UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission File No. 0-4689
PENTAIR, INC.
(Exact name of Registrant as specified in its charter)
Minnesota 41-0907434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 County B2 West,
Suite 400 St. Paul, Minnesota 55113-3105
(Address of principal executive offices) (Zip Code)
(612) 636-7920
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares outstanding of Registrant's only class of
common stock on June 30, 1995 was 18,429,913.
<PAGE>
PENTAIR, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of
Results of Operations and Financial Condition
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signature Page
Exhibit Index
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PENTAIR, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
($ expressed in thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $672,039 $597,293 $338,216 $300,358
Operating costs:
Cost of goods sold 471,899 420,687 239,275 211,103
Selling, general
and administrative 144,297 129,236 72,326 64,323
Total operating costs 616,196 549,923 311,601 275,426
Operating income 55,843 47,370 26,615 24,932
Interest expense - net (9,843) (10,844) (4,077) (5,431)
Income from continuing
operations before
income taxes 46,000 36,526 22,538 19,501
Provision for
income taxes 18,800 14,663 9,189 7,566
Income from
continuing operations 27,200 21,863 13,349 11,935
Discontinued operations:
Income from operations
of discontinued Paper
Products and Joint Venture
segments (net of applicable
income taxes of $2,740 and
$637, and $1,841 and
($67), respectively) 4,566 1,062 3,067 (110)
Gain on sale of
discontinued operations
(less applicable
income taxes of
$7,734) 12,134 0 12,134 0
Net income 43,900 22,925 28,550 11,825
Preferred dividend
requirements 2,657 2,731 1,327 1,365
Earnings applicable
to common stock $41,243 $20,194 $27,223 $10,460
Earnings per share:
Primary -
Income from:
continuing operations $1.32 $1.04 $.64 $.57
discontinued operations .90 .06 .82 .00
Net Income $2.22 $1.10 $1.46 $.57
Diluted -
Income from:
continuing operations $1.27 $1.03 $.62 $.56
discontinued operations .79 .05 .72 .00
Net Income $2.06 $1.08 $1.34 $.56
Weighted average
common and common
equivalent shares:
Primary 18,584 18,376 18,616 18,380
Diluted 21,160 21,004 21,176 21,003
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PENTAIR, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
($ expressed in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents $32,271 $32,677
Accounts receivable - net 253,043 219,527
Notes receivable 99,426 0
Inventories
Finished goods 160,680 114,875
Work in process 42,050 41,283
Raw materials and supplies 42,011 36,929
Total inventory 244,741 193,087
Deferred income taxes 28,366 23,087
Other current assets 10,444 8,701
Net assets of
discontinued operations 0 240,136
Total current assets 668,291 717,215
Property, plant
and equipment 407,456 378,732
Less accumulated
depreciation 167,457 147,581
Property, plant and
equipment - net 239,999 231,151
Marketable securities -
insurance subsidiary 24,366 23,655
Goodwill - net 177,583 170,965
Other assets 18,374 18,156
TOTAL ASSETS $1,128,613 $1,161,142
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $76,129 $78,065
Compensation and other
benefits accruals 53,476 48,657
Income taxes 11,837 2,708
Accrued product claims
and warranties 24,729 24,324
Accrued expenses and
other liabilities 84,557 61,277
Current maturities of debt 4,529 3,566
Total current liabilities 255,257 218,597
Long-term debt 246,430 408,503
Other liabilities 17,461 17,944
Deferred income taxes 22,917 366
Pensions and other
retirement compensation 32,566 21,796
Postretirement medical and
other benefits 46,128 40,878
Reserves -
insurance subsidiary 24,444 21,084
Commitments and contingencies
Shareholders' equity
Preferred stock -
at liquidation value
Authorized: 2,500,000 shares
Outstanding:
1995 - 1,901,836 66,720 68,444
1994 - 1,953,243
Unearned compensation
relating to ESOP (23,368) (27,528)
Common stock -
par value, $.16 2/3
Authorized: 72,500,000 shares
Outstanding:
1995 - 18,429,913 3,072 3,041
1994 - 18,248,155
Additional paid-in capital 170,374 166,314
Cumulative translation
and pension adjustments 18,581 8,033
Retained earnings 248,031 213,670
Total shareholders'
equity 483,410 431,974
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $1,128,613 $1,161,142
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PENTAIR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
($ expressed in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30 June 30
1995 1994
Cash flows from operating activities
<S> <C> <C>
Net income $43,900 $22,925
Adjustment for
discontinued operations (16,700) (1,062)
Adjustments to reconcile net
income to cash provided
from operating activities
Depreciation 20,508 17,544
Amortization 3,166 2,852
Deferred income taxes (619) 1,786
Changes in assets and liabilities,
net of effects of acquisitions
and dispositions
Accounts receivable (33,516) (14,788)
Inventories (51,654) (24,138)
Accounts payable (1,936) (6,235)
Accrued compensation
and benefits 4,819 12,203
Income taxes (1,619) 697
Pensions and other
retirement compensation 10,770 10,354
Reserves - insurance
subsidiary 3,360 3,634
Other assets/
liabilities - net 9,139 1,848
Cash from
continuing operations (10,382) 27,620
Cash from
discontinued operations (525) 2,198
Cash from
operating activities (10,907) 29,818
Cash flows from investing activities
Capital expenditures (22,571) (21,655)
Purchase of marketable
securities - net (711) (236)
Proceeds from sale of
discontinued
operations 206,459 0
Acquisition - net of
cash acquired 0 (140,116)
Cash provided by
(used for) investing
activities -
continuing operations 183,177 (162,007)
Cash used for investing
activities -
discontinued operations 0 (11,566)
Cash provided by (used for)
investing activities 183,177 (173,573)
Cash flows from financing activities
Borrowings 24,621 158,235
Debt payments (196,863) (6,193)
Unearned ESOP
compensation decrease 4,160 2,220
Employee stock
plans and other 2,817 1,731
Dividends paid (9,989) (9,276)
Cash provided by
(used for) financing
activities -
continuing operations (175,254) 146,717
Cash used for financing
activities -
discontinued operations 0 0
Cash (used for) provided by
financing activities (175,254) 146,717
Effect of currency
exchange rate changes 2,578 4,298
Increase (decrease)
in cash and cash equivalents (406) 7,260
Cash and cash equivalents
- beginning of period 32,677 10,327
- end of period $32,271 $17,587
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PENTAIR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Accounting Policies.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the
year ended December 31, 1995.
These statements should be read in conjunction with the financial
statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994,
previously filed with the Commission.
Certain reclassifications have been made to prior year's financial
statements to conform to the current year presentation.
Note 2. Discontinued Operations.
On April 1, 1995 the company sold its Cross Pointe Paper
Corporation subsidiary for $203.3 million, of which $100 million
was received in cash and a promissory note due January 2, 1996
was given for the remainder. Effective May 1, 1995 the company
decided to report its Paper Products and Joint Venture segments
as discontinued operations. On June 30, 1995 the company sold
its Niagara of Wisconsin Paper Corporation, its 50% share of
Lake Superior Paper Industries (LSPI) joint venture and its 12%
share of Superior Recycled Fiber Industries (SRFI) for
approximately $103 million cash.
The gain on the sale was $12.1 million after income tax expense
of $7.7 million. The transaction added 57 cents to earnings per
share in 1995.
The prior year has been restated to include the company's former
paper businesses (Paper Products and Joint Venture segments)
as discontinued operations.
Summarized results of operations and financial position data of
discontinued operations were as follows:
Results of Operations
<TABLE>
<CAPTION>
Period Ended June 30
1995 1994
<S> <C> <C>
Net Sales $187.1 $183.9
Operating Income 27.2 4.4
Net Earnings 4.6 1.1
Gain on Sale 12.1 0.0
</TABLE>
Financial Position
<TABLE>
<CAPTION>
December 31, 1994
<S> <C>
Current assets $92.1
Net property, plant and equipment 179.8
Other assets 88.5
Current liabilities (67.1)
Other liabilities (53.2)
Net assets of
discontinued operations $240.1
</TABLE>
Note 3. Long-Term Debt.
The long-term debt is summarized as follows ($ millions):
<TABLE>
<CAPTION>
6/30/95 12/31/94
<S> <C> <C>
Revolving credit facilities:
US $ revolvers $14 $157
DM revolvers 96 74
Private placement debt 125 160
Other 16 23
TOTAL 251 414
Current maturities (5) (6)
Total long-term debt $246 $408
</TABLE>
Debt agreements contain various restrictive covenants, including
a limitation on the payment of dividends and certain other
restricted payments. Under the most restrictive covenants, $151
million of the June 30, 1995 retained earnings were unrestricted
for such purposes.
Note 4. Statement of Cash Flows - supplemental information.
The following is supplemental information relating to the
Statement of Cash Flows ($000's):
<TABLE>
<CAPTION>
Six Months
Ended June 30
1995 1994
<S> <C> <C>
Interest paid (net of
capitalized interest) $16,615 $15,294
Income tax payments 24,382 15,281
</TABLE>
Non-cash Items:
Gross amounts to be realized from the sale of the Paper Products
and Joint Venture segments are approximately $316 million. Of
this amount $206 million was received in cash, a promissory note
was received for $100 million which is due January 2, 1996 and
the remainder is recorded as a miscellaneous account receivable.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
BUSINESS SEGMENT INFORMATION
Selected information for business segments for the six months ended
June 30, 1995 and 1994 follows ($ millions):
<TABLE>
<CAPTION>
General
Specialty Industrial General
Products Equipment Corporate Total
1995
<S> <C> <C> <C> <C>
Net Sales $228.3 $443.7 $0.0 $672.0
Operating Income 22.5 43.2 (9.9) 55.2
Identifiable Assets 237.0 703.4 188.2 1,128.6
Depreciation 6.2 14.3 0.0 20.5
Capital Expenditures 6.5 16.0 0.1 22.6
1994
Net Sales $216.3 $381.0 $0.0 $597.3
Operating Income 21.4 35.4 (9.4) 47.4
Identifiable Assets 209.0 621.2 288.4 1,118.6
Depreciation 4.5 13.0 0.0 17.5
Capital Expenditures 4.6 17.0 0.1 21.7
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
Consolidated Continuing Operations. Pentair reported income
from continuing operations of $27.2 million, or $1.27 per fully
diluted share, on consolidated net sales from continuing
operations of $672.0 million for the six months ended June 30,
1995. This represented a 24.4 percent increase in income from
continuing operations and a 12.5 percent increase in sales from
continuing operations over the first half of 1994. The first half
1994 income from continuing operations was $21.9 million, or
$1.03 per fully diluted share, on consolidated net sales from
continuing operations of $597.3 million.
Specialty Products Segment. Net sales increased $12.0 million
or 5.6% and operating income increased $1.2 million or 5.5%.
The increases reflect further expansion into major home center
distribution channels, tempered somewhat by a general economic
slowing of retail sales activity in the second quarter. Order rates,
supported by new product introductions, remain strong in this
segment.
General Industrial Equipment Segment. Sales increased $62.7
million or 16.5% and operating income increased $7.7 million or
21.8%. Hoffman and Schroff were major contributors to the
increased sales and operating income for the first half of 1995.
Electrical and electronic enclosure sales continued strong into
1995, assisted by the strength in durable goods spending in both
the United States and Western European markets. Sporting
ammunition sales and margins were down due to a less favorable
product mix, competitive pricing pressures, and higher raw
material costs. The Lincoln group of companies continued their
strong recovery with year to year sales up 13% and operating
income up 121%. Reported sales in this segment were increased
by $18-20 million due to the year to year strengthening of the
Deutsche mark relative to the US dollar. However, foreign
exchange rates had no material effect on the operating income of
this segment.
Discontinued Operations. Results from the Paper Products and
Joint Venture segments have been restated as discontinued
operations. See Note 2 to the financial statements for details of
these discontinued operations.
Interest Expense. Interest expense for continuing operations was
$1.0 million lower than the same period in the prior year. The
reduction in interest expense was primarily the result of reduced
allocations of interest costs in connection with a reduction of debt
via the proceeds received from the sale of Cross Pointe Paper
Corporation in early April 1995.
FINANCIAL CONDITION
Through the first half of 1995, increases in accounts receivable
due to increased sales volume, combined with seasonal and
temporary build-ups of finished goods inventories resulted in
negative cash from continuing operations of $10.4 million,
compared to a positive cash from continuing operations of $27.6
million in the same period of the prior year.
Capital expenditures of continuing operations for the first six
months were $22.6 million in 1995 and $21.7 million in 1994.
The percentage of long-term debt to total capital was reduced to
34% at June 30, 1995 compared to 49% at December 31, 1994,
largely due to the use of proceeds from the disposition of the
paper businesses to pay down outstanding debt. As a result,
substantially all of the US$ revolving credit facilities and the $35
million portion of the private placement debt that was to mature
in June 1996 was paid down. The average interest rate on the
redeemed debt was 8.81%. A make-whole premium of
approximately $950,000 was required to be paid to redeem the
private placement debt. The average interest rate on the
remaining private placement debt of $125 million is 7.31%.
Management believes that cash flows from continuing operations
will be positive by the end of 1995. The company's continuing
operations should generate sufficient cash from operations to
provide for their recurring capital needs. Capital expenditures of
continuing operations are expected to be about $70 million in
1995 as compared to $57.8 million in 1994.
Credit available under revolving credit facilities is adequate to
provide for working capital, capital expenditure, and acquisition
requirements.
OUTLOOK
In general, the Company is strong and well-positioned to continue
its growth. Given a continued steady GNP growth in the United
States and Europe, the company expects to continue to grow
sales and earnings of its continuing businesses in 1995.
With the completion of the paper business sales on June 30, the
company became entirely a diversified manufacturer of industrial
products. The performance of the company will be less
influenced by economic cycles, and capable of returning
consistent value in both the near and long term.
With its strengthened capital structure, the company has
sufficient resources to pursue both internal and external
expansion into profitable industrial business segment
opportunities.
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
Federal-Hoffman, Inc. Federal Cartridge, a division of Federal-Hoffman, Inc.,
and 79 manufacturers, distributors and retailers of
ammunition and/or firearms were sued in July 1995 by a private
environmental group pursuant to California Health and Safety
Code Section 25249 (Proposition 65) and the Business and
Professions Code Section 17200. Basic information concerning
this matter was previously reported in the Company's Form 10-K
for the year ending December 31, 1994. The lawsuit alleges
violations of California law arising from exposure to lead from the
discharge or cleaning of firearms. Claims have been made for
injunctive relief, statutory penalties and attorneys fees. Based on
the information currently known, the Registrant believes that this
matter is unlikely to result in material liability.
ITEM 2 - Changes in Securities
On July 21, 1995, the Board of Directors of Pentair, Inc. (the
"Company") declared a dividend of one common share purchase
right (a "Right") for each outstanding share of common stock, par
value $.16-2/3 per share (the "Common Shares"), of the
Company. The dividend is effective July 31, 1995 for
shareholders of record on such date (the "Record Date"). Each
Right entitles the registered holder to purchase from the Company
one Common Share at a price of $160.00 per Common Share,
subject to adjustment (the "Purchase Price"). The description
and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and Norwest Bank
Minnesota, National Association, as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated
persons (other than the Company, a subsidiary of the Company
or an employee benefit plan of the Company or a subsidiary) (an
"Acquiring Person") has acquired beneficial ownership of 15% or
more of the outstanding Common Shares (the "Shares Acquisition
Date") or (ii) 10 business days (or such later date as may be
determined by action of the Company's Board of Directors prior
to such time as any person becomes an Acquiring Person)
following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or
group (other than the Company, a subsidiary of the Company or
an employee benefit plan of the Company or a subsidiary) of 15%
or more of such outstanding Common Shares (the earlier of such
dates being called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share
certificate.
The Rights Agreement provides that, until the Distribution Date,
the Rights will be transferred with and only with the Common
Shares. Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Common Share certificates issued
after the Record Date, upon transfer or new issuance of Common
Shares, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer
of any certificates for Common Shares, outstanding as of the
Record Date, even without such notation, will also constitute the
transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution
Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on July 31, 2005 (the "Final Expiration Date"),
unless the Rights are earlier redeemed or exchanged by the
Company, in each case, as described below.
