,700 264,224 -- 684,395 150,000 717,181 11,870
CHAIRMAN 1999 718,000 174,546 -- -- 89,000 547,374 10,113
1998 683,250 683,250 -- 103,903 89,000 646,974 7,940
Randall J. Hogan(g) 2000 450,000 400,000 -- 1,012,356 53,000 22,155 11,561
CHIEF EXECUTIVE OFFICER 1999 312,500 312,500 -- 21,313 25,000 2,177 10,481
1998 217,708 175,000 -- 203,063 25,000 1,350 --
Joseph R. Collins(h) 2000 450,000 52,650 64,897(i) 8,754 53,000 201,716 11,553
VICE CHAIRMAN (FORMER) 1999 400,000 400,000 -- 45,898 40,000 150,786 8,788
1998 332,500 323,010 -- 7,980 48,250 175,983 7,940
Richard J. Cathcart 2000 350,000 350,000 -- 94,117 32,000 201,282 13,803
PRESIDENT AND CHIEF 1999 310,000 296,608 -- 24,211 25,000 150,013 11,038
OPERATING OFFICER, WATER 1998 290,000 250,421 -- 10,535 25,000 123,469 10,190
TECHNOLOGIES SEGMENT
David D. Harrison(j) 2000 308,902 120,472 432,429(k) -- 60,000 -- 1,594
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
- --------------------------
(a) Represents bonuses accrued by the Company for the year even if paid after
December 31.
(b) Other annual compensation includes perquisites and other personal benefits,
securities or property. Disclosure is required only if the amount exceeds
the lesser of $50,000 or 10% of the total annual salary and bonus reported
for the named executive officer. Information has been included only for
those named executive officers who have met the reporting threshold.
(c) The restricted share grants reflected in the table were made pursuant to
the Company's executive compensation programs. Restricted stock awards are
subject to vesting as determined by the Committee. Generally, restricted
stock awards are subject to vesting, in three equal installments on the
third, fourth and fifth anniversaries of the grant, based solely on the
continued employment of the recipient by the Company. The value of
restricted stock awards reflected in the table is based on the closing
market price of the Common Stock on the date of grant. As of December 31,
2000, the following restricted stock awards were held by each of the named
executives (based on 12/31/00 closing price of $24.1875): Buxton 36,113
shares or $873,483; Collins 4,355 shares or $105,337; Cathcart 3,453 shares
or $83,519; Harrison 0 shares or $0; Hogan 32,104 shares or $776,515.
(d) The share amounts for Mr. Collins include 23,250 stock options in 1998
awarded based on achievement of performance objectives pursuant to a
special incentive plan for the Professional Tools and Equipment Group.
(e) Includes payouts for ICUs and dividends on restricted shares.
(f) Includes Company contributions to the Retirement Savings and Stock
Incentive Plan, RSIP Sidekick Plan and match contribution to the Employee
Stock Purchase and Bonus Plan.
(g) Mr. Buxton retired as Chief Executive Officer as of December 31, 2000 and
Mr. Hogan, who was the President and Chief Operating Officer of the Company
in 2000, became the Chief Executive Officer effective January 1, 2001.
(h) Mr. Collins is retiring as Vice Chairman effective April 25, 2001.
(i) Of this amount, $50,000 reflects benefits provided under a flexible
perquisite account available to certain executives for the reimbursement of
certain business-related expenses, which may include automobile expenses,
membership fees, professional fees (including tax preparation costs) and
certain out-of-pocket medical expenses (such as co-pays and other
deductibles).
(j) Mr. Harrison joined the Company in February 2000.
(k) Approximately $416,000 of this amount represents amounts paid to Mr.
Harrison in connection with relocation expenses.
15
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize option and SAR grants and exercises during
2000 to or by the Chief Executive Officer and the executive officers named in
the Summary Compensation Table above, and the values of the options and SARs
held by such persons at the end of 2000. Option grants shown in the table below
include both incentive stock options and non-qualified stock options. No SARs
have been granted since 1983 and no SARs were exercised during 2000 or remain
outstanding at the end of 2000.
