<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Pentair, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
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<PAGE>
WINSLOW H. BUXTON
CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
March 10, 1995
Dear Shareholder:
Please join us at 10 a.m. on Wednesday, April 19, 1995, for Pentair's 28th
Annual Shareholders Meeting at the Northland Inn, Brooklyn Park, Minnesota.
During the meeting, we will elect directors to the Company's board, appoint
auditors, and conduct other business as described in the Proxy Statement. In
addition, several Pentair officers will be present to provide a detailed report
on operations and financial performance, as well as expectations for 1995. There
also will be opportunities for shareholders to ask questions.
We encourage you to join us and participate in the meeting. However, if you
are unable to attend, you can be assured your shares will be represented at the
meeting by completing and returning the enclosed proxy card in the envelope
provided. If you are unsure whether or not you can attend the meeting, please
exercise your right to vote on company business by completing and returning the
proxy card now. Sending your proxy card will not prevent you from voting in
person should you decide to attend the meeting.
I look forward to discussing Pentair's performance with shareholders and
hope you will join us on April 19th.
Sincerely,
Winslow H. Buxton
<PAGE>
PENTAIR, INC.
1500 County Road B2 West
Saint Paul, Minnesota 55113
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 19, 1995
To our Shareholders:
The Annual Meeting of Shareholders of Pentair, Inc. (the "Company") will be
held at the Northland Inn and Conference Center, 7101 Northland Circle, Brooklyn
Park, Minnesota, on Wednesday, April 19, 1995, at 10:00 a.m., for the following
purposes:
1. To elect three directors.
2. To amend the Restated Articles of Incorporation increasing the total
number of shares authorized to be issued from 75,000,000 to 100,000,000
and increase from 10,000,000 to 15,000,000 the number of authorized
shares that the Board of Directors could designate as preferred shares,
and modify the power of the Board of Directors to establish voting rights
of unissued shares.
3. To, as an alternative to Item 2, amend the Restated Articles of
Incorporation, increasing the total number of shares authorized to be
issued from 75,000,000 to 125,000,000 and increase from 10,000,000 to
15,000,000 the number of shares that the Board of Directors could
designate as preferred shares.
4. To vote upon a proposal to ratify the selection of Deloitte & Touche LLP
as independent auditors of the Company for 1995.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on February 21, 1995
as the record date for determining the shareholders entitled to vote at the
annual meeting. Accordingly, only shareholders of record at the close of
business on that date will be entitled to vote. The Company's transfer books
will not be closed.
By Order of the Board of Directors
R. T. Rueb, Secretary
Saint Paul, Minnesota
March 10, 1995
IMPORTANT: To assure that the annual meeting may be legally held, there must be
a quorum (50% plus 1 vote). Accordingly, you are urged to SIGN AND RETURN THE
ENCLOSED PROXY PROMPTLY. This will not prevent you from voting in person if you
so desire.
<PAGE>
TABLE OF CONTENTS FOR PROXY STATEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Solicitation............................................................................................... 1
Revocation and Voting of Proxy............................................................................. 1
Outstanding Shares and Voting Rights....................................................................... 2
Security Ownership of Management and Beneficial Ownership.................................................. 2
Proposals to be Acted Upon at the Annual Meeting
Item 1 -- Election of Directors.......................................................................... 5
Item 2 -- Approval of Amendment to Restated Articles..................................................... 10
Item 3 -- Approval of Alternative Amendment to Restated Articles......................................... 13
Item 4 -- Approval of Auditors........................................................................... 15
Executive Compensation..................................................................................... 15
Future Proposals........................................................................................... 23
Other Business............................................................................................. 23
</TABLE>
<PAGE>
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PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 19, 1995
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PENTAIR, INC.
1500 County Road B2 West
Saint Paul, Minnesota 55113
March 10, 1995
The following statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Pentair, Inc. (the "Company") to be voted
at the annual meeting of shareholders of the Company to be held on Wednesday,
April 19, 1995, or at any adjournment or adjournments of such meeting.
Distribution of this proxy statement and proxy to shareholders began on or about
March 10, 1995.
SOLICITATION
The cost of soliciting proxies and the notices of the meeting, including the
preparation, assembly and mailing of proxies and this statement, will be borne
by the Company. In addition to this mailing, proxies may be solicited personally
or by telephone by regular employees of the Company. Assistance in the
solicitation of proxies is also being rendered by Morrow & Co., 909 Third
Avenue, New York, New York, at a cost to the Company of $7,000 plus expenses.
Furthermore, arrangements may be made with brokers, banks and similar
organizations to send proxies and proxy materials to beneficial owners for
voting instructions, for which the Company will reimburse such organizations for
their expense in so doing and will pay all costs of soliciting the proxies.
REVOCATION AND VOTING OF PROXY
Any shareholder giving a proxy may revoke it prior to its use at the meeting
by (1) delivering a written notice expressly revoking the proxy to the Secretary
at the Company's offices, (2) signing and forwarding to the Company at its
offices a later dated proxy, or (3) attending the annual meeting and casting his
or her votes personally.
A majority of the outstanding shares will constitute a quorum at the Annual
Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Pursuant to Minnesota law and the Company's Articles of Incorporation,
abstentions are counted in determining the total number of the votes cast on
proposals presented to shareholders, but will not be treated as votes in favor
of the proposals. Broker non-votes are not counted for purposes of determining
whether a proposal has been approved.
Unless otherwise directed in the accompanying proxy, the persons named
therein will vote FOR the directors and the proposals set forth in the Notice of
Annual Meeting of Shareholders. As to any other business which may properly come
before the meeting, they will vote in accordance with their best judgment,
although the Company does not presently know of any other business.
1
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
At the close of business on February 21, 1995, the record date, there were
outstanding 18,316,470 shares of common stock, par value $.16 per share, and
1,819,078 shares of 8% Callable Cumulative Voting Convertible Preferred Stock,
Series 1990, par value $.10 per share ("voting preferred"), which are the only
classes of voting stock of the Company entitled to be voted at the meeting.
A shareholder is entitled to one vote for each common and voting preferred
share held on the record date with respect to all matters that may be brought
before the meeting. There is no cumulative voting for directors.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company. Officers, directors,
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the Company's officers and directors,
the Company believes all persons subject to these reporting requirements filed
the required reports on a timely basis, except that Charles A. Haggerty, a
director of the Company and David D. Harrison, an officer at the Company, did
not timely file Form 3, the Initial Statement of Beneficial Ownership of
Securities. Reports have been filed by both persons. Neither person bought or
sold any shares of the Company's stock during the period from the original due
date to the actual filing date.
SECURITY OWNERSHIP OF MANAGEMENT AND BENEFICIAL OWNERSHIP
The following table contains information as of February 21, 1995 concerning
the beneficial ownership of the Company's voting shares by each director, by
each executive officer, by all directors and executive officers as a group, and
by three persons known to the Company to "beneficially own" more than 5% of
either of its classes of voting shares.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF NUMBER OF VOTING PERCENT OF COMBINED VOTING
BENEFICIAL OWNER (A) COMMON SHARES (B) CLASS PREFERRED SHARES (B) CLASS PERCENTAGE (C)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
George N. Butzow 17,324(d) * 0 0 *
Winslow H. Buxton 149,353(e) * 1,156 * *
Joseph R. Collins 30,229(f) * 1,021 * *
Charles A. Haggerty 1,661(g) * 0 0 *
Harold V. Haverty 3,750(h) * 0 0 *
Quentin J. Hietpas 9,552(i) * 0 0 *
B. Kristine Johnson 6,021(j) * 0 0 *
Ronald V. Kelly 79,145(k) * 1,181 * *
Walter Kissling 1,985(l) * 0 0 *
Gerald C. Kitch 45,121(m) * 1,125 * *
Allan J. Kolles 37,624(n) * 1,085 * *
D. Eugene Nugent 413,302(o) 2.2% 850 * 2.0%
Richard M. Schulze 1,048(p) * 0 0 *
All current directors & 862,375(q) 4.6% 8,720 * 4.3%
executive officers as a group
(18 persons)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF NUMBER OF VOTING PERCENT OF COMBINED VOTING
BENEFICIAL OWNER (A) COMMON SHARES (B) CLASS PREFERRED SHARES (B) CLASS PERCENTAGE (C)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Partners, Inc. 1,228,538(r) 6.6% 0 0 6.0%
Three First National Plaza
9th Floor, Suite 111
Chicago, IL 60602-4298
The Prudential Insurance 1,824,301(s) 9.8% 0 0 8.9%
Company of America
Prudential Plaza
Newark, NJ 07102-3777
State Street Bank 56,300(t) * 1,819,078(s) 100.0% 8.9%
and Trust Company
225 Franklin St.
Boston, MA 02110
<FN>
* Less than 1.0%.