The Purchase Price payable, and the number of Common Shares
or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Common Shares, (ii) upon
the grant to holders of the Common Shares of certain rights or
warrants to subscribe for or purchase Common Shares at a price,
or securities convertible into Common Shares with a conversion
price, less than the then current market price of the Common
Shares or (iii) upon the distribution to holders of the Common
Shares of evidences of indebtedness or assets (excluding regular
quarterly cash dividends or dividends payable in Common
Shares) or of subscription rights or warrants (other than those
referred to above).
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment
of at least 1% in such Purchase Price. No fractional shares will
be issued. In lieu thereof, an adjustment in cash will be made
based on the market price of the Common Shares on the last
trading day prior to the date of exercise.
The Purchase Price is payable by certified check, cashier's check,
bank draft or money order or, if so provided by the Company, the
Purchase Price following the occurrence of a Flip-In Event (as
defined below) and until the first occurrence of a Flip-Over Event
(as defined below) may be paid in Common Shares having an
equivalent value.
In the event that any person becomes an Acquiring Person (a
"Flip-In Event"), the holders of Rights will thereafter have the right
to receive upon exercise that number of Common Shares (or, in
certain circumstances cash, property or other securities of the
Company or a reduction in the Purchase Price) having a market
value of two times the then current Purchase Price.
Notwithstanding any of the foregoing, following the occurrence of
a Flip-In Event all Rights will be null and void to the extent they
are, or (under certain circumstances specified in the Rights
Agreement) were, or subsequently become beneficially owned by
an Acquiring Person, related persons and transferees.
In the event that, at any time following the Shares Acquisition
Date, (i) the Company is acquired in a merger or other business
combination transaction or (ii) 50% or more of its consolidated
assets or earning power are sold (the events described in clauses
(i) and (ii) are herein referred to as "Flip-Over Events"), proper
provision will be made so that the holders of Rights will thereafter
have the right to receive, upon the exercise thereof at the then
current Purchase Price, that number of shares of common stock
of the acquiring company which at the time of such transaction
will have a market value of two times the then current Purchase
Price.
At any time after a person becomes an Acquiring Person and
prior to the acquisition by such Acquiring Person of 50% or more
of the outstanding Common Shares, the Board of Directors of the
Company may exchange the Rights (other than Rights owned by
such Acquiring Person which have become void), in whole or in
part, at an exchange ratio of one Common Share (or of a share
of a class or series of the Company's preferred stock having
equivalent rights, preferences and privileges) per Right (subject
to adjustment).
At any time prior to the close of business on the tenth day
following the Shares Acquisition Date, the Board of Directors of
the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on
such basis and with such conditions as the Board of Directors in
its sole discretion may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Other than the Redemption Price, the Purchase Price and the
Final Expiration Date, the terms of the Rights may be amended
by the Board of Directors of the Company without the consent of
the holders of the Rights, including an amendment to lower the
threshold for exercisability of the Rights from 15% to 10%, with
appropriate exceptions for any person then beneficially owning a
percentage of the number of Common Shares then outstanding
equal to or in excess of the new threshold, except that from and
after the Distribution Date no such amendment may adversely
affect the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Company, including, without
limitation, the right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration
Statement on Form 8-A12G filed with respect to the Rights. A
copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference
to the Rights Agreement, which is hereby incorporated herein by
reference.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are included with this Form
10-Q Report as required by Item 601 of Regulation S-K.
Exhibit Description
Number
3.1 Restated Articles of Incorporation of Pentair, Inc.
as amended through April 19, 1995
3.2 Second Amended and Superseding Bylaws of Pentair, Inc.
as amended through July 21, 1995
4.1 Rights Agreement dated as of July 21, 1995 between
Norwest Bank Minnesota, N.A. and Pentair, Inc.
11 Calculation of Earnings per Common and Common
Equivalent Share
(b) Reports on Form 8-K.
A report on Form 8K was filed on April 17, 1995 disclosing the
completion of the sale of Cross Pointe Paper Corporation to
Noranda Forest, Inc.
A report on Form 8K/A (Amendment to form 8K which was filed
on April 17, 1995) was filed on May 30, 1995 disclosing the
proforma financial information of the Pentair, Inc. excluding the
Paper Products and Joint Venture segments which were
classified as discontinued operations as of May 1, 1995. The
filing also announced the proposed disposition on June 30, 1995
of the company's Niagara of Wisconsin Paper subsidiary and the
disposition of the company's shares in its paper-related joint
ventures Lake Superior Paper Industries and Superior Recycled
Fiber Industries.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
/s/ David D. Harrison
Senior Vice President and
Chief Financial Officer
August 11, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Number
3.1 Restated Articles of Incorporation of Pentair, Inc.
as amended through April 19, 1995
3.2 Second Amended and Superseding Bylaws of Pentair, Inc.
as amended through July 21, 1995
4.1 Rights Agreement dated as of July 21, 1995 between
Norwest Bank Minnesota, N.A. and Pentair, Inc.
11 Calculation of Earnings per Common and
Common Equivalent Share
RESTATED ARTICLES OF INCORPORATION
OF PENTAIR, INC. ADOPTED ON
SEPTEMBER 4, 1981
As Amended Through April 19, 1995
All Such Amendments Are
Specifically Identified
ARTICLE I.
The name of this Corporation shall be PENTAIR, INC.
ARTICLE II.
The duration of this Corporation shall be perpetual.
ARTICLE III.
Section 1. This Corporation has general business
purposes.
Section 2. In amplification but not in limitation of
the provisions and legal effect of Section 1 hereof or
of any other provision in these Articles, and in
amplification but not in limitation of the purposes,
powers and authority this Corporation would have in
the absence from these Articles of this Section 2
hereof, the nature of the business, or objects or
purposes to be transacted, promoted or carried on are:
to manufacture, purchase or otherwise dispose of, and
to deal generally in and with paper and paper products
and related products, of every type and description;
to manufacture, purchase or otherwise acquire, invest
in, own, mortgage, sell, assign and transfer, or
otherwise dispose of, trade, deal in and deal with
goods, wares and merchandise and personal property of
every class and description; to carry on any other
business in connection with any one or more of the
foregoing purposes; and to do any and all acts and
things necessary or convenient to accomplish or
implement any one or more of the foregoing purposes.
ARTICLE IV.
This Corporation shall have all the powers granted to
private corporations organized for profit by said
Minnesota Business Corporation Act and, in
furtherance, and not in limitation, of the powers
conferred by the laws of the State of Minnesota upon
corporations organized for the foregoing purposes, the
Corporation shall have the power:
(a) To issue bonds, debentures or other
obligations of the Corporation, and to
contract indebtedness without limit as to
amount for any of the objects and purposes
of the Corporation, and to secure the same
by mortgage or mortgages, deed or deeds of
trust, or pledge, or lien, or any or all
of the real or personal property, or both,
of the Corporation.
(b) To acquire, hold, mortgage, pledge or
dispose of the shares, bonds, securities
or other evidences of indebtedness of the
United States of America or of any
domestic or foreign corporation, and while
the holder of such shares, to exercise all
the privileges of ownership, including the
right to vote thereon, to the same extend
as a natural person might or could do, by
the president of this Corporation or by
proxy appointed by him, unless some other
person, by resolution of the Board of
Directors, shall be appointed to vote such
shares.
(c) To purchase or otherwise acquire on such
terms and in such manner as the By-Laws of
this Corporation from time to time
provide, and to own and hold, shares of
the capital stock of this Corporation, and
to reissue the same from time to time.
(d) When and as authorized by the vote of the
holders of not less than a majority of the
shares entitled to vote, at a
shareholders' meeting called for that
purpose or when authorized upon the
written consent of the holders of a
majority of such shares, to sell, lease,
exchange, or otherwise dispose of all, or
substantially all, of its property and
assets, including its good will, upon such
terms and for such considerations, which
may be money, shares, bonds, or other
instruments for the payment of money or
other property, as the Board of Directors
deems expedient or advisable.
(e) To acquire, hold, lease, encumber, convey
or otherwise dispose of, either alone or
in conjunction with others, real and
personal property within or without the
state; and to take real and personal
property by will or gift.
(f) To acquire, hold, take over as a going
concern and thereafter to carry on,
mortgage, sell or otherwise dispose of,
either alone or in conjunction with
others, the rights, property and business
of any person, entity, partnership,
association, or corporation heretofore or
hereafter engaged in any business, the
purpose of which is similar to the
purposes set forth in Article III of these
Articles of Incorporation.
(g) To enter into any lawful arrangement for
sharing of profits, union of interest,
reciprocal association, or cooperative
association with any corporation,
association, partnership, individual, or
other legal entity, for the carrying on of
any business, the purpose of which is
similar to the purposes set forth in
Article III of these Articles of
Incorporation, and, insofar as it is
lawful, to enter into any general or
limited partnership, the purpose of which
is similar to such purposes.
ARTICLE V.
An agreement for consolidation or merger with one or
more foreign or domestic corporations may be
authorized by vote of the shareholders entitled to
exercise at least two-thirds of the shares entitled to
vote unless the necessary affirmative vote to
authorize any particular merger or consolidation is
reduced by the Board of Directors, which reduction
shall be to not less than a majority of the shares
entitled to vote.
ARTICLE VI.
The location and post office address of the registered
office of this Corporation shall be Rosedale Towers,
1700 West Highway 36, St. Paul, Minnesota.
ARTICLE VII. (As Amended through April 19, 1995)
The aggregate number of shares which this Corporation
shall have authority to issue is 125,000,000 shares,
of which not more than 15,000,000 shares shall be
"Preferred Shares."
a. All classes of Preferred and Common shares
may be issued as and when and for such
consideration as the Board of Directors
shall determine, and, to the full extent
permitted by the Minnesota Business
Corporation Act, the Board of Directors
shall have the power to establish any
classes or series of Preferred Shares or
Common Shares, with such par value, rights
and priorities it deems appropriate, and
to fix or alter, from time to time, in
respect of any Preferred Shares then
unissued, the rights and preferences of
such shares, including without limitation,
any or all of the following: dividend
rate and dividend cumulation rights;
voting rights; redemption rights and
price; liquidation rights and price;
conversion rights and sinking or purchase
fund rights; or the number of shares
constituting any class or series. The
Board of Directors shall also have the
power to fix the terms and provisions of
options, rights and warrants to purchase
or subscribe for shares of any class or
classes and to authorize the issuance
thereof. Dividends payable in shares of
any class may be paid to shareholders of
any other class as and when determined by
the Board of Directors.
b. The voting rights of the shares of this
Corporation shall be vested in the holders
of all shares presently outstanding, with
one vote per share. The voting rights of
unissued shares shall be fixed by the
Board of Directors, but no such share
shall be entitled to more than one vote.
No holder of any shares shall be entitled
to any cumulative voting rights.
c. No shareholder of this Corporation shall
have any pre-emptive right to subscribe
for or purchase any shares of any class or
series of the Corporation, whether now or
hereafter established or authorized, or
any securities or obligations convertible
into any such shares, or any options or
warrants or rights to purchase any such
shares.
ARTICLE VIII. (As Amended on April 22, 1986)
Section 1. If any person has become an Acquiring
Person as defined in Section 2, each holder of Voting
Shares, other than the Acquiring Person or a
transferee of the Acquiring Person, until and
including the ninetieth day following the date the
notice to holders of Voting Shares referred to in
Section 3 herein is mailed, shall have the right to
have the Voting Shares held by such holder redeemed by
the Corporation at the Redemption Price determined as
provided in Section 4 herein, and each holder of
securities convertible into Common Shares or of
options, warrants, or rights exercisable to acquire
Common Shares prior to such ninetieth day, other than
the Acquiring Person or a transferee of the Acquiring
Person, shall have the right simultaneously with the
conversion of such securities or exercise of such
options, warrants, or rights to have the Common Shares
to be received thereupon by such holder redeemed by
the Corporation at the Redemption Price; provided that
no holder of Voting Shares shall have any right to
have Voting Shares redeemed by the Corporation
pursuant to this Article if the Corporation acting
through a majority of its Board of Directors shall
either (a) recommend to the holders of Voting Shares
that a pending tender offer be accepted by the holders
of Voting Shares or (b) if no tender offer is pending
it announces that it does not oppose any accumulation
of shares by an Acquiring Person; provided, however,
that such recommendation or announcement is made
within ten days following either (i) the announcement
or publication of such tender offer made by an
Acquiring Person, (ii) any amendment to such tender
offer, (iii) a vote by shareholders of the Corporation
for approval of the acquisition of shares by the
Acquiring Person (iv) receipt by the Board of
Directors of credible notice that an Acquiring Person
exists, or (v) receipt by the Board of Directors of
credible notice that an Acquiring Person has increased
ownership of Voting Shares by more than three percent
(3%) of the Voting Shares outstanding.
Section 2. For purposes of this Article:
(a) The term "person" shall include an
individual, a corporation, partnership, trust or
other entity.
(b) An "Acquiring Person" shall be any
person who becomes the beneficial owner,
directly or indirectly, of more than twenty
percent (20%) of the voting shares outstanding
and becomes the beneficial owner, directly or
indirectly, of any additional Voting Shares
pursuant to a tender offer or otherwise or (ii)
becomes the beneficial owner, directly or
indirectly, of more than fifty percent (50%) of
the Voting Shares outstanding whether such
shares were acquired by market purchases, a
tender offer or otherwise.
(c) For the purpose of determining
whether a person is an Acquiring Person, such
person shall be deemed to beneficially own (i)
all Voting Shares with respect to which such
person has the capability to control or
influence the voting power in respect thereof
and (ii) all Voting Shares which such person has
the immediate or future right to acquire,
directly or indirectly, pursuant to agreements,
through the exercise of options, warrants or
rights or through the conversion of convertible
securities or otherwise; and all Voting Shares
which such person has the right to acquire in
such manner shall be deemed to be outstanding
shares, but Voting Shares which any other person
has the right to acquire in such manner shall
not be deemed to be outstanding shares.
(d) The term "Voting Shares" shall mean
such of the Common Shares and the Preferred
Shares of the Corporation as shall have been
granted voting rights.
(e) The acquisition of Voting Shares by
the Corporation or by any person controlling,
controlled by or under common control with the
Corporation shall not affect the right to have
Voting Shares redeemed pursuant to this Article.
(f) The right to have Voting Shares
redeemed pursuant to this Article shall attach
to such shares and shall not be personal to the
holder thereof.
(g) The term "tender offer" shall mean
an offer to acquire or an acquisition of Voting
Shares pursuant to a request or invitation for
tenders or an offer to purchase such shares for
cash, securities or any other consideration.
(h) The term "market purchases" shall
mean the acquisition of Voting Shares from
holders of such shares in privately negotiated
transactions or in transactions effected through
a broker or dealer.
(i) Subject to the provisions of Section
2(c) herein, "outstanding shares" shall mean
Voting Shares which at the time in question have
been issued by the Corporation and not
reacquired and held or retired by it or held by
any subsidiary of the Corporation.
Section 3. If Voting Shares are subject to redemption
in accordance with Section 1:
(a) Not later than sixty (60) days following
the date on which the Corporation receives credible
notice that any person has become an Acquiring Person,
the Corporation shall give written notice, by first
class mail, postage prepaid, at the addresses shown on
the records of the Corporation, to each holder of
record of Voting Shares (and to any other person known
by the Corporation to have rights to demand redemption
pursuant to Section 2 of this Article) as of a date
not more than seven (7) days prior to the date of the
mailing pursuant to this Section 3 and shall advise
each such holder of the right to have shares redeemed
and the procedure for such redemption.
(b) If the Corporation fails to give notice as
required by this Section 3, any holder entitled to
receive such notice may within twenty (20) days
thereafter serve written demand upon the Corporation
to give such notice. If within twenty (20) days after
the receipt of the written demand the Corporation
fails to give the required notice, such holder may at
the expense and on behalf of the Corporation take
such reasonable action as may be appropriate to give
notice or to cause notice to be given pursuant to this
Section 3.