Option and SAR Grants in 2000
Number % of Total Potential Realizable
of Options/ Value at Assumed
Securities SARs Annual Rates of Stock
Underlying Granted to Price Appreciation for
Options/ Employees Exercise Expira- Option Term
SARs in Fiscal or Base tion ------------------------
Name Granted(a) 2000 Price Date 5% 10%
- ---- ---------- ---------- -------- ------- ---------- ----------
Winslow H. Buxton 116,000 17.0% $36.1875 1/03/10 $2,639,942 $6,690,132
34,000 5.0% 36.6250 2/22/10 $ 783,131 $1,984,608
------- ---- ---------- ----------
150,000 22.0% $3,423,073 $8,674,740
Randall J. Hogan 53,000 7.8% 36.1875 1/03/10 $1,206,181 $3,056,698
Joseph R. Collins 53,000 7.8% 36.1875 1/03/10 $1,206,181 $3,056,698
Richard J. Cathcart 32,000 4.7% 36.1875 1/03/10 $ 728,260 $1,845,554
David D. Harrison 60,000 8.8% 36.75 2/23/10 $1,386,713 $3,514,202
- -----------------------
(a) Generally one-third of each grant becomes exercisable on each of the first
three anniversaries of the date of grant, except as follows: Buxton, 34,000
shares vest 1/15/02; Harrison, 30,000 shares vest one-fourth annually
beginning 1/22/01. The exercise price for the options granted was the
closing market price of the Common Stock as of the date of grant.
Aggregate Option and SAR Exercises in 2000 and Value at End of 2000
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
End of 2000 End of 2000
Shares Acquired Value Exercisable (E) Exercisable (E)
Name on Exercise Realized Unexercisable (U) Unexercisable (U)
- ---- --------------- -------- ----------------- -----------------
Winslow H. Buxton 77,200 $342,575 E 165,730 E $--
U 239,001 U $--
Randall J. Hogan -- -- E 24,999 E $--
U 78,001 U $--
Joseph R. Collins 22,400 $123,200 E 66,473 E $--
U 106,901 U $--
Richard J. Cathcart 22,400 $133,800 E 46,923 E $--
U 57,001 U $--
David D. Harrison -- -- E -- E $--
U 60,000 U $--
16
LONG-TERM INCENTIVE PLAN AWARDS
The following table reflects incentive compensation unit (ICU) awards made
under the Omnibus Plan during 2000 to the Chief Executive Officer and the
executive officers named in the Summary Compensation Table above.
Long-Term Incentive Plan Awards in 2000
Estimated Future Payouts
Number of Performance or Under Non-Stock Price
Shares, Units Other Period Based Plans
or Other Until Matura- -------------------------------------
Name Rights tion or Payout Threshold Target Maximum
- ---- ------------- -------------- --------- ------ -------
Winslow H. Buxton 284,400 units 3 years $ 0 $492,012 $1,353,744
Randall J. Hogan 289,600 units 3 years $ 0 $501,008 $1,378,496
Joseph R. Collins 289,600 units 3 years $ 0 $501,008 $1,378,496
Richard J. Cathcart 176,600 units 3 years $ 0 $305,518 $ 840,616
David D. Harrison 163,600 units 3 years $ 0 $283,028 $ 778,736
The ultimate payout value of each ICU is determined based on the Company's
operating income (OI) growth and return on invested capital (ROIC) averaged over
the three-year period. The target payout shown in the table is based on annual
OI growth of 10% and annual ROIC of 20% which results in a value per ICU of
$1.73. If over the three-year period there is no OI growth or ROIC is less than
15%, the value per ICU will be $0. The maximum value per ICU is $4.76. The
following matrix shows the ICU values based on the OI growth and ROIC.
OPERATING INCOME (OI) GROWTH
RETURN ON INVESTED -------------------------------------------------------------------
CAPITAL (ROIC) 0% 2% 6% 10% 12% 20% 30%
- ------------------ -------------------------------------------------------------------
15% 0.13 0.14 0.18 0.22 0.24 0.33 0.46
16% 0.44 0.47 0.53 0.60 0.64 0.79 1.00
18% 0.96 1.01 1.12 1.23 1.29 1.54 1.89
19% 1.17 1.23 1.36 1.49 1.56 1.86 2.27
20% 1.37 1.44 1.58 1.73 1.81 2.15 2.61
30% 2.61 2.73 2.98 3.24 3.38 3.96 4.76
RETIREMENT BENEFIT PLANS
The Company maintains a tax-qualified defined benefit pension plan covering
substantially all nonbargaining U.S. employees and an excess benefit plan
covering highly-paid employees. Benefits under each plan are based on a
participant's high five year average eligible earnings which generally include
salary and bonus.