(a) Unless otherwise noted, all shares are held by individuals possessing sole
voting and investment power with respect to such shares. Amounts listed do
not include 528,285 shares held by the Pentair, Inc. Master Trust for
various pension plans of the Company and it subsidiaries, the Investment
Committee of which Master Trust includes Winslow H. Buxton,, Allan J.
Kolles and two other officers. Although these individuals could be deemed
under applicable Securities and Exchange Commission rules to "beneficially
own" all of the shares held by these plans because of their shared voting
and investment power with respect to those shares, they disclaim beneficial
ownership of such shares.
(b) The shares of voting preferred stock are all held by the trustee of the
Company's Employee Stock Ownership Trust. These shares are converted into
common shares upon the retirement or other termination of employment of an
ESOP participant at the ratio of approximately 1.1538 common shares for
each preferred share. The shares of preferred stock vote together with the
common shares as a single class on most issues, with each preferred share
having one vote. The ESOP participants, including those officers listed in
the table, have the right to direct the voting of the shares allocated to
their accounts, although they have no investment power over those shares.
Since the voting preferred shares could be converted into approximately
2,098,852 common shares, under applicable SEC rules the ESOP trustee may be
deemed to beneficially own that number of common shares in addition to the
preferred shares it holds. However, to avoid overstatement of the aggregate
beneficial ownership of the common and voting preferred shares, the common
shares reported in the table do not include the shares that may be acquired
upon conversion of the voting preferred shares, and the calculations of the
percentage of common shares beneficially owned do not take into account any
such shares.
(c) Since the common shares and voting preferred shares vote together as a
single class on all issues being submitted to the shareholders at the
upcoming annual meeting, the percentages below indicate the percentage of
the aggregate voting power represented by the shares of both classes held
by each person listed.
(d) Includes 4,725 shares that could be obtained upon exercise of stock options
within 60 days and 7,928 shares representing Share Units credited to Mr.
Butzow's account in the Third Amended and Restated Compensation Plan for
Non-Employee Directors as to which he currently has no voting or investment
power.
(e) Includes 6,512 restricted shares issued pursuant to an incentive plan as to
which Mr. Buxton has sole voting power but no investment power, 217 shares
held jointly with his spouse as to which he shares voting and investment
power, and 108,433 shares that could be obtained upon exercise of employee
stock options within 60 days.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
(f) Includes 2,410 restricted shares issued pursuant to an incentive plan as to
which Mr. Collins has sole voting power but no investment power, 390 shares
held by his spouse as to which he may be deemed to share voting and
investment power, but as to which he disclaims beneficial ownership, and
13,496 shares that could be obtained upon exercise of employee stock
options within 60 days.
(g) Includes 661 shares representing share units credited to Mr. Haggerty's
account in the Third Amended and Restated Compensation Plan for
Non-Employee Directors as to which he currently has no voting or investment
power.
(h) Includes 3,000 shares that could be obtained upon exercise of stock options
within 60 days.
(i) Includes 4,725 shares that could be obtained upon exercise of stock options
within 60 days and 1,089 shares representing Share Units credited to Mr.
Hietpas's account in the Third Amended and Restated Compensation Plan for
Non-Employee Directors as to which he currently has no voting or investment
power.
(j) Includes 3,000 shares that could be obtained upon exercise of stock options
within 60 days and 2,721 shares representing Share Units credited to Ms.
Johnson's account in the Third Amended and Restated Compensation Plan for
Non-Employee Directors as to which she has no voting or investment power.
(k) Includes 2,424 restricted shares issued pursuant to an incentive plan as to
which Mr. Kelly has sole voting power but no investment power, 11,570
shares held by his spouse as to which he may be deemed to share voting and
investment power, but as to which he disclaims beneficial ownership, and
31,333 shares that could be obtained upon exercise of employee stock
options within 60 days.
(l) Includes 500 shares that could be obtained upon exercise of stock options
within 60 days and 1,485 shares representing Share Units credited to Mr.
Kissling's account in the Third Amended and Restated Compensation Plan for
Non-Employee Directors as to which he has no voting or investment power.
(m) Includes 2,862 restricted shares issued pursuant to an incentive plan as to
which Mr. Kitch has sole voting power but no investment power, and 25,483
shares that could be obtained upon exercise of employee stock options
within 60 days.
(n) Includes 1,441 restricted shares issued pursuant to an incentive plan as to
which Mr. Kolles has sole voting power but no investment power, 7,245
shares held by his spouse as to which he may be deemed to share voting and
investment power, but as to which he disclaims beneficial ownership, and
10,509 shares that could be obtained upon exercise of employee stock
options within 60 days.
(o) Includes 168,361 shares that Mr. Nugent holds jointly with his spouse as to
which he shares voting and investment power, 22,296 shares held by his
spouse as to which he may be deemed to share voting and investment power,
but as to which he disclaims beneficial ownership, and 69,450 shares that
could be obtained upon exercise of stock options within 60 days.
(p) Includes 48 shares representing share units credited to Mr. Schulze's
account in the Third Amended and Restated Compensation Plan for
Non-Employee Directors as to which he has no voting or investment power.
(q) Includes, with respect to officers not named above, 484 shares held by
children of an officer as to which such officer may be deemed to share
voting and investment power, but as to which he disclaims beneficial
ownership; 6,469 shares held jointly by officers and their spouses as to
which such officers share voting and investment power; 8,638 restricted
shares issued pursuant to an incentive plan as to which such officers have
sole voting power but no investment power; and 29,257 shares that could be
obtained upon exercise of employee stock options within 60 days.
(r) According to its Schedule 13G dated February 13, 1995, Brinson Partners,
Inc., a registered investment adviser, has sole voting power and sole
investment power over all 1,228,538 shares.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
(s) According to its Schedule 13G dated February 16, 1995, Prudential Insurance
Company of America, a registered investment adviser and broker-dealer, has
sole voting and investment power over 768,900 shares and shared voting and
investment power over 1,055,401 shares.
(t) According to its Schedule 13G dated February 13, 1995, State Street Bank
and Trust Company, as trustee under the Pentair, Inc. Employee Stock
Ownership Trust, may be deemed to have shared voting power and investment
power over all 1,819,078 voting preferred shares, but it has disclaimed
beneficial ownership of all 1,819,078 shares. State Street reports having
sole voting power and investment power over 54,200 of the common shares
listed, and shared investment power of 2,100 of the common shares listed,
which it holds as trustee for collective investment funds for other
employee benefit plans.
</TABLE>
PROPOSALS TO BE ACTED UPON AT THE ANNUAL MEETING
ITEM 1
ELECTION OF DIRECTORS
The Company's By-Laws provide for a Board of Directors (sometimes referred
to herein as the "Board") of not fewer than three members and not more than
fifteen members. The Board has set the number of directors at nine. The Board is
divided into three classes with all directors serving three-year terms but with
the beginning date for each term staggered so that the term of only one class
expires in any particular year. Vacancies that occur during a term may be filled
by the Board of Directors or by election at a special meeting of shareholders.
Any director elected to fill a vacancy by the remaining directors is required to
stand for election at the next meeting of shareholders.
At the forthcoming annual meeting, three persons are to be elected to the
Company's Board of Directors, two of whom are currently directors of the
Company. From the class of three directors normally scheduled to stand for
election this year, B. Kristine Johnson has indicated she will retire from the
Board effective the date of the annual meeting, and Karen E. Welke has been
nominated by the Board to fill the resulting vacancy. Six other directors have
terms of office that do not expire at this time, and each will continue to serve
his or her full term. Proxies cannot be voted for a greater number of directors
than the number nominated. Unless you direct otherwise, proxies will be voted
FOR the election of all nominees listed below. Should any nominee decline or be
unable to accept such nomination or to serve as director (an event management
does not now expect to occur), proxies will be voted FOR a substitute nominee or
nominees in accordance with the best judgment of the person or persons acting
under them.
If elected, all nominees are expected to serve until the 1998 Annual Meeting
of Shareholders and until their successors are duly elected and qualified.
Information concerning the persons nominated for election as directors, as
well as those continuing in office, is set forth on the following pages.
DIRECTORS STANDING FOR ELECTION
(FOR A THREE-YEAR TERM EXPIRING AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS)
<TABLE>
<S> <C>
[PHOTO] Since 1983, Mr. Hietpas has been the Senior Vice President of External Affairs
of the University of St. Thomas.
QUENTIN J. HIETPAS
Director since: 1976
Age: 64
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
[PHOTO] Since 1983, Mr. Schulze has been Founder, Chairman and Chief Executive Officer
of Best Buy Company, Inc. a consumer electronics and major appliance chain.