(c) The Directors of the Corporation shall
designate a Redemption Agent, which shall be a
corporation or association (i) organized and doing
business under the laws of the United States or any
State, (ii) subject to supervision or examination by
Federal or State authority, (iii) having combined
capital and surplus of at least $20 million, and (iv)
having the power to exercise corporate trust powers.
(d) For a period of ninety (90) days from the
date of the mailing of the notice to the holders of
Voting Shares referred to in this Section 3, holders
of Voting Shares and other persons entitled to have
Voting Shares redeemed pursuant to this Article may,
at their option, deposit certificates representing all
or less than all Voting Shares held of record by them
with the Redemption Agent together with written notice
that the holder elects to have such shares redeemed
pursuant to this Article. Redemption shall be deemed
to have been effected at the close of business on the
day such certificates are deposited in proper form
with the Redemption Agent.
(e) The Corporation shall promptly deposit in
trust with the Redemption Agent cash in an amount
equal to the aggregate Redemption Price of all of the
Voting Shares deposited with the Redemption Agent for
purposes of redemption.
(f) As soon as practicable after receipt by
the Redemption Agent of the cash deposit by the
Corporation referred to in this Section 3, the
Redemption Agent shall issue its checks payable to the
order of the persons entitled to receive the
Redemption Price of the Voting Shares in respect of
which such cash deposit was made.
Section 4. (a) The Redemption Price shall be the
amount payable by the Corporation in respect of each
Voting Share with respect to which redemption has been
demanded pursuant to this Article and shall be the
greater amount determined on either of the following
bases, but in no event shall the Redemption Price be
less than the amount of shareholders' equity in
respect of each outstanding Voting Share as determined
in accordance with generally accepted accounting
principles and as reflected in any published report by
the Corporation as at the fiscal year quarter ending
immediately preceding the notice to shareholders
referred to in Section 3 herein:
(i) The highest price per Voting Share,
including any commission paid to brokers or
dealers for solicitation or whatever, at which
Voting Shares held by the Acquiring Person were
acquired pursuant to a tender offer regardless
of when such tender offer was made or were
acquired pursuant to any market purchase or
otherwise within eighteen months prior to the
notice to holders of Voting Shares referred to
in Section 3 herein. For purposes of this
subsection (i) if the consideration paid in any
such acquisition of Voting Shares consisted, in
whole or in part, of consideration other than
cash, the Board of Directors of the Corporation
shall take such action, as in its judgment it
deems appropriate, to establish the cash value
of such consideration, but such valuation shall
not be less than the cash value, if any,
ascribed to such consideration by the Acquiring
Person.
(ii) The highest sale price per Voting
Share for any trading day during the eighteen
months prior to the notice to holders of Voting
Shares referred to in Section 3 herein. For
purposes of this subsection (ii), the sale price
for any trading day shall be the last sale price
per Voting Share traded on the New York Stock
Exchange, any or other national securities
exchange or the National Market System or, if
Voting Shares are not then traded on the
foregoing, the mean of the closing bid and
asked price per Voting Share.
(b) The determination to be made pursuant to
this Section 4 shall be made by the Board of Directors
not later than the date of the notice to holders of
Voting Shares referred to in Section 3 herein. In
making such determination the Board of Directors may
engage such persons, including investment banking
firms and the independent accountants who have
reported on the most recent financial statements of
the Corporation, and utilize employees and agents of
the Corporation, who will, in the judgment of the
Board of Directors, be of assistance to the Board of
Directors.
(c) The determinations to be made pursuant to
this Section 4, when made by the Board of Directors
acting in good faith on the basis of such information
and assistance as was then reasonably available for
such purpose, shall be conclusive and binding upon the
Corporation and its shareholders, including any person
referred to in Section 2 herein.
(d) Notwithstanding the foregoing provisions
of this Section 4, each such holder of Voting Shares
shall have the right to have the Redemption Price to
be paid determined under and pursuant to the appraisal
provisions of the Minnesota Statutes then in effect.
Section 5. This Article may be amended or repealed
only by the affirmative vote of the holders of 85% of
each class of shares of the Corporation entitled to
exercise the voting power of the Corporation;
provided, however, that if no person holds more than
twenty percent (20%) of the Voting Shares and there is
no tender offer pending or threatened of which the
Board of Directors has credible notice, the necessary
vote for amendment or repeal may be reduced by the
Board of Directors to not less than the requirements
of Article XII of these Articles of Incorporation;
provided, further that no amendment or repeal adopted
after the notice to holders of Voting Shares referred
to in Section 3 herein shall affect any Voting Shares
theretofore or thereafter deposited with the
Redemption Agent for redemption under this Article
pursuant to such notice.
ARTICLE IX.
The amount of stated capital with which this
Corporation shall commence business will be at least
$1,000.
ARTICLE X.
Meetings of the shareholders, whether annual or
special, shall be held at the principal place of
business of the Corporation at such time and date as
may be fixed in the By-Laws, or at any other place
designated by the Board of Directors pursuant to the
By-Laws or consented to in writing by all of the
shareholders entitled to vote thereat.
ARTICLE XI.
Section 1. The business of this Corporation shall be
managed by a Board of Directors who shall be elected
at the annual meeting of the shareholders. The number
of directors shall be fixed from time to time by the
By-Laws but the number thereof shall never be less
than three. The directors are hereby divided into
three classes, each class to consist as nearly as may
be of one-third of the number of directors then
constituting the whole Board. The term of office of
those of the first class shall expire at the annual
meeting in 1977. The term of office of the second
class shall expire in 1978. The term of office of the
third class shall expire in 1979. At each annual
election commencing in 1977, the directors elected
shall be chosen for a full term of three years to
succeed those whose terms then expire. Vacancies on
the Board of Directors may be filled by the remaining
directors and each person so elected shall be a
director until his successor is elected at an annual
meeting of shareholders or at a special meeting duly
called therefor.
Section 2. The Board of Directors shall have all of
the powers of the Corporation, subject to such action
restricting said powers as may legally be taken from
time to time by the shareholders either at an annual
meeting or at a special meeting duly called therefor.
Section 3. The Board of Directors shall have
authority to make and alter By-Laws, subject to the
power of the shareholders to change or repeal such
By-Laws, provided, however, that the Board shall not
make or alter any By-Law fixing the number,
qualifications, or term of office of Directors.
Section 4. Any contract or other transaction between
the Corporation and one or more of its directors, or
between the Corporation and any corporation,
association or firm of which one or more of its
directors are shareholders, members, directors,
officers or employees, or in which they are
interested, shall be valid for all purposes,
notwithstanding the presence and participation of such
director or directors at the meeting of the Board of
Directors of the Corporation which acts upon or in
reference to such contract or transaction, if the
fact of such interest shall be disclosed or known to
the Board of Directors, and the Board of Directors
shall, nevertheless, authorize, approve and ratify
such contract or transaction by a vote of a majority
of the directors present, such interested director or
directors to be counted in determining whether a
quorum is present, but not to be counted in
calculating the majority necessary to carry such vote.
This section shall not be construed to invalidate any
contract or transaction which would otherwise be valid
under the laws applicable thereto.
Section 5. The annual meeting of the Board of
Directors shall be held immediately following the
annual meeting of the shareholders, and at the same
place.
Section 6. The names and post office addresses of the
directors at the time of adoption of these Restated
Articles of Incorporation are as follows:
John Baird
28210 Woodside Road
Excelsior, Minnesota 55331
Murray J. Harpole
2223 Marion Road
St. Paul, Minnesota 55113
George N. Butzow
421 Bushaway Road
Wayzata, Minnesota 55391
Quentin J. Hietpas
1853 Hillcrest Avenue
St. Paul, Minnesota 55116
Henry M. Conor
16351 South Hillcrest Ct.
Eden Prairie, Minnesota 55343
D. Eugene Nugent
4 Aspen Lane
North Oaks, Minnesota 55110
Kenneth L. Wallace
No. 2 Falmouth Lane
Bella Vista, Arkansas 72712
Section 7. (As Added on April 26, 1988) A Director
of this Corporation shall not be personally liable to
the Corporation or its shareholders for monetary
damages for breach of fiduciary duty as a Director,
except to the extent such exemption from liability or
limitation thereof is not permitted under Section
302A.251 of the Minnesota Statutes.
If Chapter 302A of the Minnesota Statutes hereafter is
amended to authorize the further elimination or
limitation of the liability of directors, then, in
addition to the limitation on personal liability
provided herein, the liability of a Director of the
Corporation shall be limited to the fullest extent
permitted by the amended Chapter 302A of the Minnesota
Statutes.
Any repeal or modification of this Section 7 by the
shareholders of the Corporation shall be prospective
only and shall not adversely affect any limitation of
the personal liability of a Director of the
Corporation existing at the time of such repeal or
modification.
ARTICLE XII.
These articles may be amended by resolution setting
forth such amendment or amendments adopted at any
meeting of the shareholders by the affirmative vote of
the holders of 60% of the voting power of all
shareholders entitled to vote, provided such amendment
or amendments shall not receive the negative vote of
the holders of more than 25% of the voting power of
all shareholders entitled to vote. Each share of
stock shall entitle the holder thereof to one vote.
ARTICLE XIII.
These Restated Articles of Incorporation supersede and
take the place of existing Articles of Incorporation
and all amendments thereto.
SECOND AMENDED AND SUPERSEDING
BY-LAWS
OF
PENTAIR, INC.
ADOPTED ON JANUARY 15, 1982
As Amended Through July 21, 1995
All Such Amendments Are Specifically Identified
ARTICLE I
Shareholders' Meetings
Section 1. Place of Meeting. The meetings of the
shareholders shall be held at the principal place of business of
the Corporation or at any other place designated by the Board of
Directors or consented to in writing by all of the shareholders
entitled to vote thereat.
Section 2. Annual Meeting. Each year, commencing in
1982, the annual meeting of shareholders shall be held on such
date after March 1 and prior to June 1 and at such place as the
Board of Directors shall select by appropriate resolution. This
meeting shall be the only regular meeting of the shareholders in
any one calendar year.
Section 3. Special Meetings. (Amended on July 21, 1995.)
Special meetings of the shareholders may be called for any
purpose or purposes at any time by:
(a) the Chief Executive Officer;
(b) the Chief Financial Officer;
(c) two or more members of the Board of Directors;
(d) the Chairman of the Board; or
(e) a shareholder or shareholders holding ten percent (10%)
or more of the voting power of all shares entitled to vote except
that a special meeting for the purpose of considering any action
to directly or indirectly facilitate or effect a business combination,
including any action to change or otherwise effect the
composition of the Board of Directors for that purpose, must be
called by twenty five percent (25%) or more of the voting power
of all shares entitled to vote. Any shareholder or shareholders
demanding a special meeting of shareholders in accordance with
the foregoing may demand a special meeting only by written
notice of demand given to the Chief Executive Officer or Chief
Financial Officer, which written notice shall set forth the specific
purposes of the meeting.
Section 4. Notice of Meeting. Written notice stating the
place, day and hour of the meeting, and in the case of a special
meeting, the purpose or purposes for which the meeting is called,
shall be mailed or personally delivered not less than ten days nor
more than sixty days prior to the date of the meeting, by the
Secretary, to each shareholder of record entitled to vote at such
meeting. Waiver by a shareholder of notice of a shareholders'
meeting, signed by him, whether before or after the time of such
meeting, or attendance at such meeting, shall be equivalent to
the giving of such notice. In case of adjournment of a meeting
from time to time, no further notice of the adjourned meeting shall
be necessary if an announcement is made at the meeting where
the adjournment is had, specifying the place, day and hour of the
adjourned meeting.
Section 5. Voting Rights. (Amended on April 21, 1987.)
Every holder of record, as provided below, of common stock or
preferred stock having voting rights shall be entitled to vote, in
person or by proxy executed in writing and delivered to the
Secretary at or before the meeting, and he shall be entitled to
such vote for each share of stock standing in his name as shall
be fixed by the Articles of Incorporation or by resolution of the
Board of Directors; provided that no revocable proxy shall be
voted if executed more than three years prior to the date of a
meeting. Except as may otherwise be provided by the Board of
Directors from time to time, only voting shareholders of record at
the close of business on a day ten days prior to the date of a
meeting shall be entitled to vote at such meeting.
Section 6. Quorum; Action by Shareholders.
(a) The presence, in person or by proxy, of the holders of a
majority of the shares entitled to vote at the meeting shall
constitute a quorum for the transaction of business. In the
absence of a quorum any meeting may be adjourned from time to
time. The shareholders present at a duly called or held meeting
may continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a
quorum.
(b) The shareholders shall take action by the affirmative vote
of the holders of a majority of the voting power of the shares
present at a meeting, except where the articles of incorporation
or statute shall otherwise provide.
ARTICLE II
Directors
Section 1. Number of Directors; Classification. (Amended
on April 23, 1991.) The business of the Corporation shall be
managed by a Board of not less than three (3) nor more than
fifteen (15) directors, who need not be shareholders of the
Corporation; and the decisions of the Board shall be by a majority
of the members present.
The Board of Directors has been divided into three classes, as
nearly equal in number as may be, with the terms of office for
each class staggered so that the term for only one class expires
each year. When the number of directors is changed, any newly
created directorships or decrease in directorships shall be
apportioned among the classes so as to make all classes as
nearly equal in number as possible. Such classification of any
newly created directorship shall be fixed by the Board.
Section 2. Tenure. At each annual meeting the
shareholders shall elect directors to fill the vacancies of such
directors whose terms have expired. Each newly elected director
shall hold office for a term expiring at the third succeeding annual
meeting or until his successor is elected and qualifies.
Section 3. Vacancies. (Amendment approved by Board on
July 20, 1990 and Ratified by Shareholders on April 23, 1991.)
Any vacancy occurring in the Board of Directors may be filled by
the affirmative vote of a majority of the remaining directors or by
election at a meeting of shareholders. Any director who is
elected to fill a vacancy by the remaining directors shall be
required to stand for election at the next regular or special
meeting of the shareholders, regardless of whether the class of
directors into which such director has been placed will otherwise
be elected at such meeting.
Section 4. Meetings of the Board; Notice. (Amended on
October 18, 1985.) The Board of Directors shall meet each year
immediately after the annual meeting of shareholders, at the
same place. No notice of any kind to either old or new members
shall be necessary for such annual meeting or for any regular
meeting of the directors fixed from time to time by resolution of a
majority of the Board of Directors. Other meetings of the Board
of Directors may be held upon three (3) days' written notice upon
the call of the Chairman, the Chief Executive Officer, President
or any directors. Notice may be waived in writing before or after
the time of such meeting, and attendance of a director at a
meeting shall constitute a waiver of notice thereof. Neither the
business to be transacted at, nor the purpose of, any meeting
need be specified in the notice of such meeting.
Section 5. Quorum. A majority of the directors shall
constitute a quorum for the transaction of business; provided,
however, that if any vacancies exist for any reason, the remaining
directors shall constitute a quorum for the filling of such
vacancies.
Section 6. Removal of Directors. (Amended on April 22,
1986.)
(a) A director may be removed by the Board at any time, but
only with good cause shown therefor, if (1) the director was
appointed by the board to fill a vacancy and shareholders have
not since such appointment elected directors in such director's
class; and (2) a majority of the other directors present
affirmatively vote to remove the director.
(b) Any one or all of the directors may be removed with good
cause shown therefor, at any meeting of the shareholders called
for that purpose, by the affirmative vote of 60% of the voting
power of the shares entitled to vote provided that removal is not
opposed by more than 25% of the voting power of the shares
entitled to vote.
(c) "Good cause" for the purpose of this section shall mean (i)
conviction of a crime involving moral turpitude, (ii) dishonesty in
dealings with the Corporation or with respect to its assets or (iii)
engaging in competition, directly or indirectly, with the
Corporation, usurping any corporate opportunity or advantage or
knowingly violating Section 302A.255 of Minnesota Statutes, as
amended, with respect to director conflicts of interest, without the
prior consent of the Board of Directors after complete disclosure
of all material facts with respect thereto.
(d) This section 6 may be amended or repealed at any annual
or special meeting of the shareholders by the affirmative vote of
the holders of 60% of the voting power of all shareholders
entitled to vote, provided such amendment or repeal shall not
receive the negative vote of the holders of more than 25% of the
voting power of all shareholders entitled to vote.