The Company maintains an unfunded, nonqualified Supplemental Executive
Retirement Plan (SERP) for corporate officers and subsidiary presidents. The
annual retirement benefit payable under the SERP at age 65 is equal to 50% of
the participant's high three year average eligible earnings reduced by 100% of
the annual primary Social Security benefit and further reduced by age 65
benefits payable under qualified pension plans sponsored by the Company and
previous employers of the participant.
Effective January 1, 1999 the Company amended the SERP to provide an annual
retirement benefit which, expressed as a lump sum, is equal to the product of 15
percentage points for each year of service times the high five year average
eligible earnings with no reductions for Social Security or qualified pension
benefits. SERP benefits are payable as early as the attainment of age 55 and
completion of five years of service in the new plan and are converted into and
received in the form of a term certain or joint and survivor annuity. Five SERP
participants are grandfathered under the old SERP formula (including named
executive officers Buxton and Collins).
The following estimated aggregate amounts are payable, from the qualified
pension, excess plan and SERP, annually upon retirement to the named executive
officers over their lifetime: Buxton $761,254; Collins $389,723; Hogan $403,195;
Cathcart $332,045; Harrison $298,601.
17
CHANGE IN CONTROL ARRANGEMENTS
Approximately 20 key corporate executives and business unit leaders
(including the executive officers) have entered into agreements with the Company
that provide for contingent benefits in the event of a change in control of the
Company (except in certain very limited circumstances). Such benefits include:
a. bonus awards for the year in question to be made under the Management
Incentive Plan;
b. immediate vesting of all unvested stock options, termination of all
restrictions on shares issued under the Omnibus Plan, and payment for
ICU's and performance units without regard to the plans' forfeiture
provisions;
c. reimbursement of any excise taxes triggered by payments to the
executive;
d. the cost of an executive search agency;
e. directors and officers liability insurance coverage;
f. short-term replacement coverage for Company-provided group medical,
dental, and life insurance policies;
g. amount of non-vested benefits under any of the Company's tax-qualified
deferred compensation plans;
h. the accelerated accrual and vesting of benefits under the Supplemental
Executive Retirement Plan (for those executives who have been made
participants of such plan); and
i. severance pay equal to 300% (for the CEO and COO), 250% (for the
Company's other executive officers and business unit presidents) or
200% (for all other applicable executives) of annual compensation;
j. guaranteed salary, benefit and bonus levels for continuing employees
for up to a three-year period; and
k. reimbursement of the executive's legal expenses in the event of a
dispute with the Company arising out of the agreement.
In addition, the Omnibus Plan permits the Compensation and Human Resource
Committee, upon a change in control of the Company, to cancel all outstanding
options granted under the plan, whether or not exercisable, and authorize
payment of the "spread" between the exercise price of the options and the then
current market value of the underlying stock. The agreement requires the
executive to devote his or her best efforts to the Company or its successor
during the three-year period, to maintain the confidentiality of Company
information during and following employment and to refrain from competitive
activities for a period of one year following termination of employment with the
Company or its successor.
REPORT OF THE AUDIT AND FINANCE COMMITTEE OF THE BOARD OF DIRECTORS
The Audit and Finance Committee of the Board of Directors is responsible
for selecting auditors, ensuring the fiscal integrity of the Company and
establishing and reviewing internal controls. The Audit Committee adopted a
Charter of its responsibilities on February 23, 2000, which is attached as
Appendix 1 to this Proxy Statement. The Audit and Finance Committee is comprised
of the following directors:
Name of Director Term Expires Director Since
---------------- ------------ --------------
Karen E. Welke, Chair 2004* 1995
Stuart Maitland 2002 1999
Augusto Meozzi 2002 1999
*subject to reelection at the Annual Meeting
In accordance with the recently adopted SEC and NYSE standards for
independence of audit committee members, the Board of Directors considers all of
the members of the Audit and Finance Committee to be independent. None of the
members of the Audit and Finance Committee were officers or employees of the
Company during or prior to 2000, or had a relationship with the Company that
would, in the opinion of the Board of Directors, interfere with the
18
exercise of his or her independence from management and the Company. All of the
members of the Audit and Finance Committee have substantial experience in
financial matters and business operations.