RICHARD M. SCHULZE
Director since: 1994
Age: 54
Since February 1995, Ms. Welke has been Group Vice President, Medical
[PHOTO] Products Group for Minnesota Mining and Manufacturing Company (3M). Prior to
that, she held various positions with 3M including Managing Direc-
KAREN E. WELKE tor, 3M France (July 1991 to February 1995); and Division Vice President,
Director since: -- Medical-Surgical Division (March 1990 to July 1991).
Age: 50
</TABLE>
DIRECTORS CONTINUING IN OFFICE
(TERM EXPIRES AT THE 1996 ANNUAL MEETING OF SHAREHOLDERS)
<TABLE>
<S> <C>
[PHOTO] Since May 1994, Mr. Butzow has been Founder and Chairman Emeritus of MTS
GEORGE N. BUTZOW Systems, a manufacturer of high-technology testing systems. Mr. Butzow was
Director since: 1979 Chairman of the Board of Directors of MTS from 1982 to May 1994. Mr. Butzow is
Age: 65 also a director of Andrew Corporation.
Since January 1993, Mr. Buxton has been the Chairman of the Board
[PHOTO] of Directors of Pentair, Inc. Mr Buxton has been President and Chief
WINSLOW H. BUXTON Executive Officer of the Company since August 1992. Mr. Buxton was Chief
Director since: 1990 Operating Officer of the Company from August 1990 through August 1992. Mr Buxton
Age: 55 was also Vice President -- Paper Group of the Company from January 1989 through
August 1990. Mr. Buxton is also a director of Bemis Company, Inc.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
[PHOTO] Mr. Kissling has been the President since April 1992 and Chief Operating Officer
WALTER KISSLING since July 1990 of H. B. Fuller Company, a manufacturer and marketer of
Director since: 1993 specialty chemical products. He was Executive Vice President of H.B. Fuller from
Age: 63 July 1990 to April 1991, and Senior Vice President from 1980 to 1990. Mr.
Kissling is also a director of H.B. Fuller Company and Chairman and Director of
one of its subsidiaries, Kativo Chemical Industries, S.A.
</TABLE>
(TERM EXPIRES AT THE 1997 ANNUAL MEETING OF SHAREHOLDERS)
<TABLE>
<S> <C>
[PHOTO] Since 1992, Mr. Haverty has been Chairman of the Board of Directors of Deluxe
HAROLD V. HAVERTY Corporation, a manufacturer of bank checks and internal bank forms. Mr. Haverty
has been Chief Executive Officer and President of Deluxe since 1986.
Director since: 1990
Age: 64
In June 1992, Mr. Haggerty was appointed President and subsequently
[PHOTO] in July 1993 appointed Chairman of the Board of Directors and Chief Executive
Officer of Western Digital Corporation, a manufacturer of
CHARLES A. HAGGERTY hard disk drives and semiconductors. Prior to that, he held various positions
Director since: 1994 with IBM Corporation including Vice President-General Manager, Worldwide OEM
Age: 53 Storage Marketing (1991- 1992); and Vice President-General Manager, Low-end
Storage Products (1989-1990).
Mr. Nugent was the Chairman of the Board of Directors of Pentair, Inc.
[PHOTO] from July 1986 to January 1993. He was also the Chief Executive Officer of the
Company from July 1986 until August 1992. Mr. Nugent
D. EUGENE NUGENT is also a director of Apogee Enterprises, Inc., Piper Trust Funds, Inc. and VFE,
Director since: 1975 Inc.
Age: 67
</TABLE>
7
<PAGE>
DIRECTORS' ATTENDANCE
The Board of Directors held six meetings in 1994. All directors attended at
least 75% of the meetings of the Board and its committees on which they served.
COMMITTEES OF THE BOARD
The Board presently has seven committees.
The Audit Committee, which presently consists of B. Kristine Johnson
(Chair), George N. Butzow, and Charles A. Haggerty, is responsible for selecting
auditors, ensuring the fiscal integrity of the Company, and establishing and
reviewing internal controls. The Audit Committee held two meetings in 1994.
The Compensation and Personnel Committee, which presently consists of
Quentin J. Hietpas (Chair), Harold B. Haverty and D. Eugene Nugent, is
responsible for developing a broad plan of compensation for the Company that is
competitive and rewarding to the degree that it will attract, hold, and inspire
performance of executive, managerial, and other key personnel. The Committee
held nine meetings during 1994.
The Executive Committee, which presently consists of D. Eugene Nugent
(Chair), Winslow H. Buxton, Quentin J. Hietpas and Walter Kissling, makes and
implements decisions that require immediate or rapid action when it is
impractical to call a meeting of the full Board of Directors. The Committee held
two meetings in 1994.
The Nominating Committee, which presently consists of D. Eugene Nugent
(Chair), Winslow H. Buxton, and Harold B. Haverty, is responsible for nominating
candidates for vacancies on the Board. The Nominating Committee will consider
nominees recommended by shareholders under procedures set forth in the Company's
By-Laws. Sections 9 through 12 of Article II of the By-Laws provide that a
candidate may not be nominated for election as a director at the annual meeting
of shareholders unless the nomination was previously submitted to the Board or
its Nominating Committee. A shareholder wishing to nominate a candidate for
director at an annual meeting of shareholders must do so no later than the
sixtieth day of the fiscal year preceding the fiscal year in which such annual
meeting will be held. Nominations are deemed made when the Secretary of the
Company receives all of the following: (1) all information about the nominee
that may be required to be provided in any proxy statement pursuant to the
Securities Exchange Act of 1934 and regulations promulgated thereunder; (2) an
executed directors' questionnaire provided by the Company and completed by the
nominee; (3) the nominee's statement consenting to his or her nomination and
agreeing to serve, if elected; and (4) evidence that the person making the
nomination is a shareholder. After reviewing the submission, the Board or the
appointed Nominating Committee may, but need not, designate one or more of the
nominees to appear as an alternate candidate on any proxy solicited by
management or any proxy statement furnished by management. The number of such
alternate candidates may not exceed the number of directors to be elected at
that annual meeting. Exclusion of any eligible candidate from a proxy solicited
by management does not affect the right of shareholders to nominate, vote for,
or elect such candidate at any shareholders meeting held within twelve months
after submission of the nomination material described above. The Nominating
Committee held one meeting in 1994.
The Public Policy Committee, which presently consists of Harold B. Haverty
(Chair), Winslow H. Buxton and B. Kristine Johnson, is responsible for
overseeing the Company's interest in the legislative, regulatory, philanthropic
and public areas, and for making recommendations regarding the Company's role as
a responsible corporate citizen. The Committee held two meetings in 1994.
The Shareholder Affairs Committee, which presently consists of George N.
Butzow (Chair), Winslow H. Buxton and D. Eugene Nugent, is responsible for
reviewing any proposed transaction involving the Company's securities that could
significantly alter the Company's shareholder base, operations, or overall
management. It has the power to engage advisers, direct management to issue
statements on behalf of the Company, institute legal action deemed to be in the
best interests of the Company, and take other appropriate action. The Committee
held one meeting in 1994.
8
<PAGE>
The Share Rights Committee, which presently consists of Walter Kissling
(Chair), George N. Butzow and Charles A. Haggerty, is responsible for making
recommendations to the Board regarding the Company's Rights Agreement. The
Committee held one meeting in 1994.
DIRECTORS' REMUNERATION
In 1995, non-employee directors will be paid an annual retainer of $23,000,
plus $1,000 for each attendance at a Board meeting. Committee Chairs receive
$1,400, except the Chair of the Compensation Committee receives $1,600.
Non-employee directors receive $1,000 for each attendance at a committee meeting
and $500 for participation in a telephone conference in lieu of a meeting.
Under the Third Amended and Restated Compensation Plan for Non-Employee
Directors, directors who are not employees of the Company may elect to defer
payment of all or a portion of their director's fees. The amounts deferred can
be either set aside in a cash account or used to purchase shares of the
Company's common stock. The plan provides for a Company match of 25% on the
first $750 per month deferred in the form of common stock. Participants and
amounts deferred under the Plan are shown below:
<TABLE>
<CAPTION>
$ DEFERRED $ DEFERRED $ DEFERRED SHARE UNITS
1992 1993 1994 12/31/94
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Butzow $ 25,750 $ 26,200 $ 0 7,799
Haggerty 0 0 22,688 511
Hietpas 0 9,000 9,000 1,050
Johnson 23,450 25,850 33,250 2,641
Kissling 0 17,700 31,300 1,285
</TABLE>
The plan also provides that former non-employee directors who meet certain
requirements are to be considered for retirement benefits to extend for a term
equal to the number of years served as a non-employee director or until death,
whichever occurs first, which benefits shall be paid monthly in an amount equal
to the pro rata monthly retainer fee being paid to the director at the time of
termination from the Board. The Company is currently paying compensation
benefits to four former directors. Finally, in the event of an unfriendly change
in control of the Company, the plan provides for the establishment of depository
agreements and the payment into trust of funds sufficient to ensure the payment
of any deferred director's fees or retirement benefits due former directors.