Section 7. Committee of Disinterested Persons.
(a) The board may establish a committee composed of two or
more disinterested directors or other disinterested persons to
determine whether it is in the best interests of the Corporation to
pursue a particular legal right or remedy of the Corporation and
whether to cause the dismissal or discontinuance of a particular
proceeding that seeks to assert a right or remedy on behalf of the
Corporation.
(b) For purposes of this Section 7, a director or other person
is "disinterested" if the director is not the owner of more than one
percent of the outstanding shares of, or a present or former
officer, employee, or agent of, the Corporation or of a related
corporation and has not been made or threatened to be made a
party to the proceeding in question.
(c) The committee, once established, is not subject to
direction, control, or termination by the Board. A vacancy on the
committee may be filled by a majority vote of the remaining
members. The good faith determinations of the committee are
binding upon the Corporation and its directors, officers and
shareholders. The committee's existence shall terminate upon
issuance of the final written report of its determinations.
(d) A disinterested person appointed to a committee so
established is deemed to be a director for the period of existence
of the committee but has no power to act as a director except in
conjunction with the activities of the committee.
Section 8. Executive Committee. (Adopted on April 26,
1983.) The Board of Directors may by resolution or resolutions,
passed by a majority of the total number of directors, designate
an Executive Committee of three directors, one of whom shall be
an executive of the Company (an "inside" board member) and
one of whom shall be independent of management (an "outside"
board member). The Board shall designate one member of this
Committee as Chairman. The Executive Committee shall not
have authority to alter or amend the By-Laws, but shall exercise
all other powers of the Board of Directors between the meetings
of said Board, except the power to fill vacancies in the Board and
in their own membership, which vacancies shall be filled by the
Board of Directors. The Board of Directors shall have the power
at any time to change the membership of or to dissolve the
Executive Committee. The Committee shall take no action
except by unanimous approval of all its members. The
Committee shall meet at the request of the Chairman or any
member with proper notice. Regular minutes will be kept of
Executive Committee proceedings and shall be reported at the
next following meeting of the Board of Directors to become a part
of the record at that Board meeting at which they are presented.
Section 9. Nominations. (Adopted on October 18, 1985.)
No candidate may be nominated for election as a director at the
annual meeting of shareholders, and no votes cast in his or her
name for election shall be counted, unless the nomination of
such person has been previously submitted to the Board of
Directors or its nominating committee in accordance with the
provisions of this Article II. If such nomination has been duly
submitted, the nominee may be nominated for election at any
meeting held within twelve months thereafter, notwithstanding the
fact that such nominee is not listed as an alternate candidate in
the proxy furnished by management.
Section 10. Designation of Nominees. (Adopted on October
18, 1985 and Amended on March 6, 1990.) The Board of
Directors, or a nominating committee duly appointed by the Board
and composed of directors not candidates for election at the
annual meeting, shall have the sole authority to designate
candidates to be nominated by management for election as
directors of the Corporation by the shareholders.
Any holder of voting shares of the Corporation may submit the
nomination of a candidate or candidates for election as director at
the next meeting of shareholders at which an election is to be
held.
Section 11. Information Required. (Adopted on October 18,
1985 and Amended on March 6, 1990.) Each nomination for the
office of director must be submitted to the Secretary of the
Corporation no later than sixty (60) days following the end of the
Corporation's fiscal year. Nominations shall only be deemed to
have been submitted on the date on which all of the following has
been received by the Corporation:
(a) all information about the nominee which may be required
to be provided with any proxy or information statement pursuant
to the Securities Exchange Act of 1934, as amended, and rules
promulgated thereunder;
(b) a completed copy of the questionnaire required by the
Corporation for all director nominees, executed by the nominee;
(c) a statement signed by the nominee consenting to his
nomination and agreeing, if elected, to serve as a director of the
Corporation; and
(d) if submitted by a shareholder, appropriate evidence that
the person submitting the nomination is a shareholder of the
Corporation.
Copies of all appropriate forms for nomination required
hereunder shall be made available by the Secretary of the
Corporation upon request of, and without charge to, any
shareholder.
Section 12. Alternate Nominees. (Adopted on October 18,
1985.) The Board of Directors, or its duly appointed nominating
committee, may designate one or more nominees submitted by
shareholders in accordance with Section 11 hereof, to appear as
alternate candidates on any proxy solicited by, or in any proxy or
information statement furnished by, management in connection
with such annual meeting. The number of alternate candidates
for election shall not exceed the number of directors to be elected
at the annual meeting for which nominations are made. The
Board of Directors, or its duly appointed nominating committee,
may use any means it deems reasonably appropriate to
determine which shareholder nominees, if any, may be listed as
alternate candidates on management's proxy and in any proxy or
information statement supplied by the Corporation in connection
with such annual meeting of shareholders.
ARTICLE III
Officers
Section 1. Number of Officers. (Amended on April 21,
1987.) The officers of the Corporation shall consist of a
Chairman of the Board, Chief Executive Officer, President, Chief
Financial Officer, Secretary, Treasurer, and such other officers
and assistant officers and agents as may be chosen by the Board
of Directors from time to time. Any two offices may be held by
one person.
Section 2. Election; Vacancies; Tenure. Officers shall be
chosen at the annual meeting of the Board of Directors, to hold
office until the next annual meeting or until their successors are
chosen and qualified. Any officer may be removed with or
without cause by the affirmative vote of a majority of the Board of
Directors. Any vacancy shall be filled by the affirmative vote of a
majority of the directors, and an officer so chosen shall hold
office until his successor is chosen and qualified. In the absence
of an election or appointment of a Chief Executive Officer or
Chief Financial Officer by the board, the person or persons
exercising the principal functions of those offices are respectively
deemed to have been elected to those offices.
Section 3. Chairman of the Board. The Chairman of the
Board of Directors shall preside at all meetings of shareholders
and directors and shall perform such other duties as may be
prescribed from time to time by these By-Laws or by the Board of
Directors.
Section 4. Chief Executive Officer. The Chief Executive
Officer shall:
(a) Have general active management of the business of the
Corporation;
(b) When present, and in absence of the Chairman, preside
at all meetings of the board and of the shareholders;
(c) See that all orders and resolutions of the board are carried
into effect;
(d) Perform such duties as shall be delegated by the board;
and
(e) Render to the Board, whenever requested, an account of
all transactions by the Chief Executive Officer.
Section 5. President. The President shall:
(a) Perform such duties as shall be delegated by the Board or
by the Chief Executive Officer; and
(b) Render to the Chief Executive Officer or the Board,
whenever requested, an account of all transactions by the
President.
Section 6. Chief Financial Officer. The Chief Financial
Officer shall:
(a) Keep accurate financial records for the Corporation;
(b) Deposit all money, drafts, and checks in the name of and
to the credit of the Corporation in the banks and depositories
designated by the Board;
(c) Endorse for deposit all notes, checks, and drafts received
by the Corporation as ordered by the Board, making proper
vouchers therefor;
(d) Disburse corporate funds and issue checks and drafts in
the name of the Corporation, as ordered by the Board;
(e) Render to the Chief Executive Officer or the Board,
whenever requested, an account of all transactions by the Chief
Financial Officer and of the financial condition of the Corporation;
and
(f) Perform such duties as shall be delegated by the Board or
by the Chief Executive Officer.
Section 7. Treasurer. The Treasurer shall:
(a) Perform such duties as shall be delegated by the Board,
the Chief Executive Officer or the Chief Financial Officer; and
(b) Render to the Chief Financial Officer, the Chief Executive
Officer or the Board, whenever requested, an account of all
transactions by the Treasurer.
Section 8. Vice President. Each Vice President shall
perform such duties as may be prescribed from time-to-time by
these By-Laws, the Board of Directors or the Chief Executive
Officer.
Section 9. Secretary. The Secretary shall give proper
notice of meetings of shareholders and Board of Directors and
other notices required by law or by these By-Laws. He shall
attend all meetings of the shareholders and Board of Directors
and shall maintain records of, and, whenever necessary, certify
all proceedings of the Board and the shareholders. He shall also
perform all duties as these By-Laws, the Board of Directors, or
the Chief Executive Officer may from time to time prescribe.
Section 10. Salaries. The salaries of all officers shall be
fixed by the Board of Directors and the fact that any officer is a
director shall not preclude him from receiving a salary or from
voting upon the resolution providing same.
Section 11. Contracts. (Amended on July 18, 1986.) Except
as otherwise provided by the Board of Directors from
time-to-time, all formal contracts of this Corporation shall be
executed on its behalf by the Chief Executive Officer, the
President, or the Chief Financial Officer.
Section 12. Expenses and Unreasonable Compensation. In
the event any expenses authorized to be reimbursed to an officer
of this Corporation shall be disallowed as a deduction to this
Corporation, such expenses shall be deemed to be additional
compensation to such officers for the period in which received;
provided, further, that if in the event the treatment of such
expenses as additional compensation, or any other payments of
salaries, bonuses, medical reimbursements or other benefits paid
to an officer of the Corporation shall be deemed unreasonable
compensation and disallowed as a deduction to this Corporation,
then such officer shall be obligated to immediately repay to the
Corporation the full amount of any such disallowance and the
Board of Directors shall take whatever action as, in the opinion of
counsel to the Corporation, may be deemed necessary to
collect such disallowance.
Section 13. Indemnity. Each present or future director or
officer, whether or not then in office, and the executors,
administrators, or other legal representative of any such director
or officer, shall be fully indemnified by the Corporation, in the
manner and to the extent allowed by Minnesota Statutes
302A.521, or any amendment thereto.
ARTICLE IV
Capital Stock
Section 1. Issuance of Shares. The capital stock, including
both authorized but previously unissued shares, may be issued
for such consideration, not less than the par value thereof in the
case of shares having par value, as shall be fixed from time to
time by the Board of Directors.
Section 2. Transfer of Shares. (Adopted on January 19,
1993.) The shares of the Corporation shall be transferable on
the books of the Corporation: (a) in the case of those shares
represented by certificates, only upon surrender of each
certificate representing the same or with separate written
assignment accompanying the certificates, or (b) in the case of
shares without certificates, by delivery of written assignment in
respect of the shares being transferred. In either case, such
certificate or written assignment shall be properly endorsed by
the registered holder or by his duly authorized attorney, and any
written assignment shall be in form and substance satisfactory to
the Corporation. Within a reasonable time after the issue or
transfer of shares without certificates, the Corporation shall send
the shareholder a written statement of any information required
by Section 302A.417, Subd. 7 of the Minnesota Business
Corporation Act and by Section 336.8-408 of the Minnesota
Uniform Commercial Code, as each may be amended from time
to time.
Section 3. Certificates of Stock. (Adopted on January 19,
1993.) Each holder of the shares of the Corporation shall be
entitled to a certificate signed by the Chairman, Chief Executive
Officer or President and by the Chief Financial Officer, Treasurer
or Secretary of the Corporation and sealed with the seal of the
Corporation, if any, or a facsimile thereof. The certificates shall
be in such form as shall be approved by the Board of Directors.
However, unless the Board of Directors shall provide otherwise,
and except for shares which are subject to any restriction as to
transfer, all of the shares of any or all of the Corporation's
classes or series may be issued without certificates. Shares
represented by certificates shall not be re-issued without
certificates except upon the request of the shareholder and until
the certificate is surrendered to the Corporation. A holder of such
uncertificated shares may request that a certificate be provided to
such holder by giving notice to the Secretary of the Corporation.
For the purposes of Section 3(d) of Article VIII of the Articles
of Incorporation relating to redemption of the Corporation's
shares, the term "certificates" shall mean certificates or, in the
case of shares without certificates, written assignment.
Section 4. Transfer Agent and Registrar. (Adopted on
January 19, 1993.) The Board of Directors may appoint a
transfer agent and registrar and may require that any stock
certificates issued bear the countersignature of said transfer
agent and registrar.
The Board of Directors shall have authority to make and alter
such rules and regulations as they may deem expedient
concerning issue, transfer and registration of shares of the stock
of the Corporation and rights or options relating thereto.
Section 5. Record Date. The Board of Directors may fix a
time, not exceeding sixty (60) days preceding the date of any
meeting of shareholders, as the record date for determination of
shareholders entitled to notice of and to vote at such meeting and
not exceeding forty (40) days preceding the date fixed for
payment of any dividends, delivery of any rights, or other
distribution allowed by law.
Section 6. Lost Certificates. Any person claiming a
certificate of stock to be lost, stolen, or destroyed shall furnish an
affidavit of such fact and shall furnish an appropriate bond of
indemnity in form, substance, amount and with surety satisfactory
to legal counsel for the Corporation, in which bond the
Corporation and the Transfer Agent and Registrar shall be
named as obligees.
Section 7. Definitions. (Adopted on October 18, 1985.)
The following definitions shall apply herein:
(a) "Acquiring person" means a person, corporation or other
entity proposing to make a control share acquisition, but does not
include a licensed broker/dealer or underwriter who (i) purchases
shares of the Corporation solely for purposes of resale to the
public, and (ii) is not acting in concert with an acquiring person.
(b) "Beneficial owner" includes, but is not limited to, any
person who directly or indirectly through any contract,
arrangement, understanding, relationship, or otherwise has or
shares the power to vote or direct the voting of any shares of the
Corporation and the power to dispose of, or direct the disposition
of, such shares. "Beneficial ownership" includes, but is not
limited to, the right, exercisable within 60 days, to acquire
securities through the exercise of options, warrants, or rights or
the conversion of convertible securities, or otherwise. The shares
subject to these options, warrants, rights, or conversion privileges
held by a person shall be deemed to be outstanding for the
purpose of computing the percentage of outstanding securities of
the class owned by this person, but shall not be deemed to be
outstanding for the purpose of computing the percentage of the
class owned by any other person.
A person is the beneficial owner of securities beneficially
owned by any relative or spouse or relative of the spouse
residing in the home of this person, any trust or estate in which
this person owns ten percent or more of the total beneficial
interest or serves as trustee or executor, any corporation or entity
in which this person owns ten percent or more of the equity, and
any affiliate or associate of this person.
(c) "Control share acquisition" means an acquisition of shares
of the Corporation resulting in beneficial ownership by an
acquiring person of a new range of voting power specified in
Section 8(d), but does not include any of the following:
(1) an acquisition before, or pursuant to an agreement
entered into before, the date of adoption of this section of Article
IV of the By-Laws;
(2) an acquisition by a donee pursuant to an inter vivos gift
not made to avoid the provisions of Sections 7 through 14 of
Article IV or by a distributee as defined in Minn. Stat. Section
524.2-201, clause (10);
(3) an acquisition pursuant to a security agreement not
created to avoid the provisions of Sections 7 through 14 of Article
IV;
(4) an acquisition of shares of the Corporation pursuant to
a merger or exchange of shares, if the Corporation is a party to
the transaction; or
(5) an acquisition of shares from the Corporation.
Section 8. Information Statement. (Adopted on October 18,
1985.) An acquiring person shall deliver to the Corporation at its
principal executive office an information statement containing all
of the following:
(a) The identity of the acquiring person;
(b) a reference that the statement is made under this section
of the By-Laws;
(c) the number of shares of the Corporation beneficially
owned by the acquiring person;
(d) a specification of which of the following ranges of voting
power in the election of directors would result from consummation
of the control share acquisition:
(1) at least 20 percent but less than 33-1/3 percent;
(2) at least 33-1/3 percent but not more than 50 percent;
and
(3) over 50 percent.
(e) the terms of the proposed control share acquisition,
including, but not limited to, the source of funds or other
consideration and the material terms of the financial
arrangements for the control share acquisition, plans or proposals
of the acquiring person to liquidate the Corporation, to sell all or
substantially all of its assets, or merge it or exchange its shares
with any other person, to change the location of its principal
executive office or of a material portion of its business activities,
to change materially its management or policies of employment,
to alter materially its relationship with suppliers or customers or
the communities in which it operates, or make any other material
change in its business, corporate structure, management or
personnel, and such other objective facts as would be
substantially likely to affect the decision of a shareholder with
respect to voting on the proposed control share acquisition.