The Audit and Finance Committee has (i) reviewed and discussed the
Company's audited financial statements with management; (ii) discussed with the
Company's independent auditors, Deloitte & Touche LLP, the matters required to
be discussed by Statement on Auditing Standards No. 61; (iii) received from the
auditors disclosures regarding the auditors' independence in accordance with
Independence Standards Board Standard No. 1 and discussed with the auditors the
auditors' independence; and (iv) considered whether the level of non-audit
services provided by Deloitte & Touche LLP is compatible with maintaining the
independence of its auditors.
During fiscal year 2000, Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their affiliates, provided various audit,
audit-related and non-audit services to the Company as follows:
a) Audit Fees:
Aggregate fees billed for professional services rendered for the audit
of the Company's 2000 annual financial statements and review of
financial statements in the Company's Form 10-Q Reports were $587,000.
b) Financial Information Systems Design and Implementation Fees:
Aggregate fees billed for services rendered during 2000 were $0.
c) All Other Fees:
All other fees for 2000, principally consisting of fees for tax
consulting, internal audit outsourcing and other services were
$4,213,000.
Based on the review and discussions described above, the Audit and Finance
Committee recommended to the Board of Directors that the Company's audited
financial statements for the year ended December 31, 2000 be included in the
Company's 2000 Annual Report on Form 10-K for filing with the SEC. In addition,
the Audit and Finance Committee, through its Chair, reviewed the Company's
quarterly results prior to public release.
Karen E. Welke, Chair Stuart Maitland Augusto Meozzi
Audit and Finance Committee of the Pentair, Inc. Board of Directors
FUTURE PROPOSALS
The deadline for submitting a shareholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2002 Annual
Meeting of Shareholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is November 19, 2001. Unless a shareholder who wishes to bring a
matter before the shareholders at the Company's 2002 Annual Meeting notifies the
Company of such matter prior to February 2, 2002, the persons named in the proxy
for the 2002 Annual Meeting will have discretionary authority to vote for or
against or to abstain from voting on such proposal in accordance with their best
judgment, if the proposal is actually presented at the meeting. Such proposals
also must comply with the requirements of the Securities and Exchange Commission
and the Company's bylaws. Any shareholder proposal should be sent to the Company
at its principal executive offices: 1500 County Road B2 West, Saint Paul,
Minnesota 55113, Attention: Secretary.
With respect to nomination of directors, sections 9 through 12 of Article II
of the By-Laws provide that a candidate may not be nominated for election as a
director at the Annual Meeting of Shareholders unless the nomination was
previously submitted to the Board of Directors or the Nominating, Governance,
Public Policy and Share Rights Committee. A shareholder wishing to nominate a
candidate for director at an Annual Meeting of Shareholders must do so no later
than the sixtieth day after the end of the fiscal year preceding the year in
which such Annual Meeting will be held. Nominations are deemed made when the
Secretary of the Company receives all of the following: (1) all information
about the nominee that may be required to be provided in any proxy statement
pursuant to the Securities Exchange Act of 1934 and regulations promulgated
thereunder; (2) an executed directors' questionnaire provided by the Company and
completed by the nominee; (3) the nominee's statement consenting to his or her
nomination and agreeing to serve, if elected; and (4) evidence that the person
making the nomination is a shareholder. After reviewing the submission, the
Board or the appointed Nominating, Governance, Public Policy and Share Rights
Committee may, but need not, designate one or more of the nominees to appear as
an alternate candidate on any proxy solicited by management or any proxy
statement furnished by management. The number
19
of such alternate candidates may not exceed the number of directors to be
elected at that Annual Meeting. Exclusion of any eligible candidate from a proxy
solicited by management does not affect the right of shareholders to nominate,
vote for, or elect such candidate at any shareholders meeting held within twelve
months after submission of the nomination material described above.
OTHER BUSINESS
Management does not know of any other business that will be presented for
consideration at the Annual Meeting; however, if any other business does
properly come before the Annual Meeting, proxies will be voted in accordance
with the best judgment of the person or persons acting under them.
20
Appendix 1
CHARTER OF RESPONSIBILITIES
FOR
AUDIT COMMITTEE
Of
Pentair, Inc.