The Outside Directors Nonqualified Stock Option Plan provides for the
granting of options to purchase the Company's common stock to directors who are
not employees of the Company. The plan provides for automatic annual grants to
the directors and offers alternative forms of payment of the exercise price
including surrender of Pentair common stock or unexercised options. The persons
to receive options, the number of options granted, and the terms of the options
are determined by the Plan.
9
<PAGE>
No option granted under the plan, however, may extend for a period of more than
ten years from the date of the grant and no option exercise price may be less
than the current market price of Pentair common stock on the date of award of
such option.
<TABLE>
<CAPTION>
OPTIONS EXERCISE OR
NAME YEAR GRANTED BASE PRICE EXPIRATION DATE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George N. Butzow 1994 1,500 $ 35.50 1/19/99
1993 1,500 $ 28.6667 1/19/98
1992 1,500 $ 29.4167 1/14/97
Harold B. Haverty 1994 1,500 $ 35.50 1/19/99
1993 1,500 $ 28.6667 1/19/98
1992 1,500 $ 29.4167 1/14/97
Quentin J. Hietpas 1994 1,500 $ 35.50 1/19/99
1993 1,500 $ 28.6667 1/19/98
1992 1,500 $ 29.4167 1/14/97
B. Kristine Johnson 1994 1,500 $ 35.50 1/19/99
1993 1,500 $ 28.6667 1/19/98
1992 1,500 $ 29.4167 1/14/97
Walter Kissling 1994 1,500 $ 35.50 1/19/99
D. Eugene Nugent 1994 1,500 $ 35.50 1/19/99
1993 1,500 $ 28.6667 1/19/98
</TABLE>
One-third of the options granted to each recipient become exercisable on
each of the first three anniversaries of the date of grant, and the options
expire five years after the date of grant. Two current directors exercised
options during 1992-1994; the net value of shares (market value less exercise
price) realized from these exercises was $39,050.
ITEM 2
AMENDMENT TO RESTATED ARTICLES INCREASING
THE TOTAL NUMBER OF SHARES AUTHORIZED TO BE ISSUED
FROM 75,000,000 TO 100,000,000 AND INCREASE
FROM 10,000,000 TO 15,000,000 THE NUMBER OF AUTHORIZED SHARES
THAT MAY BE DESIGNATED AS PREFERRED SHARES,
AND MODIFY THE POWER OF THE BOARD OF DIRECTORS
TO ESTABLISH VOTING RIGHTS OF UNISSUED SHARES
The Board of Directors of the Company has approved and is requesting that
the shareholders adopt an amendment to the Company's Restated Articles of
Incorporation relating to the terms and number of the Company's authorized
shares.
BACKGROUND
Article VII of the Company's Restated Articles of Incorporation currently
authorizes the issuance of up to 75,000,000 shares, not more than 10,000,000 of
which may be preferred shares. Adoption of Item 2 would increase the total
number of shares authorized to be issued from 75,000,000 to 100,000,000 shares
and would increase from 10,000,000 to 15,000,000 the total authorized shares
that the Board of Directors could designate as Preferred Shares, and would give
the Board of Directors the power to issue Preferred Shares with greater or
lesser voting rights per share than for the Common Shares, by amending Article
VII of the Restated Articles of Incorporation to read as follows:
The aggregate number of shares which this Corporation shall have
authority to issue is 100,000,000 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
10
<PAGE>
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 holders of Common Shares presently outstanding shall be
entitled to one vote per share (i) in the election of directors,
except to the extent that holders of Preferred Shares have the
right, to the exclusion of holders of Common Shares, to elect one
or more directors and (ii) for all other corporate purposes. The
voting rights, if any, of unissued Preferred Shares shall be fixed
by the Board of Directors. The voting rights if any, of unissued
Common 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 outstanding or unissued Preferred or Common Shares shall be
entitled to any cumulative voting rights.
c. No shareholder of this Corporation shall have any preemptive
right to subscribe for or purchase any shares of any class or
series of this 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.
As of February 21, 1995, the Company had outstanding 18,316,470 shares of
common stock, par value, $0.16 2/3 per share, 1,819,078 shares of 8% Callable,
Cumulative Voting Convertible Preferred Stock, Series 1990, par value $0.10 per
share and 133,100 shares of $7.50 Callable Cumulative Convertible Preferred
Stock, Series 1988. In addition, 25,353,544 common shares were reserved for
future issuance upon conversion of the Company's outstanding preferred stock,
upon exercise of outstanding stock options granted under various stock option
plans, and under the Company's Rights Agreement. As a result, a total of
29,377,808 shares, not more than 8,047,822 of which could be preferred shares,
were authorized but unissued and not reserved for issuance as of February 21,
1995.
PURPOSE OF PROPOSAL
The purpose of increasing the total number of authorized shares and the
number of shares that may be designated as Preferred Shares, and of giving the
Board of Directors the power to establish voting rights of more or less than one
vote for unissued Preferred Shares, is to provide additional flexibility with
respect to the Company's authorized capital structure. In 1989 the Company's
shareholders approved the increase in the number of authorized shares from the
former level of 35,000,000 common shares and 5,000,000 Preferred Shares to the
current level of 75,000,000 shares, not more than 10,000,000 of which may be
Preferred Shares. Since that increase, the number of shares issued or reserved
for issuance has increased substantially. Although the Company has no current
agreements, commitments or plans for the sale, issuance or use of the additional
authorized shares, the purposes for which they may be issued include future
acquisitions of other businesses, employee benefit plans, equity financing,
stock dividends or splits, and other general corporate purposes.
EFFECT OF PROPOSAL
Adoption of Item 2 would increase the number of authorized but unissued and
unreserved shares by 25,000,000, and would increase by 5,000,000 the number of
authorized but unissued and unreserved shares that can be designated by the
Board as Preferred Shares. If Item 2 is adopted, no further action or
authorization by the shareholders would be necessary prior to the issuance of
the additional shares authorized thereby, unless required for a particular
transaction by applicable law, regulatory agencies, or the rules of any stock
exchange on which the Company's securities are then listed.
11
<PAGE>
Any additional authorized shares that may become issuable upon the adoption
of Item 2 which are not designated either as Preferred Shares or as a different
class of common shares would be a part of the existing class of common stock
and, if and when issued, would have the same rights and privileges as the common
stock of the Company presently outstanding. The shareholders of the Company do
not, and will not as a result of either of the proposed amendments, have
pre-emptive rights to subscribe for or purchase any newly issued shares of
stock.
Any additional Preferred Shares, or shares of a new class of common stock,
that may become issuable upon the adoption of these proposals would be issued
upon the terms fixed by the Board of Directors in accordance with any
limitations imposed by the Minnesota Business Corporation Act. The terms of each
series would include, without limitation, the following: (a) the designation and
name of such series and number of shares which shall constitute such series; (b)
the dividend rate and dividend accumulation rights, payment dates, and the
participating or other special rights with respect to payment of such dividends;
(c) whether the Company would have the right to redeem shares of such series,
and the terms of any such redemption; (d) the terms of sinking fund or other
retirement provisions, if any, for the redemption or purchase of shares of such
series; (e) the amounts payable for shares of such series, and the priority of
payment upon voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company; (f) the terms and conditions of conversion rights,
if any; (g) the voting powers, if any, of the shares of such series; and (h) any
other relative rights and preferences of the shares of such series.
The proposed amendments are not designed to deter or to prevent a change in
control of the Company. As is presently the case, however, unissued shares,
could be used by the incumbent Board of Directors to make more difficult such
change in control. In the event of any unfriendly attempt to gain control of the
Company, the Board has the power to issue additional shares in an effort to
dilute the stock ownership and voting power of persons seeking to obtain control
of the Company, which might have the effect of discouraging or making less
likely such a change in control. Such shares could also be privately placed with
purchasers who might be expected to side with the Board in opposing a hostile
takeover bid. Shares could also be issued with rights (including voting rights)
and preferences that might impede such a takeover proposal by, for example,
authorizing a class vote, either separately or with the holders of common stock,
on any merger, sale or exchange of assets by the Company, or any other
extraordinary corporate transaction. To the extent any such actions could have
the effect of making a hostile takeover less likely , they could also assist
incumbent management in retaining their positions with the Company.