Section 9. Special Meeting. (Adopted on October 18,
1985.) Within 5 days after receipt of an information statement
pursuant to Section 8, the Corporation shall call a special meeting
of the shareholders to vote on the proposed control share
acquisition. The meeting shall be held no later than 55 days after
receipt by the Corporation of the information statement, unless
the acquiring person agrees to a later date, and no sooner than
30 days after receipt of the information statement, if the acquiring
person so requests in writing when delivering the information
statement. The notice of the meeting shall be, at a minimum,
accompanied by a copy of the information statement and a
statement disclosing that the Board of Directors of the
Corporation (i) recommends acceptance of, (ii) expresses no
opinion and is remaining neutral toward, (iii) recommends
rejection of, or (iv) is unable to take a position with respect to, the
proposed control share acquisition. The notice of meeting shall
be given within 20 days after receipt of the information statement.
Section 10. Consummation of Acquisition. (Adopted on
October 18, 1985.) The acquiring person may consummate the
proposed control share acquisition if and only if both of the
following occur:
(a) the proposed control share acquisition is approved by the
affirmative vote of the holders of a majority of the voting power of
all shares entitled to vote under applicable Minnesota law; and
(b) the proposed control share acquisition is consummated
within 180 days after shareholder approval.
Section 11. Failure to Comply. (Adopted on October 18,
1985.) All shares of the Corporation acquired by an acquiring
person in violation of Section 10 shall be: (a) denied voting rights
for one year after acquisition; (b) nontransferable on the books of
the Corporation for one year after acquisition; and (c) subject to
the Corporation's option, during such one-year period, to call the
shares for redemption at the price at which the shares were
acquired. Such redemption shall occur on the date set in the call
notice, which shall not be later than 60 days after the call notice
is given.
Section 12. Proxy Solicitation. (Adopted on October 18,
1985.) Notwithstanding any contrary provision of these By-Laws,
a proxy relating to a meeting of shareholders required under
Section 9 of this Article IV must be solicited separately from the
offer to purchase or solicitation of an offer to sell shares of the
Corporation. Except for irrevocable proxies appointed in the
regular course of business and not in connection with a control
share acquisition, all proxies appointed for or in connection with
the shareholder authorization of a control share acquisition
pursuant Sections 7 through 14 of Article IV shall be at all times
terminable at will prior to the obtaining of the shareholder
authorization, whether or not the proxy is coupled with an
interest. Without affecting any vote previously taken, the proxy
may be terminated in any manner permitted by Minnesota
statutes or by giving oral notice of the termination in the open
meeting of shareholders held pursuant to Section 9 hereof. The
presence at a meeting of the person appointing a proxy does not
revoke the appointment.
Section 13. Amendments or Repeal. (Adopted on October
18, 1985.) Notwithstanding any contrary provision of these
By-Laws, the provisions of Sections 7 through 14 of this Article
may be amended or repealed by the shareholders only by the
affirmative vote of the holders of 85% of each class of shares of
the Corporation entitled to exercise the voting power of the
Corporation; provided, however, that if no person holds more
than twenty percent (20%) of the Voting Shares and there is no
control share acquisition of which the Board of Directors has
credible notice, the necessary vote for amendment or repeal may
be reduced by the Board of Directors to not less than a majority
of the outstanding shares in each class; and provided further that
no amendment or repeal of Sections 7 through 14 of this Article
adopted after the notice to shareholders referred to in Section 9
herein is given shall affect the rights of any shareholder under
said Sections 7 through 14.
Section 14. Dissenting Shareholders. (Adopted on October
18, 1985.) Shareholders dissenting from a control share
acquisition for which approval of shareholders is sought shall
have the right to obtain fair value of their shares, pursuant to the
provisions of Minnesota Statutes 302A.473 (1985), as amended.
ARTICLE V
Miscellaneous
Section 1. Seal. The corporate seal, if any, shall be circular
in form and have inscribed thereon the name of the Corporation,
the State in which it is incorporated and the words "corporate
seal."
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be fixed by the Board of Directors.
ARTICLE VI
Amendments
These By-Laws may be altered, amended or repealed by the
Board of Directors, subject to the power of the shareholders, by
the affirmative vote of a majority of the shareholders entitled to
vote, at any meeting, to change or repeal such By-Laws;
provided that notice of such proposed amendment shall have
been given in the notice of such meeting. The Board of Directors
shall not make or alter any By-Law fixing their number,
qualifications, classifications or terms of office.
PENTAIR, INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Rights Agent
Rights Agreement
Dated as of July 21, 1995
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Certain Definitions. . . . . . 1
Section 2. Appointment of Rights Agent. . 3
Section 3. Issue of Right Certificates. . 3
Section 4. Form of Right Certificates . . 4
Section 5. Countersignature and Registration 5
Section 6. Transfer, Split Up, Combination
and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen
Right Certificates . . . . . . 5
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights. . . 6
Section 8. Cancellation and Destruction of Right
Certificates . . . . . . . . . 7
Section 9. Reservation and Availability of
Common Shares. . . . . . . . . 7
Section 10. Common Shares Record Date . . 8
Section 11. Adjustment of Purchase Price, Number
of Shares or Number of Rights 8
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares . . 13
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power 14
Section 14. Fractional Rights and Fractional
Shares. . . . . . . . . . . . 15
Section 15. Rights of Action. . . . . . . 16
Section 16. Agreement of Right Holders. . 16
Section 17. Right Certificate Holder Not Deemed
a Shareholder . . . . . . . . 17
Section 18. Concerning the Rights Agent . 17
Section 19. Merger or Consolidation or Change of
Name of Rights Agent. . . . . 17
Section 20. Duties of Rights Agent. . . . 18
Section 21. Change of Rights Agent. . . . 19
Section 22. Issuance of New Right Certificates 20
Section 23. Redemption. . . . . . . . . . 20
Section 24. Exchange. . . . . . . . . . . 21
Section 25. Notice of Certain Events. . . 22
Section 26. Notices . . . . . . . . . . . 22
Section 27. Supplements and Amendments. . 23
Section 28. Successors. . . . . . . . . . 23
Section 29. Benefits of this Agreement. . 24
Section 30. Severability. . . . . . . . . 24
Section 31. Governing Law . . . . . . . . 24
Section 32. Counterparts. . . . . . . . . 24
Section 33. Descriptive Headings. . . . . 24
Exhibit A - Form of Right Certificate
Exhibit B - Summary of Rights to Purchase Common Shares
<PAGE>
RIGHTS AGREEMENT
This Agreement, dated as of July 21, 1995,
between Pentair, Inc., a Minnesota corporation (the
"Company"), and Norwest Bank Minnesota, National
Association (the "Rights Agent").
WHEREAS, the Board of Directors of the
Company has authorized and declared a dividend of one
common share purchase right (a "Right") for each Common
Share (as hereinafter defined) of the Company
outstanding on July 31, 1995 (the "Record Date") payable
on July 31, 1995 (the "Payment Date"), and has
authorized and directed the issuance of one Right with
respect to each Common Share that shall become
outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are hereinafter defined),
each Right representing the right to purchase one Common
Share of the Company, subject to adjustment as
hereinafter provided, and upon the terms and subject to
the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the
premises and the mutual agreements herein set forth, the
parties hereby agree as follows:
Section 1. Certain Definitions. For
purposes of this Agreement, the following terms have the
meanings indicated:
(a) "Acquiring Person" shall mean any
Person (as such term is hereinafter defined) who or
which, together with all Affiliates and Associates (as
such terms are hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is
hereinafter defined) of 15% or more of the Common Shares
of the Company then outstanding, but shall not include
the Company, any Subsidiary (as such term is hereinafter
defined) of the Company, any employee benefit plan of
the Company or any Subsidiary of the Company, any entity
holding Common Shares for or pursuant to the terms of
any such plan, or any trustee, administrator or
fiduciary of such a plan. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person"
as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares
outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding;
provided, however, that if a Person becomes the
Beneficial Owner of 15% or more of the Common Shares of
the Company then outstanding by reason of share
purchases by the Company and shall, after such share
purchases by the Company, become the Beneficial Owner of
any additional Common Shares (other than Common Shares
acquired solely as a result of corporate action of the
Company not caused, directly or indirectly, by such
Person) of the Company, then such Person shall be deemed
to be an "Acquiring Person."
(b) "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date of this
Agreement.
(c) A Person shall be deemed the
"Beneficial Owner" of and shall be deemed to
"beneficially own" any securities:
(i) which such Person or
any of such Person's Affiliates or
Associates beneficially owns, directly or
indirectly;
(ii) which such Person or
any of such Person's Affiliates or
Associates has (A) the right to acquire
(whether such right is exercisable
immediately or only after the passage of
time) pursuant to any agreement,
arrangement or understanding (other than
customary agreements with and between
underwriters and selling group members with
respect to a bona fide public offering of
securities), or upon the exercise of
conversion rights, exchange rights, rights
(other than these Rights), warrants or
options, or otherwise; provided, however,
that a Person shall not be deemed the
Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a
tender or exchange offer made by or on
behalf of such Person or any of such
Person's Affiliates or Associates until
such tendered securities are accepted for
purchase or exchange; or (B) the right to
vote pursuant to any agreement, arrangement
or understanding; provided, however, that a
Person shall not be deemed the Beneficial
Owner of, or to beneficially own, any
security if the agreement, arrangement or
understanding to vote such security (1)
arises solely from a revocable proxy or
consent given to such Person in response to
a public proxy or consent solicitation made
pursuant to, and in accordance with, the
applicable rules and regulations of the
Exchange Act and (2) is not also then
reportable on Schedule 13D under the
Exchange Act (or any comparable or
successor report); or
(iii) which are
beneficially owned, directly or indirectly,
by any other Person with which such Person
or any of such Person's Affiliates or
Associates has any agreement, arrangement
or understanding (other than customary
agreements with and between underwriters
and selling group members with respect to a
bona fide public offering of securities)
for the purpose of acquiring, holding,
voting (except to the extent contemplated
by the proviso to Section 1(c)(ii)(B)) or
disposing of any securities of the Company.
Notwithstanding anything in this definition
of Beneficial Ownership to the contrary, the phrase
"then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the
Company, shall mean the number of such securities then
issued and outstanding together with the number of such
securities not then actually issued and outstanding
which such Person would be deemed to beneficially own
hereunder.
(d) "Business Day" shall mean any day
other than a Saturday, a Sunday, or a day on which
banking institutions in the State of Minnesota are
authorized or obligated by law or executive order to
close.
(e) "Close of business" on any given
date shall mean 5:00 P.M., St. Paul, Minnesota time, on
such date; provided, however, that if such date is not
a Business Day it shall mean 5:00 P.M., St. Paul,
Minnesota time, on the next succeeding Business Day.
(f) "Common Shares" when used with
reference to the Company shall mean the shares of common
stock, par value $.16-2/3 per share of the Company, or
shares having equivalent rights, privileges and
preferences to common stock. "Common Shares" when used
with reference to any Person other than the Company
shall mean the capital stock (or equivalent equity
interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately
control such first-mentioned Person.
(g) "Distribution Date" shall have
the meaning set forth in Section 3(a) hereof.
(h) "Final Expiration Date" shall
have the meaning set forth in Section 7 hereof.
(i) "Person" shall mean any
individual, firm, corporation or other entity, and shall
include any successor (by merger or otherwise) of such
entity.
(j) "Redemption Date" shall have the
meaning set forth in Section 7 hereof.
(k) "Shares Acquisition Date" shall
mean the first date of public announcement (which, for
purposes of this definition, shall includes, without
limitation, a report filed pursuant to Section 13(d)
under the Exchange Act) by the Company or an Acquiring
Person that an Acquiring Person has become such.
(l) "Subsidiary" of any Person shall
mean any corporation or other entity of which a majority
of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by
such Person.
Section 2. Appointment of Rights Agent.
The Company hereby appoints the Rights Agent to act as
agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior
to the Distribution Date also be the holders of Common
Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint
such co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the
tenth day after the Shares Acquisition Date or (ii) the
tenth Business Day (or such later date as may be
determined by action of the Company's Board of Directors
prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement of, or of the
first public announcement of the intention of any Person
to commence, a tender or exchange offer the consummation
of which would result in any Person (other than the
Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the
Company, any entity holding Common Shares for or
pursuant to the terms of any such plan, or any trustee,
administrator or fiduciary of such a plan) becoming the
Beneficial Owner of Common Shares of the Company
aggregating 15% or more of the then outstanding Common
Shares (including in either case any such date which is
after the date of this Agreement and prior to the
Payment Date; the earlier of such dates being herein
referred to as the "Distribution Date"; provided,
however, that if the tenth day or Business Day, as the
case may be, after the pertinent date occurs before the
Record Date, "Distribution Date" shall mean the Record
Date), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates
for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be
Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection
with the transfer of Common Shares. As soon as
practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be
sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each
record holder of Common Shares as of the close of
business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit A
hereto (a "Right Certificate"), evidencing one Right for
each Common Share so held. As of the Distribution Date,
the Rights will be evidenced solely by such Right
Certificates.
(b) The Company has prepared a
Summary of Rights to Purchase Common Shares, attached as
Exhibit B hereto (the "Summary of Rights"), a copy of
which is available free of charge from the Company.
With respect to certificates for Common Shares
outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such
stock certificates registered in the names of the
holders thereof. Until the Distribution Date (or the
earlier of the Redemption Date or the Final Expiration
Date), the surrender for transfer of any certificate for
Common Shares outstanding on the Record Date, with or
without a copy of the Summary of Rights attached
thereto, shall also constitute the transfer of the
Rights associated with the Common Shares represented
thereby.
(c) Certificates for Common Shares
which become outstanding (including, without limitation,
reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date
but prior to the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise
affixed to them the following legend (provided, however,
that certificates for Common Shares in existence on the
Record Date may bear the legend required by the
Company's predecessor rights agreement):
This certificate also evidences and
entitles the holder hereof to certain
Rights as set forth in a Rights Agreement
between Pentair, Inc. and Norwest Bank
Minnesota, National Association (the
"Rights Agent"), dated as of July 21, 1995,
as such agreement may be amended (the
"Rights Agreement"), the terms of which are
hereby incorporated herein by reference and
a copy of which is on file at the principal
executive offices of Pentair, Inc. Under
certain circumstances, as set forth in the
Rights Agreement, such Rights will be
evidenced by separate certificates and will
no longer be evidenced by this certificate.
Pentair, Inc. will mail to the holder of
this certificate a copy of the Rights
Agreement without charge after receipt of a
written request therefor. Under certain
circumstances set forth in the Rights
Agreement, Rights issued to, or held by, an
Acquiring Person or any Affiliate or
Associate thereof (as such terms are
defined in the Rights Agreement), whether
held by such Person or any subsequent
holder, shall become null and void.
With respect to such certificates containing the
foregoing legend, until the Distribution Date, the
Rights associated with the Common Shares represented by
such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of
any such certificate shall also constitute the transfer
of the Rights associated with the Common Shares
represented thereby. In the event that the Company
purchases or acquires any Common Shares after the Record
Date but prior to the Distribution Date, any Rights
associated with such Common Shares shall be deemed
cancelled and retired.
Section 4. Form of Right Certificates. The
Right Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same
as Exhibit A hereto and may have such marks of
identification or designation and such legends,
summaries or endorsements printed thereon as the Company
may deem appropriate and as are not inconsistent with
the provisions of this Agreement, or as may be required
to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Rights may
from time to time be listed, or to conform to usage.
Subject to the provisions of Section 22 hereof, the
Right Certificates shall entitle the holders thereof to
purchase such number of Common Shares as shall be set
forth therein at the price per Common Share set forth
therein (the "Purchase Price"), but the amount and type
of securities purchasable upon exercise of each Right
and the Purchase Price shall be subject to adjustment as
provided herein.
Section 5. Countersignature and
Registration.
(a) The Right Certificates shall be
executed on behalf of the Company by its Chairman of the
Board, Chief Executive Officer, President, Chief
Financial Officer or any Vice President, either manually
or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature.
The Right Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of
the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company
with the same force and effect as though the individual
who signed such Right Certificates had not ceased to be
such officer of the Company; and any Right Certificate
may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to
sign such Right Certificate, although at the date of the
execution of this Rights Agreement any such individual
was not such an officer.