Board of Directors
The Audit Committee (the "Committee") has been appointed by the Board of
Directors to assist the Board in supervising the financial and legal compliance
of the Company. The principal responsibility of the Committee is to monitor the
integrity of the financial statements of the Company and the independence and
performance of the Company's internal and external auditors. The Committee also
will work in cooperation with the Company's legal counsel to monitor compliance
with applicable legal requirements when the risk of non-compliance might have an
adverse impact on the Company's financial condition or results of operations.
The Committee shall consist of at least three directors, all of whom shall be
independent and financially literate, and at least one of whom shall possess
financial or accounting expertise, as determined by the Board of Directors. A
director shall be considered independent if he or she meets the requirements
established by the New York Stock Exchange for audit committee independence and
will submit an annual statement to the Board confirming compliance with these
independence requirements. The members of the Committee will be appointed by the
Board on the recommendation of the Nominating and Governance Committee.
The Committee shall have the authority to retain special legal, accounting or
other consultants to advise the Committee. The Committee may request any officer
or employee of the Company or the Company's outside counsel or independent
auditor to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee.
A. With regard to the Company's financial statements and accounting practices
and policies, the Committee shall:
* Meet with management to review the annual audited financial statements
and discuss major issues regarding accounting and auditing principles
and practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
* Review significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements.
* Review with management and the independent auditor the Company's
quarterly financial statements prior to the release of quarterly
earnings.
* Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
* Review major changes to the Company's accounting principles and
practices as suggested by the independent auditor, internal auditors
or management.
B. With regard to the independent certified public accountants (external
auditors) responsible for rendering opinions reflecting proper compliance
with generally accepted accounting principles and various financial
accounting standards, the Committee shall:
* Review and recommend to the Board the appointment or retention of an
independent auditor, which firm is ultimately accountable to the
Committee and the Board.
* Review and approve the independent auditor's audit plan including
scope, staffing, timing of work and audit fees.
* Ensure that the external auditors submit on a periodic basis to the
Committee a formal written statement delineating all relationships
between the auditors and the Company; actively engage in a dialogue
with the external auditors with respect to any disclosed relationships
or services that may impact the objectivity and independence of the
external auditors; and recommend that the Board of Directors take
appropriate action in response to the external auditors' report to
satisfy itself of their independence.
* Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
* Review independent auditor's letter reports regarding the Company's
internal controls and other observations and recommendations and
management's responses.
C. With regard to the Company's internal audit practices, the Committee shall:
* Perform a general oversight function assuring adequate competent staff
and sufficient internal control policies to ensure the integrity of
the Company's financial reporting process.
* Review the performance of the internal audit department.
* As appropriate, review significant reports to management prepared by
the internal audit department and management's responses.
D. The Committee shall also:
* Review and approve the report required by the rules of the Securities
and Exchange Commission to be included in the Company's annual proxy
statement regarding the activities of the Committee.
* Review with the Company's General Counsel legal matters that may have
a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received
from regulators or government agencies.
* Meet at least annually with the Company's financial management, the
senior internal audit staff and the independent auditor in separate
executive sessions, as needed.
* The Committee shall review and reassess at least annually the adequacy
of this Charter and recommend any proposed changes to the Board for
its review and approval and submit required certifications to the
appropriate exchanges.
While the Committee has the responsibilities and power set forth in this Charter
delegated to it by the Board, it is not the duty of the Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Committee, separate from the Board, to
conduct investigations, to resolve disagreements, if any, between management and
the independent auditor or to assure compliance with laws and regulations and
the Company's Code of Conduct.
[LOGO] PENTAIR
PLEASE SIGN AND RETURN PROMPTLY TO REDUCE SOLICITATION EXPENSES
PENTAIR, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 2001
The undersigned hereby appoints Randall J. Hogan and David D. Harrison, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of Pentair, Inc. held of record by the undersigned on
February 26, 2001 at the Annual Meeting of Shareholders of Pentair, Inc. to be
held at 10:00 a.m., Wednesday, April 25, 2001, at the Lutheran Brotherhood
Auditorium, 625 4th Avenue South, Minneapolis, Minnesota, and any adjournment
or adjournments thereof.
THE BOARD RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below except those I have struck by a line through
their names.