The amendments contained in Item 2 are not the first actions taken by the
Company that could have the effect of deterring a hostile takeover. Not only do
the Company's Restated Articles of Incorporation and By-Laws contain several
provisions that could make the consummation of a hostile takeover more
difficult, the Company has taken other actions, including the adoption of a
Rights Agreement and agreeing to certain contractual provisions, that may have
such an effect. Although the Board does not currently contemplate adopting or
proposing for shareholder approval any further anti-takeover measures, it
continues to study the risks of a hostile takeover of the Company and the impact
of a takeover on shareholder value, and reserves the right to propose such
further amendments or take such actions in the future if, it its view,
circumstances should so warrant. The Board of Directors is not currently aware
of any effort to effect a change in control or takeover of the Company.
If Item 2 is approved by the shareholders, the amendments would become
effective upon the filing with the Secretary of State for the State of Minnesota
of Articles of Amendment to the Company's Restated Articles of Incorporation,
which filing would take place shortly after the annual meeting of shareholders.
VOTE REQUIRED
Because Item 2 would amend the Company's Restated Articles of Incorporation,
adoption of this proposal requires the affirmative vote of the holders of at
least 60% of the outstanding shares entitled to vote, provided that the proposal
does not receive a negative vote from holders of more than 25% of the
outstanding voting shares. Abstentions and broker non-votes have the effect of
votes against the proposal.
12
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
RESTATED ARTICLES INCREASING THE TOTAL NUMBER OF SHARES AUTHORIZED TO BE ISSUED
FROM 75,000,000 TO 100,000,000 AND INCREASE FROM 10,000,000 TO 15,000,000 THE
NUMBER OF AUTHORIZED SHARES THAT MAY BE DESIGNATED AS PREFERRED SHARES, AND
MODIFY THE POWER OF THE BOARD OF DIRECTORS TO ESTABLISH VOTING RIGHTS OF
UNISSUED SHARES.
ITEM 3
ALTERNATIVE AMENDMENT TO RESTATED ARTICLES
INCREASING THE TOTAL NUMBER OF SHARES AUTHORIZED TO BE ISSUED
FROM 75,000,000 TO 125,000,000 AND INCREASE FROM 10,000,000 TO
15,000,000 THE NUMBER OF AUTHORIZED SHARES THAT MAY BE DESIGNATED AS PREFERRED
SHARES
If the shareholders do not adopt Item 2, the Board of Directors of the
Company has approved and is requesting that the shareholders adopt an
alternative amendment to the Company's Restated Articles of Incorporation
relating to the number of the Company's authorized shares.
BACKGROUND
The current status of Article VII of the Company's Restated Articles of
Incorporation is described under the heading "Background" under Item 2. If Item
2 is adopted, this Item 3 will be void. If Item 2 is not adopted, the Board of
Directors has proposed Item 3, which would increase the total number of shares
authorized to be issued from 75,000,000 to 125,000,000 and would increase from
10,000,000 to 15,000,000 the total authorized shares that the Board of Directors
could designate as Preferred Shares, by amending Article VII of the Restated
Articles of Incorporation to read as follows:
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 preemptive
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.
13
<PAGE>
The number of shares of Common Shares and Preferred Shares outstanding,
authorized but unissued, and reserved for future issuance are set forth in the
section entitled "Background" under Item 2.
PURPOSE OF PROPOSAL
There are two differences between Item 2 and Item 3: (i) the number of
authorized shares is 125,000,000 under Proposal No. 3, rather than 100,000,000
as provided under Item 2, and (ii) under Item 3 the voting rights, if any, of
unissued shares remain, as now, at one vote per share, rather than being subject
to the power of the Board of Directors to establish different voting rights for
unissued Preferred Shares as provided under Item 2. If Item 2 is not adopted,
the Company's flexibility with respect to its capital structure (including its
ability to effect future stock splits and stock dividends) will be extremely
limited. Item 3 would provide additional flexibility and speed in responding to
future investment and financing opportunities and needs such as future
acquisitions of other businesses, employee benefit plans, equity financing,
stock dividends or splits, and other general corporate purposes.
EFFECT OF PROPOSAL
Adoption of Item 3 would increase the number of authorized but unissued and
unreserved shares by 50,000,000, and would increase by 5,000,000 the number of
authorized but unissued and unreserved shares that can be designated by the
Board as Preferred Shares. If Item 3 is adopted, no further action or
authorization by the shareholders would be necessary prior to the issuance of
the additional shares authorized thereby, unless required for a particular
transaction by applicable law, regulatory agencies, or the rules of any stock
exchange on which the Company's securities are then listed.
Any additional authorized shares that may become issuable upon the adoption
of Item 3, which are not designated either as Preferred Shares or as a different
class of common shares, would be a part of the existing class of common stock
and, if and when issued, would have the same rights and privileges as the common
stock of the Company presently outstanding. The shareholders of the Company do
not, and will not as a result of either of the proposed amendments, have
preemptive rights to subscribe for or purchase any newly issued shares of stock.
Any additional Preferred Shares, or shares of a new class of common stock,
that may become issuable upon the adoption of these proposals would be issued
upon the terms fixed by the Board of Directors in accordance with any
limitations imposed by the Minnesota Business Corporation Act. The present
authority of the Board would not change in this respect. At present, the terms
of each series could include, without limitation, the following: (a) the
designation and name of such series and number of shares which shall constitute
such series; (b) the dividend rate and dividend accumulation rights, payment
dates, and the participating or other special rights with respect to payment of
such dividends; (c) whether the Company would have the right to redeem shares of
such series, and the terms of any such redemption; (d) the terms of sinking fund
or other retirement provisions, if any, for the redemption or purchase of shares
of such series; (e) the amounts payable for shares of such series, and the
priority of payment upon voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; (f) the terms and conditions of
conversion rights, if any; (g) the voting powers, if any, of the shares of such
series (subject to the requirement that each share be entitled to one vote); and
(h) any other relative rights and preferences of the shares of such series.
The potential impact of Item 3 on a change in control of the Company is the
same as discussed with respect to Item 2, with the exception that any newly
issued Preferred Shares which are granted voting rights will be entitled to one
vote per share rather than such voting rights being subject to the power of the
Board of Directors to establish different voting rights.
It is important to note that Item 3 would not enlarge the already existing
power of the Board of Directors; the proposed amendments would simply increase
the number of shares which could be issued by the Board for the purposes
described above.
14
<PAGE>
If Item 3 is approved by the shareholders, the amendments would become
effective upon the filing with the Secretary of State for the State of Minnesota
of Articles of Amendment to the Company's Restated Articles of Incorporation,
which filing would take place shortly after the annual meeting of shareholders.
VOTE REQUIRED
If Item 2 is adopted, this proposal will become void. If Item 2 is not
adopted, however, the votes on this Proposal will be counted. Because Item 3
would amend the Company's Restated Articles of Incorporation, adoption of this
proposal requires the affirmative vote of the holders of at least 60% of the
outstanding shares entitled to vote, provided that the proposal does not receive
a negative vote from holders of more than 25% of the outstanding voting shares.
Abstentions and broker non-votes would have the effect of votes against the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 3 TO AMEND THE RESTATED
ARTICLES OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF SHARES AUTHORIZED TO
BE ISSUED FROM 75,000,000 TO 125,000,000 AND TO INCREASE FROM 10,000,000 TO
15,000,000 THE NUMBER OF AUTHORIZED SHARES THAT MAY BE DESIGNATED AS PREFERRED
SHARES.
PLEASE VOTE ON BOTH ITEM 2 AND ITEM 3.
ITEM 4
APPROVAL OF AUDITORS
Deloitte & Touche LLP, independent certified public accountants have been
the auditors for the Company since 1977. They have been retained by the Board of
Directors as the Company's auditors for the current fiscal year, and shareholder
approval of such retention is requested.
Representatives of Deloitte & Touche LLP are expected to attend the Annual
Meeting with the opportunity to make a statement if they so desire, and they
will be available to respond to appropriate questions.
The Board of Directors recommends that the shareholders vote "For" the
proposal to approve retention of Deloitte & Touche LLP, and the enclosed proxy
will be so voted unless a contrary vote or abstention is indicated. If retention
of Deloitte & Touche LLP is not approved by the shareholders, the Board of
Directors will make another appointment effective at the earliest practicable
date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RETENTION OF DELOITTE & TOUCHE LLP.
EXECUTIVE COMPENSATION
COMPENSATION AND PERSONNEL COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Personnel Committee of the Board of Directors was
comprised of Quentin J. Hietpas (Chair), Harold V. Haverty and D. Eugene Nugent
during 1994. None of the members of the Committee were officers or employees of
the Company during 1994, but D. Eugene Nugent is the former Chairman of the
Board and Chief Executive Officer of Pentair, Inc. There are no additional
insider or interlock relationships.