(b) Following the Distribution Date,
the Rights Agent will keep or cause to be kept, at its
principal office, books for registration and transfer of
the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective
holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates
and the date and certificate number of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination
and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of
Section 14 hereof, at any time after the close of
business on the Distribution Date, and at or prior to
the close of business on the earlier of the Redemption
Date or the Final Expiration Date, any Right Certificate
or Right Certificates (other than Right Certificates
representing Rights that have become void pursuant to
Section 11(a)(ii) hereof or that have been exchanged
pursuant to Section 24 hereof) may be transferred, split
up, combined or exchanged for another Right Certificate
or Right Certificates, entitling the registered holder
to purchase a like number of Common Shares as the Right
Certificate or Right Certificates surrendered then
entitle such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any
Right Certificate or Right Certificates shall make such
request in writing delivered to the Rights Agent, and
shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or
exchanged at the principal office of the Rights Agent.
Thereupon the Rights Agent shall countersign and deliver
to the person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed
in connection with any transfer, split up, combination
or exchange of Right Certificates.
(b) Upon receipt by the Company and
the Rights Agent of evidence reasonably satisfactory to
them of the loss, theft, destruction or mutilation of a
Right Certificate and, in case of loss, theft or
destruction, of indemnity or security reasonably
satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the
Right Certificate if mutilated, the Company will make
and deliver a new Right Certificate of like tenor to the
Rights Agent for delivery to the registered holder in
lieu of the Right Certificate so lost, stolen, destroyed
or mutilated.
Section 7. Exercise of Rights; Purchase
Price; Expiration Date of Rights.
(a) The registered holder of any
Right Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole
or in part at any time after the Distribution Date upon
surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly
executed, to the Rights Agent at the principal office of
the Rights Agent, together with payment of the Purchase
Price for each Common Share as to which the Rights are
exercised, at or prior to the earliest of (i) the close
of business on July 31, 2005 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed
as provided in Section 23 hereof (the "Redemption
Date"), and (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each
Common Share pursuant to the exercise of Rights shall
initially be $160.00, shall be subject to adjustment
from time to time as provided in Sections 11 and 13
hereof and shall be payable in lawful money of the
United States of America or in Common Shares of the
Company in accordance with paragraph (c) below.
(c) Upon receipt of a Right
Certificate representing exercisable Rights, with the
form of election to purchase duly executed, accompanied
by payment of the Purchase Price for the Common Shares
to be purchased as set forth below and an amount equal
to any applicable transfer tax required to be paid by
the holder of such Right Certificate in accordance with
Section 9 hereof, as set forth below, the Rights Agent
shall thereupon promptly (i) requisition from any
transfer agent of the Common Shares certificates for the
number of Common Shares to be purchased and the Company
hereby irrevocably authorizes its transfer agent to
comply with all such requests, (ii) when appropriate,
requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional Common Shares in
accordance with Section 14 hereof, (iii) after receipt
of such certificates, cause the same to be delivered to
or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be
designated by such holder, and (iv) when appropriate,
after receipt, deliver such cash to or upon the order of
the registered holder of such Right Certificate. The
payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) shall be
made in cash or by certified check, cashier's check,
bank draft or money order payable to the order of the
Company, except that, if so provided by the Board of
Directors of the Company, the payment of the Purchase
Price following the occurrence of a Section 11(a)(ii)
Event (as such term is hereinafter defined) and until
the first occurrence of a Section 13 Event (as such term
is hereinafter defined) may be made wholly or in part by
delivery of a certificate or certificates (with
appropriate stock powers executed in blank attached
thereto) evidencing a number of Common Shares of the
Company equal to the then Purchase Price divided by the
closing price (as determined pursuant to Section 11(d)
hereof) per Common Share on the Trading Day (as such
term is hereinafter defined) immediately preceding the
date of such exercise. If the Company is obligated to
issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary
so that such other securities, cash and/or other
property are available for distribution by the Rights
Agent, if and when appropriate.
(d) In case the registered holder of
any Right Certificate shall exercise less than all the
Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his
duly authorized assigns, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this
Agreement to the contrary, neither the Rights Agent nor
the Company shall be obligated to take any action with
respect to a registered holder of a Right Certificate
upon the occurrence of any purported transfer,
assignment or exercise as set forth in this Section 7
unless such registered holder shall have (i) completed
and signed the certificate following the form of
assignment or election to purchase set forth on the
reverse of the Right Certificate surrendered for such
transfer, assignment or exercise, and (ii) provided such
additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably
request.
Section 8. Cancellation and Destruction of
Right Certificates. All Right Certificates surrendered
for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the
Company or to any of its agents, be delivered to the
Rights Agent for cancellation or in cancelled form, or,
if surrendered to the Rights Agent, shall be cancelled
by it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by any of the
provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise
thereof. The Rights Agent shall deliver all cancelled
Right Certificates to the Company or shall, at the
written request of the Company, destroy such cancelled
Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of
Common Shares.
(a) The Company covenants and agrees
that it will cause to be reserved and kept available out
of its authorized and unissued Common Shares the number
of Common Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance
with Section 7.
(b) If the Common Shares issuable
upon the exercise of Rights are then listed on any
national securities exchange, the Company shall use its
best efforts to cause, from and after such time as the
Rights become exercisable, all Common Shares reserved
for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) The Company covenants and agrees
that it will take all such action as may be necessary to
ensure that all Common Shares delivered upon exercise of
Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares (except
as otherwise provided by any corporation law applicable
to the Company).
(d) The Company further covenants and
agrees that it will pay when due and payable any and all
federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the
Right Certificates or of any Common Shares upon the
exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right
Certificates to a person other than, or the issuance or
delivery of certificates for the Common Shares in a name
other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise
or to issue or to deliver any certificates for Common
Shares upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by
the holder of such Right Certificate at the time of
surrender) or until it has been established to the
Company's reasonable satisfaction that no such tax is
due.
Section 10. Common Shares Record Date.
Each Person in whose name any certificate for Common
Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of
record of the Common Shares represented thereby on, and
such certificate shall be dated, the date upon which the
Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date
upon which the Common Shares transfer books of the
Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business
Day on which the Common Shares transfer books of the
Company are open.
Section 11. Adjustment of Purchase Price,
Number of Shares or Number of Rights. The Purchase
Price, the number of Common Shares covered by each Right
and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section
11.
(a) (A) In the event the
Company shall at any time after the date of
this Agreement (A) declare a dividend on
the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common
Shares, (C) combine the outstanding Common
Shares into a smaller number of Common
Shares or (D) issue any shares of its
capital stock in a reclassification of the
Common Shares (including any such
reclassification in connection with a
consolidation or merger in which the
Company is the continuing or surviving
corporation), except as otherwise provided
in this Section 11(a), the Purchase Price
in effect at the time of the record date
for such dividend or of the effective date
of such subdivision, combination or
reclassification, and the number and kind
of shares of capital stock issuable on such
date, shall be proportionately adjusted so
that the holder of any Right exercised
after such time shall be entitled to
receive the aggregate number and kind of
shares of capital stock which, if such
Right had been exercised immediately prior
to such date and at a time when the Common
Shares transfer books of the Company were
open, such holder would have owned upon
such exercise and been entitled to receive
by virtue of such dividend, subdivision,
combination or reclassification; provided,
however, that in no event shall the
consideration to be paid upon the exercise
of one Right be less than the aggregate par
value of the shares of capital stock of the
Company issuable upon exercise of one
Right. If an event occurs which would
require an adjustment under both Section
11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall
be made prior to, any adjustment required
pursuant to Section 11(a)(ii).
(i) Subject to Section 24
of this Agreement, in the event any Person
shall become an Acquiring Person, other
than pursuant to any transaction set forth
in Section 13(a), each holder of a Right
shall thereafter have a right to receive,
upon exercise thereof at a price equal to
the then current Purchase Price multiplied
by the number of Common Shares for which a
Right is then exercisable, in accordance
with the terms of this Agreement, such
number of Common Shares of the Company as
shall equal the result obtained by (x)
multiplying the then current Purchase Price
by the number of Common Shares for which a
Right is then exercisable and dividing that
product by (y) 50% of the then current per
share market price of the Common Shares
(determined pursuant to Section 11(d)) on
the date the Person became an Acquiring
Person (such number of shares, the
"Adjustment Shares").
From and after such time as a
Person becomes an Acquiring Person (a
"Section 11(a)(ii) Event"), any Rights that
are or were acquired or beneficially owned
by such Acquiring Person (or any Associate
or Affiliate of such Acquiring Person)
shall be void and any holder of such Rights
shall thereafter have no right to exercise
such Rights under any provision of this
Agreement. No Right Certificate shall be
issued pursuant to Section 3 that
represents Rights beneficially owned by an
Acquiring Person whose Rights would be void
pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Right
Certificate shall be issued at any time
upon the transfer of any Rights to an
Acquiring Person whose Rights would be void
pursuant to the preceding sentence or any
Associate or Affiliate thereof or to any
nominee of such Acquiring Person, Associate
or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer
to an Acquiring Person whose Rights would
be void pursuant to the preceding sentence
shall be cancelled.
(ii) In the event that
there shall not be sufficient Common Shares
of the Company authorized but unissued (and
not reserved for issuance for purposes
other than upon exercise of the Rights) to
permit the exercise in full of the Rights
in accordance with the foregoing
subparagraph (ii), the Company shall: (A)
determine the excess of (1) the value of
the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value")
over (2) the Purchase Price (such excess,
the "Spread"), and (B) with respect to each
Right, make adequate provision to
substitute for the Adjustment Shares, upon
payment of the applicable Purchase Price,
(1) cash, (2) a reduction in the Purchase
Price, (3) Common Shares or other equity
securities of the Company (including,
without limitation, shares, or units of
shares, of preferred stock which the Board
of Directors of the Company has deemed to
have the same value as Common Shares (such
shares of preferred stock, hereinafter
referred to as ("common stock
equivalents")), (4) debt securities of the
Company, (5) other assets or (6) any
combination of the foregoing, having an
aggregate value equal to the Current Value,
where such aggregate value has been
determined by the Board of Directors of the
Company based upon the advice of a
nationally recognized investment banking
firm selected by the Board of Directors of
the Company; provided, however, if the
Company shall not have made adequate
provision to substitute for the Adjustment
Shares pursuant to clause (B) above within
thirty (30) days following the occurrence
of a Section 11(a)(ii) Event (the "Section
11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the
surrender for exercise of a Right and
without requiring payment of the Purchase
Price, Common Shares (to the extent
available) and then, if necessary, cash,
which shares and/or cash have an aggregate
value equal to the Spread. If the Board of
Directors of the Company shall determine in
good faith that it is likely that
sufficient additional Common Shares might
be authorized for issuance for exercise in
full of the Rights, the thirty (30) day
period set forth above may be extended to
the extent necessary, but not more than
ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the
Company may seek shareholder approval for
the authorization of such additional shares
(such period, as it may be extended, the
"Substitution Period"). To the extent that
the Company determines that some action
need be taken pursuant to the first and/or
second sentences of this Section
11(a)(iii), the Company (x) shall provide,
subject to the last paragraph of Section
11(a)(ii) hereof, that such action shall
apply uniformly to all outstanding Rights,
and (y) may suspend the exercisability of
the Rights until the expiration of the
Substitution Period to seek any
authorization of additional shares and/or
to decide the appropriate form of
distribution to be made pursuant to such
first sentence and to determine the value
thereof. In the event of any such
suspension, the Company shall issue a
public announcement stating that the
exercisability of the Rights has been
temporarily suspended, as well as a public
announcement at such time as the suspension
is no longer in effect. For purposes of
this Section 11(a)(iii), the value of the
Common Shares shall be the current per
share market price (as determined pursuant
to Section 11(d) hereof) of the Common
Shares on the Section 11(a)(ii) Trigger
Date and the value of any "common stock
equivalent" shall be deemed to have the
same value as the Common Shares on such
date.
(b) In case the Company shall fix a
record date for the issuance of rights, options or
warrants to all holders of Common Shares entitling them
(for a period expiring within 45 calendar days after
such record date) to subscribe for or purchase Common
Shares (or securities convertible into Common Shares) at
a price per Common Share (or having a conversion price
per share, if a security convertible into Common Shares)
less than the then current per share market price of the
Common Shares (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall
be the number of Common Shares outstanding on such
record date plus the number of Common Shares which the
aggregate offering price of the total number of Common
Shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be
offered) would purchase at such current market price and
the denominator of which shall be the number of Common
Shares outstanding on such record date plus the number
of additional Common Shares to be offered for
subscription or purchase (or into which the convertible
securities so to be offered are initially convertible);
provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right
be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of
one Right. In case such subscription price may be paid
in a consideration part or all of which shall be in a
form other than cash, the value of such consideration
shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
Common Shares owned by or held for the account of the
Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and
in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to
be the Purchase Price which would then be in effect if
such record date had not been fixed.
(c) In case the Company shall fix a
record date for the making of a distribution to all
holders of the Common Shares (including any such
distribution made in connection with a consolidation or
merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness or
assets (other than a regular quarterly cash dividend or
a dividend payable in Common Shares) or subscription
rights or warrants (excluding those referred to in
Section 11(b)), the Purchase Price to be in effect after
such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall
be the then current per share market price of the Common
Shares (as defined in Section 11(d)) on such record
date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed
with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one
Common Share and the denominator of which shall be such
current per share market price of the Common Shares;
provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right
be less than the aggregate par value of the shares of
capital stock of the Company to be issued upon exercise
of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and
in the event that such distribution is not so made, the
Purchase Price shall again be adjusted to be the
Purchase Price which would then be in effect if such
record date had not been fixed.
(d) For the purpose of any
computation hereunder, the "current per share market
price" of the Common Shares on any date shall be deemed
to be the average of the daily closing prices per Common
Share for the 30 consecutive Trading Days (as such term
is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current
per share market price of the Common Shares is
determined during a period following the announcement by
the issuer of such Common Shares of (i) a dividend or
distribution on such Common Shares payable in Common
Shares or securities convertible into Common Shares, or
(ii) any subdivision, combination or reclassification of
Common Shares and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such
case, the current per share market price shall be
appropriately adjusted to reflect the current market
price per Common Share. The closing price for each
Trading Day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular
way, in either case as reported in the principal
consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New
York Stock Exchange or, if the Common Shares are not
listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities
listed on the principal national securities exchange on
which the Common Shares are listed or admitted to
trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange,
the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the
over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated
Quotations System ("Nasdaq") or such other system then
in use, or, if on any such date the Common Shares are
not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a
professional market maker making a market in the Common
Shares selected by the Board of Directors of the
Company. The term "Trading Day" shall mean a day on
which the principal national securities exchange on
which the Common Shares are listed or admitted to
trading or Nasdaq, as the case may be, is open for the
transaction of business or, if the Common Shares are not
listed or admitted to trading on any national securities
exchange or Nasdaq, as the case may be, a Business Day.
(e) No adjustment in the Purchase
Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required
to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent
or to the nearest ten-thousandth of a share as the case
may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section
11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires
such adjustment or (ii) the date of the expiration of
the right to exercise any Rights.
(f) If, as a result of an adjustment
made pursuant to Section 11(a), the holder of any Right
thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than
Common Shares, thereafter the number of such other
shares so receivable upon exercise of any Right shall be
subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the
provisions with respect to the Common Shares contained
in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to
the Common Shares shall apply on like terms to any such
other shares.
(g) All Rights originally issued by
the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of
Common Shares purchasable from time to time hereunder
upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have
exercised its election as provided in Section 11(i),
upon each adjustment of the Purchase Price as a result
of the calculations made in Section 11(b) and (c), each
Right outstanding immediately prior to the making of
such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of
Common Shares (calculated to the nearest ten-thousandth
of a Common Share) obtained by (i) multiplying (x) the
number of Common Shares covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in
effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after
the date of any adjustment of the Purchase Price to
adjust the number of Rights, in substitution for any
adjustment in the number of Common Shares purchasable
upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of
Rights shall be exercisable for the number of Common
Shares for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest
one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record
date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted
or any day thereafter, but, if the Right Certificates
have been issued, shall be at least 10 days later than
the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates
on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates
held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company,
new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such
adjustment. Right Certificates to be so distributed
shall be issued, executed and countersigned in the
manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or
change in the Purchase Price or the number of Common
Shares issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of
Common Shares which were expressed in the initial Right
Certificates issued hereunder.