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Karen E. Welke William T. Monahan
2. APPROVAL OF THE INCREASE IN THE NUMBER OF
SHARES AVAILABLE FOR ISSUANCE UNDER
THE OMNIBUS STOCK INCENTIVE PLAN. [ ]FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED ON REVERSE SIDE)
(CONTINUED FROM REVERSE SIDE)
3. APPROVAL OF THE EXECUTIVE OFFICER PERFORMANCE PLAN
AS AMENDED AND RESTATED TO COMPLY WITH THE
REQUIREMENTS OF SECTION 162(M) [ ]FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO RATIFY the retention of Deloitte & Touche LLP
as independent public accountants for the current fiscal year.
[ ]FOR [ ] AGAINST [ ] ABSTAIN
5. To transact such other business as may properly come before the meeting or
any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY, BUT IF
THIS PROXY IS RETURNED SIGNED WITH NO DIRECTION MADE, THEY WILL BE VOTED "FOR"
EACH OF THE DIRECTORS AND PROPOSALS.
The undersigned hereby ratifies and confirms all that the Proxies shall
lawfully do or cause to be done by virtue hereof and hereby revokes all proxies
heretofore given to vote such shares.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PENTAIR, INC.
________________________________________________________________________________
Signature
________________________________________________________________________________
Signature if held jointly
Dated: __________________________________________________________________ , 2001
THIS CARD MUST BE DATED.
(Please sign exactly as your name appears to the left. When shares are held by
joint tenants, both should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.)
[LOGO] PENTAIR
PLEASE SIGN AND RETURN PROMPTLY
TO REDUCE SOLICITATION EXPENSES
PENTAIR, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PENTAIR, INC.
As a participant in the Pentair, Inc. International Employee Stock
Purchase and Bonus Plan (Plan), I hereby direct ABN AMRO Trust Company (Jersey)
Limited as Trustee, to vote, as designated on the reverse side, at the Annual
Meeting of Shareholders of Pentair, Inc. to be held at 10:00 a.m., Wednesday,
April 25, 2001, at the Lutheran Brotherhood Auditorium, 625 4th Avenue South,
Minneapolis, Minnesota, and any adjournment or adjournments thereof, all shares
of Common Stock of Pentair, Inc. allocated to my account in the Plan as of
February 26, 2001. I understand that this card must be received by Wells Fargo
Bank Minnesota, N.A., acting as tabulation agent for the Trustee, by April 18,
2001.
SEE REVERSE FOR VOTING INSTRUCTIONS.
---------------------------
COMPANY #
CONTROL #
---------------------------
THERE ARE TWO WAYS TO VOTE YOUR PROXY
YOUR VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/PNR/ -- QUICK *** EASY *** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. on April 24, 2001.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Pentair, Inc., c/o Shareowner Services(sm), P.O.
Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
THE BOARD RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
1. ELECTION OF DIRECTORS: 01 Karen E. Welke
02 William T. Monahan
[ ] FOR all [ ] WITHHOLD AUTHORITY
nominees listed to vote for all
(except as marked) nominees listed
(INSTRUCTIONS: TO WITHHOLD AUTHORITY -----------------------------
TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S)
IN THE BOX PROVIDED TO THE RIGHT.) -----------------------------
2. APPROVAL OF THE INCREASE IN THE NUMBER OF SHARES AVAILABLE
FOR ISSUANCE UNDER THE OMNIBUS STOCK INCENTIVE PLAN [ ] For [ ] Against [ ] Abstain
3. APPROVAL OF THE EXECUTIVE OFFICER PERFORMANCE PLAN AS
AMENDED AND RESTATED TO COMPLY WITH THE REQUIREMENTS OF
SECTION 162(M) [ ] For [ ] Against [ ] Abstain
4. PROPOSAL TO RATIFY the retention of Deloitte & Touche LLP as
independent public accountants for the current fiscal year. [ ] For [ ] Against [ ] Abstain
5. To transact such other business as may properly come before the meeting or
any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY, BUT IF
THIS PROXY IS RETURNED SIGNED WITH NO DIRECTION MADE, THEY WILL BE VOTED "FOR"
EACH OF THE DIRECTORS AND PROPOSALS.
The undersigned hereby ratifies and confirms all that the Proxies shall
lawfully do or cause to be done by virtue hereof and hereby revokes all proxies
heretofore given to vote such shares.
Address Change? Mark Box [ ] Indicate changes below:
Date ____________________, 2001
THIS CARD MUST BE DATED.
-----------------------------
-----------------------------
Signature(s) in Box
(Please sign exactly as your name appears to the left. When
shares are held by joint tenants, both should sign. When
signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by an authorized person.)