COMPENSATION AND PERSONNEL COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
OVERVIEW
The Compensation and Personnel Committee of the Board of Directors
(the"Committee") is responsible for supervising the development of and making
recommendations to the Board with respect to the Company's executive
compensation policies. In addition, the Committee makes annual recommendations
to the Board concerning compensation to be paid to the Chief Executive Officer
and each of the other executive officers of the Company.
15
<PAGE>
The Committee also oversees all aspects of the Company's executive
compensation program, including many of the Company's employee benefit plans.
The Company currently maintains a variety of compensation and benefit plans in
which its executive officers may participate including the Omnibus Stock Plan,
the Employee Stock Purchase and Bonus Plan, the Retirement Savings and Stock
Incentive Plan, the Deferred Compensation Plan, the Supplemental Executive
Retirement Plan, and the Management Incentive Plan. The Company also maintains a
defined benefit pension plan in which substantially all non-bargaining
employees, including the Company's executive officers, participate.
PENTAIR'S COMPENSATION PHILOSOPHY
The principles guiding the executive compensation program are designed to
ensure a proper linkage between executive compensation and creation of
shareholder value. Goals of the program are:
(a) to encourage innovation and growth;
(b) to reward executives for short-term top performance and long-term
shareholder value;
(c) to recognize outstanding performance;
(d) to attract and retain top quality executives and key employees;
(e) to encourage executive stock ownership; and
(f) to align management and shareholder interests.
The Company has maintained the philosophy that compensation of the executive
officers should be directly and materially linked to operating results and stock
price performance. To achieve this, compensation is heavily leveraged through
the annual bonuses and long-term equity incentives. The mix of base salary,
bonuses and other benefits reflects the Company's goal of providing average
compensation for average performance and above average compensation for above
average performance.
In order to make its recommendations to the Board concerning executive
officer compensation, the Committee annually reviews and evaluates the Company's
corporate performance and the compensation and equity ownership of its executive
officers. This is done by reviewing salary practices for comparable positions at
other major industrial organizations as disclosed in Towers Perrin Compensation
database, as well as a review of other nationally recognized pay surveys. These
major organizations include non-financial manufacturing companies that the
Corporation competes with for business or executive talent. Many of the
companies who are included in the Towers Perrin Compensation database and
national pay surveys are also listed in the S&P 500 index and the NASDAQ
Non-Financial Index included in the comparative Stock Performance Graph. The
Committee has retained Towers Perrin, an independent compensation consulting
firm, to assist in the review of executive compensation.
EXECUTIVE COMPENSATION PROGRAM
The components of the Company's executive compensation program, which are
subject to the discretion of the Committee on an individual basis, include (a)
base salaries, (b) annual cash performance-based bonuses, (c) long-term equity
incentives, and (d) miscellaneous other fringe benefits. All components are
comparable to those of similar companies.
BASE SALARY
In line with the Company's current policy with respect to the base salaries
of its executive officers, the CEO submits a written performance appraisal and
recommendation to the Committee with respect to annual salaries of the executive
officers. The Committee then discusses, evaluates and approves the salaries and
makes its recommendation to the Board. Base salary targets for executive
positions are set at the 50th percentile of competitive compensation. An
individual performance and experience factor is applied to the target midpoint
to determine each executive's actual base salary, within a range of +-20% of
midpoint. A competent employee should attain midpoint salary within 3 years by
demonstrating continuing development and performance consistent with his or her
capabilities in the position.
For 1994, the salaries of the named executive officers identified in the
Summary Compensation Table are within the salary targets for each position.
16
<PAGE>
ANNUAL CASH BONUS
Pentair compensates its employees for achievement of company and individual
performance goals. Pentair's annual profit plan approved by the Board of
Directors, is determined to be a good judge of how the Company should perform in
current market and economic conditions. Incentive bonus awards are determined by
applying the following three factors to base salary: bonus opportunity category
percentage (BOC), company performance factor and individual performance factor.
BOC categories are assigned to each position at Pentair (55% for CEO and from
35% to 40% for Senior Vice Presidents). The company performance factor is based
on achievement toward a pre-tax income goal ; this factor has the greatest
impact on the bonus amounts. The threshold of less than 80% of plan results in a
company factor of 40%, or possibly 0%, depending on the individual's performance
factor. The range between 80% of plan and attaining plan results in a downward
impact which is double the percentage shortfall, and performance above plan
results in an upward leverage which is double the percentage over plan. The
individual performance factor is determined by the assignment of a numerical
factor based on a supervisor's judgment on attainment of expectations relative
to the employee's function. The CEO submits a written performance appraisal and
recommendation to the Committee for each executive officer with respect to the
individual performance factor. A supplemental incentive award may be granted at
the discretion of the Compensation Committee to any person who has made an
extraordinary contribution to the Company's welfare or earnings. The maximum
bonus may not exceed 100 percent of an individual's salary. The Company's
performance exceeded plan in 1994 by approximately 2%, and bonuses were
leveraged up accordingly.
LONG-TERM EQUITY INCENTIVES
GRANTS
Long-term incentive compensation is awarded in the form of restricted
shares, performance units (ICUs) and stock options. All awards are proposed by
the CEO and approved by the Compensation and Personnel Committee. Long-term
incentives are determined by using the average of the 50th and 60th percentile
of comparable grant practices as compiled by the Towers Perrin compensation
database. In 1994, the award values were given in ratios of 0% restricted stock,
30% ICUs and 70% stock options. The Black-Scholes Model is used to determine the
value of stock option grants. A comparable model is used for determining ICU
grant values. The Committee has decided not to make awards of restricted stock
to senior executives of the Company as long-term incentive compensation;
restricted stock may be awarded to such individuals as described in the section
entitled "stock ownership guidelines."
The total long-term compensation awards for 1994 amounted to 92,859
incentive compensation units (ICUs) and 96,603 stock options for all executive
officers of the Company as a group. All grants of ICUs and stock options were
made in accordance with the above formula. Grants for the named executives are
shown in the Summary Compensation Table and the Option/SAR grant table.
PAYOUTS
Payouts on ICUs are based upon growth in the Company's net book value over
the life of the ICUs, as leveraged upward or downward depending on whether the
Company's return on equity and growth in earnings per share over that period met
or exceeded corporate goals.
Payouts in 1994, for named executive officers, as shown in the LTIP Payout
column on the Summary Compensation Table (page 20), were for previously awarded
ICU grants and were calculated based on the increase in book value and the
percentage attainment of Earnings Per Share and Return on Equity goals since the
date of such grants.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The base salary, annual bonus and long-term equity incentives paid to Mr.
Buxton are generally determined in accordance with the guidelines described
above, and his compensation is comprised of the same elements as for all
executive officers.
For 1994, the Compensation and Personnel Committee implemented a more formal
process in the evaluation of Mr. Buxton's performance as the CEO. The rating
process includes a self evaluation rating
17
<PAGE>
by the CEO, after which each Board member completes an evaluation and rating
with commentary. The Chairman of the Compensation and Personnel Committee
provides a consolidated rating report and chairs a discussion with the Board
members without the CEO present. From that discussion, the performance rating is
finalized and the Committee Chairman is instructed to review the final rating
results with the CEO. This then translates into a personal development plan for
the following year.
In 1994, the Committee established a high individual performance factor for
Mr. Buxton based on his exceeding performance objectives for leadership, team
building and Company financial results which included earnings per share growth
of 14.5% and return on equity of 13.2%.
The base salary market compensation rate for a CEO position at the 50th
percentile was $585,000 in 1994. Mr. Buxton's base salary was increased to
$500,000 in accordance with the Committee's guideline of a 3 year progression
toward market compensation. This resulted in a 17.6% increase in Mr. Buxton's
base salary over 1993.
Mr. Buxton's bonus was calculated using the formula described above. The
Committee used his base salary of $500,000, his BOC rate of 55% and applied the
corporate performance factor for 1994 and Mr. Buxton's individual performance
factor to obtain his bonus amount of $372,515.
Mr. Buxton's long-term incentive grants were computed based on the average
of the 50th and 60th percentile of the Towers Perrin Compensation database for
comparable grant practices. He was granted 39,000 ICUs and 41,350 stock options
in 1994.
STOCK OWNERSHIP GUIDELINES
In January 1993, stock ownership guidelines for top management were
established to motivate individual achievement and increase ownership of Pentair
common stock. The Committee determined that over a period of five years, its top
management should accumulate and hold Company stock equal to the following
values: Chief Executive Officer -- three to five times base salary; Senior
Corporate Officers -- two to three times base salary; and other corporate
officers and subsidiary presidents -- one to two times base salary. In the
opinion of the Committee, the achievement of ownership levels set forth will
result in executive management being significant shareholders and will further
encourage long-term performance and Company growth.