(k) Before taking any action that
would cause an adjustment reducing the Purchase Price
below the par value, if any, of the Common Shares
issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable
(except as otherwise provided by any corporation law
applicable to the Company) Common Shares at such
adjusted Purchase Price.
(l) In any case in which this Section
11 shall require that an adjustment in the Purchase
Price be made effective as of a record date for a
specified event, the Company may elect to defer until
the occurrence of such event the issuing to the holder
of any Right exercised after such record date of the
Common Shares and other capital stock or securities of
the Company, if any, issuable upon such exercise over
and above the Common Shares and other capital stock or
securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to
the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by
this Section 11, as and to the extent that it in its
sole discretion shall determine to be advisable in order
that any consolidation or subdivision of the Common
Shares, issuance wholly for cash of any Common Shares at
less than the current market price, issuance wholly for
cash of Common Shares or securities which by their terms
are convertible into or exchangeable for Common Shares,
dividends on Common Shares payable in Common Shares or
issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the
Company to holders of Common Shares shall not be taxable
to such shareholders.
(n) The Company covenants and agrees
that it shall not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than
a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), (ii) merge with or
into any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section
11(o) hereof), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or
a series of related transactions, assets or earning
power aggregating more than 50% of the assets or earning
power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)
hereof), if at the time of or immediately after such
consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding
or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to
be afforded by the Rights.
(o) The Company covenants and agrees
that, after the Distribution Date, it will not, except
as permitted by Section 23, Section 24 or Section 27
hereof, take (or permit any Subsidiary to take) any
action if at the time such action is taken it is
reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
Section 12. Certificate of Adjusted
Purchase Price or Number of Shares. Whenever an
adjustment is made as provided in Sections 11 and 13
hereof, the Company shall promptly (a) prepare a
certificate setting forth such adjustment, and a brief
statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer
agent for the Common Shares a copy of such certificate
and (c) mail a brief summary thereof to each holder of
a Right Certificate in accordance with Section 25
hereof.
Section 13. Consolidation, Merger or Sale
or Transfer of Assets or Earning Power.
(a) In the event that, following the
Shares Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o)
hereof), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger,
(y) any Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o)
hereof) shall consolidate with, or merge with or into,
the Company, and the Company shall be the continuing or
surviving corporation of such consolidation or merger
and, in connection with such consolidation or merger,
all or part of the outstanding Common Shares shall be
changed into or exchanged for stock or other securities
of any other Person (or the Company) or cash or any
other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or
a series of related transactions, assets or earning
power aggregating more than 50% of the assets or earning
power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o)
hereof), then, and in each such case, proper provision
shall be made so that: (i) each holder of a Right
(except as otherwise provided herein) shall thereafter
have the right to receive, upon the exercise thereof at
a price equal to the then current Purchase Price
multiplied by the number of Common Shares for which a
Right is then exercisable (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of any
of the events described in clauses (x), (y) or (z) above
(a "Section 13 Event"), the Purchase Price in effect
immediately prior to the first occurrence of a Section
11(a)(ii) Event multiplied by the number of Common
Shares for which a Right was exercisable immediately
prior to such first occurrence), in accordance with the
terms of this Agreement, such number of validly
authorized and issued, fully paid, nonassessable (except
as otherwise required by any corporation law applicable
to the Principal Party (as such term is hereinafter
defined)) and freely tradeable Common Shares of the
Principal Party, not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as
shall be equal to the result obtained by (1) multiplying
the then current Purchase Price by the number of Common
Shares for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the
number of such shares for which a Right was exercisable
immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and
dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to
as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the current
market price (determined pursuant to Section 11(d)
hereof) per Common Share of such Principal Party on the
date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all
the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal
Party following the first occurrence of a Section 13
Event; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a
sufficient number of its Common Shares) in connection
with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) hereof shall be of no
effect following the first occurrence of any Section 13
Event.
(b) "Principal Party" shall mean
(i) in the case of any
transaction described in clause (x) or (y)
of the first sentence of Section 13(a), the
Person that is the issuer of any securities
into which Common Shares are converted in
such merger or consolidation, and if no
securities are so issued, the Person that
is the other party to such merger or
consolidation; and
(ii) in the case of any
transaction described in clause (z) of the
first sentence of Section 13(a), the Person
that is the party receiving the greatest
portion of the assets or earning power
transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the
Common Shares of such Person are not at such time and
have not been continuously over the preceding twelve
(12) month-period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which
are and have been so registered, "Principal Party" shall
refer to such other Person; and (2) in case such Person
is a Subsidiary, directly or indirectly, of more than
one Person, the Common Shares of two or more of which
are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market
value.
(c) The Company shall not consummate
any such consolidation, merger, sale or transfer unless
the Principal Party shall have a sufficient number of
authorized Common Shares which have not been issued or
reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth
in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in
paragraph (a) of this Section 13, the Principal Party
will:
(i) prepare and file a
registration statement under the Securities
Act of 1933, as amended (the "Act"), with
respect to the Rights and the securities
purchasable upon exercise of the Rights on
an appropriate form, and will use its best
effort to cause such registration statement
to (A) become effective as soon as
practicable after such filing and (B)
remain effective (with a prospectus at all
times meeting the requirements of the Act)
until the Final Expiration Date; and
(ii) deliver to holders of
the Rights historical financial statements
for the Principal Party and each of its
Affiliates which comply in all respects
with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply
to successive mergers or consolidations or sales or
other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not
theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and
Fractional Shares. (a) The Company shall not be
required to issue fractions of Rights or to distribute
Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to
the registered holders of the Right Certificates with
regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right.
For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price
of the Rights for the Trading Day immediately prior to
the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall
be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction
reporting system with respect to securities listed or
admitted to trading on the principal national securities
exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to
trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter
market, as reported by Nasdaq or such other system then
in use or, if on any such date the Rights are not quoted
by any such organization, the average of the closing bid
and asked prices as furnished by a professional market
maker making a market in the Rights selected by the
Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights
the fair value of the Rights on such date as determined
in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required
to issue fractions of Common Shares upon exercise of the
Rights or to distribute certificates which evidence
fractional Common Shares. In lieu of fractional Common
Shares, the Company shall pay to the registered holders
of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one
Common Share. For purposes of this Section 14(b), the
current market value of a Common Share shall be the
closing price of a Common Share (as determined pursuant
to the second sentence of Section 11(d) hereof) for the
Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the
acceptance of the Right expressly waives his right to
receive any fractional Rights or any fractional shares
upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights
of action in respect of this Agreement, excepting the
rights of action given to the Rights Agent under Section
18 hereof, are vested in the respective registered
holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common
Shares); and any registered holder of any Right
Certificate (or, prior to the Distribution Date, of the
Common Shares), without the consent of the Rights Agent
or of the holder of any other Right Certificate (or,
prior to the Distribution Date, of the Common Shares),
may, in his own behalf and for his own benefit, enforce,
and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise
act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach
of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive
relief against actual or threatened violations of the
obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders.
Every holder of a Right, by accepting the same, consents
and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date,
the Rights will be transferable only in connection with
the transfer of the Common Shares;
(b) after the Distribution Date, the
Right Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the
principal office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent
may deem and treat the person in whose name the Right
Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as
the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the associated
Common Shares certificate made by anyone other than the
Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent
shall be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not
Deemed a Shareholder. No holder, as such, of any Right
Certificate shall be entitled to vote, receive dividends
or other distributions or be deemed for any purpose the
holder of the Common Shares or any other securities of
the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be
construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder
of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders
at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except
as provided in Section 25 hereof), or to receive
dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees
and other disbursements incurred in the administration
and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability or expense,
incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything
done or omitted by the Rights Agent in connection with
the acceptance and administration of this Agreement,
including the costs and expenses of defending against
any claim of liability in the premises.
(b) The Rights Agent shall be
protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it
in connection with, its administration of this Agreement
in reliance upon any Right Certificate or certificate
for the Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement or other
paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons, or
otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or
Change of Name of Rights Agent. (a) Any corporation
into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be
consolidated, or any corporation resulting from any
merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any
corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of
any of the parties hereto, provided that such
corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section
21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name
of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
(b) In case at any time the name of
the Rights Agent shall be changed and at such time any
of the Right Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right
Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such
Right Certificates either in its prior name or in its
changed name; and in all such cases such Right
Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The
Rights Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders
of Right Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with
legal counsel (who may be legal counsel for the
Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of
its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking
or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be
conclusively proved and established by a certificate
signed by the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer or
any Vice President and by the Treasurer or any Assistant
Treasurer or the Secretary or any Assistant Secretary of
the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by
it under the provisions of this Agreement in reliance
upon such certificate.
(c) The Rights Agent shall be liable
hereunder to the Company and any other Person only for
its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be
liable for or by reason of any of the statements of fact
or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by
the Company only.
(e) The Rights Agent shall not be
under any responsibility in respect of the validity of
this Agreement or the execution and delivery hereof
(except the due authorization, execution and delivery
hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except
its countersignature thereof); nor shall it be
responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in
any Right Certificate; nor shall it be responsible for
any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section
11(a)(ii) hereof) or any adjustment in the terms of the
Rights (including the manner, method or amount thereof)
provided for in Sections 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would
require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or
adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any
Common Shares or other securities to be issued pursuant
to this Agreement or any Right Certificate or as to
whether any Common Shares or other securities will, when
issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will
perform, execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as
may reasonably be by required by the Rights Agent for
the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby
authorized and directed to accept instructions with
respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Financial
Officer, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company, and to apply to such officers
for advice or instructions in connection with its
duties, and it shall not be liable for any action taken
or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in
acting while waiting for those instructions.
(h) The Rights Agent and any
shareholder, director, officer or employee of the Rights
Agent may buy, sell or deal in, or act as the transfer
agent for, any of the Rights, Common Shares or other
securities of the Company or become pecuniarily
interested in any transaction in which the Company may
be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though
it were not Rights Agent under this Agreement. Nothing
herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other
legal entity.
(i) The Rights Agent may execute and
exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any
such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and
continued employment thereof.
Section 21. Change of Rights Agent. The
Rights Agent or any successor Rights Agent may resign
and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company
and to each transfer agent of the Common Shares by
registered or certified mail, and to the holders of the
Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Shares by
registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the
holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by
the Company), then the registered holder of any Right
Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the
United States or of the State of Minnesota or the State
of New York (or of any other state of the United States
so long as such corporation is authorized to do business
as a banking institution in the State of Minnesota or
the State of New York), in good standing, having an
office in the State of Minnesota or the State of New
York, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject
to supervision or examination by federal or state
authority and which has at the time of its appointment
as Rights Agent a combined capital and surplus of at
least $50 million, or (b) an Affiliate of a corporation
described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and
responsibilities as if it had been originally named as
Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to
the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in
writing with the predecessor Rights Agent and each
transfer agent of the Common Shares, and mail a notice
thereof in writing to the registered holders of the
Right Certificates. Failure to give any notice provided
for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case
may be.
Section 22. Issuance of New Right
Certificates. Notwithstanding any of the provisions of
this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its
Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under
the Right Certificates made in accordance with the
provisions of this Agreement.
Section 23. Redemption. (a) The Rights
may be redeemed by action of the Board of Directors
pursuant to subsection (b) of this Section 23 and shall
not be redeemed in any other manner.
(b) The Board of Directors of the Company
may, at its option, at any time prior to the earlier of
(i) the close of business on the tenth day following the
Shares Acquisition Date (or, if the Shares Acquisition
Date shall have occurred prior to the Record Date, the
close of business on the tenth day following the Record
Date), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a
redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as
the "Redemption Price"). The redemption of the Rights
by the Board of Directors may be made effective at such
time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish.
Notwithstanding anything contained in this Agreement to
the contrary, the Rights shall not be exercisable after
the first occurrence of a Section 11(a)(ii) Event until
such time as the Company's right of redemption hereunder
has expired.
(c) Immediately upon the effectiveness of
the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to
subsection (b) of this Section 23 and without any
further action and without any notice, the right to
exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive
the Redemption Price. The Company shall promptly give
public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such
notice shall not affect the validity of such redemption.
Within 10 days after the effectiveness of the action of
the Board of Directors ordering the redemption of the
Rights pursuant to subsection (b), the Company shall
mail a notice of redemption to all the holders of the
then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of
the transfer agent for the Common Shares. Any notice
which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will
be made. Neither the Company nor any of its Affiliates
or Associates may redeem, acquire or purchase for value
any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section
24 or Section 30 hereof, and other than in connection
with the purchase of Common Shares prior to the
Distribution Date.
Section 24. Exchange. (a) The Board of
Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become
void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Shares of the Company at an exchange
ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as
the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect
such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, any
entity holding Common Shares for or pursuant to the
terms of any such plan, or any trustee, administrator or
fiduciary of such a plan), together with all Affiliates
and Associates of such Person, becomes the Beneficial
Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of
the Board of Directors of the Company ordering the
exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and
without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of
Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall
mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear
upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on
the number of Rights (other than Rights which have
become void pursuant to the provisions of Section
11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this
Section 24, the Company, at its option, may substitute
common stock equivalents (as such term is defined in
Section 11(a)(iii) hereof) for some or all of the Common
Shares exchangeable for Rights.
(d) In the event that there shall not
be sufficient Common Shares or common stock equivalents
authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary
to authorize additional Common Shares or common stock
equivalents for issuance upon exchange of the Rights.
(e) The Company shall not be required
to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, the Company
shall pay to the registered holders of the Right
Certificates with regard to which such fractional Common
Shares would otherwise be issued an amount in cash equal
to the same fraction of the current market value of a
whole Common Share. For the purposes of this paragraph
(e), the current market value of a whole Common Share
shall be the closing price of a Common Share (as
determined pursuant to the second sentence of Section
11(d) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a)
In case the Company shall propose, after the
Distribution Date, (i) to pay any dividend payable in
stock of any class to the holders of Common Shares or to
make any other distribution to the holders of Common
Shares (other than a regular quarterly cash dividend),
(ii) to offer to the holders of Common Shares rights or
warrants to subscribe for or to purchase any additional
Common Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any
reclassification of Common Shares (other than a
reclassification involving only the subdivision of
outstanding Common Shares), (iv) to effect any
consolidation or merger into or with (other than a
merger of a Subsidiary into or with the Company), or to
effect any sale or other transfer (or to permit one or
more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person, or
(v) to effect the liquidation, dissolution or winding up
of the Company, then, in each such case, the Company
shall give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for
the purposes of such stock dividend, or distribution of
rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of
the Common Shares if any such date is to be fixed, and
such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days
prior to the record date for determining holders of
Common Shares for purposes of such action, and in the
case of any such other action, at least 10 days prior to
the date of the taking of such proposed action or the
date of participation therein by the holders of the
Common Shares, whichever shall be the earlier.
(b) In case any Section 11(a)(ii)
Event or Section 13 Event shall occur, then the Company
shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with
Section 26 hereof, a notice of the occurrence of such
event, which notice shall include a brief summary of the
Section 11(a)(ii) Event or Section 13 Event, as the case
may be, and the consequences thereof to holders of
Rights.
Section 26. Notices. (a) Notices or
demands authorized by this Agreement to be given or made
by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently
given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Pentair, Inc.
1700 West Highway 36
St. Paul, Minnesota 55113
Attention: Corporate Secretary
(b) Subject to the provisions of
Section 21 hereof, any notice or demand authorized by
this Agreement to be given or made by the Company or by
the holder of any Right Certificate to or on the Rights
Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as
follows:
Norwest Bank Minnesota, National
Association
P. O. Box 738
161 North Concord Exchange
South St. Paul, Minnesota 55075
Attention: _____________________
(c) Notices or demands authorized by
this Agreement to be given or made by the Company or the
Rights Agent to the holder of any Right Certificate
shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address
of such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments.