[LOGO] PENTAIR
PLEASE SIGN AND RETURN PROMPTLY
TO REDUCE SOLICITATION EXPENSES
PENTAIR, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PENTAIR, INC.
The undersigned hereby appoints Randall J. Hogan and David D. Harrison, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated on the reverse
side, all the shares of Common Stock of Pentair, Inc. held of record by the
undersigned on February 26, 2001 at the Annual Meeting of Shareholders of
Pentair, Inc. to be held at 10:00 a.m. Wednesday, April 25, 2001, at the
Lutheran Brotherhood Auditorium, 625 4th Avenue South, Minneapolis, Minnesota,
and any adjournment or adjournments thereof.
Furthermore, if I am a participant in the Pentair, Inc. Employee Stock
Ownership Plan (Pentair ESOP) or the Federal-Hoffman Employee Stock Ownership
Plan (F-H ESOP), as appropriate, I hereby direct Fidelity Management Trust
Company as Pentair ESOP Trustee, or Wells Fargo Bank Minnesota, N.A. as F-H
ESOP Trustee, to vote at the Annual Meeting of Shareholders of Pentair, Inc. to
be held at 10:00 a.m., Wednesday, April 25, 2001, at the Lutheran Brotherhood
Auditorium, 625 4th Avenue South, Minneapolis, Minnesota, and any adjournment
or adjournments thereof, all shares of Common Stock of Pentair, Inc. allocated
to my account in the Pentair ESOP or F-H ESOP as of February 26, 2001. I
understand that this card must be received by Wells Fargo Bank Minnesota, N.A.,
acting as tabulation agent for the Pentair ESOP Trustee and F-H ESOP Trustee,
by April 18, 2001. If it is not received by that date, or if the voting
instructions are invalid because this form is not properly signed and dated,
the shares held in my account will be voted by Fidelity Management Trust
Company or Wells Fargo Bank Minnesota, N.A., as appropriate, in the same
proportion that the other participants direct them to vote shares allocated to
their accounts.
SEE REVERSE FOR VOTING INSTRUCTIONS.
---------------------------
COMPANY #
CONTROL #
---------------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY
CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 12:00 p.m. on April 24, 2001.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
o Follow the simple instructions the Voice provides you.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/PNR/ -- QUICK *** EASY *** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. on April 24, 2001.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to Pentair, Inc., c/o Shareowner Services-, P.O.
Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
THE BOARD RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
1. ELECTION OF DIRECTORS: 01 Karen E. Welke
02 William T. Monahan
[ ] FOR all [ ] WITHHOLD AUTHORITY
nominees listed to vote for all
(except as marked) nominees listed
(INSTRUCTIONS: TO WITHHOLD AUTHORITY -----------------------------
TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S)
IN THE BOX PROVIDED TO THE RIGHT.) -----------------------------
2. APPROVAL OF THE INCREASE IN THE NUMBER OF SHARES AVAILABLE
FOR ISSUANCE UNDER THE OMNIBUS STOCK INCENTIVE PLAN [ ] For [ ] Against [ ] Abstain
3. APPROVAL OF THE EXECUTIVE OFFICER PERFORMANCE PLAN AS
AMENDED AND RESTATED TO COMPLY WITH THE REQUIREMENTS OF
SECTION 162(M) [ ] For [ ] Against [ ] Abstain
4. PROPOSAL TO RATIFY the retention of Deloitte & Touche LLP as
independent public accountants for the current fiscal year. [ ] For [ ] Against [ ] Abstain
5. To transact such other business as may properly come before the meeting or
any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY, BUT IF
THIS PROXY IS RETURNED SIGNED WITH NO DIRECTION MADE, THEY WILL BE VOTED "FOR"
EACH OF THE DIRECTORS AND PROPOSALS.
The undersigned hereby ratifies and confirms all that the Proxies shall
lawfully do or cause to be done by virtue hereof and hereby revokes all proxies
heretofore given to vote such shares.
Address Change? Mark Box [ ] Indicate changes below:
Date ____________________, 2001
THIS CARD MUST BE DATED.
-----------------------------
-----------------------------
Signature(s) in Box
(Please sign exactly as your name appears to the left. When
shares are held by joint tenants, both should sign. When
signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by an authorized person.)