The Committee will consider making incentive grants of restricted stock
based on the increase in ownership during the preceding year. These restricted
stock grants (made under the Omnibus Plan) vest in equal increments on the
third, fourth, and fifth anniversaries of the grant The size of the grant is
equal to 10% of the increase in common shares during the year, limited to 10% of
the targeted ownership level if the targeted ownership level per the stock
ownership guidelines has been achieved.
In 1994, 5,706 restricted stock awards were granted under these guidelines.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to each of the corporation's Chief Executive Officer and four other most
highly compensated officers. Qualifying performance-based compensation will not
be subject to the deduction limit if certain requirements are met. The Company
is currently reviewing its compensation systems and intends to structure
performance-based compensation in a manner that complies with the new statute.
In 1995, however, the Company expects all compensation paid to the Chief
Executive Officer and the four other highly compensated officers will be 100%
tax deductible.
Quentin J. Hietpas, Chair Harold V. Haverty D. Eugene Nugent
Compensation and Personnel Committee of Pentair, Inc.
18
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total shareholder return on
the Company's Common Stock for the last five fiscal years, assuming the
investment of $100 on December 31, 1989 and the reinvestment of all dividends
since that date to December 31, 1994. The graph also contains for comparison
purposes the S&P 500 Index and the NASDAQ Non-Financial Index. The Indices were
prepared by the Center for Research in Security Prices (CRSP); the NASDAQ
Non-Financial Index includes SIC Codes 1 through 59, and 70 through 99. Upon
request, the Company will undertake to make accessible the identity of those
companies making up the NASDAQ Non-Financial Index in a prompt manner. The data
used was obtained from published sources and is believed to be accurate.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PENTAIR, INC S&P 500 NASDAQ
<S> <C> <C> <C>
12/31/89 100 100 100
12/31/90 93 97 88
12/31/91 156 127 142
12/31/92 156 136 155
12/31/93 200 149 178
12/31/94 264 151 170
</TABLE>
19
<PAGE>
SUMMARY COMPENSATION TABLE.
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company and the four highest paid executive officers of the Company whose
salary and bonus earned in 1994 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
AWARDS
ANNUAL COMPENSATION -------------------------- PAYOUTS
--------------------------------------- RESTRICTED SECURITIES ---------
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS (A) COMPENSATION AWARDS (B) OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) /SARS ($)(C) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Winslow H. Buxton 1994 $ 500,000 $ 372,515 $ 11,854 $ 39,902 41,350 $ 102,718 $ 0
Chief Executive 1993 425,000 343,379 9,699 0 38,250 56,820 0
Officer 1992 343,750 184,202 10,908 92,663 49,650 19,868 0
Gerald C. Kitch 1994 $ 238,500 $ 170,389 $ 6,752 $ 19,703 10,450 $ 53,018 $ 0
Senior Vice 1993 227,000 133,031 6,886 0 11,625 26,576 0
President 1992 218,000 109,036 7,579 41,919 8,850 10,034 0
Joseph R. Collins 1994 $ 238,500 $ 134,934 $ 7,500 $ 0 10,450 $ 21,181 $ 0
Senior Vice 1993 210,000 138,045 7,290 0 11,625 23,233 0
President 1992 185,000 102,742 6,557 41,919 10,350 23,890 0
Ronald V. Kelly 1994 $ 238,500 $ 98,103 $ 7,089 $ 7,668 10,450 $ 53,018 $ 0
Senior Vice 1993 227,000 122,807 7,098 0 11,625 26,576 0
President 1992 218,000 85,512 7,122 41,919 8,850 10,034 0
Allan J. Kolles 1994 $ 187,000 $ 88,659 $ 5,906 $ 5,716 5,500 $ 29,317 $ 0
Senior Vice 1993 170,000 87,406 7,721 0 6,150 29,168 0
President, 1992 160,000 66,685 7,561 19,856 4,200 28,208 0
Assistant to CEO
<FN>
- ------------------------------
(a) Represents bonuses accrued by the Company for the year even if paid after
December 31.
(b) The restricted stock awards are subject to vesting, in three equal
installments beginning in the third year after the date of grant, based
solely on the continued employment of the recipient by the Company.
Dividends are accrued and paid upon vesting of restricted shares. Interest
is accrued on unpaid dividends and paid with the dividends. The value of
restricted stock awards reflected in the table is based on the closing
market price of the common stock on the date of grant. The following
restricted stock awards were held by each of the named executives as of
December 31, 1994 (based on 12/31/94 closing price of $42.75): Buxton 8,825
shares or $377,269; Collins 2,067 shares or $88,364; Kelly 3,591 shares or
$153,515; Kitch 3,930 shares or $168,008; and Kolles 1,786 shares or
$76,352.
In 1993, the long-term equity incentive program was changed, reducing the
restricted stock portion from 25% in 1992 to 0% in 1993. The restricted
share grants in 1994 were made pursuant to the provisions discussed under
"stock ownership guidelines."
(c) Includes payouts for ICUs.
</TABLE>
20
<PAGE>
OPTIONS AND STOCK APPRECIATION RIGHTS.
The following tables summarize option and SAR grants and exercises during
1994 to or by the Chief Executive Officer or one of the executive officers named
in the Summary Compensation Table above, and the values of the options and SARs
held by such persons at the end of 1994. No SARs have been granted since 1983;
grants shown in the table below are incentive stock options and non-qualified
stock options. No SARs have been exercised or remain outstanding at the end of
1994.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
OPTION AND SAR GRANTS IN 1994 VALUE AT ASSUMED
-------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING % OF TOTAL OPTIONS/ SARS OPTION TERM
OPTIONS/ SARS GRANTED TO EMPLOYEES IN EXERCISE OR EXPIRATION --------------------
NAME GRANTED (A) FISCAL 1993 BASE PRICE DATE 5% 10%
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Winslow H. Buxton 41,350 22.1% $ 35.50 1/19/99 $ 405,561 $ 896,183
Joseph R. Collins 10,450 5.6% $ 35.50 1/19/99 $ 102,494 $ 226,484
Ronald V. Kelly 10,450 5.6% $ 35.50 1/19/99 $ 102,494 $ 226,484
Gerald C. Kitch 10,450 5.6% $ 35.50 1/19/99 $ 102,494 $ 226,484
Allan J. Kolles 5,500 2.9% $ 35.50 1/19/99 $ 53,944 $ 119,202
<FN>
- ------------------------------
(a) One-third of each grant becomes exercisable on each of the first three
anniversaries of the date of grant, and the options expire five years after
the grant date. The exercise price for the options granted was the closing
market price of the common stock as of the date of grant.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE OPTION AND SAR EXERCISES IN 1993 AND VALUE AT END OF 1993
- ----------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
END OF 1994 END OF 1994
SHARES ACQUIRED VALUE EXERCISABLE (E) EXERCISABLE (E)
NAME ON EXERCISE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Winslow H. Buxton 9,500 $ 225,542 E 75,350 E $1,485,104
U 83,400 U $ 954,579
Joseph R. Collins 5,913 $ 90,589 E 6,087 E $ 90,525
U 21,650 U $ 243,825
Ronald V. Kelly 2,500 $ 48,958 E 29,025 E $ 625,552
U 21,150 U $ 237,158
Gerald C. Kitch 3,501 $ 73,813 E 15,175 E $ 282,348
U 21,150 U $ 237,158
Allan J. Kolles 725 $ 17,921 E 5,226 E $ 89,026
U 11,000 U $ 123,117
</TABLE>
21
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS.
The following table reflects awards made under the Pentair, Inc. Omnibus
Stock Incentive Plan (one of the long-term incentive plans) during 1994 to the
Chief Executive Officer or one of the executive officers named in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER
NUMBER OF SHARES, OTHER PERIOD NON-STOCK PRICE BASED PLANS
UNITS OR OTHER UNTIL MATURATION ----------------------------
NAME RIGHTS OR PAYOUT THRESHOLD TARGET
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Winslow H. Buxton 39,000 units 3 years $ 0 $ 380,640
Joseph R. Collins 9,850 units 3 years $ 0 $ 96,136
Ronald V. Kelly 9,850 units 3 years $ 0 $ 96,136
Gerald C. Kitch 9,850 units 3 years $ 0 $ 96,136
Allan J. Kolles 5,150 units 3 years $ 0 $ 50,264
<FN>
- ------------------------
The ultimate value of each unit is computed pursuant to a formula, based on
common stock book value growth and average Earnings Per Share (EPS) and Return
on Equity (ROE) growth. The target value shown in this table is based on the
Company's objective of annual EPS growth of 10% and annual ROE growth of 15%.