Prior to the Distribution Date and subject to the
penultimate sentence of this Section 27, the Company may
and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement
without the approval of any holders of certificates
representing Common Shares. Without limiting the
foregoing, the Company may at any time prior to such
time as any Person becomes an Acquiring Person amend
this Agreement to lower the thresholds set forth in
Sections 1(a) and 3(a) hereof from 15% to not less than
10%, with appropriate exceptions for Persons then
beneficially owning Common Shares of the Company
constituting a percentage of the number of Common Shares
then outstanding equal to or in excess of the new
threshold. From and after the Distribution Date and
subject to the penultimate sentence of this Section 27,
the Company and the Rights Agent shall, if the Company
so directs, supplement or amend this Agreement without
the approval of any holders of Right Certificates in
order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be
defective or inconsistent with any other provision
herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the
provisions hereunder in any manner which the Company may
deem necessary or desirable and which shall not
adversely affect the interests of the holders of Right
Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person);
provided, that from and after the Distribution Date this
Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A)
a time period relating to when the Rights may be
redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate
from an appropriate officer of the Company which states
that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to
the contrary, no supplement or amendment shall be made
which changes the Redemption Price, the Purchase Price
or the Final Expiration Date. Prior to the Distribution
Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of
Common Shares.
Section 28. Successors. All the covenants
and provisions of this Agreement by or for the benefit
of the Company or the Rights Agent shall bind and inure
to the benefit of their respective successors and
assigns hereunder.
Section 29. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to
any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the
Common Shares) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be
for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 30. Severability. If any term,
provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected,
impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or
restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of
Directors determines in its good faith judgment that
severing the invalid language from this Agreement would
adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section
23 hereof shall be reinstated and shall not expire until
the close of business on the tenth day following the
date of such determination by the Board of Directors.
Section 31. Governing Law. This Agreement
and each Right Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State
of Minnesota and for all purposes shall be governed by
and construed in accordance with the laws of such State
applicable to contracts to be made and performed
entirely within such State and shall be subject to the
exclusive jurisdiction of the courts of, and United
States Federal Courts sitting in, such State.
Section 32. Counterparts. This Agreement
may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 33. Descriptive Headings.
Descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any
of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and attested,
all as of the day and year first above written.
PENTAIR, INC.
Attest:
By: ______________________________
By: _______________________________
Title: ______________________
Title: _______________________
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Attest:
By: _____________________________
By: ______________________________
Title: _____________________
Title: ______________________
<PAGE>
Exhibit A
[Form of Right Certificate]
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER JULY 31, 2005 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT
TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
PENTAIR, INC.
This certifies that ________________,
or registered assigns, is the registered owner of
the number of Rights set forth above, each of
which entitles the owner thereof, subject to the
terms, provisions and conditions of the Rights
Agreement, dated as of July 21, 1995, and as such
agreement may be amended (the "Rights
Agreement"), between Pentair, Inc., a Minnesota
corporation (the "Company"), and Norwest Bank
Minnesota, National Association (the "Rights
Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to
5:00 P.M., St. Paul, Minnesota time, on July 31,
2005, at the principal office of the Rights
Agent, or at the office of its successor as
Rights Agent, one fully paid nonassessable share
of common stock, par value $.16-2/3 per share
("Common Shares"), of the Company, at a purchase
price of $160.00 per Common Share (the "Purchase
Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to
Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the
number of Common Shares which may be purchased
upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number
and Purchase Price as of July 21, 1995, based on
the Common Shares as constituted at such date.
As provided in the Rights Agreement, the Purchase
Price and the number of Common Shares which may
be purchased upon the exercise of the Rights
evidenced by this Right Certificate are subject
to modification and adjustment upon the happening
of certain events.
This Right Certificate is subject to
all of the terms, provisions and conditions of
the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by
reference and made a part hereof and to which
Rights Agreement reference is hereby made for a
full description of the rights, limitations of
rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and
the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal
executive offices of the Company and the above-mentioned
offices of the Rights Agent.
This Right Certificate, with or
without other Right Certificates, upon surrender
at the principal office of the Rights Agent, may
be exchanged for another Right Certificate or
Right Certificates of like tenor and date
evidencing Rights entitling the holder to
purchase a like aggregate number of Common Shares
as the Rights evidenced by the Right Certificate
or Right Certificates surrendered shall have
entitled such holder to purchase. If this Right
Certificate shall be exercised in part, the
holder shall be entitled to receive upon
surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the
Rights Agreement, the Rights evidenced by this
Certificate (i) may be redeemed by the Company at
a redemption price of $.01 per Right or (ii) may
be exchanged in whole or in part for Common
Shares. The Board of Directors of the Company
may, at its option, at any time after any Person
becomes an Acquiring Person, but prior to such
Person's acquisition of 50% or more of the
outstanding Common Shares, exchange the Rights
evidenced by this Certificate for Common Shares,
at an exchange ratio of one Common Share per
Right, subject to adjustment, as provided in the
Rights Agreement.
No fractional Common Shares will be
issued upon the exercise of any Right or Rights
evidenced hereby, but in lieu thereof a cash
payment will be made, as provided in the Rights
Agreement.
No holder of this Right Certificate
shall be entitled to vote or receive dividends or
be deemed for any purpose the holder of the
Common Shares or of any other securities of the
Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in
the Rights Agreement or herein be construed to
confer upon the holder hereof, as such, any of
the rights of a shareholder of the Company or any
right to vote for the election of directors or
upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of
meetings or other actions affecting shareholders
(except as provided in the Rights Agreement), or
to receive dividends, distributions or
subscription rights, or otherwise, until the
Right or Rights evidenced by this Right
Certificate shall have been exercised as provided
in the Rights Agreement.
This Right Certificate shall not be
valid or obligatory for any purpose until it
shall have been countersigned by the Rights
Agent.
WITNESS the facsimile signature of
the proper officers of the Company and its
corporate seal. Dated as of ____________, ____.
ATTEST: PENTAIR, INC.
By
Title:
Countersigned:
By
Authorized Signature
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right
Certificate.)
FOR VALUE RECEIVED ______________________________
hereby sells, assigns and transfers unto
________________
(Please print name and address of transferee)
__________________ this Right Certificate, together with
all right, title and interest therein, and does
hereby irrevocably constitute and appoint
___________________ Attorney, to transfer the
within Right Certificate on the books of the
within-named Company, with full power of
substitution.
Dated: _______________________, ____
_____________________________
Signature
Signature Guaranteed:
The undersigned hereby certifies that
the Rights evidenced by this Right Certificate
are not beneficially owned by an Acquiring Person
or an Affiliate or Associate thereof (as defined
in the Rights Agreement).
_________________________
Signature
- ----
[Form of Reverse Side of Right Certificate --
continued]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To PENTAIR, INC.:
The undersigned hereby irrevocably
elects to exercise ____________________ Rights
represented by this Right Certificate to purchase
the Common Shares issuable upon the exercise of
such Rights and requests that certificates for
such Common Shares be issued in the name of:
Please insert social security
or other identifying number
______________________
(Please print name and address)
____________
If such number of Rights shall not be all the
Rights evidenced by this Right Certificate, a new
Right Certificate for the balance remaining of
such Rights shall be registered in the name of
and delivered to:
Please insert social security
or other identifying number
________________
(Please print name and address)
_______________________
Dated: ___________________, ____
_____________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a
member firm of a registered national securities
exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or
trust company having an office or correspondent
in the United States.
[Form of Reverse Side of Right Certificate --
continued]
- -----------------
The undersigned hereby certifies that
the Rights evidenced by this Right Certificate
are not beneficially owned by an Acquiring Person
or an Affiliate or Associate thereof (as defined
in the Rights Agreement).
_____________________________
Signature
- -----
NOTICE
The signature in the foregoing Forms
of Assignment and Election must conform to the
name as written upon the face of this Right
Certificate in every particular, without
alteration or enlargement or any change
whatsoever.
In the event the certification set
forth above in the Form of Assignment or the Form
of Election to Purchase, as the case may be, is
not completed, the Company and the Rights Agent
will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an
Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and
such Assignment or Election to Purchase will not
be honored.
<PAGE>
Exhibit B
PENTAIR, INC.
SUMMARY OF RIGHTS TO PURCHASE
COMMON SHARES
On July 21, 1995, the Board of
Directors of Pentair, Inc. (the "Company")
declared a dividend of one common share purchase
right (a "Right") for each outstanding share of
common stock, par value $.16-2/3 per share (the
"Common Shares"), of the Company. The dividend
is effective July 31, 1995 for shareholders of
record on such date (the "Record Date"). Each
Right entitles the registered holder to purchase
from the Company one Common Share at a price of
$160.00 per Common Share, subject to adjustment
(the "Purchase Price"). The description and
terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the
Company and Norwest Bank Minnesota, National
Association, as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10
days following a public announcement that a
person or group of affiliated or associated
persons (other than the Company, a subsidiary of
the Company or an employee benefit plan of the
Company or a subsidiary) (an "Acquiring Person")
has acquired beneficial ownership of 15% or more
of the outstanding Common Shares (the "Shares
Acquisition Date") or (ii) 10 business days (or
such later date as may be determined by action of
the Company's Board of Directors prior to such
time as any person becomes an Acquiring Person)
following the commencement of, or announcement of
an intention to make, a tender offer or exchange
offer the consummation of which would result in
the beneficial ownership by a person or group
(other than the Company, a subsidiary of the
Company or an employee benefit plan of the
Company or a subsidiary) of 15% or more of such
outstanding Common Shares (the earlier of such
dates being called the "Distribution Date"), the
Rights will be evidenced, with respect to any of
the Common Share certificates outstanding as of
the Record Date, by such Common Share
certificate.
The Rights Agreement provides that,
until the Distribution Date, the Rights will be
transferred with and only with the Common Shares.
Until the Distribution Date (or earlier
redemption or expiration of the Rights), new
Common Share certificates issued after the Record
Date, upon transfer or new issuance of Common
Shares, will contain a notation incorporating the
Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for
transfer of any certificates for Common Shares,
outstanding as of the Record Date, even without
such notation, will also constitute the transfer
of the Rights associated with the Common Shares
represented by such certificate. As soon as
practicable following the Distribution Date,
separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders
of record of the Common Shares as of the close of
business on the Distribution Date and such
separate Right Certificates alone will evidence
the Rights.
The Rights are not exercisable until
the Distribution Date. The Rights will expire on
July 31, 2005 (the "Final Expiration Date"),
unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as
described below.
The Purchase Price payable, and the
number of Common Shares or other securities or
property issuable, upon exercise of the Rights
are subject to adjustment from time to time to
prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or
reclassification of, the Common Shares, (ii) upon
the grant to holders of the Common Shares of
certain rights or warrants to subscribe for or
purchase Common Shares at a price, or securities
convertible into Common Shares with a conversion
price, less than the then current market price of
the Common Shares or (iii) upon the distribution
to holders of the Common Shares of evidences of
indebtedness or assets (excluding regular
quarterly cash dividends or dividends payable in
Common Shares) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no
adjustment in the Purchase Price will be required
until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price.
No fractional shares will be issued. In lieu
thereof, an adjustment in cash will be made based
on the market price of the Common Shares on the
last trading day prior to the date of exercise.
The Purchase Price is payable by
certified check, cashier's check, bank draft or
money order or, if so provided by the Company,
the Purchase Price following the occurrence of a
Flip-In Event (as defined below) and until the
first occurrence of a Flip-Over Event (as defined
below) may be paid in Common Shares having an
equivalent value.
In the event that any person becomes
an Acquiring Person (a "Flip-In Event"), the
holders of Rights will thereafter have the right
to receive upon exercise that number of Common
Shares (or, in certain circumstances cash,
property or other securities of the Company or a
reduction in the Purchase Price) having a market
value of two times the then current Purchase
Price. Notwithstanding any of the foregoing,
following the occurrence of a Flip-In Event all
Rights will be null and void to the extent they
are, or (under certain circumstances specified in
the Rights Agreement) were, or subsequently
become beneficially owned by an Acquiring Person,
related persons and transferees.
In the event that, at any time
following the Shares Acquisition Date, (i) the
Company is acquired in a merger or other business
combination transaction or (ii) 50% or more of
its consolidated assets or earning power are sold
(the events described in clauses (i) and (ii) are
herein referred to as "Flip-Over Events"), proper
provision will be made so that the holders of
Rights will thereafter have the right to receive,
upon the exercise thereof at the then current
Purchase Price, that number of shares of common
stock of the acquiring company which at the time
of such transaction will have a market value of
two times the then current Purchase Price.
At any time after a person becomes an
Acquiring Person and prior to the acquisition by
such Acquiring Person of 50% or more of the
outstanding Common Shares, the Board of Directors
of the Company may exchange the Rights (other
than Rights owned by such Acquiring Person which
have become void), in whole or in part, at an
exchange ratio of one Common Share (or of a share
of a class or series of the Company's preferred
stock having equivalent rights, preferences and
privileges) per Right (subject to adjustment).
At any time prior to the close of
business on the tenth day following the Shares
Acquisition Date, the Board of Directors of the
Company may redeem the Rights in whole, but not
in part, at a price of $.01 per Right (the
"Redemption Price"). The redemption of the
Rights may be made effective at such time, on
such basis and with such conditions as the Board
of Directors in its sole discretion may
establish. Immediately upon any redemption of
the Rights, the right to exercise the Rights will
terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Other than the Redemption Price, the
Purchase Price and the Final Expiration Date, the
terms of the Rights may be amended by the Board
of Directors of the Company without the consent
of the holders of the Rights, including an
amendment to lower the threshold for
exercisability of the Rights from 15% to 10%,
with appropriate exceptions for any person then
beneficially owning a percentage of the number of
Common Shares then outstanding equal to or in
excess of the new threshold, except that from and
after the Distribution Date no such amendment may
adversely affect the interests of the holders of
the Rights.
Until a Right is exercised, the
holder thereof, as such, will have no rights as a
shareholder of the Company, including, without
limitation, the right to vote or to receive
dividends.
A copy of the Rights Agreement has
been filed with the Securities and Exchange
Commission as an Exhibit to a Registration
Statement on Form 8-A filed with respect to the
Rights. A copy of the Rights Agreement is
available free of charge from the Company. This
summary description of the Rights does not
purport to be complete and is qualified in its
entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
EXHIBIT 11
PENTAIR, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
June 30 June 30
1995 1994 1995 1994
INCOME ($ thousands)
<S> <C> <C> <C> <C>
Net income $43,900 $22,925 $28,550 $11,825
Preferred dividend requirements 2,657 2,731 1,327 1,365
Earnings available
to common and common
equivalent shares - Primary 41,243 20,194 27,223 10,460
Preferred dividends
assuming conversion
of Preferred Stock:
Series 1988 497 511 247 255
Series 1990 2,160 2,220 1,080 1,110
Tax benefit on preferred
ESOP dividend
eliminated due to
conversion into common (646) (527) (314) (263)
Tax benefit on ESOP dividend
assuming conversion to common,
at common dividend rate 250 184 122 92
Earnings for
fully diluted computation $43,504 $22,582 $28,358 $11,654
SHARES (thousands)
Weighted average number
of shares outstanding
during the period 18,340 18,181 18,377 18,194
Shares issuable on exercise
of stock options less shares
repurchaseable from proceeds 244 195 239 186
Common and Common
Equivalent Shares -
Primary 18,584 18,376 18,616 18,380
Shares issuable on conversion of:
$7.50 Callable Cumulative
Convertible
Preferred Stock, Series 1988 496 511 494 510
8% Callable Cumulative
Voting Convertible
Preferred Stock, Series 1990 2,080 2,117 2,066 2,113
Common and Common
Equivalent Shares -
Fully Diluted 21,160 21,004 21,176 21,003
Earnings per share:
Primary -
Income from
continuing operations $1.32 $1.04 $.64 $.57
discontinued operations .90 .06 .82 .00
Net Income $2.22 $1.10 $1.46 $.57
Diluted -
Income from
continuing operations $1.27 $1.03 $.62 $.56
discontinued operations .79 .05 .72 .00
Net Income $2.06 $1.08 $1.34 $.56
</TABLE>