</TABLE>
DEFINED BENEFIT PENSION PLAN.
The Company maintains a tax-qualified defined benefit pension plan. In
general, the plan covers non-bargaining employees of the Company and its U.S.
subsidiaries. These employees are eligible to participate in the plan after
attaining age 21 and completing one year of service.
The following table sets forth the estimated normal retirement benefit under
specified final average annual compensation and years of service
classifications. Each listed benefit amount is determined by using a Social
Security covered compensation base of $24,600. Currently, the Internal Revenue
Code limits the annual benefit from the plan to $118,800 and limits the pay used
to calculate pensions to $150,000, although these limits are subject to upward
adjustment in future years for cost of living increases.
ESTIMATED ANNUAL GROSS RETIREMENT BENEFITS UNDER CURRENT FORMULA
<TABLE>
<CAPTION>
FINAL AVERAGE
ANNUAL YEARS OF SERVICE
COMPENSATION 10 15 20 25 30 35+
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 6,270 $ 9,405 $ 12,540 $ 15,675 $ 18,810 $ 21,945
100,000 13,770 20,655 27,540 34,425 41,310 48,195
150,000 21,270 31,905 42,540 53,175 63,810 74,445
</TABLE>
For purposes of calculating the retirement benefit for named executive
officers under the plan, eligible compensation consists of salary and bonus as
listed in the Summary Compensation Table. Current years of service under the
plan for the named officers are: Buxton, 8; Collins, 23; Kelly, 14; Kitch, 6 and
Kolles, 10.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN.
The Company has established the Supplemental Executive Retirement Plan
(SERP) to provide retirement benefits to certain key executives of the Company
and its subsidiaries. The employees are eligible for nomination after attaining
age 50 and completing five years of service. The annual normal retirement
benefit is 50% of the participant's final average annual compensation less 100%
of the participant's annual primary Social Security benefit. This benefit is
further reduced by the participant's benefits under the Company's or any
previous employer's pension plans. A participant generally does not earn or
become vested in a benefit under the plan until he or she attains age 60. The
plan has been extended to thirteen employees, five of whom (Buxton, Collins,
Kelly , Kitch and Kolles) are named executives. To date, three retirees and one
beneficiary are receiving benefits under the plan. The estimated annual benefits
pursuant to the SERP, assuming retirement at age 65, are as follows: Buxton
$359,645; Collins $103,204; Kelly $125,044; Kitch $141,298 and Kolles $76,124.
22
<PAGE>
CHANGE IN CONTROL ARRANGEMENTS.
Approximately 101 key corporate executives have entered into agreements with
the Company that provide for contingent benefits if the executive leaves the
employ of the Company within one year after an unfriendly change in control.
Such benefits include:
a. bonus awards for the year in question to be made under the Management
Incentive Plan;
b. termination of all restrictions on shares issued under the Long-Term
Executive Performance Plan or the 1990 Omnibus Stock Incentive Plan and
payment for Incentive Compensation Units and Performance Units without
regard to the plans' forfeiture provisions;
c. reimbursement of income taxes incurred in connection with the exercise
of certain nonqualified options, as well as termination of all
restrictions on transfer and termination of any right of the Company to
repurchase shares received upon exercise of such options;
d. the cost of an executive search agency;
e. directors and officers liability insurance coverage;
f. short-term replacement coverage for Company-provided group medical,
dental, and life insurance policies;
g. amount of non-vested benefits under any of the Company's tax-qualified
deferred compensation plans;
h. the accelerated accrual and vesting of benefits under the Supplemental
Executive Retirement Plan (for those executives who have been made
participants of such plan); and
i. severance pay equal to 300% of annual compensation or, for employees
other than executive officers of the Company, such amount reduced to the
extent necessary to avoid federal excise taxes under Section 280G of the
Internal Revenue Code.
In addition, the Omnibus Stock Incentive Plan permits the Compensation and
Personnel Committee upon a change in control of the Company, to cancel all
outstanding options granted under the plan, whether or not exercisable, and
authorize payment of the "spread" between the exercise price of the options and
the then current market value of the underlying stock.
Based upon compensation levels as of December 31, 1994, the dollar value of
the benefits payable upon an unfriendly change in control to the named officers
in the Summary Compensation Table by virtue of the agreements and the Omnibus
Plan provision discussed above (excluding amounts that otherwise would be
payable upon a termination of employment not involving an unfriendly change in
control) would be: Buxton, $4,853,304; Collins, $1,860,392; Kelly, $2,259,042;
Kitch, $2,326,653 and Kolles, $1,324,517.
FUTURE PROPOSALS
Any proposal that a shareholder intends to present at the 1996 annual
meeting must be received by the Company no later than November 9, 1995 for
inclusion in the 1996 notice of annual meeting, proxy statement, and form of
proxy.
OTHER BUSINESS
Management does not know of any other business that will be presented for
consideration at the meeting; however, if any other business does properly come
before the meeting, proxies will be voted in accordance with the best judgment
of the person or persons acting under them.
23
<PAGE>
<TABLE>
<S> <C> <C>
PLEASE SIGN AND PENTAIR, INC. PROXY FOR ANNUAL MEETING OF
RETURN PROMPTLY TO SHAREHOLDERS
REDUCE SOLICITATION EXPENSES APRIL 19, 1995
</TABLE>
<TABLE>
<S> <C>
Common Employee Stock Purchase Plan (ESPP)
<CAPTION>
Common Preferred (ESOP)
</TABLE>
The undersigned hereby appoints Winslow H. Buxton and David D. Harrison, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of common stock (common and ESPP listed above) of Pentair, Inc. held of
record by the undersigned on February 21, 1995 at the Annual Meeting of
Shareholders of Pentair, Inc. to be held at 10:00 a.m., Wednesday, April 19,
1995, at the Northland Inn and Conference Center, 7101 Northland Circle,
Brooklyn Park, Minnesota, and any adjournment thereof.
Furthermore, I hereby direct State Street Bank and Trust Company, as ESOP
Trustee, to vote at the Annual Meeting of Shareholders of Pentair, Inc. to be
held at 10:00 a.m., Wednesday, April 19, 1995, at the Northland Inn and
Conference Center, 7101 Northland Circle, Brooklyn Park, Minnesota, and any
adjournment thereof, all shares of voting preferred stock of Pentair, Inc.
allocated as of February 21, 1995 to my account in the Pentair, Inc. Retirement
Savings and Stock Incentive Plan, plus a pro rata portion of the shares that
have not been allocated to participant accounts or for which no instructions are
received, as designated below. I understand that this card must be received by
Norwest Bank Minnesota, N.A., acting as tabulation agent for the ESOP Trustee,
by April 12, 1995. If it is not received by that date, or if the voting
instructions are invalid because this form is not properly signed and dated, the
shares held in my account will be voted by State Street Bank and Trust Company
in the same proportion that the other participants in the plan direct the ESOP
Trustee to vote shares allocated to their accounts.
THE BOARD RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS: FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for ALL nominees listed below. / /
EXCEPT THOSE I HAVE STRUCK BY A LINE THROUGH their names.
</TABLE>
Quentin J. Hietpas Richard M. Schulze Karen E. Welke
2. To amend the Restated Articles of Incorporation increasing the total
number of shares authorized to be issued from 75,000,000 to 100,000,000
and increase from 10,000,000 to 15,000,000 the number of authorized
shares that may be designated as preferred shares, and modify the power
of the Board of Directors to establish voting rights of unissued shares.
/ / FOR / / AGAINST / / ABSTAIN
3. To, as an alternative to Item 2, amend the Restated Articles of
Incorporation, increasing the total number of shares authorized to be
issued from 75,000,000 to 125,000,000 and increase from 10,000,000 to
15,000,000 the number of authorized shares that may be designated as
preferred shares.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
4. PROPOSAL TO RATIFY the retention of Deloitte & Touche LLP as independent
public accountants for the current fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting. Management is not
presently aware of any such matters to be presented for action.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY, BUT
IF THIS PROXY IS RETURNED SIGNED WITH NO DIRECTION MADE, THEY WILL BE VOTED
"FOR" EACH OF THE DIRECTORS AND PROPOSALS.
The undersigned hereby ratifies and
confirms all that the Proxies shall
lawfully do or cause to be done by
virtue hereof and hereby revokes all
proxies heretofore given to vote such
shares.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF PENTAIR,
INC.
_____________________________________
Signature
_____________________________________
Signature if held jointly
Dated: ________________________, 1995
THIS CARD MUST BE DATED.
(Please sign exactly as your name
appears to the left. When shares are
held by joint tenants, both should
sign. When signing as executor,
administrator, attorney, trustee or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by president
or other authorized officer. If a
partnership, please sign in
partnership name by an authorized
person.)
